HomeMy WebLinkAbout2021-03-01 Agenda Packet
AGENDA
City Council/Public Financing Authority
Regular Meeting
Monday, March 1, 2021 at 4:00 PM
MAYOR AND 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
Virtual Location
Huntington Beach, CA
STAFF
OLIVER CHI, City Manager
MICHAEL E. GATES, City Attorney
ROBIN ESTANISLAU, City Clerk
ALISA BACKSTROM, City Treasure
On March 17, 2020, Governor Newsom issued Executive Order N-29-20, which allows a local legislative body to hold public
meetings via teleconferencing, and to make public meetings accessible telephonically or otherwise electronically to all
members of the public seeking to observe and to address the local legislative body.
PUBLIC PARTICIPATION/ZOOM ACCESS: In keeping with the Governor’s mandate to limit in-person gatherings
that can spread COVID-19, the Monday, March 1, 2021 meeting of the Huntington Beach City Council will be held
virtually.
The City offers several ways to view City Council meetings live or on-demand. Council meetings are livestreamed on HBTV
Channel 3 (replayed on Tuesday’s at 10:00 a.m., and Wednesday’s at 6:00 p.m.). In addition, live and archived meetings
for on-demand viewing can be accessed from https://huntingtonbeach.legistar.com/calendar, or from any Roku or Apple
device by downloading the Cablecast Screenweave App and searching for the City of Huntington Beach channel.
PUBLIC COMMENTS: At 6:00 PM, individuals wishing to attend the meeting to provide a comment on agendized or non-
agendized items may enter Zoom Webinar ID 971 5413 0528 via computer device, or by phone at (669) 900-6833. The
Webinar can be accessed here: https://huntingtonbeach.zoom.us/j/97154130528. Attendees utilizing computer devices to
request to speak may select the “Raise Hand” feature in the Webinar Controls section. Attendees entering the Webinar
and requesting to speak by phone can enter *9 to enable the “Raise Hand” feature, followed by the *6 prompt that unmutes
their handheld device microphone. Once the Mayor opens Public Comments, speakers will be provided a 15-minute window
to raise their hands, and will be prompted to speak when the City Clerk announces their name or the last three digits of their
phone number. Speakers are encouraged, but not required to identify themselves by name. Each person may have up to 3
minutes to speak, but the Mayor, at her discretion, may reduce the time allowance if warranted by the volume of calls. The
Public Comment process will only be active during designated portions of the agenda (Public Comment and/or Public
Hearing). After a speaker concludes their comment, their microphone will be muted, but they may remain in Webinar
attendance for the duration of the meeting.
Members of the public unable to attend the Zoom Webinar but interested in communicating with the City Council on agenda-
related items, are encouraged to submit a written (supplemental) communication via email at SupplementalComm@Surfcity-
hb.org, or City.Council@surfcity-hb.org. Supplemental Communications are public record, and if received by 2:00 PM on
Monday, March 1, 2021, will be distributed to the City Council prior to consideration of agenda-related items, posted to the
City website, and announced, but not read, at the meeting. Supplemental Communications received following the 2:00 PM
deadline will be incorporated into the administrative record the following day.
MEETING ASSISTANCE NOTICE: In accordance with the Americans with Disabilities Act, services are available to members of our
community who require special assistance to participate in public meetings. If you require special assistance, 48-hour prior notification will
enable the City to make reasonable arrangements for an assisted listening device (ALD) for the hearing impaired, American Sign Language
interpreters, a reader during the meeting and/or large print agendas. Please contact the City Clerk's Office at (714) 536-5227 for more
information
1
AGENDA March 1, 2021City Council/Public Financing
Authority
4:00 PM - COUNCIL CHAMBERS
CALL TO ORDER
ROLL CALL
Peterson, Kalmick, Ortiz, Carr, Posey, Moser, Delgleize
ANNOUNCEMENT OF SUPPLEMENTAL COMMUNICATIONS (Received After Agenda Distribution)
PUBLIC COMMENTS PERTAINING TO STUDY SESSION / CLOSED SESSION ITEMS (3 Minute
Time Limit) - Anyone wishing to provide a comment on a Study Session or Closed Session item
may join Zoom Webinar ID 971 5413 0528 via computer device, or by calling (669) 900-6833 (see
agenda cover sheet for request to speak instructions). Individuals will be prompted to speak when
the Clerk announces their name or the last three digits of their phone number. Speakers are
encouraged, but not required to identify themselves by name. Each speaker may have up to 3
minutes to speak; however, the time allowance may be reduced if warranted by the volume of
speakers.
STUDY SESSION
21-1801.Joint Study Session of the Planning Commission and City Council to
receive an overview on the 6th Cycle Housing Element process and
public outreach plan
Roll Call - Planning Commission: Alan Ray (Chair); Brendon Perkins
(Vice-Chair); Kayla Acosta-Galvan; Connie Mandic;
Oscar Rodriguez; John Scandura; Gracey Van Der Mark
RECESS TO CLOSED SESSION
CLOSED SESSION ANNOUNCEMENT(S)
21-1882.Mayor Carr to announce: Pursuant to Government Code § 54957.6,
the City Council takes this opportunity to publicly introduce and
identify designated labor negotiator, City Manager Oliver Chi; also in
attendance Travis Hopkins, Assistant City Manager, to discuss the
recruitment / appointment of the Chief of Police
CLOSED SESSION
Page 1 of 7
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AGENDA March 1, 2021City Council/Public Financing
Authority
21-1853.CONFERENCE WITH LABOR NEGOTIATORS (Gov. Code section
54957.6.): The City Council shall recess into Closed Session to meet
with its designated labor negotiator, Oliver Chi, City Manager; also in
attendance Travis Hopkins, Assistant City Manager, to discuss the
recruitment / appointment of the Chief of Police
21-1904.CONFERENCE WITH LEGAL COUNSEL-EXISTING LITIGATION. (Gov.
Code section 54956.9(d)(1).) Name of case: City of Huntington Beach
v. Surf City Beach Cottages, et al.; OCSC Case No. 30-2016-00874885
6:00 PM – COUNCIL CHAMBERS
RECONVENE CITY COUNCIL/PUBLIC FINANCING AUTHORITY MEETING
ROLL CALL
Peterson, Kalmick, Ortiz, Carr, Posey, Moser, Delgleize
PLEDGE OF ALLEGIANCE
INVOCATION
In permitting a nonsectarian invocation, the City does not intend to proselytize or advance any
faith or belief. Neither the City nor the City Council endorses any particular religious belief or form
of invocation.
21-1185.Mark Currie of Bahai’ of Huntington Beach and member of the
Greater Huntington Beach Interfaith Council
CLOSED SESSION REPORT BY CITY ATTORNEY
AWARDS AND PRESENTATIONS
21-1756.Mayor Carr to proclaim the month of March 2021 as Women’s History
Month
21-1837.Mayor Carr to present a proclamation for California Arbor Day to the
Huntington Beach Tree Society
ANNOUNCEMENT OF SUPPLEMENTAL COMMUNICATIONS (Received After Agenda Distribution)
PUBLIC COMMENTS (3 Minute Time Limit) - At approximately 6:00 PM, individuals wishing to
provide a comment on agendized or non-agendized items may join Zoom Webinar ID 971 5413
Page 2 of 7
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AGENDA March 1, 2021City Council/Public Financing
Authority
0528 via computer device, or by calling (669) 900-6833 (see agenda cover sheet for request to
speak instructions). Once the Mayor opens Public Comments, speakers will be provided a
15-minute window to raise their hands, and will be prompted to speak when the Clerk announces
their name or the last three digits of their phone number. Public comments will only be heard
during this portion of the agenda. Speakers are encouraged, but not required to identify
themselves by name. Each speaker may have up to 3 minutes to speak; however, the time
allowance may be reduced if warranted by the volume of speakers
COUNCIL COMMITTEE - APPOINTMENTS - LIAISON REPORTS, AB 1234 REPORTING, AND
OPENNESS IN NEGOTIATIONS DISCLOSURES
CITY MANAGER'S REPORT
21-1798.E-Bike Enforcement Practices on the Beach Pedestrian Path
21-1819.Representatives from Orange County Transportation Authority
(OCTA) to present a status report on the 405-Widening Project
CONSENT CALENDAR
21-17110.Approve and Adopt Minutes
Approve and adopt the City Council/Public Financing Authority regular meeting minutes
dated February 16, 2021 , as written and on file in the office of the City Clerk.
Recommended Action:
21-10611.Adopt Resolution No. 2021-13 authorizing submittal of a Grant
Application to the California Department of Resources Recycling and
Recovery for Rubberized Asphalt Concrete (RAC)
Adopt Resolution No. 2021-13, “A Resolution of the City Council of the City of Huntington
Beach Authorizing Submittal of Applications for all CalRecycle Grants for which the City of
Huntington Beach is Eligible.”
Recommended Action:
21-16212.Approve and authorize execution of Amendment No. 1 to
Cooperative Agreement No. C-8-1882 for the Orange County
Enhanced Mobility for Seniors and Disabled (EMSD) Grant Program
between the Orange County Transportation Authority (OCTA) and
the City of Huntington Beach
Recommended Action:
Page 3 of 7
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AGENDA March 1, 2021City Council/Public Financing
Authority
Approve and authorize the Mayor to execute “Amendment No. 1 to Cooperative
Agreement No. C-8-1882 Between the Orange County Transportation Authority and City of
Huntington Beach” for a term of May 23, 2019 , through September 30, 2023.
21-17313.Authorize the Public Works Director to request a two-year extension
from the Orange County Transportation Authority for the City’s
Project V Grant for the Huntington Beach Southeast Rideshare Pilot
Program
Authorize the Public Works Director to request a two-year extension of the timeframe for
the City’s Project V Grant for the Huntington Beach Southeast Rideshare Pilot Program.
Recommended Action:
21-16414.Adopt Resolution No. 2021-16 authorizing the application for a
Drinking Water State Revolving Fund (DWSRF) Grant to fund the
proposed Old Pirate Lane State Small Water System (SSWS)
Consolidation project, and designate the Director of Public Works as
an authorized representative for the application
A) Adopt Resolution No. 2021-16, “A Resolution of the City Council of the City of
Huntington Beach Approving the Application for Drinking Water State Revolving Grant
Funds From the California Water Resources Control Board” to fund the proposed Old
Pirate Lane State Small Water System Consolidation project; and ,
B) Designate the position of Public Works Director as the authorized representative of the
City of Huntington Beach, on behalf of the Old Pirate Lane State Small Water System, to
sign documents pertaining to the funding application.
Recommended Action:
21-16815.Adopt Resolution No. 2021-18 (Supplemental Fee Resolution 13),
establishing Short-Term Rental (STR) Permit Fees; adding a Code
Enforcement Officer I and Code Enforcement Officer II to the Table
of Organization; and amending the City’s Fiscal Year 20-21 Budget to
the extent necessary to accommodate such expenditures
A) Adopt Resolution No. 2021-18, “A Resolution of the City Council of the City of
Huntington Beach Establishing Short-Term Rental Permit Fees by Amending Resolution
2016-59, as Resolution 2016-59, as Amended by Resolution Nos. 2017-28, 2017-44,
2017-46, 2018-01, 2018-29, 2018-48, 2018-55, 2019-07, 2019-19, 2020-37 and
2021-17, Which Established a Consolidated Comprehensive Citywide Master Fee and
Charges Schedule (Supplemental Fee Resolution 13)”; and ,
Recommended Action:
Page 4 of 7
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AGENDA March 1, 2021City Council/Public Financing
Authority
B) Authorize the addition of a Code Enforcement Officer I and Code Enforcement Officer II
to the Table of Organization; and ,
C) Amend the City’s Fiscal Year 20-21 Budget to the extent necessary to accommodate
such expenditures.
21-19216.Adopt Resolution No. 2021-20 (Carr Park Renovation) approving the
application for Statewide Park Development and Community
Revitalization program Grant Funds to the State of California
Department of Parks and Recreation for Carr Park
Adopt Resolution 2021-20, “A Resolution of the City Council of the City of Huntington
Beach Approving the Application for Statewide Park Development and Community
Revitalization Program Funds (Carr Park Renovation).”
Recommended Action:
21-17017.Adopt Ordinance No. 4228 to amend Chapter 13.10 of the Huntington
Beach Municipal Code Prohibiting the Storage of Personal Property
on Public or Private Property
Approved as amended 6-1 (Peterson - No)
Approve for introduction Ordinance No. 4228, “An Ordinance of the City of Huntington
Beach Amending Chapter 13.10 of the Huntington Beach Municipal Code Prohibiting the
Storage of Personal Property on Public or Private Property.”
Recommended Action:
PUBLIC HEARING
When the Mayor opens the Public Hearing, individuals wishing to provide a comment may join
Zoom Webinar ID 971 5413 0528 via computer device, or by calling (669) 900-6833 (see agenda
cover sheet for request to speak instructions). Speakers will be provided a 15-minute window to
raise their hands, and will be prompted to speak when the Clerk announces their name or the last
three digits of their phone number. Speakers are encouraged, but not required to identify
themselves by name. Each speaker may have up to 3 minutes to speak; however, the time
allowance may be reduced if warranted by the volume of speakers
21-17218.Adopt Resolution No. 2021-17 (Supplemental Fee Resolution 12),
establishing Fees and Charges for Use and Operator Permits for
Group Homes and Sober Living Homes and Hourly Billing Rates for
Code Enforcement Services
Adopt Resolution No. 2021-17, “A Resolution of the City Council of the City of Huntington
Recommended Action:
Page 5 of 7
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AGENDA March 1, 2021City Council/Public Financing
Authority
Beach Establishing and Updating Use Permit and Operator Permit Fees for Group
Homes and Sober Living Homes and Hourly Billing Rates for Code Enforcement Services
by Amending Resolution 2016-59, as amended pursuant to Resolution Nos. 2017-28,
2017-44, 2017-46, 2018-01, 2018-29, 2018-48, 2018-55, 2019-07, 2019-19, 2019-87
and 2020-37, Which Established a Consolidated Comprehensive Citywide Master Fee
and Charges Schedule” (Supplemental Fee Resolution 12).
ADMINISTRATIVE ITEMS
21-17719.Adopt Resolution No. 2021-12 authorizing the refinance of the City’s
Unfunded Accrued Liability Account Balance through the Sale of
Taxable Pension Obligation Bonds to Refund All or a Portion of the
City’s Obligation to the California Public Employees’ Retirement
System, and authorizing the Execution and Delivery of a Bond
Purchase Contract and a Continuing Disclosure Certificate and the
Preparation of an Official Statement and Other Matters Related
Thereto; and, authorize and approve Certain Actions with Respect
Thereto; and, Adopt Resolution No. 2021-19 Adopting the City’s
Unfunded Accrued Pension Liability Policy
A) Adopt Resolution No. 2021-12, “A Resolution of the City Council of the City of
Huntington Beach Authorizing the Sale of Taxable Pension Obligation Bonds to Refund All
or a Portion of the City’s Obligation to the California Public Employees’ Retirement
System, and Authorizing the Execution and Delivery of a Bond Purchase Contract and a
Continuing Disclosure Certificate and the Preparation of an Official Statement and Other
Matters Related Thereto; and,
B) Authorize the City Manager and City Clerk to take all administrative and budgetary
actions necessary to perform the bond issuance; and,
C) Adopt Resolution No. 2021-19, “A Resolution of the City Council of the City of
Huntington Beach Adopting the City’s Unfunded Accrued Pension Liability Policy.”
Recommended Action:
COUNCILMEMBER COMMENTS (Not Agendized)
ADJOURNMENT
The next regularly scheduled meeting of the Huntington Beach City Council/Public Financing Authority is
Monday, March 15, 2021, at 4:00 PM in the Civic Center Council Chambers, 2000 Main Street, Huntington
Beach, California.
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AGENDA March 1, 2021City Council/Public Financing
Authority
INTERNET ACCESS TO CITY COUNCIL/PUBLIC FINANCING AUTHORITY AGENDA AND
STAFF REPORT MATERIAL IS AVAILABLE PRIOR TO CITY COUNCIL MEETINGS AT
http://www.huntingtonbeachca.gov
Page 7 of 7
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City of Huntington Beach
File #:21-180 MEETING DATE:3/1/2021
Joint Study Session of the Planning Commission and City Council to receive an overview on
the 6th Cycle Housing Element process and public outreach plan
Roll Call - Planning Commission: Alan Ray (Chair); Brendon Perkins (Vice-Chair); Kayla Acosta
-Galvan; Connie Mandic;
Oscar Rodriguez; John Scandura; Gracey Van Der Mark
City of Huntington Beach Printed on 2/25/2021Page 1 of 1
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City of Huntington Beach
File #:21-188 MEETING DATE:3/1/2021
Mayor Carr to announce: Pursuant to Government Code § 54957.6, the City Council takes this
opportunity to publicly introduce and identify designated labor negotiator, City Manager
Oliver Chi; also in attendance Travis Hopkins, Assistant City Manager, to discuss the
recruitment / appointment of the Chief of Police
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-185 MEETING DATE:3/1/2021
CONFERENCE WITH LABOR NEGOTIATORS (Gov. Code section 54957.6.): The City Council
shall recess into Closed Session to meet with its designated labor negotiator, Oliver Chi, City
Manager; also in attendance Travis Hopkins, Assistant City Manager, to discuss the
recruitment / appointment of the Chief of Police
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-190 MEETING DATE:3/1/2021
CONFERENCE WITH LEGAL COUNSEL-EXISTING LITIGATION. (Gov. Code section 54956.9(d)
(1).) Name of case: City of Huntington Beach v. Surf City Beach Cottages, et al.; OCSC Case
No. 30-2016-00874885
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-118 MEETING DATE:3/1/2021
Mark Currie of Bahai’ of Huntington Beach and member of the Greater Huntington Beach
Interfaith Council
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-175 MEETING DATE:3/1/2021
Mayor Carr to proclaim the month of March 2021 as Women’s History Month
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-183 MEETING DATE:3/1/2021
Mayor Carr to present a proclamation for California Arbor Day to the Huntington Beach Tree
Society
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-179 MEETING DATE:3/1/2021
E-Bike Enforcement Practices on the Beach Pedestrian Path
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-181 MEETING DATE:3/1/2021
Representatives from Orange County Transportation Authority (OCTA) to present a status
report on the 405-Widening Project
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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City of Huntington Beach
File #:21-171 MEETING DATE:3/1/2021
REQUEST FOR COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Robin Estanislau, CMC, City Clerk
PREPARED BY:Robin Estanislau, CMC, City Clerk
Subject:
Approve and Adopt Minutes
Statement of Issue:
The City Council/Public Financing Authority regular meeting minutes of February 16, 2021, require
review and approval.
Financial Impact:
None.
Recommended Action:
Approve and adopt the City Council/Public Financing Authority regular meeting minutes dated
February 16, 2021, as written and on file in the office of the City Clerk.
Alternative Action(s):
Do not approve and/or request revision(s).
Analysis:
None.
Environmental Status:
Non-Applicable.
Strategic Plan Goal:
Non-Applicable - Administrative Item
Attachment(s):
1. February 16, 2021 CC/PFA regular meeting minutes
City of Huntington Beach Printed on 2/24/2021Page 1 of 1
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Minutes
City Council/Public Financing Authority
City of Huntington Beach
Tuesday, February 16, 2021
4:00 PM – Virtual Meeting
6:00 PM – Virtual Meeting
Huntington Beach, California 92648
A video recording of the 4:00 PM and 6:00 PM portions of this meeting
is on file in the Office of the City Clerk, and archived at
www.surfcity-hb.org/government/agendas/
4:00 PM — Virtual Zoom Webinar
CALLED TO ORDER — 4:00 PM
ROLL CALL
Present: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
Absent: None
ANNOUNCEMENT OF SUPPLEMENTAL COMMUNICATIONS (Received After Agenda Distribution)
Pursuant to the Brown “Open Meetings” Act, City Clerk Robin Estanislau announced supplemental
communications that were received by her office following distribution of the Council Agenda packet:
Study Session
#1(21-157) PowerPoint communication titled Statewide Community Infrastructure Program — A
Program of the California Statewide Communities Development Authority submitted by
Ursula Luna-Reynosa, Director of Community Development.
#1 (21-157) PowerPoint communication titled Middle Income Workforce Housing Program submitted
by Ursula Luna-Reynosa, Director of Community Development.
PUBLIC COMMENTS PERTAINING TO STUDY SESSION / CLOSED SESSION ITEMS
(3 Minute Time Limit) — None
STUDY SESSION
1. 21-157 California Statewide Communities Development Authority (CSCDA) presentation
on the Statewide Community Infrastructure and Workforce Housing Programs
City Manager Oliver Chi introduced Community Development Manager Ursula Luna-Reynosa and
Deputy Director of Community Development Steve Holtz who introduced James Hamill, Managing
Director, California Statewide Communities Development Authority (CSCDA), Sean Rawson, Co-
Founder of Waterford Property Company, and Jon Penkower of C & C Development.
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Council/PFA Regular Minutes
February 16, 2021
Page 2 of 16
Director Hamill, CSCDA, presented a PowerPoint communication entitled Statewide Community
Infrastructure Program, A Program of the California Statewide Communities Development Authority
with slides titled: What is the Statewide Community Infrastructure Program?, Who Uses SCIP?, SCIP
Participating Developers, Program Benefits, What Can be Financed through the Program?, Local
Agency Requirements, and SCIP Tasks and Responsibility Schedule.
Councilmember Peterson confirmed with Director Hamill that tax revenues are not impacted by this
program.
Councilmember Delgleize and Director Hamill discussed details regarding how the program is normally
implemented by the developer after reaching an agreement with a city. Director Hamill stated that
projects range from $500,000 to $8M, that most projects are single-family homes, and explained that
CSCDA has a $14M reserve.
City Manager Chi explained that Statewide Community Infrastructure Program (SCIP) is a totally
different program from the Middle Income Workforce Housing Program, but both are managed by
CSCDA as additional tools that can be used by builders and developers to help finance offsite costs
and Development Impact Fee (DIF) costs at an interest rate that will likely be less than their borrowing
costs to finance the overall project.
Director Luna-Reynosa explained that if Council chooses to offer this program to the development
community, the process would start with a resolution, and then the City would market the program,
adding that the program is generally most effective with small to medium-sized projects.
Sean Rawson, Todd Cottle and Jon Penkower presented a PowerPoint communication entitled: Middle
Income Workforce Housing Program with slides titled: Project Team, Crisis, Cause, Solution, Target
Demographic, Overview of Workforce Housing Program, Flow Chart of Middle Income Transactions,
Public Benefits to City, City Control, Case Study #1 (4), and Next Steps.
Councilmember Posey asked about converting new assets to below market rate rent and receiving
Regional Housing Needs Assessment (RHNA) credit, and Mr. Rawson explained they are working on
introducing legislation with lobbyists to allow for RHNA credits. Councilmember Posey stated his
support for this program.
Councilmember Delgleize and Mr. Rawson discussed the impact of market fluctuation on bonds, and
the program not being dependent upon increasing rents. The discussion continued regarding some of
the benefits to developers for participating, and Mr. Penkower explained that assets are held in trust by
CSCDA for the participating city, which eliminates risk.
Councilmember Peterson shared his concerns about loss of property tax for 15 to 30 years, and that
the outstanding bonds will restrict the rent and income eligibility for the units. He also stated his opinion
that this program appears to be a form of rent control, and acknowledged that residents have voted
against any type of rent control. Mr. Rawson explained that ready and willing sellers are competing on
the open market to acquire the assets and then choosing themselves to restrict the rents on those
assets, but there is no restriction on any other landlord or owner.
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Council/PFA Regular Minutes
February 16, 2021
Page 3 of 16
Mayor Carr and Mr. Rawson discussed the possibility of a change in program administrator over the 30-
year term of the project, and noted that a city's rental preference policies can be included in the
regulatory agreement. Mayor Carr stated her support for both programs.
Director Luna-Reynosa stated the program could be described as a savings account for the City, or an
investment in real estate for the project duration while property taxes are not received, and stated the
next step for the SCIP program would be a resolution; and the Middle Income Housing Program would
start with a resolution, and include a Joint Powers Authority agreement, and a Public Benefits
agreement.
Director Luna-Reynosa also explained that Huntington Beach's Regional Housing Needs Assessment
(RHNA) target for middle-income housing needs has been met, but all units are for sale, not for rent,
and it is difficult for potential buyers to meet the underwriting requirements. She also explained that the
goals for very-low and low-income rental assets are not being met; however, the program under
consideration would allow for more moderate income rental units. Director Luna-Reynosa stated that
all housing policy decisions do not need to be focused strictly on RHNA goals, and explained some of
the flexibility options that could be considered, keeping in mind that there are Fair Housing stipulations
to prevent discrimination when setting up rental preference policies.
RECESSED TO CLOSED SESSION — 5:07 PM
A motion was made by Ortiz, second by Posey to recess to Closed Session for Item Nos. 2 – 4,
including New Item 21-166. With no objections, the motion passed.
CLOSED SESSION
2. 21-142 CONFERENCE WITH LEGAL COUNSEL-EXISTING LITIGATION. (Gov. Code
section 54956.9(d)(1).) Name of case: Kennedy Commission, et al. v. City of
Huntington Beach; OCSC Case No. 30-2015-00801675.
3. 21-143 CONFERENCE WITH LEGAL COUNSEL-EXISTING LITIGATION. (Gov. Code
section 54956.9(d)(1).) Name of case: Wilson (Carrie) v. City of Huntington Beach,
et al.; OCSC Case No. 30-2019-01094238.
4. 21-144 CONFERENCE WITH LEGAL COUNSEL-EXISTING LITIGATION. (Gov. Code
section 54956.9(d)(1).) Name of case: Rodriguez (Christian A.) v. City of
Huntington Beach, et al.; OCSC Case No.: 30-2020-01131129.
21-166 CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION.
*New Item* Significant Exposure to Litigation Pursuant to Paragraph (2) of Subdivision (d) of
Section 54956.9: Number of cases, one (1).
6:00 PM - VIRTUAL ZOOM WEBINAR
RECONVENED CITY COUNCIL/PUBLIC FINANCING AUTHORITY MEETING - 6:00 PM
ROLL CALL
Present: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
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Council/PFA Regular Minutes
February 16, 2021
Page 4 of 16
Absent: None
PLEDGE OF ALLEGIANCE — Led by Councilmember Moser
INVOCATION
In permitting a nonsectarian invocation, the City does not intend to proselytize or advance any faith or
belief. Neither the City nor the City Council endorses any particular religious belief or form of
invocation.
5. 21-117 Marsha Rechsteiner from Saints Simon and Jude Catholic Church and member of
the Greater Huntington Beach Interfaith Council
CLOSED SESSION REPORT BY CITY ATTORNEY — None
AWARDS AND PRESENTATIONS
6. 21-092 Mayor Carr recognized American Heart Month during the month of February 2021
Mayor Carr provided statistics showing that 80 percent of cardiovascular diseases can be prevented
with greater awareness and early intervention, and described some of the different symptoms to be
aware of. Mayor Carr presented a Proclamation recognizing February as American Heart Month to the
Director of Disease Management at the Jeffrey M. Carlton Heart and Vascular Institute at Hoag
Hospital, Dr. Dipti Itchhaporia.
Dr. Itchhaporia thanked the City Council for the Proclamation, for dedicating February 2021 to Women's
Health, and described some of the differences between men and women regarding cardiovascular
diseases. Mayor Carr suggested the American Heart Association's Go Red for Women website as a
place to learn more.
7. 21-161 Mayor Carr presented the Mayor’s HB Excellence Award to Catherine Lukehart,
Homeless Outreach Coordinator, Huntington Beach Police Department
Mayor Carr described Ms. Lukehart as a tireless advocate on the City's Homeless Task Force which, in
coordination with the Huntington Beach Police Department and Office of Business Development, has
established community ties with non-profits to develop a network of resources and support to help the
homeless get back on their feet.
Interim Police Chief Harvey thanked the Council for acknowledging Cathy's work from the beginning of
the Homeless Task Force to support and help define the City's current comprehensive approach to
address homelessness in Huntington Beach.
Cathy expressed her pleasure at serving in such a vibrant and supportive community, and stated the
efforts of the whole outreach team has been crucial to the success of the program.
ANNOUNCEMENT OF SUPPLEMENTAL COMMUNICATIONS (Received After Agenda Distribution)
Pursuant to the Brown "Open Meetings" Act, City Clerk Robin Estanislau announced supplemental
communications received by her office following distribution of the Council Agenda packet:
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Administrative Items
#17 (21-100) Twelve (12) email communications received regarding the proposed consideration of an
extension of the temporary closure of the second block of Main Street to vehicular traffic
through Labor Day.
#18 (21-124) PowerPoint communication titled “City of Huntington Beach – FY 2019/20 Year-End Audit
Results and FY 2020/21 Mid-Year Budget Update submitted by Dahle Bulosan, Chief
Financial Officer.
Ordinances for Introduction
#19 (21-052) Six (6) email communications regarding the proposed introduction of Ordinance No. 4228 –
prohibiting the storage of personal property on public or private property.
PUBLIC COMMENTS (3-Minute Time Limit) — 14 Call-In Speakers
The number [hh:mm:ss] following the speakers' comments indicates their approximate starting time in
the archived video located at http://www.surfcity-hb.org/government/agendas.
Amory Hanson, a Candidate for City Council in 2022 and member of the Huntington Beach Historic
Resources Board, was called to speak and stated his opposition to Administrative Item No. 17 (21-100)
regarding an extension of the Temporary Closure of the Second Block of Main Street to Vehicular
Traffic through Labor Day. (01:26:09)
Dylan Gera, student at UC Irvine School of Law and 4-year resident of Huntington Beach, was called to
speak and shared his concerns about Ordinances for Introduction Item No. 19 (21-052), regarding
Ordinance No. 4228 prohibiting the storage of personal property on public or private property.
(01:27:01)
Tony Bisson, a resident of Huntington Beach, was called to speak and shared his concerns about
Ordinances for Introduction Item No. 19 (21-052), regarding Ordinance No. 4228 prohibiting the storage
of personal property on public or private property. (01:30:36)
Jennifer Rojas, life-long resident of Huntington Beach, was called to speak and shared her concerns
about Ordinances for Introduction Item No. 19 (21-052), regarding Ordinance No. 4228 prohibiting the
storage of personal property on public or private property. (01:33:36)
Dave Shenkman, Downtown business owner and President, Downtown Business Improvement District,
was called to speak and stated support for Administrative Items No. 17 (21-100) regarding an extension
of the Temporary Closure of the Second Block of Main Street to Vehicular Traffic through Labor Day.
(01:37:05)
Nate Bernal, General Manager and Operating Partner, Baja Sharkeez, was called to speak and stated
support for Administrative Items No. 17 (21-100) regarding an extension of the Temporary Closure of
the Second Block of Main Street to Vehicular Traffic through Labor Day. (01:38:20)
Michele M. was called to speak and shared her opposition to Ordinances for Introduction Item No. 19
(21-052), regarding Ordinance No. 4228 prohibiting the storage of personal property on public or
private property. (01:39:37)
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Mark Cyprien, resident of Huntington Beach, was called to speak and shared his support for
Ordinances for Introduction Item No. 19 (21-052), regarding Ordinance No. 4228 prohibiting the storage
of personal property on public or private property. (01:41:13)
Ugochi Anaebere-Nicholson, Directing Attorney, Affordable Housing and Homelessness Prevention
Unit, Public Law Center, was called to speak and shared her concerns about Ordinances for
Introduction Item No. 19 (21-052), regarding Ordinance No. 4228 prohibiting the storage of personal
property on public or private property. (01:43:48)
Mike Adams, Planning Consultant, was called to speak and provided comments on Public Hearing Item
No. 21-078 – 714 Pacific Coast Highway Mixed Use project. He shared his experience developing the
adjacent property at 716 Pacific Coast Highway, and his concerns related to property setback and
parking recommendations. (01:46:19)
Pat Goodman was called to speak and stated her opposition to Ordinances for Introduction Item No. 19
(21-052), regarding Ordinance No. 4228 prohibiting the storage of personal property on public or
private property. (01:49:41)
Allie Most, a 6-year resident of Huntington Beach, was called to speak and shared her opposition to
Ordinances for Introduction Item No. 19 (21-052), regarding Ordinance No. 4228 prohibiting the storage
of personal property on public or private property. (01:51:19)
Isam Hanna, residing at 716 Pacific Coast Highway, was called to speak and thanked Mayor Carr for
acknowledging February as American Heart Month, and asked that the City Council support the
Planning Commission recommendation regarding parking for Public Hearing Item No. 16 (21-078) and
permits for the 714 Pacific Coast Highway Mixed Use project. (01:52:57)
Female caller #2725 played an audio recording of unidentified individuals sharing unsubstantiated
opinions on pedophilia, the LGBTQ community, and absence of religion in schools. (01:56:38)
COUNCIL COMMITTEE - APPOINTMENTS - LIAISON REPORTS, AB 1234 REPORTING, AND
OPENNESS IN NEGOTIATIONS DISCLOSURES
Councilmember Posey reported attending an Agenda Review meeting for an upcoming Vector Control
Board meeting to discuss a building for their new headquarters.
Councilmember Moser reported attending a Santa Ana Watershed Ambassador Mini Series, Workshop
II, on collaborating in the face of uncertainty; UCI Division of Continuing Education Public Policy Making
Academy, Formal Training for Public Officials; meeting with Downtown property and business owners;
meeting with leadership from Jamboree Housing regarding their permanent housing program; meeting
with Visit HB regarding diversity, inclusion and equity efforts for the tourism industry; attending a
Human Relations Task Force meeting; receiving an update from Assemblywoman Cottie Petrie-Norris
regarding Covid-19 vaccination plans; attending a Youth Board meeting; listening in on a Downtown
Restaurant and Retail call; attending a Downtown Business Improvement District meeting; meeting with
the Olson Company regarding a proposed residential development; and meeting with Huntington Beach
Interim Police Chief Harvey, Huntington Beach Fire Chief Haberle, and staff and volunteers with Wound
Walk OC to discuss crime reduction programs.
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Councilmember Kalmick reported attending the Orange County Sanitation District Board Orientation
Meeting; meeting with Huntington Beach Homeless United; attending a Jet Noise Commission meeting;
meeting with the Teamsters; meeting with staff to discuss a noise ordinance update; meeting with the
applicant and appellant for an issue to be discussed later this evening; and attending a White House
Governmental Affairs weekly briefing for state and local elected officials.
Councilmember Delgleize reported presenting at the UCI Division of Continuing Education Public Policy
Making Academy, Formal Training for Public Officials; attending a Board meeting of the Orange County
Transportation Authority, where it was announced a Board vacancy with details at www.OCTA.net, and
discussion on Measure M2, Environmental Clean-up Project grants, for watershed projects.
Mayor Pro Tem Ortiz reported participating on Mayor Carr’s behalf in a call with Orange County mayors
and County Health officials regarding COVID-19, and shared updates on the following topics: available
hospital beds, decreased positivity rates, decreased daily case figures, scheduling appointments for
testing, quarantine guidelines, vaccination pods, vaccine efficacy rates and reopening of schools.
Mayor Carr reminded everyone there are virtual Covid-19 Town Hall meetings on the first and third
Wednesday of each month at 7 PM to present the latest information; reported attending a Youth Board
meeting; Huntington Beach Council on Aging meeting; Orange County Sanitation Legislation and Public
Affairs meeting with updates for both the Federal and State levels, and she reported she was appointed
as the Representative to serve on the National Water Research Institute, and attended the Institute's
organizational meeting; attended an Economic Development Committee meeting; and a meeting of the
Downtown Business Improvement District.
CITY MANAGER’S REPORT
8. 21-160 Regional Housing Needs Assessment (RHNA) Update
City Manager Chi provided an update on the RHNA appeal process, noting an apparent increase in the
number of required units from 13,337 to 13,368, and that final determination of units is expected in
early March. He also reported that the Community Development Department is focusing on outreach
activities to be prepared to inform the public after the early March determination.
Councilmember Posey asked City Manager Chi to include in his next RHNA report the cost to the City
for RHNA non-compliance for the period of May 2015 to March 2020 to show even estimated amounts
for builder fees, property taxes, sales taxes, and include available grants. City Manager Chi
acknowledged the request.
CITY CLERK’S REPORT
9. 21-123 Presentation on the Safe and Sane Fireworks Stand Application and Lottery
Process for 2021
City Clerk Estanislau presented a PowerPoint communication entitled Safe and Sane Fireworks Stand
Application and Lottery Process 2021 with slides titled: Application Period: March 1 through March 31,
Civic Organizations (5), High School (5), Private High Schools, Youth Sports, Prior to March 1, At the
conclusion of the lottery drawing, and Questions.
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Councilmember Posey asked whether Covid-19 impacted fireworks sales last year compared to the
year prior, and since sales are not reported to the City Clerk's office it was suggested the Finance
Department might be able to provide that information so it can be shared at the lottery drawing.
CONSENT CALENDAR
10. 21-116 Approved and Adopted Minutes
A motion was made by Posey, second Kalmick to approve and adopt the City Council special meeting
minutes dated January 5, 2021; and, approve and adopt the City Council/Public Financing Authority
regular meeting minutes dated February 1, 2021, as written and on file in the office of the City Clerk.
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
11. 21-072 Approved, accepted, and authorized the appropriation of a donation in the amount
of $150,000 from the Friends of the Huntington Beach Public Library
A motion was made by Posey, second Kalmick to approve, accept, and authorize the appropriation of
$150,000 donation from the Friends of the Huntington Beach Public Library during Fiscal Year 2020/21
for use to expand the collection.
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
12. 21-111 Received and filed a status update on the 6th Cycle Regional Housing Needs
Assessment (RHNA) process
A motion was made by Posey, second Kalmick to receive and file the Regional Housing Needs
Assessment process status update.
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
13. 21-107 Adopted Resolution No. 2021-09 authorizing the Director of Public Works to
request a project delay from the Orange County Transportation Authority (OCTA)
for the commencement of the Bolsa Chica Street/Valley View Street Corridor
Project
A motion was made by Posey, second Kalmick to adopt Resolution No. 2021-09, "A Resolution of the
City Council of the City of Huntington Beach Authorizing a Request to Pursue a Project Delay from the
Orange County Transportation Authority (OCTA) for the Bolsa Chica Street/Valley View Street Corridor
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Project - Project P Regional Traffic Signal Synchronization Program - Comprehensive Transportation
Funding Program."
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
14. 21-047 Authorized execution of a License Agreement with C3 DLG 414 Main Street, LLC,
for the 414 Main Street Mixed-Use Project located on the east side of Main Street
between Orange Avenue and Pecan Avenue
A motion was made by Posey, second Kalmick to authorize the Mayor and City Clerk to execute and
record the, "License Agreement between the City of Huntington Beach and C3 DLG 414 Main Street,
LLC, to Provide Installation and Maintenance of Landscaping and Landscaping Improvements in the
Public Right-of-Way," for the 414-424 Main Street mixed-use project (Attachment 1).
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
15. 21-067 Accepted bid and authorized execution of a construction contract with Alfaro
Communication Construction, Inc., in the amount of $284,270 for the construction
of fiber optic communications to Murdy Park, the Joint Powers Training Facility
and the Water Operations Facility, CC-1593 and CC-1594
A motion was made by Posey, second Kalmick to accept the lowest responsive and responsible bid
submitted by Alfaro Communication Construction, Inc., in the amount of $284,270; and, authorize the
Mayor and City Clerk to execute a construction contract in a form approved by the City Attorney.
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
PUBLIC HEARING
16. 21-078 Approved Conditional Use Permit No. 20-012, Coastal Development Permit No. 20-
013, and Special Permit No. 20-001 (714 Pacific Coast Highway Mixed Use)
City Manager Chi introduced Senior Planner Hayden Beckman and Community Development Director
Ursula Luna-Reynosa who presented a PowerPoint communication entitled 714 PCH Mixed Use
Project – Appeal with slides titled: Project Site, Project Request, Floor Plan / Ground Floor, Floor Plan /
Second Floor, Floor Plan / Third Floor, Floor Plan / Rooftop, PC Action and Appeal, Analysis (2),
Design Review Board, Staff Recommendation, Questions?, (Drawing), and HB Mixed Use.
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Councilmember Delgleize and Director Luna-Reynosa discussed further the building code requirements
related to firewalls and setbacks at the time the adjacent property was developed at 716 Pacific Coast
Highway.
Mayor Carr and Director Luna-Reynosa discussed the different setback requirements for live-work
projects such as 716 Pacific Coast Highway vs mixed-use projects such as 714 Pacific Coast Highway.
Mayor Carr opened the Public Hearing.
City Clerk Robin Estanislau announced the supplemental communications received by her office
following distribution of the Council Agenda packet:
Public Hearing
#16 (21-078) PowerPoint Presentation titled 714 PCH Mixed Use Project – Appeal submitted by Ursula
Luna-Reynosa, Director of Community Development.
#16 (21-078) Email communication regarding the appeal of the proposed development on 714 PCH
received.
#16 (21-078) Revised Plans for 714 PCH received from Hayden Beckman, Senior Planner.
Public Hearing Speakers — 5 Call-In Speakers
Isam Hanna, owner of the property adjacent to 714 Pacific Coast Highway (PCH), was called to speak
and shared his perspective for his project 716 PCH, including his installation of the special 2-hour rated
firewall, and his opinion that his property is also a mixed-use project. He further explained that City
staff dictated the setback measurement so that it was compatible with the adjacent hotel, and added his
project was not approved with a third-floor plaza because according to City staff, it was not compatible.
John Scandura, Member of the Planning Commission but speaking on his own behalf, was called to
speak and described how the 714 PCH mixed-use project was approved by the Zoning Administrator,
and appealed to the Planning Commission by Mr. Hanna, adjacent property owner at 716 PCH. He
described how Mr. Hanna’s project constructed 8-10 years prior had more restrictive setback
requirements, and his understanding that City staff at that time requested they match the existing,
adjacent hotel. Mr. Scandura added that Director Luna-Reynosa’s information shared tonight related to
a firewall issue and differences between residential and commercial codes was not shared with the
Planning Commission. He also expressed concerns that staff processing the current application were
not involved in processing Mr. Hanna's project, and agreed to the current proposal despite setbacks
that differ from the adjacent Hanna property and the adjacent hotel. He stated his opinion that the
Commissioners who voted to deny this project believe it is inappropriate to apply different development
requirements for two adjacent properties, adding his opinion that had the City allow Mr. Hanna the
same zero setbacks, he could have built a larger structure. Mr. Scandura also recommended that the
entertainment room on the third floor be modified, as a two-bedroom unit meets parking requirements,
but the entertainment room as now configured can easily be converted into a third bedroom requiring
another parking space.
Flora Hoang, speaking on behalf of her uncle and aunt, property owners of the project at 714 PCH, was
called to speak and explained that their absence at the Planning Commission hearing as due to
COVID-19. Ms. Hoang stated the property owners have been very considerate of their neighboring
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properties while designing their building, and they are concerned about being "punished" because of
decisions that were made in the past for the 716 PCH property, and asked that the City Council
approve the 714 PCH project so they can move forward.
Darian Radac, Project Architect, Novum Architecture, and resident of Huntington Beach, was called to
speak and described the consideration taken to minimize this project’s impact on the neighbor at 716
Pacific Coast Highway. Mr. Radac described several areas of set-back that exceed requirements,
moving the roof-top deck, and opening up an 8 1/2 foot wide by 7 foot high area to allow for greater
visibility for the 716 Pacific Coast Highway property, in defining their efforts to mitigate the impact of
their project on Mr. Hanna's property.
Mike Adams, who represented Mr. Hanna for his project at 716 Pacific Coast Highway, was called to
speak. He explained that the setback is 0–3 feet on the side, and 0–5 feet on the front to allow for
discretion by the approving body to ensure compatibility, and added that the first project should set the
standard. Mr. Adams suggested that the corridor that is on the zero property line, 4 feet wide to get
from the front to the rear of the property for accessing the parking from the commercial suite, be
eliminated, and the structural wall be moved back 4 feet. He also explained how cantilevering the
upper residential portion back to the now-open corridor area would provide Mr. Hanna and the
neighbors to the east increased light and air, and would provide a better walkway for the commercial
suite. Mr. Adams suggested how changing the interior garage openings from a carport design to a
single garage design would create the space needed, and added that the Main Street lot line is where
the zero foot setback was proposed for pedestrian safety, but that was not intended for Pacific Coast
Highway where traffic flows at 45 miles per hour.
There being no more speakers, Mayor Carr closed the Public Hearing.
Community Development Director Ursula Luna-Reynosa stated for the record that 714 Pacific Coast
Highway had an active oil well at the time Mr. Hanna submitted his project application, and no structure
can be placed closer than 100 feet to an active oil well. The City approved an "alternate means and
method" as described in the Building Code, to accommodate Mr. Hanna and allowed him to build on his
property. Director Luna-Reynosa added that the oil well was abandoned just prior to Mr. Hanna starting
his development, and he had an opportunity to revise his plans, including the 2-hour rated firewall. She
also clarified that the Downtown Specific Plan states that front yard setbacks are zero to five feet
maximum with no reference to whether the front yard faces Main Street or Pacific Coast Highway, and
interior yard setback is zero with no maximum amount provided.
Councilmember Kalmick stated that his analysis shows this basic Mixed-Use project meets current
codes, and each project needs to be judged on its own merits. Councilmember Kalmick stated he would
like to add conditions for approval which stipulate 1) the media room on the third floor cannot be
converted to a third bedroom (which would require another parking space), 2) there be a trash
management program for the building to ensure the trash bins are taken to the curb, and 3) a parking
agreement for alternate parking if the parking lift equipment malfunctions. Councilmember Kalmick
believes this plan follows code, the Downtown Specific Plan, and includes appropriate accommodations
for the neighbors.
Councilmember Posey described the multiple discussions he had with the appellant, staff and
Councilmember Kalmick, and described how building standards change through the years.
Councilmember Posey stated his support for the project, including the conditions as described by
Councilmember Kalmick.
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Councilmember Delgleize stated her support for the staff recommendation.
Councilmember Peterson, Director Luna-Reynosa and Assistant Chief City Attorney Vigliotta discussed
that the project changes did not go back to the Planning Commission for consideration before coming
to City Council, and Councilmember Peterson stated his opinion that the proposed changes should
have had Planning Commission review prior to Council's consideration.
Councilmember Kalmick stated his opinion that similar situations have happened before with other
projects where minor changes have been made.
Director Luna-Reynosa and Assistant Chief City Attorney Vigliotta confirmed that detailed changes to
Conditions of Approval are not required because Code Enforcement will address issues such as trash
management if it becomes necessary.
Mayor Carr stated there appears to be confusion when live-work and mixed-use units are next to each
other in the same District, yet it appears that everyone has followed the rules, so she supports this
project believing they have included good neighbor accommodations.
Councilmember Kalmick confirmed with Senior Planner Beckman that not allowing a third bedroom for
the third-floor residence was already stipulated by the Planning Commission.
A motion was made by Kalmick, second Carr to find the proposed project exempt from the California
Environmental Quality Act pursuant to Section 15332 of the CEQA Guidelines; and, approve
Conditional Use Permit No. 20-012, Coastal Development Permit No. 20-013, and Special Permit No.
20-001 with findings and conditions of approval (Attachment No. 1), as amended to include a
condition of approval that provides for a parking management plan.
The motion as amended carried by the following vote:
AYES: Delgleize, Carr, Posey, Moser, and Kalmick
NOES: Peterson, and Ortiz
ADMINISTRATIVE ITEMS
17. 21-100 Approved an Extension of the Temporary Closure of the Second Block of Main
Street to Vehicular Traffic Through Labor Day (September 6, 2021); Authorized
Staff to Engage an Urban Design Firm; and, Appointed the Mayor, Mayor Pro Tem,
and a City Council Member to Serve on an Ad Hoc Downtown Urban Design Study
Committee
City Manager Chi provided a brief history of the item and introduced Deputy Director of Community
Development Steve Holtz. Deputy Director Holtz described the Council proposal to extend the
temporary closure of the Second Block of Main Street through Labor Day, shared that a majority of
affected businesses and property owners support the item, and described the request to form an Ad
Hoc Downtown Urban Design Study Committee to help analyze design opportunities.
Councilmember Delgleize and Director Luna-Reynosa discussed the timeframe and process for the
Downtown Urban Design project, which could conservatively take approximately three months, after
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which there would be the public engagement process. Councilmember Delgleize shared support to
consider the concerns not only the restaurants, but also the retail establishments.
Councilmember Peterson suggested that before considering an urban study, allow time for life to return
to normal, and receive input and direction from all of the businesses, not just the Business
Improvement District Board, rather than asking a consultant to provide options for the affected business
owners to consider. Councilmember Peterson also stated his opinion that the opening of the Second
Block of Main Street coincide with when the State Covid-19 restrictions are lifted rather than to a
specific date.
Councilmember Posey expressed his opinion that the Downtown businesses should have certainty, and
that the Second Block of Main Street should be closed until restaurants are allowed 100 percent indoor
dining, and it is prudent to begin the planning for options after the COVID-19 restrictions are lifted.
Councilmember Moser stated support for Councilmember Posey's comments, and believes it is now
time to bring in a professional to help determine what that area could look like.
Mayor Pro Tem Ortiz stated his support for this item and the importance of moving ahead with plans to
enhance the business environment not only in the Downtown area, but the City as a whole.
Mayor Carr stated her excitement to support this item and belief that moving ahead now will build on
the momentum created when the First and Second Blocks of Main Street are closed to vehicular traffic,
and she expects that the process will include input from businesses in all industries as well as the area
residents.
Councilmember Kalmick described his involvement with the Downtown Image Ad Hoc Committee set
up back in 2007 or 2008 after the Downtown Specific Plan update, and stated his support for moving
ahead now and bringing in consultants with specific knowledge to create a new dynamic plan.
Councilmember Kalmick volunteered to be the Councilmember on the Ad Hoc Committee.
Councilmember Moser explained the importance of also listening to the concerns of the Second Block
of Main Street businesses who do not support continued closure of the street, and finding ways to make
them more visible.
Councilmember Peterson reiterated that he supports keeping the Second Block of Main Street closed
to vehicular traffic until 100 percent indoor dining is allowed, but would rather see money spent on
business micro grants instead of a design consultant.
Councilmember Posey recommended that Councilmember Kalmick serve on the Ad Hoc committee.
A motion was made by Posey, second Ortiz to authorize the City Manager to continue the temporary
closure of the second block of Main Street to vehicular traffic to accommodate outdoor dining and retail
in the public right-of-way through September 6, 2021; and, authorize staff to engage an Urban Design
Firm; and, establish an Ad Hoc Downtown Urban Design Study Committee; and, appoint the Mayor,
Mayor Pro Tem, and City Council Member (Kalmick) to the Ad Hoc Committee.
The motion carried by the following vote:
AYES: Delgleize, Ortiz, Carr, Posey, Moser, and Kalmick
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NOES: Peterson
18. 21-124 Received and Filed Year-End Audit results for the FY 2019/20 Comprehensive
Annual Financial Report (CAFR) and FY 2020/21 Mid-Year Budget Adjustments &
Updates
City Manager Chi introduced Chief Financial Officer (CFO) Dahle Bulosan who jointly presented with
Assistant Chief Financial Officer Sunny Rief and Auditor Jennifer Farr a PowerPoint communication
entitled FY 2019/20 Year-End Audit Results & FY 2020/21 Mid-Year Budget Update with slides titled:
Overview, FY 2019/20 Audit & Year-End Results (2), FY 2019/20 Audit Reports Issued, Internal
Controls, Areas of Audit Focus in FY 2019/20, FY 2019/20 Performance (Audited), FY 2019/20 General
Fund (Audited), General Fund Balance (2), FY 2020/21 Mid-Year Budget Update (2), Mid-Year Budget
Adjustment Requests, General Fund Adjustments, Other Fund Adjustments (2), FY 2021/22 Budget
Development Calendar (2), Long-Term Budget Strategy Being Developed, UAL Refinance, Other
Budget Adjustments Being Considered, Recommended Actions, and Questions
Councilmember Posey and City Manager Chi briefly discussed AB109, the State's criminal justice
reform program, and Councilmember Posey asked that Chief Financial Officer Bulosan provide a
financial impact report on AB109 and any costs to the City associated with incarcerations, prosecutions,
and detentions.
Mayor Carr and City Manager Chi discussed the UAL payments to CalPERS which is serviced at seven
percent (7%) interest, and the amount CalPERS returns is adjusted annually as of June 30th. City
Manager Chi confirmed that the UAL obligation currently is $435M.
A motion was made by Delgleize, second Kalmick to receive and file the FY 2019/20 Comprehensive
Annual Financial Report; and, approve mid-year budget adjustments to the FY 2020/21 Revised Budget
in the funds and by the amounts contained in Attachment 1.
The motion carried by the following vote:
AYES: Peterson, Kalmick, Ortiz, Carr, Posey, Moser, and Delgleize
NOES: None
ORDINANCES FOR INTRODUCTION
19. 21-052 Approved as amended for introduction Ordinance No. 4228 to amend Chapter
13.10 of the Huntington Beach Municipal Code Prohibiting the Storage of Personal
Property on Public or Private Property
City Manager Chi presented a PowerPoint communication titled Update of Personal Property Storage
Regulations with slides titled: Navigation Center - Positive Impacts on City Operations, Current
Personal Property Storage Regulations Are Overly Broad, Current Municipal Code Language,
Recommended Limitations To Restrict Current Allowable Practices, Consider Modifications To The
Penalties Section Of The Code, Summary & Recommendation, and Questions.
Councilmember Moser, City Manager Chi and Interim Police Chief Harvey discussed how people prove
items are their property when claiming, and that no fines are assessed upon retrieval, nor is there any
interest in seeking retribution for any contraband.
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Councilmember Peterson thanked Interim Police Chief Harvey and City Attorney’s Office for coming up
with a humane solution to handling what can be considered a public health and safety issue, and
moved to approve the item. Mayor Pro Tem Ortiz would later provide a second to the motion.
Councilmember Delgleize presented concerns related to the removal of property as expressed by many
public speakers, and Interim Police Chief Harvey explained that the language in this ordinance doesn't
signal a change in approach, but is an effort to be more specific, and provides the ability to prosecute
as an infraction or as a misdemeanor.
There was additional discussion on how items such as guns or hand grenades that could be evidence
of a crime is addressed in other areas of the code, and not in this ordinance. Interim Police Chief
Harvey stated there is no intention to prosecute if contraband or narcotics are found, that confiscated
property will be stored securely at the City Yard, and reiterated that a process is in place to reclaim lost
property. Councilmember Delgleize stated her support for this item.
Councilmember Moser stated her support for clearly defining regulations for the storage of personal
property, and shared her concern that to some people this effort appears to criminalize homelessness,
as well as the possibility that a violation could be prosecuted as a misdemeanor. She asked that the
ordinance be amended to only allow prosecution as an infraction, and remove the misdemeanor option.
She made a substitute motion to reflect the change, and requested that staff report back regularly with
statistics so that in 6 to 9 months, Council can evaluate if the misdemeanor option needs to be added
back in. Councilmember Kalmick seconded the substitute motion.
Councilmember Posey referenced the current anti-camping and curfew ordinances which can be
enforced now that the Navigation Center is operational, and the seizure and removal of personal
property has to have an objective of addressing homelessness issues such as access to services, and
therefore he is in support of the substitute motion to enforce as an infraction.
Councilmember Kalmick stated his support for the comments made by Councilmembers Moser and
Posey, and added that he would like to add to the motion that staff report the number of tickets every
90 days for further evaluation of the situation and to determine if changes are needed.
Mayor Pro Tem Ortiz stated from his perspective a warning is issued as an infraction, but the option to
issue a misdemeanor for the chronic homeless person who is not interested in utilizing available
services may be necessary to get their attention and help them move somewhere else. Mayor Pro Tem
Ortiz stated it is important to maintain safe and healthy beaches, public spaces and parks for the
general public, and he would also like to have a report in 90 days to review the impact of this change.
Councilmember Peterson stated his opinion that having the misdemeanor option available is important,
and he believes Police Department staff are capable of choosing the right tool for each situation and
Council should not limit their options.
Councilmember Delgleize invited Interim Police Chief Harvey to share his comments on the discussion,
and Chief Harvey explained that this is not a new ordinance, and that over the last six years, 61
citations have been issued. He explained the intent of the amendment is to bring clarification to content
that lacks specificity, and his opinion that the ordinance be enforced with compassion, objectivity and
balance while ensuring public spaces remain safe for their intended use while also protecting the
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February 16, 2021
Page 16 of 16
property rights of the homeless population. The ordinance as currently written only allows for a
misdemeanor, and this amendment will include the possibility of issuing an infraction.
Mayor Carr clarified the substitute motion by Moser, seconded Kalmick, to approve for introduction
Ordinance No. 4228, "An Ordinance of the City of Huntington Beach Amending Chapter 13.10 of the
Huntington Beach Municipal Code Prohibiting the Storage of Personal Property on Public or Private
Property" as amended to revise Section 13.10.090 Violations, Penalties and Enforcement to read,
"Notwithstanding any other provision in this Code, each violation of the provisions of this
Chapter shall be enforced alternatively as an infraction."
The substitute motion carried by the following vote:
AYES: Delgleize, Ortiz, Carr, Posey, Moser, and Kalmick
NOES: Peterson
COUNCILMEMBER COMMENTS (Not Agendized) — None
ADJOURNMENT — At 10:06 PM to the next regularly scheduled meeting of the Huntington Beach City
Council/Public Financing Authority on Monday, March 1, 2021, at 4:00 PM in the Civic Center Council
Chambers, 2000 Main Street, Huntington Beach, California.
INTERNET ACCESS TO CITY COUNCIL/PUBLIC FINANCING AUTHORITY AGENDA AND
STAFF REPORT MATERIAL IS AVAILABLE PRIOR TO CITY COUNCIL MEETINGS AT
http://www.huntingtonbeachca.gov
__________________________________________
City Clerk and ex-officio Clerk of the City Council of
the City of Huntington Beach and Secretary of the
Public Financing Authority of the City of Huntington
Beach, California
ATTEST:
_______________________________________
City Clerk-Secretary
_________________________________________
Mayor-Chair
34
City of Huntington Beach
File #:21-106 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Sean Crumby, Director of Public Works
Subject:
Adopt Resolution No. 2021-13 authorizing submittal of a Grant Application to the California
Department of Resources Recycling and Recovery for Rubberized Asphalt Concrete (RAC)
Statement of Issue:
A resolution of the City Council is necessary to submit a Rubberized Asphalt Concrete (RAC) grant
application to the California Department of Resources Recycling and Recovery (CalRecycle).
Financial Impact:
The resolution will allow for the application of up to $250,000 in grant funding.
Recommended Action:
Adopt Resolution No. 2021-13, “A Resolution of the City Council of the City of Huntington Beach
Authorizing Submittal of Applications for all CalRecycle Grants for which the City of Huntington Beach
is Eligible.”
Alternative Action(s):
Do not adopt the Resolution and do not apply for eligible grants.
Analysis:
The City Council has adopted policies that are mindful of protecting the environment, and practices
that conserve natural resources, and minimize environmental impacts. In support of these policies,
the proposed resolution authorizes the application for grants that encourage the use of rubberized
asphalt in City pavement projects.
Rubberized asphalt concrete (RAC) utilizes crumb rubber derived from waste tires. Its use prolongs
the life of the street, reduces traffic noise, and provides an opportunity to reduce landfill waste and
recycle tires. The City has used RAC in its arterial rehabilitation projects for the past 10 years,
utilizing approximately $1.1M in CalRecycle grant funds. This use resulted in the diversion of
approximately 363,000 waste tires that would have otherwise ended up in a landfill.
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File #:21-106 MEETING DATE:3/1/2021
The current Resolution No. 2014-88, authorizing these applications, was good for five years and
expired in October 2020, necessitating the adoption of a new resolution. It is anticipated that the City
could receive up to $250,000 in grant funding over the next five years.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Enhance and maintain infrastructure
Attachment(s):
1. Resolution No. 2021-13, “A Resolution of the City Council of the City of Huntington Beach
Authorizing Submittal of Applications for all CalRecycle Grants for which the City of Huntington
Beach is Eligible.”
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City of Huntington Beach
File #:21-162 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Chris Slama, Director of Community & Library Services
Subject:
Approve and authorize execution of Amendment No. 1 to Cooperative Agreement No. C-8-1882
for the Orange County Enhanced Mobility for Seniors and Disabled (EMSD) Grant Program
between the Orange County Transportation Authority (OCTA) and the City of Huntington
Beach
Statement of Issue:
The Community & Library Services Department is requesting approval of Amendment No. 1 to
Cooperative Agreement No. C-8-1882 (Agreement) for the Orange County Enhanced Mobility for
Seniors and Disabled (EMSD) Grant Program between the Orange County Transportation Authority
(OCTA) and the City of Huntington Beach. On April 1, 2019, City Council approved the Agreement
with a term of October 1, 2018, through September 30, 2020. Amendment No. 1 will extend the term
through September 30, 2023.
Financial Impact:
Not applicable. The City’s match obligation of 20% was met in Fiscal Year 2019/20. No additional
funds are required to approve the Recommended Action.
Recommended Action:
Approve and authorize the Mayor to execute “Amendment No. 1 to Cooperative Agreement No. C-8-
1882 Between the Orange County Transportation Authority and City of Huntington Beach” for a term
of May 23, 2019, through September 30, 2023.
Alternative Action(s):
Do not approve Amendment No. 1 to Cooperative Agreement No. C-8-1882 with the Orange County
Transportation Authority and direct staff accordingly.
Analysis:
The “Surf City Seniors on the Go!” senior transportation program is a donation-based program that
provides curb-to-curb transportation services for Huntington Beach senior citizens ages 60 years and
over, transporting riders to medical appointments, shopping centers, and the Senior Center in Central
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File #:21-162 MEETING DATE:3/1/2021
Park. There is a recurring need for Community and Library Services to replace vehicles and other
equipment in order to meet the increasing demand to transport senior citizens to and from their
residences to locations within the community.
In 2019, the OCTA EMSD program offered grant opportunities to non-profit organizations and local
public agencies to assist with the purchase of vehicles and other needed equipment. For the “Surf
City Seniors on the Go!” program, the EMSD grant funds replaced three vehicles, including one small
bus (8 accessible seats and 1 wheelchair) and two medium buses (11 accessible seats and 2
wheelchairs). The grant also paid a portion of transportation software upgrades, which has helped to
eliminate the need for costly GPS tracking and push-to-talk radios, while increasing service and
routing efficiency. The total OCTA obligation for the vehicles and the transportation software was
approximately $229,000, with the City paying approximately $64,000 of the combined purchase.
The purpose of the Amendment is to extend the agreement to cover the useful life expectancy of the
vehicles purchased through the OCTA EMSD grant. No additional funds or financial obligations are
needed.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Community Engagement
Infrastructure & Parks
Attachment(s):
1) Amendment No. 1 to Cooperative Agreement No. C-8-1882 between the Orange County
Transportation Authority and the City of Huntington Beach extending the term through
September 30, 2023.
2) Cooperative Agreement No. C-8-1882 between the Orange County Transportation Authority
and the City of Huntington Beach for a term of October 1, 2018, through September 30, 2020.
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City of Huntington Beach
File #:21-173 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Sean Crumby, Director of Public Works
Subject:
Authorize the Public Works Director to request a two-year extension from the Orange County
Transportation Authority for the City’s Project V Grant for the Huntington Beach Southeast
Rideshare Pilot Program
Statement of Issue:
In the spring of 2020, the City was awarded a Project V grant from the Orange County Transportation
Authority (OCTA) for the Huntington Beach Southeast Rideshare Pilot Program. Due to COVID-19,
the program could not move forward as planned. OCTA is requesting that agencies make a formal
extension request.
Financial Impact:
Matching funds for the first year of the grant program are included in current fiscal year budget in Air
Quality Management District Fund (AQMD) account 20185301.69505. This funds will be carried over
into next fiscal year.
Recommended Action:
Authorize the Public Works Director to request a two-year extension of the timeframe for the City’s
Project V Grant for the Huntington Beach Southeast Rideshare Pilot Program.
Alternative Action(s):
Do not authorize the extension request. By not requesting an extension, the City would forego the
awarded grant funds, if a formal request is not made.
Analysis:
On January 21, 2020, the City Council adopted Resolution No. 2020-02 approving the submittal of an
application to OCTA for funding under the Project V Community-Based Transit/Circulators Program.
Under Measure M2, OCTA developed the Project V Community-Based Transit/Circulators Program,
which established a competitive process to enable local jurisdictions to develop local transit services
that complement regional transit services and meet needs in areas not adequately served by regional
transit. Projects must meet specific criteria in order to compete for funding through this program. In
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addition, local jurisdictions are required to demonstrate the ability to provide matching funds.
The City proposed a two-year pilot program to provide residents reduced cost, fixed fee, shared rides
to downtown Huntington Beach. This would connect riders to OCTA bus routes. Staff identified the
southeast area of Huntington Beach as the pilot area to gauge the effectiveness of the program. This
area was chosen due to the gaps in existing bus service, particularly from north to south with a 2.3-
mile gap between routes 178 and 1. A segment of 35 (Brookhurst from Hamilton to PCH) and route
173 were recently eliminated. A map of the proposed service area, including current active bus
routes, is attached.
The grant was awarded to the City in the early spring of 2020. The total two-year program cost is
estimated at $1,007,800, with OCTA providing $806,240 in funding , and the City providing a 20%
match of $201,560; the first year of which is currently budgeted in the AQMD fund.
The original proposed start date for the program was July 1, 2020. However, due to the COVID-19
pandemic, the program was put on hold. Not surprisingly, many other agencies were forced to delay
their respective projects/programs under Project V as well. Staff received communication from OCTA
that if the City is unable to proceed with the program by June 30, 2021, a formal extension request
needs to be submitted to OCTA. Due to the uncertainty that continues with the pandemic situation,
staff is recommending that the City request a two-year extension to the timeframe of the grant.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Community Engagement
Attachment(s):
1. Pilot Program Area Map
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CAUTION WHEN USING THIS MAP
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City of Huntington Beach
File #:21-164 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Sean Crumby, Director of Public Works
Subject:
Adopt Resolution No. 2021-16 authorizing the application for a Drinking Water State Revolving
Fund (DWSRF) Grant to fund the proposed Old Pirate Lane State Small Water System (SSWS)
Consolidation project, and designate the Director of Public Works as an authorized
representative for the application
Statement of Issue:
Residents on Old Pirate Lane have been operating an independent water system since the street
was constructed. The Orange County Department of Health recently identified high-nitrate levels in
the one water well servicing the street, which need to be addressed. The cost of these
improvements are high when funded by 13 properties, and as such, the Old Pirate Lane State Small
Water System (OPL SSWS) is seeking to consolidate into the City’s potable water system. As the
consolidating agency, the City of Huntington Beach is applying for a Drinking Water State Revolving
Fund (DWSRF) Grant to fund the project. The DWSRF Grant requires the City Council to adopt a
resolution authorizing the submission of an application, and designating an authorized representative
to sign documents pertaining to the funding application.
Financial Impact:
The total estimated cost of the project, including contingency and supplemental expenses, is
$346,000. The Drinking Water State Revolving Fund Grant will cover up to 75% ($259,500) of the
necessary project funds. An application for a Supplemental Environmental Project grant through the
Santa Ana Regional Water Quality Control Board has been completed seeking to fund the remaining
25% of the project cost ($86,500).
Recommended Action:
A) Adopt Resolution No. 2021-16, “A Resolution of the City Council of the City of Huntington Beach
Approving the Application for Drinking Water State Revolving Grant Funds From the California Water
Resources Control Board” to fund the proposed Old Pirate Lane State Small Water System
Consolidation project; and,
B) Designate the position of Public Works Director as the authorized representative of the City of
Huntington Beach, on behalf of the Old Pirate Lane State Small Water System, to sign documents
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File #:21-164 MEETING DATE:3/1/2021
pertaining to the funding application.
Alternative Action(s):
Take no action, and provide staff with alternative direction.
Analysis:
The Old Pirate Lane State Small Water System serves 13 residences on Old Pirate Drive, extending
west of Graham Street approximately one-quarter mile north of Warner Avenue. On January 30,
2020, the Orange County Department of Health identified high-nitrate levels in the well water
supplying the system. In response, the City provided the 13 affected residences temporary
emergency access to the City’s potable water system through an extension from Graham Street.
Since all 13 residences are supplied through one meter and the system lacks redundancy, the
temporary configuration does not meet City standards for a permanent installation.
The Old Pirate Lane community, State Water Board, and City explored several alternatives, including
rehabilitating or replacing the well. The State Water Board’s Division of Financial Assistance
recommended applying for the DWSRF Grant to fund consolidation of the Old Pirate Lane State
Small Water System into the City’s potable water system. As the City is the consolidating agency
absorbing the OPL SSWS, the State Water Board requested that the City act as the applicant agency ,
and apply for the grant on behalf of both parties to ensure appropriate utilization of grant funding.
The consolidation project primarily consists of the construction of approximately 260 linear feet of 8-
inch diameter potable water pipeline on Old Pirate Drive to extend the system to Doverton Drive, as
well as lateral lines and meters to each of the 13 affected residences. The project will also abandon
the existing well and distribution system, in accordance with State standards, and resolve related
property and easement issues.
Environmental Status:
The project is categorically except pursuant to Class 2, Section 15302 of the California
Environmental Quality Act.
Strategic Plan Goal:
Infrastructure & Parks
Attachment(s):
1. Resolution No. 2021-16
2. Vicinity Map
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19-7863/210126 1
RESOLUTION NO. 2021-16
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
HUNTINGTON BEACH APPROVING THE APPLICATION FOR DRINKING WATER
STATE REVOLVING GRANT FUNDS FROM
THE CALIFORNIA WATER RESOURCES CONTROL BOARD
WHEREAS, the Legislature and Governor of the State of California have provided funds
for the program shown above; and
The California Water Resources Control Board has been delegated, in part, the
responsibility for the administration of this grant program, establishing necessary procedures;
and
Said procedures established by the Water Resources Control Board require a resolution
certifying the approval of application(s) by the Applicant’s governing board before submission
of said application(s) to the State; and
The Applicant, if selected, will enter into an agreement with the State of California to
carry out the project.
NOW, THEREFORE, BE IT RESOLVED that the City of Huntington Beach:
1. Approves the filing of an application for Drinking Water State Revolving Grant Funds
for City of Huntington Beach a water system improvement Project; and
2. Certifies that Applicant understands the assurances and certification in the application;
and
3. If applicable, certifies that the project will comply with any laws and regulations
including, but not limited to, the California Environmental Quality Act (CEQA), legal
requirements for building codes, health and safety codes, and disabled access laws, and
that prior to commencement of construction all applicable permits will have been
obtained; and
4. Appoints the City Manager or designee, as agent to conduct all negotiations, execute and
submit all documents including, but not limited to, applications, agreements, payment
requests and so on, which may be necessary for the completion of the aforementioned
project(s).
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular
meeting thereof held on the ______ day of _______________________, 2021.
65
Resolution No. 2021-16
19-7765/208197 2
REVIEWED AND APPROVED:
________________________________
City Manager
_______________________________
Mayor
INITIATED AND APPROVED:
____________________________________
City Manager
APPROVED AS TO FORM:
____________________________________
City Attorney
66
ATTACHMENT 2.
OLD PIRATE LANE CONSOLIDATION PROJECT
CC-1624
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City of Huntington Beach
File #:21-168 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Ursula Luna-Reynosa, Director of Community Development
Subject:
Adopt Resolution No. 2021-18 (Supplemental Fee Resolution 13), establishing Short-Term
Rental (STR) Permit Fees; adding a Code Enforcement Officer I and Code Enforcement Officer
II to the Table of Organization; and amending the City’s Fiscal Year 20-21 Budget to the extent
necessary to accommodate such expenditures
Statement of Issue:
The City Council recently approved Ordinance No. 4224 establishing regulations, standards, and a
permitting process for Short-Term Rentals (STRs), which went into effect on February 19, 2021. In
order to implement these new processes, the City needs to establish permit application fees to offset
the costs of the program, including reviewing applications, issuing permits, and staffing to monitor
and enforce short-term rentals. Staff is seeking authorization to add two Code Enforcement Officers
to help perform these functions, and to amend the Fiscal Year 2020-21 Budget to incorporate STR-
related changes.
Financial Impact:
The anticipated revenue impact of adopting Short-Term Rental permit fees is:
·Initial Year: $210,000
·Future Years: $109,000
Revenues will offset the costs of permit application review and processing. Actual revenues will vary
based on permit applications received. If regulation is required beyond the level assumed for typical
permit review and approval, staff may bill hourly for code enforcement regulatory efforts.
The fully-burdened rate of the two additional Code Enforcement Officers is approximately $232,000
per year. It is anticipated that the City will achieve full cost recovery between the permit fee, cost
recovery, and Transient Occupancy Tax revenues generated by the Short-Term Rental program.
Recommended Action:
A) Adopt Resolution No. 2021-18, “A Resolution of the City Council of the City of Huntington Beach
Establishing Short-Term Rental Permit Fees by Amending Resolution 2016-59, as Resolution 2016-
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59, as Amended by Resolution Nos. 2017-28, 2017-44, 2017-46, 2018-01, 2018-29, 2018-48, 2018-
55, 2019-07, 2019-19, 2020-37 and 2021-17, Which Established a Consolidated Comprehensive
Citywide Master Fee and Charges Schedule (Supplemental Fee Resolution 13)”; and,
B) Authorize the addition of a Code Enforcement Officer I and Code Enforcement Officer II to the
Table of Organization; and,
C) Amend the City’s Fiscal Year 20-21 Budget to the extent necessary to accommodate such
expenditures.
Alternative Action(s):
Do not approve the recommended actions and direct staff accordingly.
Analysis:
On December 21, 2020, the City Council adopted Ordinance No. 4224 establishing regulations,
standards, and a permitting process for Short-Term Rentals (STR) affecting residential districts
citywide. The Ordinance went into effect on February 19, 2021.
The STR permit fees are intended to recover the full costs of typical staff time to review Short-Term
Rental Permit applications. Additionally, the costs of software and systems used to assist the City
with subscription, monitoring, and compliance of Short-Term Rentals are included in the cost of
service calculations. For Short-Term Rental properties that require code enforcement regulation
beyond the level assumed in the base permit fees, staff may use hourly billings for cost recovery
purposes.
Staff recommends that a fee of $589 for an initial application and $306 for an annual renewal. These
amounts are based on the time involved by the Planning Division and Code Enforcement Division in
implementing the Ordinance.
For purposes of comparison, staff surveyed other cities that impose a Short-Term Rental application
fee. Those fees are outlined in the table below:
City Fee Cost Recovery
Carpinteria $315 No information available
Long Beach $250 50% cost recovery
Newport Beach $169 100% cost recovery
Palm Springs $944 100% cost recovery
Pasadena $102 No information available
Pismo Beach $618 100% cost recovery
The proposed fee of $589 for an initial permit and $306 for an annual renewal would be toward the
middle of STR fees by cities that assess a permit fee for short-term rentals.
Hourly billing rates for Code Enforcement are included for City Council consideration as part of
Agenda Item 21-17, and are intended to be adopted and incorporated into the City’s Master Fee
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Schedule. Staff may use hourly billings for cost recovery purposes for enforcement. For example, a
property owner may be operating a short-term rental without the requisite permit and code
enforcement will spend time enforcing the City’s regulations. The only way to recoup costs
associated with those enforcement efforts will be to bill the offenders on the City’s actual costs to
enforce.
When staff presented short-term rental regulations to City Council for consideration, the City Council
directed staff to ensure that adequate code enforcement resources are available to effectively
enforce the regulations. Staff is recommending that two additional code enforcement officers (Code
Officer I and Code Officer II) will be sufficient to ensure adequate enforcement. The combined, fully-
burdened cost of two new officers is approximately $232,000 per year.
As previously presented at study sessions and when the short-term rental Ordinance was introduced,
by regulating short-term rentals, the City will receive Transient Occupancy Tax revenue. Between the
tax, permit fee, and cost recovery revenue, these two additional positions will cover 100% of the
costs of the two additional officers.
Environmental Status:
Not applicable as the action is not subject to the California Environmental Quality Act (CEQA) in that
pursuant to Section 15378(b)(4) of the CEQA Guidelines, the creation of government funding
mechanisms which do not involve any commitment to any specific project which may result in a
potentially significant physical impact on the environment, is not defined as a “project”.
Strategic Plan Goal:
Economic Development & Housing
Attachment(s):
1. Resolution No. 2021-18, “A Resolution of the City Council of the City of Huntington Beach
Establishing Short-Term Rental Permit Fees by Amending Resolution 2016-59, as Resolution
2016-59, as Amended by Resolution Nos. 2017-28, 2017-44, 2017-46, 2018-01, 2018-29,
2018-48, 2018-55, 2019-07, 2019-19, 2020-37 and 2021-17, Which Established a
Consolidated Comprehensive Citywide Master Fee and Charges Schedule (Supplemental Fee
Resolution 13)”
2. Cost of Service Analysis
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Cost of Service Calculation
Service Processing Time
Service Time Estimate Hourly Billing Rate Cost of Service
Description Planning
Code
Enforc'mt Total Planning
Code
Enforc'mt Planning
Code
Enforc'mt Total Note
Short-Term Rental Permit Processing
a) Initial Year 1.50 1.50 3.00 x $191 $150 =$287 $225 $512 [a]
b) Renewal 1.00 0.25 1.25 x $191 $150 =$191 $38 $229 [a]
Subscription / Monitoring / Compliance Platform
Description
Cost of
Service Notes
Subscription / Monitoring / Compliance
Annual Cost $27,600 [b]
Permit Count 357 [c]
Total $77
Cost of Service and Cost Recovery Analysis
Description
Cost of
Service Current Fee
Current
Cost
Recovery
Proposed
Fee
Cost
Recovery
Target
Annual
Volume
Revenue
Analysis at
Current
Fees
Revenue
Analysis at
Full Cost
Recovery
Revenue
Analysis at
Proposed
Fees
Revenue
Impact of
Proposed
Fee Change
Over /
(Under)
Recovery at
Current Fee
Over /
(Under)
Recovery at
Proposed
Fee
Short-Term Rental Permit Fee
a) Initial Year $589 $0 0%$589 100%357 $0 $210,273 $210,273 $210,273 ($210,273)$0
b) Renewal $306 $0 0%$306 100%357 $0 $109,242 $109,242 $109,242 ($109,242)$0
[a] Fully-burdened hourly rates calculated by ClearSource using FY 19/20 adopted budget. Planning services utilize uniform hourly billing rate for fee related services. Code Enforcement rate based on fully-
burdened hourly rate for Code Enforcement Officer II.
[b] Based on cost estimate received from prospective vendor.
[c] Permit count intended to serve as a reasonable estimate based on current permitting counts and recently adopted regulations authorizing hosted v. unhosted rentals.
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WORKING DRAFT MASTER FEE SCHEDULE - SHORT-TERM RENTAL PERMIT FEE
Maximum Fee Proposed Fee Note
1 Short-Term Rental Permit
Short-Term Rental Permit - Initial $589 $589 [a]
Short-Term Rental Permit - Renewal $306 $306 [a]
Code Compliance
2 Code Compliance Follow-Up, If Required
Code Enforcement Supervisor $198 $198
Senior Code Enforcement Officer $158 $158
Code Enforcement Officer II $150 $150
Code Enforcement Officer I $115 $115
Code Enforcement Technician $101 $101
Description
[a] Short-Term Rental Permit fees include initial code enforcement review required to conduct permit application review. For
Code Enforcement effort subsequent to issuance of initial permit, hourly billing rates apply.
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City of Huntington Beach
File #:21-192 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Chris Slama, Director of Community & Library Services
Subject:
Adopt Resolution No. 2021-20 (Carr Park Renovation) approving the application for Statewide
Park Development and Community Revitalization program Grant Funds to the State of
California Department of Parks and Recreation for Carr Park
Statement of Issue:
There is a need for City Council to approve Resolution No. 2021-20 for a grant application for the
Carr Park project under Round 4 of the Statewide Park Development and Community Revitalization
Program. (SPP)
Financial Impact:
As stated in the attached resolution, the City must certify that it has, or will have available, prior to
commencement of any work on the proposed projects, sufficient funds to complete the project. Per
the adopted FY 2020/21 budget, the projected Park Fund balance as of June 30, 2021, is
approximately $ 4.7 million. These funds are sufficient to cover the 10% match requirement of
$294,250 for the project. Should the City be awarded the Prop 68 grants, another Request for
Council Action (RCA) to accept the grant award and appropriate the funds will be submitted for City
Council approval.
Recommended Action:
Adopt Resolution 2021-20, “A Resolution of the City Council of the City of Huntington Beach
Approving the Application for Statewide Park Development and Community Revitalization Program
Funds (Carr Park Renovation).”
Alternative Action(s):
Do not approve the recommended action and direct staff accordingly.
Analysis:
In June of 2018, the State passed the Parks and Water Bond Act of 2018. (Proposition 68). The
Bond includes per capita and competitive grant opportunities for municipalities, park districts and non
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-profit agencies. Under the competitive category, Proposition 68 included the Statewide Park
Development and Community Revitalization Program Grant Funds. (SPP) Under Round 3 of the
program, the City applied for three projects - including renovations at Carr Park. While the City was
unsuccessful in receiving grant funds, the State Office of Grants and Local Services has advised that
we can resubmit projects from Round 3 of the grant program. Staff feels that the improvements at
Carr Park are still needed and meet the eligibility requirements of the SPP in terms of the lack of
open space in the surrounding community, the environmental enhancement and the special
population served. Carr Park is also listed in the current Parks and Recreation Master Plan and City
Council approved Playground Equipment Replacement Priority List for needed renovations.
As part of the grant application process, each project requires separate Authorizing Resolutions to be
adopted by City Council. The State requires that specific language be included in the resolutions.
Staff has worked through the City Attorney’s Office to review and prepare the resolution for Carr Park
(attached).
The estimated cost for this project is $2,942,500. If awarded the grant, the City would be required to fund a
10% match of the total project cost from Park Development Impact Fee Funds for this project at a total of
$294,250.
Should the City be awarded this grant, a separate action will be taken to City Council to accept the
grant award and appropriate the funds.
Environmental Status:
If awarded, this project will go through the appropriate environmental review as determined by the
Entitlement process.
Strategic Plan Goal:
Infrastructure & Parks
Attachment(s):
1. Resolution 2021-20, “A Resolution of the City Council of the City of Huntington Beach
Approving the Application for Statewide Park Development and Community Revitalization
Program Funds (Carr Park Renovation).”
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RESOLUTION NO. 2021-20
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF HUNTINGTON BEACH APPROVING THE APPLICATION
FOR STATEWIDE PARK DEVELOPMENT AND COMMUNITY REVITALIZATION
PROGRAM FUNDS
(CARR PARK RENOVATION)
WHEREAS, the State Department of Parks and Recreation has been delegated the
responsibility by the Legislature of the State of California for the administration of the Statewide
Park Development and Community Revitalization Grant Program, setting up necessary
procedures governing the application; and
Said procedures established by the State Department of Parks and Recreation require the
Applicant to certify by resolution the approval of the application before submission of said
application to the State; and
Successful Applicants will enter into a contract with the State of California to complete
the Grant Scope project;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Huntington Beach hereby:
1. Approves the filing of an application for the Carr Park Renovation.
2. Certifies that said Applicant has or will have available, prior to commencement of any
work on the project included in this application, the sufficient funds to complete the project.
3. Certifies that if the project is awarded, the Applicant has or will have sufficient funds
to operate and maintain the project.
4. Certifies that the Applicant has reviewed, understands, and agrees to the General
Provisions contained in the contract shown in the Grant Administration Guide.
5. Delegates the authority to the Director of Community Services to conduct all
negotiations, sign and submit all documents, including, but not limited to applications,
agreements, amendments, and payment requests, which may be necessary for the completion of
the Grant Scope.
6. Agrees to comply with all applicable federal, state and local laws, ordinances, rules,
regulations and guidelines.
7. Will consider promoting inclusion per Public Resources Code §80001 (b)(8 A-G).
19-7913/211279 1 78
Resolution No. 2021-20
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the day of , 2021.
REVIEWED AND APPROVED: INITIATED AND APPROVED:
__________________________ ___________________________________
City Manager Director of Community & Library Services
APPROVED AS TO FORM:
__________________________________
City Attorney
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City of Huntington Beach
File #:21-170 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Chris Slama, Director of Community & Library Services
Subject:
Adopt Ordinance No. 4228 to amend Chapter 13.10 of the Huntington Beach Municipal Code
Prohibiting the Storage of Personal Property on Public or Private Property
Approved as amended 6-1 (Peterson - No)
Statement of Issue:
The existing Huntington Beach Municipal Code (HBMC) Chapter 13.10 requires modification to
prevent the storage of personal property within public spaces and upon publicly owned and
maintained property, and to facilitate its removal when warranted. Additionally, while private property
owners currently have the ability within and upon their property to remove and dispose of stored or
abandoned items, there is currently no specific criminal statute to bring enforcement action.
The storage of personal property within public spaces in Huntington Beach, including but not limited
to parks, beaches, and sidewalks, is not consistent with the intended public use(s) of these locations,
and the presence of unknown and potentially dangerous items creates an undue public safety
concern for the users of these public spaces. The City of Huntington Beach responds regularly to
quality of life complaints from residents related to the storage of personal property in public places
including visible trash, discarded and clearly abandoned property, as well as unusable and unwanted
property. In addition, hypodermic needles and syringes have been discovered among this property.
Currently, City employees are limited in their ability to remove this property unless it is clearly refuse,
or is soiled or otherwise contaminated to the degree that it poses a public health risk.
Lastly, the current HBMC does not provide sufficient clarity related to enforcement , and is insufficient
in ensuring the removal of stored property is conducted appropriately and within the law. The
proposed ordinance provides clarity related to enforcement, including specific language related to the
required noticing, signage, minimum-retention period, and procedures for community members to
follow for the reclaiming of property.
Financial Impact:
Not applicable.
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File #:21-170 MEETING DATE:3/1/2021
Recommended Action:
Approve for introduction Ordinance No. 4228, “An Ordinance of the City of Huntington Beach
Amending Chapter 13.10 of the Huntington Beach Municipal Code Prohibiting the Storage of
Personal Property on Public or Private Property.”
Alternative Action(s):
Do not approve the recommended action and direct staff accordingly.
Analysis:
A review of similar ordinances in surrounding cities (Anaheim, Santa Ana, Westminster, and Costa
Mesa), and consultation with representatives from those jurisdictions, has demonstrated a consistent
approach to this issue and the need for the proposed modification. Further, civil litigation within
Orange County and the region provides compelling support for the adoption of this amendment, as a
prudent step in developing an effective strategy.
In summary, revision of HBMC Chapter 13.10 related to the storage of property will provide much-
needed clarity and procedures to allow for the lawful collection, temporary preservation, and prompt
return of property to its owners, and will provide a much-needed tool to preserve limited public
spaces for their safe and enjoyable intended uses.
A summary of the changes are as follows:
·Added definition for “Stored Personal Property;”
·Added additional language to Section 13.10.040 - Storage of Personal Property on Public and
Private Property;
·Added Section 13.10.041 - Impounding Stored Personal Property;
·Added Section 13.10.042 - Impounding Personal Property after Closure;
·Added Section 13.10.042 - Storage and Disposal of Impounded Personal Property;
·Added Section 13.10.044 - Dangerous or Perishable Stored Personal Property; and
·Added additional language to Section 13.10.090 - Violations-Penalty.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Enhance and modernize public safety service delivery
Attachment(s):
1. Ordinance No. 4228 to amend Chapter 13.10 of the Huntington Beach Municipal Code
prohibiting the storage of personal property on public or private property
2. Legislative Draft of amendments to Chapter 13.10 of the Huntington Beach Municipal Code
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City of Huntington Beach
File #:21-172 MEETING DATE:3/1/2021
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO:Honorable Mayor and City Council Members
SUBMITTED BY:Oliver Chi, City Manager
PREPARED BY:Ursula Luna-Reynosa, Director of Community Development
Subject:
Adopt Resolution No. 2021-17 (Supplemental Fee Resolution 12), establishing Fees and
Charges for Use and Operator Permits for Group Homes and Sober Living Homes and Hourly
Billing Rates for Code Enforcement Services
Statement of Issue:
The City has established regulations, standards, and a permitting process for Group Homes and
Sober Living Homes. The attached resolution establishes fees intended to offset the costs of permit
processing and regulation of group homes and sober living homes. Additionally, a schedule of hourly
billing rates for Code Enforcement services is proposed to be adopted and incorporated into the
City’s Master Fee Schedule.
Financial Impact:
The anticipated revenue impact of adopting fees for processing use permit and operator permit
applications for group homes and sober living homes is:
·Initial Year: $400,000
·Future Years: $145,000
These figures represent a full cost recovery of the staff time expected to process each application
received. Revenues will offset the costs of permit application review and processing, and are based
on total staff hours for each application as identified in the Cost of Service Analysis (Attachment No.
2). Actual revenues will vary based on permit applications received. In the first year of
implementation, staff anticipates receiving approximately 110 applications for a Special Use Permit
(for facilities with 6 or fewer residents), and approximately 30 applications for a Conditional use
Permit and Operator’s Permit (for facilities with 7 or more residents), based on Code Enforcement
figures of both known and suspected operating facilities.
Initial year revenue projections are anticipated to exceed future year revenue projections,because
Special Use Permits, Conditional Use Permits, and Operator Permits are one-time fees. If regulation
is required beyond the level assumed for typical permit review and approval, staff may bill hourly for
code enforcement regulatory efforts as the projected fee revenue will only cover the time to process
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applications and does not include enforcement.
Recommended Action:
Adopt Resolution No. 2021-17, “A Resolution of the City Council of the City of Huntington Beach
Establishing and Updating Use Permit and Operator Permit Fees for Group Homes and Sober Living
Homes and Hourly Billing Rates for Code Enforcement Services by Amending Resolution 2016-59,
as amended pursuant to Resolution Nos. 2017-28, 2017-44, 2017-46, 2018-01, 2018-29, 2018-48,
2018-55, 2019-07, 2019-19, 2019-87 and 2020-37, Which Established a Consolidated
Comprehensive Citywide Master Fee and Charges Schedule” (Supplemental Fee Resolution 12).
Alternative Action(s):
Do not approve the recommended action and direct staff accordingly.
Analysis:
On July 20, 2020, the City Council adopted Ordinances 4212, 4213, 4214, 4215, and 4216 that
together established a set of regulations for Group Homes, Sober Living Homes, and Residential
Care Facilities affecting Residential Districts Citywide.
The proposed regulations are currently in effect and upon adoption of applicable permitting fees, will
be fully implemented. Pursuant to the regulations adopted by the City Council, three new permit
processes were established:
1.Special Use Permit (SUP): In all Residential Districts, a Group Home or Sober Living Home
with six (6) or fewer residents is required to obtain a ministerial Special Use Permit from the
Community Development Director.
2.Conditional Use Permit (CUP): In all Residential Districts except Residential Low Density (RL),
a Group Home or Sober Living Home with seven (7) or more residents requires a Conditional
Use Permit (CUP) from the Planning Commission; and
a.Operator’s Permit: An Operator’s Permit that complies with Huntington Beach Municipal
Code (HBMC) Section 5.110.
The proposed permit fees for a Special Use Permit, Conditional Use Permit, or Operator’s Permit are
intended to recover the full costs of staff time to review each application. Additionally, the costs of
software and systems used to assist the City with receiving, processing, and acting upon said permit
applications are included in the cost of service calculations. For residential properties with Group
Home or Sober Living Home operations that require code enforcement regulation beyond the level
assumed in the base permit fees, staff may use hourly billings for cost recovery purposes.
Staff recommends a fee of $1,753 for a Special Use Permit, $4,765 for a Conditional Use Permit, and
$2,193 for an Operator’s Permit. These amounts are based on the time involved by the Planning
Division and Code Enforcement Division in processing each application.
For the purposes of comparison, staff surveyed other cities that have enacted ordinances regulating
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Group Homes and Sober Living homes and impose permit application fees. Those fees are:
CITY FEE DESCRIPTION FEE COST RECOVERY
Newport Beach Use Permit - Conditional (No SUP or OP
Required)
$5,271 100%
Costa Mesa Special Use Permit (Max. 6) CUP (7+) -
Operator’s Permit (Required for CUP)
$5,500 $7,500
$1,000
71.99% 74.26%
100%
County of Orange Group Home Permit (Max. 6) Use Permit
(7 +) to PC
$500 $5,000
(Deposit)
100% Unknown
Anaheim Operator’s Permit (No SUP or CUP
Required)
$966 75%
Encinitas Group Home Permit (Max. 6) CUP
(Major - 7+)
$250 $6,000 100% Unknown
The proposed fee of $1,753 for a Special Use Permit, $4,765 for a Conditional Use Permit, and
$2,193 for an Operator’s Permit are comparable to those of other cities with similar regulations.
The services for which a city imposes a user or regulatory fee typically derive from an individual
person or entity’s action, request, or behavior. Therefore, except in cases where there is an
overwhelming public benefit generated by a city’s involvement in the individual action, a fee for
service ensures that the individual bears most, if not all, of the cost incurred by the city to provide that
service. When a fee targets “100% or full cost recovery,” the individual is bearing the entirety of the
cost. When a fee targets less than full cost recovery, another City revenue source - in most cases,
the General Fund - subsidizes the individualized activity.
Industry best practice and California statute are in harmony: User and regulatory fees should be set
according to the estimated reasonable cost of service, and should bear a fair and reasonable
relationship to the payer’s burdens on or benefits received from the activities and/or services
provided by the City. The permit fees are intended to recover the typical staff effort to review use and
operator permit applications for group homes and sober living homes requesting to operate within the
City.
Hourly billing rates for Code Enforcement are intended to be adopted and incorporated into the City’s
Master Fee Schedule. Staff may use hourly billings for cost recovery purposes for enforcement. For
example, an entity may be operating without any of the requisite permits and code enforcement will
spend time enforcing the City’s regulations. The only way to recoup costs associated with those
enforcement efforts will be to bill the offenders on the City’s actual costs to enforce.
The proposed fees are intended to comply with applicable federal, state, and local laws including
providing confirmation that the proposed fees (charges) are not a tax as defined in Article 13C of the
California Constitution and that the proposed fees are no more than necessary to the cover the
reasonable costs of the City’s activities and services addressed in the fees. Additionally, the manner
in which the costs are allocated to a payor bear a fair and reasonable relationship to the payor’s
burdens on, or benefits received from the activities and services provided by the City.
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Environmental Status:
The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a
direct or reasonably foreseeable indirect physical change in the environment or is otherwise not
considered a project as defined by CEQA Statute §21065 and CEQA State Guidelines §15060(c)(3)
and §15378. The approval of the resolution meets the above criteria and is not subject to CEQA. No
additional environmental review is required.
Strategic Plan Goal:
Community Engagement
Attachment(s):
1. Resolution No. 2021-17,” A Resolution of the City Council of the City of Huntington Beach
Establishing and Updating Use Permit and Operator Permit Fees for Group Homes and Sober
Living Homes and Hourly Billing Rates for Code Enforcement Services by Amending Resolution
2016-59, as amended pursuant to Resolution Nos. 2017-28, 2017-44, 2017-46, 2018-01, 2018-
29, 2018-48, 2018-55, 2019-07, 2019-19, 2019-87 and 2020-37, Which Established a
Consolidated Comprehensive Citywide Master Fee and Charges Schedule” (Supplemental Fee
Resolution 12).”
2. Cost of Service Analysis
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Cost of Service Calculation
Service Time Estimate
Fee Description Plann'g Code Enf Bldg PW Fire Police Total
1 Group Home / Sober Living Home Use Permit
Six or Fewer Residents (Special Use Permit)8.0 1.5 0.0 0.0 0.0 0.0 9.5
Seven or More Residents
a) Conditional Use Permit 22.0 1.0 1.0 0.5 0.5 0.5 25.5
b) Operator Permit 8.0 1.5 0.0 0.0 0.0 2.5 12.0
Cost of Service = (Hourly Billing Rate * Service Time)
$191 $150 $159 $155 $176 $176 Total
Fee Description Plann'g Code Enf Bldg PW Fire Police Total
1 Group Home / Sober Living Home Use Permit
Six or Fewer Residents (Special Use Permit)$1,528 $225 $0 $0 $0 $0 $1,753
Seven or More Residents
a) Conditional Use Permit $4,202 $150 $159 $78 $88 $88 $4,765
b) Operator Permit $1,528 $225 $0 $0 $0 $440 $2,193
Current Fees & Cost Recovery Proposed Fees & Cost Recovery
Fee Description
Current Fee
Structure Fee Cost Recovery Fee Structure Fee Cost Recovery
1 Group Home / Sober Living Home Use Permit
Six or Fewer Residents (Special Use Permit)Fixed varies 100%Fixed $1,753 100%
Seven or More Residents
a) Conditional Use Permit Fixed varies 100%Fixed $4,765 100%
b) Operator Permit Fixed $0 100%Fixed $2,193 100%
Fee Description
Target Initial
Annual
Volume
Revenue
Analysis at
Full Cost
Recovery
Revenue
Analysis at
Proposed
Fees
Over /
(Under)
Recovery at
Proposed Fee
1 Group Home / Sober Living Home Use Permit
Six or Fewer Residents (Special Use Permit)110 $192,830 $192,830 $0
Seven or More Residents
a) Conditional Use Permit 30 $142,935 $142,935 $0
b) Operator Permit 30 $65,790 $65,790 $0
Total $401,555 $401,555 $0
[a] Fully-burdened hourly rates for Planning, Code Enforcement, Building, Public Works, and Fire calculated by ClearSource using FY 19/20 adopted budget. Hourly rates
for Police Services set to match Fire based on similar compensation packages.
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Maximum Fee Proposed Fee Note
1 Group Home / Sober Living Home Use Permit
Six or Fewer Residents (Special Use Permit) $1,753 $1,753
Seven or More Residents
a) Conditional Use Permit $4,765 $4,765
b) Operator Permit $2,193 $2,193
Description
WORKING DRAFT MASTER FEE SCHEDULE - USE PERMIT FOR GROUP HOME / SOBER
LIVING HOME
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City of Huntington Beach
Maximum Fee Proposed Fee Note
Code Compliance
1 Code Compliance Follow-Up, If Required
Code Enforcement Supervisor $198 $198
Senior Code Enforcement Officer $158 $158
Code Enforcement Officer II $150 $150
Code Enforcement Officer I $115 $115
Code Enforcement Technician $101 $101
Description
WORKING DRAFT MASTER FEE SCHEDULE - HOURLY BILLING RATES FOR CODE
ENFORCEMENT SERVICES
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City of Huntington Beach
FEE SCHEDULE - USE PERMIT FOR GROUP HOME / SOBER LIVING HOME
Fee Charge Basis Note
1 Group Home / Sober Living Home Use Permit
Six or Fewer Residents (Special Use Permit) $1,753 fixed fee
Seven or More Residents
a) Conditional Use Permit $4,765 fixed fee
b) Operator Permit $2,193 fixed fee
Description
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City of Huntington Beach
FEE SCHEDULE - HOURLY BILLING RATES FOR CODE ENFORCEMENT SERVICES
Fee Charge Basis Note
Code Compliance
1 Code Compliance Follow-Up, If Required
Code Enforcement Supervisor $198 per hour
Senior Code Enforcement Officer $158 per hour
Code Enforcement Officer II $150 per hour
Code Enforcement Officer I $115 per hour
Code Enforcement Technician $101 per hour
Description
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City of Huntington Beach
File #:21-177 MEETING DATE:3/1/2021
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:
Adopt Resolution No. 2021-12 authorizing the refinance of the City’s Unfunded Accrued
Liability Account Balance through the Sale of Taxable Pension Obligation Bonds to Refund All
or a Portion of the City’s Obligation to the California Public Employees’ Retirement System,
and authorizing the Execution and Delivery of a Bond Purchase Contract and a Continuing
Disclosure Certificate and the Preparation of an Official Statement and Other Matters Related
Thereto; and, authorize and approve Certain Actions with Respect Thereto; and, Adopt
Resolution No. 2021-19 Adopting the City’s Unfunded Accrued Pension Liability Policy
Statement of Issue:
City Council authorization is requested to approve the issuance and sale of Huntington Beach
Taxable Pension Obligation Bonds to refund all or a portion of its California Public Employees’
Retirement System (CalPERS) Unfunded Accrued Liability (UAL), and approve a formal policy
relating to the management of future pension liabilities (“UAL Policy”).
Financial Impact:
The issuance of pension obligation bonds for the refinancing of certain pension obligations of the City
of Huntington Beach will likely reduce the annual costs related to the UAL that the City is currently
obligated to pay CalPERS. As of June 30, 2019, the most current actuarial valuation available from
CalPERS, the City’s UAL for all citywide employees and retirees is approximately $436 million.
Approximately 63% of the UAL is related to public safety (police and fire) employees, and 37% is
related to non-safety employees.
Currently, total annual City UAL payments to CalPERS will range from $28.9 million for Fiscal Year
(FY) 2019-20, increasing to approximately $45.5 million in the peak year of FY 2030-31. The scale of
the UAL cost increase will impact the ability of the City Council to adopt future balanced budgets. It
may also impact the high level of services currently provided to Huntington Beach’s residents and
businesses.
The issuance of pension obligation bonds will allow the City of Huntington Beach to prepay up to
100% of the projected UAL, based on the most recent valuation report recently released by
CalPERS. By issuing pension obligation bonds, the City will be contractually obligated to make
annual debt service payments to the bondholders. One option would be to structure the annual debt
service payments to be level dollar amount payments over the course of the life of the bonds. Should
the City prepay 100% of its current projected UAL with an estimated 23 year bond repayment
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the City prepay 100% of its current projected UAL with an estimated 23 year bond repayment
schedule, the City could achieve budgetary savings of at least $170.1 million over the life of the bond
financing.
Recommended Action:
A) Adopt Resolution No. 2021-12, “A Resolution of the City Council of the City of Huntington Beach
Authorizing the Sale of Taxable Pension Obligation Bonds to Refund All or a Portion of the City’s
Obligation to the California Public Employees’ Retirement System, and Authorizing the Execution and
Delivery of a Bond Purchase Contract and a Continuing Disclosure Certificate and the Preparation of
an Official Statement and Other Matters Related Thereto; and,
B) Authorize the City Manager and City Clerk to take all administrative and budgetary actions
necessary to perform the bond issuance; and,
C) Adopt Resolution No. 2021-19, “A Resolution of the City Council of the City of Huntington Beach
Adopting the City’s Unfunded Accrued Pension Liability Policy.”
Alternative Action(s):
Do not approve the recommended actions and direct staff accordingly.
Analysis:
Over the last several years, CalPERS has made significant changes to the assumptions used in the
calculations of local agencies’ pension liabilities. These changes have resulted in (1) an increased
overall unfunded pension liability as the discount rate has been reduced from 7.5% to 7.0%, and (2)
sharp increases in annual payments due to CalPERS in earlier years followed by declining payments
in later years due to the method of amortizing the UAL payments.
The City has two CalPERS plans - a Public Safety plan and a Miscellaneous Employees plan. Each
plan’s UAL is comprised of multiple “amortization bases,” which are positive and negative amounts
generated each year based on the performance of the CalPERS Investment Fund and changes in
the actuarial assumptions. Each amortization base has a separate payment schedule over a fixed
period of years. Because of the CalPERS methodology, some of the payments continue to increase
each year while others will drop off. This creates a significant increase in UAL payments in the next
10 year period, from $28.9 to $45.5 million.
The difficulty that lies with the City of Huntington Beach, as well as many other local agencies, is the
ability to pay these large payments to CalPERS over the next 10 to 15 years, while still trying to
maintain a balanced budget. While the City successfully adopted a balanced FY 2020-21 budget
without the use of reserves, the long-term impact of the COVID-19 pandemic on the City’s revenues
remains uncertain. The City of Huntington Beach is focused on trying to minimize the annual
increases in the payments to CalPERS, so that balanced budgets can be maintained, and there are
manageable impacts to services offered to the residents and businesses of Huntington Beach.
Staff has identified that refinancing our existing UAL payments through the use of a Pension
Obligation Bond (“POB”) would help provide budgetary relief and control as debt service on the
bonds will be approximately level each year, without the fluctuations in the current CalPERS
amortization schedules. Along with the anticipated overall budgetary savings of $170.1 million from
issuing a POB, the City can also better plan its pension expense for budgeting purposes with a stable
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fixed payment amount. Below is a summary of actions recently taken related to the POBs:
On October 21, 2019, a Study Session entitled,“An Existential Threat- Pension Cost Increases,”was
presented to City Council, which discussed options for addressing the City’s growing UAL payments.
This presentation was also given during the October 30, 2019 Finance Commission meeting. Both
City Council and the Finance Commission unanimously provided staff with direction to begin the
process to refinance the City’s current UAL through a Pension Obligation Bond.
On November 18, 2019, the City Council authorized Resolution 2018-89 providing for the issuance of
one or more series of Taxable Pension Obligation Bonds, and authorized a Trust Agreement and the
commencement of judicial validation proceedings related to the issuance of POBs.
Shortly after City Council approved the resolution on November 18, 2019, the City filed a validation
action with the Orange County Superior Court. The action was not challenged, and a default
judgment was entered on May 18, 2020.
Staff and KNN Public Finance, as municipal advisor, have analyzed numerous financing scenarios,
including 80%, 90%, and 100% funding options, in conjunction with different repayment terms and
budgetary saving structures.
With the goal of providing level debt service payments without extending the current UAL
amortization schedule, the proposed POBs have been structured with average annual debt service
payments of $27.9M. With the lower interest rates paid on the POBs as compared to the current 7%
interest rate charged by CalPERS, the City could potentially achieve total budgetary savings of
$170.1 million (based on an estimated conservative interest rate of 3.48%) over the life of the bond
financing with a 100% prepayment scenario.
A cost comparison is summarized below (assuming a conservative interest rate of 3.48%):
CalPERS UAL Payment Costs vs. POB Refinancing Debt Service
(in Thousands)
CalPERS UAL Payment POB Refinancing Refinancing Savings
Annual Payment (average) $ 36,462 $ 27,890 $ 8,572
Total Payments 790,433 620,358 170,075
Total Interest 356,877 199,958 156,919
All estimated cost savings are subject to market conditions at the time of actual bond issuance.
While the City expects to refinance 100% of its current UAL, it is important to note this action
addresses past UALs and does not eliminate future liabilities. UALs may result from changes in
market conditions or changes in CalPERS assumptions. In order to improve the management of
future pension liabilities, a formal UAL Policy has been prepared to provide guidelines for managing
future pension liabilities for City Council approval and includes the following key provisions:
1. Increased savings level to ensure that the City has enhanced funding for any future
UAL costs that may arise.
·A mandated minimum $1 million annual contribution to the City’s Section 115 Pension
Trust.
·In addition, a requirement that the City perpetually set-aside 50% of the pension
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·In addition, a requirement that the City perpetually set-aside 50% of the pension
refinance savings in amount equal to the difference between the City’s audited FY
2019/20 UAL costs versus the year one POB debt service payments. Preliminarily, that
amount is estimated to be 50% of $978,000, which is subject to change based on
actual market conditions at the time of the bond issuance. Further, that savings amount
must be contributed to the City’s Section 115 Trust on an annual basis, and increased
for CPI moving forward perpetually.
·Finally, at the end of each fiscal year, 50% of any unassigned General Fund surplus
would be dedicated to a new restricted General Fund Pension Rate Stabilization
Reserve.
2. Establishment of an accelerated UAL repayment schedule to address any future UAL
growth.
·Accelerated repayment of any new UAL would be repaid from the Section 115 Trust or
General Fund Pension Stabilization Reserve based on the payoff time below:
New Unfunded Accrued Liability (Any new
liability incurred after the June 30, 2019 valuation
report )
Payoff Time Period
$0 to $5,000,000 Within 1 to 5 years
$5,000,001 to $10,000,000 Within 5 to 7 years
$10,000,001 to $15,000,000 Within 7 to 9 years
$15,000,001 to $20,000,000 Within 9 to 10 years
$20,000,001 or more Within 10 to 15 years
3. Codifying this enhanced savings amounts and accelerated UAL prepayment schedule,
such that any reductions can only be achieved via a 6/7 vote of the City Council.
Environmental Status:Not applicable.
Strategic Plan Goal:Non Applicable - Administrative Item
Attachment(s):
1. Resolution No. 2021-12, “A Resolution of the City Council of the City of Huntington Beach
Authorizing the Sale of Taxable Pension Obligation Bonds to Refund All or a Portion of the
City’s Obligation to the California Public Employees’ Retirement System, and Authorizing the
Execution and Delivery of a Bond Purchase Contract and a Continuing Disclosure Certificate
and the Preparation of an Official Statement and Other Matters Related Thereto .”
2. Preliminary Official Statement
3. Bond Purchase Agreement
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4. Continuing Disclosure Certificate
5. Resolution No. 2021-19, “A Resolution of the City Council of the City of Huntington Beach
Adopting the City’s Unfunded Accrued Pension Liability Policy.”
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PRELIMINARY OFFICIAL STATEMENT DATED _______ __, 2021
4125-4070-0960.13
NEW ISSUE—BOOK-ENTRY ONLY RATINGS:
Fitch “____”
S&P: “____”
See “RATINGS” herein.
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City, based upon an analysis of existing laws, regulations,
rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants,
interest on the Series 2021 Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel
is of the opinion that interest on the Series 2021 Bonds is exempt from State of California personal income taxes. Bond Counsel expresses no opinion
regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Series 2021
Bonds. See “TAX MATTERS” herein.
H
$__________
CITY OF HUNTINGTON BEACH
(ORANGE COUNTY, CALIFORNIA)
TAXABLE PENSION OBLIGATION BONDS, SERIES 2021
Dated: Date of Delivery Due: June 15, as shown on inside cover
The $__________* aggregate principal amount of City of Huntington Beach Taxable Pension Obligation Bonds, Series 2021 (the “Series
2021 Bonds”), are being issued by the City of Huntington Beach (the “City”), pursuant to Articles 10 and 11 (commencing with Section 53570) of
Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California (the “Act”), a resolution of the City authorizing the issuance of
the Series 2021 Bonds and a trust agreement, dated as of ______ 1, 2021 (the “Trust Agreement”), by and between the City and U.S. Bank National
Association, as trustee (the “Trustee”). The Series 2021 Bonds will be issued pursuant to the Trust Agreement (i) to refund a portion of the City’s
obligations under the CalPERS Contract (as described herein) consisting of 100% of the City’s unfunded accrued actuarial liability to the California
Public Employee’s Retirement System as of _______ __, 2021, and (ii) to pay the costs of issuance related to the Series 2021 Bonds. See “PLAN OF
FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein. The Series 2021 Bonds and such additional bonds, if any, are referred
to herein as “Bonds.”
The Series 2021 Bonds are issuable in denominations of $5,000 and any integral multiple thereof. Interest on the Series 2021 Bonds is
payable on June 15 and December 15 of each year, commencing December 15, 2021. See “THE BONDS” herein.
The Series 2021 Bonds will be delivered in fully registered form only, and, when delivered, will be registered in the name of Cede & Co.,
as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Series 2021 Bonds.
Ownership interests in the Series 2021 Bonds may be purchased in book-entry form only. Principal of, premium, if any, and interest on the Series
2021 Bonds will be paid by the Trustee to DTC or its nominee, which will in turn remit such payment to its participants for subsequent disbursement
to the beneficial owners of the Series 2021 Bonds. Purchasers will not receive certificates representing Series 2021 Bonds purchased by them.
Beneficial interests in the Series 2021 Bonds may be held through DTC, Clearstream or Euroclear (each as defined herein), directly as a participant
or indirectly through organizations that are participants in such systems. See “THE BONDS” herein and APPENDIX G – “PROVISIONS FOR
BOOK-ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES.”
The Series 2021 Bonds are being offered for sale in those jurisdictions in the United States of America, the European Economic Area, the
United Kingdom, Switzerland, several countries in Asia, and elsewhere where it is lawful to make such offers. The distribution of this Official
Statement and the offering, sale and delivery of the Series 2021 Bonds in certain jurisdictions is restricted by law. See “INFORMATION
CONCERNING OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS OUTSIDE THE UNITED STATES” in the introductory section of
this Official Statement.
The Series 2021 Bonds are subject to optional and mandatory sinking fund redemption, as described herein. See “THE BONDS—
Redemption” herein.
The obligations of the City under the Series 2021 Bonds, including the obligation to make all payments of interest and principal when due,
are obligations of the City imposed by law payable from funds to be appropriated by the City pursuant to the Public Employees’ Retirement Law,
commencing with Section 20000 of the California Government Code and are absolute and unconditional, without any right of set-off or counterclaim.
As provided in the Trust Agreement, all of the amounts held in the Bond Fund are pledged by the City to secure the payment of the principal or
redemption price of and interest on the Bonds in accordance with their terms, the provisions of the Trust Agreement and the Act. The Bond Fund
shall be funded pursuant to the terms of the Trust Agreement first, from Pension Tax Override Revenues up to the Secured Amount (each as defined
herein) and second, from any other source of legally available funds of the City. See “SECURITY AND SOURCES OF PAYMENT FOR THE
BONDS” herein.
Preliminary, subject to change.
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MATURITY SCHEDULE
See inside front cover
THE OBLIGATIONS OF THE CITY UNDER THE BONDS, INCLUDING THE OBLIGATION TO MAKE ALL PAYMENTS OF
INTEREST AND PRINCIPAL WHEN DUE, ARE OBLIGATIONS OF THE CITY IMPOSED BY LAW AND ARE ABSOLUTE AND
UNCONDITIONAL, WITHOUT ANY RIGHT OF SET-OFF OR COUNTERCLAIM. EXCEPT TO THE EXTENT OF THE PENSION TAX
OVERRIDE AS PROVIDED IN THE TRUST AGREEMENT, THE BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR
WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION. NEITHER THE BONDS NOR THE OBLIGATION
OF THE CITY TO MAKE PAYMENTS ON THE BONDS CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE STATE, OR ANY OF ITS
POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR
RESTRICTION.
This cover page contains information for quick reference only. It is not a summary of this issue. Potential purchasers must read the entire
Official Statement to obtain information essential to making an informed investment decision.
The Series 2021 Bonds will be offered when, as and if issued, and received by the Underwriters, subject to the approval as to their validity
by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City, and certain other conditions. KNN Public Finance, is serving as municipal advisor
to the City in connection with the issuance of the Series 2021 Bonds. Certain legal matters will be passed upon for the City by Michael E.
Gates, Esq., City Attorney, and by Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel. Certain legal matters will be passed on for the
Underwriters by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. It is anticipated that the Series 2021
Bonds will be available for delivery through DTC on or about _______ __, 2021.
Stifel
BofA Securities Hilltop Securities
Dated: _______ ___, 2021
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MATURITY SCHEDULE
$_________ Serial Bonds
CUSIP NO. PREFIX:† _______
Maturity
(June 15)
Principal
Amount
Interest
Rate Yield
CUSIP No.
Suffix†
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
$________ _____% Term Bonds due June 15, 204__- Yield: _____% CUSIP No.† _____
Preliminary, subject to change.
† Copyright 2021, American Bankers Association. CUSIP ® is a registered trademark of the American Bankers Association. CUSIP data herein
is provided by the CUSIP Service Bureau, operated by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. Neither the City nor
the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein.
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INFORMATION CONCERNING OFFERING RESTRICTIONS
IN CERTAIN JURISDICTIONS OUTSIDE THE UNITED STATES
REFERENCES IN UNDER THIS CAPTION TO THE “ISSUER” MEAN THE CITY OF HUNTINGTON BEACH
AND REFERENCES TO “SERIES 2021 BONDS” OR “SECURITIES” MEAN THE CITY OF HUNTINGTON BEACH
TAXABLE PENSION OBLIGATION BONDS, SERIES 2021.
THE INFORMATION UNDER THIS CAPTION HAS BEEN FURNISHED BY THE UNDERWRITERS, AND THE
ISSUER MAKES NO REPRESENTATION AS TO THE ACCURACY, COMPLETENESS OR ADEQUACY OF THE
INFORMATION UNDER THIS CAPTION.
COMPLIANCE WITH ANY RULES OR RESTRICTIONS OF ANY JURISDICTION RELATING TO THE
OFFERING, SOLICITATION AND/OR SALE OF THE SERIES 2021 BONDS IS THE RESPONSIBILITY OF THE
UNDERWRITERS, AND THE ISSUER SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY IN CONNECTION
THEREWITH. NO ACTION HAS BEEN TAKEN BY THE ISSUER THAT WOULD PERMIT THE OFFERING OR SALE
OF THE SERIES 2021 BONDS, OR POSSESSION OR DISTRIBUTION OF THIS OFFICIAL STATEMENT OR ANY
OTHER OFFERING OR PUBLICITY MATERIAL RELATING TO THE SERIES 2021 BONDS, OR ANY INFORMATION
RELATING TO THE PRICING OF THE SERIES 2021 BONDS, IN ANY NON-U.S. JURISDICTION WHERE ACTION FOR
THAT PURPOSE IS REQUIRED.
MINIMUM UNIT SALES
THE SERIES 2021 BONDS WILL TRADE AND SETTLE ON A UNIT BASIS (ONE UNIT EQUALING ONE
SERIES 2021 BOND OF $5,000 PRINCIPAL AMOUNT). FOR ANY SALES MADE OUTSIDE THE UNITED STATES,
THE MINIMUM PURCHASE AND TRADING AMOUNT IS 30 UNITS (BEING 30 SERIES 2021 BONDS IN AN
AGGREGATE PRINCIPAL AMOUNT OF $150,000).
NOTICE TO PROSPECTIVE INVESTORS IN CANADA
THE SERIES 2021 BONDS MAY BE SOLD ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE
PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT
45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE
PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS,
EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE SERIES 2021 BONDS MUST BE
MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.
SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A
PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS OFFICIAL STATEMENT (INCLUDING
ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR
RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY
THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD
REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S
PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.
PURSUANT TO SECTION 3A.3 (OR, IN THE CASE OF SECURITIES ISSUED OR GUARANTEED BY THE
GOVERNMENT OF A NON-CANADIAN JURISDICTION, SECTION 3A.4) OF NATIONAL INSTRUMENT 33-105
UNDERWRITING CONFLICTS (“NI 33-105”), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE
DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN
CONNECTION WITH THIS OFFERING.
NOTICE TO PROSPECTIVE INVESTORS IN
THE EUROPEAN ECONOMIC AREA AND THE UNITED KINGDOM
THIS OFFICIAL STATEMENT HAS BEEN PREPARED ON THE BASIS THAT ALL OFFERS OF THE
SECURITIES TO ANY PERSON THAT IS LOCATED WITHIN A MEMBER STATE OF THE EUROPEAN ECONOMIC
AREA (“EEA”) OR THE UNITED KINGDOM WILL BE MADE PURSUANT TO AN EXEMPTION UNDER ARTICLE 1(4)
REGULATION (EU) 2017/1129 (THE “PROSPECTUS REGULATION”) FROM THE REQUIREMENT TO PRODUCE A
PROSPECTUS FOR OFFERS OF THE SECURITIES. ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO
MAKE ANY OFFER TO ANY PERSON LOCATED WITHIN A MEMBER STATE OF THE EEA OR THE UNITED
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KINGDOM OF THE SECURITIES SHOULD ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES
FOR THE ISSUER OR ANY OF THE INITIAL PURCHASERS TO PRODUCE A PROSPECTUS OR SUPPLEMENT FOR
SUCH AN OFFER. NEITHER THE ISSUER NOR THE INITIAL PURCHASERS HAVE AUTHORIZED, NOR DO THEY
AUTHORIZE, THE MAKING OF ANY OFFER OF SECURITIES THROUGH ANY FINANCIAL INTERMEDIARY,
OTHER THAN OFFERS MADE BY THE INITIAL PURCHASERS, WHICH CONSTITUTE THE FINAL PLACEMENT OF
THE SECURITIES CONTEMPLATED IN THIS OFFICIAL STATEMENT.
THE OFFER OF ANY SECURITIES WHICH IS THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS
OFFICIAL STATEMENT IS NOT BEING MADE AND WILL NOT BE MADE TO THE PUBLIC IN ANY MEMBER
STATE OF THE EEA OR THE UNITED KINGDOM, OTHER THAN: (A) TO ANY LEGAL ENTITY WHICH IS A
“QUALIFIED INVESTOR” AS SUCH TERM IS DEFINED IN THE PROSPECTUS REGULATION; (B) TO FEWER THAN
150 NATURAL OR LEGAL PERSONS (OTHER THAN “QUALIFIED INVESTORS” AS SUCH TERM IS DEFINED IN
THE PROSPECTUS REGULATION); OR (C) IN ANY OTHER CIRCUMSTANCES FALLING WITHIN ARTICLE 1(4) OF
THE PROSPECTUS REGULATION, SUBJECT TO OBTAINING THE PRIOR CONSENT OF THE RELEVANT
UNDERWRITER FOR ANY SUCH OFFER; PROVIDED THAT NO SUCH OFFER OF THE SECURITIES SHALL
REQUIRE THE ISSUER OR THE INITIAL PURCHASERS TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF
THE PROSPECTUS REGULATION OR A SUPPLEMENT TO A PROSPECTUS PURSUANT TO ARTICLE 23 OF THE
PROSPECTUS REGULATION.
FOR THE PURPOSES OF THIS PROVISION, THE EXPRESSION AN “OFFER OF SECURITIES TO THE
PUBLIC” IN RELATION TO THE SECURITIES IN ANY MEMBER STATE OF THE EEA OR THE UNITED KINGDOM
MEANS THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE
TERMS OF THE OFFER AND THE SECURITIES TO BE OFFERED SO AS TO ENABLE AN INVESTOR TO DECIDE TO
PURCHASE THE SECURITIES.
EACH SUBSCRIBER FOR OR PURCHASER OF THE SERIES 2021 BONDS IN THE OFFERING LOCATED
WITHIN A MEMBER STATE OR THE UNITED KINGDOM WILL BE DEEMED TO HAVE REPRESENTED,
ACKNOWLEDGED AND AGREED THAT IT IS A “QUALIFIED INVESTOR” AS DEFINED IN THE PROSPECTUS
REGULATION. THE ISSUER AND EACH UNDERWRITER AND OTHERS WILL RELY ON THE TRUTH AND
ACCURACY OF THE FOREGOING REPRESENTATION, ACKNOWLEDGEMENT AND AGREEMENT.
PROHIBITION OF SALES TO EEA OR THE UNITED KINGDOM RETAIL INVESTORS – THE SERIES 2021
BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT
BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA OR IN THE
UNITED KINGDOM. FOR THESE PURPOSES, A RETAIL INVESTOR MEANS A PERSON WHO IS ONE (OR MORE)
OF: (I) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED,
“MIFID II”); OR (II) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97 (THE “INSURANCE
DISTRIBUTION DIRECTIVE”), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT
AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II. CONSEQUENTLY NO KEY INFORMATION DOCUMENT
REQUIRED BY REGULATION (EU) NO 1286/2014 (THE “PRIIPS REGULATION”) FOR OFFERING OR SELLING THE
SERIES 2021 BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA OR IN
THE UNITED KINGDOM HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE SERIES 2021
BONDS OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA OR IN THE
UNITED KINGDOM MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.
NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED KINGDOM
THIS OFFICIAL STATEMENT IS FOR DISTRIBUTION ONLY TO, AND IS DIRECTED SOLELY AT, PERSONS
WHO (I) ARE OUTSIDE THE UNITED KINGDOM, (II) ARE INVESTMENT PROFESSIONALS, AS SUCH TERM IS
DEFINED IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION)
ORDER 2005, AS AMENDED (THE “FINANCIAL PROMOTION ORDER”), (III) ARE PERSONS FALLING WITHIN
ARTICLE 49(2)(A) TO (D) OF THE FINANCIAL PROMOTION ORDER, OR (IV) ARE PERSONS TO WHOM AN
INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21
OF THE FINANCIAL SERVICES AND MARKETS ACT 2000) IN CONNECTION WITH THE ISSUE OR SALE OF ANY
SERIES 2021 BONDS MAY OTHERWISE BE LAWFULLY COMMUNICATED OR CAUSED TO BE COMMUNICATED
(ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”). THIS OFFICIAL
STATEMENT IS DIRECTED ONLY AT RELEVANT PERSONS AND MUST NOT BE ACTED ON OR RELIED ON BY
PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH
THIS OFFICIAL STATEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED
IN ONLY WITH RELEVANT PERSONS. ANY PERSON WHO IS NOT A RELEVANT PERSON SHOULD NOT ACT OR
RELY ON THIS OFFICIAL STATEMENT OR ANY OF ITS CONTENTS.
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NOTICE TO PROSPECTIVE INVESTORS IN SWITZERLAND
THE SERIES 2021 BONDS MAY NOT BE PUBLICLY OFFERED, DIRECTLY OR INDIRECTLY, IN
SWITZERLAND WITHIN THE MEANING OF THE SWISS FINANCIAL SERVICES ACT (THE “FINSA”), AND NO
APPLICATION HAS BEEN OR WILL BE MADE TO ADMIT THE SERIES 2021 BONDS TO TRADING ON ANY
TRADING VENUE (EXCHANGE OR MULTILATERAL TRADING FACILITY) IN SWITZERLAND. NEITHER THIS
OFFICIAL STATEMENT NOR ANY OTHER OFFERING OR MARKETING MATERIAL RELATING TO THE SERIES
2021 BONDS (1) CONSTITUTES A PROSPECTUS PURSUANT TO THE FINSA OR (2) HAS BEEN OR WILL BE FILED
WITH OR APPROVED BY A SWISS REVIEW BODY PURSUANT TO ARTICLE 52 OF THE FINSA, AND NEITHER
THIS OFFICIAL STATEMENT NOR ANY OTHER OFFERING OR MARKETING MATERIAL RELATING TO THE
SERIES 2021 BONDS MAY BE PUBLICLY DISTRIBUTED OR OTHERWISE MADE PUBLICLY AVAILABLE IN
SWITZERLAND.
NOTICE TO PROSPECTIVE INVESTORS IN HONG KONG
WARNING. THE CONTENTS OF THIS OFFICIAL STATEMENT HAVE NOT BEEN REVIEWED BY ANY
REGULATORY AUTHORITY IN HONG KONG. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE
OFFER OF THE SERIES 2021 BONDS. IF YOU ARE IN ANY DOUBT ABOUT ANY OF THE CONTENTS OF THIS
DOCUMENT, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
THIS DOCUMENT HAS NOT BEEN, AND WILL NOT BE, REGISTERED AS A PROSPECTUS IN HONG KONG
NOR HAS IT BEEN APPROVED BY THE SECURITIES AND FUTURES COMMISSION OF HONG KONG PURSUANT
TO THE SECURITIES AND FUTURES ORDINANCE (CHAPTER 571 OF THE LAWS OF HONG KONG) (“SFO”). THE
SERIES 2021 BONDS MAY NOT BE OFFERED OR SOLD IN HONG KONG BY MEANS OF THIS DOCUMENT OR ANY
OTHER DOCUMENT, AND THIS DOCUMENT MUST NOT BE ISSUED, CIRCULATED OR DISTRIBUTED IN HONG
KONG, OTHER THAN TO `PROFESSIONAL INVESTORS’ AS DEFINED IN THE SFO AND ANY RULES MADE
THEREUNDER. IN ADDITION, NO PERSON MAY ISSUE OR HAVE IN ITS POSSESSION FOR THE PURPOSES OF
ISSUE, WHETHER IN HONG KONG OR ELSEWHERE, ANY ADVERTISEMENT, INVITATION OR DOCUMENT
RELATING TO THE SERIES 2021 BONDS, WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY
TO BE ACCESSED OR READ BY, THE PUBLIC OF HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE
SECURITIES LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO SERIES 2021 BONDS WHICH ARE OR ARE
INTENDED TO BE DISPOSED OF ONLY (A) TO PERSONS OUTSIDE HONG KONG, OR (B) TO `PROFESSIONAL
INVESTORS’ AS DEFINED IN THE SFO AND ANY RULES MADE THEREUNDER.
NOTICE TO PROSPECTIVE INVESTORS IN JAPAN
THE SERIES 2021 BONDS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER ARTICLE 4,
PARAGRAPH 1 OF THE FINANCIAL INSTRUMENTS AND EXCHANGE ACT OF JAPAN (ACT NO.25 OF 1948, AS
AMENDED THE "FIEA"). IN RELIANCE UPON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
SINCE THE OFFERING CONSTITUTES THE PRIVATE PLACEMENT TO QUALIFIED INSTITUTIONAL INVESTORS
ONLY AS PROVIDED FOR IN "I" OF ARTICLE 2, PARAGRAPH 3, ITEM 2 OF THE FIEA. A TRANSFEROR OF THE
SERIES 2021 BONDS SHALL NOT TRANSFER OR RESELL THEM EXCEPT WHERE A TRANSFEREE IS A
QUALIFIED INSTITUTIONAL INVESTORS AS DEFINED UNDER ARTICLE 10 OF THE CABINET OFFICE
ORDINANCE CONCERNING DEFINITIONS PROVIDED IN ARTICLE 2 OF THE FIEA (THE MINISTRY OF FINANCE
ORDINANCE NO.14 OF 1993, AS AMENDED).
NOTICE TO PROSPECTIVE INVESTORS IN SOUTH KOREA
THIS OFFICIAL STATEMENT IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE CONSIDERED AS, A
PUBLIC OFFERING OF SECURITIES IN SOUTH KOREA FOR THE PURPOSES OF THE FINANCIAL INVESTMENT
SERVICES AND CAPITAL MARKETS ACT OF KOREA. THE SERIES 2021 BONDS HAVE NOT BEEN AND WILL NOT
BE REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF SOUTH KOREA FOR PUBLIC OFFERING IN
SOUTH KOREA UNDER THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT AND ITS
SUBORDINATE DECREES AND REGULATIONS (COLLECTIVELY, THE “FSCMA”). THE SERIES 2021 BONDS MAY
NOT BE OFFERED, REMARKETED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED,
REMARKETED OR SOLD TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN
SOUTH KOREA OR TO ANY RESIDENT OF SOUTH KOREA (AS DEFINED IN THE FOREIGN EXCHANGE
TRANSACTIONS LAW OF SOUTH KOREA AND ITS SUBORDINATE DECREES AND REGULATIONS
(COLLECTIVELY, THE “FETL”)) WITHIN ONE YEAR OF THE ISSUANCE OF THE SERIES 2021 BONDS, EXCEPT AS
OTHERWISE PERMITTED UNDER APPLICABLE SOUTH KOREAN LAWS AND REGULATIONS, INCLUDING THE
FSCMA AND THE FETL.
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NOTICE TO PROSPECTIVE INVESTORS IN TAIWAN
THE SERIES 2021 BONDS HAVE NOT BEEN AND WILL NOT BE REGISTERED OR FILED WITH, OR
APPROVED BY THE FINANCIAL SUPERVISORY COMMISSION OF TAIWAN, THE REPUBLIC OF CHINA
("TAIWAN") AND/OR OTHER REGULATORY AUTHORITY OR AGENCY OF TAIWAN PURSUANT TO RELEVANT
SECURITIES LAWS AND REGULATIONS OF TAIWAN AND MAY NOT BE ISSUED, OFFERED, OR SOLD IN
TAIWAN THROUGH A PUBLIC OFFERING OR IN CIRCUMSTANCES WHICH CONSTITUTE AN OFFER WITHIN THE
MEANING OF THE SECURITIES AND EXCHANGE ACT OF TAIWAN OR RELEVANT LAWS AND REGULATIONS
THAT REQUIRES A REGISTRATION, FILING OR APPROVAL OF THE FINANCIAL SUPERVISORY COMMISSION
AND/OR OTHER REGULATORY AUTHORITY OR AGENCY OF TAIWAN. THE SERIES 2021 BONDS MAY BE MADE
AVAILABLE OUTSIDE TAIWAN FOR PURCHASE OUTSIDE TAIWAN BY INVESTORS RESIDING IN TAIWAN
DIRECTLY, BUT MAY NOT BE OFFERED OR SOLD IN TAIWAN EXCEPT TO QUALIFIED INVESTORS VIA A
TAIWAN LICENSED INTERMEDIARY TO THE EXTENT PERMITTED BY APPLICABLE LAWS OR REGULATIONS.
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CITY OF HUNTINGTON BEACH
City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
(714) 536-5630
http://www.ci.huntington-beach.ca.us/
CITY COUNCIL
Kim Carr, Mayor
Tito Ortiz, Mayor Pro-Tem
Barbara Delgleize, Member
Dan Kalmick, Member
Natalie Moser, Member
Erik Peterson, Member
Mike Posey, Member
CITY STAFF
Oliver Chi, City Manager
Travis Hopkins, Assistant City Manager
Robin Estanislau, City Clerk
Michael E. Gates, City Attorney
Alisa Backstrom, City Treasurer
Joyce Zacks, Deputy City Treasurer
Dahle Bulosan, Chief Financial Officer
Sunny Rief, Assistant Chief Financial Officer
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Orrick, Herrington & Sutcliffe LLP
Los Angeles, California
Municipal Advisor
KNN Public Finance
Los Angeles, California
Trustee
U.S. Bank National Association
Los Angeles, California
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No dealer, broker, salesperson or other person has been authorized by the City or the Underwriters to give
any information or to make any representations other than as set forth herein and, if given or made, such other
information or representation must not be relied upon as having been authorized by the City or the Underwriters.
This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of the Series 2021 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an
offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Series 2021 Bonds.
Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or
not expressly so described herein, are intended solely as such and are not to be construed as representations of facts.
The information set forth in this Official Statement has been obtained from official sources and other
sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be
construed as a representation of the Underwriters. The information and expressions of opinion herein are subject to
change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under
any circumstances create any implication that there has been no change in the affairs of the City since the date
hereof. This Official Statement is submitted in connection with the sale of the Series 2021 Bonds referred to herein
and may not be reproduced or used, in whole or in part, for any other purpose. The Underwriters have provided the
following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this
Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal
securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee
the accuracy or completeness of such information.
This Official Statement contains forward-looking statements within the meaning of the Federal securities
laws. Such statements are based on currently available information, expectations, estimates, assumptions,
projections and general economic conditions. Such words as expects, intends, plans, believes, estimates, anticipates
or variations of such words or similar expressions are intended to identify forward-looking statements and include,
but are not limited to, statements under the captions “SECURITY AND SOURCES OF PAYMENT FOR THE
BONDS,” “CITY FINANCIAL INFORMATION” and “OTHER FINANCIAL INFORMATION.” The forward-
looking statements are not guarantees of future performance. Actual results may vary materially from what is
contained in a forward-looking statement. The achievement of certain results or other expectations contained in
such forward-looking statements involve known and unknown risks, uncertainties and other factors which may
cause actual results, performance or achievements described to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. No assurance is given that
actual results will meet the City’s forecasts in any way, regardless of the level of optimism communicated in the
information. The City assumes no obligation to provide public updates of forward-looking statements.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2021 BONDS
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE
UNDERWRITERS MAY OFFER AND SELL THE SERIES 2021 BONDS TO CERTAIN DEALERS AND
OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER
PAGE OF THIS OFFICIAL STATEMENT, AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED
FROM TIME TO TIME BY THE UNDERWRITERS.
CUSIP data herein is provided by the CUSIP Service Bureau, operated by Standard & Poor’s, a division of
The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a
substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not
affiliated with the City and are included solely for the convenience of the registered owners of the Series 2021
Bonds. Neither the City nor the Underwriters is responsible for the selection or uses of these CUSIP numbers, and
no representation is made as to their correctness on the Series 2021 Bonds or as included herein. The CUSIP
number for a specific maturity is subject to being changed after the issuance of the Series 2021 Bonds as a result of
various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the
procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to
all or a portion of certain maturities of the Series 2021 Bonds.
The City maintains a website, however, the information presented therein is not a part of this Official
Statement and should not be relied on in making an investment decision with respect to the Series 2021 Bonds.
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INTRODUCTION ....................................................................................................................................... 1
General Description ............................................................................................................................... 1
Terms of the Series 2021 Bonds ............................................................................................................ 2
Book-Entry Only ................................................................................................................................... 2
Security and Sources of Payment for the Series 2021 Bonds ................................................................ 2
No Reserve Fund ................................................................................................................................... 3
Validation .............................................................................................................................................. 3
The City ................................................................................................................................................. 3
Continuing Disclosure ........................................................................................................................... 4
Certain Risk Factors .............................................................................................................................. 4
Forward-Looking Statements ................................................................................................................ 4
Other Information .................................................................................................................................. 4
PLAN OF FINANCE ................................................................................................................................... 5
General .................................................................................................................................................. 5
Report of Independent Actuary ............................................................................................................. 5
ESTIMATED SOURCES AND USES OF FUNDS ................................................................................... 6
THE BONDS ............................................................................................................................................... 6
General .................................................................................................................................................. 6
Optional Redemption of the Series 2021 Bonds ................................................................................... 7
Mandatory Sinking Fund Redemption of the Series 2021 Bonds ......................................................... 8
Notice of Redemption ........................................................................................................................... 9
Selection of Bonds for Redemption .................................................................................................... 10
Clearing Systems for the Series 2021 Bonds....................................................................................... 11
SECURITY AND SOURCE OF PAYMENT FOR THE BONDS ........................................................... 11
General ................................................................................................................................................ 11
Bond Payments .................................................................................................................................... 12
Pension Tax Override Revenues ......................................................................................................... 13
Debt Service Schedule ......................................................................................................................... 15
Additional Bonds ................................................................................................................................. 16
Limited Obligations ............................................................................................................................. 16
THE CITY ................................................................................................................................................. 17
CITY FINANCIAL INFORMATION ....................................................................................................... 17
Financial Statements ............................................................................................................................ 17
Budgetary Process ............................................................................................................................... 18
City Financial Management Policies ................................................................................................... 22
Current Investments ............................................................................................................................ 23
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Reliance on State Budget..................................................................................................................... 24
Principal Sources of General Fund Revenues ..................................................................................... 24
PROPERTY TAXES ................................................................................................................................. 25
Ad Valorem Property Taxes ................................................................................................................ 25
Motor Vehicle In-Lieu Tax ................................................................................................................. 30
SALES TAXES ......................................................................................................................................... 30
OTHER TAXES ........................................................................................................................................ 31
Utility Taxes ........................................................................................................................................ 31
Transient Occupancy Tax .................................................................................................................... 31
Other Taxes ......................................................................................................................................... 32
OTHER REVENUES ................................................................................................................................ 33
OTHER FINANCIAL INFORMATION ................................................................................................... 36
Labor Relations ................................................................................................................................... 36
Risk Management ................................................................................................................................ 36
Employee Retirement Plan - CalPERS ................................................................................................ 37
Retirement Plan - Supplemental .......................................................................................................... 47
Other Post-Employment Benefits (OPEB) .......................................................................................... 48
Short-Term Obligations ....................................................................................................................... 49
Long-Term Obligations. ...................................................................................................................... 49
Overlapping Debt ................................................................................................................................ 51
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND
APPROPRIATIONS .................................................................................................................................. 54
Article XIIIA of the California Constitution ....................................................................................... 54
Article XIIIB of the California Constitution ....................................................................................... 55
Proposition 218 .................................................................................................................................... 56
Proposition 1A of 2004 ....................................................................................................................... 57
Proposition 22 ...................................................................................................................................... 58
Proposition 25 ...................................................................................................................................... 58
Proposition 26 ...................................................................................................................................... 59
Future Initiatives .................................................................................................................................. 59
CERTAIN RISK FACTORS ..................................................................................................................... 59
Bonds are a Limited Obligation of the City ........................................................................................ 59
Natural Disasters ................................................................................................................................. 60
Drought and Drought Response .......................................................................................................... 61
Climate Change and Sea Level Rise ................................................................................................... 62
Cybersecurity ....................................................................................................................................... 62
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Infectious Disease Outbreak – COVID-19 .......................................................................................... 63
Bankruptcy .......................................................................................................................................... 67
Limitations on Remedies ..................................................................................................................... 68
Risk of Tax Audit ................................................................................................................................ 69
State Budget ........................................................................................................................................ 69
Limited Secondary Market .................................................................................................................. 73
Changes in Law ................................................................................................................................... 73
TAX MATTERS ........................................................................................................................................ 73
General ................................................................................................................................................ 73
U.S. Holders ........................................................................................................................................ 74
Non-U.S. Holders ................................................................................................................................ 76
Foreign Account Tax Compliance Act (“FATCA”) — U.S. Holders and Non-U.S. Holders ............ 76
VALIDATION ........................................................................................................................................... 77
CERTAIN LEGAL MATTERS................................................................................................................. 77
FINANCIAL STATEMENTS ................................................................................................................... 77
LITIGATION ............................................................................................................................................. 78
RATINGS .................................................................................................................................................. 78
UNDERWRITING .................................................................................................................................... 78
MUNICIPAL ADVISOR ........................................................................................................................... 79
CONTINUING DISCLOSURE ................................................................................................................. 79
ADDITIONAL INFORMATION .............................................................................................................. 80
APPENDIX A GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION RELATING
TO THE CITY ............................................................................................................ A-1
APPENDIX B COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED JUNE 30, 2020 ................................................................... B-1
APPENDIX C CITY INVESTMENT POLICY ..................................................................................... C-1
APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT ............ D-1
APPENDIX E PROPOSED FORM OF BOND COUNSEL OPINION ................................................ E-1
APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE ......................................... F-1
APPENDIX G PROVISIONS FOR BOOK-ENTRY ONLY SYSTEM AND GLOBAL
CLEARANCE PROCEDURES .................................................................................. G-1
APPENDIX H CITY UNFUNDED ACCRUED LIABILITY PENSION FUNDING POLICY ........... H-1
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OFFICIAL STATEMENT
$__________
CITY OF HUNTINGTON BEACH
(ORANGE COUNTY, CALIFORNIA)
TAXABLE PENSION OBLIGATION BONDS, SERIES 2021
INTRODUCTION
The following introduction presents a brief description of certain information in connection with
the Series 2021 Bonds (as defined below) and is qualified in its entirety by reference to the entire Official
Statement and the documents summarized or described herein. References to, and summaries of,
provisions of the Constitution and the laws of the State of California (the “State”) and any documents
referred to herein do not purport to be complete and such references are qualified in their entirety by
reference to the complete provisions thereof. Capitalized terms used in this Official Statement and not
defined elsewhere herein have the meanings given such terms in the Trust Agreement (as defined below).
See APPENDIX D – ”SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT—
Definitions.”
General Description
This Official Statement, including the cover page, the inside cover page and the attached
appendices (this “Official Statement”), provides certain information concerning the issuance of
$__________* aggregate principal amount of Taxable Pension Obligation Bonds, Series 2021 (the “Series
2021 Bonds”). The Series 2021 Bonds are being issued by the City of Huntington Beach (the “City”),
pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of
the Government Code of the State of California (the “State”), a resolution of the City authorizing the
issuance of the Series 2021 Bonds and a trust agreement, dated as of ______ 1, 2021 (the “Trust
Agreement”), by and between the City and U.S. Bank National Association, as trustee (the “Trustee”).
Pursuant to its contract with respect to the City’s Safety Plan and the City’s Miscellaneous Plan,
effective October 1, 1945 (as amended to date, and as may further be amended from time to time, the
“CalPERS Contract”) with the Board of Administration of the California Public Employee’s Retirement
System (“CalPERS” or the “System”) and Section 20000 et seq. of the State Government Code (the
“Retirement Law”), the City is obligated to make payments to CalPERS arising as a result of retirement
benefits accruing to members of CalPERS. The City’s obligations under the Retirement Law include,
among others, the requirement to amortize the unfunded accrued actuarial liability (the “UAAL”) with
respect to such retirement benefits. The Series 2021 Bonds will be issued pursuant to the Trust
Agreement (i) to refund a portion of the City’s obligations to the System under the CalPERS Contract (as
described herein) consisting of 100% of the City’s UAAL to the System as of _______ __, 2021, and
(ii) to pay the costs of issuance related to the Series 2021 Bonds. See “PLAN OF FINANCE” and
“ESTIMATED SOURCES AND USES OF FUNDS” herein.
The City levies an annual retirement tax to meet its obligations under the CalPERS Contract — a
provision in the City Charter since 1966 (the “Pension Tax Override”). The proceeds of such tax will be
held by the City in a designated fund established for the Pension Tax Override (the “Pension Liability
Debt Service Fund”). While not pledged to the payment of the Bonds, the City has covenanted in the
Trust Agreement to make deposits to the Bond Fund first, from Pension Tax Override Revenues up to the
Preliminary, subject to change.
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Secured Amount (each as defined herein) and second, from any other source of legally available funds of
the City, to be applied at its discretion. See “SECURITY AND SOURCES OF PAYMENT FOR THE
BONDS” herein.
Terms of the Series 2021 Bonds
The Series 2021 Bonds will mature on the dates and in the principal amounts set forth on the
inside cover page of this Official Statement. Interest on the Series 2021 Bonds is payable semiannually
on each June 15 and December 15 (each, an “Interest Payment Date”), commencing December 15, 2021,
computed at the respective rates of interest set forth on the inside cover page of this Official Statement.
The Series 2021 Bonds will be issuable in denominations of $5,000 or any integral multiple thereof. The
Series 2021 Bonds are subject to optional and extraordinary redemption as described herein. See “THE
BONDS.”
Book-Entry Only
The Depository Trust Company, New York, New York (“DTC”). DTC will act as the depository
of the Series 2021 Bonds and all payments due on the Series 2021 Bonds will be made to DTC or its
nominee. Ownership interests in the Series 2021 Bonds may be purchased in book-entry form only.
Beneficial interests in the Series 2021 Bonds may be held through DTC, DTC, Clearstream International
S.A., a Deutsche Börse Group company, as operator of the Clearstream system (“Clearstream”), or
Euroclear S.A./N.V., a bank organized under the laws of the Kingdom of Belgium, as operator of the
Euroclear system (“Euroclear”), directly as a participant or indirectly through organizations that are
participants in such system. See APPENDIX G – “PROVISIONS FOR BOOK-ENTRY ONLY
SYSTEM AND GLOBAL CLEARANCE PROCEDURES” for a description of DTC, Clearstream,
Euroclear, and certain of their responsibilities, and the provisions for registration and registration of
transfer of the Series 2021 Bonds if the book-entry-only system of registration is discontinued.
Security and Sources of Payment for the Series 2021 Bonds
The obligations of the City under the Series 2021 Bonds, including the obligation to make all
payments of interest and principal when due, are obligations of the City imposed by law payable from
funds to be appropriated by the City pursuant to the Public Employees’ Retirement Law, commencing
with Section 20000 of the California Government Code (the “Retirement Law”) and are absolute and
unconditional, without any right of set-off or counterclaim. The Trust Agreement provides for the
establishment and maintenance in trust a special fund designated the “Bond Fund.” Also in the Trust
Agreement, the City has covenanted to establish and maintain the Pension Liability Debt Service Fund.
Subject only to the provisions of the Trust Agreement permitting the application thereof for the purposes
and on the terms and conditions set forth therein, all of the amounts held in the Bond Fund are pledged by
the City to secure the payment of the principal or redemption price of and interest on the Bonds in
accordance with their terms, the provisions of the Trust Agreement and the Act. As described herein, the
Bond Fund shall be funded pursuant to the terms of the Trust Agreement first, from Pension Tax Override
Revenues up to the Secured Amount (each as defined herein) and second, from any other source of legally
available funds of the City.
Pursuant to the Trust Agreement, not later than five (5) Business Days prior to each Interest
Payment Date, the City is obligated to deposit or cause to be deposited with the Trustee for deposit into
the Bond Fund the amount which will equal the amount of the principal of and interest on the Bonds
coming due on such Interest Payment Date. See “SECURITY AND SOURCES OF PAYMENT FOR
THE BONDS” herein.
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In the June 1978 election in which state voters approved Proposition 13, Huntington Beach voters
approved a City Charter amendment allowing the City to participate in any retirement system, rather than
only the State-run system. The Charter amendment also permitted the City to impose property taxes to
meet its obligations for the retirement system — a provision in the City Charter since 1966. California
courts have held that Proposition 13, discussed below under the heading “CONSTITUTIONAL AND
STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS,” permits additional property
taxation to pay for pension plans with special tax authority approved by voters prior to July 1, 1978;
provided the imposition of such tax is limited to the funding of employee retirement benefits at a level not
in excess of the retirement benefits in existence prior to July 1, 1978 (the “Pre-Proposition 13 Pension
Liability”). The City applies Pension Tax Override revenues to pay obligations under the City’s Safety
Plan. An independent actuary, Bartel Associates, LLC (“Bartel”) has certified that 89% of the Safety
Plan’s current UAAL constitutes Pre-Proposition 13 Pension Liability under the CalPERS Contract.
THE OBLIGATIONS OF THE CITY UNDER THE BONDS, INCLUDING THE
OBLIGATION TO MAKE ALL PAYMENTS OF INTEREST AND PRINCIPAL WHEN DUE, ARE
OBLIGATIONS OF THE CITY IMPOSED BY LAW AND ARE ABSOLUTE AND
UNCONDITIONAL, WITHOUT ANY RIGHT OF SET-OFF OR COUNTERCLAIM. EXCEPT TO
THE EXTENT OF THE PENSION TAX OVERRIDE AS PROVIDED IN THE TRUST AGREEMENT,
THE BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS
OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION. NEITHER THE BONDS NOR
THE OBLIGATION OF THE CITY TO MAKE PAYMENTS ON THE BONDS CONSTITUTE AN
INDEBTEDNESS OF THE CITY, THE STATE, OR ANY OF ITS POLITICAL SUBDIVISIONS
WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR
RESTRICTION.
No Reserve Fund
The City has not funded a reserve fund in connection with the issuance of the Series 2021 Bonds.
Validation
The authorization by the City of the issuance of the Series 2021 Bonds as obligations of the City
imposed by law, and as to the validity and conformity of the Series 2021 Bonds with all applicable
provisions of law, were validated by a judgment of the Superior Court of the State of California in and for
the County of Orange entered on May 18, 2020. The time period for the filing of appeals with respect to
the judgment has expired. No appeals were filed and therefore, the judgment is final. See
“VALIDATION” herein.
The City
The City is a municipal corporation and chartered city of the State. See “THE CITY,” “CITY
FINANCIAL INFORMATION” and APPENDIX A – “GENERAL, ECONOMIC AND
DEMOGRAPHIC INFORMATION RELATING TO THE CITY.”
As discussed under the caption “CERTAIN RISK FACTORS – Infectious Disease Outbreak –
COVID-19”, the finances and operations of the City have been and will continue to be impacted by
COVID-19. Particular financial impacts have hit the City’s sales tax revenues and transient occupancy
tax revenues. However, the City has been proactive in its planning. The City budget for fiscal year 2020-
21 was introduced on June 1, 2020 and adopted on June 29, 2020. Of particular note, the General Fund
budget is structurally balanced, with no reliance on one-time revenues to balance the budget.
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Continuing Disclosure
The City has covenanted in the Continuing Disclosure Certificate (the “Continuing Disclosure
Certificate”) to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s
Electronic Municipal Market Access system (the “EMMA System”), for purposes of Rule 15c2-12(b)(5)
(the “Rule”) adopted by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities
Exchange Act of 1934, as amended, certain annual financial information and operating data of the type set
forth herein including, but not limited to, its audited financial statements and notice of certain enumerated
events. See “CONTINUING DISCLOSURE.” See also APPENDIX F – “FORM OF CONTINUING
DISCLOSURE CERTIFICATE” for a description of the specific nature of the annual report and notices
of enumerated events and a summary description of the terms of the Continuing Disclosure Certificate
pursuant to which such reports and notices are to be made.
Certain Risk Factors
Certain events could affect the ability of the City to pay debt service on the Series 2021 Bonds
when due. See “CERTAIN RISK FACTORS” for a discussion of certain factors that should be
considered, in addition to other matters set forth herein, in evaluating an investment in the Series 2021
Bonds.
Forward-Looking Statements
Certain statements included or incorporated by reference in this Official Statement constitute
“forward-looking statements.” Such statements are generally identifiable by the terminology used such as
“plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other
expectations contained in such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results, performance or achievements described to
be materially different from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although such expectations reflected in such forward-looking
statements are reasonable, there can be no assurance that such expectations will prove to be correct. The
City is not obligated to issue any updates or revisions to the forward-looking statements if, or when, its
expectations, or events, conditions or circumstances on which such statements are based change.
Other Information
The descriptions herein of the Trust Agreement and any other agreements relating to the Series
2021 Bonds are qualified in their entirety by reference to such documents, and the descriptions herein of
the Series 2021 Bonds are qualified in their entirety by the forms thereof and the information with respect
thereto included in the aforementioned documents. See APPENDIX D – “SUMMARY OF CERTAIN
PROVISIONS OF THE TRUST AGREEMENT.” Copies of the documents are on file and, upon request
and payment to the City of a charge for copying, mailing and handling, from the Chief Financial Officer,
City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648, telephone (714) 536-5630.
The information and expressions of opinion herein speak only as of their date and are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor
any future use of this Official Statement, under any circumstances, creates any implication that there has
been no change in the affairs of the City since the date hereof.
The presentation of information, including tables of receipt of revenues, is intended to show
recent historical information and is not intended to indicate future or continuing trends in the financial
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position or other affairs of the City. No representation is made that past experience, as it might be shown
by such financial and other information, will necessarily continue or be repeated in the future.
PLAN OF FINANCE
General
The Series 2021 Bonds are being issued to: (i) to refund a portion of the City’s obligations to
CalPERS under the CalPERS Contract consisting of 100% of the City’s UAAL to the California Public
Employee’s Retirement System as of _______ __, 2021 (the “Unfunded Liability”) and (ii) to pay the
costs of issuance related to the Series 2021 Bonds. See “ESTIMATED SOURCES AND USES OF
FUNDS” herein.
CalPERS has notified the City as to the amount of the Unfunded Liability based on the June 30,
2019 actuarial valuations, which are the most recent actuarial valuations performed by CalPERS for the
City’s Miscellaneous Plan and Safety Plan. Based on the June 30, 2019 actuarial valuation as reported by
CalPERS to the City, CalPERS has projected the City’s total UAAL to be $[426,388,332] as of [April 1,
2021], consisting of $[156,228,555] with respect to the City’s Miscellaneous Plan and $[270,159,777]
with respect to the City’s Safety Plan. The Series 2021 Bonds are being issued to refund 100 percent of
the Unfunded Liability. With this deposit, the City will have fully funded its Unfunded Liability and will
not be required to make any further payments to CalPERS with respect to the Unfunded Liability
refinanced by the Series 2021 Bonds. It is possible that CalPERS will determine at a future date that an
additional unfunded liability exists that is attributable to the City if actual plan experience differs from the
current actuarial estimates.
CalPERS has confirmed the calculation of the City’s total UAAL to be $[426,388,322] as of the
date of delivery of the Series 2021 Bonds. See “SECURITY AND SOURCE OF PAYMENT FOR THE
BONDS – Pension Tax Override Revenues” herein. The City’s obligations under the CalPERS Contract
are, and the City’s obligations with respect to the Series 2021 Bonds upon issuance, including the
obligation to make all payments of interest and principal when due, will be obligations of the City
imposed by law and are absolute and unconditional, without any right of set-off or counterclaim.
Report of Independent Actuary
On June 6, 1978, California voters approved an amendment (commonly known as both
Proposition 13 and the Jarvis-Gann Initiative) to the California Constitution. California courts have held
that Proposition 13 added certain limits to the levy of taxes and valuation of property, but permits
additional property taxation to pay for pension plans with special tax authority approved by voters prior to
July 1, 1978; provided the imposition of such tax is limited to the funding of safety employee retirement
benefits at a level not in excess of the retirement benefits in existence prior to July 1, 1978 (the “Pre-
Proposition 13 Pension Liability”). In determining and confirming the amount of the Secured Amount
available to pay debt service on an amount of the Series 2021 Bonds, the City engaged Bartel to review
the cost of its CalPERS Plans, the City’s unfunded liability and the application of the Pension Tax
Override to pay for benefits either contracted for or effective before July 1, 1978. At that time, the
retirement benefit was set at 2% @ 50 for benefits under the Safety Fire Plan, and ½ Pay @ 55* for
* The ½ Pay @ 55 formula provides a benefit of ½ pay to employees retiring at age 55 or later with 20 or more years of
service. The retirement benefit is lower for retirement before age 55. For retirements with 20 or fewer years of service
retiring at age 55 or later, the equivalent benefit factor is 2.5% for each year of service. The benefit factor is lower for those
with more service or retiring before age 55.
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benefits under the Police and other Safety Plan, The only Safety benefit improvement effective after July
1, 1978 that affect the City’s CalPERS contribution rates has been 2% @ 50 for Police and other Safety,
3% @50 for all Safety. Bartel identified four possible methods to determine the cost of benefit
improvements made after July 1, 1978: (1) Short Term Cash Flow, (2) Normal Cost, (3) Use No (or
Limited) Excess Assets, and (4) Use A Portion of Excess Assets. Bartel recommended that the only
possible method that the City has sufficient and reliable information to perform a reasonable estimate is
the Normal Cost method. This method is based on CalPERS Contract Amendment Analysis. The
information suggests the best and most reasonable, long term indicator of cost is the change in Normal
Cost due to the benefit improvements. By application of the Pension Tax Override to pay for benefits
either contracted for or effective before July 1, 1978, the estimated June 30, 2019 unfunded actuarial
liability of the Safety Plan attributable to benefits contracted for or effective before July 1, 1978 is
[$240.4] million or 89% of total unfunded actuarial liability of the Safety Plan. See “SECURITY AND
SOURCE OF PAYMENT FOR THE BONDS – Pension Tax Override Revenues” herein.
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds realized upon the sale of, or in connection with, the
Series 2021 Bonds are as follows:
Estimated Sources:
Principal Amount of Series 2021 Bonds
Total Sources
Estimated Uses:
Funding of the Unfunded Liability(1)
Costs of Issuance(2)
Total Uses
(1) See “PLAN OF FINANCE.”
(3) Includes, but is not limited to, the Underwriters’ discount, the fees and expenses of Bond
Counsel, Disclosure Counsel, the Municipal Advisor, the Trustee, the Actuary, and the
rating agencies, costs of printing the Official Statement, and other costs incurred by the City
in connection with the issuance and delivery of the Series 2021 Bonds.
THE BONDS
General
The Series 2021 Bonds will be issued only in fully registered form, in denominations of $5,000
and any integral multiple thereof and will mature on the dates and in the principal amounts and bear
interest at the rates (based on a 360-day year of twelve 30-day months) set forth on the inside front cover
hereof. Interest on the Series 2021 Bonds will be payable semiannually on June 15 and December 15 of
each year, commencing December 15, 2021 (each, an “Interest Payment Date”).
The Series 2021 Bonds will each be dated their date of original delivery, issued in fully registered
form, without coupons, and, when issued, will be registered in the name of Cede & Co., as nominee of
The Depository Trust Company, New York, New York (“DTC”). DTC will act as Securities Depository
of the Series 2021 Bonds. Ownership interests in the Series 2021 Bonds may be purchased in book-entry
form only. Purchasers will not receive certificates representing Series 2021 Bonds purchased by them.
Beneficial interests in the Series 2021 Bonds may be held through DTC, Clearstream or Euroclear as
operator of the Euroclear System, directly as a participant or indirectly through organizations that are
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participants in such systems. See APPENDIX G – “PROVISIONS FOR BOOK-ENTRY ONLY
SYSTEM AND GLOBAL CLEARANCE PROCEDURES.” Payments of principal of, premium, if any,
and interest on the Series 2021 Bonds will be paid by the Trustee to DTC, which is obligated in turn to
remit such principal, premium, if any, and interest to its DTC Participants for subsequent disbursement to
the beneficial owners of the Series 2021 Bonds.
Payment of interest on the Series 2021 Bonds due on or before the maturity or prior redemption
thereof will be made to the person whose name appears in the registration books kept by the Trustee as
the Owner thereof as of the close of business on the Record Date for an Interest Payment Date, whether or
not such day is a Business Day, such interest to be paid by check mailed on the Interest Payment Date by
first class mail to such Owner at the address as it appears in such books; provided that upon the written
request of an Owner of $1,000,000 or more in aggregate principal amount of Series 2021 Bonds received
by the Trustee prior to the applicable Record Date, interest will be paid by wire transfer in immediately
available funds. “Record Date” means the first day (whether or not such day is a Business Day) of the
month of each Interest Payment Date. For a further description of the Series 2021 Bonds, see “–
Redemption Provisions” below and APPENDIX D — “SUMMARY OF CERTAIN PROVISIONS OF
THE TRUST AGREEMENT.”
The Series 2021 Bonds are being offered for sale in those jurisdictions in the United States of
America, the European Economic Area, the United Kingdom, Switzerland, several countries in Asia, and
elsewhere where it is lawful to make such offers. The distribution of this Official Statement and the
offering, sale and delivery of the Series 2021 Bonds in certain jurisdictions is restricted by law. See
“INFORMATION CONCERNING OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS
OUTSIDE THE UNITED STATES” in the introductory section of this Official Statement.
Optional Redemption of the Series 2021 Bonds
Optional Redemption. The Series 2021 Bonds are subject to optional redemption prior to their
maturity at the option of the City, in whole or in part, on any date on or after June 15, 20__, from any
source of available funds, at a redemption price equal to 100% of the principal amount of the Series 2021
Bonds to be redeemed, plus unpaid, accrued interest thereon to the date of redemption, without premium.
Make-Whole Optional Redemption. From the date of issuance of the Series 2021 Bonds to but
not including _____ 15, 20__, the Series 2021 Bonds are subject to redemption prior to their respective
stated maturities, at the option of the City, from lawfully available funds deposited in the Optional
Redemption Account, as a whole or in part (in such order of maturity as shall be selected by the City in a
written order of the City filed with the Trustee, which may be made through DTC, by pro rata pass-
through distribution of principal as described under “—Selection of Bonds for Redemption” below), on
any date, at a redemption price equal to the greater of:
(1) 100% of the principal amount of such Series 2021 Bonds to be redeemed; or
(2) the sum of the present value of the remaining scheduled payments of principal
and interest to the maturity date or dates of such Series 2021 Bonds to be redeemed, not including
any portion of those payments of interest accrued and unpaid as of the date on which such Series
2021 Bonds are to be redeemed, discounted to the date on which such Series 2021 Bonds are to
be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day
months, [(i) with respect to the Series 2021 Bonds maturing on June 15, 20__ through and
including June 15, 20__, at the Treasury Rate, and (ii) with respect to the Series 2021 Bonds
maturing on June 15, 20__ through and including June 15, 20__, at the Treasury Rate, plus __
basis points],
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plus, in each case, accrued interest on such Series 2021 Bonds to be redeemed to the redemption
date.
“Treasury Rate” as such term is used in “Make-Whole Optional Redemption” above means, with
respect to any redemption date for a particular Series 2021 Bond, the yield to maturity as of such
redemption date of United States Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at
least two Business Days prior to the redemption date (excluding inflation indexed securities) (or, if such
Statistical Release is no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to the maturity date of the Series 2021 Bond to be
redeemed; provided, however, that if the period from the redemption date to such maturity date is less
than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year will be used.
Calculation of Make-Whole Optional Redemption Price. The redemption price of the Series 2021
Bonds to be redeemed at the option of the City as described in “Make-Whole Optional Redemption”
above will be determined by an independent accounting firm, investment banking firm or municipal
advisor retained by the City at the City’s expense to calculate such redemption price. The City and the
Trustee shall be furnished with the redemption price by such independent accounting firm, investment
banking firm or municipal advisor and the City and the Trustee may conclusively rely on the
determination of such redemption price by such independent accounting firm, investment banking firm or
municipal advisor and will not be liable for such reliance.
Mandatory Sinking Fund Redemption of the Series 2021 Bonds
The Series 2021 Bonds maturing on June 15, 20__ and bearing interest at the rate of ____% are
subject to mandatory sinking fund redemption, in part (as described below), on June 15 in each year,
commencing _______ 15, 20__, at a redemption price equal to 100% of the principal amount of the Series
2021 Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in
the aggregate respective principal amounts in the respective years as follows:
Redemption Date
(June 1)
Principal
Amount
20__
20__
20__
20__
20__ (maturity)
The Series 2021 Bonds maturing on June 15, 20__ and bearing interest at the rate of ____% are
subject to mandatory sinking fund redemption, in part (as described below), on June 15 in each year,
commencing _______ 15, 20__, at a redemption price equal to 100% of the principal amount of the Series
2021 Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in
the aggregate respective principal amounts in the respective years as follows:
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Redemption Date
(June 1)
Principal
Amount
20__
20__
20__
20__
20__ (maturity)
[In the event that the Term Bonds are optionally redeemed, in part, the foregoing mandatory
sinking fund payments will be reduced as nearly as practicable on a pro rata basis in integral multiples of
$5,000.]
Notice of Redemption
Notice of redemption will be mailed by first-class mail by the Trustee, not less than 20 nor more
than 60 days prior to the redemption date to the respective Owners of the Series 2021 Bonds designated
for redemption at their addresses appearing on the registration books of the Trustee. Each notice of
redemption will state the date of such notice, the redemption price, if any, (including the name and
appropriate address of the Trustee), the CUSIP number (if any) and ISIN number (if any) of the maturity
or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate
numbers of the Series 2021 Bonds of such maturity, to be redeemed and, in the case of Series 2021 Bonds
to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each
such notice will also state that on said date there will become due and payable on each of said Series 2021
Bonds the redemption price, if any, thereof and in the case of a Bond to be redeemed in part only, the
specified portion of the principal amount thereof to be redeemed, together with interest accrued thereon to
the redemption date, and that from and after such redemption date interest thereon will cease to accrue,
and will require that such Series 2021 Bonds be then surrendered at the address of the Trustee specified in
the redemption notice; provided, however, that any such notice of redemption may be cancelled and
annulled by a Written Request of the City given to the Trustee at least five days prior to the date fixed for
redemption, whereupon the Trustee will forthwith give appropriate notice of such cancellation and
annulment to all the recipients of such notice of redemption. The failure of any Owner to receive notice
pursuant to the Trust Agreement or any defect therein shall not invalidate any of the proceedings taken in
connection with such redemption.
With respect to any notice of any optional redemption of Bonds, such notice may state that such
redemption is conditional upon receipt by the Trustee, on or prior to the date fixed for such redemption, of
moneys that, together with other available amounts held by the Trustee, are sufficient to pay the
redemption price of, and accrued interest on, the Bonds to be redeemed, and that if such moneys is not so
received, such notice will be of no force and effect and the City will not be required to redeem such
Bonds. In the event a notice of redemption of Bonds contains such a condition and such moneys are not
so received, the redemption of Bonds as described in the conditional notice of redemption will not be
made and the Trustee will, within a reasonable time after the date on which such redemption was to occur,
give notice to the persons and in the manner in which the notice of redemption was given, that such
moneys were not so received and that there will be no redemption of Bonds pursuant to such notice of
redemption.
If notice of redemption has been duly given as aforesaid and money for the payment of the
redemption price of the Bonds called for redemption is held by the Trustee, then on the redemption date
designated in such notice Bonds so called for redemption shall become due and payable, and from and
after the date so designated interest on such Bonds shall cease to accrue, and the Owners of such Bonds
shall have no rights in respect thereof except to receive payment of the redemption price thereof.
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All Bonds redeemed pursuant to the provisions of the Trust Agreement will be canceled by the
Trustee upon surrender thereof and destroyed.
Selection of Bonds for Redemption
Whenever provision is made for the redemption of less than all of the Bonds of a particular
maturity, the Trustee will select the Bonds to be redeemed from all Bonds not previously called for
redemption (a) with respect to any optional redemption of Bonds, as directed in a Written Certificate of
the City, and (b) with respect to any other redemption of Additional Bonds, among maturities, as provided
in the Supplemental Trust Agreement pursuant to which such Additional Bonds are issued, and by lot
among Bonds of the same Series with the same maturity in any manner which the Trustee in its sole
discretion deems appropriate and fair. The Trustee will promptly notify the Authority and the City in
writing of the numbers of the Bonds so selected for redemption on such date. For purposes of such
selection, any Bond may be redeemed in part in Authorized Denominations.
The City may direct the Trustee to redeem such Bonds (including the Series 2021 Bonds) on a
pro rata basis as to each Owner in whose name such Bonds are registered on the Record Date
immediately preceding a redemption date. “Pro rata” is determined, in connection with any mandatory
sinking fund redemption or any optional redemption, in part, by multiplying the principal amount of the
Bonds of such maturity to be redeemed on the applicable redemption date by a fraction, the numerator of
which is equal to the principal amount of the Bonds of such maturity owned by an Owner, and the
denominator of which is equal to the total amount of the Bonds of such maturity then Outstanding
immediately prior to such redemption date, and then rounding the product down to the next lower integral
multiple of $5,000, provided that the portion of any Bonds to be redeemed are required to be in
Authorized Denominations and all Bonds of a maturity to remain outstanding following any redemption
are required to be in authorized denominations.
If the Series 2021 Bonds are in book-entry form at the time of such redemption, any direction for
the pro rata redemption Bonds would be subject to written notice to DTC in accordance with the Trust
Agreement and the pro rata reduction in principal provision included in the DTC Letter of
Representations of the City on file with DTC, in accordance with the operational arrangements of DTC
then in effect. The Underwriters have advised the Trustee and the City that the Series 2021 Bonds will be
made eligible for partial redemption to be treated by DTC in accordance with its rules and procedures as a
“pro rata pass-through distribution of principal.” In connection with each such redemption, the Trustee
will include in the written notice of redemption described above the dollar amount per $1,000 principal
amount payable on account of principal and accrued interest to effect a pro rata reduction through a pass-
through distribution of principal on the related redemption date. DTC will be responsible for distributing
the principal and accrued interest among its Direct Participants, as applicable, pro rata in accordance with
its rules and procedures for a pro rata pass-through distribution of principal based upon the beneficial
interest in the Series 2021 Bonds being redeemed that DTC records list as owned by each DTC Direct
Participant as of the record date for such payment. Any failure of the Trustee to provide such notice, or of
DTC or its participants or any other intermediary to make such selection or proportional allocation, for
whatever reason, will not affect the sufficiency or the validity of the redemption of the Series 2021
Bonds. In addition, if DTC’s prevailing operational arrangements do not allow for allocation of a
redemption on a pro rata pass-through distribution of principal basis, the portion of the Series 2021
Bonds to be redeemed on such redemption date will be selected in accordance with DTC’s then existing
rules and procedures, and may be by lot.
So long as there is a Securities Depository for the Series 2021 Bonds, there will be only one
registered Owner and neither the City nor the Trustee will have responsibility for prorating partial
redemptions among beneficial owners of the Series 2021 Bonds.
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Clearing Systems for the Series 2021 Bonds
DTC will act as the initial securities depository for the Series 2021 Bonds. Euroclear and
Clearstream are participants of DTC and facilitate the clearance and settlement of securities transactions
by electronic book entry transfer between their respective account holders. The information in this
section and in APPENDIX G – “PROVISIONS FOR BOOK-ENTRY ONLY SYSTEM AND GLOBAL
CLEARANCE PROCEDURES” concerning DTC and DTC’s book entry system, and the Euroclear and
Clearstream systems has been obtained from sources that the City believes to be reliable, but the City
takes no responsibility for the accuracy thereof.
So long as the Series 2021 Bonds are held in book-entry form by DTC, all payments of principal
of, optional redemption and make-whole optional redemption, if any, and interest on the Series 2021
Bonds will be made pursuant to DTC’s rules and procedures. See APPENDIX G – “PROVISIONS FOR
BOOK-ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES.”
In the event (i) DTC determines not to continue to act as Securities Depository for the Series
2021 Bonds, or (ii) DTC shall no longer so act and gives notice to the Trustee of such determination, or
(iii) the City determines that DTC is no longer able to carry out its functions as Securities Depository or
the City determines that it is in the best interest of the City to remove DTC from its functions as
Securities Depository, DTC’s services may be discontinued and the Series 2021 Bonds may be transferred
pursuant to the terms of the Trust Agreement. Generally, with respect to transfer of the Series 2021
Bonds, the Trust Agreement provides that if the City determines to replace DTC or its successor with
another qualified Securities Depository, then upon receipt of the Outstanding Series 2021 Bonds by the
Trustee, a single new Series 2021 Bond shall be executed and delivered in the aggregate principal amount
of the Series 2021 Bonds then Outstanding, registered in the name of such replacement qualified
Securities Depository or its nominee, as the case may be. Upon the discontinuance or termination of the
services of DTC with respect to the Series 2021 Bonds, unless a substitute Securities Depository is
appointed by the City to undertake the functions of DTC under the Trust Agreement, the City is obligated
to deliver Series 2021 Bond certificates to or upon the order of the Beneficial Owners of such Series 2021
Bonds, as described in the Trust Agreement, and such Series 2021 Bonds shall no longer be restricted to
being registered in the registration books kept by the Trustee in the name of the Nominee, but may be
registered in whatever name or names Owners transferring or exchanging such Series 2021 Bonds shall
designate, in accordance with the provisions of the Trust Agreement.
THE INFORMATION CONTAINED HEREIN AND IN APPENDIX G CONCERNING DTC,
CLEARSTREAM AND EUROCLEAR AND THEIR BOOK-ENTRY SYSTEMS HAS BEEN
OBTAINED FROM DTC, CLEARSTREAM AND EUROCLEAR, RESPECTIVELY, AND THE CITY
MAKES NO REPRESENTATION AS TO THE COMPLETENESS OR THE ACCURACY OF SUCH
INFORMATION OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH
INFORMATION SUBSEQUENT TO THE DATE OF THIS OFFICIAL STATEMENT.
SECURITY AND SOURCE OF PAYMENT FOR THE BONDS
General
The City is a member of the California Public Employees’ Retirement System (“CalPERS”), an
agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement
and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and
beneficiaries. CalPERS acts as a common investment and administrative agent for participating public
entities within the State, including the City. As such, the City is obligated by the Retirement Law and the
CalPERS Contract, to make contributions to CalPERS to (a) fund pension benefits for City employees
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who are members of CalPERS, (b) amortize the unfunded actuarial liability with respect to such pension
benefits, and (c) appropriate funds for such purposes. The City participates in two retirement plans (with
tiers within such plans) under the CalPERS Contract. The City is authorized pursuant to Articles 10 and
11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of the California Government
Code (the “Refunding Bond Law”), to issue bonds for the purpose of refunding obligations evidenced by
the CalPERS Contract. The proceeds from the sale of the Series 2021 Bonds (exclusive of costs of
issuance) will be used to refund the City’s obligations to CalPERS evidenced by the two retirement plans
in which the City participates pursuant to the CalPERS Contract and representing the current UAAL with
respect to certain pension benefits under the Retirement Law. The authorization by the City of the
issuance of the Series 2021 Bonds as obligations of the City imposed by law, and as to the validity and
conformity of the Series 2021 Bonds with all applicable provisions of law, were validated by a judgment
of the Superior Court of the State of California in and for the County of Orange entered on May 18, 2020.
See “VALIDATION” herein.
Bond Payments
The obligations of the City under the Bonds, including the obligation to make all payments of
interest and principal when due, are obligations of the City imposed by law payable from funds to be
appropriated by the City pursuant to the Retirement Law and are absolute and unconditional, without any
right of set-off or counterclaim. The Trust Agreement provides for the establishment and maintenance in
trust a special fund designated the “Bond Fund.” Subject only to the provisions of the Trust Agreement
permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of
the amounts held in the Bond Fund are pledged by the City to secure the payment of the principal or
redemption price of and interest on the Bonds in accordance with their terms, the provisions of the Trust
Agreement and the Act. Said pledge shall constitute a first lien on such assets.
The Trust Agreement provides that not later than five (5) Business Days prior to each Interest
Payment Date, the City is obligated to deposit or cause to be deposited with the Trustee for deposit into
the Bond Fund an amount of the principal of and interest on the Bonds coming due on such Interest
Payment Date. The Bond Fund shall be funded pursuant to the terms of the Trust Agreement first, from
Pension Tax Override Revenues up to the Secured Amount (each as defined herein) and second, from any
other source of legally available funds of the City.
In the event that, on the first Business Day of the month of each Interest Payment Date, amounts
in the Bond Fund are insufficient to pay the principal, if any, of and interest on the Bonds due and payable
on such Interest Payment Date, the Trustee shall immediately notify the City of the amount of such
insufficiency. Upon being so notified, the City shall, prior to the close of business on the Business Day
immediately preceding such Interest Payment Date, deliver or cause to be delivered to the Trustee
immediately available funds in an amount equal to the amount of such insufficiency. Immediately upon
receipt thereof, the Trustee shall deposit such funds in the Bond Fund.
On each Interest Payment Date, the Trustee shall withdraw from the Bond Fund for payment to
the Owners of the Bonds the principal, if any, of and interest on the Bonds then due and payable. If there
are insufficient funds in the Bond Fund to pay the principal, if any, of and interest on the Bonds, the
Trustee shall apply the available funds first to the payment of interest on the Bonds, then to the payment
of principal of the Bonds.
The Bonds do not constitute an obligation of the City for which the City is obligated to levy or
pledge any form of taxation. Neither the Bonds nor the obligation of the City to make payments on the
Bonds constitute an indebtedness of the City, the State, or any of its political subdivisions within the
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meaning of any constitutional or statutory debt limitation or restriction. See “CONSTITUTIONAL AND
STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” herein.
Pension Tax Override Revenues
By City Charter amendment adopted at the 1978 general election, allowing the City to participate
in any retirement system, rather than only the State-run system, the City imposed property taxes to meet
its obligations under the CalPERS Contract — a provision in the City Charter since 1966 (the “Pension
Tax Override”). In 1983-84, the Pension Tax Override was set at a rate not to exceed $0.04930 cents per
$100 of assessed valuation. In August 2012, Chapter 3.07 of the Municipal Code capped the Pension Tax
Override tax rate to the fiscal year 2012-13 rate of $0.01500 per $100 of assessed value. This is the
currently applied rate. In accordance with the Trust Agreement, all Pension Tax Override Revenues,
together with any interest earned thereon, when and as received by the City, will be immediately
deposited and held in the Pension Liability Debt Service Fund. The City further agrees and covenants
that all such Pension Tax Override Revenues shall be accounted for separately and apart from all other
money, funds, accounts or other resources of the City. In fiscal year 2019-20, the City received
approximately $________ of Pension Tax Override Revenues. The City expects no part of the revenues
generated by the Pension Tax Override to be allocable to the Huntington Beach Redevelopment Successor
Agency as tax increment revenues.
California courts have held that Proposition 13, discussed below under the heading
“CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS,”
permits additional property taxation to pay for pension plans with special tax authority approved by voters
prior to July 1, 1978; provided the imposition of such tax is limited to the funding of employee retirement
benefits at a level not in excess of the retirement benefits in existence prior to July 1, 1978 (the “Pre-
Proposition 13 Pension Liability”). Among other matters, the City’s validation action with respect to this
financing judicially validated the application of the revenues generated by the Pension Tax Override
toward the payment of debt service on the Series 2021 Bonds to the extent the Series 2021 Bonds fund
Pre-Proposition 13 Pension Liability under the CalPERS Contract. An independent actuary, Bartel has
certified that 89% of the current Safety Plan UAAL constitutes Pre-Proposition 13 Pension Liability
under the CalPERS Contract. Bartel has also certified that for the fiscal year starting July 1, 2020, the
estimated normal cost for the Safety Plan is $10,360,000 and the estimated normal cost attributable to
Pre-Proposition 13 Pension Liability is $8,216,000. Of the City’s required normal and unfunded liability
contribution rates as percentages of payroll projected by CalPERS for fiscal year 2020-21 at 60.8%,
(Safety Plan), 52.0% of payroll with respect to the Safety Plan constitutes Pre-Proposition 13 Pension
Liability. These required contributions are reflected in the City’s fiscal year 2020-21 budget.
The City’s fiscal year 2020-21 unfunded liability payments for its Miscellaneous and Safety plans
totaling $31,484,000 were prepaid to CalPERS on July 15, 2020. See “PLAN OF FINANCE – Report of
Independent Actuary” herein.
Under the Trust Agreement, the Pension Tax Override Revenues will be available to pay a
portion of the debt service on the Bonds in an amount up to the extent of the Secured Amount. Pension
Tax Override Revenues are only available to pay debt service on the Bonds to the extent of the Secured
Amount. The term “Secured Amount” means debt service on an amount of Bonds (including a pro rata
share of costs of issuance) the proceeds of which have been used to fund Pre-Proposition 13 Pension
Liability under the CalPERS Contract. The Secured Amount with respect to the Series 2021 Bonds will
be determined at the time of issuance of the Series 2021 Bonds. Based upon Bartel’s certification of the
percentage of the UAAL for the Safety Plan, the Secured Amount with respect to the Series 2021 Bonds
is approximately $______ annually (representing that portion of debt service allocable to the [$240.4]
million or 89% of total unfunded actuarial liability of the Safety Plan). The Secured Amount is the total
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amount of the Pension Tax Override Revenues that may be applied to pay debt service on the Series 2021
Bonds until maturity, representative of a portion of the aggregate UAAL and aggregate debt service of the
Series 2021 Bonds. Based on Pension Tax Override Revenues received in fiscal year 2019-20, the City
expects approximately __%* of annual debt service on the Series 2021 Bonds will be payable from
Pension Tax Override Revenues, such amount allocable to the current Safety Plan portion of the UAAL.]
In the case of the issuance of Additional Bonds, the Secured Amount with respect thereto will be
determined at the time of issuance of such Bonds under the Trust Agreement; and if less than all of the
proceeds of a Series of Bonds issued under the Trust Agreement are used to fund Pre-Proposition 13
Pension Liability under the CalPERS Contract.
As defined in the Trust Agreement, “Pension Tax Override” means the ad valorem tax override
annually levied at the rate of $0.01500 per $100 of the assessed value of all taxable property within the
City pursuant to Article XIIIA, Section 1(b)(1) of the California Constitution.
“Pension Tax Override Authorization” means City Charter Section 607, adopted and ratified by
the City Council on January 17, 1966.
“[Pension Tax Override Fund]” means the Pension Liability Debt Service Fund established by the
City in accordance with the Trust Agreement.
“Pension Tax Override Revenues” means all of the revenues received by or payable to the City
from the Pension Tax Override.
“Pre-Proposition 13 Pension Liability” means employee retirement benefits at a level not in
excess of the retirement benefits in existence prior to July 1, 1978 under the CalPERS Contract.
In accordance with the Trust Agreement, Pension Tax Override Revenues, when and as received
by the City, will be deposited and held in the Pension Liability Debt Service Fund. The City further
agrees and covenants that all such Pension Tax Override Revenues shall be accounted for separately and
apart from all other money, funds, accounts or other resources of the City.
Not later than five (5) Business Days prior to each Interest Payment Date, the City will transfer
from the Pension Liability Debt Service Fund to the Trustee an amount which, together with amount
simultaneously transferred to the Trustee for deposit in the Bond Fund, and the amount then on deposit in
the Bond Fund, will equal the amount of the principal of and interest on the Bonds coming due on such
Interest Payment Date. The Trustee shall, upon receipt of the amount required to be transferred by the
City pursuant to this subsection, deposit such amount in the Bond Fund.
The City has covenanted pursuant to the Trust Agreement that so long as any Bonds remain
outstanding, (a) the City will, or cause the County to, annually levy and collect the Pension Tax Override;
(b) the City will take such steps as are lawfully permitted by the City to enforce the collection of the
Pension Tax Override; provided, that so long as the County acts as the collection agency for property
taxes in the City (including the Pension Tax Override), the City shall be deemed to be in compliance with
this subsection (b) unless the County fails to perform its duties to collect the Pension Tax Override;
(c) the City Council will not amend, or permit the amendment by initiative of, any legislative action
heretofore taken by the City Council in respect of the levy of the Pension Tax Override to reduce the rate
at which the Pension Tax Override is levied or reduce the property or classes of property against which it
Preliminary, subject to change.
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is levied; and (d) the City Council will not repeal, or permit the repeal by initiative of, the Pension Tax
Override Authorization.
A challenge to the Pension Tax Override was narrowly defeated in 2012 with the failure to reach
the requisite 50% majority on a ballot question entitled, “A Huntington Beach Levy of Property Tax for
Municipal Purposes, Measure Z” which appeared on the November 6, 2012 ballot. If Measure Z had been
approved, the Pension Tax Override would have been repealed.
The Pension Tax Override was the subject of a prior judgment of the Orange County Superior
Court. That judgment was subsequently upheld by the Appellate Court on appeal, in the case of Howard
Jarvis Taxpayers Assn. v. County of Orange, and Real Party in Interest, City of Huntington Beach,
Orange County Superior Court Case No. 818780, which invalidated certain property taxes collected by
the County of Orange on behalf of the City to the extent that such taxes exceeded the City’s employer
contribution for retirement benefits that were in effect prior to July 1, 1978, or amendments thereto
mandated by the California Legislature. Following that decision, the City agreed to a tax rate not to
exceed $0.01500 per $100 of assessed value annually.
THE OBLIGATIONS OF THE CITY UNDER THE BONDS, INCLUDING THE
OBLIGATION TO MAKE ALL PAYMENTS OF INTEREST AND PRINCIPAL WHEN DUE, ARE
OBLIGATIONS OF THE CITY IMPOSED BY LAW AND ARE ABSOLUTE AND
UNCONDITIONAL, WITHOUT ANY RIGHT OF SET-OFF OR COUNTERCLAIM. EXCEPT TO
THE EXTENT OF THE PENSION TAX OVERRIDE AS PROVIDED IN THE TRUST AGREEMENT,
THE BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS
OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION. NEITHER THE BONDS NOR
THE OBLIGATION OF THE CITY TO MAKE PAYMENTS ON THE BONDS CONSTITUTE AN
INDEBTEDNESS OF THE CITY, THE STATE, OR ANY OF ITS POLITICAL SUBDIVISIONS
WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR
RESTRICTION.
For summary information on the receipt of Pension Tax Override Revenues, see “CITY
FINANCIAL INFORMATION – Principal Sources of General Fund Revenues.” As discussed above,
Pension Tax Override Revenues are only available to pay debt service to the extent of the Secured
Amount, with such payments to be available pro rata among Outstanding Bonds. For further discussion
of the levy and collection of taxes such as the Pension Tax Override see “CONSTITUTIONAL AND
STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”
Debt Service Schedule
The following table sets forth the annual debt service schedule for the Series 2021 Bonds by
fiscal year (assuming no optional redemption prior to the scheduled maturity of the Series 2021 Bonds)
and the portion of total annual debt service payments eligible for payment from the Pension Override Tax.
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Debt Service Schedule
Year
Ending
[June 30] Principal Interest
Total Debt
Service
Payments
Projected
Pension Tax
Override
Revenues *
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
Total
* Amount shown is fiscal year 2019-20 revenues, without any increase in the proceeds of the Pension Tax
Override. See “SECURITY AND SOURCE OF PAYMENT FOR THE BONDS - Pension Tax
Override Revenues.”
Source: Stifel, Nicolaus & Company, Incorporated
Additional Bonds
The City may from time to time issue additional bonds for (i) the purpose of satisfying any
obligation of the City to make payments to the System pursuant to the Retirement Law relating to pension
benefits accruing to the System's members, and/or for payment of all costs incidental to or connected with
the issuance of additional bonds for such purpose, and/or (ii) the purpose of refunding any Bonds then
Outstanding, including payment of all costs incidental to or connected with such refunding. Such
additional bonds may be issued on a parity with the Series 2021 Bonds without the consent of any Owner.
For more information regarding the issuance of additional bonds, see APPENDIX D – “SUMMARY OF
CERTAIN PROVISIONS OF THE TRUST AGREEMENT – Additional Bonds.”
Limited Obligations
THE BONDS ARE GENERAL OBLIGATIONS OF THE CITY PAYABLE FROM ANY
LAWFULLY AVAILABLE FUNDS OF THE CITY AND ARE NOT LIMITED AS TO PAYMENT TO
ANY SPECIAL SOURCE OF FUNDS OF THE CITY. THE OBLIGATIONS OF THE CITY UNDER
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THE BONDS, INCLUDING THE OBLIGATION TO MAKE ALL PAYMENTS OF INTEREST AND
PRINCIPAL WHEN DUE, ARE OBLIGATIONS OF THE CITY IMPOSED BY LAW AND ARE
ABSOLUTE AND UNCONDITIONAL, WITHOUT ANY RIGHT OF SET-OFF OR
COUNTERCLAIM. EXCEPT TO THE EXTENT OF THE PENSION TAX OVERRIDE AS
PROVIDED IN THE TRUST AGREEMENT, THE BONDS DO NOT CONSTITUTE AN
OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE
ANY FORM OF TAXATION. NEITHER THE BONDS NOR THE OBLIGATION OF THE CITY TO
MAKE PAYMENTS ON THE BONDS CONSTITUTE AN INDEBTEDNESS OF THE CITY, THE
STATE, OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.
THE CITY
Founded in the late 1880’s, Huntington Beach was incorporated as a general law city in 1909 and
became a charter city in 1937. The City has a City Council/City Manager form of government. The City
Council has seven members, each of whom is elected to a four-year term. City Council Members are
limited to two consecutive terms. There are three elected department heads, the City Attorney, City Clerk
and City Treasurer. The position of Mayor is filled on a rotating basis.
The City encompasses 31.6 square miles (26.4 square miles is land, 5.2 square miles is water) in
the coastal area of Orange County, California, adjacent to the Cities of Costa Mesa, Fountain Valley,
Newport Beach, Seal Beach and Westminster. The City is approximately 40 miles southeast of Los
Angeles and 90 miles northwest of San Diego. As of January 1, 2020, the State of California Finance
Department estimated its population at 201,281.
On August 22, 2011, the City completed the process of annexation of the adjacent community of
Sunset Beach, a 134-acre, formerly unincorporated area of about 1,000 residents. The area was placed
under the City’s sphere of influence by the Local Agency Formation Commission (LAFCO), which
oversees the process of municipal boundary changes, in an effort to reduce the number of Orange County
“islands,” the generally small, unincorporated areas that are hard to serve.
See APPENDIX A – “GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY” for a general description of the City as well as certain demographic and
statistical information.
CITY FINANCIAL INFORMATION
Financial Statements
The City’s accounting policies conform to generally accepted accounting principles. The audited
financial statements also conform to the principles and standards for public financial reporting established
by the Governmental Accounting Standards Board.
Basis of Accounting and Financial Statement Presentation. The government-wide financial
statements are reported using the accrual basis of accounting. Revenues are recorded when earned and
expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied. Grants and similar items are
recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the modified accrual basis of
accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are
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considered to be available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as
under accrual accounting. However, debt service expenditures are recorded only when payment is due.
Change to June 30 Fiscal Year End. With the City Council’s adoption of a new fiscal year end,
changing its fiscal year end from September 30 to June 30, effective for fiscal year 2017-18, the City’s
financial period aligns with that of the State, the County, and with CalPERS. As a result, the summary
financial information for fiscal year 2017-18 presents nine months of activities only.
Audited Financial Statements. The City retained the firm of Davis Farr LLP, Certified Public
Accountants to examine the general purpose financial statements of the City as of and for the City’s fiscal
year ended June 30, 2020. The City is the recipient of the Government Finance Officers Association
Certificate of Achievement for Excellence in Financial Reporting for the fiscal year ended June 30, 2020
and has been for 34 consecutive years. The audited financial statements for fiscal year ended June 30,
2020, are attached hereto as APPENDIX B – “COMPREHENSIVE ANNUAL FINANCIAL REPORT
OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.” The City has not requested, and the
auditor has not provided, any review or update of such financial statements in connection with their
inclusion in this Official Statement.
Budgetary Process
The City Council adopts an annual budget with appropriations for all City funds prior to the
beginning of the fiscal year, which begins on July 1 of each year. The City Council has the legal
authority to amend the budget at any time during the fiscal year. The City maintains budgetary controls
to ensure compliance with legal provisions embodied in the appropriated budget approved by the City
Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the
appropriated amount) for the City’s operating budget is the department level within each fund, and for the
capital improvement budget it is each individual capital improvement project within each fund. A
Department Head, with the Chief Financial Officer’s approval, may transfer appropriations (with no
dollar limitation) within like categories (operating and capital expenditures) of the same department.
Transfers of appropriations for salaries and benefits require additional approval of the City Manager or
his designee. All other appropriation changes require the approval of the City Council. All
appropriations lapse at the end of the fiscal year unless specific carryovers are approved by the City
Council.
As discussed under the caption “CERTAIN RISK FACTORS – Infectious Disease Outbreak –
COVID-19”, the finances and operations of the City have been and will continue to be impacted by
COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, 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 address its impacts are uncertain. The spread of
COVID-19 has altered the behavior of businesses and people in a manner that has had a negative effect on
global and local economies. The activities that generate, in particular, sales and use taxes, property taxes,
and transient occupancy taxes, actually received by the City may be adversely affected by the spread of
COVID-19. There can be no guarantee that sales and use taxes, property taxes, and transient occupancy
taxes resulting from changes in consumer activity and to collected in the future will be consistent with
historical collection trends.
The City budget for fiscal year 2020-21 was introduced on June 1, 2020 and adopted on June 29,
2020. Of particular note, the General Fund budget is structurally balanced, with no reliance on one-time
revenues to balance the budget.
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To date, the City has received $14.3 million in CARES Act funding passed through various
agencies, including the State of California and County of Orange. These revenues and related
expenditures are not included in the General Fund, but are reported separately in a Grants Special
Revenue Fund. CARES Act proceeds deposited therein were applied by the City only to the payment of
COVID-19 related expenditures and costs. Additionally, the City was awarded an additional $648,000
from the County of Orange for Small Business Relief, to be used to fund a micro-grant program for small
businesses negatively impacted by COVID-19.
The City’s fiscal year 2020-21 budgeted General Fund revenues remain conservative at
$210.5 million as the nation continues to experience the effects of the COVID-19 pandemic. Property tax
receipts for fiscal year 2019-20 were largely unaffected by the pandemic, and current economic indicators
show that the financial growth of property tax will continue to increase at a moderate pace in fiscal year
2020-21. The economic impacts of the COVID-19 pandemic to sales tax, transient occupancy tax, and
use of money and property are expected to continue through fiscal year 2020-21 and are budgeted
accordingly.
The City’s adopted budget for fiscal year 2020-21 identifies $21.0 million in expenditure
reductions to balance the General Fund budget, including: operating budget reductions; continuation of
the hiring freeze for all non-essential personnel; a planned reduction in workforce of approximately 5% of
total full-time positions within the City; reductions in overtime and part-time personnel, and reduced
transfers to General Liability, Infrastructure, and Equipment Replacement funds. The planned reduction
was achieved through a voluntary early separation program, which closed October 5, 2020, with 97
employees electing to participate in the plan. This program, coupled with an extensive reorganization
plan, will provide an estimated $6 million in General Fund savings for Fiscal Year 2020-21, with ongoing
savings in excess of $6 million annually in future years.
The following tables show the City’s budget and actual results for General Fund revenues and
expenditures for fiscal year 2016-17 through fiscal year 2019-20, and the adopted budget for fiscal year
2020-21. [The City’s expects City Council review of its mid-year budget update and adjustments on
February 16, 2021. Currently, the City does not expect material adjustments to its adopted budget to be
materially adverse to those budget projections.]
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City of Huntington Beach
General Fund Budget Summary
Fiscal Years 2016-17 through 2017-18
(in Thousands)
Fiscal Year
2016-17
Adopted Budget
Fiscal Year
2016-17
Actual
Nine-Month
2017-18 Adopted
Budget
Nine-Month
2017-18
Actual
REVENUES
Property Taxes(1) $ 80,120 $ 80,826 $ 79,058 $ 80,614
Sales Taxes 41,441 40,371 30,758 31,364
Utility Taxes 19,837 19,303 13,743 14,014
Other Taxes 17,844 17,991 14,599 14,883
License and Permits 8,336 8,736 6,128 6,247
Fines, Forfeitures and Penalties 5,090 3,995 2,989 3,048
Use of Money and Property 16,363 16,555 10,931 11,211
Intergovernmental 3,676 3,831 3,521 3,901
Charges for Current Services 26,132 24,800 18,401 18,132
Other 1,312 1,492 2,102 1,502
Total Revenues $220,151 $217,900 $182,230 $184,916
EXPENDITURES
Current:
City Council 364 333 301 279
City Manager 2,403 2,116 2,190 1,928
City Treasurer 209 201 178 134
City Attorney 2,667 3,052 2,097 2,037
City Clerk 971 830 647 602
Finance 5,884 5,763 5,009 4,376
Human Resources(2) 5,864 5,535 5,431 5,323
Community Development 7,313 6,770 5,940 5,428
Fire 45,710 46,746 36,976 36,304
Information Services 6,931 6,384 5,402 5,225
Police 74,144 73,543 57,520 57,218
Community Services 10,453 10,652 8,016 6,410
Library Services 4,270 4,246 3,807 3,283
Public Works 22,954 22,081 19,557 19,009
Non-Departmental(2) 23,641 25,163 22,128 20,048
Debt Service:
Principal 1,414 981 524 311
Interest 32 186 87 87
Total Expenditures $215,224 $214,582 $175,810 $168,002
Excess of Revenues
Over Expenditures 4,927 3,318 6,420 16,914
OTHER FINANCING SOURCES (USES)
Transfers In 929 221 1,463 152
Transfers Out (5,836) (6,068) (13,400) (13,400)
Total Other Financing Sources (Uses) (4,907) (5,847) (11,937) (13,248)
Net Change in Fund Balances 20 (2,529) (5,517) 3,666
Fund Balance – Beginning of Year 62,847 62,847 61,180 61,180
Prior Period Adjustment 862 862 3,788 3,788
Fund Balance – Beginning Restated 63,709 63,709 64,968 64,968
Fund Balance – End of Year $ 63,729 $ 61,180 $ 59,451 $ 68,634
(1) Beginning with the fiscal year ended June 30, 2020, the Pension Tax Override is no longer reported in the General Fund; instead,
these revenues are included in the Pension Liability Debt Service Fund.
(2) 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 expenditures are no longer presented separately but are included as
part of the City Manager budget beginning with the fiscal year ended June 30, 2020.
Source: City of Huntington Beach Finance Department.
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City of Huntington Beach
General Fund Budget Summary
Fiscal Years 2018-19 through 2020-21
(in Thousands)
Fiscal Year
2018-19
Adopted
Budget
Fiscal Year
2018-19
Actual
Fiscal Year
2019-20
Adopted
Budget
Fiscal Year
2019-20
Actual
Fiscal Year
2020-21
Adopted
Budget
REVENUES
Property Taxes(1) $ 85,909 $ 89,367 $ 89,732 $87,497 $87,966
Sales Taxes 42,993 43,942 41,203 41,063 39,227
Utility Taxes 18,360 18,788 17,906 18,149 16,605
Other Taxes 20,092 20,227 20,926 17,499 12,416
License and Permits 7,594 8,292 7,858 8,368 7,358
Fines, Forfeitures and Penalties 4,316 4,300 4,519 3,403 3,282
Use of Money and Property 17,236 19,859 17,272 17,510 14,500
Intergovernmental 2,903 4,974 3,074 4,102 3,130
Charges for Current Services 25,656 25,390 27,132 25,501 24,630
Other 1,378 1,492 1,460 2,395 1,396
Total Revenues $226,437 $236,631 $231,082 $225,487 $210,510
EXPENDITURES
Current:
City Council 428 369 454 394 396
City Manager 2,862 2,656 3,872 4,045 6,472
City Treasurer 264 248 260 297 284
City Attorney 2,877 2,874 2,811 2,898 3,034
City Clerk 1,053 981 926 874 1,005
Finance 6,559 6,467 6,481 6,174 6,164
Human Resources(2) 7,455 6,362 -- -- --
Community Development 8,501 7,960 9,600 9,184 9,201
Fire 52,376 53,547 52,623 55,030 48,488
Information Services 7,790 7,938 7,766 7,812 7,475
Police 84,378 82,098 84,506 85,993 79,702
Community Services 10,122 9,414 9,930 9,064 8,924
Library Services 4,998 4,710 4,930 4,752 4,844
Public Works 28,162 28,289 27,838 27,264 26,844
Non-Departmental(2) -- -- -- -- --
Debt Service:
Principal 1,321 1,379 1,078 1,637 2,075
Interest 203 177 195 218 194
Total Expenditures $219,349 $215,469 $213,270 $215,636 $205,103
Excess of Revenues
Over Expenditures 7,088 21,162 17,812 9,851 5,408
OTHER FINANCING SOURCES (USES)
Transfers In 499 13 1,514 172 13
Transfers Out (9,896) (10,796) (19,190) (8,948) (5,421)
Total Other Financing Sources (Uses) (9,397) (10,783) (17,676) (8,776) (5,408)
Net Change in Fund Balances (2,309) 10,379 136 1,075 --
Fund Balance – Beginning of Year 68,634 68,634 79,013 79,013 80,088
Prior Period Adjustment -- -- -- -- --
Fund Balance – Beginning Restated 68,634 68,634 79,013 79,013 80,088
Fund Balance – End of Year $ 66,325 $ 79,013 $ 79,149 $ 80,088 $80,088
(1) Beginning with the fiscal year ended June 30, 2020, the Pension Tax Override is no longer reported in the General Fund; instead, these
revenues are included in the Pension Liability Debt Service Fund.
(2) 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 expenditures are no longer presented separately but are included as part
of the City Manager budget beginning with the fiscal year ended June 30, 2020.
Source: City of Huntington Beach Finance Department.
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City Financial Management Policies
The City Council has adopted a comprehensive set of financial management policies to provide
for: (i) establishing targeted General Fund reserves; (ii) the prudent investment of City funds; and
(iii) establishing parameters for issuing and managing debt supported by the General Fund, Enterprise
Funds and any other related funding entity of the City.
Economic Uncertainties Reserve Policy. The City’s Economic Uncertainties Reserve Policy
states the goal of achieving an Economic Uncertainties Reserve Commitment equal to the value of the
two months of General Fund expenditures adopted budget amount. As of June 30, 2020, the City had an
Economic Uncertainties Reserve balance of $25,010,000. Since this date, there have been no changes to
the reserve. The current goal for the reserve balance represents 11.5% of the fiscal year 2020-21 General
Fund adopted budget.
Appropriations and use of these funds will be reserved for emergency situations including, but
not limited to the following:
An unplanned, major event such as catastrophic disaster requiring expenditures over 5% of
the General Fund adopted budget
Budgeted revenue 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
Once established, appropriations from these reserves can only be made by formal City Council
action. Should the Economic Uncertainties Reserve commitment be used, and its level falls below the
minimum amount of two months of General Fund expenditures adopted budget, the goal is to replenish
the fund within three fiscal years.
The City has never appropriated funds from the Economic Uncertainties Reserve.
Pension Liability Funding Policy. Beginning fiscal year 2013-14, the City implemented a unique
“One Equals Five” plan for reducing its unfunded liability for the City’s CalPERS pension plans. Based
on an analysis conducted by the City’s actuary, each additional $1 million contributed to the City’s
pension plans will potentially benefit the City five times over resulting in $5 million in taxpayer savings
over a 25-year period. The City has set aside a minimum of $1 million each year towards this plan since
its establishment. This funding has never been utilized and is set aside in a Section 115 Trust. [On
[March 1], 2021, the City Council adopted an Unfunded Accrued Liability Pension Funding Policy (the
“Unfunded Accrued Liability Pension Funding Policy”), formally requiring the following each fiscal year,
unless set aside by a 6/7th vote of the City Council:
- Annual $1.5 million contribution to the City’s Section 115 Trust. Section 115 Trust assets to
be restricted and only accessed to pay CalPERS costs to reduce volatility and offset
unexpected pension rate increases.
- Perpetual Set-Aside of 50% of Pension Refinance Savings. Based on the City’s estimated
savings of $978,000 in fiscal year 2021-22, 50% of that savings amount, or $489,000 (to be
adjusted annually by CPI), will be budgeted on an annual basis for deposit into the City's
Section 115 Trust to offset any future UAAL costs that arise. This deposit to be in addition to
the annual $1.5 million contribution.
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- Annual set-aside of an additional 50% of any General Fund surplus at year-end and deposit
into a City held General Fund Pension Rate Stabilization Reserve, to be restricted and only
accessed to pay CalPERS costs to reduce volatility and offset unexpected pension rate
increases.
- Accelerated Payment Schedule is established to provide parameters for the payment for any
new UAAL, only using available amounts in the Section 115 Trust and the General Fund
Pension Rate Stabilization Reserve to meet this accelerated schedule.
- Annual Assessment of Additional Discretionary Payments (“ADP”) to be Made to CalPERS.
After completion of the City’s annual audit, the City will make an assessment and
determination to utilize any available reserves or one-time savings from the prior fiscal year
to be appropriated as an ADP, provided there is no adverse effect the general operations of
the City. ADP’s may be deposited with CalPERS, invested in the City’s Section 115 Trust, or
set-aside in the General Fund Pension Rate Stabilization Reserve.
- Additional Discretionary Payments (“ADP”) may be deposited with CALPERS at any time.
After completion of the City’s annual audit, all discretionary fund reserve balances will be
reviewed by City staff. Based on any budgetary constraints at that time, an assessment should
be coordinated to determine the cost / benefit
The Unfunded Accrued Liability Pension Funding Policy establishes a process for the City to
accelerate the payoff for any future UAAL that develops as calculated annually by CalPERS. The City’s
overall objective under the policy is to fund its CalPERS pension plan up to 100% of the total accrued
liability, and no less than 80%, whenever possible. The funding policy is intended to support the decision
making process of the City Council and should be consistent with the overall purpose and goals of the
City’s pension plan. See APPENDIX H – “CITY UNFUNDED PENSION LIABILITY POLICY.”
Investment Policy. The investment of funds of the City (except pension and retirement funds) is
made in accordance with the City’s 2021 Investment Policy, as approved on February 1, 2021 (the
“Investment Policy”), and Section 53601 et seq. of the California Government Code. The Investment
Policy is subject to revision at any time and is reviewed at least annually to ensure compliance with the
stated objectives of safety, liquidity, yield, and current laws and financial trends. All amounts held under
the Trust Agreement are invested at the direction of the City in Permitted Investments, as defined in the
Trust Agreement, and are subject to certain limitations contained therein. See APPENDIX C – “CITY
INVESTMENT POLICY” and APPENDIX D – “SUMMARY OF CERTAIN PROVISIONS OF THE
TRUST AGREEMENT – Deposit and Investments of Money in Funds.”
Current Investments
The assets of the City’s investment portfolio, as of December 31, 2020, are shown in the
following table:
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Investment Portfolio of the City
As of December 31, 2020
(in Thousands)
Type Par Value
Market
Value
Book
Value
% of
Portfolio
Days to
Maturity
Federal Agency Issues – Coupon $ 49,000 $ 50,982 $ 49,168 20.45% 718
Local Agency Inv. Fund (LAIF) 41,551 41,551 41,551 17.28 1
OC Investment Pool 75,110 75,110 75,110 31.26 1
Treasury Securities – Coupon 8,000 8,324 7,978 3.32 1,150
Medium Term Notes 15,000 15,730 15,274 6.35 870
Corporate Bonds 50,899 52,643 51,309 21.34 534
Total Investments $239,560 $244,340 $240,390 100.00% 355
Source: City of Huntington Beach
Reliance on State Budget
Approximately 56.7% (consisting of the sales tax, property tax and the motor vehicle license fee)
of the City’s General Fund revenues included in the budget for fiscal year 2019-20 consisted of payments
collected by the State and passed-through to local governments or collected by the County and allocated
to local governments by State law. Approximately 60.4% of the City’s General Fund revenues included
in the budget for fiscal year 2020-21 are expected to come from such sources. There can be no assurance
that any future State budget difficulties will not adversely affect the City’s revenues or its ability to pay
the principal of and interest due on the Series 2021 Bonds under the Trust Agreement. See
“CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND
APPROPRIATIONS – Proposition 1A of 2004” and “CERTAIN RISK FACTORS – State Budgets.”
Principal Sources of General Fund Revenues
The following table shows the City’s General Fund tax revenues by source for the most recent
five fiscal years received or anticipated for fiscal years ending September 30, 2016 through June 30,
2020. The current spread of COVID-19 has altered the behavior of businesses and people in a manner
that has had significant negative effects on global and local economies, which initially are expected to
materially impact sales and use taxes, property taxes, and transient occupancy taxes resulting from
changes in consumer activity, reduced travel and related use of lodging facilities within the City. There
can be no assurances what long-term effect the current spread of COVID-19 will have on the levels
consumer and business activity in the City for a period of time. See “CERTAIN RISK FACTORS –
Infectious Disease Outbreak – COVID-19” and the detail in the sections below describing General Fund
tax revenues by source, sales taxes and other taxes. As noted above, the approximately $14.3 million in
CARES Act funding received to date is not included in the table below. These revenues and related
expenditures are not included in the General Fund, but are reported separately in a Grants Special
Revenue Fund.
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City of Huntington Beach
General Fund Tax Revenues by Source
(in Thousands)
Source
Fiscal Year
2016-17
Actual
Nine-Month
2017-18
Actual
Fiscal Year
2018-19
Actual
Fiscal Year
2019-20
Actual
Adopted
Budget
2020-21
Property Taxes $ 75,035 $ 74,999 $ 82,992 $ 87,497 $ 87,966
Pension Override Tax(1) 5,791 5,615 6,375 -- --
Property Tax Revenues 80,826 80,614 89,367 87,497 87,966
Sales and Use Taxes 40,371 31,364 43,942 41,063 39,227
Utility Taxes 19,303 14,014 18,788 18,149 16,605
Other Taxes(2) 17,991 14,883 20,227 17,489 12,416
Total Tax Revenues $158,491 $140,875 $172,324 $164,198 $156,214
(1) Beginning with the fiscal year ended June 30, 2020, the Pension Tax Override is no longer reported in the General
Fund; instead, these revenues are included in the Pension Liability Debt Service Fund.
(2) Includes Transient Occupancy Taxes, Franchise Taxes and other taxes.
Source: City of Huntington Beach Finance Department
Deposits to the Grants Special Revenue Fund in the past year were allocated to Community
Development Block Grant, HOME Grant, street improvement and traffic signal grants and projects, and
COVID-19 related expenditures that are expected to be reimbursed by FEMA and/or funded with CARES
Act Funds from the State. CARES Act proceeds deposited therein were applied by the City only to the
payment of COVID-19 related expenditures and costs.
As described in further detail below, COVID-19 has impacted sales and use taxes and transient
occupancy taxes resulting from changes in consumer activity, reduced travel and related use of lodging
facilities within the City. Property taxes were the single largest revenue source to the General Fund in
fiscal year 2018-19, representing approximately 37.8% of revenues, followed by sales taxes representing
approximately 18.6%. These sources represented an aggregate of approximately 56.3% of the actual
General Fund revenues for fiscal year 2018-19 and represent an aggregate of approximately 56.7% and
60.4% of General Fund revenues in the City’s fiscal year 2019-20 actuals and fiscal year 2020-21 adopted
budget. As discussed above, Pension Tax Override Revenues are only available to pay debt service to the
extent of the Secured Amount, with such payments to be available pro rata among Outstanding Bonds.
For further discussion of the levy and collection of taxes such as the Pension Tax Override see
“CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”
For a discussion of potential State Budget impacts on General Fund revenues, see “– State
Budgets.” For a discussion of property tax revenues and sales taxes, see “PROPERTY TAXES” and
“SALES TAXES” below.
PROPERTY TAXES
Ad Valorem Property Taxes
General. The County levies a one percent property tax on behalf of all taxing agencies in the
County, including the City. The taxes collected are allocated on the basis of a formula established by
State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year
allocation plus an allocation on the basis of “situs” growth in assessed value (new construction, change of
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ownership, inflation) prorated among the jurisdictions which serve the tax rate areas within which the
growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit
the levying of taxes for less than county-wide or less than city-wide special and school districts. In
addition, the County levies and collects additional approved property taxes and assessments on behalf of
any taxing agency within the County.
Taxes are levied for each fiscal year on taxable real and personal property which is situated in the
County as of the preceding January 1. However, upon a change in ownership of real property or
completion of new construction, State law permits an accelerated recognition and taxation of increases in
real property assessed valuation (known as a “floating lien date”). For assessment and collection
purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate
parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State and
County assessed property secured by a lien which is sufficient, in the opinion of the assessor, to secure
payment of the taxes. Other property is assessed on the “unsecured roll.” See “CONSTITUTIONAL
AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” herein.
Retirement Tax. In accordance with the City Charter, the City imposes a retirement tax (the
“Pension Tax Override”) to meet its obligations under its contract with the California Public Employees’
Retirement System (CalPERS). The City has levied such tax since 1966. In fiscal year 1983-84, the
Pension Tax Override was set at a rate not to exceed $0.04930 cents per $100 of assessed valuation. In
August 2012, Chapter 3.07 of the Municipal Code capped the Pension Tax Override tax rate to the fiscal
year 2012-13 rate of $0.01500 per $100 of assessed value. This is the currently applied rate. Revenues
generated by the Pension Tax Override are applied to pay the costs of retirement benefits for public safety
employees.
California courts have held that Proposition 13, discussed below under the heading
“CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS,”
permits additional property taxation to pay for pension plans with special tax authority approved by voters
prior to July 1, 1978; provided the imposition of such tax is limited to the funding of safety employee
retirement benefits at a level not in excess of the retirement benefits in existence prior to July 1, 1978 (the
“Pre-Proposition 13 Pension Liability”).
Tax Levies, Collections and Delinquencies. Property taxes are levied by the County for each
fiscal year on taxable real and personal property which is situated in the County. Property taxes collected
in advance are recorded as deferred revenue and recognized as revenue in the year they become available.
The County levies, bills and collects property taxes for the City. Property taxes paid to the City by the
County within 60 days after the end of the fiscal year are “available” and are, therefore, recognized as
revenue.
For assessment and collection purposes, property is classified either as “secured” or “unsecured”
and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the
assessment roll containing State/assessed public utilities property and property the taxes on which are a
lien on real property sufficient, in the opinion of the County Assessor, to secure payment of the taxes.
Other property is assessed on the “unsecured roll.”
Secured and unsecured property taxes are levied based on the assessed value as of January 1, the
lien date, of the preceding fiscal year. Secured property tax is levied on October 1 and due in two
installments, on November 1 and March 1. Collection dates are December 10 and April 10 which are also
the delinquent dates. At that time, delinquent accounts are assessed a penalty of 10%. Accounts that
remain unpaid on June 30 are charged an additional 1.5 % per month. Such property may thereafter be
redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a
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redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State
and then is subject to sale by the County Treasurer. Although the County maintains a Teeter Plan, which
is an alternative method for the distribution of secured property taxes to local agencies, the City has
elected not to be included in the County’s Teeter Plan. See “CERTAIN RISK FACTORS – Infectious
Disease Outbreak - COVID-19” for the potential of a grant of waivers on penalties, based on application
and approval, benefiting taxpayers that do not make timely payment of property taxes, due to the COVID-
19 virus.
Unsecured property tax is levied on July 1 and due on July 31, and has a collection date of
August 31 which is also the delinquent date. A 10% penalty attaches to delinquent unsecured taxes. If
unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on
the first day of each month until paid. The taxing authority has four ways of collecting delinquent
unsecured personal property taxes: (1) bringing a civil action against the taxpayer; (2) filing a certificate
in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of
the taxpayer; (3) filing a certificate of delinquency for record in the County Clerk and County Recorder’s
office in order to obtain a lien on certain property of the taxpayer; and (4) seizing and selling personal
property, improvements, or possessory interests belonging or assessed to the assessee.
Assessed Valuation. All property is assessed using full cash value as defined by Article XIIIA of
the State Constitution. State law provides exemptions from ad valorem property taxation for certain
classes of property such as churches, colleges, nonprofit hospitals and charitable institutions.
Future assessed valuation growth allowed under Article XIIIA (new construction, certain changes
of ownership, 2% inflation) will be allocated on the basis of “situs” among the jurisdictions that serve the
tax rate area within which the growth occurs. Local agencies and schools will share the growth of “base”
revenues from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation
in the following year. The availability of revenue from growth in tax bases to such entities may be
affected by the establishment of redevelopment agencies which, under certain circumstances, may be
entitled to revenues resulting from the increase in certain property values. The State Board of
Equalization is directing county assessors to use 1.036 percent as the Proposition 13 inflation adjustment
factor for Fiscal Year 2021-22. The Proposition 13 inflation adjustment factor is applied to all parcels
that have not been reduced under Proposition 8 due to the economic downturn.
The passage of Assembly Bill 454 in 1987 changed the manner in which unitary and operating
non-unitary property is assessed by the State Board of Equalization. The legislation deleted the formula
for the allocation of assessed value attributed to such property and imposed a State-mandated local
program requiring the assignment of the assessment value of all unitary and operating non-unitary
property in each county of each State assessee other than a regulated railway company. The legislation
established formulas for the computation of applicable county-wide rates for such property and for the
allocation of property tax revenues attributable to such property among taxing jurisdictions in the county
beginning in fiscal year 1988-89. This legislation requires each county to issue each State assessee, other
than a regulated railway company, a single tax bill for all unitary and operating non-unitary property.
Assessment Appeals. Property tax values determined by the County Assessor may be subject to
appeal by property owners. Assessment appeals are annually filed with the Assessment Appeals Board
for a hearing and resolution. The resolution of an appeal may result in a reduction to the County
Assessor’s original taxable value and a tax refund to the applicant/property owner.
Each assessment appeal could result in a reduction of the taxable value of the real property,
personal property or possessory interest of the property which is the subject of the appeal. Alternatively,
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an appeal may be withdrawn by the applicant or the Assessment Appeals Board may deny or modify the
appeal at a hearing or by stipulation.
Effect of Delinquencies and Foreclosures on Property Tax Collections. As described above, once
an installment of property tax becomes delinquent, penalties are assessed commencing on the applicable
delinquency date until the delinquent installment(s) and all assessed penalties are paid. In the event of
foreclosure and sale of property by a mortgage holder, all past due property taxes, penalties and interest
are required to be paid before the property can be transferred to a new owner.
In the most recent cycle of increased foreclosure activity within the State, the greatest impacts to
date are in regions of the Central Valley, the Inland Empire, and other areas in the State where the large
numbers of new mortgages were originated in more affordable areas. The increased level of default and
foreclosure activity has resulted in downward pressure on home prices in the affected areas.
Set forth in the tables below are assessed valuation for secured and unsecured property within the
City of Huntington Beach for the ten most recent fiscal years and the current fiscal year and tax levies and
collections (as of the close of each fiscal year) for the ten most recent fiscal years.
Gross Assessed Value of All Taxable Property
(Dollars in Thousands)
Fiscal Year Secured Unsecured Total(1)
Percent
Increase
2010-11 $25,584,186 $1,090,869 $26,675,055 1.0%
2011-12 25,553,372 1,170,004 26,723,376 0.2
2012-13 26,988,540 1,056,938 28,045,479 4.9
2013-14 28,059,691 1,106,038 29,165,729 4.0
2014-15 29,797,376 989,809 30,787,185 5.6
2015-16 31,260,013 1,132,728 32,392,741 5.2
2016-17 32,596,119 1,067,760 33,663,879 3.9
2017-18 34,240,137 1,100,077 35,340,214 5.0
2018-19 36,002,850 1,117,879 37,120,729 5.0
2019-20 37,741,614 1,145,838 38,887,451 4.8
2020-21 39,450,207 1,111,018 40,561,224 4.3
(1) Excludes redevelopment project area incremental assessed valuation.
Source: City of Huntington Beach Finance Department; County of Orange Auditor Controller
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General Fund Property Tax Levies and Collections
Secured Taxes
(Dollars in Thousands)
Fiscal Year Total Levy(1)
Total
Collections(2)
Delinquency
Amount(3)
Delinquency
Percent
2010-11 $44,014 $43,572 $ 746 1.7%
2011-12 44,304 43,562 660 1.5
2012-13 47,162 46,577 565 1.2
2013-14 49,808 49,108 545 1.1
2014-15 52,188 51,335 519 1.0
2015-16 55,886 54,462 1,263 2.3
2016-17 58,258 57,006 1,253 2.2
2017-18 62,418 60,205 2,073 3.3
2018-19 63,934 62,844 920 1.4
2019-20 66,411 65,263 1,092 1.6
(1) Excludes refunds and collection charges.
(2) Includes delinquent tax collections. Although the County maintains a Teeter Plan, which is an
alternative method for the distribution of secured property taxes to local agencies, the City has elected
not to be included in the County’s Teeter Plan.
(3) As of end of fiscal year.
Source: City of Huntington Beach Finance Department
In 1978, the voters of the State passed Proposition 8, a constitutional amendment to Article XIIIA
that allows a temporary reduction in assessed value when real property suffers a decline in value. A
decline in value occurs when the current market value of real property is less than the current assessed
(taxable) factored base year value as of the lien date, January 1.
See also “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS – Article XIIIA of the California Constitution.”
Principal Taxpayers. The following table sets forth the principal property taxpayers in the City
as of fiscal year 2020-21, the most current information available.
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Top Ten Property Taxpayers
Fiscal Year 2020-21
(Dollars in Thousands)
Property Owner Primary Land Use
2020-21
Assessed
Valuation
% of
Total
1. AES HB Energy LLC Utility $ 793,855 1.96%
2. Bella Terra Associates LLC* Commercial 389,326 0.96
3. SoCal Holding LLC* Possessory Interest 239,724 0.59
4. PCH Beach Resort LLC Commercial 225,367 0.56
5. DCO Pacific City LLC Residential 221,223 0.55
6. Huntington Gateway Industrial* Industrial 188,695 0.47
7. McDonnell Douglas Corp/Boeing* Commercial 170,588 0.42
8. LSRef4 Shark* Huntington LLC Residential 167,305 0.41
9. The Waterfront Hotel LLC Commercial 145,907 0.36
10. Elan Multifamily LLC* Residential 139,445 0.34
Total Top Ten $ 2,681,435 6.61
All other Properties 37,879,789 93.39
City Total $40,561,224 100.00
Source: Orange County Assessor
* Pending appeals on parcels as of January 2021.
Motor Vehicle In-Lieu Tax
Vehicle license fees (“VLF”) are assessed as a percentage of a vehicle’s depreciated market value
for the privilege of operating a vehicle on California’s public highways. The City receives a portion of
VLF collected Statewide. Several years ago, the Statewide VLF was reduced by approximately two-
thirds. However, the State continued to remit to cities and counties the same amount that those local
agencies would have received if the VLF had not been reduced, known as the “VLF backfill.” The State
VLF backfill was phased out and as of fiscal year 2011-12 all of the VLF is now received through an in-
lieu payment from State property tax revenues. The backfill is funded from property tax revenue (i.e.,
property tax in lieu of VLF). The in lieu property tax is allocated to local governments based on growth
in assessed valuation.
There can be no assurance that the property tax revenues the City currently expects to receive will
not be reduced pursuant to State legislation enacted in the future. If the property tax formula is
permanently changed in the future it could have a material adverse effect on the receipt of property tax
revenue by the City. There can be no assurance that any future State budget difficulties will not adversely
affect the City’s revenues or its ability to pay the principal of and interest due on the Series 2021 Bonds
under the Trust Agreement. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES, REVENUES AND APPROPRIATIONS – Proposition 1A of 2004” and “CERTAIN RISK
FACTORS – State Budgets.”
SALES TAXES
A sales tax is imposed on retail sales or consumption of personal property. Sales tax revenues
total $43.9 million or 18.6% of the City’s total General Fund revenues for fiscal year 2018-19. The
current spread of COVID-19 has altered the behavior of businesses and people in a manner that has had
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significant negative effects on global and local economies, including reducing travel and related use of
lodging facilities, and consumer spending. See “CERTAIN RISK FACTORS – Infectious Disease
Outbreak – COVID-19.” As a result of the COVID-19 pandemic, national consumer spending dropped in
the fourth quarter of fiscal year 2019-20. Actual General Fund revenues are $41.1 million or 18.2% for
fiscal year 2019-20, and $39.2 million or 18.6% of budgeted General Fund revenues for fiscal year 2020-
21.
Sales Tax Rates. The City’s sales tax revenue represents the City’s share of the sales and use tax,
imposed on taxable transactions occurring within the City’s boundaries. Sales and use taxes are imposed
under the Bradley-Burns Uniform Local Sales and Use Tax Law.
The following table shows components of the City’s current 7.75% sales and use tax rate.
City of Huntington Beach
Sales Tax Rate
As of July 1, 2020
Jurisdiction Rate
State 6.00%
City portion of State 1.25
Orange County Transportation Authority 0.50
Total 7.75%
Source: State of California, Board of Equalization
On March 30, 2020, the Governor signed an Executive Order providing emergency relief for
businesses generating less than $1,000,000 in annual sales to delay filing for 30 days until July 31, 2020.
The impacts of this Order are unknown at this time.
OTHER TAXES
Utility Taxes
The City levies a utility users tax on users for the consumption of various utilities in the City
including water, telephone, natural gas, electric, and cable television services. The City levies a 5% tax
for electricity, gas, and water services. In November 2010, in furtherance of a telecommunications
modernization ordinance adopted in consideration of the application of State law to certain features of its
then existing ordinance, the City introduced a successful ballot measure and the electorate of the City
voted to reduce the utility users tax rate for telecommunications and video services from 5% to 4.9%,
effectively immediately. Revenue from this source can be volatile, as it reflects not only changes in
utility rates, but also business activities and changes in technology. Electricity and natural gas sales are
sensitive to weather (warmer winters and cooler summers reduce demand). Revenues generated from the
utility users tax represented approximately 7.9% and 8.0% of the City’s total General Fund revenues for
fiscal year 2018-19 and actual revenues for fiscal year 2019-20, and 7.9% of the projected General Fund
revenues for fiscal year 2020-21.
Transient Occupancy Tax
Transient occupancy tax (TOT) accrues to the City at a rate of 10% of room charges from its 24
inns, motels, hotels, and resorts. TOT receipts represent $14 million or 5.9% of the City’s total General
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Fund revenues on the fiscal year 2018-19, $9.6 million or 4.3% of the actual General Fund revenues for
fiscal year 2019-20, and approximately $6.9 million or 3.3% of projected General Fund revenues for
fiscal year 2020-21. This revenue source is the most impacted by the effects of the COVID-19 pandemic
due to the stay-at-home orders. Declines in transient occupancy tax resulted from the shelter-in-place
orders related to the COVID-19 pandemic began in the fourth quarter of fiscal year 2019-20 and are
projected to continue through fiscal year 2020-21. The City cannot predict when, or if, travel and tourism
activity will return to the level of such activity which existed prior to the outbreak of the COVID-19
pandemic. None of the hotels in the City are currently closed.
On December 21st, City Council approved Ordinance 4224, establishing a set of regulations,
standards, and a permitting process for short-term rentals (STRs) affecting residential districts citywide.
The Ordinance permits only home-hosted STRs in Huntington Beach. Unhosted STRs are allowed in
Sunset Beach only for properties that apply for permits within the first six months of fee establishment,
and hosted STRs for properties that apply after the initial six month period. The TOT rate of 10% would
be assessed on all STRs. The STR permit fee is being developed and the estimated additional TOT
revenue anticipated from short-term rentals is under review.
Other Taxes
In addition, the City levies a franchise tax on its gas, electric, cable television and trash collection
franchises based on franchise agreements between the City and the franchise agency. Revenues generated
from franchise taxes represented approximately $6.2 million or 2.6% of the City’s total General Fund
revenues on the fiscal year 2018-19, approximately $7.9 million or 3.5% of the actual General Fund
revenues for fiscal year 2019-20, and $5.5 million or 2.6% of projected revenues for fiscal year 2020-21.
The City’s Utility Users Tax, Measure P was approved with 68.6% voting to approve the ballot question
on the November 2, 2010 ballot. Measure P was proposed to raise more revenue for the City by
expanding the type of services to which the City’s existing utility tax would be applied. The tax, after
Measure P, was applied to telephone and video services regardless of the specific type of technology or
method of billing. At the same time, the tax rate was reduced from 5% to 4.9%.
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OTHER REVENUES
The following table illustrates other General Fund revenue sources:
City of Huntington Beach
Other Revenue Sources
(in Thousands)
Source
Fiscal
Year
Actual
2015-16
Fiscal
Year
Actual
2016-17
Nine-
Month
Actual
2017-18(1)
Fiscal
Year
Actual
2018-19
Adopted
Budget
2019-20
Fiscal
Year
Actual
2019-20
Adopted
Budget
2020-21
Licenses and Permits $ 9,639 $ 8,736 $ 6,247 $ 8,292 $ 7,858 $ 8,368 $ 7,358
Fines and Forfeitures 5,144 3,995 3,048 4,300 4,519 3,403 3,282
Use of Money and Property 16,861 16,555 11,211 19,859 17,272 17,510 14,500
Intergovernmental 4,327 3,831 3,901 4,974 3,074 4,102 3,130
Charges for Current Services 25,813 24,800 18,132 25,390 27,132 25,501 24,630
Other Revenue 2,509 1,492 1,502 1,492 1,460 2,395 1,396
Total Other Revenues $64,293 $59,409 $44,041 $64,307 $61,315 $61,279 $54,296
(1) Fiscal year 2017-18 financial information presents nine months of activities only as the fiscal year change from
September 30 to June 30 resulted in a reporting period from October 1, 2017 to June 30, 2018. Prior fiscal years ended
September 30.
Source: City of Huntington Beach Finance Department
Licenses and Permits. These revenues consist primarily of building construction permit fees.
Fines, Forfeitures and Penalties. These revenues include parking citations and other fines for
municipal code violations.
Use of Money and Property. These revenues consist primarily of investment earnings and
lease/concession income.
Intergovernmental. These revenues consist primarily of reimbursements from Federal, State, and
County sources.
Charges for Services. The City charges fees for plan checking, building inspection and a variety
of other municipal services.
Other Revenues. These revenues consist of passport processing fees, sales of surplus city
equipment, restitution and settlement payments as well as other miscellaneous and reimbursement
revenues such as reimbursement for property damage.
The following two tables summarize the General Fund Balance Sheet and Statement of Revenues,
Expenditures and Changes in Fund Balance of the City’s General Fund for the fiscal years 2015-16
through 2019-20. As a result of City Council action taken December 18, 2017, the City’s fiscal year
changed from a September 30 year-end to a June 30 year-end. As a result, the summary financial
information for fiscal year 2017-18 presents nine months of activities and the prior fiscal years included
therein ended September 30 and each represent 12 months of activities.
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City of Huntington Beach
General Fund Balance Sheet
Fiscal Years 2015-16 through 2019-20
(in Thousands)
Fiscal Year Ended,
2016 2017 2018(5) 2019 2020
ASSETS:
Cash and Investments $56,700 $52,201 $64,405 $74,657 $76,184
Cash and Investments with Fiscal Agent -- -- -- -- --
Taxes Receivable 29,623 31,301 10,405 10,607 11,350
Other Receivables, Net 6,610 7,115 8,181 7,783 7,523
Prepaids -- -- 41 23 120
Total Assets $92,933 $90,617 $83,032 $93,070 $95,177
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES:
Liabilities:
Accounts Payable $ 4,999 $ 4,929 $ 4,096 $ 4,102 $ 3,888
Accrued Payroll 4,360 2,871 4,365 4,286 5,389
Deposits Payable 1,691 1,349 1,924 2,070 2,360
Unearned Revenue -- -- 1,730 1,840 626
Claims Payable -- -- -- -- --
Total Liabilities $11,050 $ 9,149 $12,115 $12,298 $12,263
Deferred Inflows of Resources:
Unavailable Revenue 19,036 20,288 2,283 1,759 2,826
Total Deferred Inflows of Resources 19,036 20,288 2,283 1,759 2,826
Fund Balances:
Nonspendable (1) $ -- $ -- $ 41 $ 23 $ 120
Restricted (2) 2,637 2,671 6,384 8,154 9,320
Committed (3) 25,011 25,011 25,011 25,011 25,010
Assigned (4) 35,199 33,498 34,464 45,825 45,638
Unassigned -- -- 2,734 -- --
Total Fund Balance $62,847 $61,180 $68,634 $79,013 $80,088
TOTAL LIABILITIES, DEFERRED
INFLOWS OF RESOURCES AND
FUND BALANCES $92,933 $90,617 $83,032 $93,070 $95,177
(1) Nonspendable includes amounts that are not in spendable form, such as inventories and prepaids, and other items that by
definition are not in spendable form.
(2) Restricted includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource
providers, or through enabling legislation.
(3) Committed includes amounts that can be used only for the specific purposes determined by a formal action of the City
Council. The City Council has authority to establish, modify, or rescind a fund balance commitment.
(4) Assigned includes amounts that are intended to be used by the City for specific purposes but do not meet the criteria to be
classified as restricted or committed. The City Manager or designee has the authority to establish, modify, or rescind a fund
balance assignment.
(5) Fiscal year 2017-18 financial information presents nine months of activities only as the fiscal year change from
September 30 to June 30 resulted in a reporting period from October 1, 2017 to June 30, 2018. Prior fiscal years ended
September 30.
Source: City of Huntington Beach Comprehensive Annual Financial Report
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City of Huntington Beach
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balance
Fiscal Years 2015-16 through 2019-20
(in Thousands)
Fiscal Year Ended,
2016 2017 2018(1)2019 2020
REVENUES:
Property Taxes $ 86,382 $ 80,826 $ 80,614 $ 89,367 $ 87,497
Sales Taxes 36,097 40,371 31,364 43,942 41,063
Utility Taxes 19,482 19,303 14,014 18,788 18,149
Other Taxes 17,313 17,991 14,883 20,227 17,499
Licenses and Permits 9,639 8,736 6,247 8,292 8,368
Fines and Forfeitures 5,144 3,995 3,048 4,300 3,403
From Use of Money and Property 16,861 16,555 11,211 19,859 17,510
Intergovernmental 4,327 3,831 3,901 4,974 4,102
Charges for Current Services 25,813 24,800 18,132 25,390 25,501
Other 2,509 1,492 1,502 1,492 2,395
Total Revenues $223,567 $217,900 $184,916 $236,631 $225,487
EXPENDITURES:
Current:
City Council 318 333 279 369 394
City Manager 2,169 2,116 1,928 2,656 4,045
City Treasurer 204 201 134 248 297
City Attorney 2,539 3,052 2,037 2,874 2,898
City Clerk 790 830 602 981 874
Finance 5,659 5,763 4,376 6,467 6,174
Human Resources 6,582 5,535 5,323 6,362 --
Planning & Building 7,062 -- -- -- --
Community Development -- 6,770 5,428 7,960 9,184
Fire 46,106 46,746 36,304 53,547 55,030
Information Services 6,742 6,384 5,225 7,938 7,812
Police 71,638 73,543 57,218 82,098 85,993
Community Services 9,903 10,652 6,410 9,414 9,064
Library Services 4,077 4,246 3,283 4,710 4,752
Public Works 21,411 22,081 19,009 28,289 27,264
Non-Departmental 24,460 25,163 20,048 -- --
Debt Service
Principal 163 981 311 1,379 1,637
Interest 41 186 87 177 218
Total Expenditures $209,864 $214,582 $168,002 $215,469 $215,636
Excess (Deficiency) of Revenues
Over (Under) Expenditures 13,703 3,318 16,914 21,162 9,851
OTHER FINANCING SOURCES (USES):
Transfers In 13 221 152 13 172
Transfers Out (15,661) (6,068) (13,400) (10,796) (8,948)
Total Other Financing Sources (Uses) (15,648) (5,847) (13,248) (10,783) (8,776)
Net Change in Fund Balances (1,945) (2,529) 3,666 10,379 1,075
Fund Balances – Beginning of Year 64,792 62,847 61,180 68,634 79,013
Prior Period Adjustments -- 862 3,788 -- --
Fund Balance Beginning Restated 64,792 63,709 64,968 68,634 79,013
Fund Balances – End of Year $ 62,847 $ 61,180 $ 68,634 $ 79,013 $ 80,088
(1) Fiscal year 2017-18 financial information presents nine months of activities only as the fiscal year change from
September 30 to June 30 resulted in a reporting period from October 1, 2017 to June 30, 2018. The prior fiscal years ended
September 30 and represent 12 months of activities.
Source: City of Huntington Beach Comprehensive Annual Financial Report
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OTHER FINANCIAL INFORMATION
Labor Relations
City employees are represented by eight labor union associations, the principal one being
Huntington Beach Municipal Teamsters which represents approximately 39.1% of all City employees.
Currently 94.3% of all permanent City employees are covered by negotiated agreements. Negotiated
agreements have the following expiration dates:
Negotiated Employee Agreements
Bargaining Unit
Contract Expiration
Date
Number of
Employees
Huntington Beach Municipal Teamsters Expired 9/30/2020 306
Management Employees’ Organization Expired 10/31/2020 86
Police Officers’ Association 6/30/2023 234
Police Management Association Expired 6/30/2020 12
HB Firefighters’ Association 6/30/2021 103
Fire Management Association Expired 9/30/2017 5
Marine Safety Officers’ Association Expired 3/31/2018 14
Surf City Lifeguard Employees’ Association Expired 6/30/2019 21
Source: City of Huntington Beach Finance Department
The expired contracts are currently under active negotiations. The City has never had an
employee work stoppage.
Risk Management
The City is exposed to various risks of losses related to torts; theft of, damage to and destruction
of assets; errors and omissions; injuries to employees; and natural disasters. 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. The full
amount of claims is reported as a liability in the government-wide financial statements. Liabilities
include amounts incurred, but not reported.
Liability claims up to $1,000,000 are paid from the City’s Self Insurance General Liability
Internal Service Fund. The City currently purchases 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 last three years that exceeded the coverage limit.
Workers’ compensation claims of up to $1,000,000 per claim are paid from the Self Insured
Workers’ Compensation Internal Service Fund. Excess workers’ compensation coverage is purchased
through the CSAC-Excess Insurance Authority. Payments for claims from $1,000,000 to statutory limits
are covered by CSAC-Excess Insurance Authority.
All funds of the City participate in the program and make payments to these funds based on
estimated cost information.
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The Self Insurance Workers’ Compensation Internal Service Fund had a $14.2 million deficit as
of June 30, 2020. 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.
See Note 9 in APPENDIX B – “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF
THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.”
Employee Retirement Plan - CalPERS
General. The City contributes to the California Public Employees’ Retirement System
(CalPERS), an agent, which is a multiple-employer public employee defined benefit pension plan.
CalPERS provides retirement and disability benefits, annual cost-of living adjustments, and death benefits
to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for
participating public entities within California. Benefit provisions and all other requirements are
established by state statute and city ordinance. Copies of CalPERS annual financial report may be
obtained from their executive office: 400 P Street, Sacramento, CA 95814 or on their website:
www.calpers.ca.gov. See Note 7 in APPENDIX B – “COMPREHENSIVE ANNUAL FINANCIAL
REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.”
The City makes two types of contributions for covered employees. The first contribution
represents the amount the City is required to make (the employer rate). The second represents an amount,
which is made by the employee, but is reimbursed to the employee by the City (the member rate). The
member rate is set by contract and normally remains unchanged. The employer rate is an actuarially
established rate, is set by CalPERS, and changes from year to year.
One of the most significant changes to the State and local financial landscape is the recently
enacted Public Employees’ Pension Reform Act (“PEPRA”) of 2013. While PEPRA will have no
immediate impact to current pension costs, the law will reduce pension costs of virtually all public
employers in the long term. New employees hired after December 31, 2012 will be enrolled in a plan
with substantially lower benefits. In addition, new employees will be required to pay at least 50% of the
pension costs. The City, as with virtually all public agencies in California, still has an underfunded
pension plan for existing employees. The new reform legislation will have no impact on this unfunded
liability. Pension contribution rates for existing employees are expected rise over the medium term. The
City will be working with labor groups to increase the amount paid by employees in order to mitigate
impacts upon the City’s overall financial condition.
As a result of City Council action taken December 18, 2017, the City’s fiscal year changed from a
September 30 year-end to a June 30 year-end. The new June 30 fiscal year end aligns the City’s financial
period with that of the State, the County, and with CalPERS.
Actuarial Methods and Assumptions. In each actuarial valuation, the CalPERS actuary estimates
the actuarial value of the assets (the “Actuarial Value”) of the CalPERS Plans at the end of the fiscal year
(which assumes, among other things, that the rate of return during that fiscal year equaled the assumed
rate of return of 7.75%). The CalPERS actuary uses a smoothing technique to determine Actuarial Value
that is calculated based on certain policies. As described below, these policies changed significantly in
recent years.
On January 1, 2013, PEPRA took effect. On April 17, 2013, the CalPERS Board of
Administration approved a recommendation to change the CalPERS amortization and rate smoothing
policies. Beginning with the June 30, 2013 valuations that set the 2015-16 rates, CalPERS would no
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longer use an actuarial value of assets and will employ 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.
At its April 17, 2013, meeting, CalPERS’ Board of Administration (the “Board of
Administration”) approved a recommendation to change the CalPERS amortization and smoothing
policies. Prior to this change, CalPERS employed an amortization and smoothing policy that spread
investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year
period. After this policy change, CalPERS commenced an amortization and smoothing policy that pays
for all gains and losses amortized over a 20-year period with a five-year ramp-up and five-year ramp-
down period. The new amortization and smoothing policy was used for the first time in the June 30, 2013
actuarial valuations in setting employer contribution rates for fiscal year 2015-16.
On February 18, 2014, the Board of Administration approved new demographic actuarial
assumptions based on a 2013 study of recent experience. The largest impact, applying to all benefit
groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will
continue to increase. Because retirement benefits will be paid out for more years, the cost of those
benefits will increase as a result. The Board of Administration also assumed earlier retirements for Police
(3% at age 50), and Miscellaneous (2.7% at age 55 and 3% at age 60), which will increase costs for those
groups. As a result of these changes, rates began to increase beginning in fiscal year 2016-17 (based on
the June 30, 2014 valuation) and are expected to continue to increase with full impact in fiscal year 2020-
21.
Also in 2014, CalPERS completed a 2-year asset liability management study incorporating
actuarial assumptions and strategic asset allocation. On February 19, 2014, the Board of Administration
adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of
returns. The Board of Administration also approved several changes to the demographic assumptions that
more closely align with actual experience. The most significant of these is mortality improvement to
acknowledge the greater life expectancies CalPERS reported seeing in its membership and expected
continued improvements. The new actuarial assumptions were first used in the June 30, 2014 valuation to
set the fiscal year 2016-17 contribution for public agency employers. The increase in liability due to new
actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance
with Board of Administration policy. These new actuarial assumptions are set forth in this section.
On November 18, 2015, the Board of Administration adopted a funding risk mitigation policy
intended to incrementally lower its discount rate – its assumed rate of investment return – in years of good
investment returns, help pay down the pension fund’s unfunded liability, and provide greater
predictability and less volatility in contribution rates for employers. The policy establishes a mechanism
to reduce the discount rate by a minimum of 0.05 percentage points to a maximum of 0.25 percentage
points in years when investment returns outperform the then existing discount rate, currently 7.5%, by at
least four percentage points. CalPERS staff modeling anticipates the policy will result in a lowering of
the discount rate to 6.5% in about 21 years, improve funding levels gradually over time and cut risk in the
pension system by lowering the volatility of investment returns. More information about the funding risk
mitigation policy can be accessed through the CalPERS web site at the following website address:
https://www.calpers.ca.gov/page/newsroomicalpers-news/2015/adopts-funding-risk-mitigation-policy.
The reference to this website is provided for reference and convenience only. The information contained
within the website may not be current, has not been reviewed by the City and is not incorporated in this
Official Statement by reference.
In December 2016, the Board of Administration voted to lower the CalPERS discount rate from
7.5% to 7.0% over the following three years, advising plan members that this incremental lowering of the
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discount rate would give employers more time to prepare for the changes in contribution costs. The
discount rate changes approved by the Board of Administration for the current and next two fiscal years
are as follows:
Fiscal Year 2018-19: 7.375%
Fiscal Year 2019-20: 7.250%
Fiscal Year 2020-21: 7.000%
For actuarial methods and assumptions, see Note 6 in APPENDIX B – “COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.”
See also the tabular information for the Retirement Plan, the CalPERS City Safety Plan and the CalPERS
City Municipal Plan under the heading “Required Supplementary Information” therein.
Projected Rates. The tables below show the employer contribution rates and projected employer
contribution rates for the City’s Miscellaneous Plan and Safety Plan for the seven years from fiscal year
2019-20 through fiscal year 2025-26. The tables below show projected employer contribution rates
(before cost sharing) for the current and following five fiscal years. The projected employer contribution
rates are based on a CalPERS investment return assumption of 7.0 percent, which was adopted by the
Board of Administration in December 2016. The actual investment return for fiscal year 2019-20 was not
known at the time that the June 30, 2019 actuarial valuations were provided by CalPERS, in July 2020
(the “2020 CalPERS Report”). However, CalPERS reports that as of the preparation date of its report, the
year to date return for the 2019-20 fiscal year was well below the 7.0 percent assumed return. To the
extent the actual investment return for fiscal year 2019-20 differs from 7.0 percent, the actual contribution
requirements will differ. The projections further assume that all actuarial assumptions will be realized
and that no further changes to assumptions, contributions, benefits, or funding will occur during the
projection period. Changes in the UAL due to actuarial gains or losses as well as changes in actuarial
assumptions or methods are amortized using a 5-year ramp up, phasing in the impact of unanticipated
changes in UAL over a 5-year period and attempting to minimize employer cost volatility from year to
year. Required contributions can change gradually and significantly over the next five years. In years
where there is a large increase in UAL the relatively small amortization payments during the ramp up
period could result in a funded ratio that is projected to decrease initially while the contribution impact of
the increase in the UAL is phased in. The projected contribution rates do not reflect that the City’s
Miscellaneous Plan’s normal cost will decline over time as new employees are hired into PEPRA and
other lower cost benefit tiers.
The tables below do not reflect the City’s prepayment to CalPERS on July 15, 2020 of the fiscal
year 2020-21 unfunded liability payments for its Miscellaneous and Safety plans totaling $31,484,000.
See “PLAN OF FINANCE – Report of Independent Actuary” herein. Further changes will result with the
issuance of the Series 2021 Bonds to refund 100% of the Unfunded Liability. With this deposit, the City
will have fully funded its Unfunded Liability and will not be required to make any further payments to
CalPERS with respect to the Unfunded Liability refinanced by the Series 2021 Bonds. See “SECURITY
AND SOURCE OF PAYMENT FOR THE BONDS – Debt Service Schedule.”
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City of Huntington Beach Miscellaneous Plan
Actual and Projected Future Pension Contribution Rates
Fiscal Years 2019-20 Through 2025-26
Fiscal Year
Ended
(June 30)
Normal Cost
Contribution
Rate
UAL
Payment
Total as a
% of
Payroll
2020 10.0% $12,765,260 35.9%
2021 10.8 13,849,615 38.9
2022 10.5 14,692,509 41.8
2023† 10.3 15,844,000 43.1
2024† 10.1 16,539,000 43.5
2025† 9.9 17,373,000 44.0
2026† 9.7 15,866,000 40.0
† CalPERS projected.
Source: City of Huntington Beach Finance Department and 2020 CalPERS Report.
City of Huntington Beach Safety Plan
Actual and Projected Future Pension Contribution Rates
Fiscal Years 2019-20 Through 2025-26
Fiscal Year
Ended
(June 30)
Normal Cost
Contribution
Rate
UAL
Payment
Total as a
% of
Payroll
2020 20.9% $17,127,399 57.3%
2021 21.7 18,717,558 60.8
2022 21.2 20,222,418 64.4
2023† 20.8 21,875,000 66.2
2024† 20.5 22,957,000 66.9
2025† 20.1 24,087,000 67.5
2026† 19.7 24,813,000 67.3
† CalPERS projected.
Source: City of Huntington Beach Finance Department and 2020 CalPERS Report.
The member rates are as follows for fiscal years 2019-20 and 2020-21:
Miscellaneous - Classic 8.000%
Miscellaneous - PEPRA 6.250
Safety – Classic 9.000
Safety – PEPRA 11.750
The City’s fiscal year 2019-20 annual employer contribution of $42,725,000 was equal to the
City’s required and actual contributions and includes both the normal cost and UAL contribution. The
required contribution was determined as part of the June 30, 2018, actuarial valuations provided by
CalPERS in October 2019 (the “2019 CalPERS Report”), using the entry age normal actuarial cost
method.
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Public Employees’ Pension Reform Act of 2013 (PEPRA). On January 1, 2013, the Public
Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a public employer’s
contribution to a defined benefit plan, in combination with employee contributions to that defined benefit
plan, shall not be less than the normal cost rate. Since fiscal year 2013-14, the percentage of City full-
time employees (FTEs) enrolled in PEPRA has increased from 9.5% to 40.0%. The increase in the
number of PEPRA members over the last eight fiscal years is shown below:
Fiscal
Year
PEPRA
Misc.
PEPRA
Safety
Misc.
Classic
Safety
Classic
Total
FTEs
Total
PEPRA
FTEs
% of
PEPRA
FTEs
2013-14 57 30 499 329 915 87 9.5%
2014-15 85 43 476 327 931 128 13.7
2015-16 116 55 452 308 931 171 18.4
2016-17 142 63 431 292 928 205 22.1
2017-18* 156 91 404 292 943 247 26.2
2018-19 174 103 363 269 909 277 30.5
2019-20 208 112 343 253 916 320 34.9
2020-21** 209 122 280 217 828 331 40.0
* Effective fiscal year 2017-18, the City changed its fiscal year from September 30 to June 30.
** Fiscal year 2020-21 data is current as of October 2020.
Source: City of Huntington Beach Finance Department
The City has begun negotiating with all eight of its collective bargaining units for employer cost-
sharing retirement benefit concessions and have reached agreements with six:
The City and the Huntington Beach Firefighters’ Association (HBFA) have agreed that HBFA
“Classic” members pay 3% of the employer-paid contribution to CalPERS, effective November 2018.
HBFA PEPRA members pay the difference between the required PEPRA employee contribution and
12%, which is currently 0.25% for the fiscal year 2019-20.
The City and the Fire Management Association (FMA) have agreed that FMA “Classic” members
pay 2% of the employer-paid contribution to CalPERS, effective October 2016.
The City and the Police Management Association (PMA) have agreed that PMA “Classic”
members pay 2% of the employer-paid contribution to CalPERS, effective January 2017.
The City and the Police Officers’ Association (POA) have agreed that POA “Classic” sworn
members will pay 2% of the employer-paid contribution to CalPERS, effective January 2020, increasing
by an additional 1% per year through 2022, for a total cost share of 4%. POA “Classic” non-sworn
members will pay 1.25% of the employer-paid contribution to CalPERS, effective January 2020. POA
“PEPRA” sworn members will pay 1.25% of the employer-paid contribution to CalPERS, effective
January 2020, not to exceed a total of 13% of pensionable compensation. POA “PEPRA” non-sworn
members will pay 1.5% of the employer-paid contribution to CalPERS, effective January 2020, increasing
by 1.25% in January 2021 for a total employee contribution not to exceed 9%.
The City and the Huntington Beach Municipal Teamsters (HBMT) have agreed that HBMT
“Classic” and “PEPRA” members will pay 1% of the employer-paid contribution to CalPERS, effective
October 1, 2019.
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The City and the Management Employees’ Organization (MEO) have agreed that MEO “Classic”
and “PEPRA” members will pay 1% of the employer-paid contribution to CalPERS, effective
November 1, 2019.
All bargaining units pay 100% of the required employee contributions for CalPERS. “Classic”
members for Miscellaneous and Safety contribute 8% and 9%, respectively. PEPRA members for
Miscellaneous and Safety pay 6.25% and 11.75%, respectively.
Negotiations with the Fire Management Association, Marine Safety Officers’ Association, and
Surf City Lifeguard Employee Association are ongoing.
Contributions. Section 20814(c) of the California Public Employee’s Retirement Law requires
that the employer contribution rates for all public employers be determined on an annual basis by the
CalPERS actuary and shall be effective on the July 1 following notice of a change in the rate. 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.
Beginning with fiscal year 2017-18 CalPERS began collecting employer contributions toward the
plan’s unfunded liability as dollar amounts instead of the prior method of a contribution rate. According
to CalPERS, this change was to address potential funding issues that could arise from a declining payroll
or reduction in the number of active members in the plan. Funding the unfunded liability as a percentage
of payroll could lead to the underfunding of the plans. Due to stakeholder feedback regarding internal
needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include
such results in the contribution projection set forth in the tables below. These results are provided for
information purposes only. Contributions toward the unfunded liability will continue to be collected as
set dollar amounts.
The following tables set forth the City’s required contributions for fiscal years 2014-15 through
2019-20. The City funded the required employer contribution in such fiscal years.
Miscellaneous Plan
Fiscal Year
Employer Normal
Cost Rate
Total Employer
Contribution
(in thousands)
Required
Employee
Classic Rate
Required
Employee
PEPRA Rate
2014-15 24.843% $10,510 8.00% 6.25%
2015-16 26.483 11,238 8.00 6.25
2016-17 26.428 11,921 8.00 6.25
2017-18(1) 28.428 9,734 8.00 6.25
2018-19 32.179 14,819 8.00 6.25
2019-20 35.902 16,878 8.00 6.25
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Safety Plan
Fiscal Year
Employer Normal
Cost Rate
Total Employer
Contribution
(in thousands)
Required
Employee
Classic Rate
Required
Employee
PEPRA Rate
2014-15 42.969% $19,125 9.00% 11.75%
2015-16 45.123 19,129 9.00 11.75
2016-17 45.701 19,468 9.00 11.00
2017-18(1) 45.701 15,223 9.00 11.00
2018-19 51.009 23,062 9.00 11.00
2019-20 57.341 25,847 9.00 11.75
(1) Effective fiscal year June 30, 2018, the City changed its fiscal year end from September 30 to June 30, resulting in a one-
time nine-month period for the October 1, 2017-June 30, 2018 period.
Source: Huntington Beach CAFR for the Fiscal Year Ended June 30, 2020 and CalPERS actuarial reports for fiscal years.
Funding Status. The Board of Administration has adopted a new amortization policy effective
with the June 30, 2019 actuarial valuation. The new policy shortens the period over which actuarial gains
and losses are amortized from 30 years to 20 years with the payments computed using a level dollar
amount. In addition, the new policy removes the 5-year ramp-up and ramp-down on UAL bases
attributable to assumption changes and non-investment gains/losses. The new policy removes the 5-year
ramp-down on investment gains/losses. These changes will apply only to new UAL bases established on
or after June 30, 2019.
In December 2016, the Board of Administration voted to lower the discount rate from 7.5 percent
to 7.0 percent over the subsequent three years. For public agencies including the City, the discount rate
changes approved by the Board of Administration for the three fiscal years ending June 30, 2019, 2020,
and 2021 are 7.375%, 7.25%, and 7.00%, respectively. Effective October 1, 2017, the City changed its
fiscal year end from September 30 to June 30.
The City’s net pension liability for each Plan is measured as the total pension liability, less the
pension plan’s fiduciary net position. The net pension liability is measured as of each June 30, using the
annual actuarial valuation as of the prior June 30 rolled forward using standard update procedures. The
City’s changes in net pension liability for each Plan for the last 5 years as reported by CalPERS is shown
below.
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Schedule of Funding Progress
Retirement Plan-Normal
(Dollars in Thousands)
Local Miscellaneous Local Safety
Measurement
Period
Total
Pension
Liability
Fiduciary
Net
Position
Net
Pension
Liability %
Total
Pension
Liability
Fiduciary
Net
Position
Net
Pension
Liability %
6/30/2014 $485,656 $373,141 $112,515 70.5 $624,982 $440,704 $184,728 76.8
6/30/2015 493,569 371,115 122,454 75.2 639,852 441,234 198,618 69.0
6/30/2016 514,955 363,147 151,808 70.5 670,963 433,724 237,239 64.6
6/30/2017 557,090 393,812 163,278 70.7 729,281 472,474 256,807 64.8
6/30/2018 571,812 415,455 156,357 72.7 755,812 497,767 258,045 65.9
6/30/2019 591,598 432,522 159,076 73.1 782,326 518,644 263,682 66.3
Source: City of Huntington Beach CAFR as of June 30, 2020 and GASB 68 CalPERS Report as of measurement date June 30,
2019.
The Total Pension Liability, Fiduciary Net Assets, and Net Pension Liability calculations and
sensitivity of the Net Pension Liability to Changes in the Discount Rate that follow are prepared using the
requirements in GASB Statement No. 68 - Accounting and Financial Reporting for Pensions - an
amendment of GASB Statement No. 27 (“GASB No. 68”). The plan fiduciary net position pursuant to
the GASB No. 68 accounting valuation report may differ from the plan assets reported in the annual
actuarial valuation report due to several reasons. For example, for the accounting valuations, CalPERS
must keep items such as deficiency reserves and fiduciary self-insurance included as assets. These
amounts are excluded for rate setting purposes in the actuarial valuation. The City has agreed in its
Continuing Disclosure Certificate to update this table as part of its Annual Report.
The following table illustrates net pension liabilities and funded ratios for the past five fiscal
years for each of the City’s plans. The following table is an alternative presentation of the information set
forth above, and the City will not update this table as part of its Annual Report.
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Schedule of Funding Progress
Retirement Plan-Normal
(Dollars in Thousands)
Actuarial
Valuation
Date/Plan
Entry Age
Normal
Actuarial
Accrued
Liability (AAL)
Market
Value of
Assets
Unfunded
Accrued
Liability
Funded
Ratio
(Market
Value)
6/30/2015
Safety $ 654,038 $440,552 $213,486 67.4%
Miscellaneous 503,489 370,535 132,954 73.6
Total $1,157,527 $811,087 $346,440
6/30/2016
Safety $ 681,856 $432,727 $249,129 63.5%
Miscellaneous 522,362 362,308 160,054 69.4
Total $1,204,218 $795,035 $409,183
6/30/2017
Safety $ 721,352 $471,442 $249,910 65.4%
Miscellaneous 546,431 392,946 153,485 71.9
Total $1,267,783 $864,388 $403,395
6/30/2018
Safety $ 768,274 $498,167 $270,107 64.8%
Miscellaneous 581,854 415,788 166,066 71.5
Total $1,350,128 $913,955 $436,173
6/30/2019
Safety $ 791,607 $518,802 $272,805 65.5%
Miscellaneous 595,842 432,653 163,189 72.6
Total $1,387,449 $951,455 $435,994
Source: City of Huntington Beach Finance Department and 2019 CalPERS Report.
For funded status of the plans, see Note 6 in APPENDIX B – “COMPREHENSIVE ANNUAL
FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.” See also
the tabular information for the Retirement Plan, the CalPERS City Safety Plan and the CalPERS City
Municipal Plan under the heading “Required Supplementary Information” therein.
Volatility Ratios. As noted in the 2019 CalPERS Report, the actuarial calculations are based on a
number of assumptions about very long-term demographic and economic behavior. Unless these
assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are
exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences
between actual experience and the assumptions are called actuarial gains and losses and serve to lower or
raise the employer’s rates from one year to the next. Therefore, the rates will inevitably fluctuate,
especially due to the ups and downs of investment returns.
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Asset Volatility Ratio (AVR). Plans that have higher asset to payroll ratios produce more volatile
employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may
experience twice the contribution volatility due to investment return volatility, than a plan with an asset to
payroll ratio of 4. As part of the 2019 CalPERS Report, CalPERS has provided the asset volatility ratio, a
measure of each plan’s current rate volatility, as shown in the table below. It should be noted that this
ratio is a measure of the current situation. It Increases over time but generally tends to stabilize as the
plan matures.
Liability Volatility Ratio. Plans that have higher liability to payroll ratios produce more volatile
employer rates due to investment return and changes in liability. For example, a plan with a liability to
payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll
ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this
ratio indicates a longer-term potential for contribution volatility and the asset volatility ratio, described
above, will tend to move closer to this ratio as the plan matures.
The following table illustrates rate volatility as of June 30, 2019.
Miscellaneous Plan Safety Plan
1. Market Value of Assets without Receivables $431,236,329 $518,476,936
2. Payroll 43,309,805 43,194,672
3. Asset Volatility Ratio (AVR = 1. / 2.) 10.0 12.0
4. Accrued Liability 595,842,161 791,606,900
5. Liability Volatility Ratio (4. / 2.) 13.8 18.3
Source: 2020 CalPERS Reports.
Superfunded Status. Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA)
that became effective January 1, 2013, a plan in superfunded status (actuarial value of assets exceeding
present value of benefits) would normally pay a zero employer contribution rate while also being
permitted to use its superfunded assets to pay its employees’ normal member contributions.
However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s
contribution to a defined benefit plan, in combination with employee contributions to that defined benefit
plan, shall not be less than the total normal cost rate...” This means that not only must employers pay
their employer normal cost regardless of plan surplus, but also, employers may no longer use superfunded
assets to pay employee normal member contributions.
Internal Revenue Code Section 415. The limitations on benefits imposed by Internal Revenue
Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this
limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base.
This results in lower contributions for those employers contributing to the Replacement Benefit Fund and
protects CalPERS from prefunding expected benefits in excess of limits Imposed by federal tax law.
Internal Revenue Code Section 401(a)(17). The limitations on compensation imposed by Internal
Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any
changes in the compensation limitation since the prior valuation is included and amortized as part of the
actuarial gain or loss base.
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Retirement Plan - Supplemental
The City provides a supplemental retirement plan (the “Supplemental Retirement Plan”) for all
employees hired prior to 1997 (exact dates are different for various associations). The plan is a single-
employer defined benefit plan. It is a defined benefit plan and will pay the retiree an additional amount to
his or her CalPERS amount for life. The Supplemental Retirement Plan is a closed plan. Effective in
1998, new City employees are ineligible to participate in the plan (exact dates are different for various
associations). The City’s contracts with employee bargaining associations, which establish the plan.
These associations must agree to any changes to the plan. The amount will cease upon the employee’s
death. The amount that is computed as a factor of an employee’s normal retirement allowance is
computed at retirement and remains constant for his or her life. Of the 892 eligible employees reported
on the September 30, 2017 valuation report (the most recent actuarial report), only 738 were receiving
plan benefits.
For the year ended June 30, 2020, the City recognized pension expense in the amount of
$7,083,000 for the Supplemental Plan. The Supplemental Plan’s fiduciary net position as a percentage of
the total pension liability was 83.04% as of June 30, 2020, for a net liability of $12,057,000.
No separately prepared financial statements are prepared for this plan and it is not included in the
financial report of any other pension plan. Prior to fiscal year 2008-09, the City had prefunded these
benefits and recorded the amounts in a fiduciary fund. In fiscal year 2008-09, the City established the
Supplemental Employee Retirement Plan and Trust, and transferred $24,918,000 to an irrevocable trust
from the prefunded amounts. The plan and trust are still reported as a fiduciary fund pension trust.
Below is the Supplemental Retirement Plan participant data at the June 30, 2020 measurement
date:
Retirees and beneficiaries receiving benefits 728
Active Plan Members 116
Total Plan Participants 844
Source: City of Huntington Beach Finance Department
The City annually transfers amounts from the various City funds to a pension trust fund. The
City is required under the Supplemental Employee Retirement Plan and Trust to contribute the actuarially
determined rate of 2.0% of total payroll for all permanent employees for the year ended June 30, 2020.
Administrative costs of this plan are financed through investment earnings.
For actuarial methods and assumptions, see Note 7 in APPENDIX B – “COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.”
See also the tabular information for the Supplemental Retirement Plan under the heading “Required
Supplementary Information” therein.
Since the City is required to adopt GASB 68 for the supplemental pension plan, the difference
between the Total Pension Liability (TPL) and the Fiduciary Net Position (FNP) must be recorded as a
liability in the government-wide financial statements. As of June 30, 2020, the amount of this liability is
$12,057,000, and the plan was 83.0% funded. Benefits are recognized when due and payable under plan
provisions.
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Other Post-Employment Benefits (OPEB)
The City administers the two other post-employment benefit (OPEB) plans as described below.
As of June 30, 2019 measurement period, the plan was 88.9% funded. The Total OPEB Liability was
$32,845,000, the Plan Fiduciary Net Position was $29,193,000, resulting in a net OPEB liability of
$3,652,000, of which $3,263,000 is payable from Governmental Activities. The covered payroll (annual
payroll of active employees covered by the plan) was $79.7 million. See Note 8 in APPENDIX B –
“COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR
ENDED JUNE 30, 2020.”
Post-Employment Medical Insurance. The City agreed, via contract, with each employee
association to provide post-employment medical insurance to retirees. This OPEB is 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
• The retiree becomes eligible to enroll automatically or voluntarily in Medicare
If an employee is terminated prior to retirement from the City, no postemployment benefits are
provided. Employees hired on or after October 1, 2014 are not eligible for this benefit.
The maximum subsidy a retiree is entitled to is $344 per month after 25 years of service. If a
retiree dies, the benefits that would be payable for his or her insurance are provided to the spouse or
family for 18 months. Benefits for insurance premiums are payable based on the years of service credit
for the retiree. The retiree may use the subsidy for any of the medical insurance plans that the City’s
active employees may enroll.
PEMHCA. The City provides an agent multiple-employer defined benefit healthcare plan to
retirees through CalPERS under the California Public Employees Medical and Hospital Care Act
(PEMHCA), commonly referred to as CalPERS 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 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 financial
statements attached hereto as APPENDIX B since they are in an irrevocable trust administered by
CalPERS. 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. See
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APPENDIX B – “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED JUNE 30, 2020.”
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, $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.
The City’s actual contributions of $1,959,000 for fiscal year ending June 30, 2020, are greater
than the actuarially determined contribution of $1,793,000.
For actuarial methods and assumptions, see Note 8 in APPENDIX B – “COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.”
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.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined
regarding the funded status of the plan and the annual required contributions of the City are subject to
continual revision as actual results are compared with past expectations and new estimates are made about
the future. The schedule of funding progress above, presents multiyear trend information about whether
the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liabilities
for benefits.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan
as understood by the City and plan members) and include the types of benefits provided at the time of
each valuation. The actuarial methods and assumptions used include techniques that are designed to
reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets,
consistent with the long-term perspective of the calculations.
Short-Term Obligations
The City currently has no outstanding short-term obligations.
Long-Term Obligations.
General Obligation Debt. The City has no long-term general obligation bonded indebtedness
outstanding and has never defaulted on any of its bonded indebtedness previously issued. The City has
no authorized but unissued debt.
Lease Obligations. The City has made use of various lease arrangements with the Huntington
Beach Public Financing Authority (the “Authority”) to finance capital projects through the issuance of
certificates of participation and lease revenue bonds. The Authority is a joint exercise of powers entity
formed on March 8, 1988, as amended including by that Second Amendment to Joint Exercise of Powers
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Agreement, dated as of July 17, 2014, by and among the City, the Successor Agency to the
Redevelopment Agency of the City of Huntington Beach and the Huntington Beach Housing Authority,
pursuant to Articles 1 through 4, Chapter 5, Division 7, Title 1 of the California Government Code.
On June 2, 2010, the Authority issued $14,745,000 aggregate principal amount of its Huntington
Beach Public Financing Authority Lease Revenue Refunding Bonds, 2010 Series A (Capital
Improvement Refinancing Project) (the “Series 2010A Bonds”) under and an indenture, dated as of
June 1, 2010, by and between the Authority and U.S. Bank National Association, as trustee. The bonds
were issued to (a) refinance the costs of the acquisition, construction, installation and equipping of certain
public capital improvements, including the refunding of (i) the Huntington Beach Public Financing
Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) and (ii) the Huntington Beach
Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing
Project), (b) fund a reserve fund for the Series 2010A Bonds, and (c) pay costs of issuance of the Series
2010A Bonds. The Series 2010A Bonds were refunded and defeased with net proceeds of the Series
2020A Bonds described below.
On September 28, 2011, the Authority issued $36,275,000 aggregate principal amount of its
Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2011 Series A (Capital
Improvement Refinancing Project) (the “Series 2011A Bonds”) under an indenture, dated as of
September 1, 2011, by and among the City, the Authority and The Bank of New York Mellon Trust
Company, N.A., as trustee. The Series 2011A Bonds were issued to (a) refinance the costs of the
acquisition, construction, installation and equipping of certain public capital improvements, including the
refunding of (i) the Huntington Beach Public Financing Authority Lease Revenue Bonds, 2001 Series A
(Capital Improvement Financing Project), and (ii) the Huntington Beach Public Financing Authority
Lease Revenue Bonds, 2001 Series B (Capital Improvement Refinancing Project), (b) fund a reserve fund
for the Series 2011A Bonds, and (c) pay costs of issuance of the Series 2011A Bonds. The Series 2011A
Bonds were refunded and defeased with net proceeds of the Series 2020B Bonds described below.
On November 13, 2014, the Authority issued $15,295,000 aggregate principal amount of its
Huntington Beach Public Financing Authority Lease Revenue Bonds, 2014 Series A (Senior Center
Project) (the “Series 2014A Bonds”) under an indenture, dated as of September 1, 2011, as amended and
supplemented by a first supplemental indenture, dated as of November 1, 2014, each by and among the
City, the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee. The Series
2014A Bonds were issued to (a) finance the costs of the acquisition, construction, installation and
equipping of certain public capital improvements, including the costs of construction of a senior center,
(b) fund a reserve fund for the Series 2011A Bonds and the Series 2014A Bonds, and (c) pay costs of
issuance of the Series 2014A Bonds.
On August 12, 2020, the Authority issued $4,835,000 aggregate principal amount of Huntington
Beach Public Financing Authority Lease Revenue Refunding Bonds, 2020 Series A (Tax-Exempt) (the
“Series 2020A Bonds”) and $14,440,000 aggregate principal amount of Huntington Beach Public
Financing Authority Lease Revenue Refunding Bonds, 2020 Series B (Federally Taxable) (the “Series
2020B Bonds” and, together with the Series 2020A Bonds, the “Series 2020 Lease Revenue Bonds”),
under a master indenture, dated as of June 1, 2020, by and among the City, the Authority and U.S. Bank
National Association, as trustee. The Series 2020A Bonds were issued to (i) refund the outstanding
Series 2010A Bonds, and (ii) pay costs of issuance of the Series 2020A Bonds and the Series 2020B
Bonds were issued to (i) advance refund the outstanding Series 2011A Bonds, and (ii) pay costs of
issuance of the Series 2020B Bonds.
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On October 1, 2014, the City entered into a lease-leaseback financing with Capital One Public
Funding, LLC to upgrade aged street, area and pole lighting from high-pressure sodium lamps to energy
efficient LED light sources, resulting in long-term energy cost savings to the City.
On May 1, 2016, the City entered into a $3 million CLEEN loan agreement with the California
Infrastructure and Economic Development Bank (“I-Bank”) to purchase and retrofit approximately
11,000 streetlights from high-pressure sodium to LED, resulting in long-term energy cost savings to the
City. This loan was supplemented by an additional $3 million 1 percent interest loan from the California
Energy Commission executed May 27, 2016.
The City entered into a Master Lease Agreement with JP Morgan Chase Bank, N.A. (“Chase”) on
February 5, 2016. Since then, the City has entered into various lease-purchase agreements with Chase to
fund the City’s portion of the Countywide 800 mHz Backbone (emergency telecommunication dispatch
and information) and radios, three fire engines, and two ambulances.
The following table is a summary of the City’s long-term General Fund-secured obligations as of
June 30, 2020 but for the Series 2020 Lease Revenue Bonds which were issued in August 2020. Each has
an equal claim to General Fund revenues.
Summary of Long-Term General Fund Obligations
Original
Issue
Outstanding
Principal
Fiscal Year
2020-21
Payments(1)
Series 2020A Bonds(2) $ 4,835,000 $ 4,835,000 $ 0
Series 2020B Bonds(3) 14,440,000 14,440,000 1,610,000
2014A Lease Revenue Bonds 15,295,000 12,530,000 615,000
LED Lighting Phase I 1,062,924 545,000 114,000
I-Bank CLEEN Loan 3,000,000 2,171,000 289,000
CEC Loan 3,000,000 2,588,000 261,000
Leases Payable 8,136,846 5,241,000 1,190,000
Total Long-Term Obligations $49,769,770 $42,350,000 $4,079,000
(1) Amount due in fiscal year 2020-21 represents principal payments only.
(2) Refunded and defeased the Series 2010A Bonds, as described above.
(3) Refunded and defeased the Series 2010B Bonds, as described above.
Source: City of Huntington Beach Finance Department
Because the Series 2021 Bonds are not allocated in their entirety to the General Fund, debt
service on the Series 2021 Bonds is not included in this table.
The City is not a party to any other material lease obligations or direct placement loans or
obligations.
See also, Note 11 in APPENDIX B – “COMPREHENSIVE ANNUAL FINANCIAL REPORT
OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2020.”
Overlapping Debt
Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California
Municipal Statistics, Inc. and effective June 30, 2020. The Debt Report is included for general
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information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and
makes no representation in connection therewith.
The Debt Report generally includes long-term obligations sold in the public credit markets by
public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term
obligations generally are not payable from revenues of the City (except as indicated) nor are they
necessarily obligations secured by land within the City. In many cases, long-term obligations issued by a
public agency are payable only from the general fund or other revenues of such public agency.
The contents of the Debt Report are as follows: (1) the first column indicates the public agencies
which have outstanding debt as of the date of the Debt Report and whose territory overlaps the City;
(2) the second column shows the respective percentage of the assessed valuation of the overlapping public
agencies identified in column 1 which is represented by property located in the City; and (3) the third
column is an apportionment of the dollar amount of each public agency’s outstanding debt (which amount
is not shown in the table) to property in the City, as determined by multiplying the total outstanding debt
of each agency by the percentage of the City’s assessed valuation represented in column 2.
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CITY OF HUNTINGTON BEACH
Statement of Direct and Overlapping Bonded Debt
as of June 30, 2020
2019-20 Assessed Valuation: $42,462,946,112
Total Debt
6/30/20
Percent
Applicable(1)
City’s Share
of Debt
6/30/20
OVERLAPPING TAX AND ASSESSMENT DEBT:
Metropolitan Water District of Southern California $ 37,300,000 1.371% $ 511,383
Coast Community College District 908,050,757 28.561 259,348,377
Huntington Beach Union High School District 172,819,998 73.021 126,194,891
Fountain Valley School District 52,460,000 26.739 14,027,279
Huntington Beach School District 88,868,962 99.947 88,821,861
Ocean View School District 38,855,000 93.503 36,330,591
Westminster School District 100,121,110 23.804 23,832,829
Los Alamitos Unified School District Facilities District No. 1 152,430,227 1.189 1,812,395
City of Huntington Beach Community Facilities District No. 1990-1 170,000 100.000 170,000
City of Huntington Beach Community Facilities District No. 2000-1 9,675,000 100.000 9,675,000
City of Huntington Beach Community Facilities District No. 2002-1 3,945,000 100.000 3,945,000
City of Huntington Beach Community Facilities District No. 2003-1 16,415,000 100.000 16,415,000
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $581,084,606
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
Orange County General Fund Obligations $386,745,000 6.786% $ 26,244,516
Orange County Pension Obligations 466,863,754 6.786 31,681,374
Orange County Board of Education Certificates of Participation 12,930,000 6.786 877,430
North Orange County Regional Occupation Program Certificates of Participation 8,950,000 0.087 7,787
Coast Community College District General Fund Obligations 2,600,000 28.561 742,586
Huntington Beach Union High School District Certificates of Participation 62,581,090 73.021 45,697,338
Los Alamitos Unified School District Certificates of Participation 38,286,024 1.068 408,895
Huntington Beach School District Certificates of Participation 12,106,385 99.947 12,099,969
Ocean View School District Certificates of Participation 19,595,000 93.503 18,321,913
Westminster School District Certificates of Participation 35,707,297 23.804 8,499,765
City of Huntington Beach General Fund Obligations 45,038,000 100.000 45,038,000(2)
TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $189,619,573
OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $ 6,150,000 100.000% $ 6,150,000
TOTAL DIRECT DEBT $ 45,038,000
TOTAL OVERLAPPING DEBT 731,816,179
COMBINED TOTAL DEBT $776,854,179
(1) 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 taxing entity’s assessed value that is within the boundaries of the City divided by the
taxing entity’s total taxable assessed value.
(2) Excludes the Series 2021 Bonds and the Series 2020 Lease Revenue Bonds (which refunded the Series 2010A Bonds and the Series 2010B
Bonds). The City has no tax and revenue anticipation notes, enterprise revenue or mortgage revenue obligations outstanding.
Ratios to 2019-20 Assessed Valuations:
Total Overlapping Tax and Assessment Debt ........................................................................... 1.37%
Total 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%
Source: California Municipal Statistics and City of Huntington Beach Finance Department
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CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,
REVENUES AND APPROPRIATIONS
Article XIIIA of the California Constitution
On June 6, 1978, California voters approved an amendment (commonly known as both
Proposition 13 and the Jarvis-Gann Initiative) to the California Constitution. This amendment, which
added Article XIIIA to the California Constitution, among other things affects the valuation of real
property for the purpose of taxation in that it defines the full cash property value to mean “the county
assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or
thereafter, the appraised value of real property newly constructed, or when a change in ownership has
occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a
rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a
rate not to exceed 2% per year, or reduced in the event of declining property value caused by damage,
destruction or other factors including a general economic downturn. The amendment further limits the
amount of any ad valorem tax on real property to one percent of the full cash value except that additional
taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and
bonded indebtedness for the acquisition or improvement of real property approved on or after July 1,
1978 by two-thirds of the votes cast by the voters voting on the proposition.
Legislation enacted by the California Legislature to implement Article XIIIA provides that all
taxable property is shown at full assessed value as described above. In conformity with this procedure, all
taxable property value included in this Official Statement (except as noted) is shown at 100% of assessed
value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved
bonded indebtedness and pension liability are also applied to 100% of assessed value.
The voters of the State subsequently approved various measures which further amended
Article XIIIA. One such amendment generally provides that the purchase or transfer of (i) real property
between spouses or (ii) the principal residence and the first $1,000,000 of the Full Cash Value of other
real property between parents and children, do not constitute a “purchase” or “change of ownership”
triggering reappraisal under Article XIIIA. Other amendments permitted the State Legislature to allow
persons over the age of 55 who meet certain criteria or “severely disabled homeowners” who sell their
residence and buy or build another of equal or lesser value within two years in the same county, to
transfer the old residence’s assessed value to the new residence. Other amendments permit the State
Legislature to allow persons who are either 55 years of age or older, or who are “severely disabled,” to
transfer the old residence’s assessed value to their new residence located in either the same or a different
county and acquired or newly constructed within two years of the sale of their old residence.
In the November 1990 election, the voters approved an amendment of Article XIIIA to permit the
State Legislature to exclude from the definition of “new construction” certain additions and
improvements, including seismic retrofitting improvements and improvements utilizing earthquake
hazard mitigation technologies constructed or installed in existing buildings after November 6, 1990.
Article XIIIA has also been amended to provide that there would be no increase in the Full Cash
Value base in the event of reconstruction of the property damaged or destroyed in a disaster.
Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the
assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to
subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate higher
than 2%, depending on the assessor’s measure of the restoration of value of the damaged property.
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Section 4 of Article XIIIA also provides that cities, counties and special districts cannot, without
a two-thirds vote of the qualified electors, impose special taxes, which has been interpreted to include
special fees in excess of the cost of providing the services or facility for which the fee is charged, or fees
levied for general revenue purposes.
Both the California State Supreme Court and the United States Supreme Court have upheld the
validity of Article XIIIA.
Article XIIIB of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which
added Article XIIIB to the California Constitution. In June 1990, Article XIIIB was amended by the
voters through their approval of Proposition 111. Article XIIIB of the California Constitution limits the
annual appropriations of the State and any city, county, school district, authority or other political
subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for
changes in the cost of living, population and services rendered by the governmental entity. The “base
year” for establishing such appropriation limit is fiscal year 1978-79. Increases in appropriations by a
governmental entity are also permitted (1) if financial responsibility for providing services is transferred
to the governmental entity, or (2) for emergencies so long as the appropriations limits for the three years
following the emergency are reduced to prevent any aggregate increase above the Constitutional limit.
Decreases are required where responsibility for providing services is transferred from the government
entity.
Appropriations subject to Article XIIIB include generally any authorization to expend during the
fiscal year the proceeds of taxes levied by the State or other entity of local government, exclusive of
certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance
and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not
include debt service on indebtedness existing or legally authorized as of January l, 1979, on bonded
indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in
an election for such purpose, appropriations required to comply with mandates of courts or the Federal
government, appropriations for qualified outlay projects, and appropriations by the State of revenues
derived from any increase in gasoline taxes and motor vehicle weight fees above January l, 1990 levels.
“Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to any entity of
government from (1) regulatory licenses, user charges, and user fees to the extent such proceeds exceed
the cost of providing the service or regulation, (2) the investment of tax revenues and (3) certain State
subventions received by local governments. As amended by Proposition 111, the appropriations limit is
tested over consecutive two-year periods. Any excess of the aggregate “proceeds of taxes” received by
the City over such two-year period above the combined appropriations limits for those two years is to be
returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years.
As amended in June 1990, the appropriations limit for the City in each year is based on the limit
for the prior year, adjusted annually for changes in the costs of living and changes in population, and
adjusted, where applicable, for transfer of financial responsibility of providing services to or from another
unit of government. The change in the cost of living is, at the City’s option, either (1) the percentage
change in California per capita personal income, or (2) the percentage change in the local assessment roll
for the jurisdiction due to the addition of nonresidential new construction. The measurement of change in
population is a blended average of statewide overall population growth, and change in attendance at local
school and community college (“K-14”) districts.
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Article XIIIB permits any government entity to change the appropriations limit by vote of the
electorate in conformity with statutory and Constitutional voting requirements, but any such voter-
approved change can only be effective for a maximum of four years.
The City’s appropriations limit was $964,662,284 for fiscal year 2019-20 and is $1,001,044,445
for fiscal year 2020-21 which is well below the total City budget amounts for both years. Therefore, the
City did not have a need to calculate the appropriations subject to limitation.
Proposition 218
On November 5, 1996, the voters of the State approved Proposition 218, a constitutional
initiative, entitled the “Right to Vote on Taxes Act” (“Proposition 218”). Proposition 218 added
Articles XIIIC and XIIID to the California Constitution and contained a number of interrelated provisions
affecting the ability of local governments, including the City, to levy and collect both existing and future
taxes, assessments, fees and charges. The City is unable to predict whether and to what extent
Proposition 218 may be held to be constitutional or how its terms will be interpreted and applied by the
courts. Proposition 218 could substantially restrict the City’s ability to raise future revenues and could
subject certain existing sources of revenue to reduction or repeal, and increase the City’s costs to hold
elections, calculate fees and assessments, notify the public and defend its fees and assessments in court.
However, the City does not presently believe that the potential financial impact on the City as a result of
the provisions of Proposition 218 will adversely affect the City’s ability to pay its debt obligations and
perform its other obligations as and when due.
Article XIIIC requires that all new local taxes be submitted to the electorate before they become
effective. Taxes for general governmental purposes of the City require a majority vote and taxes for
specific purposes, even if deposited in the City’s General Fund, require a two-thirds vote. Further, any
general purpose tax that the City imposed, extended or increased without voter approval after
December 31, 1994 may continue to be imposed only if approved by a majority vote in an election held
within two years of November 5, 1996. The City has not enacted, imposed, extended or increased any tax
without voter approval since January 1, 1995. The voter approval requirements of Article XIIIC reduce
the flexibility of the City to deal with fiscal problems by raising revenue through new, extended or
increased taxes. No assurance can be given that the City will be able to raise taxes in the future to meet
increased expenditure requirements.
Article XIIIC also expressly extends to voters the power to reduce or repeal local taxes,
assessments, fees and charges through the initiative process, regardless of the date such taxes,
assessments, fees or charges were imposed. This extension of the initiative power is not limited by the
terms of Proposition 218 to fees imposed after November 6, 1996 and absent other legal authority could
result in retroactive reduction in any existing taxes, assessments or fees and charges. SB 919 provides
that the initiative powers extended to voters under Article XIIIC likely excludes actions construed as
impairment of contracts under the contract clause of the United States Constitution. SB 919 provides that
the initiative power provided for in Proposition 218 “shall not be construed to mean that any owner or
beneficial owner of a municipal security, purchased before or after November 6, 1998, assumes the risk
of, or in any way consents to, any action by initiative measure that constitutes an impairment of
contractual rights” protected by the United States Constitution. However, no assurance can be given that
the voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes,
assessments, fees or charges that currently are deposited into the City’s General Fund and other
Governmental Funds. Further, “fees” and “charges” are not defined in Article XIIIC or SB 919, and it is
unclear whether these terms are intended to have the same meanings for purposes of Article XIIIC as they
do in Article XIIID. Accordingly, the scope of the initiative power under Article XIIIC could include all
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sources of General Fund and other Governmental Funds monies not received from or imposed by the
federal or State government or derived from investment income.
The initiative power granted under Article XIIIC of Proposition 218, by its terms, applies to all
local taxes, assessments, fees and charges. The City is unable to predict whether the courts will
ultimately interpret the initiative provision to be limited to property related local taxes, assessments, fees
and charges. No assurance can be given that the voters of the City will not, in the future, approve an
initiative which reduces or repeals local taxes, assessments, fees or charges which are deposited into the
City’s General Fund and other Governmental Funds. The City believes that in the event that the initiative
power was exercised so that all local taxes, assessments, fees and charges which may be subject to the
provisions of Proposition 218 are reduced or substantially reduced, the financial condition of the City,
including its General Fund and other Governmental Funds, would be materially adversely affected.
A challenge to the Pension Tax Override was narrowly defeated in 2012 with the failure to reach
the requisite 50% majority on a ballot question entitled, “A Huntington Beach Levy of Property Tax for
Municipal Purposes, Measure Z” which appeared on the November 6, 2012 ballot. If Measure Z had been
approved, the Pension Tax Override would have been repealed.
Article XIIID of Proposition 218 adds several new requirements to make it more difficult for
local agencies to levy and maintain “assessments” for municipal services and programs. “Assessment” is
defined in Proposition 218 and SB 919 as any levy or charge upon real property for a special benefit
conferred upon the real property. This includes maintenance assessments imposed in City service areas
and in special districts. In most instances, in the event that the City is unable to collect assessment
revenues relating to specific programs as a consequence of Proposition 218, the City will curtail such
services rather than use amounts in the General Fund to finance such programs. However, no assurance
can be given that the City may or will be able to reduce or eliminate such services in the event the
assessments that presently finance them are reduced or repealed.
Article XIIID also adds several provisions, including notice requirements and restrictions on use,
affecting “fees” and “charges” which are defined as “any levy other than an ad valorem tax, a special tax,
or an assessment, imposed by a local government upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related service.” The annual amount of
revenues that are received by the City and deposited into its General Fund and other Governmental Funds
which may be considered to be property related fees and charges under Article XIIID of Proposition 218
is not substantial. Accordingly, presently the City does not anticipate that any impact Proposition 218
may have on future fees and charges will not adversely affect the ability of the City to make payments of
principal of and interest on the Series 2021 Bonds. However, no assurance can be given that the City may
or will be able to reduce or eliminate such services in the event the fees and charges that presently finance
them are reduced or repealed.
Additional implementing legislation respecting Proposition 218 may be introduced in the State
legislature from time to time that would supplement and add provisions to California statutory law. No
assurance may be given as to the terms of such legislation or its potential impact on the City.
Proposition 1A of 2004
On November 3, 2004 the voters of the State approved Proposition 1A (“Proposition 1A of
2004”). Proposition 1A of 2004 amended the State Constitution to, among other things, reduce the
Legislature’s authority over local government revenue sources by placing restrictions on the State’s
access to local governments’ property, sales, and VLF revenues as of November 3, 2004. Pursuant to
Proposition 1A of 2004, the State is able to borrow up to 8% of local property tax revenues but only if the
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Governor proclaims such action is necessary due to a severe State fiscal hardship and two-thirds of both
houses of the State Legislature approve the borrowing. Any amounts borrowed are required to be repaid
within three years. Proposition 1A of 2004 also permits the State to borrow from local property tax
revenues for no more than two fiscal years within a period of 10 fiscal years, and only if previous
borrowings have been repaid. In addition, the State cannot reduce the local sales tax rate or restrict the
authority of the local governments to impose or change the distribution of the Statewide local sales tax.
Proposition 1A of 2004 generally prohibits the State from mandating activities on cities, counties, or
special districts without providing the funding needed to comply with the mandates, and if the State does
not provide funding for the activity that has been determined to be mandated, the requirement on cities,
counties, or special districts to abide by the mandate is suspended. Proposition 1A of 2004 also expanded
the definition of what constitutes a mandate to encompass State action that transfers to cities, counties,
and special districts financial responsibility for a required program for which the State previously had
partial or complete responsibility. The State mandate provisions of Proposition 1A of 2004 do not apply
to schools or community colleges or to mandates relating to employee rights.
Proposition 22
Proposition 22 eliminates the State’s ability to borrow or shift local revenues and certain State
revenues that fund transportation programs. It restricts the State’s authority over a broad range of tax
revenues, including property taxes allocated to cities (including the City), counties, special districts and
redevelopment agencies, the Vehicle License Fee, State excise taxes on gasoline and diesel fuel, the State
sales tax on diesel fuel, and the former State sales tax on gasoline. It also makes a number of significant
other changes, including restricting the State’s ability to use motor vehicle fuel tax revenues to pay debt
service on voter-approved transportation bonds.
Proposition 22 supersedes certain provisions of Proposition 1A of 2004. See “—Proposition 1A
of 2004” above. In addition, Proposition 22 generally eliminates the State’s authority to temporarily shift
property taxes from cities, counties, and special districts to schools, temporarily increase school and
community college district’s share of property tax revenues, prohibits the State from borrowing or
redirecting redevelopment property tax revenues or requiring increased pass-through payments thereof,
and prohibits the State from reallocating vehicle license fee revenues to pay for State imposed mandates.
In addition, Proposition 22 requires a two-thirds vote of each house of the State Legislature and a public
hearing process to be conducted in order to change the amount of fuel excise tax revenues shared with
cities and counties. The State’s Legislative Analyst’s Office (LAO) states that Proposition 22 will
prohibit the State from enacting new laws that require redevelopment agencies to shift funds to schools or
other agencies.
Proposition 22 prohibits the State from borrowing sales taxes or excise taxes on motor vehicle
fuels or changing the allocations of those taxes among local government except pursuant to specified
procedures involving public notices and hearings. In addition, Proposition 22 requires that the State apply
the formula setting forth the allocation of State fuel tax revenues to local agencies revert to the formula in
effect on June 30, 2009. The LAO anticipates that Proposition 22 will require the State to adopt
alternative actions to address its fiscal and policy objectives, particularly with respect to short-term cash
flow need.
Proposition 25
Proposition 25 reduces the legislative vote requirement for passage of the annual State budget and
certain related trailer bills from two-thirds to a simple majority. The reduced vote requirement does not
apply to measures that increase State tax revenues, which will continue to require a two-thirds vote. It
also requires members of the legislature to permanently forfeit their pay and reimbursement for travel and
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living expenses for each day after June 15 that a budget is not passed. It does not change the ability of the
Governor to eliminate or reduce any appropriation using a line-item veto.
Proposition 26
Proposition 26 imposes a two-thirds voter approval requirement for the imposition of certain fees
and charges by the State. It would also impose a majority voter approval requirement on local
governments with respect to fees and charges for general purposes, and a two-thirds voter approval
requirement with respect to fees and charges for special purposes. The initiative, according to its
supporters, is intended to prevent the circumvention of tax limitations imposed by the voters pursuant to
Proposition 13, approved in 1978, and other measures through the use of non-tax fees and charges.
Proposition 26 expressly excludes from its scope “a charge imposed for a specific government service or
product provided directly to the payor that is not provided to those not charged, and which does not
exceed the reasonable cost to the [State/local government] of providing the service or product to the
payor.” The City believes that the initiative is not intended to and would not apply to fees for utility
services charged by local governments such as the City; however, the City is unable to predict whether
Proposition 26 will be interpreted by the courts to apply to the provision of utility services by local
governments such as the City.
Future Initiatives
Article XIIIA, Article XIIIB, Proposition 218 and Proposition 1A were each adopted as measures
that qualified for the ballot pursuant to the State’s initiative process. From time to time, other initiative
measures could be adopted, which may place further limitations on the ability of the State, the City or
local districts to increase revenues or to increase appropriations which may affect the City’s revenues or
its ability to expend its revenues. City Measure Z which appeared on the November 6, 2012 ballot, but
was rejected by voters, is an example.
CERTAIN RISK FACTORS
This section provides a general overview of certain risk factors which should be considered, in
addition to the other matters set forth in this Official Statement, in evaluating an investment in the Series
2021 Bonds. This section is not meant to be a comprehensive or definitive discussion of the risks
associated with an investment in the Series 2021 Bonds, and the order in which this information is
presented does not necessarily reflect the relative importance of various risks. Potential investors in the
Series 2021 Bonds are advised to consider the following factors, among others, and to review this entire
Official Statement to obtain information essential to the making of an informed investment decision. Any
one or more of the risk factors discussed below, among others, could lead to a decrease in the market
value and/or in the marketability of the Series 2021 Bonds. There can be no assurance that other risk
factors not discussed herein will not become material in the future.
Bonds are a Limited Obligation of the City
The Bonds do not constitute an obligation of the City for which the City is obligated to levy or
pledge any form of taxation and the Trust Agreement does not create a pledge, lien or encumbrance upon
the funds of the City, except as described herein. Pursuant to Retirement Law, the Bonds are payable
from any available funds of the City. The City covenants in the Trust Agreement to punctually pay the
principal or redemption price of and interest on every Bond issued under the Trust Agreement in strict
conformity with the terms hereof and of the Bonds, and will faithfully observe and perform all the
agreements and covenants to be observed or performed by the City contained in the Trust Agreement.
The City is liable and may become liable on other obligations payable from general revenues, some of
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which may have a priority over payments of the principal of and interest on the Bonds, or which the City,
in its discretion, may determine to pay prior to the principal of and interest on the Bonds.
The obligations of the City under the Bonds, including the obligation to make all payments of
interest and principal when due, are obligations of the City imposed by law and are absolute and
unconditional, without any right of set-off or counterclaim.
The City has the capacity to enter into other obligations without the consent of or prior notice to
the Owners of the Bonds. To the extent that additional obligations are incurred by the City, the funds
available to make payments of the principal of and interest on the Bonds may be decreased. In the event
the City’s revenue sources are less than its total obligations, the City could choose to fund other activities
before making payments of principal of and interest on the Series 2021 Bonds. The same result could
occur if, because of State constitutional limits on expenditures, the City is not permitted to appropriate
and spend all of its available revenues. The City’s appropriations, however, have never exceeded the
limitations on appropriations under Article XIIIB of the California Constitution. For information on the
City’s current limitations on appropriations, see “CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS – Article XIIIB of the California
Constitution.”
Upon issuance of the Series 2021 Bonds, Bond Counsel will render its opinion (substantially in
the form of APPENDIX E – “PROPOSED FORM OF BOND COUNSEL OPINION”) to the effect that,
subject to the limitations and qualifications described therein, the Trust Agreement constitutes a valid and
binding obligation of the City. As to the City’s practical realization of remedies upon default by the City,
see “– Limitations on Remedies.”
Natural Disasters
Earthquake. Generally, within the State, some level of seismic activity occurs on a regular basis.
During the past 150 years, the Southern California area has experienced several major and numerous
minor earthquakes. The most recent major earthquake in the Southern California area was the Northridge
earthquake, which occurred on January 17, 1994. The Northridge earthquake, with an epicenter
approximately 50 miles north of the City, measured 6.5 on the Richter scale. A recent report issued by a
working group of scientists and engineers, known as the Working Group on California Earthquake
Probabilities, sponsored in part by the U.S. Geological Survey, has projected that California has more
than a 99% chance of having a magnitude 6.7 or larger earthquake within the next 30 years, according to
scientists using a new model to determine the probability of big quakes. The likelihood of a major quake
of magnitude 7.5 or greater in the next 30 years is projected at 46% and such a quake is most likely to
occur in the southern half of the State.
The City has been affected by earthquakes, in most instances attributed to the Newport-
Inglewood fault, which has been responsible for several sizable temblors including the 1933 Long Beach
quake. An occurrence of severe seismic activity in the City could impact the City’s General Fund
revenues and expenditures.
Similarly, the City is susceptible to tsunami and seiche hazards. A tsunami is a sea wave
generated by a submarine earthquake, landslide or volcanic eruption. A seiche is another form of
earthquake- or landslide-induced wave or oscillation that can be generated in an enclosed body of water
such as a lagoon or harbor. The entire City is less than 100 feet above sea level, and about 75 percent is
less than 25 feet above sea level. From the coast, the first 2 miles of inland homes and terrain east of the
Bolsa Chica wetlands and the Pacific Ocean range in elevation between 0 to 5 feet above sea level.
Homes in the upscale Huntington Harbour sector are at 5 to 10 feet above sea level and at the inland
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border with Fountain Valley, the elevation is about 15 feet. As such, the City is located in an area that is
susceptible to tsunami run up and seiche hazards. Also, due to the high water table condition and subsoils
of City, portions of the City can experience substantial liquefaction in earthquakes, in which vibrations or
groundwater pressure within a mass of soil cause the soil particles to lose contact with one another and
approach a slurry consistency.
Although the City believes that no significant active or inactive fault lines pass through the City;
however, if there were to be an occurrence of severe seismic activity at the City, there could be a negative
impact on property values and operations within the City which could have an adverse effect on the City’s
ability to make payments of principal of and interest on the Series 2021 Bonds.
Wildfire. The City is substantially developed as a highly urbanized coastal city. Like other areas
of Southern California, greenbelt areas in the City can season to become dry vegetation which may
combine with swift moving Santa Ana winds and result in fast moving fires. No part of the City is
located in a “Very High Fire Hazard Severity Zone” - Cal Fire’s designation for places highly vulnerable
to devastating wildfires.
Flood. Historical flooding of Huntington Beach dates back to 1825. The most recent flooding
was February 6 and 7, 1998, when a constant rainfall and heavy downpour caused street closures,
intersection flooding, and up to 2-3 feet deep flooding in a mobile home park.
Portions of the City are located in flood zones. The flood zone boundaries of Huntington
Harbour and Sunset Beach were revised in March 2019 and affected properties were placed into a Special
Flood Hazard Area (SFHA) and designated as “AE” or “VE” zones on the flood map. In June 2019, the
Federal Emergency Management Agency (FEMA) issued a Letter of Map Revision (LOMR) that changed
the flood designation of properties within the vicinity of the East Garden Grove Wintersburg Channel,
from the confluence of Bolsa Bay to the San Diego Freeway (Interstate 405). Properties that were
designated as flood zone A were revised to flood zone AE or X.
Although improvements to the Santa Ana River have reduced potential flood impacts, flooding in
the City may occur. It may be caused by the Santa Ana River, East Garden Grove Wintersburg Channel,
Talbert Channel, Huntington Beach Channel, or the Pacific Ocean. Most floods occur when the
floodwaters leave the river or channels; however, tsunamis from the ocean may create flooding near the
coastline.
Drought and Drought Response
California has recently experienced extended drought conditions, although rainfall in recent years
has somewhat abated the drought conditions throughout the State. Water service within the City is
provided by the City’s Public Utilities Department through its regional water supply agencies (the Orange
County Water District and The Metropolitan Water District of Southern California, a regional supplier or
supplemental water). While these suppliers currently anticipate being able to supply water for existing
and new development within the City for the foreseeable future, there can be no assurance that any
renewal of drought conditions will not adversely affect their ability to do so. The City utilizes a broad
range of conservation methods, including: long-term water conservation programs and incentive
programs for efficient landscaping and irrigation management programs, park and recreation partnerships,
and public education and outreach.
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Climate Change and Sea Level Rise
The direct risks posed by climate change currently include or are expected to include more
extreme heat events, rising sea levels, changes in precipitation levels, and more intense storms. In order
to address these risks, California law (the Global Warming Solutions Act) requires the State to
significantly reduce its emissions of greenhouse gases (GHGs), which contribute to climate change.
Sources of GHG emissions in the City include cars and trucks, electricity and natural gas use in
buildings, decomposition of solid waste, landscaping and construction equipment, oil drilling, and water
and wastewater distribution, treatment, and use. On-road vehicle use represents the largest source of
GHGs, followed by energy use in residential and nonresidential buildings. These three sources comprised
95 percent of Huntington Beach’s GHG emissions in 2012. Going forward, Huntington Beach’s GHG
emissions will continue to change due to new policies, technological improvements, and population
growth and new development.
Current science indicates that sea level rise is directly linked to climate change, and sea level is
expected to increase over time. The City has 9.5 miles of shoreline and other coastal and inland areas that
are threatened by sea level rise. The Huntington Beach community is vulnerable to coastal erosion of its
protective beaches and flooding from wave run-up (particularly from large waves associated with coastal
storms). Sea level rise threatens the inland areas by exacerbating flooding from very high tides, and by
contributing to flooding from extreme rainfall events.
In 2017, the City adopted a Greenhouse Gas Reduction Program (GGRP), which quantified
baseline (2005), existing (2012), and projected (2040) GHG emissions and identified specific measures
and performance standards that would reduce GHG levels consistent with State reduction targets if
implemented. In addition, the City prepared a sea level rise vulnerability assessment estimating the
consequences, probability, and resulting risk from various sea level rise scenarios, including an inventory
of potentially affected assets and their estimated replacement value. Based on the vulnerability
assessment, the City prepared a Coastal Resiliency Program, which outlines strategies the City could
implement to minimize potential impacts from sea level rise. However, there is an inherent degree of
uncertainty in projecting future GHG emissions and sea level rise. As well, the City cannot provide
assurances that the adoption of future policies and implementation of measures to reduce GHG emissions
and sea level rise impacts will occur.
The City cannot predict the timing, extent, or severity of climate change, GHG emissions or sea
level rise; the extent to which protective measures would be implemented and effective; or whether such
changes or measures will have a material adverse effect on the City’s operations and finances, or the State
and local economies.
Cybersecurity
The City relies heavily on computers and technology to conduct its daily operations. The City
and its departments face cyber threats from time to time, including but not limited to hacking, viruses,
malware, phishing, and other attacks on computers and other sensitive digital networks and systems.
In 2017, the City’s Information Services Department performed an in-house cybersecurity
assessment to evaluate all computing resources including networking infrastructure, operating system of
all computers, business applications and systems, and related components. The findings of this
assessment were used to drive the creation of a list of recommendations that was used to increase the
overall resiliency of the City’s computing resources. The police department has a separate network with
physical separation and law enforcement compliance requirement.
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Currently the City has a complex layered cyber security posture to protect the City’s digital assets
and networks. The City also uses anti-phishing software and practices periodic security awareness
training for end-users. Additionally, the City has a Cyber insurance policy with maximum aggregate limit
of $10,000,000.
Although the City has a comprehensive layered security defense mechanism, no assurances can
be given that the City’s security and operational control measures will guard 100% against all cyber
threats and attacks. The results of any attack on the City’s computer and information-technology systems
could adversely affect the City’s operations and damage its digital networks and systems, and potential
losses from such attacks, as well as the costs of defending against future attacks, could be substantial.
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 (the “Pandemic”) by the World Health
Organization and is currently affecting many parts of the world, including the United States and
California. On January 31, 2020, the Secretary of the United States Health and Human Services
Department declared a public health emergency for the United States and on March 13, 2020, the
President of the United States declared the outbreak of COVID-19 in the United States a national
emergency. Also on March 13, 2020, California Governor Gavin Newsom issued Executive Order N-26-
20, proclaiming a State of Emergency to exist in California as a result of the threat of the COVID-19
virus. Subsequently, the President’s Coronavirus Guidelines for America and the United States Centers
for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-
19 in the United States.
On March 16, 2020, the Governor issued Executive Order N-28-20, lifting the State’s preemption
of landlord/tenant law, authorizing local governments to halt evictions for renters and homeowners, slows
foreclosures, and protects against utility shutoffs for Californians affected by the COVID-19 virus, and
further providing that the order does not relieve a tenant from the obligation to pay rent, or restrict the
landlord’s ability to recover rent that is due. The order expands a local government’s authority to limit
residential or commercial evictions, but only as to nonpayment evictions caused by a documented loss of
income caused by the pandemic or the governmental responses. The order also requests banks and other
financial institutions to halt foreclosures and related evictions during this time period. By legislation
signed in August 2020, no tenant can be evicted before February 1, 2021 as a result of rent owed due to a
COVID-19 related hardship that accrued between March 4 and August 31, 2020, if the tenant provides a
declaration of hardship according to the legislation’s timelines. For a COVID-19 related hardship that
accrues between September 1, 2020 and January 31, 2021, tenants must also pay at least 25 percent of the
rent due to avoid eviction. Tenants are still responsible for paying unpaid amounts to landlords, but those
unpaid amounts cannot be the basis for an eviction. Landlords may begin to recover this debt on March
1, 2021, and small claims court jurisdiction is temporarily expanded to allow landlords to recover these
amounts. Landlords who do not follow the court evictions process will face increased penalties under the
legislation.
On March 19, 2020, the Governor issued Executive Order N-33-20, a State-wide stay at home
order to protect the health and well-being of all Californians and to establish consistency across the State
in order to slow the spread of the COVID-19 virus; such order to go into effect immediately and to stay in
effect until further notice. The order directs all individuals living in the State to stay home or at their
place of residence except as needed to maintain continuity of operations of the federal critical
infrastructure sectors as outlined at https://www.cisa.gov/identifying-critical-infrastructure-during-covid-
19. This includes 16 critical infrastructure sectors whose assets, systems, and networks, whether physical
or virtual, are considered so vital to the United States that their incapacitation or destruction would have a
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debilitating effect on security, national economic security, national public health or safety, or any
combination thereof. The City can take no responsibility for the continued accuracy of this internet
address or for the accuracy, completeness or timeliness of information posted therein, and such
information is not incorporated in this Official Statement by such reference.
The City has been and continues to be proactive in reviewing its responses to the impacts of the
Pandemic. Effective March 17, 2020, the City suspended all street sweeping enforcement within the City.
On June 10, 2020, the City announced that street sweeping and related parking control enforcement
would resume on June 22, 2020 with a two-week written warning period.
On March 31, 2020, the City approved two forms of temporary financial relief, including rent
abatement to concessionaire tenants of City-owned facilities and a suspension on water shutoffs for
delinquent bills, each designed to mitigate some of the significant financial burdens of the Pandemic. A
July 6, 2020 City approval for the termination of the rental abatement program was not implemented, as
the impacts of the Pandemic continued. Both programs are still ongoing.
By early April 10, 2020, the City closed all metered parking along both sides of Pacific Coast
Highway within City boundaries in the interest of limiting beach visitations and promoting social
distancing during the Pandemic. Also, all beaches within Huntington Harbor were closed starting
April 17 until further notice. Beginning May 15, 2020, certain beach parking lots were reopened with
50% capacity, moving to 100% capacity beginning May 28, 2020. Then, with the warmer summer
months approaching, residents and out-of-town visitors visited the beach with increased frequency,
generating additional parking revenues for the City.
On April 20, 2020, the City approved payment deferral programs for Business License payment
renewals, Transient Occupancy Taxes, and Business Improvement District (“BID”) assessments collected
by the City to provide local businesses with temporary relief from the financial burdens of the Pandemic.
A similar payment deferral program for the Tourism Business Improvement District (“TBID”)
assessments collected by the City was approved by City Council on May 4, 2020.
Effective May 1, 2020, the City closed all beaches, including the City’s bike paths, parking lots,
and associated amenities. On May 5, 2020, the beaches were reopened for active recreation use only after
extensive discussions with other local area cities and State representatives, including those at the
California Natural Resources Agency and the California Department of Parks and Recreation.
On May 23, 2020, the State authorized the County’s plan to facilitate an accelerated reopening of
Stage 2 reopening. Business that fall under the category on the Stage 2 reopening include, but are not
limited to, dine-in restaurants, destination retail, shopping malls, and in-store retail, with proper safety
protocols in place.
On June 15, 2020, the City Council approved the creation of a COVID-19 Small Business Relief
Program to utilize $4.75 million in CARES Act funding provided by the County of Orange to award
grants up to $10,000 to qualified Huntington Beach small businesses with fewer than 30 employees, and
made such grants, together with additional support grants up to $2,000 to such qualified small business at
the end of the calendar year. The program, administered by the Orange County Small Business
Development Center, has assisted 709 local small businesses. The City has also established a OneHB
Support Fund, bridging philanthropy and local giving in support of Huntington Beach small businesses.
In June 2020, the OneHB Support Fund received its first major donation of $100,000, funding grants to
20 qualified small businesses. This program was awarded the “Red Tape to Red Carpet” award for its
public-private partnership by the Orange County Business Council on November 18, 2020. The City was
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also awarded an additional $648,000 for Small Business Grant Relief, to be used to fund a micro-grant
program for small businesses negatively impacted by COVID-19.
On July 6, 2020, City Council approved the closure of the 2nd block of Main Street to vehicular
traffic to temporarily allow restaurants and other establishments to expand their operations outdoors while
maintaining social distancing protocols. This program, called “Surf City Stroll,” is currently extended
through September 6, 2021, as approved by Council on February 16, 2021.
On November 3, 2020, the City held a ribbon-cutting ceremony for its temporary alternative
shelter site, which will provide up to 174 shelter beds for homeless individuals in need. The facility
began serving homeless clients in late November 2020. This project was a joint effort by the City and the
County funded through CARES Act monies to help control the spread of COVID-19 and to preserve the
public health of this vulnerable population.
Since that date, the State has been monitoring COVID-19 cases in each local community and has
reported increases in the number cases of COVID-19 confirmed, and patients hospitalized. Starting
September 9, 2020, the State began utilizing a four-tier, color-coded system for tracking COVID-19
trends. The new system will determine when counties can move forward with business reopenings. The
four tiers, purple (widespread), substantial (red), moderate (orange), and minimal (yellow), have a
different set of rules regarding what businesses are and aren’t allowed to reopen, whether they may open
indoors or outdoors, and at what capacity they can operate. Counties must remain at each tier for a
minimum of 21 days.
The County, and other California counties that are in the red, or substantial tier, allow for limited
reopening of restaurants, places of worship, shopping centers, hair salons, movie theaters, and other
businesses with modifications and/or capacity limits. Breweries (where no meals are provided),
cardrooms, convention centers, and festivals remain closed under this tier.
Many of the federal, State and local actions and policies under the aforementioned disaster
declarations and shelter-in-place orders are focused on limiting instances where the public can congregate
or interact with each other, which affects the operation of businesses and directly impacts the economy.
These include, for example, imposing limitations on social gatherings and temporarily closing school
districts throughout the State. In addition to the actions by the State and federal officials, certain local
officials, including the County, have declared a local state of disaster and have issued “shelter-in-place”
orders.
The Pandemic has negatively affected travel, commerce, and financial markets globally, and is
widely expected to continue negatively affecting economic growth and financial markets worldwide.
These negative impacts may reduce or negatively affect property values and/or the collection of sales tax
revenues and ad valorem tax revenues within the City. A decline in property values may impact the
City’s ability to pay debt service on the Series 2021 Bonds when due, and have further impacts on the
City’s finances and operations. Additionally, the City collects a sales and use tax on all taxable
transactions within the City’s boundaries as well as transient occupancy taxes. A reduction in the
collection of sales tax and transient occupancy tax revenues may negatively impact the City’s operating
budget and overall financial condition.
On March 25, 2020, Orange County Treasurer Tax Collector Shari Freidenrich announced her
plan to grant waivers on penalties to taxpayers as allowed by existing law to assist them during these
challenging times, providing that for taxpayers that do not make payment of property taxes due to the
COVID-19 virus by April 10, such taxpayers would be expected to submit to the Treasurer a Penalty
Cancellation Request Form and documentation to support the cancellation of penalties as allowed in
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limited circumstances under current State law, allowing for waiver of penalties, costs and other charges
when failure to make a timely payment is due to reasonable cause and circumstances beyond the
taxpayer’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful
neglect. The most recent report issued by the Orange County Treasurer Tax Collector’s Office on
January 12, 2021 notes that countywide, secured property tax collections are only slightly behind by
0.14%, with 96.95% of all first installment secured taxes collected this year versus 97.09% at the same
time last year. For the second installment, 12.68% of the property taxes have been collected countywide
versus 12.35% at the same time last year. Payments for the first installment of property taxes have been
received from 95.8% of the first installment bills, the same percentage as in the prior year at this time.
The County has also received second installment property tax payments from 166,000 taxpayers, up from
159,000 taxpayers at the same time last year.
The current spread of COVID-19 is altering the behavior of businesses and people in a manner
that may have negative effects on global, national and local economies, and which has resulted in a
volatile stock market response. These events and other factors resulting from such an outbreak,
particularly if prolonged, could result in, or increase the likelihood of, the occurrence of certain of the
other potential adverse effects described in this Official Statement, including those relating to declines in
the value of property, and delays in (or insufficient funds received from) the collection of sales taxes,
transient occupancy taxes, and property taxes.
On January 7, 2021, Orange County announced the launching of “Operation Independence,” a
county-wide collaborative effort with the Orange County Fire Authority to help administer COVID-19
vaccinations to all interested county residents by the Fourth of July. The goal of Operation Independence
is to set up regional vaccine points of dispensing (PODs), with initial sites located in Huntington Beach,
Irvine, and Anaheim. The County’s goal is to provide five large, regional Super PODs, that are expected
to dispense thousands of vaccines each day once they are fully operational. Currently, the County has
two Super PODs located in Disneyland and Soka University.
Information provided by County Health Officials is available at: http://www.ochealthinfo-com-
novel coronavirus. The City can take no responsibility for the continued accuracy of this internet address
or for the accuracy, completeness or timeliness of information posted therein, and such information is not
incorporated in this Official Statement by such reference. The City provides additional information on
actions with respect to the COVID-19 virus at https://hbready.com. The information on such website is
not incorporated herein by such reference or otherwise.
On March 27, 2020, the President signed H.R. 748, known as the Coronavirus Aid, Relief, and
Economic Security (CARES) Act or “Phase 3,” a $2 trillion stimulus and supplemental spending plan to
address the effects of the COVID-19 virus, which includes more than $150 billion for the so-called
“Marshall Plan” for hospitals and health care infrastructure. Also included is $150 billion for state and
local governments. On April 24, 2020, the President signed H.R. 266, known as “Phase 3.5,” titled the
Paycheck Protection Program and Heath Care Enhancement Act, which appropriates additional funds for
the Paycheck Protection Program (the “PPP”) and for emergency Economic Injury Disaster Loan
(“EIDL”) grants; mandates a certain “set-aside” for qualifying small and midsize PPP lenders; and makes
other appropriations, including for a Department of Health and Human Services COVID-19-related
“emergency fund.” The Act increases appropriations for PPP loans from the $349,000,000,000 originally
provided in the CARES Act to $670,335,000,000. It also increases appropriations for emergency EIDL
grants from the $10,000,000,000 originally provided in the CARES Act to $20,000,000,000. The Act
expands the types of entities eligible to receive emergency EIDL grants to include agricultural enterprises
with not more than 500 employees.
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The City continues to monitor the spread of COVID-19 and is working with local, State, and
national agencies to address the potential impact of the Pandemic upon the City. The City projects that
two of three primary sources of operating revenue (sales and transient occupancy tax) will be dramatically
reduced and long term required expenditures significantly increased. While the potential impact of the
Pandemic on the City cannot be quantified at this time, the continued outbreak of COVID-19 could delay
and/or impair the collection of sales taxes, transient occupancy taxes, and property taxes and have an
adverse effect on the City’s operations and financial condition and impair the City’s ability to pay debt
service on the Series 2021 Bonds when due.
Projections included in this Official Statement represent City’s forecast of future results as of the
date of hereof as well as estimates, trends and assumptions that are inherently subject to economic,
political, regulatory, competitive and other uncertainties, all of which are difficult to predict and many of
which will be beyond the control of the City. As a result, projected results may not be realized and actual
results could be significantly higher or lower than projected. The City is not obligated to update, or
otherwise revise, the financial projections or the specific portions presented to reflect circumstances
existing after the date when made or to reflect the occurrence of future events, even in the event that any
or all of the assumptions are shown to be in error.
A continued spread of the COVID-19 virus, future outbreak of the COVID-19 virus or another
infectious disease, or the fear of any such outbreak, and measures taken to prevent or reduce it, could
adversely impact State, national and global economic activities and, accordingly, adversely impact the
financial condition and operations of the City, and the extent of impact could be material. The City
cannot predict the duration of COVID-19, the duration or expansion of travel restrictions and warnings,
whether additional countries or destinations will be added to the travel restrictions or warnings, and what
effect such travel restrictions and warnings may have on tourism-related revenues. Additionally, the City
cannot predict what impact COVID-19 may have on the City’s general financial condition or operations,
or the assessed values of property within the City. The City is monitoring the impact of COVID-19 and
will incorporate it into the assumptions used in the fiscal year 2020-21 budget as necessary.
Bankruptcy
In addition to the limitation on remedies contained in the Trust Agreement, the rights and
remedies provided in the Trust Agreement may be limited by and are subject to the provisions of federal
bankruptcy laws and to other laws or equitable principles that may affect the enforcement of creditors’
rights. The City is a unit of State government and therefore is not subject to the involuntary procedures of
the United States Bankruptcy Code (the “Bankruptcy Code”). However, pursuant to Chapter 9 of the
Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its
debts. In the event the City were to become a debtor under the Bankruptcy Code, the City would be
entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9
proceeding. Among the adverse effects of such a bankruptcy might be: (i) the application of the
automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection
of payments from the City or the commencement of any judicial or other action for the purpose of
recovering or collecting a claim against the City; (ii) the avoidance of preferential transfers occurring
during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or
court-approved secured debt which may have a priority of payment superior to that of Owners of Series
2021 Bonds; and (iv) the possibility of the adoption of a plan for the adjustment of the City’s debt (a
“Plan”) without the consent of the Trustee or all of the Owners of Series 2021 Bonds, which Plan may
restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court
finds that the Plan is fair and equitable.
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The Bonds are not secured by any property other than the funds that the City has actually
deposited with the Trustee, and the City is only obligated to deposit funds with the Trustee twice each
year, five (5) days prior to each Interest Payment Date. The Bonds are not secured by any funds held by
the City. If the City is in bankruptcy, it may not be obligated to make any further deposits with the
Trustee. As a result, the Bonds may be treated as unsecured obligations of the City in the bankruptcy
case. Under such circumstances, the Holders of the Bonds could suffer substantial losses.
The City may be able, without the consent and over the objection of the Trustee or the Holders of
the Bonds, to alter the priority, interest rate, payment terms, maturity dates, payment sources, covenants,
and other terms or provisions of the Trust Agreement and the Bonds, as long as the bankruptcy court
determines that the alterations are fair and equitable.
There may be delays in payments on the Bonds while the court considers any of these issues.
There may be other possible effects of a bankruptcy of the City that could result in delays or reductions in
payments on the Bonds, or result in losses to the Holders of the Bonds. Regardless of any specific
adverse determinations in a City bankruptcy proceeding, the fact of a City bankruptcy proceeding could
have an adverse effect on the liquidity and value of the Bonds.
Recent bankruptcies in the City of Stockton, the City of San Bernardino and the City of Detroit
have brought scrutiny to pension obligation securities. Specifically, in the Stockton bankruptcy the Court
found that CalPERS was an unsecured creditor of the city with a claim on parity with those of other
unsecured creditors. A variety of events, including, but not limited to, additional rulings adverse to the
interests of bond owners in the Stockton, San Bernardino and Detroit bankruptcy cases or additional
municipal bankruptcies, could prevent or materially adversely affect the rights of Beneficial Owners to
receive payments on the Series 2021 Bonds in the event the City files for bankruptcy. Accordingly, in the
event of bankruptcy, Beneficial Owners may not recover the full amount of principal and interest due on
the Series 2021 Bonds.
The opinion to be delivered by Bond Counsel concurrently with the execution and delivery of the
Series 2021 Bonds will be subject to various limitations on remedies including those related to
bankruptcy and the various other legal opinions to be delivered concurrently with the issuance of the
Series 2021 Bonds will be similarly qualified. See Appendix C. In the event that the City fails to comply
with its covenants under the Trust Agreement or fails to pay debt service payments on the Series 2021
Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the
Beneficial Owners of the Series 2021 Bonds.
Limitations on Remedies
The rights of the Owners of Series 2021 Bonds are subject to the limitations on legal remedies
against cities in the State, including applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors’ rights generally, now or hereafter in effect, and to the
application of general principles of equity, including concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law.
Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the
bankruptcy proceedings for public agencies such as the City, there are no involuntary petitions in
bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of
Series 2021 Bonds, the Trustee could be prohibited from taking any steps to enforce their rights under the
Trust Agreement, and from taking any steps to collect amounts due from the City under the Trust
Agreement.
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All legal opinions with respect to the enforcement of the Trust Agreement will be expressly
subject to a qualification that such agreements may be limited by bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors’ rights generally and by applicable principles of
equity if equitable remedies are sought.
Risk of Tax Audit
In December 1999, as a part of a larger reorganization of the Internal Revenue Service (the
“IRS”), the IRS commenced operation of its Tax Exempt and Government Entities Division (the “TE/GE
Division”), as the successor to its Employee Plans and Exempt Organizations division. The new TE/GE
Division has a subdivision that is specifically devoted to tax-exempt bond compliance. Public statements
by IRS officials indicate that the number of tax-exempt bond examinations is expected to increase
significantly under the TE/GE Division. The City has not been contacted by the IRS regarding the
examination of any of its tax-exempt bond transactions.
State Budget
Approximately 57% (consisting of the sales tax, property tax and the motor vehicle license fee) of
the City’s fiscal year 2019-20 General Fund budget consisted of payments collected by the State and
passed-through to local governments or collected by and allocated to local governments by State law.
The financial condition of the State has an impact on the level of these revenues. In past years the State
has reduced revenues to cities and counties to help solve the State’s budget problems.
The following information concerning the State of California’s budgets has been obtained from
publicly available information which the City believes to be reliable; however, neither the City can take
no responsibility as to the accuracy or completeness thereof and have not independently verified such
information. Information about the State Budget is regularly available at various State-maintained
websites. Text of the budget may be found at the Department of Finance website, www.dof ca.gov, under
the heading “California Budget.” An impartial analysis of the budget is posted by the State Legislative
Analyst’s Office at www.lao.ca.gov. In addition, various State official statements, many of which contain
a summary of the current and past State budgets, may be found at the website of the State Treasurer,
www.treasurer.ca.gov. The information referred to is prepared by the respective State agency
maintaining each website and not by the City or the Underwriters, and the neither the City nor the
Underwriters can take responsibility for the continued accuracy of the internet addresses or for the
accuracy or timeliness of information posted there, and such information is not incorporated herein by
these references.
The State’s fiscal year begins on July 1 and ends on June 30. The annual budget is proposed by
the Governor by January 10 of each year for the next fiscal year (the “Governor’s Budget”). Under State
law, the annual proposed Governor’s Budget cannot provide for projected expenditures in excess of
projected revenues and balances available from prior fiscal years. Following the submission of the
Governor’s Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only through an
appropriation made by law. The primary source of the annual expenditure authorizations is the Budget
Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a
two-thirds majority vote of each house of the Legislature. The Governor may reduce or eliminate specific
line items in the Budget Act or any other appropriations bill without vetoing the entire bill. Such
individual line-item vetoes are subject to override by a two-thirds majority vote of each house of the
Legislature.
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Appropriations also may be included in legislation other than the Budget Act. Continuing
appropriations, available without regard to fiscal year, may also be provided by statute or the State
Constitution. Funds necessary to meet an appropriation need not be in the State treasury at the time such
appropriation is enacted; revenues may be appropriated in anticipation of their receipt.
Proposed 2020-21 State Budget. The Governor released his proposed State budget for fiscal year
2020-21 (the “Proposed 2020-21 State Budget”) on January 10, 2020. Since the Proposed 2020-21 State
Budget preceded the COVID-19 pandemic, it did not take into account the significant adverse impacts it
will have on the State’s financial condition in fiscal year 2020-21. The complete Proposed 2020-21 State
Budget is available from the California Department of Finance website at www.dof.ca.gov. The City can
take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness
or timeliness of information posted therein, and such information is not incorporated herein by such
reference.
May Revision to the 2020-21 Proposed State Budget. The Governor released the May Revision to
the Proposed 2020-21 State Budget (the “2020-21 May Revision”) on May 14, 2020, which reflects the
initial and profound effects of the COVID-19 pandemic on the State’s economy. The 2020-21 May
Revision indicates that, although the State began 2020 with a solid fiscal foundation as reflected in the
Proposed 2020-21 State Budget, the COVID-19 pandemic and resulting recession have changed the fiscal
landscape dramatically. Job losses and business closures are sharply reducing State revenues. Compared
to the Proposed 2020-21 State Budget, the 2020-21 May Revision projects that State general fund
revenues will decline over $41 billion. Such a decrease in State general fund revenues, combined with
the increased costs in health and human services programs and the added costs to address COVID-19,
leads to a projected budget deficit of approximately $54 billion before the changes proposed in the 2020-
21 May Revision.
Consistent with the State’s constitutional obligation to enact a balanced budget and the
prohibition against issuing long-term bonds to finance deficits, the 2020-21 May Revision proposed
certain action to achieve a balanced budget for fiscal year 2020-21.
2020-21 State Budget. The Governor signed the fiscal year 2020-21 State budget (the “2020-21
State Budget”) on June 29, 2020. The 2020-21 Budget acknowledges that the rapid onset of COVID-19
has had an immediate and severe impact on the State’s economy. The ensuing recession has caused
significant job losses, precipitous drops in family and business income and has exacerbated income
inequality. The May Revision forecast included a peak unemployment rate of 24.5% in the second
quarter of 2020 and a decline in personal income of nearly 9%. The 2020-21 Budget reports that the
official unemployment rate exceeded 16% in both April and May 2020.
The 2020-21 Budget includes a number of measures intended to address a projected deficit of
$54.3 billion and occasioned principally by declines in the State’s three main tax revenues (personal
income, sales and use and corporate, as discussed above). The measures included in the 2020-21 Budget,
and described below, are intended to close this deficit and set aside $2.6 billion in the State’s traditional
general fund reserve, including $716 million for the State to respond to the changing conditions of the
COVID-19 pandemic:
ꞏ Drawdown of Reserves – The 2020-21 Budget draws down $8.8 billion in total
State reserves, including $7.8 billion from the State’s budget stabilization account (“BSA”), $450
million from the Safety Net Reserve and all money in the Public School System Stabilization
Account.
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ꞏ Triggers – The 2020-21 Budget includes $11.1 billion in reductions and deferrals
that would be restored if at least $14 billion in federal funds are received by October 15, 2020. If
the State receives less than this amount, reductions and deferrals would be partially restored. The
triggers include $6.6 billion in deferred spending on education, $970 million in funding for the
California State University and University of California systems, $2.8 billion in State employee
compensation and $150 million for courts, as well as funding for various other State programs.
The triggers would also fund an additional $250 million for county programs to backfill revenue
losses.
ꞏ Federal Funds – The 2020-21 Budget relies on $10.1 billion in federal funds,
$8.1 billion of which has already been received. This relief includes recent Congressional
approval for a temporary increase in the federal government’s share of Medicaid costs, a portion
of the State’s Coronavirus Relief Fund allocation pursuant to the CARES Act and federal funds
provided for childcare programs.
ꞏ Borrowing/Transfers/Deferrals – The 2020-21 Budget relies on $9.3 billion in
special fund borrowing and transfers, as well as deferrals to K-14 education spending.
Approximately $900 million of special fund borrowing is associated with reductions to State
employee compensation and is subject to the triggers discussed above.
ꞏ Increased Revenues – The 2020-21 Budget temporarily suspends for three years
net operating loss tax deductions for medium and large businesses and limits business tax credits,
with an estimated increase in tax revenues of $4.3 billion in State fiscal year 2020-21.
ꞏ Canceled Expansions, Updated Assumptions and Other Measures – The 2020-21
Budget includes an additional $10.6 billion of measures, including cancelling multiple
programmatic expansions, anticipated governmental efficiencies, higher ongoing revenues above
the forecast included in the May Revision and lower health and human services caseload costs
than assumed by the May Revision.
For State fiscal year 2019-20, the 2020-21 Budget projects total State general fund revenues and
transfers of $137.6 billion and authorizes expenditures of $146.9 billion. The State is projected to end
State fiscal year 2019-20 with total available general fund reserves of $17 billion, including $16.1 billion
in the BSA and $900 million in the Safety Net Reserve Fund.
For State fiscal year 2020-21, the 2020-21 Budget projects total State general fund revenues and
transfers of $137.7 billion and authorizes expenditures of $133.9 billion. The State is projected to end
State fiscal year 2020-21 with total available general fund reserves of $11.4 billion, including $2.6 billion
in the traditional State general fund reserve (of which $716 million is earmarked for COVID-19-related
responses), $8.3 billion in the BSA and $450 million in the Safety Net Reserve Fund.
As a result of the projected reduction of State revenues occasioned by the COVID-19 pandemic,
the 2020-21 Budget estimates that the Proposition 98 minimum funding guarantee for fiscal year 2020-21
is $70.1 billion, approximately $10 billion below the revised prior-year funding level. For K-12 school
districts, this results in per-pupil spending in fiscal year 2020-21 of $10,654, a reduction of $1,339 from
the prior year.
There can be no assurance that additional legislation will not be enacted in the future to
implement provisions relating to the State budget, address the COVID-19 outbreak or otherwise that may
affect the City or its General Fund revenues.
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Because of such measures described above, the 2020-21 State Budget is a balanced budget for
fiscal year 2020-21 that projects approximately $137.7 billion in revenues. The 2020-21 State Budget
sets aside $2.6 billion in the Special Fund for Economic Uncertainties.
The complete 2020-21 State Budget is available from the California Department of Finance
website at www.dof.ca.gov. The City can take no responsibility for the continued accuracy of this
internet address or for the accuracy, completeness or timeliness of information posted therein, and such
information is not incorporated herein by such reference.
Potential Impact of State Financial Condition on the City. Currently, the COVID-19 pandemic is
materially adversely impacting the financial condition of the State and has caused a recession which will
likely result in significant increases in unfunded liabilities of the two main retirement systems managed
by State entities, CalPERS and the CalSTRS. The State also has a significant unfunded liability with
respect to other post-employment benefits.
Current and future State budgets will be significantly affected by the COVID-19 pandemic and
other factors over which the City has no control. The City cannot determine what actions will be taken in
the future by the State Legislature and the Governor to deal with the COVID-19 pandemic, the current
recession and resulting changing State revenues and expenditures. There can be no assurance that, as a
result of the COVID-19 pandemic or otherwise, the State will not significantly reduce revenues to local
governments (including the City) or shift financial responsibility for programs to local governments as
part of its efforts to address State financial conditions. Although the State is not a significant source of
City revenues, there can be no assurance that State actions to respond to the COVID-19 pandemic will not
materially adversely affect the financial condition of the City.
Changes in State Budget. The City cannot predict what future actions will be taken by the State
Legislature and the Governor to address changing State revenues and expenditures or the impact such
actions will have on State revenues available in the current or future years. As indicated above, the 2020-
21 May Revision and the 2020-21 State Budget differ dramatically from the Proposed 2020-21 State
Budget due to the effects of the COVID-19 pandemic on the State. The 2020-21 State Budget may be
affected by national and State economic conditions and other factors which the City cannot predict,
including the continued and evolving effects of the COVID-19 pandemic on State revenues that may in
turn impact the funding that the City receives from the State. See “CERTAIN RISK FACTORS –
Infectious Disease Outbreak – COVID-19.”
In fact, the State Legislature and the Governor have widely differing proposals for the final fiscal
year 2020-21 State budget largely related to whether or not to assume the receipt of potential federal aid
in addressing the budget deficit. The 2020-21 May Revision put forward by the Governor reduces
programs and spending to address budget shortfalls, but indicates adjustments will be made if federal aid
becomes available. The State Legislature’s fiscal year 2020-21 State budget assumes the receipt of
potential federal aid and rejects many of the reductions included in the 2020-21 May Revision. On
June 15, 2020, the Constitutional deadline for the State Legislature to approve a fiscal year 2020-21 State
budget, the State Legislature passed four main bills containing the fiscal year 2020-21 State budget,
reportedly without reaching any prior agreement with the Governor on such bills. It is widely reported
that the State Legislature’s fiscal year 2020-21 State budget is unlikely to become the final fiscal year
2020-21 State budget given its rejection of the reductions included the 2020-21 May Revision. Reports
indicate that negotiations between the State Legislature and the Governor are ongoing. Accordingly, the
City cannot provide any assurances what the final fiscal year 2020-21 State budget will include and
whether it will be consistent with the 2020-21 May Revision or the State Legislature’s fiscal year 2020-21
State budget. The City cannot predict the impact that the final fiscal year 2020-21 State budget, or
subsequent budgets, will have on its finances and operations.
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Future State Budgets. The City cannot predict what actions will be taken in this or any future
fiscal year by the State Legislature or the Governor to deal with the State’s current or future budget
deficits, changing State revenues and expenditures, or what the effect of national and state economic
conditions on future State budgets will be. Moreover, the State Legislature or Governor could take
additional actions which could affect the State’s receipts, expenditures and borrowings during the current
fiscal year, and thereby influence the City’s financial situation. Future State budgets will be affected by
national and State economic conditions and other factors, including the current economic downturn, over
which the City has no control.
Further information about the State budget is available from the Public Finance Division of the
State Treasurer’s Office. In addition, information about the State budget is regularly available at various
State-maintained websites, including www.dof.ca.gov (Department of Finance), www.lao.ca.gov (Office
of the Legislative Analyst) and www.treasurer.ca.gov (State Treasurer). The above-mentioned websites
are included herein for informational purposes only. The City makes no representations concerning, and
do not take any responsibility for, the accuracy or timeliness of information posted on such websites or
the continued maintenance of such websites by the respective entities.
Limited Secondary Market
As stated herein, investment in the Series 2021 Bonds poses certain economic risks which may
not be appropriate for certain investors, and only persons with substantial financial resources who
understand the risk of investment in the Series 2021 Bonds should consider such investment. There can
be no guarantee that there will be a secondary market for purchase or sale of the Series 2021 Bonds or, if
a secondary market exists, that the Series 2021 Bonds can or could be sold for any particular price.
Changes in Law
There can be no assurance that the electorate of the State will not at some future time adopt
additional initiatives or that the Legislature will not enact legislation that will amend the laws or the
Constitution of the State resulting in a reduction of the revenues of the City and consequently, having an
adverse effect on the security for the Series 2021 Bonds. See “CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND APPROPRIATIONS.”
TAX MATTERS
General
In the opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel to the City (“Bond Counsel”),
based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among
other matters, the accuracy of certain representations and compliance with certain covenants, interest on
the Series 2021 Bonds is not excluded from gross income for federal income tax purposes under
Section 103 of the Code. Bond Counsel observes that interest on the Series 2021 Bonds is not excluded
from gross income for federal income tax purposes under Section 103 of the Code. Bond Counsel is of
the opinion that interest on the Series 2021 Bonds is exempt from State of California personal income
taxes. Bond Counsel expresses no opinion regarding any other tax consequences relating to the
ownership or disposition of, or the amount, accrual, or receipt of interest on, the Series 2021 Bonds. The
proposed form of opinion of Bond Counsel is contained in Appendix E hereto.
The following discussion summarizes certain U.S. federal tax considerations generally applicable
to holders of the Series 2021 Bonds that acquire their Series 2021 Bonds in the initial offering. The
discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date
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hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should
note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service (the
“IRS”) with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be
given that the IRS will not take contrary positions. Further, the following discussion does not deal with
U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations
applicable to all categories of investors, some of which may be subject to special taxing rules (regardless
of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs,
RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies,
partnerships, S corporations, estates and trusts, investors that hold their Series 2021 Bonds as part of a
hedge, straddle or an integrated or conversion transaction, or investors whose “functional currency” is not
the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax consequences, (ii) the net
investment income tax imposed under Section 1411 of the Code, or (iii) the indirect effects on persons
who hold equity interests in a holder. This summary also does not consider the taxation of the Series
2021 Bonds under state, local or non-U.S. tax laws. In addition, this summary generally is limited to U.S.
tax considerations applicable to investors that acquire their Series 2021 Bonds pursuant to this offering
for the issue price that is applicable to such Series 2021 Bonds (i.e., the price at which a substantial
amount of the Series 2021 Bonds is sold to the public) and who will hold their Series 2021 Bonds as
“capital assets” within the meaning of Section 1221 of the Code.
As used herein, “U.S. Holder” means a beneficial owner of a Series 2021 Bond that for U.S.
federal income tax purposes is an individual citizen or resident of the United States, a corporation or other
entity taxable as a corporation created or organized in or under the laws of the United States or any state
thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal
income taxation regardless of its source or a trust where a court within the United States is able to
exercise primary supervision over the administration of the trust and one or more United States persons
(as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that
has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used
herein, “Non-U.S. Holder” generally means a beneficial owner of a Series 2021 Bond (other than a
partnership) that is not a U.S. Holder. If a partnership holds Series 2021 Bonds, the tax treatment of such
partnership or a partner in such partnership generally will depend upon the status of the partner and upon
the activities of the partnership. Partnerships holding Series 2021 Bonds, and partners in such
partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the
Series 2021 Bonds (including their status as U.S. Holders or Non-U.S. Holders).
Notwithstanding the rules described below, it should be noted that certain taxpayers that are
required to prepare certified financial statements or file financial statements with certain regulatory or
governmental agencies may be required to recognize income, gain and loss with respect to the Series
2021 Bonds at the time that such income, gain or loss is recognized on such financial statements instead
of under the rules described below (in the case of original issue discount, such requirements are only
effective for tax years beginning after December 31, 2018).
Prospective investors should consult their own tax advisors in determining the U.S. federal, state,
local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the Series
2021 Bonds in light of their particular circumstances.
U.S. Holders
Interest. Interest on the Series 2021 Bonds generally will be taxable to a U.S. Holder as ordinary
interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s
method of accounting for U.S. federal income tax purposes.
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[To the extent that the issue price of any maturity of the Series 2021 Bonds is less than the
amount to be paid at maturity of such Series 2021 Bonds (excluding amounts stated to be interest and
payable at least annually over the term of such Series 2021 Bonds) by more than a de minimis amount,
the difference may constitute original issue discount (“OID”). U.S. Holders of Series 2021 Bonds will be
required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with
a constant yield method based on a compounding of interest (which may be before the receipt of cash
payments attributable to such income). Under this method, U.S. Holders generally will be required to
include in income increasingly greater amounts of OID in successive accrual periods.]
Series 2021 Bonds purchased for an amount in excess of the principal amount payable at maturity
(or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a
Series 2021 Bond issued at a premium may make an election, applicable to all debt securities purchased at
a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term
of such Series 2021 Bond.
Sale or Other Taxable Disposition of the Series 2021 Bonds. Unless a nonrecognition provision
of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the
City) or other disposition of a Series 2021 Bond will be a taxable event for U.S. federal income tax
purposes. In such event, in general, a U.S. Holder of a Series 2021 Bond will recognize gain or loss equal
to the difference between (i) the amount of cash plus the fair market value of property received (except to
the extent attributable to accrued but unpaid interest on the Series 2021 Bond, which will be taxed in the
manner described above) and (ii) the U.S. Holder’s adjusted U.S. federal income tax basis in the Series
2021 Bond (generally, the purchase price paid by the U.S. Holder for the Series 2021 Bond, decreased by
any amortized premium)[, and increased by the amount of any OID previously included in income by
such U.S. Holder with respect to such Series 2021 Bond]. Any such gain or loss generally will be capital
gain or loss. In the case of a non-corporate U.S. Holder of the Series 2021 Bonds, the maximum marginal
U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S.
federal income tax rate applicable to ordinary income if such U.S. holder’s holding period for the Series
2021 Bonds exceeds one year. The deductibility of capital losses is subject to limitations.
Defeasance of the Series 2021 Bonds. If the City defeases any Series 2021 Bond, the Series 2021
Bond may be deemed to be retired and “reissued” for U.S. federal income tax purposes as a result of the
defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the difference
between (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified
stated interest which will be taxable as such) and (ii) the holder’s adjusted tax basis in the Series 2021
Bond.
Information Reporting and Backup Withholding. Payments on the Series 2021 Bonds generally
will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406
of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of
the Series 2021 Bonds may be subject to backup withholding at the current rate of 24% with respect to
“reportable payments,” which include interest paid on the Series 2021 Bonds and the gross proceeds of a
sale, exchange, redemption, retirement or other disposition of the Series 2021 Bonds. The payor will be
required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer
identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the
TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in
Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not
subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup
withholding rules may be refunded or credited against the U.S. Holder’s federal income tax liability, if
any, provided that the required information is timely furnished to the IRS. Certain U.S. holders
(including among others, corporations and certain tax-exempt organizations) are not subject to backup
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withholding. A holder’s failure to comply with the backup withholding rules may result in the imposition
of penalties by the IRS.
Non-U.S. Holders
Interest. Subject to the discussions below under the headings “Information Reporting and
Backup Withholding” and “Foreign Account Tax Compliance Act,” payments of principal of, and interest
on, any Series 2021 Bond to a Non-U.S. Holder, other than (1) a controlled foreign corporation, a such
term is defined in the Code, which is related to the City through stock ownership and (2) a bank which
acquires such Series 2021 Bond in consideration of an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business, will not be subject to any U.S. federal
withholding tax provided that the beneficial owner of the Series 2021 Bond provides a certification
completed in compliance with applicable statutory and regulatory requirements, which requirements are
discussed below under the heading “Information Reporting and Backup Withholding,” or an exemption is
otherwise established.
Disposition of the Series 2021 Bonds. Subject to the discussions below under the headings
“Information Reporting and Backup Withholding” and “FATCA,” any gain realized by a Non-U.S.
Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the City or a
deemed retirement due to defeasance of the Series 2021 Bond ) or other disposition of a Series 2021 Bond
generally will not be subject to U.S. federal income tax, unless (i) such gain is effectively connected with
the conduct by such Non-U.S. Holder of a trade or business within the United States; or (ii) in the case of
any gain realized by an individual Non-U.S. Holder, such holder is present in the United States for 183
days or more in the taxable year of such sale, exchange, redemption, retirement (including pursuant to an
offer by the City) or other disposition and certain other conditions are met.
U.S. Federal Estate Tax. A Series 2021 Bond that is held by an individual who at the time of
death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a
result of such individual’s death, provided that, at the time of such individual’s death, payments of
interest with respect to such Series 2021 Bond would not have been effectively connected with the
conduct by such individual of a trade or business within the United States.
Information Reporting and Backup Withholding. Subject to the discussion below under the
heading “FATCA,” under current U.S. Treasury Regulations, payments of principal and interest on any
Series 2021 Bonds to a holder that is not a United States person will not be subject to any backup
withholding tax requirements if the beneficial owner of the Series 2021 Bond or a financial institution
holding the Series 2021 Bond on behalf of the beneficial owner in the ordinary course of its trade or
business provides an appropriate certification to the payor and the payor does not have actual knowledge
that the certification is false. If a beneficial owner provides the certification, the certification must give
the name and address of such owner, state that such owner is not a United States person, or, in the case of
an individual, that such owner is neither a citizen nor a resident of the United States, and the owner must
sign the certificate under penalties of perjury. The current backup withholding tax rate is 24%.
Foreign Account Tax Compliance Act (“FATCA”) — U.S. Holders and Non-U.S. Holders
Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of
payments made to foreign financial institutions, unless the foreign financial institution enters into an
agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain
U.S. persons or U.S.-owned entities, annually report certain information about such accounts, and
withhold 30% on payments to account holders whose actions prevent it from complying with these and
other reporting requirements, or unless the foreign financial institution is otherwise exempt from those
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requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a
non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or
the entity furnishes identifying information regarding each substantial U.S. owner. Under current
guidance, failure to comply with the additional certification, information reporting and other specified
requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments
of interest on the Series 2021 Bonds. In general, withholding under FATCA currently applies to
payments of U.S. source interest (including OID) and, under current guidance, will apply to certain
“passthru” payments no earlier than the date that is two years after publication of final U.S. Treasury
Regulations defining the term “foreign passthru payments.” Prospective investors should consult their
own tax advisors regarding FATCA and its effect on them.
The foregoing summary is included herein for general information only and does not discuss all
aspects of U.S. federal taxation that may be relevant to a particular holder of Series 2021 Bonds in light of
the holder’s particular circumstances and income tax situation. Prospective investors are urged to consult
their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition
of Series 2021 Bonds, including the application and effect of state, local, non-U.S., and other tax laws.
VALIDATION
In November 2019, the City, acting pursuant to the provisions of Section 860 et. seq. of the
California Code of Civil Procedure and Section 53511 et. seq. of the California Government Code, filed a
complaint in the Superior Court of the State of California for the County of Orange seeking judicial
validation of the transactions relating to the issuance of the Series 2021 Bonds and certain other matters.
On May 18, 2020, the court entered a default judgment to the effect that, among other things, the Series
2021 Bonds are valid, legal and binding obligations of the City not subject to the debt limitation provided
in Article XVI, Section 18 of the State Constitution and that the Series 2021 Bonds are valid and in
conformity with all applicable provisions of law. The Trust Agreement executed by the City in
connection with the issuance of the Series 2021 Bonds was also the subject of the default judgment, as
was the authorization that certain Pension Tax Override revenues may be applied to the repayment of the
Series 2021 Bonds, each of which were validated as legal and binding obligations imposed by law. The
time period for the filing of appeals with respect to the judgment expired on June 17, 2020. No appeals
were filed and therefore, the judgment is final. In issuing its opinion as to the validity of the Series 2021
Bonds, Bond Counsel will rely upon the entry of the foregoing default judgment.
CERTAIN LEGAL MATTERS
Legal matters incident to the authorization, issuance, sale and delivery by the City of the Series
2021 Bonds are subject to the approval as to their validity of Orrick, Herrington & Sutcliffe LLP, as Bond
Counsel to the City. Bond Counsel, as such, undertakes no responsibility for the accuracy, completeness
or fairness of this Official Statement. Certain legal matters will be passed upon for the City by the City
Attorney, and by Orrick, Herrington & Sutcliffe LLP, as Disclosure Counsel. Certain legal matters will
be passed on for the Underwriters by Stradling Yocca Carlson & Rauth, a Professional Corporation,
Newport Beach, California. Certain compensation of Bond Counsel and Disclosure Counsel is contingent
upon the issuance and delivery of the Series 2021 Bonds.
FINANCIAL STATEMENTS
The City’s financial statements for the fiscal year ended June 30, 2020, included in
APPENDIX B – “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY FOR THE
FISCAL YEAR ENDED JUNE 30, 2020,” have been audited by Davis Farr LLP, Certified Public
Accountants, Irvine, California, as stated in its report appearing in such appendix. Davis Farr LLP has
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not undertaken to update its report or to take any action intended or likely to elicit information concerning
the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is
expressed by Davis Farr LLP with respect to any event subsequent to its report.
LITIGATION
To the best knowledge of the City, except as otherwise disclosed in this Official Statement, there
is no pending or threatened litigation concerning the validity of the Series 2021 Bonds or challenging any
action taken by the City in connection with the authorization of the Trust Agreement, or any other
document relating to the Series 2021 Bonds to which the City is or is to be become a party or the
performance by the City of any of their obligations under any of the foregoing. Further, to the best
knowledge of the City, except as otherwise disclosed in this Official Statement, there is no litigation,
proceeding, action, suit, or investigation pending, with service of process having been accomplished, or
threatened in writing against the City, which in any manner, questions the right of the City to pay debt
service on the Series 2021 Bonds in accordance with the Trust Agreement.
RATINGS
Fitch Ratings, Inc. (“Fitch”) and S&P Global Ratings, a Standard & Poor’s Financial
Services LLC business (“S&P”) have assigned their ratings of “____” and “____,” respectively, to the
Series 2021 Bonds. Such ratings reflect only the views of such organizations and any desired explanation
of the significance of such ratings should be obtained from the rating agency furnishing the same, at the
following addresses: Fitch Ratings, Inc., 33 Whitehall Street, New York, New York 10007, and
Standard & Poor’s Ratings Services, 55 Water Street, New York, New York 10041. Generally, a rating
agency bases its rating on the information and materials furnished to it and on investigations, studies and
assumptions of its own. There is no assurance such ratings will continue for any given period of time or
that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the
judgment of the rating agencies, circumstances so warrant. Any such downward revision or withdrawal
of such ratings may have an adverse effect on the market price of the Series 2021 Bonds.
UNDERWRITING
The Series 2021 Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated for
itself and as representative of BofA Securities, Inc. and Hilltop Securities (collectively, the
“Underwriters”). The Underwriters have agreed to purchase the Series 2021 Bonds at a price of
$_______, which amount represents the principal amount of the Series 2021 Bonds of $__________, less
$_______, representing the Underwriters’ discount. The contract of purchase pursuant to which the
Series 2021 Bonds are being purchased by the Underwriters provides that the Underwriters will purchase
all of the Series 2021 Bonds if any are purchased. The obligation of the Underwriters to make such
purchase is subject to certain terms and conditions set forth in such contract of purchase. The
Underwriters may offer and sell the Series 2021 Bonds to certain dealers and others at prices different
from the prices stated on the inside cover page of this Official Statement. The offering prices may be
changed from time to time by the Underwriters.
BofA Securities, Inc., an underwriter of the Series 2021 Bonds, has entered into a distribution
agreement with its affiliate Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”). As part of
this arrangement, BofA Securities, Inc. may distribute securities to MLPF&S, which may in turn
distribute such securities to investors through the financial advisor network of MLPF&S. As part of this
arrangement, BofA Securities, Inc. may compensate MLPF&S as a dealer for their selling efforts with
respect to the Series 2021 Bonds.
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The Underwriters and their respective affiliates are full service financial institutions engaged in
various activities, which may include securities trading, commercial and investment banking, financial
advisory, investment management, principal investment, hedging, financing and brokerage services. The
Underwriters and their respective affiliates have, from time to time, performed, and may in the future
perform, various investment banking services for the City, for which they received or will receive
customary fees and expenses.
In the ordinary course of their various business activities, the Underwriters and their respective
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or
related derivative securities, which may include credit default swaps) and financial instruments (including
bank loans) for their own account and for the accounts of their customers and may at any time hold long
and short positions in such securities and instruments. Such investment and securities activities may
involve securities and instruments of the City.
The Underwriters and their respective affiliates may also communicate independent investment
recommendations, market color or trading ideas and/or publish or express independent research views in
respect of such assets, securities or instruments and may at any time hold, or recommend to clients that
they should acquire, long and/or short positions in such assets, securities and instruments.
MUNICIPAL ADVISOR
KNN Public Finance, Los Angeles California (the “Municipal Advisor”) has served as municipal
advisor to the City in connection with the issuance of the Series 2021 Bonds. The Municipal Advisor has
not independently verified any of the data contained in this Official Statement or conducted a detailed
investigation of the affairs of the City to determine the accuracy or completeness of this Official
Statement. The Municipal Advisor assumes no responsibility for the accuracy or completeness of any of
the information contained in this Official Statement. The fees of the Municipal Advisor are contingent
upon issuance of the Series 2021 Bonds.
CONTINUING DISCLOSURE
The City has covenanted to provide, or cause to be provided, to the Municipal Securities
Rulemaking Board’s EMMA System, for purposes of the Rule, certain annual financial information and
operating data of the type set forth herein including, but not limited to, its audited financial statements and
notice of certain enumerated events. These covenants have been made in order to assist the Underwriters
in complying with the Rule. The City will execute a continuing disclosure certificate (the “Continuing
Disclosure Certificate”) for the benefit of the owners of the Series 2021 Bonds. See APPENDIX F –
“FORM OF CONTINUING DISCLOSURE CERTIFICATE” for a description of the Continuing
Disclosure Certificate. A failure by the City to provide any information required thereunder will not
constitute an Event of Default under the Trust Agreement. Within the last five years, with respect to the
then outstanding Series 2010A Bonds and Series 2011A Bonds, the City’s annual report for the fiscal year
ending June 30, 2020 was not posted to properly reference certain CUSIP numbers and the filing of an
event notice of a rating upgrade in 2016 concerning the then outstanding Series 2010A Bonds and Series
2011A Bonds was not filed on a timely basis by the City pursuant to the Rule, such filing being
approximately 9 days late. The City has made the necessary filings to address the deficiencies identified
above. Currently, the City believes that it is in material compliance with its continuing disclosure
undertakings under the Rule for the last five years.
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ADDITIONAL INFORMATION
Summaries and explanations of the Series 2021 Bonds and documents contained in this Official
Statement do not purport to be complete, and reference is made to such documents for full and complete
statements of their provisions.
INFORMATION RELATING TO DTC, CLEARSTREAM AND EUROCLEAR AND THE
BOOK ENTRY SYSTEM DESCRIBED UNDER THE HEADING “THE BONDS — CLEARING
SYSTEMS FOR THE SERIES 2021 BONDS” AND IN APPENDIX G — “PROVISIONS FOR BOOK-
ENTRY ONLY SYSTEM AND GLOBAL CLEARANCE PROCEDURES” IS BASED UPON
INFORMATION FURNISHED BY DTC, CLEARSTREAM AND EUROCLEAR AND IS BELIEVED
TO BE RELIABLE. NEITHER THE CITY NOR THE UNDERWRITERS MAKES ANY
REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO SUCH
INFORMATION, INCLUDING WITHOUT LIMITATION, REPRESENTATIONS AND
WARRANTIES AS TO THE COMPLETENESS OR THE ACCURACY OF SUCH INFORMATION
OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION
SUBSEQUENT TO THE DATE OF THIS OFFICIAL STATEMENT.
The preparation and distribution of this Official Statement have been authorized by the City.
CITY OF HUNTINGTON BEACH
By
Chief Financial Officer
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APPENDIX A
GENERAL, ECONOMIC AND DEMOGRAPHIC INFORMATION
RELATING TO THE CITY
The information in this Appendix is obtained from publicly available sources which do not yet
provide current information in many cases to reflect the adverse impact of the Pandemic, particularly
with respect to employment and taxable transactions. See “CERTAIN RISK FACTORS – Infectious
Disease Outbreak – COVID-19” in this Official Statement for additional information. Further, the
information herein is subject to change without notice, and neither delivery of this Official Statement nor
any sale thereafter of the Series 2021 Bonds shall under any circumstances imply that there has not been
any change in the affairs of the City or in any other information contained herein since the date of the
Official Statement. The Series 2021 Bonds are payable solely amounts deposited by the City in the Bond
Fund under the Trust Agreement, as and when paid by the City. See “SECURITY AND SOURCES OF
PAYMENT FOR THE BONDS.” The taxing power of the City of Huntington Beach, the County of
Orange, the State of California or any political subdivision thereof is not pledged to the payment of the
Series 2021 Bonds.
General Information
Founded in the late 1880’s, Huntington Beach (the “City”) was incorporated as a general law city
in 1909 and became a charter city in 1937. The City encompasses 31.6 square miles (26.4 square miles is
land, 5.2 square miles is water) in the coastal area of Orange County, California (the “County”), adjacent
to the Cities of Costa Mesa, Fountain Valley, Newport Beach, Seal Beach and Westminster. The City is
approximately 40 miles southeast of Los Angeles and 90 miles northwest of San Diego. As of January 1,
2020, the State of California Finance Department estimated its population at 201,281, according to the
State of California’s Department of Finance.
The City is a full service city. Its major departments include the City Manager’s office, Finance,
Community Development, Library Services, Public Works, Community Services, Information Services,
and Police and Fire.
Internationally known as Surf City, the City boasts 9.5 miles of scenic, accessible beachfront, the
largest stretch of uninterrupted beachfront on the West Coast. Tourism remains a vital part of the
economy, as over 11 million visitors flock to the City each year. The City’s parks and recreation features
its iconic 1,856 foot-long pier – one of the largest recreational piers in the world, public parks, riding
stables and equestrian trails, marina, a wildlife preserve, and an eight-mile biking, inline skating, jogging,
and walking trail along the ocean. The crown jewel of the City’s recreation system is the wide expanse of
beautiful and spacious beaches, where large crowds gather to watch events as the U.S. Open
Championship of Surfing, AVP Pro Beach Volleyball and the Great Pacific Airshow – the only
beachfront air show on the West Coast.
The Huntington Beach Art Center and the Huntington Beach Playhouse provide a wide variety of
fine arts, and the excellent library system and numerous museums provide a strong cultural foundation.
The educational system, with five city high schools and 35 elementary schools, is excellent, frequently
receiving local, state, and federal awards and honors, including recognition as California Distinguished
Schools and National Blue Ribbon Schools.
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Government Organization
The City has a council/manager form of government. The City Council is comprised of seven
members elected bi-annually at large to four-year terms and the Mayor is selected by the Council
Members to a one-year term. The City Council appoints the City Manager who is responsible for the day-
to-day administration of City business and the coordination of all departments of the City.
The members of the City Council, the expiration dates of their terms and key administrative
personnel are set forth in the charts below.
CITY COUNCIL
Council Member Term Expires
Kim Carr, Mayor November 2022
Tito Ortiz, Mayor Pro-Tem November 2024
Barbara Delgleize, Member November 2022
Dan Kalmick, Member November 2024
Natalie Moser, Member November 2024
Erik Peterson, Member November 2022
Mike Posey, Member November 2022
KEY ADMINISTRATIVE PERSONNEL
Oliver Chi City Manager
Travis Hopkins Assistant City Manager
Robin Estanislau City Clerk
Michael E. Gates City Attorney
Alisa Backstrom City Treasurer
Dahle Bulosan Chief Financial Officer
Sunny Rief Assistant Chief Financial Officer
Governmental Services
Public Safety and Welfare – Law enforcement, fire, and marine safety protection services are
provided by the City. The Huntington Beach Police Department currently employs 209 sworn officers.
The Huntington Beach Fire Department employs 108 sworn fire fighters operating out of eight fire
stations and maintains a Hazardous Materials Response Unit operating as a part of a county wide response
team. The City’s 10 Marine Safety officers, supported by part-time ocean lifeguards, provide year-end
lifeguard services on the City’s beaches, including medical aid and code enforcement services.
Community Development – The department plans for the future growth and development of the
City and safeguards existing building stock. Services include planning, building, code enforcement,
permit and plan check services, and inspection services.
Public Works – The City’s Public Works department is responsible for the planning, construction,
operation and maintenance of the City-owned infrastructure. The infrastructure includes buildings,
streets, parks, landscaping, flood control, beach facilities and utilities. Essential services such as water,
sewer, drainage, and traffic control systems are operated and maintained 24 hours a day.
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Library and Community Services – The City’s library services include the Central Library and
four branches. The City’s Community Services Department provides citizens with a variety of park and
recreational and marine safety (lifeguard) services on a year round basis. Facilities include the
Huntington Beach Art Center, fifty-six park sites, over 10 miles of beach, a public golf course, Equestrian
Center, and state-of-the-art Senior Centers.
Community Information
Public school education is available through four elementary school districts and one high school
district. There are 26 elementary schools, 4 middle schools and 5 high schools. Students are also served
by 10 parochial and private schools. Area colleges and universities include Orange Coast College,
Golden West College, California State University - Long Beach, California State University - Fullerton
and the University of California at Irvine.
Health Care services available within the immediate area are provided by Huntington Beach
Hospital in Huntington Beach, Hoag Memorial Hospital in Newport Beach and Fountain Valley Regional
Hospital.
Area attractions include Disneyland, Knott’s Berry Farm, and the Aquarium of the Pacific.
Locally, the City’s public beaches routinely serve as the site of the U.S. Open of Surfing and AVP Beach
Volleyball tour. The City is also the destination for the Great Pacific Airshow, attracting a crowd of over
1.2 million over the two-day event. Other attractions include the Bolsa Chica Ecological Reserve, a
restored wetlands area known for winter bird watching, International Surf Museum.
Transportation
The City is 12 miles from John Wayne/Orange County Airport (SNA), 18 miles from Long Beach
Airport (LGB), 38 miles from Los Angeles International (LAX) and 48 miles from Ontario International
Airport (ONT).
Greyhound Lines serves the City with stops in Santa Ana and Irvine. In Orange County, the
Orange County Transportation Authority (OCTA) provides convenient service and connections to bus and
commuter rail serving the greater Los Angeles (Metropolitan Transportation Authority) and San Diego
areas.
The City is accessible by train. The nearest train depots are in Santa Ana, Anaheim and Irvine.
Population
The following table provides a comparison of population growth for the City and the County
between 2010 and 2020.
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Population(1)
City of Huntington Beach and Orange County
2010-2020
Year
City of
Huntington Beach
Orange
County
2010 190,136 3,008,855
2011 190,828 3,036,412
2012 193,588 3,072,381
2013 194,678 3,103,018
2014 196,131 3,122,962
2015 197,742 3,145,029
2016 199,796 3,162,789
2017 200,669 3,184,229
2018 200,211 3,192,092
2019 201,239 3,192,987
2020 201,281 3,194,332
(1) The population estimates provided for 2010-2020 incorporate 2010 Census numbers
as benchmarks. The City is not otherwise aware of any diminution in its population
or that of the County.
Source: State of California Department of Finance
Personal Income
“Effective Buying Income” is defined as personal income less personal tax and nontax payments,
a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of
wages and salaries, other labor-related income (such as employer contributions to private pension funds),
proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-
farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments
(such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and
local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as “disposable
personal income.”
City of Huntington Beach, State of California and United States
Per Capita Income
Year
City of
Huntington
Beach
Orange
County
State of
California United States
2015 43,016 34,817 30,318 28,930
2016 43,863 35,939 31,458 29,829
2017 45,597 37,603 33,128 31,177
2018 47,078 39,590 35,021 32,621
2019 48,774 41,514 36,955 34,103
Source: U.S. Census Bureau, American Community Survey (5-Year Estimates).
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Employment and Industry
The following table sets forth labor force, employment and unemployment for the period from
2015 to 2019, in the City, the County, the State and the United States:
CITY OF HUNTINGTON BEACH LABOR MARKET
Labor Force, Employment and Unemployment
Annual Average
(Dollars in Thousands)
Year and Area
Civilian
Labor Force
Civilian
Employment Unemployment
Unemployment
Rate (%)
2015
City of Huntington Beach 108 103 5 4.3%
Orange County 1,584 1,514 71 4.5
California 18,829 17,661 1,168 6.2
United States 157,130 148,834 8,296 5.3
2016
City of Huntington Beach 108 104 4 4.0%
Orange County 1,597 1,533 65 4.0
California 19,021 17,980 1,041 5.5
United States 159,187 151,436 7,751 4.9
2017
City of Huntington Beach 109 105 4 3.5%
Orange County 1,608 1,552 56 3.5
California 19,176 18,257 919 4.8
United States 160,320 153,337 6,982 4.4
2018
City of Huntington Beach 109 106 3 2.9%
Orange County 1,618 1,570 48 3.0
California 19,281 18,461 820 4.3
United States 162,075 155,761 6,314 3.9
2019
City of Huntington Beach 109 106 3 2.8%
Orange County 1,623 1,578 45 2.8
California 19,412 18,627 784 4.0
United States 163,539 157,538 6,001 3.7
Source: California Employment Development Department; United States Department of Labor Bureau of Labor Statistics
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The principal private employers operating within the City and their respective number of
employees as of June 30, 2020, are as follows:
CITY OF HUNTINGTON BEACH
Principal Private Employers
Name of Employer
Number of
Employees % 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
QS Wholesale 580 0.55
Safran Cabin Inc. 555 0.53
Cambro Manufacturing 550 0.52
Huntington Beach Hospital 527 0.50
Walmart 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%
Source: City of Huntington Beach
Since June 30, 2019, The Boeing Company has reduced its number of employees to
approximately 3,112 as a result of its plans to scale down many of its facilities, including the one in the
City, by a total of 4.5 million square feet, with jobs from the Huntington Beach facility moving to other
plants, including in Seal Beach, El Segundo and Long Beach. Also, the Safran Group has laid off
approximately 83 employees at two sites in Orange County and furloughed an unspecified number of
local workers at its Huntington Beach location, due to the COVID-19 pandemic.
Commercial Activity
The following charts summarize the volume of retail sales and taxable transactions for the City
for 2015 through 2019.
CITY OF HUNTINGTON BEACH
Total Taxable Transactions
2015-2019
Year
Retail Sales
($000’s)
Retail Sales
Permits
Total Taxable
Transactions
($000’s)
Issued
Sales
Permits
2015 2,502,440 5,769 3,207,380 8,725
2016 2,554,369 5,997 3,246,972 9,106
2017 2,642,949 6,095 3,489,560 9,295
2018 2,635,760 6,146 3,576,655 9,586
2019 2,656,632 6,237 3,475,367 9,977
Source: California Department of Tax and Fee Administration, “Taxable Sales in California”
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A seven-year history of taxable transactions by type of business for the City are shown in the
tables below.
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2013-2015
Retail and Food Services 2013 2014 2015
Clothing and Clothing Accessories Stores $ 132,820 $ 133,527 $ 137,002
General Merchandise Stores 300,820 303,646 307,010
Food & Beverage Stores 172,131 175,499 179,964
Food Services and Drinking Places 377,360 402,998 427,287
Home Furnishings and Appliance Stores 188,396 157,622 192,010
Bldg. Material & Garden Equip. & Supplies 147,573 153,404 158,232
Motor Vehicles and Parts Dealers 514,669 567,216 613,888
Gasoline Stations 245,807 242,706 209,073
Other Retail Group 262,886 272,133 277,975
Total Retail and Food Services $2,342,462 $2,408,750 $2,502,440
All Other Outlets 627,018 702,792 704,940
Total All Outlets $2,969,480 $3,111,543 $3,207,380
Source: California Department of Tax and Fee Administration, “Taxable Sales in California”
CITY OF HUNTINGTON BEACH
Taxable Transactions by Type of Business
(in Thousands)
2016-2019
Retail and Food Services 2016 2017 2018 2019
Motor Vehicles and Parts Dealers $ 630,858 $ 673,889 $ 648,412 $ 664,025
Home Furnishings and Appliance Stores 193,813 174,172 143,410 136,696
Bldg. Material & Garden Equip. & Supplies 164,331 165,304 166,074 168,275
Food & Beverage Stores 183,992 187,099 194,418 197,759
Gasoline Stations 182,175 199,801 221,463 222,605
Clothing and Clothing Accessories Stores 147,388 155,905 159,043 151,587
General Merchandise Stores 299,854 307,140 312,130 312,893
Food Services and Drinking Places 469,566 501,561 511,876 520,587
Other Retail Group 282,392 278,078 278,934 282,204
Total Retail and Food Services $2,554,369 $2,642,949 $2,635,760 $2,656,632
All Other Outlets 692,603 846,610 940,895 818,735
Total All Outlets $3,246,972 $3,489,560 $3,576,655 $3,475,367
Source: California Department of Tax and Fee Administration, “Taxable Sales in California”
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APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2020
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APPENDIX C
CITY INVESTMENT POLICY
CITY OF HUNTINGTON BEACH
STATEMENT OF INVESTMENT POLICY
[2021]
TABLE OF CONTENTS
Section
1.0 Purpose ...................................................................................................................................... 2
2.0 Policy ......................................................................................................................................... 2
3.0 Scope ......................................................................................................................................... 2
3.1 Funds ......................................................................................................................................... 2
4.0 Prudence .................................................................................................................................... 3
5.0 Objective ................................................................................................................................... 3
5.1 Safety ......................................................................................................................................... 3
5.2 Liquidity .................................................................................................................................... 3
5.3 Return on Investments ............................................................................................................... 3
6.0 Investment Advisory Board ....................................................................................................... 3
7.0 Delegation of Authority ............................................................................................................. 4
8.0 Ethics and Conflicts of Interest ................................................................................................. 4
9.0 Authorized Financial Dealers & Institutions ............................................................................. 4
10.0 Authorized & Suitable Investments ........................................................................................... 5
10.1 Investment Pools/Money Market Funds .................................................................................... 9
11.0 Portfolio Adjustments ................................................................................................................ 9
12.0 Collateralization ........................................................................................................................ 9
13.0 Safekeeping and Custody ........................................................................................................ 10
14.0 Diversification ......................................................................................................................... 10
15.0 Maximum Maturities ............................................................................................................... 10
16.0 Internal Control ....................................................................................................................... 11
17.0 Performance Standards ............................................................................................................ 11
17.1 Market Yield (Benchmark) ..................................................................................................... 11
18.0 Reporting ................................................................................................................................. 12
19.0 Investment Policy Adoption .................................................................................................... 12
Glossary ...................................................................................................................................................... 13
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1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the City’s unexpended
cash balances, and to outline the policies to assist in maximizing the efficiency of the City’s cash
management system while meeting the daily cash flow demands of the City.
2.0 Policy:
The investment practices and policies of the City of Huntington Beach are based upon California
state law and prudent money management.
3.0 Scope:
This investment policy applies to all financial assets as indicated in Section 3.1 below of the City
of Huntington Beach. These funds are accounted for in the City’s Comprehensive Annual
Financial Report.
3.1 Funds:
The City Treasurer is responsible for investing the unexpended cash in the City Treasury for all
funds, except for the employee’s pension funds, which are invested separately by CALPERS,
those funds which are invested separately by the City Treasurer under bond indenture agreements,
and funds which are invested separately by the City Treasurer or trustees under other agreements
approved by Council such as the Retiree Medical Trust, the Post-Employment Section 115 Trust
and the Supplemental Pension Trust. The City Treasurer will strive to maintain the level of
investment of this cash (that is not to be utilized for operating cash flow in the next six months),
as close as possible to 100%. These funds are described in the City’s annual financial report and
include:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project Funds
3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
3.1.6 Debt Service Funds
3.1.7 Infrastructure Funds
3.1.8 Capital Improvement Reserve Funds
3.1.9 Any new fund created by the legislative body, unless specifically exempted
This investment policy applies to all transactions involving the financial assets and related
activity of the foregoing funds. It is the City’s policy to pool funds for investment purposes to
provide efficiencies and economies of scale. Investing through a pooled account will provide for
greater use of funds by allowing for a more efficient cash flow, a reduction in transaction costs
and a greater access to the market.
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4.0 Prudence:
The standard of prudence to be used by the City Treasurer shall be the “prudent investor”
standard. This shall be applied in the context of managing an overall portfolio.
The “Prudent Investor Rule” provides, pursuant to California Government Code
Section 53600.3, that investments shall be made with judgment and care—under circumstances
then prevailing—which persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation, but for investment, considering the probable
safety of their capital as well as the probable income to be derived. The City Treasurer and any
designee of the City Treasurer, as investment officers acting in accordance with written
procedures and the investment policy and exercising due diligence, shall be relieved of personal
responsibility for an individual security’s credit risk or market price changes, provided deviations
from expectations are reported to the City Council in a timely fashion and appropriate action is
taken to control adverse developments.
5.0 Objective:
Consistent with this aim, investments are made under the terms and conditions of California
Government Code Section 53600, et seq. Criteria for selecting investments and the absolute
order of priority are:
5.1 Safety:
Safety of principal is the foremost objective of the investment program. Investments of the City
of Huntington Beach shall be undertaken in a manner that seeks to ensure the preservation of
capital in the overall portfolio.
5.2 Liquidity:
The investment portfolio will remain sufficiently liquid to enable the City of Huntington Beach to
meet all reasonably anticipated operating requirements and to maintain compliance with any
indenture agreement, as applicable. Liquidity is essential to the safety of principal. Furthermore,
since all possible cash demands cannot be anticipated, the portfolio will invest primarily in
securities with active secondary and resale markets.
5.3 Return on Investments:
The investment portfolio shall be designed with the objective of attaining a market-average rate
of return throughout budgetary and economic cycles (market interest rates), within the City of
Huntington Beach’s investment policy’s risk parameters and the cash flow needs of the City. See
also Section 17.0.
6.0 Investment Advisory Board:
By City Charter, the City Treasurer is the custodian of all public funds of the City of Huntington
Beach. The City Council members may each appoint one Huntington Beach resident to serve on
an Investment Advisory Board for the purpose of advising the City Treasurer and the City
Council on the City’s investment program. The Investment Advisory Board will review the
investment portfolio for compliance with the adopted investment policy on a quarterly basis and
will prepare an Annual Report.
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7.0 Delegation of Authority:
In accordance with the State of California Government Code § 53607, the City Council delegates
investment authority to the City Treasurer for a period of one year and such investment authority
must be renewed annually. Adoption of this policy constitutes delegation of investment authority
to the City Treasurer for the following year unless revoked in writing. Within the City
Treasurer’s office, the responsibility for the day to day investment of City funds will be the City
Treasurer and may be delegated to such deputy chosen by the City Treasurer in the absence of the
City Treasurer (as allowable per State of California Government Code § 41006). The City
Treasurer shall be responsible for all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials.
8.0 Ethics and Conflicts of Interest:
In addition to state and local statutes relating to conflicts of interest, all persons involved in the
investment process shall refrain from personal business activity that could conflict with proper
execution of the investment program, or which could impair their ability to make impartial
investment decisions. Employees and investment officers are required to file annual disclosure
statements as required for “public officials who manage public investments” (as defined and
required by the Political Reform Act and related regulations, being Government Code
Sections 81000 and the Fair Political Practices Commission (FFPC)).
9.0 Authorized Financial Dealers and Institutions:
The City Treasurer will maintain a list of the financial institutions and broker/dealers authorized
to provide investment and depository services and will perform an annual review of the financial
condition and registrations of such qualified providers. The City Treasurer will also require
annual audited financial statements to be on file for each company. The City shall annually send
a copy of the current investment policy to all financial institutions and broker/dealers approved to
do business with the City.
As far as feasibly possible, all money belonging to, or in the custody of, a local agency, including
money paid to the City Treasurer or other official to pay the principal, interest, or penalties of
bonds, shall be deposited for safekeeping in national or state chartered banks, savings
associations, federal associations, credit unions, or federally insured industrial loan companies in
this state selected by the City Treasurer or other official having legal custody of the money; or
may be invested in the investments set forth in Section 10.0. To be eligible to receive local
agency money, a bank, savings association, federal association, or federally insured industrial
loan company shall have received an overall rating of not less than “satisfactory” in its most
recent evaluation by the appropriate federal financial supervisory agency of its record of meeting
the credit needs of California’s communities, including low- and moderate-income
neighborhoods.
In order to be approved by the City, the dealer must be a “primary” dealer or regional dealer that
qualifies under Securities and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule).
The institution must have an office in California. The dealer must be experienced in institutional
and public fund trading practices and familiar with the California Government Code as related to
investments appropriate for the City; and, other criteria as may be established in the investment
procedures. All broker/dealers and financial institutions who desire to become qualified bidders
for investment transactions must submit a “Broker/Dealer Application” and related documents
relative to eligibility including a current audited annual financial statement, U4 form for the
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broker, proof of state registration, proof of Financial Industry Regulatory Authority, Inc.
(“FINRA”) certification and a certification of having read and understood the City’s investment
policy and agreeing to comply with the policy. Capital requirements for registered government
securities brokers and dealers shall meet or exceed the requirements as set forth by the Securities
and Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule). Such companies shall also
have a minimum of five years of operation.
10.0 Authorized and Suitable Investments:
The City is authorized by California Government Code Section 53600, et. seq. to invest in
specific types of securities. Investments not specifically listed below are deemed inappropriate
and are prohibited:
A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with City
Council approval). Maximum term of 180 days.
Banks must have a short term rating of at least A1/P1 and a long-term rating of “A” or
higher as provided by a nationally recognized statistical rating organization (“NRSRO”).
No more than 10 percent of the agency’s money may be invested in the bankers
acceptances of any one commercial bank pursuant to this section.
B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio.
Maximum term of 3 years (up to 5 years with City Council approval).
May be issued by a nationally or state-chartered bank, a savings association or a federal
association (as defined by Section 5102 of the Financial Code), a state or federal credit
union, or by a federally-licensed or state-licensed branch of a foreign bank. Issuer must
have a short term rating of A1/P1 and a long term rating of “A” or higher as provided by
an NRSRO. No more than 10 percent of the agency’s money may be invested in
negotiable certificates of deposit of any one issuer.
C. COMMERCIAL PAPER, maximum 25% of portfolio. Maximum term of 270 days.
Commercial paper must be of “prime” quality of the highest ranking or of the highest
letter and number rating as provided by an NRSRO. The entity that issues the
commercial paper shall meet all of the following conditions in either paragraph (1) or
paragraph (2):
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general corporation.
(B) Has total assets in excess of five hundred million dollars ($500,000,000).
(C) Has debt other than commercial paper, if any, that is rated “A” or higher
by an NRSRO.
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose corporation,
trust, or limited liability company.
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(B) Has program-wide credit enhancements including, but not limited to,
overcollateralization, letters of credit, or surety bond.
(C) Has commercial paper that is rated “A-1” or higher, or the equivalent, by
an NRSRO. Split ratings (i.e. A2/P1) are not allowable. No more than
10 percent of the outstanding commercial paper of any single corporate
issue may be purchased.
No more than 10 percent of the agency’s money may be invested in Commercial Paper of
any one issuer.
D. BONDS ISSUED BY THE STATE OF CALIFORNIA OR ANY OF THE OTHER
49 UNITED STATES. Maximum term of 5 years.
Bonds must have an “A” rating or higher by an NRSRO. No more than 10 percent of the
agency’s money may be invested in state bonds of any one issuer.
E. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE
STATE OF CALIFORNIA. Maximum term of 5 years.
Bonds must have an “A” rating or higher by an NRSRO. No more than 10 percent of the
agency’s money may be invested in city or local agency bonds of any one issuer.
F. OBLIGATIONS OF THE UNITED STATES TREASURY. Maximum term of 5
years.
United States Treasury bills, bonds and notes or certificates of indebtedness, for which
the faith and credit of the United States are pledged for the payment of principal and
interest. There is no limit on the percentage of the portfolio that can be invested in this
category.
G. U.S. GOVERNMENT AGENCY SECURITIES (FEDERAL AGENCIES).
Maximum term of 5 years.
Obligations, participations or other instruments of or issued by a federal agency or a
United States government-sponsored enterprise. There is no limit on the percentage of
the portfolio that can be invested in this category.
H. REPURCHASE AGREEMENT. Maximum term of 3 months.
Investments in repurchase agreements may be made, on any investment authorized in this
section, when the term of the agreement does not exceed 3 months.
A Master Repurchase Agreement must be signed with the bank or broker/dealer who is
selling the securities to the City.
I. REVERSE-REPURCHASE AGREEMENTS. (Requires City Council approval for
each transaction).
Reverse repurchase agreements or securities lending agreements may be utilized only
when all of the following conditions are met:
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(A) The security to be sold on reverse repurchase agreement or securities
lending agreement has been owned and fully paid for by the local agency
for a minimum of 30 days prior to sale.
(B) The total of all reverse repurchase agreements and securities lending
agreements on investments owned by the local agency does not exceed
20 percent of the base value of the portfolio.
(C) The agreement does not exceed a term of 92 days, unless the agreement
includes a written codicil guaranteeing a minimum earning or spread for
the entire period between the sale of a security using a reverse repurchase
agreement or securities lending agreement and the final maturity date of
the same security.
(D) Funds obtained, or funds within the pool of an equivalent amount to that
obtained from selling a security to a counterparty (by way of a reverse
repurchase agreement or securities lending agreement), shall not be used
to purchase another security with a maturity longer than 92 days from the
initial settlement date of the reverse repurchase agreement or securities
lending agreement, unless the reverse repurchase agreement or securities
lending agreement includes a written codicil guaranteeing a minimum
earning or spread for the entire period between the sale of a security
using a reverse repurchase agreement or securities lending agreement
and the final maturity date of the same security.
Investments in reverse repurchase agreements, securities lending agreements, or similar
investments in which the local agency sells securities prior to purchase with a
simultaneous agreement to repurchase the security, shall only be made with primary
dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered
bank that has or has had a significant banking relationship with a local agency.
(A) For purposes of this chapter, “significant banking relationship” means
any of the following activities of a bank:
(i) Involvement in the creation, sale, purchase, or retirement of a
local agency’s bonds, warrants, notes, or other evidence of
indebtedness.
(ii) Financing of a local agency’s activities.
(iii) Acceptance of a local agency’s securities or funds as deposits.
J. MEDIUM-TERM CORPORATE NOTES, maximum 30% of portfolio with a
maximum remaining maturity of 5 years or less.
Notes eligible for investment must be rated “A” or higher by an NRSRO. No more than
10 percent of the agency’s money may be invested in medium-term corporate notes of
any one issuer.
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K. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable certificates of
deposit). Maximum term of 3 years.
Deposits must be made with banks or savings & loan that have a short term rating of
A1/P1 or a long-term rating of at least an “A” rating or higher by an NRSRO. No more
than 10 percent of the agency’s money may be invested in time-deposits of any one
issuer.
L. MONEY MARKET FUNDS, maximum 15% of portfolio.
No more than 10 percent of the agency’s surplus funds may be invested in shares of
beneficial interest of any one Money Market fund. Local agencies may invest in “shares
of beneficial interest” issued by diversified management companies which invest only in
direct obligations in U.S. Treasury bills, notes and bonds, U. S. Government Agencies
and repurchase agreements with a weighted average of 60 days or less. They must have
the highest rating from at least two NRSROs, must maintain a daily principal per share
value of $1.00 per share and distribute interest monthly, and must have a minimum of
$500 million in assets under management. The purchase price of the shares may not
include commission.
M. THE LOCAL AGENCY INVESTMENT FUND (LAIF).
LAIF is a special fund of the California State Treasury through which any local
government may pool investments. The City may invest up to the maximum allowable
by the State Treasurer’s Office (currently $75,000,000). Investments in LAIF are highly
liquid and may be converted to cash within 24 hours.
N. Shares of beneficial interest issued by a joint powers authority organized pursuant to
Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a)
to (q), inclusive. Each share shall represent an equal proportional interest in the
underlying pool of securities owned by the joint powers authority. The City may invest
up to $20,000,000 per joint powers authority. To be eligible under this section, the joint
powers authority issuing the shares shall have retained an investment adviser that meets
all of the following criteria:
(1) The adviser is registered or exempt from registration with the Securities and
Exchange Commission.
(2) The adviser has not less than five years of experience investing in the securities
and obligations authorized in subdivisions (a) to (q), inclusive.
(3) The adviser has assets under management in excess of five hundred million
dollars ($500,000,000).
O. United States dollar denominated senior unsecured unsubordinated obligations issued or
unconditionally guaranteed by the International Bank for Reconstruction and
Development (IBRD), International Finance Corporation (IFC), or Inter-American
Development Bank (IDB), with a maximum remaining maturity of five years or less, and
eligible for purchase and sale within the United States. Investments under this
subdivision shall be rated “AA” or better by an NRSRO and shall not exceed 10 percent
of the agency’s moneys that may be invested pursuant to this section.
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Investment Type Maximum Maturity
Maximum Specified % of
Portfolio per Issuer
Minimum Quality
Requirements
Bankers’ Acceptances 180 days 25% (up to 40% with Council
approval) / 10%
A1/P1, “A” Rating
Negotiable Certificates of Deposit 3 years (up to 5 years
with Council approval)
30%/ 10% A1/P1, “A” Rating
Commercial Paper 270 days 25% / 10% A1, “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 5 years None None
IBRD, IFC, IADB 5 years 10% “AA” Rating
Repurchase Agreements 3 Months None None
Reverse Repurchase Agreements 92 days 20% of the base value of the
portfolio. Requires City
Council Approval
None
Medium-Term Corporate Notes 5 years 30%/ 10% “A” Rating
Non-negotiable Certificates of Deposit 3 years None / 10% A1/P1, “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
Joint Powers Authority N/A None / $20,000.000 See 10.0 N above
10.1 Investment Pools/Money Market Funds:
The City Treasurer or designee shall be required to investigate all local government investment
pools and money market mutual funds prior to investing and performing at least a quarterly
review thereafter while the City is invested in the pool or the money market fund. LAIF is
authorized under provisions in Section 16429.1 of the California Government Code as an
allowable investment for local agencies even though some of the individual investments of the
pool are not allowed as a direct investment by a local agency.
11.0 Portfolio Adjustments:
California government code Section 53601 states that if a percentage limitation for a particular
category of investment is specified, then that percentage is applicable only at the date of
purchase. Should any investment listed in Section 10.0 exceed a percentage-of-portfolio
limitation or a percentage-by-issuer limitation due to an incident such as fluctuation in portfolio
size, the affected securities may be held to maturity to avoid losses. When no loss is indicated,
the Treasurer may consider reconstructing the portfolio basing his/her decision on the expected
length of time the portfolio will be unbalanced. As well, the credit criteria listed herein refers to
the credit rating at the time the security is purchased. If a security held in the portfolio is
downgraded by an NRSRO to a level below the quality required by this investment policy, the
City Treasurer will review the credit and make a determination as to whether to sell or retain such
security. The City Treasurer will review the portfolio for such compliance no less than quarterly.
12.0 Collateralization:
Under provisions of the California Government Code, California banks, and other depository
institutions are required to secure the City’s deposits by pledging government securities with a
value of 110 % of principal and accrued interest. California law also allows financial institutions
to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of
City’s total deposits. Collateral will always be held by an independent third party. A clearly
marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained.
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The market value of securities that underlay a repurchase agreement shall be valued at 102
percent or greater of the funds borrowed against those securities and the value shall be adjusted
no less than quarterly. Since the market value of the underlying securities is subject to daily
market fluctuations, the investments in repurchase agreements shall be in compliance if the value
of the underlying securities is brought back up to 102 percent no later than the next business day.
The City Treasurer, at his/her discretion, may waive the collateral requirement for deposits that
are fully insured (current limit is $250,000) by the Federal Deposit Insurance Corporation. The
right of collateral substitution is granted. The City Treasurer or designee shall ensure that all
demand deposits that exceed the FDIC limit (currently $250,000) shall be fully collateralized with
securities authorized under state law and this Investment Policy.
13.0 Safekeeping and Custody:
All City investments shall have the City of Huntington Beach as its registered owner, and all
interest and principal payments and withdrawals shall indicate the City of Huntington Beach as
the payee. All securities will be held with a qualified financial institution, contracted by the City
as a third party custodian with a separate custodial agreement (does not apply to insured
Certificates of Deposit, money market funds, or the Local Agency Investment Fund). All
agreements and statements will be subject to review annually by external auditors in conjunction
with their audit. All securities shall be acquired by the safekeeping institution on a “Delivery-Vs-
Payment” (DVP) basis. For Repurchase Agreements, the purchase may be delivered by book
entry, physical delivery or by third-party custodial agreement consistent with the Government
Code. The transfer of securities to the counterparty bank’s customer book entry account may be
used for book entry delivery. The City Treasurer or designee shall require a Broker Trade
confirmation for all trades.
14.0 Diversification:
The City’s investment portfolio will be diversified to mitigate incurring unreasonable and
avoidable risks associated with concentrating investments in specific security types, maturity
segment, or in individual financial institutions.
A. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be
mitigated by investing in those securities with an “A” or above rating and approved in the
investment policy and by diversifying the investment portfolio so that the failure of any
one issuer would not unduly harm the City’s cash flow.
B. Market risk, defined as the risk of market value fluctuations due to overall changes in
the general level of interest rates, shall be mitigated by structuring the portfolio so that
securities mature as much as possible in conjunction with major cash outflows, thus
minimizing the need to sell securities prior to their maturity. It is explicitly recognized
herein, however, that in a diversified portfolio, occasional measured losses are inevitable
and must be considered within the context of overall investment return. The City’s
investment portfolio will remain sufficiently liquid to enable the City to meet all
operating requirements which might be reasonably anticipated.
15.0 Maximum Maturities:
To the extent possible, the City of Huntington Beach will attempt to match its investments with
anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not
directly invest in securities maturing more than five (5) years from the date of purchase, unless
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the legislative body has granted express authority to make that investment either specifically, or
as a part of an investment program approved by the City Council. The City of Huntington Beach
shall not permit more than 50% of its investment portfolio to be invested in securities with
maturities over four years.
16.0 Internal Control:
The City Treasurer and the Finance Department shall establish a system of internal controls
designed to prevent loss of public funds due to fraud, employee error, misrepresentation by third
parties, or unanticipated market changes. No investment personnel may engage in an investment
transaction except as provided for under the terms of this policy and the procedure established by
the City Treasurer.
The external auditors shall annually review the investments, with respect to the investment
policy. This review will provide internal control by assuring compliance with policies and
procedures for the investments that are selected for testing. Additionally, account reconciliation
and verification of general ledger balances relating to the purchasing or maturing of investments
and allocation of interest on investments to fund balances shall be performed by the Finance
Department and approved by the City Treasurer. To provide further protection of City funds,
written procedures prohibit the wiring of any City funds without the authorization of at least two
of the four designated City officials:
1. City Treasurer
2. Treasury Manager
3. Chief Financial Officer
4. Accounting Manager
17.0 Performance Standards:
This investment policy shall be reviewed at least annually by the Investment Advisory Board and
the City Council to ensure its consistency with the overall objectives of preservation of principal,
liquidity, and return, and its relevance to current law and financial and economic trends.
The moneys entrusted to the City Treasurer will be primarily a passively managed portfolio.
However, the City Treasurer will make best efforts to observe, review, and react to changing
conditions that affect the portfolio.
17.1 Market Yield (Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return throughout
budgetary and economic cycles, taking into account the City’s investment risk constraints and
cash flow. Investment return becomes a consideration only after the basic requirements of
investment safety and liquidity have been met. Because the investment portfolio is designed to
operate on primarily a ‘hold-to-maturity’ premise, and because of the safety, liquidity, and yield
priorities, the performance benchmark that will be used by the Treasurer to determine whether
market yields are being achieved shall be the 12-month moving average of the interpolated 1.5-
Year Constant Maturity Treasury (CMT) rate. This interpolated rate shall be utilized in order to
best match the average duration of the portfolio. However, since return on investment is the least
important objective of the investment portfolio, the benchmark will be used only as a reference
tool. The reporting of a benchmark does not imply that the City Treasurer will add additional risk
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to the investment portfolio in order to attain or exceed the benchmark. The prohibition of highly
speculative investments precludes pursuit of gain or profit through unusual risk and precludes
investments primarily directed at gains or profits from conjectural fluctuations in market prices.
The City Treasurer will not directly pursue any investments that are leveraged or deemed
derivative in nature. However, as long as the original investments can be justified by their
ordinary earning power, trading in response to changes in market value can be used as part of
ongoing portfolio management.
18.0 Reporting:
The City Treasurer shall submit a quarterly report to the City Council, City Manager, Chief
Financial Officer and the Investment Advisory Board within 30 days following the end of the
quarter. This report will include the following elements pursuant to State law and Government
Accounting Standard Board (GASB) #40:
18.1 Type of investment
18.2 Institution/Issuer
18.3 Purchase Date
18.4 Date of maturity
18.5 Amount of deposit or cost of the investment
18.6 Face value of the investment
18.7 Current market value of securities and source of valuation
18.8 Rate of interest
18.9 Interest earnings
18.10 Statement relating the report to its compliance with the Statement of Investment Policy or
the manner in which the portfolio is not in compliance
18.11 Statement on availability of funds to meet the next six month’s obligations
18.12 Monthly and Year to date City Treasurer Budget Amounts for Interest Income
18.13 Percentage of Portfolio by Investment Type
18.14 Days to Maturity for all Investments
18.15 Comparative report on Monthly Investment Balances & Interest Yields
18.16 Monthly transactions
This quarterly report shall be placed on the City Council Agenda for Council and public review.
In addition, a commentary on capital markets and economic conditions may be included with the
report. The City Treasurer shall submit to the City Council, City Manager and Chief Financial
Officer a monthly report listing the above stated (18.1 – 18.16) financial transactions.
19.0 Investment Policy Adoption:
By virtue of a resolution of the City Council of the City of Huntington Beach, the Council shall
acknowledge the receipt and filing of this annual statement of investment policy for the respective
year.
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GLOSSARY
AGENCIES: Federal agency securities.
ASKED: The price at which securities are offered. (The price at which a firm will sell a security to an
investor.)
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company.
The accepting institution guarantees payment of the bill, as well as the issuer. The drafts are drawn on a
bank by an exporter or importer to obtain funds to pay for specific merchandise. An acceptance is a high
grade negotiable instrument.
BASIS POINT: One one-hundredth of a percent (i.e. 0.01%)
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment
portfolio. A benchmark should represent a close correlation to the level of risk and the average duration
of the portfolio’s investments.
BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.)
BROKER: A broker brings buyers and sellers together for a commission. He/she does not take a
position.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a
certificate. Large-denomination CD’s are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure
repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: Short term unsecured promissory note issued by a corporation (including
limited liability companies) to raise working capital. These negotiable instruments are purchased at a
discount to par value or at par value with interest bearing. Commercial paper is issued by corporations
such as General Motors Acceptance Corporation, IBM, Bank of America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the
City. It includes combined statements for each individual fund and account group prepared in conformity
with Generally Accepted Accounting Principles. It also includes supporting schedules necessary to
demonstrate compliance with finance-related legal and contractual provisions, extensive introductory
material and a detailed Statistical section.
COUPON: a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the
bond’s face value. b) A certificate attached to a bond evidencing interest due on a payment date.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions; buying and selling for
his/her own account.
DEBENTURE: An unsecured bond backed only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange
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of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed
receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the
movement of one or more underlying index or security, and may include a leveraging factor, or
(2) financial contracts based upon notional amounts whose value is derived from an underlying index or
security (interest rates, foreign exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower
than face value. A security selling below original offering price shortly after sale is considered to be at a
discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a
discount and redeemed at maturity for full face value (e.g. US Treasury Bills).
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent
returns.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to
various classes of institutions (e.g. S&L’s, Small business firms, students, farmers, farm cooperatives, and
exporters).
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency that insures bank
deposits, currently up to $250,000 per deposit.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently
pegged by the Federal Reserve though open-market operations.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal
Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York
Federal Reserve Bank is a permanent member, while the other presidents serve on a rotating basis. The
committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of
Government Securities in the open market as a means of influencing the volume of bank credit and
money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by congress and
consisting of a seven-member Board of Governors in Washington, D.C.; 12 regional banks and
approximately 38 percent of the 8,039 commercial banks in the United States are members of the Federal
Reserve System. National banks must be members; state-chartered banks may join if they meet certain
requirements.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a
substantial loss of value. In the money market, a security is said to be liquid if the spread between bid
and asked prices is narrow and a reasonable size can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political
subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.
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MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between
the parties to repurchase-reverse agreements that establish each party’s rights in the transactions. A
master agreement will often specify, among other things, the right of the buyer-lender to liquidate the
underlying securities in the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and
payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper,
bankers’ acceptances, etc.) are issued and traded.
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (“NRSRO”): Firms
that review and assess the creditworthiness of an obligor as an entity or with respect to specific securities
or money market instruments and express their opinion in the form of a letter rating. A credit rating
agency may apply to the SEC for registration as a nationally recognized statistical rating organization
(“NRSRO”). The primary rating agencies are Standard & Poor’s Corporation, Moody’s Investor
Services, Inc. and Fitch, Inc.
NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial institution,
bank or savings and loan, bought at par value with the promise to pay face value plus accrued interest at
maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular
certificates of deposit.
OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an
offer.) See “Asked” and “Bid”.
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in
the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence
the volume of money and credit in the economy. Purchases inject reserves into the bank system and
stimulate growth of money and credit: Sales have the opposite effect. Open market operations are the
Federal Reserve’s most important and most flexible monetary policy tool.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market
activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are
subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-
registered securities broker/dealers, banks and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states, the law requires that a fiduciary,
such as a trustee, may invest money only in a list of securities selected by the custody state—the so-called
“legal list”. In other states, the trustee may invest in a security if it is one that would be bought by a
prudent person of discretion and intelligence who is seeking a reasonable income and preservation of
capital.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from
the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has
segregated for the benefit of the commission eligible collateral having a value of not less than its
maximum liability and which has been approved by the Public Deposit Protection Commission to hold
public deposits.
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RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current
market price. This may be the amortized yield to maturity; on a bond, the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an
investor with an agreement to repurchase them at a fixed date. The security “buyer” in effect lends the
“seller” money for the period of the agreement, and the terms of the agreement are structured to
compensate him for this.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables
of all types and descriptions are held in the bank’s vaults for protection.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA,
FHLMC, etc.) and Corporations, which have imbedded option (e.g. call features, step-up coupons,
floating rate coupons, derivative-based returns) into their debt structure. Their market performance is
impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape
of the yield curve.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the
initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in
securities transactions by administering securities legislation.
SEC RULE 15c3-1: See “Uniform Net Capital Rule”.
SMALL BUSINESS ADMINISTRATION (SBA): The portion of these securities which are
guaranteed by Federal government to provide financial assistance through direct loans and loan
guarantees to small businesses. Cash flows from these instruments may not be in equal installments
because of prepayments.
SUPRANATIONAL SECURITIES: United States dollar denominated senior unsecured
unsubordinated obligations issued or unconditionally guaranteed by the International Bank for
Reconstruction and Development (IBRD), International Finance Corporation (IFC), or Inter-American
Development Bank (IDB), with a maximum remaining maturity of five years or less, and eligible for
purchase and sale within the United States. Investments under this subdivision shall be rated “AA” or
better by an NRSRO and shall not exceed 10 percent of the agency’s moneys that may be invested
pursuant to this section.
TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in three months, six months, or one year.
TREASURY BOND: Long-term U.S. Treasury securities having initial maturities of more than 10
years.
TREASURY NOTES: Intermediate-term coupon bearing U.S. Treasury having initial maturities of from
one year to ten years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member
firms as well as nonmember broker/dealers in securities maintain a maximum ratio of indebtedness to
liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money
owed to a firm, including margin loans and commitments to purchase securities, one reason new public
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issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets
easily converted into cash.
YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) Income Yield
is obtained by dividing the current dollar income by the current market price for the security, (b) Net
Yield or Yield to Maturity is the current income yield minus any premium above par or plus any discount
from par in purchase price, with the adjustment spread over the period from the date of purchase to the
date of maturity of the bond.
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APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT
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APPENDIX E
PROPOSED FORM OF BOND COUNSEL OPINION
Upon delivery of the Series 2021 Bonds, Orrick, Herrington & Sutcliffe LLP, Los Angeles,
California, Bond Counsel to the City, proposes to render its final approving opinion with respect to the
Series 2021 Bonds in substantially the following form:
[Date of Delivery]
City of Huntington Beach
Huntington Beach, California
City of Huntington Beach
(Orange County, California)
Taxable Pension Obligation Bonds, Series 2021
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel to the City of Huntington Beach (the “City”) in connection with
issuance of $__________ aggregate principal amount of City of Huntington Beach Taxable Pension
Obligation Bonds, Series 2021 (the “Series 2021 Bonds”), issued pursuant to the Trust Agreement, dated
as of ______ 1, 2021 (the “Trust Agreement”), by and between the City and U.S. Bank National
Association, as trustee (the “Trustee”). Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Trust Agreement.
In such connection, we have reviewed the Trust Agreement, opinions of counsel to the City, the
Trustee and others, certificates of the City, the Trustee and others and such other documents, opinions and
matters to the extent we deemed necessary to render the opinions set forth herein.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and
court decisions, including the default judgment rendered on May 2020, by the Superior Court of the State
of California for the County of Orange in the action entitled City of Huntington Beach v. All Persons
Interested, etc., Case No. 30-2019-011113643-CU-MC-CJC, and cover certain matters not directly
addressed by such authorities. Such opinions may be affected by actions taken or omitted or events
occurring after original delivery of the Series 2021 Bonds on the date hereof. We have not undertaken to
determine, or to inform any person, whether any such actions are taken or omitted or events do occur or
any other matters come to our attention after original delivery of the Series 2021 Bonds on the date
hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied
upon or otherwise used in connection with any such actions, events or matters. Our engagement with
respect to the Series 2021 Bonds has concluded with their issuance, and we disclaim any obligation to
update this letter. We have assumed the genuineness of all documents and signatures presented to us
(whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity
against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of
the factual matters represented, warranted or certified in the documents, and of the legal conclusions
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contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed
compliance with all covenants and agreements contained in the Trust Agreement.
We call attention to the fact that the rights and obligations under the Series 2021 Bonds and the
Trust Agreement and their enforceability may be subject to bankruptcy, insolvency, receivership,
reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting
creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in
appropriate cases and to the limitations on legal remedies against cities in the State of California. We
express no opinion with respect to any indemnification, contribution, liquidated damages, penalty
(including any remedy deemed to constitute or having the effect of a penalty), right of set-off, arbitration,
judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or
severability provisions contained in the foregoing documents, nor do we express any opinion with respect
to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the
Trust Agreement or the accuracy or sufficiency of the description contained therein of, or the remedies
available to enforce liens on, any such property. Our services did not include financial or other non-legal
advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official
Statement or other offering material relating to the Series 2021 Bonds and express no opinion with respect
thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the
following opinions:
1. The Series 2021 Bonds constitute the valid and binding limited obligations of the City.
2. The Trust Agreement has been duly executed and delivered by, and constitutes a valid
and binding agreement of, the City.
3. The Series 2021 Bonds do not constitute an obligation of the City for which the City is
obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of
taxation. Neither the Series 2021 Bonds nor the obligation of the City to make payment of the interest on
or the principal of the Series 2021 Bonds constitutes an indebtedness of the City or the State of California,
or any of its political subdivisions, in contravention of any constitutional or statutory debt limitation or
restriction.
4. Interest on the Series 2021 Bonds is exempt from State of California personal income
taxes. We express no opinion regarding other tax consequences related to the ownership or disposition of,
or the amount, accrual or receipt of interest on, the Series 2021 Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
per
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APPENDIX F
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by
the City of Huntington Beach (the “City”) in connection with the issuance of the above-named bonds (the
“Bonds”). The Bonds are being issued by the City pursuant to Articles 10 and 11 (commencing with
Section 53570) of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California
(the “Act”), a resolution of the City authorizing the issuance of the Series 2021 Bonds and a trust
agreement, dated as of ______ 1, 2021 (the “Trust Agreement”), by and between the City and U.S. Bank
National Association, as trustee (the “Trustee”). The City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed
and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order
to assist the Participating Underwriters (Series 2021 Bonds) in complying with Securities and Exchange
Commission (“S.E.C.”) Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which
apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section,
the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly,
to make investment decisions concerning ownership of any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries).
“Dissemination Agent” shall mean KNN Public Finance, or any successor Dissemination Agent
designated in writing by the City and which has filed with the City a written acceptance of such
designation.
“Financial Obligation” shall mean, for the purposes of the Listed Events set out in
Section 5(a)(10) and 5(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection
with, or pledged as security or a source of payment for, an existing or planned debt obligation; or
(iii) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as
defined in the Securities Exchange Act of 1934, as amended) as to which a final official statement (as
defined in the Rule) has been provided to the MSRB consistent with the Rule.
“Holder” shall mean the person in whose name any Bond shall be registered.
“Listed Events” shall mean any of the events listed in Section 5(a) or (b) of this Disclosure
Certificate.
“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated
or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until
otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB
are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB,
currently located at http://emma.msrb.org.
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“Official Statement” shall mean the Official Statement, dated _______ ___, 2021 (including all
exhibits or appendices thereto), relating to the offer and sale of Bonds.
“Participating Underwriters (Series 2021 Bonds)” shall mean the original underwriters of the
Bonds required to comply with the Rule in connection with offering of the Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than nine months after
the end of the City’s fiscal year (which shall be April 1 of each year, so long as the City’s fiscal year ends
on June 30), commencing with the report for the 2020-21 fiscal year (which is due not later than April 1,
2022), provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of
this Disclosure Certificate. The Annual Report must be submitted in electronic format, accompanied by
such identifying information as is prescribed by the MSRB, and may cross-reference other information as
provided in Section 4 of this Disclosure Certificate; provided, that the audited financial statements of the
City may be submitted separately from the balance of the Annual Report and later than the date required
above for the filing of the Annual Report if they are not available by that date. If the City’s fiscal year
changes, it shall give notice of such change in a filing with the MSRB. The Annual Report shall be
submitted on a standard form in use by industry participants or other appropriate form and shall identify
the Bonds by name and CUSIP number.
(b) Not later than 15 business days prior to the date specified in subsection (a), the City shall
provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to
provide to the MSRB an Annual Report by the date required in subsection (a), the City shall, in a timely
manner, send or cause to be sent to the MSRB a notice in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall (if the Dissemination Agent is other than the City) file a
report with the City certifying that the Annual Report has been provided to the MSRB pursuant to this
Disclosure Certificate, stating the date it was provided to the MSRB.
SECTION 4. Content of Annual Reports. The City’s Annual Report shall contain or include by
reference the following:
(a) Audited financial statements of the City for the preceding fiscal year, prepared in
accordance with generally accepted accounting principles as promulgated to apply to governmental
entities from time to time by the Governmental Accounting Standards Board (GASB) and the laws of the
State of California and including all statements and information prescribed for inclusion therein by the
Controller of the State of California. If the City’s audited financial statements are not available by the
time the Annual Report is required to be provided to the MSRB pursuant to Section 3(a), the Annual
Report shall contain unaudited financial statements in a format similar to the financial statements
contained in the final Official Statement, and the audited financial statements shall be provided to the
MSRB in the same manner as the Annual Report when they become available.
To the extent not included in the audited financial statement of the City, the Annual Report shall
also include the following:
(i) General Fund Tax Revenues by Source;
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(ii) Gross Assessed Value of All Taxable Property;
(iii) General Fund Property Tax Levies and Collections (Secured Taxes); and
(iv) Principal Secured Property Taxpayers.
Any or all of the items listed above may be set forth in one or a set of documents or may be
included by specific reference to other documents, including official statements of debt issues of the City
or related public entities, which have been made available to the public on the MSRB’s website. The City
shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following
events with respect to the Bonds in a timely manner not later than ten business days after the occurrence
of the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Adverse tax opinions or issuance by the Internal Revenue Service of proposed or
final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes; or
9. Bankruptcy, insolvency, receivership or similar event of the City.
10. Default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a Financial Obligation of the City, any of which reflect financial
difficulties.
Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the City
in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in
which a court or governmental authority has assumed jurisdiction over substantially all of the assets or
business of the City, or if such jurisdiction has been assumed by leaving the existing governmental body
and officials or officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a
court or governmental authority having supervision or jurisdiction over substantially all of the assets or
business of the City.
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(b) The City shall give, or cause to be given, notice of the occurrence of any of the following
events with respect to the Bonds, if material, in a timely manner not later than ten business days after the
occurrence of the event:
1. Unless described in paragraph 5(a)(5), other material notices or determinations
by the Internal Revenue Service with respect to the tax status of the Bonds or other material
events affecting the tax status of the Bonds;
2. Modifications to rights of Bond holders;
3. Optional, unscheduled or contingent Bond calls;
4. Release, substitution, or sale of property securing repayment of the Bonds;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation, or acquisition involving the City
or the sale of all or substantially all of the assets of the City, other than in the ordinary course of
business, the entry into a definitive agreement to undertake such an action or the termination of a
definitive agreement relating to any such actions, other than pursuant to its terms;
7. Appointment of a successor or additional trustee or the change of name of a
trustee; or
8. Incurrence of a Financial Obligation of the City, or agreement to covenants,
events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the
City, any of which affect Bond holders.
(c) The City shall give, or cause to be given, in a timely manner, notice of a failure to
provide the annual financial information on or before the date specified in Section 3 hereof, as provided in
Section 3(b) hereof.
(d) Upon the occurrence of a Listed Event described in Section 5(a), or upon the occurrence
of a Listed Event described in Section 5(b) which the City determines that knowledge of a Listed Event
described in Section 5(b) would be material under applicable federal securities laws, the City shall within
ten business days of occurrence file a notice of such occurrence with the MSRB. Notwithstanding the
foregoing, notice of the Listed Event described in subsection (b)(3) need not be given under this
subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected
Bonds pursuant to the Trust Agreement.
(e) The City intends to comply with the Listed Events described in subsection (a)(10) and
subsection (b)(8), and the definition of “Financial Obligation” in Section 2, with reference to the Rule,
any other applicable federal securities laws and the guidance provided by the Securities and Exchange
Commission in Release No. 34-83885, dated August 20, 2018 (the “2018 Release”), and any further
amendments or written guidance provided by the Securities and Exchange Commission or its staff with
respect to the amendments to the Rule effected by the 2018 Release.
SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to
this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying
information as is prescribed by the MSRB.
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SECTION 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure
Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of
such termination in a filing with the MSRB.
SECTION 8. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the City pursuant to this Disclosure Certificate, and any information that the Dissemination
Agent may be instructed to file with the MSRB shall be prepared and provided to it by the City. The
initial Dissemination Agent shall be KNN Public Finance.
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate may be waived, if the City has received an opinion of counsel knowledgeable in federal
securities laws to the effect that such amendment or waiver would not, in and of itself, cause the
undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof
but taking into account any subsequent change in or official interpretation of the Rule.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City
shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a
change of accounting principles, on the presentation) of financial information or operating data being
presented by the City. In addition, if the amendment relates to the accounting principles to be followed in
preparing financial statements, (i) notice of such change shall be given in a filing with the MSRB, and
(ii) the Annual Report for the year in which the change is made should present a comparison (in narrative
form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis
of the new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in
this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice required to be filed pursuant to this Disclosure Certificate, in addition to that
which is required by this Disclosure Certificate. If the City chooses to include any information in any
Annual Report or notice in addition to that which is specifically required by this Disclosure Certificate,
the City shall have no obligation under this Disclosure Certificate to update such information or include it
in any future Annual Report or notice of occurrence of a Listed Event or any other event required to be
reported.
SECTION 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
City to comply with its obligations under this Disclosure Certificate; provided, that any such action may
be instituted only in the Superior Court of the State of California in and for the County of Orange or in
U.S. District Court for the Central District of California in or nearest to the County. A default under this
Disclosure Certificate shall not be deemed an event of default under the Trust Agreement, and the sole
remedy under this Disclosure Certificate in the event of any failure of the City to comply with this
Disclosure Certificate shall be an action to compel performance.
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SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The
Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, the Trustee, their officers, directors, employees and agents,
harmless against any loss, expense, cost, claim, suit, judgment, damages and liabilities which it may incur
arising out of the disclosure of information pursuant to this Disclosure Certificate or arising out of or in
the exercise or performance of its powers and duties hereunder, including the costs and expenses
(including attorneys fees and expenses) of defending against any claim of liability, but excluding
liabilities due to the Dissemination Agent's negligence or willful misconduct.
The Dissemination Agent shall be paid compensation by the City for its services provided
hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the
City from time to time and all expenses, legal fees and advances made or incurred by the Dissemination
Agent in the performance of its duties hereunder. The Dissemination Agent may rely and shall be
protected in acting or refraining from acting upon and directions from the City or an opinion of nationally
recognized bond counsel. Neither the Trustee nor the Dissemination Agent shall have any liability to any
party for any monetary damages or other financial liability of any kind whatsoever related to or arising
from any breach of this Disclosure Certificate. No person shall have any right to commence any action
against the Trustee or Dissemination Agent seeking any remedy other than to compel specific
performance of this Disclosure Certificate. Any company succeeding to all or substantially all of the
Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent
hereunder without the execution or filing of any paper or any further act. The obligations of the City
under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Bonds.
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent, the Participating Underwriters (Series 2021 Bonds) and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 14. Governing Law. This Disclosure Certificate shall be construed in accordance
with and governed by the laws of the State of California applicable to contracts made and performed in
the State of California.
Date: _______ __, 2021
CITY OF HUNTINGTON BEACH
By:
Chief Financial Officer
AGREED AND ACKNOWLEDGED:
KNN PUBLIC FINANCE,
as Dissemination Agent
By:____________________________________
Authorized Representative
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EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Huntington Beach
Name of Bond Issue: City of Huntington Beach
(Orange County, California)
Taxable Pension Obligation Bonds, Series 2021
Date of Issuance: _______ __, 2021
NOTICE IS HEREBY GIVEN that the City of Huntington Beach (the “City”) has not provided
an Annual Report with respect to the above-named Bonds as required by Section 4 of the City’s
Continuing Disclosure Certificate, dated the Date of Issuance. [The City anticipates that the Annual
Report will be filed by _____________.]
Dated: _______________
CITY OF HUNTINGTON BEACH
By:
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APPENDIX G
PROVISIONS FOR BOOK-ENTRY ONLY SYSTEM AND
GLOBAL CLEARANCE PROCEDURES
The information set forth in this Appendix G is subject to any change in or reinterpretation of the
rules, regulations and procedures of DTC, Euroclear or Clearstream (DTC, Euroclear and Clearstream
together, the “Clearing Systems”) currently in effect. The information in this Appendix G concerning the
Clearing Systems has been obtained from sources believed to be reliable, but the City does not take any
responsibility for the accuracy, completeness or adequacy of the information in this Appendix G.
Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued
applicability of the rules, regulations and procedures of the relevant Clearing System. The City will not
have any responsibility or liability for any aspect of the records relating to, or payments made on account
of beneficial ownership interests in the Series 2021 Bonds held through the facilities of any Clearing
System or for maintaining, supervising or reviewing any records relating to such beneficial ownership
interests.
Depository Trust Company Procedures
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
Series 2021 Bonds (the “Securities”). The Securities will be issued as fully-registered securities
registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be
requested by an authorized representative of DTC. One fully-registered Security certificate will be issued
for the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized
under the New York Banking Law, a “banking organization” within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of
the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over
3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money
market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with
DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other
securities transactions in deposited securities, through electronic computerized book-entry transfers and
pledges between Direct Participants’ accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company
for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which
are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the
DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard &
Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and
Exchange Commission. More information about DTC can be found at www.dtcc.com. The information
on such website is not incorporated herein by such reference or otherwise.
Purchases of Securities under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual
purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect
Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their
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purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book-entry system for the Securities is
discontinued.
To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are
registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records
reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Trust Agreement. For
example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities
for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,
Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies
of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are
being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under
its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to
whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Redemption proceeds, distributions, and dividend payments on the Securities will be made to
Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s
practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail
information from the City or the Trustee, on payable date in accordance with their respective holdings
shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in
bearer form or registered in “street name,” and will be the responsibility of such Participant and not of
DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility of
the City or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of
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DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct
and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Securities at any
time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered. The
City may decide to discontinue use of the system of book-entry-only transfers through DTC (or a
successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
The City and the Underwriters cannot and do not give any assurances that DTC, the Participants
or others will distribute payments of principal, interest or premium, if any, with respect to the securities
paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other
notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the
manner described in this Official Statement. The City and the Underwriters are not responsible or liable
for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner
with respect to the securities or an error or delay relating thereto.
Global Clearance Procedures
The information set out below is subject to any change in or reinterpretation of the rules,
regulations and procedures of the Clearing Systems currently in effect. The information in this subsection
concerning the Clearing Systems has been obtained from sources believed to be reliable. No
representation is made herein by the City as to the accuracy, completeness or adequacy of such
information or as to the absence of material adverse changes in such information subsequent to the date of
this Official Statement. The City will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in the Series 2021 Bonds held
through the facilities of any Clearing System or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Beneficial interests in the Series 2021 Bonds may be held through DTC, Clearstream
International S.A., a Deutsche Börse Group company, as operator of the Clearstream system
(“Clearstream”), or Euroclear S.A./N.V., a bank organized under the laws of the Kingdom of Belgium, as
operator of the Euroclear system (“Euroclear”), directly as a participant or indirectly through
organizations that are participants in such system.
Euroclear and Clearstream. Euroclear and Clearstream each hold securities for their customers
and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer
between their respective account holders. Euroclear and Clearstream provide various services including
safekeeping, administration, clearance and settlement of internationally traded securities and securities
lending and borrowing. Euroclear and Clearstream also deal with domestic securities markets in several
countries through established depositary and custodial relationships. Euroclear and Clearstream have
established an electronic bridge between their two systems across which their respective participants may
settle trades with each other.
Euroclear and Clearstream customers are worldwide financial institutions, including underwriters,
securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to
Euroclear and Clearstream is available to other institutions that clear through or maintain a custodial
relationship with an account holder of either system, either directly or indirectly.
Clearing and Settlement Procedures. The Series 2021 Bonds sold in offshore transactions will be
initially issued to investors through the book-entry facilities of DTC, or Clearstream and Euroclear in
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Europe if the investors are participants in those systems, or indirectly through organizations that are
participants in the systems. For any of such Series 2021 Bonds, the record holder will be DTC’s
nominee. Clearstream and Euroclear will hold omnibus positions on behalf of their participants through
customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective
depositories.
The depositories, in turn, will hold positions in customers’ securities accounts in the depositories’
names on the books of DTC. Because of time zone differences, the securities account of a Clearstream or
Euroclear participant as a result of a transaction with a participant, other than a depository holding on
behalf of Clearstream or Euroclear, will be credited during the securities settlement processing day, which
must be a business day for Clearstream or Euroclear, as the case may be, immediately following the DTC
settlement date. These credits or any transactions in the securities settled during the processing will be
reported to the relevant Euroclear participant or Clearstream participant on that business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream
participant or Euroclear participant to a DTC Participant, other than the depository for Clearstream or
Euroclear, will be received with value on the DTC settlement date but will be available in the relevant
Clearstream or Euroclear cash account only as of the business day following settlement in DTC.
Transfer Procedures. Transfers between participants will occur in accordance with DTC rules.
Transfers between Clearstream participants or Euroclear participants will occur in accordance with their
respective rules and operating procedures. Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly through Clearstream participants or
Euroclear participants, on the other, will be effected by DTC in accordance with DTC rules on behalf of
the relevant European international clearing system by the relevant depositories; however, cross-market
transactions will require delivery of instructions to the relevant European international clearing system by
the counterparty in the system in accordance with its rules and procedures and within its established
deadlines in European time.
The relevant European international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its depository to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in accordance with normal
procedures for same day funds settlement applicable to DTC. Clearstream participants or Euroclear
participants may not deliver instructions directly to the depositories.
The City will not impose any fees in respect of holding the Series 2021 Bonds; however, holders
of book-entry interests in the Series 2021 Bonds may incur fees normally payable in respect of the
maintenance and operation of accounts in DTC, Euroclear and Clearstream.
Initial Settlement. Interests in the Series 2021 Bonds will be in uncertified book-entry form.
Purchasers electing to hold book-entry interests in the Series 2021 Bonds through Euroclear and
Clearstream accounts will follow the settlement procedures applicable to conventional Eurobonds. Book-
entry interests in the Series 2021 Bonds will be credited to Euroclear and Clearstream participants’
securities clearance accounts on the business day following the date of delivery of the Series 2021 Bonds
against payment (value as on the date of delivery of the Bonds). DTC participants acting on behalf of
purchasers electing to hold book-entry interests in the Series 2021 Bonds through DTC will follow the
delivery practices applicable to securities eligible for DTC's Same Day Funds Settlement system. DTC
participants’ securities accounts will be credited with book-entry interests in the Series 2021 Bonds
following confirmation of receipt of payment to the City on the date of delivery of the Series 2021 Bonds.
Secondary Market Trading. Secondary market trades in the Series 2021 Bonds will be settled by
transfer of title to book-entry interests in Euroclear, Clearstream or DTC, as the case may be. Title to
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such book-entry interests will pass by registration of the transfer within the records of Euroclear,
Clearstream or DTC, as the case may be, in accordance with their respective procedures. Book-entry
interests in the Series 2021 Bonds may be transferred within Euroclear and within Clearstream and
between Euroclear and Clearstream in accordance with procedures established for these purposes by
Euroclear and Clearstream. Book-entry interests in the Series 2021 Bonds may be transferred within
DTC in accordance with procedures established for this purpose by DTC. Transfer of book-entry
interests in the Series 2021 Bonds between Euroclear or Clearstream and DTC may be effected in
accordance with procedures established for this purpose by Euroclear, Clearstream and DTC.
Special Timing Considerations. Investors should be aware that investors will only be able to
make and receive deliveries, payments and other communications involving the Series 2021 Bonds
through Euroclear or Clearstream on days when those systems are open for business. In addition, because
of time-zone differences, there may be complications with completing transactions involving Clearstream
and/or Euroclear on the same business day as in the United States. U.S. investors who wish to transfer
their interests in the Series 2021 Bonds, or to receive or make a payment or delivery of the Series 2021
Bonds, on a particular day, may find that the transactions will not be performed until the next business
day in Luxembourg if Clearstream is used, or Brussels if Euroclear is used.
Clearing Information. It is expected that the Series 2021 Bonds will be accepted for clearance
through the facilities of Euroclear and Clearstream. The CUSIP numbers for the Bonds are set forth on
the inside cover of the Official Statement.
General. Neither Euroclear nor Clearstream is under any obligation to perform or continue to
perform the procedures referred to above, and such procedures may be discontinued at any time.
NONE OF THE CITY, THE TRUSTEE OR THE UNDERWRITERS WILL HAVE ANY
RESPONSIBILITY FOR THE PERFORMANCE BY EUROCLEAR OR CLEARSTREAM OR THEIR
RESPECTIVE DIRECT OR INDIRECT PARTICIPANTS OR ACCOUNT HOLDERS OF THEIR
RESPECTIVE OBLIGATIONS UNDER THE RULES AND PROCEDURES GOVERNING THEIR
OPERATIONS OR THE ARRANGEMENTS REFERRED TO ABOVE.
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APPENDIX H
CITY UNFUNDED ACCRUED LIABILITY PENSION FUNDING POLICY
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$___________
CITY OF HUNTINGTON BEACH
TAXABLE PENSION OBLIGATION BONDS, SERIES 2021
BOND PURCHASE AGREEMENT
_______ __, 2021
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Ladies and Gentlemen:
The undersigned Stifel, Nicolaus & Company, Incorporated (the “Representative”) on behalf of
itself and as representative of BofA Securities, Inc. and Hilltop Securities Inc. (collectively, the
“Underwriters”) offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with
the City of Huntington Beach, California (the “City”), which, upon the acceptance by the City, will be
binding upon the City and the Underwriters. This offer is made subject to acceptance by the City by the
execution of this Purchase Agreement and delivery of the same to the Representative prior to 11:59 P.M.,
California time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the
Underwriters upon notice delivered to the City at any time prior to the acceptance hereof by the City.
Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Trust
Agreement (defined herein).
Section 1. Purchase and Sale. Upon the terms and conditions and on the basis of the
representations, warranties and agreements herein set forth, the Underwriters hereby agree to purchase
from the City, and the City hereby agrees to issue, sell and deliver to the Underwriters all (but not less
than all) of the City of Huntington Beach Taxable Pension Obligation Bonds, Series 2021 (the “Bonds”)
in the aggregate principal amount of $___________. The Bonds shall be dated as of their date of
delivery. Interest on the Bonds shall be payable semiannually on June 15 and December 15 in each year,
commencing [June 15], 2021 (each an “Interest Payment Date”) and will bear interest at the rates and on
the dates as set forth in Exhibit A hereto. The purchase price for the Bonds shall be $___________
(which represents the principal amount of the Bonds in the amount of $___________, less an
Underwriters’ discount of $___________.
The Underwriters agree to make a bona fide public offering of the Bonds at the initial offering
yields set forth in the Official Statement (defined herein); however, the Underwriters reserve the right to
make concessions to dealers and to change such initial offering yields as the Underwriters shall deem
necessary in connection with the marketing of the Bonds. The Underwriters agrees that, in connection
with the public offering and initial delivery of the Bonds to the purchasers thereof from the Underwriters,
the Underwriters will deliver or cause to be delivered to each purchaser a copy of the final Official
Statement prepared in connection with the Bonds, for the time period required under Rule 15c2-12
promulgated under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”). Terms defined
in the Preliminary Official Statement, and to be set forth in the final Official Statement are used herein as
so defined.
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The City acknowledges and agrees that: (i) the purchase and sale of the Bonds pursuant to this
Purchase Agreement is an arm’s-length commercial transaction between the City and the Underwriters;
(ii) in connection therewith and with the discussions, undertakings and procedures leading up to the
consummation of such transaction, the Underwriters are and have been acting solely as a principal and is
not acting as a municipal advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as
amended), financial advisor or fiduciary; (iii) the Underwriters have not assumed an advisory or fiduciary
responsibility in favor of the City with respect to the offering contemplated hereby or the discussions,
undertakings and procedures leading thereto (irrespective of whether the Underwriters have provided
other services or is currently providing other services to the City on other matters); (iv) the only
obligations the Underwriters have to the City with respect to the transaction contemplated hereby
expressly are set forth in this Purchase Agreement; and (v) the City has consulted its own financial and/or
municipal, legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed
appropriate.
Section 2. The Bonds. The Bonds are being issued pursuant to Articles 10 and 11
(commencing with Section 53570) of Chapter 3 of Part 1 of Division 2 of Title 5 of the California
Government Code (the “Refunding Law”) and the Trust Agreement, dated as of __________ 1, 2021
(the “Trust Agreement”), between the City and U.S. Bank National Association, as trustee (together with
any successor as trustee under the Trust Agreement, the “Trustee”). The Bonds shall be obligations of
the City payable from any lawfully available funds, shall not be limited as to payment to any special
source of funds of the City and the payment thereof shall not be subject to appropriation. The Bonds do
not constitute an obligation of the City for which the City is obligated to levy or pledge any form of
taxation or for which the City has levied or pledged any form of taxation. The Bonds otherwise shall be
as described in the Preliminary Official Statement and the Official Statement, the Refunding Law and the
Legal Documents. The Underwriters’ agreement to purchase the Bonds from the City is made in reliance
upon the City’s representations, covenants and warranties and on the terms and conditions set forth in this
Purchase Agreement.
The City is obligated by the Public Employees’ Retirement Law, constituting Part 3 of Division 5
of Title 2 of the California Government Code (the “Retirement Law”), and the contract between the
Board of Administration of the California Public Employees’ Retirement System (“CalPERS”),
established under Government Code sections 20000 through 21500 of (the “Retirement Law”), and the
City Council of the City, effective October 1, 1945 (as amended, the “CalPERS Contract”), to make
contributions to CalPERS to (a) fund pension benefits for its employees who are members of CalPERS,
(b) amortize the unfunded actuarial liability with respect to such pension benefits, and (c) appropriate
funds for the purposes described in (a) and (b). The City participates in two retirement plans (with tiers
within such plans) under the CalPERS Contract.
The proceeds of the Bonds will be used to: (i) to refund a portion of the City’s obligations under
the CalPERS Contract, consisting of 100% of the City’s UAAL as of ____ __, 2021, and (ii) pay the costs
of issuance related to the Bonds.
Section 3. Public Offering. The Underwriters agree to make an initial public offering of all
the Bonds at the public offering prices (or yields) set forth on Exhibit A attached hereto and incorporated
herein by reference. Subsequent to the initial public offering, the Underwriters reserve the right to change
the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds,
provided that the Underwriters shall not change the interest rates set forth on Exhibit A. The Bonds may
be offered and sold to certain dealers at prices lower than such initial public offering prices.
Section 4. The Official Statement. By its acceptance of this Purchase Agreement, the City
ratifies, confirms and approves of the use and distribution by the Underwriters prior to the date hereof of
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the Preliminary Official Statement relating to the Bonds, dated ________ __, 2021 (including the cover
page, all appendices and all information incorporated therein and any supplements or amendments thereto
and as disseminated in its printed physical form or in electronic form in all respects materially consistent
with such physical form, the “Preliminary Official Statement”) that the City has deemed “final” as of its
date, for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended
(“Rule 15c2-12”) except for certain omissions permitted to be omitted therefrom by Rule 15c2-12. The
City hereby agrees to deliver or cause to be delivered to the Underwriters, within seven (7) business days
of the date hereof, copies of the final official statement, dated the date hereof, relating to the Bonds
(including all information previously permitted to have been omitted by Rule 15c2-12, the cover page, all
appendices, all information incorporated therein and any amendments or supplements as have been
approved by the City and the Underwriters (the “Official Statement”)) in such quantity as the
Underwriters shall reasonably request to comply with Rule 15c2-12(b)(4) and the rules of the Municipal
Securities Rulemaking Board (the “MSRB”). To the extent required by applicable MSRB Rules, the City
hereby confirms that it does not object to distribution of the Official Statement in electronic form.
Section 5. Closing. At 8:00 a.m., California time, on ________ __, 2021, or at such other
time or date as the City and the Representative mutually agree upon, the City shall deliver or cause to be
delivered to the Trustee, and the Trustee shall deliver or cause to be delivered through the facilities of The
Depository Trust Company, New York, New York (“DTC”), the Bonds in definitive form, duly executed
and authenticated. Concurrently with the delivery of the Bonds, the City shall deliver the documents
hereinafter mentioned at the offices of Orrick Herrington & Sutcliffe, Los Angeles, California (“Bond
Counsel”) or another place to be mutually agreed upon by the City and the Representative. The
Underwriters will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1
hereof by wire transfer in immediately available funds. This payment for and delivery of the Bonds,
together with the delivery of the aforementioned documents referenced herein, is called the “Closing.”
The Bonds shall be registered in the name of Cede & Co., as nominee of DTC in denominations
of $5,000 and any integral multiple thereof as provided in the Trust Agreement, and shall be made
available to the Representative at least one (1) business day before the Closing for purposes of inspection
and packaging. The City acknowledges that the services of DTC will be used initially by the
Underwriters to permit the issuance of the Bonds in book-entry form, and agrees to cooperate fully with
the Underwriters in employing such services.
Section 6. Representations, Warranties and Covenants of the City. The City represents,
warrants and covenants to the Underwriters as follows.
(a) The City is a general law city and municipal corporation of the State of California (the
“State”), duly organized and validly existing pursuant to the Constitution and laws of the State.
(b) The City had full legal right, power and authority to adopt the Resolutions, and the City
has, and at the Closing Date will have, full legal right, power and authority (i) to execute and deliver the
Trust Agreement, the Continuing Disclosure Certificate relating to the Bonds (the “Continuing
Disclosure Certificate”), and this Purchase Agreement (collectively, the “Legal Documents”), to
perform its obligations under the Legal Documents, and has by official action duly authorized and
approved the execution and delivery of, and the performance by the City of the obligations on its part
contained in the Legal Documents, (ii) to issue, sell and deliver the Bonds to the Underwriters as provided
herein, and (iii) to carry out, give effect to and consummate the transactions contemplated by the Legal
Documents and the Resolutions.
(c) The City Council duly and validly adopted the Resolutions at meetings of the City
Council duly noticed and at which quorums were present, and the Resolutions have not been modified or
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amended and are in full force and effect, and has duly approved the execution and delivery of the Bonds
and the other Legal Documents, and the performance by the City of its obligations contained therein, and
the taking of any and all action as may be necessary to carry out, give effect to and consummate the
transactions contemplated by each of said documents.
(d) The Bonds and the other Legal Documents have been, on or before the Closing Date will
be, duly executed and delivered by the City, and, on the Closing Date, the Bonds, when authenticated and
delivered to the Underwriters in accordance with the Trust Agreement, and the other Legal Documents
will constitute legally valid and binding obligations, enforceable against the City in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting creditors' rights generally.
(e) The City is, and at the Closing Date will be, in compliance, in all respects, with the Legal
Documents.
(f) The City is not in breach of or default under any applicable law or administrative
regulation of the State or the United States of America or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or
is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the
giving of notice, or both, would constitute a default or an event of default under any such instrument, in
each case which breach or default has or may have a material adverse effect on the ability of the City to
perform its obligations under the Legal Documents.
(g) No consent, approval, authorization or other action by any governmental or regulatory
authority having jurisdiction over the City that has not been obtained is or will be required for the
issuance and delivery of the Bonds or the consummation by the City of the other transactions
contemplated by the Trust Agreement.
(h) The adoption of the Resolutions and the execution and delivery by the City of the Legal
Documents and the approval by the City of the Official Statement and compliance with the provisions on
the City’s part contained in the Legal Documents, will not conflict with, or result in a violation or breach
of, or constitute a default under, any law, administrative regulation, judgment, decree, loan agreement,
indenture, trust agreement, bond, note, resolution, agreement or other instrument to which the City is a
party or is otherwise subject to, which conflict, breach or default has or may have a material adverse
effect on the ability of the City to carry out its obligations under the Legal Documents, nor will any such
execution, delivery, adoption or compliance result in the creation or imposition of any material lien,
charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or
assets of City under the terms of any such law, administrative regulation, judgment, decree, loan
agreement, indenture, trust agreement, bond, note, resolution, agreement or other instrument, except as
provided by the Legal Documents.
(i) Prior to the date hereof, the City has provided to the Underwriters for its review the
Preliminary Official Statement, that the City has deemed final for purposes of Rule 15c2-12, has
approved the distribution of the Preliminary Official Statement and the Official Statement, and has duly
authorized the execution and delivery of the Official Statement (including in electronic form). The
Preliminary Official Statement, at the date thereof, and as of the date hereof, did not and does not contain
any untrue statement of a material fact or omit to state any material fact necessary to make the statements
therein (other than the information relating to DTC and its book-entry system, as to which no view is
expressed), in light of the circumstances under which they were made, not misleading. As of the date
hereof and on the Closing, the Official Statement did not and will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the statements therein (other than the
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information relating to DTC and its book-entry system, as to which no view is expressed), in light of the
circumstances under which they were made, not misleading.
(j) By official action of the City prior to or concurrently with the acceptance hereof, the City
has duly approved the distribution of the Preliminary Official Statement and the distribution of the
Official Statement (including in electronic form), and has duly authorized and approved the execution and
delivery of, and the performance by the City of the obligations on its part contained, in the Legal
Documents.
(k) The City will advise the Representative promptly of any proposal to amend or
supplement the Official Statement and will not effect or consent to any such amendment or supplement
without the consent of the Representative, which consent will not be unreasonably withheld. The City
will advise the Representative promptly of the institution of any proceedings known to it by any
governmental authority prohibiting or otherwise affecting the use of the Official Statement in connection
with the offering, sale or distribution of the Bonds.
(l) The financial statements relating to the receipts, expenditures and cash balances of the
City as of June 30, 2020 as set forth in the Preliminary Official Statement and in the Official Statement
fairly represent the financial position and results of operations of the City as of the dates and for the
periods therein set forth in accordance with generally accepted accounting principles. Except as disclosed
in the Preliminary Official Statement or the Official Statement, there has not been any materially adverse
change in the financial position and results of operations of the City or in its operations since June 30,
2020 and, except as disclosed in the Preliminary Official Statement or the Official Statement, there has
been no occurrence, circumstance or combination thereof which is reasonably expected to result in any
such materially adverse change.
(m) As of the time of acceptance hereof and as of the date of Closing, no action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency,
public board or body, is pending or, to the knowledge of the City, threatened (i) in any way questioning
the corporate existence of the City or the titles of the officers of the City to their respective offices;
(ii) affecting, contesting or seeking to prohibit, restrain or enjoin the execution or delivery of any of the
Bonds, or in any way contesting or affecting the validity of the Bonds or the Legal Documents or the
consummation of the transactions contemplated thereby or contesting the power of the City to enter into
the Legal Documents; (iii) which may result in any material adverse change to the financial condition of
the City or to its ability to make payment of principal or redemption price of and interest on the Bonds
when due; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement or the
Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official
Statement or the Official Statement contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and there is no basis for any action, suit,
proceeding, inquiry or investigation of the nature described in clause (i) through (iv) of this sentence.
(n) To the extent required by law, the City will undertake, pursuant to the Continuing
Disclosure Certificate, to provide annual reports and notices of certain events. A description of this
undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official
Statement. Except as otherwise disclosed in the Preliminary Official Statement, the City has not failed to
comply in all material respects with any previous undertakings with regard to Rule 15c2-12 to provide
annual reports or notices of enumerated events in the past five years and, the City has been in material
compliance during the past five years with its continuing disclosure obligations in accordance with Rule
15c2-12.
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(o) Any certificate signed by any officer of the City authorized to execute such certificate in
connection with the issuance, sale and delivery of the Bonds and delivered to the Underwriters shall be
deemed a representation and warranty of the City to the Underwriters as to the statements made therein
but not of the person signing such certificate.
(p) The City will promptly apply the proceeds of the Bonds to refund the Unfunded Liability
as of the date of issuance of the Bonds and to pay costs associated with the issuance and delivery of the
Bonds.
(q) During the period from the date hereof until the Closing Date, the City agrees to furnish
the Underwriters with copies of any documents it files with any regulatory authority which are reasonably
requested by the Underwriters.
(r) The City is not in material default, nor has the City been in material default at any time,
as to the payment of principal or interest with respect to a material obligation issued by the City or with
respect to a material obligation guaranteed by the City as guarantor.
(s) As of the date hereof, the City does not have any revenue bonds, capital lease obligations,
installment payment obligations or other material financial obligation, nor other material obligations
secured by payments from the general fund of the City, except as disclosed in the Preliminary Official
Statement and the Official Statement.
(t) The default judgment dated May 18, 2020 entered in favor of the City in connection with
City of Huntington Beach v. All Persons Interested, etc. was duly entered, the appeal period has run
without any appeal having been filed, and the default judgment is in full force and effect.
(u) The City had, prior to the adoption of the Resolution, and has, in full force and effect, a
Debt Management Policy that complies with Government Code Section 8855(i).
Section 7. Conditions to the Obligations of the Underwriters. The Underwriters have
entered into this Purchase Agreement in reliance upon the representations and warranties of the City
contained herein. The obligations of the Underwriters to accept delivery of and pay for the Bonds on the
date of the Closing shall be subject, at the option of the Underwriters, to the accuracy in all respects of the
statements of the officers and other officials of the City, as well as authorized representatives of the City
Attorney, Bond Counsel, Disclosure Counsel and the Trustee made in any certificates or other documents
furnished pursuant to the provisions hereof, to the performance by the City of its obligations to be
performed hereunder at or prior to the date of the Closing, and to the following additional conditions:
(a) The representations, warranties and covenants of the City contained herein shall be true,
complete and correct at the date hereof and at the time of the Closing, as if made on the date of the
Closing;
(b) At the time of Closing, the Legal Documents shall be in full force and effect as valid and
binding agreements between or among the various parties thereto, and the Legal Documents and the
Preliminary Official Statement and the Official Statement shall not have been amended, modified or
supplemented except as may have been agreed to in writing by the Representative, and all such
reasonable actions as, in the opinion of Bond Counsel, shall reasonably deem necessary in connection
with the transactions contemplated hereby;
(c) At the time of the Closing, no default shall have occurred or be existing under the Legal
Documents, or any other agreement or document pursuant to which any of the City’s financial obligations
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were executed and delivered, and the City shall not be in default in the payment of principal or interest
with respect to any of its financial obligations, which default would result in any material adverse change
to the financial condition of the City or adversely impact its ability to make payment of principal or
redemption price of and interest on the Bonds when due;
(d) In recognition of the desire of the City and the Underwriters to effect a successful public
offering of the Bonds, and in view of the potential adverse impact of any of the following events on such
a public offering, this Purchase Agreement shall be subject to termination in the absolute discretion of the
Representative by notification, in writing, to the City prior to delivery of and payment for the Bonds, if at
any time prior to such time, regardless of whether any of the following statements of fact were in
existence or known of on the date of this Purchase Agreement:
(i) there shall have occurred any outbreak or escalation of hostilities, declaration by
the United States of America of a national emergency or war or other calamity or crisis the effect of
which on financial markets is materially adverse such as to make it, in the sole judgment of the
Representative, impractical to proceed with the purchase or delivery of the Bonds as contemplated by the
Official Statement (exclusive of any amendment or supplement thereto); or
(ii) a general banking moratorium shall have been declared by federal, State or New
York authorities, or the general suspension of trading on any national securities exchange; or
(iii) any event shall occur which makes untrue any statement or results in an omission
to state a material fact necessary to make the statements in the Preliminary Official Statement or the
Official Statement, in the light of the circumstances under which they were made, not misleading, which
event, in the reasonable opinion of the Representative would materially or adversely affect the ability of
the Representative to market the Bonds; or
(iv) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted
by any governmental body, department or agency of the State, or a decision by any court of competent
jurisdiction within the State shall be rendered which materially adversely affects the market price of the
Bonds; or
(v) the marketability of the Bonds or the market price thereof, in the reasonable
opinion of the Representative, has been materially adversely affected by an amendment to the
Constitution of the United States of America or by any legislation in or by the Congress of the United
States of America or by the State, or the amendment of legislation pending as of the date of this Purchase
Agreement in the Congress of the United States of America, or the recommendation to Congress or
endorsement for passage (by press release, other form of notice or otherwise) of legislation by the
President of the United States of America, the Treasury Department of the United States of America, the
Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of
the United States Senate or the Committee on Ways and Means of the United States House of
Representatives, or the proposal for consideration of legislation by either such Committee or by any
member thereof, or the presentment of legislation for consideration as an option by either such
Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States of
America, or the favorable reporting for passage of legislation to either House of the Congress of the
United States of America by a Committee of such House to which such legislation has been referred for
consideration; or
(vi) an order, decree or injunction shall have been issued by any court of competent
jurisdiction, or order, ruling, regulation (final, temporary or proposed), official statement or other form of
notice or communication issued or made by or on behalf of the Securities and Exchange Commission, or
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any other governmental agency having jurisdiction of the subject matter, to the effect that: (i) obligations
of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not
exempt from registration under the Securities Act of 1933, as amended, or that the Trust Agreement is not
exempt from qualification under the Trust Indenture Act of 1939; or (ii) the issuance, offering or sale of
obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including
any or all underlying obligations, as contemplated hereby or by the Preliminary Official Statement and the
Official Statement, is or would be in violation of the federal securities laws as amended and then in effect;
or
(vii) legislation shall be introduced, by amendment or otherwise, or be enacted by the
House of Representatives or the Senate of the Congress of the United States of America, or a decision by
a court of the United States of America shall be rendered, or a stop order, ruling, regulation or official
statement by or on behalf of the Securities and Exchange Commission or other governmental agency
having jurisdiction of the subject matter shall be made or proposed, to the effect that the issuance,
offering or sale of obligations of the general character of the Bonds, as contemplated hereby or by the
Preliminary Official Statement and the Official Statement, is or would be in violation of any provision of
the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, as
amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect, or
with the purpose or effect of otherwise prohibiting the issuance, offering or sale of the Bonds or
obligations of the general character of the Bonds, as contemplated hereby or by the Preliminary Official
Statement and the Official Statement; or
(viii) additional material restrictions not in force as of the date hereof shall have been
imposed upon trading in securities generally by any governmental authority or by any national securities
exchange, which, in the Representative’s reasonable opinion, materially adversely affects the
marketability or market price of the Bonds; or
(ix) the New York Stock Exchange, or other national securities exchange or
association or any governmental authority, shall impose as to the Bonds, or obligations of the general
character of the Bonds, any material restrictions not now in force, or increase materially those now in
force, with respect to the extension of credit by or the charge to the net capital requirements of broker
dealers; or
(x) trading in securities on the New York Stock Exchange or the American Stock
Exchange shall have been suspended or limited or minimum prices have been established on either such
exchange which, in the Representative’s reasonable opinion, materially adversely affects the
marketability or market price of the Bonds; or
(xi) any rating of the Bonds or the rating of any general fund obligations of the City
shall have been downgraded or withdrawn by a national rating service, which, in the reasonable opinion
of the Representative, materially adversely affects the market price of the Bonds; or
(xii) any action shall have been taken by any government in respect of its monetary
affairs which, in the reasonable opinion of the Representative, has a material adverse effect on the United
States securities market, rendering the marketing and sale of the Bonds, or enforcement of sale contracts
with respect thereto impracticable; or
(xiii) the commencement of any action, suit or proceeding described in Section 6(m).
(e) at or prior to the Closing, the Representative shall receive or have received the following
documents, in each case to the reasonable satisfaction, in form and substance, of the Representative and
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Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California
(“Underwriter’s Counsel”):
(i) a copy of the default judgment, dated May 18, 2020, entered in favor of the City
in connection with City of Huntington Beach v. All Persons Interested, etc., Case No ___________ filed
in the Superior Court of California, County of Orange;
(ii) all resolutions relating to the Bonds adopted by the City and certified by an
authorized official of the City, authorizing the execution and delivery of the Legal Documents and the
delivery of the Bonds and the Official Statement;
(iii) the Legal Documents duly executed and delivered by the respective parties
thereto, with only such amendments, modifications or supplements as may have been agreed to in writing
by the Representative; and
(iv) the approving opinion of Bond Counsel, dated the date of Closing and addressed
to the City, in substantially the form attached as Appendix B to the Preliminary the Official Statement and
the Official Statement, together with a reliance letter thereon addressed to the Underwriters;
(v) a supplemental opinion of Bond Counsel dated the date of Closing and addressed
to the Underwriters, to the effect that:
(A) the statements on the cover of the Official Statement and in the Official
Statement under the captions “INTRODUCTION,” “THE BONDS,” “SECURITY AND SOURCE OF
PAYMENT FOR THE BONDS,” “TAX MATTERS” and “VALIDATION” and in APPENDIX D –
“SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT,” APPENDIX E –
“PROPOSED FORM OF BOND COUNSEL OPINION” and APPENDIX F – “FORM OF
CONTINUING DISCLOSURE CERTIFICATE,” and excluding any material that may be treated as
included under such captions and appendices by any cross-reference, insofar as such statements expressly
summarize provisions of the Bonds, the Trust Agreement, and Bond Counsel’s final opinion relating to
the Bonds, are accurate in all material respects as of the date of Closing;
(B) the Purchase Agreement has been duly authorized, executed and
delivered by the City and is the valid, legal and binding agreement of the City enforceable in accordance
with its terms, except that the rights and obligations under the Purchase Agreement are subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws
affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to
the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public
agencies in the State, and provided that no opinion is expressed with respect to any indemnification or
contribution provisions contained therein; and
(C) the Bonds are not subject to the registration requirements of the
Securities Act of 1933, as amended, and the Trust Agreement is exempt from qualification under the
Trust Indenture Act of 1939, as amended;
(vi) the Official Statement, executed on behalf of the City;
(vii) evidence that the rating on the Bonds is as described in the Official Statement;
(viii) a certificate, dated the date of Closing, signed by a duly authorized officer of the
City satisfactory in form and substance to the Representative to the effect that: (i) the representations,
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warranties and covenants of the City contained in this Purchase Agreement are true and correct in all
material respects on and as of the date of Closing with the same effect as if made on the date of the
Closing by the City, and the City has complied with all of the terms and conditions of the Purchase
Agreement required to be complied with by the City at or prior to the date of Closing; (ii) to the best of
such officer’s knowledge, no event affecting the City has occurred since the date of the Official Statement
which should be disclosed in the Official Statement for the purposes for which it is to be used or which is
necessary to disclose therein in order to make the statements and information therein not misleading in
any material respect; (iii) the information and statements contained in the Official Statement (other than
information relating to DTC and its book entry system) did not as of its date and do not as of the Closing
contain an untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading in any
material respect; (iv) the City is not in breach of or default under any applicable law or administrative
regulation of the State or the United States of America or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or
is otherwise subject, which would have a material adverse impact on the City’s ability to perform its
obligations under the Legal Documents, and no event has occurred and is continuing which, with the
passage of time or the giving of notice, or both, would constitute such a default or an event of default
under any such instrument; and (v) no further consent is required for inclusion of its audited financial
statements in the Preliminary Official Statement and the Official Statement;
(ix) an opinion dated the date of Closing and addressed to the Underwriters, the
Trustee and the Bond Counsel, of the Office of the City Attorney of the City of Huntington Beach,
substantially in the form attached as Exhibit B hereto;
(x) a letter of Orrick Herrington & Sutcliffe LLP, Los Angeles, California,
Disclosure Counsel to the City dated the date of Closing and addressed to the Underwriters substantially
to the effect that, on the basis of the information made available to them in the course of their
participation in the preparation of the Official Statement as disclosure counsel, but without having
undertaken to determine or verify independently, or assuming any responsibility for, the accuracy,
completeness or fairness of any of the statements contained in the Official Statement, no facts have come
to the attention of the personnel in such firm directly involved in rendering legal advice and assistance to
the City in connection with the preparation of the Official Statement which caused them to believe that
(A) the Preliminary Official Statement as of its date or as of ______ __, 2021 (excluding therefrom
financial, demographic and statistical data; forecasts, projections, estimates, assumptions and expressions
of opinions; statements relating to DTC, Cede & Co. and the operation of the book-entry system;
statements relating to the treatment of the Bonds or the interest, discount or premium, if any, thereon or
therefrom for tax purposes under the law of any jurisdiction; and the statements contained in the
Preliminary Official Statement under the captions “TAX MATTERS,” and in the Appendices to the
Preliminary Official Statement; as to all of which they express no view) contained any untrue statement of
a material fact or omitted to state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading, except for such
information as is permitted to be excluded from the Preliminary Official Statement pursuant to Rule 15c2-
12 of the Securities Exchange Act of 1934, as amended, including but not limited to information as to
pricing, yields, interest rates, maturities, amortization, redemption provisions, debt service requirements,
Underwriters’ discount and CUSIP numbers or (B) the Official Statement as of its date or as of the
Closing Date (excluding therefrom financial, demographic and statistical data; forecasts, projections,
estimates, assumptions and expressions of opinions; statements relating to DTC, Cede & Co. and the
operation of the book-entry system, statements relating to the treatment of the Bonds or the interest,
discount or premium, if any, thereon or therefrom for tax purposes under the law of any jurisdiction; and
the statements contained in the Official Statement under the captions “TAX MATTERS,” and in
Appendix __, ___, and __ to the Official Statement; as to all of which they express no view) contained
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any untrue statement of a material fact or omitted to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were made, not misleading;
(xi) an opinion of counsel to the Trustee, addressed to the Underwriters and the City,
dated the date of the Closing, to the effect that:
(A) the Trustee is a national banking association duly organized and validly
existing under the laws of the United States of America, having full corporate power to undertake the trust
created under the Trust Agreement;
(B) the Trust Agreement has been duly authorized, executed and delivered
by the Trustee and, assuming due authorization, execution and delivery by the other parties thereto, the
Trust Agreement constitutes the valid, legal and binding obligations of the Trustee enforceable in
accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditors’ rights generally and by the application of equitable
principles, if equitable remedies are sought;
(C) the Trustee has duly authenticated the Bonds upon the order of City;
(D) the Trustee’s actions in executing and delivering the Trust Agreement are
in full compliance with, and do not conflict with any applicable law or governmental regulation and, to
the best of such counsel’s knowledge, after reasonable inquiry with respect thereto, do not conflict with or
violate any contract to which the Trustee is a party or any administrative or judicial decision by which the
Trustee is bound;
(E) no consent, approval, authorization or other action by any governmental
or regulatory authority having jurisdiction over the banking or trust powers of the Trustee that has not
been obtained is or will be required for the execution and delivery of the Bonds or the consummation by
the Trustee of its obligations under the Trust Agreement; and
(F) there is no action, suit, proceeding, inquiry or investigation at law or in
equity before or by any court or public body pending or, to the best of such counsel’s knowledge,
threatened against or affecting the Trustee, which would materially adversely impact the Trustee’s ability
to complete the transactions contemplated by the Trust Agreement.
(xii) a certificate, dated the date of Closing, signed by a duly authorized officer of the
Trustee satisfactory in form and substance to the Representative, to the effect that:
(A) the Trustee is duly organized and existing as a national banking
association under the laws of the United States of America, having the full corporate power and authority
to enter into and perform its duties under the Trust Agreement;
(B) the Trustee is duly authorized to enter into the Trust Agreement and has
duly executed and delivered the Trust Agreement, and assuming due authorization and execution by the
other parties thereto, the Trust Agreement is legal, valid and binding upon the Trustee and enforceable
against such party in accordance with its terms;
(C) the Trustee has duly authenticated the Bonds under the Trust Agreement
and delivered the Bonds to or upon the order of the Underwriters;
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(D) no consent, approval, authorization or other action by any governmental
or regulatory authority having jurisdiction over the banking or trust powers of the Trustee that has not
been obtained is required for the execution and delivery of the Bonds or the consummation by the Trustee
of its obligations under the Trust Agreement; and
(E) there is no action, suit, proceeding, inquiry or investigation at law or in
equity before or by any court or public body pending or, to the best of such counsel’s knowledge,
threatened against or affecting the Trustee, which would materially adversely impact the Trustee’s ability
to complete the transactions contemplated by the Trust Agreement.
(xiii) the preliminary and final forms required to be delivered to the California Debt
and Investment Advisory Commission pursuant to Section 53583 of the Government Code of the State of
California and Section 8855(i) and (j) of the Government Code;
(xiv) a copy of the executed Blanket Issuer Letter of Representations by and between
the City and DTC relating to the book-entry system;
(xv) an opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation,
Newport Beach, California, as Underwriters’ Counsel, in form and substance acceptable to the
Representative, substantially to the effect that:
(A) the Bonds are exempt from registration pursuant to the Securities Act of
1933, as amended, and the Trust Agreement is exempt from qualification pursuant to the Trust Indenture
Act of 1939, as amended;
(B) based upon an examination which they have made, and without having
undertaken to determine independently or assuming any responsibility for the accuracy or completeness
or fairness of the statements, and based on its participation in the conferences (which did not extend
beyond the date of the Official Statement), and in reliance thereon, on oral and written statements and
representations of the City and others and on the records, documents, certificates, opinions and matters
therein mentioned, such counsel advises the Underwriters as a matter of fact and not opinion that, during
the course of such counsel’s representation of the Underwriters on this matter, (a) as of the date of the
Preliminary Official Statement and as of _____ __, 2021, no facts had come to the attention of the
attorneys in such counsel’s firm rendering legal services to the Underwriters in connection with the
Preliminary Official Statement which caused it to believe that the Preliminary Official Statement
contained any untrue statement of a material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading, and (b)
as of the date of the Official Statement and as of the Closing Date, no facts had come to the attention of
the attorneys in such counsel’s firm rendering legal service to the Underwriters in connection with the
Official Statement which caused it to believe as of the date of the Official Statement and as of the Closing
Date that the Official Statement contained or contains any untrue statement of a material fact or omitted
or omits to state any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, such counsel expressly
excludes from the scope of this paragraph and expresses no view or opinion about, any CUSIP numbers,
financial, accounting, statistical or economic, engineering or demographic data or forecasts, numbers,
charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, management
discussion and analysis, environmental matters, environmental litigation, any statements about
compliance with prior continuing disclosure undertakings, information relating to DTC and its book-entry
system, the Appendices to the Preliminary Official Statement and the Official Statement, and information
relating to ratings, rating agencies, tax exemption, included or referred to therein or omitted therefrom,
which such counsel expressly excludes from the scope of this paragraph and as to which such counsel
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expresses no opinion or view, and no responsibility is undertaken or view expressed with respect to any
other disclosure document, materials or activity, or as to any information from another document or
source referred to by or incorporated by reference in the Preliminary Official Statement or the Official
Statement; and
(C) the Continuing Disclosure Certificate, together with Section 5(o) of the
Purchase Agreement, satisfies the requirements contained in Rule 15c2-12 for an undertaking for the
benefit of the holders of the Bonds to provide the information at the times and in the manner required by
Rule 15c2-12; provided that, for purposes of such opinion, Underwriter’s Counsel will not be expressing
any view regarding the content of the Official Statement that is not expressly stated in clause (B) above;
(xvi) a Rule 15c2-12 certificate, dated the date of the Preliminary Official Statement
and executed by the City;
(xvii) [[a certificate of the CalPERS actuary acknowledging of payment of the
Unfunded Liability]];
(xviii) such additional legal opinions, Bonds, proceedings, instruments or other
documents as the Representative or Underwriters’ Counsel may reasonably request.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriters to
purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, this Purchase
Agreement shall terminate, and except as set forth in Section 9 hereof, neither the Underwriters nor the
City shall be under further obligation hereunder.
Section 8. Changes in Official Statement. Within 90 days after the Closing or within 25
days following the “end of the underwriting period” (as defined in Rule 15c2-12), whichever occurs first,
if any event relating to or affecting the Bonds, the Trustee, or the City shall occur as a result of which it is
necessary, in the reasonable opinion of the Representative, to amend or supplement the Official Statement
in order to make the Official Statement not misleading in any material respect in the light of the
circumstances existing at the time it is delivered to a purchaser, the City will forthwith prepare and
furnish to the Underwriters an amendment or supplement that will amend or supplement the Official
Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances existing at the time the
Official Statement is delivered to purchaser, not misleading. The City shall cooperate with the
Representative in the filing by the Representative of such amendment or supplement to the Official
Statement with the MSRB. The Underwriters acknowledge that the “end of the underwriting period” will
be the date of Closing unless the Underwriter otherwise notifies the City in writing that it still owns some
or all of the Bonds.
Section 9. Expenses. (a) Whether or not the Underwriters accept delivery of and pays for
the Bonds as set forth herein, they shall be under no obligation to pay, and the City shall pay out of the
proceeds of the Bonds or any other legally available funds of the City, all expenses incidental to the
performance of the City’s obligations hereunder, including but not limited to the cost of printing and
delivering the Legal Documents to the Underwriters, the costs of printing and shipping and electronic
distribution of the Preliminary Official Statement and the Official Statement in reasonable quantities, the
fees and disbursements of the City, the Trustee and its counsel, Bond Counsel, Disclosure Counsel, City
Attorney, the City’s actuary, accountants, engineers, appraisers, economic consultants and any other
experts or consultants retained by the City in connection with the issuance and sale of the Bonds, rating
agency fees, advertising expenses, and any other expenses not specifically enumerated in paragraph (b) of
this section incurred in connection with the issuance and sale of the Bonds. The City shall pay out of the
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proceeds of the Bonds, for any expenses incurred by the Underwriters on behalf of the City’s employees
and representatives which are incidental to implementing this Purchase Agreement, including meals,
transportation, and lodging of those employees and representatives.
(b) Whether or not the Bonds are delivered to the Underwriters as set forth herein, the City
shall be under no obligation to pay, and the Underwriters shall be responsible for and pay (which may be
included as an expense component of the Underwriters’ discount), MSRB, CUSIP Bureau and CDIAC
fees and expenses to qualify the Bonds for sale under any “blue sky” laws, and all other expenses incurred
by the Underwriters in connection with its public offering and distribution of the Bonds not specifically
enumerated in paragraph (a) of this section, including the cost of preparing this Purchase Agreement and
other Underwriter documents, travel expenses and the fees and disbursements of Underwriters’ Counsel.
Section 10. Notices. Any notice or other communication to be given to the Underwriters
under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus &
Company, Incorporated, 515 South Figueroa Street, Suite 1800, Los Angeles, CA 90071, Attention: Tom
Jacob, Director. Any notice or communication to be given to the City under this Purchase Agreement
may be given by delivering the same in writing to the City of Huntington Beach, 2000 Main Street,
Huntington Beach, CA 92648, Attention: City Manager. All notices or communications hereunder by any
party shall be given and served upon each other party.
Section 11. Parties in Interest. This Purchase Agreement is made solely for the benefit of
the City and the Underwriters (including the successors or assigns thereof) and no other person shall
acquire or have any right hereunder or by virtue hereof. All representations, warranties and agreements of
the City in this Purchase Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriters and shall survive the delivery of and payment for
the Bonds.
Section 12. Counterparts. This Purchase Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument
Section 13. Electronic Signature. Each of the parties hereto agrees that the transaction
consisting of this Purchase Agreement may be conducted by electronic means. Each party agrees, and
acknowledges that it is such party’s intent (a) that, by signing this Purchase Agreement using an
electronic signature, it is signing, adopting and accepting this Purchase Agreement, and (b) that signing
this Purchase Agreement using an electronic signature is the legal equivalent of having placed the
undersigned officer’s handwritten signature on this Purchase Agreement on paper. Each party
acknowledges that it is being provided with an electronic or paper copy of this Purchase Agreement in a
usable format.
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Section 14. Governing Law. This Purchase Agreement shall be governed by and construed
in accordance with the laws of the State.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
BOFA SECURITIES, INC.
HILLTOP SECURITIES INC.
STIFEL, NICOLAUS & COMPANY,
INCORPORATED, as Representative
By:
Authorized Officer
Accepted:
CITY OF HUNTINGTON BEACH
By:
City Manager
Time of Execution: ____:____
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EXHIBIT A
MATURITY SCHEDULE
Maturity Date
(June 15) Principal Amount Interest Rate Yield
$______ _____% Term Bond due June 15, 20__; Yield _____%; Price ______%
$______ _____% Term Bond due June 15, 20__; Yield _____%; Price ______%
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EXHIBIT B
FORM OF CITY ATTORNEY OPINION
________ __, 2021
City of Huntington Beach
Huntington Beach, California
Stifel, Nicolaus & Company, Incorporated, as
Representative
Los Angeles, California
City of Huntington Beach
City of Huntington Beach Taxable Pension Obligation Bonds, Series 2021
Ladies and Gentlemen:
We have acted as counsel to the City of Huntington Beach (the “City”) in connection with the
issuance and sale by the City of $__________ aggregate principal amount of its City of Huntington Beach
Taxable Pension Obligation Bonds, Series 2021 (the “Bonds”). We have examined and relied upon
originals (or copies certified or otherwise identified to our satisfaction) of such documents, records and
other instruments as we deem necessary or appropriate for the purposes of this opinion, including, without
limitation: (i) those documents relating to the existence, organization and operation of the City; (ii)
Resolution No. ____, adopted by a majority of the City Council of the City (the “City Council”) on _____
__, 2020 and Resolution No. ____, adopted by a majority of the City Council of the City (the “City
Council”) on _____ ___, 2021 (collectively, the “Resolutions”); (iii) all necessary documentation of the
City relating to the authorization, execution and delivery of the Trust Agreement, dated as of _______ 1,
2021 (the “Trust Agreement”), between the City and U.S. Bank National Association, as trustee; (iii) the
default judgment dated May 18, 2020, entered in favor of the City in connection with City of Huntington
Beach v. All Persons Interested, etc., Case No _____________ filed in the Superior Court of California,
County of Orange; (iv) the Purchase Agreement, dated _______ __, 2021 (the “Purchase Agreement”),
executed by Stifel, Nicolaus & Company, Incorporated, as representative of the Underwriters named
therein (the “Representative”), and accepted by the City; (v) the Preliminary Official Statement, dated
______ __, 2021 (the “Preliminary Official Statement”), relating to the Bonds; (vi) the Official Statement,
dated ______ __, 2021 (the “Official Statement”), relating to the Bonds; (vii) the Continuing Disclosure
Certificate, dated ________ __, 2021 (the “Continuing Disclosure Certificate”), of the City; and (viii)
such other records, documents, certificates, opinions, and other matters as are in our judgment necessary
or appropriate to enable us to render the opinions expressed herein. All capitalized terms used herein and
not otherwise defined shall have the meaning given to such terms as set forth in the Trust Agreement.
Based on the foregoing, and with regard to State of California (the “State”) law and United States
federal law, we are of the opinion that:
(a) The City is a charter city and municipal corporation of the State, duly organized and
validly existing pursuant to the Constitution and laws of the State.
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(b) The resolutions of the City approving and authorizing the execution and delivery of the
Bonds, the Trust Agreement, the Purchase Agreement, and the Continuing Disclosure Certificate
(collectively, the “Legal Documents”) and approving and authorizing the issuance of the Bonds and the
delivery of the Official Statement and other actions of the City were duly adopted at meetings of the
governing body of the City which were called and held pursuant to law and with all public notice required
by law and at which quorums were present and acting throughout, and the resolutions are now in full
force and effect and has not been amended or superseded in any way.
(c) Except as disclosed in the Preliminary Official Statement and in the Official Statement,
there is no action, suit or proceeding pending, or to the best of our knowledge, threatened against the City
to (i) restrain or enjoin the execution or delivery of the Legal Documents (ii) in any way contesting or
affecting the validity of the Legal Documents, the Resolution or the authority of the City to enter into the
Legal Documents, or (iii) in any way contesting or affecting the powers of the City in connection with
any action contemplated by the Official Statement, the Resolution or the Legal Documents.
(d) The execution and delivery of the Legal Documents and compliance with the provisions
thereof, do not and will not in any material respect conflict with or constitute on the part of the City a
breach of or default under any agreement or other instrument to which the City is a party or by which it is
bound or any existing law, regulation, court order or consent decree to which the City is subject, which
breach or default has or may have a material adverse effect on the ability of the City to perform its
obligations under the Legal Documents.
(e) No authorization, approval, consent, or other order of the State or any other governmental
body within the State is required for the valid authorization, execution and delivery of the Legal
Documents or the consummation by the City of the transactions on its part contemplated therein, except
such as have been obtained and except such as may be required under state securities or blue sky laws in
connection with the purchase and distribution of the Bonds by the Underwriter.
Very truly yours,
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CONTINUING DISCLOSURE CERTIFICATE
City of Huntington Beach
relating to
|
City of Huntington Beach
Taxable Pension Obligation Bonds, Series 2021
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by
the City of Huntington Beach (the “City”) in connection with the issuance of the above-named bonds (the
“Bonds”). The Bonds are being issued by the City pursuant to Articles 10 and 11 (commencing with
Section 53570) of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California (the
“Act”), a resolution of the City authorizing the issuance of the Series 2021 Bonds and a trust agreement,
dated as of _______ 1, 2021 (the “Trust Agreement”), by and between the City and U.S. Bank National
Association, as trustee (the “Trustee”). The City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and
in order to assist the Participating Underwriters (Series 2021 Bonds) in complying with Securities and
Exchange Commission (“S.E.C.”) Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which
apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section,
the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to, and as described
in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly,
to make investment decisions concerning ownership of any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries).
“Dissemination Agent” shall mean KNN Public Finance, or any successor Dissemination Agent
designated in writing by the City and which has filed with the City a written acceptance of such designation.
“Financial Obligation” shall mean, for the purposes of the Listed Events set out in
Section 5(a)(10) and 5(b)(8), a (i) debt obligation; (ii) derivative instrument entered into in connection with,
or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee
of (i) or (ii). The term “Financial Obligation” shall not include municipal securities (as defined in the
Securities Exchange Act of 1934, as amended) as to which a final official statement (as defined in the Rule)
has been provided to the MSRB consistent with the Rule.
“Holder” shall mean the person in whose name any Bond shall be registered.
“Listed Events” shall mean any of the events listed in Section 5(a) or (b) of this Disclosure
Certificate.
“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or
authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until
otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB
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4130-2078-4161.2
are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently
located at http://emma.msrb.org.
“Official Statement” shall mean the Official Statement, dated ______ , 2021 (including all
exhibits or appendices thereto), relating to the offer and sale of Bonds.
“Participating Underwriters (Series 2021 Bonds)” shall mean the original underwriters of the
Bonds required to comply with the Rule in connection with offering of the Bonds.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than nine
months after the end of the City’s fiscal year (which shall be April 1 of each year, so long as the City’s
fiscal year ends on June 30), commencing with the report for the 2020-21 fiscal year (which is due not later
than April 1, 2022), provide to the MSRB an Annual Report which is consistent with the requirements of
Section 4 of this Disclosure Certificate. The Annual Report must be submitted in electronic format,
accompanied by such identifying information as is prescribed by the MSRB, and may cross-reference other
information as provided in Section 4 of this Disclosure Certificate; provided, that the audited financial
statements of the City may be submitted separately from the balance of the Annual Report and later than
the date required above for the filing of the Annual Report if they are not available by that date. If the
City’s fiscal year changes, it shall give notice of such change in a filing with the MSRB. The Annual Report
shall be submitted on a standard form in use by industry participants or other appropriate form and shall
identify the Bonds by name and CUSIP number.
(b) Not later than 15 business days prior to the date specified in subsection (a), the
City shall provide the Annual Report to the Dissemination Agent (if other than the City). If the City is
unable to provide to the MSRB an Annual Report by the date required in subsection (a), the City shall, in a
timely manner, send or cause to be sent to the MSRB a notice in substantially the form attached as
Exhibit A.
(c) The Dissemination Agent shall (if the Dissemination Agent is other than the City)
file a report with the City certifying that the Annual Report has been provided to the MSRB pursuant to this
Disclosure Certificate, stating the date it was provided to the MSRB.
SECTION 4. Content of Annual Reports. The City’s Annual Report shall contain or include
by reference the following:
(a) Audited financial statements of the City for the preceding fiscal year, prepared in
accordance with generally accepted accounting principles as promulgated to apply to governmental entities
from time to time by the Governmental Accounting Standards Board (GASB) and the laws of the State of
California and including all statements and information prescribed for inclusion therein by the Controller
of the State of California. If the City’s audited financial statements are not available by the time the Annual
Report is required to be provided to the MSRB pursuant to Section 3(a), the Annual Report shall contain
unaudited financial statements in a format similar to the financial statements contained in the final Official
Statement, and the audited financial statements shall be provided to the MSRB in the same manner as the
Annual Report when they become available.
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4130-2078-4161.2
To the extent not included in the audited financial statement of the City, the Annual Report
shall also include the following:
(i) General Fund Tax Revenues by Source;
(ii) Gross Assessed Value of All Taxable Property;
(iii) General Fund Property Tax Levies and Collections (Secured Taxes); and
(iv) Principal Secured Property Taxpayers.
Any or all of the items listed above may be set forth in one or a set of documents or may
be included by specific reference to other documents, including official statements of debt issues of the
City or related public entities, which have been made available to the public on the MSRB’s website. The
City shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the
following events with respect to the Bonds in a timely manner not later than ten business days after the
occurrence of the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial
difficulties;
3. Unscheduled draws on credit enhancements reflecting financial
difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Adverse tax opinions or issuance by the Internal Revenue Service of
proposed or final determination of taxability or of a Notice of Proposed
Issue (IRS Form 5701 TEB);
6. Tender offers;
7. Defeasances;
8. Rating changes; or
9. Bankruptcy, insolvency, receivership or similar event of the City.
10. Default, event of acceleration, termination event, modification of terms,
or other similar events under the terms of a Financial Obligation of the
City, any of which reflect financial difficulties.
Note: for the purposes of the event identified in subparagraph (9), the event is considered
to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for
the City in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal
law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets
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or business of the City, or if such jurisdiction has been assumed by leaving the existing governmental body
and officials or officers in possession but subject to the supervision and orders of a court or governmental
authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court
or governmental authority having supervision or jurisdiction over substantially all of the assets or business
of the City.
(b) The City shall give, or cause to be given, notice of the occurrence of any of the
following events with respect to the Bonds, if material, in a timely manner not later than ten business days
after the occurrence of the event:
1. Unless described in paragraph 5(a)(5), other material notices or
determinations by the Internal Revenue Service with respect to the tax
status of the Bonds or other material events affecting the tax status of the
Bonds;
2. Modifications to rights of Bond holders;
3. Optional, unscheduled or contingent Bond calls;
4. Release, substitution, or sale of property securing repayment of the Bonds;
5. Non-payment related defaults;
6. The consummation of a merger, consolidation, or acquisition involving the
City or the sale of all or substantially all of the assets of the City, other
than in the ordinary course of business, the entry into a definitive
agreement to undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its terms;
7. Appointment of a successor or additional trustee or the change of name of
a trustee; or
8. Incurrence of a Financial Obligation of the City, or agreement to
covenants, events of default, remedies, priority rights, or other similar
terms of a Financial Obligation of the City, any of which affect Bond
holders.
(c) The City shall give, or cause to be given, in a timely manner, notice of a failure to
provide the annual financial information on or before the date specified in Section 3 hereof, as provided in
Section 3(b) hereof.
(d) Upon the occurrence of a Listed Event described in Section 5(a), or upon the
occurrence of a Listed Event described in Section 5(b) which the City determines that knowledge of a Listed
Event described in Section 5(b) would be material under applicable federal securities laws, the City shall
within ten business days of occurrence file a notice of such occurrence with the MSRB. Notwithstanding
the foregoing, notice of the Listed Event described in subsection (b)(3) need not be given under this
subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds
pursuant to the Trust Agreement.
(e) The City intends to comply with the Listed Events described in subsection (a)(10)
and subsection (b)(8), and the definition of “Financial Obligation” in Section 2, with reference to the Rule,
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any other applicable federal securities laws and the guidance provided by the Securities and Exchange
Commission in Release No. 34-83885, dated August 20, 2018 (the “2018 Release”), and any further
amendments or written guidance provided by the Securities and Exchange Commission or its staff with
respect to the amendments to the Rule effected by the 2018 Release.
SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to
this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying
information as is prescribed by the MSRB.
SECTION 7. Termination of Reporting Obligation. The City’s obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all
of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice
of such termination in a filing with the MSRB.
SECTION 8. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared
by the City pursuant to this Disclosure Certificate, and any information that the Dissemination Agent may
be instructed to file with the MSRB shall be prepared and provided to it by the City. The initial
Dissemination Agent shall be KNN Public Finance.
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate
may be waived, if the City has received an opinion of counsel knowledgeable in federal securities laws to
the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate
the Rule if such amendment or waiver had been effective on the date hereof but taking into account any
subsequent change in or official interpretation of the Rule.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall
describe such amendment in the next Annual Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change
of accounting principles, on the presentation) of financial information or operating data being presented by
the City. In addition, if the amendment relates to the accounting principles to be followed in preparing
financial statements, (i) notice of such change shall be given in a filing with the MSRB, and (ii) the Annual
Report for the year in which the change is made should present a comparison (in narrative form and also,
if feasible, in quantitative form) between the financial statements as prepared on the basis of the new
accounting principles and those prepared on the basis of the former accounting principles.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the City from disseminating any other information, using the means of dissemination set forth in
this Disclosure Certificate or any other means of communication, or including any other information in any
Annual Report or notice required to be filed pursuant to this Disclosure Certificate, in addition to that which
is required by this Disclosure Certificate. If the City chooses to include any information in any Annual
Report or notice in addition to that which is specifically required by this Disclosure Certificate, the City
shall have no obligation under this Disclosure Certificate to update such information or include it in any
future Annual Report or notice of occurrence of a Listed Event or any other event required to be reported.
SECTION 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
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City to comply with its obligations under this Disclosure Certificate; provided, that any such action may be
instituted only in the Superior Court of the State of California in and for the County of Orange or in U.S.
District Court for the Central District of California in or nearest to the County. A default under this
Disclosure Certificate shall not be deemed an event of default under the Trust Agreement, and the sole
remedy under this Disclosure Certificate in the event of any failure of the City to comply with this
Disclosure Certificate shall be an action to compel performance.
SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The
Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall
have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, the Trustee, their officers, directors, employees and agents,
harmless against any loss, expense, cost, claim, suit, judgment, damages and liabilities which it may incur
arising out of the disclosure of information pursuant to this Disclosure Certificate or arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses (including
attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the
Dissemination Agent’s negligence or willful misconduct.
The Dissemination Agent shall be paid compensation by the City for its services provided
hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the
City from time to time and all expenses, legal fees and advances made or incurred by the Dissemination
Agent in the performance of its duties hereunder. The Dissemination Agent may rely and shall be protected
in acting or refraining from acting upon and directions from the City or an opinion of nationally recognized
bond counsel. Neither the Trustee nor the Dissemination Agent shall have any liability to any party for any
monetary damages or other financial liability of any kind whatsoever related to or arising from any breach
of this Disclosure Certificate. No person shall have any right to commence any action against the Trustee
or Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure
Certificate. Any company succeeding to all or substantially all of the Dissemination Agent’s corporate
trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing
of any paper or any further act. The obligations of the City under this Section shall survive resignation or
removal of the Dissemination Agent and payment of the Bonds.
SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent, the Participating Underwriters (Series 2021 Bonds) and Holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
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SECTION 14. Governing Law. This Disclosure Certificate shall be construed in accordance
with and governed by the laws of the State of California applicable to contracts made and performed in the
State of California.
Date: ______ __, 2021
CITY OF HUNTINGTON BEACH
By:
Chief Financial Officer
AGREED AND ACKNOWLEDGED:
KNN PUBLIC FINANCE, as Dissemination Agent
By:
Authorized Representative
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EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Huntington Beach
Name of Bond Issue: City of Huntington Beach (Orange County, California)
Taxable Pension Obligation Bonds, Series 2021
Date of Issuance: ______, 2021
NOTICE IS HEREBY GIVEN that the City of Huntington Beach (the “City”) has not provided an
Annual Report with respect to the above-named Bonds as required by Section 4 of the City’s Continuing
Disclosure Certificate, dated the Date of Issuance. [The City anticipates that the Annual Report will be
filed by _____________.]
Dated:_______________
CITY OF HUNTINGTON BEACH
By: [to be signed only if filed]
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A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
ADOPTING THE CITY’S UNFUNDED ACCRUED LIABILITY PENSION FUNDING
POLICY
The City Council of the City of Huntington Beach does hereby resolve as follows:
WHEREAS, the City currently provides employees with retirement benefits through
CalPERS, a defined benefit pension program; and
WHEREAS, the CalPERS pension system currently stands at being around 71% funded;
and
WHEREAS, in an effort to stabilize the overall pension fund, CalPERS has instituted
new programs that require employers such as the City to accelerate payments to pay-down
existing Unfunded Accrued Liabilities (UAL) account balances; and
WHEREAS, the City currently has an UAL account balance of around $436 million,
which is required to be paid off during the next 23-year period at 7% interest; and
WHEREAS, to decrease overall costs, the City has considered refinancing the repayment
of its UAL account balance to take advantage of historically low interest rates through use of a
Pension Obligation Bond (POB); and
WHEREAS, to institute added fiscal discipline and future financial stability, concurrent
with the development of the refinancing plan, the City has also developed a new financial policy
that would mandate budgetary actions to facilitate the accelerated payoff of any future UAL
account balances that may form; and
WHEREAS, the Unfunded Accrued Liability Pension Funding Policy (the “Policy”) has
been structured to maintain the City’s sound financial position and ensure that all pension
funding decisions are structured to protect both current and future taxpayers, ratepayers,
employees, and residents of the City.
NOW, THEREFORE, the City Council of the City of Huntington Beach does hereby
resolve as follows:
SECTION 1. The City of Huntington Beach Unfunded Accrued Liability Pension
Funding Policy, included as Exhibit A, is hereby approved and adopted.
SECTION 2. Any action to either reduce the mandated savings amount or reduce the
accelerated UAL repayment terms contained in the Policy can only be achieved through a 6/7
vote of the City Council. Staff is further directed to codify terms of the Policy, along with the
6/7 vote requirement.
RESOLUTION NO. 2021-19
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SECTION 3. The City Manager, the City Treasurer, the Chief Financial Officer, and all
other officers of the City are hereby authorized and directed, jointly and severally, to do any and
all things to effectuate the purposes of this Resolution and to implement the Policy, and any such
actions previously taken by such officers are hereby ratified and confirmed.
SECTION 4. This Resolution shall take effect immediately upon adoption.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the ______ day of _______________________, 2021.
REVIEWED AND APPROVED:
________________________________
City Manager
_______________________________
Mayor
APPROVED AS TO FORM:
____________________________________
City Attorney
INITIATED AND APPROVED:
____________________________________
Chief Financial Officer
RESOLUTION NO. 2021-19
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City of Huntington Beach
Unfunded Accrued Liability Pension Funding Policy
PURPOSE
The purpose of this Unfunded Accrued Liability Pension Funding Policy (“Policy”) is to
provide procedures related to fiscal protocols for the City regarding a process to accelerate
the payoff for any Unfunded Accrued Liabilities (“UAL”) that develops as calculated
annually by CALPERS, or for any unfunded accrued liabilities remaining after refinancing
the City’s existing UAL costs through use of a pension obligation bond (“POB”).
This funding Policy is intended to support the decision making process of the City Council
and should be consistent with the overall purpose and goals of the City of Huntington
Beach’s pension plan. As used in this Policy, “City” shall mean the City and/or the City
and its related entities, as the context may require.
The City recognizes that a fiscally prudent Policy should:
Maintain the City’s sound financial position;
Ensure the City has the flexibility to respond to changes in future service priorities,
revenue levels, and operating expenditures;
Protect the City’s creditworthiness;
Ensure that all pension funding decisions are structured to protect both current and
future taxpayers, ratepayers, employees and residents of the City, and;
Ensure that the structure of the City’s POB and future UAL amortization is
consistent with the City’s strategic planning goals, objectives, capital improvement
program, budget, and/or debt policy.
The provisions contained in the “Policy Parameters – Accelerating the Process of Funding
New UAL Growth” section of this Unfunded Accrued Liability Pension Funding Policy can
only be modified through a 6/7 vote of the City Council.
BACKGROUND
The primary goal of funding defined benefit pension plans is to ensure that sufficient assets
will be accumulated to deliver promised benefits when they come due. Establishing sound
funding guidelines promotes pension benefit security.
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Unfunded Accrued Liability Pension Funding Policy, page 2
The City’s overall objective is to fund its CALPERS pension plan up to 100% of the total
accrued liability, and no less than 80%, whenever possible. To date, the City has
established a Section 115 Trust to prefund future pension liabilities. In addition, upon
approval of this Policy, the City intends to create a Pension Rate Stabilization Reserve in
the General Fund, the goal of which will be to maintain additional savings to apply towards
the City’s unfunded accrued pension liabilities. It is the intention of the City to establish
the Pension Rate Stabilization Reserve to allow the City to set-aside funds in the General
Fund to contribute towards the pension plan funded percentage and manage ongoing
pension costs.
The City is committed to fiscal sustainability by employing long-term financial planning
efforts, maintaining appropriate reserve levels, and employing prudent practices in
governance, management, budget administration, and financial reporting. This Policy is
intended to make all relevant information readily available to decision-makers and the
public to improve the quality of decisions, identify policy goals, and to demonstrate a
commitment to long-term financial planning. Adherence to this Policy signals to rating
agencies and the capital markets that the City is well-managed and able to meet its
obligations in a timely manner.
Key factors relevant to the City’s efforts to achieve 80% - 100% funding of its CALPERS
plan include the following items:
The financial position of the City
Stability of the plan and/or the affordability of the annual contributions
Benefit security
The terms of the CALPERS contract for Huntington Beach, along with any related
collective bargaining agreements
Minimum funding requirements under State law
There are a number of advantages to developing a funding policy to address an unfunded
accrued pension liability. These advantages include the following:
Provides the framework to ensure the proper management of future liabilities and to
minimize the effects on operations. The adoption of a funding policy will ensure a
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Unfunded Accrued Liability Pension Funding Policy, page 3
disciplined decision making process, which will contribute to better predictability in
funding.
Having a written summary of the funding policy that is accessible to employees and
the public will help improve the transparency of funding decisions and increase the
understanding of pension funding issues.
The exercise of developing this funding policy improves the identification,
understanding, and management of the risk factors that affect the variability of
funding requirements and the security of benefits to the employees and retirees.
POLICY PARAMETERS – ACCELERATING THE PROCESS OF FUNDING NEW UAL
GROWTH
Every June 30th, CALPERS will complete a new actuarial valuation report and will calculate
the City of Huntington Beach’s pension liability as of the new valuation date. If the value of
the funded assets is not equivalent to this new liability amount, the City will incur a new
unfunded accrued liability at that point in time. The unfunded accrued liability may increase
or decrease from year to year, due to the following factors:
Changes in actuarial assumptions and experience changes (e.g., changes in the
discount rate, changes in demographic experience, etc.)
Changes in actuarial gains and losses due to asset returns being higher or lower than
expected
Changes in plan benefits
Changes in number of employees participating (Classic/PEPRA), employee pickup
of plan contributions, etc.
Due to the possibility of new UAL pension liabilities developing in the future, the City of
Huntington Beach is working to create a UAL Pension Funding Policy in order to address
any new pension liabilities, or amortization bases, that may arise on an annual basis.
Of note, any new increase or decrease in the liability resulting from the annual actuarial
valuation is identified as a separate line item, or amortization base, on the annual
CALPERS actuarial valuation report. To address that matter, the City’s UAL Pension
Funding Policy will incorporate the following programmatic components:
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Unfunded Accrued Liability Pension Funding Policy, page 4
Minimum Annual Contribution of $1M to the City’s Section 115 Trust
In December 2015, City Council approved the establishment of an irrevocable
Section 115 Trust with PARS, through which the City can pre-fund its pension
obligations. The Section 115 Trust allows the City to build its pension reserve while
maintaining oversight of investment management and control over the risk tolerance
of the portfolio. As part of the UAL Pension Funding Policy, unless set aside by a
6/7th vote of the City Council, the City will be required to set aside no less than $1M
annually into the City’s Section 115 Trust. Further the trust assets shall be restricted
and may only be accessed to pay CALPERS costs to reduce volatility and offset
unexpected pension rate increases.
Perpetual Set-Aside of 50% of Pension Refinance Savings
The City will realize an estimated savings of $978,000 in the first year of refinancing
its UAL pension debt, as determined by comparing year one of the preliminary POB
debt service payment against the actuarially determined UAL payment made to
CalPERS included in the City’s audited Fiscal Year 2019/20 CAFR. Unless set-aside
by a 6/7th vote of the City Council, 50% of that savings amount, or $489,000, will be
budgeted on an annual basis for deposit into the City’s Section 115 Trust to offset
any future UAL costs that arise. This amount is over and above the $1M minimum
annual contribution to the City’s Section 115 Trust, and shall be adjusted each year
by the annual Consumer Price Index for All Urban Consumers, all items, 1982-84
equals 100, as published by the United States Department of Labor, Bureau of Labor
Statistics, for the Los Angeles/Long Beach/Anaheim Area.
Establish an Additional Annual 50% Set-Aside of any General Fund Surplus
Into a Restricted General Fund Pension Rate Stabilization Reserve
Annually, unless set aside by a 6/7th vote of the City Council, the UAL Pension
Funding Policy will require that the City set aside a minimum of fifty percent (50%) of
any annual General Fund surplus into a City’s General Fund Pension Rate
Stabilization Reserve. Further any funds placed into the City’s General Fund Pension
Rate Stabilization Reserve shall be restricted and may only be accessed to pay
CALPERS costs to reduce volatility and offset unexpected pension rate increases.
Accelerate the Payoff/Funding of New UAL
The table below lays out the City’s parameters for accelerating the payoff of new
pension UAL in a designated amount of time, based on the amount of any annual
UAL growth:
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Unfunded Accrued Liability Pension Funding Policy, page 5
New Unfunded Accrued Liability
(Any new liability incurred after the
June 30, 2019 valuation report )
Payoff Time Period
$0 to $5,000,000 Within 1 to 5 years
$5,000,001 to $10,000,000 Within 5 to 7 years
$10,000,001 to $15,000,000 Within 7 to 9 years
$15,000,001 to $20,000,000 Within 9 to 10 years
$20,000,001 or more Within 10 to 15 years
Repayment of newly incurred UAL pension liability in accordance with the above
schedule would be funded from balances available in the Section 115 Trust or
General Fund Pension Stabilization Reserve, or from an additional allocation to be
made through the City’s budget process, unless set aside by a 6/7th vote of the City
Council.
Annual Assessment of Additional Discretionary Payments to be Made to
CalPERS
Additional Discretionary Payments (“ADP”) may be deposited with CALPERS at any
time. After completion of the City’s annual audit, all discretionary fund reserve
balances will be reviewed by City staff. Based on any budgetary constraints at that
time, an assessment should be coordinated to determine the cost / benefit of utilizing
any available reserves or one-time savings from the prior fiscal year to make an
ADP’s. ADP's should not aversely effect the general operations of the City. ADP’s
could be deposited with CalPERS, invested in the City’s Section 115 trust, or set-
aside in the General Fund Pension Rate Stabilization Reserve.
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