March 4, 2024 Breaking News, Latest News, and Videos

Santa Monica’s City Finances Get Clean Bill Of Health:

Standing strong in net capital position and with $366 million as the City’s General Fund balance June 2014, it was announced Tuesday evening that Santa Monica received an independent auditor’s stamp of approval for its Comprehensive Annual Financial Report (CAFR) financial year 2013-2014.

The City has received a clean audit report for more than three decades. This year, the City’s independent auditor, Macias, Gini & O’Connell LLP issued an “unmodified, or clean, opinion,” for Santa Monica’s CAFR.

The result demonstrates a strong financial position for the City, according to Gigi Decavalles-Hughes, Santa Monica City’s Director of Finance and City Treasurer.

“Overall the report shows that the City is on a solid financial footing and that spending and reserves are reflecting Council approved direction, priorities and fiscal policies,” said Decavalles-Hughes.

The most notable measure of a City’s financial health is the General Fund balance, according to City staff.

As presented in the Basic Financial Statements, the City’s General Fund had a balance of $366 million as of June 30, 2014. This balance is comprised of a number of categories: $35.1 million non-spendable, restricted or committed resources; $212.7 million assigned funds set aside for specific purposes based on budget priorities; and $118.2 million in unassigned funds – $47.5 million rainy day contingency; $9.7 million economic uncertainty reserve to mitigate potential revenue losses; $57.5 million for public works infrastructure expenditures; and $3.5 million fund balance.

“Overall, the City’s CAFR shows that City finances are stable,” stated City staff. “However, there are several unpredictable factors that will require the City to continue to exercise caution and restraint over the next few years.”

The City’s General Fund balance also decreased by $18.2 million from the prior year, primarily due to the spending down of funds set aside in prior years, according to City staff.

Long Term Liabilities

While short-term liabilities are considered current and payable within a year after the date of the financial statements, long-term liabilities are due after a year and are an important factor in the City’s financial planning.

The primary source of long-term liabilities is in the form of bonds and the debt service that is owed on them. In June 2014, $7.8 million in Hyperion Project Revenue Refunding 2005 bonds were redeemed. $7.7 million in debt service payments were made on one general obligation bond for the Main Library construction, five General Fund revenue bonds for various parking structures and the Public Safety Facility, and two revenue bonds for wastewater improvements.

The City did not issue any new debt for the fiscal year ended June 30, 2014.

Pension Costs

A key liability carried by the City, but not shown in the financial statements, is future pension spending. In an effort to make pension accounting more transparent, the Governmental Accounting Standards Board (GASB) will be requiring government entities to include unfunded liability on the face of their financial statements beginning in financial year 2014-2015.

“Pension costs remain a challenge for the City,” City staff said.

Recent State-mandated reforms and cost saving measures approved by Council, including an additional $25 million paid toward the City’s unfunded pension liability, have worked to mitigate pension cost increases for the City. However, the City’s various pension plans are approximately 71 percent funded, leaving a combined unfunded actuarial liability in excess of $385 million.

“The City will continue its more aggressive Council–adopted policy to pay down at least an additional $1 million of its unfunded liability every year,” the City stated.

Employees are also doing their part to decrease the costs of pensions by increasing their pension contributions each year, they said.

Settlement with the State

On Oct. 28, 2013 the City and the Successor Agency entered into a settlement agreement with the State Department of Finance, the State Controller’s Office, and the Board of Equalization stipulating payment of $56.8 million over four equal installments beginning on January 15, 2014 and ending on July 15, 2015.

The City paid down the total settlement on Jan. 14, 2015, leading the State to issue a Finding of Completion to the Successor Agency.

Among other things, the finding of completion allows the Successor Agency to make certain loan repayments to the City and utilize proceeds from bonds issued prior to January 1, 2011 in a manner consistent with the original bond covenants, according to the City.

Net Capital Position

On the flipside, Santa Monica’s Net Capital Position, a key financial indicator, returned positive results.

“Our net position for the entire city shows a 1.2 billion in capital assets,” stated Decavalles-Hughes.

Capital assets include land, buildings, improvements, intangibles, infrastructure and utility systems, and construction in progress. Intangible assets provide rights of use of things like software and payments for Santa Monica’s cost of improvements to the City of Los Angeles sewage treatment system. Capital assets include the following notable new items as of June 30, 2014:

• $30.3 million final cost for Parking Structure 6

• $40.9 million final cost for Tongva Park and Ken Genser Square

• $9.5 million final cost for the Pico Branch Library

• $19.2 million for 38 new 40-foot buses acquired by the Big Blue Bus

• $6.1 million for construction in progress related to Pier infrastructure improvements

• $2.9 million in capital payments made to the City of Los Angeles for Santa Monica’s shared cost of the Amalgamated System in the Wastewater Fund

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