HomeMy WebLinkAboutC NotesCITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies
a. Description of the Reporting Entity
The City of Palm Desert was originally incorporated on November 26, 1973, as a
General Law City. In December 1997, Measure LL was enacted following a vote by
Palm Desert residents, which adopted a City Charter. The City operates under a
Council-Manager form of government and provides the following services: public safety
(police and fire), highways and streets, public improvements, community development
(planning, building and zoning) and general administrative services.
The City has defined its reporting entity in accordance with accounting principles generally
accepted in the United States of America which provides guidance for determining which
governmental activities, organizations and functions should be included in the reporting
entity. The Basic Financial Statements present information on the activities of the reporting
entity, which include the City of Palm Desert (the primary government) and its component
units, entities for which the government is considered financially accountable.
Accounting principles generally accepted in the United States of America require that the
component units be separated into blended or discretely presented units for reporting
purposes. The following criteria were used in determination of blended component units:
appointment of the governing board and fiscal dependence. Although legally separate
entities, blended component units are, in substance, part of the City’s operations.
Therefore, they are reported as part of the primary government. Discretely presented
component units are reported in a separate column in the basic financial statements to
emphasize that they are legally separate from the City.
Blended Component Units
Following are descriptions of legally separate component units for which the City is
financially accountable that are blended with the Primary Government. The governing
bodies of these component units are substantially the same with operational responsibility
as the City and provides a financial benefit.
The Palm Desert Housing Authority (Housing Authority) was established by the
City Council in January 1998, and is responsible for the administration of providing
affordable housing in the City. The Housing Authority transactions are reported in the
governmental funds balance sheet as a major fund.
The Palm Desert Financing Authority (Financing Authority) was formed on
January 26, 1989. The purpose of the Financing Authority is to issue debt and loan the
proceeds to the City and Agency. The Financing Authority’s capital related transactions
are reported in the governmental fund financial statements in the capital projects funds,
and the collection of assessments and payments of debt service is recorded in the
fiduciary funds.
The City Council of Palm Desert is the governing body for the Housing Authority and
Financing Authority.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Separate financial statements are not issued for the Housing Authority and
Financing Authority.
Discretely Presented Component Unit
The Palm Desert Recreational Facilities Corporation (Corporation) was incorporated on
February 25, 1997. The purpose of the Corporation is to lease, operate and manage a
restaurant and bar in the Desert Willow Golf Course in Palm Desert, California. The Board
of Directors of the Corporation appoints an executive director to administer operations.
The Corporation is in a separate column to emphasize that it is legally separate from the
City and is financially accountable to the City. The two-member board governing the
Corporation is appointed by the City Council, the City has authority to approve the
Corporation’s budget, and the City must approve any debt issued.
Complete financial statements of the Component Unit can be obtained from the City’s
administrative offices.
b. Basis of Presentation:
Government-Wide Financial Statements
The government-wide financial statements (i.e., the statement of net position and the
statement of activities) report information on all of the nonfiduciary activities of the primary
government and its component units. For the most part, the effect of interfund activity has
been removed from these statements. Governmental activities, which normally are
supported by taxes and intergovernmental revenues, are reported separately from
business-type activities, which rely to a significant extent on fees and charges for support.
Likewise, the primary government is reported separately from certain legally separate
component units for which the primary government is financially accountable.
The statement of activities demonstrates the degree to which the direct and indirect
expenses of a given function or segment are offset by program revenues. Direct expenses
are those that are clearly identifiable with a specific function or segment. 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 or segment, and 2) grants and
contributions that are restricted to meeting the operational or capital requirements of a
particular function or segment. Taxes and other items not properly included among
program revenues are reported instead as general revenues. Expenses reported for
functional activities include allocated indirect expenses.
Separate financial statements are provided for governmental funds, proprietary funds and
fiduciary funds, even though the latter are excluded from the government-wide financial
statements. Major individual governmental funds and major individual enterprise funds are
reported as separate columns in the fund financial statements.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Fund Financial Statements
The 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. Each fund is
accounted for by providing a separate set of self-balancing accounts that constitute its
assets, liabilities, deferred inflows of resources, fund equity, revenues and
expenditures/expenses. Funds are organized into three major categories: governmental,
proprietary and fiduciary. An emphasis is placed on major funds within the governmental
and proprietary categories.
A fund is considered major if it is the primary operation fund of the City or meets the
following criteria:
a. Total assets plus deferred outflows of resources, liabilities plus deferred inflows of
resources, revenues or expenditures/expenses of that individual governmental or
enterprise fund are at least 10% of the corresponding total for all funds of that category
or type; and
b. Total assets plus deferred outflows of resources, liabilities plus deferred inflows of
resources, revenues or expenditures/expenses of the individual governmental fund or
enterprise fund are at least 5% of the corresponding total for all governmental and
enterprise funds combined.
c. The government has determined that a fund is important to the financial statement
user.
The funds of the financial reporting entity are described below:
Governmental Fund Types
General Fund - The General Fund is the general operating fund of the City. It is used to
account for all financial resources except those required to be accounted for in another
fund.
Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of
specific revenue resources (other than major capital projects) that are legally restricted to
expenditures for specified purposes.
Debt Service Funds - Debt Service Funds are used to account for the accumulation of
resources for, and the payment of, general long-term obligation principal, interest and
related costs.
Capital Projects Funds - Capital Projects Funds are used to account for financial resources
to be used for the acquisition or construction of major capital facilities.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Proprietary Fund Types
Enterprise Funds - The Enterprise Funds account for operations that are financed and
operated in a manner similar to private business enterprises, where the intent of the
City Council is that the costs (expenses including depreciation) of providing goods and
services to the general public on a continuing basis be financed or recovered primarily
through user charges.
The Primary Government’s Enterprise funds consist of the Parkview Office Complex and
the Desert Willow Golf Course. Desert Willow Golf Course is operated by a management
company. The discretely presented Component Unit’s fund consists of the Palm Desert
Recreational Facilities Corporation, also operated by a management company.
Internal Service Funds - The Internal Service Funds account for financial transactions
related to replacement of City-owned vehicles and equipment and to fund compensated
absences. These services are provided to other departments or agencies of the City on a
cost reimbursement basis.
Fiduciary Fund Types
Private-Purpose Trust Fund
The Successor Agency to the Palm Desert Redevelopment Agency Private Purpose Trust
Fund is used to account for the activities of the Successor Agency to the Palm Desert
Redevelopment Agency.
Agency Funds
The Agency, Special Assessment and Treasurers 1911 Bond Act Funds are used to
account for assets held by the City in a custodial capacity as a trustee or as an agent.
These assets include deposits placed with the City by developers, individuals and groups
to obtain future services, as well as deposits from assessment district’s property owners.
These deposits are reduced by payments and/or refunds to individuals or entities at some
future time. Agency funds are custodial in nature and do not involve measurement of
results of operations.
The City’s Retiree Service Stipend Fund is used to account for assets held to pay for the
retiree service stipend.
The major funds are as follows:
Governmental Funds
The General Fund is the general operating fund of the City. It is used to account for all
financial resources except those required to be accounted for in another fund.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
The Measure A Special Revenue Fund - In 1988, Riverside County voters approved a
half-cent sales tax, known as Measure A, to fund a variety of highway improvements, local
street and road maintenance, commuter assistance and specialized transit projects. This
fund is used to collect this tax, and pursuant to the provision of Measure A
(Ordinance No. 88-1 and Ordinance No. 02-001 of the County of Riverside) it is restricted
for local street and road expenditures only.
The Prop A Fire Tax Special Revenue Fund is used to account for all revenues derived
from tax collected within the City for upgrading fire protection and prevention. Its use is
restricted to obtaining, furnishing, operating and maintaining fire protection and prevention
services (currently under contract with Riverside County Fire Department) equipment or
apparatus. This fund is reported as a major fund because the tax collected is a voter
approved measure.
The Housing Asset Fund is used to account for any funds generated from housing assets
of the former Redevelopment Agency to be used for projects that benefit low and moderate
income families.
The Housing Authority Special Revenue Fund is used to account for revenues and
expenditures related to rental units owned by the Housing Authority, established in
January, 1998.
The Capital Properties Capital Projects Fund is used to account for the cost of city owned
properties that will either be sold or for the construction of public facilities, and the proceeds
of bond funds for capital related properties.
Proprietary Fund
The Desert Willow Golf Course Fund is used to account for the fees collected and expenses
incurred in connection with operating the municipal golf course in the City of
Palm Desert.
c. Measurement Focus and Basis of Accounting
Measurement focus is a term used to describe which transactions are recorded within the
various financial statements. Basis of accounting refers to when transactions are recorded
regardless of the measurement focus applied.
On the government-wide Statement of Net Position and the Statement of Activities, both
governmental and business-like activities are presented using the economic resources
measurement focus. The accounting objectives of the economic measurement focus are
the determination of operating income, changes in net position (or cost recovery), financial
position and cash flows. All assets, deferred outflows of resources, liabilities and deferred
inflows of resources (whether current or noncurrent) associated with their activities are
reported.
In the fund financial statements, the “current financial resources” measurement focus or
the “economic resources” measurement focus is used as appropriate:
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
1. All governmental funds utilize a “current financial resources” measurement focus. Only
current financial assets, deferred outflows of resources, current liabilities and deferred
inflows of resources are generally included on their balance sheets. Their operating
statements present sources and uses of available spendable financial resources
during a given period. These funds use fund balance as their measure of available
spendable financial resources at the end of the period.
2. The proprietary fund and private purpose trust fund utilize an “economic resources”
measurement focus. Proprietary fund and private purpose trust fund equity are
classified as net position.
3. Agency funds are not involved in the measurement of results of operations; therefore,
measurement focus is not applicable to them.
Basis of Accounting
In the government-wide Statement of Net Position and Statement of Activities, both
governmental and business-like activities are presented using the accrual basis of
accounting. Under the accrual basis of accounting, revenues are recognized when earned
and expenses are recorded when the liability is incurred or economic asset used.
Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and
exchange-like transactions are recognized when the exchange takes place.
In the fund financial statements, governmental funds are presented on the modified accrual
basis of accounting. Under this modified accrual basis of accounting, revenues are
recognized when “measurable and available”. Measurable means knowing or being able
to reasonably estimate the amount. Available means collectible within the current period
or soon enough thereafter to pay current liabilities.
Revenues that are susceptible to accrual include property taxes and special assessments
that are levied for and due for the fiscal year and collected within 60 days after year-end.
Licenses, permits, fines, forfeits, charges for services and miscellaneous revenues are
recorded as governmental fund type revenues when received in cash because they are
not generally measurable until actually received. Revenue from taxpayer assessed taxes,
such as sales taxes, are recognized in the accounting period in which they became both
measurable and available to pay liabilities of the current period. Grants and similar items
are recognized as soon as all eligibility requirements imposed by the provider have been
met. Expenditures generally are recorded when a liability is incurred, as under accrual
accounting. However debt service expenditures as well as expenditures related to
compensated absences and claims and judgments, are recorded only when payment is
due.
Interfund activity has been eliminated from the general government function for the
government-wide financial statements except for charges between the government’s
Desert Willow Golf Course and Parkview Office Complex funds and various other functions
of the government. Elimination of these charges would distort the direct costs and program
revenues for the various functions considered.
The accrual basis of accounting is followed by the proprietary fund and private purpose
trust fund. Under the accrual basis of accounting, revenues are recognized when earned
and expenses are recorded when the liability is incurred or economic assets are used.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Proprietary funds distinguish operating revenues and expenses from non-operating items.
Operating revenues and expenses generally result from providing goods and services in
connection with a proprietary fund’s principal ongoing operations. The principal revenue of
the Desert Willow Golf Course and Parkview Office Complex Enterprise Funds are charges
to customers for use of the golf course and rental fees. Operating expenses for enterprise
funds include the cost of sales and services, administrative expenses and depreciation on
capital assets. All revenues and expenses not meeting this definition are reported as
non-operating revenues and expenses.
d. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position and the governmental funds balance
sheet will sometimes report a separate section for deferred outflows of resources. This
separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to future periods and so will not be recognized as
an outflow of resources (expense/expenditure) until that time. The City has the following
items that qualify for reporting in this category:
Deferred amount on refunding. A deferred amount on refunding results from the
difference in the carrying value of the refunded debt and its reacquisition price. This
amount is deferred and amortized over the shorter of the life of the refunded or
refunding debt.
Deferred outflows related to pensions and OPEB. This amount is equal to employer
contributions made after the measurement date of the net pension liability and net
OPEB liability.
Deferred outflows related to pensions resulting from the difference in projected and
actual earnings on investments of the pension plan fiduciary net position. These
amounts are amortized over five years.
Deferred outflows of resources related to pensions arising from a change in
assumptions. These amounts are amortized over a closed period equal to the average
of the expected remaining service lives of all employees that are provided with
pensions through the plan, which is 3.0 years.
In addition to liabilities, the statement of net position and the governmental funds balance
sheet will sometimes report a separate section for deferred inflows of resources. This
separate financial statement element, deferred inflows of resources, represents an
acquisition of net position that applies to future periods and will not be recognized as an
inflow of resources (revenue) until that time. The City has the following items that qualify
for reporting in this category:
Deferred inflows from unavailable revenue, which arises under a modified accrual
basis of accounting is reported only in the governmental fund balance sheet. The
governmental funds report unavailable revenues from the following sources: rent,
investment income, grants, notes receivables collections and reimbursements. These
amounts are unavailable and recognized as an inflow of resources in the period that
the amounts become available.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Deferred inflows related to pensions for differences between expected and actual
experience. These amounts are amortized over a closed period equal to the average
of the expected remaining service lives of all employees that are provided with
pensions through the plan, which is 3.0 years.
Deferred inflows from pensions resulting from changes in assumptions. These
amounts are amortized over a closed period equal to the average expected remaining
service lives of all employees that are provided with pensions through the plan, which
is 3.0 years.
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 recognition period differs depending on the source of the gain or loss:
Net difference between projected and actual
earnings on OPEB plan investments
5 years
All other amounts Expected average remaining service lifetime
(EARL) (5.44 years at June 30, 2017
measurement date)
e. 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, a flow
assumption must be made about the order in which the resources are considered to be
applied.
It is the City’s practice to consider restricted - net position to have been depleted before
unrestricted - net position is applied.
f. Capital Assets and Depreciation
Capital assets, which include property, plant, equipment and infrastructure assets
(e.g., roads, traffic signals, drainage systems and similar items), are reported in the
applicable governmental or business-type activities column in the government-wide
financial statements. Capital assets are defined by the City as assets with an initial cost of
more than $500 and an estimated life in excess of one year. Such assets are recorded at
historical cost or estimated historical cost if purchased or constructed. Donated capital
assets are recorded at acquisition value at the date of donation.
The City has reported general infrastructure assets acquired in prior and current years.
The cost of normal maintenance and repairs that do not add to the value of the asset or
materially extend asset lives are not capitalized.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
Property, plant and equipment of the primary government, as well as the component units,
are depreciated using the straight-line method over the following estimated useful lives:
Buildings 40 years
Improvements other than buildings 20 years
Machinery and equipment 5 to 8 years
Infrastructure 20 to 75 years
g. Appropriations Limit
Under Article XIII-B of the California Constitution (the Gann Spending Limitation Initiative),
the City is restricted as to the amount of annual appropriations from the proceeds of taxes,
and if proceeds of taxes exceed allowed appropriations, the excess must either be
refunded to the State Controller or returned to the taxpayers through revised tax rates,
revised fee schedules or other refund arrangements. For the fiscal year ended
June 30, 2018, proceeds of taxes did not exceed appropriations.
h. Investments
Investments are reported in the accompanying financial statements at fair value. Fair value
is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Changes in fair value
that occur during a fiscal year are recognized as investment income reported for that fiscal
year. Investment income includes interest earnings, changes in fair value, and any gains
or losses realized upon the liquidation, maturity, or sale of investments.
i. Cash and Investments
For purposes of the statement of cash flows, the City has defined cash and investments to
include cash on hand, demand deposits, investments held in various instruments, and
investments held in the California Local Agency Investment Fund (LAIF),
California Asset Management Program (CAMP) and Riverside County Treasurer’s Pooled
Investment Fund.
j. Employee Compensated Absences
It is the government’s policy to permit employees to accumulate earned but unused
vacation and sick leave (compensated absences). Vacation pay and sick leave, which are
expected to be liquidated with expendable available resources, are reported as expenditure
and liability of the governmental fund that will pay it only if they have matured, for example,
as a result of employee resignations or retirements. Compensated absences in the amount
of $2,386,772, are reported in the Compensation Benefits Internal Service Fund.
k. Property Held for Resale
The land held for resale is recorded in the Housing Asset Fund as property held for resale
at the lower of cost or market. At June 30, 2018, the cost of the property held for resale for
various housing properties in Palm Desert totaled $61,516.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
l. Inventories, Prepaid Costs and Deposits
Inventory in the amount of $199,741 and $47,624, for the Desert Willow Golf Course
Enterprise Fund (Primary Government) and Palm Desert Recreational Facilities
Corporation (Component Unit), respectively, are reported at lower of cost or market.
Inventory in the amount of $4,868 in the Other Governmental Funds are also reported at
lower of cost or market. Inventory and prepaid costs are recorded as an expenditure when
consumed rather than purchased.
Certain payments to vendors that reflect costs applicable to future accounting periods are
recorded as prepaid costs in the government-wide and fund financial statements.
The Measure A Special Revenue Fund has a deposit in the amount of $15,393,231 with
another governmental agency to pay for future construction of a City project.
m. Property Tax Calendar
Property taxes are assessed and collected each fiscal year according to the following
property tax calendar:
Lien date: January 1
Levy date: July 1 to June 30
Due date: November 1 - 1st Installment
March 1 - 2nd Installment
Delinquent date: December 10 - 1st Installment
April 10 - 2nd Installment
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 prescribed by state
statutes. The City accrues only those taxes, which are received within 60 days after the
year-end. The City is a participant in the Teeter Plan under the California Revenue and
Taxation Code. The County of Riverside has responsibility for the collection of delinquent
taxes and the City receives 100% of the levy.
n. Restricted Assets
Certain proceeds of debt issues, as well as certain resources set aside for their repayment,
are classified as restricted assets on the balance sheet because they are maintained in
separate trustee bank accounts and their use is limited to applicable bond covenants. In
addition, funds have been restricted for future capital improvements by City resolution.
o. 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 District’s California Public Employees’ Retirement System (CalPERS) plans
(Plans) and additions to/deductions from the Plans’ fiduciary net position have been
determined on the same basis as they are reported by CalPERS. 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.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 1: Summary of Significant Accounting Policies (Continued)
p. 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 the OPEB expense have been
determined by an independent actuary. For this purpose, benefit payments are recognized
when currently due and payable in accordance with the benefit terms.
Generally accepted accounting principles require that the reported results must pertain to
liability and asset information within certain defined timeframes. For this report, the
following timeframes are used:
Valuation Date June 30, 2017
Measurement Date June 30, 2017
Measurement Period June 30, 2016 to June 30, 2017
q. Use of Estimates
The financial statements are prepared in accordance with accounting principles generally
accepted in the United States of America and, accordingly, include amounts that are based
on management’s best estimates and judgments. The financial statements include
estimates for the value of the capital assets (infrastructure), depreciation expense, the fair
value of investments, the amounts reported for the net pension liability and related items
(Note 8), the amounts reported for the net pension liability, net OPEB liability and related
items (Note 12), and claims payable (Note 6). Accordingly, actual results could differ from
the estimates.
r. New Accounting Pronouncement – GASB 75
In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions. The Statement establishes new
accounting and financial reporting for OPEB provided to the employees of state and local
governments. Statement No. 75 replaces the requirements of Statements No. 45,
Accounting and Financial Reporting by Employers for Postemployment Benefits Other
Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and
Agent Multiple-Employer Plans, for OPEB.
GASB Statement No. 75 is effective for periods beginning after June 15, 2017 and was
implemented by the City for the fiscal year ending June 30, 2018.
Note 2: Cash and Investments
As of June 30, 2018, cash and investments were reported in the accompanying financial
statements as follows:
Governmental activities 273,795,348$
Business-type activities 7,613,487
Component unit 120,150
Fiduciary funds 58,645,446
340,174,431$ Total cash and investments
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Cash and investments at June 30, 2018, consisted of the following:
Primary Government
Demand accounts (2,812,107)$
Petty cash 22,750
Investments 284,198,192
Total cash and investments - Primary Government 281,408,835$
Component Unit
Demand accounts 120,150$
Fiduciary Funds
Demand accounts 17,688,778$
Pooled with primary government 11,367,398
Investments 29,589,270
Total cash and investments - Fiduciary Funds 58,645,446$
The City of Palm Desert maintains a cash and investment pool that is available for use for all
funds. Each fund type’s position in the pool is reported on the combined balance sheet as cash
and investments. The City has adopted an investment policy, which authorizes it to invest in
various investments.
Deposits
At June 30, 2018, the carrying amount of the deposits was $26,364,219, and the bank balance
was $28,382,756. The $2,018,537 difference represents outstanding checks, deposits in transit
and other reconciling items.
The California Government Code requires California banks and savings and loan associations
to secure an Entity’s deposits by pledging government securities with a value of 110% of an
Entity’s deposits. California law also allows financial institutions to secure deposits by pledging
first trust deed mortgage notes having a value of 150% of total deposits. The City Treasurer
may waive the collateral requirement for deposits that are fully insured up to $250,000 by the
FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by
an authorized Agent of Depository recognized by the State of California Department of Banking.
The collateral for deposits with savings and loan associations is generally held in safekeeping
by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These
securities are physically held in an undivided pool for all California public agency depositors.
Under Government Code Section 53655, the placement of securities by a bank or savings and
loan association with an Agent of Depository has the effect of perfecting the security interest in
the name of the local governmental agency. Accordingly, all collateral held by
California Agents of Depository are considered to be held for, and in the name of, the local
governmental agency.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Investments
Under provision of the City’s investment policy and in accordance with the
California Government Code, the following investments are authorized:
x United States Treasury bills, notes, bonds or certificates of indebtedness
x United States government-sponsored agency obligations, participations or other
instruments
x Banker’s Acceptances issued by commercial banks
x Commercial Paper issued by general corporations
x Negotiable Certificates of Deposits, issued by a nationally or state-chartered bank, a
savings association, a federal association or by a state-licensed branch of a foreign
bank
x Time Certificates of Deposit issued by qualified public depositories.
x Repurchase Agreements sold by authorized brokers
x Medium-term Notes issued by corporations organized and operating in the
United States, or by depository institutions operating in the United States and licensed
by the United States or by any state
x Money Market Mutual Funds that are registered with the SEC under the Investment
Act of 1940
x State of California Local Agency Investment Fund (LAIF) that is managed by the
State Treasurer’s Office
x Structured Notes in the form of callable securities or “STRIPS” issued by the
United States Treasury, Federal Agencies or government-sponsored enterprises
x Local Government Investment Pools
GASB Statement No. 31
The City adopted GASB Statement No. 31, Accounting and Financial Reporting for Certain
Investments and for External Investment Pools, as of July 1, 1997. GASB Statement
No. 31 establishes fair value standards for investments in participating interest earning
investment contracts, external investment pools, equity securities, option contracts, stock
warrants and stock rights that have readily determinable fair values.
The City Treasurer is authorized under state and municipal law to invest in various types of
securities that meet specified credit quality standards, based upon credit risk ratings assigned
by Standard and Poors (S&P), Fitch, or by Moody’s Investor Services (Moody’s). Permissible
City investments include medium-term notes that are rated “A” or higher at time of purchase;
commercial paper that is rated “A-1” or the equivalent; money market mutual funds that are
rated “AAA”; and United States Government and Federal Agency securities (the quality of
United States Treasury securities is not analyzed since they are not deemed to have credit
risk).
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. Presented below is the minimum rating required,
when applicable, by the California Government Code, the City’s investment policy, or debt
agreements, and the rating by Standard and Poor’s, Fitch and Moody’s as of year-end for each
investment type.
47
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Primary Government
Investment Type
Total as of
June 30, 2018
Minimum
Legal
Rating Aaa AAA Other Unrated
California Local Agency
Investment Fund 900,544$ N/A -$ -$ -$ 900,544$
California Asset Management
Program 58,259,364 N/A - 58,259,364 - -
Riverside County Treasurer's
Pooled Investment Fund 68,385,716 N/A 68,385,716 - - -
Medium-Term Corporate Notes 7,466,985 A 1,968,624 - 5,498,361 -
Commercial Paper 73,420,540 A1/P1 - - 73,420,540 -
Held by Fiscal Agent:
Money Market Deposit Account 73,931,314 N/A - - - 73,931,314
California Local Agency
Investment Fund 1,833,729 N/A - - - 1,833,729
Total 284,198,192$ 70,354,340$ 58,259,364$ 78,918,901$ 76,665,587$
The ratings for the “Other” category above are as follows:
Investment Type Aa P-1 Total
Medium-Term Corporate Notes 5,498,361$ -$ 5,498,361$
Commercial Paper - 73,420,540 73,420,540
Total 5,498,361$ 73,420,540$ 78,918,901$
48
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Fiduciary Funds
Investment Type
Total as of
June 30, 2018
Minimum
Legal
Rating Aaa AAA Unrated
California Local Agency
Investment Fund 701$ N/A -$ -$ 701$
California Asset
Management Program 5,492 N/A - 5,492 -
Riverside County Treasurer's
Pooled Investment Fund 53,339 N/A 53,339 - -
Investment in City Bonds -
Successor Agency RDA 1,290,000 N/A - - 1,290,000
Held by Fiscal Agent:
Money Market Deposit Accounts
Successor Agency RDA 23,556,767 N/A - - 23,556,767
Money Market Deposit Accounts
Assessment District 2,128,077 N/A - - 2,128,077
California Local Agency
Investment Fund -
Assessment District 2,554,894 N/A - - 2,554,894
Total 29,589,270$ 53,339$ 5,492$ 29,530,439$
Custodial Credit Risk
The 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 deposits or will not be able to
recover collateral securities that are in the possession of an outside party. The custodial credit
risk for the investments is the risk that, in the event of the failure of the counterparty to a
transaction, a government will not be able to recover the value of investment or collateral
securities that are in the possession of an outside party.
As of June 30, 2018, none of the City’s deposits or investments were exposed to custodial
credit risk.
49
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Concentration of Credit Risk
The City’s investment policy imposes restrictions on the percentage the City can invest in
certain types of investments, which the City is in compliance. As of June 30, 2018, in
accordance with GASB Statement No. 40, if the City has invested more than 10% of its total
investments in any one issuer then they are exposed to concentration of credit risk. The City is
not invested in any one issuer that is more than 10% of its total investments.
The City’s Investment policy imposes the following restrictions on the maximum percentage it
can invest in a single type of investment.
Issuer
Portfolio
Maximum
Single Issuer
Maximum
United States Treasury Bills, Notes, Bonds 100% N/A
United States Government-Sponsored Agency
Securities 100% 30%
Banker's Acceptances 40% 30%
Commercial Paper 25% 10%
Negotiable Certificates of Deposit 30% N/A
Time Certificates of Deposit 15% N/A
Repurchase Agreements 20% N/A
Medium-Term Corporate Notes 30% 10%
Money Market Mutual Funds 20% N/A
Local Agency Investment Fund (LAIF) $50M/Acct N/A
Structured Notes (STRIPS) 20% N/A
Local Government Investment Pools 75% N/A
N/A - Not Applicable
The City’s policy is more conservative than state law, which has no issuer concentration limits
on federal agency debt.
Interest Rate Risk
The City’s investment policy limits investment maturities as a means of managing its exposure
to fair value losses arising from increasing interest rates. The City’s investment policy states
that the City shall not invest in securities with maturities exceeding five years and the
weighted-average maturity of the City portfolio shall not exceed 540 days. The City has elected
to use the segmented time distribution method of disclosure for its interest rate risk.
50
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
As of June 30, 2018, the City had the following investments and maturities:
Primary Government
Less Than 6 months - 1 year -Over Fair
6 months 1 year 3 years 3 years Value
Investment Fund 900,544$ -$ -$ -$ 900,544$
Management Program 58,259,364 - - - 58,259,364
Pooled Investment Fund 68,385,716 - - - 68,385,716
Agency Securities - - - - -
Medium-Term Corporate Notes 5,498,361 - 1,968,624 - 7,466,985
Commercial Paper 58,652,890 14,767,650 - - 73,420,540
Held by Fiscal Agent:
Money Market Deposit Accounts 73,931,314 - - - 73,931,314
California Local Agency
Investment Fund 1,833,729 - - - 1,833,729
Total Investments 267,461,918$ 14,767,650$ 1,968,624$ -$ 284,198,192$
Investment Type
Riverside County Treasurer's
U.S. Government Sponsored
California Local Agency
California Asset
Fiduciary Funds
Less Than 6 months - 1 year -Over Fair
6 months 1 year 3 years 3 years Value
Investment Fund 701$ -$ -$ -$ 701$
Management Program 5,492 - - - 5,492
Riverside County Treasurer's
Pooled Investment Fund 53,339 - - - 53,339
Successory Agency RDA 107,000 - 314,000 869,000 1,290,000
Held by Fiscal Agent:
Money Market Deposit Accounts -
Successory Agency RDA 23,556,767 - - - 23,556,767
Money Market Deposit Accounts -
Assessment District 2,128,077 - - - 2,128,077
LAIF - Assessment District 2,554,894 - - - 2,554,894
Total Investments 28,406,270$ -$ 314,000$ 869,000$ 29,589,270$
Investment Type
California Asset
Investment in City Bonds -
California Local Agency
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated
by California Government Code Section 16429 under the oversight of the Treasurer of the
State of California. The fair value of the City’s investment in this pool is reported in the
accompanying financial statements at amounts based upon the City’s pro-rata share of the fair
value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that
portfolio). The balance available for withdrawal is based on the accounting records maintained
by LAIF, which are recorded on an amortized cost basis.
51
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Investment in California Asset Management Program
The California Asset Management Program (CAMP) is a public joint powers authority which
provides California Public Agencies with investment management services for surplus funds
and comprehensive investment management, accounting and arbitrage rebate calculation
services for proceeds of tax-exempt financings. The CAMP currently offers the Cash Reserve
Portfolio, a short-term investment portfolio, as a means for Public Agencies to invest these
funds. Public Agencies that invest in the Pool (Participants) purchase shares of beneficial
interest. Participants may also establish individual, professionally managed investment
accounts (Individual Portfolios) by separate agreement with the Investment Advisor.
Investments in the Pools and Individual Portfolios are made only in investments in which
Public Agencies generally are permitted by California statute. The CAMP may reject any
investment and may limit the size of a Participant’s account. The Pool seeks to maintain, but
does not guarantee, a constant net asset value of $1.00 per share. A Participant may withdraw
funds from its Pool accounts at any time by check or wire transfers. Requests for same-day
wire transfers must be made by 11:00 a.m. that day. Fair value of the Pool is determined by
the fair value per share of the Pool’s underlying portfolio.
Investment in Riverside County Treasurer’s Pooled Investment Fund
The City is a voluntary participant in the Riverside County Treasurer’s Pooled Investment Fund
(Pooled Fund). The fair value of the City’s investment in this pool is reported in the
accompanying financial statements at amounts based upon the City’s pro-rata share of the fair
value that the Riverside County Treasurer’s Office has provided for the entire Pooled Fund
(in relation to the amortized cost of that portfolio). The balance available for withdrawal is based
upon the accounting records that the Riverside County Treasurer’s Office maintains, which are
recorded on an amortized cost basis.
Fair Value Measurements
The City categorizes its fair value measurement within the fair value hierarchy established by
generally accepted accounting principles. The hierarchy is based on the relative inputs used to
measure the fair value of the investments. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy are described as follows:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical
assets in active markets that the City has the ability to access.
Level 2: Inputs to the valuation methodology include:
x Quoted prices for similar assets in active markets;
x Quoted prices for identical or similar assets in inactive markets;
x Inputs other than quoted prices that are observable for the asset;
x Inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
52
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair
value measurement. Unobservable inputs reflect the City’s own assumptions
about the inputs market participants would use in pricing the asset
(including assumptions about risk). Unobservable inputs are developed based on
the best information available in the circumstances and may include the City’s
own data.
The asset’s level within the hierarchy is based on the lowest level of input that is significant to
the fair value measurement. Valuation techniques used need to maximize the use of
observable inputs and minimize the use of unobservable inputs.
The determination of what constitutes observable requires judgment by the City’s
management. City management considers observable data to be that market data which is
readily available, regularly distributed or updated, reliable, and verifiable, not proprietary, and
provided by multiple independent sources that are actively involved in the relevant market.
The categorization of an investment within the hierarchy is based upon the relative observability
of the inputs to its fair value measurement and does not necessarily correspond to City
management’s perceived risk of that investment.
The methods described may produce a fair value calculation that may not be indicative of net
realizable value or reflective of future fair values. The use of different methodologies or
assumptions to determine the fair value of certain financial instruments could result in a
different fair value measurement at the reporting date.
When available, quoted prices are used to determine fair value. When quoted prices in active
markets are available, investments are classified within Level 1 of the fair value hierarchy.
When quoted prices in active markets are not available, fair values are based on evaluated
prices received by City’s asset manager from third party service provider.
The following is a description of the recurring valuation methods and assumptions used by the
City to estimate the fair value of its investments.
For a large portion of the City’s portfolio, the City’s custodian applies their leveling methodology
across all securities in a specific sector (i.e. U.S. Government Sponsored
Agency Securities). Inputs to their pricing models are based on observable market inputs in
active markets.
The Successor Agency Former RDA’s investment in City bonds is not tradable and is
categorized in Level 3. When valuing Level 3 securities, the inputs or methodology are not
necessarily an indication of the risks associated with investing in those securities. Changes in
valuation techniques may result in transfers into or out of an assigned level within the disclosure
hierarchy.
53
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 2: Cash and Investments (Continued)
Primary Government
Quoted Observable Unobservable
Prices Inputs Inputs
Level 1 Level 2 Level 3 Total
Medium-Term Corporate Notes -$ 7,466,985$ -$ 7,466,985$
Commercial Paper - 73,420,540 - 73,420,540
Negotiable Certificates of Deposit - - - -
Total Leveled Investments -$ 80,887,525$ -$ 80,887,525
California Local Agency Investment Fund*900,544
California Asset Management Program*58,259,364
Pooled Investment Fund*68,385,716
Held by Fiscal Agent:
Money Market Deposit Accounts*73,931,314
California Local Agency Investment Fund* 1,833,729
Total Investment Portfolio 284,198,192$
Investment Type
Riverside County Treasurer's
Fiduciary Funds
Quoted Observable Unobservable
Prices Inputs Inputs
Level 1 Level 2 Level 3 Total
Investment in City Bonds -
-$ -$ 1,290,000$ 1,290,000$
Total Leveled Investments -$ -$ 1,290,000$ 1,290,000$
California Local Agency Investment Fund*701
California Asset Management Program*5,492
Pooled Investment Fund*53,339
Held by Fiscal Agent:
Money Market Deposit Accounts* -
Successor Agency Former RDA 23,556,767
Money Market Deposit Accounts* -
Assessment District 2,128,077
LAIF* - Assessment District 2,554,894
Total Investment Portfolio 29,589,270$
* Not subject to fair value measurements
Investment Type
Riverside County Treasurer's
Successor Agency Former RDA
54
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 3: Receivables
Primary Government’s Governmental Funds
Notes and Loans Receivable:
On August 8, 2006, the City Palm Desert issued $3,165,000 of Limited Obligation Bonds. The
proceeds of the Bonds were used to finance the construction of the utility undergrounding and
pay the cost of issuance. The debt service on the bonds is to be paid by assessments secured
on the property tax rolls of those properties benefiting from the improvements. Bond maturities
began September 2, 2007, and continue annually through 2036. The interest rates of the bonds
range from 3.85% to 5.15%. The City of Palm Desert is the only bondholder on record for the
bonds and reports a receivable in the general fund that corresponds to the outstanding principal
on the bonds. As of June 30, 2018, the receivable balance was $1,368,000.
The City entered into several individual loan agreements with residents of the Highlands Utility
Undergrounding Assessment District No. 04-01. The loans were issued by the City to pay off
the principal of the respective properties assessment. In turn, the residents agreed to pay to
the City the full cost of the loan amount plus any accrued interest at a rate of 5.35%. The full
amount of the loan along with all accrued interest is due and payable at the earliest of
September 2, 2036 or any change in ownership of the property. As of June 30, 2018, the total
receivable from the Highlands Deferral Loan Program was $14,978.
Pursuant to Health and Safety Code 34176(b), the housing assets of the former RDA have
been transferred to the Housing Asset Fund as the successor housing entity. The Housing
Asset Fund has a loan receivable for the construction of a multi-family affordable housing
development dated June 14, 2001, with a balance of $6,419,855 due from the Palm Desert
Development Company. The loan is secured by a Deed of Trust with assignment to property,
rent and fixtures on the housing development located in Palm Desert. Interest is earned and
due annually at a rate of 1% per annum from the date on which the final certificate of occupancy
is issued. Principal on the loan is based on the applicable agency’s percentage of positive net
cash flow derived from the operations of the Development.
The Housing Asset Fund has $421 in home improvement loans and an additional notes
receivable of $1,200. Payments of interest and principal are due monthly on these loans.
The Community Development Block Grant Special Revenue Fund has $15,613 in a home
improvement loan.
On August 28, 2008 the City Council approved through resolution the Energy Independence
Program (EIP), which is supported by Assembly Bill AB811. The EIP program allowed the City
to create the funding mechanism to assist the residents and businesses entering into a loan
agreement with the City and providing the money for the borrowers to acquire and install energy
efficient improvements. Assembly Bill AB811 allows the City to lien the properties through
annual property tax assessments for a period not to exceed 20 years. To date,
279 residents and business owners entered into loan agreements with the City and have
completed their improvements through the EIP program, as of June 30, 2018, 105 loans have
been repaid. The loans are payable in two annual installments for a period of 5 years to
20 years at an interest rate of 7% annually. On June 30, 2018, the outstanding loans receivable
through the EIP Program was $3,366,207.
55
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 3: Receivables (Continued)
Pursuant to Health and Safety Code 34176(b), the housing assets of the former RDA have
been transferred to the Palm Desert Housing Authority as the successor housing entity. The
Housing Authority has loans for several other projects, all of which are secured by a deed of
trust. A valuation allowance equal to the loan balance has been recognized since there is a
significant possibility that these loans will either become uncollectible or forgiven by the
Housing Authority at a future date if all the terms of the loans have been met.
Detailed information for these loans is as follows:
Loan
Balance Interest Maturity Special Provisions
Project Name Outstanding Rate Date Secured By of Loan
Self-Help Housing
Program
429,000$ 7.25% 30 years
or 2024
Deed of Trust Loan balance and interest due
upon maturity, unpaid balance of
loan or interest will bear an
interest rate of 12%.
Home Improvement
Loans (1)
340,692$ N/A N/A Deed of Trust
Loan ispayable upon c hange or
transfer of title, refinancing or
upon the death of the borrower.
Restrictive covenants are placed
against property to maintain
affordability for up to 45 years in
exchange for favorable loan
terms.
Portola Palms
Mobilehome Park
104,865$ 3.00% 30 years
from date
of loan
Deed of Trust Loan balance and interest will be
forgiven at maturity if debtor does
not breach the terms and
conditions of either the unit
regulatory agreement or note.
Desert Rose (1) 2,452,457$ 3.00% 30-45
years*
from date
of loan
Deed of Trust Loan will be forgiven at maturity
unless the debtor is in violation of
the unit regulatory agreement or
the deed of trust.
Falcon Crest (1) 5,649,429$ 3.00% 30-45
years*
from date
of loan
Deed of Trust Loan is payable upon change or
transfer of title, refinancing or
upon the death of the borrower.
Acquisition,
Rehabilitation, Resale
190,510$ 3.00% 30-45
years
from date
of loan
Deed of Trust
Assignment of
Rent
Loan is payable upon change or
transfer of title, refinancing or
upon the death of the borrower.
Restrictive covenants are place
against property to maintain
affordability from up to 45 years
in exchange for favorable loan
terms.
* All properties acquired from the former Redevelopment Agency after June 2009 will have a 45 year restrictive covenant.
(1) Portion of deferred loans are from funding sources other than Housing Authority.
56
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 4: Interfund Receivables, Payable and Transfers
Due To/From Other Funds
The composition of interfund balances as of June 30, 2018, was as follows:
Due To Due From Amount
General Fund Other Governmental Funds 2,138,000$
Desert Willow Golf Course 1,500,000
Housing Asset Fund General Fund 1,847,200
Other Governmental Funds 2,683,800
Other Governmental Funds Desert Willow Golf Course 500,000
8,669,000$
The General Fund advanced $2,138,000 to the Energy Independence Special Revenue Fund
to payoff the bonds used to fund energy efficiency and loaned $1,500,000 to Desert Willow
Golf Course to fund the daily operations, including the daily operations of the restaurant.
The Housing Asset Fund amounts are related to the advances due from the Successor Agency
(former Redevelopment Agency) per AB 1484.
The Golf Capital Projects Fund advanced $500,000 to Desert Willow Golf Course for operations
during the construction phase of the clubhouse and kitchen expansion.
Due To/From Component Unit
Due From
Component
Unit
Major Funds:
General Fund 285,000$
Desert Willow Golf Course 608,947
893,947$
The receivable by the General Fund is for rent owed by the Palm Desert Recreational Facilities
Corporation (PDRFC), and the receivable by the Desert Willow Golf Course represents funds
loaned to PDRFC for operation.
57
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 4: Interfund Receivables, Payable and Transfers (Continued)
Interfund Transfers
The composition of interfund transfers as of June 30, 2018, was as follows:
Transfers Out General Fund
Prop A Fire Tax
Special
Revenue Fund
Other
Governmental
Funds Totals
General Fund -$ 3,668,540$ 807,298$ 4,475,838$
Housing Authority
Special Revenue
Fund 9,750 - 526,684 536,434
Other
Governmental
Funds 1,301,080 - - 1,301,080
Enterprise Fund
Parkview Office Complex 300,000 - - 300,000
Totals 1,610,830$ 3,668,540$ 1,333,982$ 6,613,352$
Transfers In
Transfers are used to:
1. Transfer revenues to provide for capital projects.
2. Transfer revenues to provide for additional resources to pay for expenditures.
3. Transfer to cover future cost of assets.
58
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 5: Capital Assets
A summary of changes in capital assets at June 30, 2018, was as follows:
Primary Government – Governmental Activities
Balance at
June 30, 2017 Transfers Additions Deletions
Balance at
June 30, 2018
Capital assets, not being
depreciated:
Land 79,452,532$ -$ 85,097$ (248,680)$ 79,288,949$
Right-of-way 121,078,691 - 16,954 - 121,095,645
Construction-in-progress 1,885,789 (38,256) 445,974 - 2,293,507
130,668 - 93,343 - 224,011
Total capital assets, not
being depreciated 202,547,680 (38,256) 641,368 (248,680) 202,902,112
Buildings 144,174,975 - - - 144,174,975
60,140,409 - 154,567 (24,699) 60,270,277
Machinery and equipment 10,478,840 38,256 212,830 (155,589) 10,574,337
Infrastructure 241,725,688 - - - 241,725,688
6,217,457 - 402,723 (255,442) 6,364,738
Total capital assets,
being depreciated 462,737,369 38,256 770,120 (435,730) 463,110,015
Buildings (60,568,116) - (3,499,729) - (64,067,845)
(38,060,540) - (2,418,434) 20,583 (40,458,391)
Machinery and equipment (9,667,904) - (295,470) 155,589 (9,807,785)
Infrastructure (103,715,190) - (5,344,595) - (109,059,785)
(4,236,129) - (453,019) 254,897 (4,434,251)
(216,247,879) - (12,011,247) 431,069 (227,828,057)
Capital assets, being
depreciated, net 246,489,490 38,256 (11,241,127) (4,661) 235,281,958
Capital assets, net -
Governmental Activities 449,037,170$ -$ (10,599,759)$ (253,341)$ 438,184,070$
Equipment - Internal
service fund
Total accumulated
depreciation
Internal Service Fund -
Construction-in-progress
Capital assets,
being depreciated:
Improvements other
than buildings
Equipment - Internal
service fund
Less accumulated
depreciation for:
Improvements other
than buildings
59
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 5: Capital Assets (Continued)
A summary of changes in capital assets at June 30, 2018, was as follows:
Primary Government – Business-Type Activities
Balance at
July 1, 2017 Additions Deletions
Balance at
June 30, 2018
Land 53,304,965$ -$ -$ 53,304,965$
Total capital assets, not being depreciated 53,304,965 - - 53,304,965
Buildings and improvements 27,340,012 159,863 - 27,499,875
Machinery and equipment 6,630,388 1,540,446 (1,547,296) 6,623,538
Total capital assets, being depreciated 33,970,400 1,700,309 (1,547,296) 34,123,413
Buildings and improvements (10,939,629) (890,925) - (11,830,554)
Machinery and equipment (6,006,083) (533,910) 1,547,296 (4,992,697)
Total capital assets being depreciated, net 17,024,688 275,474 - 17,300,162
Capital assets, net - Business-Type Activities 70,329,653$ 275,474$ -$ 70,605,127$
1,547,296 (16,823,251)
Capital assets, not being depreciated:
Capital assets, being depreciated:
Less accumulated depreciation for:
Total accumulated depreciation (16,945,712) (1,424,835)
Depreciation expense was charged to functions/programs of the primary government as
follows:
Governmental Activities:
General government 2,085,099$
Housing and redevelopment 1,706,242
Public safety 107,145
Public works 5,891,456
Parks, recreation and culture 1,768,286
Depreciation expenses for internal service funds is charged to
various functions based on usage of capital assets 453,019
Total depreciation expense - governmental activities 12,011,247$
Business-Type Activities:
Parkview Office complex 362,802$
Desert Willow Golf Course 1,062,033
Total depreciation expense - business-type activities 1,424,835$
60
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 6: Long-Term Liabilities
The following is a summary of long-term liability transactions of the City for the year ended
June 30, 2018.
Primary Government – Governmental Activities
Balance
June 30, 2017 Additions Reductions
Balance
June 30, 2018
Due Within
One Year
Special assessment debt
with government
commitment 1,410,000$ -$ (42,000)$ 1,368,000$ 44,000$
Limited obligation
improvement bonds 1,398,000 - (108,000) 1,290,000 107,000
Claims and judgments
payable 398,683 367,025 (405,471) 360,237 -
Compensated absences
payable 2,583,719 1,309,296 (1,506,243) 2,386,772 300,000
Total 5,790,402$ 1,676,321$ (2,061,714)$ 5,405,009$ 451,000$
Debt service payments for the special assessment debt with government commitment, tax
allocation bonds and notes payable are made from debt service funds and a special revenue
fund.
The City historically allocates costs to liquidate liabilities for compensated absences and
pension liability based on the allocation of the employees earning the respective benefits and
their respective payroll expense to various fund across the City.
Primary Government – Business-type Activities
Balance
June 30, 2017 Additions Reductions
Balance
June 30, 2018
Due Within
One Year
Capital leases 499,881$ 1,399,284$ (405,835)$ 1,493,330$ 562,498$
Special Assessment Debt with Government Commitment
Highlands Undergrounding Assessment District No. 04-01, Limited Obligation Improvement
Bonds, Series 2006
On August 8, 2006, the City Palm Desert issued $3,165,000 of Limited Obligation Bonds. The
proceeds of the Bonds were used to finance the construction of the utility undergrounding and
pay the cost of issuance. The debt service on the bonds is to be paid by assessments secured
on the property tax rolls of those properties benefiting from the improvements. In the event that
assessment collections are insufficient to pay the debt service, the City has a potential
obligation to provide additional funds to pay the debt service, therefore these bonds are
reported as special assessment debt with government commitment. Bond maturities begin
September 2, 2007, and continue annually through 2036. The interest rates of the bonds range
from 3.85% to 5.15%. The City of Palm Desert is the only bondholder on record of the bonds
and the City does not own the constructed assets.
61
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 6: Long-Term Liabilities (Continued)
The future debt service requirements on the Highlands Undergrounding Assessment District
No. 04-01, Limited Obligation Improvement Bonds, Series 2006 are as follows:
Year Ending
June 30, Principal Interest Total
2019 44,000$ 68,895$ 112,895$
2020 47,000 66,653 113,653
2021 49,000 64,265 113,265
2022 52,000 61,727 113,727
2023 54,000 59,037 113,037
2024-2028 315,000 249,650 564,650
2029-2033 404,000 157,899 561,899
2034-2037 403,000 42,874 445,874
Total 1,368,000$ 771,000$ 2,139,000$
Limited Obligation Bonds
Limited Obligation Improvement Bonds Series 2009A (Taxable)
On January 29, 2009, the City issued $2,015,000 Limited Obligation Improvement Bonds
Series 2009A (Taxable). The proceeds of the Bonds were used to fund the City’s Energy
Independence Program. Concurrent with the issuance of the Bonds, the City entered into a
bond purchase agreement with the Agency whereby the Agency agreed to purchase the Bonds
equal to par value.
The Series 2009A (Taxable) bonds consist of $2,015,000 Serial Bonds with interest at
3% payable semiannually on September 2 and March 2. Bond maturities commenced
September 2, 2010, and continue annually through September 2, 2029.
The future debt service requirements on the Limited Obligation Improvement Bonds Series
2009A (Taxable) are as follows:
Year Ending
June 30, Principal Interest Total
2019 63,000$ 21,825$ 84,825$
2020 64,000 19,920 83,920
2021 58,000 18,090 76,090
2022 59,000 16,335 75,335
2023 61,000 14,535 75,535
2024-2028 318,000 44,220 362,220
2029-2030 136,000 4,050 140,050
Total 759,000$ 138,975$ 897,975$
62
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 6: Long-Term Liabilities (Continued)
Limited Obligation Improvement Bonds Series 2009B (Taxable)
On September 2, 2009, the City issued $1,136,000 Limited Obligation Improvement Bonds
Series 2009B (Taxable). The proceeds of the Bonds were used to fund the City’s Energy
Independence Program. Concurrent with the issuance of the Bonds, the City entered into a
bond purchase agreement with the Agency whereby the Agency agreed to purchase the Bonds
equal to par value.
The Series 2009B (Taxable) bonds consist of $1,136,000 Serial Bonds with interest at
3% payable semiannually on September 2 and March 2. Bond maturities commenced
September 2, 2010, and continue annually through September 2, 2029.
The future debt service requirements on the Limited Obligation Improvement Bonds
Series 2009B (Taxable) are as follows:
Year Ending
June 30, Principal Interest Total
2019 44,000$ 15,270$ 59,270$
2020 45,000 13,935 58,935
2021 43,000 12,615 55,615
2022 45,000 11,295 56,295
2023 46,000 9,930 55,930
2024-2028 219,000 29,235 248,235
2029-2030 89,000 2,715 91,715
Total 531,000$ 94,995$ 625,995$
Claims and Judgments Payable
Estimates for all workers’ compensation and general liabilities up to the self-insured levels have
been recorded as long-term liabilities. At June 30, 2018, total estimated workers’ compensation
and general liability claims payable, including a provision for incurred but not reported claims,
were $141,272 and $218,965, respectively, for a total claims and judgments payable of
$360,237.
Changes in claims liabilities during the past two years are as follows:
June 30, 2017 June 30, 2018
Claims payable - Beginning of year 324,332$ 398,683$
Incurred claims (including IBNR) and
changes in estimates 503,647 367,025
Claims payments (429,296) (405,471)
Claims payable - End of year 398,683$ 360,237$
63
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 6: Long-Term Liabilities (Continued)
Business-type Activities – Capital Leases
Obligations under capital leases are as follows:
De Lange Landen Public Finance LLC - The present value of the minimum
lease payment on the Club Car cart fleet equipment was capitalized at $976,366
using an interest rate of 2.99%. Lease is payable in 48 months, commencing on
October 1, 2014; scheduled in 24 periods during the months of February through
July of each year of the lease. Payments are $33,671. There are no payments
scheduled from August through January of each year. Interest accrues each
month. The lease agreement was executed on August 11, 2014.274,175$
GPSI Leasing, LLC - The present value of the minimum lease payment on the
GPSI Visage Golf Cart GPS System was capitalized at $303,530 using an
interest rate of 16.66%. On December 27, 2013 GPSI lease was amended to
extend for an additional 31 months and lower the payment to $7,044. The
amended lease was payable in 48 monthly installments of $7,044 beginning
January 1, 2014. On August 4, 2017 GPSA lease was amended to extend the
initial term of the lease to expire on December 26, 2018. All other attributes of
the original lease as amended on December 27, 2013 remained the same.19,650
PNC Equipment Finance LLC -
The present value of the minimum lease
payment on the Toro golf course maintenance equipment was capitalized at
$1,399,284 using an interest rate of 2.95%. Lease is payable in 60 monthly
installments of $25,078 beginning on October 1, 2017. The lease was executed
on June 21, 2017.1,199,505
Present value of net minimum lease payments 1,493,330
Less: current portion (562,498)
930,832$
The following is a schedule, by year, of future minimum lease payments and present value of
the net minimum lease payments for capital leases as of June 30, 2018:
Year Ending Minimum Lease
June 30, Payments
2019 620,468$
2020 300,933
2021 300,933
2022 300,933
2023 75,233
Total 1,598,500
Less: amounts representing interest (105,170)
Present value of net minimum lease payments 1,493,330$
The assets acquired through capital lease are as follows:
Machinery and equipment 2,878,011$
Less: accumulated depreciation (1,634,085)
1,243,926$
64
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 7: Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with
Internal Revenue Code Section 457. The plan, available to all City employees, permits them to
defer a portion of their salary until future years. The deferred compensation is not available to
employees until termination, retirement, death or unforeseeable emergency. Pursuant to
changes in August 1996, of IRC Section 457, in January 1997, the City established a trust in
which all assets held by Nationwide Retirement Solutions, Inc. (NRS) and ICMA Retirement
Corporation (ICMA) were placed. The City does not have fiduciary responsibility for the plan
assets held by NRS and ICMA. The assets, all property and rights purchased with such
amounts and all income attributable to such amounts are held in trust for the exclusive benefit
of the participants and the beneficiaries. The assets are no longer the property of the City, and
as such, are no longer subject to the claims of the City’s general creditors. As a result, the
assets in the amount of $15,438,281 held by NRS and ICMA of the 457 Plan are not reflected
in the City’s financial statements.
Note 8: Pension Plan
a. General Information about the Pension Plan:
Plan Description
All qualified permanent and probationary employees are eligible to participate in the City’s
Miscellaneous Plan, agent multiple-employer defined benefit pension plans administered
by the California Public Employees’ Retirement System (CalPERS), which acts as a
common investment and administrative agent for its participating member employers.
Benefit provisions under the Plan are established by State statute and City resolution.
CalPERS issues publicly available reports that include a full description of the pension plan
regarding benefit provisions, assumptions and membership information that can be found
on the CalPERS website.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living
adjustments and death benefits to plan members, who must be public employees and
beneficiaries. Benefits are based on years of credited service, equal to one year of full time
employment. Members with five years of total service are eligible to retire at age 50 with
statutorily reduced benefits. All members are eligible for non-duty disability benefits after
10 years of service. The death benefit is one of the following: the Basic Death Benefit, the
1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living
adjustments for the plan are applied as specified by the Public Employees’ Retirement
Law.
The Plan’s provisions and benefits in effect at June 30, 2018, are summarized as follows:
Prior to On or after
Hire date January 1, 2013 January 1, 2013
Benefit formula 2.7% @ 55 2.0% @ 62
Benefit vesting schedule 5 years of service 5 years of service
Benefit payments monthly for life monthly for life
Retirement age 50-67 52-67
Monthly benefits, as a % of eligible compensation 2.0% - 2.7% 1.0% - 2.5%
Required employee contribution rates 7%-8%6.25%
Required employer contribution rates 35.067%35.067%
65
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 8: Pension Plan (Continued)
Employees Covered
At June 30, 2018, the following employees were covered by the benefit terms for all Plans:
Inactive employees or beneficiaries currently receiving benefits 149
Inactive employees entitled to but not yet receiving benefits 75
Active employees 111
Total 335
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law 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.
Funding contributions for both Plans are determined annually on an actuarial basis as of
June 30 by CalPERS. 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 City is required to contribute the
difference between the actuarially determined rate and the contribution rate of employees.
b. Net Pension Liability
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 Plan is measured as
of June 30, 2017, using an annual actuarial valuation as of June 30, 2016 rolled forward to
June 30, 2017 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, 2016 actuarial valuations were determined using
the following actuarial assumptions:
Valuation date June 30, 2016
Measurement date June 30, 2017
Actuarial cost method Entry age normal
Actuarial assumptions:
Discount rate 7.15%
Inflation 2.75%
Payroll Growth 3.00%
Projected Salary Increase
Investment Rate of Return
Mortality rate table *
Varies by Entry Age and Service
7.50 Net of Pension Plan Investment and Administrative
Expenses; includes Inflation
Derived using CalPERS' membership data
for all funds
All other actuarial assumptions used in the June 30, 2016 valuation were based on the
results of an actuarial experience study for the period from 1997 to 2011, including updates
to salary increase, mortality and retirement rates. The Experience Study report can be
obtained at the CalPERS website under Forms and Publications.
66
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 8: Pension Plan (Continued)
Discount Rate
The discount rate used to measure the total pension liability was 7.15% for the Plan. To
determine whether the municipal bond rate should be used in the calculation of a discount
rate for the plan, CalPERS stress tested plans that would most likely result in a discount
rate that would be different from the actuarially assumed discount rate. Based on the
testing of the Plans, the tests revealed the assets would not run out. Therefore, the current
7.15% discount rate is appropriate and the use of the municipal bond rate calculation is not
deemed necessary. The long term expected discount rate of 7.15% is applied to all plans
in the Public Employees Retirement Fund (PERF). The stress test results are presented in
a detailed report called “GASB Crossover Testing Report” that can be obtained from the
CalPERS website under the GASB 68 section.
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. Such cash flows were developed assuming that both members and employers
will make their required contributions on time and as scheduled in all future years. Using
historical returns of all the funds’ asset classes, expected compound (geometric) returns
were calculated over the short-term (first 10 years) and the long-term (11-60 years) using
a building-block approach. Using the expected nominal returns for both short-term and
long-term, the present value of benefits was calculated for each fund. The expected rate
of return was set by calculating the single equivalent expected return that arrived at the
same present value of benefits for cash flows as the one calculated using both short-term
and long-term returns. The expected rate of return was then set equivalent to the single
equivalent rate calculated above and rounded down to the nearest one quarter of one
percent.
The table below reflects the long-term expected real rate of return by asset class. The rate
of return was calculated using the capital market assumptions applied to determine the
discount rate and asset allocation. The target allocation shown was adopted by the
CalPERS Board effective on July 1, 2014.
Asset Class
New Strategic
Allocation
Real Return
Years 1 - 10 (1)
Real Return
Years 11+ (2)
Global Equity 47.00% 4.90% 5.38%
Global Fixed Income 19.00% 0.80% 2.27%
Inflation Sensitive 6.00% 0.60% 1.39%
Private Equity 12.00% 6.60% 6.63%
Real Estate 11.00% 2.80% 5.21%
Infrastructure and Forestland 3.00% 3.90% 5.36%
Liquidity 2.00% -0.40% -0.90%
Total 100.00%
(1) An expected inflation of 2.5% used for this period.
(2) An expected inflation of 3.0% used for this period.
67
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 8: Pension Plan (Continued)
c. Changes in the Net Pension Liability
The changes in the net pension liability for the year ended June 30, 2018, with a
measurement date of June 30, 2017, for the Miscellaneous Plan are as follows:
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability (Asset)
Balance at June 30, 2016 (Valuation Date)115,826,117$ 78,278,246$ 37,547,871$
Changes in the Year:
Service Cost 2,204,265 - 2,204,265
Interest on the Total Pension Liability 8,558,529 - 8,558,529
Difference between Expected and Actual Experience (1,895,482) - (1,895,482)
Changes in Assumptions 7,367,723 - 7,367,723
Contributions - Employer - 5,303,371 (5,303,371)
Contributions - Employee - 828,467 (828,467)
Net Investment Income - 8,800,663 (8,800,663)
Benefit Payments including Refunds of Employee
Contributions (5,401,531) (5,401,531) -
Administrative expense - (115,573) 115,573
Net Changes 10,833,504 9,415,397 1,418,107
Balance at June 30, 2017 (Measurement Date)126,659,621$ 87,693,643$ 38,965,978$
Increase (Decrease)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability 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 6.15%
Net Pension Liability 56,816,307$
Current Discount Rate 7.15%
Net Pension Liability 38,965,978$
1% Increase 8.15%
Net Pension Liability 24,279,287$
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the
separately issued CalPERS financial reports.
Changes of Assumptions
In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent.
68
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 8: Pension Plan (Continued)
d. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2018, the City recognized pension expense of $3,479,313. At
June 30, 2018, the City reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following sources:
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Pension contributions subsequent to measurement date $ 5,396,908 -$
Difference between actual and expected experience - (2,923,668)
Change in Assumptions 4,911,815 (130,710)
Net difference between projected and actual earnings on
pension plan investments 1,101,808 -
Total 11,410,531$ (3,054,378)$
$5,396,908 reported as deferred outflows of resources related to contributions subsequent
to the measurement date will be recognized as a reduction of the net pension liability in the
year ending June 30, 2019. Other amounts reported as deferred inflows of resources
related to pensions will be recognized as pension expense as follows:
Year Ending
June 30 Amount
2019 164,082$
2020 2,970,042
2021 461,800
2022 (636,679)
2023 -
Thereafter -
Total 2,959,245$
e. Payable to the Pension Plan
At June 30, 2018, the City had no outstanding amount of contributions to the pension plan
required for the year ended June 30, 2018.
Note 9: Fund Balances
In the fund financial statements, reserves segregate portions of fund balances that are either
not available or have been earmarked for specific purposes. The various reserves established
as of June 30, 2018, were as follows:
69
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 9: Fund Balances (Continued)
General Fund Measure A
Prop A Fire
Tax
Housing
Asset Fund
Housing
Authority
Capital
Properties
Other
Governmental
Funds Total
Nonspendable:
Advances 8,971,800$ -$ -$ -$ -$ -$ -$ 8,971,800$
1,382,978 - - - - - - 1,382,978
Prepaid costs 154,316 - - 476 - - 1,250 156,042
Total Nonspendable 10,509,094 - - 476 - - 1,250 10,510,820
Restricted for:
Capital projects:
Assessment districts improvements - - - - - - 2,030,638 2,030,638
Capital bond projects - - - 4,944,279 - 68,754,748 - 73,699,027
Total capital projects - - - 4,944,279 - 68,754,748 2,030,638 75,729,665
Debt service - - - - - - 91,368 91,368
Low income housing:
Projects and programs - - - 42,370,541 - - 2,858,798 45,229,339
Apartments - - - - 8,102,515 - - 8,102,515
Total low income housing - - - 42,370,541 8,102,515 - 2,858,798 53,331,854
Public facilities:
Park facilities - - - - - - 1,416,407 1,416,407
Childcare facilities - - - - - - 1,332,828 1,332,828
City facilities - - - - - - 1,656,520 1,656,520
Total public facilities - - - - - - 4,405,755 4,405,755
Public safety:
Fire facilities - - 5,895 - - - 1,108,171 1,114,066
Fire operation - - 1,889,172 - - - - 1,889,172
Police programs & equipment - - - - - - 94,630 94,630
Total public safety - - 1,895,067 - - - 1,202,801 3,097,868
Special programs:
Community projects - - - - - - 31,510 31,510
Recycling projects - - - - - - 2,494,126 2,494,126
Special district advertising - - - - - - 63,586 63,586
Air quality projects - - - - - - 127,342 127,342
Landscaping and lighting - - - - - - 3,242,212 3,242,212
Art construction & improvements - - - - - - 1,383,878 1,383,878
Total special programs - - - - - - 7,342,654 7,342,654
Street related purposes:
Construction & improvements - 15,652,497 - - - - - 15,652,497
Street resurfacing - - - - - - 1,576,768 1,576,768
Facilities maintenance reserve - 6,317,522 - - - - - 6,317,522
Drainage projects - - - - - - 1,592,857 1,592,857
Traffic signals projects - - - - - - 410,318 410,318
Total street related purposes - 21,970,019 - - - - 3,579,943 25,549,962
Total Restricted - 21,970,019 1,895,067 47,314,820 8,102,515 68,754,748 21,511,957 169,549,126
Committed to:
Aquatic Center - - - - - - 2,134,436 2,134,436
Capital asset replacement - - - - 11,875,488 - - 11,875,488
Capital Improvement Projects Reserve 12,297,553 - - - - - - 12,297,553
Facilities Maintenance Reserve 15,541,441 - - - - - - 15,541,441
Liability Reserve 4,000,000 - - - - - - 4,000,000
Other Fund Stability Reserve 3,300,000 - - - - - - 3,300,000
Emergency/Contigency Reserve 11,602,479 - - - - - - 11,602,479
Employment Benefits Reserve 8,925,165 - - - - - - 8,925,165
Economic Development/Land Acquisition Reserve 4,000,000 - - - - - - 4,000,000
Energy loan program - - - - - - 2,741,897 2,741,897
Total Committed 59,666,638 - - - 11,875,488 - 4,876,333 76,418,459
Assigned to:
General fund operating reserve 14,502,403 - - - - - - 14,502,403
Capital projects:
Facilities maintenance reserve - - - - - - 2,197,824 2,197,824
City capital outlay projects - - - - - - 6,400,000 6,400,000
Total capital projects - - - - - - 8,597,824 8,597,824
Property acquisition - - - - - - 420,387 420,387
Community contingency 444,000 - - - - - - 444,000
Public facilities:
City facilities 51,035 - - - - - - 51,035
Parks facilities - - - - - - 3,812,000 3,812,000
Facilities maintenance reserve - - - - - - 3,360,178 3,360,178
Public facilities - - - - - - 737,119 737,119
Golf facilities - - - - - - 3,502,886 3,502,886
Total public facilities 51,035 - - - - - 11,412,183 11,463,218
Special programs:
Library - - - - - - 667,255 667,255
Professional services 487,649 - - - - - - 487,649
Total special programs 487,649 - - - - - 667,255 1,154,904
Street related purposes:
Street maintenance 7,421 - - - - - - 7,421
Facilities maintenance reserve - - - - - - 2,160,414 2,160,414
Traffic signals projects - - - - - - - -
Total street related purposes 7,421 - - - - - 2,160,414 2,167,835
Total Assigned 15,492,508 - - - - - 23,258,063 38,750,571
Unassigned 4,702,308 - - - - - - 4,702,308
Totals 90,370,548$ 21,970,019$ 1,895,067$ 47,315,296$ 19,978,003$ 68,754,748$ 49,647,603$ 299,931,284$
Loans and notes receivable
Capital
Projects Fund Special Revenue Funds
70
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 9: Fund Balances (Continued)
The fund balances reported on the fund statements now consist of the following categories:
Nonspendable - This classification includes amounts that cannot be spent because they are
either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
Restricted - This classification includes amounts that can be spent only for specific purposes
stipulated by constitution, external resource providers or through enabling legislation.
Committed - This classification includes amounts that can be used only for the specific
purposes determined by a formal action of the City Council. The City considers the adoption of
a resolution to institute a formal action of City Council for the purpose of establishing, modifying
or rescinding committed fund balances.
Assigned - This classification includes amounts to be used by the government for specific
purposes but do not meet the criteria to be classified as restricted or committed. This includes
amounts that are assigned through adoption of a resolution by City Council. The Council may
delegate the ability of an employee or committee to assign uses of specific funds, for specific
purposes. Such delegation of authority occurred on September 27th, 2018 and will be in effect
for future fiscal years.
Unassigned - This classification includes the residual balance for the government’s general
fund and includes all spendable amounts not contained in other classifications. In other funds,
the unassigned classification is used only to report a deficit balance resulting from
overspending for specific purposes for which amounts had been restricted, committed or
assigned.
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.
Note 10: Risk Management
a. Description of Self-Insurance Pool Pursuant to Joint Power Agreement
The City of Palm Desert is a member of the California Joint Powers Insurance Authority
(Authority). The Authority is composed of 116 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 which operates through a
nine-member Executive Committee.
71
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 10: Risk Management (Continued)
b. Self-Insurance Programs of the Authority
Each member pays an annual contribution at the beginning of the coverage period. A
retrospective adjustment is then conducted annually thereafter, for coverage years
2012-13 and prior. Coverage years 2013-14 and forward are not subject to routine annual
retrospective adjustment. The total funding requirement for self-insurance programs is
based on an actuarial analysis. Costs are allocated to individual agencies based on payroll
and claims history, relative to other members of the risk-sharing pool.
Primary Liability Program
In the liability program, claims are pooled separately between police and general
government exposures. (1) The payroll of each member is evaluated relative to the payroll
of other members. A variable credibility factor is determined for each member, which
establishes the weight applied to payroll and the weight applied to losses within the
formula. (2) The first layer of losses includes incurred costs up to $30,000 for each
occurrence and is evaluated as a percentage of the pool’s total incurred costs within the
first layer. (3) The second layer of losses includes incurred costs from $30,000 to $750,000
for each occurrence and is evaluated as a percentage of the pool’s total incurred costs
within the second layer. (4) Incurred costs from $750,000 to $50 million, are distributed
based on the outcome of cost allocation within the first and second loss layers.
The overall coverage limit for each member, including all layers of coverage, is
$50 million per occurrence. Costs of covered claim for subsidence losses have a
sub-limit of $40 million per occurrence.
Workers’ Compensation
The City of Palm Desert also participates in the workers’ compensation pool administered
by the Authority. In the workers’ compensation program claims are pooled separately
between public safety (police and fire) and general government exposures. (1) The payroll
of each member is evaluated relative to the payroll of other members. A variable credibility
factor is determined for each member, which establishes the weight applied to payroll and
the weight applied to losses within the formula. (2) The first layer of losses includes incurred
costs up to $50,000 for each occurrence and is evaluated as a percentage of the pool’s
total incurred costs within the first layer. (3) The second layer of losses includes incurred
costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage of
the pool’s total incurred costs within the second layer. (4) Incurred costs in excess from
$100,000 to statutory limits are distributed based on the outcome of cost allocation within
the first and second loss layers.
For 2017-18, the Authority’s pooled retention is $2 million per occurrence, with reinsurance
to statutory limits under California Workers’ Compensation Law.
Employer’s Liability losses are pooled among members to $2 million. Coverage from
$2 million to $5 million is purchased as part of a reinsurance policy, and Employer’s Liability
losses from $5 million to $10 million are pooled among members.
72
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 10: Risk Management (Continued)
c. Purchased Insurance
Property Insurance
The City of Palm Desert participates in the all-risk property protection program of the
Authority. This insurance protection is underwritten by several insurance companies. The
City of Palm Desert’s property is currently insured according to a schedule of covered
property submitted by the City of Palm Desert to the Authority. The City of Palm Desert’s
property currently has all-risk property insurance protection in the amount of $243,753,167.
There is a $10,000 deductible per occurrence except for non-emergency vehicle insurance,
which has a $2,500 deductible.
Crime Insurance
The City of Palm Desert purchases crime insurance coverage in the amount of
$10,000,000 with a $2,500 deductible. The fidelity coverage is provided through the
Authority.
Special Event Tenant User Liability Insurance
The City or Palm Desert further protects against liability damages by requiring tenant users
of certain property to purchase low-cost tenant user liability insurance for certain activities
on agency property. The insurance premium is paid by the tenant user and is paid to the
City of Palm Desert according to a schedule. The City of Palm Desert then pays for the
insurance. The insurance is facilitated by the Authority.
d. 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 no
significant reductions in pooled or insured liability coverage in the fiscal year
2017-18.
73
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 11: Unearned Revenues and Deferred Inflows of Resources
Unearned Revenues
Major Governmental Funds
General Fund has received $2,198 in advance rent payments.
Measure A Special Revenue Fund has $15,393,231 in funds received from the Successor
Agency that are deemed unearned until expenditures are incurred related to construction of
interchange.
Housing Authority Special Revenue Fund has other amounts reported as unearned revenues
include $13,098 for prepaid rents.
Other Governmental Funds
Special Revenue Funds
$105,807 of grant funds are deemed unearned until expenditures are incurred in the
Public Safety Police Grants Fund.
$12,141 of grant funds are deemed unearned until expenditures are incurred in the
Recycling Fund.
$33,646 represents the unused portions of prepaid aquatic fees in the Aquatic Center Fund.
Capital Projects Fund
Capital Projects Reserve fund has $63,041 of unearned revenue represents deposits for street
improvements and public facilities, as the funds have not been spent as of
June 30, 2018.
Business-type Activities
The balance of $129,654 represents the unused portions of prepaid golf fees and value of
unredeemed gift certificates.
The balance of $8,910 represents the unearned rent for the Parkview Office.
Component Unit
The balance of $79,452 represents the unused portions of prepaid banquets.
74
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 11: Unearned Revenues and Deferred Inflows of Resources (Continued)
Deferred Inflows of Resources
Major Governmental Funds
General Fund
On March 13, 1997, the former Redevelopment Agency (Agency) purchased land from the City
for the purpose of developing a second golf course financed by a note in the amount of
$2,055,000. The note has no specific due date. Recognition of the revenue from the sale has
been reported as deferred inflows of resources until it becomes available.
On March 13, 1997, the City entered into an agreement with subsequent amendments on
June 4, 1997, May 18, 2004, and May 12, 2009, with the Palm Desert Recreational Facilities
Corporation (Corporation) for the use of property at the City’s Golf Resort
(Desert Willow). Payment is due when the Corporation’s revenues exceed its expenses.
At June 30, 2018, the Corporation owed the City rent totaling $285,000, which will be
recognized as revenue by the City when the rent is paid by the Corporation.
The City entered into several individual loan agreements with residents of the Highlands Utility
Undergrounding Assessment District No. 04-01. The residents agreed to pay to the City the full
cost of the loan amount plus any accrued interest at a rate of 5.35%. The full amount of the
loan along with all accrued interest is due and payable at the earliest of
September 2, 2036, or any change in ownership of the property. As of June 30, 2018, $38,628
in interest has been accrued. Recognition of the interest revenue has been reported as
unavailable until it becomes due.
Interest receivable in the amount of $48,802 on the advance from the General Fund to the
Energy Independence Special Revenue Fund, and $495,618 on investments purchased, and
$1,662,480 on advances to the Successor Agency is reported as unavailable revenue.
Other accounts receivable for reimbursement of court fees in the amount of $19,952,
outstanding lien in the amount of $49,562, traffic light reimbursements in the amount of
$83,440, county abandoned vehicle reimbursement in the amount of $17,224 and Transient
Occupancy tax from hotels in the amount of $90,751 are not available at year end.
Housing Asset Fund
Uncollected interest on notes receivable of $32,579 due from the Palm Desert Development
Company has been reported as unavailable.
Interest in the amount of $1,019,475 on advances to the Successor Agency is reported as
unavailable revenue.
75
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 11: Unearned Revenues and Deferred Inflows of Resources (Continued)
Other Governmental Funds
Special Revenue Funds
The Community Development Block Grant Special Revenue Fund has $15,613 in a home
improvement loan as unavailable.
The New Construction Tax Special Revenue Fund has $117,720 in interest on advances to the
Successor Agency is reported as unavailable.
Interest accrued on loans of $148,595 on loans receivable through the City’s EIP Program is
reported as unavailable (see Note 3).
Capital Projects Funds
The Capital Projects Reserve Capital Projects Fund has $1,440,000 in interest on advances to
the Successor Agency is reported as unavailable.
The Parks and Recreational Facilities Capital Projects Fund has $857,700 in interest on
advances to the Successor Agency is reported as unavailable.
Debt Service Fund
Assessment receivables in the amount of $1,227,632 represent future assessments to be
received from property owners in Highlands Undergrounding Assessment Districts 04-1 to pay
for long-term obligations incurred in making capital improvements in the Assessment District.
Recognition of the revenue from the assessments has been deferred until it becomes available.
Once received, the monies will be used to make annual debt service payments.
Note 12: Other Post-Employment Benefits
a. Plan Description
In addition to the pension benefits described in Note 8, the City provides other
post-employment benefits (OPEB) through the California Employers’ Retiree Benefit Trust
Fund (CERBT), an agent multiple-employer defined benefit healthcare plan administered
by the California Public Employees’ Retirement System (CalPERS).
All full-time or part-time employees who meet the eligibility requirements for this program
may continue their medical coverage through the CalPERS Health Plan and receive
reimbursement from the City for a portion of the costs for the coverage. Separate financial
statements for the CERBT may be obtained by writing to CalPERS at Lincoln Plaza North,
400 Q Street, Sacramento, California 95811, or by visiting the CalPERS website at
www.calpers.ca.gov.
76
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 12: Other Post-Employment Benefits (Continued)
Employees Hired Prior to January 1, 2008
Eligibility for the stipend requires retirement simultaneously from the City and CalPERS on
or after age 50 with at least 10 consecutive years of service with the City. Eligible
employees must be covered under the CalPERS Health Plan at the time of retirement and
elect to participate in the stipend program within 30 days of retirement.
The City’s contribution towards the coverage is based on years of service as follows:
Consecutive Years of Service City's Contribution
With the City at Retirement Percentage
10 years of service 50%
11 years of service 55%
12 years of service 60%
13 years of service 65%
14 years of service 70%
15 or more years of service 75%
Employees Hired On or After January 1, 2008
Eligibility for the stipend requires retirement simultaneously from the City and CalPERS on
or after age 50 with at least 15 consecutive years of service with the City. Eligible
employees must be covered under the CalPERS Health Plan at the time of retirement and
elect to participate in the stipend program within 30 days of retirement. The stipend is
discontinued when the retiree reaches Medicare eligibility age. The City’s contribution
towards the coverage will be applied to the lowest cost plan and is based on age at
retirement and consecutive years of service with the City as outlined in the following table:
Age1516171819202122232425+
50 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
51 10% 15% 20% 25% 30% 35% 40% 45% 50% 50% 50%
52 20% 25% 30% 35% 40% 45% 50% 50% 50% 50% 50%
53 30% 35% 40% 45% 50% 50% 50% 50% 50% 50% 50%
54 40% 45% 50% 50% 50% 50% 50% 50% 50% 50% 50%
55+ 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50%
Consecutive Years of Service at Retirement
Employees with at least 5 years of service, not meeting the eligibility requirements for the
stipend program, who retire simultaneously from the City and CalPERS are eligible to
continue medical coverage through the CalPERS Health Plan. The City is required to pay
the CalPERS minimum employer contribution ($128 in 2017 and $133 in 2018) for these
employees.
77
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 12: Other Post-Employment Benefits (Continued)
Employees Hired On or After January 1, 2015
Employees are not eligible for either of the defined retiree health benefits plan, but are
instead enrolled in the City’s ICMA Retirement Health Savings Account. Employees have
a mandatory 1% contribution to the Retirement Health Savings Plan and the City matches
the 1% contribution. In addition, an employee can participate in the ICMA 401A
Governmental Money Purchase Plan with a maximum pre-tax dollar contribution of 10%,
with the City maximum match of 2%.
As of June 30, 2017, the date of the most recent actuarial valuation, the City's plan has
110 active employees.
Employees Covered - Plan membership, at June 30, 2017, membership consisted of the
following:
Inactive plan members or beneficiaries 103
Active plan members 110
b. City Contributions to the Plan
City contributions to the Plan occur as benefits are paid to retirees and/or to the OPEB
trust.
c. Net OPEB Liability
The City’s Net OPEB Liability was measured as of June 30, 2017 and the Total OPEB
Liability used to calculate the Net OPEB Liability was determined by an actuarial valuation
as of June 30, 2017. Standard actuarial update procedures were used to project/discount
from valuation to measurement dates.
Actuarial assumptions. The total OPEB liability was determined using the following
actuarial assumptions, applied to all periods included in the measurement, unless
otherwise specified:
Inflation 2.75%
Salary Increase 3.25% per annum
Assumed Wage Inflation 3% per annum
Investment Rate of Return 6.73% per annum
Healthcare cost-trend rates Assumed to start at 7.50% and grade down to 5.00% for years
2024 and thereafter.
Retirement Age The City offers the same plans to its retirees as to its active
employees, with the general exception that upon reaching age 65
and becoming eligible for Medicare, the retiree must join one of the
Medicare Supplement coverages offered under PEMHCA.
Mortality Mortality rates used were those published by CalPERS, adjusted to
back out 20 years of Scale BB to central year 2008, then projected
using the MacLeod Watts Scale 2017 applied generationally.
78
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 12: Other Post-Employment Benefits (Continued)
d. Discount Rate
GASB 75 requires a discount rate that reflects the following:
a) The long-term expected rate of return on OPEB plan investments – to the extent that
the OPEB plan’s fiduciary net position (if any) is projected to be sufficient to make
projected benefit payments and assets are expected to be invested using a strategy to
achieve that return;
b) A yield or index rate for 20-year, tax-exempt general obligation municipal bonds with
an average rating of AA/Aa or higher – to the extent that the conditions in
(a) are not met.
e. Changes in the Net OPEB Liability
The changes in the Net OPEB liability for the Plan are as follows:
Total OPEB
Liabilit y
Plan Fiduciary
Net Position
Net OPEB
Liabilit y
Balance at June 30, 2016 (Measurement Date)16,980,271$ 12,198,460$ 4,781,811$
Changes recognized for the measurement period:
Service Cost 346,417 - 346,417
Interest 1,144,106 - 1,144,106
Expected Investment Income - 841,020 (841,020)
Employer Contributions - 1,255,960 (1,255,960)
Administrative Expenses - (6,541) 6,541
Benefit Payments (653,187) (653,187) -
Investment Experience - 61,311 (61,311)
Net Changes in Fiscal Year 2016-2017 837,336 1,498,563 (661,227)
Balance at June 30, 2017 (Measurement Date)17,817,607$ 13,697,023$ 4,120,584$
Increase (Decrease)
f. Sensitivity of the Total OPEB Liability and Net OPEB Liability to Changes in the
Discount Rate
The following presents the Total OPEB liability and Net OPEB liability, as well as what the
total OPEB liability and net OPEB liability would be if they were calculated using a discount
rate that is 1-percentage point lower (5.73 percent) or 1-percentage-point higher
(7.73 percent) than the current discount rate:
Discount Rate - 1%
(5.73%)
Current Discount Rate
(6.73%)
Discount Rate +1%
(7.73%)
Total OPEB Liability $ 20,159,568 $ 17,817,607 $ 15,876,175
Net OPEB Liability 6,462,545 4,120,584 2,179,152
79
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 12: Other Post-Employment Benefits (Continued)
g. Sensitivity of the Total OPEB Liability and Net OPEB Liability to Changes in the
Health Care Cost Trend Rates
The following presents the Total OPEB liability and net OPEB liability, as well as what the
Total OPEB liability and net OPEB liability would be if they were calculated using
healthcare cost trend rates that are 1-percentage-point lower (6.50 percent decreasing to
4.00 percent) or 1-percentage-point higher (9.50 percent decreasing to 7.00 percent) than
the current healthcare cost trend rates:
1% Decrease
(6.50% decreasing
to 4.00%)
Trend Rate
(7.50% decreasing to
5.00%)
1% Increase
(8.50% decreasing
to 6.00%)
Total OPEB Liability $ 15,657,265 $ 17,817,607 $ 20,763,124
Net OPEB Liability 1,960,242 4,120,584 7,066,101
h. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2018, the City recognized OPEB expense of $643,782.
As of fiscal year ended June 30, 2018, the City reported deferred outflows and inflows of
resources related to OPEB from the following sources:
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Difference between projected and actual return on
OPEB plan investments
Contributions made subsequent to the
measurement date 1,217,465 -
Total 1,217,465$ 49,049$
$ - $ 49,049
The City will recognize the Contributions Made Subsequent to the Measurement Date in
the next fiscal year. In addition, future recognition of the deferred resources is shown
below:
Measurement
Period ended
June 30:
Deferred
Outflows/(Inflows)
of Resources
2018 (12,262)$
2019 (12,262)
2020 (12,262)
2021 (12,263)
2022 -
Thereafter -
Total (49,049)$
80
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 13: Special Assessment Debt
Below is a summary of the changes in the special assessment bonds payable:
Balance at
July 1, 2017 Additions
Payments and
Reductions
Balance at
June 30, 2018
Due Within
One Year
2003 Assessment Revenue
Bonds 1,695,000$ -$ 170,000$ 1,525,000$ 170,000$
AD 98-1 Limited Obligation
Refunding Bonds 130,000 - 65,000 65,000 65,000
CFD 2005-1 Special Tax Bonds
Series 2006A 30,085,000 - 890,000 29,195,000 935,000
AD 2004-2 Limited Obligation
Improvement Bonds 22,575,000 - 640,000 21,935,000 670,000
2008 Special Tax Refunding
Bonds 1,630,000 - 1,630,000 - -
Total 56,115,000$ -$ 3,395,000$ 52,720,000$ 1,840,000$
The City has Special Assessment Bonds Payable issued under the 1911 and 1915, Special
Improvement Acts and the 1982 Mello-Roos Community Facilities Act
(1982 Bonds). The City has no liability to 1911 Act bondholders until assessments have been
collected from the property owner. Such liability is then recorded in the Agency Funds.
Therefore, the 1911 Bonds are not recorded as liabilities in the accompanying financial
statements.
The City also has no liability to the 1915 Act bondholders or the bondholders of bonds issued
under the 1982 Mello-Roos Community Facilities Act until assessments are collected on the
tax rolls. However, the City may take certain actions to assume secondary liability for all or part
of 1915 Act Bonds and the 1982 Bonds until such time as foreclosure proceedings are
consummated.
Special assessment bonds payable, as described below, and are not recorded as
long-term liabilities, as these obligations do not constitute a debt or obligation of the City.
81
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 13: Special Assessment Debt (Continued)
2003 Assessment Revenue Bonds
In June 2003, the Palm Desert Financing Authority issued $4,423,000 in
2003 Assessment Revenue Bonds. The proceeds were used to purchase three series of limited
obligation improvement bonds issued by the City in connection with the financing and
refinancing of certain improvements of benefit to property within the City’s Assessment District
No. 94-2 (Sunterrace), Assessment District No. 94-3 (Merano) and Silver Spur Ranch Utility
Undergrounding Assessment District No. 01-01. These bonds were issued under the
1915 Improvement Bond Act to provide funds for public improvements in the respective
assessment districts.
Debt service requirements to maturity are as follows:
Year Ending
June 30, Principal Interest Total
2019 170,000$ 76,229$ 246,229$
2020 175,000 67,344 242,344
2021 180,000 58,069 238,069
2022 100,000 50,719 150,719
2023 110,000 45,206 155,206
2024-2028 640,000 130,271 770,271
2029 150,000 4,031 154,031
Total 1,525,000$ 431,869$ 1,956,869$
As of June 30, 2018, the principal amounts to be repaid by each assessment district to pay off
the loans from the Financing Authority are as follows:
Assessment District 94-3 265,000$
Assessment District 01-1 1,270,000
1,535,000$
Assessment District 98-1 Limited Obligation Refunding Improvement Bonds
The bonds were issued in an original amount of $2,955,000 in February 2004, to redeem and
defease the outstanding limited obligation improvement bonds of Assessment District
No. 98-1, which were issued in 1998. The bonds are secured by unpaid assessments on
parcels within the District.
Under the 1915 Act, annual assessments on the unpaid assessments sufficient to meet the
scheduled debt service requirements are to be included on the regular county tax bills for the
assessed parcels for which there are unpaid assessments. Interest rates vary from 1.5% to
5.1% with interest payable semi-annually on March 2 and September 2, with principal maturing
annually on September 2.
82
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 13: Special Assessment Debt (Continued)
Debt service requirements to maturity are as follows:
Year Ending
June 30, Principal Interest Total
2019 65,000$ 1,658$ 66,658$
Total 65,000$ 1,658$ 66,658$
Community Facilities District No. 2005-1
The bonds were issued in an original amount of $50,000,000 in May 2006, to construct and
acquire certain public facilities of benefit to the District, provide for the establishment of a
reserve account, provide capitalized interest, and pay the costs of issuance of the bonds. The
bonds are secured by and payable from a pledge of net taxes derived from special taxes to be
levied by the District on real properties within the boundaries of the District from the net
proceeds of any foreclosure actions brought following delinquency in the payment of the special
taxes, and from amounts held in certain funds under the indenture. Interest rates vary from
4.0% to 5.5% with interest payable semi-annually on March 1 and September 1, with principal
maturing annually on September 1.
In May 2007, the 2007 Bonds were issued in the amount of $17,915,000 pursuant to the
Bond Indenture in May 2006, as supplemented by a First supplemental Indenture in May 2007,
to provide construct and acquire certain public facilities of benefit to the District, provide
capitalized interest, and pay the costs of issuance of the 2007 Bonds. The bonds are secured
by and payable, on parity with the bonds issued in May 2006 for $50,000,000, from a pledge
of net taxes derived from special taxes to be levied by the District on real properties within the
boundaries of the District from the net proceeds of any foreclosure actions brought following
delinquency in the payment of the special taxes, and from amounts held in certain funds under
the indenture. On March 1, 2016, a combined total of $20,885,000 of the outstanding bonds
were called. Interest rates vary from 3.875% to 5.20% with interest payable semi-annually on
March 1 and September 1, with principal maturing annually on September 1.
Debt service requirements to maturity are as follows:
Year Ending
June 30, Principal Interest Total
2019 935,000$ 1,533,500$ 2,468,500$
2020 980,000 1,485,625 2,465,625
2021 1,030,000 1,435,375 2,465,375
2022 1,080,000 1,382,625 2,462,625
2023 1,140,000 1,325,700 2,465,700
2024-2028 6,635,000 5,643,617 12,278,617
2029-2033 8,680,000 3,610,479 12,290,479
2034-2037 8,715,000 990,414 9,705,414
Total 29,195,000$ 17,407,335$ 46,602,335$
83
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 13: Special Assessment Debt (Continued)
Section 29 Assessment District (No 2004-02), Limited Obligation Improvement Bonds,
Series 2007
In March 2007, the City of Palm Desert issued $29,430,000 Limited Obligation Improvement
Bonds. The proceeds of the Bonds will be used to finance certain infrastructure improvements
within the City’s Section 29 Assessment District (No. 2004-02). The debt service on the bonds
is to be paid by assessments secured on the property tax rolls of those properties benefiting
from the improvements. The bonds consist of Serial Bonds in the amount of $6,870,000 with
interest ranging from 4.00% to 4.70% payable semiannually on March 2 and September 2.
Bond maturities begin September 2, 2009, and continue annually through 2019. Term bonds
in the amount of $2,525,000 carry an interest rate of 4.75% and mature September 2, 2022.
Term bonds in the amount of $5,110,000 carry an interest rate of 5.05% and mature
September 2, 2027. Term bonds in the amount of $14,925,000 carry an interest rate of 5.10%
and mature September 2, 2037.
Debt service requirements to maturity are as follows:
Year Ending
June 30, Principal Interest Total
2019 670,000$ 1,086,913$ 1,756,913$
2020 700,000 1,054,885 1,754,885
2021 735,000 1,020,979 1,755,979
2022 765,000 985,354 1,750,354
2023 800,000 948,185 1,748,185
2024-2028 4,660,000 4,080,324 8,740,324
2029-2033 5,960,000 2,739,975 8,699,975
2034-2038 7,645,000 1,013,753 8,658,753
Total 21,935,000$ 12,930,368$ 34,865,368$
2008 Special Tax Refunding Bonds
In December 2007, the City of Palm Desert Communities Facilities District No. 91-1
(Indian Ridge Public Improvements) issued $10,935,000 of Special Tax Refunding Bonds,
Series 2008 to refund and defease all the outstanding $16,260,000 principal amount of the
Palm Desert Financing Authority 1997 Revenue Bonds. These bonds were issued pursuant to
the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being
Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California.
These Special Tax Refunding Bonds were paid off during the current fiscal year.
Bond Reserve Requirements
At June 30, 2018, the fund balance reserve requirements and actual reserve balances were as
follows:
Requirement Actual
Assessment District 98-1 66,658$ 68,651$
2003 Financing Authority Revenue Bonds 222,372 234,011
CFD 2005-1 Special Tax Bonds 2,468,500 2,559,689
Assessment District 29 1,756,913 1,806,018
84
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 14: Other Disclosures
The Palm Desert Recreational Facilities Corporation has a deficit of $837,361, which will be
eliminated by increasing revenues through banquet reservations and outings directly related to
the expansion of the outside dining terrace and the kitchen.
The Fiduciary Private-Purpose Trust Fund has a deficit of $212,424,154, which will be funded
through future property taxes collected by the County under the direction of the State. The
State of California is the responsible body for the elimination of this deficit.
Note 15: Construction and Other Significant Commitments
Construction Commitments
Primary Government
Project
Current Year
Spent
Prior Year
Spent
Remaining
Commitment
General Fund
Parks / Recreation $ 41,510 $ - $ 129,376
City Owned Buildings Improvements 4,430 9,000 51,035
Street Improvements - - 7,421
ADA Compliance Assistance Program - - 141,500
CDBG - - 957
Building & Safety Microfilm Conversion - - 58,916
Governmental Software Implementation 5,457 - 10,194
Promotion Advertising / Rebranding 54,306 - 8,664
Urban Plan 20,554 - 6,446
Hotel Feasibility 6,810 14,535 28,655
Misc. Non-Construction 192,485 - 102,942
Measure A
Street Improvements 14,880 - 16,452
Prop A Fire Fund
City Owned Buildings Improvements - - 5,895
Capital Properties
San Pablo Improvements 283,429 - 607,726
Presidents Plaza Parking Lot Improvements - - 606,120
Other Governmental Funds
Parks / Recreation - - 9,032
City Owned Buildings Improvements 4,056 - 164,587
Street Resurfacing 1,264,776 - 465,823
Street Improvements 780 - 19,763
Recycle Projects 16,950 - 48,050
CDBG 90,068 - 77,890
Governmental Software Implementation 92,379 - 64,884
Alessandro West Improvement Project 5,032 12,904 37,999
Drainage Improvements 162,659 129,716 221,113
El Paseo Art Exhibit - 36,416 9,000
Landscape and Lighting 11,060 - 2,415
Misc. Non-Construction 15,692 - 2,408
$ 2,287,313 $ 202,571 $ 2,905,263
85
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 15: Construction and Other Significant Commitments (Continued)
Fiduciary Funds
Project
Current Year
Spent
Prior Year
Spent
Remaining
Commitment
El Paseo Revitalization $ - $ 3,709 $ 131,714
Sewer Rent Payment 93,115 - 2,898,211
93,115$ 3,709$ 3,029,925$
Note 16: Dissolution of California Redevelopment Agencies and Wind-Down by Successor
Agencies
Pursuant to AB X1 26 (adopted by the California Legislature in June 2011) and the State
Supreme Court’s decision in California Redevelopment Association, et al. v. Ana Matosantos,
et al., 53 Cal. 4th 231 (2011), all redevelopment agencies in the State were dissolved as of
February 1, 2012, and a successor agency was established for each former redevelopment
agency to wind-down the affairs of its former redevelopment agency. Certain actions of each
successor agency must first be approved by its oversight board, composed of seven-members
representing taxing entities.
On August 25, 2011, the City Council adopted Resolution No. 2011-76, pursuant to Health and
Safety Code (“HSC”) Section 34172, electing for the City to serve as the successor agency
(“SARDA”) to the former Palm Desert Redevelopment Agency (the “Dissolved RDA”). Although
the Board of Directors of the SARDA is comprised of the same individuals as the City Council,
HSC Section 34173(g) expressly affirms that the SARDA is a separate public entity from the
City,and that the liabilities of the Dissolved RDA shall not be transferred to the City nor shall
the assets of the Dissolved RDA become assets of the City.
The City elected on February 9, 2012 to have the Palm Desert Housing Authority serve as the
Housing Successor. Under HSC Section 34176, the Housing Successor assumed the
housing functions of the Dissolved RDA. The Housing Authority (as the Housing Successor)
submitted to the State Department of Finance (“DOF”) a list of housing assets to be transferred
by the SARDA to the Housing Successor. On August 31, 2012, the DOF issued a letter
indicating that the DOF did not have any objection to such housing asset list.
The housing assets (per the housing asset list), obligations, and activities of the Dissolved RDA
were transferred to the Housing Successor and are reported in the Housing Asset Fund
beginning in fiscal year 2011-2012. However, outstanding bonds (“Housing Bonds”), secured
by a pledge of moneys which would have been deposited into the Dissolved RDA’s low and
moderate income housing fund (known as the “Housing Set Aside”), remain as the SARDA’s
enforceable obligations. See also “Stipulated Judgment” below. All other assets, obligations,
and activities of the Dissolved RDA have been transferred and are reported in a fiduciary fund
(private-purpose trust fund) in the financial statements of the City.
Upon dissolution of the Dissolved RDA, the County Auditor-Controller (“CAC”) is charged
with establishing a Redevelopment Property Tax Trust Fund (the “RPTTF”) for the SARDA and
depositing into the RPTTF the amount of property taxes that would have been redevelopment
property tax increment had the Dissolved RDA not been dissolved.
86
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 16: Dissolution of California Redevelopment Agencies and Wind-Down by Successor
Agencies (Continued)
The SARDA is required to prepare an annual recognized obligation payment schedule
(the “ROPS”) approved by the oversight board setting forth the amounts due for enforceable
obligations from each July 1 through the following June 30. The ROPS is submitted to the CAC
and the DOF for consideration. The CAC only makes payments to the SARDA from the RPTTF
based on the ROPS amount approved by the DOF.
SARDA was required to conduct due diligence reviews of both the low and moderate income
housing fund and all other funds by October 15, 2012 and January 15, 2013, respectively, to
compute the funds (cash) which were not needed by the SARDA to be retained to pay for
existing enforceable obligations or were otherwise restricted, and therefore, must be remitted
to the CAC. The SARDA paid a total amount of $40,988,399 to the CAC based on the due
diligence reviews per the DOF’s determination.
The DOF issued a Finding of Completion on May 15, 2013 after SARDA made the payments
required as a result of the due diligence reviews. The Finding of Completion allows the
placement of loan agreements between the Dissolved RDA and the City (which were previously
voided by operation of law upon the Dissolved RDA’s dissolution) on the ROPS. On
February 23, 2015, the Oversight Board approved Resolution OB-114, making the finding to
reestablish the City loans as enforceable obligations of the SARDA. DOF subsequently
approved this action on April 10, 2015. When the repayments begin, 20% of each repayment
amount will be allocated to the Housing Asset Fund. At June 30, 2018, the long-term advances
totaled $22,655,000 (the “Advances”). In the financial statements $9,236,000 is reported in the
General Fund and $13,419,000 is reported in Other Governmental Funds. An offset of 20%
has been reported as due to other funds in the respective funds totaling $4,531,000, which is
based on principal only. See further discussion under Note 17.
Pursuant to HSC Section 34191.4(b), unpaid interest on the remaining principal amount of the
Advances shall be calculated at a simple rate of 3%. No interest on the Advances has been
paid since December 31, 2010. Based on the 3% simple rate, the unpaid accrued interest on
the Advances as of June 30, 2018 totaled $5,097,375.
The State Controller of the State of California was directed to review the propriety of any
transfers of assets between the Dissolved RDA and other public bodies that occurred after
January 1, 2011. The State Controller completed its review on March 14, 2013 and did not
identify any unallowable transfers of assets that occurred between the Dissolved RDA and the
City or other public agencies.
The SARDA’s use and disposition of all properties held (Long Range Property Management
Plan (“LRPMP”), was approved by the DOF on June 2, 2014. The LRPMP allowed the SARDA
to transfer property used for government purposes with a cost basis of $6,390,263 to the City.
Stipulated Judgment
On May 15, 1991, the Riverside County Superior Court entered a final judgment incorporating
the terms of a Stipulation for Entry of Judgment (“Original Stipulation”) in Case No. 51124 and
a Stipulation for Entry of Judgment pursuant to Settlement Agreement and Mutual Release
(“Settlement Agreement”) in Case No. 51124, among the Dissolved RDA, the City, the Western
Center on Law and Poverty, Inc., California Rural Legal Assistance, and others. On June 18,
1997 and on September 20, 2002, the Riverside County Superior Court amended the
judgment, incorporating Stipulations Amending Stipulation for Entry of Judgment.
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 16: Dissolution of California Redevelopment Agencies and Wind-Down by Successor
Agencies (Continued)
The judgment, as amended (the “Judgment”), generally required the Dissolved RDA to use
20% of its tax increment revenues, and additional tax increment revenues if necessary, to
develop, rehabilitate, or otherwise financially assist affordable housing units and to meet certain
housing needs of the City. Before dissolution, the Dissolved RDA used its Low and Moderate
Housing Set-Aside to fulfill its obligations under the Judgment (including the payment of debt
service on the Housing Bonds issued to finance and refinance affordable housing projects that
satisfied the requirements of both the Judgment and the relevant Redevelopment Law
provisions).
While the low and moderate income housing fund has been eliminated upon the dissolution
of the Dissolved RDA and the requirement to deposit the Housing Set-Aside into such fund,
the SARDA continues to recognize the Judgment as its enforceable obligation. On its ROPS,
the SARDA has included line items designated as “Stipulation Judgment Case No. 51124,”
listing the amounts necessary to fulfill its obligations under the Judgment (after taking into
account the amounts already listed for the repayment of the Housing Bonds). While the DOF
originally approved such line items, the DOF changed its position beginning with ROPS
14-15A (i.e., covering the period commencing July 1, 2014).
On August 14, 2014, the SARDA filed an action, SARDA to the Palm Desert Redevelopment
Agency v. Michael Cohen, Sacramento Superior Court Case No. 34-2014-00167698
(the “Successor Agency Lawsuit”), seeking to compel the DOF to permit payment of the
affordable housing obligations mandated by the Judgment. Subsequently, in view of the fact
that there were similar cases pending in the California Court of Appeal (Third District), the
SARDA voluntarily dismissed its action without prejudice pending resolution of those other
cases. To date, none of the other cases has resulted in a decision that would compel the DOF
to permit payment of the obligations under the Judgment as an enforceable obligation.
Note 17: Successor Agency Disclosures
The assets and liabilities of the Dissolved RDA (except for those transferred to the Housing
Successor and reported in the Housing Asset Fund) have been transferred to the SARDA. The
SARDA is acting in a fiduciary capacity for the assets and liabilities. Disclosures related to
these transactions are as follows:
Advances To/From the City of Palm Desert
The composition of advances as of June 30, 2018, was as follows:
Advances From Advances To Amount
General Fund Successor Agency 9,236,000$
Other Governmental Funds Successor Agency 13,419,000
Housing Asset Fund Successor Agency 4,711,140
27,366,140$
The advances from the General Fund and Other Governmental Funds were made to the
Dissolved RDA for capital improvements. The Dissolved RDA’s Low Moderate Housing Fund
made advances to the Dissolved RDA for the purpose of covering the SERAF payment. Both
SERAF and City
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CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 17: Successor Agency Disclosures (Continued)
Loans were approved by both the Oversight Board and DOF as enforceable obligations of the
SARDA. The initial repayments of the SERAF loan have been included and approved with the
15-16A ROPS period.
The advances repayable to City Funds are to be repaid with a defined schedule over a
reasonable term of years, are subject to a formula distribution pursuant to HSC Section
34191.4, and have a lower priority for repayment relative to the repayment of SERAF loans.
The advances related to the borrowing for the SERAF payment have a priority over repayment
of the other advances. 20% of the repayment of the other advances not related to the SERAF
advances shall be deducted and transferred to the Housing Asset Fund (Housing Authority, as
Housing Successor).
Balance at
July 1, 2017 Additions Deletions
Balance at
June 30, 2018
Capital assets, not being depreciated:
Land 35,501,118$ -$ (567,159)$ 34,933,959$
Total capital assets, not being depreciated 35,501,118 - (567,159) 34,933,959
Buildings and improvements 1,264,879 - - 1,264,879
Total capital assets, being depreciated 1,264,879 - - 1,264,879
Buildings and improvements (335,106) (31,622) - (366,728)
Total capital assets being depreciated, net 929,773 (31,622) - 898,151
Capital assets, net 36,430,891$ (31,622)$ (567,159)$ 35,832,110$
- (366,728)
Capital assets, being depreciated:
Less accumulated depreciation for:
Total accumulated depreciation (335,106) (31,622)
Tax Allocation Bonds
A summary of changes in tax allocation bonds at June 30, 2018, was as follows:
Balance
July 1, 2017
Additions/
Accretion
Repayments/
Reductions
Balance
June 30, 2018
Due Within
One Year
Project Area No. 1
2007A TARRBs, $32,600,000 3,680,000$ -$ (3,680,000)$ -$ -$
Project Area No. 2
2003 TARBs, $15,745,000 15,745,000 - - 15,745,000 -
2017 A TARBs, $52,390,000 52,390,000 - (1,385,000) 51,005,000 2,740,000
2017 B TARBs, $140,130,000 140,130,000 - (2,045,000) 138,085,000 6,545,000
2017 H-A TARBs, $7,365,000 7,365,000 - (355,000) 7,010,000 365,000
2017 H-B TARBs, $45,815,000 45,815,000 - (6,770,000) 39,045,000 7,560,000
Subtotal 265,125,000 - (14,235,000) 250,890,000 17,210,000
Add: Unamortized bond premium 8,707,367 - 771,586 7,935,781 -
Less: Unamortized bond discount (2,276,267) - (134,732) (2,141,535) -
Total 271,556,100$ -$ (13,598,146)$ 256,684,246$ 17,210,000$
2017 Tax Allocation Refunding Bonds
89
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 17: Successor Agency Disclosures (Continued)
The tax allocation revenues bonds issued before 2011 (i.e., before the dissolution of the
Dissolved RDA) were issued by the Palm Desert Financing Authority, the proceeds of which
were loaned to the Dissolved RDA for financing or refinancing redevelopment projects.
Pursuant to the bond documents, the Authority’s bonds were secured by the Dissolved RDA’s
(and after dissolution, are secured by the Successor Agency’s) repayment of the loans, and
the repayment of the loans were secured by tax increment (after the Dissolved RDA’s
dissolution, are secured by certain moneys deposited in the RPTTF, see Notes 16) and other
funds as provided in the bond documents.
In January 2017, the Successor Agency issued four series of bonds: (i) the Tax Allocation
Refunding Bonds, 2017 Series A, in the aggregate principal amount of $52,390,000
(the “2017A Bonds”), (ii) the Taxable Tax Allocation Refunding Bonds, 2017 Series B, in the
aggregate principal amount of $140,130,000 (the “2017B Bonds”), (iii) the Tax Allocation
Refunding Bonds, 2017 Series H-A, in the aggregate principal amount of $7,365,000
(the “2017H-A Bonds”); and (iv) the Taxable Tax Allocation Refunding Bonds, 2017 Series
H-B, in the aggregate principal amount of $45,815,000 (the “2017H-B Bonds”). As further
described below, the 2017 refunding refunded all of the outstanding tax allocation revenue
bonds, except for the Project Area No. 1 2007A Bonds and the Project Area No. 2 2003 Bonds.
None of these bonds or any interest thereon are a debt of the City, the State of California or
any of its political subdivisions (except for the Successor Agency), and none the City, the
State of California nor any of its political subdivisions (except for the Successor Agency) is
liable on the bonds, nor in any event shall the bonds and interest thereon be payable out of
any funds or properties other than those provided under the respective bond documents.
The remaining outstanding the Project Area No. 2 2003 Bonds are, Project Area No. 1 2007A
Bonds (prior to the final pay-off in June 2018) were, insured by MBIA Insurance Corporation
(“MBIA”). On February 18, 2009, MBIA announced the restructuring of its financial guaranty
insurance operations into two separately capitalized sister companies, with one entity
(MBIA Illinois) assuming the risk associated with its US municipal exposures, and the other
(MBIA Corp) insuring the remainder of the portfolio. Effective March 19, 2009, MBIA Illinois
was renamed National Public Finance Guarantee Corporation (“NPFGC”).
Some (but not all) of the maturities of each series of the 2017 Bonds are insured by Build
America Mutual Assurance Company.
Tax Allocation Refunding Revenue Bonds (Project Area No. 1, as amended) 2007 Series A
On January 9, 2007, the Palm Desert Financing Authority issued $32,600,000 Tax Allocation
Refunding Revenue Bonds (Project Area No. 1, as amended) 2007 Series A. The Palm Desert
Financing Authority loaned the bond proceeds to the Dissolved RDA. The proceeds of the bond
were loaned to refinance a portion of the outstanding obligations of the Dissolved RDA, fund
various redevelopment capital projects within Project Area No. 1, as amended, and pay the
costs associated with the issuance of the bonds. The Series A bonds consist of $32,600,000
Serial Bonds with interest rates ranging from 3.50% to 5.00% payable semiannually on October
1 and April 1. Bond maturities began April 1, 2008, and continue annually through 2018.
The 2007 Series A Tax Allocation Refunding Revenue Bonds (Project Area No. 1, as amended)
were paid off as of June 30, 2018.
90
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 17: Successor Agency Disclosures (Continued)
2003 Series Tax Allocation Revenue Bonds (Project Area No. 2)
On March 26, 2003, the Palm Desert Financing Authority issued $15,745,000 of Tax Allocation
Revenue Bonds (Project Area No. 2) 2003 Series. The Palm Desert Financing Authority loaned
the bond proceeds to the Dissolved RDA to fund various redevelopment capital projects in
Project Area No. 2. Interest rates on the bonds vary from 4.5% to 5.0% per annum payable
semi-annually on February 1 and August 1, with principal maturing as follows:
$ 875,000 Serial Bonds August 1, 2023
910,000 Serial Bonds August 1, 2024
2,485,000 Term Bonds August 1, 2026
11,475,000 Term Bonds August 1, 2033
The future debt service requirements on the 2003 Series Tax Allocation Revenue Bonds
(Project Area No. 2) are as follows:
Principal Interest Total
2019 -$ 769,006$ 769,006$
2020 - 769,006 769,006
2021 - 769,006 769,006
2022 - 769,006 769,006
2023 - 769,006 769,006
2024 - 2028 5,675,000 3,264,041 8,939,041
2029 - 2033 8,175,000 1,536,876 9,711,876
2034 1,895,000 47,375 1,942,375
15,745,000$ 8,693,322$ 24,438,322$
Year Ending
June 30,
2017 Series A Tax Allocation Refunding Bonds
On January 31, 2017, the Successor Agency issued the 2017A Bonds, in the principal amount
of $52,390,000. The proceeds from the 2017A Bonds were utilized to refund the Project Area
No. 1 2002A Bonds, Project Area No. 1 2003 Bond, Project Area No. 1 2004 Bonds, the Project
Area No. 2 2002A Bonds, and the Project Area No. 4 1998 Bonds and pay certain costs
associated with the issuance of the bonds.
The refunding resulted in a difference between the reacquisition price and the net carrying
amount of the old debt of ($3,569), which is reported as a deferred inflow of resources in the
accompanying financial statements and amortized over the remaining life of the refunding debt.
The agency completed the refunding to reduce its total debt service payments by $9,247,916
and to obtain an economic gain (difference between the present values of the old and new debt
service payments) of $7,627,413.
91
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 17: Successor Agency Disclosures (Continued)
Interest rates on the bonds vary from 2.00% to 5.00% per annum payable semi-annually on
April 1 and October 1, commencing April 1, 2017, with principal maturing annually on
October 1. As of June 30, 2018, the outstanding principal balance on the bonds is $51,005,000.
The future debt service requirements on the 2017A Bonds are as follows:
Year Ending
June 30, Principal Interest Total
2019 2,740,000$ 2,427,050$ 5,167,050$
2020 2,730,000 2,331,350 5,061,350
2021 2,875,000 2,204,875 5,079,875
2022 3,060,000 2,056,500 5,116,500
2023 3,195,000 1,900,125 5,095,125
2024 - 2028 24,995,000 6,385,625 31,380,625
2029 - 2030 11,410,000 841,250 12,251,250
Total 51,005,000$ 18,146,775$ 69,151,775$
2017 Series B Tax Allocation Refunding Bonds
On January 31, 2017, the Successor Agency issued the 2017B Bonds, in the principal amount
of $140,130,000. The proceeds from the 2017B Bonds were utilized refund the Project Area
No. 1 2006A Bonds, the Project Area No. 2 2006A Bonds, the Project Area No. 2 2006D Bonds,
the Project Area No. 3 2003 Bonds, the Project No. 3 2006A Bonds, the Project Area
No. 3 2006B Bonds, the Project Area No. 3 2006C Bonds, the Project Area No. 4 2001 Bonds,
the Project Area No. 4 2006A Bonds, and the Project Area No. 4 2006B Bonds and pay certain
costs associated with the issuance of the bonds.
The refunding resulted in a difference between the reacquisition price and the net carrying
amount of the old debt of ($414,197), which is reported as a deferred inflow of resources in the
accompanying financial statements and amortized over the remaining life of the refunding debt.
The agency completed the refunding to reduce its total debt service payments by $22,311,587
and to obtain an economic gain (difference between the present values of the old and new debt
service payments) of $13,310,309.
Interest rates on the bonds vary from 1.25% to 4.25% per annum payable semi-annually on
April 1 and October 1, commencing April 1, 2017, with principal maturing annually on
October 1. As of June 30, 2018, the outstanding principal balance on the bonds is
$138,085,000.
92
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 17: Successor Agency Disclosures (Continued)
The future debt service requirements on the 2017B Bonds are as follows:
Year Ending
June 30, Principal Interest Total
2019 6,545,000$ 4,500,828$ 11,045,828$
2020 8,685,000 4,360,800 13,045,800
2021 8,325,000 4,180,294 12,505,294
2022 8,780,000 3,971,400 12,751,400
2023 9,405,000 3,726,844 13,131,844
2024 - 2028 35,820,000 14,844,841 50,664,841
2029 - 2033 30,135,000 9,533,322 39,668,322
2034 - 2038 27,755,000 2,783,431 30,538,431
2039 - 2042 2,635,000 229,606 2,864,606
Total 138,085,000$ 48,131,366$ 186,216,366$
2017 Series H-A Tax Allocation Refunding Bonds
On January 31, 2017, the Successor Agency issued the 2017H-A Bonds, in the principal
amount of $7,365,000. The proceeds from the 2017H-A Bonds were used to refund the
2002 Housing Bonds and pay certain costs associated with the issuance of the bonds.
The refunding resulted in a difference between the reacquisition price and the net carrying
amount of the old debt of $58,238, which is reported as a deferred outflow of resources in the
accompanying financial statements and amortized over the remaining life of the refunding debt.
The agency completed the refunding to reduce its total debt service payments by $1,332,840
and to obtain an economic gain (difference between the present values of the old and new debt
service payments) of $1,063,959.
Interest rates on the bonds vary from 2.00% to 5.00% per annum payable semi-annually on
April 1 and October 1, commencing April 1, 2017, with principal maturing annually on
October 1. As of June 30, 2018, the outstanding principal balance on the bonds is $7,010,000.
The future debt service requirements on the 2017 Series H-A Tax Allocation Refunding Bonds
are as follows:
Year Ending
June 30, Principal Interest Total
2019 365,000$ 310,194$ 675,194$
2020 380,000 297,119 677,119
2021 395,000 279,644 674,644
2022 415,000 259,394 674,394
2023 430,000 238,269 668,269
2024 - 2028 2,515,000 835,718 3,350,718
2029 - 2032 2,510,000 186,784 2,696,784
Total 7,010,000$ 2,407,122$ 9,417,122$
93
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 17: Successor Agency Disclosures (Continued)
2017 Series H-B Tax Allocation Refunding Bonds
On January 31, 2017, the Successor Agency issued the 2017H-B Bonds, in the principal
amount of $45,815,000. The proceeds from the 2017 H-B Bonds were used to refund the
2007 Housing Bond and pay certain costs associated with the issuance of the bonds.
The refunding resulted in a difference between the reacquisition price and the net carrying
amount of the old debt of ($353,876), which is reported as a deferred inflow of resources in the
accompanying financial statements and amortized over the remaining life of the refunding debt.
The agency completed the refunding to reduce its total debt service payments by $3,419,425
and to obtain an economic gain (difference between the present values of the old and new debt
service payments) of $1,617,843.
Interest rates on the bonds vary from 1.25% to 3.00% per annum payable semi-annually on
April 1 and October 1, commencing April 1, 2017, with principal maturing annually on
October 1. As of June 30, 2018, the outstanding principal balance on the bonds is $39,045,000.
The future debt service requirements on the 2017H-B Bonds are as follows:
Year Ending
June 30, Principal Interest Total
2019 7,560,000$ 849,150$ 8,409,150$
2020 7,680,000 710,925 8,390,925
2021 5,735,000 569,606 6,304,606
2022 5,860,000 428,175 6,288,175
2023 6,015,000 268,556 6,283,556
2024 6,195,000 92,925 6,287,925
Total 39,045,000$ 2,919,337$ 41,964,337$
Note 18: Restatement of Net Position
In the current fiscal year, the City implemented GASB Statement No. 75, Accounting and
Financial Reporting for Postemployment Benefits Other Than Pensions. Due to this
implementation, the City restated governmental activity net position, as of the beginning of the
fiscal year, by the amount of $13,081,531 due to the following:
733,953,668$
(9,432,358)
(4,781,811)
1,132,638
(13,081,531)
Net Position - beginning of year, as restated 720,872,137$
Net Position - beginning of year
OPEB contribution made after measurement date
Increase in OPEB liability
Decrease in Net OPEB assets
Changes to beginning Net Position
94
CITY OF PALM DESERT
NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2018
Note 19: Subsequent Events
On August 13th, 2018, the City Council, acting as the as governing body of the
Successor Agency to the Palm Desert Redevelopment Agency (SARDA) executed a Purchase
and Sale Agreement to sell SARDA owned Desert Willow Lot Pad E to the City of Palm Desert
for the appraised value of $2,670,000. The goals of this comprehensive disposition strategy
are to implement the requirements of the Long Range Property Management Plan (LRPMP)
and to maximize the property’s economic development opportunities that align with the City’s
Strategic Plan.
95