HomeMy WebLinkAbout15 - NB-3 - Receive and File Audited Financial Repor - 1/19/20211
CITY COUNCIL AND COSTA MESA
PUBLIC FINANCING AUTHORITY
AGENDA REPORT
MEETING DATE: JANUARY 19, 2021 ITEM NUMBER: NB-3
SUBJECT:RECEIVE AND FILE THE CITY’S AUDITED FINANCIAL REPORTS AND
COSTA MESA PUBLIC FINANCING AUTHORITY’S AUDITED FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2020
DATE: JANUARY 7, 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
RECOMMENDATION:
1. Staff recommends that the City Council receive and file the following reports for
the fiscal year ended June 30, 2020:
a. Comprehensive Annual Financial Report (CAFR) (Attachment 1);
b. Air Quality Improvement Fund Compliance Report (Attachment 2);
c. Audit Communication Letter (Attachment 3); and
d. Independent Accountant's Report on Agreed-Upon Procedures Applied to
Appropriation Limit Worksheets (Attachment 4).
2. Staff recommends that the City Council and Costa Mesa Public Financing Authority
receive and file the Costa Mesa Public Financing Authority audited financial
statements for the fiscal year ended June 30, 2020 (Attachment 5).
BACKGROUND:
Federal Single Audit guidelines require a recipient of federal funds to have an
independent annual financial audit and compliance audit of the federal programs. As
such, the City has retained an independent public accounting firm of licensed certified
public accountants, Davis Farr LLP, to complete an audit of the City’s financial records.
The goal of the financial statement audit is to provide users with a reasonable assurance
from an independent source that the information presented in the financial statements is
reliable and free of material misstatements. All of the financial reports received
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unmodified opinions from Davis Farr LLP. This is the highest and cleanest attestation
report given by independent auditors.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
The CAFR is an audited summary report of the financial transactions of the City for Fiscal
Year 2019-20. The report is presented to the City Council and designed to provide
summary financial information. The financial statements were prepared in conformity with
Generally Accepted Accounting Principles (GAAP) and comply with reporting
requirements of the national Governmental Accounting Standards Board (GASB). The
specific financial documents on which the auditor expresses an opinion include (1) the
financial statements, and (2) notes to the basic financial statements, which include
required supplementary information. These documents, along with the auditor’s opinion
letter and management’s discussion and analysis, form the core of the CAFR. The
additional documents within the CAFR include: the letter of transmittal jointly from the City
Manager and Finance Director, the combining and individual fund statements, and a
supplemental statistical section presenting detailed information to assist the reader in
assessing the economic condition of the City.
The City's audit was performed in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits contained
in the Government Auditing Standards, issued by the Comptroller General of the United
States. Such audits utilize sampling of data, inquiries of staff and management, testing of
procedures and transactions, confirmation with outside parties, spot checking of internal
files and documents, review of meeting minutes, specialized audit checklists, and
numerous other techniques. The auditors also considered the City's internal controls in
determining what procedures to use and the size of samples to be selected. Therefore,
the audit procedures do not include review of 100 percent of transactions. In their report,
the auditors indicated that the financial statements were free of material misstatements
and all significant transactions were recognized in the proper period.
AIR QUALITY IMPROVEMENT FUND COMPLIANCE REPORT
Assembly Bill 2766 (AB2766) authorized the South Coast Air Quality Management District
(SCAQMD) to impose an annual vehicle registration fee and to distribute a portion of
those collected revenues to all local jurisdictions within the South Coast Air Basin. These
revenues are to be used solely to reduce air pollution from motor vehicles by
implementing new programs and studies necessary for the implementation of the
California Clean Air Act. The City's Air Quality Improvement Fund accounts for the use of
these funds received from SCAQMD. The Air Quality Improvement Fund Compliance
Report received an unmodified (clean) audit opinion.
COSTA MESA PUBLIC FINANCING AUTHORITY FINANCIAL STATEMENTS
The Costa Mesa Public Financing Authority was created by a joint powers agreement
between the City of Costa Mesa and the former Costa Mesa Redevelopment Agency,
dated August 20, 1990, to provide financing for capital improvements, acquisition of
capital improvements, and the purchase of local obligations. Davis Farr LLP also
completed an audit of the Costa Mesa Public Financing Authority’s (a component unit of
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the City of Costa Mesa) financial statements and the related notes to the financial
statements.
AUDIT COMMUNICATION LETTER
Audit clarity standards (AU-C) Section 260 requires defined and documented
communications between the auditors and the City Council or Audit Committee. This letter
provides an opportunity for the auditors to report on any difficulties or major concerns
discovered during the audit and explain their role. They provide commentary on
management's responsibilities for accounting policies and states that no significant
difficulties were encountered in performing the audit, and no disagreements occurred with
management.
INDEPENDENT ACCOUNTANT’S REPORT ON AGREED-UPON PROCEDURES
APPLIED TO APPROPRIATION LIMIT WORKSHEETS
Section 1.5 of Article XIIIB of the California Constitution requires that the City follow the
procedures agreed upon by the State of California and the League of California Cities (as
presented in the League publication entitled “Article XIIIB Appropriations Limitation
Uniform Guidelines”) to determine the annual appropriations limit, which sets forth the
maximum amount of special tax revenues an agency is allowed to spend. The auditors
perform an "Agreed-Upon Procedure" where they recalculate the Gann Limit. They
determined that the City has correctly calculated the Gann Limit.
DISCUSSION:
Based on the results of their audit, Davis Farr LLP provided the City with an unmodified
opinion on the financial statements, which indicates that the City’s financial statements
are free of material misstatements and are in accordance with GAAP. This is the best
opinion the City could receive.
GENERAL FUND FINANCIAL RESULTS
FY 2019-20 General Fund revenues (before transfers) totaled $136.45 million, or
approximately $4.37 million less than the final budget due to COVID impact. The major
variances were discussed at the City Council meeting on October 20, 2020 when staff
presented the FY 2019-20 preliminary financial results. A brief summary is as follows:
Sales and use tax revenues reflect a reduction of $2.9 million or five percent lower
than budget, a direct impact from the Stay-at-Home orders and operating
restrictions to business sectors within the County.
Transient Occupancy Tax (TOT) revenue was lower than budget by $3.0 million, a
32 percent decrease. The sudden decline in tourism, business travel and
conferences resulted in a significant impact to the City’s hotel industry.
Fees and Charges were lower than budget by $1.2 million. This category covers
fees and charges related to recreational activities such as sports, instructional
classes, camps, and special events. Due to the closure of parks and recreational
areas, and safety guidelines by the State to maintain six feet of distance and not
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congregate in groups of 10 or more, these recreational activities were suspended
for most of March through June 30, 2020.
Measure X Marijuana Gross Receipts Tax came in under budget by $379,000,
largely related to the tax rate reduction from six percent to one percent
implemented in April 2020.
Property Tax revenue is five percent higher than budgeted by $2 million as the tax
rolls was determined by the County of Orange, pre-COVID, in January 2019 for
the 2019/20 fiscal year. As a result, this revenue category was not impacted by
the pandemic.
Licenses and Permits came in $1.2 million higher than the budget mostly due to
the continued development activity in the City for projects already underway.
Investment earnings is $1.2 million higher than the budget due to required fair
market value adjustment to the City’s investment portfolio holdings.
General Fund expenditures (before transfers) totaled $126.8 million, approximately $4.2
million below the budget. This is directly attributed to the City Council swift adoption of a
$10 million Cost Containment Plan in April 2020 in response to COVID-related revenue
losses. Specifically, the cost containment measures included deferring capital projects,
eliminating the City Manager’s contingency funds, furloughing and releasing over 90 part-
time staff, utilizing vacancy savings and restricting travel, conferences and trainings. Staff
also implemented new procurement processes to ensure expenditures were limited to
essential city services.
The City has incurred substantial costs in COVID related mitigation, prevention and safety
measures. COVID expenditures are reported in the Disaster Fund, not in the General
Fund as these expenditures are eligible for potential federal grant reimbursements and
required to be tracked separately. A brief summary of the Disaster Fund activity is
presented later in this report.
General Fund transfers-out totaled $10.6 million and included $4.3 million to the Capital
Improvements Fund, $1.1 million to the Equipment Replacement Fund for vehicle
replacements and police car video system upgrade, $2.8 million to the Financing Authority
for debt service payments, and $2.4 million to the Housing Authority assistance programs.
GENERAL FUND – FUND BALANCE
The General Fund’s fund balance increased by $ 0.2 million, or 0.3% of the General Fund.
Essentially, the General Fund ended in balance for FY 2019-20 despite the extraordinary
revenue losses due to the pandemic. The City was able to reduce expenditures to absorb
the revenue losses without utilizing reserves or the capital projects identified in April 2020.
As of June 30, 2020, the City has $25.1 million committed for declared disasters, self-
insurance and economic uncertainty; $9.5 million assigned for compensated absences,
Police Retirement 1% Supplemental Plan, Section 115 Pension Trust, prepaid items, and
inventory; and $18.8 million in unassigned fund balance. Table 1 below shows fund
balance amounts since 2010.
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Table 1
PENSIONS AND OPEB (RETIREE MEDICAL)
At June 30, 2020, the net pension liability increased by $9 million to $304.7 million for two
reasons: plan participants increased by 3% and $7.4 million net change in actuarial
assumptions. Three of the City’s four pension plans are administered by CalPERS. The
Police 1% Supplemental Plan is administered by the City and is paid on a pay as you go
basis.
FY 2019-20 is the third year the City is required to record the other post-employment
benefits (OPEB) net liability on its financial statements, similar to the pension liability
above. The City’s net OPEB liability increased by $5.7 million to $58.9 million, as reflected
in Table 2 below. This plan is administered by the City and is paid to retirees on a pay as
you go basis.
Table 2
DISASTER FUND
In accordance with Federal guidelines, the City is required to track revenues and
expenditures related to a proclaimed local emergency. The Disaster Fund was set up to
comply with the Federal guidelines. In March 2020, the City, State and the President
proclaimed the coronavirus pandemic (COVID) as an emergency; triggering the utilization
of this fund. As of June 30, 2020, the Disaster Fund incurred COVID related expenditures
totaling $3.4 million and received $1.1 million in federal funds, resulting in a deficit fund
balance of $2.3 million. Subsequent to FY 2019-20, the City has received $32,000 from
a federal agency, $1.4 million from the State and $187,000 from the County of Orange.
Staff continues to work with various agencies to pursue additional cost recovery
TOTAL FUND
BALANCE
% Increase/
(Decrease)
Declared
Disasters
(A)
Self-Insurance
(B)
Economic
(C)
Compensated
Absences
(D)
Police
Retirement
1% Supp
(D)
Section 115
Pension Trust
OPEB
(D)
Non-
Spendable
(E)
June 30, 2020 $ 53,463,668 0%14,125,000$ 2,000,000$ 9,000,000$ 5,036,540$ 2,364,522$ 1,750,000$ -$ 362,189$ 18,825,417$
June 30, 2019 53,296,499 -3%14,125,000 2,000,000 7,500,000 4,892,819 2,297,253 1,750,000 - 280,195 20,451,232
June 30, 2018 55,224,080 -12%14,125,000 2,000,000 6,000,000 4,354,527 2,376,305 1,000,000 - 2,038,518 23,329,730
June 30, 2017 63,065,129 -2%14,125,000 2,000,000 4,500,000 4,010,752 2,527,726 - 4,280,610 2,253,843 30,867,198
June 30, 2016 64,472,461 20%14,125,000 2,000,000 3,000,000 4,107,428 2,766,672 - 3,946,563 2,486,085 32,040,713
June 30, 2015 53,815,951 7%14,125,000 2,000,000 1,500,000 4,036,221 2,166,823 - 3,622,775 4,165,795 22,199,337
June 30, 2014 50,200,326 10%14,125,000 2,000,000 - 4,443,799 2,262,032 - 3,310,261 3,430,104 20,629,130
June 30, 2013 45,646,441 -5%14,125,000 2,000,000 - 4,871,727 2,362,297 - 2,897,591 3,137,794 16,252,032
June 30, 2012 47,809,926 6%14,125,000 2,000,000 - 5,435,878 2,440,991 - 2,470,935 12,872,213 8,464,909
June 30, 2011 45,275,530 9%14,125,000 2,000,000 - 5,438,852 2,534,919 - 1,926,696 13,334,328 5,915,735
June 30, 2010 41,520,065 -15%- - - - - - - 14,421,676 27,098,389
General Fund - Fund Balance
Committed Assigned
Unassigned (F)
Net Pension Net Pension
Liability Liability Increase/
Pensions 6/30/2019 % Funded 6/30/2020 % Funded (Decrease)
Miscellaneous Plan (Agent)94,271,077$ 67%100,136,743$ 66%5,865,666$
Safety Police Plan (Agent)123,743,183 59%124,388,501 60%645,318
Safety Fire Plan (Cost Sharing)75,280,246 73%77,775,545 73%2,495,299
Police 1% Supplemental Plan 2,297,253 0%2,364,522 0%67,269
Total Pension 295,591,759 304,665,311 9,073,552
OPEB 53,202,676 0%58,917,480 0%5,714,804
Total - All Plans 348,794,435$ 363,582,791$ 14,788,356$
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opportunities. The Disaster Fund will continue to account for COVID related expenditures
in compliance with federal expenditure guidelines. At the end of COVID disaster recovery,
staff will reconcile and true up related revenues and expenditures in this fund.
ALTERNATIVES CONSIDERED:
The City Council and Public Financing Authority may choose to reject all or part of the
reports as presented. The reports are for receive and file actions.
FISCAL REVIEW:
There is no fiscal impact associated with receiving and filing the reports.
LEGAL REVIEW:
The City Attorney has reviewed and approved this report as to form.
CITY COUNCIL GOALS & PRIORITIES:
This item is administrative in nature.
CONCLUSION:
Staff recommends that the City Council receive and file the following reports:
a. Comprehensive Annual Financial Report (CAFR);
b. Air Quality Improvement Fund Compliance Report;
c. Audit Communication Letter; and
d. Independent Accountant's Report on Agreed-Upon Procedures Applied to
Appropriation Limit Worksheets.
Staff also recommends that the City Council and Costa Mesa Public Financing Authority
receive and file the Costa Mesa Public Financing Authority Financial Statements for the
fiscal year ended June 30, 2020.
CAROL MOLINA JENNIFER KING, CPA
Finance Director Assistant Finance Director
KIMBERLY HALL BARLOW
City Attorney
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ATTACHMENTS: 1. Comprehensive Annual Financial Report (CAFR)
2. Air Quality Improvement Fund Compliance Report
3. Audit Communication Letter
4. Independent Accountant's Report on Agreed-Upon Procedures
Applied to Appropriation Limit Worksheets
5. Costa Mesa Public Financing Authority Financial Statements
CITY OF COSTA MESA, CALIFORNIA
FISCAL YEAR ENDED
JUNE 30, 2020
COMPREHENSIVE
ANNUAL FINANCIAL
REPORT
CITY OF COSTA MESA, CALIFORNIA
Comprehensive Annual Financial Report
Year ended June 30, 2020
Prepared by: Finance
Department
www.costamesaca.gov
CITY OF COSTA MESA, CALIFORNIA
Comprehensive Annual Financial Report
Year ended June 30, 2020
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION:
Letter of Transmittal i
List of Principal Officials vii
Organizational Chart viii
GFOA Certificate of Achievement for Excellence in Financial Reporting ix
FINANCIAL SECTION:
Independent Auditor’s Report 1
Management’s Discussion and Analysis (Required Supplementary
Information) 4
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position 15
Statement of Activities 16
Fund Financial Statements:
Governmental Funds:
Balance Sheet 18
Reconciliation of the Balance Sheet to the Statement of
Net Position 20
Statement of Revenues, Expenditures and Changes in Fund
Balances 21
Reconciliation of the Statement of Revenues, Expenditures
and Changes in Fund Balances to the Statement of Activities 23
Proprietary Funds:
Statement of Net Position 24
Statement of Revenues, Expenses and Changes in Net Position 25
Statement of Cash Flows 26
Fiduciary Funds:
Statement of Net Position 27
Statement of Changes in Net Position 28
Notes to the Basic Financial Statements 29
CITY OF COSTA MESA, CALIFORNIA
Comprehensive Annual Financial Report
Year ended June 30, 2020
TABLE OF CONTENTS, (CONTINUED)
Page
Required Supplementary Information:
Miscellaneous Plan:
Schedule of Changes in the Net Pension Liability and Related Ratios 71
Schedule of Contributions 72
Police Safety Plan:
Schedule of Changes in the Net Pension Liability and Related Ratios 73
Schedule of Contributions 74
Fire Safety Plan:
Schedule of Proportionate Share of the Net Pension Liability 75
Schedule of Contributions 76
Police 1% Supplemental Retirement Plan:
Schedule of Changes in the Net Pension Liability and Related Ratios 77
Other Post-Employment Benefit Plan:
Schedule of Changes in OPEB Liability and Related Ratios 78
Schedule of Revenues, Expenditures and Changes in Fund
Balances – Budget and Actual:
General Fund 80
Gas Tax Fund 82
Government Grants Fund 83
Notes to Required Supplementary Information 84
Supplementary Schedules:
Nonmajor Governmental Funds:
Combining Balance Sheet 88
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 92
Schedule of Revenues, Expenditures and Changes in Fund
Balances – Budget and Actual:
Major and Nonmajor Special Revenue Funds
HOME Program Fund 96
Proposition 172 Fund 97
Air Quality Improvement Fund 98
Community Development Fund 99
Supplemental Law Enforcement Services Fund 100
Rental Rehabilitation Fund 101
Narcotics Forfeiture Fund 102
Local Law Enforcement Block Grant Fund 103
Office of Traffic Safety Fund 104
Housing Authority Fund 105
CITY OF COSTA MESA, CALIFORNIA
Comprehensive Annual Financial Report
Year ended June 30, 2020
TABLE OF CONTENTS, (CONTINUED)
Page
Major and Nonmajor Capital Projects Funds:
Measure “M2” Fund 106
Parking Districts Fund 107
Golf Course Improvements Fund 108
Park Development 109
Drainage Fees Fund 110
Traffic Impact Fees Fund 111
Fire System Development Fees Fund 112
Jack Hammett Sports Complex Fund 113
Lions Park Capital Improvements Fund 114
Capital Improvements Fund – Major Fund 115
Internal Service Funds:
Combining Statement of Net Position 117
Combining Statement of Revenues, Expenses and Changes in
Net Position 118
Combining Statement of Cash Flows 119
Agency Funds:
Combining Statement of Fiduciary Assets and Liabilities 121
Combining Statement of Changes in Fiduciary Assets and
Liabilities 122
STATISTICAL SECTION: Table
Net Position by Component – Last Ten Fiscal Years 1 125
Changes in Net Position – Last Ten Fiscal Years 2 126
Fund Balances of Governmental Funds – Last Ten Fiscal Years 3 127
Changes in Fund Balance of Governmental Funds – Last Ten Fiscal Years 4 128
Tax Revenues by Source, Governmental Funds – Last Ten Fiscal Years 5 129
Taxable Sales by Category – Last Ten Calendar Years 6 130
Principal Sales Tax Remitters by Category – Current Year and Nine Years Ago7 131
Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years 8 132
Property Tax Levies and Collections – Last Ten Fiscal Years 9 133
Assessed Value and Estimated Actual Value of
Taxable Property – Last Ten Fiscal Years 10 134
CITY OF COSTA MESA, CALIFORNIA
Comprehensive Annual Financial Report
Year ended June 30, 2020
TABLE OF CONTENTS, (CONTINUED)
Table Page
Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years 11 135
Principal Property Taxpayers – Current Year and Nine Years Ago 12 136
Ratio of General Bonded Debt Outstanding
and Legal Debt Margin – Last Ten Fiscal Years 13 137
Ratio of Outstanding Debt by Type - Last Ten Fiscal Years 14 138
Direct and Overlapping Governmental Activities Debt 15 139
Demographic and Economic Statistics – Last Ten Calendar Years 16 140
Principal Employers - Current Year and Nine Years Ago 17 141
Operating Indicators by Function/Program – Last Ten Fiscal Years 18 142
Full Time Equivalent City Government Employees by
Function/Program – Last Ten Fiscal Years 19 143
Capital Asset Statistics by Function/Program – Last Ten Fiscal Years 20 144
INTRODUCTORY SECTIONFINANCIAL REPORTCOMPREHENSIVE ANNUAL
INTRODUCTORY SECTION
i
CITY OF COSTA MESA
77 FAIR DRIVE, P.O. BOX 1200, COSTA MESA, CA 92628-1200
FROM THE OFFICE OF THE FINANCE DIRECTOR —CITY TREASURER
December 21, 2020
Honorable Mayor and Councilmembers:
The Comprehensive Annual Financial Report (CAFR) of the City of Costa Mesa (the City) for
the fiscal year ended June 30, 2020, is hereby submitted. These statements have been
prepared in conformity with generally accepted accounting principles (GAAP) and audited in
accordance with generally accepted auditing standards by an independent public accounting
firm of licensed certified public accountants.
This report consists of management’s representations concerning finances of the City.
Responsibility for both accuracy of the data, and completeness and fairness of presentation,
including all disclosures, rests with management. To provide a reasonable basis for making
these representations, management has established a comprehensive internal control
framework that is designed both to protect the government’s assets from loss, theft, or misuse
and to compile sufficient reliable information for preparation of financial statements in
conformity with GAAP. Because the cost of internal controls should not outweigh their
benefits, the City’s comprehensive framework of internal controls has been designed to
provide reasonable rather than absolute assurance that the financial statements will be free
from material misstatement.
As management, we assert that, to the best of our knowledge and belief, the enclosed data
is accurate in all material respects and is reported in a manner designed to present fairly the
financial position and results of operations of various funds and component units of the City.
All disclosures necessary to enable the reader to gain an understanding of the City's financial
activities have been included.
The City’s financial statements for the year ended June 30, 2020, have been audited by Davis
Farr LLP, an independent public accounting firm of licensed certified public accountants. The
goal of the independent audit was to provide reasonable assurance that the financial
statements of the City for the fiscal year ended June 30, 2020, are free of material
misstatement. The independent audit involved examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements; assessing the accounting
principles used and significant estimates made by management; and evaluating the overall
financial statement presentation. The independent auditor concluded, based upon the audit,
that there was a reasonable basis for rendering an unmodified opinion that the City’s financial
statements for the fiscal year ended June 30, 2020, and that the statements are fairly
presented in conformity with GAAP. The independent auditor’s report is presented as the first
component in the financial section of this report.
The independent audit of the financial statements of the City was part of a broader, federally
mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The
standards governing Single Audit engagements require the independent auditor to report not
only on the fair presentation of the financial statements, but also on the audited government’s
internal controls and compliance with legal requirements, with special emphasis on internal
controls and legal requirements involving the administration of federal awards. These reports
are available in the City’s separately issued Single Audit Report.
GAAP requires that management provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of Management’s Discussion and
Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should
be read in conjunction with it. The MD&A can be found immediately following the independent
auditor’s report.
PROFILE OF THE GOVERNMENT
The City, incorporated in 1953, has an estimated population of 114,778 and a land area of
16.8 square miles. It is located in the southern coastal area of Orange County, California, and
is bordered by the cities of Santa Ana, Newport Beach, Huntington Beach, Fountain Valley,
and Irvine. The City is approximately 35 miles southeast of Los Angeles and 85 miles
northwest of San Diego. At its nearest point, the City is approximately 1.5 miles from the
Pacific Ocean. The City is also home to the world-renowned Henry and Renee Segerstrom
Concert Hall, the Segerstrom Center for the Arts, and the Orange County Fairgrounds.
The City has operated under the council-manager form of government since incorporation.
Policy making and legislative authority are vested in the Mayor and City Council. The City
Manager is responsible for carrying out policies and ordinances approved by the City Council,
overseeing the day-to-day operations of the City, and appointing department heads.
In November 2016, voters approved Measure EE Voting District Formation and six voting
districts were formed. Beginning in December 2018, the City Council transitioned from five
Council Members to seven Council Members. Each of the six districts elects one Council
Member and the Mayor is elected at-large every two years. Council members are elected to
four-year staggered terms.
The City is a “full service city” and provides a wide range of services. These services include:
police and fire protection; animal control; emergency medical aid; building safety regulation
and inspection; street lighting; land use planning and zoning; housing and community
development; maintenance and improvement of streets and related structures; traffic safety,
maintenance, and improvement; homeless shelter; and a full range of recreational and
cultural programs. A “full-service city" is defined as a city that is financially responsible for
the full set of basic tax-dependent municipal services within its jurisdiction including police,
fire, parks and recreation, streets, and land-use planning.
The City maintains budgetary controls, the objective of which is to ensure compliance with
legal provisions embodied in the annual budget approved by the City Council. Annual budgets
are legally adopted for all governmental funds on a basis consistent with GAAP, except for
certain special revenue and debt service funds for which annual budgets are not adopted.
Budgetary control for management purposes is maintained as authorized by City Council at
the department functional level within individual funds.
The City Manager submits the budget to the City Council, who adopts it prior to the beginning
of the fiscal year. Public hearings are conducted prior to budget adoption. Supplemental
appropriations, when required during the fiscal year, are also approved by the City Council.
Intra-functional and interfund budgetary amendments are approved by the City Manager
subject to the total amount authorized by City Council.
ECONOMIC CONDITION
Fiscal year 2019-2020 was the beginning of an unprecedented time in our nation. Our country
was faced with a novel and infectious virus, known as the coronavirus (COVID-19), leading
to a worldwide pandemic that has collapsed the global economy and battered our public health
care system in a manner previously unseen. Its adverse impact on the United States economy
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has resulted in business closures and job losses for over 18 million Americans and an
unemployment rate of 10.5 percent. The economic impact of COVID-19 is unparalleled in its
scale and scope of damage.
As a result of the speed and severity of the economic downturn resulting from COVID-19, the
City is experiencing a significant decrease in its major General Fund revenue sources
comprised of local tax revenues, fees, fines and other charges.
In fiscal year 2019-20, General Fund sales tax revenue decreased by $9 million or 13.9
percent, primarily due to the pandemic. Large number of layoffs has significantly affected
consumer spending. Costa Mesa is primarily based on retail commercial business. Shopping
trends were thriving before COVID-19. The State’s shelter-in-place orders resulting from
COVID-19 has drastically impacted sales tax revenue.
The City’s hotel taxes (transient occupancy tax) decreased by $2 million or 23.4 percent.
Business closure and shelter-in-place orders led to sharp decline in tourism, travel,
conferences, and conventions worldwide.
The General Fund expenditures (before net other financing uses) increased by 1.7 percent
compared to the prior year. For fiscal year 2019-20, the General Fund ended with an operating
surplus of $9.7 million before net other financing uses of $9.5 million. Net financing uses
decreased by 54.8% compared to the prior year as fiscal year 2018-19 amount reflected
several one-time transfers for the permanent bridge shelter, sober living litigations and
Information Technology systems. After net other financing uses, the General Fund ended with
net increase of $0.2 million to the fund balance for fiscal year 2019-20.
The City expects the local economy to continue to be negatively impacted by the COVID-19
pandemic in the next several years. However, the ultimate financial impact and duration
cannot be estimated at this time. While the City of Costa Mesa continues to face financial
challenges brought on by a worldwide pandemic, the City enjoys many advantages that
empowers it to rise to the challenge. These advantages include a strong, diverse local
economy, well-funded emergency reserves, and a fervent commitment to deliver robust
services to the community.
MAJOR AND FUTURE DEVELOPMENT INITIATIVES
Major Developments:
The Place and 17 West (671 W. 17th Street) – 177-unit live/work and loft development
approved on a 9.1-acre site is currently under construction by Meritage Homes and Intracorp;
the project was completed in summer of 2020.
The Press (1375 Sunflower Street- former LA Times) – The master plan for the 665,000 square
foot office project was approved in August 2017. Construction for rehabilitation of the first two
phases of the project is under way. The first phase is near completion and the second phase is
expected to be completed by June/ July 2021. Phase 3, which includes a 51,600 square foot
market hall with indoor and outdoor restaurants is also under construction and expected to be
completed by August 2021.
Independent and Assisted Living Facility (1650 Monrovia Ave) – This project consists of 111
units of independent and assisted living facility in a 4-story building to include amenities such
as a fitness center, dance studio, cafe, bar/lounge in addition to a small event space and
ancillary office space. The project just completed this year and is occupied.
Audi Fletcher Jones Auto Dealership (1275 Bristol Street) – This project involves demolition
of the former Ganahl Lumber retail and storage buildings and construction and operation of a
iv
new two-story, 50,971-square-foot Audi Fletcher Jones automotive dealership sales and
service center. The project has just completed.
Harbor / Hamilton (2095 Harbor Blvd. and Hamilton Street) – This 1.53 acre site is approved
for construction of a detached single-family condominium development. This project will
consist of 28 two and three-bedroom, three story, detached homes including seven units with
ground level work space. The grading has been completed and the model homes are under
construction.
Vanguard University (55 Fair Drive) – The university has submitted a master plan amendment
to replace some of the existing buildings with more modern facilities, provide additional
student housing, and replace some surface parking with a parking structure. This amendment
reflects long range plans for the university and will take several years to complete. The
42,687 square foot 2-story student center is complete.
Halcyon House (former Symphony Apartments located at 595 Anton Blvd.) – The five-story
project consisting of 393 units of luxury apartment at the corner of Anton Boulevard and
Avenue of the Arts was approved in 2015. Construction of the underground parking and the
podium structures are well on the way. The project is anticipated to be completed in 2022.
Newport & Ford (1957 Newport Blvd.) – The 38-unit three-story condominium project was
approved by the City Council in October 2018. The first phase is now occupied. Construction
phases two through six that include 17 units are expected to be completed in spring of 2021.
Orange County Museum of Art (3333 Avenue of the Arts) – The project consists of 53,875
square-foot two-story structure which will become the new home to the Orange County
Museum of Art on the existing vacant site within the Theater Arts District. Construction is well
underway and the project is expected to be completed in 2021.
LUX Apartments (2277 Harbor Boulevard) – The grading permit for the multi-level parking
garage has started and the first and second floor framing was completed. The project
developer is currently seeking a new construction manager and expected to restart the
construction by early 2021.
Avenue of the Arts Hotel Expansion (3350 Avenue of the Arts) – The master plan amendment
for the project that included a new building design of the approved hotel expansion was
approved in November 2019. The new master plan includes a two-level underground parking
structure, a new restaurant and hotel lobby, and six levels of 150 new hotel rooms.
Construction drawings for the project is anticipated to be submitted in 2021.
The Plant (765-767 Baker Street and 2972 Century Place) – This project consists of the
proposed renovation of three existing commercial buildings (containing the former Car Mart
and Plant Stand) totaling 19,100 square feet, for retail and restaurant uses surrounding a
central courtyard area. In addition, new buildings are proposed consisting of two greenhouse
structures which will contain food stall uses, and a four-story mixed use building with 48
residential units, 14 live/work units, and 2,570 square feet of workshop/maker office space
above a two-level parking structure containing 170 parking spaces. Additionally, 39 on-site
open parking spaces and 34 open parking spaces accessible from Century Place are proposed,
for a total of 243 proposed parking spaces. This project was approved by the City Council;
submittal of development plans are anticipated in 2021.
Education First – The proposed project would develop an EF Education First: International
Language Campus (“EF”). The proposed project would include the following: 1) renovation of
the existing three-story building (approximately 44-feet tall) modified to 57,700 square feet
in area, including approximately 50 classrooms, a student services area, cafeteria, and
faculty/staff offices; 2) development of a three-story, 49,800-square-foot dormitory to the
north of the existing building; 3) development of two two-story, 23,000-square-foot
v
dormitories; 4) surface parking areas; 5) outdoor recreational facilities including a pool with
a pool house; and 6) landscaping. The project includes the addition of 87,000 square feet of
new buildings on the project site. Therefore, the total existing and proposed building square
footage on the project site would be 155,000 square feet. The proposed project could serve
up to 1,374 students and would have approximately 70 employees. The project was approved
by the Planning Commission but has been on hold due to COVID-19. Construction is expected
to commence in the first half of 2021.
Vans Headquarter Expansion - The Vans Building Expansion Project proposes to construct a
three-story, 91,032 square foot office building approximately 40-feet north of the existing
Vans Headquarter building on the Vans Headquarters Campus (Campus) located at 1588
South Coast Drive, Costa Mesa. The proposed project would also construct a three-story
parking structure accommodating 358 parking spaces in the northeast quadrant of the
Campus. Ancillary improvements include a small amphitheater/seating area just east of the
proposed office building and south of the proposed parking structure, and a half pipe skate
ramp just west of the proposed office building. A project design feature is a traffic signal on
Hyland Avenue at the Vans north driveway. The project has been entitled, plan approved, and
construction has commenced onsite.
Future Development (not approved but in the process):
One Metro West (1683 Sunflower Avenue) – The proposed Project is a mixed-use development
and consists of residential, specialty retail, creative office, and recreational uses. The Project
is proposed to include up to 1,057 dwelling units (anticipated to be rental units), 25,000
square feet of commercial creative office, 6,000 square feet of specialty retail, and 1.5-acres
of public open space. All existing buildings, structures, parking areas, drive aisles, and
hardscape/landscape improvements are proposed to be demolished. The proposed
development includes three multi-family residential structures with a maximum building
height of seven stories; one stand-alone office building up to four stories in height; tenant-
serving commercial retail space integrated into one of the residential structures; open space;
landscaping; streetscape improvements; and a Class-I bike trail system on Sunflower Avenue
providing access to the Santa Ana River Trail. The proposed Project is subject to Measure Y,
as codified in Article 22, Chapter IX of Title 13 (Zoning) of the Costa Mesa Municipal Code.
Pursuant to Measure Y, after final approval by the City Council, including all CEQA review, the
voters must then approve the Project.
DEBT ADMINISTRATION
The City accounts for general debt service under the following funds in the financial
statements: the Public Financing Authority (PFA) Debt Service Fund and the Financing
Authority (FA) Debt Service Fund. Sources of revenues for retirement of outstanding bonded
indebtedness include general property and sales taxes.
In October 2017, the FA issued the 2017 Lease Revenue Bonds that refinanced the PFA Series
2007 Certificates of Participation (COP) and provided partial funding for the Lion’s Park,
Donald Dungan Library and Neighborhood Community Center project. Standard & Poor’s rated
the 2017 bonds AA+ upon initial issuance. On November 3, 2020, Standards and Poor’s
affirmed the 2017 bonds’ AA+ long-term rating with a stable outlook. According to the final
report, S&P “reviewed governance risks and consider them better than the sector standard
because of the City's very strong management profile with strong financial policies and
practices, and successful economic development efforts.”
The City continuously reviews existing debt for refunding possibilities to lower total debt
service requirements. The City has also adopted a comprehensive set of debt policies covering
all aspects of debt issuance in order to consolidate information for debt obligations and
maintain or improve its good credit standing.
vii
City of Costa Mesa
List of Principal Officials
June 30, 2020
Mayor
Katrina Foley
City Council
Andrea Marr
Manuel Chavez
Loren Gameros
Jeff Harlan
Don Harper
Arlis Reynolds
City Manager -------------------------------------- --Lori Ann Farrell Harrison
Assistant City Manager ------------------------------------------ --Susan Price
City Attorney (Contract) -------------------------------- Kimberly Hall Barlow
Economic and Development Services Director ------------------- Jennifer Le
Finance Director -------------------------------------------------- Carol Molina
Information Technology Director ----------------------------------- Steve Ely
Parks and Community Services Director ----------------------- Jason Minter
Public Services Director ------------------------------------ Raja Sethuraman
Fire Chief ---------------------------------------------------------- Dan Stefano
Police Chief -------------------------------------------------------- Bryan Glass
CITY OF COSTA MESA, CALIFORNIA
City of Costa Mesa, California
Organization Chart
Visit our website at www.costamesaca.gov
Citizens of Costa Mesa
City Council
City AttorneyParks, Arts & Community
Services Commission
Council Appointed
Committees
and Commissions
Planning
Commission0.53"0.48"
0.02"
Mayor and
Council Members
City Manager
Administration
City Clerk
Human Resources
Risk Management
Contracted
Administration
Engineering Services
Transportation Services
Maintenance Services
Development Services Finance
$
Parks & Community
Services
Administration
Planning
Building Safety
Housing and Community Development
Community Improvement
Administration
Financial Operations
Successor Agency
Information
Technology
Fire Public Services Police
Administration
Operations/EMS
Prevention
Police Administration
Police Field Operations
Police Support Services
Recreation
Animal Services
Homeless Program
viii
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Costa Mesa
California
For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2019
Executive Director/CEO
ix
INDEPENDENT AUDITOR’SREPORTFINANCIAL REPORTCOMPREHENSIVE ANNUAL
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
The Honorable Mayor and
Members of the City Council
of the City of Costa Mesa
Costa Mesa, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each
major fund, and the aggregate remaining fund information of the City of Costa Mesa (the
City), as of and for the year ended June 30, 2020 and the related notes to the basic financial
statements, which collectively comprise the City’s basic financial statements as listed in the
table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States
of America; this includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America, and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditors
consider internal control relevant to the City’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
City’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinions.
1
Opinions
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, each major fund,
and the aggregate remaining fund information of the City of Costa Mesa, as of June 30,
2020, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted
in the United States of America.
Report on Summarized Comparative Information
We have previously audited the City of Costa Mesa’s 2019 financial statements, 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
management’s discussion and analysis, the pension and OPEB schedules, and the budgetary
comparison schedules 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.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements
that collectively comprise the City’s basic financial statements. The introductory section,
combining and individual fund financial statements and schedules, and statistical section
are presented for purposes of additional analysis and are not a required part of the basic
financial statements.
The supplementary section is the responsibility of management and was derived from and
relates directly to the underlying accounting and other records used to prepare the basic
financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting
and other records used to prepare the basic financial statements or to the basic financial
2
statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the
supplementary section is fairly stated in all material respects in relation to the basic financial
statements as a whole.
The introductory and statistical sections have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express
an opinion or provide any assurance on them.
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 City’s internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters. The purpose of that report is to describe
the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City’s internal control
over financial reporting and compliance.
Irvine, California
December 21, 2020
3
MANAGEMENT’S DISCUSSIONAND ANALYSISFINANCIAL REPORTCOMPREHENSIVE ANNUAL
MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the City of Costa Mesa (City), we offer readers of the City’s financial statements
this narrative overview and analysis of the financial activities for the fiscal year ended June 30,
2020. We encourage all readers to consider information presented here in conjunction with
additional information that we have furnished in our letter of transmittal, which can be found on
pages i–vi of this report.
FINANCIAL HIGHLIGHTS
Assets and deferred outflows of resources of the City’s primary government exceeded its
liabilities and deferred inflows of resources at the close of fiscal year 2020 by $21.8 million (net
position). Of this amount, $251.4 million (unrestricted net position deficit) primarily resulted
from implementations of Governmental Accounting Standards Board (GASB) Statement Nos.
68, 71 and 73 for pensions, and GASB Statement No. 75 for Postemployment Benefit Other
than Pensions (OPEB). These statements established standards for measuring and recognizing
liabilities for defined benefit plans.
In the government-wide financial statements, total net position decreased by $6.9 million from
the prior fiscal year total of $28.7 million primarily due to pension and OPEB accounting.
In the fund financial statements, the governmental funds reported a combined ending fund
balance of $102.3 million, an increase of $2.9 million in comparison with the prior year total of
$99.4 million.
At the end of fiscal year 2020, the General Fund’s unassigned fund balance was $18.8 million
or 15 percent of general fund expenditures of $126.8 million. Unassigned fund balance may be
used to meet the government’s ongoing obligations.
At June 30, 2020, the City reported $304.7 million in pension liabilities and $58.9 million in
OPEB liabilities.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the basic financial statements
which are comprised of three components: 1) government-wide financial statements, 2) fund
financial statements, and 3) notes to the basic financial statements. This report also contains other
required supplementary information in addition to the basic financial statements themselves.
Government-Wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview
of the City’s finances, in a manner similar to a private-sector business.
The statement of net position presents information on all assets, deferred outflows of resources,
liabilities, and deferred inflows of resources, with difference between assets/deferred outflows of
resources and liabilities/deferred inflows of resources reported as net position. Over time, increases
or decreases in net position may serve as a useful indicator of whether the financial position of the
City is improving or deteriorating.
The statement of activities presents information to show how the government’s net position
changed during the most recent fiscal year. All changes in net position are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this statement for some items that will result in cash
flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
4
Both government-wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions
that are intended to recover all or a significant portion of their costs through user fees and charges
(business-type activities). Governmental activities include general government, protection of
persons and property, community programs, public services, and interest on long-term debt. The
City has no business-type activities or discretely presented component units.
The basic government-wide financial statements can be found on pages 15-16 of this report.
Fund Financial Statements
A fund is a grouping of related accounts used to maintain control over resources that have been
segregated for specific activities or objectives. The City, like other state and local governments,
uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. All of the City’s funds can be divided into three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental Funds
Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources available
at the end of the fiscal year. Such information may be useful in evaluating a government’s near-
term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By
doing so, readers may better understand the long-term impact of the government’s near-term
financing decisions. Both the governmental funds balance sheet and statement of revenues,
expenditures, and changes in fund balances provide reconciliations to facilitate this comparison
between governmental funds and governmental activities.
The City maintains 26 individual governmental funds. Information is presented separately in the
governmental funds balance sheet and statement of revenues, expenditures, and changes in fund
balances for the General, Capital Improvements, Gas Tax, Disaster, and Government Grants funds,
all of which are considered to be major funds. Data from the other 21 governmental funds are
combined into a single, aggregated presentation. Individual fund data for each of these nonmajor
governmental funds is provided in the form of combining statements elsewhere in this report.
The City adopts an annual operating and capital budget for its General, Special Revenue, and Capital
Projects funds. Budgetary comparison statements have been provided for these fund types to
demonstrate compliance with the budget.
The basic governmental fund financial statements can be found on pages 18-23 of this report.
Proprietary Funds
The City maintains one type of proprietary fund, internal service funds. Internal service funds are
an accounting device used to accumulate and allocate costs internally among various City functions.
The City uses internal service funds to account for equipment replacement, self-insurance (workers’
compensation, general liability, unemployment), and information technology replacement
functions. Because there are no business-type functions, they have been included within
governmental activities in the government-wide financial statements.
5
Proprietary funds provide the same type of information as government-wide financial statements,
only in more detail. Proprietary fund financial statements provide separate information for the
Equipment Replacement, Self-Insurance, and Information Technology Replacement funds, all of
which are considered to be nonmajor funds. The internal service funds are combined into a single,
aggregated presentation in the proprietary fund financial statements. Individual fund data for each
nonmajor internal service funds is provided in the form of combining statements in the
supplementary schedules section of this report.
The basic proprietary fund financial statements can be found on pages 24-26 of this report.
Fiduciary Funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the
government. Fiduciary funds are not reflected in the government-wide financial statements because
resources of these funds are not available to support the City’s own programs and services. The
accounting method used for fiduciary funds is much like that used for proprietary funds. The basic
fiduciary fund financial statements can be found on page 27-28 of this report.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of data provided
in the government-wide and fund financial statements. The notes to the basic financial statements
can be found on pages 29-70 of this report.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents
certain required supplementary information concerning the City. Required supplementary
information can be found on pages 71-84 of this report.
The combining statements referred to earlier in connection with nonmajor governmental funds and
internal service funds are presented immediately following the required supplementary information
section. Combined and individual fund statements and schedules can be found on pages 88-119 of
this report.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
City assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources
by $21.8 million at June 30, 2020, a decrease of $6.9 million from 2019.
As in previous years, the City’s net position continued to reflect the impact from implementations
of GASB Statements No. 68, 71 and 73 for pension and GASB 75 for OPEB, all of which account for
the City’s defined benefit liabilities. The City’s total defined benefit liability is estimated at $363.6
million on the Statement of Net Position, an increase of $14.8 million comparing to the previous
year.
Another significant portion of the City’s total net position reflects its investment in capital assets
(e.g., land, buildings, machinery, and equipment), less related outstanding debt used to acquire
assets that are still in service. The City uses these capital assets to provide services to citizens;
consequently, these assets are not available for future spending. Although the City’s investment in
its capital assets is reported net of related debt, it should be noted that resources needed to repay
this debt must be provided from other sources, since the capital assets themselves cannot be used
to liquidate these liabilities.
6
At the end of fiscal year 2019-20, the City continued to report positive balances in two out of three
categories of net position for the government as a whole, as well as for its separate governmental
activities. However, the unrestricted net position reported a negative balance of $251.4 million
primarily due to implementations of pension and OPEB accounting standards.
Percent
Increase/ Increase/
June 30, 2020 June 30, 2019 (Decrease) (Decrease)
ASSETS:
Current and other assets $139,065,874 $129,997,146 $ 9,068,728 6.98%
277,554,449 279,007,696 (1,453,247) -0.52%
Total assets 416,620,323 409,004,842 7,615,481 1.86%
Deferred outflows of resources 47,770,801 47,571,214 199,587 0.42%
LIABILITIES:
Current and other liabilities 16,028,238 12,579,329 3,448,909 27.42%
Long-term liabilities 414,825,401 402,067,074 12,758,327 3.17%
Total liabilities 430,853,639 414,646,403 16,207,236 3.91%
Deferred inflows of resources 11,771,635 13,271,587 (1,499,952) -11.30%
NET POSITION:
Net investment in capital assets 248,815,081 248,255,931 559,150 0.23%
Restricted 24,367,869 21,880,398 2,487,471 11.37%
Unrestricted (251,417,100) (241,478,263) (9,938,837) 4.12%
Total net position $ 21,765,850 $ 28,658,066 $ (6,892,216) -24.05%
CONDENSED STATEMENT OF NET POSITION
Capital assets, net of accumulated
depreciation
7
During the fiscal year 2019-20, the City’s total net position decreased by $6.9 million.
2020 2019
REVENUES:
Program Revenues:
Charges for services 19,374,347$ 21,654,008$
Operating contributions and grants 10,576,719 9,339,283
Capital contributions and grants 6,251,484 9,142,040
General Revenues:
Taxes:
Property taxes 45,548,585 43,226,688
Sales and use taxes 55,866,831 62,689,811
Transient occupancy tax 6,587,224 8,595,417
Franchise taxes 4,822,964 5,042,551
Business tax 1,663,100 1,093,154
Other intergovernmental, unrestricted 91,674 55,343
Investment income 4,075,623 4,264,987
Miscellaneous 1,638,221 1,380,413
Total revenues 156,496,772 166,483,695
EXPENSES:
General government activities: 32,124,703 34,008,731
Protection of persons and property 96,625,585 86,440,751
Community programs 17,285,898 16,363,506
Public services 16,269,612 27,937,004
Interest on long-term debt 1,083,190 1,138,694
Total expenses 163,388,988 165,888,686
Change in net position (6,892,216) 595,009
NET POSITION, BEGINNING OF YEAR 28,658,066 28,063,057
NET POSITION, END OF YEAR $ 21,765,850 $ 28,658,066
CHANGES IN NET POSITION
Governmental Activities
8
Governmental Activities
Governmental activities decreased the City’s net position by $6.9 million. The Coronavirus (COVID-
19) pandemic that started at the beginning of 2020 forced government agencies worldwide to issue
business closure and shelter-at-home orders to protect life and safety. As a result, many of the
City’s revenue suffered unprecedented losses. Key factors to the decrease in net position included:
Sales tax decreased by $6.8 million or 10.9 percent. The worldwide pandemic has resulted
in large number of layoffs and significantly curtailed consumer spending. Costa Mesa is
primarily based on retail commercial business, sales tax from which is the City’s largest
revenue source. The State’s shelter-in-place orders resulting from COVID-19 has drastically
affected sales tax revenue.
Transient occupancy tax decreased by $2 million or 23.4 percent. This is due to a decline in
tourism, travel, conferences, and conventions directly correlated to the worldwide pandemic.
Charges for services decreased by $2.3 million or 10.5 percent. The pandemic triggered
business closures and state-mandated restrictions. As a result, certain service requests
decreased and some City program and activities were cancelled.
Other one-time revenue decrease that was not pandemic-related is capital contributions and
grants. The decrease totaled $2.9 million or 31.6 percent primarily due to timing of Measure
M regional grants.
Operating contributions and grants increased by $1.2 million or 13.2 percent primarily due
to one-time CARES Act grants for pandemic related mitigation and preventions.
Other revenue increase that is not pandemic-related is property tax revenue, which
increased by $2.3 million or 5.4 percent as local housing market value continues to
appreciate.
Overall revenue decreased by $10 million or 6 percent compared to fiscal year 2018-19.
Overall expenses decreased by $2.5 million or 1.5 percent from fiscal year 2018-19. In
response to COVID revenue losses, the City implemented multi-pronged operating cost
reduction measures. At the same time, the City incurred significant expenses for COVID
related protection and safety actions, resulting in a slight decrease to overall expenses.
FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
As was noted earlier, the City uses fund accounting to ensure and demonstrate compliance with
professional standards promulgated by oversight agencies and also due to finance-related legal
requirements.
Governmental Funds
The focus of the City’s governmental funds is to provide information on near-term inflows, outflows,
and balances of spendable resources. Such information is useful in assessing financing
requirements. In particular, unassigned fund balance may serve as a useful measure of a
government’s net resources available for spending at the end of the fiscal year.
As of the end of fiscal year 2019-20, the City’s governmental funds reported combined ending fund
balance of $102.3 million, an increase of $2.9 million in comparison with the prior fiscal year fund
balance of $99.4 million. Of this total amount:
9
$0.4 million represents nonspendable fund balance which includes amounts that cannot be
used because they are either not spendable in form or legally or contractually required to
remain intact.
$25.7 million represents restricted fund balance which includes amounts that can be spent
only for specific purposes stipulated by external sources or through enabling legislation.
$25.1 million represents committed fund balance which includes amounts that can be used
only for specific purposes determined by a formal action of the City Council. It includes
legislation (City Council action) that can only be overturned by a subsequent council action
requiring a voting consensus.
$34.6 million represents assigned fund balance which includes amounts that are designated
or expressed by the City Council for certain purposes but do not require formal actions like
resolutions or ordinances.
The remaining $16.5 million constitutes unassigned fund balance.
The General Fund is the primary operating fund of the City. At the end of fiscal year 2019-20, the
General Fund’s fund balance increased by $0.2 million. While the total fund balance amounted to
$53.5 million, the unassigned fund balance was $18.8 million. As discussed in previous sections,
the worldwide COVID pandemic significantly impacted City key revenues and expenditures:
Sales tax revenues decreased by $9 million or 14 percent from fiscal year 2018-19. Of this
amount, $6.8 million decrease was attributed to COVID impact. The remaining variance was
due to an one-time $2 million sales tax revenue catch-up received in 2018-19.
Transient occupancy tax decreased by $2 million or 23.4 percent as a result of the pandemic.
Property tax increased by $2.4 million or 5.5 percent.
Overall, total revenues in the General Fund decreased by $7.3 million or 5.1 percent.
Protection of person and property expenditures increased by $4.4 million or 5.7 percent
from fiscal year 2018-19. This increase is primarily due to public safety responses and
mitigation costs resulting from the pandemic.
Community programs and public services expenditures decreased by $2.2 million in total as
the City implemented cost reduction measures in response to revenue losses from COVID.
Overall, total expenditures in the General Fund increased by $2.2 million or 1.7 percent.
Major Funds Other Than the General Fund
The Capital Improvements Fund had $11.5 million in fund balance at the end of the fiscal year
which represents a net decrease of $0.2 million or 1.9 percent from the prior fiscal year.
The Gas Tax Fund had $11.8 million in fund balance at the end of the fiscal year which represents
a net increase of $2.8 million or 30.8 percent from the prior fiscal year.
The Disaster Fund had ($2.3) million in deficit fund balance at the end of the fiscal year. This fund
is established to account for appropriations directly related to efforts in coordinating, managing and
funding eligible response and recovery efforts associated with domestic major disasters and
emergencies. This fund was triggered in February 2020, when the City first experienced COVID
10
related events. The City continues to track all COVID mitigation expenditures and related federal
and state grants in this fund.
The Government Grants Fund has $0.06 million in fund balance at the end of the fiscal year. This
fund is established to account for receipt and disbursement of grant monies provided by federal,
state and county governmental agencies for various programs.
Proprietary Funds
The City’s proprietary funds provide the same type of information found in the government-wide
financial statements, but in more detail. The City also utilizes Internal Service Funds which are a
propriety fund type.
The unrestricted net position of the Internal Service Funds at the end of the year was $3.4 million.
Total net position increased by $2.6 million from the prior fiscal year. This increase was primarily
due to lower claims liability estimates.
GENERAL FUND BUDGETARY HIGHLIGHTS
During fiscal year 2019-20, actual revenues were $4.1 million or 2.9 percent lower than the
originally estimated and $4.4 million or 3.1 percent lower than the final adjusted budget. This is
due to the effects of the worldwide COVID pandemic.
Actual expenditures were $6.1 million or 4.6 percent less than originally estimated and $4.2 million
or 3.2 percent less than the final adjusted budget. The variance was due to cost reduction measures
implemented in response to revenue loss from COVID.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
The City’s investment in capital assets for its governmental activities (the City has no business-
type activities or discretely presented component units) as of June 30, 2020, amounted to $277.6
million net of accumulated depreciation and amortization. The investment in capital assets includes
land, building improvements and structures, landscaping and sprinklers, machinery and equipment,
intangible assets, park system and facilities, and road and storm drain infrastructure. The City’s
investment in capital assets for the current fiscal year decreased by $1.5 million. Major
infrastructure asset additions during fiscal year 2019-20 were citywide street rehabilitation for
Zones 2 and 5, Bristol Street Storm Drain Drivers, and other ongoing capital projects. Other assets
capitalized included vehicle replacements and a variety of equipment purchases. During the fiscal
year, capital assets not being depreciated increased by $4.4 million and capital assets being
depreciated decreased by $5.9 million.
11
Construction in progress as of June 30, 2020 totaled $17 million and included some of the following
projects with significant commitment balances:
Additional information on the City’s capital assets can be found in note 6 on pages 47-48 of this
report.
Long-Term Debt
At year-end, the City had two outstanding bond issues: the Public Financing Authority 2006
Revenue Refunding Bonds with an outstanding balance of $410,000; the Financing Authority 2017
Lease Revenue Bonds with an outstanding balance of $26.5 million. Additionally, the City had $21
million in other outstanding liabilities related to loans, claims and employee benefits.
Long-term liabilities had a net decrease of $2 million, primarily due to scheduled debt service
payments.
2020 2019
Land $ 34,579,306 $ 34,579,306
Land rights related to streets 29,821,224 29,821,224
Construction in progress 16,985,950 12,588,527
Building improvements and structures 59,748,311 63,096,506
Machinery and equipment 12,920,546 14,541,568
Intangibles 587,320 787,199
Park system and facilities 6,616,992 7,431,039
Infrastructure- roads 100,823,445 101,117,444
Infrastructure- storm drains 15,471,355 15,044,883
TOTALS $ 277,554,449 $ 279,007,696
Governmental Activities
CAPITAL ASSETS
(NET OF DEPRECIATION)
CONSTRUCTION PROJECT TOTAL BUDGET
SPEND TO
DATE
REMAINING
COMMITMENT
Bridge Shelter at Airway 10,050,000$ 7,255,220$ 2,794,780$
Lions Park Projects (Library, Community Center and Park) 38,923,100 34,025,896 4,897,204
Citywide Street Maintenance 7,712,298 2,998,332 4,713,966
Citywide Storm Drain Improvements 2,484,388 185,708 2,298,680
Merrimac Way Bicycle Facilities 2,030,000 - 2,030,000
TOTALS 61,199,786$ 44,465,156$ 16,734,630$
CONSTRUCTION COMMITMENTS
12
Additional information on the City’s long-term debt can be found in notes 7 through 8 on pages 48-
50 of this report.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
During fiscal year 2019-20, the local economy was confronted with the COVID-19 pandemic, leading
to business closures and job losses. As a result, the City is experiencing a significant decrease in
revenue sources, as well as increased expenditures in order to protect the residents and City staff
from the infectious virus. Although the City continues to be impacted by the reduction of sales tax
and other related revenues associated with the various stages of the State’s stay-at-home order
due to the worldwide pandemic, the mentioned on-going developments and continued businesses
innovations will continue to offset some of the losses. Therefore, the City is well poised to continue
to proactively manage the financial challenges, as demonstrated with the immediate
implementation of the FY 2019-20 year-end cost containment measures that were put into place at
the end of March 2020 that resulted in an essentially positive year-end balance in the General Fund.
Further, the fiscal year 2020-21 budget reflects a multi-faceted approach for addressing the
estimated deficit, which defunds 13.75 full-time vacant positions citywide for all or a portion of next
fiscal year, reduces certain non-essential services, includes the establishment of a five percent
employee furlough, and utilizes emergency reserves.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City’s finances for all who have
an interest in the government’s funding streams and overall fiscal conditions. This report and other
financial related information can be found on the City’s website www.costamesaca.gov. Questions
concerning any information provided in this report or requests for additional financial information
should contact:
by mail: Finance Department, City of Costa Mesa, P.O. Box 1200, Costa Mesa, California,
92628-1200
by e-mail: financeadmin@costamesaca.gov
by phone: 714-754-5243
2020 2019
Bonds Payable 30,222,813$ 32,170,580$
Other Liabilities 21,019,797 21,102,059
TOTALS 51,242,610$ 53,272,639$
OUTSTANDING DEBT
Governmental Activities
13
GOVERNMENT-WIDEFINANCIAL STATEMENTSFINANCIAL REPORTCOMPREHENSIVE ANNUAL
GOVERNMENT-WIDE FINANCIAL STATEMENTS
GOVERNMENT-WIDE FINANCIAL STATEMENTS
The Statement of Net Position and the Statement of Activities report information about the City as
a whole and its activities. These statements include all assets, deferred outflows of resources,
liabilities, deferred inflows of resources, and net position using the accrual basis of accounting,
which is similar to accounting used by most private-sector companies. All current year revenues
and expenses are taken into account regardless of when cash is received or paid.
Statement of Net Position
The Statement of Net Position presents information on all of the City’s assets, deferred outflows of
resources, liabilities, and deferred inflows of resources, with the difference between assets/deferred
outflows and liabilities/deferred inflows reported as net position. Over time, increases or decreases
in net position may serve as a useful indicator of whether the financial position of the City is
improving or deteriorating.
Statement of Activities
The Statement of Activities presents information to show how the City’s net position changed during
the most recent fiscal year. All changes in net position are reported as soon as the underlying
event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues
and expenses are reported in this statement for some items that will only result in cash flows in
future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
14
Governmental Activities
2020 2019
Assets:
Cash and investments (note 2)119,401,427$ 106,378,857$
Cash and investments with fiscal agent (note 2)2,011,305 3,008,453
Due from other governments 13,093,504 16,006,001
Accounts receivable 2,284,298 2,460,897
Interest receivable 529,414 620,482
Loans receivable, net (note 5)862,534 862,533
Rent receivable 425,221 260,189
Inventories 164,782 158,366
Prepaid items 293,389 241,368
Capital assets (note 6):
Nondepreciable 81,386,480 76,989,057
Depreciable, net of accumulated depreciation 196,167,969 202,018,639
Total assets 416,620,323 409,004,842
Deferred outflows of resources:
Deferred outflows related to pensions (note 11)41,239,600 45,738,895
Deferred outflows related to OPEB (note 14)6,531,201 1,832,319
Total deferred outflows of resources 47,770,801 47,571,214
Liabilities:
Accounts payable 7,432,608 6,643,856
Accrued liabilities 3,080,801 3,207,448
Accrued interest payable 301,975 322,072
Retentions payable 1,734,890 1,798,816
Deposits payable 644,495 607,137
Unearned revenue 2,833,469 -
Long-term liabilities:
Portion due within one year (note 7)7,666,000 6,322,365
Portion due beyond one year (note 7)43,576,610 46,950,274
OPEB liability (note 14)58,917,480 53,202,676
Police retirement 1% supplemental liability (note 12)2,364,522 2,297,253
Net pension liability (note 11)302,300,789 293,294,506
Total liabilities 430,853,639 414,646,403
Deferred inflows of resources:
Deferred inflows related to pensions (note 11)11,548,022 11,504,588
Deferred inflows related to OPEB (note 14)223,613 1,766,999
Total deferred inflows of resources 11,771,635 13,271,587
Net position:
Net investment in capital assets 248,815,081 248,255,931
Restricted for:
Protection of persons and property 1,628,892 872,898
Community programs 5,687,227 6,162,341
Public services 17,051,750 14,845,159
Unrestricted (251,417,100) (241,478,263)
Total net position 21,765,850$ 28,658,066$
CITY OF COSTA MESA, CALIFORNIA
Statement of Net Position
June 30, 2020
(With Comparative Data for Prior Year)
See notes to financial statements
15
Program Revenue
Operating Capital
Charges for Contributions Contributions
Functions/programs Expenses Services and Grants and Grants 2020 2019
Governmental activities:
General government 32,124,703$ -$ 1,183,496$ -$ (30,941,207)$ (34,008,731)$
Protection of persons
and property 96,625,585 7,461,872 2,875,046 - (86,288,667) (76,772,121)
Community programs 17,285,898 4,816,413 1,677,786 278,521 (10,513,178) (5,480,882)
Public services 16,269,612 7,096,062 4,840,391 5,972,963 1,639,804 (8,352,927)
Interest on long-term debt 1,083,190 - - - (1,083,190) (1,138,694)
Total governmental activities 163,388,988$ 19,374,347$ 10,576,719$ 6,251,484$ (127,186,438) (125,753,355)
General revenues:
Taxes:
Property taxes 45,548,585 43,226,688
Sales and use taxes 55,866,831 62,689,811
Transient occupancy tax 6,587,224 8,595,417
Franchise taxes 4,822,964 5,042,551
Business tax 1,663,100 1,093,154
Other intergovernmental, unrestricted 91,674 55,343
Investment income 4,075,623 4,264,987
Miscellaneous 1,638,221 1,380,413
Total general revenues 120,294,222 126,348,364
Change in net position (6,892,216) 595,009
Net position - beginning of year 28,658,066 28,063,057
Net position - end of year 21,765,850$ 28,658,066$
Changes in Net Position
Revenue and
Net (Expense)
CITY OF COSTA MESA, CALIFORNIA
Statement of Activities
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to financial statements
16
FUND FINANCIALSTATEMENTSFINANCIAL REPORTCOMPREHENSIVE ANNUAL
FUND FINANCIAL STATEMENTS
GOVERNMENTAL FUNDS
Major Governmental Funds
GENERAL FUND
The General Fund must be classified as a major fund in the accompanying fund financial
statements and is used to account for all general revenues of the City not specifically levied or
collected for some special purpose, and for expenditures related to the rendering of general
services by the City. The General Fund is used to account for all resources not required to be
accounted for in another fund.
SPECIAL REVENUE FUNDS
Gas Tax Fund
Established to account for the receipt and disbursement of funds required to be used for construction
and maintenance of the City’s road network system. Financing is provided by the City’s share of
State gasoline taxes, including allocations from the Highway Users Tax Account (HUTA) and the
Road Maintenance and Rehabilitation Account (RMRA).
Disaster Fund
Established to account for receipt and disbursement of Federal and State grant monies received for
COVID-19 mitigation and relief efforts.
Government Grants Fund
Established to account for receipt and disbursement of grant monies provided by Federal, State,
and County governmental agencies for various programs.
CAPITAL PROJECTS FUNDS
Capital Improvements Fund
Established to account for the construction of capital facilities financed by the City’s General Fund
and various governmental grants.
Nonmajor Governmental Funds
Nonmajor governmental funds constitute all other governmental funds which include ten Special
Revenue Funds, two Debt Service Funds and nine Capital Projects Funds.
17
Disaster
General Gas Tax Fund
Cash and investments 44,734,647$ 11,575,696$ -$
Cash and investments with fiscal agents - 22,524 -
Due from other governments 9,387,795 308,552 1,111,022
Accounts receivable, net 2,167,564 - -
Interest receivable 269,509 44,084 -
Loans receivable, net - - -
Rent receivable 425,221 - -
Due from other funds (note 3)2,966,367 - -
Inventories 68,800 - -
Prepaid items 293,389 - -
Total assets 60,313,292$ 11,950,856$ 1,111,022$
Accounts payable 3,047,805$ 45,942$ 353,502$
Accrued liabilities 3,006,747 5,594 37,437
Retentions payable - 90,663 -
Deposits payable 178,712 - -
Due to other funds (note 3)- - 2,914,057
Unearned revenue - - -
Total liabilities 6,233,264 142,199 3,304,996
Unavailable revenue 616,360 30,837 115,406
Non-spendable:
Prepaid items 293,389 - -
Inventories 68,800 - -
Restricted:
Protection of persons and property - - -
Community programs - - -
Public services - 11,777,820 -
Debt service - - -
Committed 25,125,000 - -
Assigned 9,151,062 - -
Unassigned 18,825,417 - (2,309,380)
Total fund balances 53,463,668 11,777,820 (2,309,380)
Total liabilities, deferred inflows of
resources, and fund balances 60,313,292$ 11,950,856$ 1,111,022$
Liabilities:
Deferred inflows of resources:
Fund balances (note 10):
Assets:
Special Revenue
CITY OF COSTA MESA, CALIFORNIA
Balance Sheet
Governmental Funds
June 30, 2020
(With Comparative Data for Prior Year)
See notes to financial statements
18
Special Revenue Capital Projects Nonmajor
Government Capital Governmental
Grants Improvements Funds 2020 2019
2,968,419$ 12,842,134$ 27,645,943$ 99,766,839$ 89,628,306$
- 17,460 1,971,321 2,011,305 3,008,453
- 1,398,787 887,348 13,093,504 16,006,001
- - 110,707 2,278,271 2,449,826
11,283 25,436 104,221 454,533 535,004
- - 862,534 862,534 862,533
- - - 425,221 260,189
- - - 2,966,367 181,374
- - - 68,800 44,655
- - - 293,389 235,540
2,979,702$ 14,283,817$ 31,582,074$ 122,220,763$ 113,211,881$
82,818$ 2,035,503$ 1,314,309$ 6,879,879$ 6,190,242$
- - 18,448 3,068,226 3,198,793
- 187,213 1,457,014 1,734,890 1,798,816
- - 465,783 644,495 607,137
- - 52,310 2,966,367 125,103
2,833,469 - - 2,833,469 -
2,916,287 2,222,716 3,307,864 18,127,326 11,920,091
- 573,745 454,975 1,791,323 1,913,089
- - - 293,389 235,540
- - - 68,800 44,655
63,415 - 1,446,931 1,510,346 755,560
- - 5,636,628 5,636,628 5,365,265
- - 5,985,821 17,763,641 14,694,320
- - 765,715 765,715 938,687
- - - 25,125,000 23,625,000
- 11,487,356 13,987,280 34,625,698 33,277,895
- - (3,140) 16,512,897 20,441,779
63,415 11,487,356 27,819,235 102,302,114 99,378,701
2,979,702$ 14,283,817$ 31,582,074$ 122,220,763$ 113,211,881$
Totals
See notes to financial statements
19
Fund balances of governmental funds 102,302,114$
Amounts reported for governmental activities in the Statement of Net Position are
different because:
Capital Related Items
When capital assets (property, plant, equipment) for governmental activities are
purchased or constructed, the cost of those assets are reported as expenditures in the
governmental funds. However, the Statement of Net Position includes those capital
assets among the assets of the City as a whole:
Cost of capital assets 632,177,302
Accumulated depreciation/amortization (362,223,882)
Long-Term Debt Transactions
Long-term liabilities applicable to the City'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:
Bonds payable (26,935,000)
Premium on bonds (3,287,813)
Loans payable (128,261)
Employee benefits leave payable (5,036,540)
Accrued Interest
Accrued liabilities in the Statement of Net Position differ from the amount reported
in governmental funds are due to accrued interest on outstanding debt payable.(301,975)
Internal Service Funds
Internal Service Funds are used by management to charge the costs of certain
activities to individual City funds. The assets and liabilities of the Internal Service
Funds are included in governmental activities in the Statement of Net Position
because they primarily service governmental activities of the City.10,992,207
Deferred Inflows of Resources
Certain unavailable revenues that do not provide current financial resources
are reported as deferred inflows of resources in the funds.1,791,323
Pension and OPEB
Amounts regarding the pension plans and OPEB are as follows:
Deferred outflows of resources related to pensions 41,239,600
Deferred outflows of resources related to OPEB 6,531,201
Deferred inflows of resources related to pensions (11,548,022)
Deferred inflows of resources related to OPEB (223,613)
CalPERS pension liability (302,300,789)
OPEB liability (58,917,480)
Police 1% supplemental retirement liability (2,364,522)
Net position of governmental activities 21,765,850$
CITY OF COSTA MESA, CALIFORNIA
Governmental Funds
Reconciliation of the Balance Sheet to the Statement of Net Position
June 30, 2020
See notes to financial statements
20
Disaster
General Gas Tax Fund
Revenues:
Taxes 114,188,567$ -$ -$
Licenses and permits 5,496,049 - -
Charges for services 6,813,680 - -
Fines and forfeitures 1,400,807 - -
Intergovernmental 3,096,059 4,651,870 1,068,090
Investment income 1,578,983 399,539 -
Rental income 2,901,367 - -
Miscellaneous 974,524 10,780 -
Total revenues 136,450,036 5,062,189 1,068,090
Expenditures:
Current:
General government 29,156,496 - 1,598,046
Protection of persons and property 81,472,603 - 499,974
Community programs 9,564,688 - 709,914
Public services 6,560,001 2,290,228 569,536
Debt service:
Principal 15,392 - -
Interest and fiscal charges - - -
Total expenditures 126,769,180 2,290,228 3,377,470
Excess (deficiency) of revenues
over (under) expenditures 9,680,856 2,771,961 (2,309,380)
Other financing sources (uses):
Issuance of debt - - -
Transfer in (note 4)1,150,000 - -
Transfer out (note 4)(10,663,687) - -
Total other financing sources (uses)(9,513,687) - -
Net change in fund balances 167,169 2,771,961 (2,309,380)
Fund balances at beginning of year 53,296,499 9,005,859 -
Fund balances at end of year 53,463,668$ 11,777,820$ (2,309,380)$
Special Revenue
CITY OF COSTA MESA, CALIFORNIA
Governmental Funds
Statement of Revenues, Expenditures, and Changes in Fund Balances
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to financial statements
21
Special Revenue Capital Projects
Nonmajor
Government Capital Governmental
Grants Improvements Funds 2020 2019
-$ -$ 275,032$ 114,463,599$ 123,969,423$
- - - 5,496,049 5,104,022
- - 2,676,147 9,489,827 9,990,454
- - 667,077 2,067,884 2,468,993
286,326 1,327,189 4,576,758 15,006,292 16,646,740
63,462 304,698 1,047,716 3,394,398 3,616,606
- - 664,888 3,566,255 3,479,527
- 1,076,110 100,219 2,161,633 3,226,941
349,788 2,707,997 10,007,837 155,645,937 168,502,706
- 53,640 - 30,808,182 29,219,530
286,373 208,371 471,859 82,939,180 78,762,212
- 60,175 3,962,360 14,297,137 13,265,742
- 5,863,654 5,223,256 20,506,675 50,429,478
- - 1,800,000 1,815,392 1,795,261
- - 1,230,958 1,230,958 1,298,315
286,373 6,185,840 12,688,433 151,597,524 174,770,538
63,415 (3,477,843) (2,680,596) 4,048,413 (6,267,832)
- - - - 153,914
- 4,402,680 5,258,547 10,811,227 15,899,228
- (1,150,000) (122,540) (11,936,227) (21,148,507)
- 3,252,680 5,136,007 (1,125,000) (5,095,365)
63,415 (225,163) 2,455,411 2,923,413 (11,363,197)
- 11,712,519 25,363,824 99,378,701 110,741,898
63,415$ 11,487,356$ 27,819,235$ 102,302,114$ 99,378,701$
Totals
See notes to financial statements
22
Net changes in fund balances - total governmental funds 2,923,413$
Amounts reported for governmental activities in the Statement of Activities are
different because:
Capital Related Items
When capital assets for governmental activities are purchased or constructed,
the resources expended for those assets are reported as expenditures in
governmental funds. However, in the Statement of Activities, the cost of those
assets is allocated over their estimated usefull lives and reported as depreciation
expense. As a result, fund balance decreases by the amount of financial resources
used, whereas net position decreases by the amount of depreciation expense
charged for the year.
Capital outlay 12,335,023
Depreciation expense (13,340,739)
Other capital asset related items (3,300)
Long-Term Debt Transactions
Some expenses reported in the Statement of Activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds. Repayment of debt service is reported as an expenditure in
governmental funds and, thus, has the effect of reducing fund balances because
current financial resources have been used. For the City as a whole, however,
the principal payments reduce the liabilities in the Statement of Net Position and do
not result in an expense in the Statement of Activities.
Net changes in employee benefits leave payable (143,721)
Principal payments - bonds 1,800,000
Principal payments - loans payable 15,392
Amortization of bond premium 147,767
Pension and OPEB
Pension and OPEB expense reported in the governmental funds include the actual
contributions. In the Statement of Activities, pension and OPEB expenses include
the change in net pension and opeb liabilities and the related changes in pension and
OPEB amounts for deferred outflows of resources and deferred inflows of resources.
of resources and deferred inflows of resources.
Net change in pension liability (13,616,281)
Net change in OPEB liability 527,464
Accrued Interest
Recording of the current year change of accrued interest on outstanding debt payable.20,097
Internal Service Funds
Internal Service Funds are used by management to charge the costs of certain
activities to individual City funds. The adjustments for Internal Service Funds "close"
those funds by charging additional amounts to participating governmental activities to
completely cover the Internal Service Funds' costs for the year.2,564,435
Deferred Inflows of Resources
Certain unavailable revenues that do not provide current financial
resources are reported as deferred inflows of resources in the funds.(121,766)
Change in net position of governmental activities (6,892,216)$
CITY OF COSTA MESA, CALIFORNIA
Governmental Funds
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balances to the Statement of Activities
Year ended June 30, 2020
See notes to financial statements
23
2020 2019
Assets:
Current assets:
Cash and investments 19,634,588$ 16,750,551$
Accounts receivable 6,027 11,071
Interest receivable 74,881 85,478
Prepaid expenses - 5,828
Inventories 95,982 113,711
Total current assets 19,811,478 16,966,639
Capital Assets:
Construction in progress 391,214 -
Motorized equipment 14,323,172 14,194,370
Other equipment 2,846,895 2,836,671
Accumulated depreciation (9,960,252) (8,985,781)
Net capital assets 7,601,029 8,045,260
Total assets 27,412,507 25,011,899
Liabilities:
Current liabilities:
Accounts payable 552,729 453,614
Accrued liabilities 12,575 8,655
Due to other funds - 56,271
Claims payable 2,299,557 905,682
Total current liabilities 2,864,861 1,424,222
Long-term liabilities:
Claims payable 13,555,439 15,159,905
Total long-term liabilities 13,555,439 15,159,905
Total liabilities 16,420,300 16,584,127
Net Position:
Investment in capital assets 7,601,029 8,045,260
Unrestricted 3,391,178 382,512
Total net position 10,992,207$ 8,427,772$
Governmental Activities -
Internal Service Funds
CITY OF COSTA MESA, CALIFORNIA
Proprietary Funds
Statement of Net Position
(With Comparative Data for Prior Year)
June 30, 2020
See notes to financial statements
24
2020 2019
Operating revenues:
Charges for services 7,875,941$ 8,438,850$
Total operating revenues 7,875,941 8,438,850
Operating expenses:
Allocated administrative costs 1,488,451 1,034,256
Depreciation 1,279,612 1,052,361
Fuel and repair parts 1,061,932 1,282,424
Materials and supplies 30,602 270,346
Claims and premiums 3,550,804 10,576,593
Total operating expenses 7,411,401 14,215,980
Operating income (loss)464,540 (5,777,130)
Nonoperating revenues (expenses):
Investment income 694,080 648,383
Contributions 278,521 -
Gain/(loss) on sale of equipment 2,294 (17,263)
Total nonoperating revenues (expenses) 974,895 631,120
Income (loss) before transfers 1,439,435 (5,146,010)
Transfers in (note 4)1,125,000 5,249,279
Change in net position 2,564,435 103,269
Net position at beginning of year 8,427,772 8,324,503
Net position at end of year 10,992,207$ 8,427,772$
Internal Service Funds
CITY OF COSTA MESA, CALIFORNIA
Proprietary Funds
Statement of Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2020
Governmental Activities -
(With Comparative Data for Prior Year)
See notes to financial statements
25
2020 2019
Cash flows from operating activities:
Cash received from customers and user departments 7,880,985$ 8,495,185$
Cash payments to suppliers for goods and services (5,252,269) (10,499,735)
Cash payments to employees for services (1,206,551) (714,832)
Net cash provided by (used for) operating activities 1,422,165 (2,719,382)
Cash flows from noncapital financing activities:
Cash received from other funds 1,125,000 5,305,550
Cash paid to other funds (56,271) -
Net cash provided by (used for)
noncapital financing activities 1,068,729 5,305,550
Cash flows from capital and related financing activities:
Cash received from disposal of assets 36,198 52,562
Acquisition of capital assets (347,732) (1,733,088)
Net cash provided by (used for) capital
and related financing activities (311,534) (1,680,526)
Cash flows from investing activities:
Investment income received 704,677 598,850
Net cash provided by (used for) investing activities 704,677 598,850
Net increase (decrease) in cash and cash equivalents 2,884,037 1,504,492
Cash and cash equivalents at beginning of year 16,750,551 15,246,059
Cash and cash equivalents at end of year 19,634,588$ 16,750,551$
Reconciliation of operating income (loss) to net cash
provided by (used for) operating activities:
Operating income (loss)464,540$ (5,777,130)$
Adjustments to reconcile operating income (loss)
to net cash provided by (used for) operating activities:
Depreciation 1,279,612 1,052,361
(Increase) decrease in inventories 17,729 16,736
(Increase) decrease in accounts receivable 5,044 62,163
(Increase) decrease in prepaid items 5,828 (5,828)
Increase (decrease) in accounts payable (143,917) (100,764)
Increase (decrease) in accrued liabilities 3,920 (2,846)
Increase (decrease) in claims payable (210,591) 2,035,926
Net cash provided by (used for) operating activities 1,422,165$ (2,719,382)$
There were no noncash investing, capital and financing activities during fiscal years ended
June 30, 2020 and 2019, except for a donation of $278,521 worth of trailers that was recorded
in the Equipment Replacement Internal Service Fund in fiscal year 2020.
Internal Service Funds
Governmental Activities -
CITY OF COSTA MESA, CALIFORNIA
Proprietary Funds
Statement of Cash Flows
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to financial statements
26
Successor Agency
to the City of
Costa Mesa
Redevelopment
Agency
Private Purpose Agency
Trust Fund Funds
Assets:
Cash and cash investments (note 2)1,035,837$ 2,396,350$
Accounts receivable - 49,965
Total assets 1,035,837 2,446,315
Liabilities:
Accounts payable - 309,633
Loan from City (note 20)6,212,950 -
Deposits payable - 2,136,682
Total liabilities 6,212,950 2,446,315$
Net Position:
Held in trust for Successor Agency (5,177,113)$
CITY OF COSTA MESA, CALIFORNIA
Fiduciary Funds
Statement of Net Position
June 30, 2020
See notes to financial statements
27
2020 2019
Additions:
Property tax 1,270,135$ 1,792,343$
Total revenues 1,270,135 1,792,343
Deductions:
Administrative expenses 1,500 5,250
Interest expenses 156,085 195,866
Total expenses 157,585 201,116
Change in net position 1,112,550 1,591,227
Net position at beginning of year (6,289,663) (7,880,890)
Net position at end of year (5,177,113)$ (6,289,663)$
Private Purpose Trust Fund
Redevelopment Agency
to the City of Costa Mesa
Successor Agency
CITY OF COSTA MESA, CALIFORNIA
Fiduciary Funds
Statement of Changes in Net Position
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to financial statements
28
NOTES TO THE FINANCIALSTATEMENTSFINANCIAL REPORTCOMPREHENSIVE ANNUAL
NOTES TO THE FINANCIAL STATEMENTS
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(1) Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies of the City of Costa Mesa,
California (City):
(a) Description of Reporting Entity
The City of Costa Mesa was incorporated on June 29, 1953 as a general law city under
the Government Code of the State of California. The City operates under a Council-
Manager form of government. Among services provided by the City are the following:
public works, parks and recreation, planning, community development, fire, and law
enforcement services.
As required by generally accepted accounting principles, these financial statements
present the City and its component units, entities for which the City is considered to
be financially accountable. The City is considered to be financially accountable for an
organization if the City appoints a voting majority of that organization’s governing
body and the City is either able to impose its will on that organization, or there is a
potential for that organization to provide specific financial benefits to or impose
specific financial burdens on the City. The City is also considered to be financially
accountable if an organization is fiscally dependent upon the City (i.e., it is unable
to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without
approval from the City). In certain cases, other organizations are included as
component units if the nature and significance of their relationship with the City are
such that their exclusion would cause the City’s financial statements to be misleading
or incomplete.
All of the City’s component units are considered to be blended component units.
Blended component units, although legally separate entities, are, in substance, part
of the City’s operations and so data from these units are appropriately presented as
funds of the primary government. The following organizations are considered to be
component units of the City:
Costa Mesa Public Financing Authority
The Costa Mesa Public Financing Authority (Public Financing Authority) was
established on August 20, 1990 for the purpose of financing public capital
improvements. Even though it is legally separate, it is reported as if it were part of
the City because the City Council also serves as the governing board of the Authority.
Transactions of the Public Financing Authority are reported in the Debt Service Fund.
Separate financial statements of the Public Financing Authority can be obtained at
City Hall.
Costa Mesa Housing Authority
The Costa Mesa Housing Authority (Housing Authority) was created pursuant to the
State of California Health and Safety Code, Section 34176(a).The Housing Authority
promotes affordable housing for low and moderate income households within the City,
administers the homeless outreach program and operates the bridge shelter for
homeless individuals. The Housing Authority is a separate entity primarily funded by
housing loan repayments and transfers from the City. City Council members, in
29
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
separate session, serve as the governing board of the Housing Authority, and all
accounting and administrative functions are performed by the City. Financial activity
of the Housing Authority has been reported as if it were part of the City in the Housing
Authority Special Revenue Fund. Separate financial statements of the Housing
Authority can be obtained at City Hall.
Costa Mesa Financing Authority
The Costa Mesa Financing Authority (Financing Authority) was created by a joint
powers agreement between the City of Costa Mesa (the City) and the Costa Mesa
Housing Authority (the Housing Authority), dated August 1, 2017. It was created
pursuant to Article 1 of Chapter 5 of Division 7 of Title of the Government Code of
the State of California (the “JPA Act”). Transactions of the Financing Authority are
reported in the Debt Service Fund. Separate financial statements of the Financing
Authority can be obtained at City Hall.
(b) Basis of Accounting and Measurement Focus
The basic financial statements of the City are composed of the following:
Government-wide financial statements
Fund financial statements
Notes to the basic financial statements
Government-wide Financial Statements
Government-wide financial statements display information about the reporting
government as a whole, except for its fiduciary activities. These statements include
separate columns for the governmental and business-type activities of the primary
government (including its blended component units), as well as its discretely
presented component units. The City has no business-type activities or discretely
presented component units. Eliminations have been made in the Statement of
Activities so that certain allocated expenses are recorded only once (by the function
to which they were allocated). However, general government expenses have not been
allocated as indirect expenses to the various functions of the City.
Government-wide financial statements are presented using the economic resources
measurement focus and the accrual basis of accounting. 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 expenses are
recognized in the accounts and reported in the financial statements. Under the
accrual basis of accounting, revenues, expenses, gains, losses, assets, deferred
outflows of resources, liabilities and deferred inflows of resources resulting from
exchange and exchange-like transactions are recognized when the exchange takes
place. Revenues, expenses, gains, losses, assets, deferred outflows of resources,
liabilities and deferred inflows of resources resulting from nonexchange transactions
are recognized in accordance with the requirements of GASB Statement No. 33.
Program revenues include charges for services, special assessments, and payments
made by parties outside of the reporting government’s citizenry if that money is
30
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
restricted to a particular program. Program revenues are netted with program
expenses in the Statement of Activities to present the net cost of each program.
Amounts paid to acquire capital assets are capitalized as assets in the government-
wide financial statements, rather than reported as expenditures. Proceeds of long-
term debt are recorded as a liability in the government-wide financial statements,
rather than as other financing sources. Amounts paid to reduce long-term
indebtedness of the reporting government are reported as a reduction of the related
liability, rather than as expenditures.
Franchise fees and business license charges have been reported as general revenues
because the fees are based on gross receipts, not charges for services.
Fund Financial Statements
The underlying account system of the City is organized and operated on the basis
of separate funds. 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. Fund financial statements for the primary
government’s governmental, proprietary, and fiduciary funds are presented after the
government-wide financial statements. These statements display information about
major funds individually and nonmajor funds in the aggregate for governmental
funds. Proprietary statements include financial information for internal service funds.
Fiduciary statements include financial information for agency and private purpose
trust funds. Fiduciary funds of the City represent assets held by the City in a custodial
capacity for other individuals or organizations.
Governmental Funds
In the fund financial statements, governmental funds are presented using the
modified accrual basis of accounting. Revenues are recognized when they become
measurable and available as net current assets. 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 City uses an
availability period of 60 days.
Sales taxes, property taxes, franchise taxes, motor vehicle in lieu, transient
occupancy taxes, grants, and interest associated with the current fiscal period are
all considered to be susceptible to accrual and so have been recognized as revenues
of the current fiscal period to the extent normally collected within the availability
period. Other revenue items are considered to be measurable and available when
cash is received by the government.
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). Locally imposed derived tax revenues are recognized as
revenues in the period in which the underlying exchange transaction upon which
31
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
they are based takes place. 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 generally only current
assets, current liabilities and deferred inflows of resources are 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 balance. 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. Special reporting
treatments are used to indicate, however, that they should not be considered
“available spendable resources,” since they do not represent fund balance.
Recognition of governmental fund type revenues represented by unavailable
revenues are reported as deferred inflows of revenues.
Due to the nature of their spending measurement focus, expenditure recognition for
governmental fund types excludes amounts represented by noncurrent liabilities.
Since they do not affect net current assets, such long-term amounts are not
recognized as governmental fund type expenditures or fund liabilities.
Amounts expended to acquire capital assets are recorded as expenditures in the year
that resources were expended, rather than as fund assets. Proceeds of long-term
debt are recorded as other financing sources, rather than a fund liability. Amounts
paid to reduce long-term indebtedness are reported as fund expenditures.
When both restricted and unrestricted resources are combined in a fund, expenses
are considered to be paid first from restricted resources, and then from unrestricted
resources.
Proprietary and Fiduciary Funds
The City’s internal service funds are proprietary funds. In the fund financial
statements, proprietary and private-purpose trust funds are presented using the
accrual basis of accounting. Revenues are recognized when they are earned and
expenses are recognized when related goods or services are delivered. In the fund
financial statements, proprietary and private-purpose trust funds are presented using
the economic resources measurement focus. This means that all assets and all
liabilities (whether current or noncurrent) associated with their activity are included
on the Statement of Net Position. Proprietary fund type operating statements present
increases (revenues) and decreases (expenses) in total net position.
32
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Proprietary fund operating revenues, such as charges for services, result from
exchange transactions associated with principal activity of the fund. Exchange
transactions are those in which each party receives and gives us essentially equal
values. Nonoperating revenues, such as investment income, gain or loss on sale of
equipment and miscellaneous revenues result from nonexchange transactions or
ancillary activities. Operating expenses for internal service funds include the cost of
sales and services, administrative expenses, and depreciation on capital assets. All
expenses not meeting this definition are reported as nonoperating expenses. Amounts
paid to acquire capital assets are capitalized as assets in the internal service fund
financial statements, rather than being reported as expenses. Proceeds of long-term
debt are recorded as liabilities in the internal service fund financial statements, rather
than being reported as other financing sources. Amounts paid to reduce long-term
indebtedness of the internal service fund are reported as reductions of the related
liability, rather than as expenses. The City’s agency funds are fiduciary funds. Agency
funds are custodial in nature (assets equal liabilities) and have no measurement focus
but utilize the accrual basis of accounting for reporting its assets and liabilities.
(c) Property Tax Calendar
Property tax revenues are recognized in the fiscal year for which the taxes have been
levied, provided this accrual meets the available criteria. “Available” means collectible
within the current period or soon enough thereafter to be used to pay liabilities of the
current period. The County of Orange collects property taxes for the City tax liens
attached annually as of 12:01 a.m. on the first day in January preceding the fiscal
year for which the taxes are levied. The tax levy covers the fiscal period July 1st to
June 30th. All secured personal property taxes and one-half of the taxes on real
property are due November 1st. The second installment is due February 1st. All taxes
are delinquent if not paid as of December 10th and April 10th, respectively. Unsecured
personal property taxes become due on the first of March each year and are delinquent
if not paid as of August 31st.
(d) Fund Classifications
The City reports the following major governmental funds:
General Fund – The General Fund is the general operating fund of the City. All general
tax revenues and other receipts that are not restricted by law or contractual
agreement to some other fund are accounted for in this fund. Expenditures of this
fund include the general operating expenditures and other costs, which are not paid
through other funds.
Special Revenue Fund
Gas Tax Fund - Established to account for the receipt and disbursement of funds
required to be used for construction and maintenance of the City’s road network
system. Financing is provided by the City’s share of State gasoline taxes, including
allocations from the Highway Users Tax Account (HUTA) and the Road Maintenance
and Rehabilitation Account (RMRA).
Disaster Fund - Established to account for receipt and disbursement of Federal and
State grant monies received for COVID-19 mitigation and relief efforts.
33
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Government Grants Fund - Established to account for receipt and disbursement of
grant monies provided by Federal, State, and County governmental agencies for
various programs.
Capital Projects Fund
Capital Improvements Fund – This capital projects fund was established to account
for construction of capital facilities financed by the City’s General Fund and various
governmental grants.
The City’s fund structure also includes the following fund types:
Special Revenue Funds – The special revenue funds are used to account for the
proceeds of specific revenue sources that are restricted by law or administrative
action for a specified purpose.
Debt Service Funds – The debt service funds are used to account for the accumulation
of resources for, and the payment of, long-term liabilities, interest, and related fiscal
agent costs.
Capital Projects Funds – The capital projects funds are used to account for financial
resources segregated for the acquisition and construction of major capital
facilities (other than those financed by the proprietary funds).
Internal Service Funds – The internal service funds are used to finance and account
for activities involved in rendering equipment replacement, self-insurance services,
and information technology replacement to departments within the City. Costs of
materials, equipment, and services used are accumulated in these funds and charged
to the user departments as such goods are delivered or services rendered.
Private Purpose Trust Fund – The private-purpose trust fund accounts for the
assets, liabilities, additions, and deductions made on behalf of the former Costa Mesa
Redevelopment Agency.
Agency Funds – The agency funds are used to account for assets held by the City in
a fiduciary capacity for individuals, government entities, and others. Such funds are
operated by carrying out the specifications of trust indentures, statutes, ordinances,
or other governing regulations.
(e) Cash and Investments
Certain assets and liabilities are required to be reported at fair value. The fair value
framework provides a hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3 measurements). The three levels
of fair value hierarchy are described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for
identical assets or liabilities in active markets.
34
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Level 2 - Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly and fair value is determined
through the use of models or other valuation methodologies including:
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in markets that are
inactive; inputs other than quoted prices that are observable for the asset or
liability;
Inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the
fair value measurement. These unobservable inputs reflect the City’s own assumptions
about the inputs market participants would use in pricing the asset or liability
(including assumptions about risk). These unobservable inputs are developed based
on the best information available in the circumstances and may include the City’s own
data.
(f) Cash Equivalents
For purposes of the statement of cash flows, cash equivalents are defined as short-
term, highly liquid investments that are both readily convertible to known amounts of
cash or so near their maturity that they present insignificant risk of changes in value
because of changes in interest rates. Cash and cash equivalents include all
investments with original purchase maturities of three months or less. Cash
equivalents also represent the proprietary funds share in the cash and investment
pool of the City.
The City pools idle cash from all funds in order to maximize income from investment
activities. Investments are recorded on the City’s books at fair value (quoted market
price or best available estimate thereof). Interest income on investments is allocated
to individual funds on the basis of monthly cash and investment balances.
(g) Inventories
Inventories of materials and supplies are carried at cost on an average cost basis.
The City uses the consumption method of accounting for inventories.
(h) Prepaids
The City uses the consumption method to record prepaid items.
(i) 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 City.
35
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Pending Accounting Standards
GASB has issued the following pronouncements that have an effective date
subsequent to June 30, 2020, which may impact the City’s 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 City’s fiscal year ending June 30, 2021.
GASB 87 – Leases: Effective for the City’s fiscal year ending June 30, 2022.
GASB 90 – Majority Equity Interests – an amendment of GASB Statements No. 14 and
No. 61: Effective for the City’s fiscal year ending June 30, 2021.
GASB 91 – Conduit Debt Obligations: Effective for the City’s fiscal year ending June
30, 2023.
GASB 92 – Omnibus 2020: Effective for the City’s fiscal year ending June 30, 2022.
GASB 93 – Replacement of Interbank Offered Rates: Effective for the year ending
June 30, 2022.
GASB 94 – Public-Private and Private-Public Partnerships and Availability Payment
Arrangements: Effective for the City’s fiscal year ending June 30, 2023.
GASB 96 – Subscription-Based Information Technology Arrangement: Effective for the
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 year ending June 30, 2021.
(j) Capital Assets
Capital assets (including infrastructure) are recorded at historical cost at the time of
purchase. Assets acquired from gifts or contributions are recorded at acquisition value
on the date received. 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 include public domain (infrastructure) capital assets consisting of
certain improvements including roads, streets, sidewalks, medians, sewers, and
storm drains. Public domain assets acquired prior to 1980 have been included in the
accompanying financial statements.
Capital assets used in operations are depreciated or amortized over their
estimated useful lives using the straight-line method in the government-wide financial
statements and in the fund financial statements of proprietary funds. It is the City’s
policy not to depreciate or amortize assets in its first year of service. A full year of
depreciation or amortization is charged at final year of asset life or upon disposal.
36
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Depreciation and amortization are charged as expenses against operations and
accumulated depreciation and amortization are reported on the respective statement
of net position.
The ranges of lives used for computing depreciation and amortization for each capital
asset class are as follows:
Building improvements and structures 10-20 years
Landscaping and sprinklers 35-40 years
Automotive equipment 2-20 years
Office furniture 5-20 years
Office machines 3-20 years
Other equipment 5-60 years
Intangible assets 7-10 years
Park system and facilities 10-25 years
Infrastructure – roads 10-50 years
Infrastructure – storm drains 50-100 years
(k) Deferred Outflows/Inflows of Resources
The statement of net position and the governmental funds balance sheet will
sometimes report a separate section for deferred outflows of resources. This
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 (expenditure) until that time. The City has two items that
qualify for reporting in this category. The items are deferred outflows related to
pensions and OPEB.
The statement of net position and the governmental funds balance sheet will
sometimes report a separate section for deferred inflows of resources. This financial
statement element, deferred inflows of resources, represents an acquisition of net
position that applies to future periods and so will not be recognized as an inflow of
resources (revenue) until that time. The City has three types of items which qualify
for reporting in this category. Two of the items are deferred inflows related to pensions
and OPEB, which are presented on the government-wide statement of net position.
The third item, unavailable revenue, is reported only in the governmental funds
balance sheet. The governmental funds report unavailable revenues from accounts,
taxes and grant receivables. These amounts are deferred and recognized as an inflow
of resources in the period that the amounts become available.
(l) Fund Balances
Fund balances are reported in the fund statements in the following classifications:
Nonspendable Fund Balance – This includes amounts that cannot be spent because
they are either not spendable in form (such as inventory) or legally or contractually
required to be maintained intact (such as endowments).
Restricted Fund Balance – This includes amounts that can be spent only for specific
purposes stipulated by constitution, external resource providers, or through enabling
legislation. If Council action limiting the use of funds is included in the same action
37
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(legislation) that created (enables) the funding source, then it is restricted.
Committed Fund Balance – This includes amounts that can be used only for specific
purposes determined by formal action of a city ordinance by the Council. It includes
legislation (Council action) that can only be overturned by new legislation requiring
the same type of voting consensus that created the original action. Therefore, if
Council action limiting the use of funds is separate from the action (legislation) that
created (enables) the funding source, then it is committed, not restricted. For the
purposes of establishing, modifying, and rescinding a committed fund balance, the
City considers an ordinance more binding than a resolution or a minute action by City
Council.
Assigned Fund Balance – This includes amounts that are designated or expressed by
the Council, but does not require a formal action like a resolution or ordinance. The
Council may delegate the ability to an employee or committee to assign uses of
specific funds for specific purposes. In June 2011, the City Council passed Resolution
11-27, delegating authority to establish, modify, or rescind a fund balance assignment
to the Finance Director.
Unassigned Fund Balance – This includes amounts that are the residual balance for
the City’s general fund and includes all spendable amounts not contained in other
classifications. In other funds, the unassigned classification is used only to report a
deficit balance resulting from overspending for specific purposes for which amounts
had been restricted, committed or assigned.
In order to calculate the amounts to report as restricted, committed, assigned, and
unassigned fund balance in the governmental fund financial statements, a flow
assumption must be made about the order in which the resources are considered
to be applied. It is the government’s policy to consider restricted fund balance to have
been depleted before using any components of unrestricted fund balance. Further,
when components of the unrestricted fund balance can be used for the same purpose,
committed fund balance is depleted first, followed by assigned fund balance.
Unassigned fund balance is applied last.
(m) Employee Leave Benefits
Eligible employees accumulate up to 26.5 days of vacation each year, depending on
the employee’s bargaining unit and length of service, but may not carry over from one
year to the next more than the equivalent of one to two (depends on Memorandum of
Understanding or Salary Resolution) year’s vacation without prior approval of the
respective department head and/or City Manager.
A liability is recorded for unused vacation and similar compensatory leave balances
since the employees’ entitlement to these balances are attributable to services already
rendered and it is probable that virtually all of these balances will be liquidated by
either paid time off or payments upon termination or retirement.
A liability is recorded for unused sick leave balances except for miscellaneous,
confidential and Costa Mesa Police Association (CMPA) employee groups. The liability
is recorded only to the extent that it is probable that the unused balances will result
in termination payments. Unused sick leave is converted to CalPERS service credit at
38
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
the time of retirement. The ability to liquidate leave balances is available to all
employee groups with the exception of miscellaneous, confidential and CMPA employee
groups, separations from which result in the forfeiture of the accrued sick leave
benefit. Other amounts of unused sick leave are excluded from the liability since their
payment is contingent solely upon the occurrence of a future event (illness), which is
outside the control of the City and the employee.
A current liability is accrued in the governmental funds for material leave benefits due
on demand to governmental fund employees that have terminated prior to year-end.
All other amounts are only recorded in the government-wide financial statements.
These non-current amounts will be recorded as fund expenditures in the year in which
they are paid or become due on demand to terminated employees.
(n) Claims and Judgments
The City records a liability for litigation, judgments, and claims when it is probable
that an asset has been impaired or a liability has been incurred prior to year-end and
the probable amount of loss (net of any insurance coverage) can be reasonably
estimated. This liability is recorded in an internal service fund, which accounts
for the City’s self-insurance activities.
(o) 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:
CalPERS Plans
Valuation Date June 30, 2018
Measurement Date June 30, 2019
Measurement Period July 1, 2018 to June 30, 2019
Supplemental Plan
Valuation Date June 30, 2020
Measurement Date June 30, 2020
Measurement Period July 1, 2019 to June 30, 2020
(p) Other Post Employment Benefits (OPEB)
For purposes of measuring the net 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
39
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
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
(q) Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(r) 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
Cash and investments are reported as follows:
Cash and investments at June 30, 2020 consisted of the following:
Petty cash on hand $ 65,202
Demand deposits 2,622,062
Investments 122,157,655
Total cash and investments $ 124,844,919
Statement of Net Position:
Cash and investments $ 119,401,427
Cash and investments with fiscal agent 2,011,305
Statement of Fiduciary Net Position:
Cash and investments 3,432,187
Total cash and investments $ 124,844,919
40
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Investments Authorized by the California Government Code and the City of Costa Mesa’s
Investment Policy
The table below identifies investment types that are authorized for the City by the California
Government Code and investment policies of the City. The table also identifies certain
provisions of the California Government Code (or the City’s investment policy, where more
restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This
table does not address investments of debt proceeds held by bond trustee that are governed
by the provisions of debt agreements of the City, rather than the general provisions of the
California Government Code or the City’s investment policy.
* Based on state law requirements or investment policy requirements, whichever is more
restrictive.
Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustees are governed by provisions of the debt
agreements, rather than the general provisions of the California Government code or the
City’s investment policy. The table below identifies the investment types that are authorized
for investments held by bond trustees. The table also identifies certain provisions of these
debt agreements that address interest rate risk, credit risk, and concentration of credit risk.
Generally, the following investment types are authorized by the City’s debt agreements:
Authorized
Investments
Maximum
Maturity
Maximum
Percentage
Allowed
Maximum
Investment in
One Issuer
U.S. Treasury Securities None None None
Federal Agency Securities 1 year None None
Banker’s Acceptances 30 days None None
Commercial Paper 270 days None None
Authorized Maximum Percentage Investment In
Investments Maturity*of Portfolio*One Issuer*
U.S. Treasury Securities 5 years None None
Federal Agency Securities 5 years None 35%
Municipal Securities 5 years None 5%
Banker’s Acceptances 180 days 40%5%
Commercial Paper 270 days 25%5%
Federally Insured Time Deposit 5 Years None None
Non-Negotiable Certificates of Deposit 5 years 20%None
Certificate of Deposit Placement Service 5 years 30%None
Negotiable Certificates of Deposit 5 years 30%5%
Repurchase Agreements 1 year 30%None
Medium-Term Corporate Notes 5 years 30%5%
Money Market Mutual Funds N/A 20%10%
Asset Backed Securities 5 years 20%None
County Pooled Investment Funds N/A 35%None
Local Agency Investment Fund N/A up to $65 million None
41
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Money Market Mutual Funds None None None
Investment Agreements None None None
Interest-Bearing Time Deposits 30 days None None
Repurchase Agreements 270 days None None
Local Agency Investment Fund None None None
State Obligations None None None
Pre-funded Municipal Obligations None None None
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the
fair value of an investment. Generally, the longer the maturity of an investment, the
greater the sensitivity of its fair value to changes in market interest rates. One of the
ways that the City manages its exposure to interest rate risk is by purchasing a combination
of shorter term and longer-term investments, and by timing cash flows from maturities so
that a portion of the portfolio is maturing or coming close to maturity evenly over time as
necessary to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the City’s investments (including
investments held by bond trustee) to market interest rate fluctuations is provided by the
following table that shows the distribution of the City’s investments by maturity:
Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations
The City (including investments held by bond trustees) held no investments that were highly
sensitive to interest rate fluctuations (to a greater degree than already indicated in the
information provided above).
Investment Type
12 Months
Or Less
13 to 24
Months
25 to 60
Months T otal
F ederal Agency Securities 3,154,749$ 9,403,726$ 11,941,991$ 24,500,466$
State Investment Pool (LAIF) 57,552,108 - - 57,552,108
U.S. Treasury Securities 2,915,642 11,187,535 7,781,955 21,885,132
Medium-Term Corporate Notes 2,570,046 8,656,036 4,046,517 15,272,599
Asset Backed Securities - 539,701 229,082 768,783
Money Market Mutual Funds 25,877 - - 25,877
Held by Trustee:
Costa Mesa Community
F acility - 225,000 - 225,000
Money Market Mutual 1,871,690 - - 1,871,690
Lehman Brothers Holdings
Inc.
Bankruptcy
56,000 - - 56,000
T otal 68,146,112$ 30,011,998$ 23,999,545$ 122,157,655$
42
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to
the holder of the investment. This is measured by the assignment of a rating by a
nationally recognized statistical rating organization. Presented below is the minimum rating
required by (where applicable) the California Government Code, the City’s investment policy,
or debt agreements, and the actual rating as of year-end for each investment type:
* not required to be rated
GASB requires the disclosure of more than 5% total investments with a single issuer. At June
30, 2020, the City’s investment in the following single issuers exceeded 5%:
Issuer Investment Type Reported Amount Percentage
FHLMC Federal Agency Securities $ 6,066,339 5%
FNMA Federal Agency Securities 10,780,788 9%
FHLB Federal Agency Securities 7,653,339 6%
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside party. The custodial
credit risk for investments is the risk that, in the event of the failure of the counterparty
(e.g., broker-dealer) to a transaction, a government will not be able to recover the value of
its investment or collateral securities that are in the possession of another party. The
California Government Code and the City’s investment policy do not contain legal or policy
requirements that would limit the exposure to custodial credit risk for deposits or
investments, other than the following provision for deposits: The California Government
Code requires that a financial institution secure deposits made by the state or local
governmental units by pledging securities in an undivided collateral pool held by a depository
regulated under state law (unless so waived by the governmental unit). The market value
of the pledged securities in the collateral pool must equal at least 110% of the total amount
deposited by the public agencies. California law also allows financial institutions to secure
City deposits by pledging first trust deed mortgage notes having a value of 150% of the
secured public deposits.
Minimum Legal
Rating AAA AA A Not Rated T otal
Federal Agency Securities N/A -$ 24,500,466$ -$ -$ 24,500,466$
U.S. Treasury Securities* N/A - - - - 21,885,132
Medium-Term Corporate Notes A 709,583 3,999,529 10,563,487 - 15,272,599
State Investment Pool (LAIF) N/A - - - 57,552,108 57,552,108
Money Market Mutual Funds AAA 25,877 - - - 25,877
Asset Backed Securities AAA 768,783 - - - 768,783
Held by Trustee:
Costa Mesa Community
Facilities District Bonds N/A - - - 225,000 225,000
Money Market Mutual Funds AAA 1,871,690 - - - 1,871,690
Lehman Brothers Holdings
Inc. Bankruptcy N/A - - - 56,000 56,000
T otal 3,375,933$ 28,499,995$ 10,563,487$ 57,833,108$ 122,157,655$
Investment Type
43
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by California Government Code Section 16429 under the oversight of the
Treasurer of the State of California. The fair value of the City’s investment in this pool is
reported in the accompanying financial statements at amounts based upon the City’s pro-
rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the
amortized cost of that portfolio). The balance available for withdrawal is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost basis.
Fair Value Measurements
The City’s investments in the Costa Mesa Community Facilities District Bonds and Lehman
Brothers Holdings, Inc. Bankruptcy are valued based on cost and the City’s assumptions
originated from market participant input, respectively. These investments are not traded
on, and therefore, are categorized in Level 3. When valuing Level 3 securities, the inputs
or methodology are not necessarily an indication of the risks associated with investing in
those securities. Changes in valuation techniques may result in transfers into or out of an
assigned level within the disclosure hierarchy.
Quoted
Prices
Level 1
Observable
Inputs
Level 2
Unobservable
Inputs
Level 3 Total
Federal Agency Securities -$ 24,500,466$ -$ 24,500,466$
U.S. Treasury Securities - 21,885,132 - 21,885,132
Medium Term Corporate Notes - 15,272,599 - 15,272,599
Asset Backed Securities - 768,783 - 768,783
Held by Trustee:
Costa Mesa Community
Facilities District Bonds - - 225,000 225,000
Lehman Brothers Holdings Inc.
Bankruptcy - - 56,000 56,000
Investments measured at Fair
Value -$ 62,426,980$ 281,000$ 62,707,980
State Investment Pool (LAIF)*57,552,108
Money Market Mutual Funds*25,877
Held By Trustee:
Money Market Mutual Funds*1,871,690
T otal Investment Portfolio 122,157,655$
* Not subject to fair value categorization
44
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(3) Interfund Receivables and Payables
Interfund receivable and payable balances at June 30, 2020 are as follows:
All receivables resulted from short term borrowing to cover negative cash balances.
(4) Transfers In and Out
Transfers in and out for the year ended June 30, 2020 are as follows:
(a) The General Fund transferred the following:
1. $4,280,140 to the Capital Improvements Capital Projects Fund to fund capital
improvement projects;
2. $6,714 to the Proposition 172 Fund to close the fund;
3. $2,813,487 to the Financing Authority Debt Service Fund for debt service payments;
4. $2,438,346 to the Housing Authority to subsidize homeless program costs.
5. $1,125,000 to the Internal Service Funds for vehicle replacements and to fund upgrades
to the police car video system.
(b) The Capital Improvements Capital Projects Fund transferred $1,150,000 to the General
Fund for operational costs.
(c) The Nonmajor Governmental funds transferred the following:
1. The Air Quality Improvement Fund transferred $122,540 to the Capital Improvements
Fund to fund capital improvement projects.
Receivable Fund Payable Fund Amount
General Fund Disaster Fund 2,914,057$
General Fund Nonmajor Governmental Funds 52,310
2,966,367$
T ransfers out T ransfers in T otal
General Fund Capital Improvements Fund 4,280,140$ (a1)
General Fund Nonmajor Governmental Funds 5,258,547 (a2 to a4)
General Fund Internal Service Funds 1,125,000 (a5)
Capital Improvements Fund General Fund 1,150,000 (b)
Nonmajor Governmental Funds Capital Improvements Fund 122,540 (c 1)
11,936,227$
45
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(5) Loans Receivable
The City’s loans receivable at June 30, 2020 by loan programs are as follows:
Allowance for uncollectible accounts are established for various loans.
General Fund Loan to the Successor Agency
In years prior to 2013, the General Fund made loans in the amount of $9,278,545 to the
Successor Agency (formerly the Redevelopment Agency of the City of Costa Mesa). Loan
repayments are approved annually by the State. As a result, an allowance for doubtful accounts
has been recorded for the outstanding loan balance.
Loan receivable $ 6,212,950
Less allowance for doubtful accounts (6,212,950)
Loans receivable, net $ -
HOME Program 1,283,780$
Community Development Loan Program 191,195
Rental Rehabilitation Program 225,581
First Time Home Buyer Program 1,516,118
Single Family Rehabilitation Program 142,500
Neighborhood Stabilization Program 181,250
Other Programs 681,283
T otal 4,221,707
Less allowance for uncollectible loans (3,359,173)
Loans receivable, net 862,534$
46
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(6) Capital Assets
A summary of changes in capital assets is as follows:
Balance at Balance at
July 1, 2019 Additions Deletions June 30, 2020
Capital assets not being depreciated:
Land 34,579,306$ -$ -$ 34,579,306$
Land rights related to streets 29,821,224 - - 29,821,224
Construction in progress 12,588,527 12,619,001 (8,221,578) 16,985,950
Total capital assets not
being depreciated 76,989,057 12,619,001 (8,221,578) 81,386,480
Capital assets being depreciated/amortized:
Building improvements and structures 103,059,221 352,450 - 103,411,671
Landscaping and sprinklers 10,097,796 18,299 - 10,116,095
Automotive equipment 14,633,128 467,853 (369,873) 14,731,108
Office furniture 937,150 - (15,925) 921,225
Office machines 9,050,523 20,357 (147,664) 8,923,216
Other equipment 13,402,008 422,807 (449,136) 13,375,679
Intangible assets 1,606,245 - - 1,606,245
Park system and facilities 18,038,086 - - 18,038,086
Infrastructure - roads 294,797,721 5,827,933 (4,288,674) 296,336,980
Infrastructure - storm drains 99,194,605 1,697,193 - 100,891,798
Total capital assets being
depreciated/amortized 564,816,483 8,806,892 (5,271,272) 568,352,103
Less accumulated depreciation/amortization:
Building improvements and structures (39,962,715) (3,700,645) - (43,663,360)
Landscaping and sprinklers (9,338,139) (87,505) - (9,425,644)
Automotive equipment (8,594,998) (956,900) 335,968 (9,215,930)
Office furniture (535,792) (49,837) 15,925 (569,704)
Office machines (7,609,721) (329,383) 147,664 (7,791,440)
Other equipment (7,500,387) (1,089,508) 445,836 (8,144,059)
Intangible assets (819,046) (199,879) - (1,018,925)
Park system and facilities (10,607,047) (814,047) - (11,421,094)
Infrastructure - roads (193,680,277) (6,121,932) 4,288,674 (195,513,535)
Infrastructure - storm drains (84,149,722) (1,270,721) - (85,420,443)
Total accumulated
depreciation/amortization (362,797,844) (14,620,357) 5,234,067 (372,184,134)
Total capital assets being
depreciated/amortized, net 202,018,639 (5,813,465) (37,205) 196,167,969
Capital assets, net 279,007,696$ 6,805,536$ (8,258,783)$ 277,554,449$
47
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Depreciation expense is charged to the following functions for the year ended June 30, 2020:
Governmental activities:
General government $ 1,135,127
Protection of persons and property 3,605,730
Community programs 2,363,194
Public services 7,516,306
Total depreciation expense-governmental activities $14,620,357
The City has active construction projects as of June 30, 2020. The significant projects include
the following:
Remaining
Construction Project Project # Total Budget Spent to Date Commitment
Bridge Shelter at Airway 200098 $ 10,050,000 $ 7,255,220 $ 2,794,780
Lions Park Projects (Library,
Community Center and Park) 800015 38,923,100 34,025,896 4,897,204
Citywide Street Maintenance 400015 7,712,298 2,998,332 4,713,966
Citywide Storm Drain
Improvements 550011 2,484,388 185,708 2,298,680
Merrimac Way Bicycle Facilities 450011 2,030,000 - 2,030,000
Total $ 61,199,786 $44,465,156 $16,734,630
(7) Changes in Long-Term Liabilities
A summary of changes in long-term liabilities in primary government for the year ended
June 30, 2020 is as follows:
Due Due
Balance at Balance at Within One Beyond One
July 1, 2019 Additions Reductions June 30, 2020 Year Year
Bonds payable:
Public Financing Authority
2006 Revenue
Refunding Bonds 600,000$ -$ (190,000)$ 410,000$ 200,000$ 210,000$
Financing Authority
2017 Lease Revenue
Bonds 28,135,000 - (1,610,000) 26,525,000 1,675,000 24,850,000
Unamortized premium 3,435,580 - (147,767) 3,287,813 147,767 3,140,046
Total bonds payable 32,170,580 - (1,947,767) 30,222,813 2,022,767 28,200,046
Other liabilities:
Loans payable 143,653 (15,392) 128,261 15,391 112,870
Claims payable 16,065,587 2,335,037 (2,545,628) 15,854,996 2,299,557 13,555,439
Employee leave
benefits payable 4,892,819 3,410,390 (3,266,669) 5,036,540 3,328,285 1,708,255
Total other liabilities 21,102,059 5,745,427 (5,827,689) 21,019,797 5,643,233 15,376,564
Total 53,272,639$ 5,745,427$ (7,775,456)$ 51,242,610$ 7,666,000$ 43,576,610$
48
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(8) Long-Term Liabilities
Costa Mesa Public Financing Authority Bonds - 2006 Revenue Refunding Bonds
On June 1, 2006, Costa Mesa Public Financing Authority issued $2,365,000 of Revenue
Refunding Bonds, Series 2006A, to advance refund the outstanding portion of the
$3,225,000 of the 1991 Lease Revenue Bonds issued on November 1, 1991. The bonds were
issued to provide monies to enable the Authority to acquire the City of Costa Mesa
Community Facilities District 91-1 (Plaza Tower Public Improvements) 1991 Special Tax
Bonds, issued under the Mello-Roos Community Facilities Act of 1982. The $2,365,000
Revenue Refunding Bonds, which consists of $1,955,000 of serial bonds and $410,000 of
term bonds. The serial bonds mature from August 1, 2007 through August 1, 2019 in
annual installments ranging from $120,000 to $190,000. The term bonds mature from
August 1, 2020 through August 1, 2021 in annual installments ranging from $200,000 to
$210,000. Interest is payable semi-annually on February 1 and August 1 of each year,
commencing on February 1, 2007 at rates ranging from 3.85% to 5.10%.
There is a reserve requirement of $220,910 on the 2006 Revenue Refunding Bonds. The City
has $221,363 on reserve with the fiscal agent at June 30, 2020. The principal balance
outstanding at June 30, 2020 is $410,000.
The bonds are secured by special tax levied within CFD 91-1 Plaza Tower Public
Improvements. The special taxes are levied and collected for debt service on the bonds are
required to be remitted to the fiscal agent for the bonds within ten business days of receipt.
The City received taxes on December 17, 2019 and April 21, 2020 and remitted payments
to the fiscal agent six and eight business days later, respectively.
The annual debt service requirements for the bonds as of June 30, 2020 are as follows:
Costa Mesa Financing Authority Bonds - 2017 Lease Revenue Bonds
On October 1, 2017, the Costa Mesa Financing Authority issued $29,735,000 of 2017 Lease
Revenue Bonds to finance certain capital improvements of the City of Costa Mesa and to
advance refund $16,765,000 of outstanding Costa Mesa Public Financing Authority 2007
Certificates of Participation (2007 Certificates). The bond issue also included a bond premium
of $3,694,172. The bonds mature from October 1, 2018 through October 1, 2042 in
annual installments ranging from $570,000 to $2,220,000. Interest is payable semi-annually
on April 1 and October 1 of each year, commencing on April 1, 2018 at a rate ranging from
2% to 5%. As of June 30, 2020, the principal outstanding is $26,525,000 and the
unamortized bond premium balance is $3,287,813.
Y ear
Ending
June 30 Principal Interest T otal
2021 200,000$ 15,810$ 215,810$
2022 210,000 5,355 215,355
T otal 410,000$ 21,165$ 431,165$
49
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Bond proceeds of $14,530,520 along with $2,302,225 of 2007 Certificates sinking fund
monies, were used to purchase U.S. government securities. Those securities were deposited
in an irrevocable trust with an escrow agent to provide for all future debt service payments
on the 2007 Certificates. As a result, the 2007 Certificates are considered to be defeased and
the liability for those certificates have been removed from the government-wide Statement
of Net Position.
The annual debt service requirements for the bonds as of June 30, 2020 are as follows:
Loans Payable – SCE On-Bill Financing (OBF) Loans
During the year ended June 30, 2019, the City entered into loan agreements with Southern
California Edison to finance certain street lighting projects. The total amount of the loans was
$153,914. The loan’s term is ten years with monthly payments of $1,282. The loans bears no
interest.
The annual debt service requirements for loans payable as of June 30, 2020 are as follows:
Y ear
Ending
June 30 Principal Interest T otal
2021 1,675,000$ 1,139,550$ 2,814,550$
2022 1,740,000 1,062,550 2,802,550
2023 1,830,000 973,300 2,803,300
2024 1,920,000 879,550 2,799,550
2025 2,015,000 781,175 2,796,175
2026 - 2030 6,135,000 2,657,625 8,792,625
2031 - 2035 3,660,000 1,680,250 5,340,250
2036 - 2040 4,495,000 865,093 5,360,093
2041 - 2043 3,055,000 151,044 3,206,044
T otal 26,525,000$ 10,190,137$ 36,715,137$
Y ear
Ending
June 30 Principal Interest T otal
2021 15,391$ -$ 15,391$
2022 15,391 - 15,391
2023 15,391 - 15,391
2024 15,391 - 15,391
2025 15,391 - 15,391
2026 - 2029 51,306 - 51,306
T otal 128,261$ -$ 128,261$
50
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(9) Debt Without Government Commitment
The following bond issuance is not reflected in the Statement of Net Position since it is an
obligation of private parties (with no government commitment) payable entirely from and
secured by non-City resources as described in the bond resolutions and statements of
the various issues.
The City of Costa Mesa Community Facilities District No. 91-1, issued $2,965,000 of District
91-1 Special Tax Bonds on November 1, 1991. All of the bonds were acquired by the Costa
Mesa Public Financing Authority. The bonds mature from August 1, 1992 through August 1,
2021 in annual principal payments ranging from $25,000 to $265,000 and bear an interest
rate of 8.30%.
The bonds were issued to acquire certain improvements to the Anton/Bristol intersection,
street improvements to Anton Boulevard and repay certain costs incurred by third parties
with respect to the construction of the Metro Fire Station and the I-405 Access Study. The
City is not liable for repayment of these bonds but is only acting as an agent for the
property owners in collecting the assessments, forwarding the collections to the bondholders,
and initiating foreclosure proceedings. The outstanding balance at June 30, 2020 was
$225,000.
(10) Fund Balances
Fund balance consisted of the following at June 30, 2020:
1. Restricted fund balances in the Public Services category consist of fund balances in the Gas
Tax, Air Quality Improvement, Lions Park Capital Improvements, and Measure “M2”
Construction funds. Revenues received in these funds are legally restricted for specific
purposes, such as transportation and facility related capital projects.
2. The fund balance committed for declared disasters was adopted by Ordinance No. 91-20
and Municipal Code Section 2-206 to provide required funding as a result of a declared
Gas Disaster Government Capital Non-Major
General Tax Fund Grants Improvements Funds
Nonspendable:
Prepaid items 293,389$ -$ -$ -$ -$ -$
Inventories 68,800 - - - - -
Restricted for:
Protection of persons and Property - - - 63,415 - 1,446,931
Community programs - - - - - 5,636,628
Public services (1)- 11,777,820 - - - 5,985,821
Debt service - - - - - 765,715
Committed for:
Declared disasters (2)14,125,000 - - - - -
Self insurance (3)2,000,000 - - - - -
Economic reserves 9,000,000 - - - - -
Assigned for:
Compensated absences 5,036,540 - - - - -
Police Retirement 1% Supplemental 2,364,522 - - - - -
Section 115 Trust 1,750,000 - - - - -
Protection of persons and Property - - - - - 651,497
Public services - - - - 11,487,356 13,335,783
Unassigned 18,825,417 - (2,309,380) - - (3,140)
Total Fund Balance 53,463,668$ 11,777,820$ (2,309,380)$ 63,415$ 11,487,356$ 27,819,235$
Major Funds
51
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
emergency by the City Council for an unanticipated but urgent event threatening the public
health, safety and welfare of the City. Any fund balance utilized has to be replenished.
3. The fund balance committed for self-insurance was codified in the Ordinance No. 96-14
and City Municipal Code Section 2-154 to provide a self-insurance reserve to be used to
pay actual losses not covered by insurance policies or insurance pools. Any fund balance
utilized has to be replenished.
4. The fund balance committed for economic reserves was adopted by the City Council on
March 3, 2015 as a part of the reserve goal plan. The City commits $1,500,000 each year
toward economic reserve.
The following funds had deficits at June 30, 2020:
Major Governmental Funds:
Special Revenue Funds:
Disaster Fund $ (2,309,380)
Nonmajor Governmental Funds:
Special Revenue Funds:
Office of Traffic Safety (3,140)
Internal Service Fund:
Self-Insurance – Worker’s Compensation/General Liability
Unemployment (3,041,190)
Fiduciary Fund:
Successor Agency to the City of Costa Mesa Redevelopment
Agency Private Purpose Trust Fund (5,177,113)
(11) Defined Benefit Pension Plans
(a) General Information about the Pension Plans
Employees of the City are members of the California Public Employees’ Retirement System
(CalPERS), the cost of which is paid by the City. The information below includes the aggregate
total pension plan related items:
Below are descriptions of the retirement plans along with selected information regarding
benefits, contributions, liabilities and actuarial assumptions:
Miscellaneous Police Safety F ire Safety Total
Net pension liability (100,136,743)$ (124,388,501)$ (77,775,545)$ (302,300,789)$
Deferred outflows of
resources - pension 12,298,486 13,689,690 15,251,424 41,239,600
Deferred inflows of
resources - pension (1,754,005) (4,173,738) (5,620,279) (11,548,022)
Pension Expense 12,166,781 17,363,384 9,575,898 39,106,063
52
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the City’s
separate Miscellaneous and Police Safety Plans, agent multiple-employer defined benefit
pension plans and the Fire Safety cost sharing plans. The plans are administered by CalPERS,
which acts as a common investment and administrative agent for its participating member
employers. Benefit provisions under the Plans 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.
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. Fire members may receive the alternate death benefit in lieu of the Basic
Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and
has at least 20 years of total CalPERS service. The cost of living adjustments for each plan
are applied as specified by the Public Employees’ Retirement Law.
The Plans’ provisions and benefits in effect at June 30, 2020, are summarized as follows:
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%
rates 10.469%7%6.75%
rates 6.98%9.45%9.45%
Miscellaneous (Agent Multiple-Employer)
Required employee contribution
Required employer contribution
53
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Employees Covered
At the June 30, 2019 measurement date, the following employees were covered by each
plan’s benefit terms:
Miscellaneous Police Safety Fire Safety
Inactive employees or
beneficiaries currently
receiving benefits
549
190
154
Inactive employees entitled to
but not yet receiving benefits
723
70
-
Active employees 330 131 79
Totals
1,602
391
223
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
Police Safety (Agent Multiple-Employer)
On or After On or After
Hire Date March 11, 2012 January 1, 2013
Benefit formula 3%@50 2.7%@57
Benefit vesting schedule 5 years of service 5 years of service
Benefit payments monthly for life monthly for life
Retirement age 50 50 - 57
Monthly benefits, as a % of
eligible compensation 3% 2.0% to 2.7%
rates 14%11.50%
rates 15.54%20.54%
Prior to On or After On or After
Hire Date December 30, 2012 December 30, 2012 January 1, 2013
Benefit formula 3.0%@50 2.0%@50 2.7%@57
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 50 - 55 50 - 57
Monthly benefits, as a % of
eligible compensation 3% 2.0% to 2.7% 2.0% to 2.7%
rates 14%9%12%
rates 18.65%16.64%13.03%
Required employer contribution
Required employee contribution
Fire Safety (Cost Sharing Multiple-Employer)
Required employee contribution
Required employer contribution
54
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
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 plan member contribution requirements as
identified by the pension plan terms are classified as plan member contributions.
(b) Net Pension Liability
The City’s net pension liability for each Plan is measured as the total pension liability, less
the pension plan’s fiduciary net position. The net pension liability of each Plan is measured
as of June 30, 2019, based on an annual actuarial valuation as of June 30, 2018 and rolled
forward to June 30, 2019 using standard update procedures. A summary of principal
assumptions and methods used to determine the net pension liability is shown below.
Actuarial Methods and Assumptions Used to Determine Total Pension Liability
For the three CalPERS Plans, the June 30, 2018 valuation was rolled forward to determine
the June 30, 2019 pension liability, based on the following actuarial methods and
assumptions:
Valuation date June 30, 2018
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
Post Retirement 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 rates include 15 years of projected
mortality improvement using 90% of Scale MP 2016 published by the Society of Actuaries.
For more details on this table, please refer to the CalPERS Experience Study and Review of
Actuarial Assumptions report from December 2017 that can be found on the CalPERS
website.
55
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Discount Rate
The discount rate used to measure the total pension liability was 7.15%. 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.
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 return by asset class are as followed:
Asset Class1
Assumed asset
allocation
Real Return
Years 1–102
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
56
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Changes in Net Pension Liability
The changes in the net pension liability for the Miscellaneous (Agent Multiple-Employer) Plan,
using the measurement date of June 30, 2019, are as follows:
Total Plan Net Position
Pension Fiduciary Liability
Liability Net Position (Asset)
Balance at June 30, 2018
(Valuation Date)281,681,539$ 187,410,462$ 94,271,077$
Changes in the Year:
Service cost 3,828,540 - 3,828,540
Interest on the total pension liability 19,990,625 - 19,990,625
Differences between actual and
expected experience 4,152,146 - 4,152,146
Net plan to plan resource movement - - -
Changes in assumptions - - -
Contributions - employer - 8,320,570 (8,320,570)
Contributions - employees - 2,055,169 (2,055,169)
Net investment income - 11,863,211 (11,863,211)
Administrative expenses - (133,740) 133,740
Benefit payments, including refunds
of employee contributions (16,317,568) (16,317,568) -
Other Miscellaneous Income/(Expense)- 435 (435)
Net Changes 11,653,743 5,788,077 5,865,666
Balance at June 30, 2019
(Measurement Date)293,335,282$ 193,198,539$ 100,136,743$
Increase (Decrease)
57
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
The changes in the net pension liability for the Police Safety (Agent Multiple-Employer)
Plan, using the measurement date of June 30, 2019, are as follows:
Proportionate Share of the Net Pension Liability for the Fire Safety Plan
As of June 30, 2020, the City reported net pension liabilities for its proportionate share of
the net pension liability of the Fire Safety Plan as follows:
The City’s proportionate share of the net pension liability was based on a projection of
the City’s long-term share of contributions to the pension plans relative to the projected
contributions of all participating employers, actuarially determined.
T otal Plan Net Position
Pension Fiduciary Liability
Liability Net Position (Asset)
Balance at June 30, 2018
(Valuation Date)304,146,231$ 180,403,048$ 123,743,183$
Changes in the Year:
Service cost 4,959,915 - 4,959,915
Interest on the total pension liability 21,235,614 - 21,235,614
Differences between actual and -
expected experience (2,112,152) - (2,112,152)
Net plan to plan resource movement - - -
Changes in assumptions - - -
Contributions - employer - 9,471,893 (9,471,893)
Contributions - employees - 2,222,313 (2,222,313)
Net investment income - 11,872,172 (11,872,172)
Administrative expenses - (128,739) 128,739
Benefit payments, including refunds
of employee contributions (15,024,883) (15,024,883) -
Other Miscellaneous Income/(Expense)- 420 (420)
Net Changes 9,058,494 8,413,176 645,318
Balance at June 30, 2019
(Measurement Date)313,204,725$ 188,816,224$ 124,388,501$
Increase (Decrease)
Proportionate
Share of Net
Pension Liability
Balance at: 6/30/2018 75,280,246$
Balance at: 6/30/2019 77,775,545
Net Changes during 2019-20 2,495,299
58
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
The City’s proportionate share of the net pension liability for this Plan as of the measurement
dates of June 30, 2018 and 2019 was as follows:
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the City’s net pension liability for each Plan, calculated using the Plan’s
discount rate, as well as what the City’s net pension liability would be if it were calculated
using a discount rate that is 1-percentage point lower or 1-percentage point higher than the
current rate:
Miscellaneous Police Safety Fire Safety
1% Decrease 6.15% 6.15% 6.15%
Net Pension Liability $ 137,931,501 $ 167,916,962 $ 106,223,505
Current Discount Rate 7.15% 7.15% 7.15%
Net Pension Liability $ 100,136,743 $ 124,388,501 $ 77,775,545
1% Increase 8.15% 8.15% 8.15%
Net Pension Liability $ 69,010,826 $ 88,865,233 $ 54,452,674
Pension Plans Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the
separately issued CalPERS financial reports.
Amortization of Deferred Outflows and Inflows of Resources
Under GASB 68, 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 outflows and deferred inflows of resources
related to pensions and are to be recognized in future pension expense.
The amortization period differs depending on the source of the gain or loss:
F ire Safety
Proportion - June 30, 2018 1.28299%
Proportion - June 30, 2019 1.24590%
Change - Increase (Decrease) (.03709%)
Net difference between projected and actual
earnings on pension plan investments
All other amounts
5 years
Straight-line amortization over the
expected average remaining lifetime of
all members (EARSL)
59
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Pension Expense and Deferred Outflows/Inflows of Resources Related to Pension
For the year ended June 30, 2020, the City recognized pension expense of $12,166,781,
$17,363,384 and $9,575,898 for the Miscellaneous, Police Safety, and Fire Safety Plans,
respectively. At June 30, 2020, the City reported deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows Inflows
of Resources of Resources
Pension contributions subsequent to measurement date 9,876,401$ -$
Differences between expected and actual experience 2,422,085 (500,520)
Change in assumptions - (139,772)
Net differences between projected and actual
earnings on plan investments - (1,113,713)
Total 12,298,486$ (1,754,005)$
Deferred Deferred
Outflows Inflows
of Resources of Resources
Pension contributions subsequent to measurement date 11,174,155$ -$
Differences between expected and actual experience - (2,541,790)
Change in assumptions 2,515,535 (684,599)
Net differences between projected and actual
earnings on plan investments - (947,349)
Total 13,689,690$ (4,173,738)$
Deferred Deferred
Outflows Inflows
of Resources of Resources
Pension contributions subsequent to measurement date 6,865,279$ -$
Differences between expected and actual experience 5,078,042 -
Change in assumptions 3,187,884 (622,113)
Change in employer's proportion - (3,668,609)
Net difference between projected and actual
earnings on plan investments - (1,069,935)
Differences between employer's contributions and
change in employer's proportion 120,219 (259,622)
Total 15,251,424$ (5,620,279)$
Miscellaneous
Police Safety
Fire Safety
60
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
At June 30, 20, deferred outflows of resources in the amounts of $9,876,401, $11,174,155,
and $6,865,279 were related to contributions subsequent to the measurement date for the
Miscellaneous, Police Safety and Fire Safety Plans, respectively. They will be recognized as a
reduction of the net pension liability in the fiscal year ending June 30, 2021. Other amounts
reported as deferred outflows of resources and deferred inflows of resources related to
pensions will be recognized as pension expense as follows:
(12) Police 1% Supplemental Retirement Plan
(a) General Information about the Pension Plan
Plan Description
The plan was effective on July 1, 1993 for sworn members of the City of Costa Mesa Police
Department. The plan was originally a 1% supplemental plan to the City’s 2%@50 benefit.
Under the Retirement Plan for Safety Employees of the City of Costa Mesa, the City joined
CalPERS with 3%@50 Safety benefit as of December 31, 2000 and transferred active
members to CalPERS. Employees who retired prior to July 1, 1999 were not transferred to
CalPERS.
The Police 1% Supplemental Retirement Plan is a single employer defined benefit plan.
This Plan currently has only retired participants as all active employees were transferred to
the CalPERS 3%@ 50 benefit plan. The number of participants at June 30, 2020 was 18.
The average monthly benefit being paid is $949.24. The retirement benefit is 1% of the
highest 12-month earnings for credited services up to 25 years. Maximum benefit is
75% of the highest 12-month earnings for service retirement including all public plan
pension benefits but not including Social Security. The 75% is proportionately reduced for
less than 25 years of Costa Mesa Police Department service.
Contributions
The City has not adopted a funding policy for this supplemental retirement plan and
accordingly plan benefits impact financial resources as benefits are paid.
F iscal Year
Ending
June 30 Miscellaneous Police Safety Fire Safety
2021 1,743,611$ 1,548,941$ 3,620,151$
2022 (1,028,979) (2,593,851) (1,588,001)
2023 (294,095) (790,044) 525,539
2024 247,543 176,751 208,177
2025 - - -
Thereafter - - -
61
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(b) Pension Liability
The City’s pension liability for the Plan is measured as the total pension liability, as the
pension plan has no fiduciary net position. The pension liability of the Plan is measured
as of June 30, 2020, using an annual actuarial valuation as of June 30, 2020. A summary of
principal assumptions and methods used to determine the net pension liability is shown
below.
Actuarial Methods and Assumptions
The total pension liabilities in the June 30, 2020 actuarial valuations were determined using
the following actuarial assumptions:
Measurement Date June 30, 2020
Actuarial Assumptions:
Discount Rate
2.45% per annum. This discount rate is the mid-point,
rounded to 5 basis points, of 3-20 year municipal bond
rate indices: S&P Municipal Bond 20 Year High Grade
Rate Index, Bond Buyer 20-Bond GO Index, Fidelity GO
AA 20 Year Bond Index.
Payroll Growth N/A; all participants have retired
Inflation Rate 2.75% per year
Cost Method Entry Age Normal as a level percentage of payroll
Employer Funding Policy Pay-as-you-go
Census Data
Retirement
Disability/Turnover Rate
Mortality
Census information was provided by the Plan Sponsor
as of June 2020.
N/A; all participants have retired
Rates are based on the 2017 CalPERS Experience Study
for Public Agency Police as shown below:
Discount Rate
The discount rate used to measure the total pension liability was 2.45%. The projection of
cash flows used to determine the discount rate assumed that plan member contributions will
be made at the current contribution rate and that contributions will be made at rates equal
to the difference between actuarially determined contribution rates and the member rate.
Age Male Female Male Female
50 0.37% 0.35% 0.37% 0.35%
60 0.67% 0.48% 0.67% 0.48%
70 1.34% 0.93% 1.61% 1.11%
80 3.98% 3.01% 4.77% 3.61%
90 13.04% 10.09% 14.35% 11.10%
100 32.22% 28.15% 32.22% 28.15%
110 100.00% 100.00% 100.00% 100.00%
Healthy Retirees Non-Duty Disabled Retirees
62
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Professional judgment on future contributions has been applied in those cases where
contribution patterns deviate from the actuarially determined rates. Basted on those
assumptions, the pension plan's fiduciary net position was projected to be depleted for current
members during the fiscal year. Therefore, the long-term expected rate of return of 2.45%
was used to discount funded projected benefit payments to determine the total pension
liability. The single effective discount rate was 2.45%.
The discount rate changed from 3.15% as of June 30, 2019 to 2.45% as of June 30, 2020
measurement date.
(c) Changes in the Pension Liability
Sensitivity of the Total Pension Liability to Changes in the Discount Rate
The following presents the total pension liability, calculated using the discount rate of
2.45%, as well as what the net pension liability would be if it were calculated using a
discount rate that is 1-percentage point lower or 1-percentage point higher than the current
rate:
1% Decrease 1.45%
Pension Liability $ 2,561,007
Current Discount Rate
2.45%
Pension Liability $ 2,364,522
1% Increase
3.45%
Pension Liability $ 2,192,291
Balance at June 30, 2019 2,297,253$
Changes in the year:
Interest on the total pension liability 69,134
Differences between actual expected
and actual experience 80,298
Changes in assumptions 122,873
Benefit payments, including refunds
of member contributions (205,036)
Net Changes 67,269
Balance at June 30, 2020 2,364,522$
63
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions
For the fiscal year ended June 30, 2020, the City recognized pension expense of $272,305.
At June 30, 2020, the City did not report any deferred outflows/inflows of resources related
to the Police 1% Supplemental Retirement Plan.
(13) Defined Contribution Plan
On January 1, 2000, the City adopted a Defined Contribution Plan (Plan) for part-time
employees that work under 1,000 hours during the fiscal year and do not meet the eligibility
requirements to be enrolled in the California Public Employee Retirement System (CalPERS).
The Plan is administered by the Public Agency Retirement Services (PARS). As of June
30, 2020, there were 124 active participants in the Plan. Both the City and employees are
required to each contribute 3.75% of gross wages. The City’s contribution to the defined
contribution plan for the year ended June 30, 2020 was $51,123.
(14) Other Post Employment Benefits Plan (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 years or more 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.
Employees Covered
As of the June 30, 2019 measurement date, the following current and former employees were
covered by the benefit terms under the Plan:
Active employees 445
Inactive employees or beneficiaries currently receiving benefits 429
Inactive employees entitled to, but not yet receiving benefits -
Total 874
64
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Contributions
The contribution requirements of plan members and the City are established and may be
amended by the City Council. The contribution required to be made under the City Council
and labor agreement requirements is on a pay-as-you-go basis (i.e., as medical insurance
premiums become due). For the fiscal year ended June 30, 2020, the City contributed
$1,814,680 to the Plan. The City has not established a trust for the purpose of holding assets
accumulated for plan benefits.
The City’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:
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.
65
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
Changes in the Total OPEB Liability
The changes in the Plan’s total OPEB liability is as follows:
Sensitivity of the OPEB Liability to Changes in the Discount Rate
The following presents the City’s OPEB liability if it were calculated using a discount rate that
is one percentage point lower or one percentage point higher than the current rate, for the
measurement period ended June 30, 2019:
1% Decrease
(2.51%)
Current
Discount Rate
(3.51%)
1% Increase
(4.51%)
OPEB Liability $ 67,831,972 $ 58,917,480 $ 51,760,591
Sensitivity of the OPEB Liability to Changes in the Health Care Cost Trend Rates
The following presents the OPEB liability of the City if it were calculated using health care cost
trend rates that are one percentage point lower or one percentage point higher than the
current rate, for the measurement period ended June 30, 2019:
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability are recognized in OPEB expense
systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The
remaining amounts are categorized as deferred outflows and deferred inflows of resources
related to OPEB and are to be recognized in future OPEB expense. The initial amortization
period for deferred inflows and deferred outflows is three years.
Balance at June 30, 2019 53,202,676$
Changes recognized for the measurement period:
Service cost 1,110,733
Interest 1,852,821
Differences between expected and actual experience 2,081,994
Changes of assumptions 3,420,614
Contributions - employer -
Benefit payments (2,751,358)
Administrative expense -
Net Changes 5,714,804
Balance at June 30, 2020
(Measurement Date June 30, 2019)58,917,480$
Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
(5.50% decreasing to (6.50% decreasing to (7.50% decreasing to
3.50%)4.50%)5.50%)
OPEB Liability $54,445,461 $58,917,480 $65,423,998
66
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2020, the City recognized OPEB expense of $1,277,219. At
June 30, 2020, the City reported deferred outflows and inflows of resources related to OPEB
from the following sources:
The $1,814,680 reported as deferred outflows of resources related to contributions subsequent
to the June 30, 2019 measurement date will be recognized as a reduction of the net OPEB
liability during the fiscal year ending June 30, 2021.
Other amounts reported as deferred inflows of resources related to OPEB will be recognized as
expense as follows:
Fiscal Year
Ending June 30:
Deferred
Outflows/(Inflows)
of Resources
2021 $ 562,474
2022 786,087
2023 786,087
2024 786,087
2025 786,087
Thereafter 786,086
(15) Post Employment Benefits-RHS (Defined Contribution)
On January 1, 2004, the City adopted a new Retirement Health Savings Plan (RHS) for
all full-time active employees. This benefit was ratified in the City’s contractual agreements
(MOU) with the Costa Mesa Employees Association (CMCEA), Costa Mesa Police
Association (CMPA), Costa Mesa Police Management Association (CMPMA), and the Costa
Mesa Firefighters Association (CMFA). This post-employment medical benefit is to assist
employees with their qualifying medical expenses or premiums upon retirement or separation
from the City with no minimum age requirement. The RHS plan is a defined contribution plan
for all full time employees at the City. Under this plan, the employee and the City each make
a mandatory 1% of base pay contribution. If the employee separates from the City prior
to the 10-year vesting period, the employee forfeits his or her share of the City’s
contribution. The City has no payment obligations once the employee separates from the
City. Per a side letter agreement with employees, the RHS program was suspended starting
November 7, 2010. For the CMPMA, effective July 2014, a 1% employee contribution is
required to the plan, but no employer contribution is required. The City’s contribution to
the defined contribution post retirement plan for the year ended June 30, 2020 was $0.
Deferred
Outflows Deferred Inflows
of Resources of Resources
OPEB contributions subsequent to measurement date 1,814,680$ -$
Differences between expected and actual differences 1,784,566 -
Changes in assumptions 2,931,955 (223,613)
Total 6,531,201$ (223,613)$
67
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(16) Expenditures in Excess of Appropriations
Excess of expenditures over appropriations in individual funds at the function level (level of
budgetary control) is as follows at June 30, 2020:
(17) Risk Management
For the fiscal year ended June 30, 2020, the City participated in the California Municipal
Excess Liability (“CAMEL”) Program. The membership of CAMEL consists of 21 cities with
similar interests and needs regarding liability insurance. The Board of Directors sets the
premiums for each participant and each participant is represented on the Board. Premiums
are based upon the losses incurred by each member and are not affected by losses incurred
by other members.
In the Self-Insurance Workers’ Compensation/General Liability/Unemployment Internal
Service Fund, the City has recorded liabilities of $15,854,996 for lawsuits and other claims
arising in the ordinary course of business. The City is also self-insured for the first
$2,000,000 of each claim arising for workers’ compensation and has purchased outside
insurance coverage in excess of the $2,000,000 up to an unlimited maximum. The City is
self-insured for the first $2,000,000 of each claim arising for general liability. The City has
purchased outside insurance coverage in excess of the $2,000,000 up to a maximum of
$25,000,000 per occurrence. For the past three years, claim payments have not exceeded
the amount of applicable insurance coverage. The City has estimated losses for claims and
judgments and has established liabilities of $12,823,448 for workers’ compensation and
$3,031,548 for general liability. Losses for claims incurred but not reported are recorded
when the probable amount of loss can be reasonably estimated. These amounts represent
estimates of amounts to be paid for reported claims and incurred but not yet reported claims
based upon past experience, modified for current trends and information. While the ultimate
amount of losses incurred through June 30, 2020 is dependent on future developments,
based upon information from the City Attorney, the City’s claims administrators and others
involved with the administration of the programs, City management believes the accrual is
adequate to cover such losses. The City is contingently liable for additional losses not
reported in the accompanying financial statements in the range of approximately $25,000
to $2,000,000 for which the likelihood of an unfavorable outcome is only reasonably possible,
as determined by legal counsel.
Changes in claims payable for the past two fiscal years are as follows:
F unction Expenditures Appropriations Excess
General Fund Police Protection 50,525,708$ 49,254,780$ 1,270,928$
Special Revenue Funds:
Supplemental Law Protection of Persons
Enforcement Services Fund and property 259,786 237,700 22,086
Fiscal Year
Beginning
Balance
Claims
Incurred and
Changes in
Estimates
Claim
Payments Ending Balance
2018-19 14,029,661$ 4,160,416$ (2,124,490)$ 16,065,587$
2019-20 16,065,587 2,360,983 (2,571,574) 15,854,996
68
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
The City is currently the subject of a number of lawsuits related to sober living facilities within
Costa Mesa. These cases are at various phases. At this time, the probability of an unfavorable
outcome ranges from remote to probable, however the City Council has not given direction
on whether to vigorously defend these cases or attempt to settle. Without direction, it is
difficult to estimate the potential exposure to the City. Professional standards require a loss
contingency to be accrued if it is probable that a liability has been incurred and the amount
of the loss can be reasonably estimated. As of June 30, 2020, the City set up a loss reserve
of $375,000 related to sober living lawsuits.
(18) Pledged Revenue
The City and its component units has one debt issuance outstanding that is collateralized by
the pledging of certain revenues. The amount and term of the remainder of this commitment
is indicated in the debt service to maturity table presented in the notes. The purpose for
which the proceeds of the related debt issuance was utilized is disclosed in the debt
description in Note 9. For the current year, debt service payments as a percentage of the
pledged gross revenue (or net of certain expense where so required by the debt agreement)
are indicated in the table below. This percentage also approximates the relationship of debt
service to pledged revenue for the remainder of the term of the commitment:
(19) Golf Course Lease Agreement
The City has entered into an agreement with Mesa Verde Partners (MVP) under which MVP
will operate and collect user fees from the Costa Mesa Country Club through August 31,
2029. The agreement requires MVP to pay a percentage of gross receipts that MVP receives
from green fees, driving range, cart rental, sales from the proshop, food and beverages, and
the rental of banquet and meeting rooms, or a flat minimum monthly rate, whichever is
greater. The percentage of gross receipts varies from 6 percent to 35 percent depending on
the revenue type, and the minimum rent is adjusted every two years. The minimum rent for
the period of September 1, 2019 to August 31, 2021 is $147,000 per month. In fiscal
year 2020, the City received a total of $2,353,901 from the golf course operations,
$2,245,142 of which is reported in the General Fund and the remaining $108,759 in the Golf
Course Improvements Capital Projects Fund. The City reports the golf course and related
equipment under capital assets in the government-wide financial statements.
Annual Amount of Annual Debt Service Debt Service as a
Description of Pledged Revenue (net Payments (of all debt Percentage of
Pledged Revenue of expenses)secured by this revenue)Pledged Revenue
Mello-Roos CFD 91-1 246,105$ 215,708$ 87.65%
69
CITY OF COSTA MESA, CALIFORNIA
Notes to the Basic Financial Statements
Year ended June 30, 2020
(20) Legislation and Litigation Affecting the Successor Agency
As of February 1, 2012, California redevelopment agencies were dissolved. The Successor
Agency to the Costa Mesa Redevelopment Agency (Successor Agency) succeeded to the
former Costa Mesa Redevelopment Agency (former Agency) and administers the enforceable
obligations, including a $9,278,545 loan from the City’s General Fund to the former agency.
The Department of Finance has approved the Successor Agency to reinstate this loan on its
Report Obligation Payment Schedule (ROPS).
The City has adjusted the loan for principal/interest additions and principal repayments from
the annual ROPS as approved by the Department of Finance. As of June 30, 2020, the
Successor Agency’s loan payable balance was $6,212,950.
A summary of changes in long-term liabilities in the Successor Agency for the year ended
June 30, 2020 is as follows:
Portion Due Portion Due
Balance Balance at Within One Beyond One
July 1, 2019 Additions Reductions June 30, 2020 Y ear Y ear
Loans Payable 7,375,891$ 156,085$ (1,319,026)$ 6,212,950$ 1,291,045$ 4,921,905$
Total 7,375,891$ 156,085$ (1,319,026)$ 6,212,950$ 1,291,045$ 4,921,905$
70
REQUIRED SUPPLEMENTARYINFORMATIONFINANCIAL REPORTCOMPREHENSIVE ANNUAL
REQUIRED SUPPLEMENTARY INFORMATION
Measurement date June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019
Total pension liability:
Service cost 3,366,560$ 3,187,235$ 3,269,125$ 3,659,618$ 3,528,896$ 3,828,540$
Interest on total pension liability 17,792,384 18,262,096 18,633,944 18,996,998 19,188,563 19,990,625
Difference between expected and
actual experience - (2,016,112) (2,818,846) (1,038,444) (3,837,320) 4,152,146
Changes in assumptions - (4,399,842) - 15,484,252 (1,071,584) -
Changes in benefits - - - - - -
Benefit payments, including refunds
of employee contributions (12,853,585) (13,476,175) (14,145,202) (14,720,378) (15,285,935) (16,317,568)
Net Change in Total Pension Liability 8,305,359 1,557,202 4,939,021 22,382,046 2,522,620 11,653,743
Total pension liability - beginning of year 241,975,291 250,280,650 251,837,852 256,776,873 279,158,919 281,681,539
Total pension liability - End of Year (a)250,280,650$ 251,837,852$ 256,776,873$ 279,158,919$ 281,681,539$ 293,335,282$
Plan Fiduciary Net Position:
Contributions - employer 4,903,142$ 5,768,827$ 6,226,072$ 6,712,045$ 7,300,573$ 8,320,570$
Contributions - employees 2,137,933 1,978,052 1,966,557 1,936,240 1,906,040 2,055,169
Net investment income 26,075,603 3,881,685 897,287 18,711,484 15,161,548 11,863,211
Benefit payments (12,853,585) (13,476,175) (14,145,205) (14,720,378) (15,285,935) (16,317,568)
Plan to plan resource movement - 13,634 3,064 - (1,077) -
Administrative expense - (193,604) (104,766) (246,188) (279,147) (133,740)
Other miscellaneous income (expense)- - - - (530,105) 435
Net change in plan fiduciary net position 20,263,093 (2,027,581) (5,156,991) 12,393,203 8,271,897 5,788,077
Plan fiduciary net position - beginning of year 153,666,841 173,929,934 171,902,353 166,745,362 179,138,565 187,410,462
Plan fiduciary net position - end of year (b) 173,929,934$ 171,902,353$ 166,745,362$ 179,138,565$ 187,410,462$ 193,198,539$
Net pension liability - ending (a)-(b)76,350,716$ 79,935,499$ 90,031,511$ 100,020,354$ 94,271,077$ 100,136,743$
Plan fiduciary net position as a percentage of
the total pension liability 69.49%68.26%64.94%64.17%66.53%65.86%
Covered payroll 18,366,435$ 17,928,997$ 19,890,931$ 19,532,886$ 20,067,193$ 24,394,495$
Net pension liability as a percentage of
covered payroll 415.71%445.84%452.63%512.06%469.78%410.49%
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:
* - Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Changes in the Net Pension Liability and Related Ratios
Miscellaneous Plan
Last Ten Fiscal Years*
None in 2019. In 2018, demographic assumptions and inflation were changed in accordance to the CalPERS
Experience Study and Review of Actuarial Assumptions December 2017. In 2017, The accounting discount
rate reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect
an adjustment of the discount rate from 7.50% (net of administrative expense) to 7.65% (without a
reduction for pension plan administrative expenses). In 2014, amounts reported were based on the 7.50%
discount rate.
71
Fiscal year ended June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020
Actuarially determined contribution 5,221,083$ 6,056,123$ 6,522,784$ 6,913,866$ 9,256,492$ 9,876,401$
Contributions in relation to the actuarially
determined contributions (5,221,083) (6,056,123) (6,522,784) (6,913,866) (9,256,492) (9,876,401)
Contribution deficiency (excess)-$ -$ -$ -$ -$ -$
Covered payroll 17,928,997$ 19,890,931$ 19,532,886$ 20,067,193$ 24,394,495$ 24,012,483$
Contributions as a percentage of covered payroll 29.12%30.45%33.39%34.45%37.95%41.13%
Notes to schedule:
Valuation date for June 30, 2020 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 Fair 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; includes 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.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Contributions
Miscellaneous Plan
Last Ten Fiscal Years*
72
Measurement date June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019
Total pension liability:
Service cost 4,675,505$ 4,048,034$ 4,011,055$ 4,475,641$ 4,653,580$ 4,959,915$
Interest on total pension liability 17,563,332 18,452,568 19,519,447 20,072,034 20,611,486 21,235,614
Difference between expected and
actual experience - 1,744,508 4,436,634 (2,148,051) (1,494,789) (2,112,152)
Changes in assumptions - (4,744,823) - 17,608,748 (1,540,347) -
Changes in benefits - - - - - -
Benefit payments, including refunds of
employee contributions (11,159,179) (12,625,831) (13,319,431) (13,984,335) (14,129,155) (15,024,883)
Net Change in Total Pension Liability 11,079,658 6,874,456 14,647,705 26,024,037 8,100,775 9,058,494
Total pension liability - beginning of year 237,419,600 248,499,258 255,373,714 270,021,419 296,045,456 304,146,231
Total pension liability - end of year (a)248,499,258$ 255,373,714$ 270,021,419$ 296,045,456$ 304,146,231$ 313,204,725$
Plan fiduciary net position:
Contributions - employer 5,066,147$ 5,228,944$ 5,992,098$ 7,592,902$ 8,263,652$ 9,471,893$
Contributions - employees 2,204,590 2,191,295 1,988,684 2,012,546 2,120,029 2,222,313
Net investment income 24,794,991 3,618,253 825,770 17,309,154 14,402,562 11,872,172
Benefit payments (11,159,179) (12,625,831) (13,319,431) (13,984,335) (14,129,155) (15,024,883)
Plan to plan resource movement - - 72 - 222 -
Administrative expense - (182,933) (98,993) (233,009) (265,711) (128,739)
Other miscellaneous income (expense)- - - - (504,590) 420
Net change in plan fiduciary net position 20,906,549 (1,770,272) (4,611,800) 12,697,258 9,887,009 8,413,176
Plan fiduciary net Position -beginning of year 143,294,304 164,200,853 162,430,581 157,818,781 170,516,039 180,403,048
Plan fiduciary new position - end of year (b)164,200,853$ 162,430,581$ 157,818,781$ 170,516,039$ 180,403,048$ 188,816,224$
Net pension liability - ending (a)-(b)84,298,405$ 92,943,133$ 112,202,638$ 125,529,417$ 123,743,183$ 124,388,501$
Plan fiduciary net position as a percentage
of the total pension liability 66.08%63.61%58.45%57.60%59.31%60.29%
Covered payroll 14,884,359$ 13,714,558$ 14,161,162$ 14,696,132$ 14,529,255$ 17,534,445$
Net pension liability as a percentage of
covered payroll 566.36%677.70%792.33%854.17%851.68%709.40%
Notes to schedule:
Benefit changes:
The figures above do not include any liability impact that may have resulted from plan changes which
occurred after the June 30, 2017 valuation date. This applies for voluntary benefit changes as well as
any offers of Two Years Additional Credit (a.k.a. Golden Handshakes).
Changes in assumptions:
* - Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
None in 2019. In 2018, demographic assumptions and inflation were changed in accordance to the CalPERS
Experience Study and Review of Actuarial Assumptions December 2017. In 2017, The accounting discount rate
reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an
adjustment of the discount rate from 7.50% (net of administrative expense) to 7.65% (without a reduction for
pension plan administrative expenses). In 2014, amounts reported were based on the 7.50% discount rate.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Changes in the Net Pension Liability and Related Ratios
Police Safety Plan
Last Ten Fiscal Years*
73
Fiscal year ended June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020
Actuarially determined contribution 5,237,595$ 5,994,277$ 7,592,899$ 8,098,773$ 10,894,754$ 11,174,155$
Contributions in relation to the actuarially
determined contributions (5,237,595) (5,994,277) (7,592,899) (8,098,773) (10,894,754) (11,174,155)
Contribution deficiency (excess)-$ -$ -$ -$ -$ -$
Covered payroll 13,714,558 14,161,162 14,696,132 14,529,255 17,534,445 16,175,525
Contributions as a percentage of covered payroll 38.19%42.33%51.67%55.74%62.13%69.08%
Notes to schedule:
Valuation date for June 30, 2020 6/30/2017
Methods and assumptions used to determine contribution rates:
Actuarial Cost Method Entry Age Normal
Amortization method/period For details, see June 30, 2017 Funding Valuation Report.
Asset valuation method Fair 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; includes 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.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Contributions
Police Safety Plan
Last Ten Fiscal Years*
74
Measurement date June 30, 2014 June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019
Plan's proportion of the net pension
liability 0.86630%0.85980%0.78750%0.75976%0.78122%0.75901%
Plan's proportionate share of the net
pension liability 53,906,245$ 59,018,969$ 68,144,130$ 75,347,795$ 75,280,246$ 77,775,545$
Plan's covered payroll 9,348,967$ 8,616,507$ 9,235,056$ 9,116,708$ 9,057,608$ 9,614,585$
Plan's proportionate share of the
net pension liability as a percentage
of covered payroll 576.60%684.95%737.89%826.48%831.13%808.93%
Plan's proportionate share of the
fiduciary net position as a percentage
of the Plan's total pension liability 70.20%78.40%74.06%71.74%73.39%73.37%
Plan's proportionate share of aggregate
employer contributions 4,567,080$ 4,600,229$ 4,087,020$ 5,040,152$ 5,855,909$ 6,865,279$
Notes to schedule:
Benefit changes:
The figures above do not include any liability impact that may have resulted from plan changes which
occurred after the June 30, 2017 valuation date. This applies for voluntary benefit changes as well as
any offers of Two Years Additional Credit (a.k.a. Golden Handshakes).
Changes in assumptions:
* - Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
None in 2019. In 2018, demographic assumptions and inflation were changed in accordance to the
CalPERS Experience Study and Review of Actuarial Assumptions December 2017. In 2017, The
accounting discount rate reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015,
amounts reported reflect an adjustment of the discount rate from 7.50% (net of administrative
expense) to 7.65% (without a reduction for pension plan administrative expenses). In 2014, amounts
reported were based on the 7.50% discount rate.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Proportionate Share of the Net Pension Liability
Fire Safety Plan
Last Ten Fiscal Years*
75
Fiscal year ended June 30, 2015 June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020
Contractually required contribution
(actuarially determined)3,877,163$ 3,286,280$ 3,598,782$ 5,040,152$ 5,855,909$ 6,865,279$
Contributions in relation to the actuarially
determined contributions (4,603,714) (3,786,280) (3,598,782) (5,040,152) (5,855,909) (6,865,279)
Contribution deficiency (excess)(726,551)$ (500,000)$ -$ -$ -$ -$
Covered payroll 8,616,507$ 9,235,056$ 9,116,708$ 9,057,608$ 9,614,585$ 9,034,047$
Contributions as a percentage of covered payroll 53.43%41.00%39.47%55.65%60.91%75.99%
Notes to schedule:
Valuation date for June 30, 2020 6/30/2017
Methods and assumptions used to determine contribution rates:
Actuarial Cost Method Entry Age Normal
Amortization method/period For details, see June 30, 2017 Funding Valuation Report.
Asset valuation method Fair 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; includes 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.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Contributions
Fire Safety Plan
Last Ten Fiscal Years*
76
Measurement date June 30, 2016 June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020
Total pension liability:
Service cost -$ -$ -$ -$ -$
Interest on total pension liability 80,950 77,214 82,454 79,579 69,134
Difference between expected and actual experience (19) - (9,704) - 80,298
Changes in assumptions - (107,900) (18,938) 46,602 122,873
Changes in benefits - - - - -
Benefit payments, including refunds of employee contributions (211,287) (208,260) (205,233) (205,233) (205,036)
Net Change in Total Pension Liability (130,356) (238,946) (151,421) (79,052) 67,269
Total pension liability - beginning of year 2,897,028 2,766,672 2,527,726 2,376,305 2,297,253
Total pension liability - end of year (a)2,766,672$ 2,527,726$ 2,376,305$ 2,297,253$ 2,364,522$
Plan fiduciary net position as a percentage of the
total pension liability 0.00%0.00%0.00%0.00%0.00%
Covered payroll N/A N/A N/A N/A N/A
Net pension liability as a percentage of
covered payroll N/A N/A N/A N/A N/A
The discount rate changed from 3.50% as of June 30, 2018 to 3.15% as of June 30, 2019 measurement date.
The discount rate changed from 3.15% as of June 30, 2019 to 2.45% as of June 30, 2020 measurement date.
* - Fiscal year 2016 was the first year of implementation, therefore only five years are shown.
CITY OF COSTA MESA, CALIFORNIA
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
POLICE 1% SUPPLEMENTAL RETIREMENT PLAN
Last Ten Fiscal Years*
77
Measurement date June 30, 2017 June 30, 2018 June 30, 2019
Total OPEB liability
Service cost 1,229,918$ 1,098,145$ 1,110,733$
Interest on the total OPEB liability 1,622,474 1,812,069 1,852,821
Actual and expected experience difference - - 2,081,994
Changes in assumptions (3,959,316) (670,841) 3,420,614
Changes in benefit terms - - -
Benefit payments (2,318,709) (2,469,425) (2,751,358)
Net change in total OPEB liability (3,425,633) (230,052) 5,714,804
Total OPEB liability - beginning 56,858,361 53,432,728 53,202,676
Total OPEB liability - ending 53,432,728$ 53,202,676$ 58,917,480$
Plan fiduciary net position as a percentage of the total OPEB liability 0.00%0.00%0.00%
Covered - employee payroll1 41,026,788$ 43,392,898$ 43,828,141$
OPEB liability as a percentage of covered-employee payroll1 130.24%122.61%134.43%
Notes to schedule:
1 - OPEB benefits are not based on employee payroll.
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.
CITY OF COSTA MESA, CALIFORNIA
Schedule of Changes in Total OPEB Liability and Related Ratios
Last Ten Fiscal Years*
78
GENERAL FUND
The General Fund is used to account for all general revenues of the City not specifically levied
or collected for special purposes, and for expenditures related to the provision of general services
by the City. The General Fund is used to account for all resources not required to be accounted for
in another fund.
79
Variance with
Final Budget
Original Final Positive Prior Year
Budget Budget Actual (Negative)Actual
Revenues:
Taxes:
Sales tax 58,741,249$ 58,741,249$ 55,866,831$ (2,874,418)$ 64,902,009$
Property tax 43,246,886 43,246,886 45,248,448 2,001,562 42,873,901
Transient occupancy tax 9,619,199 9,619,199 6,587,224 (3,031,975) 8,595,417
Franchise tax 5,166,745 5,166,745 4,822,964 (343,781) 5,042,551
Business license tax 955,000 955,000 899,426 (55,574) 929,351
Marijuana business tax 1,143,000 1,143,000 763,674 (379,326) 163,803
Total taxes 118,872,079 118,872,079 114,188,567 (4,683,512) 122,507,032
Licenses and permits 4,299,500 4,299,500 5,496,049 1,196,549 5,104,022
Fines and forfeitures 1,623,244 1,623,244 1,400,807 (222,437) 1,851,890
Intergovernmental:
Motor vehicle in-lieu 60,000 60,000 91,674 31,674 55,343
Prop 172 1,113,607 1,113,607 1,102,506 (11,101) -
Advances repayment 1,060,817 1,060,817 1,060,817 - 962,362
Grants and other reimbursements 378,600 1,304,746 841,062 (463,684) 730,275
Total intergovernmental 2,613,024 3,539,170 3,096,059 (443,111) 1,747,980
Charges for services 8,048,821 8,048,821 6,813,680 (1,235,141) 7,240,115
Rental 3,283,988 3,283,988 2,901,367 (382,621) 2,847,393
Investment income (loss)1,000,000 346,351 1,578,983 1,232,632 1,534,416
Miscellaneous 810,247 810,247 974,524 164,277 920,450
Total revenues 140,550,903 140,823,400 136,450,036 (4,373,364) 143,753,298
Expenditures:
Current:
General government:
City council 773,216 790,666 698,823 91,843 667,505
City manager:
Administration 4,056,091 3,934,253 3,186,039 748,214 4,762,525
City clerk 1,065,377 1,015,645 778,232 237,413 975,348
Personnel services 1,601,614 1,561,193 1,413,892 147,301 1,508,553
Risk management services 2,970,875 2,745,153 2,388,330 356,823 2,492,585
City attorney 1,000,000 1,000,000 1,102,739 (102,739) 1,170,015
Financial services 4,369,638 4,004,248 3,252,348 751,900 3,310,640
Information technology 3,665,497 3,531,532 3,191,741 339,791 3,043,528
Facilities and equipment
maintenance 11,864,788 11,705,956 11,091,624 614,332 11,115,451
Non-departmental 2,164,000 1,669,000 2,052,728 (383,728) 173,380
Total general government 33,531,096 31,957,646 29,156,496 2,801,150 29,219,530
CITY OF COSTA MESA, CALIFORNIA
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to required supplementary information
80
Variance with
Final Budget
Original Final Positive Prior Year
Budget Budget Actual (Negative)Actual
Protection of persons and property:
Police protection 49,482,346 49,254,780 50,525,708 (1,270,928) 46,271,527
Fire protection 28,237,213 28,896,258 28,840,324 55,934 28,809,135
Building and safety 2,502,337 2,392,503 2,106,571 285,932 2,026,340
Total protection of persons
and property 80,221,896 80,543,541 81,472,603 (929,062) 77,107,002
Community programs:
Community recreation 7,298,474 6,942,747 5,562,004 1,380,743 6,611,826
Planning 2,074,007 2,130,124 1,981,670 148,454 2,015,363
Community improvement 1,498,604 1,399,757 1,169,632 230,125 1,198,878
Development services
administration 875,127 881,640 851,382 30,258 1,010,295
Total community programs 11,746,212 11,354,268 9,564,688 1,789,580 10,836,362
Public services:
Administration 1,775,189 1,660,227 1,567,609 92,618 2,173,723
Engineering 2,653,489 2,621,125 2,423,039 198,086 2,525,079
Transportation 2,916,521 2,798,697 2,569,353 229,344 2,746,831
Total public services 7,345,199 7,080,049 6,560,001 520,048 7,445,633
Debt Service:
Principal - - 15,392 (15,392) 10,261
Total debt service - - 15,392 (15,392) 10,261
Total expenditures 132,844,403 130,935,504 126,769,180 4,166,324 124,618,788
Excess (deficiency) of revenues
over (under) expenditures 7,706,500 9,887,896 9,680,856 (207,040) 19,134,510
Other financing sources (uses):
Transfers in 1,150,000 1,150,000 1,150,000 - 41,287
Transfers out (9,311,099) (10,266,715) (10,663,687) (396,972) (21,103,378)
Total other financing sources (uses)(8,161,099) (9,116,715) (9,513,687) (396,972) (21,062,091)
Net change in fund balance (454,599) 771,181 167,169 (604,012) (1,927,581)
Fund balance at beginning of year 53,296,499 53,296,499 53,296,499 - 55,224,080
Fund balance at end of year 52,841,900$ 54,067,680$ 53,463,668$ (604,012)$ 53,296,499$
CITY OF COSTA MESA, CALIFORNIA
General Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
For the fiscal year ended June 30, 2020
(With Comparative Data for Prior Year)
(continued)
See notes to required supplementary information
81
Variance with
Final Budget
Original Final Positive Prior Year
Budget Budget Actual (Negative)Actual
Revenues:
Intergovernmental 4,936,918$ 4,936,918$ 4,651,870$ (285,048)$ 4,486,417$
Investment income 100,000 100,000 399,539 299,539 341,405
Miscellaneous - - 10,780 10,780 -
Total revenues 5,036,918 5,036,918 5,062,189 25,271 4,827,822
Expenditures:
Current:
Public services 4,363,237 8,631,852 2,290,228 6,341,624 3,150,038
Total expenditures 4,363,237 8,631,852 2,290,228 6,341,624 3,150,038
Excess (deficiency) of revenues
over (under) expenditures 673,681 (3,594,934) 2,771,961 6,366,895 1,677,784
Net change in fund balance 673,681 (3,594,934) 2,771,961 6,366,895 1,677,784
Fund balance at beginning of year 9,005,859 9,005,859 9,005,859 - 7,328,075
Fund balance at end of year 9,679,540$ 5,410,925$ 11,777,820$ 6,366,895$ 9,005,859$
CITY OF COSTA MESA, CALIFORNIA
Gas Tax Fund - Major Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to required supplementary information
82
Variance with
Final Budget
Original Final Positive Prior Year
Budget Budget Actual (Negative)Actual
Revenues:
Intergovernmental -$ 393,391$ 286,326$ (107,065)$ -$
Investment income - - 63,462 63,462 -
Total revenues - 393,391 349,788 (43,603) -
Expenditures:
Current:
Protection of persons and property - 668,066 286,373 381,693 -
Community programs - 150,000 - 150,000 -
Public services 1,105,000 1,354,500 - 1,354,500 -
Total expenditures 1,105,000 2,172,566 286,373 1,886,193 -
Excess (deficiency) of revenues
over (under) expenditures (1,105,000) (1,779,175) 63,415 1,842,590 -
Net change in fund balance (1,105,000) (1,779,175) 63,415 1,842,590 -
Fund balance at beginning of year - - - - -
Fund balance (deficit) at end of year (1,105,000)$ (1,779,175)$ 63,415$ 1,842,590$ -$
CITY OF COSTA MESA, CALIFORNIA
Government Grants Fund - Major Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
See notes to required supplementary information
83
CITY OF COSTA MESA, CALIFORNIA
Notes to Required Supplementary Information
Year ended June 30, 2020
(1) Budgetary Data
Annual budgets are legally adopted or amended for all governmental funds on a basis
consistent with generally accepted accounting principles, except for the following funds for
which annual budgets were not adopted or amended:
Special Revenue Funds:
Disaster Fund
Debt Service Funds:
Financing Authority Debt Service Fund
Public Financing Authority Debt Service Fund
The City Council adopts an annual budget submitted by the City Manager prior to the
beginning of each new fiscal year. Public hearings are conducted prior to budget adoption
by the Council. Supplemental appropriations, when required during the period, are also
approved by the City Council. Interfunctional budget adjustments are approved by the
City Manager. Expenditures may not legally exceed appropriations at the department
functional level. At fiscal year-end all operating budget appropriations lapse.
84
SUPPLEMENTARYSCHEDULESFINANCIAL REPORTCOMPREHENSIVE ANNUAL
SUPPLEMENTARY SCHEDULES
MAJOR AND NONMAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Special Revenue Funds are used to account for revenue derived from specific taxes or other
earmarked revenues sources (other than expendable trust or for major capital projects) that are
restricted by law or administrative action to expenditures for specified purposes.
The following funds have been classified as nonmajor governmental funds in the accompanying fund
financial statements:
HOME Program Fund
Established to account for the receipt and disbursement of funds received under the Federal Home
Investment Partnership Program of the Department of Housing and Urban Development. These
revenues must be expended for acquisition, rehabilitation, and new construction of rental housing.
Proposition 172 Fund
Established to account for the receipt and disbursement of voter-approved one-half cent permanent
increase in the state sales tax in November 1993. These revenues must be expended for public
safety purposes.
Air Quality Improvement Fund
Established to account for the receipt and disbursement of the City’s share of funds received under
Health & Safety Code 44223 (AB 2766) to finance mobile source air pollution reduction programs
consistent with the California Clean Air Act of 1988.
Community Development Fund
This fund accounts for the receipt and disbursement of the Department of Housing and Urban
Development grants. These revenues must be expended to accomplish one of the following
objectives: elimination of slum or blighted areas to benefit low and moderate income persons, or to
meet certain urgent community development needs.
Supplemental Law Enforcement Services Fund (SLESF)
Established to account for the receipt and disbursement of funds received under the State Citizen’s
Option for Public Safety (COPS) Program allocated pursuant to Government Code Section 30061
enacted by Assembly Bill 3229, Chapter 134 of the 1996 Statutes. These COPS/SLESF funds are
allocated based on population and can only be spent for “front line municipal police services” as per
Government Code Section 30061(c)(2).
Rental Rehabilitation Program Fund
Established to account for the receipt and disbursement of grants received from the Department of
Housing and Urban Development under Section 17 of the U.S. Housing Act of 1937. These revenues
must be expended to provide assistance to rehabilitate primarily privately-owned residential rental
property.
Narcotics Forfeiture Fund
Established to account for the receipt and disbursement of narcotic forfeitures received from County,
State, and Federal agencies pursuant to Section 11470 of State Health and Safety Code and Federal
Statute 21USC Section 881.
Local Law Enforcement Block Grant Fund
Established to account for the receipt and disbursement of Federal grant monies provided by the
1998 Appropriations Act, Public Law 105-119. These funds are restricted for projects utilized to
reduce crime and improve public safety.
85
Office of Traffic Safety Fund
Established to account for the receipt and disbursement of Federal grant monies received through
the State Office of Traffic Safety. These funds are restricted for operations utilized to enhance traffic
safety and to reduce drunk driving within the City.
Housing Authority Fund
Established pursuant to the California Health and Safety Code, Section 34176(a). The Housing
Authority serves two distinct functions: Low and Moderate Income Housing Asset Fund (LMIHAF)
and homeless program. The LMIHAF is to promote affordable housing for families of low and
moderate income within the City. The homeless program is to provide temporary assistance
including housing to homeless individuals.
CAPITAL PROJECTS FUNDS
Capital Projects Funds are established to account for financial resources segregated for acquisition
and construction of major capital facilities (other than those financed by proprietary funds).
The following have been classified as major funds in the accompanying government-wide financial
statements:
Capital Improvements Fund
Established to account for construction of capital facilities funded by the City’s General Fund and
various governmental grants.
The following have been classified as nonmajor funds in the accompanying fund financial
statements:
Measure “M2” Fund
Established to account for the receipt and expenditure of the 2006 voter-approved one-half
percent sales tax for local transportation improvements. Measure M2 is a 30-year extension of
the earlier Measure M program.
Parking Districts Fund
Established under the Vehicle Parking District Law of 1943 to provide vehicle facilities in the
downtown area. Funding is provided through specific property tax levies.
Golf Course Improvements Fund
Established to account the receipt and disbursement of funds for Costa Mesa Country Club
capital improvements. Funding is provided by the receipt of two and one-half percent of monthly
gross receipts of green and tournament fees.
Park Development Fund
Established to account for the receipt and disbursement of funds for development and maintenance
of the City’s park system. Funding is provided by fees charged to residential and commercial
developers.
Drainage Fees Fund
Established to account for the receipt and disbursement of funds for construction and maintenance
of the City’s drainage system. Funding is provided by fees charged to residential and commercial
developers.
Traffic Impact Fees Fund
Established to account for the receipt and disbursement of funds for transportation improvements
Citywide. Funding is provided by fees charged to residential and commercial developers.
86
Fire System Development Fees Fund
Established to account for receipt and disbursement of development impact fees established by
Ordinance 89-1 for future construction of fire protection facilities and equipment for the north
Costa Mesa area.
Jack Hammett Sports Complex Fund
Establish to account for receipt and disbursement of funds related to on-going maintenance of Jack
Hammett Sports Complex. Funding is provided by the facility’s rental income.
Lions Park Capital Improvements Fund
Established to account for the receipt and disbursement of funds for construction of a new library
and renovation of the existing library into a neighborhood community center. Project funding is
partially provided by bond proceeds with the remaining balance provided by the Capital
Improvements Fund.
DEBT SERVICE FUNDS
Debt Service Funds are used to account for accumulated resources for and payment of general long-
term debt. The following have been classified as nonmajor funds in the accompanying fund financial
statements:
Public Financing Authority Debt Service Fund
To accumulate monies for payment of the 2006 Revenue Refunding bonds. The 2006 Revenue
Refunding bonds refunded the 1991 Local Agency Revenues Bonds that provided monies for the
purchase of the Costa Mesa Community Facilities 1991 Special Tax Bonds.
Financing Authority Debt Service Fund
To accumulate monies for the payment of the 2017 Lease Revenue Bonds. The 2017 Lease Revenue
bonds refunded the Public Financing Authority 2007 Certificates of Participation and provided partial
funding for the Lion’s Park Project.
87
Air
HOME Proposition Quality Community
Program 172 Improvement Development
Assets:
Cash and investments 1,663,135$ -$ 338,729$ -$
Cash and investments with fiscal agents - - - -
Due from other governments 16,120 - 36,251 138,048
Accounts receivable, net - - - -
Interest receivable 6,334 - 1,290 -
Loans receivable, net - - - -
Total assets 1,685,589$ -$ 376,270$ 138,048$
Liabilities:
Accounts payable 7,524$ -$ 7,502$ 42,283$
Accrued liabilities 79 - - 4,609
Retentions payable - - - -
Deposits payable - - - -
Due to other funds - - - 4,006
Total liabilities 7,603 - 7,502 50,898
Deferred Inflows of Resources:
Unavailable revenues 1,334 - - 49,265
Fund Balances:
Restricted for:
Protection of persons or property - - - -
Community programs 1,676,652 - - 37,885
Public services - - 368,768 -
Debt service - - - -
Assigned for:
Protection of persons and property - - - -
Public services - - - -
Unassigned - - - -
Total fund balances (deficit)1,676,652 - 368,768 37,885
Total liabilities, deferred inflows
of resources, and fund balances 1,685,589$ -$ 376,270$ 138,048$
CITY OF COSTA MESA, CALIFORNIA
Nonmajor Governmental Funds
Combining Balance Sheet
June 30, 2020
(With Comparative Data for Prior Year)
Special Revenue
88
Supplemental Local Law
Law Rental Enforcement Office of
Enforcement Rehabilitation Narcotics Block Traffic Housing
Services Program Forfeiture Grant Safety Authority
11,364$ 280,406$ 1,817,383$ 34,311$ -$ 3,646,271$
- - - - - 24,615
- - - - 48,304 -
- - - - - 17,576
43 1,069 6,959 131 - 11,879
- - - - - 862,534
11,407$ 281,475$ 1,824,342$ 34,442$ 48,304$ 4,562,875$
-$ -$ -$ -$ -$ 883,687$
- - - - - 11,049
- - - - - -
- - 423,260 - - 27,523
- - - - 48,304 -
- - 423,260 - 48,304 922,259
- - - - 3,140 -
11,407 - 1,401,082 34,442 - -
- 281,475 - - - 3,640,616
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - (3,140) -
11,407 281,475 1,401,082 34,442 (3,140) 3,640,616
11,407$ 281,475$ 1,824,342$ 34,442$ 48,304$ 4,562,875$
Special Revenue
89
Parking Golf Course Park Drainage
Measure "M2" Districts Improvements Development Fees
Assets:
Cash and investments 5,369,007$ 108,021$ 291,756$ 5,791,550$ 2,292,344$
Cash and investments with fiscal agents 110,000 - - - -
Due from other governments 648,614 11 - - -
Accounts receivable - - 20,201 - -
Interest receivable 20,843 411 1,111 22,067 8,730
Loans receivable - - - - -
Total assets 6,148,464$ 108,443$ 313,068$ 5,813,617$ 2,301,074$
Liabilities:
Accounts payable 261,616$ -$ 37,547$ 40,366$ 29,205$
Accrued liabilities 2,711 - - - -
Retentions payable 261,868 - - 250,000 17,500
Deposits payable - - - - -
Due to other funds - - - - -
Total liabilities 526,195 - 37,547 290,366 46,705
Deferred Inflows of Resources:
Unavailable revenues 328,306 - - - -
Fund Balances:
Restricted for:
Protection of persons or property - - - - -
Community programs - - - - -
Public services 5,293,963 - - - -
Debt service - - - - -
Assigned for:
Protection of persons and property - - - - -
Public services - 108,443 275,521 5,523,251 2,254,369
Unassigned - - - - -
Total fund balances (deficit)5,293,963 108,443 275,521 5,523,251 2,254,369
Total liabilities, deferred inflows
of resources, and fund balances 6,148,464$ 108,443$ 313,068$ 5,813,617$ 2,301,074$
(With Comparative Data for Prior Year)
(Continued)
Combining Balance Sheet
Nonmajor Governmental Funds
CITY OF COSTA MESA, CALIFORNIA
Capital Projects
90
Fire System Jack Hammett Lions Park Public
Traffic Development Sports Capital Financing Financing
Impact Fees Fees Complex Improvements Authority Authority 2020 2019
4,678,934$ 649,025$ 497,245$ 176,462$ -$ -$ 27,645,943$ 25,432,374$
- - - 1,070,991 765,672 43 1,971,321 3,008,453
- - - - - - 887,348 1,404,879
72,930 - - - - - 110,707 342,170
18,316 2,472 1,894 672 - - 104,221 125,748
- - - - - - 862,534 862,533
4,770,180$ 651,497$ 499,139$ 1,248,125$ 765,672$ 43$ 31,582,074$ 31,176,157$
4,579$ -$ -$ -$ -$ -$ 1,314,309$ 2,960,081$
- - - - - - 18,448 29,823
2,611 - - 925,035 - - 1,457,014 1,409,836
- - 15,000 - - - 465,783 422,810
- - - - - - 52,310 125,103
7,190 - 15,000 925,035 - - 3,307,864 4,947,653
72,930 - - - - - 454,975 864,680
- - - - - - 1,446,931 755,560
- - - - - - 5,636,628 5,365,265
- - - 323,090 - - 5,985,821 5,688,461
- - - - 765,672 43 765,715 938,687
- 651,497 - - - - 651,497 156,846
4,690,060 - 484,139 - - 13,335,783 12,468,458
- - - - - - (3,140) (9,453)
4,690,060 651,497 484,139 323,090 765,672 43 27,819,235 25,363,824
4,770,180$ 651,497$ 499,139$ 1,248,125$ 765,672$ 43$ 31,582,074$ 31,176,157$
Totals
Debt ServiceCapital Projects
91
Supplemental
Air Law
HOME Proposition Quality Community Enforcement
Program 172 Improvement Development Services
Revenues:
Taxes -$ -$ -$ -$ -$
Charges for services - - - - -
Fines and forfeitures - - - - -
Intergovernmental 141,966 - 146,894 411,358 273,684
Investment income 61,227 - 14,257 445 248
Rental income - - - - -
Miscellaneous 49,818 - - - -
Total revenues 253,011 - 161,151 411,803 273,932
Expenditures:
Current:
Protection of persons and property - - - - 259,786
Community programs 241,430 - - 448,742 -
Public services - - 62,209 - -
Principal - - - - -
Interest - - - - -
Total expenditures 241,430 - 62,209 448,742 259,786
Excess (deficiency) of revenues
over (under) expenditures 11,581 - 98,942 (36,939) 14,146
Other financing sources (uses):
Transfer in - 6,714 - - -
Transfer out - - (122,540) - -
Total other financing
sources (uses)- 6,714 (122,540) - -
Net change in fund balances 11,581 6,714 (23,598) (36,939) 14,146
Fund balances (deficit) at beginning
of the year 1,665,071 (6,714) 392,366 74,824 (2,739)
Fund balances (deficit) at end of year 1,676,652$ -$ 368,768$ 37,885$ 11,407$
CITY OF COSTA MESA, CALIFORNIA
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Year ended June 30, 2020
(With Comparative Data for Prior Year)
Special Revenue
92
Local Law
Rental Enforcement Office of
Rehabilitation Narcotics Block Traffic Housing
Program Forfeiture Grant Safety Authority
-$ -$ -$ -$ 258,209$
- - - - -
- 667,077 - - -
- - - 163,410 -
10,139 57,113 1,297 - 102,263
- - - - 405,379
40,000 - - - 10,401
50,139 724,190 1,297 163,410 776,252
- 45,523 - 166,550 -
- - - - 2,968,016
- - - - -
- - - - -
- - - - -
- 45,523 - 166,550 2,968,016
50,139 678,667 1,297 (3,140) (2,191,764)
- - - - 2,438,346
- - - - -
- - - - 2,438,346
50,139 678,667 1,297 (3,140) 246,582
231,336 722,415 33,145 - 3,394,034
281,475$ 1,401,082$ 34,442$ (3,140)$ 3,640,616$
Special Revenue
93
Parking Golf Course Park Drainage
Measure M Districts Improvements Development Fees
Revenues:
Taxes -$ 16,823$ -$ -$ -$
Charges for services - - - 1,049,018 898,498
Fines and forfeitures - - - - -
Intergovernmental 3,439,446 - - - -
Investment income 194,417 2,368 10,387 223,901 78,484
Rental income - - 108,759 - -
Miscellaneous - - - - -
Total revenues 3,633,863 19,191 119,146 1,272,919 976,982
Expenditures:
Current:
Protection of persons and property - - - - -
Community programs - - - 304,172 -
Public services 2,524,353 - 45,143 1,285,782 194,126
Principal - - - - -
Interest - - - - -
Total expenditures 2,524,353 - 45,143 1,589,954 194,126
Excess (deficiency) of revenues
over (under) expenditures 1,109,510 19,191 74,003 (317,035) 782,856
Other financing sources (uses):
Transfer in - - - - -
Transfer out - - - - -
Total other financing
sources (uses)- - - - -
Net change in fund balances 1,109,510 19,191 74,003 (317,035) 782,856
Fund balances (deficit) at beginning
of the year 4,184,453 89,252 201,518 5,840,286 1,471,513
Fund balances (deficit) at end of year 5,293,963$ 108,443$ 275,521$ 5,523,251$ 2,254,369$
CITY OF COSTA MESA, CALIFORNIA
Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
(continued)
(With Comparative Data for Prior Year)
Capital Projects
94
Fire System Jack Hammett Lions Park Public
Traffic Development Sports Capital Financing Financing
Impact Fees Fees Complex Improvements Authority Authority 2020 2019
-$ -$ -$ -$ -$ -$ 275,032$ 1,462,391$
259,298 469,333 - - - - 2,676,147 2,750,339
- - - - - - 667,077 617,103
- - - - - - 4,576,758 8,135,597
174,805 25,318 18,998 27,550 43,161 1,338 1,047,716 1,258,522
- - 150,750 - - - 664,888 632,134
- - - - - - 100,219 1,734,799
434,103 494,651 169,748 27,550 43,161 1,338 10,007,837 16,590,885
- - - - - - 471,859 1,655,210
- - - - - - 3,962,360 2,429,380
295,541 - - 816,102 - - 5,223,256 21,807,807
- - - - 190,000 1,610,000 1,800,000 1,785,000
- - - - 25,708 1,205,250 1,230,958 1,298,315
295,541 - - 816,102 215,708 2,815,250 12,688,433 28,975,712
138,562 494,651 169,748 (788,552) (172,547) (2,813,912) (2,680,596) (12,384,827)
- - - - - 2,813,487 5,258,547 3,852,207
- - - - - - (122,540) (5,129)
- - - - - 2,813,487 5,136,007 3,847,078
138,562 494,651 169,748 (788,552) (172,547) (425) 2,455,411 (8,537,749)
4,551,498 156,846 314,391 1,111,642 938,219 468 25,363,824 33,901,573
4,690,060$ 651,497$ 484,139$ 323,090$ 765,672$ 43$ 27,819,235$ 25,363,824$
Totals
Debt ServiceCapital Projects
95
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 499,710$ 141,966$ (357,744)$ 69,058$
Investment income - 61,227 61,227 64,631
Miscellaneous 100,000 49,818 (50,182) 1,454,658
Total revenues 599,710 253,011 (346,699) 1,588,347
Expenditures:
Current:
Community programs 465,723 241,430 224,293 168,919
Total expenditures 465,723 241,430 224,293 168,919
Excess (deficiency) of revenues
over (under) expenditures 133,987 11,581 (122,406) 1,419,428
Net change in fund balance 133,987 11,581 (122,406) 1,419,428
Fund balance at beginning of year 1,665,071 1,665,071 - 245,643
Fund balance at end of year 1,799,058$ 1,676,652$ (122,406)$ 1,665,071$
CITY OF COSTA MESA, CALIFORNIA
HOME Program Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
96
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Taxes -$ -$ -$ 1,126,008$
Investment income - - - 176
Total revenues - - - 1,126,184
Expenditures:
Current:
Protection of persons and property - - - 1,141,054
Total expenditures - - - 1,141,054
Excess (deficiency) of revenues
over (under) expenditures - - - (14,870)
Other financing sources (uses):
Transfer in - 6,714 6,714 -
Total other financing sources (uses)- 6,714 6,714 -
Net change in fund balance - 6,714 - (14,870)
Fund balance (deficit) at beginning of year (6,714) (6,714) - 8,156
Fund balance (deficit) at end of year (6,714)$ -$ -$ (6,714)$
CITY OF COSTA MESA, CALIFORNIA
Proposition 172 Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
97
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 146,983$ 146,894$ (89)$ 149,546$
Investment income 2,000 14,257 12,257 13,414
Total revenues 148,983 161,151 12,168 162,960
Expenditures:
Current:
Public services 540,705 62,209 478,496 125,632
Total expenditures 540,705 62,209 478,496 125,632
Excess (deficiency) of revenues
over (under) expenditures (391,722) 98,942 490,664 37,328
Other financing sources (uses):
Transfer out (122,540) (122,540) - -
Total other financing sources (uses)(122,540) (122,540) - -
Net change in fund balance (391,722) (23,598) 490,664 37,328
Fund balance at beginning of year 392,366 392,366 - 355,038
Fund balance at end of year 644$ 368,768$ 490,664$ 392,366$
CITY OF COSTA MESA, CALIFORNIA
Air Quality Improvement Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
98
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 1,869,451$ 411,358$ (1,458,093)$ 1,086,273$
Investment income (loss)- 445 445 124
Miscellaneous 30,000 - (30,000) 75,316
Total revenues 1,899,451 411,803 (1,487,648) 1,161,713
Expenditures:
Current:
Community programs 708,450 448,742 259,708 535,540
Public services 1,725,000 - 1,725,000 594,027
Total expenditures 2,433,450 448,742 1,984,708 1,129,567
Excess (deficiency) of revenues
over (under) expenditures (533,999) (36,939) 497,060 32,146
Net change in fund balance (533,999) (36,939) 497,060 32,146
Fund balance at beginning of year 74,824 74,824 - 42,678
Fund balance at end of year (459,175)$ 37,885$ 497,060$ 74,824$
CITY OF COSTA MESA, CALIFORNIA
Community Development Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
99
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 237,775$ 273,684$ 35,909$ 263,294$
Investment income - 248 248 146
Total revenues 237,775 273,932 36,157 263,440
Expenditures:
Current:
Protection of persons and property 237,700 259,786 (22,086) 305,297
Total expenditures 237,700 259,786 (22,086) 305,297
Excess (deficiency) of revenues
over (under) expenditures 75 14,146 14,071 (41,857)
Other financing sources (uses):
Transfer in - - - 44,544
Total other financing sources (uses)- - - 44,544
Net change in fund balance 75 14,146 14,071 2,687
Fund balance (deficit) at beginning of year (2,739) (2,739) - (5,426)
Fund balance (deficit) at end of year (2,664)$ 11,407$ 14,071$ (2,739)$
CITY OF COSTA MESA, CALIFORNIA
Supplemental Law Enforcement Services Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
100
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Investment income 500$ 10,139$ 9,639$ 8,932$
Miscellaneous - 40,000 40,000 171,751
Total revenues 500 50,139 49,639 180,683
Expenditures:
Current:
Community programs - - - 80,000
Total expenditures - - - 80,000
Excess (deficiency) of revenues
over (under) expenditures 500 50,139 49,639 100,683
Net change in fund balance 500 50,139 49,639 100,683
Fund balance at beginning of year 231,336 231,336 - 130,653
Fund balance at end of year 231,836$ 281,475$ 49,639$ 231,336$
CITY OF COSTA MESA, CALIFORNIA
Rental Rehabilitation Program Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
101
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Fines and forfeitures -$ 667,077$ 667,077$ 617,103$
Investment income 6,000 57,113 51,113 42,071
Total revenues 6,000 724,190 718,190 659,174
Expenditures:
Current:
Protection of persons and property 180,961 45,523 135,438 46,867
Total expenditures 180,961 45,523 135,438 46,867
Excess (deficiency) of revenues
over (under) expenditures (174,961) 678,667 853,628 612,307
Net change in fund balance (174,961) 678,667 853,628 612,307
Fund balance at beginning of year 722,415 722,415 - 110,108
Fund balance at end of year 547,454$ 1,401,082$ 853,628$ 722,415$
CITY OF COSTA MESA, CALIFORNIA
Narcotics Forfeiture Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
102
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Investment income -$ 1,297$ 1,297$ 1,240$
Total revenues - 1,297 1,297 1,240
Expenditures:
Current:
Protection of persons and property - - - -
Total expenditures - - - -
Excess (deficiency) of revenues
over (under) expenditures - 1,297 1,297 1,240
Net change in fund balance - 1,297 1,297 1,240
Fund balance at beginning of year 33,145 33,145 - 31,905
Fund balance at end of year 33,145$ 34,442$ 1,297$ 33,145$
CITY OF COSTA MESA, CALIFORNIA
Local Law Enforcement Block Grand Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
103
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 258,007$ 163,410$ (94,597)$ 162,919$
Total revenues 258,007 163,410 (94,597) 162,919
Expenditures:
Current:
Protection of persons and property 255,807 166,550 89,257 161,992
Total expenditures 255,807 166,550 89,257 161,992
Excess (deficiency) of revenues
over (under) expenditures 2,200 (3,140) (5,340) 927
Fund balance (deficit) at beginning of year - - - (927)
Fund balance (deficit) at end of year 2,200$ (3,140)$ (5,340)$ -$
CITY OF COSTA MESA, CALIFORNIA
Office of Traffic Safety Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
104
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Taxes 265,204$ 258,209$ (6,995)$ 320,775$
Investment income 18,000 102,263 84,263 109,584
Rental income 370,000 405,379 35,379 378,469
Intergovernmental 463,068 - (463,068) -
Miscellaneous 10,000 10,401 401 33,074
Total revenues 1,126,272 776,252 (350,020) 841,902
Expenditures:
Current:
Community programs 3,407,395 2,968,016 439,379 1,644,921
Total expenditures 3,407,395 2,968,016 439,379 1,644,921
Excess (deficiency) of revenues
over (under) expenditures (2,281,123) (2,191,764) 89,359 (803,019)
Other financing sources (uses):
Transfers in 2,046,324 2,438,346 392,022 1,003,400
Total other financing
sources (uses)2,046,324 2,438,346 392,022 1,003,400
Net change in fund balance (234,799) 246,582 481,381 200,381
Fund balance at beginning of year 3,394,034 3,394,034 - 3,193,653
Fund balance at end of year 3,159,235$ 3,640,616$ 481,381$ 3,394,034$
CITY OF COSTA MESA, CALIFORNIA
Housing Authority Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
105
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 2,923,429$ 3,439,446$ 516,017$ 6,404,507$
Investment income 30,000 194,417 164,417 256,599
Total revenues 2,953,429 3,633,863 680,434 6,661,106
Expenditures:
Current:
Public services 8,446,231 2,524,353 5,921,878 6,742,956
Total expenditures 8,446,231 2,524,353 5,921,878 6,742,956
Excess (deficiency) of revenues
over (under) expenditures (5,492,802) 1,109,510 6,602,312 (81,850)
Net change in fund balance (5,492,802) 1,109,510 6,602,312 (81,850)
Fund balance at beginning of year 4,184,453 4,184,453 - 4,266,303
Fund balance at end of year (1,308,349)$ 5,293,963$ 6,602,312$ 4,184,453$
CITY OF COSTA MESA, CALIFORNIA
Measure "M2" Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
106
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Taxes 10,054$ 16,823$ 6,769$ 15,608$
Investment income 600 2,368 1,768 3,200
Total revenues 10,654 19,191 8,537 18,808
Excess (deficiency) of revenues
over (under) expenditures 10,654 19,191 8,537 18,808
Other financing sources (uses):
Transfers out - - - (1,287)
Total other financing sources (uses)- - - (1,287)
Net change in fund balance 10,654 19,191 8,537 17,521
Fund balance at beginning of year 89,252 89,252 - 71,731
Fund balance at end of year 99,906$ 108,443$ 8,537$ 89,252$
CITY OF COSTA MESA, CALIFORNIA
Parking Districts Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
107
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Investment income -$ 10,387$ 10,387$ 6,430$
Rental income - 108,759 108,759 102,915
Total revenues - 119,146 119,146 109,345
Expenditures:
Current:
Public services 45,986 45,143 843 -
Total expenditures 45,986 45,143 843 -
Excess (deficiency) of revenues
over (under) expenditures (45,986) 74,003 119,989 109,345
Other financing sources (uses):
Transfers out - - - -
Total other financing sources (uses)- - - -
Net change in fund balance (45,986) 74,003 119,989 109,345
Fund balance at beginning of year 201,518 201,518 - 92,173
Fund balance at end of year 155,532$ 275,521$ 119,989$ 201,518$
CITY OF COSTA MESA, CALIFORNIA
Golf Course Improvements Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
108
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Charges for services 2,159,027$ 1,049,018$ (1,110,009)$ 2,299,373$
Investment income 25,000 223,901 198,901 254,348
Total revenues 2,184,027 1,272,919 (911,108) 2,553,721
Expenditures:
Current:
Community programs 1,029,568 304,172 725,396 -
Public services 6,174,282 1,285,782 4,888,500 1,899,529
Debt service:
Interest - - - 9,735
Total expenditures 7,203,850 1,589,954 5,613,896 1,909,264
Excess (deficiency) of revenues
over (under) expenditures (5,019,823) (317,035) 4,702,788 644,457
Other financing sources (uses):
Transfers out - - - (3,842)
Total other financing sources (uses)- - - (3,842)
Net change in fund balance (5,019,823) (317,035) 4,702,788 640,615
Fund balance at beginning of year 5,840,286 5,840,286 - 5,199,671
Fund balance at end of year 820,463$ 5,523,251$ 4,702,788$ 5,840,286$
CITY OF COSTA MESA, CALIFORNIA
Park Development Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
109
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Charges for services 277,200$ 898,498$ 621,298$ 268,800$
Investment income 10,000 78,484 68,484 57,202
Total revenues 287,200 976,982 689,782 326,002
Expenditures:
Current:
Public services 2,068,007 194,126 1,873,881 56,979
Total expenditures 2,068,007 194,126 1,873,881 56,979
Excess (deficiency) of revenues
over (under) expenditures (1,780,807) 782,856 2,563,663 269,023
Net change in fund balance (1,780,807) 782,856 2,563,663 269,023
Fund balance at beginning of year 1,471,513 1,471,513 - 1,202,490
Fund balance at end of year (309,294)$ 2,254,369$ 2,563,663$ 1,471,513$
CITY OF COSTA MESA, CALIFORNIA
Drainage Fees Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
110
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Charges for services 200,000$ 259,298$ 59,298$ 182,166$
Investment income 20,000 174,805 154,805 177,173
Total revenues 220,000 434,103 214,103 359,339
Expenditures:
Current:
Public Services 1,717,868 295,541 1,422,327 67,090
Total expenditures 1,717,868 295,541 1,422,327 67,090
Excess (deficiency) of revenues
over (under) expenditures (1,497,868) 138,562 1,636,430 292,249
Net change in fund balance (1,497,868) 138,562 1,636,430 292,249
Fund balance at beginning of year 4,551,498 4,551,498 - 4,259,249
Fund balance at end of year 3,053,630$ 4,690,060$ 1,636,430$ 4,551,498$
CITY OF COSTA MESA, CALIFORNIA
Traffic Impact Fees Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
111
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Charges for services -$ 469,333$ 469,333$ -$
Investment income 2,700 25,318 22,618 5,865
Total revenues 2,700 494,651 491,951 5,865
Net change in fund balance 2,700 494,651 491,951 5,865
Fund balance at beginning of year 156,846 156,846 - 150,981
Fund balance at end of year 159,546$ 651,497$ 491,951$ 156,846$
CITY OF COSTA MESA, CALIFORNIA
Fire System Development Fees Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
112
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Investment income 2,500$ 18,998$ 16,498$ 12,398$
Rental income 150,000 150,750 750 150,750
Total revenues 152,500 169,748 17,248 163,148
Net change in fund balance 152,500 169,748 17,248 163,148
Fund balance at beginning of year 314,391 314,391 - 151,243
Fund balance at end of year 466,891$ 484,139$ 17,248$ 314,391$
CITY OF COSTA MESA, CALIFORNIA
Jack Hammett Sports Complex Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
113
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Investment income -$ 27,550$ 27,550$ 185,582$
Total revenues - 27,550 27,550 185,582
Expenditures:
Current:
Public services 816,102 816,102 - 12,321,594
Total expenditures 816,102 816,102 - 12,321,594
Excess (deficiency) of revenues
over (under) expenditures (816,102) (788,552) 27,550 (12,136,012)
Net change in fund balance (816,102) (788,552) 27,550 (12,136,012)
Fund balance at beginning of year 1,111,642 1,111,642 - 13,247,654
Fund balance at end of year 295,540$ 323,090$ 27,550$ 1,111,642$
CITY OF COSTA MESA, CALIFORNIA
Lions Park Capital Improvements Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
114
Variance with
Final Budget
Final Positive Prior Year
Budget Actual (Negative)Actual
Revenues:
Intergovernmental 3,105,000$ 1,327,189$ (1,777,811)$ 2,276,746$
Investment income 200,000 304,698 104,698 482,263
Miscellaneous 148,500 1,076,110 927,610 571,692
Total revenues 3,453,500 2,707,997 (745,503) 3,330,701
Expenditures:
Current:
General government 229,999 53,640 176,359 -
Protection of persons and property 742,206 208,371 533,835 -
Community programs 150,000 60,175 89,825 -
Public services 16,709,670 5,863,654 10,846,016 18,026,000
Total expenditures 17,831,875 6,185,840 11,646,035 18,026,000
Excess (deficiency) of revenues
over (under) expenditures (14,378,375) (3,477,843) 10,900,532 (14,695,299)
Other financing sources (uses):
Issuance of debt - - - 153,914
Transfers in 4,402,680 4,402,680 - 12,005,734
Transfers out (1,150,000) (1,150,000) - (40,000)
Total other financing sources (uses)3,252,680 3,252,680 - 12,119,648
Net change in fund balance (11,125,695) (225,163) 10,900,532 (2,575,651)
Fund balance at beginning of year 11,712,519 11,712,519 - 14,288,170
Fund balance at end of year 586,824$ 11,487,356$ 10,900,532$ 11,712,519$
CITY OF COSTA MESA, CALIFORNIA
Capital Improvements Fund - Major Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual
Year ended June 30, 2020
(With Comparative Data for Prior Year)
115
INTERNAL SERVICE FUNDS
Internal Service Funds are used to account for the financing of goods and services provided by
one City department to another City department on a cost-reimbursement basis.
Equipment Replacement Fund
Established to account for all motorized equipment used by City departments.
Self Insurance Fund – Workers’ Compensation/General Liability/Unemployment
Established to account for receipt and disbursement of funds used to pay worker’s compensation,
general liability, and unemployment premiums and claims filed against the City.
Information Technology Replacement Fund
Established to provide funds for future replacements and upgrades to City computer equipment,
systems, and supporting infrastructure.
116
Self-Insurance-
Workers'
Compensation/
General Information
Equipment Liability/Technology
Replacement Unemployment Replacement 2020 2019
Assets:
Current assets:
Cash and investments 1,582,373$ 12,916,329$ 5,135,886$ 19,634,588$ 16,750,551$
Accounts receivable 6,027 - - 6,027 11,071
Interest receivable 6,034 49,288 19,559 74,881 85,478
Prepaid expenses - - - - 5,828
Inventories 95,982 - - 95,982 113,711
Total current assets 1,690,416 12,965,617 5,155,445 19,811,478 16,966,639
Capital assets:
Construction in progress - - 391,214 391,214 -
Motorized equipment 14,323,172 - - 14,323,172 14,194,370
Other equipment 2,659,096 - 187,799 2,846,895 2,836,671
Accumulated depreciation (9,926,448) - (33,804) (9,960,252) (8,985,781)
Net capital assets 7,055,820 - 545,209 7,601,029 8,045,260
Total assets 8,746,236 12,965,617 5,700,654 27,412,507 25,011,899
Liabilities:
Current liabilities:
Accounts payable 160,611 149,086 243,032 552,729 453,614
Accrued liabilities 9,221 2,725 629 12,575 8,655
Due to other funds - - - - 56,271
Claims payable - 2,299,557 - 2,299,557 905,682
Total current liabilities 169,832 2,451,368 243,661 2,864,861 1,424,222
Long-term liabilities:
Claims payable - 13,555,439 - 13,555,439 15,159,905
Total long-term liabilities - 13,555,439 - 13,555,439 15,159,905
Total liabilities 169,832 16,006,807 243,661 16,420,300 16,584,127
Net Position:
Investment in capital assets 7,055,820 - 545,209 7,601,029 8,045,260
Unrestricted (deficit)1,520,584 (3,041,190) 4,911,784 3,391,178 382,512
Total net position (deficit)8,576,404$ (3,041,190)$ 5,456,993$ 10,992,207$ 8,427,772$
Totals
CITY OF COSTA MESA, CALIFORNIA
Internal Service Funds
Combining Statement of Net Position
June 30, 2020
(With Comparative Data for Prior Year)
117
Self-Insurance-
Workers'
Compensation/
General Information
Equipment Liability/Technology
Replacement Unemployment Replacement 2020 2019
Operating revenues:
Charges for services 2,571,510$ 5,304,431$ -$ 7,875,941$ 8,438,850$
Total operating revenues 2,571,510 5,304,431 - 7,875,941 8,438,850
Operating expenses:
Allocated administrative costs 854,808 585,122 48,521 1,488,451 1,034,256
Depreciation 1,245,808 - 33,804 1,279,612 1,052,361
Fuel and repair parts 1,061,932 - - 1,061,932 1,282,424
Materials and supplies - - 30,602 30,602 270,346
Claims and premiums - 3,550,804 - 3,550,804 10,576,593
Total operating expenses 3,162,548 4,135,926 112,927 7,411,401 14,215,980
Operating income (loss)(591,038) 1,168,505 (112,927) 464,540 (5,777,130)
Nonoperating revenues (expenses):
Investment income 44,372 461,258 188,450 694,080 648,383
Contributions 278,521 - - 278,521 -
Gain (loss) on sale of equipment 2,294 - - 2,294 (17,263)
Total nonoperating revenues (expenses)325,187 461,258 188,450 974,895 631,120
Income (loss) before transfers (265,851) 1,629,763 75,523 1,439,435 (5,146,010)
Transfers in 1,125,000 - - 1,125,000 5,249,279
Change in net position 859,149 1,629,763 75,523 2,564,435 103,269
Net position (deficit) at beginning of year 7,717,255 (4,670,953) 5,381,470 8,427,772 8,324,503
Net position (deficit) at end of year 8,576,404$ (3,041,190)$ 5,456,993$ 10,992,207$ 8,427,772$
Totals
CITY OF COSTA MESA, CALIFORNIA
Internal Service Funds
Combining Statement of Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2020
(With Comparative Data for Prior Year)
118
Self-Insurance-
Workers'
Compensation/
General Information
Equipment Liability/Technology
Replacement Unemployment Replacement 2020 2019
Cash flows from operating activities:
Cash received from customers and user departments 2,575,450$ 5,305,535$ -$ 7,880,985$ 8,495,185$
Cash payments to suppliers for goods and services (1,082,550) (4,097,053) (72,666) (5,252,269) (10,499,735)
Cash payments to employees for services (854,242) (352,309) - (1,206,551) (714,832)
Net cash provided by (used for) operating activities 638,658 856,173 (72,666) 1,422,165 (2,719,382)
Cash flows from noncapital financing activities:
Cash received from other funds 1,125,000 - - 1,125,000 5,305,550
Cash paid to other funds (56,271) - - (56,271) -
Net cash provided by (used for)
noncapital financing activities 1,068,729 - - 1,068,729 5,305,550
Cash flows from capital and related financing activities:
Cash received from disposal of assets 36,198 - - 36,198 52,562
Acquisition of capital assets (199,550) - (148,182) (347,732) (1,733,088)
Net cash provided by (used for) capital
and related financing activities (163,352) - (148,182) (311,534) (1,680,526)
Cash flows from investing activities:
Investment income received 38,338 472,464 193,875 704,677 598,850
Net cash provided by (used for) investing activities 38,338 472,464 193,875 704,677 598,850
Net increase (decrease) in cash and cash equivalents 1,582,373 1,328,637 (26,973) 2,884,037 1,504,492
Cash and cash equivalents at beginning of year - 11,587,692 5,162,859 16,750,551 15,246,059
Cash and cash equivalents at end of year 1,582,373$ 12,916,329$ 5,135,886$ 19,634,588$ 16,750,551$
Reconciliation of operating income (loss) to net cash
provided by (used for) operating activities:
Operating income (loss)(591,038)$ 1,168,505$ (112,927)$ 464,540$ (5,777,130)$
Adjustments to reconcile operating income (loss)
to net cash provided by (used for) operating activities:
Depreciation 1,245,808 - 33,804 1,279,612 1,052,361
(Increase) decrease in accounts receivable 3,940 1,104 - 5,044 62,163
(Increase) decrease in prepaid items - - 5,828 5,828 (5,828)
(Increase) decrease in inventories 17,729 - - 17,729 16,736
Increase (decrease) in accounts payable (38,347) (105,570) - (143,917) (100,764)
Increase (decrease) in accrued liabilities 566 2,725 629 3,920 (2,846)
Increase (decrease) in claims payable - (210,591) - (210,591) 2,035,926
Net cash provided by (used for) operating activities 638,658$ 856,173$ (72,666)$ 1,422,165$ (2,719,382)$
Totals
CITY OF COSTA MESA, CALIFORNIA
Internal Service Funds
Combining Statement of Cash Flows
Year ended June 30, 2020
(With Comparative Data for Prior Year)
119
AGENCY FUNDS
Agency Funds are used to account for assets held by the City in a fiduciary capacity for
individuals, government entities, and others. Such funds are operated by carrying out
specifications of trust indentures, statutes, ordinances, or other governing regulations.
Deposits Fund
Established to account for various other funds held by the City in an agent or trustee capacity
for individuals, private organizations, other governmental units, and/or other funds.
Community Facilities District Fund
Established to account for special taxes received under the Mello-Roos Community Facilities
Act of 1982. Bonds were issued to provide for improvements within the District.
Costa Mesa Foundation Fund
Established for the purpose of providing opportunities for donors to contribute assets for
the benefit of the Community.
120
Community
Facilities Costa Mesa
Deposits District Foundation 2020 2019
Assets:
Cash and investments 2,230,116$ -$ 166,234$ 2,396,350$ 2,692,095$
Accounts receivable 49,897 - 68 49,965 32,117
Total assets 2,280,013$ -$ 166,302$ 2,446,315$ 2,724,212$
Liabilities:
Accounts payable 309,633$ -$ -$ 309,633$ 493,637$
Deposits payable 1,970,380 - 166,302 2,136,682 2,230,575
Total liabilities 2,280,013$ -$ 166,302$ 2,446,315$ 2,724,212$
Totals
CITY OF COSTA MESA, CALIFORNIA
Agency Funds
Combining Statement of Fiduciary Assets and Liabilities
June 30, 2020
(With Comparative Data for Prior Year)
121
Balance at Balance at
July 1, 2019 Additions Deletions June 30, 2020
DEPOSITS
Assets:
Cash and investments 2,546,427$ 5,705,231$ (6,021,542)$ 2,230,116$
Accounts receivable 31,977 216,246 (198,326) 49,897
Total assets 2,578,404$ 5,921,477$ (6,219,868)$ 2,280,013$
Liabilities:
Accounts payable 491,762$ (5,641,338)$ 5,459,209$ 309,633$
Deposits payable 2,086,642 (7,548,934) 7,432,672 1,970,380
Total liabilities 2,578,404$ (13,190,272)$ 12,891,881$ 2,280,013$
COMMUNITY FACILITIES DISTRICT
Assets:
Cash and investments -$ 251,382$ (251,382)$ -$
Total assets -$ 251,382$ (251,382)$ -$
Liabilities:
Accounts payable -$ (249,122)$ 249,122$ -$
Held for bondholders - (251,382) 251,382 -
Total liabilities -$ (500,504)$ 500,504$ -$
COSTA MESA FOUNDATION
Assets:
Cash and investments 145,668$ 121,683$ (101,117)$ 166,234$
Accounts receivable 140 3,578 (3,650) 68
Total assets 145,808$ 125,261$ (104,767)$ 166,302$
Liabilities:
Accounts payable 1,875$ (96,293)$ 94,418$ -$
Deposits payable 143,933 (99,917) 122,286 166,302
Total liabilities 145,808$ (196,210)$ 216,704$ 166,302$
CITY OF COSTA MESA, CALIFORNIA
Agency Funds
Combining Statement of Changes in Fiduciary Assets and Liabilities
Year ended June 30, 2020
122
TOTALS - ALL AGENCY FUNDS
Balance at Balance at
July 1, 2019 Additions Deletions June 30, 2020
Assets:
Cash and investments 2,692,095$ 6,078,296$ (6,374,041)$ 2,396,350$
Accounts receivable 32,117 219,824 (201,976) 49,965
2,724,212$ 6,298,120$ (6,576,017)$ 2,446,315$
Total assets
Liabilities:
Accounts payable 493,637$ (5,986,753)$ 5,802,749$ 309,633$
Deposits payable 2,230,575 (7,648,851) 7,554,958 2,136,682
Total liabilities 2,724,212$ (13,635,604)$ 13,357,707$ 2,446,315$
CITY OF COSTA MESA, CALIFORNIA
Agency Funds
Combining Statement of Changes in Fiduciary Assets and Liabilities
Year ended June 30, 2020
123
STATISTICAL SECTIONFINANCIAL REPORTCOMPREHENSIVE ANNUAL
STATISTICAL SECTION
STATISTICAL SECTION
This part of the City’s comprehensive annual financial report presents detailed information as a
context for understanding what information in the financial statements, note disclosures, and
required supplementary information says about the government’s overall financial health.
FINANCIAL TRENDS TABLES 1 - 4
These schedules contain financial trend information to help the reader
understand how the government’s financial performance and well-
being have changed over time.
REVENUE CAPACITY TABLES 5 - 12
These schedules contain revenue information to help the reader
assess the government’s most significant local revenue source.
DEBT CAPACITY TABLES 13 - 15
These schedules present information to help the reader assess the
affordability of the government’s current levels of outstanding debt
and the government’s ability to issue additional debt in the future.
DEMOGRAPHIC AND ECONOMIC INFORMATION TABLES 16 - 17
These schedules offer demographic and economic indicators to help
the reader understand the environment within which the
government’s financial activities take place.
OPERATING INFORMATION TABLES 18 - 20
These schedules contain service and infrastructure data to help the
reader understand how the information in the government’s financial
report relates to the services the government provides and the
activities it performs.
124
TABLE 12011201220132014201520162017201820192020Governmental ActivitiesNet investment in capital assets209,554,571$ 207,954,876$ 204,884,524$ 211,291,261$ 211,133,458$ 216,195,466$ 219,280,752$ 235,177,233$ 248,255,931$ 248,815,081$ RestrictedProtection of Persons and Property1,303,260 2,519,015 2,329,840 1,441,906 552,573 1,022,546 217,303 150,169 872,898 1,628,892 Community programs2,292,260 10,262,006 8,713,244 9,622,339 8,892,751 12,793,475 9,588,998 3,767,377 6,162,341 5,687,227 Public services26,299,602 28,568,791 26,485,938 21,642,345 17,660,289 15,495,090 20,253,747 13,625,826 14,845,159 17,051,750 Unrestricted42,251,930 44,741,840 43,798,620 51,403,839 (170,836,260) (159,357,224) (161,805,274) (224,657,548) (241,478,263) (251,417,100) Total governmental activities net position281,701,623$ 294,046,528$ 286,212,166$ 295,401,690$ 67,402,811$ 86,149,353$ 87,535,526$ 28,063,057$ 28,658,066$ 21,765,850$ Source: Government-Wide Financial StatementsCITY OF COSTA MESA, CALIFORNIA NET POSITION BY COMPONENTLAST TEN FISCAL YEARS(accrual basis of accounting)125
TABLE 22011201220132014201520162017201820192020ExpensesGovernmental Activities:General government22,942,186$ 19,977,655$ 22,655,452$ 23,396,581$ 25,225,607$ 24,631,010$ 28,474,037$ 31,695,402$ 34,008,731$ 32,124,703$ Protection of persons and property58,600,881 61,788,930 63,383,715 62,634,432 64,184,047 63,956,413 70,786,483 86,777,544 86,440,751 96,625,585 Community programs5,585,317 4,310,750 6,519,916 6,784,867 10,189,480 4,639,743 12,069,675 10,126,755 16,363,506 17,285,898 Public services18,051,024 18,873,545 20,508,217 22,768,197 21,549,681 22,498,495 21,415,061 20,062,183 27,937,004 16,269,612 Redevelopment862,541 911,704 - - - - - - - - Interest on long-term debt3,043,559 2,683,598 1,726,008 1,273,152 1,210,723 1,081,605 974,233 1,082,361 1,138,694 1,083,190 Total primary government expenses 109,085,508 108,546,182 114,793,308 116,857,229 122,359,538 116,807,266 133,719,489 149,744,245 165,888,686 163,388,988Program RevenuesGovernmental Activities:Charges for services:Protection of persons and property2,660,989 2,635,880 2,739,881 2,338,910 2,299,476 2,707,819 2,819,809 3,805,473 7,267,233 7,461,872 Community programs5,290,235 5,268,839 5,856,107 6,229,677 7,498,348 8,232,995 7,577,878 9,536,570 8,207,122 4,816,413 Public services2,626,032 2,861,971 2,646,611 2,680,625 3,089,801 3,721,366 3,232,506 5,046,984 6,179,653 7,096,062 Operating grants and contributions6,717,009 8,832,089 8,443,327 8,534,673 8,562,955 4,907,815 4,487,089 7,727,382 9,339,283 10,576,719 Capital grants and contributions 6,233,234 4,555,065 5,140,960 6,148,876 5,143,592 3,370,260 7,114,471 4,755,573 9,142,040 6,251,484 Total primary government revenues 23,527,499 24,153,844 24,826,886 25,932,761 26,594,172 22,940,255 25,231,753 30,871,982 40,135,331 36,202,550 Total primary government net expense (85,558,009)$ (84,392,338)$ (89,966,422)$ (90,924,468)$ (95,765,366)$ (93,867,011)$ (108,487,736)$ (118,872,263)$ (125,753,355)$ (127,186,438)$ General Revenues and Other Changes in Net PositionGovernmental Activities:Taxes:Property taxes 24,626,634$ 21,564,340$ 23,192,755$ 22,984,093$ 24,139,297$ 26,168,612$ 37,925,385$ 40,373,351$ 43,226,688$ 45,548,585$ Sales and use taxes 40,953,224 43,077,849 46,743,795 50,329,310 52,117,128 58,524,162 57,591,889 56,971,636 62,689,811 55,866,831 Transient occupancy tax 5,344,968 6,524,510 7,257,695 7,676,090 7,995,154 8,622,505 8,924,854 8,819,617 8,595,417 6,587,224 Franchise taxes 4,240,255 4,471,326 4,818,972 4,891,465 4,885,925 5,060,402 4,593,631 4,965,515 5,042,551 4,822,964 Business tax 866,442 888,967 917,633 916,285 954,408 973,521 918,928 919,450 1,093,154 1,663,100 Other intergovernmentalunrestricted 9,112,000 8,594,277 8,814,644 9,229,059 5,660,305 11,209,989 51,340 60,031 55,343 91,674 Investment income 2,499,790 1,377,209 640,159 1,772,900 1,692,528 1,871,216 496,650 256,438 4,264,987 4,075,623 Miscellaneous 860,972 978,394 181,943 495,154 949,533 913,351 1,333,610 1,903,266 1,380,413 1,638,221 Settlements - - 1,452,623 121,971 - - - - - - Extraordinary items:Gain on transfer of assetsto Successor Agency- 9,260,371 - - - - - - - - (Loss) on advanceto Successor Agency- - (11,888,159) - - - - - - - Total primary government88,504,285 96,737,243 82,132,060 98,416,327 98,394,278 113,343,758 111,836,287 114,269,304 126,348,364 120,294,222 Change in Net Position2,946,276$ 12,344,905$ (7,834,362)$ 7,491,859$ 2,628,912$ 19,476,747$ 3,348,551$ (4,602,959)$ 595,009$ (6,892,216)$ Source: Government-Wide Financial StatementsFiscal YearsCITY OF COSTA MESA, CALIFORNIA CHANGES IN NET POSITIONLAST TEN FISCAL YEARS(accrual basis of accounting)126
TABLE 32011201220132014201520162017201820192020General fundNonspendable13,334,328$ 13,917,262$ 3,137,794$ 3,430,104$ 4,165,795$ 2,486,085$ 2,253,843$ 2,038,518$ 280,195$ 362,189$ Restricted- - - - - - - - - - Committed16,125,000 16,125,000 16,125,000 16,125,000 16,125,000 16,125,000 16,125,000 16,125,000 23,625,000 25,125,000 Assisgned9,900,467 10,347,804 10,131,615 10,016,092 11,325,819 13,820,663 13,819,088 13,730,832 8,940,072 9,151,062 Unassigned5,915,735 7,419,860 16,252,032 20,629,130 22,199,337 32,040,713 30,867,198 23,329,730 20,451,232 18,825,417 Total general fund45,275,530$ 47,809,926$ 45,646,441$ 50,200,326$ 53,815,951$ 64,472,461$ 63,065,129$ 55,224,080$ 53,296,499$ 53,463,668$ All other governmental fundsNonspendable12,849$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Restricted 34,165,657 31,441,902 29,302,059 25,097,114 20,914,771 19,309,083 28,056,898 30,108,463 21,753,832 25,676,330 Committed - - - - - - - - - - Assisgned7,146,775 7,095,166 9,162,682 11,741,220 19,147,805 23,738,380 27,619,480 25,415,708 24,337,823 25,474,636 Unassigned(12,177,382) (2,572,973) (2,892,237) (2,288,538) (368,083) (139,064) (248,979) (6,353) (9,453) (2,312,520) Total all other governmental funds 29,147,899$ 35,964,095$ 35,572,504$ 34,549,796$ 39,694,493$ 42,908,399$ 55,427,399$ 55,517,818$ 46,082,202$ 48,838,446$ Source: Fund Financial StatementsCITY OF COSTA MESA, CALIFORNIA FUND BALANCES OF GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)127
TABLE 42011201220132014201520162017201820192020RevenuesTaxes76,031,925$ 76,526,993$ 82,930,849$ 86,797,242$ 90,091,915$ 99,349,202$ 99,464,729$ 110,884,896$ 123,969,423$ 114,463,599$ Licenses and permits1,557,797 1,903,361 1,997,057 2,085,348 2,313,296 2,983,081 2,933,305 3,837,564 5,104,022 5,496,049 Fines and forfeits2,104,816 3,508,181 4,483,240 3,614,144 1,367,190 1,609,134 1,352,682 1,612,230 2,468,993 2,067,884 Intergovernmental21,681,418 19,838,941 19,213,168 21,769,293 22,010,125 17,612,288 23,205,265 10,558,481 16,646,740 15,006,292 Charges for services4,478,711 4,167,896 4,320,932 4,721,191 6,117,030 6,668,445 5,909,112 9,553,421 9,990,454 9,489,827 Rental2,900,049 3,054,100 2,987,055 3,021,585 3,113,662 3,336,053 3,289,222 3,404,676 3,479,527 3,566,255 Investment income2,284,183 1,189,168 533,469 1,712,058 1,771,527 1,775,765 420,561 244,606 3,616,606 3,394,398 Return on equity - - 2,551,815 - - - - - - - Settlements - - 1,452,623 121,971 - - - - - - Miscellaneous 1,069,225 1,376,946 892,970 1,177,245 2,206,428 1,679,917 2,170,215 2,081,739 3,226,941 2,161,633 Total revenues 112,108,124 111,565,586 121,363,178 125,020,077 128,991,173 135,013,885 138,745,091 142,177,613 168,502,706 155,645,937 ExpendituresGeneral government21,739,252 20,974,387 21,982,783 23,893,450 24,699,226 25,102,067 26,518,266 29,048,355 29,219,530 30,808,182Protection of persons and property56,207,290 59,993,364 60,468,091 64,047,209 61,096,404 64,426,376 66,141,703 70,198,327 78,762,212 82,939,180 Community programs6,259,971 6,125,337 6,166,791 6,442,241 8,821,298 8,019,356 9,410,168 10,888,393 13,265,742 14,297,137 Public services11,849,471 13,613,312 16,781,751 22,863,385 21,860,252 19,836,633 21,680,495 42,305,565 50,429,478 20,506,675 Redevelopment862,541 911,704 - - - - - - - - Debt service:Principal4,395,904 4,525,739 3,872,050 2,450,000 2,540,000 2,650,000 2,755,000 4,070,000 1,795,261 1,815,392 Interest3,082,508 2,734,050 1,741,101 1,296,111 1,213,671 1,109,037 992,383 1,041,853 1,298,315 1,230,958 Bond issuance costs- - - - - - - 344,858 - - Payment to refundedbond escrow agent- - - - - - - 2,302,225 - - Total expenditures104,396,937 108,877,893 111,012,567 120,992,396 120,230,851 121,143,469 127,498,015 160,199,576 174,770,538 151,597,524 Excess of revenues over (under) expenditures7,711,187 2,687,693 10,350,611 4,027,681 8,760,322 13,870,416 11,247,076 (18,021,963) (6,267,832) 4,048,413 Other financing sources (uses):Transfers in 8,460,300 5,099,168 6,212,460 8,597,756 14,253,945 12,852,940 16,058,019 12,370,819 15,899,228 10,811,227 Transfers out(8,221,795) (5,099,168) (6,212,460) (9,094,260) (14,253,945) (12,852,940) (19,658,019) (18,063,009) (21,148,507) (11,936,227) Extraordinary Gain (loss)- 5,645,371 (11,888,159) - - - - - - - Issuance of debt- - - - - - - 29,735,000 153,914 - Premium on debt issue- - - - - - - 3,694,172 - - Payment to bond escrow agent- - - - - - - (14,530,520) - - Bond proceeds- - - - - - - - - - Total other financing sources (uses)238,505 5,645,371 (11,888,159) (496,504) - - (3,600,000) 13,206,462 (5,095,365) (1,125,000) Net change in fund balances 7,949,692$ 8,333,064$ (1,537,548)$ 3,531,177$ 8,760,322$ 13,870,416$ 7,647,076$ (4,815,501)$ (11,363,197)$ 2,923,413$ Debt service as a percentageof noncapital expenditures7.45%7.03%5.40%3.44%3.37%3.38%3.18%5.64%2.21%2.19%Source: Fund Financial StatementsCITY OF COSTA MESA, CALIFORNIA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)128
TABLE 5Transient PropositionFiscal Years Sales Property Occupancy Franchise Business 172 Total2011 40,173,714$ 24,626,634$ 5,344,968$ 4,240,255$ 866,442$ 779,510$ 76,031,523$ 2012 42,234,307 21,564,340 6,524,510 4,471,326 888,967 843,542 76,526,993 2013 45,830,107 23,192,755 7,257,695 4,818,972 917,633 913,688 82,930,850 2014 49,264,634 22,984,093 7,676,090 4,891,465 916,285 1,064,676 86,797,243 2015 51,115,064 24,139,297 7,995,154 4,885,926 954,408 1,002,064 90,091,914 2016 57,593,561 26,168,612 8,622,505 5,060,402 973,521 930,601 99,349,202 2017 56,556,867 27,435,427 8,924,854 4,593,631 918,928 1,035,022 99,464,729 2018 54,656,183 40,458,402 8,819,617 4,965,515 919,450 1,065,729 110,884,896 2019 64,902,009 42,873,901 8,595,417 5,042,551 1,093,154 1,126,008 123,633,040 2020 55,866,831 45,548,585 6,587,224 4,822,964 1,663,100 1,102,506 115,591,210 Source: Required Supplementary InformationCITY OF COSTA MESA, CALIFORNIA TAX REVENUES BY SOURCE, GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)129
TABLE 62010201120122013201420152016201720182019Apparel stores436,980$ 484,036$ 604,936$ 681,348$ 715,097$ 727,073$ 754,197$ 714,478$ 814,593$ 835,594$ General merchandise540,920 568,293 591,832 599,163 615,702 618,702 582,500 565,635 534,747 512,500 Food stores92,57593,721 94,377 87,225 88,872 103,225 90,941 88,385 90,178 91,470 Eating and drinking establishments337,684 371,523 387,667 421,830 443,384 469,465 496,041 515,683 535,744 556,504 Building materials145,342 142,575 150,604 180,198 193,248 205,343 224,225 236,497 242,750 251,846 Auto dealers and supplies 536,390 577,755 613,669 670,976 753,804 858,187 924,641 1,006,804 1,153,396 1,230,062 Service stations 196,497 240,892 269,067 263,352 245,432 215,707 190,969 200,170 235,572 232,911 Other retail stores 853,264 924,979 961,488 972,383 1,025,424 1,047,009 1,050,063 1,116,930 1,178,337 1,165,897 All other outlets 758,854 778,329 839,005 914,501 1,015,134 1,112,851 1,206,829 1,157,415 1,269,997 1,402,675 3,898,506$ 4,182,103$ 4,512,645$ 4,790,976$ 5,096,097$ 5,357,562$ 5,520,406$ 5,601,997$ 6,055,314$ 6,279,459$ City direct sales tax rate 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%Source: State of California Board of Equalization, California Department of Taxes and Fees Administration, State Controller's Office and the HdL CompaniesCalendar YearsCITY OF COSTA MESA, CALIFORNIA TAXABLE SALES BY CATEGORYLAST TEN CALENDAR YEARS(in thousands of dollars)130
TABLE 7PercentagePercentageof Total Cityof Total CityTaxableTaxableTaxableTaxableCategorySales Rank SalesSales Rank SalesAll other outlets1,402,675$ 1 22.34%758,854$ 2 19.47%Auto dealers and supplies1,230,062 2 19.59%536,390 4 13.76%Other retail stores1,165,897 3 18.57%853,264 1 21.89%Apparel stores835,594 4 13.31%436,980 5 11.21%Eating and drinking establishments556,504 5 8.86% 337,684 6 8.66%General merchandise512,500 68.16%540,920 3 13.88%Building materials251,846 7 4.01% 145,342 8 3.73%Service stations232,911 83.71%196,497 7 5.04%Food stores91,470 91.46%92,575 9 2.37%Source: State of California Board of Equalization, California Department of Taxes and Fees Administration, State Controller's Office and the HdL CompaniesCITY OF COSTA MESA, CALIFORNIA PRINCIPAL SALES TAX REMITTERS BY CATEGORYCURRENT YEAR AND NINE YEARS AGO20192010131
TABLE 8City Orange State of TotalLocal County California Sales TaxFiscal Years RateRateRateRate20111.00 0.50 7.25 8.75 20121.00 0.50 6.25 7.75 20131.00 0.50 6.50 8.00 20141.00 0.50 6.50 8.00 20151.00 0.50 6.50 8.00 20161.00 0.50 6.50 8.00 20171.25 0.50 6.00 7.75 20181.25 0.50 6.00 7.75 20191.25 0.50 6.00 7.75 20201.25 0.50 6.00 7.75 Source: State of California Board of EqualizationCITY OF COSTA MESA, CALIFORNIA DIRECT AND OVERLAPPING SALES TAX RATESLAST TEN FISCAL YEARS132
TABLE 9Fiscal Year Taxes Levied Collected forEnded for the Percentage SubsequentPercentageJune 30, Fiscal YearAmountof Levy Years (2)Amountof Levy (1)201120,670,091$ 20,059,681$ 97.05% 594,003$ 20,653,684$ 99.92%201220,574,309 19,958,891 97.01% 408,220 20,367,111 98.99%201321,112,082 20,599,679 97.57% 382,281 20,981,960 99.38%201422,178,464 21,732,926 97.99% 285,325 22,018,251 99.28%201523,405,838 22,897,171 97.83% 242,634 23,139,805 98.86%201624,960,369 24,222,713 97.04% 227,104 24,449,817 97.95%201726,330,538 25,640,344 97.38% 216,963 25,857,308 98.20%201827,825,846 27,272,459 98.01% 198,624 27,471,083 98.73%201929,820,941 29,186,740 97.87% 196,710 29,383,450 98.53%202031,300,931 30,714,805 98.13% 214,204 30,929,009 98.81%(1)The Percentage of Levy may exceed 100% if the amounts collected for subsequent years exceed the delinquency.(2)The County of Orange only makes this data available by collection year. Data by levy year is not available.Source: Orange County Assessor 2019/2020 Combined Tax RollsFiscal Year of the Levy Total Collections to Date Collected within theCITY OF COSTA MESA, CALIFORNIA PROPERTY TAX LEVIES AND COLLECTIONSLAST TEN FISCAL YEARS133
TABLE 10Less: Total TaxableEstimatedTaxable AssessedResidentialCommericalIndustial Miscellaneous Tax-Exempt Assessed Total Direct Actual Taxable Value as a PercentageFiscal Years Property Property Property Property Property Value Tax RateValue (1)of Actual Taxable Value2011 8,347,650,226 3,466,364,532 1,138,864,468 1,163,583,656 - 14,116,462,882 0.17154% 14,116,462,882 100.00%2012 8,557,101,277 3,394,223,104 1,100,996,492 1,065,596,839 - 14,117,917,712 0.17226% 14,117,917,712 100.00%2013 8,704,306,093 3,479,681,880 1,122,815,201 1,070,250,329 - 14,377,053,503 0.17288% 14,377,053,503 100.00%2014 9,101,889,466 3,566,114,710 1,117,794,289 1,140,508,581 - 14,926,307,046 0.15040% 14,926,307,046 100.00%2015 9,745,389,688 3,633,678,888 1,126,437,386 1,206,217,946 - 15,711,723,908 0.15035% 15,711,723,908 100.00%2016 10,456,976,124 3,766,616,981 1,190,970,066 1,118,171,362 - 16,532,734,533 0.15038% 16,532,734,533 100.00%2017 11,033,602,522 3,918,807,590 1,336,961,702 1,180,683,099 - 17,470,054,913 0.15014% 17,470,054,913 100.00%2018 11,685,011,850 4,096,390,455 1,500,236,782 1,222,877,713 - 18,504,516,800 0.15009% 18,504,516,800 100.00%2019 12,557,043,739 4,473,583,090 1,646,413,988 1,223,132,784 - 19,900,173,601 0.15002% 19,900,173,601 100.00%2020 13,389,240,208 4,687,990,535 1,744,806,502 1,290,509,110 - 21,112,546,355 0.14848% 21,112,546,355 100.00%(1)In 1978 the voters of the State of California passed Proposition 13 which limited taxes to a total maximum rate of 1%,based upon the assessed vaule of the property being taxed. Each year, the assessed value of property may be increasedby an inflation factor (limited to a maximum of 2%). With few exceptions, property is only reassessed as a result of newconstruction or at the purchase price (market value) or economic value of the property sold. The assessed valuation datashown above, represents the only data currently available with respect to the actual market value of taxable property andis subject to the limitations described above. Therefore, the estimated actual taxable value equals the total taxable assessedvalue.Source: HdL Coren & Cone, Orange County Assessor 2010/2011- 2019/2020 Combined Tax Rolls.CITY OF COSTA MESA, CALIFORNIA ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARS(modified accrual basis of accounting)134
TABLE 11GeneralTotal County of School SpecialBasic Obligation Redevelopment Redevelopment Direct Orange District DistrictsFiscal Year Rate Debt ServiceDebt Service (2)ProgramRate (1)DebtDebtDebt2011 0.14879 - 0.00370 1.00000 0.17154 0.36649 0.48300 0.00535 2012 0.14879 - 0.00370 1.00000 0.17226 0.36649 0.48300 0.00535 2013 0.14879 - - - 0.17288 0.36649 0.48300 0.00535 2014 0.14879 - - - 0.15040 0.36649 0.48300 0.00535 2015 0.14879 - - - 0.15035 0.36649 0.48300 0.00515 2016 0.14879 - - - 0.15038 0.36649 0.48300 0.00515 2017 0.14879 - - - 0.15014 0.36649 0.48300 0.00515 2018 0.14879 - - - 0.15009 0.36649 0.48300 0.00515 2019 0.14879 - - - 0.15002 0.36649 0.48300 0.00515 2020 0.14879 - - - 0.01485 0.36649 0.48300 0.00515 (1)Per the Government Finance Officers Association, the definition of "total direct rate" is as follows: "The weighted average of all individual rates applied by the government preparing the statistical section"The "total direct rate" for the City of Costa Mesa is a weighted average derived by dividing total Cityrevenue by taxable assessed value.(2)As of February 1, 2012, the Successor Agency to the former Costa Mesa Redevelopment Agency is responsible for the outstanding Redevelopment debt.Source: HdL Coren & Cone, Orange County Assessor 2010/2011 - 2019/2020 Combined Tax Rolls.City Direct RatesOverlapping RatesCITY OF COSTA MESA, CALIFORNIA DIRECT AND OVERLAPPING PROPERTY TAX RATESLAST TEN FISCAL YEARS135
TABLE 12PercentagePercentageof Total Cityof Total CityPropertyPropertyPropertyPropertyTaxTaxTaxTaxTaxpayerRevenue Rank RevenueRevenue Rank RevenueThe Irvine Company LLC711,526$ 1 1.95%390,978$ 1 1.61%Trust Costa Mesa Courtyards LLC554,446 2 1.52%384,725 2 1.59%Triangle Center LLC541,486 3 1.49%South Coast Plaza444,089 4 1.22%375,710 3 1.55%1901 Newport LLC Royal Street410,885 5 1.13%305,061 51.26%PR II of MCC South Coast Property Owner382,818 6 1.05%United Dominion Realty LP306,661 7 0.84%264,930 61.09%Behringer Harvard Pacifica Project Owner295,910 8 0.81%Advanced Group240,963 9 0.66%0.00%S-Tract LLC235,564 10 0.65%RREEF America Reit II Corporation CCCC2370,268 41.53%WWG TSQ Owner LLC235,291 70.97%RTS-Sunflower LLC Irvine Company211,244 80.87%Interinsurance Exchange of AAA191,396 90.79%Casden Lakes LP175,130 100.72%Total4,124,348$ 11.32%2,904,733$ 12.00%Source: HdL Coren & Cone, Orange County Assessor 2019/2020 & 2010/2011 Combined Tax Rolls.CITY OF COSTA MESA, CALIFORNIA PRINCIPAL PROPERTY TAX PAYERSCURRENT YEAR AND NINE YEARS AGO2019-2020 2010-2011
136
TABLE 132011201220132014201520162017201820192020General bonded debt outstandingGeneral oligation bonds-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Redevelopment bonds (1)4,140,000 3,615,000 - - - - - - - - Total4,140,000$ 3,615,000$ -$ -$ -$ -$ -$ -$ -$ -$ Percentage of taxable assessed0.0293% 0.0256% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000%Per capita8.85$ 8.43$ -$ -$ -$ -$ -$ -$ -$ -$ Less: Amounts set aside torepay general debt704,300 704,300 - - - - - - - - Total net debt applicable to debt limit3,435,700 2,910,700 - - - - - - - - Legal debt limit (3.75% of Assessed Value)574,243,802 575,152,015 585,780,638 607,508,126 637,377,201 669,713,004 705,606,516 743,516,945 796,252,660 842,737,426 Legal debt margin570,808,102 572,241,315 585,780,638 607,508,126 637,377,201 669,713,004 705,606,516 743,516,945 796,252,660 842,737,426 Legal debt margin as apercentage of the debt limit99.40% 99.49% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%(1)As of February 1, 2012, the Successor Agency to the former Costa Mesa Redevelopment Agency is responsible for the outstanding Redevelopment debt.Source: City of Costa Mesa Finance Department and Orange County Assessor 2019/2020 combined tax rollsFISCAL YEARSCITY OF COSTA MESA, CALIFORNIA RATIO OF GENERAL BONDED DEBT OUTSTANDING AND LEGAL DEBT MARGINLAST TEN FISCAL YEARS137
TABLE 14PercentageFiscal Year of Total Certificates Lease Total PercentageEnded Redevelopment Taxable Per Revenueof Loan Purchase Primaryof Personal PerJune 30,Bond (1)Assessed Value CapitaBonds (2)Particiaption Payable Financing Government Income Capita2011 4,140,000 0.0293% 8.85 12,735,000 26,355,000 - 1,780,834 45,010,834 1.27% 1,491.22 2012 3,615,000 0.0256% 8.43 10,490,000 25,140,000 - 1,057,907 40,302,907 1.11% 1,224.86 2013 - 0.0000% - 8,140,000 23,875,000 - 611,729 32,626,729 0.89% 999.53 2014- 0.0000% - 7,005,000 22,560,000 - 415,395 29,980,395 0.79% 886.84 2015- 0.0000% - 5,830,000 21,195,000 - - 27,025,000 0.73% 832.10 2016- 0.0000% - 4,600,000 19,775,000 - - 24,375,000 0.64% 732.66 2017- 0.0000% - 3,325,000 18,295,000 - - 21,620,000 0.57% 649.85 2018- 0.0000% - 34,103,345 - - - 34,103,345 0.77% 991.21 2019- 0.0000% - 32,170,580 - 143,653 - 32,314,233 0.78% 906.39 2020- 0.0000% - 30,222,813 - 128,261 - 30,351,074 0.69% 788.54 (1)As of February 1, 2012, the Successor Agency to the former Costa Mesa Redevelopment Agency is responsible for the outstanding Redevelopment debt.(2)Amount includes the unamortized Bond Premium.Source: City of Costa Mesa Finance DepartmentCITY OF COSTA MESA, CALIFORNIA RATIOS OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARSOther Governmental Activities DebtGeneral Bonded Debt138
TABLE 15EstimatedShare ofEstimated Direct andDebtPercentage OverlappingGovernmental UnitOutstandingApplicableDebtOverlapping Debt Newport Mesa Unified School District 248,378,253$ 26.547% 65,937,017$ Coast Community College District927,763,426 13.442% 124,705,492 Santa Ana Unified School District285,682,392 3.204% 9,154,524 Rancho Santiago Community College District231,134,039 1.394% 3,220,990 Rancho Santiago Community College District SFID No. 1173,410,000 2.608% 4,522,318 Metropolitan Water District7,541,389 3.666%276,495 Total Overlapping Debt 207,816,837 City Direct DebtCosta Mesa Public Financing Authority 2006 Revenue Refunding Bonds/Costa Mesa Community Facilities District No. 91-1410,000$ 100%410,000$ City of Costa Mesa General Fund Obligations (1)29,812,813 100% 29,812,813 Loan Payable128,261 100% 128,261 Total Direct Debt 30,351,074Total Direct and Overlapping Debt238,167,911$ (1)See Note 7 in Finance Statement for more information about the City's direct debt. The amount included the unamortized Bond Premium $3,287,813.Source: HdL Coren & Cone, Orange County Assessor and Auditor Combined 2019/20 Lien Data Tax Rolls.AS OF JUNE 30, 2020DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBTCITY OF COSTA MESA, CALIFORNIA 139
TABLE 16PersonalIncome Per Capita Orange County(thousands Personal Median School UnemploymentYearPopulation (2)of dollars)Income (1)Age (1)Enrollment (3)Rate (4)2011117,178 3,536,901 30,184 3321,444 9.20%2012110,757 3,644,348 32,904 3321,619 7.90%2013111,358 3,711,117 33,326 3321,944 6.10%2014111,846 3,650,877 32,642 3421,683 5.20%2015111,835 3,780,694 33,806 3421,540 4.30%2016114,603 3,722,083 32,478 3421,392 4.40%2017114,044 3,794,132 33,269 3420,801 3.80%2018115,296 3,966,839 34,406 3520,853 3.30%2019115,830 4,129,505 35,651 3520,316 3.00%2020114,778 4,417,883 38,490 3520,008 13.60%Source: (1) - City of Costa Mesa Finance Department / and The HdL Companies(2) - California State Department of Finance(3) - Newport-Mesa Unified School District.(4) - State of California Employment Development Department as of June 30th each year.CITY OF COSTA MESA, CALIFORNIA DEMOGRAPHIC AND ECONOMIC STATISTICSLAST TEN CALENDAR YEARS140
TABLE 17PercentagePercentageof Total Cityof Total CityEmployerEmployees Rank Employment Employees Rank EmploymentWinfield Locks, Inc.5,009 1 7.46%Epl Intermediate, Inc.3,998 2 5.96%Experian Information Solutions, Inc.3,700 3 5.51%3,700 1 5.61%Coast Community College District1,313 4 1.96%2,900 2 4.39%Contech Engineered Solutions Inc.1,288 5 1.92%Automobile Club of Southern California1,200 6 1.79% International Business Machines Corporation1,131 7 1.69%750 9 1.14%Deloitte & Touche LLP700 8 1.04%Dynamic Cooking Systems, Inc.700 9 1.04%Sure Haven, Inc550 10 0.82%Orange Coast Community College 2,500 3 3.79%Coast Community College 2,500 4 3.79%Fairview Developmental Center1,500 5 2.27%Interinsurance Exchange1,200 6 1.82%First Team Real Estate Inc.1,025 7 1.55%Pacific Building Care Inc850 8 1.29%Filenet Corporation600 10 0.91%Source: Avenu Insights & Analytics, Dunn & Bradstreet, State of California Employment Development DepartmentCITY OF COSTA MESA, CALIFORNIA PRINCIPAL EMPLOYERSCURRENT YEAR AND NINE YEARS AGO2019-20202010-2011141
TABLE 18Function/Program2011201220132014201520162017201820192020General GovernmentNumber of residents served via public services programs3,000 2,023 1,500 1,000 1,500 785 750 700 700 700 Accounts payable checks issued10,187 9,634 9,561 9,506 9,764 9,182 9,031 8,734 8,857 8,604 Total printshop photocopies produced 2,528,476 2,746,559 1,554,927 1,691,606 1,806,965 1,619,784 1,749,460 1,996,486 1,699,007 1,116,892 Protection of persons and propertyPolice protectionEmergency calls1,230 1,128 1,160 1,180 1,330 N/A1,000 1,029 882 876 Calls responded to within 5 minutes82%76%80%82%77% N/A66%72%75%72%Assigned theft cases2,055 1,951 1,900 1,000 400 900 1,200 N/AN/AN/APercentage of theft cases cleared25%34%25%40%40%40%60%74%64%52%Assigned burglary cases1,425 1,452 1,460 800 350 400 200 N/AN/AN/APercentage of burglary cases cleared 25% 21% 25% 40% 40% 40% 70% 69% 64% 50%Case and arrest reports processed19,814 15,324 21,921 18,133 15,128 14,584 19,310 19,319 18,382 19,079 Fire protectionNumber of calls for service 9,500 9,800 10,000 11,300 11,100 12,955 12,721 12,936 10,572 10,637 Fire related responses238 110 200 218 214 238 271 218 261 245 Emergency medical aid responses7,200 6,400 7,000 7,818 7,250 9,366 9,374 9,603 9,639 9,454 Community ProgramsNumber of program participants atthe Downtown Recreation Center30,903 32,404 42,411 31,018 31,521 33,446 34,939 38,247 42,000 28,000 Over-the-counter plan checksreviewed within five working days270 319 338 337 225 240 240 522 630 630 Inspection requests with 24 hours14,250 14,345 14,345 17,460 22,560 29,100 31,040 29,585 29,100 18,966 Complaint response within twoworking days90%90%90%90%90%90%90%90%90%90%Public servicesNumber of trees trimmed annually4,504 7,206 7,882 8,140 7,700 7,750 6,250 6,250 6,250 8,750 Number of catch basins cleaned annually1,165 1,165 1,165 1,165 1,165 1,165 1,115 1,100 1,100 1,165 Source: City of Costa Mesa Finance DepartmentFiscal YearsCITY OF COSTA MESA, CALIFORNIA OPERATING INDICATORS BY FUNCTION/PROGRAMLAST TEN FISCAL YEARS142
TABLE 19Function/Program2011 2012 2013 (1) 2014 2015 (2) 2016 2017 2018 2019 2020General GovernmentCity council5.0 5.0 6.0 6.0 6.0 6.0 6.0 6.0 8.0 10.5 City Manager's office13.00 15.75 22.00 29.75 38.41 33.30 37.59 39.74 41.60 36.48 Financial services17.75 17.75 27.21 27.21 20.21 21.71 21.50 22.25 22.50 22.00 Information technology - - - - 10.50 12.50 12.94 13.16 12.16 13.70 Administrative services 103.05 96.47 - - - - -- - - Development services30.00 26.50 27.59 27.00 37.25 43.50 46.23 45.95 44.80 48.79 Park and community services - - - - 53.43 70.70 74.00 80.54 87.23 96.71 Protection of persons and propertyPolice protection213.88 220.68 235.60 237.68 236.41 232.63 234.46 235.60 233.76 235.17 Fire protection98.44 96.44 95.44 95.75 84.75 87.25 87.50 94.00 94.00 95.00 Public services76.50 79.25 114.99 124.43 83.37 81.77 84.82 77.47 72.05 76.70 557.62 557.84 528.83 547.82 570.33 589.36 605.04 614.71 616.10 635.05 (1)City's Administrative Servies Department was reorganized. Divisions previously allocated to that department such as Human Resources, Central Services, and Risk Management were combined with the City Manager's Office and the Information Technology Division was combined with the Finance Department. In addition, the Recreation division was combined with Public Service Department.(2)The Information Technology was separated from the Finance Department.and Park & Community Services Department was separated from Public Service Department.Source: City of Costa Mesa Finance DepartmentCITY OF COSTA MESA, CALIFORNIA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAMLAST TEN FISCAL YEARS143
TABLE 20Function/Program2011 2012 2013 2014 2015 2016 2017 2018 2019 2020PoliceStations/substations 2 2 2 2 2 2 2 2 2 2 FireFire stations6 6 6 6 6 6 6 6 6 6 Other public worksStreets (lane miles)525.0 525.0 525.0 529.0 529.0 529.0 529.0 535.6 535.6 535.6 Streetlights6,669 6,674 6,674 6,674 6,674 6,674 6,674 6,674 6,881 6,869 Traffic signals124 124 123 123 124 124 124 125 126 127 Parks and recreation Acres of open space1,957 1,957 1,957 1,957 1,957 1,957 1,957 1,957 1,957 2,067 Park sites30 30 30 30 31 31 31 31 31 32 Baseball/softball diamonds6 6 5 5 6 6 6 6 6 6 Soccer/football fields8 8 10 10 10 10 10 10 10 6 Community centers3 3 3 3 4 4 3 3 3 4 Wastewater (miles)Sanitary sewers325.7 325.7 325.7 325.7 325.7 325.7 325.7 325.7 325.7 325.7 Storm sewers45.5 45.5 45.5 45.5 45.5 45.5 45.5 45.5 45.5 45.5 Source: City of Costa Mesa Finance DepartmentFiscal YearsCITY OF COSTA MESA, CALIFORNIA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMLAST TEN FISCAL YEARS144
WWW.COSTAMESACA.GOV
Independent Auditor’s Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of the Air Quality
Improvement Special Revenue Fund Performed
in Accordance with Government Auditing Standards
The Honorable Mayor and City Council
City of 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, the financial statements of the
City of Costa Mesa, California (the City) including the Air Quality Improvement Special Revenue
Fund (the Fund) of the City, as of and for the year ended June 30, 2020, and the related notes to
the financial statements, which collectively comprise the City’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 Fund’s financial statements, we considered the City’s
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s
internal control. Accordingly, we do not express an opinion on the effectiveness of the City’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.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s Fund 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. Such provisions include
those provisions of laws and regulations identified in Assembly Bill 2766 Chapter 1705 [Health and
Safety Code Sections 44220 through 44247] (the Guide). 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
City’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards and the Guide in considering the City’s internal
control and compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
December 21, 2020
The Honorable Mayor and City Council
City of Costa Mesa, California
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the City of Costa Mesa (“City”) for the year ended June 30,
2020. Professional standards require that we provide you with information about our responsibilities
under generally accepted auditing standards and, if applicable, Government Auditing Standards and
OMB Uniform Guidance, as well as certain information related to the planned scope and timing of our
audit. We have communicated such information in our letter to you dated May 11, 2020. Professional
standards also require that we communicate to you the following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the City are described in Note 1 to the financial statements.
No significant new accounting policies were adopted, and the application of existing policies were not
changed during 2020. We noted no transactions entered into by the City during the year for which
there is a lack of authoritative guidance or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and
are based on management’s knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly sensitive because of
their significance to the financial statements and because of the possibility that future events
affecting them may differ significantly from those expected. The most sensitive estimates affecting
the City’s financial statements were:
Management’s estimate of amounts recorded as claims and liabilities is based on
management’s reliance on a third-party claims administrator. We evaluated the key
factors and assumptions used to develop the amounts by the third-party claims
administrator and determined that it is reasonable in relation to the financial
statements taken as a whole.
Management’s estimate of transactions related to net pension and OPEB liabilities
based on actuarial information. We evaluated the key factors and assumptions used to
develop the amounts by the actuary and determined that it is reasonable in relation to
the financial statements taken as a whole.
There were no particularly sensitive note disclosures affecting the financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. In addition, none of the
misstatements detected as the result of audit procedures and corrected by management were
material, either individually or in the aggregate, to each opinion unit’s financial statements taken as
a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditor’s report. We are pleased to report that no such disagreements arose during
the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 21, 2020.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City’s auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses
were not a condition to our retention.
Other Matters
We applied certain limited procedures to the management’s discussion and analysis, the schedule of
proportionate share of the net pension liability and the schedule of contributions - fire safety plans,
the schedule of changes in the net pension liability and related ratios and the schedule of
contributions - miscellaneous, police safety, the schedule of changes in OPEB liability and related
ratios, and budgetary comparison schedules information which are required supplementary
information (RSI) that supplements the basic financial statements. Our procedures consisted of
inquiries of management regarding the methods of preparing the information and comparing the
information for consistency with management’s responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We
did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the combining and individual non-major fund financial statements and
the budgetary comparison schedules, which accompany the financial statements but are not RSI.
With respect to this supplementary information, we made certain inquiries of management and
evaluated the form, content, and methods of preparing the information to determine that the
information complies with accounting principles generally accepted in the United States of America,
the method of preparing it has not changed from the prior period, and the information is appropriate
and complete in relation to our audit of the financial statements. We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the financial
statements or to the financial statements themselves.
We were not engaged to report on the introductory and statistical sections, which accompany the
financial statements but are not RSI. We did not audit or perform other procedures on this other
information and we do not express an opinion or provide any assurance on it.
Restriction on Use
This information is intended solely for the use of City Council and management of the City of Costa
Mesa and is not intended to be, and should not be, used by anyone other than these specified parties.
Irvine, California
December 21, 2020
Independent Accountant’s Report on Agreed-Upon Procedures
Applied to Appropriations Limit Worksheets
The Honorable Mayor and City Council
City of Costa Mesa, California
We have applied the procedures enumerated below to the appropriations limit worksheets prepared
by the City of Costa Mesa, California for the year ended June 30, 2020. These procedures, which
were agreed to by the City of Costa Mesa, California (City) and the League of California Cities (as
presented in the League publication entitled Article XIIIB Appropriations Limitation Uniform
Guidelines) were performed solely to assist the City of Costa Mesa, California in meeting the
requirements of Section 1.5 of Article XIIIB of the California Constitution. The City of Costa Mesa is
responsible for the calculation and adoption of the Appropriations Limit.
The sufficiency of these procedures is solely the responsibility of the management of the City.
Consequently, we make no representation regarding the sufficiency of the procedures described
below either for the purpose for which the report has been requested or for any other purpose.
The procedures performed and the results of those procedures were as follows:
1. We obtained the worksheets referred to above and compared the limit and annual adjustment
factors included in those worksheets to the limit and annual adjustment factors that were
adopted by resolution of the City Council. We also compared the population and inflation
options included in the aforementioned worksheets to those that were selected by a recorded
vote of the City Council.
Results: No exceptions were noted as a result of our procedures.
2. We recalculated the mathematical calculations reflected in the City’s worksheets.
Results: No exceptions were noted as a result of our procedures.
3. We compared the current year information used to determine the current year limit and found
that it agreed to worksheets prepared by the City and to information provided by the State
Department of Finance.
Results: No exceptions were noted as a result of our procedures.
4. We compared the amount of the prior year appropriations limit presented in the worksheets
to the amount adopted by the City Council as the limit for the prior year.
Results: No exceptions were noted as a result of our procedures.
This agreed-upon procedures engagement was conducted in accordance with attestation standards
established by the American Institute of Certified Public Accountants. We were not engaged to and
did not conduct an examination or review, the objective of which would be the expression of an
opinion or conclusion, respectively, on the calculation and adoption of the Appropriations Limit.
Accordingly, we do not express such an opinion or conclusion. Had we performed additional
procedures, other matters might have come to our attention that would have been reported to you.
No procedures have been performed with respect to the determination of the appropriation limit for
the base year, as defined by the League publication entitled Article XIIIB Appropriations Limitation
Uniform Guidelines.
This report is intended solely for the use of the City of Costa, California and should not be used by
those who have not agreed to the procedures and taken responsibility for the sufficiency of the
procedures for their purposes.
Irvine, California
December 21, 2020
COSTA MESA PUBLIC
FINANCING AUTHORITY
(A Component Unit of the
City of Costa Mesa)
Financial Statements
Year Ended June 30, 2020
COSTA MESA PUBLIC FINANCING AUTHORITY
Table of Contents
Year Ended June 30, 2020
Page
Number
Independent Auditor’s Report 1 - 2
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position 3
Statement of Activities 4
Fund Financial Statements:
Balance Sheet - Governmental Funds 5
Reconciliation of the Governmental Funds Balance
Sheet to the Statement of Net Position 6
Statement of Revenues, Expenditures and Changes in
Fund Balances - Governmental Funds 7
Reconciliation of the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balances
to the Statement of Activities 8
Notes to the Basic Financial Statements 9 - 19
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 20 - 21
1
INDEPENDENT AUDITOR’S REPORT
Board of Directors
Costa Mesa Public Financing Authority
Costa Mesa, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities and each
major fund of the Costa Mesa Public Financing Authority (the 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. 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.
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 each major fund of the
Authority as of June 30, 2020, and the respective changes in financial position thereof for the
year then ended in accordance with accounting principles generally accepted in the United States
of America.
2
Emphasis of a Matter
As described more fully in Note 1A, the basic component unit 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 accordance with accounting principles generally accepted in the
United States of America.
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
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.
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 with fiscal agent (Note 2)540,672$ 503,219$
Investment in bonds (Note 2)225,000 435,000
TOTAL ASSETS 765,672 938,219
LIABILITIES:
Interest payable 8,713 12,710
Noncurrent liabilities:
Due within one year (Note 3)200,000 190,000
Due in more than one year (Note 3)210,000 410,000
TOTAL LIABILITIES 418,713 612,710
NET POSITION:
Restricted for debt service 346,959 325,509
TOTAL NET POSITION 346,959$ 325,509$
June 30, 2020
COSTA MESA PUBLIC FINANCING AUTHORITY
Statement of Net Position
(With comparative totals for June 30, 2019)
Governmental Activities
See accompanying notes to financial statements.
3
Charges Operating Capital
for Grants and Grants and
Expenses Services Contributions Contributions 2020 2019
Governmental Activities:
Interest on
Long-term debt 21,711$ -$ -$ -$ (21,711)$ (31,275)$
Total governmental
activities 21,711$ -$ -$ -$ (21,711)$ (31,275)$
General revenues:
Investment income 43,161 57,860
Total general revenues and transfers 43,161 57,860
Changes in net position 21,450 26,585
NET POSITION AT
BEGINNING OF YEAR 325,509 298,924
NET POSITION AT END OF YEAR 346,959$ 325,509$
COSTA MESA PUBLIC FINANCING AUTHORITY
Statement of Activities
June 30, 2020
Program Revenues
Functions/Programs
(With comparative totals for the year ended June 30, 2019)
Net (Expenses) Revenues
and Changes in Net Position
Governmental Activities
See accompanying notes to financial statements.
4
2020 2019
ASSETS
Cash and investments with fiscal agent 540,672$ 503,219$
Investment in bonds 225,000 435,000
TOTAL ASSETS 765,672$ 938,219$
FUND BALANCES
FUND BALANCES:
Restricted for debt service 765,672$ 938,219$
TOTAL FUND BALANCES 765,672$ 938,219$
Total
Governmental Funds
COSTA MESA PUBLIC FINANCING AUTHORITY
Balance Sheet
Governmental Funds
June 30, 2020
(With comparative totals for June 30, 2019)
See accompanying notes to financial statements.
5
Fund balances for governmental funds 765,672$
Amounts reported for governmental activities in the Statement of Net
Position are different because:
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 governmental fund liabilities.
All liabilities (both current and long-term) are reported in the
Statement of Net Position.
Revenue bonds (410,000)
Accured interest payable for the current portion of interst due on
long-term debt has not been reported in the governmental funds.
Interest payable - revenue bonds (8,713)
Net position of governmental activities 346,959$
COSTA MESA PUBLIC FINANCING AUTHORITY
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position
June 30, 2020
See accompanying notes to financial statements.
6
2020 2019
REVENUES
Interest from bonds 39,122$ 51,875$
Other interest 4,039 5,985
TOTAL REVENUES 43,161 57,860
EXPENDITURES
Debt service:
Principal 190,000 185,000
Interest 25,708 35,130
TOTAL EXPENDITURES 215,708 220,130
EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER)
EXPENDITURES (172,547) (162,270)
NET CHANGE IN FUND BALANCE (172,547) (162,270)
FUND BALANCES AT BEGINNING OF YEAR 938,219 1,100,489
FUND BALANCES AT END OF YEAR 765,672$ 938,219$
Total
Governmental Funds
COSTA MESA PUBLIC FINANCING AUTHORITY
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
Year ended June 30, 2020
(With comparative totals for the year ended June 30, 2019)
See accompanying notes to financial statements.
7
Net change in fund balances - total governmental funds (172,547)$
Amounts reported for governmental activities in the Statement of Activities are
different because:
Repayment of long-term principal is an expenditure in the governmental funds
and, thus, has the effect of reducing the fund balances because current
financial resources have been used. For the Authority as a whole, however,
the principal payments reduce the liabilities in the Statement of Net Position
and do not result in an expense in the Statement of Activities.
Debt service principal - revenue bonds 190,000
The Statement of Net Position includes accrued interest on long-term debt.
The net change in accrued interest for the current period is reported on
the Statement of Activities.3,997
Change in net position of governmental activities 21,450$
COSTA MESA PUBLIC FINANCING 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.
8
9
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
Year Ended June 30, 2020
1. Reporting Entity and Summary of Significant Accounting Policies:
A. Description of the Reporting Entity:
The Costa Mesa Public Financing Authority (the Authority) was created by a joint powers
agreement between the City of Costa Mesa (the City) and the former Costa Mesa
Redevelopment Agency (the Agency), dated August 20, 1990. It was created pursuant to
Articles 1 through 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of
California in accordance with the provisions of the Mello-Roos Local Bond Pooling Act of
1985. The Authority was created for the purpose of providing financing for capital
improvements, acquisition of capital improvements, and the purchase of local obligations.
Article 4 authorizes the Authority to borrow money for the purpose of financing the
acquisition of capital improvements and to lease capital improvements to the City.
The Authority is an integral part of the reporting entity of the City. The financial activity of
the Authority has been included within the scope of the basic financial statements of the City
because the City Council of the City of Costa Mesa is the governing board over the
operations of the Authority. Only the financial activity 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. 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
Government-wide financial statements display information about the reporting government
as a whole, except for its fiduciary activities. These statements include separate columns for
the governmental and business-type activities of the primary government (including its
blended component units), as well as its discretely presented component units. The Authority
has no business-type activities or discretely presented component units.
10
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
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 exchange and exchange-like transactions are
recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, and
liabilities resulting from nonexchange transactions are recognized in accordance with the
requirements of Governmental Accounting Standards Board (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 statement of activities to
present the net cost of each program.
Amounts paid to acquire capital assets are capitalized as assets in the government-wide
financial statements, rather than reported as expenditures. Proceeds of long-term debt are
recorded as liabilities in the government-wide financial statements, rather than as other
financing sources. Amounts paid to reduce long-term indebtedness of the reporting
government are reported as reductions of the related liabilities, rather than as expenditures.
When both restricted and unrestricted resources are combined, expenses are considered to
be paid first from restricted resources, and then from unrestricted resources.
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 each fund are accounted for with a separate set of self-balancing accounts that
comprise its assets, liabilities, deferred inflows of resources, fund equity, revenues and
expenditures or expenses, as appropriate. Governmental resources are allocated to and
accounted for in individual funds based upon the purposes for which they are to be spent
and the means by which spending activities are controlled.
11
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
Fund financial statements for the primary government’s governmental funds are presented
after the government-wide financial statements. These statements display information about
major funds individually and other governmental funds in the aggregate for governmental
funds. Fiduciary statements include financial information for fiduciary funds and similar
component units. Fiduciary funds primarily represent assets held by the Authority in a
custodial capacity for other individuals or organizations. The Authority has no fiduciary funds.
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 uses a sixty-day availability period.
Unavailable revenues are reported as deferred inflows of resources in the governmental
funds.
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 non-exchange 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 non-exchange 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, current
liabilities and deferred inflows of resources 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.
12
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
Noncurrent portions of long-term receivables due to governmental funds are reported on
the balance sheets in spite of their spending measurement focus. Special reporting
treatments are used to indicate, however, that they should not be considered “available
spendable resources,” since they do not represent available fund balance. Recognition of
governmental fund type revenues represented by noncurrent receivables are reported as
unavailable revenues. Noncurrent portions of other long-term receivables are offset by
deferred inflows of resources - unavailable revenue.
Because of the spending measurement focus, expenditure recognition for governmental fund
types excludes amounts represented by noncurrent liabilities. Since they do not affect
net current assets, such long-term amounts are not recognized as governmental fund type
expenditures or fund liabilities.
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 debt are
recorded as an other financing sources rather than as fund liabilities. Amounts paid to reduce
long-term indebtedness are reported as fund expenditures.
C. Activities in Major Fund:
The following debt service fund is presented as a major fund in the accompanying basic
financial statements:
Revenue Refunding Bonds 2006 Series A Fund - To account for the accumulation of resources
for the payment of debt service for bond principal and interest relating to the 2006 Series A
Revenue Refunding Bonds.
D. 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.
E. Investment in Bonds:
Investment in bonds represents the Authority’s investment in bonds issued by the Costa
Mesa Community Facilities District No. 91-1.
13
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
F. Net Position:
Net position of the Authority is 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.
G. Deferred Outflow/Inflows of Resources:
In addition to assets, the statement of net position and the governmental funds 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. The Authority does not have any
applicable deferred outflows of resources.
In addition to liabilities, the statement of net position and the governmental funds 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 does not have any applicable
deferred inflows of resources.
H. Budgetary Reporting:
Formal budgetary integration is not employed for the Authority because effective control is
alternatively achieved through the debt indenture provisions.
I. Fund Equity:
The fund balances are reported in the fund statements in the following classification:
Restricted Fund Balance - this includes amounts that can be spent only for specific purposes
stipulated by constitution, external resource providers, or through enabling legislation. If the
Board action limiting the use of funds is included in the same action (legislation) that created
(enables) the funding source, then it is restricted.
J. 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.
14
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
1. Reporting Entity and Summary of Significant Accounting Policies (Continued):
K. Fair Value Measurements:
Certain assets and liabilities are required to be reported at fair value. The fair value
framework provides a hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are
described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly and fair value is determined through the use of
models or other valuation methodologies including:
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in markets that are inactive;
Inputs other than quoted prices that are observable for the asset or liability;
Inputs that are derived principally from or corroborated by observable market data by
correlation or other means.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair
value measurement. These unobservable inputs reflect the Authority’s own assumptions
about the inputs market participants would use in pricing the asset or liability (including
assumptions about risk). These unobservable inputs are developed based on the best
information available in the circumstances and may include the Authority’s own data.
L. Prior Year Data:
Selected information regarding the prior year has been included in the accompanying
financial statements. This information has been included for comparison purposes only and
does not represent a complete presentation in accordance with accounting principles
generally accepted in the United States of America. Accordingly, such information should be
read in conjunction with the Authority’s prior year financial statements, from which this
selected financial data was derived. In addition, certain minor reclassifications of the prior
year data have been made to enhance their comparability to the current year.
15
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
2. Cash and Investments:
Cash and investments at June 30, 2020 are classified in the accompanying Statement of
Net Position as follows:
Cash and investments with fiscal agent $ 540,672
Investment in bonds 225,000
Total Cash and Investments $ 765,672
Cash and investments held at June 30, 2020 consisted of the following:
Investments:
Costa Mesa Community Facilities District Bonds $ 225,000
Money Market Mutual Funds 540,672
Total Cash and Investments $ 765,672
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by provisions of the debt
agreements, rather than the general provisions of the California Government code or the City’s
investment policy. The table below identifies the investment types that are generally authorized
for investments held by bond trustee. The table also identifies certain provisions of these debt
agreements that address interest rate risk, credit risk, and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investments Maturity Allowed in One Issuer
United States Treasury Securities None None None
Federal Agency Securities None None None
Banker’s Acceptances 30 days None None
Commercial Paper 270 days None None
Money Market Mutual Funds None None None
Investment Agreements None None None
Interest-Bearing Time Deposits 30 days None None
Repurchase Agreements 270 days None None
Local Agency Investment Fund None None None
State Obligations None None None
Pre-refunded Municipal Obligations None None None
16
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in market interest rates. One of the ways that the Authority
manages its exposure to interest rate risk is by purchasing a combination of shorter term and
longer term investments and by timing cash flows from maturities so that a portion of the
portfolio is maturing or coming close to maturity evenly over time as necessary to provide the
cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the Authority’s investments (including
investments held by bond trustee) to market interest rate fluctuations is provided by the
following table that shows the distribution of the Authority’s investments by maturity:
Remaining Maturity (in Months)
12 Months 13 Months
Investment Type or Less or More Total
Costa Mesa Community Facilities
District Bonds $ 225,000 $ - $ 225,000
Money Market Mutual Funds 540,672 - 540,672
Total $ 765,672 $ - $ 765,672
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. Presented below is the minimum rating required by
(where applicable) the California Government Code, the City’s investment policy, or debt
agreements, and the Standard & Poor’s actual rating as of year end for each investment type:
Investment Type
Minimum
Legal Rating Total AAA Unrated
Costa Mesa Community Facilities
District Bonds N/A $ 225,000 $ - $ 225,000
Money Market Mutual Funds AAA 540,672 540,672 -
Total $ 765,672 $ 540,672 $ 225,000
N/A - Not Applicable
17
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
2. Cash and Investments (Continued):
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in
anyone issuer beyond that stipulated by the California Government Code. Investments in anyone
issuer (other than mutual funds and external investment pools) that represent 5% or more of
total investments by reporting unit (governmental activities or major fund) are as follows:
Reported
Major Fund/Issuer Investment Type Amount Percentage
Revenue Refunding Bond
Series 2006 A Costa Mesa
Community Facilities District Investment in Bonds $ 225,000 29.39%
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able to
recover collateral securities that are in the possession of an outside party. The custodial credit
risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-
dealer) to a transaction, a government will not be able to recover the value of its investment or
collateral securities that are in the possession of another party. The California Government Code
and the City’s investment policy do not contain legal or policy requirements that would limit
the exposure to custodial credit risk for deposits or investments, other than the following
provision for deposits: The California Government Code requires that a financial institution
secure deposits made by the state or local governmental units by pledging securities in an
undivided collateral pool held by a depository regulated under state law (unless so waived by
the governmental unit). The market value of the pledged securities in the collateral pool must
equal at least 110% of the total amount deposited by the public agencies. California law also
allows financial institutions to secure Authority deposits by pledging first trust deed mortgage
notes having a value of 150% of the secured public deposits.
Fair Value Measurements
The Authority categorizes its fair value measurement within the fair value hierarchy established
by generally accepted accounting principles. The hierarchy is based on the valuation inputs used
to measure the fair value of the assets.
The Authority’s investments in the Costa Mesa Community Facilities District Bonds are valued
based on cost as these investments are not traded, and therefore, are categorized in Level 3.
When valuing Level 3 securities, the inputs or methodology are not necessarily an indication of
the risks associated with investing in those securities. Changes in valuation techniques may
result in transfers into or out of an assigned level within the disclosure hierarchy.
18
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
2. Cash and Investments (Continued):
Not subject to fair value categorization:
Money Market Mutual Funds 540,672
Total Investments $ 765,762
3. Long Term Liabilities:
The following is a summary of changes in long-term liabilities of the Authority for the year ended
June 30, 2020:
Series 2006A Revenue Refunding Bonds:
On June 1, 2006, the Authority issued $2,365,000 of Revenue Refunding Bonds, Series 2006A,
that were to advance refund the outstanding amount of 1991 Lease Revenue Bonds issued on
November 1, 1991. The bonds were issued to provide monies to enable the Authority to acquire
the City of Costa Mesa Community Facilities District 91-1 (Plaza Tower Public Improvements).
The $2,365,000 Revenue Refunding Bonds consist of $1,955,000 of serial bonds and $410,000
of term bonds. The serial bonds mature from August 1, 2007 through August 1, 2019 in
annual installments ranging from $120,000 to $190,000. The term bonds mature from August
1, 2020 through August 1, 2021 in annual installments ranging from $200,000 to $210,000.
Interest is payable semi-annually on February 1 and August 1 of each year, commencing on
February 1, 2007 at rates ranging from 3.85% to 5.10%.
There is a reserve requirement of $220,910 on the 2006A Revenue Refunding Bonds. The
Authority has $221,363 on reserve with the fiscal agent at June 30, 2020. The principal balance
outstanding at June 30, 2020 is $410,000.
Quoted Observable Unobservable
Prices Inputs Inputs
Investment Type Level 1 Level 2 Level 3 Total
Costa Mesa Community Facilities
District Bonds -$ -$ 225,000$ 225,000$
Total Categorized Investments -$ -$ 225,000$ 225,000
Due in
Balance Balance Due Within More Than
July 1, 2019 Additions Reductions June 30, 2020 One Year One Year
Series 2006A
Refunding Bonds 600,000$ -$ (190,000)$ 410,000$ 200,000$ 210,000$
19
COSTA MESA PUBLIC FINANCING AUTHORITY
Notes to the Basic Financial Statements
(Continued)
3. Long Term Liabilities (Continued):
The bonds are secured by special tax levied with CFD 91-1 Plaza Tower Public Improvements.
The special taxes are levied and collected for debt service on the bonds are required to be
remitted to the fiscal agent for the bonds within 10 business days of receipt. The County
remitted taxes on December 17, 2019 and April 21, 2020, and the City remitted payments six
and eight days later, respectively.
Future debt requirements for the Series 2006A Revenue Refunding Bonds are as follows:
Year Ending
June 30 Principal Interest Total
2021 200,000$ 15,810$ 215,810$
2022 210,000 5,355 215,355
Total 410,000$ 21,165$ 431,165$
20
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 Public Financing 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 Public Financing Authority (the
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 Authority’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.
21
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
FISCAL YEAR 2019-
2020 FINANCIAL
PERFORMANCE
REVIEW
AND
AUDITED FINANCIAL
REPORTS
January 19, 2021
MEETING AGENDA
Finance overview
Governmental accounting overview
Auditor’s report – Jennifer Farr, Partner, Davis
Farr LLP
FY 19/20 financial performance
1
CITY FINANCE OVERVIEW
Fiscal year from July 1 to June 30
Fiscal year 2019-2020 adopted budget appropriation: $142 million –
General Fund; $172 million - all funds
Generally Accepted Accounting Principles (GAAP) based municipal
accounting
Governmental Accounting Standards Board (GASB) regulates municipal
accounting and sets forth reporting requirements for audited financial
statements
A “Fund” in municipal accounting is a set of accounts used to track and
segregate resources for specific activities and purposes
City’s fund types:
General Fund (1)Debt Service Fund (2)
Special Revenue Fund (13)Internal Service Fund (3)
Capital Projects Fund (10)Agency Fund (4)
2
GOVERNMENTAL FUND ACCOUNTING
General Fund – chief operating fund for governmental general
purposes. Tax revenue is the primary source of its revenue. Important
to monitor the fund balance of the General Fund.
Special Revenue Fund –track revenues from specific sources
restricted for certain purposes (i.e. grants, funding with external
restrictions, etc.)
Capital Projects Fund – used to track large capital projects
Debt Service Fund – used to pay back long term debt
Internal Services Fund – collect revenues from departments to pay
for internally provided services to all City departments (i.e. vehicle
equipment replacement, risk management and technology
replacement services at the City)
Agency Fund - used to account for funds held by the City in a
fiduciary capacity
3
FY 2019-2020 AUDIT OVERVIEW
Annual financial audit conducted by Davis Farr
LLP, an independent accounting firm
Audit covers the City’s financial statements and
internal controls
FY 19/20 CAFR received an unmodified (clean)
opinion
The City’s CAFR is award winning – received
Government Finance Officers Association
(GFOA) Certificate of Achievement for
Excellence in Financial Reporting for the past 22
years.
4
CITY OF COSTA MESA
Presentation of Audit Results
AUDIT REPORTS ISSUED
Separate Financial Reports
for the Public Financing
Authority, Financing Authority
and Housing Authority
AQMD Compliance Report
Gann Letter Agreed-Upon
Procedures
Letter to Those in Charge of
Governance
Reports in Progress:
Single Audit of Federal
Awards
Internal Control
Communications
5
AUDIT OPINION 6
AUDIT PROCEDURES
General government audit approach:
Substantively testing all material assets,
liabilities, deferred outflows, and deferred inflows
Analytically testing revenues and expenses
Compliance testing
Risk based auditing – current year approach included:
Pension and OPEB obligations
Impact of COVID-19
Data mining of cash disbursements
7
REVIEW OF INTERNAL CONTROLS
Auditors do not express an opinion on internal
controls
Pending issuance of report on internal controls
until the Single Audit of Federal Awards is
completed
8
Reviewed internal controls over key accounting
cycles
Cash receipting
Cash
disbursements
and purchasing
Payroll
Investing Information
systems
Grant
management
AUDIT RESULTS ON COMPLIANCE
No material instances of compliance with laws
and regulations that are direct and material to the
financial statements
General fund expenditures did not exceed the
City Council approved budget
No purchasing compliance issues identified
No investment compliance issues identified
No debt compliance issues identified
Pending single audit compliance testing
9
FISCAL YEAR 2019-
2020 FINANCIAL
PERFORMANCE
REVIEW
Jennifer King
Assistant Finance Director
FINANCIAL RESULTS – GENERAL FUND
BUDGET VS. ACTUAL
10
FY 19-20
Adopted FY 19-20
Budget Actuals Difference
Total Revenues 140,550,903 136,450,036 (4,100,867)
Less: Total Operating Expenses 132,844,403 126,769,180 (6,075,223)
Less: Total Transfers, Net 8,161,099 9,513,687 1,352,588
Operating Results (454,599) 167,169
Operating Results to Total Revenues 0.12%
FINANCIAL RESULTS – GENERAL FUND
ACTUALS FY 2018-19 VS. FY 2019-20
11
FY 18-19 FY 19-20
Actuals Actuals Difference
Total Revenues 143,753,298 136,450,036 (7,303,262)
Less: Total Operating Expenses 124,618,788 126,769,180 2,150,392
Less: Total Transfers, Net 21,062,091 9,513,687 (11,548,404)
Operating Results (1,927,581) 167,169
FUND BALANCE IN GENERAL FUND
(IN MILLIONS)
12
FY 18-19 FY 19-20
Fund Balance Category Audited Audited Difference
Committed
Declared Disasters 14,125$ 14,125$ -$
Self Insurance 2,000 2,000 -
Economic Reserves 7,500 9,000 1,500
Assigned
Compensated Absences 4,893 5,036 143
Police Retirement 1%
Supplemental Plan 2,297 2,365 68
Section 115 Trust 1,750 1,750 -
Non-spendable 280 362 82
Unassigned 20,451 18,825 (1,626)
TOTAL 53,296$ 53,463$ 167$
FINANCIAL RESULTS
ALL FUNDS
DISASTER FUND REPORTING
13
FY 19-20
Actuals
Beginning Fund Balance, July 1 -$
Total Revenues 1,068,090
Total Operating Expenses (3,377,470)
Operating Results (2,309,380)
Ending Fund Balance, June 30 (2,309,380)$
Funding received after 6/30/2020:
Federal agency 32,297
State of California 1,417,179
County of Orange 187,177
Funding received as of 1/10/2021 1,636,653
Fund 150 Disaster Fund
FINANCIAL RESULTS – ALL FUNDS
BUDGET VS. ACTUAL
14
FY 19-20
Amended FY 19-20
Budget Actuals Difference
Beginning Fund Balance, July 1 107,806,473$ 107,806,473$ -$
Total Revenues 176,543,001 173,619,513 (2,923,488)
Less: Total Operating Expenses 148,211,158 143,105,570 (5,105,588)
Less: Total CIP *51,180,482 13,089,868 (38,090,614)
Less: Total Transfers-out 8,724,005 9,122,740 398,735
Operating Results Before Debt Service Payments (31,572,644) 8,301,335 39,873,979
Less: Debt Service Payments 2,815,250 2,813,487 (1,763)
Operating Results After Debt Service Payments (34,387,894) 5,487,848 39,875,742
Ending Fund Balance, June 30 73,418,579$ 113,294,321$ 39,875,742$
* CIP budget included projects funding approved in prior years and projects had not been completed
STANDARD & POOR’S (S&P)
REAFFIRMS OUTSTANDING RATING
City’s 2017 Lease Revenue Bonds AA+ rating:
Very strong economy, with access to a broad and
diverse base
Very strong management, strong financial policies
and practices
Very strong budgetary flexibility
Very strong liquidity
Strong debt and contingent liability position
15