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Year-End Audit Results for the FY 2022/23 Annual Comprehensi
�6jiN`T 2000 Main Street, �, oy Huntington Beach,CA � .� x ��� City of Huntington Beach 92648 9 ''"' 4 APPROVED 7-0 File #: 24-195 MEETING DATE: 3/19/2024 REQUEST FOR CITY.COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Eric G. Parra, Interim City Manager VIA: Sunny Han, Chief Financial Officer PREPARED BY: Sunny Han, Chief Financial Officer Subject: Year-End Audit Results for the FY 2022/23 Annual Comprehensive Financial Report (ACFR), Fiscal Year 2023/24 Budget Update, and Fiscal Year 2023/24 Mid-Year Budget Adjustments Statement of Issue: Fiscal Year 2022/23 Year-End Audit Results The City received an Unmodified (Clean) Audit Opinion for the City's Fiscal Year (FY) 2022/23 Annual Comprehensive Financial Report (ACFR), which is the highest audit result attainable. In addition, the Government Finance Officers Association awarded their Certificate of Achievement for Excellence in Financial Reporting to the City for the 37th consecutive year. Included as an attachment is the FY 2022/23 ACFR to receive and file. Fiscal Year 2023/24 Budget Update and Mid-Year Adjustments The Finance Department has prepared a mid-year budget review for the fiscal year that began on July 1, 2023. In interfacing with operating departments, budgetary requests have been assessed across all City departments, and certain adjustments are being recommended based on available resources in the General Fund, through grants and/or restricted funds. Financial Impact: Fiscal Year 2023/24 Mid-Year Adjustments 1. General Fund (100) budget adjustments are requested as follows: a. Community & Library Services Department - funding for contract class instructors ($246,187) offset by additional recreation fee revenues for a net zero impact. b. Fire Department - funding for Fire Strike team reimbursement costs ($480,000) offset with strike team reimbursement revenues for a net zero impact and emergency medical supplies ($117,000) offset with emergency medical services revenue for a net zero impact. City of Huntington Beach Page 1 of 4 Printed on 3/13/2024 powerenli LegistarTM' File #: 24-195 MEETING DATE: 3/19/2024 2. The Public Works Department is requesting additional appropriations of$7,350 in the Local Road Safety Plan (LRSP) Grant Fund 1272 offset with additional grant revenue for a net zero impact. There are sufficient revenues, cash, and/or fund balances to support the above referenced adjustments. Recommended Action: A) Receive and File the FY 2022/23 Annual Comprehensive Financial Report and other auditor- issued reports; and, B) Approve mid-year budget adjustments to the FY 2023/24 Revised Budget in the funds and by the amounts contained in Attachment 3. Alternative Action(s): Do not approve the recommended action(s) and direct staff accordingly. Denial of Mid-Year budget adjustment requests would result in insufficient funding for critical areas and potential loss of grant funding. Analysis: Fiscal Year 2022/23 Year-End Audit Results Auditing firm Davis Farr LLP (Auditors) audited the City's financial statements and internal control for the FY 2022/23. The City received an Unmodified (Clean) Audit Opinion for the FY 2022/23 Annual Comprehensive Financial Report (ACFR), which is the highest opinion possible (Attachment 1). In addition, the Auditors issued the following reports (Attachment 2): • AU-C 260 Letter: Auditor's Communications with Those Charged with Governance • Appropriations Limit Agreed-Upon Procedures • Air Quality Management District (AQMD) Report Fiscal Year 2023/24 Budget Update The City ended FY 2022/23 with a $3.7 million General Fund surplus, after year-end transfers of $12.62M to partially fund unfunded liabilities (Workers' Compensation, General Liability, Retirement Supplemental) and Infrastructure needs. For FY 2023/24, after 29 months of post-pandemic jobs growth in California, employment growth was flat in September 2023 and declined in October 2023. California consumers and businesses are spending less, while also shifting their spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. As a result, FY 2023/24 General Fund sales tax revenues are projected to decline by approximately $1.3 million. Utility tax and franchise fee City of Huntington Beach Page 2 of 4 Printed on 3/13/2024 powered' f LegistarT^^ File #: 24-195 MEETING DATE: 3/19/2024 revenues are also lower than the prior year due to one-time natural gas spikes during FY 2022/23. In spite of these challenges, property tax revenues, the City's largest General Fund revenue source (36.7%), continues to remain strong, with revenue projected to be slightly above the adopted budget due to increased supplemental property taxes. The City is expected to end FY 2023/24 with a $2.0 million surplus, including the mid-year budget items proposed within this report. General Fund Five-Year Financial Forecast: Revenue{Recurring) 281,337 282,969 287,221 294366 301718 309,310` Revenue.ane Time)* 31380 2 276 r Planned,Use of Reserves - 8,804, - Total Sources of Funds, ' 312,717 294,049? 287,221' ' 294,366 401,718 309,310 Expenditures less UAL 254,720 264,960 269,807 281 813 290,201 297,443 , GaIPERStAL €T 4,891 5,000 5,223 8981 12,727gww 16,458 POB Payment 13,663 13,276 13,010 12,750 12,537 12,537 One Time`Expenditures 18 721F 8 804 Total Expenditures 291,995 292,040 288,040 303,544 315,465 326,438 RestrictedNReserves { 16,978` 1 surplus/(Deficit) $3,744. $2,009 ($819) ($9,178)• ($13,747) ($17,128) The Five-Year Financial Forecast above shows the balance of General Fund expenditures for five fiscal years following the audited fiscal year ended June 30, 2023. The revenue projections include updated assumptions based on economic trends and the most recent projections by sales tax and property tax experts. The expenditure projections include the future impacts of the FY 2021/22 CaIPERS investment return of-7.5 percent and FY 2022/23 investment return of 6.1 percent and assume a 6.8 percent rate of return thereafter (the CaIPERS discount rate). As CaIPERS investment gains and losses are amortized over 20 years with a five-year ramp up, only the first three years of the -7.5 percent return are shown in the Five-Year Forecast. The projections for future fiscal years also include increased expenditures for Worker's Compensation based on the increased cost of claims due to rising medical costs and an expanded list of injuries that are presumed to be work related under California law, as well as the increased cost for General Liability premiums based on the national trend of rising cyberthreats, natural disaster losses and growing number of insurers withdrawing from California and from writing,public entity liability. Fiscal Year 2023/24 Mid-Year Adiustments The FY 2023/24 Budget was adopted by City Council on June 26, 2023, for the fiscal year beginning July 1, 2023. The Finance Department has compiled recommended budget adjustments to cover additional costs and/or provide appropriations necessary to expend funds that have been received for specific purposes. The City has received revenues that will support the requested adjustments in the General Fund. The Other Funds adjustment will be funded by available grant revenue. City of Huntington Beach Page 3 of 4 Printed on 3/13/2024 powere314 LegistarT"' File #: 24-195 MEETING DATE: 3/19/2024 General Fund The Community & Library Services Department is requesting appropriations to meet increased demand for recreational and Art Center class contract instructors ($246,187). These costs will be offset by additional recreation fee revenues, resulting in a net zero impact to the General Fund. The Fire Department participates in the California Fire and Rescue Emergency Mutual Aid System, and the department has responded to multiple mutual aid requests to assist in major fires over the past years. The State of California will fully reimburse Huntington Beach for all allowable Strike Team expenditures and will reimburse an additional 14.57% administrative rate applied to these allowable expenditures. The Fire Department has incurred $480,000 in Strike Team expenditures for FY 2023/24 so far. Since there is no annual appropriation for this business unit, given that Strike Team costs are unknown until costs are incurred, the Fire Department is requesting a budget appropriation of$480,000, which will be fully reimbursed by the State. To meet the operational demands of increased vendor prices and increased medical calls, the Fire Department is requesting a budget appropriation of$117,000 for emergency medical supplies. Additional emergency medical service revenues are anticipated to offset the added costs. Other Funds Local Road Safety Plan (LRSP) (Fund 1272) The City was awarded $147,000 in State grant funds in September 2021 for development of a Local Road Safety Plan. To date, $139,650 of the total grant award has been appropriated. Staff is requesting appropriation of the remaining grant funds in the amount of$7,350. There are sufficient offsetting grant revenues, resulting in a net zero impact. Environmental Status: Not applicable Strategic Plan Goal: Non Applicable -Administrative Item Attachment(s): 1. FY 2022/23 Annual Comprehensive Financial Report (ACFR) 2. Other Auditor Issued Reports 3. Fiscal Year 2023/24 Recommended Mid-Year Adjustments 4. FY 2023/24 Budget Update and Mid-Year Budget Adjustments Presentation City of Huntington Beach Page 4 of 4 Printed on 3/13/2024 powere3t*LegistarTM CITY OF HUNTINGTON BEACH Cillflfftou llcoi , 0 HUNTINGTON BEACH CIVIC CENTER — Nil _ t } � i .i Ii. a ' i i F 1 1 a ' 1, .c #..-, t :, ,." a4 „,. :,.. Ft, �..,, Annual Comprehensive Financial Report _ _ „ , , , ..„,„.. i ,. ilit .1 ... N. ,-4 ,.:xz _-v-•«'_✓"M1" '` - ` - sac ' k ; Y t # !i r r. �; "4 i s r s t _• C ' t"" ) 1 /�i r 1 _ a For The Fiscal i/fz,' '1.I NS 70 if Year Ended c't�` 'Sz�y . June 30, 2023 9 �- r= 'COUNTY P;/," CITY OF HUNTINGTON BEACH, CALIFORNIA STING `® /® �� ®..s®,®o se TO e�®� vo•g-Nr:IV=p: R i oso <53 • Lk, 144 / ms® 000a'�g • Pa .! OA y 11%' V<s eo6 17, j 90S,le `< // UNTN 401/ ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED J U N E 30, 2023 Prepared by the Finance Department 316 THIS PAGE INTENTIONALLY LEFT BLANK 317 INTRODUCTORY SECTION 318 THIS PAGE INTENTIONALLY LEFT BLANK 319 City of Huntington Beach Annual Comprehensive Financial Report For the Year Ended June 30, 2023 TABLE OF CONTENTS INTRODUCTORY SECTION Table of Contents Letter of Transmittal iii-x City Officials xi Organizational Chart xii Certificate of Achievement in Excellence in Financial Reporting xiii FINANCIAL SECTION Independent Auditor's Report 1-4 Management's Discussion and Analysis (Required Supplementary Information) 5-21 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 23 Statement of Activities 24 Fund Financial Statements: Balance Sheet—Governmental Funds 25 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 26 Statement of Revenues, Expenditures and Changes in Fund Balances—Governmental Funds 27 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 28 Statement of Net Position— Proprietary Funds 29 Statement of Revenues, Expenses and Changes in Fund Net Position— Proprietary Funds 30 Statement of Cash Flows— Proprietary Funds 31 Statement of Fiduciary Fund Net Position—Fiduciary Funds 32 Statement of Changes in Fiduciary Fund Net Position— Fiduciary Funds 33 Notes to Financial Statements 34-117 Required Supplemental Information: Notes to Required Supplementary Information 120 Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget And Actual—General Fund 121 Schedule of Revenues, Expenditures and Changes in Fund Balance— Budget And Actual—Grants Special Revenue Fund 122 Schedule of Changes in the Net Pension Liability and Related Ratios 123-125 Schedule of Changes in the Net OPEB Liability and Related Ratios 126 Schedule of Contributions 127-129 Schedule of Money Market Weighted Rate of Return 129 Schedule of Contributions for the OPEB Plan 130 i 320 FINANCIAL SECTION (Continued) Supplementary Information: Combining and Individual Fund Statements and Schedules: Combining Balance Sheet—Other Governmental Funds 133-136 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Other Governmental Funds 137-140 Schedule of Revenues, Expenditures, and Changes in Fund Balances— Budget and Actual—Other Governmental Funds 141-149 Statement of Net Position— Internal Service Funds 151 Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds 152 Statement of Cash Flows— Internal Service Funds 153 Combining Statement of Fiduciary Fund Assets and Liabilities 155 Combining Statement of Changes in Fiduciary Net Position 155 . STATISTICAL SECTION Net Position by Component— Last Ten Fiscal Years 157-158 Changes in Net Position— Last Ten Fiscal Years 159-160 Fund Balances—Governmental Funds— Last Ten Fiscal Years 161 Changes in Fund Balances—Governmental Funds— Last Ten Fiscal Years 163-164 Assessed and Actual Valuation of All Taxable Property (Excluding Redevelopment Agency)- Last Ten Fiscal Years 165 Property Tax Rates—All Direct and Overlapping Government Tax Rate 04-001 Largest Area in City— Last Ten Fiscal Years 165 Property Tax Levies and Collections— Last Ten Fiscal Years 166 Top Ten Property Tax Payers—Current Year and Nine Years Ago 167 Ratios of Outstanding Debt by Type—Last Ten Fiscal Years 169-170 Legal Debt Margin— Last Ten Fiscal Years 171 Statement of Direct and Overlapping Bonded Debt 172 Principal Private Employers—Current Year and Nine Years Ago 173 Full-Time Actual and Budgeted City Employees by Function/Program— Last Ten Fiscal Years 174 Operating Indicators by Function/Activity— Last Ten Fiscal Years 175-176 Capital Assets Statistics by Function/Activity 177 • 321 F- ° • CITY OF HUNTINGTON BEACH December 21, 2023 Honorable Mayor, City Council and Citizens of the City of Huntington Beach: In accordance with the requirements of the City Charter, and the City of Huntington Beach's ongoing commitment to transparent financial reporting, I am pleased to present the Annual Comprehensive Financial Report (ACFR) for the year ended June 30, 2023. As required by the City Charter, and to ensure the reliability of the information contained herein, the City of Huntington Beach (the City) contracted with independent auditing firm Davis Farr LLP. The goal of the audit was to provide reasonable assurance that the City's financial statements are free from material misstatement. In addition, Davis Farr LLP audits the City's major program expenditures of federal grants for compliance with Title 2 of the United States Code of Federal Regulations Part 200 (Uniform Guidance). The Single Audit Report is published separately from this ACFR and may be obtained upon request from the City's Finance Department. This report consists of management's.representations concerning the City's finances. As such, management assumes full responsibility for the completeness and accuracy of the information presented in this document and ensuring it is reported in a manner that fairly presents the financial position and operations of the various funds of the City. To provide a reasonable basis for making these representations, and assurance that the financial statements will be free from material misstatement, management has established a comprehensive internal control framework that is designed to both protect the government's assets from theft, loss, or misuse and to compile sufficient reliable information for financial statement conformity with Generally Accepted Accounting Principles (GAAP). As the cost of internal controls should not outweigh their benefits, the City's comprehensive framework of internal controls has been designed to provide reasonable assurance rather than absolute assurance that the financial statements will be free from material misstatement. We are pleased to report that Davis Farr LLP granted the City an unmodified (clean) opinion for the financial statements of the City for the year ended June 30, 2023. The auditor's opinion can be found in the Financial Section of this report. GAAP requires that management provide a narrative introduction, overview and analysis to accompany the financial statements in the form of a Management Discussion and Analysis (MD&A). This transmittal letter is designed to complement and should be read in conjunction with it. The MD&A can be found immediately following the independent auditor's report. 111 322 Profile of the City of Huntington Beach The City of Huntington Beach is home to a thriving beach community, located on the Orange County coast, 35 miles south of Los Angeles and 90 miles north of San Diego. With a population of 194,310 residents, it is known as Surf City due to its abundance of beaches; the year-round sunny and warm Mediterranean climate; and its casual lifestyle. With over 10 miles of coastline and iconic pier spanning 1,856 foot in length- the longest pier on the West Coast- Huntington Beach plays host to over 16 million visitors annually. As the fourth largest city in Orange County, and the 23rd largest in California by population, Huntington Beach is recognized as a prime location to live, work and play, ranking #1 in the nation for "Quality of City Services" and #21 for "Best-Run City" in the State of California by WalletHub (June 2023). Huntington Beach was also ranked one of the top ten "Best City for People with Disabilities" by WalletHub (September 2023). The City boasts an annual median household income of $104,728, 52 percent higher than the median household income for the United States, 25 percent higher than the State of California and 4 percent higher than Orange County. In addition,45 percent of its residents have a college education. There are over 103,000 people employed by public and private entities in Huntington Beach. Founded in the late 1880s, Huntington Beach was incorporated as a Charter City in 1909. Huntington Beach has a Council/Manager form of government wherein seven City Council members are elected to four-year terms, and the Mayor is filled on a rotating basis from the incumbent Council Members. The City Attorney, City. Clerk and City Treasurer positions are also elected and serve four-year terms. The City of Huntington Beach is a full-service city including police, fire, public works, and other key functional departments with a dedicated and talented team of over 1002 full-time employees. In 2011, the unincorporated oceanfront community of Sunset Beach was officially annexed by the City of Huntington Beach. Sunset Beach is a small beachfront community with approximately 1,000 residents and 1.5 square miles of land. Beachfront properties with high property values make this community a valuable addition to the City. Sunset Beach features one of the widest and most pristine beaches in Southern California and is home to the historic Sunset Beach Arts Festival. A thriving beach community, Huntington Beach is home to numerous events, including the Great Pacific Airshow — the only beachfront airshow on the West Coast featuring the U.S. Air Force Thunderbirds, U.S. Navy F-35C Demo Team, Canadian Forces Snowbirds, and many others. This unique airshow, which first premiered in October 2016, has gained tremendous popularity and attracts visitors from all over the world to view the three-day event. The City's century-old traditional Fourth of July Fireworks Show and Parade, known nationally as "the largest Fourth of July Parade west of the Mississippi," spans over a five-day period that includes a Main Street Block Party with free live music, carnival rides, and other family-friendly activities, Surf City 5K Run, and spectacular fireworks show overlooking the pier. The City also hosts a variety of other exciting events for families and visitors such as the annual Concours d'Elegance, Civil War. Days, International Surfing Association (ISA) World Surfing Games, and other events. In November 2023, the inaugural Darker Waves beachfront music festival featuring New Order, Tears for Fears, the B-52s, and others, performed to a sold-out crowd of 30,000. iv 323 Economic Condition and Outlook Coming off the heels of the COVID-19 pandemic, there are several, reasons to reflect on the measures taken over the past couple years to protect the City's finances. Through the leadership and support of the City Council, the City implemented significant cost saving measures, including a Citywide Separation Incentive Program and reorganization plan, refinancing the City's pension debt, and proactive Budget Balancing Plan. Looking ahead, economic indicators point to recession. Although home sales during the pandemic resulted in a $2.9 billion increase in assessed property valuations, supply chain shortages and inflationary pressures on normal business activities set the tone for economic conditions within the next few years. Increases in utility rates such as electricity and gas contribute to a rise in projected Franchise and Utility Users Tax revenues, which help to balance the overall economic impact. The City of Huntington Beach continues to thrive together through the motto "OneHB," which reflects the City's commitment to facing the potential upcoming recession created by inflationary conditions and supply chain shortages guided by the following principles: • To stay committed to being One Team: working together to serve the people of Huntington Beach exceptionally to inspire pride in the community. • Work to have One Focus: to stay fanatical about achieving municipal excellence by being active caretakers of our unique, people-centric HB culture. • Continue to pursue One Goal: to ensure that HB continually improves its standing as a premier coastal community as measured through the health of our people, our organization, our infrastructure, and our community. • Property Tax The City of Huntington Beach's assessed valuations are very strong, reflecting both new development and increased property values. The City's Fiscal Year 2023/24 assessed property value grew 5.6 percent to $53.1 billion. This solid performance, coupled with steady year-over- year growth, reflects a stable property tax base that can weather steep declines in real estate markets. Over 60 percent of parcels have an assessed valuation (AV) base year prior to 2004, representing a significant amount of untapped AV. For Fiscal Year 2021/22, secured property tax revenue collections totaled $62.9 million. For Fiscal Year 2022/23, secured property taxes totaled $68.5 million, reflecting a 9 percent increase. V 324 City of Huntington.Beach Total AssessedValuation, Fiscal Years.2014f 15 2023/24 (in billions) $60.0~ $55.0 $53.2 $50,3 $50.0 $461 $47 3 $45.0 $43 8 , ,,, $40 0 17773 $37 5 $39 4. , ,� 1G 1a` , $34.3 $36.7 �p 4 . , K v r j 1. zk,--: Tig,$20.0 3*i 04,4,4! it 41,4' ,,,,,,,, „k, ,,,,,,.... ,..,:. ,,,,,, :„! ,„,....„,.. .. , , , ,,,1 1,P. ,./ $15.° ‘N,..''''''4: '1. ' t °V.* .t.teri 't.'''t .,i.i"''''.' l'7 ', „:.t .; °,. 10.0 •' 's e a - `$5.0 �, , • �: t by ^sh V d . - 2014/15 2015/16 2016/17 2017/18 2018/39 2019/20 2020/21: 2021/22 2022/23 2023/24 Sales Tax Huntington Beach's business community is well-diversified with no single industry or business dominating the local economy. Local businesses include aerospace and high technology, petroleum, manufacturing, computer hardware and software, financial and business services, hotel and tourism, automobile services, large-scale retailers, and surf apparel. The City's diverse sales tax base makes it a stable source of revenue and mitigates the impact of industry- specific downturns as shown below. City of Huntington Beach Composition of Sales Tax Revenue Fiscal Year 2022/23 Other State and County 50k Autos and Pools 16% Transportation 0,1 22% 3 5 t 44 $ Building and Construction h rti. 7% Restaurants and eg: . „', H 5 dos1 Business and p44n. a Industry General Consumer Fuel and Service Goods Stations 18% 8% V1 325 City of Huntington Beach 'Historical SalesTax'Revenue' $55.0 $53,+ $52,6 ti C a $50.0 $47.7 „s s, d 545,0 $439 $404 $411 . 540.0 361 a x (4.° S ti ,1 .., $31.. .. � e. e 5 0.$30.0. _$27,2. :�a ,,5' .~ $25,0 . a. saw tea , $20.0 . . ° 5'15:Q. .. _ " _ $10.Q, SS.rr. 50.0 2013/14 .2014/15- 2015/16 2016/17 2017/18* 2018/19 2019/20 2020/21 2021/22 2022/23 'Fiscal Year 2017/18 reflects nine months of data only due to the change in the City's fiscal year Transient Occupancy Tax(TOT) Transient Occupancy Tax (TOT), a 10 percent tax applied to hotel stays within the City remains strong. The City collected an impressive $17.3M in TOT revenues during FY22/23, reflecting a $1.6M, or 10 percent increase, affirming Huntington Beach's Status as a premier vacation destination. FY 2022/23 includes the first full fiscal year of TOT revenues from the City's Short- Term Vacation Rental Program totaling $971k. City of Huntington Beach Transient-Occupancy Tax-Revenue. $20.0, 'slam 517.3. $16.0 $15.8 $14,0 .<°s $14.0 n $11.4 1 $12.0 ° 0 $10.0 x, .. x S10,4' $1fl.0' $8.4 $9.2. $ S9 b: r^. 11 $80 $6.0 .. .. $4.0, . $20° , $0.0 2013/14 2014/15 2015/16 2016/17 2017/18* 2018/19 2019/20. 2020/21 2021/22 2022/23 *Fiscal Year 2017/18 reflects nine months of data only due to the change in the City's fiscal year. Vii 326 Budget Development and Monitoring The budget is prepared under the supervision of the City Manager and transmitted to the City Council for deliberation at least 30 days prior to the end of the fiscal year. Pursuant to the City's Charter, the City Council must adopt the annual budget by June 30th and may amend or revise it any time at a properly noticed meeting. Budgetary control is at the Department level within each fund and a Department Head, with the Chief Financial Officer's approval, may transfer funds within like categories (operating and capital expenditures) of the same Department. The transfer of funds for salaries and benefits requires additional approval by the City Manager or his designee. Cash Management Policies and Practices Surplus cash is invested by the elected City Treasurer, in investments allowed by the City's Investment Policy. The Investment Policy is adopted annually by the City Council after approval by the Investment Advisory Board. It outlines guidelines to meet the daily cash flow needs of the City, maximize the efficiency of the City's cash management system, and identifies prudent investment vehicles for cash balances. The rate of return earned for the year ended June 30, 2023 was 1.78 percent. The City Treasurer, as required by California Government Code 53601, has prepared an annual Statement of Investment Policy which allows the City to meet current obligations while earning a market rate of return. Further information regarding the City's cash and investments can be found in Note 2 of the financial statements. Long-Term Financial Planning and Major Initiatives The Strategic Goals provides the framework for the goals and objectives of the City. The City Council held a Strategic Planning Workshop on June 8, 2023, establishing eight goals to achieve over the next four years. The 2023-2027 Strategic Plan, approved by City Council on October 3, 2023, includes the eight Strategic Goals listed below to achieve over the next four years: • Economic Development—greater business retention, investment and job growth in the City. • Fiscal Stability— available funding to support a high-quality level of programs, services and capital investments and to build a structural surplus. • High Performing Organization— an engaged City workforce committed to responsive and exceptional public service for all. • Homelessness—A continuum of care that reduces homelessness and maintains quality of life for the entire community. • Housing — proactive programs to address diverse housing needs within the City's jurisdiction. • Infrastructure Investment — maintain and upgrade infrastructure that supports the community's day-to-day needs in accordance with the City's Infrastructure Report Card. • Public Engagement— a community that has easy access to clear, accurate, and timely City information and expresses increased awareness and involvement in City activities. • Public Safety — Ensure the safety and protection of all community members, both efficiently and effectively. viii 327 The goals drive both short and long-term budgetary decisions and the daily operations of the City by ensuring everyone is consistently working to achieve the goals outlined in the Strategic Plan. "One Stop Shop" The City is in the process of developing a "One Stop Shop" to facilitate the permitting process. The new "One Stop Shop" will streamline the permitting process and provide applicants with a comprehensive checklist to complete the necessary steps to obtain permits. The "One Stop Shop" approach aims to make the permitting process more efficient so that businesses and residents experience quicker and easier access to obtain permits for business licenses, short- term rentals, and building permits. Infrastructure Report Card Infrastructure provides essential services and affects quality of life for all Huntington Beach residents; to sustain these critical systems, it is important to routinely assess them. The City is preparing an Infrastructure Report Card (IRC) that will serve as a high-level summary to highlight the current condition of the City's Infrastructure. This report card will assign grades (A- F) to various infrastructure categories, communicating the status of each and identifying priorities for improvement. The project structure is made up of three separate committees including the Outreach and Communications Committee. The Outreach and Communications Committee is comprised of approximately 100 Huntington Beach residents appointed by the City Council and/or are recognized members of the community who will act as ambassadors of this process through their networks. This will promote resident participation, education, and awareness of the project both during the assessments and after the final report is released. Assessments began in August 2023 and the final report is anticipated to be publicly released in late April 2024. Joint Youth Training Center On November 16, 2023, the City's Police and Fire Department broke ground on the new Joint Youth Training Center (Training Center) which will replace the existing 50-year old Search & Rescue structure. This state-of-the-art Training Center will be home to the City's Fire & Police Explorer Program. Opening in late 2024, this facility will provide a much needed space to train the City's future public safety leaders. In 2021, the Huntington Beach Search and Rescue Explorer (HBSAR) program was reorganized and shifted its focus to provide the proper training in the different disciplines. As a result, the HB Police Explorer and the HB Fire Explorer programs were created to provide the youth with more experience and extensive training. The revamped Explorer programs are vital in teaching the City's youth not only the technical skills necessary to pursue a career in public safety, but also leadership and character building that will benefit the youth regardless of what career path they choose to pursue. CivicRec Migration On March 7, 2023, the Community & Library Services Department, in collaboration with the Information Services and City Treasurer Departments, successfully launched CivicRec, a new recreation registration software for the City's programs and activities. Preceeding the launch, a marketing campaign encouraged customers to create CivicRec accounts for spring and summer activity registration. Despite the time-sensitive nature of the project, it was executed ix 328 successfully, with $618,956 in transactions received on the first day, exceeding expectations. The number of transactions for instructional classes alone increased by 49% from Spring 2022, and online transactions saw more than a 10% increase, indicating positive user experiences with the user-friendly registration software. Awards and Acknowledgements The City of Huntington Beach has once again received the "Certificate of Achievement for Excellence in Financial Reporting" award bestowed by the Government Finance Officers' Association (GFOA) of the United States and Canada for the 37th consecutive year. Receipt of the award requires government entities to publish transparent, easily readable and efficiently organized Annual Comprehensive Financial Reports, conforming to program, accounting, and legal standards. The Certificate of Achievement earned for the fiscal year ended June 30, 2022, is valid for one year only. The City believes that this Annual Comprehensive Financial Report continues to conform to the Certificate of Achievement Program requirements and will be submitted to the GFOA for its consideration for another award. I wish to thank the City Council, City Manager, and City Departments for their continued diligence in their role as fiscal stewards for the City of Huntington Beach. Without their leadership and support, the favorable financial results contained in this report would not have been possible. I would also like to thank the Finance Commission, a seven-member body appointed by the City Council, which has been instrumental in helping the City maintain its long term goal of financial sustainability. The preparation of this report would also not have been possible without the professional dedicated staff of the Finance Department. Specifically, I would like to thank Zack Zithisakthanakul, Ian Wuh, Tara Mukund, Ming Zhai, Thuy Vi, and Shari Saraye for their hard work and dedication. Respectfully, Sunny Han Chief Financial Officer x 329 City of Huntington Beach City Council Gracey Van Der Mark, Mayor Pat Burns, Mayor Pro Tern Rhonda Bolton, Councilmember Casey McKeon, Councilmember Dan Kalmick, Councilmember Natalie Moser, Councilmember Tony Strickland, Councilmember Executive Team Eric Parra, Interim City Manager Travis Hopkins, Assistant City Manager Elected Department Heads Alisa Backstrom, City Treasurer Robin Estanislau, City Clerk Michael Gates, City Attorney Department Directors Sunny Han, Finance Chau Vu, Public Works Chief Scott Haberle, Fire Chief Eric Parra, Police Jennifer Villasenor, Community Development Theresa St. Peter, Interim Human Resources Director Ashley Wysocki, Community & Library Services Xi 330 CITY OF HUNTINGTON BEACH FY 2023,-24 Organizational Char THE PEOPLE OF HUNTINGTON BEACH CITY CITY CITY COUNCIL ' CITY i ATTORNEY CLERK Mayor TREASURER Mayor Pro-Tempore Advisory Adm in,Public City Council Members Investments, suport, Elections - - _ Litigation Records Revenue Management- Services * Ott 144naB9T Community Prosecution. , .. ASsi,Staht. 1 artage , .7,- I , - - ---7,,--4. , ,' : 1- ;' •, - '' .tommlittitY80' .. ' Police call?IPtInitY ' Public Works , .-Fire ' Libinty svcs ' ' ,, Developirlent' i", - Administrative planning 1 Maintenanceg Prafesioill.al FacHitie,s 8r Operations Operations = Standards Events Communications H°0"16laciisisontes &6h -- &ItiVilf 1 Health Services Permit 1 Emergency Programs& , Investigations Utilities , 1 --- - I : Response Services1 _ .. ---- ] Counter Patrol : Building Transportation Cu 1 Marine ., Libra & !, City Council . •1 Sustainahi Ii ty , c Safety ,' ltural rySvcs ' Support 1 _ Special 1 Housing Engineering Operations 1 I Support 1 Code -Finance, , ,, ' -ge,sfinorn-iiiacnis„: , l' 'lbsfoe:rAgis,on . Services 1 Enforcement =..i. Economic : Developinent Accounting Recruitment& i infrastructure - Services Selection , 1 Systems ' Budget • Benefits& ec °° Y .. Engagement& , Management , Training Support Business Labor ' Business Ucense . Relations Applications , Risk IlliElected OfficesManagement 1 Appointed Departments xii 331 410 6 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to city of Huntington Beach California For its Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 Executive DirectoriCE0 Xiii 332 THIS PAGE INTENTIONALLY LEFT BLANK 333 FINANCIAL SECTION 334 1DavisFarr Davos Farr LLP 18201 Von Karman Avenue Suite 1100 I Irvine,CA 92612 CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 I Fax:949.263.5520 Independent Auditor's Report City Council City of Huntington Beach Huntington Beach, California Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Huntington Beach (City), as of and for the year June 30, 2023, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Huntington Beach as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Emphasis of Matter As described further in Note 11 (10) to the financial statements, during the year ended June 30, 2023, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Agreements. Our opinion is not modified with respect to this matter. 335 1 Responsibilities of Management for the Financial Statements The City's management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for one year after the date that the financial statements are issued. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. 336 2 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information and pension and other post employment benefit schedules be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the Comprehensive Annual Financial Report. The other information comprises the introductory section and statistical section but does not include the financial statements and our auditor's report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. 337 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2023 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. 12) 'l '"pr , Le Irvine, California December 21, 2023 ' 338 4 MANAGEMENT DISCUSSION AND ANALYSIS 339 5 � City of Huntington Beach Management's Discussion and Analysis p , , For the Year Ended June 30, 2023 QU.�s As management of the City of Huntington Beach, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of Huntington Beach for the year ended June 30, 2023. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our Letter of Transmittal, which can be found on pages iii-x of this report. Financial Highlights Below is a summary of the City's government-wide financial information (in thousands): Total Governmental and Business-Type Activities Amount Percent Increase Increase June 30,2023 June 30,2022 (Decrease) (Decrease) Assets $ 1,367,093 $ 1,418,959 $ (51,866) -3.7% Deferred Outflows of Resources 154,594 30,890 123,704 400.5% Liabilities 664,520 548,996 115,524 21.0% Deferred Inflows of Resources 21,108 146,115 (125,007) -85.6% Total Net Position 836,059 754,738 81,321 10.8% Unrestricted Net Position (136,350) (189,318) 52,968 28.0% Long-Term Obligations 590,950 448,654 142,296 31.7% Program Revenues 212,002 154,221 57,781 37.5% Taxes 221,607 205,853 15,754 7.7% Other General Revenues 9,214 107 9,107 8511.2% Expenses 361,502 297,173 64,329 21.6% • The City of Huntington Beach's total assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by$836,059,000. Total net position increased by$81,321,000 or 10.8 percent primarily because of the increase in deferred outflows of resources and decrease in deferred inflows of resources. This change is related to GASB 68, Accounting and Financial Reporting for Pension, where the City must recognize adjustments in total pension liability and fiduciary net position. The CaIPERS FY 2021/22 -7.5 percent investment loss was recognized in the June 30, 2023 financial statements per GASB 68 requirements, which eliminated the prior year's net pension asset and created a net pension liability increase of$145,606,000. • Long-term obligations increased by$142,296,000 or 31.7 percent. The increase is primarily the result of GASB 68 adjustments. As stated above, the adjustment increased net pension liability by $145,606,000 as a result of actuarial valuation adjustment of the City's current net pension liability. • Deferred outflows of resources increased by $123,704,000 or 400.5 percent while deferred inflow of resources decreased by $125,007,000 primarily due to the differences between projected and actual earnings on Pension Plan investments used to determine the City's net pension liability. 340 6 to pW'�TINTG' City of Huntington Beach Management's Discussion and Analysis - �� For the Year Ended June 30, 2023 • Program revenues increased by$57,781,000 or 37.5 percent. Most of this increase is due to the receipt of American Rescue Plan Act grant funding. The American Rescue Plan Act of 2021 provided funding to individuals, businesses, state, and local governments to help mitigate the impacts of the COVID-19 pandemic. The City of Huntington Beach received $29,607,000 which was used for eligible police and fire expenditures. Community Development and Public Works related program revenue also saw an increase of $7,886,000 and $4,134,000 which can be attributed to an increase in permits issued, development fees, and affordable housing in-lieu fees from two new residential development projects, Gisler Residential and Delaware Housing Project. Expenses increased by$64,329,000 or 21.6 percent, largely due to the prior year's pension expenses being substantially lower than usual due to the 21.3 percent CaIPERS investment return which resulted in a Net Pension Asset in FY 2021/22. The -7.5 percent return in the subsequent fiscal year resulted in the creation of a Net Pension Liability and increased pension expense. The City also incurred additional expense for fuel, repairs, natural gas, and other utilities, due to rising costs from inflationary pressures, supply-chain issues, and rate increases. Overview of the Financial Statements This discussion and analysis serves as an introduction to the City of Huntington Beach's basic financial statements. The City of Huntington Beach's basic financial statements are comprised of three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains certain other supplementary information in addition to the basic financial statements. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City's financial condition and are prepared similarly to those in the private sector. The Statement of Net Position presents information on all of the City's assets, liabilities, deferred outflows and inflows with the difference between them reported as net position. Over time, continued increases or decreases in net position may indicate whether the City's financial condition is improving or deteriorating. The Statement of Activities presents information on how the City's net position changed during the most recent fiscal year. These changes are reported on the full accrual basis when the economic event occurs (not when the cash is received or paid). The government-wide financial statements separate functions that are primarily supported by taxes and intergovernmental revenues (governmental activities) from functions that are supported by user fees (business-type activities). Governmental 341 7 "OTT roit. A City of Huntington Beach viAg jq Management's Discussion and Analysis 744,1 For the Year Ended June 30, 2023 fiea�NiY� � activities include the City Council, City Manager, City Treasurer, City Attorney, City Clerk, Finance, Community Development, Fire, Information Services, Police, Community Services, Library Services, and Public Works departments. Business-type activities include Water, Sewer, Refuse, and Hazmat Services. The government-wide financial statements include the City and all of its component units that are legally separate but whose activities entirely support the City of Huntington Beach. The government-wide financial statements can be found on pages 23-24 of this report. Fund Financial Statements The City separates financial activities into funds to maintain control over resources that have been legally separated. All the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds are used to account for the same functions reported in governmental activities in the government-wide financial statements. However, the focus in the governmental fund section of these financial statements is on near-term resource inflows and outflows available for spending, as well as balances of resources available for spending at the end of the fiscal year. It is useful to compare information presented for the governmental funds to information presented for governmental activities in the government-wide financial statements. The reconciliations indicate to the reader the differences in financial reporting between the governmental activities section and the governmental funds section. The City maintains 24 individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenue, Expenditures, and Changes in Fund Balances for the General Fund, Grants Special Revenue Fund, Low and Moderate Income Housing Asset Fund (LMIHAF), Pension Liability Debt Service Fund, and Infrastructure Fund, all of which are considered to be major funds. Data from the other 19 smaller funds are combined into a single, aggregated presentation. Individual fund data for each of these other governmental funds is provided in combining statements elsewhere in this report. The City provides an annual appropriated budget for its governmental funds. Budgetary comparison schedules for the General Fund and Grants Special Revenue Fund are required to be presented and are included on pages 121-122. Other major governmental funds (LMIHAF Capital Projects Fund, Pension Liability Debt Service Fund and Infrastructure Fund) are presented in the Supplementary Information section on pages 148-149 of this report and demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 25 and 27 of this report. 342 8 , a ° City of Huntington Beach "# ;x Management's Discussion and Analysis Fro t•,,Fa For the Year Ended June 30, 2023 0.1 Proprietary Funds The City maintains two different types of proprietary funds, enterprise and internal service, which are used to account for the same activities, as the business-type activities in the government-wide financial statements. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Water, Sewer Service, Refuse, and Hazmat Service activities. Internal Service funds are used in accounting as a device to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its self-insurance worker's compensation activities, self-insurance general liability activities, and equipment replacement needs. Because these services predominantly benefit governmental rather than business-type functions, they have been included with governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide information for Water, Sewer Service, Refuse, Hazmat Service, Self-Insurance Workers' Compensation, Self-Insurance General Liability, and Equipment Replacement Funds. The basic proprietary fund financial statements can be found on pages 29-31 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Huntington Beach's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 32-33 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 34-117 of this report. 343 9 L. ," City of Huntington Beach 9 -7 Management's Discussion and Analysis ` �e ;��Q ` For the Year Ended June 30, 2023 ; n OUNe Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide pension and OPEB benefits to its employees and General Fund and major special revenue funds budget-to-actual comparisons. Required supplementary information can be found on pages 120-130 of this report. The combining statements and schedules referred to earlier in connection with other governmental funds is presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 133-140 of this report. Government-wide Financial Analysis As noted earlier, net position may serve, over time, as a useful indicator of a government's financial position. At the end of the current fiscal year, the City reported positive net position balances for both governmental and business-type activities, with total assets plus deferred outflows exceeding liabilities plus deferred inflows by $836,059,000. Below is a summary schedule of the City's net position on June 30, 2023 (in thousands): Amount Percent Increase Increase Governmental Activities June 30,2023 June 30,2022 (Decrease) (Decrease) Current and Other Assets $ 360,136 $ 331,062 $ 29,074 8.8% Non-Current Assets 1,809 106,219 (104,410) -98.3% Capital Assets 772,038 746,371 25,667 3.4% Total Assets 1,133,983 1,183,652 (49,669) -4.2% Deferred Outflows of Resources 144,205 28,739 115,466 401.8% Current and Other Liabilities 61,970 92,861 (30,891) -33.3% Long-Term Obligations 559,315 426,186 133,129 31.2% Total Liabilities 621,285 519,047 102,238 19.7% Deferred Inflows of Resources 20,322 136,033 (115,711) -85.1% Net Position: Net Investment in Capital Assets 727,051 712,289 14,762 2.1% Restricted 82,564 68,460 14,104 20.6% Unrestricted (173,034) (223,438) 50,404 22.6% Total Net Position $ 636,581 $ 557,311 $ 79,270 14.2% Amount Percent Increase Increase Business-Type Activities June 30,2023 June 30,2022 (Decrease) (Decrease) Current and Other Assets $ 91,312 $ 82,651 $ 8,661 10.5% Non-Current Assets 215 8,658 (8,443) -97.5% Capital Assets 141,583 143,998 (2,415) -1.7% Total Assets 233,110 235,307 (2,197) -0.9% Deferred Outflows of Resources 10,389 2,151 8,238 383.0% Current and Other Liabilities 11,600 7,481 4,119 55.1% Long-Term Obligations 31,635 22,468 9,167 40.8% Total Liabilities 43,235 29,949 13,286 44.4% Deferred Inflows of Resources 786 10,082 (9,296) -92.2% Net Position: Net Investment in Capital Assets 141,581 143,998 (2,417) -1.7% Restricted 21,213 19,309 1,904 9.9% Unrestricted 36,684 34,120 2,564 7,5% Total Net Position $ 199,478 $ 197,427 $ 2,051 1.0% 344 10 • °' City of Huntington Beach ,�;. - }� Management's Discussion and Analysis �i�UUNTY�P��F For the Year Ended June 30, 2023 Analysis of the City's Net Position Current and Other Assets: The increase in current and other assets of$29,074,000 for governmental activities is mainly due to the increase in cash balances related to increased property tax, franchise tax, utility users tax, and transient occupancy tax revenues. The overall combined asset decreased by $49,669,000 which is due to a $104,410,000 decrease in Non-current Assets. The increase in current and other assets of $8,661,000 for business-type activities is primarily due to increased cash balance in the Water Master Plan fund from revenue received for new development projects in Fiscal Year 2022/23. Two of the main projects are Gisler Residential which is for 85 single-family residential homes on 13.9 acres and Delaware Housing Project which is a 346-unit, five story residential apartment community. The overall combined asset decreased by $2,197,000 or 0.9 percent. Non-current Assets: Non-current Assets decreased by $104,410,000 in governmental activities and $8,443,000 in business-type activities due to GASB 68 adjustments. Fiscal Year 2022/23 saw an increase in net pension liability due to CaIPERS' 7.5percent investment loss in FY 2021/22 recognized in FY 2022/23, which resulted in a decrease in Net Pension Asset and an increase in Net Pension Liability. Current and Other Liabilities: Current and Other Liabilities for governmental activities decreased by $30,891,000 and increased by $4,119,000 for business-type activities. For governmental activities, most of the decrease is related to $29,607,000 of American Rescue Plan Act (ARPA) funds that were received and recorded as unearned revenue in prior years. These funds were recognized as revenue in Fiscal Year 2022/23 as they were expended on eligible public safety expenditures. The increase in business-type activities is due to normal fluctuations in accounts payable and payroll cycles. Deferred Outflows and Inflows of Resources: The increase in deferred outflows of resources of$115,466,000 and $8,238,000 for governmental activities and business-type activities and decrease of deferred inflows of resources of$115,711,000 and $9,296,000 for governmental activities and business-type activities is the result of actuarially determined amortization differences between projected and actual earnings on pension plan investments, and differences between expected and actual experience used to determine the Net Pension and Other Postemployment Benefits Liabilities. See Notes 6, 7, and 8 for additional information. Long-Term Obligations: Long-term obligations increased by $133,129,000 for governmental activities and $9,167,000 for business-type activities primarily due the FY 2021/22 7.5percent CaIPERS investment loss recognized in FY 2022/23 which created a net pension liability totaling $151,970,000. 345 11 y u r io '' � ��� City of Huntington Beach 9s a � Management's Discussion and Analysis For the Year Ended June 30, 2023 Net Investment in Capital Assets: The largest portion of the City's net position reflects investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure), less any related debt used to acquire those assets that is still outstanding. The City uses capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets are reported net of related debt, the resources needed to repay this debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. Net position invested in capital assets, net of related debt from governmental activities increased $14,762,000 or 2.1 percent, primarily due to street improvements and construction projects such as improvements to Rodger's Senior Center Repurposing, Central Park Improvements, various fiber expansion projects and replacement of outdated equipment throughout the City. Net position invested in capital assets net of related debt from business-type activities decreased $2,417,000 or 1.7 percent primarily due to depreciation expense and a reduction of sewer and lift station improvement cost. Restricted Net Position: An additional portion of the City's net position is subject to external (legally imposed or statutory) restrictions ($82,564,000 for governmental activities, and $21,213,000 for business-type activities). These amounts represent 13.0 percent and 10.6 percent of net position for governmental activities and business-type activities, respectively. Restricted net position from governmental activities increased $14,104,000 or 20.6 percent, largely due to the change in restricted net position in the Pension Liability Fund and Infrastructure Fund. The Pension Liability Fund increased due to revenues set aside from the voter-approved property tax override dedicated to the payment of pension costs. The Infrastructure Fund increased due to the City transferring $28,741,000 from the General Fund to cover future Infrastructure cost. Restricted net position from business-type activities increased by $1,904,000 or 9.9 percent primarily due to an increase in restricted Water Master Plan funds available for capital projects as funds are spent. Unrestricted Net Position: The unrestricted net position (negative $173,034,000 for governmental activities and $36,684,000 for business-type activities) represent negative 27.2 percent and 18.4 percent, respectively, of net position for governmental activities and business-type activities. Unrestricted net position for governmental activities increased $50,404,000 or 22.6 percent. Unrestricted net position for business-type activities increased by $2,564,000 or 7.5 percent. These changes can be attributed to changes in Net Pension Liability and Other Postemployment Benefits. 346 12 -,./ , ry City of Huntington,Beach L _� Management's Discussion and Analysis �9� sy4�1 .�F A�;��� For the Year Ended June 30, 2023 A condensed summary of governmental activities (in thousands) follows: Governmental Activities Amount Percent Increase Increase Revenues: June 30,2023 June 30,2022 (Decrease) (Decrease) Program Revenues: Charges for Current Services $ 82,704 $ 68,051 $ 14,653 21.5% Operating Grants and Contributions 43,005 9,301 33,704 362.4% Capital Grants and Contributions 11,202 8,537 2,665 31.2% Total Program Revenues 136,911 85,889 51,022 59.4% General Revenues: Property Taxes 109,467 102,539 6,928 6.8% Sales Taxes 57,164 57,652 (488) -0.8% Utility Taxes 22,558 19,528 3,030 15.5% Franchise Taxes 15,100 10,380 4,720 45.5% Transient Occupancy Tax 17,318 15,754 1,564 9.9% Use of Money and Property(Loss) 5,153 (1,895) 7,048 -371.9% From Other Agencies-Unrestricted 3,225 4,631 (1,406) -30.4% Disposal of Machinery and Equipment(Loss) (520) 1,699 (2,219) -130.6% Total General Revenues 229,465 210,288 19,177 9.1% Total Revenues 366,376 296,177 70,199 23.7% Expenses: City Council 429 382 47 12.3% City Manager 5,780 5,412 368 6.8% City Treasurer 396 259 137 52.9% City Attorney 3,248 2,183 1,065 48.8% City Clerk 1,370 1,060 310 29.2% Finance 6,211 5,581 630 11.3% Community Development 20,550 11,634 8,916 76.6% Fire 71,737 52,808 18,929 35.8% Information Services 8,565 6,469 2,096 32.4% Police 89,430 73,964 15,466 20.9% Community Services 13,389 11,517 1,872 16.3% Library Services 7,225 5,212 2,013 38.6% Public Works 49,151 42,598 6,553 15.4% Interest on Long-Term Debt 9,587 9,548 39 0.4% Total Expenses 287,068 228,627 58,441 25.6% Change in Net Position Before Transfers 79,308 67,550 Transfers (38) (39) Change in Net Position 79,270 67,511 Net Position-Beginning of Year 557,311 489,800 Net Position-End of Year $ 636,581 $ 557,311 The cost of all governmental activities this year was $287,068,000. However, as shown in the Statement of Activities, the amount that taxpayers ultimately financed for these activities was $150,157,000, as costs of $82,704,000 were paid by those who directly benefited from the programs, or by other governments and organizations that subsidized certain programs with operating grants and contributions of $43,005,000, and capital grants and contributions of $11,202,000. Overall, the City's governmental program revenues were $136,911,000. The City paid for the remaining "public benefit" portion of governmental activities with $229,465,000 in taxes and general revenue (some of which may only be used for certain programs) and with other revenues, such as interest and general entitlements. 347 13 City of Huntington Beach Management's Discussion and Analysis z9 i , For the Year Ended June 30, 2023 'C0UUN%�a,;�'' Charges for current services increased $14,653,000, or 21.5 percent. The largest increase in Charges for Current Services came from Community Development and Public Works. Community Development saw revenue go up by $7,864,000 while Public Works saw revenues go up by $4,066,000 due to an increase in permit issuance and fees collected for development projects such as the Gisler Residential and Delaware Housing Projects. Operating Grants and Contributions increased by $33,704,000 or 362.4 percent and Capital Grants and Contributions have increased by $2,655,000 or 31.2 percent. The Operating Grants and Contributions increase is due to the $29,607,000 of American Rescue Plan Act (ARPA) funds the City recognized as revenue in the current year. The increase in Capital Grants and Contributions is related to increased traffic impact fee and commercial sanitation fee revenue received related to large development projects within the city. Program expenses increased by$58,441,000, or 25.5 percent. As mentioned earlier, this is largely due to the prior year's pension expenses being substantially lower than usual due to the 21.3 percent CaIPERS investment return which resulted in a Net Pension Asset in FY 2021/22. The -7.5 percent return in the subsequent fiscal year resulted in the creation of a Net Pension Liability and increased pension expense. The City also incurred additional expense for fuel, repairs, natural gas, and other utilities, due to rising costs from inflationary pressures, supply-chain issues, and rate increases. Total resources available during the year to finance governmental operations were $923,687,000 consisting of net position at July 1, 2022 of $557,311,000, program revenues of $136,911,000, and general revenues of $229,465,000. Total expenses for governmental activities during the year were $287,068,000 plus transfers of $38,000. Thus, net position increased by $79,270,000 or 14.2 percent, to $636,581,000. 348 14 City of Huntington Beach Management's Discussion and Analysis For the Year Ended June 30, 2023 A condensed summary of business-type activities (in thousands) follows: Business-Type Activities Amount Percent Increase Increase June 30,2023 June 30,2022 (Decrease) (Decrease) Program Revenues: Charges for Current Services $ 75,091 $ 68,332 $ 6,759 9.9% Total Program Revenues 75,091 68,332 6,759 9.9% Use of Money and Property(Loss) 1,356 (4,328) 5,684 -131.3% Total Revenues 76,447 64,004 12,443 19.4% Expenses: Water Utility 47,974 44,182 3,792 8.6% Sewer Service 11,422 , 10,390 1,032 9.9% Refuse Collection 14,935 13,738 1,197 8.7% Hazmat Service 103 236 (133) -56.4% Total Expenses 74,434 68,546 5,888 8.6% Increase(Decrease)in Net Position Before Transfers 2,013 (4,542) Transfers 38 39 Total Change In Net Position 2,051 (4,503) Net Position-Beginning of Year 197,427 201,930 Net Position-End of Year $ 199,478 $ 197,427 The City's net position from business-type activities increased by $2,013,000 before transfers. This is mainly due to unrealized market gains in the City's investments and increased revenue. The cost of all business-type activities this year was $74,434,000. As shown in the Statement of Activities, charges for current services was $75,091,000 and unrealized market gain was $1,356,000, which was more than enough to cover business-type activities. Beginning net position was $197,427,000 and ending net position was $199,478,000, an increase of $2,051,000, or 1.0 percent. Of the ending net position, $141,581,000, or 71.0 percent, was invested in capital assets, $21,213,000 or 10.6 percent was restricted for expenses for the Water Master Plan, and $36,684,000, or 18.4 percent was unrestricted. Transfers in for business-type activities were $38,000 for the current year. Financial Analysis of the City's Major Governmental Funds Below is an analysis of the City's major governmental fund activities for the year (in thousands): Governmental Funds Amount Percent Increase Increase June 30,2023 June 30,2022 (Decrease) (Decrease) Total Fund Balance: General Fund $ 126,537 $ 102,824 $ 23,713 23.1% Grants Special Revenue Fund 655 (4,311) 4,966 115.2% LMIHAF Capital Projects Fund 4,919 4,856 63 1.3% Pension Liability Fund 24,982 20,729 4,253 20.5% Infrastructure 33,398 20,485 12,913 63.0% Total Fund Balance: $ 190,491 $ 144,583 $ 45,908 31.8% 349 15 +~ T. City of Huntington Beach Management's Discussion and Analysis For the Year Ended June 30, 2023 The General Fund Balance increased by $23,713,000, primarily due to one-time savings from the use of American Rescue Plan Act funding for public safety expenditures which facilitated the creation of an HB Recovery Reserve totaling $10,886,000. Additionally, the City realized additional revenue primarily due to one-time spikes in natural gas prices during Winter 2022-23 and increased natural gas and electricity rates. Transient Occupancy Tax (TOT) remained strong, mainly due to higher average daily rates and a full fiscal year of TOT from the City's Short-Term Vacation Rentals. The Grants Special Revenue Fund Balance increased by $4,966,000 primarily due to a payment of$3,549,000 from the Monsanto class-action settlement. The LMIHAF Capital Projects Fund Balance increased by $63,000 primarily due to the interest earned on City investments and loan payments received for developer loans. The Pension Liability Fund increased by $4,253,000, largely due to revenues set aside from the voter-approved property tax override dedicated to the payment of Public Safety pension costs. The Infrastructure Fund increased by $12,913,000 due to the City transferring HB Recovery funds from the General Fund to the Infrastructure fund for projects including: construction of a Joint Youth Training Center for Police and Fire and various mobility, arterial beautification, and sustainability-related capital improvements. Financial Analysis of the City's Major Proprietary Funds Below is an analysis of the fund net position of the City's proprietary funds (in thousands): - Enterprise Funds Amount Percent Increase Increase June 30,2023 June 30,2022 (Decrease) (Decrease) Net Position: Water Fund $ 120,533 $ 118,766 $ 1,767 1.5% Sewer Fund 78,606 78,509 97 0.1% Refuse Fund 35 16 19 118.8% Hazmat Service Fund 304 136 168 123.5% Total Net Position $ 199,478 $ 197,427 $ 2,051 1.0% Unrestricted Net Position: Water Fund $ 10,880 $ 9,104 $ 1,776 19.5% Sewer Fund 25,556 24,977 579 2.3% Refuse Fund (56) (97) 41 42.3% Hazmat Service Fund 304 136 168 123.5% Total Unrestricted Net Position $ 36,684 $ 34,120 $ 2,564 7.5% The Water Fund total net position increased by $1,767,000 due to the City receiving one- 350 16 4U!` x; City of Huntington Beach 1� a Management's Discussion and Analysis For the Year'Ended June 30, 2023 time revenue from Orange County Water District in FY 2022/23, which caused the unrestricted net position to increase by $1,776,000. All enterprise funds except for the Refuse Fund generated revenue that exceeded expenses due to supplies and operations cost exceeding revenue generated in FY 2022/23. ' Long-Term Obligations Below is a schedule of the changes to the City's long-term obligations (in thousands): Governmental Activities: June 30,2022 Additions Retirements June 30,2023 Revenue Bonds $ 27,365 $ - $ (2,205) $ 25,160 Compensated Absences 15,045 3,376 (3,603) 14,818 Claims Payable 56,431 28,002 (17,812) 66,621 Pollution Remediation 2,000 - - 2,000 LED Lighting Phase I 314 - (123) 191 I-Bank CLEEN Loan 1,586 - (303) 1,283 CEC Loan 2,063 - (266) 1,797 Pension Obligation Bonds 330,642 - (12,637) 318,005 Finance Purchase Agreement 11,714 7,742 (2,068) 17,388 Leases Payable 247 398 (189) 456 Subscriptions Payable 3,651 - (1,051) 2,600 Total Long-Term Obligations Governmental Activities 451,058 39,518 (40,257) 450,319 Business-Type Activities: Compensated Absences 1,686 529 (389) 1,826 Pension Obligation Bonds 21,368 - (888) 20,480 Business-Type Activities: 23,054 529 (1,277) 22,306 Total Long-Term Obligations $ 474,112 $ 40,047 $ (41,534) $ 472,625 Additional information on the City's long;term debt is shown in Note 11 and Note 14 to the financial statements. Note 14, Leases, provides detail related to GASB Statement No. 87 Leases Payable while Note 11 provides detail related to all other long-term debt. The City of Huntington Beach is legally restricted to issuing general obligation bonds to 12 percent of its assessed valuation. Since the City has no general obligation bonds outstanding, the limit does not apply. The City's total long-term obligations decreased by $1,487,000 or 0.3 percent from the prior fiscal year as there were more debt retirements than debt additions during the year. The City continues to maintain strong credit ratings on all of its debt issues. Most notably, on August 27, 2014 Fitch Ratings issued an AAA Implied General Obligation Bond rating to the City of Huntington Beach and that same rating was most recently reaffirmed in February 2022. The following are the ratings as determined by Standard and Poor's and Fitch Ratings as of June 30, 2023. 351 17 City of Huntington Beach Management's Discussion and Analysis v For the Year Ended June 30, 2023 Debt Instrument S & P Fitch 1999 Tax Allocation Refunding Bonds AA- AA 2002 Tax Allocation Refunding Bonds AA- N/A 2014 Lease Revenue Bonds, Series A AA AA+ 2020(a) Lease Revenue Bonds AA AA+ 2020(b) Lease Revenue Bonds AA AA+ 2021 Pension Obligation Bonds AA+ AA+ Capital Assets The capital assets of the City are those assets which are used in the performance of the City's functions including infrastructure assets. The City has elected to use the "Basic Approach" as defined by GASB Statement No. 34 for infrastructure reporting. The following infrastructure networks are recorded as capital assets in the government-wide financial statements: • Storm drain system including pump stations, drainage system and manholes. • Streets (including land underneath streets), traffic signals, curbs, gutters, and sidewalks. Below is a schedule of the City's capital assets, net of accumulated depreciation (in thousands): Amount Percent Increase Increase Governmental Activities: June 30,2023 June 30,2022 (Decrease) (Decrease) Land $ 369,538 $ 369,538 $ - 0.0% Buildings 127,820 127,310 510 0.4% Machinery and Equipment 32,401 19,510 12,891 66.1% Construction in Progress 11,249 12,235 (986) -8.1% Infrastructure 227,641 217,525 10,116 4.7% Right to Use Leased Asset 462 253 209 82.6% Right to Use SBITA Asset 2,927 3,651 (724) -19.8% Total Governmental Activities 772,038 750,022 22,016 2.9% Business-Type Activities: Land 3,907 3,907 - 0.0% Buildings 66,089 68,693 (2,604) -3.8% Machinery and Equipment 6,064 6,863 (799) -11.6% Construction in Progress 839 109 730 669.7% Infrastructure 64,684 64,426 258 0.4% Total Business-Type Activities 141,583 143,998 (2,415) -1.7% Total Capital Assets $ 913,621 $ 894,020 $ 19,601 2.2% Capital assets from governmental activities increased $22,016,000 or 2.9 percent. This increase is largely due to street replacement infrastructure costs and machinery and equipment replacement throughout the City. Capital assets from business-type activities 352 18 City of Huntington Beach Management's Discussion and Analysis 4' For the Year Ended June 30, 2023 decreased $2,415,000 or 1.7 percent largely due disposal of outdated machinery and equipment. Information on the City's capital assets can be found in Note 12 of the financial statements. Furthermore, the newly implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITA), requires the City to recognize subscription liability and an intangible right-to-use subscription asset. For FY 2022/23, the City reported $2,927,000 in right-to-use SBITA assets. General Fund Budgetary Highlights Changes to Original Budget Comparing the FY 2022/23 General Fund Original (i.e. Adopted) Budget expenditures amount of $269,971,000 to the final budgeted amount of $298,423,000 shows a net increase of$28,452,000, or 10.5 percent. This overall increase is primarily due to budget carryovers of $5,264,000, increased transfers to the Infrastructure Fund of $4,586,000, Retirement Supplement Fund of $4,620,000, Section 115 Trust of $2,000,000, Self Insurance General Liability Fund of $4,500,000, Self Insurance Worker's Compensation Fund of$5,800,000, appropriation of donation revenue totaling $986,000, and operating increases of$6,016,000. Final budgeted revenues for the General Fund increased $27,026,000 or 9.5 percent from the original (adopted) budget for the Fiscal Year ended June 30, 2023. The change from original to final budget occurred primarily as a result of adjustments made to budgeted property tax, sales tax, utility tax, other taxes, and transfers from other funds. Variance with Final Budget General Fund actual revenues were greater than the final budget by $1,707,000 for the Fiscal Year ended June 30, 2023. This budget variance is due in large part to actual investment returns outperforming budgeted amounts in the Section 115 Trust. General Fund expenditures were $7,714,000 less than the final budget. The favorable budget variance is due in large part to the following: • The Information Services and Police Departments realized a total of$2,478,000 in savings primarily due to higher than average vacancies. Economic Factors and Next Year's Budget The Adopted FY 2023/24 Budget totals $508.0 million in all funds. This reflects a $24.0 million, or 4.5 percent decrease from the FY 2022/23 Adopted All Funds Budget of$532.0 353 19 4 *° City of Huntington Beach .47 Management's Discussion and Analysis 'ti��,coe For the Year Ended June 30, 2023 OUNT million. A significant portion of the decrease is due to the one-time redistribution of$29.6 million of American Rescue Plan Act (ARPA) funds to the General Fund in FY 2022/23 for the provision of core governmental services. General Fund Budget expenditures total $285.2 million and,are supported by revenues of$283.9 million, plus the one time use of$8.8 million in General Fund Reserves. Use of reserves include the transfer of$3.9 million from the Equipment Replacement Reserve to the Equipment Replacement Fund for the purchase of critical infrastructure and public safety vehicles and equipment. The full balance of the AES Reserve ($4.9 million) is being transferred to a new AES Mitigation Fund to be used for various Capital Improvement Projects (CIP) as outlined in the Memorandum of Understanding between the City and AES Southland Development LLC. The Adopted General Fund Budget has no reliance on one-time revenues to fund ongoing operations, which is critical to maintaining the City's financial viability and success. Major highlights are as follows: Public Safety: Funding for Public Safety represents 51 cents for every dollar spent in the General fund. With more than half of the General Fund Budget committed to the Police and Fire Departments, the City has dedicated the greatest share of its resources, or $145.7 million, to these core services. In the Police Department, the budget includes $2.0 million in equipment funds for the replacement of 22 police vehicles and other front line safety equipment. The Capital Improvement Program (CIP) includes $2,680,000 for relocation and expansion of the Police Department Communications Center, updates to the women's locker room, and fiber installations at the Bella Terra Police substation. In the Fire Department, the Adopted Budget includes $825,000 for equipment replacement comprising of ten vehicles and the purchase of ambulance equipment and extraction tools. The CIP includes $345,000 for a traffic signal at Murdy Fire Station. Revenue growth, reining in expenditures, strong reserves, and public service excellence are areas of focus for the organization. The City's commitment to financial sustainability is also demonstrated by its proactive approach to addressing future budget challenges through the Adopted Budget Balancing Plan, which identifies$1.65 million in ongoing new revenues and $5.03 million in ongoing expenditure reductions, including $1.5 million in savings through implementation of a managed hiring program. As part of the process to identify where the City should focus its limited resources, a Quality of Life survey is currently underway to identify the priorities of the City's residents and other key stakeholders. 354 20 City of Huntington Beach Management's Discussion and Analysis For the Year Ended June 30, 2023 i�yUNi�e General Fund Revenue General Fund revenue is projected to .be $283.9 million, a $.7 million or 0.3 percent increase from the Fiscal Year 2022/23 Adopted Budget. The largest decrease is in Non- Operating Revenue, which is projected to be $2.8 million, a $27.3 million decrease from the FY 2022/23 Adopted Budget of $30.1 million. This is attributable to the one-time transfer of $29.6 million in ARPA funds for general governmental services that was included in the FY 2022/23 Adopted Budget. This decrease is offset by increases in Property Tax, Franchise and Utility Users Tax, Use of Money & Property, and Charges for Current Services. • Property Tax is the largest revenue category for the City and is anticipated to increase by $5.9 million or 6.0 percent to $104.2 million due to gains in assessed property valuations. • Franchise and Utility Users Taxes are projected at $33.0 million, a 21.8 percent increase, driven by increases in utility prices including gas and electricity. • Use of Money & Property is anticipated to increase by$4.9 million to $21.8 million due to parking rate increases and an expected rise in lease and concession income. • Charges for Current Services is projected to increase $7.4 million due to increased demand for services, including medical transports, recreation classes and building and planning services. Contacting the City's Financial Management Team This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report, separate reports of the City's component units or need any additional financial information, contact the Finance Department at 2000 Main Street, Huntington Beach, California, 92648-2702, phone (714) 536-5630 or email tvi@surfcity-hb.org. 355 21 BASIC FINANCIAL STATEMENTS 356 22 CITY OF HUNTINGTON BEACH STATEMENT OF NET POSITION JUNE 30,2023 (In Thousands) Governmental Business-Type ASSETS Activities Activities Total Current Assets: Cash and Investments $ 291,761 $ 76,936 $ 368,697 Cash and Investments with Fiscal Agent 12,285 - 12,285 Receivables, Net 41,373 10,532 51,905 Advances to Successor Agency 1,363 - 1,363 Lease Receivable 11,107 - 11,107 Inventories - 1,624 1,624 Prepaids 2,032 - 2,032 Joint Venture 215 2,220 2,435 Total Current Assets 360,136 91,312 451,448 Non-Current Assets: Net Other Postemployment Benefits Asset 1,809 215 2,024 Total Non-Current Assets 1,809 215 2,024 Capital Assets: Non-Depreciable 380,787 4,746 385,533 Depreciable, Net 391,251 136,837 528,088 Total Capital Assets 772,038 141,583 913,621 Total Assets 1,133,983 233,110 1,367,093 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows Related to Pensions 138,290 9,685 147,975 Deferred Outflows Related to Other Postemployment Benefits 5,915 704 6,619 Total Deferred Outflows of Resources 144,205 10,389 154,594 LIABILITIES Current Liabilities: Accounts Payable 12,043 8,258 20,301 Accrued Payroll 1,914 282 2,196 Unearned Revenue 4,087 - 4,087 Accrued Interest Payable 632 22 654 Deposits 2,250 1,649 3,899 Long-Term Obligations Due Within One Year 41,044 1,389 42,433 Total Current Liabilities 61,970 11,600 73,570 Long-Term Obligations: Long-Term Obligations Due in More than One Year 409,275 20,917 . 430,192 Net Pension Liability 150,040 10,718 160,758 Total Long-Term Obligations 559,315 31,635 590,950 Total Liabilities 621,285 43,235 664,520 DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pensions 3,105 24 3,129 Deferred Inflows Related to Other Postemployment Benefits 6,397 762 7,159 Deferred Inflows Lease Related 10,820 - 10,820 Total Deferred Inflow of Resources 20,322 786 21,108 NET POSITION Net Investment in Capital Assets 727,051 141,581 _ 868,632 Restricted for: Debt Service 4,461 - 4,461 Capital Projects 25,852 21,213 47,065 Public Works and Community Services Projects 52,251 - 52,251 Total Restricted Net Position 82,564 21,213 103,777 Unrestricted (173,034) 36,684 (136,350) Total Net Position $ 636,581 $ 199,478 $ 836,059 See Notes to the Financial Statements 357 23 CITY OF HUNTINGTON BEACH STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Net(Expense)Revenue and Changes in Program Revenues Net Position Charges for Operating Capital Grants Business- Current Grants and and Governmental Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: City Council $ 429 $ 167 $ - $ - $ (262) $ - $ (262) City Manager 5,780 4,976 311 23 (470) - (470) City Treasurer 396 153 - - (243) - (243) City Attorney 3,248 5 - - (3,243) - (3,243) City Clerk 1,370 299 - - (1,071) - (1,071) Finance 6,211 3,125 - - (3,086) - (3,086) Community Development 20,550 18,817 6,373 25 4,665 - 4,665 Fire 71,737 14,166 14,063 - (43,508) - (43,508) Information Services 8,565 623 - - (7,942) - (7,942) Police 89,430 6,139 17,994 - (65,297) - (65,297) Community Services 13,389 22,545 653 294 10,103 - 10,103 Library Services 7,225 388 585 - (6,252) - (6,252) Public Works 49,151 11,301 3,026 10,860 (23,964) - (23,964) Interest on Long-Term Debt 9,587 - - - (9,587) - (9,587) Total Governmental Activities 287,068 82,704 43,005 11,202 (150,157) - (150,157) Business-type Activities: Water Utility 47,974 48,934 - - - 960 960 Sewer Service 11,422 10,982 - - - (440) (440) Refuse Collection 14,935 14,899 - - - (36) (36) Hazmat Service 103 276 - - - 173 173 Total Business-Type Activities 74,434 75,091 - - - 657 657 Total Governmental and Business Type Activities $ 361,502 $ 157,795 $ 43,005 $ 11,202 $ (150,157) $ 657 $ (149,500) General Revenues: Taxes: Property Taxes $ 109,467 $ - $ 109,467 Sales Taxes 57,164 - 57,164 Utility Taxes 22,558 - 22,558 Franchise Taxes 15,100 - 15,100 Transient Occupancy Tax 17,318 - 17,318 Total Taxes 221,607 - 221,607 Other: Use of Money and Property 5,153 .1,356 6,509 From Other Agencies-Unrestricted 3,225 - 3,225 Disposal of Machinery and Equipment(Loss) (520) - (520) Total General Revenues 229,465 1,356 230,821 Transfers (38) 38 - Total General Revenues and Transfers 229,427 1,394 230,821 Change in Net Position 79,270 2,051 81,321 Net Position-Beginning of Year 557,311 197,427 754,738 Net Position-End of Year $ 636,581 $ 199,478 $ 836,059 See Notes to the Financial Statements 358 24 CITY OF HUNTINGTON BEACH BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30,2023 (In Thousands) LMIHAF Other Grants Special Capital Pension Governmental ASSETS General Fund Revenue Projects Liability Infrastructure Funds Total Cash and Investments $ 115,922 $ 3,020 $ 3,551 $ 24,736 $ 34,780 $ 63,156 $ 245,165 Cash and Investments with Fiscal Agent - - - - - 12,285 12,285 Taxes Receivable 14,867 - - 148 - 1,308 16,323 Other Receivables,Net 7,599 7,323 8,339 98 196 1,330 24,885 Lease Receivable 11,107 - - - - - 11,107 Advances to Successor Agency - - 1,363 - - - 1,363 Prepaids 51 - - - - - 51 Total Assets 149,546 10,343 . 13,253 24,982 34,976 78,079 311,179 LIABILITIES,DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES Accounts Payable 6,701 1,056 10 - 1,478 2,093 11,338 Accrued Payroll 1,777 29 - - 43 57 1,906 Unearned Revenue 1,122 2,965 - - - - 4,087 Deposits Payable 2,250 - - - - . - 2,250 Total Liabilities 11,850 4,050 10 - 1,521 2,150 19,581 DEFERRED INFLOWS OF RESOURCES Deferred Inflows Lease Related 10,820 - - - - - 10,820 Unavailable Revenue 339 5,638 8,324 - 57 - 14,358 Total Deferred Inflows of Resources 11,159 5,638 8,324 - 57 - 25,178 FUND BALANCES Nonspendable Prepaids 51 - - - - - 51 Restricted Underground Utilities 364 - - - - - 364 Restitution 296 - - - - - 296 Donations 777 - - - - 777 Section 115 Trust 18,141 - - - - ' - 18,141 Pollution Remediation - - - - - 336 336 Debt Service - - - 24,982 - 4,461 29,443 Highways,Streets and Transportation - - - - - 14,257 14,257 Low Income Housing - - 4,919 - - 10,891 15,810 Air Quality - - - - - 1,038 1,038 Other Capital Projects - - - - - 23,695 23,695 Other Purposes - 655 - - - 2,632 3,287 Committed Economic Uncertainties 48,411 - - - - - 48,411 Parks - - - - - 5,316 5,316 Other Capital Projects 1,040 - - - 33,398 3,196 37,634 Other Purposes 1,779 - - - - 3,910 5,689 Assigned Litigation Reserves 3,650 - - - - - 3,650 AES Reserve 4,900 - - - - 4,900 Capital Improvement Reserve 9,086 - - - 6,197 15,283 Equipment Replacement 8,295 - - - - - 8,295 General Plan Maintenance 1,515 - - - - - 1,515 HB Recovery Fund 10,886 - - - - - 10,886 Oceanview Estates 365 - - - - - 365 General Liability Plan Migration 2,801 - - - - - 2,801 Pension Rate Stabilization 4,160 - - - - - 4,160 Section 115 Trust 2,500 - - - - - 2,500 Other Purposes 7,520 - - - - - 7,520 Total Fund Balances 126,537 655 4,919 24,982 33,398 75,929 266,420 Total Liabilities,Deferred Inflows of Resources and Fund Balances $ 149,546 $ 10,343 $ 13,253 $ 24,982 $ 34,976 $ 78,079 $ 311,179 See Notes to the Financial Statements 359 25 CITY OF HUNTINGTON BEACH RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30,2023 (In Thousands) Amounts reported for governmental activities in the statement of net position are different because: Total Fund Balances Governmental Funds $ 266,420 Net Other Postemployment Benefits Asset is not available to pay in the current period and therefore are not reported in the funds. Net Other Postemployment Benefits Asset 1,799 Net Capital Assets used in governmental activities are not current financial resources and, therefore,are not reported in the governmental funds.Amounts exclude Net Capital Assets of the Internal Service Funds. Capital Assets 1,163,909 Accumulated Depreciation (404,669) Total Capital Assets 759,240 Joint Venture 215 Right to Use Leased/SBITA Assets used in governmental activities are not current financial resources and,therefore,are not reported in the governmental funds. Right to Use Leased Assets 672 Right to Use SBITA Assets 3,651 Accumulated Amortization _ (934) Total Right to Use Assets 3,389 Internal Service Funds are used by management to charge the cost of various city activities to individual governmental and business-like funds.The assets and liabilities of the Internal Service Fund must be added to the Statement of Net Position. (10,262) Revenues that are measurable but not available are not recognized as revenue in governmental funds.Such amounts are recorded as Unavailable Revenue under the modified accrual basis of accounting. 14,358 Deferred Outflows Related to Pensions 137,824 Deferred Outflows Related to Other Postemployment Benefits(OPEB) 5,883 Governmental Funds report all pension contributions as expenditures; however,in the Statement of Net Position,the excess of the total pension liability over the plan Fiduciary Net Position is reported as a Net Pension Liability. (149,527) Deferred Inflows Related to Pensions (3,104) Deferred Inflows Related to Other Postemployment Benefits(OPEB) (6,362) Other long-term liabilities are not due in the current period and,therefore, are not recorded in the governmental funds. Accrued Interest Payable I (632) Long-term liabilities,including bonds and certificates of participation payable,are not due and payable in the current period and therefore are not reported in the governmental funds. Amounts exclude Long-Term Obligation of the Internal Service Fund. Long-Term Obligations Due in One Year (21,944) Long-Term Obligations Due in More than One Year (360,716) Net Position of Governmental Activities $ 636,581 See Notes to the Financial Statements 360 26 CITY OF HUNTINGTON BEACH STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30„2023 (In Thousands) LMIHAF Other General Grants Special Capital Pension Governmental REVENUES Fund Revenue Projects Liability Infrastructure Funds Total Property Taxes $ 101,036 $ , - $ - $ 8,431 $ - $ - $ 109,467 Sales Taxes 52,599 - - - - 4,565 57,164 Utility Taxes 22,558 - - - - - 22,558 Other Taxes 32,418 - - - - 8,320 40,738 Licenses and Permits 10,630 - - - - 5,058 15,688 Fines and Forfeitures 3,945 - - - - - 3,945 Use of Money and Property(Loss) 21,401 130 79 447 (1,565) 2,234 22,726 Intergovernmental 4,024 40,872 - - 501 2,029 47,426 Charges for Current Services 32,787 - - 16,111 - 11,112 60,010 Other 2,606 3,741 - - - 6 6,353 Total Revenues 284,004 44,743 79 24,989 (1,064) 33,324 386,075 EXPENDITURES Current: City Council 453 - - - - - 453 City Manager 5,892 300 - - - 309 6,501 City Treasurer 417 - - - - - 417 City Attorney 3,404 - - - - - 3,404 City Clerk 1,441 1 - - - - 1,442 Finance 7,372 37 - - - 11 7,420 Community Development 17,061 3,343 16 - - 1,149 21,569 Fire 65,658 488 - - - 6,353 72,499 Information Services 8,269 - - - 294 8,563 Police 93,796 2,716 ' - - - 488 97,000 Community Services 12,500 343 - - 389 3,378 16,610 Library Services 6,951 204 - - - 89 7,244 Public Works 27,785 2,739 - - 14,375 17,262 62,161 Debt Service: Principal 4,000 - - 12,594 - 2,205 18,799 Interest 310 - - 8,486 - 746 9,542 Total Expenditures 255,309 10,171 • 16 21,080 14,764 32,284 333,624 Excess(Deficiency)of Revenues Over (Under)Expenditures 28,695 34,572 63 3,909 (15,828) 1,040 52,451 OTHER FINANCING SOURCES(USES) Transfers In 30,020 1 - 344 28,741 6,263 65,369 Lease(as Lessee) 398 - - - - - 398 Issuance of Finance Purchase Agreement - - - - - 7,742 7,742 Transfers Out (35,400) (29,607) - - - (400) (65,407) Total Other Financing Sources(Uses) (4,982) (29,606) - 344 28,741 13,605 8,102 Net Change In Fund Balances 23,713 4,966 63 4,253 12,913 14,645 60,553 Fund Balances-Beginning of Year 102,824 (4,311) 4,856 20,729 20,485 61,284 205,867 Fund Balances-End of Year $ 126,537 $ 655 $ 4,919 $ 24,982 $ 33,398 $ 75,929 $ 266,420 See Notes to the Financial Statements 361 27 CITY OF HUNTINGTON BEACH RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Amounts reported for governmental activities in the statement of activities are different because: Net Changes in Fund Balances-Total Governmental Funds $ 60,553 Capital expenditures-governmental funds report capital outlays as expenditures. However, in the Statement of Activities,the cost of these assets are allocated over their estimated useful lives and reported as depreciation expense. Depreciable Assets Purchased 37,934 Depreciable Assets Disposition (87) Non-Depreciable Assets Purchased 3,886 Non-Depreciable Assets Disposition (4,872) Capital Asset Depreciation (18,028) Joint Venture 16 Accrual of revenues-certain revenues in the Statement of Activities do not meet the"availability"criteria for revenue recognition in the governmental funds and Current Year Grant and Other Revenue Accrual 3,724 Prior Year Grant and Other Revenue Accrual (7,311) Repayments on long-term receivables provide current financial resources to governmental funds,while loans provided consume the current financial resources of governmental funds. These transactions,however, have no effect on net position. 234 Pension income reported in the statement of activities includes the change in the the net pension liability and related changes in pension amounts for deferred outflows and deferred inflows of resources. (11,938) Other Postemployment Benefits Payments-Expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds(expenses). 1,518 Internal Service Funds are used by management to charge the costs of certain activities,such as self insurance workers'compensation charges.The net revenue of this internal service fund is reported as governmental activities. 2,790 Liabilities not liquidated with current resources-some expenses reported in the statement of activities do not require the use of current financial resources and, therefore,are not reported as expenditures in governmental funds. Current Year Interest Accrual (632) Prior Year Interest Accrual 587 Repayment of long-term debt principal is an expenditure in the governmental funds,but the repayment reduces long-term liabilities in the Statement of Net Position. 18,799 The issuance of long-term debt provides current financial resources to governmental funds. (8,140) The repayment of some expenses such as compensated absences,claims,and pension expenses, reported in the statement of activities,do not require the use of current resources,and therefore are not reported as expenditures in the governmental funds. 237 Change in Net Position of Governmental Activities $ 79,270 See Notes to the Financial Statements 362 28 • CITY OF HUNTINGTON BEACH STATEMENT OF NET POSITION PROPRIETARY FUNDS June 30,2023 (In Thousands) Governmental Business-Type Activities-Enterprise Funds Activities Water Sewer Service Refuse Hazmat Internal Service Fund Fund Fund Service Fund Total Funds ASSETS Current Assets: Cash and Investments $ 23,384 $ 31,240 $ 490 $ 609 $ 55,723 $ 46,596 Restricted Cash and Investments 21,213 - - - 21,213 - Other Receivables,Net 6,350 628 688 18 7,684 165 Prepaids - - - - - 1,981 Joint Ventures 2,220 - - - 2,220 - Inventories 1,624 - - - 1,624 - Unbilled Receivables 1,766 457 625 - 2,848 - Total Current Assets 56,557 32,325 1,803 627 91,312 48,742 Non-Current Assets: Net Other Postemployment Benefits Asset 155 53 5 2 215 10 Total Non-Current Assets 155 53 5 2 215 10 Capital Assets: Land 3,907 - - - 3,907 - Buildings and Improvements 57,933 47,690 - - 105,623 67 Machinery and Equipment 15,463 3,905 215 - 19,583 12,957 Infrastructure 107,936 46,212 - - 154,148 - Construction in Progress - 839 - - 839 - Less Accumulated Depreciation (96,799) (45,595) (123) - (142,517) (3,615) Total Capital Assets 88,440 53,051 92 - 141,583 9,409 Total Assets 145,152 85,429 1,900 629 233,110 58,161 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows Related to Pensions 6,779 2,535 227 144 9,685 466 Deferred Outflows Related to Other Postemployment Benefits 506 173 18 7 704 32 Total Deferred Outflows of Resources 7,285 2,708 245 151 10,389 498 Total Assets and Deferred Outflows of Resources 152,437 88,137 2,145 780 243,499 58,659 LIABILITIES Current Liabilities: Accounts Payable 6,502 607 1,149 - 8,258 705 Accrued Payroll 190 81 8 3 282 8 Deposits Payable 1,493 - 156 - 1,649 - Interest Payable 15 6 1 - 22 - Current Portion of Claims Payable - - - - - 19,043 Current Portion of Compensated Absences 356 130 12 - 498 14 Long-Term Obligations Due Within One Year 624 233 21 13 891 43 Total Current Liabilities 9,180 1,057 1,347 16 11,600 19,813 Non-Current Liabilities: Compensated Absences 949 346 32 1 1,328 38 Long-Term Obligations Due in More than One Year 13,707 5,127 460 295 19,589 943 Net Pension Liability 7,504 2,806 252 156 10,718 513 Claims Payable - - - - - 47,578 Total Non-Current Liabilities 22,160 8,279 744 452 31,635 49,072 Total Liabilities 31,340 9,336 2,091 468 43,235 68,885 DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pensions 17 7 - - 24 1 Deferred Inflows Related to Other Postemployment Benefits 547 188 19 8 762 35 Total Deferred Inflows of Resources 564 195 19 8 786 36 NET POSITION Investment in Capital Assets 88,440 53,050 91 - 141,581 9,409 Restricted for: Capital Projects 21,213 - - - 21,213 - Unrestricted 10,880 25,556 (56) 304 36,684 (19,671) Total Net Position 120,533 78,606 35 304 199,478 (10,262) Total Liabilities,Deferred Inflows • of Resources,and Net Position $ 152,437 $ 88,137 $ 2,145 $ 780 $ 243,499 $ 58,659 See Notes to the Financial Statements 363 29 CITY OF HUNTINGTON BEACH STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Governmental Business-Type Activities-Enterprise Funds Activities Water Sewer Service Refuse Hazmat Internal Service Fund Fund Fund Service Fund Total Funds OPERATING REVENUES ' Sales $ 39,620 $ - $ - $ - $ 39,620 $ - Fees and Charges for Service - 10,892 14,812 276 25,980 32,668 Other 9,314 90 87 - 9,491 1,528 Total Operating Revenues 48,934 . 10,982 14,899 276 75,091 34,196 OPERATING EXPENSES Water Purchases 17,981 - - - 17,981 - Supplies and Operations 11,063 8,944 14,901 95 35,003 3,604 Engineering 2,239 - - - 2,239 - Production and Distribution 9,400 - - - 9,400 - Maintenance 1 - - - 1 - Water Meters 1,824 - - - 1,824 - Water Quality 816 - - - 816 - Water Use Efficiency 298 - - - 298 - Claims and Judgments - - - - - 25,873 Depreciation 3,978 2,338 21 - 6,337 1,453 Total Operating Expenses 47,600 11,282 14,922 95 73,899 30,930 Operating Income(Loss) 1,334 (300) (23) 181 1,192 3,266 NON-OPERATING REVENUES(EXPENSES) Investment Income 807 537 4 8 1,356 69 Interest Expense (374) (140) (13) (8) (535) (25) Disposal of Machinery and Equipment(Loss) - - - - - (520) Total Non-Operating Revenues(Expenses) 433 397 (9) - 821 (476) Income(Loss)Before Transfers 1,767 97 (32) 181 2,013 2,790 TRANSFERS Transfers In - - 51 - 51 - Transfers Out - - - (13) (13) - Total Transfers - - 51 (13) 38 Change in Net Position 1,767 97 19 168 2,051 2,790 Net Position-Beginning of Year 118,766 78,509 16 136 197,427 (13,052) Net Position-End of Year $ 120,533 $ 78,606 $ 35 $ 304 $ 199,478 $ (10,262) • • • See Notes to the Financial Statements 364 30 CITY OF HUNTINGTON BEACH STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Governmental Business-Type Activities-Enterprise Funds Activities Water Sewer Service Refuse Hazmat Internal Service Fund Fund Fund Service Fund Total Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers and Users $ 45,161 $ 10,888 $ 15,045 $ 268 $ 71,362 $ 34,133 Cash Paid to Employees for Services (10,178) (4,189) (434) (91) (14,892) (363) Cash Paid to Suppliers of Goods and Services (29,186) (4,723) (14,388) (3) (48,300) (20,027) Other Operating Items Net Cash and Investment Provided(Used)by Operating Activities 5,797 1,976 223 174 8,170 13,743 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers In - - 51 - 51 - Transfers Out - - - (13) (13) - Principal Paid (621) (233) (21) (13) (888) (43) Interest Paid (374) (140) (13) (8) (535) (26) Net Cash and Investments Provided(Used)by Noncapital Financing Activities (995) (373) 17 (34) (1,385) (69) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of Capital Assets (2,065) (1,857) - - (3,922) (5,156) Net Cash and Investments Provided(Used)by Capital and Related Financing Activities (2,065) (1,857) - - (3,922) (5,156) CASH FLOWS FROM INVESTING ACTIVITIES Investment Income 807 537 4 8 1,356 69 Net Cash and Investments Provided(Used)by Investing Activities 807 537 4 8 1,356 69 Net Increase(Decrease)in Cash and Investments 3,544 283 244 148 4,219 8,587 Cash and Investments-Beginning of Year 41,053 30,957 246 461 72,717 38,009 Cash and Investments-End of Year $ 44,597 $ 31,240 $ 490 $ 609 $ 76,936 $ 46,596 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH AND INVESTMENTS PROVIDED(USED)BY OPERATING ACTIVITIES Operating Income(Loss) $ 1,334 $ (300) $ (23) $ 181 $ 1,192 $ 3,266 Adjustments to Reconcile Operating Income(Loss)to Net Cash and Investments Provided(Used)by Operating Activities Depreciation 3,978 2,338 21 - 6,337 1,453 (Increase)Decrease in Other Receivables,Net (3,542) (49) 83 (8) (3,516) (63) (Increase)in Unbilled Receivables (204) (45) (93) - (342) - Decrease in Prepaids - - - - - (1,186) (Increase)in Joint Ventures (404) - - - (404) - (Increase)in Inventory (180) - - - (180) - (Increase)in Net Pension Asset 5,608 2,098 188 124 8,018 388 Decrease in Net Other Postemployment Benefits Asset 305 104 11 5 425 19 Increase(Decrease)in Accounts Payable 4,445 (81) 69 - 4,433 40 (Decrease)in Accrued Payroll (329) (133) (13) (9) (484) (11) (Decrease)in Deposits Payable (27) - 156 - 129 - Increase in Claims Payable - - - - - 10,190 Increase(Decrease)in Compensated Absences 127 16 3 (6) 140 11 (Increase)in Deferred Pension Outflow (5,624) (2,103) (189) (122) (8,038) (388) (Decrease)in Deferred Pension Inflow (6,222) (2,327) (209) (134) (8,892) (428) Increase in Net Pension Liability 6,967 2,606 234 149 9,956 479 (Increase)in Deferred Other Postemployment Benefits Outflow (144) (49) (5) (2) (200) (9) (Decrease)in Deferred Other Postemployment Benefits Inflow (291) (99) (10) (4) (404) (18) Net Cash and Investments Provided by Operating Activities $ 5,797 $ 1,976 $ 223 $ 174 $ 8,170 $ 13,743 NONCASH INVESTING,CAPITAL,AND FINANCING ACTIVITIES There were no noncash investing,capital,or financing activities during the year ended June 30,2023. See Notes to the Financial Statements 365 31 CITY OF HUNTINGTON BEACH STATEMENT OF FIDUCIARY FUND NET POSITION FIDUCIARY FUNDS JUNE 30, 2023 (In Thousands) Huntington Beach Pension Trust Fund- Redevelopment Retirement Successor Agency ASSETS Custodial Funds Supplemental Fund Private Purpose Trust Cash and Investments $ 4,102 $ 5 $ 11,818 Cash and Investments with Fiscal Agent 3,329 - 2,647 Mutual Funds - 63,268 - Money Market Funds - 554 - Accounts Receivable, Net 895 - - Interest Receivable - - 69 Total Assets 8,326 63,827 14,534 LIABILITIES Current Liabilities: Accounts Payable 1,522 - 319 Accrued Payroll - - 4 Advances from City of Huntington Beach - 0 - 1,363 Long-Term Obligations Due Within One Year - - 4,123 Total Current Liabilities 1,522 - 5,809• Long-Term Obligations: Long-Term Obligations Due in More than One Year - - 16,521 Total Long-Term Obligations - - 16,521 Total Liabilities 1,522 - 22,330 NET POSITION Restricted for Pension Benefits - 63,827 - Restricted for Individuals and Organizations 6,804 - (7,796) Total Net Position $ 6,804 $ 63,827 $ (7,796) • See Notes to the Financial Statements 366 32 CITY OF HUNTINGTON BEACH STATEMENT OF CHANGES IN FIDUCIARY FUND NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) Huntington Beach Pension Trust Fund- Redevelopment Retirement Successor Agency ADDITIONS Custodial Funds Supplemental Fund 1Private Purpose Trust Employer Contributions $ - $ 6,049 $ - Collected from Property Owners 1,552 - 11,434 Business Improvement District Taxes 6,960 - - Parking Assessments 2,446 - - Total Additions Before Investment Income 10,958 6,049 11,434 Investment Income: Investment Income(Loss) 127 4,935 217 Less: Investment Expense - (112)Net Investment Income(Loss) 127 4,823 217 Total Additions 11,085 10,872 11,651 DEDUCTIONS Benefits - 5,712 - Administrative Costs 20 334 - Payments to Other Organizations 7,785 - - Economic Development - - 250 Interest and Fiscal Agency Expenses 1,359 - 1,247 Principal 1,800 - - Total Deductions 10,964 6,046 1,497 Change in Net Position 121 4,826 10,154 Net Position-Beginning of Year 6,683 59,001 (17,950) Net Position-End of Year $ 6,804 $ _ 63,827 $ (7,796) See Notes to the Financial Statements 367 33 UNp j "-7, City of Huntington Beach -- s= Notes to Financial Statements Z�C ��I� For the Year Ended June 30, 2023 icOU Footnote Number Description Page 1. Summary of Significant Accounting Policies 35-52 2. Cash and Investments Notes 53-60 3. Other Receivables 60-61 4. Unearned Revenue 62 5. Unavailable Revenue 62 6. Retirement Plan — Normal 63-74 7. Retirement Plan — Supplemental 74-81 8. Other Post Employment Benefits 82-88 9. Risk Management 89-90 10. Interfund Transactions 91-92 11. Long-Term Obligations 93-104 12. Capital Assets 104-105 13. Investment in Joint Ventures 106 14. Leases 106 15. Successor Agency Trust for Assets of the Former Redevelopment Agency of the City of Huntington Beach 107-112 16. Commitments and Contingencies 112-116 17. Other Information 117 18. Subsequent Events 117 368 34 if'SW,.. . City of Huntington Beach tisx Notes to Financial Statements \ 10 For the Year Ended June 30, 2023 Z�C F �o� 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Reporting Entity The City of Huntington Beach is the primary government. It was incorporated in 1909 as a charter, full-service city. The form of government is Council-Manager. Component units are legally separate organizations for which the City Council is financially accountable, or organizations that if excluded from the accompanying financial statements, would make them misleading. The component units described below are blended (presented as if they are part of the primary government) or presented as a fiduciary trust fund with the primary government for financial reporting purposes. The criteria used in determining the scope of the reporting entity are based on the provisions of GASB Statement 14, The Financial Reporting Entity, as amended by GASB Statement 39, Determining Whether Certain Organizations Are Component Units, and GASB Statement 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. A legally separate, tax exempt organization should be reported as a blended component unit of the City if all of the following criteria are met: 1. The governing board is substantively the same as the primary government and there is a financial benefit or burden relationship between the primary government and the component unit; 2. The component unit provides services entirely, or almost entirely, to the primary government or otherwise exclusively, or almost exclusively, benefits the primary government even though it does not provide services directly to it; and 3. The component unit's total debt outstanding, including leases, is expected to be repaid entirely or almost entirely with the resources of the primary government. Based on the application of the criteria listed above, the following component units have been included. Huntington Beach Housing Authority The Housing Authority (the Authority) was established in March 2011 pursuant to Housing Authority Laws of California to provide rental assistance programs to low- income families and senior citizens, and to operate a Housing Rehabilitation Loan Program and other approved programs. The Authority is governed by a commission of seven members comprised of the City Council, which appoints management and has full accountability for the Authority's fiscal affairs. The Authority's financial data and transactions are included within the capital projects Low and Moderate Income Housing Asset Fund (LMIHAF). On January 9, 2012, the City adopted a resolution designating the Housing Authority of the City of Huntington Beach to serve as the Housing Successor Agency. The Housing Successor Agency's financial data and transactions are included within the LMIHAF Capital Projects Fund. There is no separate Component Unit Financial Report (CUFR) prepared for the Authority. 369 35 o * City of Huntington Beach \c-3, Notes to Financial Statements 9.. f oQ For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Huntington Beach Public Financing Authority (Public Financing Authority) — This Corporation was formed in March 1988 to issue debt to finance public improvements and other capital purchases for the City and the former Redevelopment Agency. The Public Financing Authority's governing body is the City Council, which also adopts its annual budget. The Public Financing Authority is financially dependent on the City. There are no separately issued financial statements available for the Public Financing Authority. The City of Huntington Beach Supplemental Retirement Plan and Trust (Supplemental Retirement Plan and Trust) — The Trust was formed to provide a supplemental retirement plan for all employees hired prior to 1997 (exact dates differed for various associations). The governing board of the Supplemental Retirement Plan consists of the City Treasurer, Chief Financial Officer, and the City Manager (or designee). The Retirement Board is responsible for supervising all investments, resolving benefit disputes, and ensuring that contributions are made in order to pay the required benefits. There are no separate financial statements for this plan and trust. b. Government-wide Financial Statements The government-wide financial statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of Governmental and Business-Type Activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets, deferred inflows/outflows of resources, and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. 370 36 ✓ TING0;, z City of Huntington Beach $" Notes to Financial Statements For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Indirect expenses are allocated to the various functions based on a proportionate use of services. The types of transactions reported as program revenues for the City are reported in three categories: 1) charges for current services; 2) operating grants and contributions; and, 3) capital grants and contributions. Taxes and other items not properly included among program revenues are reported as general revenues. As a general rule, the effects of interfund activity have been eliminated from the government-wide financial statements. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. Financial Statement Classification In the government-wide financial statements, net position is classified in the following categories: Net Investment in Capital Assets — This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets reduce this category. Restricted Net Position—This category presents restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. The government-wide Statement of Net Position reports $82,564,000 of governmental activities restricted net position, of which $45,438,000 is restricted by enabling legislation. The government-wide Statement of Net Position reports $21,213,000 of business-type activities restricted net position, of which all is restricted by enabling legislation. This category presents restrictions placed on the categories of Capital Projects, Debt Service, and Specific Projects and Programs. 371 37 ,��KlIN6IO City of Huntington Beach Notes to Financial Statements y� For the Year Ended June 30, 2023 =.AUNTY CP 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Unrestricted Net Position — This category represents the net position of the City, not restricted for any project or other purpose. The government-wide Statement of Net Position reports a deficit unrestricted net position of $173,034,000 of governmental activities unrestricted net position, which is largely a result of the new CaIPERS Unfunded Accrued Liability incurred as a result of the -7.5 percent CaIPERS investment loss in FY 2021/22 recognized in the current year financial statements. The City's Long-Term Obligations at June 30, 2023 is $590,950,000, of which, $559,315,000 is payable from Governmental Activities. The government- wide Statement of Net Position reports $36,684,000 of business-type activities unrestricted net position. c. Fund Financial Statements Separate fund financial statements are prepared for governmental funds, proprietary funds, and fiduciary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Only current assets, current liabilities, and deferred inflows are included on the Balance Sheets. The Statement of Revenues, Expenditures, and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property tax, sales tax, use of money and property, intergovernmental revenues, charges for current services, and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred. However, debt service expenditures as well as expenditures related to compensated absences and claims are recorded only when payment is due. 372 38 City of Huntington Beach v _ x Notes to Financial Statements 04,44 For the Year Ended June 30, 2023 F,yc� .,r 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental Funds Financial Statements Governmental Funds Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures, and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. Accompanying schedules are presented to reconcile and explain the differences in fund balances and changes in fund balances as presented in these statements to the net position and changes in net position presented in the government-wide financial statements. The City presents all major funds that meet those qualifications. The City's Governmental Fund Balances are comprised of the following components: • Nonspendable fund balance includes amounts that are not in spendable form and typically includes inventories, prepaid items, and other items that by definition cannot be appropriated. • The restricted fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation. • The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the City Council. The City Council has authority to establish, modify, or rescind a fund balance commitment by formal action as specified by the City's Fund Balance Policy. Commitments to fund balance are made through adoption of a resolution by City Council. • Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. The City Manager or designee has the authority to establish, modify, or rescind a fund balance assignment as specified by the City's Fund Balance Policy. • Unassigned fund balance is the residual classification for the City's General Fund and includes all spendable amounts not contained in the other classifications. Unassigned fund balance in other governmental funds is limited to any negative residual fund balance after fund balance has been classified as restricted, committed, or assigned. 373 39 ; B. City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In the government-wide statements, the City considers restricted funds to be spent first then unrestricted amounts when expenditures are incurred for purposes for which unrestricted fund balance is available. In the governmental fund statements, when expenditures are incurred, the City uses the most restrictive funds first. The City would use the appropriate funds in the following order: committed, assigned, and lastly unassigned amounts. The City establishes encumbrances to record the amount of purchase orders, contracts, and other obligations, which have not yet been fulfilled, cancelled, or discharged. Encumbrances outstanding at year-end are recorded as part of committed or assigned fund balance. Encumbrances outstanding as of June 30, 2023, by major fund (in thousands): General Fund $ 6,826 Grants Special Revenue 3,024 LMIHAF Capital Projects 2,408 Infrastructure 14,762 Other Governmental Funds 32,010 Total Encumbrance All Funds $ 59,030 Economic Uncertainties Reserve The City Council established an Economic Uncertainties Reserve in the General Fund through a resolution with a goal to commit the value of two months of the General Fund expenditure adopted budget amount. Appropriations from the Economic Uncertainties Reserve commitments can only be made by formal City Council action. Generally, appropriations and access to these funds will be reserved for emergency situations. Examples of such emergencies include, but are not limited to: • An unplanned, major event such as catastrophic disaster requiring expenditures over 5% of the General Fund adopted budget; • Budgeted revenue in excess of$1 million taken by another government entity; • Drop in projected/actual revenue of more than 5% of the General Fund adopted revenue budget; and, • Should the Economic Uncertainties Reserve be used, and its level falls below the minimum amount of two months of General Fund expenditures adopted budget, the goal is to replenish the fund within three fiscal years. 374 40 Je4f- A City of Huntington Beach oi. r4I Notes to Financial Statements For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proprietary Fund Financial Statements The City's enterprise and internal service funds are proprietary funds. Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Fund Net Position, and a Statement of Cash Flows for each major proprietary fund. Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets, deferred inflows/outflows, and liabilities (whether current or non-current) are included on the Statement of Net Position. The Statement of Revenues, Expenses, and Changes in Fund Net Position present increases (revenues) and decreases (expenses) in total Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non- operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund.All other expenses are reported as non-operating expenses. The internal service funds, which provide services to the other funds of the City, are presented in a single column in the proprietary funds financial statements. Because the principal users of the internal services funds are the City's governmental activities, the assets and liabilities of the internal service funds are consolidated into the governmental activities column of the government-wide Statement of Net Position. The costs of the internal service fund services are spread to the appropriate function or program on the government-wide Statement of Activities and the revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling effect of these revenues and expenses. 375 41 City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 F ouNTY !, ,� - 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fiduciary Funds Financial Statements Fiduciary Funds Financial Statements include a Statement of Net Position and a Statement of Changes in Net Position for Custodial and Trust Funds. These • statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. The City's fiduciary funds include Custodial and Trust Funds. Custodial Funds report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. The Custodial funds present results of operations and include net position. Trust Funds present results of operations and include net position. The Retirement Supplemental Trust Fund accounts for the activities of the Supplemental Retirement Plan for all employees hired prior to 1997, which accumulates resources for pension benefits to qualified employees. Contributions are made to the Supplemental Plan based on the City's policy to fund the required contributions as determined by the Plan's actuary and are recognized when they are made. The Retiree Medical Insurance Trust Fund accounts for the activities of the City's Other Post- Employment Benefits plans, which provide postemployment medical insurance to retirees. The Huntington Beach Redevelopment Successor Agency Private Purpose Trust Fund accounts for the Successor Agency for the former Redevelopment Agency pursuant to Assembly Bill X1 26. Fiduciary funds are not presented in the government-wide financial statements because these funds do not represent net position available to the City. The City reports the following major funds: Governmental Funds General Fund — accounts for activity not required to be accounted for in another fund. Grants Special Revenue — accounts for grant revenues received from federal, state, and local agencies restricted for related project expenditures. LMIHAF Capital Projects — accounts for the activity related to the development of affordable housing. Pension Liability Debt Service—accounts for the City's contribution to its pension plan obligations, as provided by the voter-approved property tax override and other sources of revenue, including the allocable share from Enterprise Funds and Other Governmental Funds. Infrastructure — accounts for expenditures related to certain designate infrastructure. Proprietary Funds Water Fund — used to account for water sales to customers. 376 42 ��NTfN6Ta�z�+ City of Huntington Beach Notes to Financial Statements ‘-',NArgeAlQ For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sewer Service Fund—accounts for user fees charged to residents and businesses for sewer service. Refuse Fund — used to account for activities related to refuse collection and disposal. Hazmat Service Fund — accounts for user fees charged for the City's hazardous waste material program. The City's fund structure also includes the following fund types: Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Debt Service Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Capital Projects Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Internal Service Funds Self Insurance Workers' Comp Fund — accounts for the City's self insurance workers' compensation program in an internal service fund. Self Insurance General Liability Fund — accounts for the City's self insurance general liability program in an internal service fund. Equipment Replacement Fund — accounts for the City's equipment replacement needs in an internal service fund. Fiduciary Funds Custodial Funds — are used to account for debt service activities related to the Parking Structure — Bella Terra and Community Facilities District conduit debt issues, in which the City acts as an agent, not as a principal. The Business Improvement District fund is used to account for taxes received and held until disbursement. Pension Trust Fund — Retirement Supplemental Fund - accounts for the City's supplemental retirement plan. Huntington Beach Redevelopment Successor Agency Private Purpose Trust Fund — accounts for the Successor Agency of the former Redevelopment Agency in accordance with the State's Dissolution Act. 377 43 �� City of Huntington Beach Notes to Financial Statements 9 �' For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Cash and Investments The City pools cash resources,of its various funds to facilitate cash management. Cash in excess of daily needs is invested and reported as investments. It is the City's intent to hold investments until maturity. However, the City may, in response to market conditions, sell investments prior to maturity in order to improve the quality, liquidity, or yield of the portfolio. Interest earnings are apportioned among funds based on month-end cash and investment balances. The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and highly liquid investments, such as money market funds, and any investment with a maturity of 90 days or less at the time of purchase. For financial reporting purposes, investments are adjusted to their fair value whenever the difference between fair value and the carrying amount is material. Changes in fair value that occur during the fiscal year are recognized as investments income reported for that fiscal year. Investment income includes interest earnings, changes in fair value and any gains or losses realized upon the liquidation or sale of investments. The City participates in the Local Agency Investment Fund (LAIF), an investment pool managed by the State Treasurer of the State of California. LAIF has invested a portion of the pool funds in structured notes and asset-backed securities. LAIF's investments are subject to credit risk. In addition, these structured notes and asset- backed securities are subject to interest rate risk as a result of changes in interest rates. In June 2020, the City Council adopted a resolution authorizing the deposit and investment of excess funds in the Orange County Investment Pool (OCIP). The investments in OCIP are managed by the County Treasurer. The City's investment policy is further discussed in Note 2 on page 53. The City pools all non-restricted cash for investment purchases and allocates interest income to the funds based on month-end cash balances. Funds that have restricted cash record interest income in the respective fund. e. Prepaid Items Certain payments to vendors and individuals reflect costs applicable to a future accounting period and are recorded as prepaid items in both government-wide and fund financial statements. The cost of prepaid items are recorded as expenditures/expenses during the periods benefited. 378 44 NCI ° City of Huntington Beach = Notes to Financial Statements For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) f. Capital Assets Capital assets are tangible and intangible assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the proprietary funds financial statements. Capital assets have an acquisition cost of$50,000 or greater ($100,000 for infrastructure) and a useful life of one year or more. The City records all purchased capital assets at historical cost (where historical records are available) and at estimated historical cost where no historical records exist. The reported value excludes normal maintenance and repairs, which are amounts spent in relation to capital assets that do not increase the asset's capacity or efficiency or increase its estimated useful life. Donated capital assets are recorded at acquisition value at the date of.donation. Acquisition value is the price that would be paid to acquire an asset with equivalent service potential on the date of the donation. Intangible assets follow the same capitalization policies as tangible capital assets and are reported with tangible assets in the appropriate capital asset class. In the government-wide and proprietary funds financial statements, tangible and intangible property, plant, equipment, the right to use leased assets, and infrastructure are depreciated/amortized using the straight-line method over the estimated useful life of the assets as shown below and charged to the respective activity or fund. Land and construction in progress are not depreciated. No depreciation is recorded in the governmental funds of the fund financial statements. Buildings 20 to 50 years Machinery and Equipment 5 to 30 years Infrastructure 50 Years g. Leases The City is a lessee for a noncancellable lease of equipment and property. The City recognizes a lease liability and an intangible right-to-use lease asset (lease asset) in the government-wide financial statements. The City recognizes lease liabilities with an initial, individual value of$50,000 or more. At the commencement of a lease, the City initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease 379 45 etior NG City of Huntington Beach y Notes to Financial Statements iZCFC �\�pQ� For the Year Ended June 30, 2023 SUN >t 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight-line basis over its useful life. Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments. • The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for leases. • The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise. The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability. Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position. The City is a lessor fora noncancellable lease of a building, land, and infrastructure. The City recognizes a lease receivable and a deferred inflow of resources in the government-wide and governmental fund financial statements. At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received.,The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts. • The City uses its estimated incremental borrowing rate as the discount rate for leases. 380 46 o �. City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) • The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee. The City monitors changes in circumstances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. h. Unearned Revenue In the government-wide and the fund-level financial statements, unearned revenues are those where the asset recognition (availability criteria) has been met, but the revenue recognition criteria have not been met. i. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City reports deferred outflows related to pensions and OPEB which are the result of the implementation of GASB Statement Nos. 68 and 75. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The City reported the following in this category: 1. Unavailable revenues (which include revenues, notes, and long-term receivables) measured under the modified accrual basis of accounting reported in governmental funds. These amounts are deferred and will be recognized as an inflow of resources in the period that the amounts become available. 2. Changes in the net pension liability not included in pension expense. 3. Changes in the net other postemployment benefits liability not included in OPEB expense. 4. Lease related deferrals 381 47 571 va.--. F City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 edir�FazNi 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) j. Inventories Proprietary fund inventories are valued at weighted-average cost and consist of expendable supplies and repair parts. The cost of such inventories is recorded as expenditures/expenses when consumed rather than when purchased. k. Interfund Transactions As a general rule, interfund transactions have been eliminated from the government-wide financial statements. Exceptions to this rule are payments in-lieu or charges for current service between the City's enterprise activities and the City's governmental activities. Elimination of these transactions would distort the direct costs and program revenues for the various functions. Certain eliminations have been made regarding interfund activities, payables, and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. Numerous transactions occur between funds of the City resulting in transfers and amounts due to or from other funds. Amounts due to or from are the current (due within one year) portion of monies that are to be paid or to be received from other funds. I. Long-Term Obligations In the government-wide and proprietary funds financial statements, long-term obligations are recorded as liabilities in the applicable governmental activities, business-type activities, or proprietary fund-type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the debt. In the governmental fund financial statements, bond discounts and premiums are recognized as another financing source or use. Issuance costs are recorded as a current year debt service expenditure. m. Employee Compensated Absences The City records the cost of all accumulated and unused leave time (vacation, sick, and comp) as a liability when earned in the government-wide and proprietary funds financial statements. In the governmental funds financial statements these amounts are recorded as expenditures when due and payable. 382 48 City of Huntington Beach 1-t Notes to Financial Statements For the Year Ended June 30, 2023 1. ,SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) n. Property Tax Revenue Property tax in California is levied according to Article 13-A of the California Constitution. The basic levy is a countywide-levy of one percent of total assessed valuation and is allocated to county governments, school districts, cities and special districts. Additional levies require two-thirds approval by voters and are allocated directly to the specific government. In the government-wide financial statements, property tax is recorded when earned, regardless of when levied, due, or received. City property tax revenues are recognized when levied in the governmental funds to the extent that they result in current receivables collectible within 60 days after year-end. The County acts as a collection agent for property tax for all of the local governmental units. Property taxes are normally collected twice per year. The property tax calendar is as follows: • Lien Date, January 1 - Prior Fiscal Year • Levy Date, July 1 - Levy Fiscal Year • Due Date, First Installment - November 1 • Due Date, Second Installment - February 1 • Delinquent Date, First Installment - December 10 • Delinquent Date, Second Installment - April 10 383 49 City of Huntington Beach ;{ Notes to Financial Statements For the Year Ended June 30, 2023 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) o. Redevelopment Property Tax Trust Funds Under ABX1 26, revenues that were previously distributed to redevelopment agencies (prior to their dissolution) in the form of property tax increment will no longer be received. Instead, revenues are deposited by County Auditors into Redevelopment Property Tax Trust Funds (RPTTF) created in the County Treasury for each Successor Agency. The County Auditor administers the RPTTF and disburses twice annually from this fund pass-through payments to affected taxing entities, an amount equal to the total of obligation payments that are required to be paid from tax increment as denoted on the Recognized Obligation Payment Schedules (ROPS) to Recognized Obligation Retirement Funds (RORF) established in the treasury of the Successor Agencies, and various allowed administrative fees and allowances. Any remaining balance is then distributed by the County Auditor back to affected taxing entities under a prescribed method that accounts for pass-through payments. The calendar for distribution of RPTTF funds is as follows: • Annual ROPS submission due to Department of Finance, February 1 • Distribution of RPTTF to Successor Agencies for the July-December ROPS period, June 1 • Distribution of RPTTF to Successor Agencies for the January-June ROPS period, January 2 p. Cash Flow Statements For purposes of the Statement of Cash Flows, the Proprietary Funds consider all cash and investments to be cash equivalents, as these funds participate in the citywide cash and investment pool. q. Estimates The accompanying financial statements require management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. 384 50 oti451 NT- City of Huntington Beach yi - x Notes to Financial Statements tie o QV For the Year Ended June 30, 2023 z 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) r. Pensions and OPEB For purposes of measuring the net pension liability, net OPEB liability, related deferred outflows of resources and deferred inflows of resources, pension/OPEB expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by the CaIPERS' Financial Office and the City's Defined Benefit Pension Plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. GASB Statement Nos. 68 and 75 require reported results to pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used. Supplemental Other Employee CaIPERS Post-Employment Retirement Plan Pension Plans Benefit Plan Valuation Date (VD) June 30, 2021 June 30, 2021 June 30, 2021 Measurement Date(MD) June 30, 2023 June 30, 2022 June 30, 2022 Measurement Period (MP) July 1, 2022 to July 1, 2021 to July 1, 2021 to June 30, 2023 June 30, 2022 June 30, 2022 385 51 City of Huntington Beach Notes to Financial Statements 's`F� �o� For the Year Ended June 30, 2023 %1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) s. Fair Value Measurements Certain assets and liabilities are required to be reported at fair value. The fair value framework provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described as follows: Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and fair value is determined through the use of models or other valuation methodologies including: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in markets that are inactive; • Inputs other than quoted prices that are observable for the asset or liability; • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the City's own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). These unobservable inputs are developed based on the best information available in the circumstances and may include the City's own data. 386 52 City of Huntington Beach g Notes to Financial Statements ,54� For the Year Ended June 30, 2023 2. CASH AND INVESTMENTS Investments Authorized by the California Government Code and the City's Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code Section 53601 (or the City's investment policy, where more restrictive) that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy. INVESTMENT TYPE MAXIMUM MATURITY MAXIMUM SPECIFIED%OF PORTFOLIO/ MINIMUM RATING MAXIMUMPER,ISSUER REQUIREMENTS _ Bankers'Acceptances 180 days 25%(up to 40%with Council approval)/ Al/P1,"A"Rating 10% Negotiable Certificates of Deposit 3 years(Up to 5 years 30%/10% Al/P1,"A"Rating with Council approval) Commercial Paper 270 days 25%/10% Al,"A"Rating State Obligations--CA And Others 5 years None/10% "A"Rating City/Local Agency of CA Obligations 5 years None/10% "A"Rating U.S.Treasury Obligations 5 years None None U.S.Government Agency Obligations 5 years None None Supranationals:IBRD,IFC,IDB 5 years 30% "AA"Rating Repurchase Agreements 3 Months None None 20%of the base value of the portfolio. Reverse Repurchase Agreements 92 days None Requires City Council Approval Medium-Term Corporate Notes. 5 years 30%/10% "A"Rating Non-negotiable Certificates of Deposit 3 years None/10% Al/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 Orange County Investment Pool(OCIP) N/A Up to$75,000,000 None Joint Powers Authority N/A None/$75,000,000 See 10.ON of IPS 387 53 °�o' City of Huntington Beach U - Notes to Financial Statements Z.�F o� For the Year Ended June 30, 2023 fi 2. CASH AND INVESTMENTS (Continued) Investments Authorized by Debt Agreements Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by a bond trustee, but bond indentures do allow for other forms of investments if approved in writing by the bond insurer that are not identified below. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. Maximum Percentage Maximum Investment Authorized Investment Type ` °,A Maximum Maturity°° • °• of Portfolio in One Issuer U.S.Treasury Securities 5 Years No.Limit No Limit Federal Agency Securities 5 Years No Limit No Limit Bankers'Acceptances 180 Days No Limit No Limit Time CDs 360 Days No Limit No Limit Negotiable CDs 360 Days No Limit No Limit LAIF N/A No Limit No Limit Commercial Paper 270 Days No Limit No Limit Municipal Bonds from Any State Life of Bond No Limit No Limit Money Market Funds N/A No Limit No Limit Investment Agreements Life of Bond No Limit No Limit Corporate Bonds 5 Years No Limit No Limit California Asset Mgmt. Program N/A No Limit No Limit Forward Purchase/Delivery Agreements Life of Bond No Limit No Limit 388 54 ��U~N GTO ►�o`�r, -�,^���� City of Huntington Beach 1T Notes to Financial Statements For the Year Ended June 30, 2023 2. CASH AND INVESTMENTS (Continued) Investment of the Pension Trust Fund — Retirement Supplemental Fund The Investment Policy Statement(IPS)of the Huntington Beach Supplemental Pension Trust is established in accordance with the assignment of fiduciary duties by the State of California Constitution and State and Local Government Codes. The purpose of the Investment Policy is to set guidelines for a prudent investment-making process. The policy was established with the assumption that the longer-term nature of the portfolio provides for higher risk tolerance and short-term volatility, but more potential for capital growth. The Investment Manager will be responsible for carrying out the activities related to the portfolio in accordance with the IPS to meet the goals of an agreed upon risk/return profile, and in accordance with the mix of parameters outlined below: Authorized Investment Type Minimum Target Asset Maximum Allocation Allocation Allocation Cash or Equivalents 0%, 0% 10% Money Market 0% 0% 10% Fixed Income 30% 40% 50% Intermediate Bond 30% 40% 50% Short-Term Bond 0% 0% 10% Long-Term Bond 0% 0% 10% High Yield Bond 0% 0% 10% Inflation Protected Bond 0% 0% 10% World Bond 0% 0% 10% Domestic Equity " 17% . 27% 37% Large Cap Equity(Value, Blend, Growth) 8% 18% 28% Mid Cap Equity(Value, Blend, Growth) 0% 6% 16% Small Cap Equity(Value, Blend, Growth) 0% 3% 13% Foreign Equity 11% 21% 31% Foreign Large Equity(Value, Blend, Growth) 7% 17% 27% Foreign Sm/Mid Equity(Value, Growth) 0% 0% 10% Emerging Markets 0% 4% 14% Real Estate 0%; 10% 20% Real Estate 0% 10% 20% Commodities 0% 2% 12% Natural Resources 0% 2% 12% 389 55 o �°N� ?N � City of Huntington Beach U� , olr�w � N Notes to Financial Statements For the Year Ended June 30, 2023 ouNpf e�;" 2. CASH AND INVESTMENTS (Continued) At year-end, the City had the following deposits and investments (amounts in thousands): Primary Government: Cash and Investments $ 368,697 Cash and Investments with Fiscal Agent 12,285 Total Primary Government 380,982 Fiduciary Funds: Cash and Investments 15,925 Cash and Investments with Fiscal Agent 69,798 Total Fiduciary Funds 85,723 Total Deposits and Investments $ 466,705 Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value is to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments, including investments held by bond trustees, to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity (in thousands). Investment Maturities(In Years) INVESTMENTS: Fair Value Less than 1 1 to 3 3to 5 Total US Treasuries $ 79,016 $ 26,521 $ 37,881 $ 14,614 $ 79,016 US Agency Securities* 179,931 30,547 107,163 42,221 179,931 Mutual Funds 63,268 63,268 - - 63,268 Money Market Funds 1,691 1,691 - - 1,691 Medium Term Notes-IADB 27,325 8,980 18,345 - 27,325 Corporate Bonds 44,687 9,636 28,668 6,383 44,687 Local Agency Investment Fund 3,090 3,090 - - 3,090 California Asset Mgmt Program 32,548 32,548 - - 32,548 PARS Pension Rate Stabilization Program 18,141 18,141 - - 18,141 Total Investments $ 449,697 $ 194,422 $ 192,057 $ 63,218 449,697 Total Deposits 17,008 Total Deposits and Investments $ 466,705 •Security is callable,but classified above according to original maturity date 390 56 City of Huntington Beach {`-31 - - Notes to Financial Statements For the Year Ended June 30, 2023 2. CASH AND INVESTMENTS (Continued) Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below are the minimum ratings required by, where applicable, the California Government Code or the City's investment policy, or debt agreements, and the actual rating as of the year-end for each investment type (in thousands): Remaining as of Year End INVESTMENTS: Minimum Total AAA AA A Not Rated Legal Rating US Treasuries N/A $ 79,016 $ 79,016 $ - $ - $ - US Agency Securities* N/A 179,931 179,931 - - - Mutual Funds N/A 63,268 - - - 63,268 Money Market Funds AAA 1,691 1,691 - - - Medium Term Notes-IADB AA 27,325 27,325 - - - Corporate Bonds A 44,687 - 8,972 35,715 - Local Agency Investment Fund N/A 3,090 - - - 3,090 California Asset Mgmt Program N/A 32,548 32,548 - - - PARS Pension Rate Stabilization Program N/A 18,141 - - - 18,141 Total Investments $ 449,697 $ 320,511 $ 8,972 $ 35,715 $ 84,499 Note:All US Agencies are rated AAA by Moody's and AA by S&P Concentration of Credit Risk The City's investment policy limits investments in any one issuer, except for U.S. Treasury Securities, U.S. Government Agencies and the Local Agency Investment Fund, to no more than 10% of the portfolio. In addition, no more than 50% can be invested in a single security type or with a single financial institution and every security type has a specific limit. This is in addition to the limits placed on investments by State law. Investments in any one issuer (other than U.S. Treasury Securities, external investment pools, or Money Market Funds)that represent 5% or more of the City's total investments are as follows (in thousands): Fair Value Issuer Investment Type Amount Federal Home Loan Bank U.S.Government Sponsored Enterprise Securities $ 129,305 Federal Farm Credit Bank U.S.Government Sponsored Enterprise Securities $ 22,587 Intl Bank for Recon&Development IBRD $ 18,345 U.S.Treasury Notes Obligations of the United States Treasury $ 79,016 391 57 City of Huntington Beach �y - } A Notes to Financial Statements For the Year Ended June 30, 2023 'a�OONTY CP�`,rr 2. CASH AND INVESTMENTS (Continued) Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provisions for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits. As of June 30, 2023, the City's deposits with financial institutions were covered by FDIC up to $250,000, and the remaining amounts were collateralized as described above. None of the City's investments were subject to custodial credit risk. Per the Investment Policy's statement, the City of Huntington Beach is the registered owner of all investments in the portfolio. Investment in State Investment Pool The City is a voluntary participant in LAIF, which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. 392 58 City of Huntington Beach 9x Notes to Financial Statements �oQ For the Year Ended June 30, 2023 %o ,� 2. CASH AND INVESTMENTS (Continued) Investment in California Asset Management Program Pool The City is a voluntary participant in the California Asset Management Program (CAMP). CAMP is an investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers authority and public agency created by the Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act (California Government Code Sections 6500 et seq., or the "Act") for the purpose of exercising the common power of its Participants to invest certain proceeds of debt issues and surplus funds. The Trust's activities are directed by a Board of Trustees, all of whom are employees of the California public agencies which are participants in the Trust. The City reports investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share. The Pool is managed to maintain a dollar-weighted average portfolio maturity of 60 days or less and seeks to maintain a constant net asset value (NAV) per share of$1.00. The Pool invests in obligations of the United States Government and its agencies, high- quality, short-term debt obligations of U.S. companies and financial institutions. The Pool is a permitted investment for all local agencies under California Government Code Section 53601(p). Investment in Public Agency Retirement Services Pension Rate Stabilization Program The City established a Section 115 pension trust account within the Public Agency Retirement Services Pension Rate Stabilization Program (PARS PRSP)to hold assets that are legally restricted for use in administering the City's defined benefit pension plan. The pension trust fund's specific cash and investments are managed by a third- party portfolio manager under guidelines approved by the City. 393 59 e�� `z City of Huntington Beach s,fi t-i Notes to Financial Statements For the Year Ended June 30, 2023 cowl cA,`,," 2. CASH AND INVESTMENTS (Continued) Fair Value Measurement The City categorizes its fair value investments within the fair value hierarchy established by generally accepted accounting principles. The City has the following recurring fair value measurements as of June 30, 2023 (in thousands): Fair Value Hierarchy INVESTMENTS: Level 1 I Level 2 Level 3 Total U.S.Treasuries $ - $ 79,016 $ - $ 79,016 U.S.Agency Securities - 179,931 - 179,931 Mutual Funds 63,268 - - 63,268 Medium Term Notes-IADB - 27,325 - 27,325 Corporate Bonds - 44,687 - 44,687 Total Investments $ 63,268 $ 330,959 $ - $ 394,227 3. OTHER RECEIVABLES A summary of Other Receivables as of June 30, 2023 is as follows (in thousands): FY2022-23 Description Amount Developer Loans Receivable $ 39,679 Emerald Cove Loan Receivable 6,694 Housing Rehabilitation Loans Receivable 2,310 First Time Homebuyers Receivable 1,630 Emergency Medical Fee Receivable 3,301 CDBG Program Receivable 975 Other Grants Receivable 3,321 Other Receivable 6,654 Total Other Receivables 64,564 Allowance for Uncollectible Developer Loans (39,679) Net Other Receivables on Governmental Fund Financial Statements $ 24,885 Other Receivables Reconciliation Net Receivable on Government-wide Financial Statements $ 41,373 Taxes Receivable on Governmental Fund Financial Statements (16,323) Other Receivables on Internal Service Fund (165) Net Other Receivables on Governmental Fund Financial Statements $ 24,885 394 60 ,,'oiNr-;z ti, "~� ; City of Huntington Beach Notes to Financial Statements ,.11 �o For the Year Ended June 30, 2023 %cuuNri tv, 3. OTHER RECEIVABLES (Continued) a. Developer Loans Loans made to developers to construct or rehabilitate certain facilities under deferred loan agreements total $39,679,000 at year-end. These loans are allowed until a future event occurs. Loans to the Low and Moderate Income Housing Asset Fund total $20,109,000, loans made under the Home Program total $14,483,000 and loans made under the Affordable Housing In-Lieu Program total $5,087,000. Interest rates on these loans range from 0% to 10%. The allowance for uncollectible developer loans is $36,679,000 due to the terms of the agreement to forgive the balance of loans after a specified time period if all the conditions of loan forgiveness are met. b. Emerald Cove Loan On June 15, 2010, the former Redevelopment Agency loaned Emerald Cove, LP $8,000,000 to acquire and rehabilitate Emerald Cove Senior Apartments. The loan has an interest rate of 3% and is to be repaid annually from residual receipts over 60 years. The loan was transferred to the Low and Moderate Income Housing Asset Fund in Fiscal Year 2011/12. The loan balance as of June 30, 2023 is $6,694,000. c. Housing Rehabilitation Loans Loans made to qualified homeowners and landlords in the City of Huntington Beach to rehabilitate certain single-family homes or multifamily rental housing under deferred loan agreements total $2,310,000 at year-end. These loans are deferred until a future event occurs. The interest rates on these loans range from 0% to 6%. d. Deferred Loans — First Time Homebuyers and Down Payment Assistance Loans made for down payment assistance of qualified first time homebuyers under deferred loan agreements total $1,630,000 at year-end. These loans are deferred until a future event occurs. 395 61 oy IN6 o=e. tcai City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 4. UNEARNED REVENUE Governmental and enterprise funds defer revenue recognition in connection with resources that have been received as of year-end, but not yet earned (unearned revenue). The amounts are as follows (in thousands): Grants Total Special Unearned General Fund Revenue Revenue Community Services Unearned Revenue(Classes) $ 1,090 $ - $ 1,090 Public Works-Unearned Revenue 32 - 32 Grants - 2,965 2,965 Total $ 1,122 $ 2,965 $ 4,087 5. UNAVAILABLE REVENUE Certain revenues in governmental funds are considered unavailable revenue until received. All revenues including property and sales tax are recognized in the year earned or levied in the government-wide financial statements, but are recorded as unavailable revenue in the fund financial statements to the extent they are not collected within 60 days after year-end. The amounts are as follows (in thousands): Other Total Grants Special Governmental Unavailable General Fund Revenue LMIHAF Funds Revenue Grants $ - $ 2,735 $ - $ - $ 2,735 Deferred Loans: Emerald Cove - - 6,694 - 6,694 Housing Rehabilitation - 2,310 - - 2,310 First Time Homebuyers - - 1,630 - 1,630 Other Unavailable Revenue 339 593 - 57 989 Total $ 339 $ 5,638 $ 8,324 $ 57 $ 14,358 Deferred Loans to developers and qualified individuals for housing rehabilitation and to first time homebuyers are discussed in Note 3. 396 62 City of Huntington Beach ,�--- r Notes to Financial Statements zFo For the Year Ended June 30, 2023 '�ouNry t',I' 6. RETIREMENT PLAN — NORMAL a. Summary Net Pension Liability/(Asset) Net Pension Liability/(Asset) is reported in the accompanying statement of net position as follows: Net Pension Liability/(Asset) CaIPERS Miscellaneous Plan $ 59,878 CaIPERS Safety Plan 92,092 Supplemental Plan (Note 7) 8,788 Total $ 160,758 Deferred Outflows of Resources Deferred Outflows of Resources are reported in the accompanying statement of net position as follows: Change to Net Deferred employer Difference Between Differences between pension contributions Projected and Actual Changes Expected and made after Investment Earnings in assumptions Actual Experience measurement date Total CaIPERS Miscellaneous Plan $ 37,275 $ 11,564 $ 263 $ 7,451 $ 56,553 CaIPERS Safety Plan 53,093 21,764 77 13,220 88,154 Supplemental Plan(Note 7) 3,268 - - - 3,268 Total $ 93,636 $ 33,328 $ 340 $ 20,671 $ 147,975 Deferred Inflows of Resources Deferred Inflows of Resources are reported in the accompanying statement of net position as follows: Differences between Expected and Actual Experience Total CaIPERS Miscellaneous Plan $ 148 $ 148 CaIPERS Safety Plan 2,981 2,981 Total $ 3,129 $ 3,129 397 63 ✓�N ` °" � City of Huntington Beach q-J Notes to Financial Statements i ," For the Year Ended June 30, 2023 �s��UNTY P����i 6. RETIREMENT PLAN — NORMAL (Continued) Pension expenses for the measurement period ending June 30, 2022 (the measurement date), are included in the accompanying financial statements as follows: Net Pension Expense/(Income) CalPERS Miscellaneous Plan $ 15,828 CalPERS Safety Plan 21,878 Supplemental Plan (Note 7) 2,047 Total $ 39,753 b. Plan Description Substantially all City employees working the equivalent of 1,000 hours per fiscal year are eligible to participate in the Safety Plan and Miscellaneous Plan Agent multiple-employer defined benefit plans administered by California Public Employees Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit Provisions under the Plans are established by State statutes within the Public Employee's Retirement Law. Following the passage of AB340, Public Employees' Pension Reform Act (PEPRA) by the California Legislature, employees hired on or after January 1, 2013, who were not previously enrolled in the PERS system elsewhere, or who have had a break in service of at least six months are required to be enrolled in this retirement program which provides a benefit level that is lower than the benefits provided for CalPERS employees that do not meet the PEPRA qualifications previously described. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Copies of the CaIPERS annual financial report may be obtained from the CaIPERS Executive Office —400 P Street, Sacramento, CA 95814. 398 64 doh° ' City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) Benefits Provided CaIPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Benefit provisions and all other requirements are established by State statute and may be amended by city contracts with employee bargaining groups. Participant is eligible for non-industrial disability retirement if becomes disabled and has at least 5 years of credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service. Industrial disability benefits are not offered to miscellaneous employees. The City provides industrial disability retirement benefit to safety employees. The industrial disability retirement benefit is a monthly allowance equal to 50 percent of final compensation. An employee's beneficiary may receive the basic death benefit if the employee dies while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre- retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. Upon the death of a retiree, a one-time lump sum payment of$500 will be made to the retiree's designated survivor(s), or to the retiree's estate. Benefit terms provide for annual cost-of-living adjustments to each employee's retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2 percent. 399 65 City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 e�c �o,a 6. RETIREMENT PLAN — NORMAL (Continued) The Plans' provisions and benefits in effect at June 30, 2023 are summarized as follows: Miscellaneous Agent Plans Classic PEPRA Hire date Prior to January 1, 2013 January 1, 2013 and after Benefit formula 2.5% @ 55 2% @ 62 Benefit vesting schedule 5 years of service 5 years of service Benefit payments monthly for life monthly for life Retirement age minimum 50 years minimum 52 years 2.0%-2.5%, 50 years-63+ 1.0% -2.5%, 52 years-67+ Monthly benefits, as a% of eligible compensation years, respectively years, respectively Required employee contribution rates 8.000% 6.250% Required employer contribution rates July 1, 2022-June 30, 2023 15.000% 15.000% Safety Agent Plans Classic PEPRA Hire date Prior to January 1, 2013 January 1, 2013 and after Benefit formula 3% @ 50 2.7% @ 57 Benefit vesting schedule 5 years of service 5 years of service Benefit payments monthly for life monthly for life Retirement age minimum 50 years minimum 52 years 2.0% -2.7%, 50 years-57+ Monthly benefits, as a% of eligible compensation 3%, 50+years years, respectively Required employee contribution rates 9.000% 11.75%/13.00% (Fire PEPRA) Required employer contribution rates July 1, 2022-June 30, 2023 27.590% 27.590% 400 66 /U01� Oc. x. a 8� City of Huntington Beach i' k Notes to Financial Statements For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) c. Contributions Section 20814(c) of the California Public Employees' Retirement Law ("PERL") requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall 'be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaIPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ended June 30, 2022, miscellaneous participants under the Classic and PEPRA plans are required to contribute 8% and 6.25% of their annual covered salary, respectively. Safety participants under the Classic and PEPRA plans are required to contribute 9% and 11.75% of their annual covered salary, respectively. Fire PEPRA participants are now required to contribute 13%. In addition, the City is required to make employer contributions at the actuarially determined rates of 15.000% and 27.590% for the miscellaneous and safety plans, respectively, for the period July 1, 2022 through June 30, 2023. At June 30, 2021, the valuation date, the following employees were covered by the benefit terms for each Plan: Miscellaneous Safety Active members 553 384 Transferred members 476 75 Terminated members 369 65 Retired members and beneficiaries 1097 650 401 67 oF���S.tNsra��� City of Huntington Beach Notes to Financial Statements W411eitiffiefs For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) d. Net Pension Liability The City's net pension liability is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is illustrated below: • Actuarial Assumptions—The total pension liability in the June 30, 2021 actuarial valuation, rolled forward to June 30, 2022 using standard update procedures, were determined using the following actuarial assumptions: Actuarial Methods and Assumptions Used to Determine Total Pension Liability Actuarial Cost Method Entry Age Actuarial Cost Method Actuarial Assumptions: Discount Rate 6.90% Inflation 2.30% Salary Increases Varies by entry age and service Investment Rate of Return 6.90% Net of Pension Plan Investment and Administrative Expenses;includes Inflation Mortality Rate Table* Derived using CaIPERS'membership data for all funds Post Retirement Benefit Increase The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies,2.30%thereafter *The mortality table used was developed based on CaIPERS-specific data.The probabilities of mortality are based on the 2021 CaIPERS Experience Study for the period from 2001 to 2019.Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80%of Scale MP-2020 published by the Society of Actuaries.For more details on this table,please refer to the CaIPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CaIPERS website. 402 68 r Orirc . City of Huntington Beach Notes to Financial Statements z2oo . For the Year Ended June 30, 2023 ZS'COU / 6. RETIREMENT PLAN — NORMAL (Continued) Long-term Expected Rate of Return— The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CaIPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The expected real rates of return by asset class are as follows: Assumed asset Asset Class' Allocation Real Return''2 Global Equity-Cap-weighted 30.00% 4.54% Global Equity- Non-Cap-weighted 12.00% 3.84% Private Equity 13.00% 7.28% Treasury 5.00% 0.27% Mortgage-backed Securities 5.00% 0.50% Investment Grade Corporates 10.00% 1.56% High Yield 5.00% 2.27% Emerging Market Debt 5.00% 2.48% Private Debt 5.00% 3.57% Real Assets 15.00% 3.21% Leverage (5.00)% (0.59)% An expected inflation of 2.30% used for this period. 2 Figures are based on the 2021 Asset Liability Management study. 403 69 City of Huntington Beach j--- --=- Notes to Financial Statements For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) Discount Rate —The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based, on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Subsequent Events — July 12, 2021, CaIPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CaIPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CaIPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021. On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a_reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CaIPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date. 404 70 'UNT{N67' . o:- N"� City of Huntington Beach f ,, Notes to Financial Statements z� Y ;�o fC For the Year Ended June 30, 2023 • e. Changes in the Net Pension Liability/(Asset) The following table shows the changes in net pension liability/(asset) recognized over the measurement period: Miscellaneous Plan Total Pension Plan Fiduciary Net Pension Liability Net Position Liability(Asset) Balance at June 30,2021 (Valuation Date) $ 619,966 $ 671,565 $ (51,599) Changes in the year: • Service cost 8,174 - 8,174 Interest on the total pension liabilities 43,253 - 43,253 Changes of Assumptions 19,824 - 19,824 Differences between expected and actual experience 451 - 451 Benefit payments, including refunds of members contribution: (34,942) (34,942) - Contributions-employer - 6,951 (6,951) Contributions-employee - 3,533 (3,533) Net investment income - (49,840) 49,840 Administrative expenses - (419) 419 Net changes 36,760 (74,717) 111,477 Balance at June 30,2022(Measurement Date) $ 656,726 $ 596,848 $ 59,878 Safety Plan Total Pension Plan Fiduciary Net Pension Liability Net Position Liability(Asset) Balance at June 30,2021 (Valuation Date) $ 825,437 $ 882,705 $ (57,268) Changes in the year: Service cost 14,683 - 14,683 Interest on the total pension liabilities 57,872 - 57,872 Changes of Assumptions 28,785 - 28,785 Differences between expected and actual experience 102 - 102 Benefit payments,including refunds of members contribution: (45,876) (45,876) - Contributions-employer - 13,579 (13,579) Contributions-employee - 4,985 (4,985) Net investment income - (65,933) 65,933 Administrative expenses - (549) 549 Net changes 55,566 (93,794) 149,360 Balance at June 30,2022(Measurement Date) $ 881,003 $ 788,911 $ 92,092 405 71 ro`,.r '�"'' � City of Huntington Beach f�� '\ , (o iQ Notes to Financial Statements \9ti 4..... eZ For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) Sensitivity of the Net Pension Liability/(Asset) to Changes in the Discount Rate- The following presents the City's net pension liability, calculated using the discount rate, as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: Plan's Aggregate Net Pension Liability/(Asset) Discount Rate - 1% Current Discount Discount Rate + 1% (5.90%) Rate (6.90%) (7.90%) Miscellaneous Plan $ 145,638 $ 59,878 $ (10,540) Safety Plan 210,004 92,092 (4,315) Aggregate Total $ 355,642 $ 151,970 $ (14,855) Pension Plan Fiduciary Net Position— Detailed information about each pension plan's fiduciary net position is available in the separately issued CaIPERS financial reports. Pension Income and Deferred Outflows/Inflows of Resources Related to Pensions As of the start of the measurement period (July 1, 2021), the net pension asset was $51,599,000 for the Miscellaneous Plan and $57,268,000 for the Safety Plan. For the measurement period ending June 30, 2022 (the measurement date), the City incurred a pension expense of$15,828,000 and $21,878,000 for the Miscellaneous and Safety Plans, respectively. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized over 5-years straight line. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period. 406 72 City of Huntington Beach Notes to Financial Statements i oe For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) The Expected Average Remaining Service Lifetime ("EARSL") is calculated by dividing the total future service years of active employees by the total number of plan participants (active, inactive,' and retired) in the risk pool. For the 2021-22 measurement period, the EARSL for each plan is as follows: Miscellaneous Safety Expected Average Remaining Service Lifetime 2.4 4.1 At June 30, 2023 the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Miscellaneous Plan Deferred outflows Deferred inflows of Resources of Resources Difference between projected and actual earning on pension plan investments $ 37,275 $ - Changes in assumptions 11,564 - Difference between expected and actual experience 263 (148) Contributions made subsequent to the measurement date 7,451 - Total $ 56,553 $ (148) Safety Plan Deferred outflows Deferred inflows of Resources of Resources Difference between projected and actual earning on pension plan investments $ 53,093 $ - Changes in assumptions 21,764 - Difference between expected and actual experience 77 (2,981) Contributions made subsequent to the measurement date 13,220. - Total $ _ 88,154 $ (2,981) 407 73 ✓toIN6=: rt% � "�; City of Huntington Beach %-t - 'max Notes to Financial Statements For the Year Ended June 30, 2023 6. RETIREMENT PLAN — NORMAL (Continued) For the Miscellaneous Plan and Safety 'Plan, $7,451,000 and $13,220,000, respectively, was reported as deferred outflows of resources related to pensions resulting from City's contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: • Measurement Periods Deferred Outflows/(Inflows)of Resources Ended June 30, Miscellaneous Safety 2023 $ 15,232 $ 15,306 2024 9,922 16,022 2025 4,749 14,747 2026 19,050 25,877 $ 48,953 $ 71,952 7. RETIREMENT PLAN — SUPPLEMENTAL a. Plan Description and Benefits The City administers a supplemental single-employer defined benefit retirement plan (Supplemental Plan) for all employees hired prior to 1997 (exact dates are different for various associations). The Plan is governed by a three-member Supplemental Employee Retirement Plan and Trust Board consisting of the City Treasurer, Chief Financial Officer, and the City Manager, or his/her designee. The Board has the authority, under the terms of the Trust agreement, to control and manage the operation and administration of the Plan. Benefit provisions are established and may be amended through negotiations between the City and employee bargaining associations during each bargaining period, which are then approved through resolutions of the City Council. In Fiscal Year 2008/09, the City established the Supplemental Employee Retirement Plan and Trust, and transferred $24,918,000 to an irrevocable trust from the prefunded amounts. The plan and trust are reported as a pension trust fund in the City's financial statements on a full accrual basis. 408 74 • City of Huntington Beach Notes to Financial Statements U t _ ''Q For the Year Ended June 30, 2023 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) The Supplemental Plan will pay the retiree an additional amount to his or her CaIPERS retirement benefit for life. In order to be eligible for the benefit, the retiree must retire from the City. The amount that is computed as a factor of an employee's normal retirement allowance is computed at retirement and remains constant for his or her life. This benefit is payable by the City for the duration of the life of the member, and shall cease upon the employee's death. As of June 30, 2021, the date of the Plan's most recent actuarial valuation, the average monthly benefit received by inactive plan members and beneficiaries receiving benefits is $626. Effective in 1998 (exact dates are different for various associations), new City employees are ineligible to participate in the Supplemental Employee Retirement Plan. Employees Covered: At June 30, 2023, the measurement date, the following employees were covered by the benefit terms for the Plan: Inactive employees receiving benefits 742 Active employees 49 Total 791 c. Employer Contributions The City's policy is to , make required contributions as determined by the Supplemental Plan's actuary. The required contributions were determined as part of the June 30, 2021 actuarial valuation. The City is required to contribute the actuarially determined rate of 3.5% of total payroll for all permanent employees for the year ended June 30, 2023. There are no employee contributions required for the plan. Survivor and termination benefits are not included in the plan. Administrative costs of this plan are financed through investment earnings. For the year ended June 30, 2023, the contributions were (in thousands): Contributions - employer $ 6,046 409 75 40u0;\ City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) c. Investments Investments of the Supplemental Plan are held separately from those of other City funds by investment custodians. The Supplemental Employee Retirement Plan and Trust Board is responsible for supervising all investments. Changes to the Investment Policy require approval by the Board. The policy remained the same as last fiscal year. The most recent policy was reviewed in June 2022 with an effective date of July 1, 2022. Please refer to Note 2 for a detailed description of the Supplemental Plan's Investment Policy. The major asset class allocation for the Supplemental Plan as of June 30, 2023 is listed below: Long-Term Allocation as of Expected Rate of Asset Class Strategic Allocation June 30,2023 Return Fixed Income 40.00% 37.60% 1.55% Equities 27.00% 55.49% 5.35% Real Estate 10.00% 6.03% 0.00% Commodities 2.00% 0.00% 0.00% Cash and Equivalents 0.00% 0.88% 0.45% Total 79.00% 100.00% Quoted market prices have been used to value investments as of June 30, 2023. These investments are held by the Trust or by an agent in the Trust's name. A portion of these investments is subject to credit risk (including custodial credit risk and concentrations of credit risk), interest rate risk and/or foreign currency risk.The Governmental Accounting Standards Board (GASB) Statement No. 40 requires the disclosure of such risk. Please see below for a list of investments held in any one organization that represents five percent or more of the Plan's investment portfolio at June 30, 2023: Concentration of Investments Equaling or Exceeding 5% Fidelity 500 Index Fund 25.21% Fidelity US Bond Index 18.79% Vanguard Ftse Developed Etf 17.04% Baird Aggregate Bond Fd Instl 6.93% Doubleline Total Ret Bd I 6.89% (shares Core US Reit Etf 6.03% 410 76 City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 OU- UIT 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) All Supplemental Plan investments are reflected in the schedule included in Section c of the Note, with the exception of amounts held in the City's investment pool account. The City maintains an investment pool account for City funds. Monthly contributions for the Plan are held in the City's investment pool account and are used to pay recurring expenditures. Refer to Note 2 for a description of the City's investments. For the Fiscal Year ended June 30, 2023, the annual money-weighted rate of return on the Plan's investments, net of pension plan investment expenses, was 8.37%. The money-weighted rate of return expresses investment performance, net of investment expenses, adjusted for the changing amounts actually invested. d. Net Pension Liability The City's net pension liability is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2023 using standard update procedures. A summary of principal assumptions and methods used to determine the City's net pension liability is shown on the following page. 411 77 ,+ ti4. City of Huntington Beach y; ,fix Notes to Financial Statements 'c "are.• ' For the Year Ended June 30, 2023 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) Actuarial Assumptions—The total pension liabilities in the June 30, 2021 actuarial valuations for the June 30, 2023 measurement date were determined using the following actuarial assumptions: Actuarial Methods and Assumptions Used to Determine Total Pension Liability Actuarial Cost Method Entry Age Normal,Level Percentage of Payroll Actuarial Assumptions: Discount Rate 5.50% Inflation 2.50% Salary Increases CaIPERS 1997-2015 Experience Study plus 2.75%aggregate increase Investment Rate of Return 5.50%Net of Investment Expenses CaIPERS 1997-2015 Experience Study,mortality projected fully Mortality Rate Table generational with Scale MP-2021 Retirement,Disability,Withdrawal CaIPERS 1997-2015 Experience Study plus 23%load on future service retirement liability added to reflect recent benefits experience. The changes in actuarial assumptions include the following: • All other actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality, and retirement rates. The future service retirement liabilities load increased from 15% to 23% to reflect recent experience of benefits being larger than anticipated. e. Discount Rate & Sensitivity The discount rate is used in the measurement of the Total Pension Liability. This rate considers the ability of the fund to meet benefit obligations in the future. To make this determination, employee contributions, benefit payments, expenses, and investment returns are projected into the future. The Plan Net Position (assets) in future years can then be determined and compared to its obligation to make benefit payments in those years. As long as assets are projected to be on hand in a future year, the assumed valuation discount is used. For this valuation, the discount rate is 5.50%, based on the inflation assumption of 2.50% and a long-term asset allocation of 70% equities and 30% fixed income. The geometric real rates of return were assumed to be 5.35% for equities and 1.55% for fixed income. The long-term expected rate of return is applied to all future projected benefit payments. 412 78 roF �: City of Huntington Beach Notes to Financial Statements U .,r_ ...�..•ice.. i9\ For the Year Ended June 30, 2023 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. An investment return excluding administrative expenses would have been 5.50 percent. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, both short-term and long-term market return expectations were taken into account along with expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 413 79 City of Huntington Beach \"t Notes to Financial Statements ��o,, For the Year Ended June 30, 2023 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) Changes in the Net Pension Liability The following table shows the changes in net pension liability recognized over the measurement period (in thousands): Supplemental Plan Total Plan Pension Fiduciary Net Pension Liability Net Position Liability Balance at June 30,2022 $ 74,151 $ 58,999 $ 15,152 Changes in the year: Service cost 237 - 237 Interest on the total pension liabilities 3,934 - 3,934 Differences between expected and actual experience - - - Changes of Assumptions - - - Benefit payments, including refunds of members contributions (5,712) (5,712) - Contributions-employer - 6,046 (6,046) Net investment income - 4,823 (4,823) Administrative expenses - (334) 334 Net changes (1,541) 4,823 (6,364) Balance at June 30,2023 $ 72,610 $ 63,822 $ 8,788 Sensitivity of the Net Pension Liability to Changes in the Discount Rate- The following presents the City's net pension liability, calculated using the discount rate, as well as what the City's net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate: Plan's Aggregate Net Pension Liability/(Asset) (in thousands) Current Discount Rate - Discount Rate Discount Rate + 1% (4.50%) (5.50%) 1% (6.50%) $ 15,814 $ 8,788 $ 2,792 414 80 � 6777 ,+ oF%- °,"� City of Huntington Beach ri -- , Notes to Financial Statements iy --- ` For the Year Ended June 30, 2023 couNr 7. RETIREMENT PLAN — SUPPLEMENTAL (Continued) f. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2023, the City recognized pension expense in the amount of$2,047,000 for the Supplemental Plan. At June 30, 2023, the City reported deferred outflows of resources related to the supplemental pension plan from the following source (in thousands): Deferred Outflows of Resources Difference between projected and actual earnings on pension plan investments $ 3,268 For the Supplemental Plan, $3,268,000 was reported as deferred outflows of resources related to pensions which will be recognized in pension expense as follows (in thousands): Deferred Outflows/ (Inflows) of Year Ended June 30, Resources 2024 $ 598 2025 288 2026 2,696 2027 (314) $ 3,268 415 81 ��N'[NfGjO� V City of Huntington Beach t Notes to Financial Statements >tioQ For the Year Ended June 30, 2023 CIF CooNri 8. OTHER POST EMPLOYMENT BENEFITS a. Plan Description The City administers the following two other post employment benefit(OPEB) plans: Postemployment Medical Insurance The City agreed, via contract, with each employee association to provide postemployment medical insurance to retirees. These Other Postemployment Benefits (OPEB) are based on years of service and are available to all retirees who meet all three of the following criteria: • At the time of retirement, the employee is employed by the City. • At the time of retirement, the employee has a minimum of ten years of service credit or is granted a service connected disability retirement. • Following official separation from the City, CaIPERS grants a retirement allowance. The City's obligation to provide the benefits to a retiree ceases when either of the following occurs: • During any period the retiree is eligible to receive health insurance at the expense of another employer; and/or • The retiree becomes eligible to enroll automatically or voluntarily in Medicare. The subsidy a retiree is entitled to receive is based on the retiree's years of service credit and is limited to $344 per month after 25 years of service. If a retiree dies, the benefits that would be payable for his or her insurance are provided to the spouse or family for 12 months. The retiree may use the subsidy for any of the medical insurance plans that the City's active employees may enroll in. Employees hired on or after October 1, 2014 are not eligible for this benefit. PEMHCA The City provides an agent multiple-employer defined benefit healthcare plan to retirees through CalPERS under the California Public Employees Medical and Hospital Care Act (PEMHCA), commonly referred to as PERS Health. PEMHCA provides health insurance through a variety of Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) options. The PEMHCA benefits are applied to all safety employee groups, based on retirement plan election. The benefits continue to the surviving spouse for one year. The Huntington Beach Firefighters' Association (HBFA)joined PEMHCA in 2011. All other safety groups - Fire Management Association (FMA), Marine Safety Management Association (MSOA), Police Management Association (PMA), and Police Officers' Association (POA) -joined in 2004. 416 82 se04 City of Huntington Beach Notes to Financial Statements ;ytiQ For the Year Ended June 30, 2023 8. OTHER POST EMPLOYMENT BENEFITS (Continued) Safety employees are eligible for PEMHCA benefits if they retire from the City on or after age 50 with at least five years of service or disability, and are eligible for a PERS pension. As of the June 30, 2022 measurement date, the following current and former employees were covered by the benefit terms under the plan: Postemployment Medical Insurance PEMHCA Retirees and beneficiaries receiving benefits 307 212 Inactive employees not yet receiving benefits 312 - Active Plan Members 858 391 Total Plan Participants 1,477 603 b. Accounting and Funding The City utilizes the California Employers' Retiree Benefit Trust (CERBT), an agent multiple-employer plan, for the postemployment medical insurance benefit. Benefits paid from the CERBT were $904,000 for year ended June 30, 2023. The assets of the CERBT are excluded from the accompanying financial statements since they are in an irrevocable trust administered . by CaIPERS. Copies of CaIPERS' annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA, 95814 or on their website: www.calpers.ca.gov. The City's policy is to make 100% of each year's ARC, with an additional amount to prefund benefits as determined annually by City Council in order to improve the funded status of the plan. For PEMHCA, the City selected the "unequal" method for the contribution. Under this method, the City offered a lesser contribution for retirees than for active employees. The City paid the PEMHCA minimum for actives ($143 in 2021, $149 in 2022, and $151 in 2023). 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 $90.60 per employee for the Huntington Beach Firefighter's Association (HBFA) and $143.45 for all other Safety groups in 2023. The annual increase in minimum PEMHCA contribution to CaIPERS will continue until the time that the City contribution for retirees equals the City contribution paid for active employees. 417 83 roe ; �z City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 8. OTHER POST EMPLOYMENT BENEFITS (Continued) The City's net OPEB liability was measured as of June 30, 2022 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2021, based on the following actuarial methods and assumptions: • Actuarial Cost Method - Entry Age Normal • Discount rate - 5.50% • Projected salary increases for covered employees due to inflation - aggregate increases of 2.75% per annum • Investment Rate of Return - 5.50%, assuming actuarially determined contributions funded into CERBT Investment Strategy 2 • Mortality Rate1 - Derived using CaIPERS' membership data for all funds • Pre-Retirement Turnover2- Derived using CaIPERS' membership data for all funds • PEMHCA minimum increases for actives - $151 in 2023, with 4.00% annual increases thereafter • Healthcare Trend Rate - The medical trend rate represents the long-term expected growth of medical benefits paid by the plan, due to non-age-related factors such as general medical inflation, utilization, new technology, and the like. The following table sets forth the inflation trend assumption used for the valuation: Calendar Annual Rate Calendar Annual Rate Year Non-Medicare Medicare Year Non-Medicare Medicare 2023 6.50% 5.65% 2030 4.95% 4.45% 2024 6.25% 5.45% 2031-35 4.80% 4.35% 2025 6.00% 5.25% 2036-45 4.65% 4.25% 2026 5.75% 5.05% 2046-55 4.50% 4.20% 2027 5.55% 4.90% 2056-65 4.35% 4.15% 2028 5.35% 4.75% 2066-75 4.05% 3.95% 2029 5.15% 4.60% 2076+ 3.75% 3.75% 1 Mortality information was derived from data collected during 1997 to 2015 CaIPERS Experience Study dated December 2017,which may be accessed on the CaIPERS website www.calpers.ca.gov under Forms and Publications. Post- retirement mortality rates include mortality projected fully generational with Scale MP-21. 2.The pre-retirement turnover information was developed based on CaIPERS' specific data. For more details, please refer to the 2007 to 2011 Experience Study Report.The Experience Study Report may be accessed on the CaIPERS website www.calpers.ca.gov under Forms and Publications. 418 84 City of Huntington Beach 5 Notes to Financial Statements For the Year Ended June 30, 2023 8. OTHER POST EMPLOYMENT BENEFITS (Continued) Long-Term Expected Rate of Return The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation)are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: CERBT Strategy 2 Long-Term Target Expected Real Rate Asset Class Allocation of Return Global Equity 34% 4.56% Fixed Income 41% 1.56% Treasury Inflation-Protected Securities ("TIPS") 5% -0.08% Commodities 3% 1.22% Real Estate Investment Trusts ("REITS") 17% 4.06% Total 100% * Long-term expected rate of return is 5.75% Discount Rate The discount rate used to measure the total OPEB liability was 5.75 percent. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. 419 85 fro City of Huntington Beach 15;_k kc,t Notes to Financial Statements ��� � For the Year Ended June 30, 2023 roe yoUN ��`r� 8. OTHER POST EMPLOYMENT BENEFITS (Continued) The changes in the net OPEB Liability/(Asset)for the plan are as follows (in thousands): Increase/(Decrease) Total OPEB Plan Fiduciary Net OPEB Liability Liability Net Position /(Asset) (a) (b) (c)_(a)-(b) Balance at June 30,2022 $ 30,276 $ 36,286 $ (6,010) (Measurement Date June 30,2021) Changes recognized for the measurement period: Service Cost 1,004 - 1,004 Interest 1,655 - 1,655 Assumption Changes (891) - (891) Contributions-Employer - 2,499 (2,499) Net Investment Income - (4,561) 4,561 Benefit Payments (2,352) (2,352) - Administrative Expenses - (156) 156 Net Changes (584) (4,570) 3,986 Balance at June 30,2023 $ 29,692 $ 31,716 $ (2,024) (Measurement Date June 30,2022) Sensitivity of the Net OPEB Liability/(Asset) to Changes in the Discount Rate The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for the measurement period ended June 30, 2022 (in thousands): 1% Decrease • Current Discount Rate 1% Increase (4.75%) (5.75%) (6.75%) Net OPEB Liability $ 1,828 $ (2,024) $ (5,189) 420 86 City of Huntington Beach Notes to Financial Statements i 9 2 OZCFC o e For the Year Ended June 30, 2023 8. OTHER POST EMPLOYMENT BENEFITS (Continued) • Sensitivity of the Net OPEB Liability/(Asset) to Changes in the Health Care Cost Trend Rates The following presents the net OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for the measurement period ended June 30, 2022 (in thousands): 1% Decrease Current Trend 1% Increase (5.50% Non-Medicare/ (6.50% Non-Medicare/ (7.50% Non-Medicare/ 4.65% Medicare, 5.65% Medicare, 6.65% Medicare, decreasing to 2.75% decreasing to 3.75% decreasing to 4.75% Non-Medicare/ Non-Medicare/ Non-Medicare/ 2.75% Medicare) 3.75% Medicare) 4.75% Medicare) Net OPEB Liability $ (5,447) $ (2,024) $ 2,335 OPEB Plan Fiduciary Net Position The CERBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained from the California Public Employees' Retirement System, CERBT, P.O. Box 942703, Sacramento, CA 94429-2703. Recognition of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amount are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The recognition period differs depending on the source of the gain or loss: Net difference between projected and actual earnings on OPEB plan investments 5 Years 421 87 °1��TIN6r°cic„ City of Huntington Beach ��` i Notes to Financial Statements For the Year Ended June 30, 2023 UNTY CPS 8. OTHER POST EMPLOYMENT BENEFITS (Continued) OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB As of June 30, 2023, the City incurred OPEB expense of $292,000. As of June 30, 2023, the City reported deferred outflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources OPEB Contributions subsequent to the measurement date $ 1,997 $ - Difference between expected and actual experience 639 4,682 Changes in Assumptions 1,191 2,477 Net difference between projected and actual earnings on OPEB Plan Investments 2,792 - $ 6,619 $ 7,159 The $1,997,000 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2022 measurement date will be recognized as a reduction of the net OPEB liability during the Fiscal Year ending June 30, 2024. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as expense as follows (in thousands): Deferred Measurement Periods Outflows/(Inflows) Ended June 30, of Resources 2023 $ (568) 2024 (482) 2025 (531) 2026 482 2027 (739) Thereafter (699) $ (2,537) 422 88 City of Huntington Beach n . Notes to Financial Statements 9 For the Year Ended June 30, 2023 9. RISK MANAGEMENT The City is exposed to various risks of losses related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City records the liability claims as expenditures in the Self Insurance General Liability Internal Service Fund and the workers' compensation claims in the Self Insurance Workers' Compensation Internal Service Fund. BICEP was created in 1988 by a joint powers agreement between the City of Huntington Beach and four other local entities including Oxnard, Ventura, Santa Ana, and West Covina, for the purpose of providing joint insurance coverage and related risk management services for member cities. BICEP allows member entities to finance a claims payment pool for certain liability claims in excess of$1,000,000 to a maximum coverage limit of $27,000,000 for claims incurred through June 30, 2015, and $24,000,000 thereafter. Effective July 1, 2019, the member agencies of BICEP agreed to dissolve the Joint Powers Authority. BICEP continues to exist for the purpose of disposing of all claims, the distribution of assets, and any other functions necessary to conclude the affairs of BICEP as provided in the Bylaws of the Authority. Upon dissolution of BICEP, the City purchased liability insurance in the open marketplace, which provides insurance for claims costs exceeding the City's self-insured retention of $1,000,000. The maximum coverage limit is $30,000,000, which is inclusive of the self-insured retention. Claims that exceed the maximum limit of liability are covered by the City's Self-Insurance General Liability Internal Service Fund. There were no liability claims in the past three years that exceeded the coverage limit. Although, there are two claims that exceed the self-insured retention of$1,000,000 and is not covered under the City's liability insurance plan. Refer to note 18 for further details. Liability Claims Claims up to $1,000,000 are paid from the City's Self Insurance General Liability Internal Service Fund. Payments for claims from $1,000,000 to the maximum limit discussed above are covered by the excess liability coverage purchased by the City. Any claims exceeding the maximum limit are covered by the Self Insurance General Liability Internal Service Fund. The liability for these claims is recorded as part of long- term obligations in the Self Insurance General Liability Fund and government-wide financial statements. Liabilities include amounts incurred, but not reported. 423 89 City of Huntington Beach 4 Notes to Financial Statements ;* o4,� For the Year Ended June 30, 2023 �F ou, 9. RISK MANAGEMENT (Continued) Workers' Compensation Claims Workers' compensation claims of up to $1,000,000 per claim are paid from the Self Insured Workers' Comp Internal Service Fund. Excess workers' compensation coverage is purchased through the CSAC/Prism-Excess Insurance Authority. Payments for claims from $1,000,000 to statutory limits are covered by CSAC/Prism- Excess Insurance Authority. The Self Insurance Workers' Comp Internal Service Fund has a $24.3 million deficit at year-end at the 55 percent confidence level. The City has established plans to help reduce the deficit in this fund. This will be accomplished by additional transfers from the General Fund, Proprietary funds, and other governmental funds in which employees are charged over the next nine years. Claims activity and liabilities relating to the current and prior year are (in thousands): Workers' Compensation General Liability Total Balance June 30, 2021 $ 34,794 $ 11,985 $ 46,779 Additions 16,278 7,993 24,271 Reductions (8,309) (6,310) (14,619) Net Increase (Decrease) 7,969 1,683 9,652 Balance June 30, 2022 42,763 13,668 56,431 Additions 12,154 15,848 28,002 Reductions (10,830) (6,982) (17,812) Net Increase (Decrease) 1,324 8,866 10,190 Balance June 30,2023 $ 44,087 $ 22,534 $ 66,621 424 90 � e City of Huntington Beach -- = - Notes to Financial Statements V �0 For the Year Ended June 30, 2023 --- �l NTYrF 10. INTERFUND TRANSACTIONS a. Advances to/from Other Funds The amounts at year-end were (in thousands): Advances to (Payable): Redevelopment Agency Private Purpose Trust Advances from (Receivable): Major Governmental Funds LMIHAF Capital Projects $ 1,363 There is a $1,363,000 advance from the LMIHAF Capital Projects Fund to the Redevelopment Agency Private Purpose Trust Fund as of June 30, 2023 for Main Pier property acquisitions prior to the dissolution of the Redevelopment Agency on February 1, 2012. No set interest rates or fixed repayment terms have been established. 425 91 tvr ��� � City of Huntington Beach • Notes to Financial Statements o .f� e For the Year Ended June 30, 2023 INN 10. INTERFUND TRANSACTIONS (Continued) b. Transfers In/Out The amounts at year-end were (in thousands): Transfers Out Grants Other Total Hazmat General Special Governmental Governmental Service Total Transfers In Fund Revenue Funds Funds Fund Transfers In General Fund $ - $ 29,607 $ 400 $ 30,007 $ 13 $ 30,020 Grants Special Revenue 1 - - 1 - 1 Pension Liability 344 - - 344 - 344 Infrastructure 28,741 - - 28,741 - 28,741 Other Governmental Funds 6,263 - - 6,263 - 6,263 Total Governmental Funds 35,349 29,607 400 65,356 13 65,369 Refuse Fund 51 - - 51 - 51 Total Enterprise Funds 51 - - 51 - 51 Total Transfers Out $ 35,400 $ 29,607 $ 400 $ 65,407 $ 13 $ 65,420 The following is a summary of the significant transfers: • $29,607,000 was transferred from the Grant Fund to the General Fund to fully expend ARPA funds for eligible police and fire personnel costs. • $51,000 was transferred from the General Fund to the Refuse Enterprise Fund ' to fund the senior citizen rate reduction on refuse charges. • $6,263,000 was transferred from the General Fund to Other Governmental Funds for debt service payments of$2,963,000 and technology upgrades within the Police Department totalling $3,300,000. • $13,000 was transferred from the Hazmat Service Enterprise Fund to the General Fund to cover administrative and overhead expenditures. • $28,741,00 was transferred from the General Fund to the Infrastructure Fund for infrastructure-related projects such as road repairs and enhancement and other capital improvement projects. 426 92 r °ram T .A City of Huntington Beach �! }x Notes to Financial Statements 3 .. . For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS Below is a schedule of changes in long-term governmental obligations for the year (in thousands): June 30, June 30, Accrued Due Within Governmental Activities: 2022 Additions Retirements 2023 Interest One Year Public Financing Authority: 2014(a)Lease Revenue Bonds $ 11,215 $ - $ (685) $ 10,530 $ 121 $ 720 2020(a)Lease Revenue Bonds 4,835 - - 4,835 36 - 2020(b)Lease Revenue Bonds 11,315 - (1,520) 9,795 21 1,530 Total Public Financing Authority 27,365 - (2,205) 25,160 178 2,250 Other Long-Term Obligations: Compensated Absences 15,045 3,376 (3,603) 14,818 - 2,039 Claims Payable 56,431 28,002 (17,812) 66,621 - 19,043 Pollution Remediation 2,000 - - 2,000 - - LED Lighting Phase I 314 - (123) 191 1 126 I-Bank CLEEN Loan 1,586 - (303) 1,283 12 310 CEC Loan 2,063 - (266) 1,797 - 269 Pension Obligation Bonds 330,642 - (12,637) 318,005 347 12,683 Finance Purchase Agreement 11,714 7,742 (2,068) 17,388 61 3,097 Leases Payable 247 398 (189) 456 - 216 Subscriptions Payable 3,651 - (1,051) 2,600 33 1,011 Total Other Long-Term Obligations 423,693 39,518 (38,052) 425,159 454 38,794 Total Long-Term Obligations- Governmental Activities $ 451,058 $ 39,518 $ (40,257) $ 450,319 $ 632 $ 41,044 427 93 !' 01 , City of Huntington Beach I. :x� Notes to Financial Statements 417 For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) a. Public Financing Authority (1) 2014(a) Public Financing Authority Lease Revenue Bonds Year of Issuance 2014 Type of Debt Lease Revenue Bonds Original Principal Amount $15,295,000 Security Lease with City Interest Rates 3.0% to 5.0% Interest Payment Dates March 1st, September 1st Principal Payment Dates September 1st Purpose of Debt Finance the construction of a new Senior Center Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 720 $ 352 $ 1,072 2025 750 319 1,069 2026 785 289 1,074 2027 810 265 1,075 2028 835 240 1,075 2029-2033 4,580 789 5,369 2034-2035 2,050 83 2,133 Total $ 10,530 $ 2,337 $ 12,867 428 94 �4 City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) (2) 2020(a) Public Financing Authority Lease Revenue Bonds Year of Issuance 2020 Type of Debt Lease Revenue Bonds Original Principal Amount $4,835,000 Security Lease with City Interest Rates 4.0% to 5.0% Interest Payment Dates May 1st, November 1st Principal Payment Dates May 1st Purpose of Debt Defease 2010(a) Lease revenue Bonds which Defeased 1997 Leasehold Revenue Bonds (Construct Pier Plaza and Purchase 800 MHZ system), 2000 Lease Revenue Bonds (Capital Improvements and defeasance of Emerald Cove Certificate of Participation) Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ - $ 224 $ 224 2025 - 224 224 2026 - 224 224 2027 - 224 224 2028 - 224 224 2029-2032 4,835 679 5,514 Total $ 4,835 $ 1,799 $ 6,634 429 95 45-;;;;,i City of Huntington Beach Notes to Financial Statements For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) (3) 2020(b) Public Financing Authority Lease Revenue Bonds Year of Issuance 2020 Type of Debt Lease Revenue Bonds • Original Principal Amount $14,440,000 Security Lease with City Interest Rates 0.329% to 1.831% Interest Payment Dates May 1st, November 1st Principal Payment Dates May 1st Purpose of Debt Defease 2011(a) Lease revenue Bonds which Defeased 2001(a) Leasehold Revenue Bonds (Construct Sports Complex and South Beach Phase II Improvements) and 2001(b) Lease Revenue Bonds (Defeased Civic Improvement Corporation Certificates) Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 1,530 $ 129 • $ 1,659 2025 1,545 117 1,662 2026 1,560 103 1,663 2027 1,575 83 1,658 2028 1,600 61 1,661 2029-2030 1,985 41 2,026 Total $ 9,795 $ 534 • $ 10,329 430 96 City of Huntington Beach $ t Notes to Financial Statements stir ,, o For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) b. Other Long-Term Obligations (1) Compensated Absences There is no repayment schedule to pay the compensated absences amount of $14,818,000 relating to governmental operations. The General Fund typically liquidates the vacation and sick leave liability. (2) Claims Payable There is no repayment schedule for the claims payable for governmental activities of$66,621,000 described in Note 9. The City pays the claims upon final settlement. The General Fund typically liquidates the claims payable liability. (3) Pollution Remediation The City plans to remediate hazardous materials contamination of land located within Huntington Central Park used as a gun range facility prior to its close in 1997. The City is voluntarily planning to remediate the site in order to use the area for park purposes. The cost of the gun range remediation is estimated to be $2,000,000 and is reported as a long-term liability in the government-wide financial statements. The liability was measured by estimating a reasonable range of potential outlays and multiplying those outlays by their probability of occurring. (4) LED Lighting Phase I Year of Issuance 2014 Type of Debt Leaseback from Capital One Public Funding, LLC Principal Amount Original $1,062,924 Security Loan Agreement with Capital One Public Funding, LLC Interest Rate 2.32% Interest Payment Dates February 1st and August 1st Principal Payment Dates August 1st Purpose of Debt To purchase and upgrade street, area and pole lighting to energy efficient LED light sources 431 97 y City of Huntington Beach hr- Notes to Financial Statements For the Year Ended June 30, 2023 ti 11. LONG-TERM OBLIGATIONS (Continued) Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 126 $ 5 $ 131 2025 65 1 66 Total $ 191 $ 6 $ 197 (5) I-Bank CLEEN Loan Year of Issuance 2016 Type of Debt CLEEN Loan from the California Infrastructure and Economic Development Bank (I-Bank) Principal Amount Original $3,000,000 Security Edwards Fire Station Interest Rate 2.32% Interest Payment Dates February 1st and August 1st Principal Payment Dates August 1st Purpose of Debt To purchase and upgrade street pole lighting to energy efficient LED light sources Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 310 $ 26 $ 336 2025 317 19 336 2026 324 11 335 2027 332 4 336 Total $ 1,283 $ 60 $ 1,343 432 98 tit $ City of Huntington Beach Notes to Financial Statements '47For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) (6) California Energy Commission (CEC) Loan Year of Issuance 2016 Type of Debt Loan from the California Energy Commission (CEC) Principal Amount Original $3,000,000 Security Loan Agreement with CEC Interest Rate 1.00% Interest Payment Dates June 22nd and December 22nd Principal Payment Dates June 22nd and December 22nd Purpose of Debt To upgrade street pole lighting to energy efficient LED light sources Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 269 $ 17 $ 286 2025 272 15 287 2026 274 12 286 2027 277 9 286 2028 280 6 286 2029-2030 425 4 429 Total $ 1,797 $ 63 $ 1,860 433 99 ,,+VTI City of Huntington Beach Notes to Financial Statements a4 For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) (7) Pension Obligation Bonds Year of Issuance 2021 Type of Debt Pension Obligation Bonds Principal Amount Original $341,501,000 Interest Rates 0.221% to 3.376% Interest Payment Dates June 15th and December 15th Principal Payment Dates June 15th Purpose of Debt Pay 85% of CaIPERS UAL as of the June 30, 2019 valuation report. Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 12,683 $ 8,463 $ 21,146 2025 12,768 8,385 21,153 2026 12,898 8,248 21,146 2027 13,076 8,074 21,150 2028 13,291 7,855 21,146 2029-2033 70,952 34,789 105,741 2034-2038 81,029 24,703 105,732 2039-2043 87,758 10,848 98,606 2044 13,550 457 14,007 Total $ 318,005 $ 111,822 $ 429,827 434 100 City of Huntington Beach Notes to Financial Statements a> ,¢ e#14 For the Year Ended June 30, 2023 NPUNti TYa<<+ 11. LONG-TERM OBLIGATIONS (Continued) (8) Finance Purchase Agreement Year of Issuance 2021 Type of Debt Capital Purchase Agreement Principal Amount Various Security Master Lease Agreement Interest Rates 1.249% and 1.775% Interest Payment Dates Semi-Annually Principal Payment Dates Semi-Annually Purpose of Debt Public Safety Equipment Financing In May 2023, a new purchase agreement was approved by City Council in the amount of$7,742,143 to finance fire equipments, engines and truck. Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 3,097 $ 427 $ 3,524 2025 2,473 361 2,834 2026 2,266 302 2,568 2027 2,324 245 2,569 2028 2,038 186 2,224 2029-2031 5,190 223 5,413 Total $ 17,388 $ 1,744 $ 19,132 (9) Lease Payable The City of Huntington Beach has entered into three leases as a lessee for the use of land and equipment and is required to make monthly fixed payments ranging from $4,982 to $7,195 over the lease terms. As of June 30, 2023, the value of the lease liability was $456,340. The future principal and interest lease payments as of June 30, 2023, were as follows: Year Ending Principal Interest Total June 30 2024 $ 216 $ 8 $ 224 2025 155 4 159 2026 85 1 86 Total $ 456 $ 13 $ 469 435 101 �4fGro r City of Huntington Beach %`A Notes to Financial Statements For the Year Ended June 30, 2023 'y-a- %" 11. LONG-TERM OBLIGATIONS (Continued) (10) Subscription Payable For the year ended June 30, 2023, the financial statements include the adoption of GASB Statement No. 96, Subscription-Based Information Technology Arrangements. The primary objective of this statement is to enhance the relevance and consistency of information about governments' subscription activities. This statement establishes a single model for subscription accounting based on the principle that subscriptions are financings of the right to use an underlying asset. Under this Statement, an organization is required to recognize a subscription liability and an intangible right-to-use subscription asset. The City of Huntington Beach has entered into six subscription agreements for the use of various IT software and is required to make annual fixed payments ranging from $15,018 to $544,839 over the subscription terms. As of June 30, 2023, the value of the subscription liability was $2,600,000. The future principal and interest subscription payment as of June 30, 2023, were as follows: Year Ending June 30 Principal Interest Total 2024 $ 1,011 $ 58 $ 1,069 2025 963 36 999 2026 441 13 454 2027 91 4 95 2028 94 2 96 Total $ 2,600 $ 113 $ 2,713 436 102 City of Huntington Beach Notes to Financial Statements W��r For the Year Ended June 30, 2023 C8U 1f 11. LONG-TERM OBLIGATIONS (Continued) c. Long-Term Obligations — Business-Type Activities Below is a schedule of the long-term obligations of business-type activities (in thousands): Long-Term Obligations-Business-Type June 30, June 30, Accrued Due Within Activities: 2022 Additions Retirements 2023 Interest One Year Compensated Absences $ 1,686 $ 529 $ (389) $ 1,826 $ - $ 498 Pension Obligation Bonds 21,368 - (888) 20,480 22 891 Total Long-Term Obligations- Business-Type Activities $ 23,054 $ 529 $ (1,277) $ 22,306 $ 22 $ 1,389 (1) Compensated Absences There is no repayment schedule for the compensated absences amount of $1,826,000 relating to business-type activities. The balance for the outstanding business-type compensated absences is predominately related to the Water and Sewer funds. (2) Pension Obligation Bond Year of Issuance 2021 Type of Debt Pension Obligation Bonds Principal Amount Original $22,144,000 Interest Rates 0.221% to 3.376% Interest Payment Dates June 15th and December 15th Principal Payment Dates June 15th Purpose of Debt Pay 85% of CalPERS UAL as of the June 30, 2019 valuation report. Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 891 $ 531 $ 1,422 2025 897 527 1,424 2026 907 518 _ 1,425 2027 919 504 1,423 2028 934 489 1,423 2029-2033 4,989 2,129 7,118 2034-2038 5,696 1,420 7,116 2039-2042 5,247 446 5,693 Total $ 20,480 $ 6,564 $ 27,044 437 103 a4 City of Huntington Beach -} Notes to Financial Statements '„�..4,, "��o For the Year Ended June 30, 2023 11. LONG-TERM OBLIGATIONS (Continued) d. Long-Term Conduit Debt Obligations Below is a schedule of the conduit debt obligations for which the City is not liable in any manner (in thousands): June 30, June 30, Community Facilities Districts: 2022 Additions Retirements 2023 Community Facilities District No.2000-1 • 2013 Special Tax Refunding Bonds $ 8,405 . $ - $ (675) $ 7,730 Community Facilities District No.2002-1 Special Assessment Tax Bonds 3,605 - (200) 3,405 Community Facilities District No.2003-1 2013 Special Tax Refunding Bonds 14,670 - (925) 13,745 Total Community Facilities Districts 26,680 - (1,800) 24,880 Total Obligations Not Recorded in Financial Statements $ 26,680 $ - $ (1,800) $ 24,880 12. CAPITAL ASSETS a. Changes in Capital Assets Capital asset activity for the year was (in thousands): June 30; June 30, Governmental Activities 2022 Additions Dispositions 2023 Capital Assets,Not Depreciated: Land $ 369,538 $ - $ - $ 369,538 Construction in Progress 12,235 3,886 _ (4,872) 11,249 Total Capital Assets-Not Depreciated 381,773 3,886 (4,872) 380,787 Capital Assets Being Depreciated Buildings 221,759 5,757 (441) 227,075 Machinery and Equipment 75,098 18,451 (3,977) 89,572 Infrastructure 461,990 18,485 (976) 479,499 Right to Use Leased Asset 448 398 (174) 672 Right to Use SBITA Asset 3,651 - - 3,651 Total Capital Assets Being Depreciated 762,946 43,091 (5,568) 800,469 Less Accumulated Depreciation: Buildings (94,449) (5,247) 441 (99,255) Machinery and Equipment (55,588) (5,016) 3,433 (57,171) Infrastructure (244,465) (8,369) 976 (251,858) Right to Use Leased Asset (195) (126) 111 (210) Right to Use SBITA Asset - (724) - (724) Total Accumulated Depreciation (394,697) (19,482) 4,961 (409,218) Total Depreciated-Net 368,249 23,609 (607) 391,251 Total Capital Assets 1,144,719 46,977 (10,440) 1,181,256 Total Accumulated Depreciation (394,697) (19,482) 4,961 (409,218) Capital Assets of Governmental Activities-Net $ 750,022 $ 27,495 $ (5,479) $ 772,038 438 104 �; - ,,, City of Huntington Beach tU ._ a , Notes to Financial Statements , �o V•PFor the Year Ended June 30, 2023 12. CAPITAL ASSETS (Continued) June 30, June 30, Business-Type Activities: 2022 Additions Dispositions 2023 Capital Assets,Not Depreciated: Land $ 3,907 $ - $ - $ 3,907 Construction in Progress 109 730 - 839 Total Capital Assets-Not Depreciated 4,016 730 - 4,746 Capital Assets Being Depreciated Buildings 105,623 - - 105,623 Machinery and Equipment 22,388 479 (3,284) 19,583 Infrastructure 151,668 2,725 (245) 154,148 Total Capital Assets Being Depreciated 279,679 3,204 (3,529) 279,354 Less Accumulated Depreciation: Buildings (36,930) (2,604) - (39,534) Machinery and Equipment (15,525) (1,266) 3,272 (13,519) Infrastructure (87,242) (2,467) 245 (89,464) Total Accumulated Depreciation (139,697) (6,337) 3,517 (142,517) Total Depreciated-Net 139,982 (3,133) (12) 136,837 Total Capital Assets 283,695 3,934 (3,529) 284,100 Total Accumulated Depreciation (139,697) (6,337) 3,517 (142,517) Capital Assets of Business Activities-Net $ 143,998 $ 2,41) $ (12) $ 141,583 b. Depreciation Expense Depreciation in governmental activities was charged to the following functions/programs in the Statement of Activities (in thousands): Department: City Manager $ 54 City Attorney 2 City Clerk 1 Finance 416 Community Development 135 Fire 288 Information Services 444 Police 222 Community Services 3,065 Library Services 358 Public Works 13,043 Internal Service Fund depreciation charged to functions 1,454 Total $ 19,482 Depreciation in business-type activities was charged to the following functions/programs in the Statement of Activities (in thousands): Fund: Water $ 3,978 Sewer Service 2,338 Refuse 21 Total $ 6,337 439 105 0GQ ati. City of Huntington Beach p. nPr F Notes to Financial Statements For the Year Ended June 30, 2023 PUNT`{t 13. INVESTMENT IN JOINT VENTURES The City participates in a firefighter training center called Central Net Operations Authority (CNOA) through a joint powers agreement with the City of Fountain Valley. The City of Huntington Beach records 76 percent of CNOA net assets as Joint Venture Investments. 14. LEASES The City of Huntington Beach has entered into 27 leases as a lessor for the use of City land and infrastructures. The lessees are required to make fixed monthly payments ranging from $322 to $44,314 over the lease terms. The City recognized $1,662,482 in lease revenue and $104,926 in interest revenue during the current fiscal year related to these agreements. As of June 30, 2023, the lease receivable is $11,106,832 and deferred inflow of resources is $10,819,540. The future principal and interest payments as of June 30, 2023, were as follows: Year Ending June 30 Principal Interest Total 2024 $ 1,612 $ 105 $ 1,717 2025 1,491 95 1,586 2026 1,501 87 1,588 2027 1,423 78 1,501 2028 833 70 903 2029-2033 1,590 243 1,833 2034-2038 840 201 1,041 2039-2043 808 139 947 2044-2048 640 79 719 2049-2053 369 22 391 Total $ 11,107 $ 1,119 $ 12,226 440 106 v �ra City of Huntington Beach Notes to Financial Statements %N. <,o; For the Year Ended June 30, 2023 15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH a. General Discussion On December 29, 2011, the California Supreme Court upheld ABX1 26 that provided for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Huntington Beach that was previously reported as a Redevelopment Agency within the City as a blended component unit. • ABX1 26 provides that upon dissolution of a Redevelopment Agency, either the City or another unit of local government will agree to serve as the "Successor Agency"to hold the assets until they are distributed to other units of state and local government. On January 9, 2012, the City Council elected to become the Successor Agency for the former Redevelopment Agency in accordance with ABX1 26 as part of City resolution number 2012-01. After enactment of the law, effective June 28, 2011, Redevelopment Agencies in the State of California generally cannot enter into new projects, obligations or commitments. Subject to the control of a newly established Oversight Board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future fiscal years, Successor Agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior Redevelopment Agency have been paid in full and all assets have been liquidated. ABX1 26 directs the State Controller of the State of California to review the propriety of any transfers of assets between Redevelopment Agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as of successor agency by ABX1 26. 441 107 ArWAI MG ti a . City of Huntington Beach Notes to Financial Statements 0. i-y aka For the Year Ended June 30, 2023 15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (Continued) b. Long-Term Debt Below is a schedule of changes in long-term obligations of the Successor Agency for the year (in thousands): June 30, June 30, Accrued Due Within Successor Agency: 2022 Additions Retirements 2023 Interest One Year Bonds Payable 1999 Tax Allocation Refunding Bonds $ 1,190 $ - $ (405) $ 785 $ 16 $ 425 2002 Tax Allocation Bonds 2,575 - (875) 1,700 35 920 Total Bonds Payable 3,765 - (1,280) 2,485 51 1,345 Other Long-Term Obligations Mayer DDA 626 - (626) - - - Bella Terra OPA(Parking) 3,481 - (1,613) 1,868 - 1,619 Bella Terra AHA(Phase II) 12,118 - (789) 11,329 - 789 CIM DDA(Parking&Infrastructure) 4,971 - (330) 4,641 243 353 CIM DDA(Additional Parking) 337 - (16) 321 24 17 Total Other Long-Term Obligations 21,533 - (3,374) 18,159 267 2,778 • Total Long-Term Obligations $ 25,298 $ - $ (4,654) $ 20,644 $ 318 $ 4,123 (1) 1999 Tax Allocation Refunding Bonds Year of Issuance 1999 , Type of Debt Tax Allocation Refunding Bonds Original Principal Amount $10,835,000 Security Tax Increment Interest Rates 3.00% to 5.05% Interest Payment Dates February 1st and August 1st Principal Payment Dates August 1st Purpose of Debt Prepay Agency's 1992 Loans to Public Financing Authority Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 425 $ 29 $ 454 2025 360 9 369 Total $ 785 $ 38 $ 823 442 108 oti� cr�° City of Huntington Beach i -171 Notes to Financial Statements For the Year Ended June 30, 2023 15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (Continued) (2) 2002 Tax Allocation Refunding Bonds Year of Issuance 2002 Type of Debt Tax Allocation Refunding Bonds Original Principal Amount $20,900,000 Security Tax Increment Interest Rates 2.00% to 5.00% Interest Payment Dates February 1st and August 1st Principal Payment Dates August 1st Purpose of Debt Prepay Agency's 1992 Loans to Public Financing Authority and fully defease 1992 Public Financing Authority bonds Debt service requirements to maturity are (in thousands): Year Ending Principal Interest Total June 30 2024 $ 920 $ 62 $ 982 2025 780 20 800 Total $ 1,700 $ 82 $ 1,782 Pledged Revenues The Successor Agency will repay a total of$2,605,000, principal and interest, for the outstanding 1999 and 2002 Tax Allocation Refunding Bonds as of June 30, 2022 from semi-annual Redevelopment Property Tax Trust Fund (RPTTF) revenue allocations. The 1999 and 2002 Tax Allocation Refunding Bonds are not a debt of the City of Huntington Beach, the State of California, nor any of its political subdivisions, and neither the City, the State nor any of its political subdivision is liable therefore, not in any event shall the bonds be payable out of funds or properties other than those of the Redevelopment Agency as set forth in the bond indenture. 443 109 ,61,0INGrp City of Huntington Beach gip= Notes to Financial Statements z� zt oe For the Year Ended June 30, 2023 Fc"b tJiY C4`�4 15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (Continued) (3) Mayer Disposition and Development Agreement In Fiscal Year 1996/97, the Agency entered into a disposition and development agreement(DDA)with Robert Mayer Corporation (Corporation) concerning additional development adjacent to the Waterfront Hotel. Under the agreement, the Corporation would advance payments for the project costs with the Agency reimbursing up to $16,750,000 of the costs. Project- generated revenues as available will repay these amounts over the time needed to fully amortize the advance. The interest rate of this obligation is 6.32%. The DDA has been approved as an enforceable obligation by the DOF. As of year-end, the Successor Agency obligation under the agreement was completed. (4) Bella Terra Parking Structure In Fiscal Year 2005/06, the Agency entered into an owner participation agreement with Bella Terra Associates, LLC (formerly Huntington Center Associates, LLC). Under the agreement, the Corporation would construct various public improvements, including a parking structure, which would then be deeded to the City. The Agency would reimburse $15,000,000 of the costs of the public improvements.As of year-end, the Successor Agency obligation under the agreement amounted to $1,868,000. Project-generated revenues as available will repay these amounts over the time needed to fully amortize the advance. The interest rate of this obligation is 6.94%. The agreement has been approved as an enforceable obligation by the DOF. (5) Bella Terra Phase II In Fiscal Year 2010/11, the Agency entered into an affordable housing agreement with BTDJM Phase li Associates (DJM). The agreement would facilitate the construction of a 467 unit mixed use project, including 43 moderate units and 28 very low units. Under the terms of the agreement, the Agency would reimburse DJM for the construction of the affordable units up to $17,000,000. DJM has transferred the site to UDR, and as of year-end, the Successor Agency obligation under the agreement amounted to $11,329,000. Reimbursement of the affordable units will be based upon the site-generated tax increment for the mixed use project as well as the 20% housing fund from the site-generated Bella Terra I. The interest rate of this obligation is 4.00%. The agreement has been approved as an enforceable obligation by the DOE 444 110 1 #11C,' City of Huntington Beach "a # Notes to Financial Statements �2 - 0� For the Year Ended June 30, 2023 %couuNrr EV 15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (Continued) (6) CIM/Huntington Disposition and Development Agreement — Strand Parking Structure and Infrastructure Year of Issuance 2009 Type of Debt Loan from CIM Group, LLC Original Principal Amount $7,900,000 Security Tax Increment Interest Rates 7.00% Interest Payment Dates September 30th Principal Payment Dates September 30th Purpose of Debt Strand Parking Structure and Infrastructure As of year-end, the Successor Agency obligation under the agreement amounted to $4,641,000. Repayment shall be made solely from Redevelopment Property Tax Trust Fund (RPTTF) revenues received by the Huntington Beach Redevelopment Successor Agency Private Purpose Trust Fund in the amounts included in the Oversight Board approved Recognized Obligation Payment Schedule (ROPS) to the County Auditor Controller (CAC) and the Department of Finance (DOF). The DDA has been approved as an enforceable obligation by the DOF. 445 111 'o� m"�" � City of Huntington Beach tf _:r _,_ ten U --�;$ Notes to Financial Statements For the Year Ended June 30, 2023 15. SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (Continued) (7) CIM/Huntington Disposition and Development Agreement —Additional Strand Parking Year of Issuance 2009 Type of Debt Loan from CIM Group, LLC Original Principal Amount $950,000 Security Tax Increment Interest Rates 10.00% Interest Payment Dates September 30th Principal Payment Dates September 30th Purpose of Debt Additional Strand Parking Structure and Infrastructure As of year-end, the Successor Agency obligation under the agreement amounted to $321,000. Repayment shall be made solely from Redevelopment Property Tax Trust Fund (RPTTF) revenues received by the Huntington Beach Redevelopment Successor Agency Private Purpose Trust Fund in the amounts included in the Oversight Board approved Recognized Obligation Payment Schedule (ROPS) to the County Auditor Controller (CAC) and the Department of Finance (DOF). The DDA has been approved as an enforceable obligation by the DOF. c. Advances from the City Housing Fund The Successor Agency has recorded advances from the City Housing Fund totaling $1,363,000 from the Low-Income Housing Fund to the Redevelopment Agency Capital Projects Fund for Main Pier property acquisitions. 16. COMMITMENTS AND CONTINGENCIES a. Legal Actions There are legal actions pending against the City resulting from normal operations. In the opinion of management and the City Attorney, the financial resolution of these actions should not have a significant impact on these financial statements. 446 112 4 ! .,e;., City of Huntington Beach Notes to Financial Statements. 93w 'Q For the Year Ended June 30, 2023 16. COMMITMENTS AND CONTINGENCIES (Continued) b. Sales Tax Sharing Agreements City Council has agreed to provide sales tax rebates to various companies, based upon various factors such as increased job-base or new sales tax to the City. The sales tax rebates serve to attract and retain various companies in the City of Huntington Beach. The City of Huntington Beach has four sales tax sharing agreements that extend until 2024, 2033, and 2038. Sales tax rebates totaled $1,245,883 for the year ended June 30, 2023. Sales tax sharing agreements include an agreement with Surf City Auto Group II, Inc. wherein the sales tax sharing is a 50%/50% Auto Group/City split with base sales of$1,767,586 (Jeep sales for 2023) and increases by 1% each year. The other sales tax sharing agreements are with Pinnacle Petroleum through 2024, with base sales of $100,000, and McKenna Subaru Huntington Beach through 2033 with a 45%/55% McKenna/City split with base sales of$150,800. c. Cooperation and Owner Participation Agreements On September 2, 2003, the Redevelopment Agency Approved a Cooperation Agreement Regarding Capital Improvements in the Southeast Coastal Redevelopment Project with the City. This agreement commits the Redevelopment Agency to reimburse the City for a number of capital improvement projects to be undertaken as part of the Five Year Capital Improvement Program in the Southeast Redevelopment project area starting in FY 2003/04 as they are undertaken. The Successor Agency received its Finding of Completion notice from the Department of Finance on May 13, 2014. The Oversight Board (to the Successor Agency) have approved and reauthorization of the loans between the City and former Redevelopment Agency in FY 2016/17. The State Department of Finance (DOF) has denied the validity of the loans and the City has filed suit against the State. On April 22, 2022, the Superior Court of California issued.a Proposed Judgment stating that the agreement did not constitute an enforceable obligation and that repayment was not required. The City requested a hearing with the Court to appeal this determination. On February 17, 2023, the Superior Court of California issued a final ruling stating that the agreement did not constitute an enforceable obligation; thus, repayment was not required. d. Redevelopment Successor Agency Debt to City The City has advanced money to the Redevelopment Agency for major capital improvements, economic development projects, and operations. In January 2011, the City Council and Redevelopment Agency Board approved a revised Cooperation Agreement, which included a Promissory Note that memorialized indebtedness previously incurred by the Agency and owed to the City from a series of loans made from the City to the Agency from 1982 to present. 447 113 oN1; 04 fi City of Huntington Beach f tit -n Notes to Financial Statements For the Year Ended June 30; 2023 16. COMMITMENTS AND CONTINGENCIES (Continued) The City and Successor Agency have not' recorded the advances in the accompanying financial statements due to uncertainties related to Health and Safety Code Section 34191.4, which establishes certain restrictions and limitations on the repayment of city-agency loans. In accordance with Health and Safety Code Section 34191.4(b)(3), all other loans between the city and former Redevelopment Agency will begin to be repaid, at a 3% interest rate, as determined by SB 107 upon approval of the Oversight Board and the Department of Finance. The Oversight Board (to the Successor Agency) have approved and reauthorized the loans between the City and former Redevelopment Agency in FY 2016/17. The State Department of Finance has denied the validity of the loans and the City has filed suit against the State. On April 22, 2022, the Superior Court of California issued a Proposed Judgment stating that the majority of the agreements between the City and the former Redevelopment Agency were not considered enforceable obligations and that repayment was not required, with the exception of the $22,400,000 loan for the purchase of the Waterfront property. The DOF denied this obligation in a follow up letter to the City dated August 24, 2022. The City has requested a hearing with the Court to appeal this determination. On February 17, 2023, the Superior Court of California issued a final ruling confirming the April 22, 2022 determination. Below is a schedule of the activity for the year (in thousands): June 30, June 30, 2022 Additions Reductions 2023 General Fund Direct Advances $ 2,312 $ - $ - $ 2,312 Indirect Advances 6,567 - - 6,567 Land Sales 32,833 - - 32,833 Interest 31,163 1,696 - 32,859 Total General Fund 72,875 1,696 - 74,571 Sewer Fund Direct Advances 301 7 - 308 Deferred Development Fees 188 4 - 192 Total Sewer Fund 489 11 - 500 Drainage Fund Direct Advances 727 16 - 743 Deferred Development Fees 201 4 - 205 Total Drainage Fund 928 20 - 948 Park Acquisition and Development Fund Direct Advances 5,983 140 - 6,123 Deferred Development Fees 444 10 - 454 Total Park Acquisition and Development Fund 6,427 150 - 6,577 Water Fund Direct Advances 4,503 17 - 4,520 Total Water Fund 4,503 17 - 4,520 Total All Funds $ 85,222 $ 1,894 $ - $ 87,116 448 114 City of Huntington Beach Lty- ' \-1;, Notes to Financial Statements For the Year Ended June 30, 2023 16. COMMITMENTS AND CONTINGENCIES (Continued) e. Low Moderate Income Housing Asset Fund Debt to City In May 2009, a Promissory Note was issued by the Redevelopment Agency to the City to pay for outstanding bonded debt related to the Emerald Cove Housing Project. The note is secured by a pledge of Set-Aside Funds. Based on the Promissory Note, the interest rate for the loan is 0% and the loan was scheduled to be repaid by 2021. The City has not recorded the advances in the accompanying financial statements due to uncertainties surrounding ABX1 26 and Assembly Bill 1484 and related litigation (see note 16f). On April 22, 2022, the Superior Court of California issued a Proposed Judgment stating that this loan is considered an enforceable obligation to be paid on the FY 2023-24 Recognized Obligation Payment Schedule (ROPS). Below is a schedule of the activity for the year (in thousands): June 30, June 30, 2022 Additions Reductions 2023 General Fund Emerald Cove $_ 3,245 $ - $ _- $ 3,245 f. Successor Agency Litigation Until 2012, the Huntington Beach Redevelopment Agency existed and received property tax increment from property within the "City Redevelopment Project Area." In 2012, the State Legislature dissolved all redevelopment agencies, and all tax increment was returned to the County for payment to other taxing entities. The only exception was that tax increment would continue to be paid to the Successor Agency to the City Redevelopment Agency to pay any pre-dissolution, legally binding obligations established prior to the dissolution of the agencies. Further, the City transferred the former Redevelopment Agency's housing obligations to the Huntington Beach Housing Authority pursuant to Health and Safety Code section 34176. The Successor Agency contended that its payments to retire the former Redevelopment Agency's portion of the 2010 Lease Revenue Bonds used to finance the Emerald Cove low income housing project were such an obligation. The annual payment on these bonds is approximately$400,000 a year. The amount that the City contends to be due to pay the former Redevelopment Agency's share of the bonds is $3,245,000. The Successor Agency also contended that the 2012 Pacific City Development Agreement was a pre-dissolution, legally binding obligation. Pacific City is a development project that was conditioned on providing 77 affordable housing units, of which the Successor Agency now was obliged to construct 26 units off-site, at a cost of$6,500,000. This would not be a City General Fund obligation. 449 115 ` � City of Huntington Beach - 5 Notes to Financial Statements x#l� t.' trey For the Year Ended June 30, 2023 16. COMMITMENTS AND CONTINGENCIES (Continued) On April 22, 2022, the Superior Court of California issued a Proposed Judgment stating that the majority of the agreements between the City and the former Redevelopment Agency were not considered enforceable obligations and that repayment was not required, with the exception of the $22,400,000 loan for the purchase of the Waterfront property and the Promissory Note related to the Emerald Cove Housing Project. The City has requested a hearing with the Court to appeal this determination. On February 17, 2023, the Superior Court of California issued a final ruling confirming the April 22, 2022 determination. On May 19, 2023, the DOF issued a letter confirming the Court ruling. The Housing Authority is reviewing options on meeting the affordable housing requirements for Pacific City with other projects. The City itself does not require a reserve for either case. g. Orange County Oil Spill Response On October 2, 2021, the United State Coast Guard notified the City of a possible oil spill in the area of Huntington Beach, which was classified as a major spill later in the day. The oil spill was originally estimated to be 5.8 nautical miles long, running from the Huntington Beach Pier down to Newport Beach. Given the oil spill impacts, a decision was made by the City and State to close the ocean from the Pier to the Santa Ana River jetty. Additionally, a decision was made by City leadership to cancel the third day of the Pacific Airshow on October 3rd. The oil spill was declared a State emergency by the Governor on October 4th, with a local emergency declaration following the same day. The oil spill has significantly affected the City, with substantial ecological impacts occurring at the beach and at the Huntington Beach Wetlands. In response, Huntington Beach Fire and Marine Safety personnel were deployed to implement oil containment efforts. The U.S. Coast Guard, acting as the lead agency, formed an Incident Management Team (comprised of federal, state and regional agencies) to respond to the oil spill incident and coordinate clean-up efforts. A Unified Command Team that includes the U.S. Coast Guard, California Department of Fish and Wildlife, and Amplify Energy Corporation was established to investigate the oil spill incident. The City has submitted a claim for $653,259 with Amplify for lost revenues and expenditures incurred for response efforts. The claim is still under review with Amplify at this time. 450 116 UGr° City of Huntington Beach (47, z ,= Notes to Financial Statements For the Year Ended June 30, 2023 -.°OUNTj '11 17. OTHER INFORMATION Fund and Accumulated Deficits The following funds have total fund deficits at year-end (in thousands): Internal Service Fund: Self Insurance Workers' Comp $ 24,342 Self Insurance General Liability $ 8,420 The Self Insurance Workers' Compensation fund has a deficit due to increases in statutory benefits related to workers' compensation claims and rising healthcare costs. The Self Insurance General Liability fund has a deficit due to increases in claims judgements, cost of litigation and rising number of lawsuits against the City. As such, the City has set aside $3,650,000 in litigation reserve for general liability claims in the General Fund. The City has established plans to reduce and eliminate the deficits in these funds. Additional transfers will be made over the next ten to twenty years from the General Fund, Proprietary funds, and other governmental funds to address the deficits in the Self Insurance Workers' Compensation and General Liability Internal Service Funds. 18. SUBSEQUENT EVENTS Kennedy Commission v. Huntington Beach The Kennedy Commission case arises from an amendment to City's Beach and Edinger Corridors Specific Element Plan to limit the development of multifamily housing. The case, filed by the Kennedy Commission in July 2015 stating that the amendment was in violation of California's Housing Element laws, was tried in Superior Court and ruled in favor of the Plaintiff. The City appealed the trial court decision and prevailed upon appeal. The Kennedy Commission then appealed the decision with the Supreme Court, which upheld the Court of Appeal's decision in favor of the City. In February 2020, the City adopted a revised Housing Element to comply with clarifying language in Senate Bill 1333 regarding the applicability of key provisions of state planning and zooming laws to charter cities which was certified by the California Department of Housing and Community Development as compliant with Housing Element Law. In response, the Kennedy Commission requested its remaining claims against the City be dismissed and filed a motion for attorney's fees. In July 2021, the Superior Court awarded the Kennedy Commission $3.5 million in attorney's fees. The City submitted an appeal, which was denied on July 19, 2023. The settlement was paid in full in September 2023. 451 117 REQUIRED SUPPLEMENTARY INFORMATION 452 118 THIS PAGE INTENTIONALLY LEFT BLANK 453 119 i1WITINGG1 O o5"t6'F i 2\ $ 5 1 City of Huntington Beach Notes to Required Supplementary Information coUNT10," For the Year Ended June 30, 2023 Budgetary Information The City Council must annually adopt a budget by June 30 of the prior fiscal year. The budgeted expenditures become the appropriations to the various departments. The budget includes estimates for revenue that, along with the appropriations, compute the budgetary fund balance. The appropriated budget covers substantially all governmental fund expenditures with the exception of capital improvement projects (capital projects funds) carried forward from prior years, which constitute a legally authorized non-appropriated budget. The City Council may amend the budget at any time. The City Manager may transfer funds from between object purposes (personal services, operating expenditures, or capital outlay expenditures) within the same department without changing the total departmental budget. Department heads, with the Chief Financial Officer's approval, may transfer funds from like object categories of the same department. The City Council must approve any changes to departmental budgets. Expenditures may not exceed appropriations at the departmental level. All unused appropriations lapse at year-end. During the year, the City Council made several supplemental appropriations which included carryovers of prior year encumbrances, all of which were within available fund balance and estimated revenue amounts. The City Council adopts governmental fund budgets consistent with generally accepted principles as legally required. There are no significant non-budgeted financial activities. Revenues for special revenue funds are budgeted by entitlements, grants and estimates of future development and economic growth. Expenditures and transfers are budgeted based upon available financial resources. On or before February 28th of each year, each department submits data to the City Manager for budget preparation. Staff prepares the budget by fund, function, and activity. The budget includes information on past years, current year estimates and requested appropriations for the next fiscal year. Before May 1st, the City Council receives the proposed budget. The City Council holds public hearings and may amend the budget by a majority vote. Changes to the budget must be within the available revenues and reserves. These financial schedules show budgetary data for the General and Grants Special Revenue. The original budget, revised budget, actual expenditures, and variance amounts are shown. The City uses an encumbrance system as an aid in controlling expenditures. When the City issues a purchase order for goods or services, it records an encumbrance until the vendor delivers the goods or performs the service. At year-end, the City reports all outstanding encumbrances as committed or assigned fund balance in governmental fund types. The City reappropriates these encumbrances into the new fiscal year. The following pages present schedules of budget to actual comparison of the General and Grants Special Revenue Fund's Revenues, and Expenditures and Changes in Fund Balance (in thousands). 454 120 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) General Fund Variance with Final Budget Positive REVENUES Original Budget Final Budget Actual (Negative) Property Taxes $ 98,259 $ 101,036 $ 101,036 $ - Sales Taxes 53,343 52,599 52,599 - Utility Taxes 18,457 22,558 22,558 - Other Taxes 23,075 32,390 32,418 28 Licenses and Permits 8,201 10,630 10,630 - Fines, Forfeitures and Penalties 4,534 3,945 3,945 - Use of Money and Property 16,997 20,008 21,401 1,393 Intergovernmental 2,729 3,988 4,024 36 Charges for Current Service 26,596 32,596 32,787 191 Other 1,626 2,516 2,606 90 Total Revenues 253,817 282,266 284,004 1,738 EXPENDITURES Current: City Council 403 456 453 3 City Manager 4,743 7,592 5,892 1,700 City Treasurer 275 417 417 - City Attorney 2,752 3,404 3,404 - City Clerk 1,143 1,521 1,441 80 Finance 6,420 8,093 7,372 721 Community Development 15,409 19,309 17,061 2,248 Fire 51,570 65,658 65,658 - Information Services 7,733 9,242 8,269 973 Police 78,443 95,301 93,796 1,505 Community Services 9,762 12,669 12,500 169 Library Services 5,451 7,149 6,951 198 Public Works 21,630 27,785 27,785 - Debt Service: Principal 696 4,000 4,000 - Interest 63 310 310 - Total Expenditures 206,493 262,906 255,309 7,597 Excess of Revenues Over Expenditures 47,324 19,360 28,695 9,335 OTHER FINANCING SOURCES(USES) Transfers In 31,474 30,051 30,020 (31) Leases(as Lessee) - - 398 398 Transfers Out (63,478) (35,517) (35,400) 117 Total Other Financing Sources(Uses) (32,004) (5,466) (4,982) 484 Net Change In Fund Balance 15,320 13,894 23,713 9,819 Fund Balance-Beginning of Year 102,824 102,824 102,824 - Fund Balance-End of Year $ 118,144 $ 116,718 $ 126,537 $ 9,819 See Accompanying Notes to Required Supplementary Information 455 121 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Grants Special Revenue Variance with Final Budget Positive REVENUES Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 130 $ 130 Intergovernmental 15,035 27,662 40,872 13,210 Other - - 3,741 3,741 Total Revenues 15,035 27,662 44,743 17,081 EXPENDITURES Current: City Manager 6 2,007 300 1,707 City Clerk - 1 1 - Finance - 37 37 - Community Development 2,947 7,710 3,343 4,367 Fire - 492 488 4 Police 1,016 5,019 2,716 2,303 Community Services 311 370 343 27 Library Services 60 285 204 81 Public Works 12,131 21,661 2,739 18,922 Total Expenditures 16,471 37,582 10,171 27,411 Excess of Revenues Over(Under) Expenditures (1,436) (9,920) 34,572 44,492 OTHER FINANCING USES Transfers In - - 1 1 Transfers Out (29,669) (29,607) (29,607) - Total Other Financing Sources(Uses) (29,669) (29,607) (29,606) 1 Net Change In Fund Balance (31,105) (39,527) 4,966 44,493 Fund Balance-Beginning of Year (4,311) (4,311) (4,311) - Fund Balance-End of Year $ (35,416) $ (43,838) $ 655 $ 44,493 • See Accompanying Notes to Required Supplementary Information 456 122 City of Huntington Beach Required Supplementary Information Schedule of Changes in the Net Pension Liability and Related Ratios During the Measurement Period (in Thousands) Last Ten Fiscal Years* CaIPERS City Miscellaneous Plan-99 • Measurement Period 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 Total Pension Liability Service cost $ 8,174 $ 8,005 $ 7,779, $ 8,327 $ 8,314 $ 8,084 $ 7,436 $ 7,102 $ 7,263 Interest on total pension liability 43,253 42,217 41,058 40,150 38,769 37,749 37,194 35,653 34,412 Differences between expected and actual experience 451 (891) (6,087) (183) (2,042) (9,148) 1,072 (2,900) - Changes in assumptions 19,824 - - - (3,634) 30,762 - (8,565) - Benefit payments,including refunds of employee contributions (34,942) (33,392) (30,321) (28,508) (26,685) (25,312) (24,316) (23,377) (22,444) Net change in total pension liability 36,760 15,939 12,429 19,786 14,722 42,135 21,386 7,913 19,231 Total pension liability-beginning 619,966 604,027 591,598. 571,812 557,090 514,955 493,569 485,656 466,425 Total pension liability-ending(a) $ 656,726 $ 619,966 $ 604,027 $ 591,598 $ 571,812 $ 557,090 $ 514,955 $ 493,569 $ 485,656 Plan Fiduciary Net Position Contributions-employer $ 6,951 $ 150,917 $ 16,879 $ 14,816 $ 13,495 $ 12,316 $ 10,982 $ 9,747 $ 9,066 Contributions-employee 3,533 3,450 3,630 3,779 3,649 3,869 3,736 3,790 3,909 Investment income (49,840) 107,447 21,485 27,288 32,963 40,328 1,856 8,230 56,429 Administrative Expense (419) (443) (609) (296) (614) (536) (226) (418) (472) Benefit payments (34,942) (33,392) (30,321) (28,508) (26,685) (25,312) (24,316) (23,377) (22,444) Plan to Plan Resource Movement - - - (13) 1 - - - - Other - - - 1 (1,166) - - 2 - Net change in plan fiduciary net position (74,717) 227,979 11,064 17,067 21,643 30,665 (7,968) (2,026) 46,488 Plan fiduciary net position-beginning 671,565 443,586 432,522 415,455 393,812 363,147 371,115 373,141 326,653 Plan fiduciary net position-ending(b) $ 596,848 $ 671,565 $443,586 $ 432,522 $415,455 $ 393,812 $ 363,147 $ 371,115 $ 373,141 Net pension liability-beginning (51,599) 160,441 159,076 156,357 163,278 151,808 122,454 112,515 139,771 Net pension liability(asset)-ending(a)-(b) $ 59,878 $ (51,599) $ 160,441 $ 159,076 $ 156,357 $ 163,278 $ 151,808 $ 122,454 $ 112,515 Plan fiduciary net position as a percentage of the total pension liability(asset) 90.88% 108.32% 73.44% 73.11% 72.66% 70.69% 70.52% 75.19% 76.83% Covered payroll $ 46,824 $ 45,740 $ 45,952 $ 45,419 $ 45,431 $ 44,848 $ 44,365 $ 44,233 $ 41,142 Net pension liability as a percentage of covered payroll 127.88% N/A 349.15% 350.24% 344.16% 364.07% 342.18% 276.84% 273.48% Notes to Schedule: Benefit changes:the figures above include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date.However,offers of Two Years Additional Service Credit(a.k.a.Golden Handshakes)that occurred after the Valuation Date are not included in the figures above,unless the liability impact is deemed to be material by the plan actuary. Changes in assumptions: Effective with the June 30,2021 valuation date(2022 measurement date),the accounting discount rate was reduced from 7.15%to 6.90%.In determining the long-term expected rate of return,CaIPERS took into account long-term market return expectations as well as the expected pension fund cash flows.Projected returns for all asset classes are estimated,combined with risk estimates,and are used to project compound(geometric)returns over the long term.The discount rate used to discount liabilities was informed by the long- term projected portfolio return.In addition,demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.The accounting discount rate was 7.15%for measurement dates 2017 through 2021,7.65%for measurement dates 2015 through 2016,and 7.50%for measurement date 2014. Fiscal year 2013/14 was the first year of implementation,therefore only nine years are shown. For covered employee payroll,the measurement period of July 1,2021 to June 30,2022 was used. 457 123 City of Huntington Beach Required Supplementary Information(Unaudited) Schedule of Changes in the Net Pension Liability and Related Ratios During the Measurement Period (in Thousands) Last Ten Fiscal Years* CaIPERS City Safety Plan-100 Measurement Period 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014,15 2013-14 Total Pension Liability Service cost $ 14,683 $ 13,386 $ 13,226 $ 13,644 $ 13,509 $ 13,657 $ 12,159 $ 11,119 $ 11,096 Interest on total pension liability 57,872 56,114 54,597 53,048 51,223 49,350 48,390 46,160 44,246 Differences between expected and actual experience 102 (3,882) (4,721) (1,220) 2,584 (10,819) 2,678 (820) - Changes in assumptions 28,785 - - - (3,657) 40,352 - (11,054) - Benefit payments,including refunds of employee contributions (45,876) (44,362) (41,247) (38,958) (37,128) (34,222) (32,116) (30,535) (29,540) Net change in total pension liability 55,566 21,256 21,855 26,514 26,531 58,318 31,111 14,870 25,802 Total pension liability-beginning 825,437 804,181 782,326 755,812 729,281 670,963 639,852 624,982 599,180 Total pension liability-ending(a) $ 881,003 $ 825,437 $ 804,181 $ 782,326 $ 755,812 $ 729,281 $ 670,963 $ 639,852 $ 624,982 Plan Fiduciary Net Position Contributions-employer $ 13,579 $ 257,381 $ 25,848 $ 23,063 $ 21,058 $ 20,629 $ 18,703 $ 17,791 $ 15,152 Contributions-employee 4,985 4,395 4,355 4,337 4,164 4,570 4,058 4,110 3,850 Investment income (65,933) 133,170 25,784 32,776 39,336 48,413 2,144 9,661 66,805 Administrative Expense (549) (532) (731) (355) (736) (640) (270) (497) (555) Benefit payments (45,876) (44,362) (41,247) (38,958) (37,128) (34,222) (32,116) (30,535) (29,540) Net Plan to Plan Resource Movement - - - 13 (3) - (29) - - Other - - - 1 (1,398) - - - - Net change in plan fiduciary net position (93,794) 350,052 14,009 20,877 25,293 38,750 (7,510) 530 55,712 Plan fiduciary net position-beginning 882,705 532,653 518,644 497,767 472,474 433,724 441,234 440,704 384,992 Plan fiduciary net position-ending(b) $ 788,911 $ 882,705 $ 532,653 $ 518,644 $ 497,767 $ 472,474 $ 433,724 $ 441,234 $ 440,704 Net pension liability-beginning (57,268) 271,528 263,682 258,045 256,807 237,239 198,618 184,278 214,188 Net pension liability(asset)-ending(a)-(b) $ 92,092 $ (57,268) $ 271,528 $ 263,682 $ 258,045 $ 256,807 $ 237,239 $ 198,618 $ 184,278 Plan fiduciary net position as a percentage of the total pension liability(asset) 89.55% 106.94% 66.24% 66.30% 65.86% 64.79% 64.64% 68.96% 70.51% Covered payroll $ 48,023 $ 45,665 $ 43,783 $ 43,684 $ 43,371 $ 43,283 $ 42,619 $ 42,252 $ 38,397 Net pension liability as a percentage of covered payroll 191.77% N/A 620.17% 603.61% 594.97% 593.32% 556.65% 470.08% 479.93% Notes to Schedule: Benefit changes:the figures above include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date.However,offers of Two Years Additional Service Credit(a.k.a.Golden Handshakes)that occurred after the Valuation Date are not included in the figures above,unless the liability impact is deemed to be material by the plan actuary. Changes in assumptions: Effective with the June 30,2021 valuation date(2022 measurement date),the accounting discount rate was reduced from 7.15%to 6.90%.In determining the long- term expected rate of return,CaIPERS took into account long-term market return expectations as well as the expected pension fund cash flows.Projected returns for all asset classes are estimated,combined with risk estimates,and are used to project compound(geometric)returns over the long term.The discount rate used to discount liabilities was informed by the long-term projected portfolio return.In addition,demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CaIPERS Experience Study and Review of Actuarial Assumptions.The accounting discount rate was 7.15%for measurement dates 2017 through 2021,7.65%for measurement dates 2015 through 2016,and 7.50%for measurement date 2014. *Fiscal year 2013/14 was the first year of implementation,therefore only nine years are shown. For covered employee payroll,the measurement period of July 1,2021 to June 30,2022 was used. 458 124 City of Huntington Beach Required Supplementary Information Schedule of Changes in the Net Pension Liability and Related Ratios During the Measurement Period (in Thousands) Last Ten Fiscal Years* Supplemental Retirement Plan Total Pension Liability 2022-23 2021-22 2020-21 2019-20 2018-19 2017-18•• 2016-17 2015-16 2014-15 2013-14 Service cost $ 237 $ 299 $ 350 $ 338 $ 398 $ 344 $ 487 $ 552 $ 495 $ 544 Interest on total pension liability 3,934 3,897 4,292 3,954 3,990 2,964 3,976 3,945 3,919 3,828 Differences between expected and actual experience - 492 - 4,594 - (794) - 982 - - Changes in assumptions - (1,638) 6,547 1,756 - 2,115 1,515 2,928 - - Benefit payments,including refunds of employee contributions (5,712) (5,668) (5,494) (5,012) (4,771) (3,388) (4,144) (3,773) (3,588) (3,548) Net change in total pension liability (1,541) (2,618) 5,695 5,630 (383) 1,241 1,834 4,634 826 824 Total pension liability-beginning 74,151 76,769 71,074 65,444 65,827 64,586 62,752 58,118 57,292 56,468 Total pension liability-ending(a) $ 72,610 $ 74,151 $ 76,769 $ 71,074 $ 65,444 $ 65,827 $ 64,586 $ 62,752 $ 58,118 $ 57,292 Plan Fiduciary Net Position Contributions-employer $ 6,046 $ 6,006 $ 1,435 $ 3,506 $ 4,962 $ 3,507 $ 5,346 $ 7,277 0$ 4,678 0$ 4,539 Investment income 4,823 (11,362) 15,717 2,114 2,582 2,128 6,373 4,282 (1,313) 3,465 Administrative Expense (334) (338) (314) (444) (191) (145) (182) (189) (170) (176) Benefit payments (5,712) (5,668) (5,494) (5,012) (4,771) (3,388) (4,144) (3,773) (3,588) (3,548) Section 115 Trust Segregation - - - - - (3,788) - - - - Other - - - - - - - - 3,183 258 Net change in plan fiduciary net position 4,823 (11,362) 11,344 164 2,582 (1,686) 7,393 7,597 2,790 4,538 Plan fiduciary net position-beginning 58,999 70,361 59,017 58,853 56,271 57,957 50,564 42,967 40,177 35,639 Plan fiduciary net position-ending(b) $ 63,822 $ 58,999 $ 70,361 $ 59,017 $ 58,853 $ 56,271 $ 57,957 $ 50,564 $ 42,967 $ 40,177 Net pension liability-beginning 15,152 6,408 12,057 6,591 9,556 6,629 12,188 15,151 17,115 20,829 Net pension liability-ending(a)-(b) $ 8,788 $ 15,152 $ 6,408 $ 12,057 $ 6,591 $ 9,556 $ 6,629 $ 12,188 $ 15,151 $ 17,115 Plan fiduciary net position as a percentage of the total pension liability 87.90% 79.57% 91.65% 83.04% 89.93% 85.48% 89.74% 80.58% 73.93% 70.13% Covered payroll $ 5,497 $ 6,670 $ 7,684 $ 8,469 $ 12,863 $ 10,890 $ 17,167 $ 19,517 $ 22,069 $ 22,004 Net pension liability as a percentage of covered payroll 159.87% 227.17% 83.39% 142.37% 51.24% 87.75% 38.61% 62.45% 68.65% 77.78% • Fiscal year 2013/14 was the first year of implementation,therefore only ten years are shown. **The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018. 459 125 City of Huntington Beach Required Supplementary Information Schedule of Changes in Net OPEB Liability and Related Ratios For the Measurement Periods Ended June 30 (in Thousands) Last Ten Fiscal Years* Other Post Employment Benefits Plan Measurement Period 2022 2021 ' 2020 2019 2018 2017 Total OPEB Liability Service cost $ 1,004 $ 1,120 $ 1,096 $ 1,241 $ 1,205 $ 877 Interest on the total OPEB liability • 1,655 2,119 2,064 1,859 1,787 1,293 Actual and expected experience difference - (6,296) - 1,411 - - Changes in assumptions (891) 1,603 (298) (3,358) - - Benefit payments (2,352) (2,129) (1,848) (1,742) (1,683) (1,036) Net change in total OPEB liability (584) (3,583) 1,014 (589) 1,309 1,134 Total OPEB liability-beginning 30,276 33,859 32,845 33,434 32,125 30,991 Total OPEB liability-ending(a) $ 29,692 $ 30,276 $ 33,859 $ 32,845 $ 33,434 $ 32,125 Plan Fiduciary Net Position Contribution-employer" $ 2,499 $ 1,882 $ 1,959 $ 2,270 $ 4,191 $ 1,036 Net investment income (4,561) 6,025 1,580 1,901 1,126 471 Benefit payments (2,352) (2,129) (1,848) (1,742) (1,683) (1,036) Administrative expense (156) (131) (245) (61) (131) (9) Net change in plan fiduciary net position (4,570) 5,647 1,446 2,368 3,503 462 Plan fiduciary net position-beginning 36,286 30,639 29,193 26,825 23,322 22,860 Plan fiduciary net position-ending(b) $ 31,716 $ 36,286 $ 30,639 $ 29,193 $ 26,825 $ 23,322 Net OPEB liability(asset)-ending(a)-(b) ' $ (2,024) $ (6,010) $ 3,220 $ 3,652 $ 6,609 $ 8,803 Plan fiduciary net position as a percentage of the total OPEB liability(asset) 106.82% 119.85% 90.49% 88.88% 80.23% 72.60% Covered employee payroll $ 72,524 $ 70,881 $ 76,521 $ 79,682 $ 81,458 $ 60,985 Net OPEB liability as a percentage of covered employee payroll N/A N/A 4.21% 4.58% 8.11% 14.43% Notes to Schedule: Fiscal year 2017/18 was the first year of implementation,therefore only six years of information are shown. "Contributions to the OPEB plan are not based on employee pay. 460 126 Schedule of Contributions For the Year Ended June 30,2023 (in Thousands) Last Ten Fiscal Years* CaIPERS City Miscellaneous Plan'-99 2022-231 2021-221 2020-21 1 2019-20 1 2018-191 2017-18 1'2 2016-171 2015-16 1 2014-151 2013-141 Actuarially determined contribution $ 7,451 $ 6,951 $ 18,086 $ 16,878 $ 14,819 $ 9,734 $ 11,921 $ 11,238 $ 10,510 $ 8,685 Contributions in relation to the actuarially determined contributions (7,451) (6,951) (18,086) (16,878) (14,819) (9,734) (11,921) (11,238) (10,510) (8,685) Contribution deficiency(excess) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ Covered payroll $ 51,089 $ 46,824 $ 45,740 $ 45,952 $ 45,419 $ 33,210 $ 45,118 $ 44,253 $ 46,337 $ 43,327 Contributions as a percentage of covered payroll 14.58% 14.84% 39.54% 36.73% 32.63% 29.31% 26.42% 25.39% 22.68% 20.05% 'Historical information is required only for measurement periods for which GASB 68 is applicable. 2 The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018. Notes to Schedule Valuation date:6/30/2013 through 06/30/2020 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period For details,see Miscellaneous Plan of the City of Huntington Beach Annual Valuation Report as of June 30,2022. Asset valuation method For 10/1/14-6/30/15,15 Year Smoothed Market(for details,see June 30,2012 Funding Valuation Report).For 7/1/15-6/30/22,Fair Value(for details,see the Funding Valuation Reports for the years ended June 30,2013-2022). Inflation 2.75%for 10/1/2013-6/30/2019,2.50%for 7/1/2019-6/30/2020,'and 2.80%for 7/1/2020-6/30/2022. Salary increases Varies by entry age and service Payroll growth 2.75%for 10/1/2013-6/30/2020,and 2.80%for 7/1/2020-6/30/2022. Discount Rate The prescribed discount rate assumption,adopted by the board on November 17,2021,is 6.80 percent compounded annually(net of investment and administrative expenses)as of June 30,2022. Retirement age For 10/1/13-6/30/16,the probabilities of retirement are based on the 2014 CaIPERS Experience study for the period from 1997 to 2007.For 7/1/16-6/30/19,the probabilities of retirement are based on the 2014 CalPERS Experience study for the period from 1997 to 2011.For 7/1/19- 6/30/22,the probabilities of Retirement are based on the 2017 CaIPERS Experience Study for the period from 1997 to 2015. Mortality For 10/1/13-6/30/16,the probabilities of mortality are based on the 2010 CaIPERS Experience Study for the period from 1997 to 2007.For 7/1/16- 6/30/19,the probabilities of mortality are based on the 2014 CaIPERS Experience Study for the period from 1997 to 2011. For 7/1/16-6/30/18, Pre-retirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries. For 7/1/18-6/30/19,Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of Actuaries.For 7/1/19-6/30/22,the probabilities of mortality are based on the 2017 CaIPERS Experience Study for the period from 1997 to 2015.Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. 'Beginning with the June 30,2013 valuations,CaIPERS employed an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. Note:The CaIPERS 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. 461 127 City of Huntington Beach Required Supplementary Information Schedule of Contributions For the Year Ended June 30,2023 (in Thousands) Last Ten Fiscal Years* CaIPERS City Safety Plan-100 2022-231 2021-22 2020-21' 2019-20 2018-19' 2017-18 1'2 2016-17 2015-16' 2014-15 2013-141 Actuarially determined contribution $ 13,220 $ 13,579 $ 27,691 $ 25,847 $ 23,062 $ 15,223 $ 19,468 $ 19,129 $ 18,125 $ 14,759 Contributions in relation to the actuarially determined contributions (13,220) (13,579) (27,691) (25,847) (23,062) (15,223) (19,468) (19,129) (19,125) (14,759) Contribution deficiency(excess) $ - $ - $ - $ - $ - $ - $ - $ - $ (1,000) $ Covered payroll $48,601 $ 48,023 $45,665 $ 43,783 $ 43,684 $ 31,943 $ 43,269 $ 42,607 $ 44,055 $ 41,167 Contributions as a percentage of covered payroll 27.20% 28.28% 60.64% 59.03% 52.79% 47.66% 44.99% 44.90% 43.41% 35.85% 'Historical information is required only for measurement periods for which GASB 68 is applicable. • 2 The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018. Notes to Schedule Valuation date:6/30/2013 through 06/30/2020 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method/period For details,see Safety Plan of the City of Huntington Beach Annual Valuation Report as of June 30,2022. Asset valuation method For 10/1/14-6/30/15,15 Year Smoothed Market(for details,see June 30,2012 Funding Valuation Report).For 7/1/15-6/30/22,Fair Value (for details,see the Funding Valuation Reports for the years ended June 30,2013-2022). Inflation 2.75%for 10/1/2013-6/30/2019,2.50%for 7/1/2019-6/30/2020,and 2.80%for 7/1/2020-6/30/2022. Salary increases Varies by entry age and service. Payroll growth 2.75%for 10/1/2013-6/30/2020,and 2.80%for 7/1/2020-6/30/2022. Discount Rate The prescribed discount rate assumption,adopted by the board on November 17,2021,is 6.80%compounded annually(net of invesment and administrative expenses)as of June 30,2022. Retirement age For 10/1/13-6/30/16,the probabilities of retirement are based on the 2014 CaIPERS Experience study for the period from 1997 to 2007. For 7/1/16-6/30/19,the probabilities of retirement are based on the 2014 CaIPERS Experience study for the period from 1997 to 2011. For 7/1/19-6/30/22,the probabilities of Retirement are based on the 2017 CaIPERS Experience Study for the period from 1997 to 2015. Mortality For 10/1/13-6/30/16,the probabilities of mortality are based on the 2010 CaIPERS Experience Study for the period from 1997 to 2007. For 7/1/16-6/30/19,the probabilities of mortality are based on the 2014 CaIPERS Experience Study for the period from 1997 to 2011. For 7/1/16-6/30/18,Pre-retirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries. For 7/1/18-6/30/19,Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of Actuaries.For 7/1/19-6/30/22,the probabilities of mortality are based on the 2017 CaIPERS Experience Study for the period from 1997 to 2015.Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90%of Scale MP-2016 published by the Society of Actuaries. *Beginning with the June 30,2013 valuations,CaIPERS employed an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. Note:The CaIPERS 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. 462 128 City of Huntington Beach Required Supplementary Information Schedule of Contributions For the Year Ended June 30,2023 (in Thousands) Last Ten Fiscal Years* Supplemental Retirement Plan 2022-23 2021-22 2020-21 2019-20 2018-19 2017-18 '2 2016-17 2015-16 2014-15' 2013-14' Actuarially determined contribution $ 1,413 $ 889 $ 933 $ 1,689 $ 2,258 $ 2,879 $ 3,895 $ 3,576 $ 3,634 $ 4,534 Contributions in relation to the actuarially determined contributions (6,046) (6,006) (1,435) (3,506) (4,962) (3,507) (5,346) (7,277) (4,678) (4,539) Contribution deficiency(excess) $ (4,633) $ (5,117) $ (502) $ (1,817) $ (2,704) $ (628) $ (1,451) $ (3,701) $ (1,044) $ (5) Covered payroll $ 5,497 $ 6,670 $ 7,684 $ 8,469 $ 12,863 $ 10,890 $ 17,167 $ 19,517 $ 22,069 $ 22,004 Contributions as a percentage of covered payroll 109.99% 90.04% 18.68% 41.40% 38.58% 32.20% 31.14% 37.29% 21.20% . 20.63% Historical information is required only for measurement periods for which GASB 68 is applicable. 2 The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine-month reporting period from October 1,2017 to June 30,2018. Notes to Schedule Valuation date: 6/30/2021 6/30/2021 6/30/2019 6/30/2019 9/30/2017 9/30/2017 9/30/2015 9/30/2013 9/30/2013 9/30/2011 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal,Level Percentage of Payroll 9/30/12 UAAL:fixed 10-year period,Gains/Losses:fixed 15-year period,Discount rate change loss:10-year period,6/30/18 UAAL:fixed 5-year Amortization method/period period fresh start.19-year closed period for 2021/2022. 20-year fixed period for 2022/23.Level dollar amortization. Asset valuation method Investment gains/losses spread over a 3-year rolling period. Inflation 3%for 10/1/2013-6/30/2020 and 2.50%per annum for 7/1/2020-6/30/2023. Salary increases Aggregate-2.75%annually.Merit-CalPERS 1997-2015 Experience Study. Payroll growth Merit-CaIPERS 1997-2011 Experience Study plus 3.25%aggregate increase for the October 1,2013 to June 30,2018 measurement period. 3% aggregate increase for the July 1,2018-June 30,2019 measurement period.Merit-CaIPERS 1997-2015 Experience Study plus 2.75%annually increase for the July 1,2021-June 30,2023 period. 6.5%,net of pension plan investment and administrative expenses,including inflation for the October 1,2013 to June 30,2018 measurement period.6.25%,net of pension plan investment and administrative expenses,for the July 1,2019-June 30,2022 measurement period.5.50%,net of pension plan investment and administrative expenses,for the July 1,2022-June 30,2023 measurement period. Investment rate of return Retirement age The probabilities of retirement are based on the CaIPERS 1997-2015 Experience Study. Mortality The probabilities of mortality are based on the CaIPERS 1997-2015 Experience Study.Pre-retirement and Post-retirement mortality rates include mortality projected fully generational with Scale MP-2019,modified to converge to ultimate improvement rates in 2022 for the October 1,2013 to June 30,2018 measurement period. Mortality projected fully generational with Scale MP-2019 for the July 1,2021 to June 30,2022 measurement • period.Mortality projected fully generational with Scale MP-2021 for the July 1,2022 to June 30,2023 measurement period. Schedule of Money Weighted Rate of Return 2023 2022 2021 2020 2019 20182 2017 2016 2015 2014 Annual Money Weighted Rate of Return,net of investment expense 8.37% -15.97% 26.88% 3.79% 4.79% 4.04% 12.87% 10.20% -2.82% 9.20% 'Historical information is required only for measurement periods for which GASB 68 is applicable. 2 The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from October 1,2017 to June 30,2018. • 463 129 City of Huntington Beach Required Supplementary Information Schedule of Contributions For the Year Ended June 30,2023 (in Thousands) Last Ten Fiscal Years* Other Post Employment Benefits Plan Fiscal Year Ended June 30 2023 2022 2021 2020 2019 2018** Actuarially Determined Contribution(ADC) $ 856 $ 1,401 $ 1,364 $ 1,793 $ 1,746 $ 2,022 Contributions in relation to the ADC*** (1,997) (2,499) (1,882) (1,9591 (2,270) (4,192) Contribution deficiency(excess) $ (1,141) $ (1,098) $ (518) $ (166) $ (524) $ (2,170) Covered-employee payroll** $ 72,558 $ 72,524 $ 70,881 $ 76,521 $ 79,682 $ 59,589 Contributions as a percentage of covered-employee payroll 2.75%' 3.45% 2.66% 2.56% 2.85% 7.03% Notes to Schedule: Valuation date: 6/30/2021 6/30/2021 6/30/2019 6/30/2017 6/30/2017 6/30/2015 Methods and assumptions used to determine contributions: Actuarial Cost Method Entry Age Normal Amortization Method/Period Level percent of payroll over a 20-year fixed period Asset Valuation Method Investment gains and losses spread over 5-year rolling period. Inflation 3%for 10/1/17-6/30/18 and 2.75%per annum for the measurement period 7/1/2018 to 6/30/2022.2.50%per annum for the measurement period 7/1/2022 to 6/30/2023. Payroll Growth 2.75%per annum,in aggregate. Investment Rate of Return 6%for the October 1,2017-June 30,2018 period.6.25%for the July 1,2018-June 30,2020.5.50%for the July 1,2020-June 30, 2021 period.5.75%for the July 1,2021 to June 30,2023 period.Assumes investing in California Employers'Retiree Benefit Trust asset allocation Strategy 3,moving to Strategy 2 beginning March 2019. Healthcare cost-trend rates 7.0%initial,1.0%-2.0%near term increase then decreasing 0.5%per year to trend rate that reflects medical price inflation to an ultimate rate of 4.0%in 2076. Retirement Age Tier 1 employees-2.5%@55 and Tier 2 employees-2.0%@62.The probabilities of retirement are based on the 2014 CaIPERS Experience Study for the period from 1997-2011.Tier 1 employees-2.5%@55 and Tier 2 employees-2.0%@ 62.The probabilities of retirement are based on the CaIPERS 1997-2015 experience Study for Measurement period as of 6/30/21. Mortality Pre-retirement mortality probability based on 2014 CaIPERS 1997-2011 Experience Study covering CaIPERS participants.Post- retirement mortality probability based on CalPERS Experience Study 2007-2011 covering participants in CalPERS.Mortality based on CaIPERS 1997-2015 Experience Study covering participants in CalPERS. *Historical information is required only for measurement periods for which GASB 75 is applicable. Future years'information will be displayed up to 10 years as information becomes available. **For the nine-month period ending June 30,2018. The City changed its fiscal year effective October 1,2017. ***Contributions to the OPEB plan are not based on employee pay. 464 130 SUPPLEMENTARY INFORMATION 465 131 seF��NTN�Z ivy �ffi :44 City of Huntington Beach vo<4.tqri..imer o�2 we{�P`���' Other Governmental Funds Special Revenue Funds account for revenues and expenditures legally constrained to a specific purpose. • The Air Quality Fund accounts for revenues from the local agencies used to improve local air quality. • The Development Impact Fee Fund accounts for fees collected for new developments to be used for transportation, park land acquisition and development, library and other public facilities in an effort to mitigate the impacts of those new developments. • The Disability Access Fund accounts for the State Mandated Disability Access Fee (SB 1186)to fund increased training certified access specialist (CASp) services for the public and to facilitate compliance with construction related accessibility requirements. • The Drainage Fund accounts for fees received from developers to construct and maintain the City's drainage system. • The Strand Parking Structure Fund accounts for the activities of the Strand Parking Structure. • The Gas Tax Fund accounts for monies allocated under the Streets and Highways Code of California. Expenditures may be made for any street related purpose allowed under the code. • The Housing Residual Receipt Fund accounts for residual receipts received for housing activities. • The Park Acquisition and Development Fund accounts for fees received from developers to develop and maintain the City's park system. • The Surf City "3" Fund accounts for revenues and expenditures related to a 1%fee on cable television and other video subscription services to fund the purchase and acquisition of capital equipment and facilities necessary to program and broadcast PEG (public, education and government)events on the City's cable channel. • The ELM Automation Fund accounts for automation fee revenues and Enterprise Land Management (ELM) replacement costs and maintenance expenditures. • The Traffic Congestion Relief Fund accounts for moneys allocated for roadway maintenance as established by Assembly Bill 2928. • The Traffic Impact Fee Fund accounts for moneys received from the traffic impact fee levied on new developments in the City. • The Transportation Fund accounts for moneys received from the countywide half cent sales tax and other specific sources to be spent on transportation related expenditures. Debt Service Funds account for the receipts for and payment of general long-term debt. • The Public Financing Authority accounts for the activity of the Huntington Beach Public Financing Authority. Capital Projects Funds account for the acquisition and construction of capital assets other than those financed by proprietary fund types. • The Affordable Housing In-Lieu Fund accounts for the Affordable Housing In-Lieu Fee from developers of housing projects who have elected to pay the fee in-lieu of building the affordable housing in their project. • The Lease Capital Project Fund records activity for leases project expenditures. • The Parking In-Lieu Fund records construction activity from developers who pay fees in-lieu of directly providing parking facilities to the City. • The Sewer Development Fund accounts for fees received from developers to construct and maintain sewer facilities. • The Technology Fund accounts for technology infrastructure project expenditures. 466 132 CITY OF HUNTINGTON BEACH COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS June 30,2023 (In Thousands) SPECIAL REVENUE FUNDS Development Disability Strand Parking ASSETS Air Quality Impact Fee Access Drainage Structures Gas Tax Cash and Investments $ 1,032 $ 8,379 $ 409 $ 4,126 $ 3,907 $ 4,985 Taxes Receivable - - - - - 297 Other Receivables 71 34 2 18 16 797 Total Assets ' 1,103 8,413 411 4,144 3,923 6,079 LIABILITIES Accounts Payable 65 187 - 15 13 1,265 Accrued Payroll - 3 - - - 18 Total Liabilities 65 190 - 15 13 1,283 FUND BALANCES Restricted Pollution Remediation - - - - - - Highways,Streets and Transportation - - - - - 4,796 Low Income Housing - - - - - - Air Quality 1,038 - - - - - Other Capital Projects - 8,223 - 4,129 - - Other Purposes - - 411 - - - Committed Parks - - - - - - Other Purposes - - - - 3,910 - Total Fund Balances 1,038 8,223 411 4,129 3,910 4,796 Total Liabilities,Deferred Inflows of Resources and Fund Balances $ 1,103 $ 8,413 $ 411 $ 4,144 $ 3,923 $ 6,079 467 133 CITY OF HUNTINGTON BEACH COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS June 30,2023 (In Thousands) (continued) SPECIAL REVENUE FUNDS Traffic Housing Park Acquisition ELM Automation Congestion Traffic Impact Total Special Residual Receipt and Development Surf City"3" Fund Relief , Fee Transportation Revenue Funds $ 1,296 $ 5,486 $ 1,482 $ 671 $ 1,464 $ 4,165 $ 3,386 $ 40,788 119 - 143 - 749 1,308 5 166 6 3 6 _ 17 14 1,155 1,301 5,652 1,607 674 1,613 4,182 4,149 43,251 - - 37 20 283 1 166 2,052 - - - 3 - - 33 57 - - 37 23 283 1 199 2,109 - 336 - - - - - 336 - - - - 1,330 4,181 3,950 14,257 1,301 - - - - - - 1,301 - - - - - 1,038 - - - - - - 12,352 - - 1,570 651 - - - 2,632 5,316 - - - - - 5,316 - - - - - - 3,910 1,301 5,652 1,570 651 1,330 4,181 3,950 41,142 $ 1,301 $ 5,652 $ 1,607 $ 674 $ 1,613 $ 4,182 $ 4,149 $ 43,251 l 468 134 CITY OF HUNTINGTON BEACH COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS June 30,2023 (In Thousands) (continued) DEBT SERVICE FUNDS CAPITAL PROJECT FUNDS Public Financing Total Debt Service Affordable Housing Lease Capital ASSETS Authority Fund In-Lieu Project Cash and Investments $ 3,386 $ 3,386 $ 9,551 $ 39 Cash and Investments with Fiscal Agent 1,075 1,075 - 11,210 Taxes Receivable - - - - Other Receivables 2 2 39 94 Total Assets 4,463 4,463 9,590 11,343 LIABILITIES Accounts Payable 2 2 - - Accrued Payroll - - - - Total Liabilities 2 2 - - FUND BALANCES Restricted Pollution Remediation - - - - Debt Service 4,461 4,461 - - Highways,Streets and Transportation - - - - Low Income Housing - - . 9,590 - Air Quality - - - - Other Capital Projects - - - 11,343 Other Purposes - - - - Committed Parks - - - - Other Capital Projects - - - - Other Purposes - - - - Assigned Capital Improvement Reserve - - - - Total Fund Balances 4,461 4,461 9,590 11,343 Total Liabilities,Deferred Inflows of Resources and Fund Balances $ 4,463 $ 4,463 $ 9,590 $ 11,343 469 135 CITY OF HUNTINGTON BEACH COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS June 30,2023 (In Thousands) (continued) CAPITAL PROJECT FUNDS Total Capital Projects Total Other Parking In-Lieu Sewer Development Technology Funds Governmental Funds $ 767 $ 2,454 $ 6,171 $ 18,982 $ 63,156 - - - 11,210 12,285 - - - - 1,308 3 11 26 173 1,330 770 2,465 6,197 30,365 78,079 1 38 - 39 2,093 - - - - 57 1 38 - 39 2,150 - - - - 336 - - - - 4,461 - - - - 14,257 - - - 9,590 10,891 - - - - 1,038 - - - 11,343 23,695 - - - - 2,632 - - - - 5,316 769 2,427 - 3,196 3,196 - - - - 3,910 - - 6,197 6,197 6,197 769 2,427 6,197 30,326 75,929 $ 770 $ 2,465 $ 6,197 $ 30,365 $ 78,079 470 136 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) SPECIAL REVENUE FUNDS Strand Development Disability Parking REVENUES Air Quality Impact Fee Access Drainage Structures Gas Tax Sales Taxes $ - $ - $ - $ - $ - $ - Other Taxes - - - - - 7,822 • Licenses and Permits - - 70 - - - Use of Money and Property(Loss) 15 140 6 32 1,625 - Intergovernmental 324 - - - - 75 Charges for Current Service - 1,978 - 1,003 - - Other - - - - - - Total Revenues 339 2,118 76 1,035 1,625 7,897 EXPENDITURES Current: City Manager - - - - - - Finance - - 6 - - - Community Development - - - - 1,143 - Fire - 1 - - - - Information Systems - - - - - - Police - 488 - - - - • Community Services - 2,973 - - - - Library Services - 89 - - - - Public Works 515 - - 392 - 8,698 Total Expenditures 515 3,551 6 392 1,143 8,698 Excess Of Revenues Over (Under)Expenditures (176) (1,433) 70 643 482 (801) Other Financing Sources(Uses): Transfers Out - - - - (400) - Total Other Financing Sources(Uses) - - - - (400) - Net Change in Fund Balances (176) (1,433) 70 643 82 (801) Fund Balances-Beginning of Year 1,214 9,656 341 3,486 3,828 5,597 Fund Balances-End of Year $ 1,038 $ 8,223 $ 411 $ 4,129 $ 3,910 $ 4,796 471 • 137 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) (continued) SPECIAL REVENUE FUNDS Traffic Housing Park Acquisition ELM Automation Congestion Traffic Impact Total Special Residual Receipt and Development Surf City"3" Fund Relief Fee Transportation Revenue Funds $ - $ - $ - $ - $ - $ - $ 4,565 $ 4,565 - - 498 - - - - 8,320 - - - - - - - 70 20 (169) 23 (13) 31 60 57 1,827 - - - - 1,618 - - 2,017 - 4,614 - 683 - 1,516 - 9,794 6 - - - - - - 6 26 4,445 521 670 1,649 1,576 4,622 26,599 - - 309 - - - - 309 - - - - - - - 6 - - - - - - - 1,143 - - 1 - - - 286 - - - 286 - - - - - - - 488 - 405 - - - - - 3,378 - - - - - - - 89 - - - - 2,496 42 3,888 16,031 - 405 309 286 2,496 42 3,888 21,731 26 4,040 212 384 (847) 1,534 734 4,868 - - - - - - - (400) - - - - - - - (400) 26 4,040 212 384 (847) 1,534 734 4,468 1,275 1,612 1,358 267 2,177 2,647 3,216 36,674 $ 1,301 $ 5,652 $ 1,570 $ 651 $ 1,330 $ 4,181 $ 3,950 $ 41,142 • 472 138 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) (continued) DEBT SERVICE FUNDS CAPITAL PROJECT FUNDS • Public Financing Total Debt Service Affordable Housing Lease Capital REVENUES Authority Funds In-Lieu Project Sales Taxes $ - $ - $ - $ - Other Taxes - - - - Licenses and Permits - - 4,932 - Use of Money and Property(Loss) 22 22 117 326 Intergovernmental - - - Charges for Current Service - - - - Other - - - - Total Revenues 22 22 5,049 326 EXPENDITURES Current: City Manager - - - - Finance 5 5 - - Community Development - - - - Fire - - - 6,352 Information Systems - - - - Police - - - - Community Services - - - - Library Services - - - - Public Works - - - - Debt Service: Principal 2,205 2,205 - - Interest 746 746 - - Total Expenditures 2,956 2,956 - 6,352 Excess Of Revenues Over (Under)Expenditures (2,934) (2,934) 5,049 (6,026) Other Financing Sources(Uses): Transfers In 2,963 2,963 - - Issuance of Long-Term Debt - - - 7,742 Transfers Out - - - - Total Other Financing Sources(Uses) 2,963 2,963 - 7,742 Net Change in Fund Balances 29 29 5,049 1,716 Fund Balances-Beginning of Year 4,432 4,432 4,541 9,627 Fund Balances-End of Year $ 4,461 $ 4,461 $ 9,590 ,$ 11,343 473 139 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGE$ IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) (continued) CAPITAL PROJECT FUNDS Total Capital Projects Total Other Parking In-Lieu Sewer Development Technology Funds Governmental Funds $ - $ - $ - $ - $ 4,565 - - - - 8,320 56 - - 4,988 5,058 - 58 (116) 385 2,234 - 12 - 12 2,029 - 1,318 - 1,318 11,112 - - - - 6 56 1,388 (116) 6,703 33,324 - - - - 309 - - - - 11 6 - - 6 1,149 - - - 6,352 6,353 - - 8 8 294 - - s- - 488 - - - - 3,378 - - - - 89 - 1,231 - 1,231 17,262 - - - - 2,205 - - - - 746 6 1,231 8 7,597 32,284 50 157 (124) (894) 1,040 - - 3,300 3,300 6,263 - - - 7,742 7,742 - - - - (400) - - 3,300 11,042 13,605 50 157 3,176 10,148 14,645 719 2,270 3,021 20,178 61,284 $ 769 $ 2,427 $ 6,197 $ 30,326 $ 75,929 474 140 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) Air Quality Variance with Final Budget Positive REVENUES: ' Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 15 $ 15 Intergovernmental 250 250 324 74 Total Revenues 250 250 339 89 EXPENDITURES: Current: Public Works 788 1,508 515 993 Total Expenditures 788 1,508 515 993 Net Change in Fund Balance (538) (1,258) (176) 1,082 Fund Balance-Beginning of Year 1,214 1,214 1,214 - Fund Balance-End of Year $ 676 $ (44) $ 1,038 $ 1,082 Development Impact Fee Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 140 $ 140 Charges for Current Service 1,035 1,035 1,978 943 Total Revenues 1,035 1,035 2,118 1,083 EXPENDITURES: Current: Fire - 827 1 826 Police 415 1,529 488 1,041 Community Services 1,636 5,301 2,973 2,328 . Library Services 350 388 _ 89 299 Total Expenditures 2,401 8,045 3,551 4,494 Net Change in Fund Balance (1,366) (7,010) (1,433) 5,577 Fund Balance-Beginning of Year 9,656 9,656 9,656 - Fund Balance-End of Year $ 8,290 $ 2,646 $ 8,223 $ 5,577 Disability Access Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Licenses and Permits $ 84 $ 84 $ 70 $ (14) Use of Money and Property - - 6 6 Total Revenues _ 84 84 76 (8) EXPENDITURES: Current: Finance 84 84 6 78 Total Expenditures 84 84 _ 6 78 Net Change in Fund Balance - - 70 70 Fund Balance-Beginning of Year 341 341 341 - Fund Balance-End of Year $ 341 $ 341 $ 411 $ 70 475 141 • CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Drainage ' Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 32 $ 32 Charges for Current Service _ 200 200 1,003 803 Total Revenues 200 200 1,035 835 EXPENDITURES: Current: Public Works 2,845 . 3,830 392 3,438 Total Expenditures 2,845 3,830 392 3,438 Net Change in Fund Balance (2,645) (3,630) 643 4,273 Fund Balance-Beginning of Year 3,486 3,486 3,486 - Fund Balance-End of Year $ 841 $ (144) $ 4,129 $ 4,273 Strand Parking Structure Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ 1,450 $ 1,450 $ 1,625 $ 175 Total Revenues 1,450 1,450 1,625 175 EXPENDITURES: Current: Community Development 1,147 1,466 1,143 _ 323 Total Expenditures 1,147 1,466 1,143 323 OTHER FINANCING SOURCES(USES): Transfers Out (400) (400) (400) - Total Other Financing Sources(Uses) (400) (400) (400) - Net Change in Fund Balance (97) (416) 82 498 Fund Balance-Beginning of Year 3,828 3,828 3,828 - Fund Balance-End of Year $ 3,731 $ 3,412 $ 3,910 $ 498 Gas Tax Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Other Taxes $ 8,273 $ 8,276 $ 7,822 $ (454) Intergovernmental - 75 75 Total Revenues 8,273 _ 8,276 7,897 (379) EXPENDITURES: Current: • Public Works 8,140 13,436 8,698 4,738 Total Expenditures 8,140 13,436 8,698 4,738 OTHER FINANCING SOURCES(USES): Transfers Out 022) . _ - - - Total Other Financing Sources(Uses) (122) - - - Net Change in Fund Balance 11 (5,160) (801) 4,359 Fund Balance-Beginning of Year 5,597 5,597 5,597 - Fund Balance-End of Year $ 5,608 $ 437 $ 4,796 $ 4,359 476 142 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Housing Residual Receipt Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 20 $ 20 Other 32 32 6 (26) Total Revenues 32 32 26 (6) EXPENDITURES: Current: Community Development 32 32 - 32 Total Expenditures 32 32 - 32 Net Change in Fund Balance - - 26 26 Fund Balance-Beginning of Year 1,275 1,275 1,275 - Fund Balance-End of Year $ 1,275 $ 1,275 $ 1,301 $ 26 Park Acquisition and Development Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property(Loss) $ - $ - $ (169) $ (169) Charges for Current Service - - 4,614 4,614 Total Revenues - - . 4,445 4,445 EXPENDITURES: Current: Community Services - 425 405 20 Total Expenditures - 425 405 20 Net Change in Fund Balance - (425) 4,040 4,465 Fund Balance-Beginning of Year 1,612 1,612 1,612 - Fund Balance-End of Year $ 1,612 $ 1,187 $ 5,652 $ 4,465 Surf City"3" Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Other Taxes $ 500 $ 500 $ 498 $ (2) Use of Money and Property - _ - 23 23 Total Revenues 500 500 521 21 EXPENDITURES: Current: City Manager 623 843 309 534 Total Expenditures 623 843 309 534 Net Change in Fund Balance (123) (343) 212 555 Fund Balance-Beginning of Year 1,358 1,358 1,358 - Fund Balance-End of Year $ 1,235 $ 1,015 $ 1,570 $ 555 477 143 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) ELM Automation Fund Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property(Loss) $ - $ - $ (13) $ (13) Charges for Current Service 360 360 683 323 Total Revenues 360 360 670 310 EXPENDITURES: Current: Information Systems 422 439 286 153 Total Expenditures 422 439 286 153 OTHER FINANCING SOURCES(USES): Transfers In 118 118 - (118) Transfers Out (18) - - - Total Other Financing Sources(Uses) 100 118 - (118) Net Change in Fund Balance 38 39 384 345 Fund Balance-Beginning of Year 267 267 267 - Fund Balance-End of Year $ 305 $ 306 $ 651 $ 345 Traffic Congestion Relief Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 31 $ 31 Intergovernmental 1,939 1,939 1,618 (321) Total Revenues 1,939 1,939 1,649 (290) EXPENDITURES: Current: Public Works 2,135 3,507 2,496 1,011 Total Expenditures 2,135 3,507 2,496 1,011 Net Change in Fund Balance (196) (1,568) (847) 721 Fund Balance-Beginning of Year 2,177 2,177 2,177 - Fund Balance-End of Year $ 1,981 $ 609 $ 1,330 $ 721 Traffic Impact Fee Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 60 $ 60 Charges for Current Service 100 100 1,516 1,416 Total Revenues 100 100 1,576 1,476 EXPENDITURES: Current: Public Works 290 2,150 42 2,108 Total Expenditures 290 2,150 42 2,108 Net Change in Fund Balance (190) (2,050) 1,534 3,584 Fund Balance-Beginning of Year 2,647 2,647 2,647 - Fund Balance-End of Year $ 2,457 $ 597 $ 4,181 $ 3,584 478 144 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Transportation Variance with ' Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Sales Taxes $ 4,056 $ 4,056 $ 4,565 $ 509 Use of Money and Property - - 57 57 Total Revenues 4,056 4,056 4,622 566 EXPENDITURES: Current: •Public Works 4,171 6,417 3,888 2,529 Total Expenditures 4,171 6,417 3,888 2,529 OTHER FINANCING SOURCES(USES): Transfers Out 208 - - - Total Other Financing Sources(Uses) 208 - - - Net Change in Fund Balance 93 (2,361) 734 3,095 Fund Balance-Beginning of Year 3,216 3,216 3,216 - Fund Balance-End of Year $ 3,309 $ 855 $ 3,950 $ 3,095 Public Financing Authority Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 22 $ 22 Total Revenues - - 22 22 EXPENDITURES: Current: Finance 12 12 5 7 Debt Service: Principal 2,205 2,205 2,205 - Interest 746 746 746 - Total Expenditures 2,963 _ 2,963 2,956 7 OTHER FINANCING SOURCES(USES): • Transfers In 2,963 2,963 2,963 - Total Other Financing Sources(Uses) 2,963 2,963 2,963 - Net Change in Fund Balance - - 29 29 Fund Balance-Beginning of Year 4,432 4,432 4,432 - Fund Balance-End of Year $ 4,432 $ 4,432 $ 4,461 $ 29 Affordable Housing In-Lieu Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Licenses and Permits $ 747 $ 747 $ 4,932 $ 4,185 Use of Money and Property - - 117 117 Total Revenues 747 747 5,049 4,302 Net Change in Fund Balance 747 747 5,049 4,302 Fund Balance-Beginning of Year 4,541 4,541 4,541 - Fund Balance-End of Year $ 5,288 $ 5,288 $ 9,590 $ 4,302 479 145 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) Lease Capital Project Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 326 $ 326 Total Revenues - - 326 326 EXPENDITURES: Current: Fire - 17,360 6,352 11,008 Total Expenditures - 17,360 6,352 11,008 OTHER FINANCING SOURCES(USES): Issuance of Long-Term Debt - 7,742 7,742 - Total Other Financing Sources(Uses) - 7,742 7,742 - Net Change in Fund Balance - (9,618) 1,716 11,334 Fund Balance-Beginning of Year 9,627 9,627 9,627 - Fund Balance-End of Year $ 9,627 $ 9 $ 11,343 $ 11,334 Parking In-Lieu Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Licenses and Permits $ 394 $ 394 $ 56 $ (338) Total Revenues 394 394 56 (338) EXPENDITURES: Current: Community Development 100 100 6 94 Total Expenditures 100 • 100 6 94 Net Change in Fund Balance 294 294 50 (244) Fund Balance-Beginning of Year 719 719 719 - Fund Balance-End of Year $ 1,013 $ 1,013 $ 769 $ (244) Sewer Development Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ - $ - $ 58 $ 58 Intergovernmental 12 12 12 - Charges for Current Service 155 155 1,318 1,163 Total Revenues 167 167 1,388 1,221 EXPENDITURES: Current: .° Public Works - 1,900 1,231 669 Total Expenditures - 1,900 1,231 669 Net Change in Fund Balance 167 "(1,733) 157 1,890 Fund Balance-Beginning of Year 2,270 2,270 2,270 - Fund Balance-End of Year $ 2,437 $ 537 $ 2,427 $ 1,890 480 146 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) Technology Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property(Loss) $ - $ - $ (116) $ (116) Total Revenues - - (116) (116) EXPENDITURES: Current: Information Systems 1,000 3,094 8 3,086 Total Expenditures 1,000 3,094 8 3,086 OTHER FINANCING SOURCES(USES): Transfers In 3,300 3,300 3,300 - Total Other Financing Sources(Uses) 3,300 3,300 3,300 Net Change in Fund Balance 2,300 206 3,176 2,970 Fund Balance-Beginning of Year 3,021 3,021 3,021 - Fund Balance-End of Year $ 5,321 $ 3,227 $ 6,197 $ 2,970 481 147 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) LMIHAF Capital Projects Fund Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property $ 200 $ 200 $ 79 $ (121) Total Revenues 200 200 79 (121) EXPENDITURES: Current: Community Development 25 2,425 16 2,409 Total Expenditures 25 2,425 16 2,409 Net Change in Fund Balance 175 (2,225) 63 2,288 Fund Balance-Beginning of Year 4,856 4,856 4,856 - Fund Balance-End of Year $ 5,031 $ 2,631 $ 4,919 $ 2,288 Pension Liability Debt Service Fund Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Property Taxes $ 6,621 $ 6,621 $ 8,431 $ 1,810 Use of Money and Property - - 447 447 Charges for Current Service - 15,950 16,111 161 Other - Total Revenues 6,621 22,571 24,989 2,418 EXPENDITURES: Debt Service: Principal 14,525 14,525 12,594 1,931 Interest 9,046 _ 9,046 8,486 560 Total Expenditures 23,571 23,571 21,080 2,491 Excess of Revenues Over(Under)Expenditures (16,950) (1,000) 3,909 4,909 OTHER FINANCING SOURCES(USES): Transfers In 17,325 1,375 344 1,031 Total Other Financing Sources(Uses) 17,325 1,375 344 1,031 Net Change in Fund Balance 375 375 4,253 5,940 Fund Balance-Beginning of Year 20,729 20,729 20,729 - Fund Balance-End of Year $ 21,104 $ 21,104 $ 24,982 $ 5,940 482 148 CITY OF HUNTINGTON BEACH SCHEDULE OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2023 (In Thousands) . Infrastructure Variance with Final Budget Positive REVENUES: Original Budget Final Budget Actual (Negative) Use of Money and Property(Loss) $ - $ - $ (1,565) $ (1,565) Intergovernmental - 135 501 366 Total Revenues - 135 (1,064) (1,199) EXPENDITURES: Current: Community Services 158 455 389 66 Public Works 24,707 46,698 14,375 32,323 Total Expenditures 24,865 47,153 14,764 32,389 Excess of Revenues Over(Under)Expenditures (24,865) (47,018) (15,828) 31,190 OTHER FINANCING SOURCES(USES): Transfers In 24,355 28,741 28,741 - Transfers Out 218 - - - Total Other Financing Sources(Uses) 24,573 28,741 28,741 - Net Change in Fund Balance (292) (18,277) 12,913 31,190 Fund Balance-Beginning of Year 20,485 20,485 20,485 - Fund Balance-End of Year $ 20,193 $ 2,208 $ 33,398 $ 31,190 • 483 149 � NTINGTpy. City of Huntington Beach sic° Internal Service Funds Internal Services Funds are used to accumulate and allocate costs internally among the City's various functions. • The Self Insurance Workers'Comp Fund accounts for the City's self insurance workers'compensation program. • The Self Insurance General Liability Fund accounts for the City's self insurance general liability program. • The Equipment Replacement Fund accounts for the City's equipment replacement needs. 484 150 CITY OF HUNTINGTON BEACH STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS June 30,2023 (In Thousands) Governmental Activities - Equipment Self Insurance Self Insurance Replacement Internal Service Workers'Comp General Liability Fund Fund Total ASSETS Current Assets: Cash and Investments $ 20,503 $ 14,184 $ 11,909 $ 46,596 Other Receivables,Net 76 40 49 165 Prepaids _ 600 - 1,381 1,981 Total Current Assets 21,179 14,224 13,339 48,742 Non-Current Assets: Net Other Postemployment Benefits Asset 7. 3 - 10 Total Non-Current Assets 7 3 - 10 Capital Assets: Buildings and Improvements - - 67 67 Machinery and Equipment - - 12,957 12,957 Less Accumulated Depreciation - - (3,615) (3,615) Total Capital Assets - - 9,409 9,409 Total Assets 21,186 14,227 22,748 58,161 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows Related to Pensions 466 - - 466 Deferred Outflows Related to Other Postemployment Benefits 22 10 - 32 Total Deferred Outflows of Resources 488 10 - 498 Total Assets and Deferred Outflows of Resources 21,674 14,237 22,748 58,659 LIABILITIES Current Liabilities: Accounts Payable 353 104 248 705 Accrued Payroll 4 4 - 8 Current Portion of Claims Payable 8,604 10,439 - 19,043 Current Portion of Compensated Absences 13 1 - 14 Long-Term Obligations Due Within One Year 43 - _ _ 43 Total Current Liabilities 9,017 10,548 248 19,813 Non-Current Liabilities: Compensated Absences 35 3 - 38 Long-Term Obligations Due in More than One Year 943 - - 943 Net Pension Liability 513 - - 513 Claims Payable 35,483 12,095 - 47,578 Total Non-Current Liabilities 36,974 12,098 - 49,072 Total Liabilities 45,991 22,646 248 68,885 DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pensions 1 - - 1 Deferred Inflows Related to Other Postemployment Benefits 24 11 - 35 Total Deferred Inflows of Resources 25 11 - 36 NET POSITION Net Investment in Capital Assets - - 9,409 9,409 Unrestricted (24,342) (8,420) 13,091 (19,671) Total Net Position (24,342) (8,420) 22,500 (10,262) Total Liabilities,Deferred Inflows of Resources,and Net Position $ 21,674 $ 14,237 $ 22,748 $ 58,659 485 151 CITY OF HUNTINGTON BEACH STATEMENT OF REVENUES, EXPENSES,AND CHANGES IN FUND NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Governmental Activities Equipment Self Insurance Self Insurance Replacement Internal Service Workers'Comp General Liability Fund Fund Total OPERATING REVENUES Fees and Charges for Service $ 13,628 $ 10,750 $ 8,290 $ 32,668 Other 846 442 240 1,528 Total Operating Revenues 14,474 11,192 8,530 34,196 OPERATING EXPENSES Supplies and Operations 1,710 390 1,504 3,604 Claims and Judgments 10,419 15,454 - 25,873 Depreciation - - 1,453 1,453 Total Operating Expenses 12,129 15,844 2,957 30,930 Operating Income(Loss) 2,345 (4,652) 5,573 3,266 NON-OPERATING REVENUES(EXPENSES) Investment Income(Loss) 46 39 (16) 69 Interest Expense (25) - - (25) • Disposal of Machinery and Equipment(Loss) - - (520) (520) Total Non-Operating Revenues(Expenses) 21 39 (536) (476) Income(Loss)Before Transfers 2,366 (4,613) 5,037 2,790 Change in Net Position 2,366 (4,613) 5,037 2,790 Net Position-Beginning of Year (26,708) (3,807) 17,463 (13,052) Net Position-End of Year $ (24,342) $ 8,420) $ 22,500 $ (10,262) 486 152 CITY OF HUNTINGTON BEACH STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30,2023 (In Thousands) Governmental Activities Equipment Self Insurance Self Insurance Replacement Internal Service Workers'Comp General Liability Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers and Users $ 14,444 $ 11,179 $ 8,510 $ 34,133 Cash Paid to Employees for Services (180) (183) - (363) Cash Paid to Suppliers of Goods and Services (10,848) (6,711) (2,468) (20,027) Net Cash and Investment Provided(Used)by Operating Activities 3,416 4,285 6,042 13,743 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Debt Service (43) - - (43) Interest Paid (26) - - (26) Net Cash and Investments Provided(Used)by Noncapital Financing Activities (69) - - (69) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of Capital Assets - - (5,156) (5,156) Net Cash and Investments Provided(Used)by Capital and Related Financing Activities - - (5,156) (5,156) CASH FLOWS FROM INVESTING ACTIVITIES Investment(Loss) 46 39 (16) 69 Net Cash and Investments Provided(Used)by Investing Activities 46 39 (16) 69 Net Increase in Cash and Investments 3,393 4,324 870 8,587 Cash and Investments-Beginning of Year 17,110 9,860 11,039 38,009 Cash and Investments-End of Year $ 20,503 $ 14,184 $ 11,909 $ 46,596 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH AND INVESTMENTS PROVIDED(USED)BY OPERATING ACTIVITIES Operating Income(Loss) $ 2,345 $ (4,652) $ 5,573 $ 3,266 Adjustments to Reconcile Operating Income(Loss)to Net Cash and Investments Provided(Used)by Operating Activities Depreciation - - 1,453 1,453 Decrease(Increase)in Other Receivables,Net (30) (13) (20) (63) Decrease in Prepaids - - (1,186) (1,186) (Increase)in Net Pension Asset 388 - - 388 (Increase)in Net Other Postemployment Benefits Asset 13 6 - 19 Increase(Decrease)in Accounts Payable (260) 78 222 40 Increase in Accrued Payroll (15) 4 - (11) Increase in Claims Payable 1,324 8,866 - 10,190 (Decrease)in Compensated Absences 7 4 - 11 Decrease in Deferred Pension Outflow (388) - - (388) Increase in Deferred Pension Inflow (428) - - (428) (Decrease)in Net Pension Liability 479 - - 479 (Increase)in Deferred Other Postemployment Benefits Outflow (6) (3) - (9) Increase in Deferred Other Postemployment Benefits Inflow _ (13) (5) - (18) Net Cash and Investments Provided(Used) by Operating Activities $ 3,416 $ 4,285 $ 6,042 $ 13,743 NONCASH INVESTING,CAPITAL,AND FINANCING ACTIVITIES There were no noncash investing,capital,or financing activities during the year ended June 30,2023. 487 153 ►I Offaili - 7` P 9t� City of Huntington Beach .-z��F�aPivr.iP,,,„�� Fiduciary Funds Fiduciary Funds account for assets held by the City as a custodian for other organizations or individuals. • The Community Facilities Districts Funds accounts for the debt service activity of the City's three community facilities districts. • The Huntington Beach Business Improvement District Fund accounts for the activities of the City's business improvement district. • The Bella Terra Parking Structure Fund accounts for the activities of the Bella Terra Parking Structure. 488 154 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF FIDUCIARY FUND ASSETS AND LIABILITIES FIDUCIARY FUNDS JUNE 30, 2023 Custodial Funds Community Business Parking Facilities Improvement Structure-Bella Total Custodial ASSETS: Districts Districts Terra Funds Current Assets: Cash and Investments $ 1,372 $ 695 $ 2,035 $ 4,102 Cash with Fiscal Agent 1,615 - 1,714 3,329 Accounts Receivable, Net _ 9 841 45 895 Total Assets 2,996 1,536 3,794 8,326 LIABILITIES: Current Liabilities: Accounts Payable - 1,271 251 1,522 Total Current Liabilities - 1,271 251 1,522 Total Liabilities • - 1,271 251 1,522 NET POSITION • Restricted for: Restricted for Individuals and Organizations 2,996 265 3,543 6,804 Total Net Position $ 2,996 $ 265 $ 3,543 $ 6,804 CITY OF HUNTINGTON BEACH COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2023 Custodial Funds Community Business Parking Facilities Improvement Structure-Bella Total Custodial ADDITIONS Districts Districts Terra Funds Special Assessments or Special Taxes Collected from Property Owners $ 1,552 $ - $ - $ 1,552 Business Improvement District Taxes - 6,960 - 6,960 Parking Assessments - - 2,446 2,446 Interest Income 54 - 73 127 Total Additions 1,606 6,960 2,519 11,085 DEDUCTIONS Administrative Costs 20 - - 20 Payments to other Organizations - 7,006 779 7,785 Interest and Fiscal Agency Expenses 625 - 734 1,359 Principal 875 - 925 1,800 Total Deductions 1,520 7,006 2,438 10,964 Change in Net Position 86 (46) 81 121 Net Position-Beginning of Year 2,910 311 3,462 6,683 Net Position-End of Year $ 2,996 $ 265 $ 3,543 $ 6,804 489 155 \s�a�iNcroh \F9 Q City of Huntington Beach Statistical Section F�UUNTY to- This part of the City of Huntington Beach's Annual Comprehensive Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the City's overall financial health. Financial Trends - contains trend information to help the reader understand how the City's financial performance has changed over time. Revenue Capacity - contains information to help the reader assess the City's most significant local revenue source, the property tax. Debt Capacity - presents information to assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information - offers information to help the reader understand the environment within which the City's financial activities take place. Operating Information -contains service and infrastructure data to help the reader understand how the City's financial report relates to the services the City provides and the activities it performs. Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year. 490 156 • CITY OF HUNTINGTON BEACH NET POSITION BY COMPONENT-LAST TEN FISCAL YEARS (In Thousands) Fiscal Year Ended June 30, Governmental Activities 2023 2022 2021 2020 2019 Net investment in capital assets $ 727,051 $ 712,289 $ 699,204 $ 673,498 $ 664,281 Restricted 82,564 68,460 65,755 79,926 66,089 Unrestricted (173,034) (223,438) (275,159) (274,523) (251,022) Total Governmental Activities Net Position $ 636,581 $ 557,311 $ 489,800 $ 478,901 $ 479,348 Business-Type Activities Net investment in capital assets $ 141,581 $ 143,998 $ 142,469 $ 142,785 $ 145,696 Restricted 21,213 19,309 20,332 22,248 21,153 Unrestricted 36,684 34,120 39,129 38,482 36,747 Total Business-Type Activities Net Position $ 199,478 $ 197,427 $ 201,930 $ 203,515 $ 203,596 Primary Government Net investment in capital assets $ 868,632 $ 856,287 $ 841,673 $ 816,283 $ 809,977 Restricted 103,777 87,769 86,087 102,174 87,242 Unrestricted (136,350) (189,318) (236,030) (236,041) (214,275) Total Primary Government Net Position $ 836,059 $ 754,738 $ 691,730 $ 682,416 $ 682,944 CITY OF HUNTINGTON BEACH CHANGES IN NET POSITION -LAST TEN FISCAL YEARS (In Thousands) Fiscal Year Ended Expenses: June 30, Governmental Activities: 2023 2022 2021 2020 2019 City Council $ 429 $ 382 $ 423 $ 405 $ 360 City Manager 5,780 5,412 11,163 3,328 4,501 City Treasurer 396 259 340 317 246 CityAttomey 3,248 2,183 3,140 3,136 2,886 City Clerk 1,370 1,060 1,147 949 976 Finance 6,211 5,581 6,828 6,661 6,245 Human Resources**** - - - - 6,261 Community Development* 20,550. 11,634 19,716 15,722 6,144 Fire 71,737 52,808 65,960 62,840 56,494 Information Services 8,565 6,469 6,230 8,643 7,530 Police 89,430 73,964 102,415 97,204 87,355 Community Services 13,389 11,517 11,365 12,539 13,369 Library Services 7,225 5,212 6,181 5,776 5,206 Public Works 49,151 42,598 40,270 45,834 40,803 Non-Departmental*** - - - - - Interest on Long-Term Debt 9,587 9,548 2,706 _ 1,686 1,823 Total Governmental Activities 287,068 228,627 277,884 265,040 240,199 Business-Type Activities Water Utility 47,974 44,182 46,054 44,463 43,405 Sewer Service 11,422 10,390 9,284 9,828 9,442 Refuse Collection 14,935 13,738 12,936 12,609 12,051 Hazmat Service 103 236 241 235 234 Total Business-Type Activities 74,434 68,546 68,515 67,135 65,132 Total Business and Government Type Activities $ 361,502 $ 297,173 $ 346,399 $ 332,175 $ 305,331 * Planning and Building departments were combined in Fiscal Year ended September 30,2011.The combined department was later renamed to Community Development in Fiscal Year ended September 30,2016. ** The 2018 period reflects nine months of activity only as the fiscal year change resulted in reporting period from October 1,2017 to June 30,2018. 491 157 • CITY OF HUNTINGTON BEACH NET POSITION BY COMPONENT-LAST TEN FISCAL YEARS (In Thousands) (continued) Fiscal Year Ended June 30, September 30, Governmental Activities 2018** 2017 2016 2015 2014 Net investment in capital assets $ 650,466 $ 646,336 $ 624,180 $ 615,512 $ 618,825 Restricted 58,537 41,888 41,555 52,270 34,018 Unrestricted (254,528) (262,874) (222,863) (222,787) 89,524 Total Governmental Activities Net Position $ 4.54,475 $ 425,350 $ 442,872 $ 444,995 $ 742,367 Business-Type Activities Net investment in capital assets $ 143,954 $ 140,478 $ 142,566 $ 142,616 $ 140,770 Restricted 25,886 30,444 32,049 28,096 27,951 Unrestricted 27,492 22,228 21,997 28,476 53,166 Total Business-Type Activities Net Position $ 197,332 $ 193,150 $ 196,612 $ 199,188 $ 221,887 Primary Government Net investment in capital assets $ 794,420 $ 786,814 $ 766,746 $ 758,128 $ 759,595 Restricted 84,423 72,332 73,604 80,366 61,969 Unrestricted (227,036) (240,646) (200,866) (194,311) 142,690 Total Primary Government Net Position $ 651,807 $ 618,500 $ 639,484 $ 644,183 $ 964,254 CITY OF HUNTINGTON BEACH CHANGES IN NET POSITION -LAST TEN FISCAL YEARS (In Thousands) (continued) Fiscal Year Ended Expenses: June 30, September 30, Governmental Activities: 2018** 2017 2016 2015 2014 City Council $ 218 $ 347 $ 321 $ 270 $ 258 City Manager 2,063 4,691 3,849 3,302 3,878 City Treasurer 101 216 208 158 169 City Attorney 1,536 3,307 2,598 2,284 2,321 City Clerk 475 889 806 855 747 Finance 3,455 6,201 5,765 5,208 5,314 Human Resources**** 4,760 5,693 6,814 5,169 4,616 Community Development* 4,301 7,576 7,208 6,605 7,091 Fire 26,688 52,941 47,965 42,162 43,194 Information Services 4,375 7,047 6,852 6,552 6,456 Police 42,109 84,786 74,943 64,048 66,681 Community Services 6,768 15,558 9,935 13,809 12,509 Library Services 2,890 5,064 4,611 4,246 4,024 Public Works 23,898 35,373 31,791 27,979 31,691 Non-Departmental*** 18,164 29,368 35,240 24,080 21,602 Interest on Long-Term Debt 1,467 2,063 2,119 2,245 1,946 Total Governmental Activities 143,268 261,120 241,025 208,972 212,497 Business-Type Activities Water Utility 28,414 45,940 41,643 38,614 41,499 Sewer Service 6,127 9,351 8,729 8,192 9,712 Refuse Collection 8,916 10,821 11,277 11,308 11,145 Hazmat Service 117 224 _ 244 204 231 Total Business-Type Activities 43,574 66,336 61,893 58,318 62,587 Total Business and Government Type Activities $ 186,842 $ 327,456 $ 302,918 $ 267,290 $ 275,084 *** Beginning with Fiscal Year ended June 30,2019,non-departmental expenditures are no longer presented separately but are included as part of functional expenditures. ****Human Resources was combined with the City Manager's Office in Fiscal Year ended June 30,2020. 492 158 CITY OF HUNTINGTON BEACH CHANGES IN NET POSITION-LAST TEN FISCAL YEARS (In Thousands) Fiscal Year Ended Program Revenues: June 30, Governmental Activities: 2023 2022 2021 2020 2019 Charges for Services City Council $ 167 $ 162 $ 162 $ 177 $ 149 City Manager 4,976 4,131 4,208 5,315 3,300 City Treasurer 153 149 149 163 135 City Attorney 5 5 6 7 7 City Clerk 299 269 30 220 327 Finance 3,125 3,036 3,055 3,302 2,899 Human Resources**** - - - - 751 Community Development* 18,817 10,953 8,353 10,037 7,459 Fire 14,166 13,401 8,877 10,122 9,831 Information Services 623 604 610 636 628 Police 6,139 6,687 6,477 5,329 6,044 Community Services 22,545 21,117 15,558 17,631 23,530 Library Services 388 302 153 266 308 Public Works 11,301 7,235 6,045 6,614 6,368 Non-Departmental*** - - - - Total Charges for Services 82,704 68,051 53,683 59,819 61,736 Operating Grants 43,005 9,301 6,013 8,141 6,644 Capital Grants 11,202 8,537 10,192 14,483 8,361 Total Governmental Activities Program Revenue 136,911 85,889 69,888 82,443 76,741 Business-Type Activities: Water Utility 48,934 43,590 42,523 40,518 43,958 Sewer Service 10,982 10,791 10,828 10,900 11,868 Refuse Collection 14,899 13,675 13,014 12,573 12,022 Hazmat Service 276 276 266 279 276 Total Business-Type Activities Program Revenues 75,091 68,332 66,631 64,270 68,124 Total Primary Government Program Revenue 212,002 154,221 136,519 146,713 144,865 Net(Expense)Revenue: Governmental Activities (150,157) (142,738) (207,996) (182,597) (163,458) Business-Type Activities 657 (214) (1,884) (2,865) 2,992 Total Net(Expense)Revenue (149,500) (142,952) (209,880) (185,462) (160,466) General Revenue and Other Changes in Net Position Governmental Activities: Property Taxes 109,467 102,539 99,958 94,263 89,124 Sales Taxes 57,164 57,652 51,162 44,616 47,437 Utility Taxes 22,558 19,528 18,374 18,149 18,788 Other Taxes 32,418 26,134 17,293 18,635 20,227 Use of Money and Property 5,153 (1,895) 4,399 3,208 8,746 From Other Agencies 3,225 4,631 22,000 3,317 4,046 Gain on Sale of Property (520) 1,699 - - - Other - - - - - Transfers (38) (39) (38) (38) (37) Total Governmental Activities General Revenues 229,427 210,249 213,148 182,150 188,331 Business-Type Activities: Use of Money and Property 1,356 (4,328) 261 2,746 3,235 Transfers 38 39 _ 38 38 37 Total Business-Type Activities General Revenues 1,394 (4,289) 299 2,784 _ 3,272 Total General Revenues and Transfers 230,821 205,960 . 213,447 184,934 191,603 Extraordinary Gain - - - - - Changes in Net Position-Governmental Activities 79,270 67,511 5,152 (447) 24,873 Changes in Net Position-Business-Type Activities 2,051 (4,503) (1,585) (81) 6,264 Total Changes in Net Position 81,321 63,008 3,567 (528) 31,137 Net Position-Beginning of Year 754,738 691,730 682,416 682,944 651,807 Prior Period Adjustment-Governmental Activities - - 5,747 - - Prior Period Adjustment-Business-Type Activities - - - - Net Position-Beginning of Year as restated 754,738 691,730 688,163 682,944 651,807 Net Position-End of Year $ 836,059 $ 754,738 $ 691,730 $ 682,416 $ 682,944 * Planning and Building departments were combined in the Fiscal Year ended September 30,2011.The combined department was later renamed to Community Development in Fiscal Year ended September 30,2016. ** The 2018 period reflects nine months of activity only as the fiscal year change resulted in reporting period from October 1,2017 to June 30,20493 159 • CITY OF HUNTINGTON BEACH CHANGES IN NET POSITION -LAST TEN FISCAL YEARS (In Thousands) (continued) Fiscal Year Ended Program Revenues: June 30, September 30, Governmental Activities: 2018** 2017 2016 2015 2014 Charges for Services City Council $ 91 $ 108 $ 116 $ 71 $ 68 City Manager 2,374 3,515 3,029 2,994 2,835 City Treasurer 81 100 101 639 621 City Attorney 4 5 4 143 139 City Clerk 229 257 201 199 321 Finance 1,746 2,047 2,277 1,353 1,313 Human Resources**** 373 654 513 1,263 2,499 Community Development* 5,448 7,448 9,252 10,670 9,357 Fire 9,104 10,296 9,894 8,625 8,672 Information Services 381 501 521 834 809 Police 4,703 4,968 5,958 5,512 5,170 Community Services 19,245 21,693 18,853 18,569 18,055 Library Services 237 476 408 495 434 ' Public Works 4,392 5,392 5,733 6,474 6,367 Non-Departmental*** 916 1,116 1,290 327 318 Total Charges for Services 49,324 58,576 58,150 58,168 56,978 Operating Grants 3,976 7,329 4,723 7,458 7,958 Capital Grants 6,055 _ 3,408 5,939 9,809 5,486 Total Governmental Activities Program Revenue 59,355 69,313 68,812 75,435 70,422 Business-Type Activities: Water Utility 29,530 39,938 35,765 35,350 36,944 Sewer Service 8,362 10,854 11,280 11,239 10,665 Refuse Collection 8,820 11,282 11,215 11,221 11,006 Hazmat Service 25 287 235 222 183 Total Business-Type Activities Program Revenues 46,737 62,361 58,495 58,032 58,798 Total Primary Government Program Revenue 106,092 131,674 127,307 133,467 129,220 Net(Expense)Revenue: Governmental Activities (83,913) (191,807) (172,213) (133,537) (142,075) Business-Type Activities 3,163 (3,975) (3,398) (286) (3,789) Total Net(Expense)Revenue (80,750) (195,782) (175,611) (133,823) (145,864) General Revenue and Other Changes in Net Position . Governmental Activities: Property Taxes 61,185 82,925 87,128 82,615 81,355 Sales Taxes 33,844 43,551 34,289 33,063 29,243 Utility Taxes 14,014 19,303 19,482 20,229 20,621 Other Taxes 14,883 17,991 17,313 16,464 15,601 Use of Money and Property 2,158 3,370 3,618 5,551 3,725 From Other Agencies 2,263 3,896 4,397 5,653 4,279 Gain on Sale of Property - - - - - Other 2,811 2,438 5,693 4,440 6,903 Transfers (332) (51) (38) 35 (38) Total Governmental Activities General Revenues 130,826 173,423 171,882 168,050 161,689 Business-Type Activities: Use of Money and Property 279 462 939 1,281 1,015 Transfers 332 51 38 (35) 38 Total Business-Type Activities General Revenues 611 513 977 1,246 1,053 Total General Revenues and Transfers 131,437 173,936 172,859 169,296 162,742 Extraordinary Gain - - - - - _ - Changes in Net Position-Governmental Activities 46,913 (18,384) (331) 34,513 19,614 Changes in Net Position-Business-Type Activities 3,774 (3,462) (2,421) 960 (2,736) Total Changes in Net Position 50,687 (21,846) (2,752) 35,473 16,878 Net Position-Beginning of Year 618,500 639,484 642,236 964,254 962,179 Prior Period Adjustment-Governmental Activities (17,788) 862 - (333,677) (457) Prior Period Adjustment-Business-Type Activities 408 - (23,814) (14,346) Net Position-Beginning of Year as restated 601,120 640,346 642,236 606,763 947,376 Net Position-End of Year $ 651,807 $ 618,500 $ 639,484 $ 642,236 $ 964,254 *** Beginning with the Fiscal Year ended June 30,2019,non-departmental expenditures are no longer presented separately but are included as part of functional expenditures. **** Human Resources was combined with the City Manager's Office in the Fiscal Year ended June 30,2020. 494 160 CITY OF HUNTINGTON BEACH FUND BALANCES - GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS (In Thousands) (Modified Accrual Basis of Accounting) , Fiscal Year Ended June 30, 2023 2022 2021 2020 2019 General Fund: Nonspendable $ 51 $ 82 $ 115 $ 120 $ 23 Restricted 19,578 14,623 13,561 9,320 8,154 Committed 51,230 26,665 25,565 25,010 25,011 Assigned 55,678 61,454 55,368 45,638 45,825 Unassigned - - - - - Total General Fund $ 126,537 $ 102,824 $ 94,609 $ 80,088 $ 79,013 Other Governmental Funds: Nonspendable $ - $ - $ 105 $ 50 $ 64 Restricted 87,866 75,774 70,161 71,671 59,213 Committed 45,820 28,559 26,857 21,735 20,308 Assigned 6,197 3,021 3,280 3,527 3,614 Unassigned - (4,311) - - - Total Other Governmental Funds $ 139,883 $ 103,043 $ 100,403 $ 96,983 $ 83,199 Fiscal Year Ended Fiscal Year Ended September 30, June 30, 2018 2017 2016 2015 2014 General Fund: Nonspendable $ 41 $ - $ - $ 4,479 $ 4,378 Restricted 6,384 2,671 2,637 2,871 2,070 Committed 25,011 25,011 25,011 25,011 25,011 Assigned 34,464 33,498 35,199 32,431 29,595 Unassigned 2,734 - - - - Total General Fund $ 68,634 $ 61,180 $ 62,847 $ 64,792 $ 61,054 Other Governmental Funds: Nonspendable $ 726 $ - $ - $ - $ - Restricted 52,742 40,588 40,293 45,515 27,214 Committed 20,800 17,686 21,368 21,659 16,447 Assigned 2,701 826 838 161 151 Unassigned - - - - - Total Other Governmental Funds $ 76,969 $ 59,100 $ 62,499 $ 67,335 $ 43,812 495 161 THIS PAGE INTENTIONALLY LEFT BLANK 496 162 CITY OF HUNTINGTON BEACH CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS -LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) (In Thousands) Fiscal Year Ended June 30, 2023 2022 2021 2020 2019 REVENUES: Property Taxes $ 109,467 $ 102,539 $ 99,958 $ 94,263 $ 89,367 Sales Taxes 57,164 57,652 51,162 44,616 47,437 Utility Taxes 22,558 19,528 18,374 18,149 18,788 Other Taxes 40,738 33,720 25,745 24,578 27,196 Licenses and Permits 15,688 9,596 8,213 11,266 8,574 Fines and Forfeitures 3,945 5,144 4,619 3,403 4,300 From Use of Money and Property 22,726 14,365 19,163 27,863 23,276 From Other Agencies 47,426 13,060 29,836 11,309 13,072 Charges for Current Service/Other Revenue 66,363 52,809 27,428 34,772 33,787 TOTAL REVENUES 386,075 308,413 284,498 270,219 265,797 EXPENDITURES Current: City Council 453 426 1,043 394 369 City Manager 6,501 5,265 15,976 4,342 6,598 City Treasurer 417 326 837 297 248 City Attorney 3,404 2,995 7,714 2,898 2,874 City Clerk 1,442 1,295 2,810 886 981 Finance 7,420 7,259 16,173 6,200 6,484 Human Resources***** - - - - 6,362 Community Development** 21,569 14,412 39,212 14,692 8,138 Fire 72,499 62,880 149,726 56,477 54,431 Information Systems 8,563 7,871 19,095 8,473 8,342 Police 97,000 93,976 232,438 87,682 83,546 Community Services 16,610 18,455 25,064 14,429 11,720 Library Services 7,244 6,300 14,099 5,199 4,944 Public Works 62,161 50,158 88,007 47,655 46,878 Non-Departmental**** - - - - - Capital Outlay*** - - - - - Debt Service: Principal 18,799 15,918 3,983 5,122 5,346 Interest 9,542 11,299 937 1,748 1,890 TOTAL EXPENDITURES 333,624 298,835 617,114 256,494 249,151 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 52,451 9,578 (332,616) 13,725 16,646 OTHER FINANCING SOURCES(USES): Transfers In 65,369 21,642 13,058 10,009 11,190 Issuance of Long-Term Debt - - 372,010 1,172 - Issuance Premium - - 1,743 - - Issuance Discount - - (649) - - Payments to Escrow - - (28,256) - - Lease(as Lessee) 398 448 - - - Issuance of Finance Purchase Agreement 7,742 868 - - - Transfers Out (65,407) (21,681) (13,096) (10,047) (11,227) TOTAL OTHER FINANCING SOURCES(USES) 8,102 1,277 344,810 1,134 (37) INCREASE(DECREASE)IN FUND BALANCES $ 60,553 $ 10,855 $ 12,194 $ 14,859 $ 16,609 DEBT SERVICE AS A PERCENTAGE OF NON-CAPITAL EXPENDITURES 9.7% 10.1% 0.9% 3.0% 3.3% * The 2017/18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from October 1,2017 to June 30,2018. ** Planning and Building departments were combined in Fiscal Year ended September 30,2011.The department was later renamed to Community Development in Fiscal Year ended September 30,2016. *** Beginning with the Fiscal Year ended September 30,2017,capital outlay expenditures are no longer presented separately but are included as part of functional expenditures. However,capital outlay expenditures are excluded in the calculation of debt service as a percentage of non-capital expenditures. 497 163 CITY OF HUNTINGTON BEACH CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS-LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) (In Thousands) (continued) Fiscal Year Ended _ _ June 30, September 30, 2018* 2017 2016 2015 2014 REVENUES: Property Taxes $ 80,614 $ 80,826 $ 86,382 $ 82,472 $ 79,460 Sales Taxes 33,844 43,551 39,305 32,234 30,454 Utility Taxes 14,014 19,303 19,482 20,229 20,621 Other Taxes 18,409 17,991 17,313 16,464 15,601 Licenses and Permits 6,293 8,812 9,820 9,270 7,976 Fines and Forfeitures 3,048 3,995 5,144 4,746 4,392 From Use of Money and Property 11,600 17,210 18,055 17,473 16,695 From Other Agencies 10,384 15,293 13,712 18,634 16,804 Charges for Current Service/Other Revenue 30,216 32,351 32,506 35,869 33,886 TOTAL REVENUES 208,422 239,332 241,719 237,391 . 225,889 EXPENDITURES Current: City Council 279 333 318 278 258 City Manager 3,143 4,116 3,092 2,703 3,040 City Treasurer 134 201 204 167 169 City Attorney 2,037 3,052 2,539 2,425 2,321 City Clerk 602 830 790 895 747 Finance 4,376 5,763 5,659 5,452 5,314 Human Resources***** 5,323 5,535 6,776 4,606 4,298 Community Development** 5,554 6,963 7,062 6,954 7,091 Fire 36,347 46,831 46,200 45,008 42,602 Information Systems 5,385 6,603 6,742 6,846 6,456 Police 57,916 75,015 72,612 68,940 66,628 Community Services 7,958 14,124 10,768 10,223 10,040 Library Services 3,436 4,422 4,247 4,146 3,739 Public Works 30,357 38,635 23,659 23,820 22,872 Non-Departmental***** 22,432 28,396 24,670 20,067 21,033 Capital Outlay**** - - 27,269 14,986 10,729 Debt Service: Principal 311 5,091 5,933 5,454 4,797 Interest 965 2,066 2,138 2,226 1,987 TOTAL EXPENDITURES 186,555 247,976 250,678 225,196 214,121 EXCESS(DEFICIENCY)OF REVENUES OVER(UNDER)EXPENDITURES 21,867 (8,644) (8,959) 12,195 11,768 OTHER FINANCING SOURCES(USES): Transfers In 13,261 6,692 9,034 12,158 9,832 Issuance of Long-Term Debt - 2,767 10,197 Issuance Premium - - - - - Issuance Discount - - - - - Payments to Escrow - - - - - Lease(as Lessee) - - - - - Issuance of Finance Purchase Agreement - - - - - Transfers Out (13,593) (6,743) (17,053) (14,238) (9,870) TOTAL OTHER FINANCING SOURCES(USES) (332) 2,716 2,178 (2,080) (38) INCREASE(DECREASE)IN FUND BALANCES $ 21,535 $ (5,928) $ (6,781) $ 10,115 $ 11,730 DEBT SERVICE AS A PERCENTAGE OF NON-CAPITAL EXPENDITURES 0.7% 3.2% 3.6% 3.7% 3.3% **** Beginning with the Fiscal Year ended June 30,2019, non-departmental expenditures are no longer presented separately but are included as part of functional expenditures. ***** Human Resources was combined with the City Manager's Office in Fiscal Year ended June 30,2020. 498 164 CITY OF HUNTINGTON BEACH ASSESSED AND ACTUAL VALUATION OF ALL TAXABLE PROPERTY (EXCLUDING REDEVELOPMENT AGENCY) LAST TEN FISCAL YEARS (In Thousands) Common Total Assessed Total Direct Tax Fiscal Year Property Public Utilities Total Secured Unsecured Valuation Rate 2013-2014 28,005,989 53,702 28,059,691 1,106,038 29,165,729 0.17082 2014-2015 29,723,274 74,102 29,797,376 989,809 30,787,185 0.17082 2015-2016 31,193,211 66,802 31,260,013 1,132,728 32,392,741 0.17082 2016-2017 32,540,317 55,802 32,596,119 1,067,760 33,663,879 0.17082 2017-2018 34,199,035 41,102 34,240,137 1,100,077 35,340,214 0.17082 2018-2019 35,941,648 61,202 36,002,850 1,117,879 37,120,729 0.17082 2019-2020 37,741,095 518 37,741,613 1,145,838 38,887,451 0.17082 2020-2021 39,449,688 518 39,450,206 1,111,018 40,561,224 0.17082 2021-2022 40,789,946 518 40,790,464 1,041,429 41,831,893 0.17082 2022-2023 43,432,681 948 43,433,629 1,232,123 44,665,752 0.17082 Source: County of Orange Auditor Controller PROPERTY TAX RATES ALL DIRECT AND OVERLAPPING GOVERNMENTS TAX RATE 04-001 LARGEST AREA IN CITY LAST TEN FISCAL YEARS Direct Overlapping City Basic Rate Metro Water Total Direct and Fiscal Year (1), (2) City Other School Districts District Others Overlapping 2013-2014 0.15582 0.01500 0.59841 0.00350 0.31444 1.08717 2014-2015 0.15582 0.01500 0.62448 0.00350 0.29444 1.09324 2015-2016 0.15582 0.01500 0.07615 0.00350 0.84418 1.09465 2016-2017 0.15582 0.01500 0.07786 0.00350 0.83599 1.08817 2017-2018 0.15582 0.01500 0.09970 0.00350 0.84418 1.11820 2018-2019 0.15582 0.01500 0.09246 0.00350 0.84418 1.11096 2019-2020 0.15582 0.01500 0.08788 0.00350 0.84418 1.10638 2020-2021 0.15582 0.01500 0.07983 0.00350 0.84418 1.09833 2021-2022 0.15582 0.01500 0.07541 0.00350 0.84418 1.09391 2022-2023 0.15582 0.01500 0.07449 0.00350 0.84418 1.09299 Note: Rates are per$100 of assessed valuation Source: County of Orange Auditor Controller (1) Excludes rates associated with Mello-Roos Districts (2) In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1%fixed amount. This 1% is shared by all taxing agencies for which the subject property resides. In 1986, the State Constitution was amended to allow rates over the 1% base rate for voter approved general obligation debt. Valuations of real property are frozen at the value of the property in 1975,with an allowable adjustment up to 2% per year for inflation. However, property is assessed to its current value when a change of ownership occurs. New construction, including tenant improvements, is assessed at its current value. 499 165 CITY OF HUNTINGTON BEACH PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (In Thousands) Collected within the Fiscal Year of the Levy Total Collections Delinquent Delinquent Percentage Tax Percentage Taxes Delinquency Fiscal Year Total Levy Amount of Levy Collections Amount of Levy Receivable Percent Secured Taxes 2013-2014 49,808 48,452 97.3% 656 49,108 98.6% 545 1.1% 2014-2015 52,188 50,759 97.3% 576 51,335 98.4% 519 1.0% 2015-2016 55,886 53,916 96.5% 546 54,462 97.5% 1,263 2.3% 2016-2017 58,258 56,481 96.9% 525 57,006 97.9% 1,253 2.2% 2017-2018 62,418 59,731 95.7% 474 60,205 96.5% 2,073 3.3% 2018-2019 63,934 62,222 97.3% 622 62,844 98.3% 920 1.4% . 2019-2020 66,411 64,767 97.5% 496 65,263 98.3% 1,092 1.6% 2020-2021 69,341 67,887 97.9% 626 68,513 98.8% 926 1.3% 2021-2022 72,014 69,871 97.0% 714 70,585 98.0% 1,510 2.1% 2022-2023 78,388 76,256 97.3% 547 76,803 98.0% 1,501 1.9% Unsecured Taxes 2013-2014 1,922 1,693 88.1% 33 1,726 89.8% 76 4.0% 2014-2015 2,016 1,839 91.2% 37 1,876 93.1% 69 3.4% 2015-2016 1,925 1,740 90.4% 35 1,775 92.2% 39 2.0% 2016-2017 1,899 1,692 89.1% 23 1,715 90.3% 34 1.8% 2017-2018 1,964 1,829 93.1% 28 1,857 94.6% 26 1.3% 2018-2019 1,964 1,804 91.9% 20 1,824 92.9% 29 1.5% 2019-2020 2,038 1,906 93.5% 15 1,921 94.3% 43 2.1% 2020-2021 2,143 1,955 91.2% 26 1,981 92.4% 82 3.8% 2021-2022 2,267 2,059 90.8% 46 2,105 92.9% 90 4.0% 2022-2023 2,233 2,102 94.1% 42 2,144 96.0% 59 2.6% Community Facilities Districts 2013-2014 3,968 3,957 99.7% 6 3,963 99.9% - 0.0% 2014-2015 3,981 3,967 99.6% 1 3,968 99.7% 2 0.1% 2015-2016 4,121 4,106 99.6% 9 4,115 99.9% 2 0.0% 2016-2017 4,098 4,085 99.7% 2 4,087 99.7% - 0.0% 2017-2018 4,141 4,128 99.7% 5 4,133 99.8% - 0.0% 2018-2019 4,099 4,086 99.7% 3 4,089 99.8% 1 0.0% 2019-2020 4,053 4,027 99.4% 2 4,029 99.4% 14 0.3% 2020-2021 3,949 3,937 99.7% - 3,937 99.7% - 0.0% 2021-2022 3,987 3,975 99.7% - 3,975 99.7% - 0.0% 2022-2023 4,006 3,962 98.9% - 3,962 98.9% 31 0.8% Source: County of Orange Auditor Controller's Office Note: , The levy and tax year is for July 1st through June 30th and does not include the Redevelopment Agency. 2013/2014 to current fiscal year includes the following: Secured:includes supplemental,st ltg reorg, nuisance abatement,weed abatement,retirement override, tax admin charges,and community interest. Does not include Community Facilities District CFDs. Unsecured: includes aircraft unsecured tax. Does not include CFDs. Miscellaneous:excluded from all tables. Delinquency Amount:reflects the"unpaid"amounts as stated in the OC Auditor-Controller website. 500 166 • CITY OF HUNTINGTON BEACH TOP TEN PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO 2022-2023 Taxable Assessed Value Percent (In Thousands) of Total TAV AES Huntington Beach Energy, LLC $ 780,550 1.75% Bella Terra Associates LLC 401,138 0.90% Social Holding LLC 278,251 0.62% DCO Pacific City LLC 227,698 0.51% Huntington Gateway Industrial LLC 218,039 0.49% PCH Beach Resort LLC 204,525 0.46% The Boening Company/McDonnell Douglas 150,918 0.34% The Waterfront Hotel LLC 147,891 0.33% Monogram Residential Huntington Beach 141,850 0.32% One Pacific Plaza Owner LLC 131,445 0.29% Total Top Ten 2,682,305 6.01% . All Other Property Taxpayers 41,983,447 93.99% City Total $ 44,665,752 100.00% 2013-2014 Taxable Assessed Value Percent (In Thousands) of Total TAV OXY USA Inc $ 568,551 1.95% Boeing/McDonnell Douglas 333,126 1.14% Bella Terra Associates LLC 231,961 0.80% DCOR, LLC 202,939 0.70% Mayer Financial LP 191,542 0.66% United Dominion Realty LP 137,308 0.47% CIM Huntington LLC 104,015 0.36% Pacific Sands LLC 88,516 0.30% Essex Huntington on Edinger LP 84,384 0.29% 21002 HB LLC 67,652 0.23% Total Top Ten 2,009,994 6.90% All Other Property Taxpayers 27,155,735 93.10% City Total $ 29,165,729 100.00% Source: County of Orange Auditor Controller's Office Note:Information provided for the period from July 1st through June 30th. 501 167 THIS PAGE INTENTIONALLY LEFT BLANK 502 168 CITY OF HUNTINGTON BEACH RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (In Thousands) Fiscal Year Ended June 30, Long-Term Indebtedness 2023 2022 2021 2020 2019 Governmental Activities: . Judgement Obligation Bonds $ - $ - $ - $ - $ - Public Financing Authority: 2010(a)Lease Revenue Bonds - - - 7,410 8,235 2011(a)Lease Revenue Bonds - - - 15,725 17,770 2014(a)Lease Revenue Bonds 10,530 11,215 11,880 12,530 13,145 2020(a)Lease Revenue Bonds 4,835 4,835 4,835 - - 2020(b)Lease Revenue Bonds 9,795 11,315 12,830 - Total Public Financing Authority 25,160 27,365 29,545 35,665 39,150 Other Long-Term Obligations: Finance Purchase Agreement 17,388 11,714 12,753 5,241 5,083 Leases Payable 456 247 - - - Subscriptions Payable 2,600 - - - - PARS Payable - - - - - Section 108 Loan City - - - - - LED Lighting Phase I 192 314 432 546 656 CEC 1,797 2,063 2,457 2,588 2,818 I-Bank 1,283 1,586 1,882 2,171 2,454 Pension Obligation Bonds 318,005 330,642 341,501 - - Total Other Long-Term Obligations 341,721 346,566 359,025 10,546 11,011 Total Long-Term Obligations-Governmental Activities 366,881 373,931 388,570 46,211 50,161 Long-Term Obligations-Business-Type Activities: Pension Obligation Bonds 20,480 21,368 22,144 - - Total Long-Term Obligations-Business-Type Activities 20,480 21,368 22,144 - - Total Long Term Obligations-Governmental Activities and Business-Type Activities $ 387,361 $ 395,299 $ 410,714 $ 46,211 $ 50,161 2023 2022 2021 2020 2019 Population 198,373 197,437 198,039 200,748 202,265 Debt Per Capita $ 1,953 $ 2,002 $ 2,074 $ 230 $ 248 Total Personal Income(In Thousands)* $10,841,878 $9,995,248 $9,659,154 $9,450,814 $ 9,222,677 Per Capita Personal Income* $ 54,654 $ 50,625 $ 48,774 $ 47,078 $ 45,597 Unemployment Rate** 3.60% 2.80% 4.70% 8.60% 2.60% Total Employment** 103,900 104,300 100,700 96,200 107,700 * Source:Claritas, Inc. . ** Source:State of California Employment Development Department ***The 2017/18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from October 1,2017 to June 30,2018. 503 169 CITY OF HUNTINGTON BEACH RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (In Thousands) Fiscal Year Ended June 30, September 30, Long-Term Indebtedness 2018*** 2017 2016 2015 2014 Governmental Activities: Judgement Obligation Bonds $ - $ - $ 659 $ 1,634 $ 2,574 Public Financing Authority: 2010(a)Lease Revenue Bonds 9,030 9,030 9,795 10,525 11,230 2011(a)Lease Revenue Bonds 19,735 19,735 21,650 24,985 28,165 2014(a)Lease Revenue Bonds 13,740 13,740, 14,315 14,865 - 2020(a)Lease Revenue Bonds - - - - - 2020(b)Lease Revenue Bonds - - - - - Total Public Financing Authority 42,505 42,505 45,760 50,375 39,395 Other Long-Term Obligations: Finance Purchase Agreement 6,079 6,286 4,130 - - Leases Payable - - - - - Subscriptions Payable - - - - - PARS Payable - - - - 29 Section 108 Loan City 430 430 625 805 975 LED Lighting Phase I 762 866 966 1,063 - CEC 3,000 3,000 3,000 - - I-Bank 2,730 2,730 3,000 - - Pension Obligation Bonds - - - - - Total Other Long-Term Obligations 13,001 13,312 11,721. 1,868 1,004 Total Long-Term Obligations-Governmental Activities 55,506 55,817 58,140 53,877 42,973 Long-Term Obligations-Business-Type Activities: Pension Obligation Bonds - - - - - Total Long-Term Obligations-Business-Type Activities - - - - - Total Long Term Obligations-Governmental Activities and Business-Type Activities $ 55,506 $ 55,817 $ 58,140 $ 53,877 $ 42,973 2018*** 2017 2016 2015 2014 Population 201,761 202,413 201,919 198,389 195,999 Debt Per Capita $ 275 $ 276 $ 288 $ 272 $ 219 Total Personal Income(In Thousands)* $8,849,843 $8,878,441 $ 8,880,801 $8,725,545 $ 8,278,410 Per Capita Personal Income* $ 43,863 $ 43,863 $ 43,982 $ 43,982 $ 42,237 Unemployment Rate** 2.70% 2.80% 3.90% 3.90% 3.60% Total Employment** 106,900 103,200 107,200 104,000 120,200 504 170 CITY OF HUNTINGTON BEACH LEGAL DEBT MARGIN LAST TEN FISCAL YEARS (In Thousands) Assessed Debt Limit - 12% of Debt Applicable. Legal Debt Fiscal Year Valuation Assessed Valuation to Limit Margin 2013-2014 29,165,729 3,499,887 - 3,499,887 2014-2015 30,787,185 3,694,462 - 3,694,462 2015-2016 32,392,741 3,887,129 - 3,887,129 2016-2017 33,663,879 4,039,665 - 4,039,665 2017-2018 35,340,214 4,240,826 - 4,240,826 2018-2019 37,120,729 4,454,487 - 4,454,487 2019-2020 38,887,451 4,666,494 - 4,666,494 2020-2021 40,561,224 4,867,347 - 4,867,347 2021-2022 41,831,893 5,019,827 - 5,019,827 2022-2023 44,665,752 5,359,890 - 5,359,890 505 171 CITY OF HUNTINGTON BEACH STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT JUNE 30, 2023 2022-23 Assessed Valuation: $48,837,916,731 Debt Repaid with Property Taxes(Tax and Assessment Debt): Percent Debt Applicable Overlapping Tax and Assessment Debt Applicable* to City Metropolitan Water District 1.341% 257,673 Coast Community College District 28.162% 259,310,369 Huntington Beach Union High School District 73.088% 110,384,805 Fountain Valley School District 27.197% 15,616,517 Huntington Beach School District 99.942% 150,571,580 Ocean View School District 93.690% 118,962,878 Westminster School District 24.002% 32,894,635 Los Alamitos Unified School District Facilities District No. 1 1.146% 2,503,382 ' City of Huntington Beach Community Facilities Districts(1990-1,2000-1,2002-1,2003-1) 100.000% 24,880,000 Total Overlapping Tax and Assessment Debt $ 715,381,839 Direct and Overlapping General Fund Debt Orange County General Fund Obligations 6.738% 30,399,498 Orange County Board of Education General Fund Obligations 6.738% 731,747 North Orange County Regional Occupation Program Certificates of Participation 0.085% 6,622 Coast Community College District General Fund Obligations 28.162% 416,798 Coast Community College District Pension Obligation Bonds 28.162% 388,636 Huntington Beach Union High School District Certificates of Participation 73.088% 40,261,321 Los Alamitos Unified School District Certificates of Participation 1.030% 335,494 Huntington Beach School District General Fund Obligations 99.942% 14,916,939 Ocean View School District Certificates of Participation 93.690% 13,636,580 Westminster School District General Fund Obligations 24.002% 6,210,518 City of Huntington Beach General Fund Obligations 100.000% 45,818,885 City of Huntington Beach Pension Obligation Bonds 100.000% 338,485,000 Total Direct and Overlapping General Fund Obligation Debt $ 491,608,038 Overlapping Tax Increment Debt(Successor Agency) 100.000% 2,485,000 Total Direct Debt $ 384,303,885 Total Overlapping Debt 825,170,992 Combined Total Debt $ 1,209,474,877 (1)Percentage of overlapping agency's assessed valuation located within boundaries of the City. (1)Excludes tax and revenue anticipation notes, enteFprise revenue, mortgage revenue, and non-bonded leases obligations. Ratios to Adjusted Assessed Valuations Combined Direct Debt($384,303,885) 0.79% Combined Total Debt 2.48% Ratios to Redevelopment Successor Agency Incremental Valuation ($3,957,815,683) Total Overlapping Tax Increment Debt 0.06% *The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. Source:California Municipal Statistics and City of Huntington Beach Finance Department 506 172 CITY OF HUNTINGTON BEACH PRINCIPAL PRIVATE EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2023 % of total The Boeing Company 3,112 3.00% Cambro Manufacturing 650 0.63% Hyatt Regency Huntington Beach 641 0.62% Safran Cabin Inc 633 0.61% Boardriders Wholesale LLC 574 0.55% Huntington Beach Hospital 527 0.51% Wal-Mart 462 0.44% No Ordinary Moments 458 0.44% Waterfront Hilton Beach Resort 450 0.43% Home Depot USA Inc 436 0.42% Total of top 10 7,943 7.65% All others 95,957 92.35% Total employment(public and private) 103,900 100.00% 2014 % of total Boeing 5,581 4.64% Quiksilver 1,228 1.02% Cambro MFG Co. 951 0.79% Ensign United States Drilling 925 0.77% Hyatt Regency Huntington Beach 641 0.53% C & D Aerospace 555 0.46% Huntington Beach Hospital 527 0.44% Walter Wholesale Electronics 480 0.40% Wal-Mart 462 0.38% Rainbow Disposal 408 0.34% Total of top 10 11,758 9.77% All others 108,431 90.24% Total employment(public and private) 120,189 100.00% Source: Finance Department, City of Huntington Beach 507 173 CITY OF HUNTINGTON BEACH FULL-TIME ACTUAL AND BUDGETED CITY EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Actual General Government: 2023 2022 2021 2020 2019 2018*** 2017 2016 2015 2014 City Council 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 City Manager 30.00 27.00 20.00 18.00 12.50 12.50 11.50 11.50 11.50 11.50 City Treasurer 9.50 9.50 1.50 1.50 2.00 2.00 2.00 1.50 1.50 1.50 City Attorney 15.00 11.00 11.00 11.00 11.00 11.00 12.00 11.00 11.00 11.00 City Clerk 6.00 5.00 4.00 ' 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Finance 28.50 28.50 32.50 31.50 33.00 33.00 33.00 32.50 31.50 31.50 Human Resources** - - - - 15.00 15.00 15:00 15.00 15.00 15.00 Community Development 60.50 57.50 57.50 54.00 44.00 44.00 44.00 43.50 44.00 43.00 Information Systems . 25.00 25.00 26.00 22.00 30.00 30.00 30.00 30.00 30.00 30.00 Library Services 29.25 29.25 29.25 23.25 28.25 28.25 28.25 28.25 28.25 28.25 Fire 201.00 201.00 201.00 200.00 198.00 198.00 198.00 198.00 198.00 196.50 Police 353.00 353.00 357.00 356.00 365.50 364.50 364.50 364.50 361.50 360.50 Community Services 33.00 33.00 33.00 37.00 36.00 36.00 44.00 44.00 43.00 43.00 Public Works 211.00 211.00 207.00 199.00 207.00 207.00 199.00 199.00 198.00 196.00 1,002.75 991.75 980.75 958.25 987.25 986.25 986.25 983.75 978.25 972.75 Source:Finance Department,City of Huntington Beach * Economic Development was combined with Community Development in the year ended June 30,2020.Previously,it was combined with the City Manager's Office as of the year ended September 30,2014. **Human Resources was combined with City Manager's Office in the year ended June 30,2020. ***The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from • October 1,2017 to June 30,2018. • 508 174 CITY OF HUNTINGTON BEACH OPERATING INDICATORS BY FUNCTION/ACTIVITY LAST TEN FISCAL YEARS Function/Program 2023 2022 2021 2020 2019 Finance: Water Bills Processed 638,052 637,956 637,920 636,708 639,245 Active Business Licenses 18,787 18,849 19,011 20,910 21,414 Accounts Receivable Billings Processed 10,649 12,437 20,183 25,687 30,217 City Clerk: Passports Issued**** 6,455 5,721 418 4,579 7,024 Planning: Entitlements Processed 143 154 112 162 221 Plan Reviews 442 606 1,955 1,358 1,542 Field Inspection Complaints 15,247 7,403 11,899 11,610 8,183 Code Violation Cases 5,599 5,051 4,473 3,260 4,786 Building: Number of Permits Issued 11,536 10,292 9,075 8,855 9,807 Number of Inspections Completed 33,983 31,080 26,710 32,859 36,562 Value of Construction Permits(Thousands of Dollars) 369,060 237,945 166,000 169,393 135,910 Processed Number of Certificate of Occupancies* 521 641 655 515 686 Completed Plan Reviews 6,916 5,701 4,673 3,469 3,491 Counter Visits 6,264 14,289 115 14,922 21,409 Fire: Inspections 7,557 7,311 4,008 5,965 6,140 Responses 21,936 22,076 20,428 21,068 20,354 Ocean Rescues 3,027 4,160 4,116 2,487 4,953 Estimated Beach Visitors 9,101,188 8,345,139 7,910,293 6,712,125 10,577,290 Police: Physical Arrests 5,358 5,585 5,363 5,785 5,979 Parking Violations 75,408 97,299 95,753 59,484 79,069 Traffic Violations 6,544 8,869 10,920 12,105 13,314 Community Services: Park/Open Space Acreage 1,072 1,072 1,072 1,066 1,066 Enrollment in Recreation Classes 35,192 34,616 15,511 28,952 37,978 Public Works: Water Sold(Acre Feet)** 23,358 26,459 27,731 25,966 26,251 Gallons of Sewage Pumped Per Day** 17 million 19 million 19 million 19 million • 19 million Library: Items in Collection 289,299 290,351 291,444 294,849 293,995 Items Borrowed 811,837 796,882 481,523 779,124 942,821 * Beginning the 2013/14 Fiscal Year,the Building Department no longer processes Certificate of Occupancies. **Reduction of estimate is the result of the Governor's executive order to reduce water consumption. ***The 2017-18 period reflects nine months of activity only as the fiscal year change resulted in a nine month reporting period from October 1,2017 to June 30,2018. ****Passport acceptance was closed to the public from June 2020 through May 2021 due to COVID-19. It was reopened on June 15,2021. Source:Various departments of the City of Huntington.Beach 509 175 CITY OF HUNTINGTON BEACH OPERATING INDICATORS BY FUNCTION/ACTIVITY LAST TEN FISCAL YEARS (Continued) Function/Program 2018*** 2017 2016 2015 2014 Finance: Water Bills Processed 476,290 632,997 635,052 536,684 630,240 Active Business Licenses 21,782 22,074 21,420 21,424 20,450 Accounts Receivable Billings Processed 25,000 34,963 30,826 38,594 42,360 City Clerk: Passports Issued 5,757 7,408 5,623 5,121 4,598 Planning: Entitlements Processed 206 216 221 280 204 Plan Reviews 1,466 1,376 1,653 1,595 1,466 Field Inspection Complaints 7,005 8,459 7,951 8,233 7,030 Code Violation Cases 4,219 3,981 4,324 4,710 2,545 Building: Number of Permits Issued 7,490 9,728 10,981 10,670 9,348 Number of Inspections Completed 30,501 38,796 39,380 ' 38,320 36,142 Value of Construction Permits(Thousands of Dollars) 109,462 216,252 283,910 234,946 216,343 Processed Number of Certificate of Occupancies* 523 740 n/a n/a n/a Completed Plan Reviews 2,771 4,172 4,172 3,815 3,148 Counter Visits 16,498 21,731 23,492 21,893 21,326 Fire: Inspections 3,963 2,758 5,132 6,499 6,641 Responses 14,490 20,555 20,279 19,562 15,815 Ocean Rescues 3,530 3,639 3,977 5,371 6,426 Estimated Beach Visitors 12,522,640 13,339,518 12,272,030 11,803,943 12,035,134 Police: Physical Arrests 4,614 5,298 5,112 4,854 4,303 Parking Violations 54,500 70,846 90,361 83,453 74,668 Traffic Violations 11,869 19,916 17,639 17,596 16,330 Community Services: Park/Open Space Acreage 1,065 1,065 1,062 1,062 1,062 Enrollment in Recreation Classes 27,152 37,968 34,424 30,228 30,184 Public Works: Water Sold(Acre Feet)** 19,777 25,944 24,505 24,763 29,279 Gallons of Sewage Pumped Per Day** 19 million 22 million 19 million 19 million 22 million Library: Items in Collection 292,037 288,599 285,814 343,655 332,092 Items Borrowed 655,626 943,642 921,105 908,656 937,533 510 176 CITY OF HUNTINGTON BEACH CAPITAL ASSET STATISTICS BY FUNCTION/ACTIVITY JUNE 30, 2023 Library Services One Main Library and Four Branches Fire: Fire Stations 8 Police: Stations One Main Station and Three Substations Community Services: Acreage of Parks 1,072 Community Centers 6 Public Works: Centerline Square Miles of Streets Maintained 451 Miles of Beach Maintained 4.7 Miles of Storm Drains Maintained 120 Miles of Sewer Maintained 362 Source:Various departments of the City of Huntington Beach 511 177 Davis Davis Farr LLP :}4 18201 Von Karman Avenue I Suite 1100 I Irvine,CA 92612 CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 I Fax:949.263.5520 Honorable Mayor and City Council City of Huntington Beach Huntington Beach, California • We have audited the financial statements of the governmental activities, the business- type activities, and the aggregate remaining fund information of the City of Huntington Beach (the "City") as of and for the year ended June 30, 2023, and have issued our report thereon dated December 21, 2023. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter, our responsibility, as described by professional standards, is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and our network firms have complied with all relevant ethical requirements regarding independence under the American Institute of Certified Public Accountants ("AICPA") independence standards, contained in the Code of Professional Conduct. 512 Significant Risks Identified We have identified the following significant risks: • Implementation of GASB Statement No. 96 Subscription-Based Information Technology Agreements • Compliance with Federal grant requirements Qualitative Aspects of the Entity's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. The City changed accounting policies related to Subscription-Based Information Technology Arrangements by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 96, Subscription-Based Information Technology Agreements, in the fiscal year 2023. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The most sensitive accounting estimates affecting the financial statements are: • Judgments involving the estimated useful lives and depreciation methodology used for capital assets, including certain infrastructure. We evaluated management's judgments for reasonableness. • Judgments as to which City capital projects should be capitalized and depreciated in the government-wide financial statements and proprietary funds. We evaluated management's judgments for reasonableness. • Judgments relating to the collectability of accounts and notes receivable. We evaluated management's judgments for reasonableness. • Judgments with respect to recording claims payable and remediation obligations. We evaluated management's judgments for reasonableness. • Judgments involving calculation of the pension liability. We evaluated the actuarial valuation report supporting the calculations. • Judgments involving the calculation of the other post-employment benefit (OPEB) liability. We evaluated the actuarial valuation report supporting the calculations. 513 We evaluated the key factors and assumptions used to develop the estimates and determined that it is reasonable in relation to the financial statements taken as a whole and in relation to the applicable opinion units. Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the City's financial statements were: • The disclosure of pensions in note 6 to the financial statements. • The disclosure of OPEB in note 8 to the financial statements. The financial statement disclosures are neutral, consistent, and clear. Significant Difficulties Encountered during the Audit We encountered no difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards also require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion. Uncorrected misstatements or matters underlying those uncorrected misstatements could potentially cause future-period financial statements to be materially misstated, even though the uncorrected misstatements are immaterial to the financial statements currently under audit. Management has corrected all identified misstatements. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. None of the misstatements identified by us as a result of our audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City's financial statements or the auditor's report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in the attached letter dated December 21, 2023. 514 Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City's auditors. Other Information Included in Annual Comprehensive Financial Report Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the City's annual reports, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have read the information and considered whether such information, or the manner of its presentation, was materially inconsistent with its presentation in the financial statements. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements. This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. 1:).4o'14./ 'r." P , Le Irvine, California December 21, 2023 515 Eai i s Fa r Davis Farr LLP 18201 Von Karman Avenue I Suite 1100 I Irvine,CA 92612 CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 I Fax:949.263.5520 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Air Quality Special Revenue Fund Performed in Accordance with Government Auditing Standards City Council City of Huntington Beach Huntington Beach, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the Air Quality Special Revenue Fund of the City of Huntington Beach, California, as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Air Quality Special Revenue Fund of the City of Huntington Beach's basic financial statements, and have issued our report thereon dated December 21, 2023. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Air Quality Special Revenue Fund's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Air Quality Special Revenue Fund's internal control. Accordingly, we do not express an opinion on the effectiveness of the Air Quality Special Revenue Fund's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified. 516 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Air Quality Special Revenue Fund's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, including applicable provisions of Assembly Bill 2766 (AB2766) Chapter 1705 (Health and Safety Code Sections 44220 through 44247), noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 1:7) t741oP L.L Irvine, California December 21, 2023 517 Eai is a r r Davis Farr LLP 18201 Von Korman Avenue Suite 1100 I Irvine,CA 92612 CERTIFIED PUBLIC ACCOUNTANTS Main:949.474.2020 I Fax:949.263.5520 INDEPENDENT ACCOUNTANT'S REPORT The Honorable Mayor and City Council City of Huntington Beach, California We have performed the procedures enumerated below on the City of Huntington Beach, California (City) appropriations limit worksheets for compliance with the requirements of Section 1.5 of Article XIIIB of the California Constitution for the year ended June 30, 2023. The City is responsible for compliance with Section 1.5 of Article XIIIB of the California Constitution. The City has agreed to and acknowledged that these procedures are appropriate to meet the intended purpose of evaluating compliance with the requirements of Section 1.5 of Article XIIIB of the California Constitution and the League of California Cities publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines for the year ended June 30, 2023. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes. The procedures and the associated findings are as follows: 1. We obtained the worksheets referred to above and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote. Results: No exceptions were noted as a result of our procedures. 2. We recalculated the mathematical computations reflected in the City's worksheets. Results: No exceptions were noted as a result of our procedures. 3. We compared the current year information used to determine the current year limit and agreed it to worksheets prepared by the City and to information provided by the State Department of Finance. Results: No exceptions were noted as a result of our procedures. 4. We compared the amount of the prior year appropriations limit presented in the worksheets to the amount adopted by the City Council for the prior year. Results: No exceptions were noted as a result of our procedures. 518 The Honorable Mayor and City Council City of Huntington Beach, California Page Two We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively on the worksheets referred to above. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by the League publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement. This report is intended solely for the information and use of the Management of the City of Huntington Beach, California and is not intended to be, and should not be, used by anyone other than the specified party. 1)4,41 Cfre Irvine, California December 21, 2023 519 ATTACHMENT 3 Fiscal Year 2023/2024 Recommended Mid-Year Budget Adjustments Recommended Adjustments by Fund: APPROPRIATION INCREASE Fund No Fund Name Appropriation Revenue Offset Net Increase Dept 100 General Fund 246,187 246,187 - Community&Library Services 100 General Fund 597,000 597,000 - Fire General Fund Subtotal 843,187 843,187 i 1272 Local Road Safety Plan Grant(LRSP) 7,350 7,350 - Public Works Other Funds Subtotal 7,350 7,350 All Funds Total 850,537 850,537 - 520 . . ,.....„ 4•14.- 4.. ØTINa0* essess••.•• —Ai'''. ... •I., .. -.... pRP0RA 7* `••• ,'`► .- ���' �o •. t eo \ CityFY 2023/24 Budget Update & •- -- --- - _� _` •, \ FY 2023/24 Mid-Year Budget �,,le, /, r�ir< ,. • C I Adjustments • t --_-_------.-- — 7----- — • .7_,:---- ______ -- - -.. ....-:-..-- — • _ _ — _ _____-- _, ___ ____ . '77- ..----- ....---- .........----- : "cc. c _ „ 0 i"_ -�� -�/.• City Council Meeting • y •• 0$ March 19 2024 •� 17 gp9 � •:'� 0 _ elie i *es t <S,( A V (1 NriAso- Air,, i miiew 521 Presentation Ove rview • FY 2023/24 Budget Update • FY 2023/24 Mid-Year Budget Adjustment Requests 0 O`• ••\.Nc I° PQRA/FO..1 \ 1 .::'-- - '•.• <9 i\ : , a��iM Al ��2nF•..*--•7;1911 P�•``t.Q�I AY ... Nill;Vi`/i0 2 522 • • City FY 2023/24 Budget Update • �fC�-� NT I NET- '/ O`er. CORPORATEO•••. 40 114 -fit • G'Z C.? ''; Z • An' • \�vC1�• .) <1909 •�` +1 t •s c©UNT' t�'I"1� 3 +atdriorii • 523 City Budget and Financial Position - FY 2022/23 The City ended FY 2022/23 with a $3.7 million General Fund surplus, after year-end transfers of $12.62M to partially fund unfunded liabilities (Workers' Compensation, General Liability, Retirement Supplemental) and Infrastructure needs. • Revenues were available for transfers primarily due to one-time spikes in natural gas prices during Winter 2022-23, as well as increased natural gas and electricity rates, resulting in additional utility tax and franchise fee revenue above the adopted budget. • Additionally, Transient Occupancy Tax (TOT) remained strong, mainly due to higher average daily rates and a full fiscal year.of TOT from the City's Short-Term Vacation Rentals. • Demand for emergency medical services (EMS) continues to increase. 4 524 CityBudget and Financial Position - FY 2023/24 After 29 months of post-pandemic jobs growth in California, employment growth was flat in September 2023 and declined in October 2023. California consumers and businesses are spending less, and shifting from taxable goods to nontaxable items. • Property tax revenues, the City's largest General Fund revenue source (36.7%), remains strong, with revenue projected to be slightly above the adopted budget due to increased supplemental property taxes. • Sales tax revenues, the City's second largest General Fund revenue source (18.9%), is projected to decline by approximately $1 .3M due to a shift in consumer spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. • Utility tax and franchise fee revenues are lower than prior year due to lower gas commodity prices. The City is currently projecting to end FY 2023/24 with a $2M General Fund surplus (subject to change). 5 • 525 General Fund Long-Term Financial Plan 6 . 1 % CaIPERS Return FY22/23 rho ile # _ i v.aw F� a Arc ��asl `�� � °.� #j� � P �J d $�- � off: c � � o.` -dr� . ro�;e�t�z • i ° os Qi .,... rt) h a �Y2w r. l a 4 2 m a�� g' s_ • 2 s/'t - -FY 8 a a. Revenue (Recurring) _ 281,337. 2 282;969 287,221 - 294,366= 301,718 309,310 Revenue (One Time)* , 31,380a 2,276� �} a Planned Use of Reserves 8,804, - - Total Sources ofFunds 312,717 �;r 294,0491 287,221 294,366 301,718 309,310 Expenditures less UAL 254,720 264,960 269,807 281,813 290,201 2.97,443 CaIPERS UALx 4,891i 5,000, 5.223 8 981e 12,7271 16,4581 POB Payment 13,663 13,276 13,010 12,750 12,537 12,537 One Time Expenditures 18,72.1, 8,804,E Total Expenditures 291,995 a 292,040 ,288,040. . 303,544 315,465 326,438 Restricted Reserves a 16,978 iuk s 0 s gym. Surplus/(Deficit) $3,744 $2,009 ($819) ($9,178), ($13,747) ($17,128) * FY 22/23 one-time revenue consists of $29.6M in American Rescue Plan Act funding and $1.8M in transfers from the Housing Agreement and Triple Flip fund. FY 23/24 one-time consists of General Fund portion of Emerald Cove settlement. • Current forecast requires use of Section 115 Trust reserves (per UAL Policy) starting in FY 25/26. 6 526 • CaIPERS Update • CaIPERS FY 21/22 return of -7.5% and FY 22/23 return of 6.1 % requires escalating UAL payments by the City • June 26 — City Council approved updates to the General Fund Reserve Policy requiring a minimum of 25% of unrestricted one-time revenues to be transferred to the City's Section 115 Trust to address CaIPERS' unfavorable returns • Section 115 Trust balance as of June 30, 2023: $20.6M /\\\ cr • CaIPERS investment policy a ec�e�asf� b�ncr asp-asp- � � �e focuses on long-term plan W < : .UAL d � c UAL, g- u returns DaYrn�en se� � �:t Rrk�� ^s .risry " $ e `# • POB is financially advantageous as long as CaIPERS long-term 41PERS 'arget R n:=6.8% 1 return is > 2.925% 527 Unfunded Liabilities • Insurance premiums are anticipated to increase due to rising medical costs and an expanded list of injuries that are presumed to be work related under California law, such as post-traumatic stress. • General Liability insurance premiums are also expected to increase as additional markets withdraw from California and from writing public entity liability. The City is currently self- insured up to $1 million per claim with $25M in excess coverage per claim/occurrence. • Staff is closely monitoring the City's unfunded liabilities to identify cost saving opportunities Kat*W"M",11 tvc:pi*,66:4-1$ ..7A.,,...411t, on an ongoing basis. ; m'�" 4 sr xr•` s° ",� s#,= � •& ,"r V" �`" E" o x dbf t ,,-s s$ , "+ � o4,4 �, 22 ia� li ies o f6 3 D '4:7workers' Compensation $25 OM ($2•1M} $229M General Liability �$0.2M° $4.5M $4.7M Retiree Supplemental $15 2M ($6•4M) j $8 8M CaIPERS UAL ($41.6M) $232 2M $190.6M 8 528 FY 2023/24 Mid -Year Budget Adjustments I . • f/� flflRPURgrF., �` a..:e. n ea9.�°.=��0 �l UNPI 529 General Fund Adjustments Community & Library Services Department • $246K - increased demand for contract class instructors offset with recreational and art class revenues for a net zero impact Fire Department - • $480K - Fire strike team reimbursement costs offset with strike team reimbursement revenues for a net zero impact • $117K - Medical & safety supplies for City ambulances offset with emergency medical response revenues for a net zero impact Total General Fund Adjustments - $843,187, all offset by additional revenues 10 530 Other Fund Adjustments LRSP Grant (Fund 1272) — Public Works • $7,350 to allocate remaining awarded State grant funds for development of a Local Road Safety Plan (LRSP). A total of $147,000 was awarded, but only $139,650 has been appropriated to date. Staff is requesting appropriation of the remaining grant funds. There are sufficient offsetting grant revenues and expenditures for a net zero impact. 11 531 Summary of Mid-Year Budget Requests , .... .. ,,,.... :.,..... ,,,,.....s.r,6:4.°..'...:.".,..? ° F ' m 2 , ecipi . , A°A ust 4o y - I Communit & Library Services 1,1 3 General Fund � � $843,187 y Fire Department 597,000 ir Other Funds ' LRSP Grant Fund 1 7,350 [ $7,350 II Total $850,537 . I Less: Offsetting revenues �, _($850,537)n Net Increase ;� � - • Approve appropriations of $850,537 • Projected General Fund FY 23/24 surplus after appropriation: $2M 12 532 a { ' 4 P .i y,, s t pT!F ::4--•:.'--,.;-,,,,,,,4,-.0-„,...i.,•' '....—:',41,--4-mi frto,fdiseiotia:1114,,A10,1,t, ,;„;ii.,..,,-„,,,:„±z4.!=,:,,,.:;_,i,s,t,;,,,,,,,!,,,,i-:.7...i.,,,,,,.. ...--4,,,,,,...,.,,,i,..17.,,, � � ' a v"'. if FI FINE.t „. i i ,.,.�;; �' °s' g *r wuestions ? C � rmk. 0 ; , ,,,,....*,,„,„,,.;,.:60„,„...a.,: t_ e jti 4 F `.r,�w�''".fi a7^det ',y, --5,h a - 'Gam .::3s G. + "s"'ti^} '' ''-` y.� y a "" V'. dg «#'t , ' 71- *r-"1"' i`'.; t. .i 7 c axi s „ ..r rrs 4 • y� ; 43.zw";t ~ ,t._ -.-." Y� P 4 � � I _.... i- x 140. 4 iirek Ty " y ' fiy"41� •-� e "ti r+rt. '"' ".:" y ,S ' •".may j'RI H. NMV� 4 T _ r '-'"i :g.. _ �te"."y�i�t ,� y � ?H FC C r.' sz - axe ys 533 From: Fikes,Cathy To: Agenda Alerts Subject: FW:Next meeting Date: Monday,March 18,2024 10:27:21 AM From: Nancy Bramet<nevonwb@gmail.com> Sent:Saturday, March 16, 2024 9:59 AM To:CITY COUNCIL(INCL. CMO STAFF)<city.council@surfcity-hb.org> Subject: Next meeting City Council... PLEASE,stop trying to fix what isn't broken. I believe the library runs just fine as is... no need to change that. IF you must have a"Community Parent Guardian Review Board".Then you MUST include some members of the LGBTQ community on that board as well, it needs to be well rounded not just white,christian parents that are afraid of everything that they don't understand and don't want to understand. Otherwise it is NOT representative of ALL parents in our community. Let's be clear I am not for this community, I believe it to be a complete waste of resources but if it goes thru then it MUST have a group that represents everyone. Not understanding why you want to put together a board when you said we didn't have the resources for them anymore and gutted several boards that were in fact useful. We disagree on that as well but then council you really don't seem to listen to it appears to me most of the citizens in HB. AND BIG NOOOOOO to leaving the League of California Cities. You all complain about homelessness then when a bill come thru that directly helps with that you don't like it. UNBELIEVABLE!! Also for the Gas Tax... OK... people this is for our roads,WHICH WE NEED!!! I don't like taxes either but I am smart enough to know that taxes pay for things we ACTUALLY need, like police,fire department, roads;bridges etc. I would far rather my tax dollars go to that than the city always suing the state for not doing low income housing,which we actually need. I still don't understand your argument on that. I have asked and your response if you truly believe your reason doesn't hold water. If you can build all this new housing that isn't low income,then you could have built low income housing. Our library is fine, LEAVE IT ALONE!!! There is no reason to privatize it... even if the "great attorney" has lost all the law suits which he said he would win (I am not an attorney and I realized that was a major long shot even if it was a good attorney) our taxes paid major$$$on that. We are throwing good money at bad on these law suits...the council seems to think they are above it. YOU ARE NOT! If you don't like living in the state of California or Huntington Beach then leave it like your friend Tito did. I am not being nice here but I find most of you just exhausting. You honestly don't seem to have an idea here what you are doing or you have your own personal agenda which is even worse. You are to work for ALL the people of HB... make it better,safe. All you are doing is trying to change our city and what has made it great. STOP IT!!! SUPPLEMENTAL COMMUNICATION Here is something to do,work on our homeless and helping them. That is not an easy problem3/19/2024 but well worth finding a solution for. Meeting Date: 23 (24-195) Agenda Item No.; And do a better job of balancing the budget... although I know that is hard with all the lawsuits we have lost. But learn when to fight and when to just do what is actually right. Not putting in low income housing was wrongs'I I I Giving in to the AirShow people was wrong.. and then hiring them on a 10 year contract are you kidding me. They are using our beach,they should be paying us for that privilege. I hope you all have read this completely because I know it isn't nice. But you know,you have made the last few years not great for me, because you seem to what to change everything that HB is. I am begging you please STOP IT!! Regards, Nancy Bramet From: Fikes.Cathy To: Agenda Alert* Subject: FW:City Council Meeting Agenda for March 19,2024 Date: Monday,March 18,2024 11:35:08 AM From: Larry Slonim <laryslonim@aol.com> Sent: Monday, March 18, 2024 9:25 AM To:CITY COUNCIL(INCL. CMO STAFF)<city.council@surfcity-hb.org> Subject:City Council Meeting Agenda for March 19, 2024 To All Members of the Huntington Beach City Council: We have been very concerned about the 4-3 vote by the City Council to put Charter Amendments A, B & C on the ballot for the Primary Election, and have been following to vote tally closely. As of Sunday, March 17th, with about 46% of the voters registered in the City of HB voting, the tallies for A& B have be trending Yes and the tally for C has been trending No. We strongly agree with the constituents voting No on C, primarily because it gave the mayor, ANY mayor, the authority to cancel and change Council Meetings at his or her sole discretion. While the four new councilmembers represent a majority vote advantage, it's clear to us that they often decide to vote as a block, with very minimal debate or deliberation of dissenting opinions, whether coming from the other 3 councilmembers (Kalmick, Moser and Bolton), and/or from public comments made relative to agenda items listed to be discussed at the Council Meetings. This is totally contrary to and blatantly hypocritical of one of the main reasons, if not the KEY reason, they chose to run for city office in the first place, back in 2022. Since taking office, fairness, precedence and decorum has suffered badly as a result, and continues to get worse. Integrity and trust in the Council and the City Attorney has been terribly compromised. We strongly urge the four new councilmembers to attempt to modify the course they are currently on. Lastly, we think that the current Administrative Agenda items 23 and 24, scheduled or the meeting of March 19th, be DEFERRED until the first meeting in April, to provide time for a more reasonable understanding and evaluation by the public and the other council members of the details contained within them. Respectfully, Larry and Susan Slonim From: Pat Goodman To: suoolementalcommasurfcity-hb.orq Subject Agenda Item 23 Date: Monday,March 18,2024 1:11:29 PM I'm very concerned about the fiscal health of our city over the next four years. Slide 6 of the current year budget update shows a cummulative deficit of$40m. I hope that you will begin the process of addressing this serious issue. Thank you, Pat Goodman Huntington Beach, CA From: Levin,Shannon To: suoolementalcommOsurfcity-hb.orq Subject: RN:City Coundl Meeting Agenda for March 19,2024(revised the morning of 3/19/24) Date: Tuesday,March 19,2024 8:47:14 AM From: Larry Slonim<laryslonim@aol.com> Sent:Tuesday, March 19, 2024 8:28 AM To:CITY COUNCIL(INCL. CMO STAFF)<city.council@surfcity-hb.org> Subject: Re: City Council Meeting Agenda for March 19, 2024 (revised the morning of 3/19/24) To All Members of the Huntington Beach City Council: (Please note my latest revisions are to supersede my earlier email dated 3/18/24 in bold black text) We have been very concerned about the 4-3 vote by the City Council to put Charter Amendments A, B & C on the ballot for the Primary Election, and have been following to vote tally closely. As of Sunday, March 17th, with about 46% of the voters registered in the City of HB voting, the tallies for A& B have be trending Yes and the tally for C has been trending No. We strongly agree with the constituents voting No on C, primarily because it gave the mayor, ANY mayor, the authority to cancel and change Council Meetings at his or her sole discretion. While the four new councilmembers (Strickland, Van Der Mark, Burns and Mckeon) regularly exercise a majority vote advantage, it's clear to me and my wife that they often decide to vote as a block too hastily, with superficial debate or consideration of,dissenting opinions, whether coming from the other 3 councilmembers (Kalmick, Moser and Bolton), and/or from public comments made that are relevant to Council's agenda items. This is totally contrary to and blatantly hypocritical of one of the main reasons, if not the KEY reason, they claimed and continue to claim that the prior City Council was not responsive to the concerns of all its residents. Since the four new councilmembers have taken office, deference, respect, honesty and trust has suffered badly and continues to get worse. Any reliance in them and the City Attorney to responsibly steer our city has been greatly compromised. We strongly urge the four of them to modify the course they are currently on. Lastly, we think that the current Administrative item 23 (24-195) Approval of FY 2023/24 Revised Budget, and Ordinance for Introduction item 24 (24-209) Ordinance No. 4318, scheduled for the meeting of March 19th, be DEFERRED until the first meeting in April, to provide proper time for a more reasonable understanding and evaluation by the public and the other council members of the details and potential impacts contained within them. A glaring case in point is that it's now been established beyond any reasonable doubt that having "more secure" municipal elections, regardless of their purported costs, will not produce safer elections than have been won in 2022 and with the likely approval of Charter Amendments A & B in 2024. City run elections would clearly be an added burden to the City's proposed revised budget and are NOT needed! Certainly not at the expense of selling off our public library system to fund them, or by cutting other, more needed city services! Our four new councilmembers have to SEE that, and truly appreciate that reality. Otherwise, the legacy they create for our city will very, very grim. Respectfully, Larry and Susan Slonim