The City of Hermosa Beach
2002-03 COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
(Including Report from Independent Auditor)
Web Links to other Beach Cities 2003 - 2005 Budget Information
Link to: The City of Manhattan Beach 2004 - 2005 Adopted Budget
Link to: The City of Redondo Beach 2003 - 2004 Adopted Budget
Link to: The City of El Segundo 2003 - 2004 Adopted Budget
2003-2004 Budget Message
Honorable Mayor and Councilmembers:
In accordance with the City Code, I am submitting the FY 2003-04 Combined Operating and Capital Budget for your review and approval.
Overview
The budget represents the most significant policy document that the City Council makes each year. The budget sets the City's work plan for the coming year, approves service levels of the several operating departments and details the capital investments that the City will make.
The most significant factors shaping the preparation of this budget are the increased costs associated with our ongoing programs and a lack of growth in sales tax with the expected loss of the last two new car dealerships located in the city. The expenditure side of the budget includes an additional $450,000 for retirement and health insurance costs. The retirement costs are projected to climb for the next several years as the rates are adjusted to reflect the negative investment returns experienced by the retirement system. Health insurance related costs are increasing throughout the nation much faster than inflation after several years of slower increases.
The revenue growth has been slower in all areas except property taxes where we continue to see increases that are higher than inflation and transient occupancy tax due to new hotels last year and this year. The loss of the new car dealerships cannot be overstated as having an impact on the overall revenue of the city. The VW dealership site does have a new development approved, which will generate some sales tax, but not as much as the dealership did. The BMW site will continue the current operation, probably until April 2004. Staff has had discussions with the dealership owners about the possible continued use of the site for service and used auto sales. The loss of these sources of revenue are important for both the short and long term, as the city attempts to continue to provide the services demanded by our residents and which are consistent with those provided by other cities in the South Bay. Additional revenues or increases in existing revenue will need to be considered in order to continue providing full range of services.
The other issue that is a complete unknown is the loss in revenue that the city may experience as a result of actions that the State Legislature and Governor may take to balance the state budget. The shortfall at the state level is unprecedented and even though local governments have so far been spared cuts in the early state budget balancing actions, it is expected that one way or another local government will again be called on to balance the state government programs. If the state does end up taking local government revenues to fund its programs, the city will have to amend this budget to reflect any changes. It is likely that consideration of any amendments will be done in July or August depending on when the state completes its budget. It is also important to point out that the state budget crisis is a multiyear problem. Some experts have said that the state will face this problem for 4 to 5 years. The last time that the state faced a budget gap this large in terms of percentage of its general fund was the 1992-93 fiscal year. That year the state tapped local government for a share of its property taxes, which if the city received those funds they would total over $1,000,000 this year. The funds targeted this year have been the Vehicle License Fees (VLF) and if we lost this source of revenue it would have significant impact on city services for the next several years.
This budget as proposed is balanced with recommended increases in a number of fees and charges including parking fees and fines. A separate report details these proposed changes both for the current fiscal year and beyond. In addition, staff will be proposing that the City Council consider placing two items on the November ballot for consideration by the voters: increasing the business license tax and the hotel tax (transient occupancy tax). This would allow the city to deal with state cuts without having to wait until the 2005 municipal election.
Revenue
Since the General Fund pays for the majority of operating expenses, this analysis of revenue and expenditures will focus on that fund. Most of the revenue in the other funds is either grant funds or other one-time funds which are restricted by use; therefore an overall comparison is not meaningful.
General Fund revenue estimates predict a 1% increase over estimates for 2003. Current year property tax revenue is projected to increase by 7%, reflecting continued health in the housing market in the beach area. Property tax represents 33% of total General Fund revenue. Please refer to the chart on page 30 for property tax distribution breakdown.
Sales tax revenue comprises 14% of total General Fund revenue and is estimated to decrease by 4% due to loss of the two auto dealerships. Prior to 2001-02, sales tax revenue rose 25% over the past two years, 59% over the past five years. The State sales tax rate is currently 8 1/4%, distributed as follows: 6% State; 1% City of Hermosa Beach; County Transportation 1/4%, Proposition A Transportation 1/2%. Proposition C Transportation 1/2%.
The third largest revenue source, utility user tax, is projected at just over $2 million, which is consistent with the 2000-01 level. For the new year, the tax represents 13% of total General Fund revenue. The tax rate is 6%.
Transient Occupancy Tax now represents 7% of General Fund revenue and is estimated to increase by 11% over 2002-03. A new 70-room hotel has just opened this fiscal year. In 2001-02, a 72-room hotel opened last fiscal year and an existing beachfront hotel expanded by 70%.
The graph below depicts these top four revenue sources in the General Fund.
MAJOR REVENUE SOURCES
Excess assets are available in the Public Employees Retirement System (PERS) for the Miscellaneous Group employees (non-safety). When this "superfunding" occurs, PERS allows those excess funds to be used for the payment of employer paid employee contributions. The funds from PERS show as revenue in the General Fund account "Use of PERS Excess Assets"; expenditure accounts continue to show the expense for city paid employer contributions. PERS estimates that these excess funds cease to be available after 2003-04.
Expenditures
There are no significant changes proposed in service levels for any of the departments. Expenditure increases reflect higher costs in a number of areas, including those associated with salary, retirement and benefit increases. Negotiations are under way with our employee organizations. Current agreements expire on 6/30/03.
No new positions are recommended. The requested positions included seven (7) new positions in the Fire Department. This request is similar to the one made last year with the addition of a position to fund a CERT coordinator.
The Lighting Fund was reduced by almost $66,000 because the cost of the Lighting/Landscaping/Medians Division is more than the assessment generates. The estimated balance available at the end of 2004 is 0. It is recommended that the City Council submit the issue of increasing the assessment to the voters through the "mailed ballot" procedure available for assessments.
This budget includes $6.8 million in funding for proposed capital projects in our continuing effort to improve our streets, parks, sewers and buildings. The most notable projects (including carry-over projects) are the Pier Phase III, Community Center ADA improvements, residential streets and sidewalk ramps. No transfer is proposed from the General Fund to the Capital Improvement Fund this year, as these revenues were needed to balance the preliminary budget, however, $275,000 from the Tyco Fund is transferring to the Capital Improvement Fund. The 5-Year Capital Projects Work Plan will be provided under separate cover for review at the study session. This work plan will detail each project, including funding and timeline, from start to finish, to improve accountability for the capital improvement projects.
All significant changes in fund balances shown in the Budget Summary are due to capital improvement project expenditures, which is the intended purpose of these funds. There have been no significant changes in the revenue stream for these funds.
I would like to thank all the Department Directors for their work and the Finance Department staff and Finance Director, Viki Copeland for putting the budget together. This has been an extremely difficult year to develop a budget to present to the City Council and I really appreciate the extra effort that has been made by all involved.
Respectfully submitted,
Stephen R. Burrell
City Manager
The City of Hermosa Beach
2002-03 COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
July 20, 2004
Honorable Mayor and Members of City Council Meeting of
the Hermosa Beach City Council July 27, 2004
2002-03 COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
(Including Report from Independent Auditor)
RECOMMENDATION
It is recommended that the City Council:
Receive and file the 2002-03 Comprehensive Annual Financial Report (CAFR), which includes
the report from Caporicci and Larson, our independent auditors.
BACKGROUND
Annually the City has a financial audit performed by an independent, certified public accounting
firm. The auditor’s report is located behind the second divider that is labeled “Financial
Section”.
Normally, the CAFR is complete by December and presented to City Council in January. This
year was a year of great change year because of the implementation of GASB 34. GASB, or
the Governmental Accounting Standards Board, is the standard-setting body for state and local
government financial reporting. GASB 34 is the statement that established new financial
reporting standards, which, for our City, were implemented for the 2002-03 fiscal year reporting.
Implementation of the new standards involved a complete overhaul of report formatting for
2002-03 and conversion of the previous year’s data in addition to 2002-03 in order to have
comparative information. Well over a year of planning was required, involving not only the
Finance staff but also Public Works, an outside appraisal firm and additional services from the
auditors. The staff appreciates the City Council’s support for the extra effort and the financial
resources for the additional services that were required to make it happen.
The most recent fund balances, as contained in the 2002-03 CAFR were used in the 2004-05
Preliminary Budget, therefore the City Council did have accurate information when considering
the 2004-05 Preliminary Budget. The fact that the CAFR had not actually been presented to
the City Council did not, therefore, affect any of the decision-making. Staff plans to present the
2003-04 CAFR at the normal time.
Some of the efforts involved in the project were the independent identification and appraisal of
the city’s infrastructure assets, which involved Public Works and American Appraisal,
development of accounting data to convert to and support the new statements, development of
new fixed asset policies and new systems for recording the infrastructure assets.
The City again received an unqualified opinion, which indicates that the auditor believes the
financial statements present a fair picture of the financial position of the City, as opposed to a
qualified opinion, in which the auditor “qualifies” or limits his opinion for specific reasons, such
as lack of fixed asset accounting, significant internal control deficiencies or now, noncompliance
with GASB 34.
The report has again been submitted to the Government Finance Officers Association (GFOA)
to qualify for the Certificate of Achievement for Excellence in Financial Reporting for the ninth
time. The filing deadline was extended in consideration of GASB 34 implementation. The
award program requires a high level of compliance with governmental standards, inclusion of
information well beyond the general-purpose financial statements and an unqualified audit
opinion.
ANALYSIS
The new reporting model:
Presents financial information in new formats, namely, the Government Wide Financial
Statements, beginning on page 15. These are designed to show net assets and equity
of the City as a whole, provide information on the cost of services and show how
programs are financed.
Requires a new section, Management’s Discussion and Analysis (MD &A) to present
financial highlights and assess performance for the year.
Requires reporting on “major” funds rather than aggregate fund types.
Requires accrual accounting for all governmental funds, meaning that long term assets
and liabilities (such as capital assets, including infrastructure) are included in addition to
short term assets and liabilities. All revenues and all costs of providing services are also
reported, not just those received or paid in or soon after year-end.
Much of the information previously contained in the staff report is now found in the MD &A
starting on page 3. General Fund information is found on page 10. Detailed sales tax
information, however, is not included in the CAFR, therefore it is presented below.
Sales tax represents 15% of total General Fund revenue and declined by 6% from 2001-02,
primarily due to the loss of the Porsche/Audi dealership and associated lease revenue.
2002-03 Sales Tax By Class*
Top Ten Categories
RANK/BUSINESS CLASS Sales Tax Increase/ % of %
2002-03 (Decrease) Change of Total
Prev. Yr.
1. Auto dealers and Supplies $ 732,516 (164,504) (18.34) 33.60
2. Eating/Drinking Places 588,939 21,120 3.72 27.01
3. Other Retail 213,255 10,386 5.12 9.78
4. Food Stores 197,822 7,322 3.84 9.07
5. Building Materials 130,038 2,717 2.13 5.96
6. Business, Service and Repair 102,213 (9,978) (8.89) 4.69
7. Service Stations 77,371 16,435 26.97 3.55
8. Furniture/Appliance 56,423 6,674 13.42 2.59
9. Wholesale Furniture/Textiles 49,194 2,261 4.82 2.26
10. Non-store and Part time Retailers 32,317 (7,078) (17.97) 1.48
Threshold for inclusion, $300 per quarter
Sales Tax by Geographic Area
LOCATION Revenue % of % Chg Revenue % of
2001-02 Total 2002-03 Total
PCH $1,303,871 62 (9) 1,185,399 59
Downtown 448,084 21 1 453,675 23
Pier/Valley/Monterey 283,568 13 5 297,012 15
Aviation 72,661 3 6 77,326 4
Gary Caporicci, the partner in charge of our audit, will be available at the meeting to make
some comments about the new CAFR model and to answer any questions you may have.
Since the reporting model is new for all of us, if you have particular questions, we would
appreciate knowing them in advance so we can give an adequate answer.
CONCUR:
_____________________ _______________________
Stephen R. Burrell, Viki Copeland,
City Manager Finance Director
The reports are available for review in the library and the Finance Department.
TREASURER'S REPORT - June - 2004
GENERAL ACCOUNT
FUND 6/1/2004 6/30/2004
NUMBER FUND NAME BALANCE CASH ADJUSTMENT CHECKS ADJUSTMENT BALANCE
001 GENERAL $4,577,527 $1,200,067 $226,959 (1,012,752) (419,810) $4,571,992
105 Lighting/Landscape $171,357 $650 (33,398) (9,224) $129,384
109 Downtown Enhancement $849,022 $92,780 $156 (45,148) (801) $896,008
110 PARKING $218,912 $330,822 $2,207 (87,549) (139,760) $324,633
115 STATE GAS TAX ($24,847) $62,802 (29,624) $8,331
117 AB939 $369,824 $4,915 $18 (3,113) (209) $371,435
119 Compensated Absences $196,609 (12,418) $184,191
121 PROP A Open Space (39,397) (1,714) ($41,111)
122 TYCO $1,948,567 (9,916) (23,649) $1,915,001
125 PARK REC FAC TAX $171,179 $25,886 (3,406) $193,659
NUMBER FUND NAME BALANCE CASH ADJUSTMENT CHECKS ADJUSTMENT BALANCE
126 RAILROAD Right of Way $29,518 (1) $29,517
127 BUILDING Improvement $3,868 $3,868
136 LOWER PIER ADMIN EXP. $821 (86) $735
137 MYRTLE ADMIN EXPENSE $8,963 (242) $8,721
138 LOMA ADMIN EXPENSE $11,663 (280) $11,383
140 COMM DEV. Block Grant ($10,957) $5,589 ($2,504) ($7,872)
145 PROPOSITION A $209,222 $49,177 (3,595) (8) $254,796
146 PROPOSITION C $874,059 $40,999 (30) $915,027
150 GRANTS ($256,220) (1,864) ($258,085)
NUMBER FUND NAME BALANCE CASH ADJUSTMENT CHECKS ADJUSTMENT BALANCE
151 OFC of Traffic Safety Grant $0.00 $0.00
152 Air Quality MGMT District $10,770 $5,895 (69) (0.17) $16,596
153 Supplement Law Enfr Serv $110,306 (8,000) (30,466) $71,838
154 CA Law Enf Equip Program $36,319 $28,108 (1.27) $64,426
156 Task Force/Auto Theft Prev ($37,490) (7,488) (2,284) ($47,263)
160 Sewer Maintienance $1,300,081 $4,398 $63,763 (51,299) (9,071) $1,307,870
170 Asset Seizure $146,477 (16,000) (3,380) $127,097
180 FIRE PROTECTION $390,908 $10,767 $524 (10,738) (11,673) $379,789
198 Retirement Stabilize Fund $371,020 (13) $371,007
199 Contingency $2,620,195 (91) $2,620,103
NUMBER FUND NAME BALANCE CASH ADJUSTMENT CHECKS ADJUSTMENT BALANCE
301 Capital Improvement $1,850,437 $22,913 (48,714) (141) $1,824,495
302 Artesia Bl. Relinquishment $519,864 (18) $519,846
305 Lower Pier Assess. Dist $70,438 (2) $70,436
307 Myrtle Util Undergrnd $4,613 $4,613
308 Loma Util Undergrnd $99,024 (3) $99,020
309 Bayview Dr Undergrnd Dist $0.00 $0.00
310 Bonnie Brae Undergrnd Dist $0.00 $0.00
311 Beach Dr Undergrnd Dist $6,414 $12,000 (1,186) $17,228
312 Prospect Undergrnd Dist $0.00 $0.00
610 Lower Pier Dist Redemp $30,416 $30,416
617 MYRTLE Redemption $93,151 $93,151
618 LOMA Redemption $107,284 $107,284
705 INSURANCE $3,983,540 $118,027 (82,799) (551) $4,018,216
715 Equip Replacement $2,605,737 $1,703 $107,565 (32,573) (7,975) $2,674,457
900 INVESTMENT $0.00 $0.00
NUMBER FUND NAME BALANCE CASH ADJUSTMENT CHECKS ADJUSTMENT BALANCE
TOTAL GENERAL ACCOUNT $23,629,212 $1,847,805 $570,893 ($1,458,713) (706,941) $23,882,256
TRUST BALANCE BALANCE
ACCOUNTS 6/1/2004 DEPOSITS CHARGES 6/30/2004
PAYROLL $3,000 $949,896 ($949,896) $3,000
CABLE TV DEPOSIT $10,000 $10,000
TOTAL TRUST ACCOUNTS $13,000 $949,896 ($949,896) $13,000
August 11, 2004
Honorable Mayor and Members of Adjourned Meeting of
The Hermosa Beach City Council August 13, 2004
2004 IMG
CONCERT ON THE BEACH: SHERYL CROW
Recommendation
It is recommended that the City Council approve the request from IMG to produce an evening concert on the beach, Thursday, September 23rd, 2004, featuring Sheryl Crow.
Summary
The Community Resources Department received a special event application from IMG, the company responsible for the production of Beach Bash, to produce a concert on the beach that would feature Sheryl Crow. The verbal request was received Thursday, August 5, 2004, after the Council agenda had been prepared. The City event application and $500 application fee were received Friday, August 6, 2004. An interdepartmental operations meeting was held Tuesday, August 10, 2004 to assess production feasibility and safety concerns. Per Council direction, this special event request was adjourned from the regular meeting of August 10, 2004 to Friday, August 13, 2004 at 6:00 p.m.
ENTERTAINMENT VENUE
Opening Act 6:00-6:45PM
TBD Remarks 6:55-7:04PM
First Support Act 7:05-7:55PM
American Express Remark 8:11-8:19PM
Sheryl Crow plus guest performers 8:20-10:00PM
Fireworks Display 10:01-10:04PM
Show Ends 10:05PM
Event capacity is determined to be 10,000 spectators situated on the sand (no bleachers) in six (6) designated quadrants situated on the north side of the Pier (Attachment A). Each quadrant measures 120’ X 200’ totaling 24,000 sq. ft per section. Open area capacity is typically set at 1 person per 7 sq. ft. Should more than the anticipated crowds of 10,000 arrive; there is safe seating capacity for 20,000 within the grids as shown on Attachment A.
A 6’ perimeter fence will control access to the venue site with secured entrances on both east and west sides. Other structural components include a stage, media deck, and elevated seating for a VIP area.
Per coastal commission policy, IMG cannot charge admission to the proposed event, but may sell or designate preferred seating (VIP) for up to 24% of the total amount of seating capacity. More than 75% of the seating capacity shall be available free of charge for general public admission.
The event contract (Attachment B) stipulates that a minimum of sixty (60) private security guards, one (1) Police Sergeant, eight (8) Police Officers, and two (2) Fire/Paramedic Officers are assigned to the event for security purposes.
Fiscal Impact: $25,452 Estimated Permit Fees (Attachment C)
$74,548 Charitable Donation toward youth/family orientated City programs and /or facility utilized by youth populations
The production schedule (Attachment D) details equipment load-in procedures beginning Thursday, September 16th with vehicles crossing the Strand for two consecutive days. Truck movement will discontinue over the course of the weekend and resume Monday, September 20th. All load-in and teardown proceedings will be implemented between the hours of 8:00AM and 8:00PM.
The American Express media outreach will be limited to local markets. Banner, print and radio marketing plans are outlined in Attachments E and F.
Attachments:
A. Venue Site Plan
B. Commercial Event Contract
C. Fiscal Impact Detail
D. Production Schedule
E. Street Banner Design
F. Marketing Plan
Respectfully Submitted, Concur,
____________________________ ________________________
Lisa Lynn Stephen R. Burrell
Community Resources Department City Manager
August 2, 2004
Honorable Mayor and Members of Regular Meeting of
the Hermosa Beach City Council August 10, 2004
1. MUNICIPAL MATTERS
a. STREETLIGHT ELIMINATION. Memorandum from Public Works Director Richard Morgan dated August 2, 2004. (PDF File).
RECOMMENDATION: Authorize the removal of up to 50% of the streetlights in the northwest portion of the City as a test project before proceeding citywide.
b. PROJECT NO. CIP 00-630 PIER RENOVATION - PHASE III, AWARD CONSTRUCTION CONTRACT, APPROPRIATE FUNDS, AND APPROVE PROFESSIONAL SERVICES AGREEMENT FOR CONSTRUCTION SUPPORT. Memorandum from Public Works Director Richard Morgan dated August 2, 2004. (PDF File).
RECOMMENDATION: That the City Council: