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Agenda Item 4 - CONSIDERATION OF ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) AND OTHER RELATED REPORTS FOR THE YEAR ENDED JUNE 30, 2021AGENDA ITEM NO.4 AGENDA STAFF REPORT City of West Covina I Office of the City Manager DATE: March 15, 2022 TO: Mayor and City Council FROM: David Carmany City Manager SUBJECT: CONSIDERATION OF ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) AND OTHER RELATED REPORTS FOR THE YEAR ENDED JUNE 30, 2021 RECOMMENDATION: It is recommended that the City Council receive and file the following letters and financial reports for the year ended June 30, 2021: . Annual Comprehensive Financial Report; . Government Auditing Standards Letter; . Audit Communication Letter; . West Covina Housing Authority Fund Financial Report; . West Covina Housing Authority Fund Addendum to the Annual Progress Report; and . Air Quality Improvement Fund Financial Statements. These documents were reviewed by the Audit Committee on February 9, 2022. BACKGROUND: Annually, the Finance Department prepares and publishes the City's Annual Comprehensive Financial Report ("ACFR") following the completion of an independent and certified audit (Attachment No. 1). This document is an extensive report summarizing the financial activities of the City that occurred from July 1, 2020 through June 30, 2021. This document was formerly known as the Comprehensive Annual Financial Report ("CAFR"). The name change was recently formalized by the Governmental Accounting Standards Board (GASB) following stakeholder concerns that the acronym of the prior name of the report sounded like a profoundly offensive term when spoken. Otherwise, no changes were made to the report's structure or content. The ACFR is prepared in compliance with the Governmental Accounting Standards Board (GASB) standards. Pursuant to GASB guidelines, the City's ACFR is divided into three sections: Introductory, Financial, and Statistical. The Introductory section contains a Letter of Transmittal. This letter includes a brief overview of the City, the economic outlook, operational controls and major initiatives. The Financial section contains the independent auditors' opinion letter, Management's Discussion and Analysis (MD&A), and the Basic Financial Statements. The audit firm of Van Lant & Fankhanel LLP has issued an unmodified ("clean") opinion on the financial statements for the year ended June 30, 2021. This means that their examination, testing and audit procedures allowed them to conclude that the financial statements present fairly the financial position of the City. This is the best opinion the City can receive from its auditors. The MD&A provides a narrative of how the financial report is presented and key highlights of some of the changes in financial position. The MD&A provides tables showing comparative information from the year ended June 30, 2020, to the year ended June 30, 2021. The final section of the ACFR is the Statistical section. This section presents data useful in analyzing the City's financial and operational history for comparative purposes. Some of the statistics tracked include financial trends, revenue capacity, and debt capacity which are useful for evaluating the City's financial stability. Additional statistics include operating indicators. DISCUSSION: Annual Comprehensive Financial Report The ACFR represents the City of West Covina's financial position at June 30, 2021 and includes financial statements for all of its component units. Financial highlights of the fiscal year are noted in the Financial section of the ACFR and include the following: . As of June 30, 2021, the City's total net position (assets plus deferred outflows of resources less liabilities and less deferred inflows of resources) was a deficit of $26.4 million. . The City's total net position decreased $7.5 million from the prior year. This is mostly due to an increase in long-term debt related to the issuance of the 2020 Lease Revenue Bonds of $204.1 million. The increase to debt is offset with increase to Deferred Outflows of Resources relating to pension and OPEB liabilities totaling approximately $179.4. The City's total governmental funds reported combined ending fund balances of $127.1 million, an increase of $42.7 million in comparison with the prior fiscal year of $84.4 million. The increase is comprised of changes in fund balance of $41.8 and a restatement of $0.9 million. Of the $127.1 million fund balance, $4.0 million, or 3.2%, of this total is non -spendable (not available for new spending). The restricted fund balance categories of $92.2 million or 72.5% is spendable for restricted purposes. The assigned fund balance of $9.7 million, or 7.6%, represents amounts that are intended to be used for specific purposes, but are not formally restricted or committed. The unassigned fund balance category of $21.2 million, or 16.7%, represents the City's fund balance reserves. . The City's business -type computer service enterprise activity (West Covina Service Group) had an operating gain for fiscal year (FY) 2020-21 of $282,448, compared with a $82,266 operating gain in FY 2019-20. The total net position for the computer service enterprise fund as of June 30, 2021, is 38,329. The net position in the prior year was ($244,119). Government Auditing Standards Letter The Government Auditing Standards Letter (Attachment No. 2) notes any identified deficiencies or weaknesses in internal control over financial reporting that could lead to material misstatements in the City's financial statements as well as any other compliance findings. 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 City'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. The auditors did identify deficiencies in internal control over financial reporting that they considered to be material weaknesses. These findings and management's response are discussed in Attachment No. 2. Furthermore, the results of the tests performed identified two significant deficiencies that are also discussed in Attachment No. 2. Audit Communication Letter The Audit Communication Letter (Attachment No. 3) provides certain information related to the audit of the City's financial records including the following: . Qualitative Aspects of Accounting Practices — The letter notes that City management is responsible for the selection and use of appropriate accounting policies. The letter indicates that there have been no significant changes in accounting policies or their application during the fiscal year. The letter also noted that there were no transactions entered into by the City during Fiscal Year 2020-21 for which there was a lack of authoritative guidance, and that all significant transactions were recorded in the proper accounting periods. . Significant Difficulties Encountered during the Audit— The letter communicates the auditors encountered no significant difficulties in dealing with management relating to the performance of the audit. . Uncorrected and Corrected Misstatements — The letter communicates the auditors' responsibility to note all known and likely misstatements identified during the audit. The auditors noted no such misstatements that were material, either individually or in aggregate, to the financial statements taken as a whole. . Disagreements with Management — The auditors are required to communicate any disagreements with management related to an accounting, reporting or auditing matter, whether resolved or not, in the Audit Communication Letter. No such disagreements arose during the course of the audit for Fiscal Year 2020-21. West Covina Housina Authoritv Annual Financial Report Changes in state law require the Housing Authority, as the Housing Successor, to prepare an annual report regarding the low and moderate income housing asset fund (Report) of the former West Covina Redevelopment Agency (RDA). The law also requires the completion of an independent audit of the low and moderate -income housing asset fund (Fund). The attached annual report includes both the Report and the audit mentioned above (Attachment No. 4). Senate Bill 341 (SB 341), which is partly codified in Health and Safety Code Section 34176.1 and became effective on January 1, 2014, requires each housing successor that assumed the housing functions of a former redevelopment agency, to post a report on its website that contains information regarding the Fund of the former redevelopment agency for the previous fiscal year. Each housing successor is also required to present this report to its governing body. In this case, the City Council designated the Community Development Commission (CDC) as the governing body of the Housing Authority. Because the CDC's membership is the City Council, the Housing Authority, as the housing successor, is required to present the Report on the Fund to the City Council pursuant to SB 341. In addition, the Housing Successor is required to conduct and provide to the City Council an independent financial audit (Audit) of the Fund. Similar to the above, the West Covina Housing Authority assumed the housing functions of the former RDA. The transfer of the functions included the transfer of formerly designated RDA low and moderate -income housing funds together with any funds generated by former RDA housing assets. The funds must be maintained by the Housing Authority in a separate fund and expended in accordance with Health and Safety Code section 34176.1 ("Section 34176.1 "). To ensure that the monies in the Fund are expended in accordance with the law, Section 34176.1(f) requires an independent financial audit of the Fund. SB 341 also requires annual reporting and website posting of additional housing information related to the Fund. As noted above, the CDC is the governing body of the Housing Authority and the City Council serves as the membership of the CDC. During their review of our compliance with Senate Bill 341 (Attachment No. 5), the auditors noted no instances of non-compliance for Fiscal Year 2020-21. Air Qualitv Improvement Fund Financial Statements California Assembly Bill 2766 authorizes air pollution control districts to levy fees on motor vehicles. Fees are to be used to reduce air pollution. Under this program, the Department of Motor Vehicles collects the fees and provides the amounts to the South Coast Air Quality Management District (SCAQMD) for vehicles registered in the South Coast District. Forty cents of every dollar provided to SCAQMD is allocated to the cities and counties in the South Coast District proportionately based upon population. The amounts attributable to the City of West Covina (the City), are maintained in the City's Air Quality Improvement Special Revenue Fund (Attachment No. 6). The audit firm of Van Lant & Fankhanel LLP has issued an unmodified ("clean") opinion on the financial statements for the year ended June 30, 2021. Independent Accountant's Report on Agreed -Upon Procedures Applied to Appropriations Limit Worksheets These procedures (Attachment No. 7) accompany the Appropriations Limit worksheet which was performed solely to assist the City in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. Fiscal Impact FISCAL IMPACT: City Wide As of June 30, 2021, the City's total net position (assets plus deferred outflows of resources less liabilities and less deferred inflows of resources) was a deficit of $26.4 million. The City's total net position decreased $7.5 million from the prior year. This is mostly due to an increase in long-term debt related to the issuance of the 2020 Lease Revenue Bonds of $204.1 million. The increase to debt is offset with increase to Deferred Outflows of Resources relating to pension and OPEB liabilities totaling approximately $179.4. The City's total governmental funds reported combined ending fund balances of $127.1 million, an increase of $42.7 million in comparison with the prior fiscal year of $84.4 million. The increase is comprised of changes in fund balance of $41.8 and a restatement of $0.9 million. Of the $127.1 million fund balance, $4.0 million, or 3.2%, of this total is non -spendable (not available for new spending). The restricted fund balance categories of $92.2 million or 72.5% is spendable for restricted purposes. The assigned fund balance of $9.7 million, or 7.6%, represents amounts that are intended to be used for specific purposes, but are not formally restricted or committed. The unassigned fund balance category of $21.2 million, or 16.7%, represents the City's fund balance reserves. General Fund In the General Fund, the City ended the fiscal year with a total Fund Balance of $25AM — a $5.8 million, or 29%, increase. Of this, approximately $4 million is nonspendable or restricted. Nonspendable and restricted consists of prepaid expenses ($133k), Advances to Other Funds ($868k), Land Held for Resale ($3M), and Pension Trust ($9k). This leaves an Unassigned fund balance of $21.4 million. Per the City's Fund Balance Policy, the city shall maintain a minimum unassigned fund balance of at least 17% of the General Fund operating expenditures. At the end of the fiscal year, the annual excess revenue over expenditures in the City's General Fund will be automatically allocated as follows, unless the transfer is overridden by an action of City Council: 25% stays in the General Fund Balance reserves, 50% is transferred to the City's Capital Projects Fund, and 25% goes to pay down the City's Other Post Employment Benefit (OPEB) liability. Based on the ending balance as of June 30, 2021, the General Fund allocation is as follows: Unassigned Fund Balance 21,468,986 Less Reserve Requirement 12,017,236 (17% Expenditures as of FY2021-22 Q1 Amendment) Available Fund Balance 9,451,750 25% Reserve 2,362,937 50% Capital Projects Fund 4,725,875 25% OPEB Liability 2,362,937 The allocation for the OPEB liability is proposed to be used to pay down the City's Public Agency Retirement System ("PARS") retirement enhancement plans which had a total pension liability of $5.56M as of June 30, 2021. This allocation was included in the mid -year budget amendment approved by Council on February 15, 2022. Attachments Attachment No. 1 - Annual Comprehensive Financial Report for the Year Ended June 30, 2021 Attachment No. 2 - Government Auditing Standards Letter Attachment No. 3 - Audit Communication Letter Attachment No. 4 - West Covina Housing Authority Fund Financial Report Attachment No. 5 - West Covina Housing Authority Fund Addendum to the Annual Progress Report Attachment No. 6 - Air Quality Improvement Fund Financial Statements Attachment No. 7 - Procedures Applied to Appropriations Limit CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability COVINA ANN COMPREHENSIVE FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2021 WWW.WESTCOVINA.ORG CITY OF WEST COVINA, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT Year Ended June 30, 2021 Prepared by Finance Department City of West Covina Annual Comprehensive Financial Report Year Ended June 30. 2021 TABLE OF CONTENTS INTRODUCTORY SECTION Paqe Letter of Transmittal i List of City Officials v Organizational Chart v FINANCIAL SECTION Independent Auditor's Report Management's Discussion & Analysis Basic Financial Statements Government -wide Financial Statements Statement of Net Position 16 Statement of Activities 17 Fund Financial Statements: Balance Sheet - Governmental Funds 19 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 21 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 24 Statement of Net Position - Proprietary Funds 25 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 26 Statement of Cash Flows - Proprietary Funds 27 Statement of Net Position - Fiduciary Funds 28 Statement of Changes in Net Position - Fiduciary Funds 29 Notes to Financial Statements 30 Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: General Fund 80 Housing Special Revenue Fund 81 Gas Tax Special Revenue Fund 82 Notes to Required Supplementary Information 83 Schedule of Changes in the Net Pension Liability — Miscellaneous Plan 84 Schedule of Changes in the Net Pension Liability - Safety Plan 86 Schedule of Changes in the Net Pension Liability - PARS EPMC Plan 88 Schedule of Changes in the Net Pension Liability - PARS Exec Plan 90 Schedule of Contributions 92 Schedule of Changes in the Net OPEB Liability and Related Ratios 94 Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: Citywide Debt Service Fund 95 City of West Covina Annual Comprehensive Financial Report Year Ended June 30. 2021 TABLE OF CONTENTS - Continued Pam Supplementary Information - Continued Non -major Governmental Funds: 96 Combining Balance Sheet 100 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 108 Budgetary Comparison Schedules for Non -major Funds: Drug Enforcement Rebate 116 Air Quality Improvement 117 Integrated Waste Management 118 Proposition A 119 Proposition C 120 Police Donations 121 Transportation Development Act 122 AB939 123 Various Grants 124 Community Development Block Grant 125 SAFER Grant 126 Inmate Welfare 127 Public Safety Augmentation 128 COPS/SLESA 129 Park CESF 130 Maintenance District #1 131 Maintenance District #2 132 Coastal Sage Shrub 133 Maintenance District #4 134 Maintenance District #6 135 Maintenance District #7 136 Citywide Maintenance District 137 Sewer Maintenance 138 Auto Plaza Improvement District 139 Measure W 140 Charter PEG 141 West Covina Community Services Foundation 142 Measure R 143 Measure M 144 Measure A 145 Community Corrections 146 Measure H 147 City Capital Projects Fund 148 Construction Tax 149 Information Technology 150 Development Impact Fees 151 Park Development 152 Internal Service Funds: 153 Combining Statement of Net Position - Internal Service Funds 154 Combining Statement of Revenues, Expenses, and Changes in Net Position - Internal Service Funds 155 Combining Statement of Cash Flows - Internal Service Funds 156 City of West Covina Annual Comprehensive Financial Report Year Ended June 30. 2021 TABLE OF CONTENTS - Continued Pam Supplementary Information - Continued Pension Trust Funds: 157 Combining Statement of Fiduciary Net Position — Pension Trust Funds 158 Combining Statement of Changes in Fiduciary Net Position — Pension Trust Funds 159 STATISTICAL SECTION Net Position by Component 160 Changes in Net Position 162 Changes in Net Position — Governmental Activities 166 Changes in Net Position — Business -type Activities 168 Fund Balances of Governmental Funds 170 Changes in Fund Balances of Governmental Funds 172 Assessed Value and Estimated Actual Value of Taxable Property 174 Direct and Overlapping Property Tax Rates 176 Principal Property Tax Payers 178 Property Tax Levies and Collections 179 Ratios of Outstanding Debt by Type 181 Ratios of General Bonded Debt Outstanding 183 Direct and Overlapping Debt 184 Legal Debt Margin Information 185 Pledged Revenue Coverage 187 Demographic and Economic Statistics 189 Principal Employers 190 Full-time and Part-time City Employees by Function 191 Operating Indicators by Function 192 Capital Asset Statistics by Function 194 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - West Covina Housing Authority Special Revenue Fund Year Ended June 30, 2021 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Investment Income $ - $ $ 385,983 $ 385,983 Other Revenues 310,000 98,802 98,802 Total Revenues 310,000 484,785 484,785 EXPENDITURES Current: Public Safety 204,251 204,251 181,450 22,801 Community Development 1,364,598 1,079,598 786,828 292,770 Total Expenditures 1,568,849 1,283,849 968,278 315,571 Excess (Deficiency) of Revenues over Expenditures (1,258,849) (1,283,849) (483,493) 800,356 OTHER FINANCING SOURCES (USES) Transfers In - Transfers Out Total Other Financing Sources (Uses) - Net Change in Fund Balance (1,258,849) (1,283,849) (483,493) 800,356 Fund Balance, Beginning 24,491,816 24,491,816 24,491,816 - Fund Balance, Ending $ 23,232,967 $ 23,207,967 $ 24,008,323 $ 800,356 Ll City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - State Gas Tax Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Revenue from Other Agencies Charges for Services Total Revenues EXPENDITURES Current: General Government Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance, Beginning Fund Balance, Ending Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 2,041,970 $ 2,041,970 $ 1,966,902 $ (75,068) - - 19,411 19,411 2,695,312 2,695,312 2,090,987 (604,325) 4,432 4,432 444 (3,988) 4,741,714 4,741,714 4,077,744 (663,970) 3,000 3,000 2,979 21 4,638,315 5,480,404 3,636,308 1,844,096 4,641,315 5,483,404 3,639,287 1,844,117 100,399 (741,690) 438,457 1,180,147 567,148 567,148 567,148 567,148 100,399 (174,542) 1,005,605 1,180,147 4,720,311 4,720,311 4,720,311 $ 4,820,710 $ 4,545,769 $ 5,725,916 $ 1,180,147 LEI City of West Covina Notes to Required Supplementary Information Year Ended June 30, 2021 BUDGETS AND BUDGETARY ACCOUNTING Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for governmental funds. The City's budget ordinance requires that in June of each year the City Manager to the City Council for the fiscal year commencing the following July 1. As modified during public study sessions, the preliminary budget becomes the proposed budget. Following public hearings on the proposed budget, the final annual budget is adopted by the City Council in June of the fiscal year. After adoption of the final budget, transfers of appropriations within the general fund departments may be done by the City Manager. Budget transfers within a department/fund may be done by department heads. Budget modifications between funds and increases or decreases to a fund's overall budget must be approved by the City Council. Numerous properly authorized amendments are made during the fiscal year. Budgetary control is enhanced by integrating the budget into the general ledger accounts. Encumbrance accounting (e.g. purchase orders) is employed by the City. A budget was not adopted for the ARPA Special Revenue Fund due to the timing of receiving the funds. In addition, the City did not adopt a budget for the following non -major governmental Funds: General Plan Update Special Revenue Fund, Art In Public Places Special Revenue Fund, CASP Training Special Revenue Fund, Sportsplex Special Revenue Fund, and Future Street Improvements Capital Projects Fund. 83 City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Changes in the Net Pension Liability and Related Ratios - Last 10 Years* CalPERS Pension Plan - Miscellaneous Total Pension Liability Service cost Interest on total pension liability Changes in assumptions Differences between expected and actual experience Benefit payments, including refunds Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary Net Position Contributions - employer Contributions - employee Net investment income Benefit payments Net Plan to Plan Resource Movement Administrative/Other Expense Other Miscellaneous Income/Expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as percentage of covered payroll Measurement Period 2020 2019 2018 $ 1,230,251 $ 1,488,940 $ 1,598,999 11,161,901 11,031,185 10,735,301 - - (792,110) (956,094) 1,166,025 884,485 (9,824,549) (9,388,384) (9,225,744) 1,611,509 4,297,766 3,200,931 161,363,763 157,065,997 153,865,066 $ 162,975,272 $ 161,363,763 $ 157,065,997 $ 3,588,307 $ 3,041,783 $ 2,610,696 658,924 597,814 785,970 5,681,537 7,327,093 9,216,240 (9,824,549) (9,388,384) (9,225,744) (266) (162,590) (80,969) (172,889) - (328,320) (58,371) 1,497,337 2,885,687 115, 332, 254 113, 834, 917 110, 949, 230 $ 115,273,883 $ 115,332,254 $ 113,834,917 $ 47,701,389 $ 46,031,509 $ 43,231,080 70.73% 71.47% 72.48% $ 7,843,755 $ 8,498,816 $ 12,173,646 608.14% 541.62% 355.12% Notes to Schedule of Changes in Net Pension Liability and Related Ratios: 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 to voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes in Assumptions: In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflected an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate. * Pension schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. 84 Measurement Period 2017 2016 2015 2014 $ 1,568,756 $ 1,395,164 $ 1,454,757 $ 1,653,769 10,499,411 10,423,152 10,180,561 9,849,865 8,138,458 - (2,336,836) - (1,086,666) (568,485) (134,455) (8,527,256) (8,197,448) (7,534,397) (6,835,867) 10,592,703 3,052,383 1,629,630 4,667,767 143, 272, 363 140, 219, 980 138, 590, 350 133, 922, 583 $ 153,865,066 $ 143,272,363 $ 140,219,980 $ 138,590,350 $ 2,449,585 $ 1,871,710 $ 1,507,469 $ 1,441,234 788,064 819,011 714,712 921,495 11,531,815 590,110 2,500,142 17,189,513 (8,527,256) (8,197,448) (7,534,397) (6,835,867) (4,880) 307 (154,821) (66,948) (123,626) 6,087,387 (4,988,445) (2,935,393) 12,716,375 104,861,843 109,850,288 112,785,681 100,069,306 $ 110,949,230 $ 104,861,843 $ 109,850,288 $ 112,785,681 $ 42,915,836 $ 38,410,520 $ 30,369,692 $ 25,804,669 72.11% 73.19% 78.34% 81.38% $ 14,062,225 $ 9,349,710 $ 9,381,292 $ 10,025,879 305.19% 410.82% 323.73% 257.38% 85 City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Changes in the Net Pension Liability and Related Ratios - Last 10 Years* CalPERS Pension Plan - Safety Total Pension Liability Service cost Interest on total pension liability Changes in assumptions Differences between expected and actual experience Benefit payments, including refunds Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary Net Position Contributions - employer Contributions - employee Net investment income Benefit payments Net Plan to Plan Resource Movement Administrative/Other Expense Other Miscellaneous Income/Expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as percentage of covered payroll Measurement Period 2020 2019 2018 $ 5,180,535 $ 5,573,847 $ 5,300,363 27,556,923 26,959,893 26,141,448 - - (1,644,342) (2,269,271) 706,038 2,470,547 (22,204,388) (21,231,071) (20,444,515) 8,263,799 12, 008, 707 11, 823, 501 396,192,719 384,184,012 372,360,511 $ 404,456,518 $ 396,192,719 $ 384,184,012 $ 12,592,111 $ 11,176,490 $ 10,515,780 1,806,665 1,731,882 1,830,019 12, 466, 983 15, 909, 762 19, 582, 552 (22,204,388) (21,231,071) (20,444,515) (568) (354,567) (174,192) (364,120) - 568 (691,471) 4,306,804 7,413,439 10,427,677 251,509,957 244,096,518 233,668,841 $ 255,816,761 $ 251,509,957 $ 244,096,518 $ 148,639,757 $ 144,682,762 $ 140,087,494 63.25% 63.48% 63.54% $ 16,447,485 $ 16,283,859 $ 14,051,195 903.72% 888.50% 996.98% Notes to Schedule of Changes in Net Pension Liability and Related Ratios: 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 to voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes in Assumptions: In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflected an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate. * Pension schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. e% Measurement Period 2017 2016 2015 2014 $ 5,376,792 $ 4,729,431 $ 4,604,800 $ 4,824,545 25,330,388 24,899,740 24,117,128 23,426,151 21,000,606 - (5,858,071) - (2,764,123) (145,882) (1,760,971) (19,858,900) (18,951,025) (17,865,208) (17,362,607) 29,084,763 10,532,264 3,237,678 10,888,089 343,275,748 332,743,484 329,505,806 318,617,717 $ 372,360,511 $ 343,275,748 $ 332,743,484 $ 329,505,806 $ 10,058,079 $ 8,387,165 $ 7,339,064 $ 6,403,118 1,818,024 1,660,160 1,628,630 2,416,548 23,916,665 1,179,228 5,057,426 34,775,710 (19,858,900) (18,951,025) (17,865,208) (17,362,607) 4,880 10,338 (321,946) (137,683) (254,287) 15,611,922 (7,857,275) (4,084,037) 26,232,769 218,056,919 225,914,194 229,998,231 203,765,462 $ 233,668,841 $ 218,056,919 $ 225,914,194 $ 229,998,231 $ 138,691,670 $ 125,218,829 $ 106,829,290 $ 99,507,575 62.75% 63.52% 67.89% 69.80% $ 17,084,933 $ 17,288,458 $ 16,517,686 $ 16,974,682 811.78% 724.29% 646.76% 586.21 % 87 City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Changes in the Net Pension Liability and Related Ratios - Last 10 Years* PARS Pension Plan - EPMC Total Pension Liability Service cost Interest on total pension liability Changes in assumptions Differences between expected and actual experience Benefit payments, including refunds Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary Net Position Contributions - employer Contributions - employee Net investment income Benefit payments Net Plan to Plan Resource Movement Administrative/Other Expense Other Miscellaneous Income/Expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered Employee payroll Net pension liability as percentage of covered employee payroll Measurement Period 2020 2019 2018 $ 30,564 $ 29,665 $ 29,701 41,806 46,211 46,463 146,898 90,640 10,475 - 45,697 - (103,008) (80,968) (56,554) 116,260 131,245 30,085 1,092,902 961,657 931,572 $ 1,209,162 $ 1,092,902 $ 961,657 $ 56,957 $ 62,350 $ 60,056 2,908 6,567 8,234 (103,008) (80,968) (56,554) (10,788) (769) (775) (53,931) (12,820) 10,961 141,856 154,676 143,715 $ 87,925 $ 141,856 $ 154,676 $ 1,121,237 $ 951,046 $ 806,981 7.27% 12.98% 16.08% $ 10,222,450 $ 14,447,921 $ 15,855,534 10.97% 6.58% 5.09% Notes to Schedule of Changes in Net Pension Liability and Related Ratios: Benefit Changes: None. Changes in Assumptions: In 2020, the discount rate was updated to . In 2019, the discount rate was updated to 3.90% and the mortality improvement scale was updated to Scale MP- 2019. In 2018, the discount rate used to measure the total pension liability was 4.86 percent. In 2017, amounts reported reflect an adjustment of the discount rate from 3.90 percent to 4.98 percent. In 2016, amounts reported reflect an adjustment of the discount rate from 3.50 percent to 3.90 percent. In 2015, amounts reported reflect an adjustment of the discount rate from 4.80 percent to 3.50 percent. In 2014, amounts reported were based on the 4.80 percent discount rate. * Pension schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. VE, Measurement Period 2017 2016 2015 2014 $ 35,733 $ 40,000 $ 36,000 $ 36,000 35,268 32,000 28,000 36,000 (85,060) (37,000) 200,000 - 98,508 (72,000) (42,877) (91,000) (9,000) (64,000) 41,572 (56,000) 183,000 8,000 890,000 946,000 763,000 755,000 $ 931,572 $ 890,000 $ 946,000 $ 763,000 $ 61,019 $ 56,000 $ 56,000 $ 65,000 10,029 (1,000) 3,000 12,000 (42,877) (91,000) (9,000) (64,000) (9,456) (1,000) (7,000) (3,000) 18,715 (37,000) 43,000 10,000 125,000 162,000 119,000 109,000 $ 143,715 $ 125,000 $ 162,000 $ 119,000 $ 787,857 $ 765,000 $ 784,000 $ 644,000 15.43% 14.04% 17.12% 15.60% n/a $ 13,388,000 n/a n/a n/a 5.71 % n/a n/a Me City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Changes in the Net Pension Liability and Related Ratios - Last 10 Years* PARS Pension Plan - Executive Staff Total Pension Liability Service cost Interest on total pension liability Changes in assumptions Differences between expected and actual experience Benefit payments, including refunds Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary Net Position Contributions - employer Contributions - employee Net investment income Benefit payments Net Plan to Plan Resource Movement Administrative/Other Expense Other Miscellaneous Income/Expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered Employee payroll Net pension liability as percentage of covered employee payroll Measurement Period 2020 2019 2018 $ 14,068 $ 11,963 $ 12,235 143,620 133,267 130,692 879,137 281,983 (101,877) - 477,904 (155,804) (152,749) (139,056) 881,021 752,368 (98,006) 4,020,306 3,267,938 3,365,944 $ 4,901,327 $ 4,020,306 $ 3,267,938 $ 77,814 $ 78,102 $ 74,100 15,031 31,817 36,931 (155,804) (152,749) (139,056) (9,475) (3,109) (3,379) (72,434) (45,939) (31,404) 534,237 580,176 611,580 $ 461,803 $ 534,237 $ 580,176 $ 4,439,524 $ 3,486,069 $ 2,687,762 9.42% 13.29% 17.75% $ 219,555 $ 179,572 $ 172,512 2022.06% 1941.32% 1558.01% Notes to Schedule of Changes in Net Pension Liability and Related Ratios: Benefit Changes: None. Changes in Assumptions: In 2019, the discount rate was updated to 3.63% and the mortality improvement scale was updated to Scale MP-2019. In 2018, the discount rate used to measure the total pension liability was 4.16 percent. In 2017, amounts reported reflect an adjustment of the discount rate from 6.25 percent to 3.95 percent. In 2016, amounts reported reflect an adjustment of the discount rate from 4.70 percent to 6.25 percent. In 2015, amounts reported reflect an adjustment of the discount rate from 5.55 percent to 4.70 percent. In 2014, amounts reported were based on the 5.55 percent discount rate. * Pension schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. Die INTRODUCTORY SECTION Measurement Period 2017 2016 2015 2014 $ 20,388 $ 30,000 $ 116,000 $ 112,000 161,327 141,000 178,000 168,000 803,038 (455,000) 346,000 - (111,492) (643,000) (136,317) (137,000) (104,000) (82,000) 736,944 (421,000) (107,000) 198,000 2,629,000 3,050,000 3,157,000 2,959,000 $ 3,365,944 $ 2,629,000 $ 3,050,000 $ 3,157,000 $ 73,467 $ 78,000 $ 78,000 $ 59,000 49,861 9,000 13,000 75,000 (136,317) (137,000) (104,000) (82,000) (8,431) (4,000) (6,000) (6,000) (21,420) (54,000) (19,000) 46,000 633,000 687,000 706,000 660,000 $ 611,580 $ 633,000 $ 687,000 $ 706,000 $ 2,754,364 $ 1,996,000 $ 2,363,000 $ 2,451,000 18.17% 24.08% 22.52% 22.36% n/a $ 143,000 n/a n/a n/a 1395.80% n/a n/a 91 City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Contributions — Last 10 Years* Agent Multiple -employer Plan — Miscellaneous Plan Contributions in Relation to the Contributions Contractually Actuarially Contribution as a % of Required Determined Deficiency/ Covered Covered Fiscal Year Contributions Contributions (Excess) Payroll Payroll 2021 $ 3,887,907 $ (41,343,286) $ (37,455,379) $ 6,699,270 617.13% 2020 3,588,349 (3,588,349) - 7,843,755 45.75% 2019 3,041,539 (3,041,539) - 8,498,816 35.79% 2018 2,610,696 (2,610,696) - 12,173,646 21.45% 2017 2,449,585 (2,449,585) - 14,062,225 17.42% 2016 1,871,710 (1,871,710) - 9,349,710 20.02% 2015 1,507,469 (1,507,469) - 9,381,292 16.07% Schedule of Contributions — Last 10 Years* Agent Multiple -employer Plan — Safety Plan Contributions in Relation to the Contributions Contractually Actuarially Contribution as a % of Required Determined Deficiency/ Covered Covered Fiscal Year Contributions Contributions (Excess) Payroll Payroll 2021 $ 14,008,612 $ (149,096,249) $(135,087,637) $ 17,133,244 81.76% 2020 12,592,730 (12,592,730) - 16,447,485 76.56% 2019 11,174,096 (11,174,096) - 16,289,859 68.60% 2018 10,515,780 (10,515,780) - 14,051,195 74.84% 2017 10,058,079 (10,058,079) - 17,084,933 58.87% 2016 8,387,165 (8,387,165) - 17,288,458 48.51% 2015 7,339,064 (7,339,064) - 16,517,686 44.43% * Pension schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Plan Contributions PARS Pension Plan - EPMC Last 10 Years* Contributions in Contributions Relation to the as a % of Contractually Actuarially Contribution Covered Covered Required Determined Deficiency/ Employee Employee Fiscal Year Contributions Contributions (Excess) Payroll Payroll 2021 $ 173,000 $ (52,666) 120,334 $ 7,202,240 0.73% 2020 134,000 (56,957) 77,043 10,222,450 0.56% 2019 134,000 (62,350) 71,650 14,447,921 0.43% 2018 104,000 (60,056) 43,944 n/a n/a 2017 105,000 (66,000) 39,000 n/a n/a 2016 105,000 (59,000) 46,000 13,737,000 0.43% 2015 82,000 (56,000) 26,000 n/a n/a Schedule of Plan Contributions PARS Pension Plan - Executive Staff Last 10 Years* Contributions in Contributions Relation to the as a % of Contractually Actuarially Contribution Covered Covered Required Determined Deficiency/ Employee Employee Fiscal Year Contributions Contributions (Excess) Payroll Payroll 2021 $ 488,000 $ (79,364) 408,636 $ 269,281 0,00% 2020 313,000 (77,814) 235,186 219,555 35.44% 2019 314,000 (78,102) 235,898 179,572 43.49% 2018 278,000 (74,100) 203,900 n/a n/a 2017 279,000 (73,000) 206,000 96,000 76,04% 2016 439,000 (78,000) 361,000 n/a n/a 2015 439,000 (78,000) 361,000 n/a n/a * Pension schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. 93 City of West Covina Required Supplementary Information Year Ended June 30, 2021 Schedule of Changes in the Net OPEB Liability and Related Ratios for the Measurement Periods Ended June 30 Last10 Years* Measurement Period 2020 2019 2018 2017 Total OPEB Liability service cost $ 1,575,501 $ 1,545,500 $ 1,619,250 $ 1,913,541 Interest on total OPEB liability 2,156,480 2,285,257 2,158,673 1,889,517 Changes in assumptions 13,555,256 2,887,380 (2,524,608) (7,040,369) Changes in benefits - - - - Differences between expected and actual experience - (1,738,131) - - Benefit payments, including refunds (2,509,638) (2,384,056) (2,470,254) (2,467,893) Net change in total OPEB liability 14,777,599 2,595,950 (1,216,939) (5,705,204) Total OPEB liability - beginning 61,293,027 58,697,077 59,914,016 65,619,220 Total OPEB liability - ending (a) $ 76,070,626 $ 61,293,027 $ 58,697,077 $ 59,914,016 Covered - employee payroll 33,069,467 26,672,215 28,239,505 26,527,000 Total OPEB liability as a percentage of covered -employee payroll 223.14% 221.54% 200.84% 219.29% * OPEB schedules are intended to show information for ten years, additional years' information will be displayed as it becomes available. 94 SUPPLEMENTARY INFORMATION City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Citywide Debt Service Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: General Government Public Safety Debt Service: Principal Interest Debt Issuance Costs Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Debt Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Final Budget Actual Amounts Variance - Positive (Negative) $ 40,000 $ 85,015 $ 45,015 2,023,978 2,220,769 196,791 2,063,978 2,305,784 241,806 626,715 9,795 616,920 - 36,523 (36,523) 1,928,918 1,928,918 5,419,622 5,419,621 1,083,165 1,083,165 9,058,420 8,478,022 580,398 (6,994,442) (6,172,238) 822,204 4,502,868 4,502,868 (186,582,240) (186,582,240) 204,095,000 204,095,000 22,015,628 22,015,628 15,021,186 15,843,390 822,204 4,055,990 4,055,990 $ 19,077,176 $ 19,899,380 $ 822,204 95 C01d:I=1MCISIV=1:7kihyil=1kikEll N1Ukioil City of West Covina Other Governmental Funds Year Ended June 30, 2021 Special Revenue Funds Drug Enforcement Rebate This fund accounts for the City's portion of revenue received from drug asset seizures. The revenue is used to enhance the police programs. Air Quality Improvement This fund accounts for the City's portion of motor vehicle registration fees collected under AB 2766. This fee was levied to fund programs to reduce air pollution from mobile sources such as cars, trucks and buses. Money is distributed to the cities based on population, and additional discretionary grants are made based on specific requests. Integrated Waste Management This fund accounts for landfill local enforcement agency activities and waste management programs, other than AB939. Proposition A This fund accounts for the 0.5% sales tax collected in Los Angeles County which is used for transportation programs and projects. Proposition C This fund accounts for gasoline taxes which are restricted for transportation programs and projects. Police Donations This fund accounts for donations received and expenditures related to various police programs. Transportation Development Act This fund accounts for regional Transportation Development Act funds received from Los Angeles County which are used for local streets and roads. AB939 This fund accounts for programs to reduce solid waste deposits in local landfills, pursuant to AB939. Various Grants This fund accounts for various Federal, State of California, and local grants that are restricted to expenditures for specific programs and projects. Community Development Block Grant (CDBG) This fund accounts for the activities of the Community Development Block Grant received from the U.S. Department of Housing and Urban Development. SAFER Grant This fund accounts for personnel costs that are reimbursable through the Staffing for Adequate Fire and Emergency Response (SAFER) Grant. Inmate Welfare This fund accounts for any money, refund, rebate or commission received from a telephone call from inmates while incarcerated to meet the requirements of California Penal Code: Part 3; Title 4; Chapter 1; Section 4025. The monies are to be expended for the benefit, education, and welfare of inmates confined within the jail. Any funds that are not needed for the welfare of the inmates maybe expended for the maintenanceof the jail facilities. 12. City of West Covina Other Governmental Funds Year Ended June 30, 2021 Special Revenue Funds - Continued Public Safety Augmentation This fund accounts for sales tax revenue legally restricted for public safety. Revenue is used to augment police operations. COPS/SLESA This fund accounts for revenue from the State restricted for supplementing police operations. Park CESF This fund is to account for coronavirus emergency supplemental funding received and expenditures in preventing, preparing for, and responding to the event. Maintenance District #1 The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owners annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Maintenance District #2 The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Coastal Sage Shrub This community facilities district was formed to provide for the restoration and ongoing maintenance of sensitive environmental habitat within the development area of a former landfill, including habitat for endangered species such as the California gnatcatcher (Polioptila californica). Maintenance District #4 The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Maintenance District #6 The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owners annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Maintenance District #7 The City levies special benefit assessments and property taxes upon property within defined districts. Through the Los Angeles County Tax Collector, assessments are placed on the property owner's annual tax bill. These funds are used to maintain and improve the open spaces within the districts by providing landscape maintenance. Citywide Maintenance District Revenue for the fund comes from annual special benefit assessments from property owners who benefit from covered improvements. This fund provides the majority of funding for the City's street lighting system and street tree program. 97 City of West Covina Other Governmental Funds Year Ended June 30, 2021 Special Revenue Funds - Continued Sewer Maintenance This fund supports the City's street sweeping program and maintenance of the City's sewer system. The City also provides services to the City of Covina through this fund. Auto Plaza Improvement District This fund is an assessment district supported by six of West Covina's automobile dealers to fund the construction, maintenance and operations of a reader board adjacent to Interstate 10. General Plan Update This fund accounts for the General Plan and Zoning Code Update Surcharge which is designated to be used for future plan updates. Measure W This fund accounts for the special parcel tax on all property owners in Los Angeles County approved November 2018. This tax raises funds to pay for stormwater projects including the infrastructure and any associated programs to capture, treat and recycle rainwater. Charter PEG This fund accounts for monies received from the City's cable television franchisee for a one-time litigation settlement and for cable -related capital expenditures. Art in Public Places This fund accounts for development fees paid in lieu of acquisition and installation of approved artwork in a development with expenditures restricted to acquisition, installation, maintenance and repair of artworks at approved sites. West Covina Community Services Foundation This fund accounts for activity of the West Covina Community Services Foundation, a 501(c) (3) nonprofit organization. Measure R This fund accounts for sales tax revenues collected in Los Angeles County to provide transportation related projects and programs. Measure M Under Measure M, the City receives a portion of a '/2 cent sales tax levied in Los Angeles County to provide transportation related projects and programs. The City uses Measure M Funds for certain capital projects or transportation projects such as street rehabilitation and reconstruction, traffic monitoring systems, and congestion management and planning. Measure A Under Measure A, the City receives a portion of a 1.5 cent per square foot parcel tax levied in Los Angeles County to help fund new parks and maintain existing ones. The City uses Measure A Funds for certain capital projects related to parks, such as rebuilding restrooms, updating park parking lots, and the purchase of new playground equipment. Community Corrections This fund is a used to account for grant activity from the Board of State and Community Corrections. Fis UNievommZIPPIA Finance Department February 22, 2022 To the Members of the City Council, the City Manager, and the Citizens of the City of West Covina: It is a pleasure to submit the Comprehensive Annual Financial Report (CAFR) of the City of West Covina (City) for the fiscal year ended June 30, 2021. This report consists of management's representations concerning the finances of the City. Management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed to both protect the City's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's 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, this financial report is complete and reliable in all material respects. The City's financial statements have been audited by Van Lant & Fankhanel, LLP, a firm of certified public accountants. The auditors have issued an unmodified opinion on these financial statements. Their report is located at the front of the financial section of this report. The Management's Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Profile of the Government The City of West Covina is located in the San Gabriel Valley, 20 miles east of downtown Los Angeles and 15 miles north of Orange County. Incorporated as a general law city in 1923, the City's 16 square miles flourished with walnut groves and orange groves for many decades. The post -World War II building boom rapidly transformed the City, which experienced a significant population increase between 1950 and 1960, from less than 5,000 to more than 50,000 citizens. Subsequent to this rapid population increase, the City has continued to grow at a steady pace with a current population in excess of 109,000. The City's location and access to major freeways makes West Covina close to many visitor attractions and an ideal business and commercial center. The City has over 32,000 housing units and offers the amenities of a big city location with a high standard of living for its community. Under the Council -Manager form of government, the five City Council members are elected by districts to overlapping four-year terms. The City Council selects a Mayor from one of its members each November to serve a one-year term. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The City provides a full range of services to its citizens, including police, fire and emergency medical; construction and maintenance of streets, traffic signalization and other infrastructure; planning and building safety; and social, recreational and cultural activities and events. The City offers sixteen parks, four community centers, a Sports Complex, and a county operated library. The City is financially accountable for the Successor Agency to the former Redevelopment Agency of the City of West Covina, a financing authority, and a housing authority, which are combined within the City's financial statements. Additional information regarding all three of these legally separate entities can be found in the notes to the financial statements. The annual budget serves as a foundation for the City's financial planning and control. The City Council holds public hearings and adopts an annual budget for all funds. The budget appropriations are prepared by fund, function, and department. The City Manager is authorized to transfer budgeted amounts within departments to assure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase total appropriations in individual funds must be approved by the City Council. Economic Outlook and Major Objectives From early in its history, the City of West Covina has been noted as a city of beautiful homes. Through its General Plan, the City Council strives to maintain the City's high -quality residential base and living environment. The City's identity is defined by carefully designed entry point elements, landmark areas, and open space areas. Known as the headquarters of the East San Gabriel Valley, the City strives to maintain a prosperous business and commercial climate. Despite the current challenging financial and economic environment, West Covina derives significant economic stability from the City's three major commercial districts: Plaza West Covina, Eastland Center, and The Lakes. The California State Auditor has identified several risks in the City's financial condition, including a major unfunded pension liability, general fund expenditures that have exceeded revenues, and high turnover and reductions in staff in recent years. The City of West Covina continues work to secure the financial future of the City while safeguarding the delivery of great public services. This requires stewardship and a willingness to consider all alternatives in service provision. The City of West Covina will continue to strive to provide the highest level of service to its residents and businesses, so the community can thrive. Short-term and Long-term Financial Planning Annually, the City adopts a budget covering operating revenues and expenditures, labor usage, capital expenditures, and other sources and uses of funds. For financial planning purposes, the City conducts comprehensive citywide financial forecasting in conjunction with its revenue consultants and other sources. During the past few years, the City has utilized a range of temporary and permanent cost reduction initiatives, economic development, and revenue generation priorities, outside grants, and the use of fiscal reserves as necessary. As a result, the City has weathered the effects of the recession while providing critical services to the public in areas such as public safety, facility maintenance, parks maintenance, and infrastructure improvement. On June 5, 2018, the City Council adopted a fund balance policy to maintain a minimum unassigned fund balance of 17% of the General Fund operating expenditures. Awards and Acknowledgements The preparation of this report could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department. I would like to express my appreciation to all members of the Department who assisted and contributed to the preparation of this report. These are extremely challenging times for local government in which many difficult decisions must be made. Credit also must be given to City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, J Stephanie Sikkema Finance Director CITY OF WEST COVINA CITY OFFICIALS JUNE 30, 2021 CITY COUNCIL Letty Lopez-Viado, Mayor Dario Castellanos, Mayor Pro Tern Rosario Diaz Brian Tabatabai Tony Wu ELECTED OFFICIALS Nickolas S. Lewis, City Clerk Colleen B. Rozatti, City Treasurer CITY MANAGER David N. Carmany EXECUTIVE MANAGEMENT TEAM Paulina Morales, Assistant City Manager / Public Services Director Thomas P. Duarte, City Attorney Lisa Sherrick, Assistant City Clerk Robbeyn Bird, Finance Director Vincent Capelle, Fire Chief Helen Tran, Human Resources Director Vacant Position, Community Development Director Richard Bell. Police Chief iv City of West Covina Other Governmental Funds Year Ended June 30, 2021 Special Revenue Funds - Continued Measure H This funding accounts for funding received and expenditures related to prevent and combat homelessness CASP Training This fund accounts for funding received and expenditure incurred to support jailer mental health awareness training programs. Sportsplex This fund accounts for activity at the West Covina Sportsplex, a recreation facility which amenities include softball fields, a pavilion, playgrounds, and restaurants. Capital Proiects Funds City Capital Projects This fund accounts for all capital expenditures not being accounted for in the capital projects described below or in other fund types. Construction Tax This fund accounts for monies received from developers based on the construction of dwelling units and used primarily to construct public domain assets. Information Technology The funds paid into this fund are to be used for information technology capital outlay projects. Development Impact Fees This fund accounts for fees received from residential developers to help fund the purchase/replacement of vehicles/equipment along with the repairs and improvements of city facilities. Park Development This fund accounts for park fees received from residential developers to be used for new park construction. Future Street Improvements This fund accounts for monies paid in -lieu of street rehabilitation improvements. n City of West Covina Combining Balance Sheet Non -major Governmental Funds - Continued June 30,2021 ASSETS Cash and Investments Cash and Investments with Fiscal Agent Restricted Cash and Investments Receivables, net: Accounts Taxes Other Due from Other Agencies Prepaid Items Total Assets LIABILITIES Accounts Payable Other Accrued Liabilities Deposits Payable Unearned Revenue Due to Other Funds Advances from Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCE (DEFICITS) Restricted Assigned Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows and Fund Balances (Deficits) Special Revenue Drug Air Integrated Enforcement Quality Waste Proposition Proposition Rebate Improvement Management A C $ 5,920,861 $ 452,600 $ - $ 498,668 $ 1,760,318 35,194 $ 5,920,861 $ 487,794 $ - $ 498,668 $ 1,760,318 $ 157,748 $ - $ - $ - $ 217,242 4,367 - - - 2,570 162,115 - 219,812 5,758,746 487,794 - 498,668 1,540,506 5,758,746 487,794 498,668 1,540,506 $ 5,920,861 $ 487,794 $ $ 498,668 $ 1,760,318 100 Special Revenue Transportation Community Police Development Various Development SAFER Inmate Donations Act AB939 Grants Block Grant Grant Welfare $ 35,447 $ - $ 811,237 $ 1,348,663 $ - $ - $ 10,938 - - - - 3,614 - - - - - 28,731 - - - - - 66,938 - 117,415 - - - 60,457 - 350,525 - - - $ 35,447 $ 60,457 $ 878,175 $ 1,727,919 $ 121,029 $ - $ 10,938 $ - $ - $ - $ 255,455 $ 61,676 $ - $ - - - 1,248 195,151 13,402 - - 340 - - - 29,464 - - - 60,457 - - 45,611 - - 60,457 1,248 480,070 121,029 60,457 96,797 60,457 96,797 35,447 - 876,927 1,151,052 - - 10,938 (60,457) - - - - - 35,447 (60,457) 876,927 1,151,052 10,938 $ 35,447 $ 60,457 $ 878,175 $ 1,727,919 $ 121,029 $ - $ 10,938 Continued 101 City of West Covina Combining Balance Sheet Non -major Governmental Funds - Continued June 30,2021 ASSETS Cash and Investments Cash and Investments with Fiscal Agent Restricted Cash and Investments Receivables, net: Accounts Taxes Other Due from Other Agencies Prepaid Items Total Assets LIABILITIES Accounts Payable Other Accrued Liabilities Deposits Payable Unearned Revenue Due to Other Funds Advances from Other Funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCE (DEFICITS) Restricted Assigned Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows and Fund Balances (Deficits) SDecial Revenue Public Safely Park Maintenance Maintenance Augmentation COPS/SLESA CESF District#1 District#2 $ 239,275 $ 648,070 $ - $ 2,973,580 $ 757,707 232,533 98,681 - 9,996 2,755 $ 471,808 $ 746,751 $ - $ 2,983,576 $ 760,462 $ - $ 10,594 $ - $ 19,695 $ 6,389 26,717 - - 6,547 1,213 26,717 10,594 26,242 7,602 76,680 98,681 - 76,680 98,681 - - 368,411 637,476 - 2,957,334 752,860 368,411 637,476 2,957,334 752,860 $ 471,808 $ 746,751 $ $ 2,983,576 $ 760,462 102 Special Revenue Citywide Auto Plaza Coastal Sage Maintenance Maintenance Maintenance Maintenance Sewer Improvement Shrub District #4 District #6 District #7 District Maintenance District $ 412,994 $ 2,232,595 $ 255,092 $ 367,572 $ 1,400,344 $ 8,895,718 $ 166,368 - 15,562 3,870 2,745 28,760 67,496 8,262 $ 412,994 $ 2,248,157 $ 258,962 $ 370,317 $ 1,429,104 $ 8,963,214 $ 174,630 $ 7,343 $ 98,703 $ 11,496 $ 17,397 $ 204,180 $ 25,624 $ 5,037 - 2,006 583 482 1,781 55,455 - - - - - - - 279,529 7,343 100,709 12,079 17,879 205,961 81,079 284,566 405,651 2,147,448 246,883 352,438 1,223,143 8,882,135 - (109,936) 405,651 2,147,448 246,883 352,438 1,223,143 8,882,135 (109,936) $ 412,994 $ 2,248,157 $ 258,962 $ 370,317 $ 1,429,104 $ 8,963,214 $ 174,630 Continued 103 City of West Covina Combining Balance Sheet Non -major Governmental Funds - Continued June 30,2021 Special Revenue General An in West Covina Plan Measure Charter Public Community Update W PEG Places Services Found. ASSETS Cash and Investments $ 537,260 $ 1,158,725 $ 30,658 $ 297,823 $ 309,260 Cash and Investments with Fiscal Agent - - - - - Restricted Cash and Investments - - - - - Receivables, net: Accounts - - - - - Taxes - - - - - Other - - - - - Due from Other Agencies - - - - - Prepaid Items - - - - - Total Assets $ 537,260 $ 1,158,725 $ 30,658 $ 297,823 $ 309,260 LIABILITIES Accounts Payable $ - $ 28,608 $ 1,915 $ - $ 2,903 Other Accrued Liabilities - - - - - Deposits Payable - - - - - Uneamed Revenue - - - - - Due to Other Funds - - - - - Advances from Other Funds Total Liabilities 28,608 1,915 - 2,903 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Total Deferred Inflows of Resources - FUND BALANCE (DEFICITS) Restricted 537,260 1,130,117 28,743 297,823 306,357 Assigned - - - - - Unassigned Total Fund Balances (Deficits) 537,260 1,130,117 28,743 297,823 306,357 Total Liabilities, Deferred Inflows and Fund Balances (Deficits) $ 537,260 $ 1,158,725 $ 30,658 $ 297,823 $ 309,260 Special Revenue CASP Measure Measure Measure Community Measure Training R M A Corrections H Fund Sportsplex $ 3,370,469 $ 4,050,144 $ - $ 2,088 $ - $ 80,864 $ 106,864 - - 328,954 - - - - 168,280 2,575 - - - - - 57,776 - - $ 3,370,469 $ 4,050,144 $ 328,954 $ 2,088 $ 226,056 $ 83,459 $ 106,864 $ 54,168 $ 1,948 $ 30,006 $ - $ 80,028 $ - $ 106,864 5,780 105 - - 3,004 - - 298,947 - 143,024 - - 59,948 2,053 328,953 226,056 106,864 57,776 57,776 3,310,521 4,048,091 1 2,088 - 83,459 - - - - - (57,776) - - 3,310,521 4,048,091 1 2,088 (57,776) 83,459 $ 3,370,469 $ 4,050,144 $ 328,954 $ 2,088 $ 226,056 $ 83,459 $ 106,864 Continued 105 City of West Covina Combining Balance Sheet Non -major Governmental Funds - Continued June 30,2021 Capital Projects Construction Information Development Park City Tax Technology Impact Fees Development ASSETS Cash and Investments $ 3,620,702 $ 259,736 $ 219,440 $ 477,206 $ 3,303,442 Cash and Investments with Fiscal Agent - - - - - Restricled Cash and Investments 6,279,886 - - - - Receivables, net: Accounts - - - - - Taxes - - - - - Other - - - - - Due from Other Agencies 68,194 - - - - Prepaid Items - - - - - Total Assets $ 9,968,782 $ 259,736 $ 219,440 $ 477,206 $ 3,303,442 LIABILITIES Accounts Payable $ 281,290 $ - $ 4,847 $ - $ - OtherAccruedLiabilities - - - - - Deposits Payable - - - - - Unearned Revenue - - - - - Due to Other Funds - - - - - Advances from Other Funds Total Liabilities 281,290 - 4,847 - - DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - - - - - Total Deferred Inflows of Resources - - - - FUND BALANCE (DEFICITS) Restricted - 259,736 214,593 477,206 3,303,442 Assigned 9,687,492 - - - - Unassigned Total Fund Balances (Deficits) 9,687,492 259,736 214,593 477,206 3,303,442 Total Liabilities, Deferred Inflows and Fund Balances (Deficits) $ 9,968,782 $ 259,736 $ 219,440 $ 477,206 $ 3,303,442 M. Capital Projects Future Street Improvements Total $ 231,250 $ 47,243,998 - 6,283,500 - 357,685 - 470,660 - 390,402 - 536,952 $ 231,250 $ 55,283,197 $ - $ 1,691,156 - 320,411 - 340 - 29,464 - 548,039 279,529 2,868,939 390,391 390,391 231,250 42,564,544 - 9,687,492 (228,169) 231,250 52,023,867 $ 231,250 $ 55,283,197 107 City of West Covina Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -major Governmental Funds Year Ended June 30, 2021 REVENUES Taxes Special Assessments Investment Income Revenue from Other Agencies Charges for Services Other Revenues Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Community Services Community Development Debt Service: Principal Interest Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of Capital Assets Issuance of Debt Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Prior Period Adjustments Fund Balances - Ending Special Revenue Drug Air Integrated Enforcement Quality Waste Proposition Proposition Rebate Improvement Management A C $ - $ - $ - $ 2,379,112 $ 1,804,338 20,056 1,216 - 900 6,301 1,136,669 172,248 - - - 1,156,725 173,464 - 2,380,012 1,810,639 2,117,563 - - - - - 1,981 - - 622,789 - - 1,844,605 1,196,214 - - - - 25,520 2,117,563 1,981 - 1,844,605 1,844,523 (960,838) 171,483 - 535,407 (33,884) - - 11,073 - - - 11,073 - (960,838) 171,483 11,073 535,407 (33,884) 6,719,584 316,311 (11,073) (36,739) 1,574,390 $ 5,758,746 $ 487,794 $ - $ 498,668 $ 1,540,506 108 Special Revenue Transportation Community Police Development Various Development SAFER Inmate Donations Act AB939 Grants Block Grant Grant Welfare 122 - 2,610 384 - - 33 - - - 1,269,473 808,986 - - - - - - - - 2,422 1,300 - 261,712 197,431 129,061 - - 1,422 - 264,322 1,467,288 938,047 - 2,455 2,320 - - 546,454 - - - - - 95,795 312,415 - - - - 554,179 234,666 - - - - - - 303,744 - - 2,320 - 95,795 1,413,048 538,410 - - (898) - 168,527 54,240 399,637 - 2,455 - - - 1,442,765 70,270 - - (22) - - - - (10) - (22) - - 1,442,765 70,270 (10) - (920) - 168,527 1,497,005 469,907 (10) 2,455 36,367 (60,457) 708,400 (345,953) (469,907) 10 8,483 $ 35,447 $ (60,457) $ 876,927 $ 1,151,052 $ - $ - $ 10,938 Continued 109 City of West Covina Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -Major Governmental Funds - Continued Year Ended June 30, 2021 Special Revenue Public Safety Park Maintenance Maintenance Augmentation COPS/SLESA CESF District #1 District #2 REVENUES Taxes $ 834,745 $ - $ - $ 623,785 $ 222,194 Special Assessments - - - - - Investment Income 1,130 2,032 - 9,341 2,351 Revenue from Other Agencies - 253,970 23,910 - - Charges for Services - - - - - Other Revenues - - - - - Total Revenues 835,875 256,002 23,910 633,126 224,545 EXPENDITURES Current: General Government - - - - - Public Safety 996,719 55,263 23,769 - - Public Works - - - 292,959 115,010 Community Services - - - - - Community Development - - - - - Debt Service: Principal - - - - - Interest - - - - - Bond Issuance Costs - - - - - Total Expenditures 996,719 55,263 23,769 292,959 115,010 Excess (Deficiency) of Revenues Over Expenditures (160,844) 200,739 141 340,167 109,535 OTHER FINANCING SOURCES (USES) Transfers In - - - - - Transfers Out - - - - (9,000) Sale of Capital Assets - - - - - Issuance of Debt - - - - - Total Other Financing Sources (Uses) - - - - (9,000) Net Change in Fund Balances (160,844) 200,739 141 340,167 100,535 Fund Balances - Beginning 529,255 436,737 (141) 2,617,167 652,325 Prior Period Adjustments - - - - - Fund Balances - Ending $ 368,411 $ 637,476 $ - $ 2,957,334 $ 752,860 110 Special Revenue Citywide Auto Plaza Coastal Sage Maintenance Maintenance Maintenance Maintenance Sewer Improvement Shrub District #4 District #6 District #7 District Maintenance District $ 107,360 $ - $ - $ - $ - $ 350,196 $ 115,616 - 1,020,481 154,799 173,983 1,769,426 3,719,042 - 1,328 7,102 797 1,136 4,856 25,498 530 108,688 1,027,583 155,596 175,119 1,774,282 4,094,736 116,146 65,703 1,095,923 146,288 145,177 1,945,713 1,771,368 - - - - - - - 53,929 65,703 1,095,923 146,288 145,177 1,945,713 1,771,368 53,929 42,985 (68,340) 9,308 29,942 (171,431) 2,323,368 62,217 - 9,000 - - - - - - 9,000 - - - - - 42,985 (59,340) 9,308 29,942 (171,431) 2,323,368 62,217 362,666 2,206,788 237,575 322,496 1,394,574 6,558,767 (172,153) $ 405,651 $ 2,147,448 $ 246,883 $ 352,438 $ 1,223,143 $ 8,882,135 $ (109,936) Continued ill City of West Covina Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -Major Governmental Funds - Continued Year Ended June 30, 2021 REVENUES Taxes Special Assessments Investment Income Revenue from Other Agencies Charges for Services Other Revenues Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Community Services Community Development Debt Service: Principal Interest Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of Capital Assets Issuance of Debt Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Prior Period Adjustments Fund Balances - Ending Special Revenue General Art in West Covina Plan Measure Charter Public Community Update W PEG Places Services Found. $ - $ 1,328,840 $ - $ - $ - 1,133 190 1,008 758 129,865 - - - - - - - - 42,800 129,865 1,329,973 190 1,008 43,558 79,296 199,856 - - - - 19,026 - 199,856 79,296 - 19,026 129,865 1,130,117 (79,106) 1,008 24,532 129,865 1,130,117 (79,106) 1,008 24,532 - - 107,849 296,815 281,825 407,395 - - - - $ 537,260 $ 1,130,117 $ 28,743 $ 297,823 $ 306,357 112 Special Revenue CASP Measure Measure Measure Community Measure Training R M A Corrections H Fund Sportsplex $ 1,355,129 $ 1,535,411 $ - $ - $ - $ - $ - 10,790 11,636 - 7 - - - - - 328,955 - 299,497 19,145 - 1,365,919 1,547,047 328,955 7 299,497 19,145 - - - - 198 294,738 - - 561,666 - - - - - 106,864 401,737 79,286 328,954 - - - - 963,403 79,286 328,954 198 294,738 - 106,864 402,516 1,467,761 1 (191) 4,759 19,145 (106,864) 106,864 - - - - - - 106,864 402,516 1,467,761 1 (191) 4,759 19,145 - 2,908,005 2,580,330 - 2,279 (62,535) - - - - - - - 64,314 - $ 3,310,521 $ 4,048,091 $ 1 $ 2,088 $ (57,776) $ 83,459 $ - Continued 113 City of West Covina Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -Major Governmental Funds - Continued Year Ended June 30, 2021 REVENUES Taxes Special Assessments Investment Income Revenue from Other Agencies Charges for Services Other Revenues Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Community Services Community Development Debt Service: Principal Interest Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of Capital Assets Issuance of Debt Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Prior Period Adjustments Fund Balances - Ending Construction Information Development Park City Tax Technology Impact Fees Development $ - $ 40,343 $ - $ - $ - 855 - - 10,919 - 61,664 79,710 211,450 41,198 61,664 79,710 222,369 757,571 - - - - - - 5,878 - 14,882 500,000 757,571 - 5,878 - 514,882 (757,571) 41,198 55,786 79,710 (292,513) 3,847,001 - - - - (183,496) - - (101,713) (1,034,796) - - - - 3,900,000 6,602,048 - - - - 10,265,553 - - (101,713) 2,865,204 9,507,982 41,198 55,786 (22,003) 2,572,691 179,510 218,538 158,807 499,209 730,751 $ 9,687,492 $ 259,736 $ 214,593 $ 477,206 $ 3,303,442 114 Capital Projects Future Street Improvements Total $ - $ 10,697,069 - 6,837,731 - 125,019 - 4,312,853 - 132,287 11,250 996,378 11,250 23,101,337 - 79,296 - 4,794,595 - 7,500,267 - 4,658,667 - 383,193 - 500,000 - 17,916,018 11,250 5,185,319 - 5,486,973 - (1,329,037) - 3,900,000 - 6,602,048 - 14,659,984 11,250 19,845,303 - 31,486,855 220,000 691,709 $ 231,250 $ 52,023,867 115 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Drug Enforcement Rebate Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenues from Other Agencies Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ $ 20,056 $ 20,056 1,136, 669 1,136,669 1,156, 725 1,156, 725 5,284,121 2,117,563 3,166,558 5,284,121 2,117,563 3,166,558 (5,284,121) (960,838) 4,323,283 (5,284,121) (960,838) 4,323,283 6,719,584 6,719,584 - $ 1,435,463 $ 5,758,746 $ 4,323,283 116 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Air Quality Improvement Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 1,216 $ 1,216 354,200 172,248 (181,952) 354,200 173,464 (180,736) 52,101 1,981 50,120 52,101 1,981 50,120 302,099 171,483 (130,616) 302,099 171,483 (130,616) 316,311 316,311 Fund Balance, Ending $ 618,410 $ 487,794 $ (130,616) 117 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Integrated Waste Management Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Charges for Services Total Revenues EXPENDITURES Current: Public Protection Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Final Actual Budget Amounts 11,073 Variance - Positive (Negative) 11,073 11,073 11,073 11,073 11,073 (11,073) (11,073) - $ (11,073) $ - $ 11,073 118 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Proposition A Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 2,384,800 $ 2,379,112 $ (5,688) 10,000 900 (9,100) 2,394,800 2,380,012 (14,788) 2,323,938 1,844,605 479,333 2,323,938 1,844,605 479,333 70,862 535,407 464,545 70,862 535,407 464,545 (36,739) (36,739) - $ 34,123 $ 498,668 $ 464,545 119 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Proposition C Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Community Services Community Development Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Variance - Final Actual Positive Budget Amounts (Negative) $ 2,008,263 $ 1,804,338 $ (203,925) - 6,301 6,301 2,008,263 1,810,639 (197,624) 1,038,395 622,789 415,606 1,476,103 1,196,214 279,889 70,940 25,520 45,420 2,585,438 1,844,523 740,915 (577,175) (33,884) 543,291 (577,175) (33,884) 543,291 1,574,390 1,574,390 Fund Balance, Ending $ 997,215 $ 1,540,506 $ 543,291 120 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Police Donations Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Other Revenues Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 122 $ 122 1,300 1,300 - 1,300 1,422 122 29,085 2,320 26,765 29,085 2,320 26,765 (27,785) (898) 26,887 (23) (22) 1 (23) (22) 1 (27,808) (920) 26,888 36,367 36,367 - $ 8,559 $ 35,447 $ 26,888 121 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Transportation Development Act Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Final Budget 82,000 82,000 70,000 70,000 12,000 12,000 Actual Variance - Positive (Negative) (82,000) (82,000) 70,000 70,000 (12,000) (12,000) Fund Balance, Beginning (60,457) (60,457) Fund Balance, Ending $ (48,457) $ (60,457) $ (12,000) 122 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - AB 939 Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Other Revenues Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Variance - Final Actual Positive Budget Amounts (Negative) $ 2,000 $ 2,610 $ 610 170,760 261,712 90,952 172,760 264,322 91,562 194,717 95,795 98,922 194,717 95,795 98,922 (21,957) 168,527 190,484 (21,957) 168,527 190,484 708,400 708,400 Fund Balance, Ending $ 686,443 $ 876,927 $ 190,484 123 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Various Grants Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Other Revenues Total Revenues EXPENDITURES Current: Public Safety Public Works Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 384 $ 384 3,449,844 1,269,473 (2,180,371) 80,460 197,431 116,971 3,530,304 1,467,288 (2,063,016) 747,687 546,454 201,233 1,313,620 312,415 1,001,205 1,369,506 554,179 815,327 3,430,813 1,413,048 2,017,765 99,491 54,240 (45,251) 515,021 1,442,765 927,744 515,021 1,442,765 927,744 614,512 1,497,005 882,493 (345,953) (345,953) Fund Balance, Ending $ 268,559 $ 1,151,052 $ 882,493 124 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Community Development Block Grant Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenues from Other Agencies Other Revenues Total Revenues EXPENDITURES Current: Community Services Community Development Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 2,068,139 808,986 (1,259,153) 41,654 129,061 87,407 2,109,793 938,047 (1,171,746) 461,605 234,666 226,939 2,441,433 303,744 2,137,689 2,903,038 538,410 2,364,628 (793,245) 399,637 1,192,882 70,270 70,270 70,270 70,270 (793,245) 469,907 1,263,152 (469,907) (469,907) $ (1,263,152) $ $ 1,263,152 125 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - SAFER Grant Special Revenue Fund Year Ended June 30, 2021 REVENUES Revenues from Other Agencies Other Revenues Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Final Budget Actual (11) (10) Variance - Positive (Negative) (11) (10) 1 (11) (10) 1 10 10 $ (1) $ $ 1 126 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Inmate Welfare Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Charges for Services Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 33 $ 33 1,000 2,422 1,422 1,000 2,455 1,455 1,000 1,000 1,000 1,000 2,455 2,455 - 2,455 2,455 8,483 8,483 - Fund Balance, Ending $ 8,483 $ 10,938 $ 2,455 127 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Public Safety Augmentation Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 823,667 $ 834,745 $ 11,078 - 1,130 1,130 823,667 835,875 12,208 793,636 996,719 (203,083) 793,636 996,719 30,031 (160,844) 12,208 30,031 (160,844) (190,875) 529,255 529,255 $ 559,286 $ 368,411 $ (190,875) 128 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - COPS/SLESA Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 2,032 $ 2,032 161,021 253,970 92,949 161,021 256,002 94,981 192,420 55,263 137,157 192,420 55,263 137,157 (31,399) 200,739 232,138 (31,399) 200,739 232,138 436,737 436,737 - $ 405,338 $ 637,476 $ 232,138 129 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Parks CESF Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 23,910 23,910 23,910 23,910 58,260 23,769 34,491 58,260 23,769 34,491 (58,260) 141 58,401 (58,260) 141 58,401 (141) (141) $ (58,401) $ - $ 58,401 130 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Maintenance District #1 Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 502,809 $ 623,785 $ 120,976 16,000 9,341 (6,659) 518,809 633,126 114,317 394,254 292,959 101,295 394,254 292,959 101,295 124,555 340,167 215,612 124,555 340,167 215,612 2,617,167 2,617,167 - $ 2,741,722 $ 2,957,334 $ 215,612 131 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Maintenance District #2 Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 145,981 $ 222,194 $ 76,213 5,000 2,351 (2,649) 150,981 224,545 73,564 179,700 115,010 64,690 179,700 115,010 64,690 (28,719) 109,535 138,254 (9,000) (9,000) (9,000) (9,000) - (37,719) 100,535 138,254 652,325 652,325 $ 614,606 $ 752,860 $ 138,254 132 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Coastal Sage Shrub Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 110,731 $ 107,360 $ (3,371) 2,000 1,328 (672) 112,731 108,688 (4,043) 98,161 65,703 32,458 98,161 65,703 32,458 14,570 42,985 28,415 (9,000) 9,000 (9,000) - 9,000 5,570 42,985 37,415 362,666 362,666 - $ 368,236 $ 405,651 $ 37,415 133 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Maintenance District #4 Special Revenue Fund Year Ended June 30, 2021 REVENUES Special Assessments Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 1,042,060 $ 1,020,481 $ (21,579) 15,000 7,102 (7,898) 1,057,060 1,027,583 (29,477) 1,099,509 1,095,923 3,586 1,099,509 1,095,923 3,586 (42,449) (68,340) (25,891) 9,000 9,000 9,000 9,000 (33,449) (59,340) (25,891) 2,206,788 2,206,788 $ 2,173,339 $ 2,147,448 $ (25,891) 134 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Maintenance District #6 Special Revenue Fund Year Ended June 30, 2021 REVENUES Special Assessments Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 1,042,060 $ 154,799 $ (887,261) 15,000 797 (14,203) 1,057,060 155,596 (901,464) 1,099,509 146,288 953,221 1,099,509 146,288 953,221 (42,449) 9,308 51,757 (42,449) 9,308 51,757 237,575 237,575 - $ 195,126 $ 246,883 $ 51,757 135 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Maintenance District #7 Special Revenue Fund Year Ended June 30, 2021 REVENUES Special Assessments Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 171,949 $ 173,983 $ 2,034 1,800 1,136 (664) 173,749 175,119 1,370 177,552 145,177 32,375 177,552 145,177 32,375 (3,803) 29,942 33,745 (3,803) 29,942 33,745 322,496 322,496 - $ 318,693 $ 352,438 $ 33,745 136 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Citywide Maintenance District Special Revenue Fund Year Ended June 30, 2021 REVENUES Special Assessments Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 1,693,012 $ 1,769,426 $ 76,414 8,000 4,856 (3,144) 1,701,012 1,774,282 73,270 2,711,443 1,945,713 765,730 2,711,443 1,945,713 765,730 (1,010,431) (171,431) 839,000 (1,010,431) (171,431) 839,000 1,394,574 1,394,574 - $ 384,143 $ 1,223,143 $ 839,000 137 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Sewer Maintenance Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Special Assessments Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 210,000 $ 350,196 $ 140,196 3,740,010 3,719,042 (20,968) 20,000 25,498 5,498 3,970,010 4,094,736 124,726 6,648,043 1,771,368 4,876,675 6,648,043 1,771,368 4,876,675 (2,678,033) 2,323,368 5,001,401 (2,678,033) 2,323,368 5,001,401 6,558,767 6,558,767 - $ 3,880,734 $ 8,882,135 $ 5,001,401 138 CITYCLERK CITY COUNCIL ■ CITY TREASURER (ELECTED) (ELECTED) (ELECTED) CITYATTORNEY CITY CLERK'S OFFICE CITYMANAGER ASSISTANT CITY MANAGER COMMUNITY 11 PUBLIC DEVELOPMENT SERVICES HUMAN RESOURCES/RISK MANAGEMENT FIRE ■ POLICE ■ FINANCE Van Lank VL Fankhanel, LLP Ce f,ed 1'ubhc A¢ou nta A d Independent Auditor's Report The Honorable City Council City of West Covina, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of the City of West Covina, California, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City of West Covina'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 of 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 auditor considers 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. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of the City of West Covina, California, as of June 30, 2021, 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the budgetary comparison information, and other required supplementary information as listed in the 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 required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or to 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, the supplementary information as listed in the table of contents, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining statements and schedules listed in the supplementary information section of the table of contents are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statement themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation 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. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 22, 2022, on our consideration of the City of West Covina'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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. February 22, 2022 91 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Auto Plaza Improvement District Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Community Development Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 115,668 $ 115,616 $ (52) 1,000 530 (470) 116,668 116,146 (522) 68,561 53,929 14,632 68,561 53,929 14,632 48,107 62,217 14,110 48,107 62,217 14,110 (172,153) (172,153) - $ (124,046) $ (109,936) $ 14,110 139 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Measure W Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 1,370,000 $ 1,328,840 $ (41,160) - 1,133 1,133 1,370,000 1,329,973 (40,027) 1,290,152 199,856 1,090,296 1,290,152 199,856 1,090,296 79,848 1,130,117 1,050,269 79,848 1,130,117 1,050,269 $ 79,848 $ 1,130,117 $ 1,050,269 140 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Charter PEG Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: General Government Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 190 190 190 190 107,579 79,296 28,283 107,579 79,296 28,283 (107,579) (79,106) 28,473 (107,579) (79,106) 28,473 107,849 107,849 - $ 270 $ 28,743 $ 28,473 141 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - West Covina Community Svcs. Found. Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Other Revenues Total Revenues EXPENDITURES Current: Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 758 $ 758 103,616 42,800 (60,816) 103,616 43,558 (60,058) 230,043 19,026 211,017 230,043 19,026 211,017 (126,427) 24,532 150,959 (126,427) 24,532 150,959 281,825 281,825 - $ 155,398 $ 306,357 $ 150,959 142 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Measure R Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 1,656,988 $ 1,355,129 $ (301,859) 15,000 10,790 (4,210) 1,671,988 1,365,919 (306,069) 583,190 561,666 21,524 1,847,444 401,737 1,445,707 2,430,634 963,403 1,467,231 (758,646) 402,516 1,161,162 (758,646) 402,516 1,161,162 2,908,005 2,908,005 - $ 2,149,359 $ 3,310,521 $ 1,161,162 143 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Measure M Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 1,607,051 $ 1,535,411 $ (71,640) 15,000 11,636 (3,364) 1,622,051 1,547,047 (75,004) 1,560,423 79,286 1,481,137 1,560,423 79,286 1,481,137 61,628 1,467,761 1,406,133 61,628 1,467,761 1,406,133 2,580,330 2,580,330 - $ 2,641,958 $ 4,048,091 $ 1,406,133 144 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Measure A Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Works Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 339,332 328,955 (10,377) 339,332 328,955 (10,377) 339,332 328,954 10,378 339,332 328,954 10,378 1 1 - 1 1 145 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Community Corrections Special Revenue Fund Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Final Actual Budget Amounts $ $ 7 $ 7 Variance - Positive (Negative) 7 7 2,271 198 2,073 2,271 198 2,073 (2,271) (191) 2,080 (2,271) (191) 2,080 2,279 2,279 - $ 8 $ 2,088 $ 2,080 146 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Measure H Special Revenue Fund Year Ended June 30, 2021 REVENUES Taxes Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Safety Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 313,000 299,497 (13,503) 313,000 299,497 (13,503) 626,715 294,738 331,977 626,715 294,738 331,977 (313,715) 4,759 318,474 (313,715) 4,759 318,474 (62,535) (62,535) $ (376,250) $ (57,776) $ 318,474 147 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - City Capital Projects Fund Year Ended June 30, 2021 REVENUES Investment Income Charges for Services Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Debt Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 5,060,763 757,571 4,303,192 5,060,763 757,571 4,303,192 (5,060,763) (757,571) 4,303,192 5,060,763 3,847,001 (1,213,762) (179,510) (183,496) (3,986) 6,602,048 6,602,048 4,881,253 10,265,553 5,384,300 (179,510) 9,507,982 9,687,492 179,510 179,510 - $ - $ 9,687,492 $ 9,687,492 148 FINANCIAL SECTION City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Construction Tax Capital Projects Fund Year Ended June 30, 2021 REVENUES Taxes Investment Income Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 70,000 $ 40,343 $ (29,657) - 855 855 70,000 41,198 (28,802) 20,000 20,000 20,000 20,000 50,000 41,198 (8,802) 50,000 41,198 (8,802) 218,538 218,538 $ 268,538 $ 259,736 $ (8,802) 149 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Information Technology Capital Projects Fund Year Ended June 30, 2021 REVENUES Revenue from Other Agencies Other Revenues Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ 310,000 $ - $ (310,000) - 61,664 61,664 310,000 61,664 (248,336) 310,000 5,878 304,122 310,000 5,878 304,122 55,786 55,786 55,786 55,786 158,807 158,807 - $ 158,807 $ 214,593 $ 55,786 150 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Development Impact Fees Capital Projects Fund Year Ended June 30, 2021 REVENUES Investment Income Other Revenues Total Revenues EXPENDITURES Current: Public Works Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) 79,710 79,710 - 79,710 79,710 514,882 - 514,882 514,882 514,882 (514,882) 79,710 594,592 (1,034,796) 1,034,796 3,900,000 (101,713) (4,001,713) 2,865,204 (101,713) (2,966,917) 2,350,322 (22,003) (2,372,325) 499,209 499,209 $ 2,849,531 $ 477,206 $ (2,372,325) 151 City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - Park Development Capital Projects Fund Year Ended June 30, 2021 REVENUES Investment Income Other Revenues Total Revenues EXPENDITURES Current: Public Works Debt Service: Principal Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Sale of Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending Variance - Final Actual Positive Budget Amounts (Negative) $ - $ 10,919 $ 10,919 - 211,450 211,450 - 222,369 222,369 514,882 14,882 500,000 500,000 500,000 - 1,014,882 514,882 500,000 (1,014,882) (292,513) 722,369 (1,034,796) (1,034,796) 3,900,000 3,900,000 2,865,204 2,865,204 - 1,850,322 2,572,691 722,369 730,751 730,751 - $ 2,581,073 $ 3,303,442 $ 722,369 152 INTERNAL SERVICE FUNDS City of West Covina Internal Service Funds Year Ended June 30, 2021 INTERNAL SERVICE FUNDS The internal service funds are used to account for goods and services provided by one City department to other City departments on a cost reimbursement basis. Fleet Management This fund provides maintenance on materials and supplies for City vehicles and other gasoline or diesel powered equipment. Self -Insurance This fund accounts for the use of funds that are charged to departments for the administration and payment of claims under the City's self -insured general liability and workers' compensation programs. Retiree Health Savings Plan This fund accounts for the set aside lump sum benefits for retiring employees. Vehicle Replacement This fund provides for replacement of City vehicles. 153 ASSETS Current Assets: Cash and Investments Restricted Cash and Investments Accounts Receivable Inventories Total Current Assets Noncurrent Assets: Capital Assets, Depreciable, Net Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Accounts Payable Other Accrued Liabilities Due to Other Funds Current Portion of Long -Term Liabilities: Compensated Absences Claims Payable Total Current Liabilities Noncurrent Liabilities: Compensated Absences Claims Payable Total Noncurrent Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position City of West Covina Combining Statement of Net Position Internal Service Funds June 30, 2021 Fleet Retiree Health Vehicle Management Self -Insurance Savings Plan Replacement Totals $ 205,349 $ 15,206,572 $ 345,368 $ - $ 15,757,289 - 110,857 - - 110,857 100,000 1,050 - - 101,050 40,179 - - - 40,179 345,528 15,318,479 345,368 - 16,009,375 105,648 - - 568,633 674,281 105,648 - - 568,633 674,281 451,176 15,318,479 345,368 568,633 16,683,656 93,341 5,308 1,953 - 95,294 5,308 98,649 - 1,953 62,452 62,452 62,452 163,054 200 - - - 200 - 12,740,483 - - 12,740,483 200 12,740,483 - - 12,740,683 95,494 12,745,791 - 62,452 12,903,737 105,648 - - 568,633 674,281 250,034 2,572,688 345,368 (62,452) 3,105,638 $ 355,682 $ 2,572,688 $ 345,368 $ 506,181 $ 3,779,919 154 City of West Covina Combining Statement of Revenues, Expenses, and Changes in Net Position Internal Service Funds Year Ended June 30, 2021 OPERATING REVENUES Charges for Services Rental Income Other Revenues Total Operating Revenues OPERATING EXPENSES Personnel Services Cost of Sales, Services and Operations Depreciation Insurance and Claims Paid Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest Income Gain/(Loss) on Disposal of Capital Assets Fleet Retiree Health Vehicle Management Self -Insurance Savings Plan Replacement Totals $ 1,038,187 $ 4,032,510 $ - $ - $ 5,070,697 266,386 - - - 266,386 31,545 57,059 - - 88,604 1,336,118 4,089,569 - - 5,425,687 126,491 - 23,900 - 150,391 1,604,445 136,194 - - 1,740,639 19,666 - - 166,734 186,400 - 3,194,721 - - 3,194,721 1,750,602 3,330,915 23,900 166,734 5,272,151 (414,484) 758,654 (23,900) (166,734) 153,536 1,195 1,195 Total Nonoperating Revenues (Expenses) - - 1,195 - 1,195 Income (Loss) Before Operating Transfers (414,484) 758,654 (22,705) (166,734) 154,731 Transfers In - 3,966,682 - - 3,966,682 Transfers Out - - - - - Change in Net Position (414,484) 4,725,336 (22,705) (166,734) 4,121,413 Net Position - Beginning of Year 770,166 (2,152,648) 368,073 672,915 (341,494) Net Position - End of Year $ 355,682 $ 2,572,688 $ 345,368 $ 506,181 $ 3,779,919 155 City of West Covina Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from User Departments Cash Paid to Suppliers for Goods and Services Cash Paid to Employees for Services Net Cash from Operating Activities CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES Cash Paid (to) from Other Funds Net Cash from Noncapital and Related Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and Construction of Capital Assets Net Cash from Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest Received Net Cash from Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of the Year Cash and Cash Equivalents, End of the Year Reconciliation of Operating Income (Loss) to Net Cash from Operating Activities: Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Miscellaneous Income Changes in Operating Assets and Liabilities: (Increase) Decrease in Accounts Receivable (Increase) Decrease in Inventory and Prepaid Items Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Claims Payable Net Cash from Operating Activities Fleet Retiree Health Vehicle Management Self -Insurance Savings Plan Replacement Totals $ 1,730,936 $ 4,088,519 $ - $ - $ 5,819,455 (1,622,333) (4,193,673) - - (5,816,006) (125,127) - (23,900) - (149,027) (16,524) (105,154) (23,900) - (145,578) - 3,966,682 - - 3,966,682 - 3,966,682 - - 3,966,682 - - 1,195 - 1,195 - - 1,195 - 1,195 (16,524) 3,861,528 (22,705) - 3,822,299 221,873 11,455,901 368,073 - 12,045,847 $ 205,349 $ 15,317,429 $ 345,368 $ - $ 15,868,146 $ (414,484) $ 758,654 $ (23,900) $ (166,734) $ 153,536 19,666 166,734 186,400 394,818 (1,050) - - 393,768 (9,706) - - - (9,706) (8,182) (424,338) - - (432,520) 1,364 - - - 1,364 - (438,420) - - (438,420) $ (16,524) $ (105,154) $ (23,900) $ - $ (145,578) 156 PENSION TRUST FUNDS City of West Covina Pension Trust Funds Year Ended June 30, 2021 PENSION TRUST FUNDS Pension Trust Funds are used to account for monies required to be held in trust for the members and beneficiaries of defined benefit pension plans. Retirement Enhancement Defined Benefit Pension Trust Fund This fund accounts for the assets and activities of the Public Agency Retirement System Enhancement Plan. Supplemental Retirement Defined Benefit Pension Trust Fund This fund accounts for the assets and activities of the Public Agency Supplemental Retirement Plan. 157 City of West Covina Combining Statement of Fiduciary Net Position Pension Trust Funds June 30, 2021 ASSETS Cash and Investments Total Assets NET POSITION Held in Trust for Pension Benefits Retirement Supplemental Enhancement Retired Defined Benefit Defined Benefit Pension Fund Pension Fund Total Pension Trust Funds $ 71,013 $ 460,451 $ 531,464 71,013 460,451 531,464 $ 71,013 $ 460,451 $ 531,464 158 City of West Covina Combining Statement of Changes in Fiduciary Net Position Pension Trust Funds June 30, 2021 ADDITIONS Contributions: Employer Contributions Investment Earnings: Interest Income Total Additions DEDUCTIONS Administrative Costs Benefit Distributions Total Deductions Net Increase (decrease) in fiduciary net position Net Position, beginning of the year Net Position, end of the year Retirement Supplemental Total Enhancement Retired Pension Defined Benefit Defined Benefit Trust Pension Fund Pension Fund Funds $ 52,666 $ 79,364 $ 132,030 18,412 96,424 114,836 71,078 175,788 246,866 6,231 5,903 12,134 81,760 171,238 252,998 87,991 177,141 265,132 (16,913) (1,353) (18,266) 87,926 461,804 549,730 $ 71,013 $ 460,451 $ 531,464 159 STATISTICAL SECTION City of West Covina Description of Statistical Section Contents June 30, 2021 This part of the City of West Covina's Annual Comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information say about the government's overall financial health. Contents: Pages Financial Trends these schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time 160 Revenue Capacity these schedules contain information to help the reader assess the City's most significant local revenue source, the property tax 174 Debt Capacity these schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future 181 Demographic and Economic Information these schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place 189 Operating Information these schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs 191 159 CITY OF WEST COVINA Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2012 2013 2014 2015 Governmental activities: Net investment in capital assets $222,784,189 $164,621,539 $161,771,546 $144,215,248 Restricted 53,331,999 46,016,224 47,468,277 48,793,821 Unrestricted (27,344,668) (297,086) 191,878 (129,152,694) Total governmental activities net pension $248,771,520 $210,340,677 $209,431,701 $ 63,856,375 Business -type activities: Net investment in capital assets $ $ $ $ - Restricted - Unrestricted (994,560) (426,769) 60,922 188,045 Total business -type activities net pension $ (994,560) $ (426,769) $ 60,922 $ 188,045 Primary government: Net investment in capital assets Restricted Unrestricted Total primary government net pension $222,784,189 $164,621,539 $161,771,546 $144,215,248 53,331,999 46,016,224 47,468,277 48,793,821 (28,339,228) (723,855) 252,800 (128,964,649) $247,776,960 $209,913,908 $209,492,623 $ 64,044,420 Source: City of West Covina Finance Department 160 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 $148,989,212 $153,784,463 $153,940,332 $147,204,908 $140,572,511 $139,507,563 56,902,504 50,717,656 51,130,936 57,782,735 65,969,665 89,226,135 (138,162,202) (144,659,629) (201,951,785) (207,212,078) (225,184,697) (255,200,972) $ 67,729,514 $ 59,842,490 $ 3,119,483 $ (2,224,435) $ (18,642,521) $ (26,467,274) (135,676) (252,336) (275,010) (326,385) (244,119) 38,329 $ (135,676) $ (252,336) $ (275,010) $ (326,385) $ (244,119) $ 38,329 $148,989,212 $153,784,463 $153,940,332 $147,204,908 $140,572,511 $139,507,563 56,902,504 50,717,656 51,130,936 57,782,735 65,969,665 89,226,135 (138,297,878) (144,911,965) (202,226,795) (207,538,463) (225,428,816) (255,162,643) $ 67,593,838 $ 59,590,154 $ 2,844,473 $ (2,550,820) $ (18,886,640) $ (26,428,945) 161 CITY OF WEST COVINA Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Expenses: Governmental activities: General government Public safety Public works Community services Community development Interest on long-term debt Total governmental activities expenses Fiscal Year 2012 2013 2014 2015 $ 4,953,340 $ 5,519,153 $ 7,472,254 $ 5,676,067 49,369,913 47,323,516 45,443,958 49,813,447 20,510,387 20,372,375 21,109,952 20,586,770 6,949,951 6,878,176 6,437,040 7,035,872 4,071,050 1,127,924 658,082 766,886 5,927,002 1,652,750 1,677,062 1,353,156 91,781,643 82,873,894 82,798,348 85,232,198 Business -type activities: Computer enterprise 1,701,367 1,435,855 1,284,419 1,427,789 Total business -type activities expenses 1,701,367 1,435,855 1,284,419 1,427,789 Total primary government expenses Program revenues: Governmental activities: Charges for services: General government Public safety Public works Community services Community development Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities: Charges for services: Computer enterprise Total business -type activities program revenues Total primary government program revenues 93,483,010 84,309,749 84,082,767 86,659,987 599,066 548,333 486,478 885,123 3,196,729 3,018,478 3,037,891 2,825,831 7,046,096 7,781,333 8,878,122 8,278,038 1,141,162 1,195,612 1,180,562 1,275,278 255,669 348,112 621,352 502,621 12,557,141 10,344,778 11,021,410 12,405, 742 958,459 597,405 4,458,250 2,224,864 Source: City of West Covina Finance Department 25,754,322 23,834,051 29,684,065 28,397,497 1,805,242 2,105,421 1,873,636 1,655,134 1,805,242 2,105,421 1,873,636 1,655,134 27,559,564 25,939,472 31,557,701 30,052,631 162 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 $ 4,963,302 $ 5,775,173 $ 7,523,129 $ 7,515,920 $ 7,781,252 $ 18,929,254 48,410,511 56,169,907 67,734,047 58,057,784 72,653,866 62,479,977 20,259,279 21,243,019 21,161,586 21,625,190 23,649,892 17,212,496 7,368,492 7,926,410 8,926,070 9,280,450 9,418,860 7,675,178 753,721 2,190,319 1,618,181 795,685 1,394,131 1,568,283 1,572,645 1,575,724 1,515,826 1,680,335 1,874,899 8,354,304 83,327,950 94,880,552 108,478,839 98,955,364 116,772,900 116,219,492 1,638,573 1,575,066 1,305,426 1,263,693 1,230,639 475,672 1,638,573 1,575,066 1,305,426 1,263,693 1,230,639 475,672 84,966,523 96,455,618 109,784,265 100,219,057 118,003,539 116,695,164 400,051 546,626 814,465 3,170,579 3,201,495 3,610,467 8,271,744 7,714,148 8,967,472 1,365,482 1,491,858 2,110,943 425,013 416,014 264,959 13, 317, 378 10,955,031 10, 285, 701 1,004,826 445,980 151,966 829,295 369,796 312,112 3,839,103 4,304,075 3,718,158 9,156,370 2,034,963 4,458,831 1,903,119 2,438,156 697,351 465,097 6,780,115 - 12,097,219 19,989,920 21,764,524 360,872 582,023 10,621,147 27,955,073 24,771,152 26,205,973 28,651,075 36,499,048 41,572,123 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 758,120 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 758,120 29,368,187 26,045,470 27,405,135 29,750,103 37,748,243 42,330,243 163 CITY OF WEST COVINA Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Net revenues (expenses): Governmental activities Business -type activities net primary government revenues (expenses) General revenues and other changes in net position: Governmental activities: Taxes: Property taxes Sales tax Franchise tax Othertaxes Motor vehicle in lieu, unrestricted Investment income Other general revenues Transfers Extraordinary gain (loss) Total governmental activities Business -type activities: Investment income Other revenues Transfers Total business -type activities Total primary government Changes in net position: Governmental activities Business -type activities Total primary government change in net position Fiscal Year 2012 2013 2014 2015 $ (66,027,321) $ (58,612,191) $ (53,114,283) $ (56,834,701) 103,875 669,566 589,217 227,345 (65,923,446) (57,942,625) (52,525,066) (56,607,356) 23,313,556 20,937,356 20,420,020 21,156,596 13,177,914 13,307,736 14, 705,790 15,096,101 3,224,053 3,361,812 3,478,532 3,635,092 7,835,918 6,265,257 7,451,947 7,433,106 55,880 57,902 - - 1,647,399 185,451 695,341 660,157 5,193,850 7,310,544 5,960,967 6,999,034 98,811 101,775 101,775 101,775 55,825,872 (19,629,066) 110,373,253 31,898,767 52,814,372 55,081,861 1,553 (98,811) (101,775) (101,775) (101,775) (98,811) (101,775) (101,775) (100,222) 110,274,442 31,796,992 52,712,597 54,981,639 44,345,932 (26,713,424) (299,911) (1,752,840) 5,064 568,040 487,442 127,123 $ 44,350,996 $ (26,145,384) $ 187,531 $ (1,625,717) Source: City of West Covina Finance Department (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 $ (55,372,877) $ (70,109,400) $ (82,272,866) $ (70,304,289) $ (80,273,852) $ (74,647,369) (225,459) (300,748) (106,264) (164,665) 18,556 282,448 (55,598,336) (70,410,148) (82,379,130) (70,468,954) (80,255,296) (74,364,921) 22,352,163 23,994,740 25,392,860 26,365,067 27,422,706 30,108,110 17,228,237 16,503,563 17,449,827 17,464,609 17,033,647 20,858,803 3,540,011 3,698,184 4,011,817 4,207,765 4,445,101 4,644,360 6,485,394 6,725,309 7,692,437 9,158,794 5,026,703 4,571,270 (566,064) 4,452,938 559,164 2,016,573 2,682,794 223,485 4,236,920 6,847,642 9,256,591 5,747,563 7,244,815 5,520,479 101,775 - - - - - 9,789,266 - - 63,167,702 62,222,376 64,362,696 64,960,371 63,855,766 65,926,507 3,513 2,070 884 1,083 - - 182,018 82,706 112,207 63,710 (101,775) - - - (98,262) 184,088 83,590 113,290 63,710 63,069,440 62,406,464 64,446,286 65,073,661 63,919,476 65,926,507 7,794,825 (7,887,024) (17,910,170) (5,343,918) (16,418,086) (8,720,862) (323,721) (116,660) (22,674) (51,375) 82,266 282,448 $ 7,471,104 $ (8,003,684) $ (17,932,844) $ (5,395,293) $ (16,335,820) $ (8,438,414) 165 CITY OF WEST COVINA Changes in Net Position Governmental Activities Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2012 2013 2014 2015 Expenses: General government $ 4,953,340 $ 5,547,949 $ 7,472,254 $ 5,676,067 Public safety 49,369,913 47,160,347 45,443,958 49,813,447 Public works 20,510,387 20,465,106 21,109,952 20,586,770 Community services 6,949,951 6,911,667 6,437,040 7,035,872 Community development 4,071,050 708,422 658,082 766,886 Interest on long-term debt 5,927,002 1,652,751 1,677,062 1,353,156 Total expenses 91,781,643 82,446,242 82,798,348 85,232,198 Program revenues: Charges for services: General government 599,066 548,333 486,478 885,123 Public safety 3,196,729 3,018,478 3,037,891 2,825,831 Public works 7,046,096 7,781,333 8,878,122 8,278,038 Community services 1,141,162 1,195,612 1,180,562 1,275,278 Community development 255,669 348,112 621,352 502,621 Operating grants and contributions 12,557,141 10,344,778 11,021,410 12,405,742 Capital grants and contributions 958,459 597,405 4,458,250 2,224,864 Total program revenues 25,754,322 23,834,051 29,684,065 28,397,497 Net program revenues (expenses) (66,027,321) (58,612,191) (53,114,283) (56,834,701) General revenues and other changes in net position: Taxes: Property taxes 23,313,556 20,937,356 20,420,020 21,156,596 Sales tax 13,177,914 13,307,736 14,705,790 15,096,101 Franchise tax 3,224,053 3,361,812 3,478,532 3,635,092 Othertaxes 7,835,918 6,265,257 7,451,947 7,433,106 Motor vehicle in lieu, unrestricted 55,880 57,902 - - Investment income 1,647,399 185,451 695,341 660,157 Other general revenues 5,193,850 7,310,544 5,960,967 6,999,034 Transfers 98,811 101,775 101,775 101,775 Extraordinary gain (loss) 55,825,872 (19,629,066) - - Total governmental revenues and other changes 110,373,253 31,898,767 52,814,372 55,081,861 Changes in net position $ 44,345,932 $ (26,713,424) $ (299,911) $ (1,752,840) Source: City of West Covina Finance Department .: (continued) Fiscal Year $ 4,963,302 $ 5,775,173 $ 7,523,129 $ 7,515,920 $ 7,781,252 $ 18,929,254 48,410,511 56,169,907 67,734,047 58,057,784 72,653,866 62,479,977 20,259,279 21,243,019 21,161,586 21,625,190 23,649,892 17,212,496 7,368,492 7,926,410 8,926,070 9,280,450 9,418,860 7,675,178 753,721 2,190,319 1,618,181 795,685 1,394,131 1,568,283 1,572,645 1,575,724 1,515,826 1,680,335 1,874,899 8,354,304 83,327,950 94,880,552 108,478,839 98,955,364 116,772,900 116,219,492 400,051 546,626 814,465 829,295 369,796 312,112 3,170,579 3,201,495 3,610,467 3,839,103 4,304,075 3,718,158 8,271,744 7,714,148 8,967,472 9,156,370 2,034,963 4,458,831 1,365,482 1,491,858 2,110,943 1,903,119 2,438,156 697,351 425,013 416,014 264,959 465,097 6,780,115 - 13,317,378 10,955,031 10,285,701 12,097,219 19,989,920 21,764,524 1,004,826 445,980 151,966 360,872 582,023 10,621,147 27,955,073 24,771,152 26,205,973 28,651,075 36,499,048 41,572,123 (55,372,877) (70,109,400) (82,272,866) (70,304,289) (80,273,852) (74,647,369) 22,352,163 23,994,740 25,392,860 26,365,067 27,422,706 30,108,110 17,228,237 16,503,563 17,449,827 17,464,609 17,033,647 20,858,803 3,540,011 3,698,184 4,011,817 4,207,765 4,445,101 4,644,360 6,485,394 6,725,309 7,692,437 9,158,794 5,026,703 4,571,270 (566,064) 4,452,938 559,164 2,016,573 2,682,794 223,485 4,236,920 6,847,642 9,256,591 5,747,563 7,244,815 5,520,479 101,775 - - - - - 9,789,266 - - - 63,167,702 62,222,376 64,362,696 64,960,371 63,855,766 65,926,507 $ 7,794,825 $ (7,887,024) $ (17,910,170) $ (5,343,918) $ (16,418,086) $ (8,720,862) 167 CITY OF WEST COVINA Changes in Net Position Business -Type Activities Last Ten Fiscal Years (accrual basis of accounting) Expenses: Computer Enterprise Total expenses Program revenues: Charges for services: Computer Enterprise Total program revenues Net revenues (expenses) Fiscal Year 1041P�10111119�zZflE�zZflR $ 1,701,367 $ 1,435,606 $ 1,284,419 $ 1,427,789 1,701,367 1,435,606 1,284,419 1,427,789 1,805,242 2,105,421 1,873,636 1,655,134 1,805,242 2,105,421 1,873,636 1,655,134 103,875 669,815 589,217 227,345 General revenues and other changes in net position: Investment income 1,553 Other revenues - Transfers (98,811) (101,775) (101,775) (101,775) Total general revenues and other changes (98,811) (101,775) (101,775) (100,222) Changes in net position $ 5,064 $ 568,040 $ 487,442 $ 127,123 Source: City of West Covina Finance Department 168 (continued) Fiscal Year $ 1,638,573 $ 1,575,066 $ 1,305,426 $ 1,263,693 $ 1,230,639 $ 475,672 1,638,573 1,575,066 1,305,426 1,263,693 1,230,639 475,672.00 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 758,120 1,413,114 1,274,318 1,199,162 1,099,028 1,249,195 758,120.00 (225,459) (300,748) (106,264) (164,665) 18,556 282,448.00 3,513 2,070 884 1,083 - - 182,018 82,706 112,207 63,710 (101,775) (98,262) 184,088 83,590 113,290 63,710 $ (323,721) $ (116,660) $ (22,674) $ (51,375) $ 82,266 $ 282,448 169 CITY OF WEST COVINA Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) General Fund: Nonspendable Restricted Assigned Unassigned Total general fund All other governmental funds: Nonspendable Restricted Assigned Unassigned Total all other governmental funds Fiscal Year 2012 2013 2014 2015 $ 15,580,789 $ 6,621,695 $ 6,595,326 $ 6,483,924 13,187,181 4,108,967 5,687,385 20,531,695 $ 28,767,970 $ 10,730,662 $ 12,282,711 $ 27,015,619 $ 6,200,423 $ 6,814,431 $ 157,500 $ 151,923 31,101,636 32,133,653 56,225,097 59,918,077 1,378,401 893,566 3,891,565 4,930,693 (110,042) (373,264) (47,867) (438,708) $ 38,570,418 $ 39,468,386 $ 60,226,295 $ 64,561,985 Source: City of West Covina Finance Department 170 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 $ 7,129,779 $ 6,982,268 $ 9,952,978 $ 8,976,583 $ 7,086,958 $ 4,009,651 - - - - 7,650 9,440 - 320,200 320,200 - - 15,032,610 14,119,078 11,979,653 9,884,913 12,580,716 21,468,986 $ 22,162,389 $ 21,101,346 $ 22,252,831 $ 19,181,696 $ 19,675,324 $ 25,488,077 $ 5,277,203 $ 4,980,450 $ 110,833 $ 99,167 $ 82,420 $ - 51,467,448 45,082,696 49,600,866 57,840,755 64,044,695 92,198,163 5,065,065 2,820,665 2,004,895 1,107,138 1,786,815 9,687,492 (531,412) (1,100,860) (710,218) (692,305) (1,158,958) (228,169) $ 61,278,304 $ 51,782,951 $ 51,006,376 $ 58,354,755 $ 64,754,972 $101,657,486 171 CITY OF WEST COVINA Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Revenues: Taxes Special assessments Licenses and permits Fines and forfeitures Investment income Rental income Intergovernmental Charges for services Repayment of notes and loans Other Total revenues Expenditures Current: General government Public safety Public works Community services Community development Pass -through payments Debt service: Principal retirement Interest and fiscal charges Cost of issuance Developer agreement payments Total expenditures Excess (deficiency) of revenues over(under)expenditures Other financing sources (uses): Transfers in Transfers out Acquisition under capital leases Issuance of bonds Premium of refunding bonds issued Payment to refunded bond escrow agent Extraordinary gain (loss) Total other financing sources (uses) Special Item Payment towards UAL Net change in fund balances Debt service as a percentage of noncapital expenditures Fiscal Year 2012 2013 2014 2015 $ 53,636,172 $ 46,185,045 $ 48,785,393 $ 50,918,823 5,270,856 5,511,465 5,513,535 5,595,338 866,642 1,156,196 1,717,153 1,419,457 1,097,836 1,048,819 1,036,732 959,606 3,419,665 533,388 716,472 679,844 421,521 370,913 367,798 406,350 12,481,691 9,496,633 11,097,551 10,769,196 6,732,076 6,124,201 6,751,541 6,803,615 332,698 925,235 26,148 - 1,720,792 5,105,117 6,258,384 5,490,327 85,979,949 76,457,012 82,270,707 83,042,556 4,950,311 5,205,956 7,087,335 5,757,334 44,109,598 42,688,487 43,332,847 45,906,138 18,209,981 16,203,144 17,790,042 13,724,417 5,917,227 5,872,485 5,399,732 5,816,443 4,246,590 666,255 679,007 761,896 2,112,227 - - - 5,155,105 1,773,261 1,870,239 1,866,947 6,307,988 1,659,473 1,666,054 1,360,370 351,444 - - - 91,360,471 74,069,061 77,825,256 75,193,545 (5,380,522) 2,387,951 4,445,451 7,849,011 8,947,657 3,639,400 3,744,115 3,201,793 (8,848,846) (3,537,625) (3,642,340) (3,100,018) 2,185,000 - (2,248,061) - 7,453,315 (19,629,066) - 11,578,351 7,552,126 (19,527,291) 38,714 11,680,126 $ 2,171,604 $ (17,139,340) $ 4,484,165 $ 19,529,137 Source: City of West Covina Finance Department 16.20% 5.21 % 5.18% 4.92% 172 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 $ 54,237,649 $ 55,502,969 $ 59,255,716 $ 62,477,442 $ 62,588,256 $ 72,496,610 5,550,657 5,318,497 6,077,861 6,347,182 6,490,254 6,837,731 1,156,613 1,037,389 1,089,850 1,140,622 1,491,744 1,528,117 796,989 894,618 1,290,187 1,318,333 921,872 380,169 (570,132) 4,448,607 551,948 2,008,971 2,677,045 (18,511) 529,833 604,817 649,968 647,749 700,455 952,185 11,218,711 10,193,278 7,920,178 12,581,261 15,386,915 11,623,792 7,731,236 7,359,139 8,681,704 7,473,923 7,690,819 6,376,218 1,487,103 2,129,531 4,229,895 1,142,659 3,783,990 2,785,758 82,138,659 87,488,845 89,747,307 95,138,142 101,731,350 102,962,069 5,103,814 6,214,682 5,700,461 6,828,020 6,488,092 6,910,013 50,962,883 54,480,972 53,087,630 58,205,797 58,857,571 60,290,745 15, 509, 267 15, 328, 717 17, 635, 489 14, 800, 936 17, 262, 224 15, 356, 778 6,864,180 10,824,395 6,975,178 7,290,775 7,263,052 6,172,738 898,714 2,198,881 1,182,255 1,086,128 1,214,558 1,568,283 2,027,461 7,931,202 1,958,918 13,353,918 1,833,918 2,428,918 1,574,753 1,566,392 1,501,956 1,691,316 1,932,807 5,419,621 - - - 389,726 - 1,083,165 82,941,072 98,545,241 88,041,887 103,646,616 94,852,222 99,230,261 (802,413) (11,056,396) 1,705,420 (8,508,474) 6,879,128 3,731,808 4,831,038 5,643,232 3,902,056 149,121 1,494,913 197,353,567 (10,812,296) (5,643,232) (5,232,566) (9,121) (1,676,955) (201,320,249) 2,568,446 500,000 - 196759 3,900,000 - - 24,165,000 - 210,697,048 1,380,718 - (12,900,000) (3,412,812) 500,000 (1,330,510) 12,785,718 14,717 210,630,366 - - - (172,543,016) $ (4,215,225) $ (10,556,396) $ 374,910 $ 4,277,244 $ 6,893,845 $ 41,819,158 4.70% 10.29% 4.18% 15.08% 3.97% 7.91% 173 CITY OF WEST COVINA Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (in thousands) Fiscal Year Taxable Ended Less: Assessed June 30 Secured Non -Unitary Unsecured Exemptions Value 2012 $ 6,381,873 $ - $ 12,762 $ (85,792) $ 6,308,843 2013 6,477,468 - 10,645 (93,277) 6,394,836 2014 6,670,267 - 15,080 (73,615) 6,611,732 2015 7,116,733 - 12,346 (94,084) 7,034,995 2016 7,458,200 - 14,738 (95,915) 7,377,023 2017 7,829,861 - 11,212 (100,253) 7,740,820 2018 8,229,924 - 9,185 (84,900) 8,154,209 2019 8,718,033 - 10,356 (101,379) 8,627,010 2020 9,082,038 - 11,724 (79,629) 9,014,133 2021 9,458,367 - 11,927 (119,220) 9,351,074 NOTE: In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1 % based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor' (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Source: HdL Coren & Cone, Los Angeles Assessor 2011/2012 - 2020/2021 Combined Tax Rolls 174 (continued) Successor Agency (SA) of the former Community Development Commission (CDC) City and SA Taxable Total Taxable Total Less: Assessed Assessed Direct Tax Secured Unsecured Exemptions Value Value Rate $ 2,408,026 $ 152,958 $ (152,569) $ 2,408,415 $ 8,717,258 33.518% 2,429,152 160,821 (152,386) 2,437,587 8,832,423 33.456% 2,498,131 161,438 (186,502) 2,473,067 9,084,799 14.083% 2,566,170 161,710 (184,907) 2,542,973 9,577,968 14.116% 2,795,635 162,488 (189,554) 2,768,569 10,145,592 14.138% 3,028,206 165,375 (170,529) 3,023,052 10,763,872 14.165% 3,103,316 163,326 (154,330) 3,112,312 11,266,521 14.109% 3,305,249 167,442 (168,062) 3,304,629 11,931,639 14.221% 3,483,295 169,859 (195,530) 3,457,624 12,471,757 14.236% 3,604,156 168,578 (222,612) 3,550,122 12,901,196 14.262% 175 CITY OF WEST COVINA Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $100 of assessed value) Basic Levy' Baldwin Park Unified Bassett Unified School District Covina Valley Unified School District Hacienda -La Puente Unified Metropolitan Water District Mt. San Antonio College Rowland Heights Unified Walnut Valley Unified West Covina Municipal Maint. Dist. West Covina Unified Total Direct & Overlapping2 Tax Rates City Share of 1% Levy Per Prop 133 Redevelopment Rate° Total Tax Rates Fiscal Year 2012 2013 2014 2015 1.00000 1.00000 1.00000 1.00000 0.17506 0.16406 0.15842 0.16519 0.11628 0.12773 0.11632 0.11539 0.08999 0.09500 0.11472 0.11426 0.06430 0.06689 0.06653 0.06432 0.00370 0.00350 0.00350 0.00350 0.02642 0.02896 0.02023 0.02129 0.09195 0.10053 0.12297 0.14313 0.11735 0.12554 0.11342 0.11510 0.18180 0.18180 0.18310 0.18310 0.05377 0.04965 0.03626 0.05412 1.92061 1.94365 1.93547 1.97941 0.13820 0.13820 0.13820 0.13820 1.00370 N/A N/A N/A 0.33518 0.33456 0.14083 0.14116 ' In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of any voter approved bonds. 2 Overlapping rates are those of local and county governments that apply to property owners within the City. Not all overiappping rates apply to all city property owners. s City's share of 1 % Levy is based on the City's share of the general fund tax rate area with the largest net taxable value within the City. ERAF general fund tax shifts may not be included in tax ratio figures. 4 Redevelopment Rate is based on the largest RDA tax rate area and only includes rate(s) from indebtedness adopted prior to 1989 per California State statute. RDA direct and overlapping rates are applied only to the incremental property values. The approval of ABX1 26 eliminated Redevelopment from the State of California for the fiscal year 2012/13 and 5 Total Direct Rate is the weighted average of all individual direct rates applied to by the government preparing the statistical section information and excludes revenues derived from aircraft taxes. Beginning in 2013/14 the Total Direct Rate no longer includes revenue generated from the former redevelopment tax rate areas. Challenges to recognized enforceable obligations are assumed to have been resolved during 2012/13. For the purpose of this report, residual revenue is assumed to be distributed to the City in the same proportions as general fund revenue. Source: Los Angeles County Assessor 2011/12 - 2020/21 Tax Rate Table 176 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 0.16288 0.10510 0.13039 0.12402 0.13032 0.19256 0.15771 0.16781 0.17443 0.16349 0.14196 0.14705 0.11062 0.12581 0.14205 0.13976 0.13521 0.12658 0.06394 0.06600 0.10531 0.10706 0.08252 0.08261 0.00350 0.00350 0.00350 0.00350 0.00350 0.00350 0.02154 0.02400 0.02371 0.02435 0.04781 0.04459 0.12426 0.12444 0.11841 0.11861 0.10760 0.10905 0.09285 0.06601 0.07388 0.10582 0.09538 0.09893 0.18310 0.18310 0.18310 0.18310 0.18310 0.18480 0.04205 0.04914 0.09514 0.09795 0.08192 0.09980 1.96245 1.91492 2.04992 2.06766 2.00932 2.08947 0.13820 0.13820 0.13820 0.13820 0.13820 0.13820 N/A N/A N/A N/A N/A N/A 0.14138 0.14165 0.14109 0.14221 0.14236 0.14262 177 CITY OF WEST COVINA Principal Property Taxpayers Current Year and Nine Years Ago 2021 2012 Percent of Percent of Total City Taxable Total City Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Plaza West Covina LLC $ 276,723,444 1 2.18% $166,002,849 1 3.00% GREF Eastland Center LP Colony at the Lakes 624 South Glendora Avenue Owner LLC Walnut Ridge Apartments LP TPA Nasch LLC Envision WC MB RE LLC Sunset Figueroa LLC ET AL Francisquito Avenue Fee Owner LLC Francisquito Avenue Fee Owner LLC Citrus Valley Medical Center Eastland Shopping Center LLC Hassen Real Estate Partnership Eastland Tower Partnership Gateway Crescent LLC Lend Lease AR Timberwood LP 851 S. Sunset Avenue Apartments LLC California Newspapers Partnership Totals 187,719,035 2 1.48% 176,679,227 3 1.39% 75,430,010 4 0.59% 61,873,914 5 0.49% 59,189,641 6 0.47% 52,481,550 7 0.41% 46,695,740 8 0.37% 45,627,749 9 0.36% 44,324,100 10 0.35% $1,026,744,410 23,290,368 8 0.42% 98,956,886 2 1.79% 79,680,065 3 1.44% 37,351,122 4 0.68% 30,000,000 5 0.54% 24,246,476 6 0.44% 23,368,580 7 0.42% 22,128,098 9 0.40% 21,539,126 10 0.39% 6.09% $526,563,570 9.52% Source: HdL Coren & Cone; Los Angeles County Assessor 2011-12 and 2020-21 Combined Tax Rolls and the Non UnitaryTax Roll 178 CITY OF WEST COVINA PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years City Collected within the Fiscal Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date Year Ended for the Percent Subsequent Percent June 30 Fiscal Year Amount of Levy Years Amount of Levy 2012 $ 8,961,279 $ 8,280,265 92.40% $ (167,264) $ 8,113,001 90.53% 2013 9,094,235 8,853,013 97.35% (75,056) 8,777,957 96.52% 2014 9,119,226 9,105,997 99.85% (67,229) 9,038,768 99.12% 2015 9,702,185 9,491,592 97.83% 34,965 9,526,557 98.19% 2016 10,173,156 9,881,520 97.13% 88,647 9,970,167 98.00% 2017 10,671,800 10,440,321 97.83% 109,928 10,550,250 98.86% 2018 11,679,354 11,040,516 94.53% 267,238 11,307,754 96.82% 2019 12,395,960 11,894,401 95.95% 96,641 11,991,042 96.73% 2020 12,607,874 11,998,360 95.17% 241,683 12,240,043 97.08% 2021 13,527,500 12,917,734 95.49% 91,377 13,009,111 96.17% Notes: The amounts presented include City property taxes and Community Development Commission tax increment. This schedule also includes amounts collected by the City and the Community Development Commission that were passed -through to other agencies. Fiscal year 2012 collections for Community Development Commission are as of January 1, 2012. This is due to ABx1 26 (RDA Dissolution Bill ) that was effective February 1, 2012. Subsequent to January 1, 2012, there were no property taxes levied under the Community Development Commission. Source: Los Angeles County Auditor Controller's Office - Accounting Division 179 (continued) Community Development Commission Collected within the Fiscal Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date Year Ended forthe Percent Subsequent Percent June 30 Fiscal Year Amount of Levy Years Amount of Levy 2012 $ 20,612,835 $ 8,727,674 42.34% $ 191,262 $ 8,918,936 43.27% 2013 N/A N/A N/A N/A N/A N/A 2014 N/A N/A N/A N/A N/A N/A 2015 N/A N/A N/A N/A N/A N/A 2016 N/A N/A N/A N/A N/A N/A 2017 N/A N/A N/A N/A N/A N/A 2018 N/A N/A N/A N/A N/A N/A 2019 N/A N/A N/A N/A N/A N/A 2020 N/A N/A N/A N/A N/A N/A 2021 N/A N/A N/A N/A N/A N/A flf CITY OF WEST COVINA Ratios of Outstanding Debt by Type Last Ten Fiscal Years Business -Type Governmental Activities Activities Fiscal Year Lease Capital Total Total Ended Revenue Lease Governmental Business -type June 30 Bonds Loans Obligations Activities Activities 2012 $ 50,825,000 $ 1,800,221 $ 1,409,134 $ 54,034,355 $ - 2013 49,645,000 1,658,532 957,535 52,261,067 - 2014 48,385,000 1,512,768 773,282 50,671,051 - 2015 47,225,000 12,941,113 216,342 60,382,455 - 2016 46,000,000 12,208,103 2,715,337 60,923,440 - 2017 42,570,000 10,920,515 - 53,490,515 - 2018 41,190,000 10,341,597 - 51,531,597 - 2019 39,680,000 9,762,679 - 49,442,679 2020 38,425,000 9,183,761 - 47,608,761 2021 241,170,000 8,104,843 - 249,274,843 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements (1) These ratios are calculated using personal income and population for the prior calendar year. Source: City of West Covina Finance Department 181 Total Percentage Debt Primary of Personal Per Government Income(1) Capita(1) $ 54,034,355 2.02% 506 52,261,067 1.90% 487 50,671,051 1.88% 470 60,382,455 2.28% 560 60,923,440 2.27% 565 53,490,515 1.98% 496 51,531,597 1.88% 476 49,442,679 1.70% 457 47,608,761 1.56% 449 249,274,843 7.86% 2,361 (continued) 182 CITY OF WEST COVINA Ratio of General Bonded Debt Outstanding Last Ten Fiscal Years (in thousands of dollars, except Per Capita) Fiscal Year Lease Percent of Ended Revenue Assessed Per June 30 Bonds Total Value(1) Capita 2012 $ 50,825 50,825 0.58% 476 2013 49,645 49,645 0.56% 463 2014 48,385 48,385 0.53% 449 2015 47,225 47,225 0.49% 438 2016 46,000 46,000 0.45% 426 2017 42,570 42,570 0.40% 395 2018 41,190 41,190 0.37% 381 2019 39,680 39,680 0.33% 367 2020 38,425 38,425 0.31% 363 2021 241,170 241,170 1.87% 2,284 Notes: General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which, the City has none). (1) Assessed value has been used because the actual value of taxable property is not readily available in the State of California. Source: City of West Covina Finance Department and Los Angeles County Assessor's Office 183 CITY OF WEST COVINA Direct and Overlapping Debt June 30, 2021 Estimated Estimated Share Debt Percentage of Overlapping Governmental Unit Outstanding Applicable (1) Debt Debt repaid with Property Taxes: Metropolitan Water District $ 13,101,783 0.810 $ 106,128 MT. SAN ANTONIO CCD DS 2008 SERIES 2013A 161,337,332 12.795 20,642,362 W. SAN ANTONIO CCD DS 2008 SERIES 2013B 2,610,000 12.795 333,937 W. SAN ANTONIO CCD DS 2013 REF SERIES A 18,045,000 12.795 2,308,774 MT. SAN ANTONIO CCD DS 2013 REF SERIES B 21,260,000 12.795 2,720,118 W. SAN ANTONIO CCD DS 2008 SERIES 2015C 7,315,000 12.795 935,920 W. SAN ANTONIO CCD DS 2015 REF BONDS 16,415,000 12.795 2,100,223 MT. SAN ANTONIO CCD DS 2018 SERIES 2019A 288,690,000 12.795 36,936,544 MT. SAN ANTONIO CCD DS 2020 SERIES A 180,433,674 12.795 23,085,650 BALDWIN PARK USD 2002 SERIES 2004 5,265,804 0.291 15,333 BALDWIN PARK USD 2006 SERIES 2013 2,054,915 0.291 5,984 BALDWIN PARK USD 2016 REF BONDS 60,840,000 0.291 177,156 BALDWIN PARK USD 2006 SERIES 2019 11,370,000 0.291 33,107 BALDWIN PARK USD 2019 REF BONDS 32,996,025 0.291 96,079 BALDWIN PARK USD 2018 SERIES 2020 30,000,000 0.291 87,355 BASSETT USD DS 2006 SER B 10,375,729 0.099 10,298 BASSETT USD DS 2014 REF SERIES A 7,600,000 0.099 7,543 BASSETT USD DS 2014 REF SERIES B 5,520,000 0.099 5,479 BASSETT USD DS 2014 SERIES A 8,435,000 0.099 8,372 BASSETT USD DS 2016 REF BONDS 6,240,000 0.099 6,193 BASSETT USD DS 2014 SERIES B 19,530,000 0.099 19,384 COVINA VALLEY USD DS 2001 SERIES B 8,328,416 31.525 2,625,557 COVINA VALLEY USD DS 2001 REFUND 2010 SERIES A 1,025,000 31.525 323,134 COVINA VALLEY USD DS 2012 SERIES A 4,815,000 31.525 1,517,942 COVINA VALLEY USD DS 2013 REF BONDS 10,560,000 31.525 3,329,070 COVINA VALLEY USD DS 2012 SERIES B 36,145,000 31.525 11,394,813 COVINA VALLEY USD DS 2012 SERIES C 12,000,000 31.525 3,783,034 COVINA VALLEY USD DS 2012 SERIES CI 2,650,000 31.525 835,420 COVINA VALLEY USD DS 2016 REF BONDS 15,900,000 31.525 5,012,520 COVINA VALLEY USD DS 2012 SERIES D 28,515,000 31.525 8.989,434 COVINA VALLEY USD DS 2012 SERIES E 14,000,000 31.525 4,413,539 COVINA VALLEY USD DS 2019 REF BONDS 57,545,000 31.525 18,141,223 HACIENDA -LA PUENTE USD DS 2005 REFUNDING BONDS 16,150,000 1.395 225,313 HACIENDA -IA PUENTE USD DS 2007 REFUNDING 48,225,000 1.395 672,800 HACIENDA -IA PUENTE USD DS 2016 SERIES 2017A 57,895,000 1.395 807,709 ROWLAND HEIGHTS USD DS 2005 REF BONDS 5,702,988 14.519 828,040 ROWLAND HEIGHTS USD DS 2006 SERIES D OSCB 12,375,000 14.519 1,796,777 ROWLAND HEIGHTS USD DS 2006 SERIES E 19,272,549 14.519 2,798,260 ROWLAND HEIGHTS USD DS 2012 SERIES A 557,451 14.519 80,939 ROWLAND HEIGHTS USD DS 2013 REF BONDS 375,000 14.519 54,448 ROWLAND HEIGHTS USD DS 2012 SERIES B 22,215,000 14.519 3,225,486 ROWLAND HEIGHTS USD DS 2015 REF BONDS 106,139,972 14.519 15,410,894 ROWLAND HEIGHTS USD DS 2019 REF BONDS 58,560,000 14.519 8,502,564 WALNUT VALLEY USD DS 2000 SERIES D 10,749,084 0.755 81,109 WALNUT VALLEY USD DS 2000 SERIES E 4,123.484 0.755 31,115 WALNUT VALLEY USD DS 2011 REF 380,000 0.755 2,867 WALNUT VALLEY USD DS 2007 SERIES B MEAS.S 10,004,472 0.755 75,491 WALNUT VALLEY USD DS 2014 REF BONDS SERIES A 3,260,000 0.755 24,599 WALNUT VALLEY USD DS 2014 REF BONDS SERIES B 1,535,000 0.755 11,583 WALNUT VALLEY USD DS 2016 REF BONDS 38,260,000 0.755 288,698 WALNUT VALLEY USD DS 2016 SERIES A BONDS 38,440,000 0.755 290,056 WALNUT VALLEY USD DS 2019 REF BONDS 25,360,000 0.755 191,359 WALNUT VALLEY USD DS 2016 SERIES B BONDS 47,900,000 0.755 361,438 WEST COVINA USD 2002 REFUNDING SERIES A 8,075,000 95.496 7,711,324 WEST COVINA USD DS 2012 REF BONDS 8,915,000 95.496 8,513,493 WEST COVINA USD DS 2016 SERIES A 68,205,000 95.496 65,133,232 WEST COVINA USD DS 2016 SERIES B 32,435,000 95.496 30,974,216 Sub Total Overlapping Debt 298,101,435 City of West Covina Direct Debt - Lease Revenue Bonds 204,095,000 Total Direct and Overlapping Debt $ 502,196,435 Note: Overlapping governments ere those that mindde, at least in part, with the geographic bounded.. of Me City. This schedule estimates the portion of the outstanding debt of those ovedappiW Wsc mments that is home by the residents and businesses of Gkntlo s. This process recognizes that, when considering the Cilys ability 0 issue and repay bng-term debt, the entire dent burden home by the residents and businesses should be taken into amount. However, this does not imply that every taxpayer is a resident and, therefore, responsible far the debt, for each overlapping government. (1) The percentage of overlapping debt applicable is estimated usiW taxable assessed property values. Applicable percentages were estimated by determining the portion of the Countys taxable assessed value that Is Within the government's boundaries and dividing It by the Counlys total taxable assessed value. Source: HEL Comn 8 Cone, Los Angeles, County Assessor and Auditor Combined 2020-21 Lien Date Tax Rolls 4� MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis of the financial performance of the City of West Covina (the City) provides an overview of the City's financial activities for the fiscal year ended June 30, 2021. The information presented herein should be considered in conjunction with the transmittal letter and financial statements identified in the accompanying table of contents. FINANCIAL HIGHLIGHTS • As of June 30, 2021, the City's total net position (assets plus deferred outflows of resources less liabilities and less deferred inflows of resources) was a deficit of $26.4 million. • The City's total net position decreased $7.5 million from the prior year. This is mostly due to an increase in long-term debt related to the issuance of the 2020 Lease Revenue Bonds of $204.1 million. The increase to debt is offset with increase to Deferred Outflows of Resources relating to pension and OPEB liabilities totaling approximately $179.4. The City's total governmental funds reported combined ending fund balances of $127.1 million, an increase of$42.7 million in comparison with the prior fiscal year of$84.4 million. The increase is comprised of changes in fund balance of $41.8 and a restatement of $0.9 million. Of the $127.1 million fund balance, $4.0 million, or 3.2%, of this total is non - spendable (not available for new spending). The restricted fund balance categories of $92.2 million or 72.5% is spendable for restricted purposes. The assigned fund balance of $9.7 million, or 7.6%, represents amounts that are intended to be used for specific purposes, but are not formally restricted or committed. The unassigned fund balance category of $21.2 million, or 16.7%, represents the City's fund balance reserves. • The City's business -type computer service enterprise activity (West Covina Service Group) had an operating gain for fiscal year (FY) 2020-21 of $282,448, compared with a $82,266 operating gain in FY 2019-20. The total net position for the computer service enterprise fund as of June 30, 2021 is 38,329. The net position in the prior year was ($244,119). OVERVIEW OF THE FINANCIAL STATEMENTS The annual report consists of four parts — management's discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non -major governmental funds and internal service funds. The basic financial statements include two kinds of statements that present different views of the City: • The first two statements are government -wide financial statements that provide both long- term and short-term information about the City's overall financial status. • The remaining statements are fund financial statements that focus on individual parts of the City government, reporting the City's operations in more detail than the government - wide statements. • The governmental funds statements tell how general government services like public safety were financed in the short-term as well as what remains for future spending. 4 • Proprietary funds statements offer short- and long-term financial information about the activities that are operated like a business, such as the West Covina Service Group, the City's computer service enterprise. • Fiduciary fund statements provide information about the fiduciary relationships — like the custodial funds of the City — in which the City acts solely as an agent or trustee for the benefit of others, to whom the resources in question belong. The financial statements also include notes that provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. Reporting the City as a Whole The accompanying government -wide financial statements include two statements that present financial data for the City as a whole. The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private -sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net position and changes in them. The City's net position is one way to measure the City's financial health, or financial position. Over time, increases and decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non -financial factors, however, such as changes in the City's property tax or sales tax base and the condition of the City's roads, to assess the overall health of the City. The Statement of Net Position and the Statement of Activities are divided into two kinds of activities: Governmental activities — Most of the City's basic services such as public safety, streets and roads, economic development and parks and recreation, are reported here. Sales taxes, property taxes, state subventions, and other revenues finance most of these activities. • Business -type activities — The City charges a fee to customers to help it cover all or most of the cost of the services accounted for in these funds. These activities include the City's computer service enterprise operation. The government -wide financial statements include the West Covina Housing Authority, the West Covina Public Financing Authority, the Parking Authority of the City of West Covina and the West Covina Community Services Foundation (component units), along with the City of West Covina (the primary government). Although legally separate, these component units are important because the City is financially accountable for them. The activities of the Successor Agency of the former redevelopment agency can be found in the Fiduciary Fund Section of the Financial Statements in the Private Purpose Trust Fund. 5 CITY OF WEST COVINA Legal Debt Margin Information Last Ten Fiscal Years (in thousands of dollars) Assessed valuation Conversion percentage Adjusted assessed valuation Debt limit percentage Debt limit Total net debt applicable to limitation Legal debt margin Total debt applicable to the limit as a percentage of debt limit Fiscal Year 2012 2013 2014 2015 $ 6,308,843 $ 6,394,836 $ 6,611,732 $ 7,034,995 25% 25% 25% 25% 1,577,211 1,598,709 1,652,933 1,758,749 15% 15% 15% 15% 236,582 239,806 247,940 263,812 $ 236,582 $ 239,806 $ 247,940 $ 263,812 0.0% 0.0% 0.0% 0.0% The Government Code of the State of California provides for a legal debt margin of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). Although the statutory debt limit has not been amended by the State since this change, the percentages presented in the above computations have been proprtionately modified to 3.75% (25% of 15%) for the purpose of this calculation in order to be consistent with the computational effect of the debt limit at the time of the state's establishment of the limit. Source: City of West Covina Finance Department Los Angeles County Tax Assessor's Office 185 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 $ 7,377,023 $ 7,740,820 $ 8,154,209 $ 8,627,010 $ 9,014,133 $ 9,351,074 25% 25% 25% 25% 25% 25% 1,844,256 1,935,205 2,038,552 2,156,753 2,253,533 2,337,769 15% 15% 15% 15% 15% 15% 276,638.36 290,280.75 305,782.84 323,512.88 338,029.99 350,665.28 $ 276,638 $ 290,281 $ 305,783 $ 323,513 $ 338,030 $ 350,665 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% iM CITY OF WEST COVINA Pledged Revenue Coverage Last Ten Fiscal Years (In thousands of dollars) Lease Revenue Bonds and Certificates of Participation Fiscal Year Ended Debt Service June 30 Revenue Principal Interest Coverage 2012 $ 48,347 $ 1,505 $ 1,155 18.18 2013 53,006 1,605 1,272 18.42 2014 54,753 1,715 1,249 18.47 2015 57,588 1,655 891 22.62 2016 58,133 1,900 1,121 19.24 2017 64,372 4,005 1,185 12.40 2018 67,196 2,005 1,306 20.29 2019 65,426 1,255 1,918 20.62 2020 70,935 1,255 1,918 22.36 2021 72,992 1,350 1,859 22.75 Tax Allocation Bonds Fiscal Year Ended Tax Debt Service June 30 Increment Principal Interest Coverage 2012 17,260 1,250 1,079 7.41 2013 12,152 1,305 1,030 5.20 2014 8,675 1,358 978 3.71 2015 9,260 1,420 920 3.96 2016 15,110 1,480 853 6.48 2017 9,365 19,005 802 0.47 2018 10,256 1,480 - 6.93 2019 12,625 1,820 361 5.79 2020 9,633 1,820 361 4.42 2021 6,775 1,865 306 3.12 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest or depreciation expenses. Source: City of West Covina Finance Department 187 (continued) Assessment District Bond Fiscal Year Less Net Ended Operating Available Debt Service June 30 Revenue Expenses Revenue Principal Interest Coverage 2012 $ 4,444 $ 70 $ 4,374 $ 1,580 $ 2,105 1.19 2013 5,569 1,027 4,542 1,770 2,004 1.20 2014 5,740 767 4,973 2,055 1,890 1.26 2015 3,305 1,457 1,848 2,340 1,758 0.45 2016 6,911 1,429 5,482 2,940 2,124 1.08 2017 4,596 2,536 2,060 2,745 1,365 0.50 2018 4,596 2,536 2,060 3,000 1,429 0.47 2019 5,304 929 4,375 3,250 1,004 1.03 2020 3,999 3,365 634 3,495 1,120 0.14 2021 5,937 3,916 2,021 3,735 650 0.46 188 CITY OF WEST COVINA Demographic and Economic Statistics Last Ten Calendar Years Per Personal Capita Annual Calendar Income Personal Unemployment Year Population (in thousands) Income Rate 2011 106,713 $ 2,670,706 $ 25,027 10.9% 2012 107,248 2,751,555 25,656 8.2% 2013 107,828 2,698,504 25,026 6.7% 2014 107,879 2,653,176 24,594 10.1% 2015 107,873 2,680,000 24,844 8.2% 2016 107,813 2,705,736 25,096 6.4% 2017 108,245 2,737,892 25,293 5.2% 2018 108,116 2,916,516 26,975 4.6% 2019 105,999 3,053,619 28,807 4.4% 2020 105,593 3,173,022 30,050 13.1% Sources: HdL Coren & Cone, California State Department of Finance, and California Employment 189 CITY OF WEST COVINA Principal Employers Current Year and Nine Years 2021 2012 Percent of Percent of Number of Total Number of Total Employer Employees Rank Employment Employees Rank Employment Queen of the Valley Campus 1,685 1 3.60% 1,442 1 2.95% WC Unified School District 1,350 2 2.88% 1,277 2 2.61% Merakey Allos 663 3 1.42% City of West Covina 364 4 0.78% 433 3 0.89% Macy's 298 5 0.64% 283 5 0.58% Target Store #T-2147 260 6 0.56% Target Store #T1028 248 7 0.53% 261 6 0.53% Interspace/Concorde Battery Corporation 226 8 0.48% 220 7 0.45% The Home Depot 166 9 0.35% Porto's Bakery 157 10 0.34% JC Penney Corp Inc. #1505-7 340 4 0.70% B.J.'s Restaurant & Brewery 185 8 0.38% S G V Newspaper Group 183 9 0.37% K Mart Corporation #3235 146 10 0.30% Totals 5,417 11.57% 4,770 9.76% Note: "Total Employment" as used above represents the total employment of all employers located within City limits. Source: Labor Market Info, EDD, State of California HdL Coren & Cone 190 CITY OF WEST COVINA Full-time and Part-time City Employees by Function Last Ten Fiscal Years Function General government Public safety Public works Public Services Community services Community development Total Fiscal Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 36 31 31 31 32 42 46 36 32 38 264 253 244 268 268 282 259 238 237 259 72 64 69 71 71 75 56 44 - - - - - - - - - - 25 32 44 41 42 41 41 87 64 64 27 22 16 7 2 2 2 1 1 3 12 13 432 396 389 413 414 487 426 385 333 364 Source: City of West Covina Finance Department 191 CITY OF WEST COVINA Operating Indicators by Function Last Ten Fiscal Years Function/Program Public Safety: Police: Total arrests Calls for police service (1) Graffiti sites cleaned Fire: Emergency responses Fire inspections Public Services: Building permits issued Graffiti sites cleaned (2) Fiscal Year 2012 2013 2014 2015 2,557 2,755 2,537 2,544 71,741 65,554 69,874 71,098 23,579 19,910 20,014 16,156 7,545 7,871 7,990 8,555 496 837 749 717 2,435 3,882 2,925 3,617 N/A N/A N/A N/A Community Services: Recreation class registrations (3) 6,927 6,027 6,283 Note: (1) Calls received that generated an incident number but not necessarily a police response. (2) Due to department restructuring, the responsibility for graffiti abatement was absorbed by the Police Department starting fiscal year 2008-2009 and by Public Works starting fiscal year 2015-2016. (3) The increase in recreation class registrations in FY18 relates to inclusions of daycare classes. (4) The decrease in recreation class registrations in FY20 relates to COVID restrictions. Source: City of West Covina Finance Department 6,487 192 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 2,624 2,818 3,080 2,538 2,037 1,266 72,368 74,898 84,850 73,713 68,605 61,353 N/A N/A N/A N/A N/A N/A 9,494 9,353 9,383 9,289 8,944 9,405 778 816 805 1,009 920 964 5,038 1,547 1,399 2,938 3,022 3,701 13,964 6,694 2,391 3,077 3,140 2,632 7,129 7,500 17,902 26,482 8,075 65 193 CITY OF WEST COVINA Capital Asset Statistics by Function/Program Last Ten Fiscal Years Fiscal Year Function 2012 2013 2014 2015 Public Safety: Police: Stations Fire: Stations Public works: Streets (miles) Streetlight poles Streelight fixtures Traffic signals Parks and recreation: Sports Complex Parks Community centers Wastewater: Sanitary sewers (miles) Storm sewers (miles) Source: City of West Covina 1 1 1 1 5 5 5 5 231.0 231.0 231.0 231.0 826 826 826 826 1,109 1,109 1,109 1,109 117 117 117 114 1 1 1 1 16 16 16 16 4 4 4 4 238.9 238.9 238.9 238.9 42.0 42.0 42.0 42.0 194 (continued) Fiscal Year 2016 2017 2018 2019 2020 2021 1 1 1 1 1 1 5 5 5 5 5 5 240.3 240.3 240.3 240.3 240.3 240.3 826 674 674 674 674 674 1,109 420 420 420 420 420 114 97 97 97 97 97 1 1 1 1 1 1 16 16 16 16 16 16 4 4 4 4 4 4 238.9 227.0 227.0 227.0 227.0 227.0 42.0 26.0 26.0 26.0 26.0 26.0 195 VLVan Lank Fankhanel, LLP Ce f,ed 1'ubhc A¢ou nta A d 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 City Council City of West Covina West Covina, 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 governmental activities, business -type activities, each major fund and the aggregate remaining fund information of the City of West Covina (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 22, 2022. Internal Control Over Financial Reporting In planning and performing our audit of the 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 preceding paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify a deficiency in internal control, described in the accompanying schedule of findings and responses as item 2021-001 that we consider to be a material weakness. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 1 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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. City of West Covina's Responses to Findings The City's responses to the findings identified in our audit are described in the accompanying schedule of findings and responses. The City's responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. 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 in considering the organization's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. z% r am, ilf February 22, 2022 2 CITY OF WEST COVINA SCHEDULE OF FINDINGS AND RESPONSES Year Ended June 30, 2021 2021-001 Housing Loans Receivable Administration Condition: The City and Housing Authority have issued loans in prior years for first-time homebuyers and home improvement loans. The terms of these loans vary depending on the loan type and the period when it was issued. As part of our audit procedures, we selected various loans listed on the loans receivable schedule provided and reviewed the related promissory notes. Based on this review, we found that certain loans required periodic payments to be made throughout the year, however, it does not appear that the City has been receiving payments in accordance with the terms of the loan. In another instance, City staff were unable to provide the promissory note for the loan selected. In addition, one of the promissory notes reviewed indicates a 5% interest rate, charged annually, on the outstanding balance of the loan, however, through discussions with City staff, the City is not calculating and charging 5% per year. Criteria: In a strong internal control environment, procedures should be established to ensure the loans receivable schedule is properly maintained throughout the year, payments are collected and recorded in accordance with the applicable promissory notes, and proper records are maintained for all loans receivable balances. Cause of Condition: A large number of the first-time homebuyer and housing improvement loans were issued many years ago, in some cases 30+ years or more, and it does not appear that detailed administration and tracking of these loans has been done annually to ensure the loan balances are sufficiently tracked and accounted for each year. Potential Effect of Condition: The City may not be collecting the full value of the amounts due in accordance with the terms of the promissory note agreements. Recommendation: We recommend the City perform a detailed review of the loan balances and perform test recalculations of the interest balances on the loans to ensure the interest calculations are in accordance with the executed loan agreements and that payments are being collected in accordance with these agreements. Views of Responsible Officials: The City will perform a detailed review of the loans to ensure the interest calculations and collections are done in accordance with the executed loan agreements. Additionally, the City will establish a process for updating loan balances moving forward. 3 Van Lank VL Fankhanel, LLP Ce f,ed Public Accou ratan is — February 22, 2022 City Council City of West Covina West Covina, CA We have audited the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of the City of West Covina for the year ended June 30, 2021. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and 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 June 21, 2021. 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 new accounting policies were adopted and the application of existing policies was not changed during the fiscal year. 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 financial statements were: Management's estimate of the fair value of investments is based on information provided by financial institutions. We evaluated the key factors and assumptions used to develop the fair value of investments in determining that it is reasonable in relation to the financial statements as a whole. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 Management's estimate of capital assets depreciation is based on historical estimates of each capitalized item's useful life. We evaluated key factors and assumptions used to develop the estimated useful lives in determining that they are reasonable in relation to the financial statements as a whole. Management's estimate of the net pension and net OPEB liabilities are based on actuarial information provided by the California Public Employee Retirement System's (CaIPERS) actuarial office, and other sources. We evaluated the key factors and assumptions used to develop these liabilities in determining that the estimated liabilities are reasonable in relation to the financial statements as a whole. Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the financial statements were: The disclosure of the fair value of investments in Note 2 to the financial statements represents amounts susceptible to market fluctuation. The disclosure of accumulated depreciation in Note 7 to the financial statements is based on estimated useful lives which could differ from actual useful lives of each capitalized item. The disclosures for the net OPEB and net pension liabilities in Notes 14, 15 and 17 to the financial statements are based on assumptions for discount rates, etc., which could differ from actual experience. The notes disclose the differences in these liabilities if different assumptions are used in estimating these liabilities. 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 trivial, and communicate them to the appropriate level of management. The following material misstatements detected as a result of audit procedures were corrected by management: (1) Adjustments were made to adjust accounts payable at year-end. (2) Adjustments were made to loans receivable balances at year-end. (3) Adjustments were made to beginning fund balances. 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 2 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 February 22, 2022. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. 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. Findings and Recommendations: In addition to our audit opinion on the financial statements, we issued our "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" dated February 22, 2022, in which we identified a material weakness in internal controls. Other Matters We applied certain limited procedures to management's discussion and analysis and the schedules listed as required supplementary information in the table of contents, 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 supplementary information as listed in the table of contents, 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 3 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 sections, which accompanies the financial statements but is not RSI. Such information has 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 it. Restrictions on Use This information is intended solely for the use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, J%v a WEST COVINA HOUSING AUTHORITY CITY OF WEST COVINA, CALIFORN/A (A COMPONENT UNIT OF THE CITY OF WEST COVINA) FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT Year Ended June 30, 2021 West Covina Housing Authority Year Ended June 30, 2021 TABLE OF CONTENTS PAGE Independent Auditor's Report Basic Financial Statements: Government -wide Financial Statements Statement of Net Position 4 Statement of Activities 5 Governmental Fund Financial Statements Balance Sheet 6 Reconciliation of the Governmental Fund Balance Sheet to the Government -wide Financial Statements 7 Balance Sheet 6 Statement of Revenues, Expenditures, and Changes in Fund Balances 8 Reconciliation of the Statement of Revenues, Expenditures and Changes In Fund Balance of Governmental Fund to the Statement of Activities 9 Notes to the Financial Statements 10 Required Supplementary Information (Unaudited) Budgetary Comparison Schedule 17 Required Supplementary Information 18 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 19 Reporting the City's Most Significant Funds The fund financial statements provide detailed information about the City's most significant funds — not the City as a whole. Some funds are required to be established by State law or by bond covenants. However, City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting administrative responsibilities for using certain taxes, grants, or other money (like grants received). The City's two kinds of funds — governmental and proprietary— use different accounting approaches. Governmental funds — Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. These funds are reported using the modified accrual accounting method, which measures cash and all other current financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship or differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in reconciliations on the pages following the fund financial statements in this report. Proprietary funds — When the City charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the City's enterprise funds are the same as the business - type activities we report in the government -wide statements but provide more detail and additional information, such as cash flows for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City's other programs and activities. Reporting the City's Fiduciary Responsibilities The City is an agent for certain assets held for, and under the control of, other organizations and individuals. All of the City's fiduciary activities are reported in separate fiduciary funds. These activities are not included in the government -wide financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. GOVERNMENT -WIDE FINANCIAL STATEMENTS Statement of Net Position As noted earlier, net position may serve over time as a useful indicator of a government's financial position. As of June 30, 2021, net position for the City was a deficit balance of $26.4 million. Compared to the prior year, the net position of the City decreased by $7.5 million. The City's net position of a deficit of $26.4 million is made up of three components: Net investment in Capital Assets, Restricted Net Position and Unrestricted Net Position. The largest portion of the City's net position, $139.5 million, reflects its net investment in capital assets (e.g., infrastructure, land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to the community. As such, these assets are not available for spending. In addition, $89.2 million of the City's net position represents resources that are subject to external restrictions on how they 11 Van Lank VL Fankhanel, LLP Ce f,ed Public Accou ratan is INDEPENDENT AUDITOR'S REPORT The Board of Directors West Covina Housing Authority West Covina, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and the general fund of the West Covina Housing Authority (Housing Authority), a component unit of the City of West Covina, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Housing 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 error or fraud. Auditor's Responsibility Our responsibility is to express an opinion 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 auditor considers 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. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities and the general fund of the Housing Authority of the City, as of June 30, 2021, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the component unit financial statements present only the Housing Authority and do not purport to, and do not present fairly the financial position of the City, as of June 30, 2021, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison schedule 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 required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has omitted 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 that basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated February 22, 2022 on our consideration of the Housing Authority's internal control over financial reporting and on our tests of 2 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 the 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 Housing Authority's internal control over financial reporting and on compliance. II v t ,/ G�i Z i February 22, 2022 BASIC FINANCIAL STATEMENTS West Covina Housing Authority Statement of Net Position June 30, 2021 ASSETS Current Assets: Cash and Investments Restricted Cash Notes and Loans Receivable Other Receivables Interest Receivable Total Current Assets Total Assets LIABILITIES Current Liabilities: Accounts Payable Accrued Liabilities Total Current Liabilities Total Liabilities NET POSITION Restricted Total Net Position Governmental Activities $ 8,505,735 12,050 14,626,990 7,212 895,110 24,047,097 24,047,097 24,313 14,461 38,774 38,774 24,008,323 $ 24,008,323 The accompanying notes are an integral part of this statement. 4 West Covina Housing Authority Statement of Activities Year Ended June 30, 2021 Governmental Activities Net (Expenses) Program Revenues Revenues Operating Charges for Grants and Governmental Functions/Programs Expenses Services Contributions Total Activities Governmental Activities: Public Safety $ 181,450 $ - $ $ - $ (181,450) Affordable Housing 786,828 98,802 98,802 (688,026) Total Governmental Activities $ 968,278 $ 98,802 $ - $ 98,802 (869,476) General Revenues: Investment Income Total General Revenues Change in Net Position Net Position - Beginning Net Position - Ending 385,983 385,983 (483,493) 24,491,816 $ 24,008,323 The accompanying notes are an integral part of this statement. I West Covina Housing Authority Balance Sheet Governmental Fund June 30, 2021 ASSETS Cash and Investments Restricted Cash Notes and Loans Receivable Other Receivables Interest Receivable Total Assets LIABILITIES Accounts Payable Accrued Liabilities Total Liabilities FUND BALANCES Restricted for Affordable Housing Total Fund Balances Total Liabilities and Fund Balances General Fund $ 8,505,735 12,050 14,626,990 7,212 895,110 $ 24,047,097 $ 24,313 14,461 774 24,008,323 24,008,323 $ 24,047,097 The accompanying notes are an integral part of this statement. 11 West Covina Housing Authority Reconciliation of the Governmental Fund Balance Sheet to the Government -Wide Statement of Net Position June 30, 2021 Fund balances -total governmental fund Amounts reported for governmental activities in the statement of net position are different because: No Reconciling Differences for Fiscal Year 2021 Net Position of Governmental Activities $ 24,008,323 $ 24,008,323 The accompanying notes are an integral part of this statement. West Covina Housing Authority Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Fund Year Ended June 30, 2021 General Fund REVENUES Investment Income $ 385,983 Other Revenues 98,802 Total Revenues 484,785 EXPENDITURES Current: Public Safety 181,450 Affordable Housing 786,828 Total Expenditures 968,278 Net Change in Fund Balances (483,493) Fund Balance, Beginning of Year 24,491,816 Fund Balance, End of Year $ 24,008,323 The accompanying notes are an integral part of this statement. West Covina Housing Authority Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Fund to the Statement of Activities Year Ended June 30, 2021 Net change in fund balances - governmental fund Amounts reported for governmental activities in the Statement of Activities are different because: No Reconciling Differences for Fiscal Year 2021 Change in net position of governmental activities $ (483,493) $ (483,493) The accompanying notes are an integral part of this statement. may be used. The remaining deficit balance of unrestricted net position of $255.2 million is a result of the implementation of GASB 68 and GASB 75. The table below reflects the Statement of Net Position for the fiscal year ended June 30, 2021, with the comparative data for the fiscal year ended June 30, 2020: Table 1 Statement of Net Position Governmental Activities Business -Type Activities Total 2021 2020 2021 2020 2021 2020 Assets: Current and other assets $ 162,856,719 $ 105,277,948 $ 74,510 $ (46,057) $ 162,931,229 $ 105,231,891 Capital assets 184,406,014 189,635,902 184,406,014 189,635,902 Total assets 347,262,733 294,913,850 74,510 (46,057) 347,337,243 294,867,793 Deferred Outflows of Resources: Pension related 191,680,785 22,698,850 - - 191,680,785 22,698,850 OPEB related 15,255,037 4,879,260 15,255,037 4,879,260 206,935,822 27,578,110 206,935,822 27,578,110 Liabilities: Long-term debt outstanding 551,727,178 322,543,812 18,573 63,620 551,745,751 322,607,432 Other liabilities 22,167,977 8,822,639 17,608 134,442 22,185,585 8,957,081 Total liabilities 573,895,155 331,366,451 36,181 198,062 573,931,336 331,564,513 Deferred Inflows of Resources: Pension related 2,260,873 3,293,071 - - 2,260,873 3,293,071 OPEB related 4,509,801 6,474,959 4,509,801 6,474,959 6,770,674 9,768,030 6,770,674 9,768,030 Net Position: Net investment in capital assets 139,507,563 140,572,511 - - 139,507,563 140,572,511 Restricted 89,220,841 65,969,665 - - 89,220,841 65,969,665 Unrestricted (255,195,678) (225,184,697) 38,329 (244,119) (255,157,349) (225,428,816) Total net position $ (26,467,274) $ (18,642,521) $ 38,329 $ (244,119) $ (26,428,945) $ (18,886,640) 7 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the West Covina Housing Authority (the Authority) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the Authority's significant accounting policies: Description of Reporting Entity On February 1, 2011, the City Council activated the West Covina Housing Authority pursuant to the State of California Health and Safety Code, Section 33000, entitled "Community Redevelopment Law". The primary purpose of the Authority is to develop affordable housing for families of low and moderate income within the City of West Covina. The Authority is a component unit of the City of West Covina. The Authority has been included within the scope of the basic financial statements of the City because the City Council exercises oversight responsibility over the operations of the Authority. On December 29, 2011, the California Supreme Court upheld Assembly Bill X1 26 that provided for the dissolution of all redevelopment agencies in the State of California. As of February 1, 2012, the West Covina Community Development Commission (Commission) was dissolved and the Housing Authority accepted the role as the Successor Housing Agency. The housing assets of the former Commission, and to the extent approved by the California Department of Finance, were transferred to the Authority, and continue the housing function of the former Commission. Only the fund of the Housing Authority is included herein, therefore, these financial statements do not purport to represent the financial position or results of operations of the City of West Covina. California. Government -wide Financial Statements The Housing Authority's Government -Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of the Governmental Activity for the Housing Authority. These statements are presented on an economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the Housing Authority's assets, deferred outflows of resources, liabilities and deferred inflows of resources, including capital assets as well as long-term debt, if any, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. 10 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued The types of transactions reported as program revenues for the Authority can be reported in three categories: 1) Charges for services 2) Operating grants and contributions, and 3) Capital grants and contributions Charges for services include revenues from customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function. Grants and contributions include revenues restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Amounts paid to acquire capital assets are capitalized as assets in the government -wide financial statements, rather than reported as expenses. Proceeds of long-term debt are recorded as a liability in the government -wide financial statements, rather than an other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than an expenditure. Governmental Fund Financial Statements Governmental funds are accounted for on a spending or current financial resources measurement focus and the modified accrual basis of accounting. Accordingly, only current assets, deferred outflows of resources, current liabilities and deferred inflows of resources are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balance presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balance. Under modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except for revenues subject to accrual (generally 60- days after year end) are recognized when due. The primary revenue source susceptible to accrual is investment income. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. The accounts of the Housing Authority are organized on the basis of a fund, which is considered a separate accounting entity. The operations of the fund are accounted for with a separate set of self - balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures. Governmental resources are allocated to and accounted for in the individual fund based upon the purposes for which they are to be spent and the means by which spending activities are controlled. 11 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued The Housing Authority reports the following major governmental fund: The General Fund is used to account for the Housing Authority's financial resources received and used in developing affordable housing for families of low and moderate income. Cash and Investments Investments are reported in the accompanying financial statements at fair value. Changes in fair value that occur during a fiscal year are recognized as investment income 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. Cash and investments are pooled with other City of West Covina funds for investment purposes, with interest being allocated quarterly to all funds legally requiring allocation and to other various funds at the direction of management based on average month -end pooled funds cash and investment balances. Interest income for cash and investments excluded from pooled cash is credited directly to the related fund. Investment policies applicable to the Housing Authority's fund are those of the City of West Covina and are included in the notes to the City's basic financial statements. Classification of Net Position and Governmental Fund Balance In the government -wide financial statements, net position is classified in the following categories: Investment in Capital Assets - This category groups all capital assets into one component of net position. Accumulated depreciation on these assets reduces this category. Restricted Net Position - This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position - This category represents the net position of the Housing Authority that is not restricted for any project or other purpose. Net Position Flow Assumption Sometimes the Housing Authority will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government -wide fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. 12 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued It is the Housing Authority's practice to consider restricted net position to have been depleted before unrestricted net position is applied. Governmental Fund Balance Classifications The fund balances reported on the fund statements consist of the following categories: Nonspendable Fund Balance - This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance - This classification includes amounts that can be spent only for specific purposes stipulated by constitution, external resource providers or through enabling legislation. Committed Fund Balance - This classification includes amounts that have been limited to specific purposes through adoption of an ordinance by the City Council, the highest level of decision making authority of the Housing Authority. These commitments may be changed or lifted but only by the same formal action that was used to impose the constraint originally. City Council action to commit fund balance must occur within the fiscal reporting period while the amount committed may be subsequently determined. Assigned Fund Balance - This classification includes amounts that are intended to be used by the Housing Authority for specific purposes through the City Council budgetary actions but do not meet the criteria to be classified as restricted or committed. Unassigned Fund Balance - This classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed or assigned. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the Housing Authority's policy is to apply restricted fund balance first. When an expenditure is incurred for purposes for which committed, assigned or unassigned fund balances are available, the Housing Authority's policy is to apply committed fund balance first, then assigned fund balance, and finally unassigned fund balance. Use of Estimates in the Preparation of the Financial Statements The financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. 13 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS Cash at June 30, 2021 consisted of the following: Equity in City Cash and Investment Pool $ 8,505,735 Restricted Cash 12,050 The City follows the practice of pooling cash and investments for all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. For more information on the City's cash and investments as of June 30, 2021, please see the City's Annual Comprehensive Financial Report. 3) NOTES AND LOANS RECEIVABLE As of June 30, 2021, the following notes and loans receivable were outstanding: Housing Rehabilitation First Time Homebuyer Loans Housing Preservation Program Home Improvement Program Lark Ellen Towers Executive Lodge Apartments Limited Partnership West Covina Senior Villas, LLC West Covina Senior Villas II, LP Other Loans Less: Allowance for Doubtful Accounts Total Governmental Funds $ 353,888 177,447 673,382 688,913 6,472, 664 6,355,378 2,833,333 8,513,884 608,196 (12,050,095) $ 14,626,990 Several housing rehabilitation loans totaling $353,888 have been made to qualified applicants using Community Development Block Grants received by the City and housing set -aside funds of the former Commission's redevelopment activities. These loans bear interest up to 5% and are repaid when title to the property changes. The Housing Authority has included 5% of the balance in the allowance for doubtful accounts. The Housing Authority has made loans to first-time home buyers totaling $177,447. These loans are secured by second trust deeds and bear interest at 5%. Principal and interest are deferred for five years and are due monthly in years 6 through 30. The Housing Authority has included 5% of the balance in the allowance for doubtful accounts. The Housing Authority has also made housing preservation loans to qualified applicants using housing set -aside funds, totaling $673,382. Principal and interest are deferred for ten years; after the tenth year, loans bear interest at 5%. Loans are repaid after the tenth year or when title to the property changes. The Housing Authority has included 5% of the balance in the allowance for doubtful accounts. 14 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 3) NOTES AND LOANS RECEIVABLE - Continued Several housing improvement loans totaling $688,913 have been made to qualified applicants. The loans are secured by second trust deeds. The Housing Authority has included 5% of the balance in the allowance for doubtful accounts. In May 1997, the Commission loaned $4,270,000 to Lark Ellen Towers. The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan accrues interest at 3% per annum and requires annual payments equal to the maximum of $35,000 or 50% of net profits earned by the project. The outstanding principal and accrued interest at June 30, 2021 was $6,472,664. In April 1998, the Commission loaned $5,622,300 to Executive Lodge Apartments Limited Partnership (Promenade Apartments project). The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan was amended and restated on April 1, 2017, with a principal of $6,056,621 accruing interest at 2.82% compounded annually and requires annual payments equal to 50% of "Available Cash Flow." The outstanding principal and accrued interest at June 30, 2021 was $6,355,378. In May 2002, the Commission loaned $4,360,000 to West Covina Senior Villas, LLC. The loan is secured by a deed of trust. The loan does not accrue interest. The loan requires annual payments of $141,667 through May 2032 that are forgiven unless the borrower defaults on the agreement. The outstanding principal at June 30, 2021 was $2,833,333. The loan is likely to be forgiven; therefore, the Housing Authority has included the entire balance in the allowance for doubtful accounts. In May 2009, the Commission entered into an agreement with West Covina Senior Villas II, L.P. to provide $8,600,000 for the acquisition of real property in the City and construction and maintenance of an approximately 65-unit apartment complex to be rented to low-income and very low-income senior citizens. The loan is secured by a deed of trust. The loan does not accrue interest and is forgiven so long as the borrower does not default on the loan. The outstanding principal at June 30, 2021 was $8,513,884. The loan is likely to be forgiven; therefore, the Housing Authority has included the entire balance in the allowance for doubtful accounts. Other notes consist of affordable housing loans of $400,000. The notes do not accrue interest and are forgiven unless the borrower sells or refinances the property. Additionally, the balance included a note of $208,196 for low-income housing which accrues no interest and is forgivable if the owner maintains the low- and moderate -income housing status. The outstanding principal of these loans combined at June 30, 2021 was $608,196. The loan is likely to be forgiven; therefore, the Housing Authority has included the entire balance in the allowance for doubtful accounts. 4) ADVANCES TO THE SUCCESSOR AGENCY OF THE CITY OF WEST COVINA Prior to the dissolution of the Commission's redevelopment activities on February 1, 2012, the City authorized several advances to be used for completing redevelopment projects throughout the community. As a result of the dissolution, the liabilities related to these advances were transferred to the Successor Agency. See the notes to the City's financial statements for more information. 15 West Covina Housing Authority Notes to Financial Statements Year Ended June 30, 2021 4) ADVANCES TO THE SUCCESSOR AGENCY OF THE CITY OF WEST COVINA -Continued The long-term amounts due from the Successor Agency at June 30, 2021 were as follows: a) The General Fund had made the several advances to the Commission totaling $8,100,000 for administrative and capital improvement construction costs (General Advance). Eighty percent (80%) of the balance is reported in the General Fund and the remaining twenty percent (20%) of the balance is reported in the West Covina Housing Authority Special Revenue Fund. The outstanding balance at June 30, 2021 was $147,238. b) In May 2010, the Commission made an advance of $6,529,308 from the Low and Moderate -Income Housing Capital Projects Fund to the Citywide Project Area Debt Service Fund to satisfy the Commission's Supplemental Educational Revenue Augmentation Fund (SERAF) obligation as required by Assembly Bill ABX4-26. The advance bears no interest. In May 2011, the Commission made an advance of $1,344,269 from the Low and Moderate -Income Housing Capital Projects Fund to the Citywide Project Area Debt Service Fund to satisfy the SERAF obligation as required by Assembly Bill ABX4-26. The advance bears no interest and must be repaid by August 1, 2022. The outstanding balance at June 30, 2021 was $747,872. With regard to repayment of the SERAF advances, repayment was authorized to begin in the 2014-15 fiscal year and annual repayments are capped pursuant to a statutory formula. Management of the Successor Agency and the Housing Authority believes, in consultation with legal counsel, that the SERAF advances are enforceable obligations payable by the Successor Agency under the Dissolution Act's repayment restrictions. Therefore, the Housing Authority has not recorded an allowance for uncollectible advances. That said, the Dissolution Act is a complicated statutory scheme and the State and local agency implementation thereof has been the subject of substantial dispute and litigation. As such, repayment of the SERAF advances cannot be guaranteed. 5) FUND BALANCE The Housing Authority's fund balance of $24,008,323 at June 30, 2021 is restricted for affordable housing purposes. it' REQUIRED SUPPLEMENTARY INFORMATION West Covina Housing Authority Required Supplementary Information (Unaudited) Budgetary Comparison Schedule For the Year Ended June 30, 2021 REVENUES Investment Income Other Revenue Total Revenues EXPENDITURES Current: Public Safety Affordable Housing Total Expenditures Variance with Final Budget Original Final Actual Positive/ Budget Budget Amounts (Negative) $ - $ $ 385,983 $ 385,983 310,000 98,802 98,802 310,000 484,785 484,785 204,251 204,251 181,450 22,801 1,364,598 1,079,598 786,828 292,770 1,568,849 1,283,849 968,278 315,571 Net Change in Fund Balance (1,258,849) (1,283,849) (483,493) 800,356 Fund Balance, Beginning of Year 24,491,816 24,491,816 24,491,816 Fund Balance, End of Year $ 23,232,967 $ 23,207,967 $ 24,008,323 $ 800,356 17 West Covina Housing Authority Notes to Required Supplementary Information Year Ended June 30, 2021 Budgetary Data The annual budget adopted by the City Council provides for the general operation of the Housing Authority. The annual budget is adopted in summary by the City Council in June of each year. The resolution sets a combined appropriation of the fund for the operation of the Housing Authority. The City Manager is authorized to transfer budgeted amounts between departments to ensure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase appropriations, must be approved by the City Council. The budgetary level of control is at the fund level. The budgeted figures used in the financial statements' budget to actual comparisons are the final amended amounts. The budget is formally integrated into the accounting system and employed as a management control device during the year. Budgets for governmental fund types are adopted on a basis consistent with generally accepted accounting principles. Operating appropriations lapse at the end of the fiscal year. 18 Changes in Net Position The City's total revenues of $107.5 million for governmental activities are $8.7 million less than the expenses of $116.2 million. The decrease is a result of expenditures, the largest being public safety, that are higher than the slow -growing revenues. A summary of the government -wide statement of activities for the year ended June 30, 2021, with the comparative data for the fiscal year ended June 30, 2020, is as follows: Revenues Program revenues: Charges for services Operating contributions and grants Capital contributions and grants General revenues: Property taxes Sales taxes Othertaxes Other general revenues Total revenues Expenses General government Public safety Public works Community services Community development Interest expense Computer service Total expenses Increase (decrease) in net position Beginning net position Restatement of net position Ending net position Table 2 Changes in Net Position Governmental Activities Business -Type Activities Total 2021 2020 2021 2020 2021 2020 $ 9,186,452 $ 15,927,105 $ 758,120 $ 1,249,195 $ 9,944,572 $ 17,176,300 21,764,524 19,989,920 - - 21,764,524 19,989,920 10,621,147 582,023 - - 10,621,147 582,023 30,108,110 27,422,706 - - 30,108,110 27,422,706 20,858,803 17,033,647 - - 20,858,803 17,033,647 9,215,630 9,471,804 - - 9,215,630 9,471,804 5,743,964 9,927,609 63,710 5,743,964 9,991,319 107,498,630 100,354,814 758,120 1,312,905 108,256,750 101,667,719 $ 18,929,254 $ 7,781,252 - - 18,929,254 7,781,252 62,479,977 72,653,866 - - 62,479,977 72,653,866 17,212,496 23,649,892 - - 17,212,496 23,649,892 7,675,178 9,418,860 - - 7,675,178 9,418,860 1,568,283 1,394,131 - - 1,568,283 1,394,131 8,354,304 1,874,899 - - 8,354,304 1,874,899 475,672 1,230,639 475,672 1,230,639 116,219,492 116,772,900 475,672 1,230,639 116,695,164 118,003,539 (8,720,862) (16,418,086) 282,448 82,266 (8,438,414) (16,335,820) (18,642,521) (2,224,435) (244,119) (326,385) (18,886,640) (2,550,820) 896,109 896,109 $ (26,467,274) $ (18,642,521) $ 38,329 $ (244,119) $ (26,428.945) $ (18,886,640) Van Lank VL Fankhanel, LLP Ce t,ed I bL, A¢ou nta A 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 The Board of Directors West Covina Housing Authority West Covina, 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 West Covina Housing Authority (Housing Authority), a component unit of the City of West Covina, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Housing Authority's basic financial statements, and have issued our report thereon dated February 22, 2022. These financial statements present only the Housing Authority and do not purport to, and do not, present fairly the financial position of the City. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Housing 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 the Housing Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of the Housing Authority's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify a deficiency in internal control, described in the accompanying schedule of findings and responses as item 2021-001 that we consider to be a material weakness. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 19 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. Housing Authority's Response to Findings The Housing Authority's response to the findings identified in our audit is described in the accompanying schedule of findings and responses. The Housing Authority's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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 Housing 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 Housing Authority's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ;. r ,�e�, ii f February 22, 2022 20 WEST COVINA HOUSING AUTHORITY SCHEDULE OF FINDINGS AND RESPONSES Year Ended June 30, 2021 2021-001 Housing Loans Receivable Administration Condition: The City and Housing Authority have issued loans in prior years for first-time homebuyers and home improvement loans. The terms of these loans vary depending on the loan type and the period when it was issued. As part of our audit procedures, we selected various loans listed on the loans receivable schedule provided and reviewed the related promissory notes. Based on this review, we found that certain loans required periodic payments to be made throughout the year, however, it does not appear that the City has been receiving payments in accordance with the terms of the loan. In another instance, City staff were unable to provide the promissory note for the loan selected. In addition, one of the promissory notes reviewed indicates a 5% interest rate, charged annually, on the outstanding balance of the loan, however, through discussions with City staff, the City is not calculating and charging 5% per year. Criteria: In a strong internal control environment, procedures should be established to ensure the loans receivable schedule is properly maintained throughout the year, payments are collected and recorded in accordance with the applicable promissory notes, and proper records are maintained for all loans receivable balances. Cause of Condition: A large number of the first-time homebuyer and housing improvement loans were issued many years ago, in some cases 30+ years or more, and it does not appear that detailed administration and tracking of these loans has been done annually to ensure the loan balances are sufficiently tracked and accounted for each year. Potential Effect of Condition: The Housing Authority may not be collecting the full value of the amounts due in accordance with the terms of the promissory note agreements. Recommendation: We recommend the Housing Authority perform a detailed review of the loan balances and perform test recalculations of the interest balances on the loans to ensure the interest calculations are in accordance with the executed loan agreements and that payments are being collected in accordance with these agreements. Views of Responsible Officials: The City and Housing Authority will perform a detailed review of the loans to ensure the interest calculations and collections are done in accordance with the executed loan agreements. Additionally, the City and Housing Authority will establish a process for updating loan balances moving forward. 21 Housing Successor of the City of West Covina Addendum to the Annual Progress Report For Fiscal Year Ended June 30. 2021 Van Lant & VLF Fankhanel, LLP Certifietl Public Accountants I — Independent Accountant's Disclaimer Report Applied to the Preparation of the Addendum to the Annual Progress Report of the Housing Successor of the City of West Covina To Management of the Housing Successor of the City of West Covina West Covina, California We have prepared the accompanying Addendum to the Annual Progress Report ("Addendum to the APR") of the Housing Successor of the City of West Covina ("Housing Successor") as of June 30, 2021, and for the year then ended in accordance with the reporting provisions of the California Health & Safety Code Section 34176 as amended by Senate Bill 341 (Chapter 796, Statutes of 2013, effective January 2014) ("SB 341"), and as amended by Senate Bill 107 (Chapter 325, Statutes of 2015, effective January 2016) HSC Section 34176.1(f). The accompanying Addendum to the APR of the Housing Successor as of June 30, 2021, and for the year then ended was not subjected to an audit, review, or compilation engagement by us and, accordingly, we do not express an opinion, conclusion, nor provide any assurance on it. This Addendum to the APR is intended solely for the information and use of management of the Housing Successor of the City of West Covina, and is not intended to be and should not be used by anyone other than this specified party. 1Mv i -t r ✓ �i ii" Murrieta, CA December 29, 2021 Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 1 Housing Successor of the City of West Covina Addendum to the Annual Progress Report For Fiscal Year Ended June 30, 2021 1) The amount the City, County, or City and County received pursuant to subparagraph (A) of paragraph (3) of subdivision (b) of Section 34191.4. No amounts received in pursuant to subparagraph (A) of paragraph (3) of subdivision (b) of Section 34191.4. 2) The amount deposited to the Low and Moderate Income Housing Asset Fund, distinguishing between amounts deposited pursuant to subparagraphs (B) and (C) or paragraph (3) of subdivision (b) of Section 34191.4, amounts deposited for others items listed on the Recognized Obligation Payment Schedule from other amounts deposited. The Housing Successor received $484, 785 as of June 30, 2021. None of these amounts were deposited for items listed on the Recognized Obligation Payment Schedule. 3) A statement of the balance in the fund as of the close of the fiscal year, distinguishing any amounts held for items listed on the Recognized Obligation Payment Schedule from other amounts. The balance in the Housing Successor as of June 30, 2021, was $24,008,323. None of which was held for items listed on the Recognized Obligation Payment Schedule. 4) A description of expenditures from the fund by category, including, but not limited to, expenditures a. for monitoring and preserving the long-term affordability of units subject to affordability restrictions or covenants entered into by the redevelopment agency or the housing successor and administering the activities described in paragraphs (2) and (3) of subdivision (a), The Housing Successor's expenditures related to this category as of June 30, 2021, were $786,828 in administrative expenditures. b. for homeless prevention and rapid re -housing services for the development of housing described in paragraph (2) of subdivision (a), and The Housing Successor had $181,450 related to homeless prevention and rapid re -housing services as of June 30, 2021. c. for the development of housing pursuant to paragraph (3) of subdivision (a). The Housing Successor had no expenditures related to the development of housing as of June 30, 2021. 2 5) As described in paragraph (1) of subdivision (a), the statutory value of real property owned by the housing successor, the value of loans and grants receivable, and the sum of these two amounts. The Housing Successor owned real property with a statutory value of zero, as of June 30, 2021. The value of loans and notes receivable in the Housing Successor as of June 30, 2020 is $14, 626, 990. The sum of the statutory value of real property and the value of loans and notes receivable is $14, 626, 990. 6) A description of any transfers made pursuant to paragraph (2) of subdivision (c) in the previous fiscal year and, if still unencumbered, in earlier fiscal years and a description of and status update on any project for which transferred funds have been or will be expended if that project has not yet been placed in service. No transfers occurred pursuant to paragraph (2) of subdivision (c) in the previous fiscal year or earlier fiscal years. 7) A description of any project for which the housing successor receives or holds property tax revenue pursuant to the Recognized Obligation Payment Schedule and the status of that project. The Housing Successor Fund did not receive or hold property tax revenues pursuant to the Recognized Obligation Payment Schedule during the fiscal year ended June 30, 2021. 8) For interests in real property acquired by the former redevelopment agency prior to February 1, 2012, a status update on compliance with Section 33334.16. For interests in real property acquired on or after February 1, 2012, a status update on the project. As of June 30, 2021, the Housing Successor did not hold any property acquired prior to February 1, 2012. No properties were acquired subsequent to February 1, 2012. 9) A description of any outstanding obligations pursuant to Section 33413 that remained to transfer to the housing successor on February 1, 2012, of the housing successor's progress in meeting those obligations, and of the housing successor's plans to meet unmet obligations. In addition, the housing successor shall include in the report posted on its Internet Web site the implementation plans of the former redevelopment agency. As of June 30, 2021, there were no outstanding obligations pursuant to Section 33413 that remained to be transferred to the Housing Successor on February 1, 2012. 10) The information required by subparagraph (B) of paragraph (3) of subdivision (a). As of June 30, 2021, the Housing Successor is in compliance with the requirements of subparagraph (B) of paragraph (3) of subdivision (a). 91 11)The percentage of units of deed -restricted rental housing restricted to seniors and assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed -restricted rental housing assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the same time period. As of June 30, 2021, the Housing Successor had 59.76% of units of deed -restricted rental housing restricted to seniors and assisted individually or jointed by the housing successor, its former redevelopment agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed -restricted rental housing assisted individually or jointly by the housing successor, its former redevelopment agency, and its host jurisdiction within the same time period. 12) The amount of any excess surplus, the amount of time that the successor agency has had excess surplus, and the housing successor's plan for eliminating the excess surplus. The Housing Successor Fund did not have any excess surplus as of June 30, 2021, or at any point during the fiscal year ended June 30, 2021. 13)An inventory of homeownership units assisted by the former redevelopment agency or the housing successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency's investment of moneys from the Low and Moderate Income Housing Fund pursuant to subdivision (f) of Section 33334.3. a. The number of those units. The Housing Successor assisted with approximately 147 homeownership units that are subject to affordable restrictions b. In the first report pursuant to this subdivision, the number of units lost to the portfolio after February 1, 2012, and the reason or reasons for those losses. For all subsequent reports, the number of the units lost to the portfolio in the last fiscal year and the reason for those losses. The Housing Successor lost 15 units in fiscal year 2020-2021. The loans on these units were paid off in the fiscal year. c. Any funds returned to the housing successor as part of an adopted program that protects the former redevelopment agency's investment of moneys from the Low and Moderate Income Housing Fund. The Housing Successor had funds returned of $132,070 during fiscal year ended June 30, 2021. d. Whether the housing successor has contracted with any outside entity for the management of the units and, if so, the identity of the entity. The Housing Successor has contracted Amerinat Loan Servicing for the management of the loans during fiscal year ended June 30, 2021. 4 CITY OF WEST COVINA AIR QUALITY IMPROVEMENT SPECIAL REVENUE FUND maIki/_1kiMF.A �'IC_NI=1►yiI=1kik AIkiIsm INDEPENDENT AUDITOR'S REPORT Year Ended June 30, 2021 City of West Covina Air Quality Improvement Special Revenue Fund Year Ended June 30, 2021 TABLE OF CONTENTS Independent Auditor's Report Basic Financial Statements: PAGE Balance Sheet 3 Statement of Revenues, Expenditures and Changes in Fund Balances 4 Notes to the Financial Statements Required Supplementary Information (Unaudited) Budgetary Comparison Schedule Notes to Required Supplementary Information 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 10 Governmental Activities Some of the more significant changes in the revenues and expenses of the City's governmental activities presented above are as follows: • Charges for services decreased by $6.7 million, primarily due to regrouping; several revenue accounts grouped in Charges for Services in FY 2019-20 are properly grouped to Operating Grants and Contributions in FY 2020-21. • Operating contributions and grants increased by $1.8 million, primarily due to an increase in COVID-19 Relief funds received in Fiscal Year 2020-21 in the amount of $1.3 million. • Capital contributions and grants increased by $10.0 million due to regrouping; several revenue accounts grouped in Operating Grants and Contributions in FY 2019-20 are properly reclassified to Capital Grants and contributions in FY 2020-21. • Property taxes, the City's largest revenue source, increased $2.7 million primarily due to an increase in the assessed valuation. • Sales Tax increased $3.8 million, reflecting the recovery from the height of the pandemic shutdown. FY 2020-21 realized large gains in sales in the areas of autos -transportation, when compared to FY 2019-20. • Other taxes, which consists of franchise taxes, transient occupancy taxes and other taxes, decreased by $0.3 million, primarily due to a $0.2 million decrease in transient occupancy taxes. There has been a decline in travel due to COVID-19 pandemic restrictions that have affected tourism worldwide. • Other general revenues decreased by $4.2 million, primarily due to regrouping; accounts grouped in General Interest Income in FY 2019-20 are properly grouped under the Functions/Programs in FY 2020-21. • There was an overall decrease in expenses of $1.3 million, primarily due to a reduction in spending overall to offset the negative fiscal impact from the pandemic and a reduction of nearly $0.8 million in the West Covina Service Group. f:] Van Lank VL Fankhanel, LLP Ce f,ed Public Accou ratan is INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and City Council of the City of West Covina West Covina, California Report on the Financial Statements We have audited the accompanying financial statements of the Air Quality Improvement Special Revenue Fund (the Fund) of the City of West Covina, California (the City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Fund'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 error or fraud. Auditor's Responsibility Our responsibility is to express an opinion 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 auditor considers 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 opinion. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 1 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund of the City, as of June 30, 2021, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2, the financial statements present only the Fund and do not purport to, and do not present fairly the financial position of the City, as of June 30, 2021, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison schedule 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 required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated February 22, 2022 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 related to the Fund. 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 the 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 Fund's internal control over financial reporting and on compliance. February 22, 2022 2 BASIC FINANCIAL STATEMENTS City of West Covina Air Quality Improvement Special Revenue Fund Balance Sheet June 30, 2021 ASSETS Cash and Investments Other Receivables Total Assets LIABILITIES Accounts Payable Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenues Total Liabilities FUND BALANCES Restricted for Public Works Total Fund Balances Total Liabilities and Fund Balances $ 452,600 35,194 $ 487,794 487,794 487,794 $ 487,794 The accompanying notes are an integral part of this statement. 3 City of West Covina Air Quality Improvement Special Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Year Ended June 30, 2021 REVENUES Investment Income Revenue from Other Agencies Total Revenues EXPENDITURES Current: Public Works Total Expenditures Net Change in Fund Balances Fund Balance, Beginning of Year Fund Balance, End of Year $ 1,216 172,248 173,464 1,980 1,980 171,484 316,310 $ 487,794 The accompanying notes are an integral part of this statement. 4 City of West Covina Air Quality Improvement Special Revenue Fund Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES California Assembly Bill 2766 authorizes air pollution control districts to levy fees on motor vehicles. Fees are to be used to reduce air pollution. Under this program, the Department of Motor Vehicles collects the fees and subvenes the amounts to the South Coast Air Quality Management District (SCAQMD) for vehicles registered in the South Coast District. Forty cents of every dollar subvened to SCAQMD is allocated to the cities and counties in the South Coast District proportionately based upon population. The amounts attributable to the City of West Covina (the City), are maintained in the City's Air Quality Improvement Special Revenue Fund (the Fund). The following is a summary of the significant accounting policies of the City as they pertain to the Fund. Only the Fund information is included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City. The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity with a self -balancing set of accounts. Monies received under Assembly Bill 2766 (AB2766) are recorded in the Fund that is used to account for the proceeds of revenue to be used for the purpose of implementing the California Clean Air Act. Basis of Accounting and Measurement Focus The Fund is accounted for using the modified -accrual basis of accounting. Under the modified -accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e. when they are both measurable and available). "Measurable' means the amount of the transaction can be determined, and "available" means collectible within the current period or soon enough thereafter (within 60 days) to be used to pay liabilities of the current period. Expenditures are generally recognized in the accounting period in which the liability is incurred, if measurable. Use of Estimates in the Preparation of the Financial Statements The financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts. Deferred Outflows and Deferred Inflows of Resources Deferred outflows of resources are transactions that result in the consumption of assets in one period that are applicable to future periods and are not considered assets as described by the statement. Deferred outflows of resources are required to be presented separately after assets on the statement of net position. Deferred inflows of resources are transactions that result in the acquisition of assets in one period that are applicable to future periods and are not considered to be liabilities as described by the statement. Deferred inflows of resources are required to be presented separately after liabilities on the statement of net position. I City of West Covina Air Quality Improvement Special Revenue Fund Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS Cash at June 30, 2021 consisted of the following: Equity in City Cash and Investment Pool $ 452,600 The City follows the practice of pooling cash and investments for all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. For more information on the City's cash and investments as of June 30, 2021, please see the City's Annual Comprehensive Financial Report. 3) FUND BALANCE Fund balances in governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the Fund is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The Fund considers restricted fund balance to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the Fund considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. A City's Council Ordinance or Resolution is the formal action that would effectively commit fund balances for a particular purpose. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonspendable Fund Balance - Amounts that cannot be spent either because they are in nonspendable form or are required to be maintained intact. Restricted Fund Balance - Amounts that are constrained to specific purposes by state or federal laws, or externally imposed conditions by grantors or creditors. Committed Fund Balance - Amounts that may be specified by a government itself, using the highest level of decision making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint. Assigned Fund Balance - Amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the fund. Unassigned Fund Balance - These are either residual positive net resources of the Fund in excess of what can properly be classified in one of the other four categories, or negative balances. 11 City of West Covina Air Quality Improvement Special Revenue Fund Notes to Financial Statements Year Ended June 30, 2021 3) FUND BALANCE - Continued The City Council establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance or resolution. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the City's policy is to apply restricted fund balance first. When an expenditure is incurred for purposes for which committed, assigned or unassigned fund balances are available, the City's policy is to apply committed fund balance first, then assigned fund balance, and finally unassigned fund balance. As of June 30, 2021, the fund balance of the Fund of $487,794 is restricted for Public Works purposes. REQUIRED SUPPLEMENTARY INFORMATION City of West Covina Air Quality Improvement Special Revenue Fund Budgetary Comparison Schedule For the Year Ended June 30, 2021 Variance with Final Budget Original Final Actual Positive/ Budget Budget Amounts (Negative) REVENUES Investment Income $ - $ - $ 1,216 $ 1,216 Revenue from Other Agencies 354,200 354,200 172,248 (181,952) Total Revenues 354,200 354,200 173,464 (180,736) EXPENDITURES Current: Public Works 52,101 52,101 1,980 50,121 Total Expenditures 52,101 52,101 1,980 50,121 Net Change in Fund Balance 302,099 302,099 171,484 (130,615) Fund Balance, Beginning of Year 316,310 316,310 316,310 Fund Balance, End of Year $ 618,409 $ 618,409 $ 487,794 $ (130,615) 3 Revenues by Source — Governmental Activities Capital grants and contributions 9.9% Property taxes 28.0% Operating grants and contributions 20.3% Sales taxes Other taxes 19.4% Charges for Other general 8 6% services revenue 8.5% 5.3% The most significant revenues of the governmental activities are property taxes ($30.1 million), sales tax ($20.9 million) and other taxes ($9.2 million). Program revenues are $41.6 million of the total revenues of the governmental activities, which include charges for services ($9.2 million), operating contributions and grants ($21.8 million), and capital grants and contributions ($10.6 million). 10 City of West Covina Air Quality Improvement Special Revenue Fund Notes to Required Supplementary Information Year Ended June 30, 2021 Budgetary Data The annual budget adopted by the City Council provides for the general operation of the Fund. The annual budget is adopted in summary by the City Council in June of each year. The resolution sets a combined appropriation of the Fund for the operation of the City. The City Manager is authorized to transfer budgeted amounts between departments to ensure adequate and proper standards of service. Budgetary revisions, including supplemental appropriations which increase appropriations, must be approved by the City Council. The budgetary level of control is at the fund level. The budgeted figures used in the financial statements' budget to actual comparisons are the final amended amounts. The budget is formally integrated into the accounting system and employed as a management control device during the year. Budgets for governmental fund types are adopted on a basis consistent with generally accepted accounting principles. Operating appropriations lapse at the end of the fiscal year. IJ Van Lank VL Fankhanel, LLP Ce f,ed 1'ubhc A¢ou nta A d 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 The Honorable Mayor and City Council of the City of West Covina West Covina, 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 Air Quality Improvement Special Revenue Fund (the Fund) of the City of West Covina, California (the City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Fund's basic financial statements, and have issued our report thereon dated February 22, 2022. The financial statements present only the Fund and do not purport to, and do not, present fairly the financial position of the City. Internal Control Over Financial Reporting In planning and performing our audit of the 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 opinion 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. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murneta. CA 92563 909.856.6879 10 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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 City'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 City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. February 22, 2022 11 Van Lank VL Fankhanel, LLP Ce f,ed Public Accou ratan is INDEPENDENT ACCOUNTANT'S REPORT ON AGREED -UPON PROCEDURES APPLIED TO APPROPRIATIONS LIMIT WORKSHEETS City Council City of West Covina West Covina, California We have performed procedures enumerated below to be the accompanying Appropriations Limit worksheet of the City of West Covina, for the year ended June 30, 2021. These procedures, which were agreed to by the City of West Covina and the League of California Cities (as presented in the publication entitled Agreed -upon Procedures Applied to the Appropriations Limitation Prescribed by Article X111B of the California Constitution), were performed solely to assist the City in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. The City's management is responsible for the Appropriations Limit worksheet. This agreed -upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and our findings were as follows: 1. We obtained the completed worksheets 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 documents to those that were selected by a recorded vote of the City Council. Finding: No exceptions were noted as a result of our procedures. 2. For the accompanying Appropriations Limit worksheet, we added last year's limit to total adjustments and agreed the resulting amount to this year's limit. Finding: No exceptions were noted as a result of our procedures. 3. We agreed the current year information presented in the accompanying Appropriations Limit worksheet to the other documents referenced in #1 above. Finding: No exceptions were noted as a result of our procedures. 4. We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit worksheet to the prior year appropriations limit adopted by the City Council during the prior year. Finding: No exceptions were noted as a result of our procedures. Van Lant & Fankhanel, LLP 29970 Technology Drive, Suite 105 A Murrieta. CA 92563 909.856.6879 We were not engaged to, and did not, perform an examination, the objective of which would be the expression of an opinion on the accompanying Appropriations Limit worksheet. Accordingly, we do not express such an opinion. 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 appropriations limit for the base year, as defined by the League publication entitled Article XIIIB of the California Constitution. This report is intended solely for the use of the City Council and management of the City of West Covina and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. I.v r ,Yc- J'iif February 22, 2022 2 CITY OF WEST COVINA APPROPRIATIONS LIMIT COMPUTATION 2020 — 2021 Change in Per Capita Personal Income Population Change Los Angeles County Change in Per Capita Personal Income Converted to a Ratio Population Growth Converted to a Ratio Calculation of Growth Factor 2019 - 2020 Appropriations Limit 2020 - 2021 Appropriations Limit ($203,107,940 x 1.0362) $ 203,107,940 $ 210,460,447 2020 - 2021 3.73% -0.11 % 1.0373 0.9989 1.0362 3 Expenses by Function — Governmental Activities The City's expenses cover a range of services whose expenses ($62.5 million), public works ($17.2 million), community sei government ($18.9 million), interest expense ($8.4 million) and million). These expenses include capital outlays which are nom assets. were as follows: Public safety vices ($7.7 million), general community development ($1.6 reflected in the City's capital 11 Business -Type Activities The business -type activity is the West Covina Service Group, which provides dispatch and records management software and services to other police departments. $2.0 $1.5 $1.0 Program Expenses The business -type activity's expenses decreased by $754,967, or 61 %, from the prior fiscal year. Charges for services and other revenues decreased by $491,075 or 39.3% in FY 2020-21 causing the increase in net position of $282,448. 12 MAJOR FUNDS As noted earlier, the City uses fund accounting to provide proper financial management of the City's resources and to demonstrate compliance with finance -related legal requirements. Major Governmental Funds The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $21.5 million, while total fund balance was $25.5 million. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 31.5% of total general fund expenditures, while total fund balance represents 37.4% of that same amount. The non -spendable portion of fund balance in the amount of $4.0 million mainly consists of Land Held for Resale in the amount of $3.0 million and of amounts currently owed to the City by the former redevelopment agency in the amount of $0.6 million. The reasons for significant changes in the revenues and expenditures of the City's General Fund from the prior year are as follows: • Total revenues, exclusive of fund transfers in, increased $2.1 million while total operating expenditures, exclusive of fund transfers out, decreased $0.9 million. • Total taxes were up $6.1 million (11.3%) from the prior year. Property taxes increased by $2.7 million (9.8%) and sales tax revenues decreased by $3.8 million (22.5%). • Investment income decreased by $2.3 million from the prior year due primarily to lower interest rates. The West Covina Housing Authority Fund provides for low and moderate income activities that were previously provided by the redevelopment agency. The Authority has outstanding loans receivable of $14.6 million and is due $0.9 million from the Successor Agency for amounts borrowed by the former redevelopment agency to fund the SERAF payments and 20% of the loans made to the former redevelopment agency by the City. The State Gas Tax Fund accounts for tax collected on fuel to fund maintenance and repair of the States' highways and roads. The fund finished the fiscal year with a total fund balance of $5.7 million. 13 GENERAL FUND BUDGET There were numerous budget amendments throughout the fiscal year mostly due to clean up items, but the net effect to the General Fund budget was $8 million. Taxes in total exceeded the budget by $8,692,939, primarily from secured property taxes and sales tax received during the fiscal year. The City budgeted conservatively for these sources of revenue as it may fluctuate from year to year. CAPITAL ASSETS Governmental Activities Business -Type Activities Total 2021 2020 2021 2020 2021 2020 Land $ 48,606,495 $ 47,212,535 $ - $ - $ 48,606,495 $ 47,212,535 Buildings and improvements 64,756,230 66,803,771 - - 64,756,230 66,803,771 Equipment and vehicles 7,613,323 8,635,313 - - 7,613,323 8,635,313 Infrastructure 43,944,658 49,625,180 - - 43,944,658 49,625,180 Rights of way 14,376,498 14,376,498 - - 14,376,498 14,376,498 Construction in progress 5,150,186 2,982,605 - - 5,150,186 2,982,605 Total $ 184,447,390 $ 189,635,902 $ $ $ 184,447,390 $ 189,635,902 The major additions to capital assets during the year ended June 30, 2021 were as follows: Construction in progress had a net increase of $2.2 million. The $5.2 million currently in progress includes the following: • Traffic Signal Modifications ($128,000) • Various Street Projects ($2.7 million) • Shadow Oak Park Playground ($329,000) • Energy Efficient Project ($255,000) • Facility Repairs/Improvements ($1.5 million) • Completed fixed asset additions of $4.4 million included: • Cameron Park land addition and new park space ($1.5 million) • Replacement of vehicles and major equipment ($789,000) • Street Rehabilitation Projects ($1.5 million) • Various Facility Repairs/Improvements ($275,000) • Police Radio Upgrades ($189,000) • Fire Emergency Care Upgrades ($132,000) Additional information on the City's capital assets can be found in Note 7 of this report. 14 LONG-TERM DEBT At the end of the current fiscal year, the City had debt outstanding of $551.7 million. Of this amount, $242.4 million represents outstanding bonds and $309.3 million represents other debt such as compensated absences payable, claims and judgments payable, capital lease obligations, and the net pension and OPEB liabilities. All of the outstanding bonds are lease revenue bonds secured by leases from the General Fund. Outstanding Bonds Governmental Activities 2021 2020 Lease Revenue Bonds $ 242,391,403 $ 39,699,508 Total $ 242,391,403 $ 39,699,508 Additional information on the City's long-term debt can be found in Note 8 of this report. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Finance Director, at City of West Covina, 1444 West Garvey Avenue South, West Covina, California 91790. 15 BASIC FINANCIAL STATEMENTS City of West Covina Statement of Net Position June 30, 2021 ASSETS Cash and Investments Cash and Investments with Fiscal Agents Receivables: Accounts Taxes Interest Notes and Loans Other Due from Other Agencies Internal Balances Prepaid Items Inventory Advances to Successor Agency Land Held for Resale Restricted Cash and Investments Capital Assets, Not Being Depreciated Capital Assets, Net of Accumulated Deprecation Total Assets DEFERRED OUTFLOWS OF RESOURCES OPEB Related Items Pension Related Items Total Deferred Outflows of Resources LIABILITIES Accounts Payable Other Accrued Liabilities Interest Payable Deposits Payable Unearned Revenue Noncurrent Liabilities: Total OPEB Liability Net Pension Liability Due Within One Year Due in More Than One Year Total Liabilities DEFERRED INFLOWS OF RESOURCES OPEB Related Items Pension Related Items Total Deferred Inflows of Resources NET POSITION Net Investment in Capital Assets Restricted for: Affordable Housing Debt Service Pension Trust Community Services Public Safety Public Works Unrestricted Total Net Position Governmental Business -type Activities Activities Total $ 108,491,345 $ $ 108,491,345 18,990,338 18,990,338 837,541 296,763 1,134,304 5,730,251 - 5,730,251 63,505 - 63,505 14,626,990 - 14,626,990 2,175,236 - 2,175,236 638,002 - 638,002 222,253 (222,253) - 133,372 - 133,372 40,179 - 40,179 1,484,058 - 1,484,058 3,007,802 - 3,007,802 6,415,847 - 6,415,847 68,133,179 - 68,133,179 116,272,835 - 116,272,835 347,262,733 74,510 347,337,243 15,255,037 - 15,255,037 191,680,785 - 191,680,785 206,935,822 - 206,935,822 4,579,716 14,569 4,594,285 3,011,820 3,039 3,014,859 3,140,172 - 3,140,172 1,601,318 - 1,601,318 9,834,951 - 9,834,951 76,070,626 - 76,070,626 201,901,907 - 201,901,907 7,958,655 18,573 7,977,228 265,795,990 - 265,795,990 573,895,155 36,181 573,931,336 4,509,801 4,509,801 2,260,873 2,260,873 6,770,674 6,770,674 139,507,563 - 139,507,563 24,008,323 - 24,008,323 19,899,380 - 19,899,380 9,440 - 9,440 1,172,271 - 1,172,271 7,773,492 - 7,773,492 36,363,229 - 36,363,229 (255,200,972) 38,329 (255,162,643) $ (26,467,274) $ 38,329 $ (26,428,945) The accompanying notes are an integral part of this statement. City of West Covina Statement of Activities Year Ended June 30, 2021 Program Revenues Charges Operating Capital for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government: Governmental Activities: General Government $ 18,934,548 $ 312,112 $ 1,308,784 $ 2,612 Public Safety 62,479,977 3,718,158 5,086,114 32,151 Public Works 17,212,496 4,458,831 10,339,861 6,166,566 Community Services 7,669,884 697,351 5,029,765 4,419,818 Community Development 1,568,283 - Interest on Long -Term Debt 8,354,304 - - - Total Governmental Activities 116,219,492 9,186,452 21,764,524 10,621,147 Business -type Activities: Computer Service Total Business -type Activities Total Primary Government 475,672 758,120 475,672 758,120 $ 116,695,164 $ 9,944,572 $ 21,764,524 $ 10,621,147 General Revenues: Taxes: Property Taxes Sales Taxes Franchise Taxes Transient Occupancy Taxes Other Taxes Other Revenues Gain/ (Loss) on Disposal of Capital Assets Investment Income Transfers In/(Out) Total General Revenues and Transfers Change in Net Position Net Position - Beginning Restatement of Net Position Net Position - Ending The accompanying notes are an integral part of this statement. 17 Net (Expense) Revenue andChanges in Net Position Governmental Business -type Activities Activities Total $ (17,311,040) (53,643,554) 3,752,762 2,477,050 (1,568,283) (8,354,304) (74,647,369) $ (17,311,040) (53,643,554) 3,752,762 2,477,050 (1,568,283) (8,354,304) (74,647,369) 282,448 282,448 282,448 282,448 (74,647,369) 282,448 (74,364,921) 30,108,110 - 30,108,110 20,858,803 - 20,858,803 4,644,360 - 4,644,360 1,305,663 - 1,305,663 3,265,607 - 3,265,607 1,620,479 - 1,620,479 3,900,000 - 3,900,000 223,485 - 223,485 - 65,926,507 65,926,507 (8,720,862) 282,448 (8,438,414) (18,642,521) (244,119) (18,886,640) 896,109 - 896,109 $ (26,467,274) $ 38,329 (26,428,945) $ 18 City of West Covina Balance Sheet Governmental Funds June 30, 2021 Special Revenue West Covina State Housing Gas General Authority Tax ARPA ASSETS Cash and Investments $ 19,269,897 $ 8,505,735 $ 7,018,773 $ 9,783,014 Cash and Investments with Fiscal Agent - - - - Restricted Cash 9,440 12,050 - - Receivables, net: Accounts 479,703 - - - Taxes 5,259,591 - - - Interest 63,505 - - - Notes and Loans - 14,626,990 - - Other 1,419,196 7,212 358,426 - Due from Other Agencies - - - - Due from Other Funds 832,744 - - Advances to Successor Agency 588,948 895,110 - - Avances to Other Funds 279,529 - - - Prepaid Items 133,372 - - - Land Held for Resale 3,007,802 - - - Total Assets $ 31,343,727 $ 24,047,097 $ 7,377,199 $ 9,783,014 LIABILITIES Accounts Payable $ 1,209,405 $ 24,313 $ 1,552,443 $ - Accrued Liabilities 2,576,155 14,461 98,840 - Deposits Payable 1,600,978 - - - Uneamed Revenue 22,473 - - 9,783,014 Due to Other Funds - - - - Advances to Other Funds - - - - Total Liabilities 5,409,011 38,774 1,651,283 9,783,014 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 446,639 - - Total Deferred Inflows of Resources 446,639 - - FUND BALANCE (DEFICITS) Nonspendable 4,009,651 - - Restricted 9,440 24,008,323 5,725,916 Committed - - - Assigned - - - Unassigned 21,468,986 - - Total Fund Balances (Deficits) 25,488,077 24,008,323 5,725,916 Total Liabilities, Deferred Inflows and Fund Balances (Deficits) $ 31,343,727 $ 24,047,097 $ 7,377,199 $ 9,783,014 The accompanying notes are an integral part of this statement. 19 Non -major Governmental Citywide Debt Funds Total $ 912,639 $ 47,243,998 $ 92,734,056 18,990,338 - 18,990,338 - 6,283,500 6,304,990 153 357,685 837,541 - 470,660 5,730,251 - 63,505 - 14,626,990 - 390,402 2,175,236 - 536,952 536,952 - 832,744 - - 1,484,058 - - 279,529 - - 133,372 - - 3,007,802 $ 19,903,130 $ 55,283,197 $ 147,737,364 $ 3,750 $ 1,691,156 $ 4,481,067 - 320,411 3,009,867 - 340 1,601,318 - 29,464 9,834,951 - 548,039 548,039 - 279,529 279,529 3,750 2,868,939 19,754,771 - 390,391 837,030 390,391 837,030 - - 4,009,651 19,899,380 42,564,544 92,207,603 - 9,687,492 9,687,492 - (228,169) 21,240,817 19,899,380 52,023,867 127,145,563 $ 19,903,130 $ 55,283,197 $ 147,737,364 20 City of West Covina Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2021 Fund balances of governmental funds $ 127,145,563 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Capital Assets 439,037,185 Accumulated Depreciation (255,305,452) 183,731,733 Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailable revenues in the funds. 837,030 Interest Payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liabiltiy in the funds. (3,140,172) Long term liabilities are not due and payable in the current period and are not reported in the funds. Bonds Payable (including premiums) (242,391,403) Loans Payable (6,602,048) Compensated Absences (3,915,668) Notes Payable (8,104,843) Net Pension Liability (201,901,907) Total OPEB Liability (76,070,626) Amounts for deferred inflows and deferred outflows related to the City's Net Pension Liability are not reported in the funds. Deferred Outflows Related to Pensions 191,680,785 Deferred Inflows Related to Pensions (2,260,873) Deferred Outflows Related to OPEB 15,255,037 Deferred Inflows Related to OPEB (4,509,801) Internal service funds are used by management to charge the costs of certain activities, such as equipment management, to individual funds. The assets and liabilities of the internal service funds must be added to the statement of net position. 3,779,919 Net position of governmental activities $ (26,467,274) The accompanying notes are an integral part of this statement. 21 City of West Covina Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2021 REVENUES Taxes Special Assessments Licenses and Permits Fines and Forfeitures Investment Income Rental Income Revenue from Other Agencies Charges for Services Other Revenues Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Community Services Community Development Debt Service: Principal Interest Debt Issuance Costs Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transferin Transfer Out Sale of Capital Assets Issuance of Debt Total Other Financing Sources (Uses) SPECIAL ITEM Payment towards Unfunded Pension Liability Net Change in Fund Balances Fund Balances, Beginning Prior Period Adjustments Fund Balances, Ending Special Revenue West Covina State Housing Gas General Authority Tax ARPA $ 59,832,639 $ - $ 1,966,902 $ 1,528,117 - - 380,169 - (633,939) 385,983 19,411 952,185 - - 2,999,183 - 2,090,987 6,243,487 - 444 1,690,578 98,802 - 72,992,419 484,785 4,077,744 6,823,237 - 2,979 55,278,177 181,450 - 4,220,203 - 3,636,308 1,508,777 398,262 786,828 - 68,228,656 968,278 3,639,287 - 4,763,763 (483,493) 438,457 - 186,796,578 - 567,148 - (13,408,972) - - - 173,387,606 - 567,148 - (172,543,016) 5,608,353 (483,493) 1,005,605 - 19,675,324 24,491,816 4,720,311 - 204,400 - - - $ 25,488,077 $ 24,008,323 $ 5,725,916 $ - The accompanying notes are an integral part of this statement. 22 Non -major Governmental Citywide Debt Funds Total $ - $ 10,697,069 $ 72,496,610 - 6,837,731 6,837,731 - - 1,528,117 - 380,169 85,015 125,019 (18,511) - - 952,185 2,220,769 4,312,853 11,623,792 - 132,287 6,376,218 - 996,378 2,785,758 2,305,784 23,101,337 102,962,069 9,795 79,296 6,915,307 36,523 4,794,595 60,290,745 - 7,500,267 15,356,778 4,658,667 6,167,444 - 383,193 1,568,283 1,928,918 500,000 2,428,918 5,419,621 - 5,419,621 1,083,165 - 1,083,165 8,478,022 17,916,018 99,230,261 (6,172,238) 5,185,319 3,731,808 4,502,868 5,486,973 197,353,567 (186,582,240) (1,329,037) (201,320,249) - 3,900,000 3,900,000 204,095,000 6,602,048 210,697,048 22,015,628 14,659,984 210,630,366 - - (172,543,016) 15,843,390 19,845,303 41,819,158 4,055,990 31,486,855 84,430,296 - 691,709 896,109 $ 19,899,380 $ 52,023,867 $ 127,145,563 23 City of West Covina Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2021 Net change in fund balances -total governmental funds $ 41,819,158 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of these assets is allocated over their estimated useful lives as depreciation expense. Capital Expenditures 6,471,973 Depreciation Expense (11,515,461) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 636,561 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, government funds report the effect of premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. The effect of these differences are as follows: Principal Paid on Notes Payable 1,078,918 Principal Paid on Bonds Payable 1,350,000 Principal Paid on Capital Lease Payable 180,122 Amortization of Premium on Lease Revenue Bonds 53,105 Issuance of Lease Revenue Bonds (204,095,000) Issuance of Loans Payable (6,602,048) Accrued interest on bonds is not recorded in the governmental funds. This is the net change in accrued interest for the period. (2,987,788) Some expenses reported in the Statement of Activities do not require the use of current financial resources and are not reported as governmental fund expenditures: Net Change in Employee Leave Benefits (58,763) Net Change in Net Pension Liability (6,750,521) Net Change in Total OPEB Liability (14,777,599) Net Change in Deferred Outflows Pension Related Amounts 168,981,935 Net Change in Deferred Inflows Pension Related Amounts 1,032,198 Net Change in Deferred Outflows OPEB Related Amounts 10,375,777 Net Change in Deferred Inflows OPEB Related Amounts 1,965,158 Internal service funds are used by management to charge the costs of certain activities, such as equipment management, to individual funds. The net revenue (expense) of the internal service funds is reported with governmental activities. 4,121,413 Change in net position of governmental activitie $ (8,720,862) The accompanying notes are an integral part of this statement. 24 City of West Covina Statement of Net Position Proprietary Funds June 30, 2021 ASSETS Current Assets: Cash and Investments Restricted Cash and Investments Accounts Receivable, Net Due from Other Agencies Inventories Total Current Assets Noncurrent Assets: Capital Assets, Not Being Depreciated Capital Assets, Net of Accumulated Depreciation Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Accounts Payable Other Accrued Liabilities Due to Other Funds Current Portion of Long -Term Liabilities: Compensated Absences Claims Payable Total Current Liabilities Noncurrent Liabilities: Compensated Absences Claims Payable Total Noncurrent Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position The accompanying notes are an integral part of this statement. Business -type Governmental Activities Activities Computer Service Internal Enterprise Fund Service Funds $ 15,757,289 110,857 296,763 101,050 - 40,179 296,763 16,009,375 674,281 - 674,281 296,763 16,683,656 14,569 98,649 3,039 1,953 222,253 62,452 18,573 258,434 163,054 200 12,740,483 - 12,740,683 258,434 12,903,737 - 674,281 38,329 3,105,638 $ 38,329 $ 3,779,919 25 City of West Covina Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds Year Ended June 30, 2021 OPERATING REVENUES Charges for Services Rental Income Other Revenues Total Operating Revenue OPERATING EXPENSES Personnel Services Cost of Sales, Services, and Operations Depreciation Insurance and Claims Paid Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Investment Income Gain/ (Loss) on Disposal of Capital Assets Total Nonoperating Revenues (Expenses) Income Before Contributions and Transfers Transfers In Transfers Out Change in Net Position Total Net Position, Beginning Total Net Position, Ending Business -type Governmental Activities Activities Computer Service Internal Enterprise Fund Service Funds $ 758,120 $ 5,070,697 - 266,386 - 88,604 758,120 5,425,687 154,214 150,391 321,458 1,740,639 - 186,400 - 3,194,721 475,672 5,272,151 282,448 153,536 1,195 282,448 154,731 3,966,682 282,448 4,121,413 (244,119) (341,494) $ 38,329 $ 3,779,919 The accompanying notes are an integral part of this statement. W. City of West Covina Statement of Cash Flows Proprietary Funds Year Ended June 30, 2021 Cash Flows from Operating Activities Cash Received from Customers Cash Received from User Departments Cash Paid to Suppliers for Goods and Services Cash Paid to Employees for Services Net Cash from Operating Activities Cash Flows from Noncapital Financing Activities Cash Paid (to) from Other Funds Net Cash from Noncapital Financing Activities Business -type Governmental Activities Activities Computer Service Internal Enterprise Fund Service Funds $ 934,005 $ 5,819,455 (432,564) (5,816,006) (204,989) (149,027) 296,452 (145,578) (296,452) 3,966,682 (296,452) 3,966,682 Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Capital Assets Proceeds from the Sale of Assets Net Cash from Capital and Related Financing Activities Cash Flows from Investing Activities Interest on Investments Net Cash from Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Other Revenues (Increase) Decrease in Accounts Receivable (Increase) Decrease in Due from Other Agencies (Increase) Decrease in Inventory and Prepaid Items Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Compensated Absences Increase (Decrease) in Claims and Judgments Net Cash Provided (Used) by Operating Activities 1,195 1,195 3,822,299 12,045,847 $ - $ 15,868,146 $ 282,448 $ 153,536 186,400 163,841 393,768 12,044 - - (9,706) (111,106) (432,520) (5,728) 1,364 (45,047) - - (438,420) $ 296,452 $ (145,578) The accompanying notes are an integral part of this statement. 27 City of West Covina Statement of Net Position Fiduciary Funds June 30, 2021 ASSETS Cash and Investments Cash and Investments with Fiscal Agent Restricted Cash and Investments Receivables, Net: Taxes Interest Assessments Due from City of West Covina Land Held for Resale Total Assets LIABILITIES Accounts Payable Accrued Liabilities Interest Payable Due to Other Governments Advances from City of West Covina Long-term Liabilities: Due to County Auditor Controller Due within One Year Due in More than One Year Total Liabilities NET POSITION Held in Trust for: Successor Agency Pension Benefits Successor Agency Pension Private -purpose Trust Custodial Trust Fund Funds Funds $ 4,063,756 7,053,103 5,571,251 615,985 1,937 9,115,000 8,104,843 54,279 $ 531,464 $ 2,820 34,580,154 531,464 2,820 48,490 - 2,820 545,019 - - 267,579 - - 201,460 - - 1,484,058 - - 8,104,843 5,684,975 92,173,646 108,510,070 (73,929,916) - 531,464 $ (73,929,916) $ 531,464 $ The accompanying notes are an integral part of this statement. 2,820 City of West Covina Statement of Changes in Net Position Fiduciary Funds Year Ended June 30, 2021 Successor Agency Pension Private -purpose Trust Custodial Trust Fund Funds Funds ADDITIONS Contributions: Taxes and assessments collected for others $ 10,772,810 $ - $ Employer Contributions - 132,030 Investment Earnings: Interest Income 312,844 114,836 Total Additions DEDUCTIONS Program Administration Administrative Costs Benefit Distributions Interest and Fiscal Charges Total Deductions Change in Net Position Net Position - Beginning of Year Net Position - End of Year 11,085,654 246,866 4,498,648 11,399,892 878,156 12,134 252,998 16,776,696 265,132 (5,691,042) (18,266) (68,238,874) 549,730 $ (73,929,916) $ 531,464 $ The accompanying notes are an integral part of this statement. 29 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of West Covina, California (the City) have been prepared in accordance with Generally Accepted Accounting Principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard -setting body for establishing governmental accounting and financial reporting principles. The City's significant accounting policies are described below. A) Financial Reporting Entity The City was incorporated on February 23, 1923 under the general laws of the State of California. The accompanying 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 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 for an organization if that organization is fiscally dependent (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. Because each component unit meets the above -mentioned criteria, included within the financial reporting entity of the City are the City of West Covina Housing Authority, the West Covina Public Financing Authority, the Parking Authority of the City of West Covina, and the West Covina Community Services Foundation, Inc. A brief description of each component unit follows: West Covina Housing Authority The West Covina Housing Authority (the Housing Authority) was formed on January 17, 2012 and is responsible for the administration of providing affordable housing in the City. The Housing Authority is administered by a Board which consists of members of the City Council. The transactions of the Housing Authority are reported as a special revenue fund is a blended component unit of the City. West Covina Public Financing Authority The West Covina Public Financing Authority (the Authority) was created by a joint powers agreement between the City and the Community Development Commission of the City on June 1, 1990. The purpose of the Authority is to provide, through the issuance of debt, financing necessary for various capital improvements. The Authority is administered by the Board who are the members of the City Council. The Authority's sole source of income is installment sale, loan and lease payments received from the City and former Community Development Commission (the Commission) which are used to meet the debt service requirements on debt issues. The Authority is blended into the debt service fund of the City. The Parking Authority of the City of West Covina The Parking Authority of the City of West Covina (the Parking Authority) was formed under the provision of the government code of the State of California for the purpose of financing and constructing parking facilities for lease to the City. The City Council acts as the governing body of the Parking Authority and is able to impose its will on the Parking Authority. It is a component unit of the City, and the financial statements of the Parking Authority are included within the financial statements of the City using the blended method. The Parking Authority has been inactive since 1999. 30 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued The West Covina Community Services Foundation, Inc. The West Covina Community Services Foundation, Inc. (the Foundation) was established on July 26, 2005 as a nonprofit public benefit corporation. It was organized and operates exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code. The Foundation is administered by the Board of Directors who are the members of the City Council. The Foundation is blended into the special revenue funds of the City. Since the City Council serves as the governing board for these component units, 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 reported with the interfund data of the primary government. Except for the Housing Authority, these component units do not issue component unit financial statements. Separate financial statements for the Housing Authority can be obtained from the City of West Covina, 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 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). 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. Interfund services provided and used are not eliminated in the process of consolidation. The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. 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. 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 Generally Accepted Accounting Principles. 31 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. Taxes and other items not included among program revenues are reported instead as general revenues. Amounts paid to acquire capital assets are capitalized as assets in the government -wide financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the government -wide financial statements rather than as another financing source. Amounts paid to reduce long- term indebtedness of the reporting government are reported as a reduction of the related liability rather than as an expenditure. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar programs are recognized as revenue as soon as all eligibility requirements imposed by providers have been met. Fund Financial Statements The underlying accounting system of the City 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, deferred outflows of resources, 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. 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 the major funds individually and other governmental funds in the aggregate for governmental funds. Fiduciary statements represent assets held by the City in a custodial capacity for other individuals or organizations in the private purpose trust, pension trust, and custodial 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. 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. Revenue recognition is subject to the measurable and available criteria for the governmental funds in the fund financial statements. Significant revenues subject to the criteria include taxes, licenses and permits, and intergovernmental revenues. 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 they are based takes place. 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. 32 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets, deferred outflows of resources, 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 balance. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Revenues, expenditures, assets, and liabilities resulting from non -exchange transactions are recognized in accordance with the requirements of Generally Accepted Accounting Principles. The City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Therefore, recognition of governmental fund type revenue represented by receivables is reported as deferred inflows of resources until they meet the "availability" criteria. Sales taxes, property taxes, franchise taxes, revenue from other agencies, rental income, occupancy taxes 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. The availability period for all revenues is 60 days. 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 other financing sources rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures rather than as a reduction of a fund liability. Proprietary and Fiduciary Funds The City's enterprise and internal service funds are proprietary funds. In the fund financial statements, the proprietary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets, deferred outflows of resources, liabilities, and deferred inflows of resources (whether current or noncurrent) associated with their activity are included on their statement of net position. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non -operating revenues, such as subsidies, taxes, and investment earnings result from non -exchange transactions or ancillary activities. Amounts paid to acquire capital assets are capitalized as assets in the enterprise fund financial statements rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the enterprise fund financial statements rather than as another financing source. Amounts paid to reduce long-term indebtedness of the enterprise fund are reported as a reduction of the related liability rather than as an expenditure. 33 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued The City's fiduciary private purpose and pension trust funds are accounted for using the economic resources measurement focus and accrual basis of accounting. The private purpose trust fund accounts for the assets held by the City for the Successor Agency to the former Community Development Commission of the City. The pension trust fund account for assets and activities of the Public Agency Retirement System Enhancement and Supplemental Retirement defined benefit pension plans. The City's fiduciary custodial accounts for assets held for the benefit of others. Because these funds are not available for use by the City, fiduciary funds are not included in the governmental -wide statements. As a general rule, the effect of interfund activity has been eliminated from the govemment-wide financial statements. Interfund services provided and used are not eliminated in the process of consolidation. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are combined and are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Classifications The City reports the following major governmental funds: The General Fund is the general operating fund of the City. This fund is used to account for all financial resources of the City, except for those required to be accounted for in another fund The West Covina Housing Authority Special Revenue Fund is used to account for assets and related income received from the former Community Development Commission to be used for the administration of providing affordable housing in the City. The State Gas Tax Special Revenue Fund accounts for the City's proportionate share of gas tax monies collected by the State of California and Proposition 1B monies which are used for street construction and maintenance. The ARPA Special Revenue Fund accounts for the grant funds received from the American Rescue Plan Act. The Citywide Debt Service Fund accounts for the payments of principal, interest, and related costs on the City long-term debt issues. The City reports the following major proprietary funds: The Computer Service Enterprise Fund is used to account for operations that are financed and operated in a manner similar to private business enterprises. The City's enterprise fund is used to account for computer services provided by the Police Department to other public agencies. Additionally, the City reports the following fund types 34 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued The Internal Service Funds are used to account for vehicle and equipment maintenance and replacement, for the City's self-insurance programs, and for retirement health savings plans for qualified City employees. Departments of the City are charged for the services provided or benefits received from these funds. Fiduciary fund financial statements consist of a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. The City has two types of fiduciary funds, a custodial fund and a private - purpose trust fund. Agency funds are used to account for the assets held for distribution by the City as an agent for another entity for which the City has custodial responsibility and accounts for the flow of assets. Private -purpose trust funds account for resources of all other trust arrangements in which principal and income benefit individuals, private organizations, or other governments (i.e. unclaimed property/escheat property). Fiduciary funds are accounted for using the accrual basis of accounting. The City reports the following fiduciary funds: Successor Agency Private Purpose Trust Fund — accounts for assets and liabilities transferred in fiscal year 2012 from the Redevelopment Agency of the City of West Covina to the Successor Agency Trust Fund. Pension Trust Fund — These funds are used to account for the assets and activities of the Public Agency Retirement System Retirement Enhancement and Supplemental Retirement plans. Custodial Funds — account for funds in which the City is acting as a custodian for another agency. The specific nature of the activities reported in the custodial funds are the West Covina Mall Community Facilities District and the West Covina Tourism Marketing District. C) Cash and Investments Investments are reported in the accompanying balance sheet at fair value, except for certain certificates of deposit and investment contracts that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest rates. 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 or sale of investments. The City pools cash and investments of all funds, except for assets held by fiscal agents. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds based on each fund's average cash and investment balance. 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, and have an original maturity date of 3 months or less. Cash equivalents represent the proprietary funds' share in the cash and investment pool of the City. D) Inventories Inventory is stated at average cost. Physical counts of inventory are taken on a cyclical basis during each fiscal year with perpetual records adjusted to actual at that time. The City uses the consumption method of accounting for inventory. 35 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued E) Prepaid Items Certain payments to vendors for costs applicable to future accounting periods are recorded as prepaid items in both government -wide and fund financial statements using the consumption method. F) Notes and Loans Receivable The accompanying financial statements report certain loans receivable for loans made to private developers, private homeowners, and other parties. Where applicable, an allowance for doubtful accounts has been recorded to reflect management's best estimate of probable losses associated with non - repayment. G) Property Taxes Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City accrues only those taxes which are received within 60 days after year end. The property tax calendar is as follows: Property Tax Calendar Lien date January 1 Levy date July 1 Due date November 1 and February Delinquent dates December 10 and April 10 H) Claims and Judgements County Remittance Dates and Percentages December 40% Advance January 10% Advance February Collection No. 1 April 35% Advance May Collection No. 2 July Collection No. 3 The City records a liability for litigation, judgments, and claims when it is probable that an asset has been impaired or a liability (including incurred but not reported) has been incurred prior to yearend and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. This liability is recorded in the internal service fund that accounts for the City's self-insurance activities. 1) Compensated Absences Payable 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 only to the extent that it is probable that the unused balances will result in termination payments. This is estimated by including in the liability the unused balances of employees currently entitled to receive termination payment, as well as those who are expected to become eligible to receive termination benefits as a result of continuing their employment with the City. 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. K%, City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued The General Fund and Computer Service Enterprise Fund typically have been used to liquidate the liability for compensated absences. J) Capital Assets Capital assets greater than $5,000 and infrastructure greater than $100,000 are capitalized and recorded at cost or at an estimated fair value of the assets at the time of acquisition where complete historical records do not exist. Contributed capital assets are valued at their acquisition value at the date of the contribution. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Capital assets include public domain infrastructure assets consisting of certain improvements other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, medians, sewer and storm drains. Depreciation has been provided using the straight-line method over the estimated useful life of the assets in the government -wide financial statements and in the fund financial statements of the proprietary and the private -purpose trust funds. Depreciation starts the year following acquisition. For capital assets, depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Governmental Activities Infrastructure - pavement 25 years Infrastructure - other 20 - 75 years Buildings 20 - 50 years Improvements other than buildings 20 - 50 years Equipment and Vehicles 5 - 25 years Business -type Activities Equipment and Machinery 5 - 25 years K) Interest Payable In the Government -Wide Financial Statements, interest payable on long-term debt is recognized as the liability is incurred. In the Fund Financial Statements, proprietary fund types recognize the interest payable when the liability is incurred. 37 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued L) Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) expenditure) until then. The City has certain items that qualify for reporting in this category: deferred outflows relating to the City's net pension and OPEB liabilities. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City reports deferred inflows for certain items under the modified accrual basis of accounting. Accordingly, unavailable revenue is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues related to taxes and grants. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The City also reports deferred inflows relating to the net pension and OPEB liabilities. M) Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CaIPERS) and Public Agency Retirement System plans (PARS) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CaIPERS and PARS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted accounting principles require that the reported results for pensions must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used for CaIPERS: Valuation Date (VD) Measurement Date (MD) Measurement Period (MP) The following timeframes are used for PARS: Valuation Date (VD) Measurement Date (MD) Measurement Period (MP) June 30, 2019 June 30, 2020 July 1, 2019 to June 30, 2020 June 30, 2020 June 30, 2020 July 1, 2019 to June 30, 2020 38 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued N) Other Postemployment Benefits (OPEB) For purposes of measuring the total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: June 30, 2019 Valuation Date; June 30, 2020 Measurement Date; and July 1, 2019 through June 30, 2020 Measurement Period. O) Net Position Flow Assumption Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government -wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to consider restricted net position to have been depleted before unrestricted net position. P) Fund Balance Nonspendable Fund Balance: These include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact, e.g., the principal of an endowment fund. Examples of "not in spendable form" include inventory, prepaid amounts, long-term notes and loans, property held for resale and other items not expected to be converted to cash. However, if the proceeds from the eventual sale or liquidation of the items would be considered restricted, committed or assigned (as defined further on) then these amounts would be included in the restricted, committed or assigned instead of the nonspendable classification. A debt service reserve fund held by a trustee is an example of fund balance in nonspendable form that is classified as restricted instead of nonspendable since the reserve is eventually liquidated to make the final debt service principal payment. Restricted Fund Balance: Amounts that have externally enforceable limitations on use. The limitations on use can be imposed by creditors, grantors, or contributors as well as by constitutional provisions, enabling legislation, laws and government regulations. Committed Fund Balance: Amounts that can be used only for the specific purposes determined by a formal action of the City's highest level of decision -making authority. The City Council is the highest level of decision -making authority for the City that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Assigned Fund Balance: Amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as committed. The City Council (Council) has by resolution authorized the City Manager to assign fund balance. The Council may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year's appropriated budget. Unlike commitments, assignments generally only exist temporarily. Additional formal action does not normally have to be taken for the removal of an assignment. Unassigned Fund Balance: These are either residual positive net resources of the General Fund in excess of what can properly be classified in one of the other four categories, or negative balances. For all funds other than the General Fund, amounts expended in excess of resources that are restricted, committed, or assigned, negative unassigned fund balance may be necessary to report. 39 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —Continued Q) 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), as follows: Level f — Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2— Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and fair value is determined through the use of models or other valuation methodologies including: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in markets that are inactive; inputs other than quoted prices that are observable for the asset or liability; • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the City's own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). These unobservable inputs are developed based on the best information available in the circumstances and may include the City's own data. R) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 40 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS Cash and investments as of June 30, 2021 are classified in the accompanying financial statements as follows: Statement of Net Position: Cash and Investments $108,491,345 Cash and Investments with Fiscal Agents 18,990,338 Restricted Cash and Investments 6,415,847 Statement of Fiduciary Net Position: Cash and Investments 4,598,040 Cash and Investments with Fiscal Agents 7,053,103 Restricted Cash and Investments 5,571,251 Total Cash and Investments 151,119,924 Cash and investments as of June 30, 2021 consist of the following: Cash on Hand $ 16,850 Deposits with Financial Institutions 22,945,621 Investments 128,157,453 Total Cash and Investments 151,119,924 Investments Authorized by the California Government Code and the City's Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code and the City's investment policy. This table also identifies certain provisions of the California Government Code (or the City's investment policy, if more restrictive) that addresses interest rate risk and concentrations of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City and investments in the City's retirement enhancement and supplemental retirement defined benefit pension trust funds that are in the Public Agency Retirement Plans (PARS Trust Pool), rather than the general provisions of the California Government Code or the City's investment policy. 41 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS -Continued Investment Types Authorized by State Law U.S. Treasury Obligations U.S. Government Sponsored Agency Securities Municipal Securities Supranationals Medium -Term Notes Collateralized Certificate of Deposit Negotiable Certificates of Deposit Banker's Acceptance Commercial Paper Asset Backed Securities Money Market Mutual Funds Repurchase Agreements County Pooled Investment Funds Local Agency Investment Fund Authorized by Investment Maxmum Policy Maturity* Yes 5 years Maxmum Maximum Percentage Investment of Portfolio* in One Issuer* None None Yes 5 years None None Yes 5 years 30% 5% Yes 5 years 30% 10% Yes 5 years 30% 5% Yes 5 years 25% 25% Yes 5 years 30% 30% Yes 180 days 40% 30% Yes 270 days 25% 5% Yes 5 years 20% 20% Yes N/A 20% 10% Yes 100 days 20% 20% Yes N/A None None Yes N/A None $75,000,000 *Based on state law requirements or investment policy requirements, whichever is more restrictive. 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 and concentration of credit risk. Maxmum Maxmum Investment Types Maxmum Percentage Investment Authorized by State Law Maturity of Portfolio in One Issuer U.S. Treasury Obligations 5 years None None U.S. Government Sponsored Agency Securities 5 years None None Municipal Securities 5 years 30% None Supranationals 5 years 30% None Medium -Term Notes 5 years 30% None Collateralized Certificate of Deposit 5 years 25% None Negotiable Certificates of Deposit 5 years 30% None Banker's Acceptance 180 days None None Commercial Paper 270 days 25% 5% Money Market Mutual Funds 5 years 20% 10% Repurchase Agreements 100 days 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund N/A None None 42 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS -Continued Investments Authorized by Pension Trust Agreements Investments of pension trust fund contributions held by the trustee are governed by the trust agreements. The City selected an investment strategy allowed by the trust agreements with the objective of providing current income and moderated capital appreciation. The strategic ranges for the investment strategy selected by the City are as follows: 5% Cash 45% Fixed Income 48.50% Equities 1.50% REIT 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 is 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 trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: I nvestment Los Angeles County Investment Pool Local Agency Investment Fund Money Market Mutual Funds U.S Government Agency Securities PARS Trust Pool Held by Bond Trustees: Collateralized Investment Agreement Money Market Mutual Funds Total Disclosures Relating to Credit Risk Remaining Maturity (in Months) 12 Months 13 to 24 25 to 60 Total Or Less Months Months $ 26,848,514 $ 26,848,514 76,259,480 226,942 113,256 540,904 5,002,670 76,259,480 226,942 113,256 540,904 5,002,670 19,165, 687 19,165, 687 $128,157,453 $ 128,157,453 $ $ 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 the California Government Code, the City's investment policy, or debt agreements and the actual rating as of year-end by Standard and Poor's or Moody's or Fitch for each investment type: 43 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS — Continued Investment Type Amount Minimum Legal Rating AAA Unrated Los Angeles County Investment Pool $ 26,848,514 NIA $ $ 26,848,514 Local Agency Investment Fund 76,259,480 NIA 76,259,480 Money Market Mutual Funds 226,942 A 226,942 - U.S Government Agency Securities 113,256 NIA - 113,256 PARS Trust Pool 540,904 NIA 540,904 Held by Bond Trustees: Collateralized Investment Agreement 5,002,670 NIA - 5,002,670 Money Market Mutual Funds 19,165,687 A 19,165,687 - Total $128,157,453 $ 19,392,629 $ 108,764,824 Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There was no investments in any one issuer (other than U.S. Government Agencies, Supranationals, Money Market Funds, and external investment pools) that represent 5% or more of total City investments. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker -dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provisions for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The 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. All the City's deposits are eitherfederally insured or collateralized as of June 30, 2021. Investments held by bond trustee are selected under the terms of the applicable trust agreement. The trustee acquires the investment and holds the investment on behalf of the reporting government. Investment in County Investment Pool The City is a voluntary participant in the Los Angeles County Investment Pool (LACIP) that is regulated by the California Government Code and the Los Angeles County Board of Supervisors under the oversight of the Los Angeles County Treasurer -Tax Collector. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amount based upon the City's pro-rata share of the fair value provided by LACIP for the entire LACIP portfolio. The balance for withdrawal is based on the accounting records maintained by LACIP, which are recorded on an amortized cost basis. 44 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 2) CASH AND INVESTMENTS— Continued Fair Value of Investments Investments (except those that may be reported at amortized cost) are measured at fair value on a recurring basis. Recurring fair value measurements, are those that Governmental Accounting Standards Board (GASB) Statements require or permit in the statement of net position at the end of each reporting period. Fair value measurements are categorized based on the valuation inputs used to measure an asset's fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Investment fair value measurements at June 30, 2021 are described below. Based upon the fair value measurements, the City held the following investments as of June 30, 2021: Fair Value Hierarchy I nvestment Type Total Level Level Level U.S. Government Agency Securities 113,256 113,256 Total $ 113,256 $ $ 113,256 $ US Government Agency Securities categorized as Level 2 are valued based on matrix pricing which use observable market inputs such as yield curves and market indices that are derived principally from or corroborated by observable market data by correlation to other means. 3) INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Due to/from Interfund receivable and payable balances at June 30, 2021 were as follows: Receivable Fund General Payable Fund Fund Non -major Governmental Funds $ 548,039 Computer Service Enterprise Fund 222,253 Internal Service Funds 62,452 Total Fund Balances $ 832,744 These interfund payables represent temporary loans to cover negative cash balances. Advances to/from Advances of $279,529 between the General Fund and the Auto Plaza Improvement District non -major special revenue fund are for cash advanced for the replacement of the reader board sign at the Auto Plaza. Interfund transfers for the year ended June 30, 2021 are as follows: 45 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 3) INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS -Continued TRANSFERSIN State Non -major Internal General Gas Tax Citywide Governmental Service TRANSFERS OUT Fund Fund Debt Funds Funds Total General Fund $ - $ 567,148 $ 4,502,868 $ 4,372,274 $3,966,682 $ 13,408,972 Citywide Debt 185,582,240 - 1,000,000 186,582,240 Non -major Governmental Funds 1,214,338 - 114,699 1,329,037 $ 186,796,578 $ 567,148 $ 4,502,868 $ 5,486,973 $3,966,682 $ 201,320,249 The General Fund transferred $567,148 to the State Gas Tax Fund for an S61 project. The General Fund transferred $4,502,868 to the Citywide Debt Service Fund for debt service payments. The General Fund transferred $4,372,274 to the Non -major Governmental Funds for various projects and operating expenditures. The General Fund transferred $3,966,682 to the Internal Service Fund for deficits in the self-insurance fund. The Citywide Debt Service Fund transferred $185,582,240 to the General Fund to pay the unfunded liability payments for the Miscellaneous and Safety CaIPERS pension plans. In addition, the Citywide Debt Service Fund transferred $1,000,000 to the Non -major Governmental Funds for various projects. The Non -major Governmental Funds transferred $1,214,338 to the General Fund to reimburse capital expenses and park property acquisition. 4) LONG-TERM RECEIVABLES FROM SUCCESSOR AGENCY Prior to the dissolution of the Commission's redevelopment activities on February 1, 2012, the City authorized several advances to be used for completing redevelopment projects throughout the community. As a result of the dissolution, the liabilities related to these advances were transferred to the Successor Agency. See Note 18 and 19 for additional information. The long-term amounts due from the Successor Agency at June 30, 2021 were as follows: a) The General Fund had made the several advances to the Commission totaling $8,100,000 for administrative and capital improvement construction costs (General Advance). Eighty percent (80%) of the balance is reported in the General Fund and the remaining twenty percent (20%) of the balance is reported in the West Covina Housing Authority Special Revenue Fund. b) In May 2010, the Commission made an advance of $6,529,308 from the Low and Moderate -Income Housing Capital Projects Fund to the Citywide Project Area Debt Service Fund to satisfy the Commission's Supplemental Educational Revenue Augmentation Fund (SERAF) obligation as required by Assembly Bill ABX4-26. The advance bears no interest. In May 2011, the Commission made an advance of $1,344,269 from the Low and Moderate -Income Housing Capital Projects Fund to the Citywide Project Area Debt Service Fund to satisfy the SERAF obligation as required by Assembly Bill ABX4-26. The advance bears no interest and must be repaid by August 1, 2022. Effective February 1, 2012, the Commission's redevelopment activities were dissolved, and the receivable side of these advances was retained by the Housing Authority. The "Dissolution Act" (AB 1x26 as amended by AB 1484) outlines the method of repayment for the General Advances and the SERAF Advances by the Successor Agency. M, City of West Covina Notes to Financial Statements Year Ended June 30, 2021 4) LONG-TERM RECEIVABLES FROM SUCCESSOR AGENCY - Continued The Dissolution Act sets a defined schedule by which the general advances may be repaid. The repayment schedule is to span a reasonable term of years, with outstanding balances incurring interest at a rate not to exceed that earned by the funds deposited into the Local Agency Investment Fund (LAIF). Repayment of the general advances is subject to additional repayment limitations. Repayment commenced in the 2015-2016 fiscal year, annual payments are capped as determined by a specific formula, repayment of the general advances is on a lower payment priority than other obligations of the Successor Agency, and twenty percent (20%) of the repayment amount must be deposited in the LMIHF for the benefit of the Housing Authority. Total general advance and SERAF advance repayments made in the fiscal year 2020-21 were $647,886 and $2,742,187, respectively. The outstanding balances at June 30, 2021 were as follows: General Advances $ 736,186 SERAF Advances 747,872 Total Advances to Successor Agency $ 1,484,058 5) NOTES AND LOANS RECEIVABLE The following notes and loans receivable were outstanding as of June 30, 2021: Housing Rehabilitation First Time Homebuyer Loans Housing Preservation Program Home Improvement Program Lark Ellen Towers Executive Lodge Apartments Limited Partnership West Covina Senior Villas, LLC West Covina Senior Villas II, LP Other Loans Less: Allowance for Doubtful Accounts Total Governmental Funds $ 353,888 177,447 673,382 688,913 6,472,664 6,355,378 2,833,333 8,513,884 608,196 (12,050,095) $ 14,626,990 Several housing rehabilitation loans totaling $353,888 have been made to qualified applicants using Community Development Block Grants received by the City and housing set -aside funds of the former Commission's redevelopment activities. These loans bear interest up to 5% and are repaid when title to the property changes. The City has included 5% of the balance in the allowance for doubtful accounts. The Housing Authority has loans to first-time home buyers totaling $177,447. Loans are secured by second trust deeds and bear interest at 5%. Principal and interest are deferred for five years and are due monthly in years 6 through 30. The City has included 5% of the balance in the allowance for doubtful accounts. 47 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 5) NOTES AND LOANS RECEIVABLE -Continued The Housing Authority also has housing preservation loans to qualified applicants using housing set -aside funds totaling $673,382. Principal and interest are deferred for ten years; after the tenth year loans bear interest at 5%. Loans are repaid after the tenth year or when title to the property changes. The City has included 5% of the balance in the allowance for doubtful accounts. Several housing improvement loans totaling $688,913 have been made to qualified applicants. The loans are secured by second trust deeds. The City has included 5% of the balance in the allowance for doubtful accounts. In May 1997, the Commission loaned $4,270,000 to Lark Ellen Towers. The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan accrues interest at 3% per annum and requires annual payments equal to the maximum of $35,000 or 50% of net profits earned by the project. The outstanding principal and accrued interest at June 30, 2021 was $6,472,664. In April 1998, the Commission loaned $5,622,300 to Executive Lodge Apartments Limited Partnership (Promenade Apartments project). The loan was transferred to the Housing Authority from the dissolved former Commission. The loan is secured by a deed of trust. The loan was amended and restated on April 1, 2017, with a principal of $6,056,621 accruing interest at 2.82% compounded annually and requires annual payments equal to 50% of "Available Cash Flow". The outstanding principal and accrued interest at June 30, 2021 was $6,355,378. In May 2002, the Commission loaned $4,360,000 to West Covina Senior Villas, LLC. The loan is secured by a deed of trust. The loan does not accrue interest. The loan requires annual payments of $141,667 through May 2032 that are forgiven by the City unless the borrower defaults on the agreement. The outstanding principal at June 30, 2021 was $2,833,333. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. In May 2009, the Commission entered into an agreement with West Covina Senior Villas II, L.P. to provide $8,600,000 for the acquisition of real property in the City and construction and maintenance of an approximately 65-unit apartment complex to be rented to low income and very low income senior citizens. The loan is secured by a deed of trust. The loan does not accrue interest and is forgiven so long as the borrower does not default on the loan. The outstanding principal at June 30, 2021 was $8,513,884. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. Other notes consist of affordable housing loans of $400,000. The notes do not accrue interest and are forgiven unless the borrower sells or refinances the property. Additionally, the balance included a note of $208,196 for low income housing which accrues no interest and is forgivable if the owner maintains the low and moderate income housing status. The outstanding principal of these loans combined at June 30, 2021 was $608,196. The loan is likely to be forgiven; therefore, the City has included the entire balance in the allowance for doubtful accounts. 6) LAND HELD FOR RESALE Land held for resale is valued at the lower of cost or the sales price per contract with the developer. The land held for resale at June 30, 2021 was comprised of land to be used as open space or a municipal golf course in the amount of $3,007,802. 48 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 7) CAPITAL ASSETS Governmental Activities: Capital Assets, Not Being Depreciated: Land Rights of Way Construction in Progress Total Capital Assets, Not Being Depreciated Capital Assets Being Depreciated: Buildings and Improvements Equipment and Vehicles Infrastructure - Pavement Infrastructure - Other Total Capital Assets Being Depreciated Less Accumulated Depreciation: Buildings and Improvements Equipment and Vehicles Infrastructure - Pavement Infrastructure - Other Total Accumulated Depreciation Net Capital Assets Being Depreciated Governmental Activities, Capital Assets Beginning Ending Balance Increases Decreases Balance $ 47,212,535 $ 1,492,856 $ (98,896) $ 48,606,495 14,376,498 - 14,376,498 2,982,605 3,862,331 (1,694,750) 5,150,186 64,571,638 5,355,187 (1,793,646) 68,133,179 115,724,610 274,766 - 115,999,376 34,335,472 1,151,100 - 35,486,572 197,037,263 1,372,562 - 198,409,825 24,153,423 153,380 - 24,306,803 371,250,768 2,951,808 - 374,202,576 (48,920,839) (2,322,307) - (51,243,146) (25,700,159) (2,173,090) - (27,873,249) (153,010,093) (6,769,708) - (159,779,801) (18,555,413) (436,756) - (18,992,169) (246,186,504) (11,701,861) - (257,888,365) 125,064,264 (8,750,053) - 116,314,211 $ 189,635,902 $ (3,394,866) $ (1,793,646) $ 184,447,390 Depreciation expense was charged to the following functions for governmental activities in the Statement of Activities: General Government Public Safety Public Works Community Services Business -type Activities: Capital Assets Being Depreciated: Equipment and Vehicles Less Accumulated Depreciation: Equipment and Vehicles Net Capital Assets Being Depreciated Business -type Activities, Capital Assets $ 720,708 1,151,022 8,327,691 1,502,440 $ 11,701,861 Beginning Ending Balance Increases Decreases Balance $ 1,059,120 $ - $ - $ 1,059,120 (1,059,120) (1,059,120) 49 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 8) LONG-TERM LIABILITIES Changes in long-term liabilities for the year ended June 30, 2021 are as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental Activities: Direct Borrowing: Notes Payable $ 9,183,761 $ $ (1,078,918) $ 8,104,843 $ 578,918 Capital Lease 180,122 (180,122) - - Loans Payable - 6,602,048 6,602,048 190,381 2006 Lease Revenue Bonds 15,400,000 - (515,000) 14,885,000 585,000 2018 Lease Revenue Bonds 23,025,000 (835,000) 22,190,000 870,000 Premium on Bonds 1,274,508 - (53,105) 1,221,403 53,105 2020 Lease Revenue Bonds - 204,095,000 - 204,095,000 3,645,000 Compensated Absences 3,857,105 3,531,541 (3,472,778) 3,915,868 2,036,251 Net Pension Liability 195,151,386 6,750,521 - 201,901,907 - Total OPEB Liability 61,293,027 17,287,237 (2,509,638) 76,070,626 Claims Payable 13,178,903 1,521,315 (1,959,735) 12,740,483 - Total $ 322,543,812 $ 239,787,662 $ (10,604,296) $ 551,727,178 $ 7,958,655 Business -type Activities Compensated Absences $ 63,620 $ 30,172 $ (75,219) $ 18,573 $ 18,573 Total $ 63,620 $ 30,172 $ (75,219) $ 18,573 $ 18,573 The liability for compensated absences, Total OPEB, and Net Pension are generally liquidated by the General Fund and internal service funds. Notes Payable — Direct Borrowing Successor Agency Note On December 4, 2015, the City and Successor Agency entered into a settlement agreement with the California Department of Finance (DOF) regarding the Other Funds Due Diligence Review. The agreement requires the City to repay the Successor Agency $11,578,351 for transfers that did not represent enforceable obligations. The Successor Agency will then remit these funds to the Los Angeles County Auditor -Controller for allocation to the affected taxing entities. The amount of the note must be repaid through biannual payments in the amount of $289,459 each January 15th and June 15th until the loan is repaid in full on June 15, 2035. There is no interest charged on this repayment. The outstanding balance as of June 30, 2021 was $8,104,843. The following represents the future annual debt service requirements: City of West Covina Notes to Financial Statements Year Ended June 30, 2021 8) LONG-TERM LIABILITIES - Continued Fiscal Year Ending June 30, Principal Interest Total 2022 $ 578,918 $ 201,136 $ 780,054 2023 578,918 196,993 775,911 2024 578,918 192,605 771,523 2025 578,918 186,786 765,704 2026 578,918 179,661 758,579 2027-2031 2,894,590 788,164 3,682,754 2032-2035 2,315,663 214,400 2,530,063 Totals $ 8,104,843 $ 1,959,745 $ 10,064,588 Energy Efficiency Loans Payable - Direct Borrowing Solar Equipment Loan In May 2021, the City entered into a lease -purchase agreement for the acquisition and installation of certain energy conservation equipment and improvements (solar) with an aggregate principal borrowing of $3,386,950. The proceeds are to be used to pay for the energy efficiency and conservation improvements as specified in the agreement. The payments bear interest at 3.60% and are due and payable semi-annually on May 13th and November 13th each year, maturing on May 13, 2041. The General Fund will generally be responsible for making the debt service payments annually. Non -Solar Equipment Loans In May 2021, the City entered into a lease -purchase agreement for the acquisition and installation of certain energy conservation equipment including lighting and HVAC (non -solar) with an aggregate principal borrowing of $3,215,098. The proceeds are to be used to pay for the energy efficiency and conservation improvements as specified in the agreement. The payments bear interest at 3.05% and are due and payable semi-annually on May 13th and November 13th each year, maturing on May 13, 2036. The General Fund will generally be responsible for making the debt service payments annually. The annual debt service requirements on the Energy Efficiency Loans Payable are as follows: Fiscal Year Ending June 30, Principal Interest Total 2022 $ 190,381 $ 218,430 $ 408,811 2023 266,072 211,558 477,630 2024 257,766 202,994 460,760 2025 280,485 194,431 474,916 2026 304,402 185,147 489,549 2027-2031 1,639,354 773,095 2,412,449 2032 - 2036 2,004,698 483,737 2,488,435 2037-2041 1,658,890 165,883 1,824,773 Totals 6,602,048 2,435,275 9,037,323 51 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 8) LONG-TERM LIABILITIES - Continued Lease Revenue Bonds 2006 Lease Revenue Bonds, Series A and B (Big League Dreams Project) In September 2006, the City issued $10,710,000 of Lease Revenue Bonds, Series A and $7,295,000 of taxable Lease Revenue Bonds, Series B to provide financing for facilities and infrastructure related to the Big League Dreams sports park. The Series A bonds mature annually through June 1, 2036, in amounts ranging from $80,000 to $1,270,000, with interest rates that range from 4.0% to a maximum of 5.0% over the term of the bonds. The Series B bonds mature annually through June 1, 2036, in amounts ranging from $115,000 to $550,000, with interest rates that range from 5.39% to a maximum of 6.07% over the term of the bonds. The bonds are payable from lease payments as rental for certain public facilities. The reserve requirement was fully funded at June 30, 2021. The outstanding principal balance as of June 30, 2021 was $14,885,000. The following represents the future annual debt service requirements: Fiscal Year Ending June 30, Principal _ 2022 $ 585,000 $ 2023 660,000 2024 695,000 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Totals 730,000 770,000 820,000 860,000 905,000 950,000 1,005,000 1,060,000 1,120,000 1,180,000 1,725,000 1,820,000 Interest 804,327 772,557 736,880 699,295 659,802 618,100 573,622 526,930 477,775 426,155 371,518 313,864 252,942 188,699 96,885 Total 1,389,327 1,432,557 1,431,880 1,429,295 1,429,802 1,438,100 1,433,622 1,431,930 1,427,775 1,431,155 1,431,518 1,433,864 1,432,942 1,913,699 1,916,885 $ 14,885,000 $ 7,519,351 $ 22,404,351 2018 Lease Revenue Refunding Bonds, Series A and B On November 20, 2018, the City issued $19,310,000 of Lease Revenue Bonds, Series A and $4,855,000 of taxable Lease Revenue Bonds, Series B to provide financing for the advance refunding of the City's 2002 Lease Revenue Bonds Series A, 2004 Lease Revenue Bonds Series A&B, and the 2013 Lease Revenue Refunding Bonds Series A. The Series A bonds mature annually through May 1, 2044, in amounts ranging from $460,000 to $125,000, with interest rates that range from 4.0% to a maximum of 5.0% over the term of the bonds. The Series B bonds mature annually through May 1, 2030, in amounts ranging from $345,000 to $500,000, with interest rates that range from 2.953% to a maximum of 4.469% over the term of the bonds. The bonds are payable from lease payments as rental for certain public facilities. The reserve requirement was fully funded as of June 30, 2021. The outstanding principal balance as of June 30, 2021 was $22,190,000. City of West Covina Notes to Financial Statements Year Ended June 30, 2021 8) LONG-TERM LIABILITIES - Continued The following represents the future annual debt service requirements: Fiscal Year Ending June 30, 2022 2023 2024 2025 2026 2027 - 2031 2032 - 2036 2037 - 2041 2042 - 2044 Total 2020 Lease Revenue Bonds, Series A Principal Interest Total $ 870,000 $ 991,076 $ 1,861,076 910,000 952,011 1,862,011 950,000 910,569 1,860,569 990,000 866,750 1,856,750 1,040,000 820,871 1,860,871 5,930,000 3,323,880 9,253,880 7,390,000 1,776,200 9,166,200 3,750,000 331,200 4,081,200 360,000 29,200 389,200 $ 22,190,000 $ 10,001,757 $ 32,191,757 On July 23, 2020, the City issued $204,095,000 of Lease Revenue Bonds, Series A (taxable) to provide financing to pay the City's unfunded pension liabilities to CalPERS, to establish a reserve fund, and pay issuance costs. The Series A bonds mature annually through August 1, 2044, in amounts ranging from $3,645,000 to $16,105,000, with interest rates that range from 1.747% to a maximum of 3.892% over the term of the bonds. The bonds are payable from lease payments as rental for certain public facilities. The reserve requirement was fully funded as of June 30, 2021. The outstanding principal balance as of June 30, 2021 was $204,095,000. The following represents the future annual debt service requirements: Fiscal Year Ending June 30, Principal Interest Total 2022 $ 3,645,000 $ 7,049,885 $ 10,694,885 2023 3,925,000 6,981,799 10,906,799 2024 4,210,000 6,904,083 11,114,083 2025 4,525,000 6,813,563 11,338,563 2026 4,560,000 6,711,662 11,271,662 2027-2031 28,370,000 31,451,914 59,821,914 2032-2036 40,055,000 25,987,515 66,042,515 2037-2041 55,805,000 17,115,632 72,920,632 2042-2045 59,000,000 4,765,754 63,765,754 Total $ 204,095,000 $ 113,781,807 $ 317,876,807 Claims Payable Claims payable are typically paid from the City's Internal Service Self -Insurance Fund. There is no fixed payment schedule for claims liabilities. Compensated Absences The liability of $3,915,868 represents the governmental activities portion of total unpaid vacation and compensation time earned by employees of the City. There is no fixed payment schedule for earned but unpaid compensated absences. The General Fund typically has been used to liquidate the liability for compensated absences. The liability of $18,573 represents the business -type activity portion of total unpaid vacation and compensation time earned by employees of the City. There is no fixed payment schedule for earned but unpaid compensated absences. 53 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 9) SELF-INSURANCE The City is exposed to various risks of loss related to its operation, including losses associated with errors and omissions, injuries to employees and members of the public. The City's Internal Service Self -Insurance Fund is used to account for and finance its uninsured risks of loss. Description of Self -Insurance Pool Pursuant to Joint Powers Agreement As of July 1, 2020, the City is a member of the California Joint Powers Insurance Authority (Authority). The Authority is composed of 123 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self -insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The Authority began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine -member Executive Committee. The City participates in the excess workers' compensation and excess general liability programs of the Authority. Excess Liability Program Liability coverage includes auto liability, employment practices liability, public officials' errors and omissions, bodily injury, personal injury, third party property damage, advertising injury, and employee benefit administration liability. The City has a retained limit of $1,000,000 per occurrence. The overall coverage limit for each member, including all layers of coverage, is $50 million per occurrence. The coverage structure is composed of a combination of pooled self-insurance, reinsurance, and excess insurance. Additional information concerning the coverage structure is available on the Authority's website: hftr)s://c Dia.org/coverage/risk sharing -pools . Excess Workers' Compensation Program The City has a retained limit of $1,000,000 per occurrence for workers' compensation claims. The Authority's pooled retention is $1 million per occurrence with reinsurance to statutory limits under California Workers' Compensation Law. Employer's Liability losses are pooled among members to $1 million. Coverage from $1 million to $5 million is purchased through reinsurance policies, and Employer's Liability losses from $5 million to $10 million are pooled among members. Purchased Insurance Pollution Legal Liability Insurance The City of West Covina participates in the pollution legal liability insurance program which is available through the Authority. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City of West Covina. Coverage is on a claims -made basis. There is a $250,000 deductible, with a limit of $5 million per member. Property Insurance The City of West Covina participates in the All -Risk Property Protection Program. This insurance protection is underwritten by several insurance companies. The City's property is currently insured according to a schedule of covered property submitted by the City to the Authority. The total insured value of scheduled City property is $97,026,667. There is a $10,000 deductible per occurrence except for non -emergency vehicle insurance which has a $2,500 deductible. 54 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 9) SELF-INSURANCE - Continued Crime Insurance The City of West Covina participates in the Crime Insurance Program. Formerly called Blanket Fidelity Bond, this policy covers faithful performance, depositor's forgery, theft of money and securities, and computer fraud related to the transfer of money. The policy limit is $3,000,000, and the deductible is $2,500. Adequacy of Protection During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that exceeded pooled or insured coverage. There were also no significant reductions in pooled or insured liability coverage in 2020-21. Claims and Judgments The City accounts for uninsured, material claims and judgments and associated legal and administrative costs when it is probable that the liability claim has been incurred and the amount of the loss can be reasonably estimated. Included therein are claims incurred but not reported, which consists of (a) known loss events expected to be presented as claims later, (b) unknown loss events that are expected to become claims, and (c) expected future development on claims already reported. This is based upon historical actual results that have established a reliable pattern supplemented by specific information about current matters. Small dollar claims and judgments are recorded as expenditures when paid. The claims and judgments liability reported in the Internal Service Self -Insurance Fund is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims and judgments be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. Claims and judgments payable, including estimated claims for incurred but not reported claims, amounted to $12,740,483 as of June 30, 2021. In the past three years, no claims for general liability or workers' compensation have exceeded the City's purchased insurance coverage. Changes in the claims and judgments payable amounts for the past two fiscal years for the Self -Insurance Fund are as follows: Year Ended Beginning June 30, of Year 2021 $ 13,178,903 2020 10,056,183 Claims and Changesin Est mates $ 1,521,315 8,147,744 Claim End Payments of Year $ 1,959,735 $ 12,740,483 5,025,024 13,178, 903 55 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 10) NON -CITY OBLIGATION DEBT Emanate Health, a California nonprofit public benefit corporation (Corporation), has requested that the California Statewide Communities Development Authority (CSCDA) participate in the issuance of one or more series of revenue bonds (Bonds) in an aggregate principal amount not to exceed $260,000,000, for the acquisition, construction, equipping, improvement, renovation, rehabilitation and/or remodeling of hospital, health care and related facilities (Project) to be owned and operated by the Corporation or one of its affiliates. For each component of the Project, the issuance of the Bonds by the CSCDA must be approved by the applicable city in which the component of the Project is located before construction can begin. One component of the Project consists of the construction of two separate buildings at the Queen of the Valley Hospital campus located in West Covina. On May 19, 2020, the City Council approved the issuance of the Bonds and Refunding Bonds by the CSCDA for the purposes of financing and/or refinancing the Project via the adoption of the resolution number 2020-26. 11) FUND BALANCE CLASSIFICATIONS The City's governmental fund balances at June 30, 2021, are presented below: West Covina State Other General Flousing Gras Citywide Governmental Fund Authority Tax ARPA Debt Funds Total Nonspendable: Prepaid Items $ 133,372 $ - $ - $ - $ - $ - $ 133,372 Advances to Successor Agency 588,948 - - - - - 588,948 Advances to Other Funds 279,529 - - - - - 279,529 Land Field for Resale 3,007,802 - - - - - 3,007,802 Restricted for: Affordable Housing - 24,008,323 - - - - 24,008,323 Debt Service - - - - 19,899,380 - 19,899,380 Pension Trust 9,440 - - - - - 9,440 Community Services - - - - - 2,809,029 2,809,029 Public Safety - - - - - 7,773,492 7,773,492 Public Works - - 5,725,916 - - 31,982,022 37,707,938 Assigned: Capital Improvement - - - - - 9,687,492 9,687,492 Unassigned 21,468,986 - - - - (228,168) 21,240,818 Total Fund Balances $ 25,488,077 $ 24,008,323 $ 5,725,916 $ $ 19,899,380 $ 52,023,867 $127,145,563 12) DEFICIT FUND BALANCES The following funds reported deficits in fund balances/net position as of June 30, 2021: Deficit Non -Major Special Revenue Governmental Funds: Balance Transportation Development Act Fund $ 60,457 Auto Plaza Improvement District 109,936 Measure H 57.776 3s City of West Covina Notes to Financial Statements Year Ended June 30, 2021 12) DEFICIT FUND BALANCES - Continued The deficit of $60,457 and $57,776 in the Transportation Development Act and Measure H Fund, respectively, are the results of expenditures incurred prior to reimbursement from grantors. The deficits will be eliminated through future grant revenues. The Auto Plaza Improvement District deficit of $57,776 will be reduced as the fund pays back the advance from the General Fund. 13) PENSION PLAN SUMMARY The City currently has a total of two pension plans administered by CaIPERS and two retirement enhancement plans administered by PARS. The pension plans consist of a miscellaneous agent plan and a safety agent plan (see Note 14 for a full description of the plans). The retirement enhancement plan consists of an EPMC replacement supplemental retirement plan and a supplemental retirement plan for executive staff and City Council (see Note 15 for a full description of the plans). The summary of the pension related liability, deferred inflows of resources and deferred outflows of resources are as follows: Miscellaneous Safety Plan Plan EPMC EXEC Total Deferred Outflows of Resources $ 42,116,926 $ 149,096,249 $ 377,650 $ 89,960 $ 191,680,785 Deferred Inflows of Resources 358,535 1,834,180 68,158 2,260,873 Pension Liability 47,701,389 148,639,757 1,121,237 4,439,524 201,901,907 14) EMPLOYEE RETIREMENT PLANS General Information about the Pension Plans Plan Descriptions: All qualified permanent and probationary employees are eligible to participate in the City's separate Miscellaneous and Safety Plans, an agent multiple -employer defined benefit pension plan administered by the California Public Employees' Retirement System (CaIPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the plan are established by State statute and Local Government 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: The Plans are agent multiple -employer defined benefit pension plans administered by the California Public Employees' Retirement System (CaIPERS). A full description of the pension plans regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the plans' June 30, 2019 Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CaIPERS' audited financial statements are publicly available reports that can be obtained at CaIPERS' website. 57 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 14) EMPLOYEE RETIREMENT PLAN — Continued The Plans' provisions in effect at June 30, 2021, are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates (1) - Depending on years of service Miscellaneous Prior to On or after Prior to On or after January 1, 2011 January 1, 2011 January 1, 2013 January 1, 2013 2.0% @ 55 2.5% @ 55 2.0% @ 55 2% @ 62 5 years service 5 years service 5 years service 5 years service monthly for life monthly for life monthly for life monthly for life 50-67+ 50-67+ 50-67+ 52-67+ (1) (1) (1) (1) 0% 8.00% 7% 6.250% 9.236% + $3,396,933 9.236% 9.236% 9.236% Prior to Prior to On or after July 1, 2012 January 1, 2013 January 1, 2013 3% @ 50 3% @ 55 2.7% @ 57 5 years service 5 years service 5 years service monthly for life monthly for life monthly for life 50 & up 50-55+ 50-57+ (1) (1) (1) 9% 9% 12.75% 21.949% + $10,090,945 21.949% 21.949% *New hires who are already enrolled in CalPERS are eligible for benefits under the Tier II, and other new hires are enrolled in the PEPRA rate plans. Employees Covered: At June 30, 2021 (June 30, 2019 valuation date), the following number of employees were covered by the benefit terms for the Plan: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total Miscellaneous Safety 445 347 277 126 70 152 848 569 3; City of West Covina Notes to Financial Statements Year Ended June 30, 2021 14) EMPLOYEE RETIREMENT PLAN — Continued Contributions: Section 20814(c) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaIPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. It is the responsibility of the employer to make necessary accounting adjustments to reflect the impact due to any Employer -Paid Member Contributions or situations where members are paying a portion of the employer contribution. Net Pension Liability The City's net pension liability for the Plans is measured as the total pension liability, less the pension plans' fiduciary net position. The net pension liability of the Plans is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions: The total pension liabilities in the June 30, 2019 actuarial valuations were determined using the following actuarial assumptions: Valuation date June 30, 2019 Measurement date June 30, 2020 Actuarial cost method entry -age normal Actuarial assumptions: Discount rate 7.15% Inflation 2.50% Projected salary increase (1) Investment rate of return 7.15% Mortality (2) Post Retirement Benefit Increase (3) (1) Depending on age, service and type of employment (2) Derived using CaIPERS' Membership Data for all Funds. (3) The lesser contract COLA or 2.5% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.5% thereafter 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. City of West Covina Notes to Financial Statements Year Ended June 30, 2021 14) EMPLOYEE RETIREMENT PLAN — Continued Long-term Expected Rate of Return - The long-term expected rate of return on pension plan investments was determined using a building-block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, 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, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short- term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The expected real rates of return by asset class are as follows: New Strategic Asset Class Allocation Global Equity 50% Global Fixed Income 28% Inflation Assets - Private Equity 8% Real Assets 13% Liquidity 1 % (1) An expected inflation of 2.0% used for this period. (2) An expected inflation of 2.92% used for this period Real Return Years 1 - 10 (1) Real Return Years 11+ (2) 4.80% 5.98% 1.00% 2.62% 0.77% 1.81% 6.30% 7.23% 3.75% 4.93% - -0.92% Discount Rate - The discount rate used to measure the total pension liability for PERF C 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 statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in Net Pension Liability The changes in the Net Pension Liability for the Miscellaneous and Safety Plans are as follows: -2 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 14) EMPLOYEE RETIREMENT PLAN — Continued Miscellaneous Increase (Decrease) Pension Plan Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) Balance at June 30, 2019 (June 30, 2020 reporting date) $ 161,363,763 $ 115,332,254 $ 46,031,509 Changes in the year: Service cost 1,230,251 - 1,230,251 Intereston the total pension liability 11,161,901 11,161,901 Changes of benefit terms - - Differences between expected and actual experience (956,094) (956,094) Changes in assumptions - - Contributions from the employer - 3,588,307 (3,588,307) Contributions from employees - 658,924 (658,924) Net investment income - 5,681,537 (5,681,537) Benefit payments, including refunds (9,824,549) (9,824,549) - Administrative/other expense - (162,590) 162,590 Netchanges 1,611,509 (58,371) 1,669,880 Balance at June 30, 2020 (June 30, 2021 reporting date) $ 162,975,272 $ 115,273,883 $ 47,701,389 Increase (Decrease) Pension Plan Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) Balance at June 30, 2019 (June 30, 2020 reporting date) $ 396,192,719 $ 251,509,957 $ 144,682,762 Changes in the year: Service cost 5,180,535 - 5,180,535 Interest on the total pension liability 27,556,923 27,556,923 Changes of benefit terms - - Differences between expected and actual experience (2,269,271) (2,269,271) Changes in assumptions - - Contributionsfromtheemployer - 12,592,111 (12,592,111) Contributions from employees - 1,806,665 (1,806,665) Net investment income - 12,466,983 (12,466,983) Benefit payments, including refunds (22,204,388) (22,204,388) Administrative/other expense - (354,567) 354,567 Netchanges 8,263,799 4,306,804 3,956,995 Balance at June 30, 2020 (June 30, 2021 reporting date) $ 404,456,518 $ 255,816,761 $ 148,639,757 Sensitivity of the Net Pension Liability to Changes in the Discount Rate: The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage - point lower (6.15 percent) or 1 percentage -point higher (8.15 percent) than the current rate: 61 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 14) EMPLOYEE RETIREMENT PLAN — Continued Miscellaneous Safety 1% Decrease 6.15% 6.15% Net Pension Liability $ 67,441,876 $ 201,618,362 Current Discount Rate 7.15% 7.15% Net Pension Liability $ 47,701,389 $ 148,639,757 1% Increase 8.15% 8.15% Net Pension Liability $ 31,334,486 $ 105,031,919 Pension Plan Fiduciary Net Position: Detailed information about the pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2021, the City recognized pension expense of $4,774,157 for the Miscellaneous Plan and $18,842,303 for the Safety Plan. At June 30, 2021, the City reported deferred outflows and deferred inflows for the Miscellaneous and Safety Plans from the following sources: Miscellaneous Safety Deferred Outflows Deferred Inflows Deferred Outflows Deferred Inflows of Resources of Resources of Resources of Resources Pension contributions subsequent to measurement date $ 41,343,285 $ - $ 146,564,102 $ - Differences between actual and expected experience - 358,535 702,480 1,560,124 Changes in assumptions - - - 274,056 Net differences between projected and actual earnings on plan investments 773,641 - 1,829,667 - Total $ 42,116,926 $ 358,535 $ 149,096,249 $ 1,834,180 The $41,343,285 and $146,564,102 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Other amounts reported as deferred outflows and deferred inflows related to pensions will be recognized as pension expense as follows: Deferred Outflows/Inflows of Year Ending Resources, Net June 30, Miscellaneous Safety 2022 $ (924,592) $ (1,472,867) 2023 283,003 (389) 2024 587,511 1,134, 267 2025 469,184 1,036,956 2026 - - Thereafter Payable to the Pension Plan: The City had no outstanding contributions to the pension plan required for the year ended June 30, 2021. M City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) A) General Information about the EPMC Replacement Supplemental Pension Plan Plan Description and Benefits Provided Effective November 1, 2007, the City established an agent multiple -employer defined benefit plan to supplement the current CalPERS retirement benefits that is to be administered for the City by the Public Agency Retirement System (PARS), a third -party administrator. The plan meets the requirements of a pension trust under California Government Code. Phase II Systems is the PARS Trust Administrator. The plan does not issue separate financial reports. The EPMC Replacement Plan was established to replace a long-standing benefit for city employees no longer allowed by CalPERS. The plan provides for a benefit in an amount equal to the member's years of service, times the member's final pay, times the CalPERS age factor, times .70% for miscellaneous employees (times .89% for safety employees). At the time of retirement, employees will make an election to receive either a lump sum payment or receive ongoing stipends over their lifetime. Employees shall be eligible to receive benefits underthis plan if he or she meets all of the following requirements under one of the following tiers: Tier 1 • Full time miscellaneous employees on or after July 1, 2004 but hired prior to July 1, 2011. • Classified as a department head or city council, employee represented by the Confidential Employees' Association, General Employees' Association, West Covina Maintenance and Crafts Employees' Association, Mid -Management Employees' Association and Non -Sworn Support Employees' Association. • Has had compensable earnings under CalPERS impacted by CalPERS regulation, thereby causing a reduction in CalPERS benefits. • At least fifty (50) years of age. • Has completed at least one year of employment. • Has terminated employment with the City and concurrently retired under • CalPERS under a regular service retirement and remains in retired status under CalPERS. • Has applied for benefits under this plan. Tier 2 • Full time miscellaneous employees on or after July 1, 2004 but hired prior to July 1, 2011. • Fire safety employee on or after July 1, 2004 but hired prior to July 1, 2012. • Police management employee on or after July 1, 2004 but hired prior to December 31, 2012, or an employee hired prior to January 1, 2013 who promotes or transfers to police management position on or after January 1, 2013. • Not represented by the West Covina Police Officers Association. • Has had compensable earnings under CalPERS impacted by CalPERS regulation, thereby causing a reduction in CalPERS benefits. • At least fifty (50) years of age. • Has completed at least one year of employment 63 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued Has terminated employment with the City and concurrently retired under CaIPERS under a regular service retirement, and remains in retired status under CalPERS. Has applied for benefits under this plan. Contributions - The City makes all contributions to these plans. Participants do not make any contributions. The actuarially required contribution is determined on the funding policy and most recent measurement available when the contribution for the reporting period was adopted. The City is funding the plan to pay the benefit payments payable each year. The City's contribution for the year ended June 30, 2021 was $52,666. Employees Covered At June 30, 2019, the valuation date, the following employees were covered by the benefit terms for the plan: EPMC Inactive employees or beneficiaries currently receiving benefits 39 Active employees 109 Total Net Pension Liability 148 The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions - The total pension liabilities in the June 30, 2019 actuarial valuations were determined using the following actuarial assumptions: EPMC Valuation date June 30, 2019 Measurement date June 30, 2020 Actuarial cost method entry -age normal Actuarial assumptions: Discount rate 6.00% Inflation 2.75% Mortality CaIPERS 1997-2015 Experience Study Mortality Improvement Mortality projected fully generation with scale MP-2019 64 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued Discount Rate GASB 67 and 68 generally require that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan's Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 and 68 will often require that the actuary performs complex projections of future benefit payments and asset values. The following circumstances were included in the evaluation of sufficiency for the City: • Annual contributions of 0.7% of payroll (closed group basis) are assumed (beginning with 2015/16). • Benefit payments are annually withdrawn from the Trust until assets are exhausted and then benefit payments made directly by the City. • All cash flows are assumed to occur on average halfway through the year. • The long-term expected rate of return on pension plan investments is 6.25%. • The actuarial assumptions do not change. • GASB 67 and 68 specify that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan's funded position. Based on these circumstances, it is the actuary's opinion that a depletion date projection is not appropriate. Therefore, the discount rate is based on the projected portion of the Total Pension Liability funded by the Fiduciary Net Position in each future year. For the funded portion, the long-term expected rate of return on pension plan investments (6.25%) was used. For the unfunded portion, the Bond Buyer 20-Bond Go Index as of the June 30, 2020, measurement date (2.67%) was used. The discount rate used (2.67%) represents the single equivalent rate of return, as described under GASB 68 (paragraph 31). The best -estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The table bellows reflects the long-term expected real rate of return by asset class: Target Expected Real Asset Class Allocation Rate of Return Equity 58% 4.82% REITs 2% 3.76% Fixed Income 35% 1.47% Cash 5% 0.06% Total 100.00% 65 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued The plan's fiduciary net position was not projected to be available to make all projected future benefit payments of current retirees. Therefore, the discount rate for calculating the total pension liability is equal to the single equivalent rate that results in the same actuarial present value as the long-term expected rate of return applied to benefit payments, to the extent that the plan's fiduciary net position is projected to be sufficient to make projected benefit payments, and the municipal bond rate applied to benefit payments, to the extent that the plan's fiduciary net position is not projected to be sufficient. The City chose the Bond Buyer General Obligation 20-Bond Index resulting in the use of a 2.67% discount rate (single equivalent rate of return) in calculating the pension liability. Changes in the Net Pension Liability The changes in the net pension liability for the Plan are as follows: Increase (Decrease) Total Plan Fiduciary Net Pension Pension Liability Net Position Liability/(Asset) Balance at June 30, 2019 (June 30, 2020 reporting date) $ 1,092,902 $ 141,856 $ 951,046 Changes in the year: Service cost 30,564 - 30,564 Interest on the total pension liability 41,806 41,806 Changes of benefit terms - - Differences between expected and actual experience - - Changes in assumptions 146,898 - 146,898 Contributions from the employer - 56,957 (56,957) Net investment income 2,908 (2,908) Benefit payments, including refunds (103,008) (103,008) - Administrative/other expense - (10,788) 10,788 Netchanges 116,260 (53,931) 170,191 Balance at June 30, 2020 (June 30, 2021 reporting date) $ 1,209,162 $ 87,925 $ 1,121,237 Sensitivity of the Net Pension Liability to Changes in the Discount Rate — The following presents the net pension liability (asset) of the City for the Plan, calculated using the discount rate for the Plan, 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: 1% Decrease 1.67% Net Pension Liability $ 1,271,453 Current Discount Rate 2.67% Net Pension Liability $ 1,121,237 1% Increase 3.67% Net Pension Liability $ 999,183 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2021, the City recognized pension expense of $135,514 for the Plan. At June 30, 2021, the City reported deferred outflows and deferred inflows related to the Plan from the following sources: Pension contributions subsequent to measurement date Differences between actual and expected experience Changes in assumptions Net differences between projected and actual earnings on plan investments Total Deferred Outflows Deferred Inflows of Resources 52,666 83,803 237,757 3,424 of Resources 14,400 53,758 $ 377,650 $ 68,158 The $52,666 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Other amounts reported as deferred outflows and deferred inflows related to pensions will be recognized as pension expense as follows: Year Ending June 30, EPMC 2022 $ 55,744 2023 48,130 2024 44,260 2025 43,762 2026 41,954 Thereafter 22,976 Payable to the Pension Plan: The City had no outstanding contributions to the pension plan required for the year ended June 30, 2021. B) Supplemental Retirement Plan for Executive Staff and City Council Pension Plan Plan Description and Benefits Provided Effective November 1, 2007, the City established a agent multiple -employer defined benefit plan to supplement the current CalPERS retirement benefits that is to be administered for the City by with the Public Agency Retirement System (PARS), a third -party administrator. The plan meets the requirements of a pension trust under California Government Code. Phase 11 Systems is the PARS Trust Administrator. The plan does not issue separate financial reports and is closed to new hires. This agent multiple -employer defined benefit pension plan is separated into three tiers. 67 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued Tier 1 (full-time non -safety Department Head and the City Manager) and Tier 2 (City Council) provides an additional retirement amount to miscellaneous department heads, City Manager and City Council in an amount equal to the amount of $823 per month. This benefit amount increases each year by CPI, up to 2%. In order to be eligible for this benefit, participants must have five years of service with the City and must retire into PERS from the City. Tier 3 (City Manager) provides an increased retirement benefit to a former City Manager consistent with the terms of his contract. It will convert the retirement formula for all years of prior CaIPERS service at non -West Covina agencies to the CalPERS 2.5% @ 55 formula currently in place with the City of West Covina. Contributions All three tiers are combined for funding purposes in this plan. The City makes all contributions to these plans. Participants do not make any contributions. The actuarially required contribution is determined on a pay as you go funding policy and most recent measurement available when the contribution for the reporting period was adopted. The City is funding the plan to pay the benefit payments payable each year. The City's contribution for the year ended June 30, 2021 was $79,364. Employees Covered At June 30, 2019, the measurement date, the following employees were covered by the benefit terms for the plan: Inactive employees or beneficiaries currently receiving benefits Active employees Total Net Pension Liability Supplemental 11 12 The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019. A summary of principal assumptions and methods used to determine the net pension liability is shown below. IMM City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued Valuation date Measurement date Actuarial cost method Actuarial assumptions: Discount rate Inflation Salary Increase Benefit Increase Mortality Investment Rate of Return Discount Rate Supplemental June 30, 2019 June 30, 2020 entry -age normal 3.63% 2.75% 3.00% 2.00% CalPERS 1997-2015 Experience Study 6.25% GASB 67 and 68 generally require that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan's Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AAIAa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 and 68 will often require that the actuary perform complex projections of future benefit payments and asset values. GASB 67 (paragraph 43) and 68 (paragraph 29) do allow for alternative evaluations of projected solvency, if such evaluation can reliably be made. GASB does not contemplate a specific method for making an alternative evaluation of sufficiency; it is left to professional judgment. The following circumstances justify an alternative evaluation of sufficiency for the City: • The City ceased contributions and withdrawals from the Trust. The City will pay benefits directly to retirees until the trust is sufficient, on an expected basis, to pay all remaining benefits. • All cash flows are assumed to occur on average halfway through the year. • The long-term expected rate of return on pension plan investments is 6.25%. • The actuarial assumptions do not change. • GASB 67 and 68 specify that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan's funded position. Based on these circumstances, it is the actuary's opinion that a depletion date projection is not appropriate. Therefore, the discount rate is based on the projected portion of the Total Pension Liability funded by the Fiduciary Net Position in each future year. For the funded portion, the long-term expected rate of return on pension plan investments (6.25%) was used. For the unfunded portion, the Bond Buyer 20-Bond Go Index as of the June 30, 2019, measurement date, (3.50%) was used. The discount rate used (3.63%) represents the single equivalent rate of return, as described under GASB 68 (paragraph 31). C�, City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued The best -estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The table below reflects the long-term expected real rate of return by asset class: Asset Class Equity REITs Fixed Income Cash Total Target Allocation 58% 2% 35% 5% 100.00% Expected Real Rate of Return 4.82% 3.76% 1.47% 0.06% The plan's fiduciary net position was not projected to be available to make all projected future benefit payments of current retirees. Therefore, the discount rate for calculating the total pension liability is equal to the single equivalent rate that results in the same actuarial present value as the long-term expected rate of return applied to benefit payments, to the extent that the plan's fiduciary net position is projected to be sufficient to make projected benefit payments, and the municipal bond rate applied to benefit payments, to the extent that the plan's fiduciary net position is not projected to be sufficient. The City chose the Bond Buyer General Obligation 20-Bond Index resulting in the use of a 3.63% discount rate (single equivalent rate of return) in calculating the pension liability. Changes in the Net Pension Liability The changes in the net pension liability, with a measurement date of June 30, 2020, for the Plan are as follows: Increase (Decrease) Total Plan Fiduciary Net Pension Pension Liability Net Position Liability/(Asset) Balance at June 30, 2019 (June 30, 2020 reporting date) $ 4,020,306 $ 534,237 $ 3,486,069 Changes in the year: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience Changes in assumptions Contributions from the employer Net investment income Benefit payments, including refunds Administrative/other expense Netchanges Balance at June 30, 2020 (June 30, 2021 reporting date) 14,068 14,068 143,620 143,620 879,137 - 879,137 - 77,814 (77,814) 15,031 (15,031) (155,804) (155,804) - - (9,475) 9,475 881,021 (72,434) 953,455 $ 4,901,327 $ 461,803 $ 4,439,524 70 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 15) PUBLIC AGENCY RETIREMENT SYSTEM (PARS) - Continued Sensitivity of the Net Pension Liability to Changes in the Discount Rate — The following presents the net pension liability (asset) of the City for the Plan, calculated using the discount rate for the Plan, 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: 1% Decrease 1.36% Net Pension Liability $ 5,351,973 Current Discount Rate 2.36% Net Pension Liability $ 4,439,524 1% Increase 3.36% Net Pension Liability $ 3,725,913 For the year ended June 30, 2021, the City recognized pension expense of $1,023,170. At June 30, 2021, the City reported deferred outflows and deferred inflows related to the Plan from the following sources: Pension contributions subsequent to measurement date Differences between actual and expected experience Changes in assumptions Net differences between projected and actual earnings on plan investments Total Deferred Outflows of Resources Deferred Inflows of Resources $ 79,364 $ 10,596 $ 89,960 $ The $79,364 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2022. Other amounts reported as deferred outflows and deferred inflows related to pensions will be recognized as pension expense as follows: Year Ending June 30, Supplemental 2022 $ 786 2023 3,293 2024 3,460 2025 3,057 2026 - Thereafter Payable to the Pension Plan: The City had no outstanding contributions to the pension plan required for the year ended June 30, 2021. 71 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 16) DEFINED CONTRIBUTION RETIREMENT PLAN During the 1991-1992 fiscal year, the City established the West Covina Part -Time Retirement Plan, a defined contribution retirement plan, for all non -benefited, part-time employees in accordance with Internal Revenue Code Section 457, to conform to Section 3121(b)(7)(F) of the Internal Revenue Code added by the Omnibus Budget Reconciliation Act of 1990. The plan is administered by Nationwide Retirement Solutions. The plan was established by the authority of the City Council who retains the authority to amend the plan. A defined contribution pension plan provides pension benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual's account are to be determined instead of specifying the amount of benefits the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant's account and the returns earned on investments of the contributions. Part-time, non -benefited, non-persable employees of the City must participate in the plan. During 2012-13, 195 part-time employees participated in the plan. All contributions to the plan vest immediately. An employee who leaves the City is entitled to all contributions and earnings applied to the individual's account through the date of separation, less legally required income tax withholding. Contribution levels into the deferred compensation plan were established by City Council resolution at 0% for the City and 7.5% for non -benefited, non-persable part-time employees. During the year, total required and actual contributions amounted to $70,471 and covered payroll for the year ended June 30, 2021 totaled $505,371. No contributions were made by the City and employees contributed $70,471 (7.72% of current covered payroll). Total plan assets at June 30, 2021 were $539,634. Plan assets are held in trust for the exclusive benefit of participants and their beneficiaries and, therefore, are not included in the financial statements. 17) OTHER POST EMPLOYMENT BENEFITS General Information About the OPEB Plan Plan Descriptions Medical - The City administers a single -employer defined benefit plan which provides healthcare benefits to eligible retirees and their dependents in accordance with various labor agreements. City paid amounts are capped at varying amounts depending on employee's bargaining unit, as follows: • Police: • Fire: $1,005 per month for employees hired before July 1, 2012, with five years of sworn service or hired after July 1, 2012, with more than twenty years of sworn service PEMHCA minimum amount ($122 and $125 per month in calendar years 2015 and 2016, respectively) for employees hired after July 1, 2012, with less than twenty years of sworn service $1,005 per month for employees hired before July 1, 2012, with five years of sworn service EMHCA minimum amount ($122 and $125 per month in calendar years 2015 and 2016, respectively) for employees hired after July 1, 2012 72 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 17) OTHER POST EMPLOYMENT BENEFITS - Continued • Miscellaneous: o PEMHCA minimum amount ($122 and $125 per month in calendar years 2015 and 2016, respectively). Life Insurance - Eligible retirees, in accordance with various labor agreements, receive life insurance benefits from the City as follows: $500 Confidential/Exempt, General, Maintenance and Non -Sworn Safety bargaining units $10,000 Executive Management, Mid -Management, Police Management (retired after September 1, 2006), Fire Management and Fire bargaining units $10,500 Police bargaining unit Employees Covered by Benefit Terms - As of the June 30, 2019 actuarial valuation, the following current and former employees were covered by the benefit terms under the Plan: Active Employees 275 Inactive employees entitled to, but not yet receiving benefits 258 Retirees or spouses of retirees currently receiving benefits 35 Total 568 Contributions - The contribution requirements of plan members and the City are established and may be amended by City Council. The contribution required to be made under City Council and bargaining unit requirements is based on a pay-as-you-go basis (i.e. as medical insurance premiums become due). For fiscal year ended June 30, 2021, the City contributed $2,520,250 to the plan, including $2,070,250, for current premiums (100% of total premiums), and $450,000 of implied subsidy premiums. Total OPEB Liability - The City's total OPEB liability was measured as of June 30, 2020 and the total OPEB liability determined by an actuarial valuation dated June 30, 2019, based on the following actuarial methods and assumptions: Valuation Date Actuarial Cost Method Mortality Health Care Trend Rate PENHCAMnimum Increase Inflation Rate Salary Changes Discount Rate June 30, 2019 Entry Age Actuarial Cost CalPERS 1997-2015 Experience Study Non -Medicare - 7.25% for 2021, 4% ultimate Medicare - 6.3% for 2021, 4% ultimate 4.25%Annually 2.75% 3.00% 2.21 % at June 30, 2020 3.50% at June 30, 2019 Discount Rate - The discount rate used to measure the total OPEB liability was 2.21 % at June 30, 2020. 73 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 17) OTHER POST EMPLOYMENT BENEFITS —Continued Changes in the Total OPEB Liability Balance at June 30, 2020 (2019 Measurement Date) Changes in the year: Service cost Interest on the total OPEB liability Changes of assumptions Total OPEB Liability (TOL) $ 61,293,027 1,575,501 2,156,480 13,555,256 Benefit payments, including refunds (2,509,638) Net changes 14,777,599 Balance at June 30, 2021 (2020 Measurement Date) $ 76,070,626 Sensitivity of the Total OPEB Liability to changes in the Discount Rate - The following presents the total OPEB liability of the City if it were calculated using a discount rate that is 1-percentage-point lower or 1- percentage-point higher than the current discount rate: Discount Rate Valuation 1% Lower Discount Rate Discount Rate 1 % Higher Total OPEB liability (asset) $ 89,956,168 $ 76,070,626 $ 65,215,431 Sensitivity of the Total OPEB Liability to changes in the Healthcare Cost Trend Rates - The following presents the total OPEB liability of the District, as well as what the District's Total OPEB would be if it were calculated using a healthcare cost trend rate that is 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rate: Current Healthcare Cost 1% Decrease Trend Rate 1% Increase Total OPEB liability (asset) $ 71,089,972 $ 76,070,626 $ 81,873,347 OPEB Expense and Recognition of Deferred Outflows/Inflows of Resources Related to OPEB The Plan Fiduciary Net Position was $0 at the June 30, 2020 measurement date, as the City is not prefunding with an OPEB trust. The City does not have assets accumulated in a trust that meets the criteria of GASB 75 to pay related benefits. Gains and losses related to changes in total OPEB liability and fiduciary net position 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 net difference between projected and actual earnings on OPEB plan investments is amortized using the straight-line method over 5 years, while all other amounts are amortized over the expected average remaining service lifetime (EARSL) of plan participants, which was 5.1 years as of the 2019 valuation date. 74 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 17) OTHER POST EMPLOYMENT BENEFITS — Continued OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2021, the City recognized OPEB expense of $4,956,914. The City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: OPEB Contributions Subsequent to the Measurement Date Changes of Assumptions Net differences between expected and actual experience Total Deferred Deferred Outflows Inflows $ 2,520,250 $ - 12,734,787 3,403,718 1,106, 083 $ 15,255,037 $ 4,509,801 The $2,520,250 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2020 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ended June 30, 2022. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as expense as follows: Year Ending June 30, 2022 $ 1,217,713 2023 1,460,486 2024 2,518,624 2025 2,762,372 2026 265,791 Thereafter - 18) COMMITMENTS AND CONTINGENCIES A) In 1989, in order to assist in the expansion of the Fashion Plaza shopping center, the City enacted an ordinance to allow the Redevelopment Agency of the City of West Covina (the predecessor to the West Covina Community Development Commission) to receive the sales tax generated as a result of the expansion project. At the same time, the City enacted an ordinance providing a credit for sales tax payable by the developer in the amount equal to the sales tax due to the redevelopment agency. These sales tax ordinances and related agreements between the City and the Agency essentially transferred the sales tax increment due to the Fashion Plaza expansion project from the City to the Agency. B) On July 25, 2005, the Board of Directors of the former West Covina Community Development Commission adopted Resolution No. 2005-50. By this resolution, the Board of Directors authorized the Commission to reimburse the City of West Covina over a period of 17 years for the sales tax revenue that had essentially been shifted from the City to the Agency. These budgeted interfund transfers between the primary government of the City of West Covina and the former Community Development Commission will be recorded in the fiscal year that they result in a flow of current financial resources, as required by the measurement focus prescribed for governmental funds. As a result of the dissolution of the Redevelopment Agency, the Department of Finance has deemed this agreement as an unenforceable obligation. 75 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 19) SUCCESSOR AGENCY DISCLOSURES The assets and liabilities of the Commission's former non -housing redevelopment activities were transferred to the City in its fiduciary capacity as the Successor Agency to the Redevelopment Agency of the City of West Covina on February 1, 2012, as a result of the dissolution of California redevelopment agencies. These assets and liabilities and any activities related to them are reported in the City's fiduciary private -purpose trust fund financial statements. Disclosures related to these assets and liabilities are as follows: Assessment Receivable In connection with the Commission's issuance of its $51,220,000 1996 Special Tax Refunding Bonds, $32,520,000 in assessments receivable was recorded. The assessment is an annual special tax levied on the Community Facilities District No.1989-1 in an amount sufficient to ensure payment of the debt service on the 1996 Special Tax Refunding Bonds. This special tax supplements sales and property tax increment revenues that also support the debt service on the bonds. The assessments receivable outstanding as of June 30, 2021 was $9,115,000. Due from the City of West Covina As part of the dissolution process, AB1484 required the Successor Agency to have due diligence reviews of both the low and moderate -income housing funds and all other funds to be completed by October 15, 2012, and January 15, 2013, to compute the funds (cash) which were not needed by the Successor Agency to be retained to pay for existing enforceable obligations. The Successor Agency remitted $1,891,166 to the County Auditor -Controller (CAC) on December 19, 2012, for the low and moderate -income housing funds due diligence review. The due diligence review for all otherfunds was finalized with the final letter of determination issued by the DOF on April 24, 2013. The DOF determined that the principal and interest payments made by the former Community Development Commission totaling $12,205,531 on various loans from the City of West Covina for the period January 1, 2011, to June 30, 2012, were on loans not made within the first two years of the formation of the former redevelopment agency. The DOF ordered the Successor Agency to remit $11,578,351 to the CAC within five days from the date of the letter. City management, in consultation with its legal counsel, did not agree with the DOF's decision and filed a lawsuit to contest the decision. The City also did not remit the payments that were disallowed to the CAC. In December 2015, the City entered into a settlement agreement, which requires the City to repay the $11,578,351 over a period of 20 years. See additional details on the long-term payable in Note 8. As the City repays the Successor Agency, the Successor Agency will remit the amounts collected to the CAC. The City reported a long-term liability of $8,104,843 (reported as part of notes payable) in the governmental activities and a receivable of $8,104,843 in the Successor Agency related to the DOF's determination at June 30, 2021. Land Held for Resale Land held for resale is valued at the lower of cost or the sales price per contract with the developer. The land held for resale at June 30, 2021 was comprised of BKK Project in the amount of $54,279. W, City of West Covina Notes to Financial Statements Year Ended June 30, 2021 19) SUCCESSOR AGENCY DISCLOSURES — Continued Long -Term Liabilities Changes in long-term liabilities for the Successor Agency are as follows: Beginning Ending Due Within Balance Addibons Delebons Balance One Year 1996 Special Tax Bonds $ 12,695,000 $ - $ (3,735,000) $ 8,960,000 $ 4,055,000 Tax Allocation Bonds: Series 2017, Refunding 10,315,000 - (1,865,000) 8,450,000 1,615,000 Premium 209,648 - (14,975) 194,673 14,975 Developer Agreement Payable 72,652,056 7,601,892 80,253,948 - Total $ 95,871,704 $ 7,601,892 $ (5,614,975) $ 97,858,621 $ 5,684,975 1996 Special Tax Bonds In 1996, the Community Development Commission issued $51,220,000 of Special Tax Refunding Bonds comprised of $9,980,000 of serial bonds and $41,240,000 of term bonds to finance public parking facilities, street and other improvements located in or adjacent to the Community Development Commission Community Facilities District. The serial bonds matured during the fiscal year ended June 30, 2007. The term bonds bear interest at a rate from 5.75% to 6.0% payable semiannually and are due September 1, 2022. The term bonds are not subject to optional redemption; mandatory redemption begins September 1, 2007, then annually thereafter through September 1, 2022. Interest is payable semiannually on March 1 and September 1 of each year. The bonds are secured by and payable from a portion of the revenues derived from an annual special tax to be levied against all taxable real property within the Special Assessment District. In addition, the Commission has pledged certain other incremental revenues generated within the District consisting of property taxes and sales taxes. In addition, the reserve requirement of $5,002,670 was fully funded at June 30, 2021. There was a bond call on March 1, 2016, for $425,000. The outstanding principal balance of the bonds at June 30, 2021 was $8,960,000. The future debt service requirements for the bonds are as follows: Fiscal Year Ending June 30, Principal Interest Total 2022 $ 4,055,000 $ 415,950 $ 4,470,950 2023 4,905,000 147,150 5,052,150 Totals $ 8,960,000 $ 563,100 $ 9,523,100 FffA City of West Covina Notes to Financial Statements Year Ended June 30, 2021 19) SUCCESSOR AGENCY DISCLOSURES —Continued 2017 Tax Allocation Revenue Refunding Bonds On February 14, 2017, the Successor Agency issued Tax Allocation Revenue Refunding bonds, Series 2017A (Tax -Exempt) and 2017B (Federally Taxable). These bonds refinanced the 1998 Housing Set -Aside Tax Allocation Bonds Series A & B, the 2001 Housing Set -Aside Tax Allocation Revenue Bonds, the 2002 Tax Allocation Refunding Bonds and the 1999 Taxable Variable Rate Demand Tax Allocation Bonds. The bonds are payable from and secured solely from the Trust Estate, which will consist primarily of principal and interest payments on the Local Obligations to be purchased by the Authority as set forth in the Agency Indenture. The interest on the Series A bonds is payable semiannually on September 1 and March 1 of each year at interest rates ranging from 2% to 5%. The principal of the Series A bonds is due annually throughout 2026, in amounts ranging from $400,000 to $670,000. The interest on the Series B bonds is payable semiannually on September 1 and March 1 of each year at interest rates ranging from 1 % to 3.75%. The principal of the Series B bonds is due annually throughout 2032, in amounts ranging from $145,000 to $1,215,000. The required reserve of $1,537,074 at June 30, 2021 was fully funded. The principal balance of outstanding bonds at June 30, 2021 was $8,450,000. The future debt service requirements for the bonds are as follows: Fiscal Year Ending June 30, Principal 2022 $ 1,615,000 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Totals Developer Agreement Payable 1,425,000 1,255,000 1,290,000 1,200,000 145,000 415,000 425,000 435,000 150,000 95,000 Interest Total $ 253,006 $ 1,868,006 205,613 1,630,613 160,406 1,415,406 117,281 1,407,281 78,007 1,278,007 58,409 203,409 48,700 463,700 33,469 458,469 17,344 452,344 6,375 156,375 1,781 96,781 $ 8,450,000 $ 980,391 $ 9,430,391 On June 26, 1989, the Commission entered into an agreement with a developer to share certain future tax revenues generated by the Community Facilities District. Since 1992, the developer's share of revenues totaled $55,372,039, the unpaid balance accrues interest at a rate of 10%. The Commission has made payments to the developer totaling $21,678,037. The balance outstanding at June 30, 2021 was $80,253,948. 20) IMPLEMENTATION OF GASB PRONOUNCEMENTS The Governmental Accounting Standards Board has issued the following Statements, which may affect the City's financial reporting requirements in the future: 78 City of West Covina Notes to Financial Statements Year Ended June 30, 2021 20) IMPLEMENTATION OF GASB PRONOUNCEMENTS - Continued GASB 87 - Leases: This Statement requires recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. The requirements of this Statement are effective for reporting periods beginning after December 15, 2020. GASB 91 - Conduit Debt Obligations: The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice. The requirements of this Statement are effective for reporting periods beginning after December 15, 2021. 21) SPECIAL ITEM The City made additional contributions to the unfunded pension liabilities of the CalPERS Safety and Miscellaneous Plans totaling $172,543,016 using bond proceeds from the 2020 Lease Revenue Bonds. 22) RESTATEMENT OF NET POSITION/PRIOR PERIOD ADJUSTMENTS A restatement of $896,109 was made in the Statement of Activities — Governmental Activities and the Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds to recognize revenues earned as of July 1, 2020. 79 REQUIRED SUPPLEMENTARY INFORMATION City of West Covina Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - General Fund Year Ended June 30, 2021 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes Licenses and Permits Fines and Forfeitures Investment Income Rental Income Revenue from Other Agencies Charges for Services Other Revenues Total Revenues EXPENDITURES Current: General Government Public Safety Public Works Community Services Community Development Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) SPECIAL ITEM Payment towards Unfunded Pension Liability Net Change in Fund Balances Fund Balances, Beginning Prior Period Adjustment Fund Balances, Ending $ 52,367,400 $ 51,139,700 $ 59,832,639 $ 8,692,939 1,312,950 1,297,950 1,528,117 230,167 533,000 533,000 380,169 (152,831) 400,000 400,000 (633,939) (1,033,939) 988,054 988,054 952,185 (35,869) 1,012,500 3,101,300 2,999,183 (102,117) 5,327,600 5,232,600 6,243,487 1,010,887 3,200,639 2,900,639 1,690,578 (1,210,061) 65,142,143 65,593,243 72,992,419 7,399,176 4,764,352 9,242,602 6,823,237 2,419,365 51,481,855 52,670,266 55,278,177 (2,607,911) 4,000,287 4,044,655 4,220,203 (175,548) 2,929,245 2,797,810 1,508,777 1,289,033 452,384 336,434 398,262 (61,828) 63,628,123 69,091,767 68,228,656 863,111 1,514,020 (3,498,524) 4,763,763 8,262,287 106,302 186,902,886 186,796,578 (106,308) (1,620,322) (2,786,582) (13,408,972) (10,622,390) (1,514,020) 184,116,304 173,387,606 (10,728,698) - (172,543,016) (172,543,016) 8,074,764 19, 675, 324 19, 675, 324 5,608,353 (2,466,411) 19,675,324 204,400 204,400 $ 19,675,324 $ 27,750,088 $ 25,488,077 $ (2,262,011) Of