HomeMy WebLinkAbout14 - NB-2 - FY19-20 Independent Audit of Costa Mesa - 1/19/20211
CITY COUNCIL/HOUSING
AUTHORITY AGENDA REPORT
MEETING DATE: JANUARY 19, 2021 ITEM NUMBER: NB-2
SUBJECT: FISCAL YEAR 2019-20 INDEPENDENT FINANCIAL AUDIT OF THE COSTA
MESA HOUSING AUTHORITY; AND THE HOUSING SUCCESSOR ANNUAL
REPORT OF THE LOW AND MODERATE INCOME HOUSING ASSET FUND
UNDER SECTION 34176.1 OF THE DISSOLUTION LAW AND SECTION
34328 OF THE CALIFORNIA HOUSING AUTHORITIES LAW
DATE: JANUARY 5, 2021
FROM: FINANCE DEPARTMENT
PRESENTATION BY: JENNIFER KING, CPA, ASSISTANT FINANCE DIRECTOR
FOR FURTHER INFORMATION CONTACT: JENNIFER KING, CPA, ASSISTANT FINANCE
DIRECTOR, (714) 754-5219
RECOMMENDATIONS:
Staff recommends that the City Council and the Housing Authority receive and file the
following:
The Fiscal Year 2019-20 Independent Financial Audit of the Costa Mesa Housing
Authority, including the Low and Moderate Income Housing Asset Fund; and
The Fiscal Year 2019-20 Housing Successor Annual Report prepared under the
California Health and Safety Code Section 34176.1 as the housing successor and Section
34328 as a housing authority.
BACKGROUND:
On January 17, 2012, under the California Housing Authorities Law (HAL), Health and
Safety Code (HSC) Section 34200, et seq., the City Council established the Costa Mesa
Housing Authority (Housing Authority). Also on that date, the City Council selected the
Housing Authority to be the housing successor and, as of February 1, 2012, to assume
the housing assets, duties, functions and obligations of the former Costa Mesa
Redevelopment Agency (Former Agency). These actions occurred as a result of the
dissolution of the Former Agency under Assembly Bill x1 26, the California Supreme
Court’s decision in California Redevelopment Association v. Matosantos, Assembly Bill
1484, and other subsequent dissolution legislation (together, “Dissolution Law”), which
laws regulate the administration of successor agencies and housing successors due to
the dissolution of all California redevelopment agencies. Further, under Section 34328
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of the HAL, the Housing Authority also prepares and presents an annual report on its
activities for the preceding year.
Under Section 34176, added by AB x1 26 and amended by AB 1484, the
State Department of Finance (DOF) issued a decision letter in January 2013 that confirms
the Housing Authority holds all affordable housing assets of the Former Agency as listed
in a Housing Asset Transfer (HAT) schedule prepared by the Housing Authority and
submitted to the DOF prior to August 1, 2012. Since dissolution, all housing assets are
held and administered by the Housing Authority in the Low to Moderate Income Housing
Asset Fund (LMIHAF) under the Dissolution Law, in particular Sections 34176 and
34176.1. Under Section 34176.1(f), the housing successor is required to conduct an
independent financial audit of the LMIHAF (LMIHAF Audit) and prepare an annual report
(Report) for each fiscal year, and provide such reports to the governing body, within
six months after the end of each fiscal year.
Since inception, the Housing Authority’s primary function had been to serve as the
housing successor to the Former Agency. Beginning in Fiscal Year (FY) 2018-19, the
Housing Authority expanded services beyond the scope of LMIHAF by consolidating the
City’s existing homeless outreach program and establishing a new homeless shelter
operation.
DISCUSSION:
An audit of the Housing Authority’s financial activities, consists of the LMIHAF activities
and homeless assistance programs, was completed as part of the City’s overall financial
audit by an independent certified public accounting firm, Davis Farr, LLP. The Housing
Authority received an unmodified opinion. This is the highest and cleanest attestation
report given by independent auditors. The reports that deal with compliance information
also received unmodified opinions with no findings. The audit results are incorporated as
part of the City’s Comprehensive Annual Financial Report (CAFR). The section in the
City’s audit/CAFR relating to the LMIHAF Audit is entitled: Costa Mesa Housing Authority
(A Component Unit of the City of Costa Mesa) Financial Statements Year ended June 30,
2020 (Attachment 1).
In FY 2019-20, the Housing Authority received approximately $0.78 million in revenues
and incurred $3 million in expenditures. The General Fund also provided $2.4 million
subsidy toward the homeless outreach and bridge shelter programs. At June 30, 2020,
the Housing Authority’s available fund balance was $3.6 million, all of which was restricted
for LMIHAF purposes.
Staff has also prepared the Report (Attachment 2) summarizing the housing successor
activities for FY 2019-20 as outlined by Section 34176.1(f). The Report was distributed
via email to all Councilmembers on December 31, 2020. The LMIHAF Audit and Report
are attached to this agenda report for the City Council’s review and to take minute action
to receive and file in accordance with the applicable Dissolution Laws. Further, as
required by Section 34176.1, the Report and the former Agency’s pre-dissolution
Implementation Plan are available to the public on the City’s website
(www.costamesaca.gov).
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Based upon information prepared by staff and data contained in the LMIHAF Audit, the
Report presents information organized into the following, Sections I. to XIV, inclusive,
under Section 34176.1(f) of the Dissolution Law:
I. Amounts Received and Deposited under Section 34191.4(b)(3)(A). This section
provides the total amount of funds paid to the City and the amount deposited into
the LMIHAF allocable to 20% of the repayments on the reinstated City/Agency loan
per Section 34191.4.
II. Amount Deposited into LMIHAF. This section provides the total amount of funds
deposited into the LMIHAF in FY 2019-20 and itemized by amounts listed on
Recognized Obligation Payment Schedule (ROPS), amounts allocable to Section
34191.4 deposits, and other amounts deposited into the LMIHAF.
III. Ending Balance of LMIHAF. This section provides a statement of the balance in the
LMIHAF as of the close of FY 2019-20. Any amounts deposited for items listed on
the ROPS, and amounts allocable to Section 34191.4 deposits, must be
distinguished from the other amounts deposited.
IV. Description of Expenditures from LMIHAF. This section provides a description of
expenditures made from the LMIHAF during FY 2019-20. The expenditures are to
be categorized among (A) administration for monitoring, preserving covenanted
housing units, (B) homeless prevention and rapid rehousing services and (C)
development of housing.
V. Statutory Value of Assets Owned by Housing Successor. This section provides
the statutory value of real property owned by the Housing Successor, the value of
loans and grants receivables, and the sum of these two amounts.
VI. Description of Transfers. This section describes transfers, if any, to another
housing successor made in previous fiscal year(s), including whether the funds are
unencumbered and the status of projects, if any, for which the transferred LMIHAF
will be used. The sole purpose of the transfers must be for development of transit
priority projects, permanent supportive housing, regional homeless shelter, housing
for agricultural employees, or special needs housing.
VII. Project Descriptions. This section describes any project for which the Housing
Successor receives or holds property tax revenue under the ROPS and the status of
that project.
VIII. Status of Compliance with Section 33334.16. As and if applicable, this section
provides a status update on compliance with Section 33334.16 for interests in real
property acquired by the Former Agency prior to February 1, 2012. For interests in
real property acquired on or after February 1, 2012, provide a status update on the
project.
IX. Description of Outstanding Obligations under Section 33413. This section
describes outstanding inclusionary and replacement housing obligations, if any,
under Section 33413 that remained outstanding prior to dissolution of the Former
Agency as of February 1, 2012, along with the Housing Successor’s progress in
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meeting those prior obligations, if any, of the Former Agency and how the Housing
Successor plans to meet unmet obligations, if any.
X. Income Test. This section provides information required by Section
34176.1(a)(3)(B), or a description of expenditures by income category and restriction
for the applicable five-year period, with the time period beginning January 1, 2014,
and whether the statutory thresholds have been met. FY 2018-19 was the end of
the initial five-year period under this section.
XI. Senior Housing Test. This section provides the percentage of deed-restricted rental
housing units restricted to seniors and assisted individually or jointly by the Housing
Successor, its former redevelopment agency, and its host jurisdiction within the
previous 10 years in relation to the aggregate number of units of deed-restricted
rental housing assisted individually or jointly by the Housing Successor, its former
redevelopment agency and its host jurisdiction within the same 10-year time period.
XII. Excess Surplus Test: This section provides the amount of excess surplus in the
LMIHAF, if any, and the length of time that the Housing Successor has had excess
surplus, and the Housing Successor’s plan for eliminating the excess surplus.
XIII. Inventory of Homeownership Units: This section provides a summary of
covenanted homeownership units assisted by the former redevelopment agency or
the housing successor that include equity sharing and repayment provisions,
including: (A) number of units; (B) number of units lost to the portfolio in the last fiscal
year and the reason for those losses, and (C) any funds returned to the housing
successor pursuant to losses or repayments.
XIV. Additional Information: Costa Mesa Housing Authority’s Activities for the
Preceding FY 2019-20 under HSC Section 34328.
ALTERNATIVES CONSIDERED:
The City Council may choose to reject all or part of the Housing Authority’s Audit and
Annual Report. Both are for receive and file actions.
FISCAL REVIEW:
There is no fiscal impact associated with receiving and filing the Housing Authority Audit
and Annual Report.
LEGAL REVIEW:
The City Attorney’s Office has reviewed and approved the report as to form.
CITY COUNCIL GOALS & PRIORITIES:
This item is administrative in nature.
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CONCLUSION:
Staff recommends that the City Council receive and file the Housing Authority Audit and
Annual Report as presented.
CAROL MOLINA JENNIFER KING, CPA
Finance Director Assistant Finance Director
KIMBERLY HALL BARLOW
City Attorney
ATTACHMENTS: 1.
2.
Costa Mesa Housing Authority Annual Report as Housing
Authority and as Housing Successor for FY 2019-20
Costa Mesa Housing Authority (A Component Unit of the City of
Costa Mesa) Financial Statements with Report on Audit by
Independent Certified Public Accountants, Year Ended June 30,
2020
COSTA MESA HOUSING
AUTHORITY
(A Component Unit of the
City of Costa Mesa)
Financial Statements
Year ended June 30, 2020
COSTA MESA HOUSING AUTHORITY
Table of Contents
Year ended June 30, 2020
Page
Number
Independent Auditor’s Report 1 - 3
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position 4
Statement of Activities 5
Fund Financial Statements:
Balance Sheet - Governmental Fund 6
Reconciliation of the Governmental Fund Balance
Sheet to the Statement of Net Position 7
Statement of Revenues, Expenditures and Changes in
Fund Balance - Governmental Fund 8
Reconciliation of the Governmental Fund Statement of
Revenues, Expenditures and Changes in Fund Balance
to the Statement of Activities 9
Notes to Basic Financial Statements 10 - 27
Required Supplementary Information:
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios 28
Schedule of Pension Plan Contributions 29
Schedule of Proportionate Share of OPEB Liability and Related Ratios 30
Schedule of Revenues, Expenditures and Changes in
Fund Balance - Budget and Actual 31
Independent Auditor’s Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards 32 - 33
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INDEPENDENT AUDITOR’S REPORT
Board of Directors
Costa Mesa Housing Authority
Costa Mesa, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities and the
major fund of the Costa Mesa Housing Authority (Authority), a component unit of the City of Costa
Mesa, California, as of and for the year ended June 30, 2020, and the related notes to the
basic financial statements, which collectively comprise the Authority’s basic financial statements as
listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these basic financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the basic financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the basic financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditors consider internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express
no such opinion. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinions.
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Opinions
In our opinion, the basic financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities and the major fund of the
Authority as of June 30, 2020, and the respective changes in financial position for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of a Matter
As described more fully in Note 1A, the basic financial statements present only the Authority and
are not intended to present fairly the financial position and results of operations of the City of Costa
Mesa, California, in conformity with accounting principles generally accepted in the United States of
America. Our opinions are not modified with respect to this matter.
Report on Summarized Comparative Information
We have previously audited the financial statements of the Authority for the year ended June 30,
2019 and we expressed an unmodified opinion on those audited financial statements in our report
dated December 13, 2019. In our opinion, the summarized comparative information presented herein
as of and for the year ended June 30, 2019 is consistent, in all material respects, with the audited
financial statements from which it has been derived.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the schedule
of proportionate share of the net pension liability and related ratios, the schedule of pension plan
contributions, the schedule of proportionate share of the Other Post Employment Benefit liability
and related ratios, and the schedule of revenues, expenditures and changes in fund balance - budget
and actual, identified as required supplementary information (RSI) in the accompanying table of
contents, be presented to supplement the basic financial statements. Such information, although
not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain
limited procedures to the RSI 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 the audit of the
basic financial statements. We do not express an opinion or provide any assurance on the RSI
because the limited procedures do not provide us with sufficient evidence to express an opinion or
provide any assurance.
Management has not presented the management’s discussion and analysis that accounting principles
generally accepted in the United States of America require to be presented to supplement the
basic financial statements. Such missing information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. Our opinions on the basic financial statements are
not affected by this missing information.
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Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December
21, 2020, on our consideration of the Authority’s internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards in
considering the Authority’s internal control over financial reporting and compliance.
Irvine, California
December 21, 2020
2020 2019
ASSETS:
Cash and investments (Note 2)3,646,271$ 2,735,225$
Cash and investments with fiscal agent (Note 2)24,615 25,584
Rent receivable 17,576 13,279
Interest receivable 11,879 14,649
Loans receivable, net of allowance (Note 3)862,534 862,533
Capital assets (Note 4):
Not depreciated 2,063,865 2,063,865
Being depreciated, net 2,636,640 2,801,430
TOTAL ASSETS 9,263,380 8,516,565
DEFERRED OUTFLOWS OF RESOURCES:
Pension related (Note 6)272,780 89,533
OPEB related (Note 7)69,557 9,345
TOTAL DEFERRED OUTFLOWS OF RESOURCES 342,337 98,878
LIABILITIES:
Accounts payable 883,687 223,005
Accrued liabilities 11,049 8,647
Deposits 27,523 25,584
Net pension liability (Note 6)2,221,033 783,393
OPEB liability (Note 7)627,570 271,334
TOTAL LIABILITIES 3,770,862 1,311,963
DEFERRED INFLOWS OF RESOURCES:
Pension related (Note 6)38,904 23,841
OPEB related (Note 7)2,381 9,012
TOTAL DEFERRED INFLOWS OF RESOURCES 41,285 32,853
NET POSITION:
Investment in capital assets 4,700,505 4,865,295
Restricted for community programs 1,093,065 2,405,332
TOTAL NET POSITION 5,793,570$ 7,270,627$
Governmental Activities
Costa Mesa Housing Authority
Statement of Net Position
June 30, 2020
(With comparative totals for June 30, 2019)
See accompanying notes to financial statements.
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Operating Capital
Charges Grants and Grants and
Expenses for Services Contributions Contributions 2020 2019
Governmental Activities:
Community programs 4,691,655$ 405,379$ -$ -$ (4,286,276)$ (1,293,083)$
Total governmental
activities 4,691,655$ 405,379$ -$ -$ (4,286,276) (1,293,083)
General revenues:
Repayment of Successor Agency advance 258,209 320,775
Investment income 102,263 109,584
Other income 10,401 33,074
Transfer from the City of Costa Mesa 2,438,346 1,003,400
Total general revenues and transfers 2,809,219 1,466,833
CHANGE IN NET POSITION (1,477,057) 173,750
NET POSITION AT BEGINNING OF YEAR 7,270,627 7,096,877
NET POSITION AT END OF YEAR 5,793,570$ 7,270,627$
Program Revenues
Functions/Programs
Net (Expense) Revenue and
Changes in Net Position
Governmental Activities
Costa Mesa Housing Authority
Statement of Activities
Year ended June 30, 2020
(With comparative totals for the year ended June 30, 2019)
See accompanying notes to financial statements.
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2020 2019
ASSETS:
Cash and investments 3,646,271$ 2,735,225$
Cash and investments with fiscal agent 24,615 25,584
Rent receivable 17,576 13,279
Interest receivable 11,879 14,649
Loans receivable, net of allowance 862,534 862,533
TOTAL ASSETS 4,562,875$ 3,651,270$
LIABILITIES:
Accounts payable 883,687$ 223,005$
Accrued liabilities 11,049 8,647
Deposits 27,523 25,584
TOTAL LIABILITIES 922,259 257,236
FUND BALANCE:
Restricted for community programs 3,640,616 3,394,034
TOTAL FUND BALANCE 3,640,616 3,394,034
TOTAL LIABILITIES AND FUND BALANCE 4,562,875$ 3,651,270$
Costa Mesa Housing Authority
Balance Sheet
Governmental Fund
June 30, 2020
(with comparative totals for June 30, 2019)
See accompanying notes to financial statements.
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Fund balance - total governmental fund 3,640,616$
Amounts reported for governmental activities in the Statement of Net
Position are different because:
Capital Related Items
When capital assets (property, plant, equipment) that are to be used in
governmental activities are purchased or constructed, the cost of those
assets are reported as expenditures in governmental funds. However,
the Statement of Net Position includes those capital assets among the
assets of the Authority as whole:
Capital assets 5,359,665
Accumulated depreciation (659,160)
Pension and OPEB Related Transactions
Long-term liabilities applicable to the Authority's governmental activities are
not due and payable in the current period and, accordingly, are not
reported as fund liabilities. All liabilities (both current and long-term) are
reported in the Statement of Net Position. Also, deferred outflows of
resources and deferred inflows of resources related to the long term
liabilities do not provide current financial resources and are therefore
not presented in the governmental funds:
Deferred outflows of resources related to pensions 272,780
Deferred outflows of resources related to OPEB 69,557
Deferred inflows of resources related to pensions (38,904)
Deferred inflows of resources related to OPEB (2,381)
CalPERS pension liability (2,221,033)
OPEB liability (627,570)
Net position of governmental activities 5,793,570$
Costa Mesa Housing Authority
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position
June 30, 2020
See accompanying notes to financial statements.
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2020 2019
REVENUES:
Rental income 405,379$ 378,469$
Repayment of Successor Agency advance 258,209 320,775
Investment income 102,263 109,584
Miscellaneous 10,401 33,074
TOTAL REVENUES 776,252 841,902
EXPENDITURES:
Current:
Community programs 2,968,016 1,644,921
TOTAL EXPENDITURES 2,968,016 1,644,921
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (2,191,764) (803,019)
OTHER FINANCING SOURCES:
Transfer from the City of Costa Mesa 2,438,346 1,003,400
Net change in fund balances 246,582 200,381
FUND BALANCE - BEGINNING OF YEAR 3,394,034 3,193,653
FUND BALANCE - END OF YEAR 3,640,616$ 3,394,034$
(with comparative totals for June 30, 2019)
Statement of Revenues, Expenditures and Changes in Fund Balance
Costa Mesa Housing Authority
Governmental Fund
Year ended June 30, 2020
See accompanying notes to financial statements.
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Net change in fund balances - total governmental fund 246,582$
Amounts reported for governmental activities in the Statement of Activities are
different because:
Capital Related Items
Governmental funds report capital outlay as expenditures.
However, in the Statement of Activities, the cost of those assets
are allocated over their estimated useful lives as depreciation
expense. This is the amount of depreciation charged to the
program in the Statement of Activities in the current period:
Depreciation expense (164,790)
Pension
Pension expense reported in the governmental funds includes the annual
required contributions. In the Statement of Activities, pension expenses
includes the change in the net pension liability, and related changes in
pension amounts for deferred outflows of resources and deferred inflows
of resources.(1,269,456)
OPEB
OPEB expense reported in the governmental funds includes the annual required
contributions. In the Statement of Activities, OPEB expense includes the change
in the net pension liability, and related changes in OPEB amounts for deferred
outflows of resources and deferred inflows of resources.(289,393)
Change in net position of governmental activities (1,477,057)$
Costa Mesa Housing Authority
Reconciliation of the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balances
to the Statement of Activities
Year ended June 30, 2020
See accompanying notes to financial statements.
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COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
Year ended June 30, 2020
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1. Reporting Entity and Summary of Significant Accounting Policies:
The accounting policies of the Costa Mesa Housing Authority (Authority) conform to accounting
principles generally accepted in the United States of America as applicable to governments. The
Governmental Accounting Standards Board (GASB) is the accepted standard setting body for
governmental accounting and financial reporting principles. The following is a summary of the
Authority’s significant accounting policies:
A. Description of the Reporting Entity:
The Authority was established on January 17, 2012, pursuant to City Council Resolution No.
12-3. The primary purpose of the Authority is to promote affordable housing for families
of low and moderate income within the City of Costa Mesa, California (City). Pursuant to
Assembly Bill 1484, the housing assets and obligations of the former Redevelopment
Agency’s Low and Moderate Income Housing Fund were transferred to the Authority. The
Authority is an integral part of the reporting entity of the City. The fund of the Authority has
been included within the scope of the basic financial statements of the City because the City
Council exercises oversight responsibility over the operations of the Authority.
Only the fund of the Authority is included herein, therefore, these financial statements do
not purport to represent the financial position or results of operations of the City.
B. Fund Accounting:
The basic accounting and reporting entity is a “fund”. A fund is defined as an independent
fiscal and accounting entity with a self-balancing set of accounts, recording resources, related
liabilities, obligations, reserves and equities segregated for the purpose of carrying out
specific activities or attaining certain objectives in accordance with special regulations,
restrictions, or limitations. The accounting records of the Authority are organized on the
basis of funds. Currently, the Authority only utilizes one fund.
C. Basis of Accounting and Measurement Focus:
The basic financial statements of the Authority are composed of the following:
Government-wide financial statements
Fund financial statements
Notes to the basic financial statements
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
11
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
Government-wide Financial Statements
Government-wide financial statements display information about the Authority as a whole.
All activities of the Authority are classified as governmental activities. Government-wide
financial statements are presented using the economic resources measurement focus and
the accrual basis of accounting. Measurement focus indicates the type of resources being
measured. Under the economic resources measurement focus, all (both current and long-
term) economic resources and obligations of the reporting government are reported in the
government-wide financial statements. Basis of accounting refers to when revenues and
expenditures are recognized in the accounts and reported in the financial statements. Under
the accrual basis of accounting, revenues, expenses, gains, losses, assets and liabilities
resulting from nonexchange transactions are recognized in accordance with the requirements
of GASB Statement No. 33.
Program revenues include charges for services, and payments made by parties outside of
the reporting government’s citizenry if that money is restricted to a particular program.
Program revenues are netted with program expenses in the s tatement of a ctivities to
present the net cost of each program.
Amounts paid to acquire capital assets are capitalized in the government-wide financial
statements, rather than reported as expenditures.
Fund Financial Statements
The underlying accounting system of the Authority is organized and operated on the basis
of separate funds, each of which is considered to be a separate accounting entity. The
operations of the fund are accounted for with a set of self-balancing accounts that comprise
its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate.
Governmental resources are allocated to and accounted for in the individual fund based upon
the purposes for which it is to be spent and the means by which spending activities are
controlled.
Fund financial statements for the Authority’s governmental fund are presented after the
government-wide financial statements. These statements display information about the
governmental major fund individually and nonmajor funds in aggregate if applicable.
Governmental Funds
In the fund financial statements, governmental funds are presented using the modified-
accrual basis of accounting. Their revenues are recognized when they become measurable
and available as fund balances. Measurable means that the amounts can be estimated, or
otherwise determined. Available means that the amounts were collected during the
reporting period or soon enough thereafter to be available to finance the expenditures
accrued for the reporting period. The Authority generally considers revenues collected within
sixty days after the fiscal year-end to be available, which includes loan repayments and rental
income.
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
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1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
Revenue recognition is subject to the measurable and availability criteria for the
governmental funds in the fund financial statements. Exchange transactions are recognized
as revenues in the period in which they are earned (i.e., the related goods or services are
provided). Imposed nonexchange transactions are recognized as revenues in the period for
which they were imposed. If the period of use is not specified, they are recognized as
revenues when an enforceable legal claim to the revenues arises or when they are received,
whichever occurs first. Government-mandated and voluntary nonexchange transactions are
recognized as revenues when all applicable eligibility requirements have been met.
In the fund financial statements, governmental funds are presented using the current
financial resources measurement focus. This means that only current assets and current
liabilities are generally included on their balance sheets. The reported fund balance is
considered to be a measure of “available spendable resources”. Governmental fund operating
statements present increases (revenues and other financing sources) and decreases
(expenditures and other financing uses) in fund balances. Accordingly, they are said to
present a summary of sources and uses of “available spendable resources” during a period.
Noncurrent portions of long-term receivables due to governmental funds are reported on
the balance sheet in spite of their spending measurement focus.
Amounts expended to acquire capital assets are recorded as expenditures in the year that
resources were expended, rather than as fund assets. The proceeds of long-term
indebtedness are recorded as other financing sources rather than as a fund liability. Amounts
paid to reduce long-term indebtedness are reported as fund expenditures.
D. New Accounting Pronouncements:
Current Year Standards
GASB 95 – Postponement of Effective Dates of Certain Authoritative Guidance. The
implementation of this statement did not result in financial impact to the Authority.
Pending Accounting Standards
GASB has issued the following pronouncements that have an effective date subsequent to
June 30, 2020, which may impact the financial reporting requirements in the future. Unless
otherwise noted, management has not determined what, if any, impact implementation of
the following Statements may have on future financial statements.
GASB 84 - Fiduciary Activities: Effective for the fiscal year ending June 30, 2021.
GASB 87 – Leases: Effective for the fiscal year ending June 30, 2022.
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
13
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
GASB 90 – Majority Equity Interests – an amendment of GASB Statements No. 14 and No.
61: Effective for the fiscal year ending June 30, 2021.
GASB 91 – Conduit Debt Obligations: Effective for the fiscal year ending June 30, 2023.
GASB 92 – Omnibus 2020: Effective for the fiscal year ending June 30, 2022.
GASB 93 – Replacement of Interbank Offered Rates: Effective for the fiscal year ending June
30, 2022.
GASB 94 – Public-Private and Private-Public Partnerships and Availability Payment
Arrangements: Effective for the fiscal year ending June 30, 2023.
GASB 96 – Subscription-Based Information Technology Arrangement: Effective for the fiscal
year ending June 30, 2023.
GASB 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for
Internal Revenue Code Section 457 Deferred Compensation Plans: Effective for the fiscal
year ending June 30, 2021.
E. Cash and Investments:
Investments are reported in the accompanying financial statements at fair value. Fair value
is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Changes in fair value
that occur during a fiscal year are recognized as investment income reported for that fiscal
year. Investment income includes interest earnings, changes in fair value, and any gains or
losses realized upon the liquidation, maturity, or sale of investments.
F. Capital Assets:
Capital assets are recorded at historical cost at the time of purchase. Assets acquired from
gifts or contributions are recorded at acquisition value on the date contributed. Generally,
capital asset purchases in excess of $5,000 are capitalized if they have an expected
useful life of two years or more. Capital assets used in operations are generally depreciated
in the government-wide financial statements. It is the Authority’s policy not to depreciate
assets in its first year of service. A full year of depreciation is charged at final year of asset
life or upon disposal. Depreciation is charged as an expense against operations and
accumulated depreciation is reported on the respective statement of net position. The range
of lives used for computing depreciation for building improvements and structures is 10 to
20 years.
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
14
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
G. Net Position:
Net position of the Authority can be classified into three components - net investment in
capital assets; restricted; and unrestricted. These classifications are defined as follows:
Net investment in capital assets - This component of net position consists of capital
assets, including restricted capital assets, net of accumulated depreciation and reduced
by the outstanding balances of any bonds, mortgages, notes, or other borrowings that
are attributable to the acquisition, construction, or improvement of those assets. If there
are significant unspent related debt proceeds at year end, the portion of the debt
attributable to the unspent proceeds are not included in the calculation of net investment
in capital assets. Rather, that portion of the debt is included in the same net position
component as the unspent proceeds.
Restricted - This component of net position consists of constraints placed on net
position use through external constraints imposed by creditors (such as through debt
covenants), grantors, contributors, or laws or regulations of other governments or
constraints imposed by law through constitutional provisions or enabling legislation.
Unrestricted - This component of net position consists of net position that does not meet
the definition of “net investment in capital assets” or “restricted”. The Authority has no
unrestricted net position.
When both restricted and unrestricted resources are available for use, it is the
Authority’s policy to use restricted resources first, then unrestricted resources as they are
needed.
H. Deferred Outflows/Inflows of Resources:
In addition to assets, the statement of net position and the governmental fund balance sheet
will sometimes report a separate section for deferred outflows of resources. This separate
financial statement element, deferred outflows of resources, represents a consumption of
net position that applies to future periods and so will not be recognized as an outflow of
resources (expense/expenditure) until that time. The Authority has two items that qualify
for reporting in this category in the statement of net position. The items are deferred outflows
related to pensions and OPEB.
In addition to liabilities, the statement of net position and the governmental fund balance
sheet will sometimes report a separate section for deferred inflows of resources. This
separate financial statement element, deferred inflows of resources, represents an
acquisition of net position that applies to future periods and will not be recognized as an
inflow of resources (revenue) until that time. The Authority has two items that qualify for
reporting in this category in the statement of net position. The items are deferred inflows
related to pensions and OPEB.
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
15
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
I. Fund Balance:
Fund balance classifications are defined as follows:
Nonspendable - This classification includes amounts that cannot be spent because they
are either (a) not in spendable form or (b) legally or contractually required to be maintained
intact.
Restricted - This classification includes amounts that can be spent only for specific purposes
stipulated by constitution, external resource providers or through enabling legislation.
Committed - This classification includes amounts that can be used only for the specific
purposes determined by a formal action of the government’s highest level of decision-making
authority.
Assigned - This classification includes amounts to be used by the government for specific
purposes but do not meet the criteria to be classified as restricted or committed. In
governmental funds, other than the general fund, assigned fund balance represents the
remaining amount that is not restricted or committed.
Unassigned - The classifications include the residual balance for the government’s general
fund and includes all spendable amounts not contained in other classifications.
It is the Authority’s policy that restricted resources will be applied first, followed by (in
order of application) committed, assigned, and unassigned resources, in the absence of
a formal policy adopted by the Board.
J. Pensions:
For purposes of measuring the net pension liability, deferred outflows of resources and
deferred inflows of resources related to pensions, and pension 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. For the 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 68 requires that the reported results must pertain to liability and asset information
within certain defined timeframe. For this report, the following timeframes are used:
Valuation Date June 30, 2018
Measurement Date June 30, 2019
Measurement Period July 1, 2018 to June 30, 2019
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
16
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
K. Other Post Employment Benefits (OPEB):
For purposes of measuring the OPEB liability, deferred outflows of resources and deferred
inflows of resources related to OPEB, and OPEB expense and information about the plan
(OPEB Plan), have been determined by an independent actuary. For this purpose, benefit
payments are recognized when currently due and payable in accordance with the benefit
terms.
Generally accepted accounting principles require that the reported results must pertain to
liability information within certain defined timeframes. For this report, the following
timeframes are used:
Valuation Date June 30, 2019
Measurement Date June 30, 2019
Measurement Period July 1, 2018 to June 30, 2019
L. Use of Estimates:
The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
M. Prior Year Data
The information included in the accompanying financial statements for the prior year has
been presented for comparison purposes only and does not represent a complete
presentation in accordance with generally accepted accounting principles. Certain minor
reclassifications of prior year data have been made in order to enhance their comparability
with current year figures.
2. Cash and Investments:
Equity in Cash and Investment Pool of the City of Costa Mesa
The Authority does not have a separate bank account; however, the Authority’s cash and
investments are maintained in an investment pool managed by the City. The Authority is a
voluntary participant in that pool. This pool is governed by and under the regulatory oversight
of the Investment Policy adopted by the City Council of the City. The Authority has not adopted
an investment policy separate from that of the City. The fair value of the Authority’s
investment in this pool is reported in the accompanying financial statements at amounts based
upon the Authority’s pro-rata share of the fair value calculated by the City for the entire City
portfolio. The balance available for withdrawal is based on the accounting records maintained by
the City, which are recorded on an original cost basis. At June 30, 2020, the Authority had
a total cash balance of $3,670,886, of which $3,646,271 was part of the City’s cash and
investment pool and the remaining $24,615 was cash held with a fiscal agent for tenant deposits.
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
17
3. Loans Receivable:
Loans receivable as of June 30, 2020 were comprised of the following:
Amount
The first-time homebuyer program provides loans to first-time
homebuyers for purchases of homes in the City of Costa Mesa. For
loans made before 2007, loan repayments were deferred for 10 years
and for loans made in 2007 and after, repayments of the loan are
deferred for 30 years.
$ 1,516,119
The single-family rehabilitation loan program provides loans to
homeowners to make home improvements and repair code
violations. There were 3 loans made under this program in 2009. The
loans do not pay interest and are not due until the property is sold.
142,500
The rental rehabilitation program is for deferred loans to owners of
multi-family properties to make improvements and repair code
violations. There are 3 remaining loans under this program and
repayment is deferred until sale, transfer or default. Interest of 4
percent is due on these loans.
145,580
There are 5 loans made to underwrite land to a developer to build 5
single-family homes to be maintained in perpetuity for affordable
housing. The Authority maintains enforceable covenants on the
property. The loans are to be repaid only upon default of affordable
housing covenants.
681,283
There are 2 loans made to eligible homebuyers under the Federal
Neighborhood Stabilization Program (NSP) administered by the State
of California. The NSP program consists of acquisition, rehabilitation,
and subsequent sale of foreclosed homes. Borrowers met income and
affordability qualifications set by the HUD HOME Program and
California Community Redevelopment law.
181,250
Total loans receivable 2,667,732
Less allowance for doubtful accounts (1,804,198)
Loans receivable, net of allowance of doubtful accounts $ 862,534
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
18
4. Capital Assets:
The following is a summary of the capital asset activity for the year ended June 30, 2020:
Depreciation expense of $164,790 was charged to the community programs function on the
Statement of Activities.
5. Repayment of Successor Agency Advance
In 2012, all California redevelopment agencies were dissolved, including the City of Costa Mesa
Redevelopment agency. In the dissolution process, the State of California Department of
Finance (DOF) disallowed a loan in the amount of $9,278,545 from the City’s General Fund to
the former Redevelopment Agency as an enforceable obligation. Subsequently, the Department
of Finance (DOF) Finding of Completion on May 24, 2013 allowed the placement of these loan
agreements on the Recognized Obligation Payment Schedule (ROPS).
The City has adjusted the loan for repayments and interest additions. The loan repayment,
reported on the ROPS, is subject to DOF approval on an annual basis. As of June 30, 2020, the
loan balance is estimated to be $6,212,950. The Housing Authority is entitled to receive
20% of the annual repayment. In the current fiscal year, the Housing Authority received
$258,209 on this loan.
6. Defined Benefit Pension Plan (CalPERS):
Plan Description
All qualified permanent and probationary Authority employees are eligible to participate in the
City’s Miscellaneous Plan, an agent multiple-employer defined benefit pension plan, administered
by the California Public Employees’ Retirement System (CalPERS), which acts as a common
investment and administrative agent for its participating member employers. Benefit provisions
under the Plan are established by State statute and City resolution. CalPERS issues publicly
available reports that include a full description of the pension plans regarding benefit
provisions, assumptions and membership information that can be found on the CalPERS website.
For further details regarding this plan, including funding progress, refer to the City of Costa
Mesa’s Comprehensive Annual Financial Report.
Balance at Balance at
July 1, 2019 Additions Deletions June 30, 2020
Capital assets not being depreciated:
Land 2,063,865$ -$ -$ 2,063,865$
Capital assets being depreciated:
Building improvements and structures 3,295,800 - - 3,295,800
Less accumulated depreciation/amortization:
Building improvements and structures (494,370) (164,790) - (659,160)
Total capital assets being
depreciated, net 2,801,430 (164,790) - 2,636,640
Capital assets, net 4,865,295$ (164,790)$ -$ 4,700,505$
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
19
6. Defined Benefit Pension Plan (CalPERS) (Continued):
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments
and death benefits to plan members, who must be public employees and beneficiaries. Benefits
are based on years of credited service, equal to one year of full-time employment. Members
with five years of total service are eligible to retire at age 50 to 62 with statutorily reduced
benefits. For employees hired into a plan with the 1.5% at 65 formula, eligibility for service
retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become
eligible for service retirement upon attainment of age 52 with at least 5 years of service. All
members are eligible for non-duty disability benefits after 5 years of service. The death benefit
is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional
Settlement 2W Death Benefit. Safety members can receive a special death benefit if the member
dies while actively employed and the death is job-related. The cost of living adjustments are
applied as specified by the Public Employees’ Retirement Law.
The Plan’s provisions and benefits in effect at June 30, 2020, are summarized as follows:
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers are 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 CalPERS’ 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. Employer contribution rates may change if plan contracts are
amended. Payments made by the employer to satisfy contribution requirements that are
identified by the pension plan terms as plan member contributions requirements are classified as
plan member contributions. For the year ended June 30, 2019, the Authority’s total contributions
for the Miscellaneous Plan were $219,071.
Prior to On or After On or After
Hire Date March 11, 2012 March 11, 2012 January 1, 2013
Benefit formula 2.5% @55 2.0%@60 2%@62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 50 - 55 50 - 63 52 - 67
Monthly benefits, as a % of
eligible compensation 2.0% to 2.5%1.092% to 2.418%1.0% to 2.5%
Required employee contribution
rates 10.469%7%6.75%
Required employer contribution
rates 6.98%9.45%9.45%
Miscellaneous (Agent Multiple-Employer)
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
20
6. Defined Benefit Pension Plan (CalPERS) (Continued):
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
The June 30, 2018 valuation was rolled forward to determine the June 30, 2019 total pension
liability, based on the following actuarial methods assumptions:
Measurement date June 30, 2019
Actuarial cost method
Entry-Age Normal in accordance with the
requirements of GASB 68
Actuarial assumptions:
Discount rate 7.15%
Inflation 2.50%
Salary increases Varies by Entry Age and Service
Mortality Rate Table1
Derived using CalPERS Membership Data
for all funds
Postretirement benefit
increase
The lessor of contract COLA or 2.50%
until Purchasing Power Protection
Allowance floor on purchasing power
applies, 2.50% thereafter
1 The mortality table used was developed based on CalPERS’ specific data. The
probabilities of mortality are based on the 2017 CalPERS Experience Study for the
period from 1997 to 2015. Pre-retirement and Post-retirement mortality rate
include 15 years of projected mortality improvement using le includes 15 years of
mortality improvements using 90% of Scale MP 2016 published by the Society of
Actuaries. For more details on this table, please refer to the CalPERS Experience
Study and Review of Actuarial Assumptions report from December 2017 that can
be found on the CalPERS website.
Discount Rate
The discount rate used to measure the total pension liability was 7.15 percent. The projection
of cash flows used to determine the discount rate assumed that contributions from plan members
will be made at the current member contribution rates and that contributions from employers
will be made at the 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 on investment was applied to all periods of projected benefit payments to
determine the total pension liability.
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.
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
21
6. Defined Benefit Pension Plan (CalPERS) (Continued):
In determining the long-term expected rate of return, CalPERS 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 the funds’ asset classes, except 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 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 rate of returns by asset class are as followed:
Asset Class1
Assumed asset
allocation
Real Return
Years 1 – 10 2
Real Return
Years 11+ 3
Global Equity 50.0% 4.80% 5.98%
Fixed Income 28.0% 1.00% 2.62%
Inflation assets 0.0% 0.77% 1.81%
Private Equity 8.0% 6.30% 7.23%
Real assets 13.0% 3.75% 4.93%
Liquidity 1.0% 0.00% (0.92%)
1 In the System’s CAFR, Fixed Income is included Global Debt Securities;
Liquidity is included in Short-term Investment; Inflation Assets are included
both Global Equity Securities and Global Debt Securities.
2 An expected inflation of 2.00% used for this period
3 An expected inflation of 2.92% used for this period
The following table shows the Authority’s proportionate share of the net pension liability over
the measurement period:
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (c) = (a) - (b)
Balance at: 6/30/2018 (VD) $ 2,340,774 $ 1,557,381 $ 783,393
Balance at: 6/30/2019 (MD) 6,506,177 4,285,144 2,221,033
Net Changes during 2018-19 4,165,403 2,727,763 1,437,640
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
22
6. Defined Benefit Pension Plan (CalPERS) (Continued):
The Authority’s net pension liability for the plan is measured as the proportionate share of the
net pension liability. The net pension liability of the plan is measured as of June 30, 2019, and
the total pension liability for the plan used to calculate the net pension liability was determined
by an actuarial valuation of June 30, 2018 rolled forward to June 30, 2019 using standard update
procedures. The Authority’s proportion of the net pension liability was based on a projection of
the Authority’s long-term share of contributions to the pension plans relative to the projected
contributions of all participating employers, actuarially determined.
The Authority’s proportionate share of the net pension liability for the plan as of June 30, 2018
and 2019 was as follows:
Miscellaneous Plan
Proportion – June 30, 2018 0.831%
Proportion – June 30, 2019 2.218%
Change – Increase (Decrease) 1.387%
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the Plan as of the Measurement Date,
calculated using the discount rate of 7.15 percent, as well as what the net pension liability would
be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or
1 percentage-point higher (8.15 percent) than the current rate:
Discount
Rate – 1%
(6.15%)
Current
Discount Rate
(7.15%)
Discount
Rate + 1%
(8.15%)
Authority’s proportionate share of the Net
Pension Liability $3,059,321
$2,221,033
$1,530,660
Amortization of Deferred Outflows and Deferred Inflows of Resources
Under GASB 68, actuarial gains and losses related to changes in total pension liability and
fiduciary net position are recognized in pension expense systematically over time. The first
amortized amounts are recognized in pension expense for the year the gain or loss occurs. The
remaining amounts are categorized as deferred inflows and deferred outflows to be recognized
in future pension expense. The amortization period differs depending on the source of the gain
or loss:
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
23
6. Defined Benefit Pension Plan (CalPERS) (Continued):
Net difference between projected and
actual earnings on pension plan
investments
5 year straight-line amortization
All other amounts Straight-line amortization over the expected average
remaining service lifetime (EARSL) of all members
that are provided with pensions (active, inactive, and
retired) as of the beginning of the measurement
period
The EARSL for the Plan for the June 30, 2019 measurement date is 2.4 years, which was obtained
by dividing the total services years by the total number of participants (active, inactive, and
retired) in the Plan. Inactive employees and retirees have remaining service lifetimes equal to
zero. Total future service is based on the members’ probability of decrementing due to an event
other than receiving a cash refund.
Pension Expense, and Deferred Outflows/Inflows of Resources Related to Pensions
For the fiscal year ended June 30, 2020, the Authority recognized pension expense of
$1,488,515. At June 30, 2020, the Authority reported deferred outflows of resources and
deferred inflows of resources related to the CalPERS pension as follows:
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to the
measurement date $ 219,059 $ -
Changes in assumptions - (3,100)
Differences between expected and actual
experience 53,721 (11,102)
Net difference between projected and
actual earnings on pension plan
investments - (24,702)
Totals
$ 272,780
$ (38,904)
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
24
6. Defined Benefit Pension Plan (CalPERS) (Continued):
The Authority reported $219,059 as deferred outflows of resources related to contributions
subsequent to the measurement date that will be recognized as a reduction of the net pension
liability in the fiscal year ending June 30, 2021. Other amounts reported as deferred inflows or
outflows of resources related to pensions will be recognized as pension expense as follows:
Fiscal Year Ended
June 30:
Deferred
Outflows/(Inflows)
of Resources
2021 $ 38,672
2022 (22,823)
2023 (6,523)
2024 5,491
2025 -
Thereafter -
7. Other Post-Employment Benefits (OPEB):
Plan Description
The City administers a single-employer defined benefit plan, which provides medical insurance
benefits to eligible retirees and their spouses in accordance with various labor agreements.
The plan covers employees hired before January 1, 2004 who retire directly from the City with
10 or more years of City service. The City provides a contribution up to a percentage of the
lesser of $500 per month or the premium for the most popular medical plan elected by the
employees. The percentage varies by retirement date and years of City service. For employees
hired on or after January 1, 2004, the City will only pay for the PEMHCA subsidy once they meet
the definition of a retiree under CalPERS. The City provides retiree life insurance of $1,000 for
the retiree and $500 for the retiree’s spouse.
Contributions
The contribution requirements of plan members and the Authority are established and may be
amended by the City Council. The required contribution is made on a pay-as-you-go basis (i.e.,
as medical insurance premiums become due). Neither the City nor the Authority has established
a trust for the purpose of holding assets accumulated for plan benefits.
Actuarial Methods and Assumptions Used to Determine Total OPEB Liability
The Authority’s total OPEB liability was measured as of June 30, 2019 by an actuarial valuation
based on the following actuarial methods and assumptions:
Discount Rate: 3.51% for accounting disclosure purposes. The rate is based on a yield for
20-year tax-exempt general obligation municipal bonds with an average rating of AA/Aa
or higher (or equivalent quality on another rating scale). For the current valuation, the
discount rate was selected from the range of indices as shown in the table below:
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
25
7. Other Post-Employment Benefits (OPEB) (Continued):
Actuarial Methods and Assumptions Used to Determine Total OPEB Liability (Continued)
As of 06/30/19
Bond Buyer Go 20 – Municipal Bond Index 3.51%
S&P Municipal Bond 20-year High Grade
Rate Index
2.79%
Fidelity 20-year Go Municipal Bond Index 3.13%
Bond Index Range 2.79% - 3.51%
Actual Discount Rate Used 3.51%
Inflation Rate: 2.75% per year
Aggregate Payroll Increases: 3.00% per year. This assumption is used to amortize the
unfunded actuarial accrued liability and to determine the Entry Age Normal actuarial
liabilities.
Mortality Rate: Based on rates used in the most recent CalPERS pension valuation.
Turnover Rate: Assumption used to project terminations (voluntary and involuntary) prior
to meeting minimum retirement eligibility for retiree health coverage. The rates represent
the probability of termination in the next 12 months. The termination rates are based on
those used in the most recent CalPERS pension valuation.
Retirement Rate: Annual retirement rates are based on those used in the most recent
CalPERS pension valuation.
The following table shows the Authority’s proportionate share of the total OPEB liability over the
measurement period ended June 30, 2019:
Increase (Decrease)
Total OPEB
Liability
Balance at: June 30, 2018 $ 271,334
Balance at: June 30, 2019 627,570
Net Changes during 2018-19 356,236
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
26
7. Other Post-Employment Benefits (OPEB) (Continued):
The Authority’s total OPEB liability for the plan is measured as the proportionate share of the
plan’s total OPEB liability. The total OPEB liability of the plan is measured as of June 30, 2019,
and the total OPEB liability for the plan used to calculate the net pension liability was determined
by an actuarial valuation of June 30, 2019. The Authority’s proportion of the total OPEB liability
was based on a projection of the Authority’s long-term share of contributions to the OPEB plan
relative to the projected contributions of all participating employers, actuarially determined. The
Authority’s proportionate share of the total OPEB liability for the plan as of June 30, 2018 and
2019 was as follows:
OPEB Plan
Proportion – June 30, 2018 0.510%
Proportion – June 30, 2019 1.065%
Change – Increase (Decrease) 0.555%
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate
The following presents the total OPEB liability of the Plan as of the Measurement Date, calculated
using the discount rate of 3.51 percent, as well as what the total OPEB liability would be if it
were calculated using a discount rate that is 1 percentage-point lower (2.51 percent) or 1
percentage-point higher (4.51 percent) than the current rate:
Discount
Rate – 1%
(2.51%)
Current
Discount Rate
(3.51%)
Discount
Rate + 1%
(4.51%)
Authority’s proportionate share of the total
OPEB liability $722,525
$627,570
$551,338
The following presents the total OPEB liability, as well as what the total OPEB liability would be
if it were calculated using healthcare cost trend rates that are 1 percentage-point lower or 1
percentage-point higher than the current healthcare cost trend rates:
1% Decrease
(5.50% decreasing
to 3.50%)
Current Healthcare
Cost
Trend Rates
(6.50% decreasing
to 4.50%)
1% Increase
(7.50%
decreasing to
5.50%)
Authority’s proportionate
share of the total OPEB liability $580,042 $627,570 $696,876
COSTA MESA HOUSING AUTHORITY
Notes to Basic Financial Statements
(Continued)
27
7. Other Post-Employment Benefits (OPEB) (Continued):
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the year ended June 30, 2020, the Authority recognized OPEB expense of $308,392. At
June 30, 2020, the Authority reported deferred outflows of resources and deferred inflows of
resources related to the OPEB plan as follows:
Deferred
Outflows
Deferred
Inflows
of Resources of Resources
OPEB contributions subsequent to
the measurement date $ 19,326 $ -
Differences between expected and
actual differences 19,006
-
Changes in assumptions 31,225 (2,381)
Totals $ 69,557 $ (2,381)
The Authority reported $19,326 as deferred outflows of resources related to contributions
subsequent to the measurement date that will be recognized as a reduction of the total OPEB
liability in the fiscal year ending June 30, 2021.
Other amounts reported as deferred inflows or outflows of resources related to pensions will be
recognized as pension expense as follows:
Fiscal Year Ended
June 30:
Deferred
Outflows/(Inflows)
of Resources
2021 $ 5,990
2022 8,372
2023 8,372
2024 8,372
2025 8,372
Thereafter 8,372
Measurement date June 30 2014 2015 2016 2017 2018 2019
Plan's proportion of the net pension liability 0.703%0.703%0.703%1.095%0.831%2.218%
Plan's proportionate share of the net pension liability 536,746$ 561,947$ 632,922$ 1,095,223$ 783,393$ 2,221,033$
Plan's covered payroll 129,116$ 126,041$ 139,833$ 213,885$ 166,758$ 541,070$
Plan's proportionate share of the net pension liability
as a percentage of covered payroll 415.71%445.84%452.63%512.06%469.78%410.49%
Plan's proportionate share of the fiduciary net position
as a percentage of the Plan's total pension liability 69.49%68.26%64.94%64.17%66.53%65.86%
Plan's proportionate share of aggregate employer
contributions 36,704$ 42,575$ 45,855$ 75,706$ 76,921$ 219,059$
Notes to schedule:
Benefit changes:
The figures above do not include any liability impact that may have resulted from plan changes which
occurred after the June 30, 2018 valuation date. This applies for voluntary benefit changes as well as
any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).
Changes in assumptions:
In 2017, The accounting discount rate reduced from 7.65% to 7.15%.
In 2018, demographic assumptions and inflation were changed in accordance to the CalPERS Experience
Study and Review of Actuarial Assumptions December 2017.
None in 2019.
* - Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
GASB 68, paragraph 68 states that the long-term expected rate of return should be
determined net of pension plan investment expense but without reduction for pension plan
administrative expense. The discount rate of 7.50% used for the June 30, 2014
measurement date was net of administrative expenses. The discount rate of 7.65% used for
the June 30, 2015 measurement date is without reduction of pension plan administration
expense.
Last Ten Fiscal Years*
Costa Mesa Housing Authority
Required Supplementary Information
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios
CalPERS Miscellaneous Plan
28
Fiscal year ended June 30 2015 2016 2017 2018 2019 2020
Contractually required contribution (actuarially determined)36,704$ 42,575$ 45,855$ 75,706$ 76,921$ 219,059$
Contributions in relation to the actuarially determined contributions (36,704) (42,575) (45,855) (75,706) (76,921) (219,059)
Contribution deficiency (excess)-$ -$ -$ -$ -$ -$
Covered payroll 126,041$ 139,833$ 213,885$ 166,758$ 202,718$ 532,597$
Contributions as a percentage of covered payroll 29.12%30.45%21.44%45.40%37.95%41.13%
Notes to schedule:
Valuation date 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017
Methods and assumptions used to determine contribution rates:
Single and agent employers Entry Age Normal
Amortization method/period For details, see June 30, 2017 Funding Valuation Report.
Asset valuation method Market Value of Assets. For details, see June 30, 2017 Funding Valuation Report.
Inflation 2.625%
Salary increases Varies by Entry Age and Service
Payroll growth 2.875%
Investment rate of return 7.25%, net of pension plan investment and administrative expense; including inflation.
Retirement age The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the
period from 1997 to 2015.
Mortality The probabilities of mortality are based on the 2017 CalPERS Experience Study for the
period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include
20 years of projected mortality improvement using Scale BB published by the
Society of Actuaries.
Other information:
For changes to previous year’s information, refer to past GASB 68 reports.
* -Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
Costa Mesa Housing Authority
Required Supplementary Information
Schedule of Pension Plan Contributions
CalPERS Miscellaneous Plan
Last Ten Fiscal Years*
29
Measurement date June 30 2017 2018 2019
Plan's proportion of the total OPEB liability 0.391%0.510%1.065%
Plan's proportionate share of the total OPEB liability 208,922$ 271,334$ 627,570$
Plan's covered payroll 160,415$ 221,304$ 466,770$
Plan's proportionate share of the OPEB liability
as a percentage of covered employee payroll 130.24%122.61%134.45%
Plan's proportionate share of the fiduciary net position
as a percentage of the Plan's total OPEB liability 0.00%0.00%0.00%
Notes to schedule:
Changes in assumptions. The discount rate as of the June 30, 2016 measurement date
was 2.85%. The discount rate as of the June 30, 2017 measurement date was 3.40%.
The discount rate as of the June 30, 2018 measurement date was 3.50%. The discount rate as of
the June 30, 2019 measurement date was 3.51%.
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.
* - Fiscal year 2018 was the first year of implementation, therefore only three years are shown.
Required Supplementary Information
Costa Mesa Housing Authority
Schedule of Proportionate Share of OPEB Liability and Related Ratios
Last Ten Fiscal Years*
30
Variance with
Final Budget
Original Final Positive Prior Year
Budget Budget Actual (Negative)Actual
REVENUES:
Rental income 370,000$ 370,000$ 405,379$ 35,379$ 378,469$
Repayment of Successor
Agency advance 265,204 265,204 258,209 (6,995) 320,775
Intergovernmental 463,068 463,068 - (463,068) -
Investment income 18,000 18,000 102,263 84,263 109,584
Miscellaneous 10,000 10,000 10,401 401 33,074
TOTAL REVENUES 1,126,272 1,126,272 776,252 (350,020) 841,902
EXPENDITURES:
Current:
Community programs 3,217,258 3,407,395 2,968,016 439,379 1,644,921
TOTAL EXPENDITURES 3,217,258 3,407,395 2,968,016 439,379 1,644,921
EXCESS (DEFICIENCY) OF
REVENUES OVER (UNDER)
EXPENDITURES (2,090,986) (2,281,123) (2,191,764) 89,359 (803,019)
Other financing sources:
Transfers from the City
of Costa Mesa 2,000,000 2,046,324 2,438,346 392,022 1,003,400
Net change in fund balance (2,090,986) (234,799) 246,582 481,381 200,381
FUND BALANCE - BEGINNING OF YEAR 3,394,034 3,394,034 3,394,034 - 3,193,653
FUND BALANCE - END OF YEAR 1,303,048$ 3,159,235$ 3,640,616$ 481,381$ 3,394,034$
Costa Mesa Housing Authority
Year ended June 30, 2020
(With Comparative Data for Prior Year)
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Housing Authority Fund
Required Supplementary Information
31
32
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER
MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
Board of Directors
Costa Mesa Housing Authority
Costa Mesa, 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, financial statements of the
governmental activities and the major fund of the Costa Mesa Housing Authority (Authority), as of
and for the year ended June 30, 2020, and the related notes to the basic financial statements,
which collectively comprise of the Authority’s basic financial statements, and have issued our report
thereon dated December 21, 2020.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of Authority’s
internal control. Accordingly, we do not express an opinion on the effectiveness of Authority’s
internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that
a material misstatement of the entity’s financial statements will not be prevented or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,
in internal control that is less severe than a material weakness, yet important enough to merit
attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not
identify any deficiencies in internal control that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
33
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s financial statements are
free from material misstatement, we performed tests of its compliance with certain provisions of
laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct
and material effect on the determination of financial statement amounts. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly, we
do not express such an opinion. The results of our tests disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
Authority’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 Authority’s internal control
and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
December 21, 2020
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 1
COSTA MESA HOUSING AUTHORITY ANNUAL REPORT
AS HOUSING AUTHORITY AND AS HOUSING SUCCESSOR
FOR FISCAL YEAR 2019-2020 UNDER CALIFORNIA
HEALTH & SAFETY CODE SECTIONS 34176.1 AND 34328
This annual report (Report) of the Costa Mesa Housing Authority (Housing Authority) is
prepared under the California Health and Safety Code (HSC), Division 24, Parts 1.8 and
1.85 (Dissolution Law), in particular Section 34176.1 as the housing successor, and under
the California Housing Authorities Law, HSC Section 34200, et seq. (HAL), in particular
Section 34328 as a housing authority. The Dissolution Law and HAL respectively require
preparation of an annual report on the housing successor and the housing authority’s
activities for the prior fiscal year. This Report details the Housing Authority’s activities
during Fiscal Year (FY) 2019-20 and is intended to satisfy the requirements under both
HSC Sections 34176.1 and 34328. More specifically, this Report includes information
required about the Low and Moderate Income Housing Asset Fund (LMIHAF) and other
information under Section 34176.1(f).
This Report is based on information prepared by City staff on behalf of the Housing
Authority and data contained within the independent financial audit of the LMIHAF (Audit),
which is prepared by Davis Farr LLP and accompanies this Report. The Audit is
incorporated in the City of Costa Mesa’s Comprehensive Annual Financial Report (CAFR)
for FY 2019-20. A copy of the Report in this draft form, has been provided to the City
Council, as governing body, and to the Housing Authority by December 31, 2020 under
34176.1(f). Upon their joint review and action to file the Report in an open meeting in
January 2021, this Report will be posted on the City’s website www.costamesaca.gov and
thereafter appended to the City’s annual update report prepared under Section 65400 of
the Government Code.
This Report conforms with and is organized into sections I through XIV, inclusive, under
HSC Section 34176.1(f) of the Dissolution Law and Section 34328 of the HAL:
I. Amounts Received and Deposited Under 34191.4(b)(3)(A). This section
provides the total amount of funds paid to the City and the amount deposited into
the LMIHAF representing 20% of repayments on the reinstated City/Agency loan
per Section 34191.4.
The Department of Finance (DOF) approved a total of $1,291,045 attributable to
the reinstated City/Agency loan under Section 34191.4. The Successor Agency
received $1,270,134 in FY 2019-20, after factoring in excess cash on hand of
$20,911 from previously approved obligations. Of the $1,291,045, $1,032,836
(representing 80% of $1,291,045) was due to the City. The remaining balance was
deposited into the LMIHAF upon receipt in May 2020, totaling $258,209
(representing 20% of $1,291,045).
II. Amount Deposited into LMIHAF . This section provides the total amount of funds
deposited into the LMIHAF in FY 2019-20 and itemized by amounts listed on
Recognized Obligation Payment Schedule (ROPS), amounts representing Section
34191.4 deposits, and other amounts deposited into the LMIHAF.
• In FY 2019-20, the amount of $258,209 (representing 20% of $1,291,045)
was deposited into the LMIHAF;
• $0 was held for items listed on the ROPS; and
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 2
• other deposits into the LMIHAF in FY 2019-20 were: (1) $405,379 rental
income, (2) $5,111 loan repayments, and (3) $102,263 investment income.
The cumulative total of all deposits into the LMIHAF was $770,962 during FY 2019-
20.
III. Ending Balance of LMIHAF. This section provides a statement of the balance in
the LMIHAF as of the close of FY 2019-20. Any amounts deposited for items listed
on the ROPS and amounts representing Section 34191.4 deposits, must be
distinguished from the other amounts deposited.
At the close of FY 2019-20 on June 30, 2020, the ending balance in the LMIHAF
was $3,640,616, of which $0 was held for items listed on the ROPS.
IV. Description of Expenditures from LMIHAF. This section provides a description
of expenditures made from the LMIHAF during FY 2019-20. The expenditures are
to be categorized among (A) administration for monitoring, preserving covenanted
housing units; (B) homeless prevention and rapid rehousing services; and
(C) development of housing.
The table below lists and describes FY 2019-20 LMIHAF expenditures by
category:
Monitoring
and
Administration
Expenditures
Costs for monitoring, enforcement, and preserving
long-term affordable housing covenants imposed by
the former Costa Mesa Redevelopment Agency
(Former Agency) or the Housing Authority, as
housing successor.
The maximum expenditure for this category in FY
2019-20 is the greater of (a) 5% of the statutory value
of (i) real property owned by the housing successor
and (ii) loans and grants receivable, or (b) $200,000
(plus allowed CPI adjustments).
Based on the valuation listed in Section V,
[lines 5+6 in that table=$5,563,039] for FY 2019-20,
the Housing Authority as housing successor was
authorized to spend up to $278,152 (i.e., 5% of
$5,563,039), but expended only $96,911.
$96,911
Homeless
Prevention
and Rapid
Rehousing
Services
Expenditures
Costs for homeless prevention and rapid rehousing
supportive services for individuals and families who
are homeless or would be homeless without this
assistance.
The housing successor was authorized to spend up
to $250,000 for this category in FY 2019-20 and had
spent $250,000.
250,000
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 3
Housing
Development
Expenditures
Costs for housing “development”, which term is
defined to include: (a) new construction, (b)
acquisition and rehabilitation, (c) substantial
rehabilitation, (d) long-term affordability covenants
on multifamily units, and (e) preservation of assisted
affordable housing that is eligible for (i) prepayment,
(ii) termination, or (iii) for which the expiration of
rental restrictions is scheduled to occur within five
years.
The costs in this category represent the operating
costs for a 30-apartment low and very low income
housing property
The 30 apartments within eight properties commonly
referred to as James/W. 18th Properties, were
acquired by the City and Housing Authority through
non-judicial foreclosure proceedings in FY 2015-
2016. This acquisition was made in order to
preserve the long-term affordable housing
covenants which were at risk of termination and
potential conversion to market housing. The intent at
that time was to transfer this property to an
experienced affordable housing developer for
development of continued affordable housing at
these properties, such as disposition or ground
lease for substantial rehabilitation or new
construction and covenanted housing for extremely
low, very low, and low-income persons and
households.
The eight properties are still owned by the Housing
Authority and continue to be operated as affordable
housing units for low and very low income
households/tenants by a professional property
management company. The operating costs for the
property include staff salaries and benefits, utilities,
supplies, repairs and maintenance, taxes, property
management fees, legal and consulting costs. The
total amount spent in FY 2019-20 was $177,469.
177,469
Total FY 2019-20 LMIHAF Expenditures $524,380
V. Statutory Value of Assets Owned by Housing Successor. This section provides
the statutory value of real property owned by the Housing Authority, as housing
successor, the value of loans and grants receivables, and the sum of these two
amounts.
Under Dissolution Law and for purposes of this Report, the “statutory value of real
property” means the value of properties formerly held by the Former Agency as
listed on the housing asset transfer schedule approved by the DOF under Section
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 4
34176(a)(2), the value of the properties transferred to the housing successor under
Section 34181(f), and the purchase price of properties purchased by the Housing
Authority. Further, the value of loans and grants receivable is included in these
reported assets held in the LMIHAF.
The following table provides the statutory value of assets owned by the Housing
Authority as of the end of FY 2019-20:
VI. Description of Transfers. This section describes transfers, if any, to another
housing successor made in previous fiscal year(s), including whether the funds are
unencumbered and the status of projects, if any, for which the transferred LMIHAF
will be used. The sole purpose of the transfers must be for development of transit
priority projects, permanent supportive housing, regional homeless shelters,
housing for agricultural employees, or special needs housing.
The Housing Authority, as housing successor, did not make any LMIHAF transfers
to other housing successor(s) under Section 34176.1(c)(2) during FY 2019-20.
VII. Project Descriptions. This section describes any project for which the Housing
Authority, as housing successor, receives or holds property tax revenue under the
ROPS and the status of that project.
The Housing Authority, as housing successor, does not receive or hold property tax
revenue under a ROPS.
VIII. Status of Compliance with Section 33334.16. As and if applicable, this section
provides a status update on compliance with Section 33334.16 for interests in real
property acquired by the former redevelopment agency prior to February 1, 2012.
For interests in real property, if any, acquired on or after February 1, 2012, provide
a status update on the project.
Section 34176.1 provides that Section 33334.16 does not apply to interests in real
property acquired by the Housing Authority, as housing successor, on or after
February 1, 2012.
With respect to interests in real property acquired by the Former Agency prior to
February 1, 2012, the time periods described in Section 33334.16 shall be deemed
1.Cash and Investments $3,646,271
2.Cash and Investments with Fiscal Agent 24,615
3.Interest Receivable 11,879
4.Rent Receivable 17,576
5.
6.Value of Loans and Grants Receivable 862,534
Total Statutory Asset Value $9,263,380
Statutory Value of Real Property Owned by
the Housing Authority
As of June 30, 2020
End of FY 2019-20
4,700,505
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 5
to have commenced on the date that the DOF approved the property as a housing
asset in the LMIHAF; thus, as to real property acquired by the Former Agency, now
held by the Housing Authority as housing successor, in the LMIHAF, the Housing
Authority as housing successor, must initiate activities consistent with development
(as the term is explained in Section IV and Section 34176.1(a)(3)(D)) of the real
property for the purpose for which it was acquired within five years of the date the
DOF approved such property as a housing asset.
In this regard, the Housing Authority as housing successor, did not own any real
property acquired for development (to be developed) as of dissolution on February
1, 2012 subject to this limitation so the five-year limitation of Section 33334.16 does
not apply.
It is noted that the Former Agency held at dissolution, now the Housing Authority
holds as landlord/ground lessor, the underlying fee interests in three Ground
Leases with Costa Mesa Family Village, a California limited partnership, as
tenant/ground lessee (affiliate of Shapell Properties) relating to the existing 72-unit
multifamily affordable housing apartment development called Costa Mesa Family
Village, located at 1924 and 1981 Wallace Avenue and 2015 Pomona Avenue. The
three ground leases end/expire in 2039. Section 33334.16 does not apply to such
ground leases and this existing affordable housing development as the subject
property was not held for development; it is developed property.
IX. Description of Outstanding Obligations under Section 33413. This section
describes outstanding inclusionary and replacement housing obligations, if any,
under Section 33413 that remained outstanding prior to dissolution of the former
redevelopment agency as of February 1, 2012, along with the Housing Authority’s
progress, as housing successor, in meeting those prior obligations, if any, of the
former redevelopment agency and how the Housing Authority, as housing
successor, plans to meet unmet obligations, if any.
Replacement Housing: Under the Former Agency’s last Implementation Plan in
effect prior to dissolution (the 2010-2014 plan), the Former Agency’s replacement
housing obligations, if any, under Section 33413(a) were transferred to the
Housing Authority as housing successor; however, the Former Agency had no
outstanding replacement housing obligations as of dissolution on February 1, 2012.
Inclusionary/Production Housing. Under the Former Agency’s last
Implementation Plan in effect prior to dissolution (the 2010-2014 plan), its
inclusionary/production housing obligations, if any, under Section 33413(b) were
transferred to the Housing Authority as housing successor; however, the Former
Agency had no outstanding inclusionary/production housing obligations as of
dissolution on February 1, 2012.
Therefore, the Housing Authority, as housing successor, has no outstanding
replacement or inclusionary/production housing obligations and thus no
implementation obligation under Section 33413.
For information, the Former Agency’s Implementation Plan is posted on the City’s
website at www.costamesaca.gov.
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 6
X. Income Test. This section provides information required by Section
34176.1(a)(3)(B), or a description of expenditures by income category and
restriction for the applicable five-year period, with the time period beginning
January 1, 2014 and whether the statutory thresholds have been met. However,
the income test is not required until year 2019.
The applicable provisions of Sections 34176.1(a)(3)(A)(B)(C) require that the
Housing Authority, as housing successor, must require at least 30% of the LMIHAF
to be expended for development of rental housing affordable to and occupied by
households earning 30% or less of the Area Median Income (AMI). If the Housing
Authority as housing successor, fails to comply with the extremely-low income
requirement in a five-year reporting period, then the provisions of Section
34176.1(B) will apply in each fiscal year following the latest fiscal year following the
Report are expended for the development of housing occupied by extremely low
income households until the housing successor demonstrates compliance with such
requirement in a subsequent annual report.
FY 2018-19 was the end of the initial five-year period under Section
34176.1(a)(3)(B). The Housing Authority initiated and in the midst of an RFP
process for which development proposals have been submitted, proposing
developers have been interviewed by a panel of staff, housing/economic
consultants and legal counsel, with the next step to present the RFP process and
supporting information to the City Council and Housing Authority during FY 2020-
21 so the governing bodies may consider and exercise their discretion regarding
development of the James/W.18th Properties as defined by Section
34176.1(a)(3)(D). For any selected developer and proposed project, the Housing
Authority will require compliance with the applicable income and funding provisions
of Section 34176.1(a)(3)(A)(B)(C); in any event, not less than three units of the 30
units among the eight James/W.18th Properties will be covenanted for occupancy
by extremely low income tenants/households. It is noted the City is party to a
contract that affects, in part, the James/W.18th Properties under which the City
agreed to issue the RFP described in this Section X, which RFP process has been
undertaken timely pursuant to that agreement. When the City Council and Housing
Authority select a developer and project, in all instances not less than three
extremely low income units will be included and covenanted in the project, and as
applicable additional units if required to comply with the applicable income and
funding provisions of Section 34176.1(a)(3)(A)(B)(C).
XI. Senior Housing Test. This section provides the percentage of deed-restricted
rental housing units restricted to seniors and assisted individually or jointly by the
housing successor, its former redevelopment agency, and its host jurisdiction
within the previous 10 years in relation to the aggregate number of units of deed-
restricted rental housing assisted individually or jointly by the housing successor,
its former redevelopment agency and its host jurisdiction within the same 10-year
time period.
The housing successor is to calculate the percentage of units of deed-restricted
rental housing restricted to seniors and assisted by the housing successor, the
Former Agency and/or the City within the previous 10 years in relation to the
aggregate number of units of deed-restricted rental housing assisted by the
housing successor, the Former Agency, and/or City within the same time period. If
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 7
this percentage exceeds 50%, then the housing successor cannot expend future
LMIHAF funds to assist additional senior housing units until the Housing Authority
as housing successor, or City assists and construction has commenced on a
number of restricted rental units that is equal to 50% of the total amount of deed-
restricted rental units.
As reported in the prior FY 2018-19 annual report, for the 10-year period of January
1, 2004 to January 1, 2014, 9.8% of the funds were expended on assistance to
provide senior affordable housing units and 90.2% of the funds were expended on
assistance to provide non-senior/family affordable housing units. In particular, 36
senior units with long-term 55-year affordability covenants were established during
the previous 10-year period (specifically, the St. John’s Manor Project in 2006).
For the current 10-year period of January 1, 2014 to January 1, 2024 that includes
the subject FY 2019-20, the Housing Authority expended no funds ($0) for senior
housing thus far; therefore 0% of funds were expended on development or
assistance to develop senior housing units.
XII. Excess Surplus Test. This section provides the amount of excess surplus in the
LMIHAF, if any, and the length of time that the housing successor has had excess
surplus, and the housing successor’s plan for eliminating the excess surplus.
The term excess surplus is defined in Section 34176.1(d) as: “an unencumbered
amount in the LMIHAF account that exceeds the greater of one million dollars
($1,000,000) or the aggregate amount deposited into the account during the
housing successor’s preceding four fiscal years, whichever is greater.” The table
below provides the Excess Surplus test for the preceding four years. The LMIHAF
does not have an excess surplus.
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 8
XIII. Inventory of Homeownership Units. This section provides a summary of
covenanted homeownership units assisted by the former redevelopment agency
or the housing successor that include equity sharing and repayment provisions,
including: (A) number of units; (B) number of units lost to the portfolio in the last
fiscal year and the reason for those losses; and (C) any funds returned to the
housing successor due to losses or repayments.
This section provides an inventory of homeownership units assisted by the Former
Agency and assumed by the Housing Authority as housing successor, that are
subject to covenants or restrictions or to an adopted program that protects the
Former Agency’s investment of moneys from the Low and Moderate Income
Housing Fund per Section 33334.3(f).
Total homeownership inventory as of dissolution on February 1, 2012
(subparagraph (A) below) and inventory, losses, and repayments for the period
from February 1, 2012 through June 30, 2019(subparagraph (B) below) include:
(A) As of dissolution on February 1, 2012, the total number of homeownership units
assisted by the Former Agency and had covenants and restrictions of record
was 41 units, which included loans and restricted single-family homes assisted
by the Former Agency through its (1) First Time Homebuyer (FTHB) Program,
(2) Single-Family Rehabilitation (SF Rehab) Program, (3) affordable housing
projects with Habitat for Humanity of Orange County, and (4) Neighborhood
LMIHAF LMIHAF
July 1, 2019 July 1, 2020
Opening Fund Balance $ 3,394,034 $ 3,640,616
Less Unavailable Amounts:
Loans Receivable Net (862,533) (862,534)
Encumbrances - -
Available Housing Successor
Funds (A) 2,531,501 2,778,082
Limitation (Greater of $1,000,000 or four years deposits):
Aggregate Amount Deposited for last four years:
2019-20 N/A $ 770,962
2018-19 $ 827,902 827,902
2017-18 687,292 687,292
2016-17 922,994 922,994
2015-16 922,260 N/A
Total $ 3,360,448 $ 3,209,150
Base Limitation $ 1,000,000 $ 1,000,000
Greater Amount (B) $ 3,360,448 $ 3,209,150
Excess/Surplus [(A)-(B)]$0 $0
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 9
Stabilization Program.
(B) The total number of homeownership units lost to the Housing Authority’s
portfolio as housing successor between February 1, 2012 through June 30,
2020, along with the reasons for those losses.
Total losses between February 1, 2012 and June 30, 2020: 27 units
Reasons for the units’ losses from the homeownership portfolio:
Principal Repayments: $717,458
Loan Impairment: $1,095,000
Foreclosure: $436,000
Funds returned to the Housing Authority as housing successor, as part of an
adopted program that protects the Former Agency’s investment of moneys from
the Low and Moderate Income Housing Fund, including loan principal, interest,
and equity sharing payments between February 1, 2012 and June 30, 2020:
$1,143,825.
(C) The number of homeownership units lost to the Housing Authority’s portfolio as
housing successor in FY 2019-20 and the reason for those losses.
There was no homeownership units lost to the Housing Authority’s portfolio as
housing successor in FY 2019-20.
Two owners made partial payments on homeownership loans. Principal and
interest payments received totaled $5,111 and were deposited into the
LMIHAF.
The funds returned to the Housing Authority as housing successor, as part of
an adopted program that protects the Former Agency’s investment of moneys
from Low and Moderate Income Housing Fund, included repayments of SF
Rehab and FTHB program loans. Total principal, interest, and equity sharing
payments during FY 2019-20 was $5,111.
(D) The Housing Authority as housing successor, has existing consulting
agreements with: AmeriNational Community Services, Inc., a Minnesota
Corporation (dba AmeriNat) and Farmers State Bank of Hartland, a Minnesota
corporation. The agreements are related to certain, but not all, aspects of
administration of the Former Agency’s SF Rehab and FTHB programs that
provided second lien mortgages for homeownership units. The consulting
services include assistance with oversight and administration of amortized loan
payments, if any, due; with tracking and calculation of loan balances in the
event of payoff; and, other administrative activities for these outstanding SF
Rehab and FTHB loans.
In addition, the Housing Authority retains the services of Keyser Marston
Associates, a professional housing economic consultant, and the Housing
Authority legal counsels, City Attorney and Authority General Counsel Kimberly
Hall Barlow of Jones & Mayer, and Celeste Brady of Stradling Yocca Carlson
Costa Mesa Housing Authority
Housing Successor Annual Report FY 2019-20 Page | 10
& Rauth (SYCR). Counsels assist staff in reviewing legal issues related to
outstanding SF Rehab and FTHB program loans, such as the refinancing of
first lien mortgages consistent with SF Rehab and FTHB program refinancing
criteria, repayments, impairment analyses, defaults, foreclosures,
bankruptcies, renting out part of the home, short sale requests, and other
issues that arise in the administration of the former Agency’s loan programs for
ownership housing.
XIV. Additional Information: Housing Authority’s Activities for the preceding year (FY
2019-20) under HSC Section 34328.
Without repeating the information presented above in this Report, the Housing
Authority:
(A) continued to monitor and enforce housing assets transferred from the Former
Agency to the Housing Authority as housing successor, as well as other
Housing Authority (non-housing successor) assets;
(B) continued property management and operation of the James/W.18 th
Properties. See Sections IV. And X. above for more detailed discussion about
these properties. The eight properties include:
• 707, 711 W. 18th Street, 8 units in two 4-plexes; 8 Low Income units;
• 734, 740, 744 James Street, 11 units in one 3-plex and two 4-plexes; 9
Low and 2 Very Low Income units;
• 745 W. 18th Street, 3 units in one 3-plex, 3 Very Low Income units; and
• 717, 721 James Street, 8 Very Low Income units.
(C) As housing successor under Section 34176.1(a)(2), the Housing Authority may
expend up to $250,000 per fiscal year “for homeless prevention and rapid
rehousing services for individuals and families who are homeless or would be
homeless but for this assistance, including the provision of short-term or
medium-term rental assistance, housing relocation, and stabilization services
including housing search, mediation, or outreach to property owners, credit
repair, security or utility deposits, utility payments, rental assistance for a final
month at a location, moving cost assistance, and case management, or other
appropriate activities for homelessness prevention and rapid rehousing of
persons who have become homeless.” In this regard in FY 2019-20 and as
detailed in this Report, the Housing Authority’s LMIHAF provided partial funding
for Community Outreach Workers who assertively work toward placing
homeless individuals and families into temporary or permanent housing as it
becomes available. Staff addresses the various needs represented by the local
homeless population on a daily basis. Further, a part-time Management Analyst
maintains the database that Community Outreach Workers and volunteers
from varied community groups utilize to streamline their reporting and
recordkeeping processes relative to placement of homeless individuals and
families into housing.
FY 2019-20
HOUSING AUTHORITY
FINANCIAL STATEMENTS
AND
OPERATING RESULTS
January 19, 2021
OVERVIEW
• Housing Authority description
• Operating results
1
HOUSING AUTHORITY
• Separate legal entity formed by the City in 2012 under California Health and
Safety Code 34200.
• Serves as the housing successor to the dissolved Costa Mesa
Redevelopment Agency (RDA) and holds the former RDA’s housing assets.
• LMIHAF expenditures limits are set by Health and Safety Code and subject
to State annual reporting.
• Accounts for City’s homeless outreach and bridge shelter operations.
• Expenditures above LMIHAF limits are funded by other sources.
2
HOUSING AUTHORITY OVERVIEW
Programs previously held by the former RDA:
• First time homebuyers program
• Single family rehabilitation program
• Federal Neighborhood Stabilization Program (NSP)
• Costa Mesa Family Village (ground lease)
• Costa Mesa Village
• Habitat for Humanity loan program
• James Street/W. 18th Street property (rental)
• Affordable Housing administration
New Programs:
• Homeless Outreach
• Homeless Bridge Shelter Operations
3
FISCAL YEAR 2019-20
HOUSING AUTHORITY OPERATING RESULTS
4
FY 19-20
Adopted FY 19-20
Budget Actual Difference
Beginning Fund Balance, July 1 3,394,034$ 3,394,034$ -$
Total Revenues 3,126,272 3,214,598 88,326
Less: Total Operating Expenses 3,217,258 2,968,016 (249,242)
Operating Results (90,986)$ 246,582$
Ending Fund Balance, June 30 3,303,048$ 3,640,616$
All Programs
FISCAL YEAR 2019-20
HOMELESS SERVICES EXPENDITURES
BUDGET TO ACTUAL
5
FY 19-20
Adopted FY 19-20
Homeless Outreach Budget Actual Difference
Salaries and Benefits 879,490$ 723,081$ (156,409)$
Operations and Maintenance 233,492 159,169 (74,323)
Fixed assets 700 424 (276)
Total Homeless Outreach Expenditures 1,113,682 882,674 (231,008)
Bridge Shelter Operations
Operations and Maintenance 1,599,386 1,810,962 211,576
Total Bridge Shelter Expenditures 1,599,386 1,810,962 211,576
Total Homeless Services Expenditures 2,713,068$ 2,693,636$ (19,432)$