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2021 04 07 FAC Special MeetingFINANCIAL ADVISORY COMMISSION AGENDA 1 APRIL 7, 2021 SPECIAL MEETING SPECIAL MEETING OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION TO THE MEMBERS OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION AND TO THE COMMISSION SECRETARY: NOTICE IS HEREBY GIVEN that a Special Meeting of the La Quinta Financial Advisory Commission is hereby called to be held on Wednesday, April 7, 2021 starting at 4:00 p.m.; at La Quinta City Hall located at 78495 Calle Tampico, La Quinta, CA 92253. Pursuant to Executive Orders N-25-20, N-29-20, N-33-20, N-35-20, and N-60- 20, executed by the Governor of California in response to the state of emergency relating to novel coronavirus disease 2019 (COVID-19) and enabling teleconferencing accommodations by suspending or waiving specified provisions in the Ralph M. Brown Act (Government Code § 54950 et seq.), members of the Financial Advisory Commission, the City Manager, City Attorney, City Staff, and City Consultants may participate in this emergency meeting by teleconference. The emergency meeting is called for the following purpose: CONSENT CALENDAR 1. Approve Minutes Dated February 24, 2021 2. Receive and File Revenue and Expenditure Report Dated January 31, 2021 3. Receive and File Revenue and Expenditure Report Dated February 28, 2021 4. Approve Minor Revisions to Cash Management Policy BUSINESS SESSION 1. Approve Fiscal Year 2021/22 Investment policy 2. Recommend Outstanding Pension Obligation Funding Options DEPARTMENTAL REPORTS 1. Short-term Vacation Rental Committee Recommendations 2. Financial Advisory Commission Subcommittees Verbal Update 1. Financial Advisory Commissioner to standby at City Council Meetings 2. Farewell to Finance Director Karla Romero FINANCIAL ADVISORY COMMISSION AGENDA 2 APRIL 7, 2021 SPECIAL MEETING Dated: April 1, 2021 /s/ W. Richard Mills W. RICHARD MILLS, Chairperson Attest: Jessica Delgado, Management Assistant DECLARATION OF POSTING I, Jessica Delgado, Management Assistant, do hereby declare that the foregoing notice for the La Quinta Financial Advisory Commission Special Meeting of April 7, 2021 was posted on the outside entry to the Council Chamber at 78495 Calle Tampico and on the bulletin boards at 51321 Avenida Bermudas and 78630 Highway 111 on April 1, 2021. Jessica Delgado, Management Assistant FINANCIAL ADVISORY COMMISSION AGENDA 3 APRIL 7, 2021 SPECIAL MEETING FINANCIAL ADVISORY COMMISSION AGENDA CITY HALL COUNCIL CHAMBERS 78-495 Calle Tampico, La Quinta SPECIAL MEETING ON WEDNESDAY, APRIL 7, 2021 AT 4:00 P.M. ****************************** SPECIAL NOTICE Teleconferencing and Telephonic Accessibility in Effect Pursuant to Executive Orders N-25-20, N-29-20, N-33-20, N-35-20, and N-60-20 executed by the Governor of California in response to the state of emergency relating to novel coronavirus disease 2019 (COVID-19) and enabling teleconferencing accommodations by suspending or waiving specified provisions in the Ralph M. Brown Act (Government Code § 54950 et seq.), members of the Financial Advisory Commission, the City Manager, City Attorney, City Staff, and City Consultants may participate in this meeting by teleconference. Additionally, pursuant to the above-referenced executive orders, the public is not permitted to physically attend at City Hall the meeting to which this agenda applies, but any member of the public may listen or participate in the open session of this meeting as specified below. Members of the public wanting to listen to this meeting may do so by tuning-in live via https://laquinta.12milesout.com/video/live. Members of the public wanting to address the Financial Advisory Commission, either for public comment or for a specific agenda item, or both, are requested to send an email notification to the La Quinta Finance Department Management Assistant at jdelgado@LaQuintaCA.gov, and specify the following information: 1) Full Name 4) Public Comment or Agenda Item Number 2) City of Residence 5) Subject 3) Phone Number 6) Written or Verbal Comments Financial Advisory Commission agendas and staff www.laquintaca.gov FINANCIAL ADVISORY COMMISSION AGENDA 4 APRIL 7, 2021 SPECIAL MEETING Verbal public comments requests to speak must be emailed to the Finance Department Management Assistant no later than 3:00 p.m. on the day of the meeting; the City will facilitate the ability for a member of the public to be audible to the Financial Advisory Commission and general public for the item(s) by contacting him/her via phone and queuing him/her to speak during the discussion. Only one person at a time may speak by telephone and only after being recognized by the Financial Advisory Written public comments, received prior to the adjournment of the meeting, will be distributed to the Financial Advisory Commission, incorporated into the agenda packet and public record of the meeting, and will not be read during the meeting unless, upon the request of the Financial Advisory Commission Chair, a brief summary of any public comment is asked to be read, to the extent the Finance Department Management Assistant can accommodate such request. It would be appreciated that any email communications for public comments related to the items on the agenda, or for general public comment, are provided to the Finance Department Management Assistant at the email address listed above prior to the commencement of the meeting. If that is not possible, and to accommodate public comments on items that may be added to the agenda after its initial posting or items that are on the agenda, every effort will be made to attempt to review emails received by the Finance Department Management Assistant during the course of the meeting. The is taken on any agenda item to allow the Finance Department Management Assistant to review emails and share any public comments received during the meeting. All emails received by the Finance Department Management Assistant, at the email address above, until the adjournment of the meeting, will be included within the public record relating to the meeting. ****************************** CALL TO ORDER Roll Call: Commissioners: Batavick, Hoffner, Hunter, Rosen, Twohey, Way and Chair Mills PLEDGE OF ALLEGIANCE PUBLIC COMMENT At this time members of the public may address the La Quinta Financial Advisory Commission on any matter not listed on the agenda. Please email Written Public Comments to jdelgado@LaQuintaCA.gov and limit your comments to three minutes (approximately 350 words). The Commission values your comments; however, in accordance with State law, no action shall be taken on any item not appearing on the agenda unless it is an emergency item authorized by the Brown Act [Government Code Section 54954.2(b)]. FINANCIAL ADVISORY COMMISSION AGENDA 5 APRIL 7, 2021 SPECIAL MEETING CONFIRMATION OF AGENDA ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS None CONSENT CALENDAR NOTE: Consent Calendar items are routine in nature and can be approved by one motion. 1. Approve Minutes Dated February 24, 2021 2. Receive and File Revenue and Expenditure Report Dated January 31, 2021 3. Receive and File Revenue and Expenditure Report Dated February 28, 2021 4. Approve Minor Revisions to Cash Management Policy BUSINESS SESSION 1. Approve Fiscal Year 2021/22 Investment policy 2. Recommend Outstanding Pension Obligation Funding Options STUDY SESSION None DEPARTMENTAL REPORTS 1. Short-term Vacation Rental Committee Recommendations 2. Financial Advisory Commission Subcommittees Verbal Update 1. Financial Advisory Commissioner to standby at City Council Meetings 2. Farewell to Finance Director Karla Romero ADJOURNMENT The next regular quarterly meeting of the La Quinta Financial Advisory Commission will be held on May 12, 2021 commencing at 4:00 p.m. at the La Quinta Study Session Room, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING I, Jessica Delgado, Management Assistant, of the City of La Quinta, do hereby declare ite, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and 51-321 Avenida Bermudas, on April 1, 2021. DATED: April 1, 2021 Jessica Delgado, Management Assistant City of La Quinta, California FINANCIAL ADVISORY COMMISSION AGENDA 6 APRIL 7, 2021 SPECIAL MEETING Public Notices The La Quinta City Hall Council Chambers is handicapped accessible. If special equipment is -7092, twenty- four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the Commission, (760) 777-7092. A one (1) week notice is required. If background material is to be presented to the Commission during a Commission meeting, please be advised that eight (8) copies of all documents, exhibits, etc., must be supplied to the Management Assistant for distribution. It is requested that this takes place prior to the beginning of the meeting. Any Writings or documents provided to a majority of the Commission regarding any item(s) on the agenda will be made available for public inspection at the Community Development counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253, during normal business hours. FINANCIAL ADVISORY COMMISSION MINUTES 1 FEBRUARY 24, 2021 SPECIAL MEETING FINANCIAL ADVISORY COMMISSION SPECIAL MEETING MINUTES WEDNESDAY, FEBRUARY 24, 2021 CALL TO ORDER A special meeting of the Financial Advisory Commission (Commission) was called to order at 4:00 p.m. by Chairperson Mills. This meeting was held by teleconference pursuant to Executive orders N-25-20, N- 29-20, N-33-20, N-35-20, and N-60-20 executed by the Governor of California in response to the state of emergency relating to novel coronavirus disease 2019 (COVID-19) and enabling teleconferencing accommodations by suspending or waiving specified provisions of the Ralph M. Brown Act (Government Code § 54950 et seq.). PRESENT: Commissioners Batavick, Hoffner, Hunter, Rosen, Twohey, Way and Chairperson Mills ABSENT: None STAFF PRESENT: Management Assistant Delgado, Accounting Manager Martinez, Financial Services Analyst Hallick, Public Works Director/City Engineer McKinney, and Management Analyst Mignogna, and Finance Director Romero. PLEDGE OF ALLEGIANCE Commissioner Rosen led the audience in the Pledge of Allegiance. PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA None CONFIRMATION OF AGENDA Confirmed ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS None CONSENT CALENDAR ITEMS 1. APPROVE MEETING MINUTES DATED FEBRUARY 10, 2021 2. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED DECEMBER 31, 2020 CONSENT CALENDAR ITEM NO. 1 FINANCIAL ADVISORY COMMISSION MINUTES 2 FEBRUARY 24, 2021 SPECIAL MEETING 3. RECEIVE AND FILE SECOND QUARTER 2020/21 TREASURY REPORTS FOR OCTOBER, NOVEMBER, DECEMBER 2020 4. RECEIVE AND FILE FEDERAL AWARDS REPORTS IN ACCORDANCE WITH THE UNIFORM GUIDANCE FOR YEAR ENDED JUNE 30, 2020 Staff provided the Commission with an overview of the federally-funded projects listed on page 6 of the Federal Awards Reports, included as Attachment 1 to the staff report for Consent Calendar Item No. 4 in the agenda packet. Motion A motion was made and seconded by Commissioners Twohey/Hoffner to approve the Consent Calendar, as submitted. Motion passed unanimously. BUSINESS SESSION 1. APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO FORM A 10-YEAR FINANCIAL PROJECTIONS TASK FORCE Finance Director Romero presented the staff report, which is on file in the Finance Department. Commissioners Batavick and Way expressed their willingness to serve on the 10-year financial projections task force. Motion A motion was made and seconded by Commissioners Hunter/Twohey to appoint Commissioners Batavick and Way to serve on the 10-year financial projections task force. Motion passed unanimously. 2. APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO FORM A LONG-RANGE STRATEGIC PLANNING TASK FORCE Commissioner Mills presented the staff report, which is on file in the Finance Department. Commissioners Hoffner, Mills, and Rosen expressed their willingness to serve on the long-range strategic planning task force. Motion A motion was made and seconded by Commissioners Way/Rosen to appoint Commissioners Hoffner, Mills, and Rosen to serve on the long-range strategic planning task force. Motion passed unanimously. 3. RECEIVE AND FILE THE 2020/21 MID-YEAR BUDGET REPORT Financial Services Analyst Hallick and Accounting Manager Martinez presented the staff report, which is on file in the Finance Department. The Commission and staff discussed General fund expenses and revenue adjustments; grant funding on additional expenditures; Facility and Fleet vehicle FINANCIAL ADVISORY COMMISSION MINUTES 3 FEBRUARY 24, 2021 SPECIAL MEETING funding adjustments and process for vehicle purchases; expenses in So. Coast Air Quality restricted fund for electric vehicle (EV) charging stations, the quantity located in La Quinta and their locations. Staff said EV charging stations for the City are required by the state and would provide the Commission with state regulations in regards to EV charging stations. The Commission recommended that the Planning Commission form a strategy to evaluate for future expenses and needs for EV charging stations. Discussion followed regarding reserve balances and unassigned fund balance. Motion A motion was made and seconded by Commissioners Way/Hoffner to receive and file the 2020/21 mid-year budget report. Motion passed unanimously. STUDY SESSION 1. DISCUSS PROJECTS TO BE INCLUDED IN FISCAL YEARS 2021/22 THROUGH 2025/26 CAPITAL IMPROVEMENT PROGRAM (CIP) BUDGET Management Analyst Mignogna and Public Works Director/City Engineer McKinney presented the staff report, which is on file in the Finance Department. Discussion followed on funding and study plan for the Village Art Plaza project. Commissioner Hoffner provided a summary of the review process and findings, review conclusions, and recommendations found on the FAC Commissioner CIP Budget Committee Report, included as Attachment 1 to the staff report. He also mentioned that the subcommittee for the CIP budget recommended that the proposed budget of $44.3 million for fiscal years 2021/22 through 2025/26 be presented to Council for consideration. Commissioner Batavick mentioned best practices to review the 5-years versus the 1-year and shared his experience on the subcommittee and review process. Staff mentioned that the initial review for the CIP projects start at the annual community workshop for the City and shared further review process of project priorities and funding. The Commission expressed consensus for the CIP budget subcommittee recommendations. Finance Director Romero said a copy of the subcommittee s report would be incorporated in a presentation to Council next week along with the Commissions comments from this meeting. 2. DISCUSS PRELIMINARY GENERAL FUND REVENUE PROJECTIONS FOR THE FISCAL YEAR 2021/22 BUDGET Finance Director Romero presented the staff report, which is on file in the Finance Department. The Commission and staff discussed strategy and planning process for reviewing revenues and expenditures. FINANCIAL ADVISORY COMMISSION MINUTES 4 FEBRUARY 24, 2021 SPECIAL MEETING 3. FINANCIAL ADVISORY COMMISSION SUBCOMMITTEE (Subcommittee) RECOMMENDATIONS Finance Director Romero and Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. Commissioner Twohey and Way shared their experience of serving on the scope of work and findings; and thanked staff obligations. The Commission and staff discussed unfunded liability payments to California Public Employees Retirement System Agency (CalPERS); funded ratio for pension tiers; current and alternative amortization schedules; and the Subcomm recommendations included in the staff report. The following was also noted as recommendations by the Commission: Presenting an analysis and the value between return on investments and additional payments sent to CalPERS Including the potential of increasing trust fund to match current liability for the next reserve study The Commission also expressed that they liked the flexibility of choosing when and if additional payments should be made to CalPERS. Staff said the report would be updated with current discussion recommendations and brought forth for review by the Subcommittee before being presented in a study session to Council. 4. DISCUSS LIBRARY DEVELOPMENT IMPACT FEE (DIF) FUND LOAN AND REPAYMENT CALCULATIONS Finance Director Romero presented the staff report, which is on file in the Finance Department. The Commission and staff discussed terms to the outstanding library DIF loan due to the Successor Agency, implementation of interest, and process for recognizing quarterly payments and interest. Commissioner Hoffner said that further review is to be done by the DIF fund loan Subcommittee and that the next meeting is scheduled for tomorrow, Thursday, February 25th. FINANCIAL ADVISORY COMMISSION MINUTES 5 FEBRUARY 24, 2021 SPECIAL MEETING DEPARTMENTAL REPORTS 1. THIRD QUARTER 2020 (JULY-SEPTEMBER) SALES TAX UPDATE FOR THE CITY OF LA QUINTA Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. The Commission commended Financial Services Analyst Hallick for a great summary update. Commissioner Mills asked Finance Director Romero to provide an update on the economic impacts workshop she had attended earlier today. Finance Director Romero thanked Commissioner Way for also attending, said it was informative, noted how the City is well ahead with some of the processes already, and said staff would provide the Commission with the link to the workshop as there are other great recommendations suggested for consideration. ADJOURNMENT There being no further business, it was moved and seconded by Commissioners Rosen/Hoffner to adjourn this meeting at 6:48 p.m. Motion passed unanimously. Respectfully submitted, Jessica Delgado, Management Assistant City of La Quinta, California City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 7, 2021 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED JANUARY 31, 2021 RECOMMENDATION Receive and file revenue and expenditure report dated January 31, 2021. EXECUTIVE SUMMARY •The report summarizes the City’s period and year-to-date (YTD) revenues and expenditures for January 2021 (Attachment 1). •These reports are also reviewed by the City Council. FISCAL IMPACT – None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget – represents revenue and expenditure budgets the Council adopted in June 2020 for fiscal year 2020/21. Current Total Budget – represents original adopted budgets plus any Council approved budget amendments from throughout the year. The 2019/20 operating and Capital Improvement Project carryovers to 2020/21 have been added to the current budget. Period Activity – represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity – represents actual revenues received and expenditures outlaid YTD. Variance Favorable/(Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used – represents the percentage activity as compared to budget YTD. CONSENT CALENDAR ITEM NO. 2 The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City’s cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Karla Romero, Finance Director Attachment: 1. Revenue and Expenditure Report for January 31, 2021 MTD YTD YTD Percent of Budget General Fund 7,071,917$ 22,973,544$ 41.74% All Funds 16,607,740$ 53,189,271$ 31.26% MTD YTD YTD Percent of Budget General Fund 4,511,416$ 18,488,824$ 28.15% Payroll - General Fund 642,408$ 5,517,849$ 52.83% All Funds 7,349,730$ 61,817,558$ 33.28% January Revenues January Expenditures General Fund Non-General Fund Property Tax 2,643,676$ County Government Revenue(1)7,285,476$ Measure G 1,209,773$ Active Transportation Grant - Complete Streets 888,003$ Sales Tax 1,059,267$ Lighting and Landscape District Assessments 515,134$ Transient Occupancy (Hotel) Tax 738,557$ SilverRock Greens Fees 306,711$ Document Transfer Tax 406,856$ County Sales Tax (Measure A)144,306$ General Fund Non-General Fund Sheriff Contract (Sept.-Nov.)3,532,788$ Capital Improvement Program (CIP)-Construction(2)1,364,231$ Greater Palm Springs Convention Bureau 42,207$ Small Business Economic Relief 533,599$ Contract Legal Services 36,213$ SilverRock Maintenance 122,368$ Parks Landscape Maintenance 35,765$ CIP-Professional Services (3)88,592$ Janitorial 24,517$ CIP-Design (4)66,433$ (2) CIP Construction: Village Complete Streets, SilverRock event space, Pavement Management Plan, Washington/Fred Waring triple left, north La Quinta landscape project. (4) CIP Design: Landscape project in north La Quinta and Fire Station #70 remodel. (3) CIP Professional Services: Consulting expenses associated with multiple ongoing capital improvement projects. Top Five Revenue/Income Sources for January Top Five Expenditures/Outlays for January (1)For Redevelopment Successor Agency semi-annual debt service obligations. For Fiscal: 2020/21 Period Ending: 01/31/2021 Page 1 of 3 Revenue Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 22,973,5447,071,91750,726,100 55,040,534 -32,066,990 41.74 % 201 - GAS TAX FUND 865,60270,0791,778,400 1,791,800 -926,198 48.31 % 202 - LIBRARY & MUSEUM FUND 268,31642,808,500 2,807,200 -2,538,884 9.56 % 203 - PUBLIC SAFETY FUND (MEASURE G)-1,924010,000 10,000 -11,924 19.24 % 210 - FEDERAL ASSISTANCE FUND -200141,900 147,472 -147,492 0.01 % 212 - SLESA (COPS) FUND 89,7698,333101,000 101,000 -11,231 88.88 % 215 - LIGHTING & LANDSCAPING FUND 1,411,100515,1341,877,000 1,877,000 -465,900 75.18 % 220 - QUIMBY FUND -2,481080,000 80,000 -82,481 3.10 % 221 - AB 939 - CALRECYCLE FUND 12,8375,39776,000 76,000 -63,163 16.89 % 223 - MEASURE A FUND 710,729144,3061,319,000 1,519,000 -808,271 46.79 % 224 - TUMF FUND -376000 -376 0.00 % 225 - INFRASTRUCTURE FUND -310200200 -231 15.38 % 226 - EMERGENCY MANAGEMENT PERFORMANCE GRANT (EMPG)-11012,100 19,700 -19,711 0.06 % 227 - STATE HOMELAND SECURITY PROGRAMS (SHSP)3,19405,000 5,000 -1,806 63.88 % 230 - CASp FUND, AB 1379 9,2311,51018,200 18,200 -8,969 50.72 % 231 - SUCCESSOR AGCY PA 1 RORF 7,276,4537,285,47620,539,264 20,539,264 -13,262,811 35.43 % 235 - SO COAST AIR QUALITY FUND 13,55013,58753,000 53,000 -39,450 25.57 % 237 - SUCCESSOR AGCY PA 1 ADMIN -298013,505 13,505 -13,803 2.21 % 241 - HOUSING AUTHORITY 1,495,042105,598513,300 1,715,756 -220,714 87.14 % 243 - RDA LOW-MOD HOUSING FUND -4,181035,000 35,000 -39,181 11.95 % 244 - HOUSING GRANTS (Multiple)00060,000 -60,000 0.00 % 247 - ECONOMIC DEVELOPMENT FUND -6,543040,000 649,100 -655,643 1.01 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)58,4420200,000 200,000 -141,558 29.22 % 250 - TRANSPORTATION DIF FUND 260,94536,081380,000 380,000 -119,055 68.67 % 251 - PARKS & REC DIF FUND 102,26418,954304,000 304,000 -201,736 33.64 % 252 - CIVIC CENTER DIF FUND 62,43411,070110,000 110,000 -47,566 56.76 % 253 - LIBRARY DEVELOPMENT DIF 19,0293,57345,000 45,000 -25,971 42.29 % 254 - COMMUNITY & CULTURAL CENTERS DIF 39,9238,60416,500 16,500 23,423 241.96 % 255 - STREET FACILITY DIF FUND 4,033017,000 2,000 2,033 201.64 % 256 - PARK FACILITY DIF FUND 31107,100 500 -189 62.19 % 257 - FIRE PROTECTION DIF 20,6583,32155,500 55,500 -34,842 37.22 % 270 - ART IN PUBLIC PLACES FUND 107,8334,642111,000 121,000 -13,167 89.12 % 275 - LQ PUBLIC SAFETY OFFICER 1,92502,600 2,600 -675 74.02 % 299 - INTEREST ALLOCATION FUND 978,232000 978,232 0.00 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 001,100 1,100 -1,100 0.00 % 401 - CAPITAL IMPROVEMENT PROGRAMS 11,446,158945,23919,058,300 73,855,948 -62,409,790 15.50 % 405 - SA PA 1 CAPITAL IMPRV FUND -9,8880100,000 100,000 -109,888 9.89 % 501 - FACILITY & FLEET REPLACEMENT 430,4390902,500 902,500 -472,061 47.69 % 502 - INFORMATION TECHNOLOGY 883,3341,9701,721,500 1,747,300 -863,966 50.55 % 503 - PARK EQUIP & FACILITY FUND 94,2080245,000 245,000 -150,792 38.45 % 504 - INSURANCE FUND 467,7170928,500 928,500 -460,783 50.37 % 601 - SILVERROCK RESORT 2,081,320352,9453,882,100 3,882,100 -1,800,780 53.61 % 602 - SILVERROCK GOLF RESERVE -83104,500 4,500 -5,331 18.46 % 760 - SUPPLEMENTAL PENSION PLAN 4,83706,500 6,500 -1,663 74.42 % 761 - CERBT OPEB TRUST 218,959060,000 75,000 143,959 291.94 % 762 - PARS PENSION TRUST 803,4890300,000 600,000 203,489 133.91 % Report Total:16,607,740 53,189,271108,606,169 170,144,279 -116,955,008 31.26 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. ATTACHMENT 1 For Fiscal: 2020/21 Period Ending: 01/31/2021 Page 2 of 3 Expenditure Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 18,488,8244,511,41647,911,600 65,689,997 47,201,173 28.15 % 201 - GAS TAX FUND 613,34336,9911,775,300 2,288,769 1,675,426 26.80 % 202 - LIBRARY & MUSEUM FUND 574,63922,2411,715,100 2,318,100 1,743,461 24.79 % 203 - PUBLIC SAFETY FUND (MEASURE G)7,71601,000,000 1,372,296 1,364,580 0.56 % 210 - FEDERAL ASSISTANCE FUND 00141,900 321,339 321,339 0.00 % 212 - SLESA (COPS) FUND 25,83319,015100,000 100,000 74,167 25.83 % 215 - LIGHTING & LANDSCAPING FUND 925,495158,8571,876,600 2,126,600 1,201,105 43.52 % 220 - QUIMBY FUND 491,275002,781,625 2,290,350 17.66 % 221 - AB 939 - CALRECYCLE FUND 1,900850100,000 250,000 248,100 0.76 % 223 - MEASURE A FUND 185,09001,263,900 2,455,084 2,269,994 7.54 % 225 - INFRASTRUCTURE FUND 00022,618 22,618 0.00 % 226 - EMERGENCY MANAGEMENT PERFORMANCE GRANT (EMPG)19,629012,000 19,600 -29 100.15 % 227 - STATE HOMELAND SECURITY PROGRAMS (SHSP)005,000 5,000 5,000 0.00 % 230 - CASp FUND, AB 1379 004,400 4,400 4,400 0.00 % 231 - SUCCESSOR AGCY PA 1 RORF 13,306,1073,8168,405,468 8,405,468 -4,900,639 158.30 % 235 - SO COAST AIR QUALITY FUND 25,32210,52042,200 48,900 23,578 51.78 % 237 - SUCCESSOR AGCY PA 1 ADMIN 8,2506,30013,505 13,505 5,255 61.09 % 241 - HOUSING AUTHORITY 643,16248,306822,300 1,143,062 499,900 56.27 % 243 - RDA LOW-MOD HOUSING FUND 00250,000 250,000 250,000 0.00 % 244 - HOUSING GRANTS (Multiple)14,1420060,000 45,858 23.57 % 247 - ECONOMIC DEVELOPMENT FUND 1,171,079534,72610,000 1,630,500 459,421 71.82 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)6,116,79606,185,000 6,185,000 68,204 98.90 % 250 - TRANSPORTATION DIF FUND 743,05601,293,000 1,957,670 1,214,614 37.96 % 251 - PARKS & REC DIF FUND 959,71300959,713 0 100.00 % 253 - LIBRARY DEVELOPMENT DIF 8,298030,000 30,000 21,702 27.66 % 254 - COMMUNITY & CULTURAL CENTERS DIF 000101,639 101,639 0.00 % 256 - PARK FACILITY DIF FUND 0005,600 5,600 0.00 % 270 - ART IN PUBLIC PLACES FUND 38,6630110,000 725,700 687,037 5.33 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 001,100 1,100 1,100 0.00 % 401 - CAPITAL IMPROVEMENT PROGRAMS 10,998,0531,555,96519,058,300 70,321,842 59,323,790 15.64 % 405 - SA PA 1 CAPITAL IMPRV FUND 2,647,939005,539,155 2,891,216 47.80 % 501 - FACILITY & FLEET REPLACEMENT 227,05545,801902,500 1,144,464 917,408 19.84 % 502 - INFORMATION TECHNOLOGY 756,23290,9301,684,200 1,924,200 1,167,968 39.30 % 503 - PARK EQUIP & FACILITY FUND 85,1260595,000 682,986 597,860 12.46 % 504 - INSURANCE FUND 791,4840827,500 904,500 113,016 87.51 % 601 - SILVERROCK RESORT 1,901,531303,9983,881,500 3,881,500 1,979,969 48.99 % 760 - SUPPLEMENTAL PENSION PLAN 12,833012,850 12,850 17 99.87 % 761 - CERBT OPEB TRUST 77601,500 1,500 724 51.74 % 762 - PARS PENSION TRUST 28,198052,000 52,000 23,802 54.23 % Report Total:7,349,730 61,817,558100,083,723 185,738,282 123,920,723 33.28 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. Fund #Name Notes 101 General Fund The primary fund of the City used to account for all revenue and expenditures of the City; a broad range of municipal activities are provided through this fund. 201 Gas Tax Fund Gasoline sales tax allocations received from the State which are restricted to street-related expenditures. 202 Library and Museum Fund Revenues from property taxes and related expenditures for library and museum services. 203 Public Safety Fund General Fund Measure G sales tax revenue set aside for public safety expenditures. 210 Federal Assistance Fund Community Development Block Grant (CDBG) received from the federal government and the expenditures of those resources. 212 SLESF (COPS) Fund Supplemental Law Enforcement Services Funds (SLESF) received from the State for law enforcement activities. Also known as Citizen's Option for Public Safety (COPS). 215 Lighting & Landscaping Fund Special assessments levied on real property for city-wide lighting and landscape maintenance/improvements and the expenditures of those resources. 217 Development Agreement Revenue and Expenditures related to development agreement for Village. 220 Quimby Fund Developer fees received under the provisions of the Quimby Act for park development and improvements. 221 AB939 Fund/Cal Recycle Franchise fees collected from the city waste hauler that are used to reduce waste sent to landfills through recycling efforts. Assembly Bill (AB) 939. 223 Measure A Fund County sales tax allocations which are restricted to street-related expenditures. 224 TUMF Fund Developer-paid Transportation Uniform Mitigation Fees (TUMF) utilized for traffic projects in Riverside County. 225 Infrastructure Fund Developer fees for the acquisition, construction or improvement of the City’s infrastructure as defined by Resolution 226 Emergency Mgmt. Performance Grant (EMPG)Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 227 State Homeland Security Programs (SHSP)Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 230 CASP Fund, AB1379 / SB1186 Certified Access Specialist (CASp) program fees for ADA Accessibility Improvements; derived from Business License renewals. Assembly Bill (AB) 1379 and Senate Bill (SB) 1186. 231 Successor Agency PA 1 RORF Fund Successor Agency (SA) Project Area (PA) 1 Redevelopment Obligation Retirement Fund (RORF) for Redevelopment Property Tax Trust Fund (RPTTF) taxes received for debt service payments on recognized obligations of the former Redevelopment Agency (RDA). 235 SO Coast Air Quality Fund (AB2766, PM10)Contributions from the South Coast Air Quality Management District. Uses are limited to the reduction and control of airborne pollutants. Assembly Bill (AB) 2766. 237 Successor Agency PA 1 Admin Fund Successor Agency (SA) Project Area (PA) 1 for administration of the Recognized Obligation Payment Schedule (ROPS) associated with the former Redevelopment Agency (RDA). 241 Housing Authority Activities of the Housing Authority which is to promote and provide quality affordable housing. 243 RDA Low-Moderate Housing Fund Activities of the Housing Authority which is to promote and provide quality affordable housing. Accounts for RDA loan repayments (20% for Housing) and housing programs,. 244 Housing Grants Activites related Local Early Action Planning (LEAP) and SB2 grants for housing planning and development. 247 Economic Development Fund Proceeds from sale of City-owned land; transferred from General Fund for future economic development. 248 SA 2004 LO/MOD Bond Fund Successor Agency (SA) low/moderate housing fund; 2004 bonds refinanced in 2014; for Washington Street Apartment rehabilitation only. 249 SA 2011 Low/Mod Bond Fund Successor Agency (SA) low/moderate housing fund; 2011 bonds refinanced in 2016. 250 Transportation DIF Fund Developer impact fees collected for specific public improvements - transportation related. 251 Parks & Rec. DIF Fund Developer impact fees collected for specific public improvements - parks and recreation. 252 Civic Center DIF Fund Developer impact fees collected for specific public improvements - Civic Center. 253 Library Development DIF Fund Developer impact fees collected for specific public improvements - library. 254 Community Center DIF Fund Developer impact fees collected for specific public improvements - community center. 255 Street Facility DIF Fund Developer impact fees collected for specific public improvements - streets. 256 Park Facility DIF Fund Developer impact fees collected for specific public improvements - parks. 257 Fire Protection DIF Fund Developer impact fees collected for specific public improvements - fire protection. 270 Art In Public Places Fund Developer fees collected in lieu of art placement; utilized for acquisition, installation and maintenance of public artworks. 275 LQ Public Safety Officer Fund Annual transfer in from General Fund; distributed to public safety officers disabled or killed in the line of duty. 299 Interest Allocation Fund Interest earned on investments. 310 LQ Finance Authority Debt Service Fund Accounted for the debt service the Financing Authority’s outstanding debt and any related reporting requirements. This bond was fully paid in October 2018. 401 Capital Improvement Program Fund Planning, design, and construction of various capital projects throughout the City. 405 SA PA 1 Capital Improvement Fund Successor Agency (SA) Project Area (PA) 1 bond proceeds restricted by the bond indenture covenants. Used for SilverRock infrastructure improvements. 501 Equipment Replacement Fund Internal Service Fund for vehicles, heavy equipment, and related facilities. 502 Information Technology Fund Internal Service Fund for computer hardware and software and phone systems. 503 Park Equipment & Facility Fund Internal Service Fund for park equipment and facilities. 504 Insurance Fund Internal Service Fund for city-wide insurance coverages. 601 SilverRock Resort Fund Enterprise Fund for activities of the city-owned golf course. 602 SilverRock Golf Reserve Fund Enterprise Fund for golf course reserves for capital improvements. 735 97-1 Agency Redemption Fund To account for sewer improvement assessments. 760 Supplemental Pension Plan (PARS Account)Supplemental pension savings plan for excess retiree benefits to general employees of the City. 761 Other Post Benefit Obligation Trust (OPEB)For retiree medical benefits and unfunded liabilities. 762 Pension Trust Benefit (PARS Account)For all pension-related benefits and unfunded liabilities. Fund Descriptions 3 of 3 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 7, 2021 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED FEBRUARY 28, 2021 RECOMMENDATION Receive and file revenue and expenditure report dated February 28, 2021. EXECUTIVE SUMMARY •The report summarizes the City’s period and year-to-date (YTD) revenues and expenditures for February 2021 (Attachment 1). •These reports are also reviewed by the City Council. FISCAL IMPACT – None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget – represents revenue and expenditure budgets the Council adopted in June 2020 for fiscal year 2020/21. Current Total Budget – represents original adopted budgets plus any Council approved budget amendments from throughout the year. The 2019/20 operating and Capital Improvement Project carryovers to 2020/21 have been added to the current budget. Period Activity – represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity – represents actual revenues received and expenditures outlaid YTD. Variance Favorable/(Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used – represents the percentage activity as compared to budget YTD. CONSENT CALENDAR ITEM NO. 3 The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City’s cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Karla Romero, Finance Director Attachment: 1. Revenue and Expenditure Report for February 28, 2021 MTD YTD YTD Percent of Budget General Fund 5,665,731$ 28,933,266$ 52.57% All Funds 7,038,839$ 60,254,629$ 35.41% MTD YTD YTD Percent of Budget General Fund 1,014,293$ 19,513,481$ 29.71% Payroll - General Fund 635,289$ 6,153,139$ 59.10% All Funds 3,111,412$ 64,956,285$ 34.97% February Revenues February Expenditures General Fund Non-General Fund Property Tax in lieu of Vehicle License Fees 2,173,317$ SilverRock Greens Fees 465,624$ Measure G 1,097,653$ County Government Revenue -Library/Museum 374,681$ Sales Tax 732,977$ Gas Tax 120,624$ Transient Occupancy (Hotel) Tax 573,267$ Interest Earnings 90,407$ Franchise Tax- Burrtec 289,749$ Development Impact Fees (Transportation)84,189$ General Fund Non-General Fund Marketing and Tourism Promotions 84,358$ CIP-Construction(2)530,685$ Parks Landscape Maintenance 35,765$ Library Operations 374,681$ Greater Palm Springs Convention Bureau 28,500$ Small Business Economic Relief 285,960$ Membership Dues(1)20,906$ SilverRock Maintenance 142,363$ Plan Checks 17,411$ Earthquake Insurance Premium 77,308$ Top Five Revenue/Income Sources for February Top Five Expenditures/Outlays for February (1) Dues: League of California Cities and Southern California Association of Governments (2) CIP Construction: SilverRock Way, landscape improvments, Firtz Burns sidewalk For Fiscal: 2020/21 Period Ending: 02/28/2021 3/31/2021 Page 1 of 3 Revenue Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 28,933,2665,665,73150,726,100 55,040,534 -26,107,268 52.57 % 201 - GAS TAX FUND 990,097120,6241,778,400 1,791,800 -801,703 55.26 % 202 - LIBRARY & MUSEUM FUND 671,514374,6812,808,500 2,807,200 -2,135,686 23.92 % 203 - PUBLIC SAFETY FUND (MEASURE G)2,411010,000 10,000 -7,589 24.11 % 210 - FEDERAL ASSISTANCE FUND 460141,900 147,472 -147,426 0.03 % 212 - SLESA (COPS) FUND 98,8498,333101,000 101,000 -2,151 97.87 % 215 - LIGHTING & LANDSCAPING FUND 1,412,11501,877,000 1,877,000 -464,885 75.23 % 220 - QUIMBY FUND 1,365080,000 80,000 -78,635 1.71 % 221 - AB 939 - CALRECYCLE FUND 28,80913,14776,000 76,000 -47,191 37.91 % 223 - MEASURE A FUND 716,18501,319,000 1,519,000 -802,815 47.15 % 224 - TUMF FUND -376000 -376 0.00 % 225 - INFRASTRUCTURE FUND 390200200 -161 19.31 % 226 - EMERGENCY MANAGEMENT PERFORMANCE GRANT (EMPG)-11012,100 19,700 -19,711 0.06 % 227 - STATE HOMELAND SECURITY PROGRAMS (SHSP)3,19405,000 5,000 -1,806 63.88 % 230 - CASp FUND, AB 1379 10,6611,28218,200 18,200 -7,539 58.58 % 231 - SUCCESSOR AGCY PA 1 RORF 7,276,453020,539,264 20,539,264 -13,262,811 35.43 % 235 - SO COAST AIR QUALITY FUND 13,631053,000 53,000 -39,369 25.72 % 237 - SUCCESSOR AGCY PA 1 ADMIN 10,873013,505 13,505 -2,632 80.51 % 241 - HOUSING AUTHORITY 1,562,96423,813513,300 1,715,756 -152,792 91.09 % 243 - RDA LOW-MOD HOUSING FUND 4,640035,000 35,000 -30,360 13.26 % 244 - HOUSING GRANTS (Multiple)00060,000 -60,000 0.00 % 247 - ECONOMIC DEVELOPMENT FUND 6,850040,000 649,100 -642,250 1.06 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)58,7810200,000 200,000 -141,219 29.39 % 250 - TRANSPORTATION DIF FUND 352,27084,189380,000 380,000 -27,730 92.70 % 251 - PARKS & REC DIF FUND 147,09144,226304,000 304,000 -156,909 48.39 % 252 - CIVIC CENTER DIF FUND 89,41325,830110,000 110,000 -20,587 81.28 % 253 - LIBRARY DEVELOPMENT DIF 27,3898,33745,000 45,000 -17,611 60.86 % 254 - COMMUNITY & CULTURAL CENTERS DIF 60,72020,07616,500 16,500 44,220 368.00 % 255 - STREET FACILITY DIF FUND 4,180017,000 2,000 2,180 209.01 % 256 - PARK FACILITY DIF FUND 33307,100 500 -167 66.54 % 257 - FIRE PROTECTION DIF 28,9217,74955,500 55,500 -26,579 52.11 % 270 - ART IN PUBLIC PLACES FUND 121,28010,960111,000 121,000 280 100.23 % 275 - LQ PUBLIC SAFETY OFFICER 2,09502,600 2,600 -505 80.56 % 299 - INTEREST ALLOCATION FUND 643,47990,40700 643,479 0.00 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 001,100 1,100 -1,100 0.00 % 401 - CAPITAL IMPROVEMENT PROGRAMS 11,446,158019,058,300 73,855,948 -62,409,790 15.50 % 405 - SA PA 1 CAPITAL IMPRV FUND 10,3010100,000 100,000 -89,699 10.30 % 501 - FACILITY & FLEET REPLACEMENT 442,3990902,500 902,500 -460,101 49.02 % 502 - INFORMATION TECHNOLOGY 889,6081,7101,721,500 1,747,300 -857,692 50.91 % 503 - PARK EQUIP & FACILITY FUND 107,1490245,000 245,000 -137,851 43.73 % 504 - INSURANCE FUND 468,1670928,500 928,500 -460,333 50.42 % 601 - SILVERROCK RESORT 2,600,758519,4373,882,100 3,882,100 -1,281,343 66.99 % 602 - SILVERROCK GOLF RESERVE 1,04304,500 4,500 -3,457 23.17 % 760 - SUPPLEMENTAL PENSION PLAN 5,15806,500 6,500 -1,342 79.35 % 761 - CERBT OPEB TRUST 218,959060,000 75,000 143,959 291.94 % 762 - PARS PENSION TRUST 785,40418,307300,000 600,000 185,404 130.90 % Report Total:7,038,839 60,254,629108,606,169 170,144,279 -109,889,650 35.41 % ATTACHMENT 1 Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. For Fiscal: 2020/21 Period Ending: 02/28/2021 3/26/2021 Page 2 of 3 Expenditure Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 19,513,4811,014,29347,911,600 65,689,997 46,176,516 29.71 % 201 - GAS TAX FUND 655,73842,3951,775,300 2,288,769 1,633,031 28.65 % 202 - LIBRARY & MUSEUM FUND 967,458392,7781,715,100 2,318,100 1,350,642 41.73 % 203 - PUBLIC SAFETY FUND (MEASURE G)7,71601,000,000 1,372,296 1,364,580 0.56 % 210 - FEDERAL ASSISTANCE FUND 00141,900 321,339 321,339 0.00 % 212 - SLESA (COPS) FUND 25,8330100,000 100,000 74,167 25.83 % 215 - LIGHTING & LANDSCAPING FUND 1,129,367203,8721,876,600 2,126,600 997,233 53.11 % 220 - QUIMBY FUND 491,275002,781,625 2,290,350 17.66 % 221 - AB 939 - CALRECYCLE FUND 1,9000100,000 250,000 248,100 0.76 % 223 - MEASURE A FUND 185,09001,263,900 2,455,084 2,269,994 7.54 % 225 - INFRASTRUCTURE FUND 00022,618 22,618 0.00 % 226 - EMERGENCY MANAGEMENT PERFORMANCE GRANT (EMPG)19,629012,000 19,600 -29 100.15 % 227 - STATE HOMELAND SECURITY PROGRAMS (SHSP)005,000 5,000 5,000 0.00 % 230 - CASp FUND, AB 1379 2,3782,3784,400 4,400 2,022 54.05 % 231 - SUCCESSOR AGCY PA 1 RORF 13,336,34019,7288,405,468 8,405,468 -4,930,872 158.66 % 235 - SO COAST AIR QUALITY FUND 25,56123942,200 48,900 23,339 52.27 % 237 - SUCCESSOR AGCY PA 1 ADMIN 9,750013,505 13,505 3,755 72.20 % 241 - HOUSING AUTHORITY 693,77450,612822,300 1,143,062 449,288 60.69 % 243 - RDA LOW-MOD HOUSING FUND 00250,000 250,000 250,000 0.00 % 244 - HOUSING GRANTS (Multiple)14,1420060,000 45,858 23.57 % 247 - ECONOMIC DEVELOPMENT FUND 1,463,432292,35310,000 1,630,500 167,068 89.75 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)6,116,79606,185,000 6,185,000 68,204 98.90 % 250 - TRANSPORTATION DIF FUND 743,05601,293,000 1,957,670 1,214,614 37.96 % 251 - PARKS & REC DIF FUND 959,71300959,713 0 100.00 % 253 - LIBRARY DEVELOPMENT DIF 8,298030,000 30,000 21,702 27.66 % 254 - COMMUNITY & CULTURAL CENTERS DIF 000101,639 101,639 0.00 % 256 - PARK FACILITY DIF FUND 0005,600 5,600 0.00 % 270 - ART IN PUBLIC PLACES FUND 51,90213,239110,000 725,700 673,798 7.15 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 001,100 1,100 1,100 0.00 % 401 - CAPITAL IMPROVEMENT PROGRAMS 11,532,566534,51319,058,300 70,321,842 58,789,276 16.40 % 405 - SA PA 1 CAPITAL IMPRV FUND 2,647,939005,539,155 2,891,216 47.80 % 501 - FACILITY & FLEET REPLACEMENT 269,92142,866902,500 1,144,464 874,542 23.58 % 502 - INFORMATION TECHNOLOGY 830,59974,3671,684,200 1,924,200 1,093,601 43.17 % 503 - PARK EQUIP & FACILITY FUND 120,37335,247595,000 682,986 562,613 17.62 % 504 - INSURANCE FUND 869,23177,747827,500 904,500 35,269 96.10 % 601 - SILVERROCK RESORT 2,216,315314,7853,881,500 3,881,500 1,665,185 57.10 % 760 - SUPPLEMENTAL PENSION PLAN 12,833012,850 12,850 17 99.87 % 761 - CERBT OPEB TRUST 77601,500 1,500 724 51.74 % 762 - PARS PENSION TRUST 33,101052,000 52,000 18,899 63.66 % Report Total:3,111,412 64,956,285100,083,723 185,738,282 120,781,997 34.97 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. Fund #Name Notes 101 General Fund The primary fund of the City used to account for all revenue and expenditures of the City; a broad range of municipal activities are provided through this fund. 201 Gas Tax Fund Gasoline sales tax allocations received from the State which are restricted to street-related expenditures. 202 Library and Museum Fund Revenues from property taxes and related expenditures for library and museum services. 203 Public Safety Fund General Fund Measure G sales tax revenue set aside for public safety expenditures. 210 Federal Assistance Fund Community Development Block Grant (CDBG) received from the federal government and the expenditures of those resources. 212 SLESF (COPS) Fund Supplemental Law Enforcement Services Funds (SLESF) received from the State for law enforcement activities. Also known as Citizen's Option for Public Safety (COPS). 215 Lighting & Landscaping Fund Special assessments levied on real property for city-wide lighting and landscape maintenance/improvements and the expenditures of those resources. 217 Development Agreement Revenue and Expenditures related to development agreement for Village. 220 Quimby Fund Developer fees received under the provisions of the Quimby Act for park development and improvements. 221 AB939 Fund/Cal Recycle Franchise fees collected from the city waste hauler that are used to reduce waste sent to landfills through recycling efforts. Assembly Bill (AB) 939. 223 Measure A Fund County sales tax allocations which are restricted to street-related expenditures. 224 TUMF Fund Developer-paid Transportation Uniform Mitigation Fees (TUMF) utilized for traffic projects in Riverside County. 225 Infrastructure Fund Developer fees for the acquisition, construction or improvement of the City’s infrastructure as defined by Resolution 226 Emergency Mgmt. Performance Grant (EMPG)Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 227 State Homeland Security Programs (SHSP)Federal Emergency Management Agency (FEMA) grant for emergency preparedness. 230 CASP Fund, AB1379 / SB1186 Certified Access Specialist (CASp) program fees for ADA Accessibility Improvements; derived from Business License renewals. Assembly Bill (AB) 1379 and Senate Bill (SB) 1186. 231 Successor Agency PA 1 RORF Fund Successor Agency (SA) Project Area (PA) 1 Redevelopment Obligation Retirement Fund (RORF) for Redevelopment Property Tax Trust Fund (RPTTF) taxes received for debt service payments on recognized obligations of the former Redevelopment Agency (RDA). 235 SO Coast Air Quality Fund (AB2766, PM10)Contributions from the South Coast Air Quality Management District. Uses are limited to the reduction and control of airborne pollutants. Assembly Bill (AB) 2766. 237 Successor Agency PA 1 Admin Fund Successor Agency (SA) Project Area (PA) 1 for administration of the Recognized Obligation Payment Schedule (ROPS) associated with the former Redevelopment Agency (RDA). 241 Housing Authority Activities of the Housing Authority which is to promote and provide quality affordable housing. 243 RDA Low-Moderate Housing Fund Activities of the Housing Authority which is to promote and provide quality affordable housing. Accounts for RDA loan repayments (20% for Housing) and housing programs,. 244 Housing Grants Activites related Local Early Action Planning (LEAP) and SB2 grants for housing planning and development. 247 Economic Development Fund Proceeds from sale of City-owned land; transferred from General Fund for future economic development. 248 SA 2004 LO/MOD Bond Fund Successor Agency (SA) low/moderate housing fund; 2004 bonds refinanced in 2014; for Washington Street Apartment rehabilitation only. 249 SA 2011 Low/Mod Bond Fund Successor Agency (SA) low/moderate housing fund; 2011 bonds refinanced in 2016. 250 Transportation DIF Fund Developer impact fees collected for specific public improvements - transportation related. 251 Parks & Rec. DIF Fund Developer impact fees collected for specific public improvements - parks and recreation. 252 Civic Center DIF Fund Developer impact fees collected for specific public improvements - Civic Center. 253 Library Development DIF Fund Developer impact fees collected for specific public improvements - library. 254 Community Center DIF Fund Developer impact fees collected for specific public improvements - community center. 255 Street Facility DIF Fund Developer impact fees collected for specific public improvements - streets. 256 Park Facility DIF Fund Developer impact fees collected for specific public improvements - parks. 257 Fire Protection DIF Fund Developer impact fees collected for specific public improvements - fire protection. 270 Art In Public Places Fund Developer fees collected in lieu of art placement; utilized for acquisition, installation and maintenance of public artworks. 275 LQ Public Safety Officer Fund Annual transfer in from General Fund; distributed to public safety officers disabled or killed in the line of duty. 299 Interest Allocation Fund Interest earned on investments. 310 LQ Finance Authority Debt Service Fund Accounted for the debt service the Financing Authority’s outstanding debt and any related reporting requirements. This bond was fully paid in October 2018. 401 Capital Improvement Program Fund Planning, design, and construction of various capital projects throughout the City. 405 SA PA 1 Capital Improvement Fund Successor Agency (SA) Project Area (PA) 1 bond proceeds restricted by the bond indenture covenants. Used for SilverRock infrastructure improvements. 501 Equipment Replacement Fund Internal Service Fund for vehicles, heavy equipment, and related facilities. 502 Information Technology Fund Internal Service Fund for computer hardware and software and phone systems. 503 Park Equipment & Facility Fund Internal Service Fund for park equipment and facilities. 504 Insurance Fund Internal Service Fund for city-wide insurance coverages. 601 SilverRock Resort Fund Enterprise Fund for activities of the city-owned golf course. 602 SilverRock Golf Reserve Fund Enterprise Fund for golf course reserves for capital improvements. 735 97-1 Agency Redemption Fund To account for sewer improvement assessments. 760 Supplemental Pension Plan (PARS Account)Supplemental pension savings plan for excess retiree benefits to general employees of the City. 761 Other Post Benefit Obligation Trust (OPEB)For retiree medical benefits and unfunded liabilities. 762 Pension Trust Benefit (PARS Account)For all pension-related benefits and unfunded liabilities. Fund Descriptions 3 of 3 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 7, 2021 STAFF REPORT AGENDA TITLE: APPROVE MINOR REVISIONS TO CASH MANAGEMENT POLICY RECOMMENDATION Approve minor revisions to Cash Management Policy. EXECUTIVE SUMMARY •The last update to the City’s Cash Management (Policy) was on October 15, 2019. A Policy review was conducted to provide clarification to language based on feedback and questions from the Financial Advisory Commission (FAC) and staff. •Staff has reviewed the proposed Policy revisions. The Policy conforms to current laws and governmental accounting best practices. •Subsequent to FAC review and approval, the Policy will be presented to City Council for approval. FISCAL IMPACT – None BACKGROUND/ANALYSIS The Policy establishes Citywide standard guidelines for the management of cash and cash equivalent transactions such as credit cards and checks. Furthermore, the Policy references additional reporting requirements for Federally funded procurements as governed under the Code of Federal Regulations (CFR) Title 2 Grant and Agreements, Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, commonly known as Uniform Grant Guidance (UGG). There were no regulatory changes in 2020/21 which would have required an update to the current Policy. However, the FAC and staff have identified edits which provide consistency and further clarification to the document. CONSENT CALENDAR ITEM NO. 4 ALTERNATIVES: There are no alternatives recommended at this time. Prepared by: Claudia Martinez, Accounting Manager Approved by: Karla Romero, Finance Director Attachment: 1. Cash Management Policy – Redlined 2. Cash Management Policy – Draft CASH MANAGEMENT POLICY 1. PURPOSE The purpose of this Cash Management Policy is to establish formal provide guidelines for standard citywide cash handling practices in order to ensure that proper and consistent procedures and internal controls for receiving, processing, and handling cash are consistently followed. 2. SCOPE This policy applies to all City Funds, employees, departments, volunteers, vendors, or other persons whose assigned duties involve handling City cash or funds. must comply with the policies and procedures contained herein. Departments are responsible for ensuring that every employee, volunteer, vendor, or other person whose assigned duties involve handling City cash or funds adheres to this Policy. 3. GENERAL POLICY It is the City of La Quinta’s (City) policy to establish a system of internal controls to protect the City’s assets, including cash, from theft, loss and misuse; and to ensure that the City receives, accurately records, and promptly deposits all cash and cash equivalents to which the City is entitled. Cash: may be comprised of, but not limited to; coin, currency, checks, money orders, debit and credit card transactions, and electronic fund transfers. The City currently has designated revenue collection sites including: a. Finance Department b. The Hub c. Wellness Center d. Museum & Library e. SilverRock Golf Course f. Special Events - On an as- needed basis, there may be situations requiring establishment of temporary receipting points, which collect cash on an ad- hoc basis (e.g. community festivals, golf tours). 4. MANAGEMENT OF CASH All City bank accounts shall be carried in the name of the City, with additional secondary designations within the bank account name as to the purpose of the bank account, where appropriate (e.g., SilverRock Golf Resort, La Quinta Housing Authority, and Dune Palms Mobile Estates). 5. CASH RECEIPTING Cash receipting, for the purpose of this policy, encompasses the following: a. Accounting for cash as it is received b. Pre-numbered consecutive receipts to be provided for cash received c. Adequate separation of duties (collectingon, depositing, and reconciling) d. Refunds, voids, and cash over/short transactions ATTACHMENT 1 Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 2 of 9 6. SEGREGATION OF DUTIES Collection of cash, deposit preparation, and reconciliation duties shall be performed by separate individuals, but at a minimum, reconciliation should be done by a separate person. The employee who physically collects the cash cannot be the same individual performing the reconciliation duties. In the event segregation of duties is not possible, the department shall work with the Finance Department to establish agreed upon internal control procedures. 7. FINANCE DEPARTMENT RESPONSIBILITY It is the responsibility of the Finance Department to track and ensure the timely deposit of City funds collected or generated at authorized locations and account for all funds submitted by all revenue collection sites. The Finance Department will assist and provide materials needed to departments and cashiers as follows: a. Provide cash handling training to City departments and employees. b. Perform cash deposit reconciliations between bank records and cash receipt vouchers, all of which that are input into the financial system. Any discrepancies resulting from errors by the bank, or the City will be resolved by the Finance Department. c. Provide revenue collection sites with a change fund to allow cashiers to give change and receipts to customers. The Finance Department is responsible for establishing citywide practices, providing forms, and other actions necessary to implement the Cash Management Policy. 8. DEPARTMENT RESPONSIBILITY Cash handling involves special internal control measures. To detect any weaknesses, those that must be monitored continually by supervisory personnel within each department that maintainswhich maintains cash. in order to detect any weaknesses. Department heads are responsible for conducting periodic reviews of their department cash handling activities to ensure these procedures are understood and followed consistently by staff. The responsibilities of City employees and their supervisors who are involved in the handling of cash on behalf of the City include: a. Cash receipting b. Distribution of petty cash c. Reconciling of cash receipts d. Depositing of cash e. Safeguarding of cash f. Reporting of cash transactions and variances 9. SAFEGUARDING OF CASH The City shall maintain, as deemed appropriate, physical security systems (i.e., safes, keys, alarms, panic buttons, motion detectors, security cameras, etc.) to ensure the Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 3 of 9 safety of personnel and funds in areas where cash is collected, reconciled, and stored. In addition, access to counter, cash handling counter, and storage areas will be restricted to authorized personnel. The safeguarding of cash relates to the processing, storing, and transporting of cash and to the safekeeping of keys and safe combinations. Each location maintains at least one safe that is used to hold cash, change boxes, point of sale cash drawers, bank deposits, and transaction records/receipts. Safes must have adequate locking mechanisms, and keys to change boxes are to be kept in locked cabinets. To ensure internal controls, access is limited to select formally designated personnel, and combinations are updated regularly and never shared. The designated employee is responsible for verifying that the cash drawers contains the designated starting balance prior to processing any payments. Verification of cash in drawer will take place in the area designated for balancing drawers. The employee is responsible for the contents, security, and keys for the cash drawer at all times. The employee must lock all cash and cash equivalents in a drawer or other secure location whenever leaving the workstation, including for break and lunch periods. The employee shall maintain adequate change in their each drawers. Additional cChange can be requested through a supervisor or directly from the Finance Department. Cash funds must not be left unattended. Cash shall always be stored in a locked, secured location until it is deposited. Access to the secured area should must be limited to authorized individuals only. 10. DEPOSITING OF FUNDS All cash collections are to be deposited. Collections may not be reserved for petty cash or used to pay department expenses. Deposits of cash on hand shall be made no less than weekly. In order toTo maintain an efficient cashiering service at the cash collection sites where the City accepts payments, the City’s policy regarding acceptance of reasonable amounts and denominations of coinage the City will accept as a form of payment is: a. City personnel will not accept over $10.00 in unrolled coins or $20.00 in rolled coins in sleeves per payment. b. Customers will indicate their name and phone number on each roll in order to provide contact information in the event questions arise on the coin roll. Regular Daily reconciliations are to be prepared at the departmental level to confirm that all receipts have been recorded in the point of salepoint-of-sale system. A designated employee at the departmental level shall prepares deposits, and a separate employee documents those reconciliations. The supervisor shall keep a log on overages/shortages by cashier. This log shall be reviewed to identify areas of improvementensure proper accountability and improvement in cash handling procedures. On For any cash overage/shortage, the cashier shall prepare a written explanation as to what occurred and attach it to the reconciliation. The Finance Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 4 of 9 Department shall ensure all transactions are properly recorded in the general ledger. 11. PROCESSING INCOMING MAIL All correspondence shall be forwarded to the appropriate department to open incoming checks, and sort, and enter them into the check log before forwarding to the appropriate staff member for processing. A reconciliation of the check log should be performed on a regular basis to ensure that all checks are being processed in the appropriate point of sale system, and accounted for in deposits. 12. REPORTABLE LOSSES Any instance of known or suspected loss or misappropriation of cash or checks shall be reported to the Finance Director, Department Director, and Human Resources immediately. In the event of a robbery or burglary, police authorities should shall be notified immediately along with Human Resources and the City Manager. 13. RETURNED CHECKS Upon receipt of a non-sufficient funds (NSF) check, the Finance Department will provide a copy of the returned check to the appropriate department and request the original transaction information to adjust the appropriate cash and revenue accounts to which the monies were originally recorded. If the check was applied to an accounts receivable invoice, a new invoice will be generated showing the amount unpaid. The Finance Department will promptly notify the payer via a letter after the NSF check is received. The payer has ten (10) business days after receipt of the letter to respond to the City. Payer must renegotiate the payment with cash, cashier’s check, money order, or credit/debit card. All checks returned by the bank for non-sufficient funds or other reasons may be subject to a returned check fee as adopted in the Citywide fee schedule. 14. REFUNDS, VOIDS, AND CASH DISCREPANCIES All refunds, voids, and cash discrepancies transactions are to be reviewed and authorized by the employee’s supervisor - cash discrepancies occur where the physical cash holdings differ to that specified by the cash receipting system. Refunds are typically not permitted to be processed at locations which take payments and handle cash. If a customer requires a refund, a request shall be submitted through the Finance Department. All refunds and voided transactions shall have the following supporting documentation: a. Transaction date b. Customer name, address, phone number, and signature c. Original customer receipt d. Reason for the refund or voided transaction e. Amount and form of payment f. Signature of cashier requesting the refund or void g. Signature of supervisor approving the transaction In the case of an overage or shortage, every effort should be made to locate amounts Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 5 of 9 causing the out of balance condition regardless of the amount. The employee and supervisor must sign an over/short report with an indication of the reason, if known, for the difference. 15. UNCLAIMED PROPERTY Finance may void and reissue old/stale dated checks in an effort to notify/pay vendors for City checks that remain outstanding prior tofor more than one year. Unclaimed property is considered unclaimed after a period of time that a check remains outstanding. The City shall follow Escheatment and Unclaimed Property Procedures established in the Accounts Receivables Write-Offs and Unclaimed Property Policy. 16. DISBURSEMENT OF CITY FUNDS Electronic distribution, such as wire transfers, of funds will be initiated by the Finance Department. Authority to transfer monies shall be properly documented and verified by the Finance Department. All wire transfer requests must provide the following: a. Wiring instructions from beneficiary b. Wire transfer of funds document(s) properly completed and signed by the employee requesting the wire transfer and the Department Director or designee. c. Backup documentation supporting the wire (invoice, purchase order number, memo, City Council approval if applicable, etc.) d. All wire transfers will require a dual-approval process whereby initiation and approval of the wire will be completed by separate members of the finance Finance staff. 17. PETTY CASH FUNDS The Purchasing and Contracting Policy of the City will establish a maximum size for petty cash payments from the petty cash fund. Petty cash should be used as a convenient method to pay small claims and is not intended for larger or frequent payments, which should be paid through Accounts Payable. The petty cash fund must be kept in a safe or locked cabinet under the control of the responsible person within the department. The petty cash fund must at all times always contain the authorized amount in cash and/or paid vouchers. The fund may not be used for any personal loansreasons, cashing checks, or for salaries. To replenish the petty cash fund, a Petty Cash Reimbursement Form must be completed. The form would showidentifies persons reimbursed, the amounts, and account numbers to be charged, and signature of the person authorizing cash disbursement. All receipts must be attached with approvals from the signing authority for the account charged. Funds received from any source must not be added to the petty cash fund., Ffunds received must be processed per the procedures for the revenue collection site. 18. RECONCILIATION Each business day, designated employee(s) shall ensure that payments processed, and payments received are reconciled. Management shall review and approve the overall Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 6 of 9 daily cash receipt reconciliation to ensure that all cash receipts are accounted for and match to the daily cash deposit, prior to submission to the Finance Department. 19. AUDITS The Finance Department shall conducts random audits at least twice a year at every location which handles payments and ensure that internal controls and procedures are being followed. The audits include verifying cash tills, change boxes, and petty cash balances to the amounts allocated and recorded and reconciled by the Finance Department. 20. CASH HANDLING POLICY REVIEW The Finance Director shall review this Policy annually to ensure careful and responsible management over City resources, and if applicable recommend any changes to the City Manager and City Council. FEDERALLY FUNDED PROCUREMENTS 21. The following section outlines the allowable costs for grants, contracts, and sub- awards at the City of La Quinta. The policy is justified byestablished from the requirement of the Code of Federal Regulations (CFR) Title 2 Grants and Agreements, Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, commonly known as Uniform Grant Guidance (UGG). It UGG provides the basic criteria to determine direct and indirect allowable and indirect allocable costs on federally funded programs regardless of the funding agency sponsoring the program. The City’s shall adhere to the UGG Administrative Requirements as updated. CFR 200.305 Payment PAYMENT Generally, the City receives payments of federal award funds on a reimbursement basis. In some cases, the City may receive an advance of federal grant funds. a. Reimbursements • The City will request reimbursement for actual expenditures incurred under federal grants at least quarterly, or more often as deemed appropriate. • Reimbursement requests will be submitted with appropriate documentation and signed by the City’s designated representative. All reimbursements are based on actual disbursements, not on obligations. • The City will maintain supporting documentation of federal expenditures (invoices, payroll records, etc.) and will make such documentation available to awarding agencies upon request. b. Advances • When the City receives advance payments of federal grant funds, it must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement of those Formatted: Underline Formatted: Centered, No bullets or numbering Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 7 of 9 funds on allowable costs of the applicable federal program. (2 CFR 200.305) • To the extent available, the City will disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments. (2 CFR 200.305) • The City will maintain advance payments of federal awards in insured, interest-bearing accounts whenever not precluded by the Federal award grant guidance, or whenever the exceptions per 2 CFR 200.305(8) do not apply. Interest amounts up to $500 per year may be retained by the City for administrative expense. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS) through an electronic medium using either Automated Clearing House (ACH) network or a Fedwire Funds Service payment. [2 CFR 200.305(9)] Allowable Costs ALLOWABLE COSTS 2 CFR, part 200, subpart E, Cost Principles, identifies direct and indirect costs that can be charged to federal awards; it also identifies those costs that cannot be charged to grant agreements and that are considered unallowable expenses. The City adopts the five tests provided by this regulation to determine the allowability of costs applied to federally funded services: a. Reasonability: For a cost to be considered reasonable, it must be necessary for fulfillment of the grant objective; acquired by means consistent with federal and state laws and regulations, and consistent with City policies and practices. b. Allocability: A cost is allocable to a program if the goods/services involved are charged in accordance with the relative benefits received by that program. To be considered allocable, a cost must be incurred solely to advance the work under the sponsored program or benefit both the sponsored program and other programs of the City in proportions that can be approximated through use of the City cost allocation methods, not to exceed the limit imposed by the grant agreements. c. Consistency: Similar costs are treated as direct or Facilities and Administration (F & A) costs when incurred in like circumstances. Costs that are generally charged as direct cost to a sponsored program should not be included as F&A costs on other projects when incurred for the same purposes. Where the City treats a particular type of cost as a direct cost of sponsored programs, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all other activities of the City. d. Limitation: Cost must conform to any limitations or exclusions in the sponsored agreement. e. Documentation: Cost must be adequately documented in order to support costs charged to the Federal award. Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 8 of 9 Expenditures must be aligned with approved budgeted items. Any deviation from the approved award budget will require prior approval from the awarding agency. Allowability of costs will be determined prior to obligating and spending federal funds on a proposed good or service. State and City rules or policy must also be considered. Whichever allowability requirements are stricter will govern whether a cost is allowable. a. Except where otherwise authorized by statute, costs must meet the following general criteria to in order to be allowable under Federal awards per 2 CFR 200.403: • Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. • Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. • Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the City. • Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. • Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. Also, reference § 200.306, Cost sharing or matching, paragraph (b). • Be adequately documented. Also, reference §§ 200.300, Statutory and national policy requirements, through 200.309, Period of performance, of 200 CFR Part 200. Direct Costs DIRECT COSTS Direct costs are those costs that which can be identified specifically with a particular award., costs Costs that can be directly assigned to an activity with a high degree of accuracy will be directly imputed to that activity. Identification with the grant rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect F&A costs of grant agreements. Examples of some of the costs charged directly include: a. Personnel salaries/fringe benefits b. Capital expenditures c. Software d. Consultants e. Equipment f. Materials and supplies Facilities and Administrative Costs (Indirect/Overhead Costs)FACILITIES AND ADMINISTRATIVE COSTS (INDIRECT/OVERHEAD COSTS) Costs incurred for common or joint objectives that which cannot be identified Resolution No. 2019 – XXX Cash Management Policy Adopted: October 15, 2019 Page 9 of 9 specifically with a sponsored program are treated as indirect costs. Examples of indirect costs include: a. Utilities b. Maintenance and operation c. Building and equipment expenses d. Administrative costs Most grant agreements include a percentage of the direct cost to cover these charges known as the Facilities and Administrative Cost Rate (F&A), refer to each individual grant agreement guideline for the indirect cost rate. Federal regulations limit instances where administrative costs can be charged directly to grants and contracts. An exception may be made if there is extensive use of such expenses, the expenses have been properly justified/documented in the grant/contract proposal, and they have been approved as a direct cost by the appropriate federal agency. Examples below list the types of expenses that are generally not allowable as a direct cost: a. Administrative and clerical salaries and wages b. Printing and copying costs c. Office supplies d. Postage and mail e. Telephone and internet 22. 21. POLICY REVIEW The Finance Director for the City/Housing Authority and administrators of federal funds shall review this Policy annually and recommend any changes to the City Manager/Executive Director and City Council/Housing Authority. Formatted: No bullets or numbering CASH MANAGEMENT POLICY 1. PURPOSE The purpose of this Cash Management Policy is to establish formal guidelines for standard citywide cash handling practices to ensure that proper procedures and internal controls for receiving, processing, and handling cash are consistently followed. 2. SCOPE This policy applies to all City Funds, employees, departments, volunteers, vendors, or other persons whose assigned duties involve handling City cash or funds. Departments are responsible for ensuring that every employee, volunteer, vendor, or other person whose assigned duties involve handling City cash or funds adheres to this Policy. 3. GENERAL POLICY It is the City of La Quinta’s (City) policy to establish a system of internal controls to protect the City’s assets, including cash, from theft, loss and misuse; and to ensure that the City receives, accurately records, and promptly deposits all cash and cash equivalents to which the City is entitled. Cash may be comprised of, but not limited to; coin, currency, checks, money orders, debit and credit card transactions, and electronic fund transfers. The City currently has designated revenue collection sites including: a. Finance Department b. The Hub c. Wellness Center d. Museum & Library e. SilverRock Golf Course f. Special Events - On an as-needed basis, there may be situations requiring establishment of temporary receipting points, which collect cash on an ad- hoc basis (e.g. community festivals, golf tours). 4. MANAGEMENT OF CASH All City bank accounts shall be carried in the name of the City, with additional secondary designations within the bank account name as to the purpose of the bank account, where appropriate (e.g., SilverRock Golf Resort, La Quinta Housing Authority, and Dune Palms Mobile Estates). 5. CASH RECEIPTING Cash receipting, for the purpose of this policy, encompasses the following: a. Accounting for cash as it is received b. Pre-numbered consecutive receipts for cash received c. Adequate separation of duties (collecting, depositing, and reconciling) d. Refunds, voids, and cash over/short transactions ATTACHMENT 2 Page 2 of 9 6. SEGREGATION OF DUTIES Collection of cash, deposit preparation, and reconciliation duties shall be performed by separate individuals, but at a minimum, reconciliation should be done by a separate person. The employee who physically collects the cash cannot be the same individual performing the reconciliation duties. In the event segregation of duties is not possible, the department shall work with the Finance Department to establish agreed upon internal control procedures. 7. FINANCE DEPARTMENT RESPONSIBILITY It is the responsibility of the Finance Department to track and ensure the timely deposit of City funds collected or generated at authorized locations and account for all funds submitted by all revenue collection sites. The Finance Department will assist and provide materials needed to departments and cashiers as follows: a. Provide cash handling training to City departments and employees. b. Perform cash deposit reconciliations between bank records and cash receipt vouchers, all of which are input into the financial system. Any discrepancies resulting from errors by the bank, or the City will be resolved by the Finance Department. c. Provide revenue collection sites with a change fund to allow cashiers to give change and receipts to customers. 8. DEPARTMENT RESPONSIBILITY Cash handling involves special internal control measures. To detect any weaknesses, those must be monitored continually by supervisory personnel within each department which maintains cash. Department heads are responsible for conducting periodic reviews of their department cash handling activities to ensure these procedures are understood and followed consistently by staff. The responsibilities of City employees and their supervisors who are involved in the handling of cash on behalf of the City include: a. Cash receipting b. Distribution of petty cash c. Reconciling of cash receipts d. Depositing of cash e. Safeguarding of cash f. Reporting of cash transactions and variances 9. SAFEGUARDING OF CASH The City shall maintain, as deemed appropriate, physical security systems (i.e., safes, keys, alarms, panic buttons, motion detectors, security cameras, etc.) to ensure the safety of personnel and funds in areas where cash is collected, reconciled, and stored. In addition, access to cash handling counter and storage areas will be restricted to authorized personnel. The safeguarding of cash relates to the processing, storing, and transporting of cash and to the safekeeping of keys and safe combinations. Each location maintains at least one safe that is used to hold cash, change boxes, point of sale cash drawers, bank Page 3 of 9 deposits, and transaction records/receipts. Safes must have adequate locking mechanisms, and keys to change boxes are to be kept in locked cabinets. To ensure internal controls, access is limited to formally designated personnel, and combinations are updated regularly and never shared. The designated employee is responsible for verifying that the cash drawers contain the designated starting balance prior to processing any payments. Verification of cash in drawer will take place in the area designated for balancing drawers. The employee is responsible for the contents, security, and keys for the cash drawer at all times. The employee must lock all cash and cash equivalents in a drawer or other secure location whenever leaving the workstation, including for break and lunch periods. The employee shall maintain adequate change in each drawer. Additional change can be requested through a supervisor or directly from the Finance Department. Cash funds must not be left unattended. Cash shall always be stored in a locked, secured location until it is deposited. Access to the secured area must be limited to authorized individuals only. 10. DEPOSITING OF FUNDS All cash collections are to be deposited. Collections may not be reserved for petty cash or used to pay department expenses. Deposits of cash on hand shall be made no less than weekly. To maintain an efficient cashiering service at the cash collection sites where the City accepts payments, the City’s policy regarding acceptance of reasonable amounts and denominations of coinage as a form of payment is: a. City personnel will not accept over $10.00 in unrolled coins or $20.00 in rolled coins in sleeves per payment. b. Customers will indicate their name and phone number on each roll in order to provide contact information in the event questions arise on the coin roll. Daily reconciliations are to be prepared at the departmental level to confirm that all receipts have been recorded in the point-of-sale system. A designated employee at the departmental level shall prepare deposits, and a separate employee documents those reconciliations. The supervisor shall keep a log on overages/shortages by cashier. This log shall be reviewed to ensure proper accountability and improvement in cash handling procedures. For any cash overage/shortage, the cashier shall prepare a written explanation as to what occurred and attach it to the reconciliation. The Finance Department shall ensure all transactions are properly recorded in the general ledger. 11. PROCESSING INCOMING MAIL All correspondence shall be forwarded to the appropriate department to open incoming checks, and sort before forwarding to the appropriate staff member for processing. 12. REPORTABLE LOSSES Any instance of known or suspected loss or misappropriation of cash or checks shall be reported to the Finance Director, Department Director, and Human Resources Page 4 of 9 immediately. In the event of a robbery or burglary, police authorities shall be notified immediately along with Human Resources and the City Manager. 13. RETURNED CHECKS Upon receipt of a non-sufficient funds (NSF) check, the Finance Department will provide a copy of the returned check to the appropriate department and request the original transaction information to adjust the appropriate cash and revenue accounts to which the monies were originally recorded. If the check was applied to an accounts receivable invoice, a new invoice will be generated showing the amount unpaid. The Finance Department will promptly notify the payer via a letter after the NSF check is received. The payer has ten (10) business days after receipt of the letter to respond to the City. Payer must renegotiate the payment with cash, cashier’s check, money order, or credit/debit card. All checks returned by the bank for non-sufficient funds or other reasons may be subject to a returned check fee as adopted in the Citywide fee schedule. 14. REFUNDS, VOIDS, AND CASH DISCREPANCIES All refunds, voids, and cash discrepancies transactions are to be reviewed and authorized by the employee’s supervisor - cash discrepancies occur where the physical cash holdings differ to that specified by the cash receipting system. Refunds are typically not permitted to be processed at locations which take payments and handle cash. If a customer requires a refund, a request shall be submitted through the Finance Department. All refunds and voided transactions shall have the following supporting documentation: a. Transaction date b. Customer name, address, phone number, and signature c. Original customer receipt d. Reason for the refund or voided transaction e. Amount and form of payment f. Signature of cashier requesting the refund or void g. Signature of supervisor approving the transaction In the case of an overage or shortage, every effort should be made to locate amounts causing the out of balance condition regardless of the amount. The employee and supervisor must sign an over/short report with an indication of the reason, if known, for the difference. 15. UNCLAIMED PROPERTY Finance may void and reissue old/stale dated checks in an effort to notify/pay vendors for City checks that remain outstanding for more than one year. Unclaimed property is considered unclaimed after a period that a check remains outstanding. The City shall follow Escheatment and Unclaimed Property Procedures established in the Accounts Receivables Write-Offs and Unclaimed Property Policy. 16. DISBURSEMENT OF CITY FUNDS Electronic distribution, such as wire transfers, will be initiated by the Finance Department. Authority to transfer monies shall be properly documented and verified by Page 5 of 9 the Finance Department. All wire transfer requests must provide the following: a. Wiring instructions from beneficiary b. Wire transfer of funds document(s) properly completed and signed by the employee requesting the wire transfer and the Department Director or designee. c. Backup documentation supporting the wire (invoice, purchase order number, memo, City Council approval if applicable, etc.) d. All wire transfers will require a dual-approval process whereby initiation and approval of the wire will be completed by separate members of the Finance staff. 17. PETTY CASH FUNDS The Purchasing and Contracting Policy of the City will establish a maximum size for petty cash payments from the petty cash fund. Petty cash should be used as a convenient method to pay small claims and is not intended for larger or frequent payments, which should be paid through Accounts Payable. The petty cash fund must be kept in a safe or locked cabinet under the control of the responsible person within the department. The petty cash fund must always contain the authorized amount in cash and/or paid vouchers. The fund may not be used for any personal reasons, cashing checks, or for salaries. To replenish the petty cash fund, a Petty Cash Reimbursement Form must be completed. The form identifies persons reimbursed, the amounts, account numbers to be charged, and signature of the person authorizing cash disbursement. All receipts must be attached with approvals from the signing authority for the account charged. Funds received from any source must not be added to the petty cash fund. Funds received must be processed per the procedures for the revenue collection site. 18. RECONCILIATION Each business day, designated employee(s) shall ensure that payments processed, and payments received are reconciled. Management shall review and approve the overall daily cash receipt reconciliation to ensure that all cash receipts are accounted for and match to the daily cash deposit, prior to submission to the Finance Department. 19. AUDITS The Finance Department shall conduct random audits at least twice a year at every location which handles payments and ensure that internal controls and procedures are being followed The audits include verifying cash till, change boxes, and petty cash balances to the amounts allocated and recorded and reconciled by the Finance Department. 20. CASH HANDLING POLICY REVIEW The Finance Director shall review this Policy annually to ensure careful and responsible management over City resources, and if applicable recommend any changes to the City Manager and City Council. Page 6 of 9 FEDERALLY FUNDED PROCUREMENTS The following section outlines the allowable costs for grants, contracts, and sub- awards at the City of La Quinta. The policy is established from the requirement of the Code of Federal Regulations (CFR) Title 2 Grants and Agreements, Part 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, commonly known as Uniform Grant Guidance (UGG). UGG provides the basic criteria to determine direct and indirect allowable costs on federally funded programs regardless of the funding agency sponsoring the program. The City shall adhere to the UGG Administrative Requirements as updated. CFR 200.305 PAYMENT Generally, the City receives payments of federal award funds on a reimbursement basis. In some cases, the City may receive an advance of federal grant funds. a. Reimbursements • The City will request reimbursement for actual expenditures incurred under federal grants at least quarterly, or more often as deemed appropriate. • Reimbursement requests will be submitted with appropriate documentation and signed by the City’s designated representative. All reimbursements are based on actual disbursements, not on obligations. • The City will maintain supporting documentation of federal expenditures (invoices, payroll records, etc.) and will make such documentation available to awarding agencies upon request. b. Advances • When the City receives advance payments of federal grant funds, it must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement of those funds on allowable costs of the applicable federal program. (2 CFR 200.305) • To the extent available, the City will disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments. (2 CFR 200.305) • The City will maintain advance payments of federal awards in insured, interest-bearing accounts whenever not precluded by the Federal award grant guidance, or whenever the exceptions per 2 CFR 200.305(8) do not apply. Interest amounts up to $500 per year may be retained by the City for administrative expense. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS) through an electronic medium using either Automated Clearing House (ACH) network or a Fedwire Funds Service payment. [2 CFR 200.305(9)] Page 7 of 9 ALLOWABLE COSTS 2 CFR, part 200, subpart E, Cost Principles, identifies direct and indirect costs that can be charged to federal awards; it also identifies those costs that cannot be charged to grant agreements and are considered unallowable expenses. The City adopts the five tests provided by this regulation to determine the allowability of costs applied to federally funded services: a. Reasonability: For a cost to be considered reasonable, it must be necessary for fulfillment of the grant objective; acquired by means consistent with federal and state laws and regulations, and consistent with City policies and practices. b. Allocability: A cost is allocable to a program if the goods/services involved are charged in accordance with the relative benefits received by that program. To be considered allocable, a cost must be incurred solely to advance the work under the sponsored program or benefit both the sponsored program and other programs of the City in proportions that can be approximated through use of the City cost allocation methods, not to exceed the limit imposed by the grant agreements. c. Consistency: Similar costs are treated as direct or Facilities and Administration (F & A) costs when incurred in like circumstances. Costs that are generally charged as direct cost to a sponsored program should not be included as F&A costs on other projects when incurred for the same purposes. Where the City treats a particular type of cost as a direct cost of sponsored programs, all costs incurred for the same purpose in like circumstances shall be treated as direct costs of all other activities of the City. d. Limitation: Cost must conform to any limitations or exclusions in the sponsored agreement. e. Documentation: Cost must be adequately documented in order to support costs charged to the Federal award Expenditures must be aligned with approved budgeted items. Any deviation from the approved award budget will require prior approval from the awarding agency. Allowability of costs will be determined prior to obligating and spending federal funds on a proposed good or service. State and City rules or policy must also be considered. Whichever allowability requirements are stricter will govern whether a cost is allowable. a. Except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards per 2 CFR 200.403: • Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. • Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. • Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the City. Page 8 of 9 • Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. • Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. Also, reference § 200.306, Cost sharing or matching, paragraph (b). • Be adequately documented. Also, reference §§ 200.300, Statutory and national policy requirements, through 200.309, Period of performance, of 200 CFR Part 200. DIRECT COSTS Direct costs are those costs which can be identified specifically with a particular award. Costs that can be directly assigned to an activity with a high degree of accuracy will be directly imputed to that activity. Identification with the grant rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect F&A costs of grant agreements. Examples of some of the costs charged directly include: a. Personnel salaries/fringe benefits b. Capital expenditures c. Software d. Consultants e. Equipment f. Materials and supplies FACILITIES AND ADMINISTRATIVE COSTS (INDIRECT/OVERHEAD COSTS) Costs incurred for common or joint objectives which cannot be identified specifically with a sponsored program are treated as indirect costs. Examples of indirect costs include: a. Utilities b. Maintenance and operation c. Building and equipment expenses d. Administrative costs Most grant agreements include a percentage of the direct cost to cover these charges known as the Facilities and Administrative Cost Rate (F&A), refer to each individual grant agreement guideline for the indirect cost rate. Federal regulations limit instances where administrative costs can be charged directly to grants and contracts. An exception may be made if there is extensive use of such expenses, the expenses have been properly justified/documented in the grant/contract proposal, and they have been approved as a direct cost by the appropriate federal agency. Examples below list the types of expenses that are generally not allowable as a direct cost: a. Administrative and clerical salaries and wages b. Printing and copying costs Page 9 of 9 c. Office supplies d. Postage and mail e. Telephone and internet 21. POLICY REVIEW The Finance Director for the City/Housing Authority and administrators of federal funds shall review this Policy annually and recommend any changes to the City Manager/Executive Director and City Council/Housing Authority. City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 7, 2021 STAFF REPORT AGENDA TITLE: APPROVE FISCAL YEAR 2021/22 INVESTMENT POLICY RECOMMENDATION Approve the Fiscal Year 2021/22 Investment Policy. EXECUTIVE SUMMARY •As part of their work plan, and as stated in Section XVIII of the City’s Investment Policy (the Policy), The Financial Advisory Commission (FAC) is asked to review the Policy annually. •Recommended revisions are reviewed by the City Manager and City Attorney, and brought before the City Council for approval. •By City Code, City Council must adopt the policy by the end of June of each year. FISCAL IMPACT - None. BACKGROUND For Fiscal Year (FY) 2020/21, the City submitted the Policy for certification by the Association of Public Treasurers of the United States and Canada (APT US&C) and was awarded their Investment Policy Certificate of Excellence. This follows two years of certifications awarded from the California Municipal Treasurers Association (CMTA). There were no new regulatory changes in FY 2020/21 that substantially affected the City’s policy. Therefore, staff recommends no changes to the current policy other than the following minor edits which are identified as red lined in Attachment 1: •Section III Scope: Removed reference to Sections XVI and XVII; the information found in those sections had already been moved under Section III in a previous policy revision, and the current sections numbered XVI and XVII do not relate to scope. •Section III Scope: Removed the word “new” in reference to arbitrage restrictions, as this has been part of the United States Tax Code for BUSINESS SESSION ITEM NO. 1 many years now. Also removed redundant wording regarding yield maximization. • Section IX Authorized Financial Dealers: Added “or designee” to the review of documentation provided by broker/dealers, to match Appendix C Segregation of Major Investment Responsibilities. • Section IX Authorized Financial Dealers: Removed reference to SSAE 16, as this has been superseded by SSAE 18 (Statement on Standards for Attestation Engagements), and the reports that are issued under the standard are System and Organizational Control (SOC) reports. • Section X Permissible Deposits and Investments: Replaced specific amounts noted under Prime Commercial Paper Section with reference to the State Code, to eliminate confusion when amendments to 53601(h) sunset in 2026. ALTERNATIVES The policy has been recognized by APT US&C and CMTA as being comprehensive as written, and therefore no alternatives are recommended at this time. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Karla Romero, Finance Director Attachment: 1. Draft Investment Policy for Fiscal Year 2021/22 (red-lined) 2. Letter from APT US&C for policy certification ATTACHMENT 1 Fiscal Year 2020/20212021/2022 Table of Contents Section Topic Page Executive Summary 1 I General Purpose 2 II Investment Policy 2 III Scope 2 IV Objectives 3 V Maximum Maturities 5 VI Prudence 5 VII Authority 5 VIII Ethics and Conflicts of Interest 6 IX Authorized Financial Dealers and Institutions 6 X Permissible Deposits and Investments 7 XI Investment Pools 10 XII Payment and Custody 10 XIII Interest Earning Distribution Policy 11 XIV Internal Controls and Independent Auditors 11 XV Reporting Standards 12 XVI Review of Investment Portfolio 13 XVII Financial Advisory Commission – City of La Quinta 13 XIII Investment Policy Adoption 13 Appendices Topic Page A Municipal Code Ordinance 2.70 – Financial Advisory Commission 14 B Municipal Code Ordinance 3.08 – Investment of Moneys and Funds 16 C Segregation of Major Investment Responsibilities 18 D Listing of Approved Financial Institutions 19 E Investment Management Process and Risk 20 F Glossary 22 Page 1 of 27 CITY OF LA QUINTA Investment Policy Fiscal Year 2020/20212021/2022 EXECUTIVE SUMMARY The general purpose of this Investment Policy is to provide the rules and standards that must be followed in administering the City of La Quinta's (the “City”) deposits and investments. The City's Investment Policy conforms to all state and local statutes and applies to all deposits and investments of the City, with the exception of bond proceeds and those noted in section III herein. It is the City's policy to deposit and invest public funds in a manner that shall provide safety of principal, liquidity to meet the City’s obligations and requirements that may be reasonably anticipated, and a risk-based market rate of return. Authority to manage the City's investment portfolio is derived from the City Municipal Code. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The City Manager, City Treasurer, and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis, before the end of each fiscal year (June). Page 2 of 27 City of La Quinta Statement of Investment Policy July 1, 20201 through June 30, 20212 Adopted by the City Council on June 16, 20201 I. GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. II. INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall conform to all State and local statutes governing the investment of public funds and set forth the permissible deposits and investments of the City's funds and the limitations thereon. III. SCOPE Except as further detailed in Sections XVI and XVIInoted below, this Investment Policy applies to all deposits and investments of the City of La Quinta, the Successor Agency to the City of La Quinta Redevelopment Agency, and the City of La Quinta Financing and Housing Authorities. These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types:  General  Special Revenue  Capital Projects  Debt Service  Enterprise  Internal Service  Trust and Agency  Any new fund types and fund(s) that may be created. Financial assets and investment activity not subject to this policy The City's Investment Policy does not apply to the following:  Cash and Investments raised from Conduit Debt Financing;  Funds held in trust in the City's name in pension or other post-retirement benefit programs;  Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; and  Short or long-term loans made to other entities by the City or Agency,  Short term (Due to/from) or long term (Advances from/to) obligations made either between the City and its funds or between the City and Agency.  Investment of bond proceeds: The City's Investment Policy shall not govern bond proceeds and bond reserve fund investments. California Government Commented [RH1]: Scheduled for this date. Study session FAC 4/7/2021. Business item FAC 5/12/2021. City Council 6/1/2021. Commented [RH2]: Old reference not previously removed. Page 3 of 27 Code Section 5922(d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions. Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. These arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity,. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. IV. OBJECTIVES The objectives of the City's investment activity, in order of priority and importance, are: A. Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of principal of the overall portfolio in accordance with the permissible deposits and investments. The City shall endeavor to preserve its investment principal by making only permissible deposits and investments, undertaken in a controlled manner to minimize the possibility of loss or misappropriation through malfeasance or otherwise. Investments not backed by the full faith and credit of the United States Government shall be diversified by allocating assets between different types of permissible investments, maturities, and issuers as a means to mitigate credit risk and interest rate risk. Investment in any single security type or single financial institution shall be limited to the maximum percentages and/or dollar amounts as noted in Section X. 1. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by: • Limiting investments to investment grade securities as permitted in Section X; and • Diversifying the issuers of the securities in the investment portfolio so that potential losses due to issuer failure or individual securities downgrades may be minimized. 2. Interest Rate Risk is the risk that market values of securities in the portfolio will decline due to changes in general interest rates. Interest rate risk may be mitigated by: Page 4 of 27 • Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and • Investing operating funds primarily in shorter-term securities. 3. Liquidity Risk is the risk that a security cannot be liquidated because of its unique features or structure or because it is thinly traded. Liquidity risk is not a material issue for the City's portfolio because of the permissible deposits and investments (see Section X). A discussion of the City's investment process and risk is presented in Appendix E. B. Provide Liquidity The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs that may be reasonably anticipated. This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated demands. Furthermore, since all possible cash needs cannot be anticipated the portfolio should be diversified and consist of securities with active secondary or resale markets. The City's policy is to generally hold securities and other investments to maturity. AccordinglyHowever, securities may be sold prior to maturity under certain circumstances as follow: • A security with declining credit quality can be sold early to minimize loss of principal. • Unanticipated liquidity needs of the portfolio require that one or more securities be sold. • When a sale/repurchase is fiscally advantageous based on market conditions and fits the needs of the portfolio C. Yield a Risk-Based Market Rate of Return The City's investment portfolio shall be structured with the objective of yielding a risk- based market rate of return throughout budgetary and economic cycles. Return on investment is less important than the safety and liquidity objectives described above. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. The portfolio's rates of return will be influenced by several factors, including actions by the Federal Reserve Board, the marketplace, and overall economic perceptions and conditions. Performance Standards: As a basis for comparison only, the Treasurer's quarterly reports will display the rates of return on the three-month Bill, six-month Bill, and the one and two-year U.S. Treasury Note, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's investment portfolio. Page 5 of 27 The investment portfolio shall be designed with the objective of obtaining a market rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. V. MAXIMUM MATURITIES It is the City's policy to generally hold securities and other investments until maturity. This buy-and-hold policy shall not prevent the sale of a security as listed in section IV.B The general buy-and-hold strategy requires that the City's investment portfolio be structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably anticipated cash needs. The City shall follow Title 5 of the California Government Code §53601 (the “State Code”) regarding maximum maturities, in that “no investment shall be made in any security…that at the time of the investment has a term remaining to maturity in excess of five years”. VI. PRUDENCE and FIDUCIARY DUTY The City shall follow the State Code §53600.3 regarding fiduciary duty and the Prudent Investor Standard as follows: Except as provided in subdivision (a) of §27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. VII. AUTHORITY Authority to manage the City's investment portfolio is derived from Chapter 3.08 of the City's Municipal Code. Management responsibility for the investment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. The City Treasurer shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may Page 6 of 27 engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. VIII. ETHICS AND CONFLICTS OF INTEREST The City Manager, City Treasurer and Ccity employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The City will maintain compliance with the procedures set forth in the Conflicts of Interest and Acceptance of Gifts and other Gratuities section of the City of La Quinta Personnel Manual and the City’s Municipal Code Chapter 2.60 Conflicts of Interest. Any questionable activity or relationship shall be reported immediately; reporting must be made in accordance with the personnel policies of the City and, until resolved, the officer or employee shall refrain from participating in the City's business related to the matter. The City Manager, City Treasurer, and City employees may conduct personal business with banks, brokers, and other financial institutions that are authorized to conduct business with the City provided that the terms of the activity to the accountholder with the City are the same as those that are available to the public in general, or to all employees as a result of contract negotiations. IX. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer maintains a listing of financial institutions which are approved for direct investment purposes, as well as a list of approved broker/dealers. 1. Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following: • Current audited financial statements; • Proof of Financial Industry Regulatory Authority (FINRA) Certification; • Proof of State of California registration; • Resume of fFinancial broker; and • Completion of the City of La Quinta Broker/Dealer Qquestionnaire, which contains a certification of having read the City's Investment Policy. The City Treasurer or designee shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and/or individual(s) conducting investment related business. The City Treasurer or designee will also contact the following agencies during the verification process: • Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1-800- 289-9999). • State of California Department of Corporations (1-916-445-3062). Page 7 of 27 A professional investment manager or management firm, if engaged by the City pursuant to Section X of this policy, may utilize their own list of approved broker/dealers on the condition that any such list is provided to the City upon request. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. An annual review of the financial condition and registrations of approved broker/dealers will be conducted by the City Treasurer or designee. Current audited financial statements and/or SSAE 16 System and Organizational Controls (SOC-1 and/or SOC-2) internal control (SOC-1) reports will be maintained on file for each financial institution and broker/dealer with which the City conducts business. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for deposit or investment (see Appendix D, "Listing of Approved Financial Institutions"): • Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). • Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. X. PERMISSIBLE DEPOSITS AND INVESTMENTS It is the City’s policy to follow Title 5 of the California Government Code (the “State Code”) in regard to allowable securities, and to be sufficiently diversified with regard to security type and issuer. Permissible deposits and investments, as allowed by Chapter 4, Part 1, Division 2, Title 5 (hereinafter cited by §), include, but are not limited to, the following: Checking, Savings, and Sweep Accounts - The City will only maintain checking and savings, accounts with state or national banks, savings associations, federal associations, and/or credit unions in accordance with §53635.2. • Collateralization: The amount of the City's deposits or investments not insured by the FDIC shall be collateralized by securities in accordance with §53652. The Treasurer may invest in an interest-bearing active deposit account as approved in §53632. The deposit account must be collateralized with securities that are in accordance with §53632.5. In addition, the market value of the collateralized securities must be maintained in accordance with Page 8 of 27 §53652 and be held by a custodian in accordance with the requirements of §53656. The proportion of the City's share of the deposit account shall be determined in accordance with §53658. Certificates of Deposit (Negotiable and Non-negotiable) – As authorized in §53601(i), the City may invest in Non- Negotiable and Negotiable Certificates of Deposits (CD) up to 30% of the overall portfolio. In no instance shall a CD or combined CD’s with a single issuer exceed the FDIC or NCUSIF insurance limit of $250,000. U.S. Treasury Bills, Notes, and Bonds – As authorized in §53601(b), the City may invest in U.S. Treasury bills, notes, and bonds directly issued and backed by the full faith and credit of the U.S. Government. The City's Investment Policy provides for investments in U.S. Treasury issues of 100% of the portfolio. U.S. Government Agency Securities and Federal Government Securities – As authorized in §53601(f), the City may invest in securities issued by U.S. Government instrumentalities and agencies (commonly referred to as government sponsored enterprises or GSE's). These securities may not be backed by the full faith and credit of the U.S. Government (with the exception of Government National Mortgage Association (GNMA) securities). Examples of GSE's include Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLB), Federal Intermediate Credit Bank (FICB), and GNMA securities. The City's Investment Policy allows investment only in securities of GNMA, FNMA, FHLMC, FHLB, and FFCB. For Fiscal Year 2019-202021-22, the maximum face amount per issuer is $20 million and the maximum face amount per purchase is $10 million. Prime Commercial Paper – As authorized in §53601(h), a portion of the City's portfolio may be invested in commercial paper of the highest rating as provided for by a nationally recognized statistical rating organization (NRSRO) such as Moody’s, Fitch, or Standard & Poor’s (S&P). There are a number of other qualifications regarding investments in commercial paper based on the financial strength and size of the corporation and the size of the investment. Up to 25% of the portfolio may be invested, with no more than 10% of the outstanding paper of any single issuer. The City limits on prime commercial paper are as defined in §53601(h) of the State Code. Local Agency Investment Fund (LAIF) – As authorized in §16429.1 and by LAIF policies, local government agencies are each authorized to invest up to the deposit limit as designated by the California State Treasurer. The City Treasurer may not invest more than the maximum amount per account as allowed by LAIF. Money Market Mutual Funds – As authorized in §53601(l), local agencies are authorized to invest in shares of beneficial interest issued by diversified Commented [RH3]: Rather than define an amount, changed to follow code as written. Code was changed in 2021 to up to 40% if total portfolio over $100 million, but this sunsets in 2026. Page 9 of 27 management companies (mutual funds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by mutual funds which include (1) attaining the highest ranking or the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services, or (2) having an investment advisor registered with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations and with assets under management in excess of five hundred million dollars ($500,000,000). Corporate Notes – As authorized in §53601(k), local agencies may invest in corporate notes. The notes must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. The City's Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: • Maximum 30% of the portfolio; • Maturities shall not exceed five years from date of purchase; • Eligible notes shall be regularly quoted and traded in the marketplace; • Eligible notes shall be in a rating category of "AA" or better by an NRSRO; • The maximum aggregate investment in each issuer shall not exceed $5 million (PAR value). Professionally Managed Account(s) – The City Treasurer may place up to 50% of the portfolio with a professional portfolio management/investment management firm (firm) The firm will be approved by the City Council based upon the City Treasurer's recommendation pursuant to completion of a public request for proposal (RFP). The firm shall have: • An established professional reputation for asset or investment management; • Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; • Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; • Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; and • Registration with the Securities and Exchange Commission under the Investment Advisers Act of 1940 Before engagement by the City and except as may be specifically waived or revised, the firm shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions: • The firm may be granted the discretion to purchase and sell investment securities in accordance with this Investment Policy; Page 10 of 27 • The firm is not required to adhere to a buy-and-hold policy; and • The firm does not need City Manager or City Treasurer approval to make permissible investments. Local Agency Bonds and California Local Agency Obligations – As authorized in §53601(a) and §53601(e), the City may invest in California local agency obligations. §53601(a) pertains to investing in bonds issued by a local agency, or by the department, board, agency or authority of the local agency. §53601(e) pertains to investing in bonds and other defined indebtedness of any local agency, or department, board, agency or authority of the local agency within the State of California. The Agency obligations must be invested in the long-term rating category of A or better by an NRSRO. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. In the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. XI. INVESTMENT POOLS There are three (3) types of investment pools: • State-run pools (e.g., LAIF); • Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools, and Joint Powers Authorities such as the California Asset Management Program (CAMP)); and • Pools that are operated for profit by third parties (e.g. money market funds). The City's Investment Policy permits investment in pools and money market funds as authorized by State Code §16429.1, §53601(l) and §53601(p). XII. PAYMENT AND CUSTODY The City shall engage qualified third-party custodians to act in a fiduciary capacity to maintain appropriate evidence of the City's ownership of securities and other eligible investments. Such custodians shall disburse funds received from the City for a purchase, to the broker, dealer or seller only after receiving evidence that the City has legal, record ownership of the securities. Even though ownership is evidenced in book-entry form rather than by actual certificates, this procedure is commonly referred to as the delivery versus payment (DVP) method for the transfer of securities. XIII. INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. The following provisions apply to the calculation and distribution of interest earnings. 1. Pooled Investments – It is the general policy of the City to pool all available operating cash of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, La Quinta Financing Authority, and La Quinta Page 11 of 27 Housing Authority, and to allocate interest earnings as a payment to each fund of an amount based on the month-end cash balance included in the common portfolio for the earning period. 2. Specific Investments – Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. XIV. INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish the following objectives: • Safeguard assets; • The orderly and efficient conduct of its business, including adherence to management policies; • Prevention or detection of errors and fraud; • The accuracy and completeness of accounting records; and • Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: • Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. • Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. • Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. • Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. • Clear delegation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. • Written confirmation of telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from Page 12 of 27 telephone transactions, all telephone transactions shall be supported by written communications or electronic confirmations and approved by the appropriate person. Written communications may be via fax or email if on letterhead and the safekeeping institution has a list of authorized signatures. Fax correspondence must be supported by evidence of verbal or written follow- up. • Development of a wire transfer agreement with the City's bank and third-party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. The system of internal controls developed by the City shall be reviewed annually by the independent auditor in connection with the annual audit of the City's Financial Statements. The independent auditor's letter on internal control over financial reporting and compliance as it pertains to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be provided to the City's Financial Advisory Commission for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Financial Advisory Commission and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. See Appendix C, "Segregation of Major Investment Responsibilities." XV. REPORTING STANDARDS The City Treasurer shall submit a quarterly Treasurer’s Report to the City Council and the Financial Advisory Commission that includes all cash and investments under the authority of the Treasurer. In addition, the City Treasurer or designee shall ensure all investment transactions are reported on a monthly basis as they occur throughout the quarter. The Treasurer's Report shall summarize cash and investment activity and changes in balances and include the following: • A certification by the City Treasurer; • A listing of purchases and sales/maturities of investments; • Cash and Investments categorized by authorized investments; LAIF will also be provided quarterly and show yield and maturity; • Comparison of month end actual holdings to Investment Policy limitations; • A two-year list of historical interest rates. XVI. REVIEW OF INVESTMENT PORTFOLIO The securities held by the City must be in compliance with this Policy at the time of purchase. Due to market conditions, some securities may no longer comply subsequent to the date of purchase, therefore a quarterly review of the portfolio will be conducted to identify any securities which may have fallen out of compliance. Any Page 13 of 27 major incidences of noncompliance identified during such review will be reported to the Financial Advisory Commission for confirmation of staff course of action. XVII. FINANCIAL ADVISORY COMMISSION - CITY OF LA QUINTA The Financial Advisory Commission (FAC) is composed of seven members from the public that are appointed by the City Council. The FAC’s membership, qualifications, and powers and duties are prescribed in Chapter 2.70 of the La Quinta Municipal Code and included in this policy as Appendix A. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each commissioner will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the FAC. All commissioners shall report annually to the City Clerk on Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be, or have the appearance of, a conflict of interest. XVIII. INVESTMENT POLICY ADOPTION The City's Investment Policy will be reviewed annually by the City's Financial Advisory Commission and the City Treasurer. The Financial Advisory Commission will forward the Investment Policy with any revisions to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Financial Advisory Commission, City Manager, City Attorney, and City Treasurer to review the Investment Policy and any comments prior to submission to the City Council for their consideration. The Investment Policy shall be adopted by resolution of the City Council annually before the end of June of each year. Page 14 of 27 City of La Quinta Municipal Code Chapter 2.70 FINANCIAL ADVISORY COMMISSION 2.70.010 General rules regarding the financial advisory commission. Except as set out below, see Chapter 2.06 for general provisions. 2.70.020 Number of members. The financial advisory commission ("FAC") shall initially consist of seven members appointed by, and serving at the will of, the city council. The city council may increase or decrease the number of members from time to time but in no event shall the membership exceed nine members or be less than five members. 2.70.030 Qualifications of members. A. In addition to the qualification requirements set forth in Section 2.06.040 of this code, a minimum of three of the members shall be finance professionals and shall have a verifiable background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. B. For those applying for the professional position, background information will be requested, and potential candidates must agree to a background check and verification by the city manager or designee. 2.70.040 Powers and duties. A. The principal functions of the FAC are: 1. Review at least annually the city's investment policy and recommend appropriate changes; 2. Review at least quarterly the treasury report and note compliance with the investment policy and adequacy of cash and investments for anticipated obligations; 3. Receive and consider other reports provided by the city treasurer; 4. Meet with the independent auditor after completion of the annual audit of the city's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities; 5. Review at least annually the revenue derived from the one percent (1%) transactions and use tax instituted by voters in November 2016 to ensure these funds are used to provide services, programs and capital projects in the city of La Quinta. APPENDIX A Page 15 of 27 6. Serve as a resource for the city treasurer on matters such as proposed investments, internal controls, use of or change of financial institutions, custodians, brokers and dealers. B. The FAC will report to the city council after each meeting either in person or through correspondence at a regular city council meeting. (Ord. 556 § 1, 2017) 2.70.050 References to the Investment Advisory Board. If any other chapter(s) or section(s) in this code refers to the Investment Advisory Board, that chapter(s) or section(s) shall be deemed to refer to the Financial Advisory Commission established by the ordinance amending chapter 2.70 of this code. Page 16 of 27 City of La Quinta Municipal Code Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS 3.08.010 Investment of city moneys and deposit of securities. Pursuant to, and in accordance with, and to the extent allowed by Sections 53607 and 53608 of the California Government Code, the authority to invest and reinvest moneys of the city, to sell or exchange securities, and to deposit them and provide for their safekeeping, is delegated to the city treasurer, which, for purposes of this chapter, is defined in Section 2.12.010 of this code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982) 3.08.020 Authorized investments. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to purchase, at their original sale or after they have been issued, securities which are permissible investments under the city council adopted city investment policy and any provision of state law relating to the investing of general city funds, including, but not limited to, Sections 53601 and 53635 of the California Government Code, as said sections now read or may hereafter be amended, from moneys in the city treasurer's custody which are not required for the immediate necessities of the city and as he or she may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord.2 § 1 1982) 3.08.040 City bonds. Bonds issued by the city and purchased pursuant to this chapter may be cancelled either in satisfaction of sinking fund obligations or otherwise if proper and appropriate; provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) 3.08.050 Reports. The city treasurer shall make a quarterly report to the city council of all investments made pursuant to the authority delegated in this chapter and as permitted by Section 53646(b)(1) of the Government Code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982) APPENDIX B Page 17 of 27 3.08.060 Deposits of securities. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to deposit for safekeeping, the securities in which city moneys have been invested pursuant to this chapter, in any institution or depository authorized by the city council adopted investment policy and terms of any state law, including, but not limited to, Section 53608 of the Government Code, as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982) 3.08.070 Trust fund administration. Any departmental trust fund established by the city council pursuant to Section 36523 of the Government Code shall be administered by the city treasurer in accordance with Section 36523 and 36524 of the Government Code and any other applicable provisions of law. (Ord. 2 § 1, 1982) Page 18 of 27 Function Responsible Parties Develop and recommend modifications to the City's formal Investment Policy City Treasurer, Financial Services Analyst, and Financial Advisory Commission Review City's Investment Policy and recommend City Council action City Manager and City Attorney Adopt formal Investment Policy City Council Implement formal Investment Policy City Treasurer Review financial institutions and select investments City Treasurer or Financial Servies Analyst Acknowledge investment selections City Manager or his/her designee Execute investment transactions City Manager, City Treasurer, or Financial Services Analyst Confirm wires Accounting Manager, Accountant, or Management Assistant Record investment transactions in City's accounting records Accounting Manager or Accountant Investment cerification- match broker confirmation to City's investment records City Treasurer or Financial Services Analyst Reconcile investment records to accounting records and bank statements Financial Services Analyst Reconcile investment records to treasurer's report of investments City Treasurer, Accounting Manager, or Financial Services Analyst Security of investments at City Accounting Manager or Management Assistant Security of investments outside of City Third Party Custodian Review internal control procedures External Auditor SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES APPENDIX C Page 19 of 27 Banking Services -Wells Fargo Bank, Government Services, Los Angeles, CA (Banking Services) -Bank of the West, San Francisco, CA (Banking Services) Custodian Services -The Bank of New York Mellon/Pershing LLC -Stifel Deferred Compensation -International City/County Management Association (ICCMA) Retirement Corporation Broker/Dealer Services -Stifel, Nicholaus, & Company, Inc. -Higgins Capital Management, Inc. -Great Pacific Securities Government/Joint Powers Authority Pools -State of California Local Agency Investment Fund (LAIF) -California Asset Management Program (CAMP) Trustee Services -US Bank (1) Other Post Employment Benefits (OPEB) Trust -California Employers' Retirement Benefits Trust (CERBT)/CalPERS Pension Trust - Administration -Public Agency Retirement Services (PARS) Listing of Approved Financial Institutions (1) US Bank is the fiscal agent for all of the following bonds: 2013, 2014, and 2016 Successor Agency to the La Quinta Redevelopment Agency (RDA) Bonds. US Bank is also the trustee and asset custodian for the PARS pension trust. APPENDIX D Page 20 of 27 INVESTMENT MANAGEMENT PROCESS AND RISK Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee each person, treasurer, or governing body authorized to make investment decisions on behalf of local agencies. Trustees are subject to the prudent investor standard. These persons shall act with care, skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates that the primary objective of any person investing public funds is to safeguard principal; secondly, to meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code Section 27000.5 specifies the same objectives for county treasurers and board of supervisors). Risk is inherent throughout the investment process. There is investment risk associated with any investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure of the insurer of a security. The market value of a security varies inversely with the level of interest rates. If an investor is required to sell an investment with a five percent yield in a comparable seven percent rate environment, that security will be sold at a loss. The magnitude of that loss will depend on the amount of time until maturity. Purchasing certain allowable securities with a maturity of greater than five years requires approval of the governing board (see Government Code Section 53601). Part of that approval process involves assessing and disclosing the risk and possible volatility of longer-term investments Another element of risk is liquidity risk. Instruments with call features or special structures, or those issued by little known companies, are examples of "story bonds" and are often thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more difficult and, consequently, the securities' marketability and price are discounted. However, under certain market conditions, gains are also possible with these types of securities. Default risk represents the possibility that the borrower may be unable to repay the obligation as scheduled. Generally, securities issued by the federal government and its agencies are considered the most secure, while securities issued by private corporations or negotiable certificates of deposit issued by commercial banks have a greater degree of risk. Securities with additional credit enhancements, such as bankers acceptances, collateralized repurchase agreements and collateralized bank deposits are somewhere between the two on the risk spectrum. The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased with the intent and capacity to hold that security until maturity. At times, market forces or operations may dictate swapping one security for another or APPENDIX E Page 21 of 27 selling a security before maturity. Continuous analysis and fine tuning of the investment portfolio are considered prudent investment management. The Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust. Source: Chapter II. Fund Management from the Local Agency Investment Guidelines Issued by California Debt and Investment Advisory Commission Page 22 of 27 GLOSSARY (Adopted from the Municipal Treasurers Association) The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities and/or Government-sponsored enterprises. ASKED: The price at which securities are offered. BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large- denomination CD's are typically negotiable. COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMMERCIAL PAPER: Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank America, etc. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of La Quinta. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. CONDUIT FINANCING: A form of Financing in which a government or a government agency lends its name to a bond issue, although it is acting only as a conduit between a specific project and bond holders. The bond holders can look only to the revenues from the project being financed for repayment and not to the government or agency whose name appears on the bond. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. APPENDIX F Page 23 of 27 DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest-bearing money market instruments that are issued at discount and redeemed at maturity for full face value DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. FNMAs (Federal National Mortgage Association) - Like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage-lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi- annual coupons. Interest is calculated on a 360-day, 30-day month basis. FFCBs (Federal Farm Credit Bank) – Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are Page 24 of 27 issued monthly with three- and six-month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. FICBs (Federal Intermediate Credit Bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine-month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis. FHLMCs (Federal Home Loan Mortgage Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBA's), Government National Mortgage Association notes (GNMA's), and Tennessee Valley Authority notes (TVA's). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per deposit per entity. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open- market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven-member Board of Governors in Washington, D.C., 12 regional banks and about 3,000 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "pass- throughs" is often used to describe Ginnie Maes. Page 25 of 27 LAIF (Local Agency Investment Fund): - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period, the minimum transaction is $5,000 and the City follows the state guidance for maximum total balance. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-half of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase--reverse repurchase agreements that establish each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer- lender to liquidate the underlying securities in the event of default by the seller-borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers' acceptances, etc.) are issued and traded. NRSRO (NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION): A credit rating agency recognized by the Securities and Exchange Commission (SEC). Examples include Fitch Ratings, Inc., Moody’s Investor’s Services, Inc., and S&P Global Ratings, among others. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. Page 26 of 27 PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker- dealers, banks and a few unregulated firms. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO) and REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. SSAE 16: The Statement on Standards for Attestation Engagements No. 16 (SSAE 16) is a set of auditing standards and guidance on using the standards, published by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) for redefining and updating how service companies report on compliance controls. The Service Organizational Control report (SOC-1) contains internal controls over financial reporting and is used by auditors and office controllers. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, and derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate necessities to be payment due within one week. Page 27 of 27 TREASURY BILLS: A non-interest- bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. UNIFORM PRUDENT INVESTOR ACT: The State of California has adopted this Act. The Act contains the following sections: duty of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, and application. YIELD: The rate of annual return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. Association of Public Treasurers of the United States and Canada www.aptusc.org Post Office Box 591 ∙ Tawas City, MI 48764-0591 ∙ info@aptusc.org ∙ (p) 989-820-5205 March 8, 2021 Ms. Rosemary Hallick, Financial Services Analyst City of La Quinta 78-495 Calle Tampico La Quinta, California 92253 Dear Mr. Hallick: The Association of Public Treasurers of the United States & Canada (APT US&C) is pleased to present the City of La Quinta, California with the Association’s Investment Policy Certificate of Excellence Award for your commitment in a establishing a comprehensive investment policy. Your plaque will be mailed to you in the coming weeks to proudly display in your office as a testament to your commitment to your profession and your community. We hope you display your award with great pride in knowing how hard you worked to earn the Investment Policy Certification. Once again, Congratulations! Sincerely, Roger Wisecup, CPA, CPFA, ACPFIM Investment Policy Certification Committee Chairperson ATTACHMENT 2 City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 7, 2021 STAFF REPORT AGENDA TITLE: RECOMMEND OUTSTANDING PENSION OBLIGATION FUNDING OPTIONS RECOMMENDATION Recommend Outstanding Pension Obligation Funding Options. EXECUTIVE SUMMARY •As of June 30, 2020, the City’s financial statements reported outstanding pension obligations $13,458,200 and a balance of $10,249,738 in the pension trust. •Financial Advisory Commission (FAC) formulated a subcommittee to review the City’s outstanding pension obligations and formulate recommendations. •Staff would like to present the recommendations for City Council’s consideration. FISCAL IMPACT None at this time, however, accelerating payments to California Public Employees’ Retirement System (CalPERS) would impact the General Fund budget. BACKGROUND/ANALYSIS FAC SUBCOMMITTEE On December 2, 2020 the FAC appointed Commissioners Twohey and Way to review the City’s outstanding pension obligations. The Committee met three times to review and discuss the following items: •CalPERS Actuarial Reports for the City’s three pension tiers. •CalPERS asset liability management cycle (ALM). •Viewed an interview on the historical performance of CalPERS and its impact on agencies. •Financial statement note disclosure pertaining to pension obligations. •How the pension trust is reported in the financial statements. •How the assets in the pension trust can be applied to outstanding pension obligations. BUSINESS SESSION ITEM NO. 2 • When pension trust assets decrease the reportable pension obligation. • How extra payments to CalPERS are applied to outstanding pension obligations. • Reviewed pension obligations and accelerated payments with the City’s actuarial consulting firm. FAC STUDY SESSION • A study session was held during the February 24, 2021 FAC meeting and subcommittee findings and recommendations were discussed. • Commissioners were generally in favor of additional discretionary payments (ADPs) which could result in savings for the City. • It was requested that calculations confirming that savings resulted in favorable present values for the City be brought back for consideration. Staff reviewed one scenario as an example for present value calculations. Using the CalPERS online Pension Outlook Tool, staff tested savings for a one-time ADP of $1.0 million. This would result in a savings for the City of $2.37 million over the life of the amortization schedule. In the near term, over the next 5 years the City would save $350,000 in the form of lower required unfunded liability payments. This has present value of $341,000 based on the 5-year United States Treasury rate of 0.85%. The same $1.0 million invested in a treasury would only yield $37,500 in interest payments to the City. RECOMMENDATIONS • Annual review of pension obligations with the FAC. • Leave assets in the Pension Trust. • Accelerate payments to CalPERS using the 10-year model for the Classic pension tier as a guideline. • Include additional payments in each year’s budget for consideration. ALTERNATIVES Prepared by: Karla Romero, Finance Director Rosemary Hallick, Financial Services Analyst Attachment: 1. Fiscal Year 2020/21 Pension Subcommittee Findings Fiscal Year 2020/21 Pension Subcommittee Findings Summary of Financial Advisory Commission (FAC) Subcommittee On December 2, 2020 the FAC appointed Commissioners Twohey and Way to review the City’s outstanding pension obligations with the City’s Financial Services Analyst and the Finance Director. This report summarizes key findings of the subcommittee. The Committee reviewed and discussed the following items: •CalPERS Actuarial Reports for the City’s three pension tiers •CalPERS asset liability management cycle (ALM) •Viewed an interview on the historical performance of CalPERS and its impact on agencies •Financial statement note disclosure pertaining to pension obligations •How the pension trust is reported in the financial statements •How the assets in the pension trust can be applied to outstanding pension obligations •When pension trust assets decrease the reportable pension obligation •How extra payments to CalPERS are applied to outstanding pension obligations •Reviewed pension obligations and accelerated payments with the City’s actuarial consulting firm. CalPERS Actuarial Reports Actuarial reports are provided annually in the summer to each member agency. The City of La Quinta (City) receives three reports, one for each pension plan tier. CalPERS actuarial reports include the following information: •Employer unfunded accrued liability payment projections for five years •Employer normal cost rates for bi-weekly payroll calculations •Employee bi-weekly payroll contribution rate for the next two years •Funded ratio of each pension tier •Summarized amortization schedule for each tier’s unfunded liability •Amortization schedule alternatives when applicable •Funding history •Discount rate sensitivity analysis •Hypothetical plan termination liability calculations ATTACHMENT 1 Key findings are summarized below: Asset Liability Management (ALM) Cycle The CalPERS four-year ALM cycle is currently underway. The ALM includes a review of CalPERS investment portfolio’s anticipated returns and retirement plan liabilities, which are based on demographic and economic factors and trends, including future salary and payroll growth, retirement ages, inflation, and life expectancy. The goal of the ALM process is to balance the expected cost of future pension payments with the expected future investment returns. During the last ALM cycle the discount rate (anticipated investment rate of return) was lowered from 7.5% to 7% over a three-year period, which resulted in increased required unfunded liability contributions from member agencies including the City of La Quinta. The City’s required unfunded accrued liability (UAL) payments have increased by $563,421 over the past four years, from $564,496 in 2017/18 to $1,127,917 in 2020/21. The current ALM cycle findings are anticipated to be completed by November Classic Tier Tier 2 PEPRA Tier Hire Date On and after 12/16/1983 On and after 12/17/2012 On and after 1/1/2013 Benefit Formula 2.5% at age 55 2% at age 60 2% at age 62 Benefit Vesting Schedule 5 years of service 5 years of service 5 years of service Benefit Payments monthly for life monthly for life monthly for life Retirement Age 50 and up 50 and up 52 and up Required employee contribution rate 8.000%7.000%6.750% Required employer contribution rate 11.432%8.081%6.985% Number of Active Members*37 8 53 Number of Retired Members*35 1 0 * As of June 30, 2019 from CalPERS valuation reports. Classic Tier Tier 2 PEPRA Tier Entry Age Normal Accrued Liability 50,417,881$ 532,890$ 1,340,430$ Plan's Market Value of Assets 35,957,546$ 505,580$ 1,253,920$ Unfunded Accrued Liability 14,460,335$ 27,310$ 86,510$ Funded Ratio 71.3%94.9%93.5% Unfunded Liability Payments Fiscal Year 2016/17 471,501$ -$ 20$ Fiscal Year 2017/18 564,145$ 201$ 150$ Fiscal Year 2018/19 698,026$ 5,197$ 8,591$ Fiscal Year 2019/20 842,026$ 4,955$ 11,921$ Fiscal Year 2020/21 952,096$ 5,590$ 19,433$ Fiscal Year 2021/22 1,108,426$ 1,962$ 17,529$ Fiscal Year 2022/23 1,224,000$ 2,000$ 18,000$ Fiscal Year 2023/24 1,295,000$ 2,000$ 18,000$ Fiscal Year 2024/25 1,371,000$ 2,000$ 18,000$ Fiscal Year 2025/26 1,412,000$ 2,000$ 18,000$ Fiscal Year 2026/27 1,449,000$ -$ -$ 2021 with recommended changes effective July 2022. Financial Statements Pension Disclosures The Comprehensive Annual Financial Statement (CAFR) includes a summary of the City’s outstanding pension obligation in Note 8 – Defined Benefit Pension Plan. The CAFR’s Note 8 includes the following information: • A description of the plan • Benefits provided • Contributions made during the fiscal year • Pension liabilities, pension expenses and deferred outflows and deferred inflows of resources related to pensions • Actuarial methods and assumptions used to determine total pension liability • Discount rate • Sensitivity of the proportionate share of the net pension liability to changes in the discount rate • Pension plan fiduciary net position Most notably the sensitivity of the proportionate share of the net pension liability to changes in the discount rate demonstrate the effects on the City’s net pension liability when changes to the discount rate are applied. The illustration below is included in Note 8. CalPERS Investment and Pension Funding CalPERS investment and pension funding facts at-a-glance for fiscal year 2019/20 are included as Exhibit A. Annual investment returns from 2011 to 2020 have been as high as 21.7% or as low as 0.1%. Annualized investment returns for 20 and 30 years have been 5.5% and 8.0% respectively. Discount Rate -1%Current Discount Rate Discount Rate +1% 6.15%7.15%8.15% Net Pension Liability 20,386,011$ 13,458,200$ 7,739,782$ ↑↑ Fiscal impact to General Fund budget higher contributions to unfunded liability lower contributions to unfunded liablity Every dollar paid to CalPERS retirees comes from three sources: investment earnings, employer (agency) contributions, and member (employee) contributions. CalPERS’s investment portfolio contains over $440 billion in assets (as of 3/29/2021), which are strategically allocated in a variety of investment options, some of which are not available to other public agencies. PENSION TRUST PERFORMANCE AND USES The City established a pension trust in August 2019 with an initial contribution of $6,540,000. An additional contribution of $3,640,000 was made in fiscal year 2019/20. The pension trust balance reported in the 2019/20 CAFR was $10,249,738. The pension trust balance as of February 28, 2021 was $10,997,147. Investments are in a moderately conservative investment strategy which has dual goals of current income and capital appreciation. A major portion of the assets are committed to income producing securities; therefore, market fluctuations are expected. The February 2021 pension trust statement indicates the City’s pension trust performance is as follows since inception. The Section 115 Trust was established to set aside money to fund the City’s pension obligation. Contributions to the Section 115 Trust are irrevocable, the assets are dedicated to providing benefits to plan members, and the assets are protected from creditors of the City. The section 115 Trust addresses the City’s pension obligations by accumulating assets to reduce the net pension liability. However, in accordance with generally accepted accounting principles, the assets in the Section 115 Trust are not considered to have present service capacity as plan assets and are therefore considered restricted assets of the City in the General Fund rather than pension plan assets. The assets held in trust will be considered pension plan assets at the time they are transferred out of the Trust into the pension plan with CalPERS. ACCELERATED PAYMENTS TO CalPERS Additional contributions made directly to CalPERS, known as Additional Discretionary Payments (ADPs), can be applied to specific tiers and amortization bases within tiers. The greatest interest rate savings are derived by choosing to apply additional payments to the highest balance with the longest amortization period. The classic tier’s Schedule of Plan’s Amortization Bases is included as an example in Exhibit B. When agencies pay the unfunded liability in a lump sum each July rather than making monthly payments, the liability payment is slightly reduced. The City budgets the full monthly amount each year and at mid-year if revenues are on target, the City sends the savings directly to CalPERS as an additional contribution to the unfunded liability. For the past three years the City has been sending additional payments from savings directly to CalPERS as follows: Since the Classic Tier has the greatest liability with the longest amortization, accelerated payments are recommended for this tier when fiscally feasible. If the City follows the 10-year amortization payment schedule in the Classic Tier, the liability would be paid in 10 years and $5,967,437 in interest savings would be realized. Additional payments could be included in the General Fund budget for consideration each fiscal year. The additional payments and savings based on a 15-year and 10-year amortizations for the Classic Tier are summarized below. Fiscal Year Classic Tier Tier 2 PEPRA Tier Total 2018/19 -$ 15,353$ 22,060$ 37,413$ 2019/20 -$ 20,000$ 10,000$ 30,000$ 2020/21 33,000$ -$ -$ 33,000$ TOTAL 33,000$ 35,353$ 32,060$ 100,413$ CalPERS Pension Outlook Tool CalPERS has an online tool which allows member agencies to calculate savings based on ADPs. Any number of scenarios can be entered, such as one-time payments or multi-year payments. The tool is based on total pension liability for all three of the City’s plans (Classic, Tier 2, and PEPRA). Using a scenario of a one-time payment of $1.0 million to CalPERS, the City would save $2.37 million over the next 24 years as compared to the current amortization schedule. The savings come in the form of reduced required annual UAL payments, starting with a $60,000 savings in 2021/22. A copy of this scenario is attached as Exhibit C. Every effort has been made to verify the accuracy of the information, which is intended for general use only. 01-2021-1 Facts at a Glance for Fiscal Year 2019–20Investment & Pension Funding Investments (PERF *) Total Fund Market Value & Fund Returns by Fiscal Year** (for FY end 6/30) (in billions) (% ) 2020 $392.5 4.7% 2019 $372.6 6.7% 2018 $354.0 8.6% 2017 $326.4 11.2% 2016 $302.0 0.6% 2015 $301.9 2.4% 2014 $300.3 18.4% 2013 $257.9 13.2% 2012 $233.4 0.1% 2011 $237.5 21.7% * Public Employees' Retirement Fund (PERF) ** Time-weighted rate of return net of investment expenses Annualized Investment Returns* (for FY end 6/30) 1 year 4.7% 3 years 6.6% 5 years 6.3% 10 years 8.5% 20 years 5.5% 30 years 8.0% * Time-weighted rate of return net of investment expenses Discount Rate Changes 2017-18* (State) 7.5% Ž 7.375% 2018-19* (School/PA) 7.5% Ž 7.375% 2018-19* (State) 7.375% Ž 7.25% 2019-20* (School/PA) 7.375% Ž 7.25% 2019-20* (State) 7.25% Ž 7.0% 2020-21* (School/PA) 7.25% Ž 7.0% 2012 7.75% Ž 7.5% 2004 8.25% Ž 7.75% * FY required contribution Total Fund Market Value 1988–2020 (for FY end 6/30) $45.4 bil $301.8 bil $172.3 bil $76.6 bil $392.5 bil $247.7 bil $0 $50 $100 $150 $200 $250 $300 $350 $400 '20'19'18'17'16'15'14'13'12'11'10'09'08'07'06'05'04'03'02'01'00'99'98'97'96'95'94'93'92'91'90'89'88 EXHIBIT A Investments (cont'd) Facts at a Glance for Fiscal Year 2019–20 Investment & Pension Funding » 2 Current Asset Allocation 28+11+6+2+53+H53.1% Public Equity 28.2% Global Fixed Income 11.3% Real Assets 6.3% Private Equity 1.1% Other: 0.9% Liquidity 0.2% Trust Level* Asset Allocation Strategic Current Asset Allocation Allocation Public Equity 53.1% 50.0% Global Fixed Income 28.2% 28.0% Real Assets 11.3% 13.0% Private Equity 6.3% 8.0% Liquidity 0.9%1.0% Trust Level* 0.2% — * The Trust Level includes Multi Asset Class, Completion Overlay, Risk Mitigation, Absolute Return Strategies (Direct Investments only), Plan Level Transition and other Total Fund level portfolios. California Investments 89+11+H11.1% California investments as percentage of the total fund $43.6 billion Fair Value (in millions) Total California Investments $43,646 Public Equity* $22,418 Global Fixed Income** $7,911 Real Assets*** $12,526 Private Equity*** $791 * Includes listed public equities corporate bonds. ** Fixed income also includes a portion of MBS & ABS, which have significant geographical exposure to CA & MHLP. *** As of March 31, 2020 Sustainable Investing CalPERS actively engages with the companies we own to protect the long-term sustainability of our investment. From issues regarding environmental responsibility to safe labor practices, we keep an open dialog with company leaders and vote our proxies. 14,000+Number of companies where CalPERS cast proxy votes in 2020 worldwide (calendar year) * The Trust Level includes Multi Asset Class, Completion Overlay, Risk Mitigation, Absolute Return Strategies (Direct Investments only), Plan Level Transition and other Total Fund level portfolios. Facts at a Glance for Fiscal Year 2019–20 Investment & Pension Funding » 3Pension Funding Funded Status of Retirement Plans by Member Category State School PA Total 2018–19 70.0%  * 68.5% * 70.8% * 70.2%* 2017–18 69.5%  * 68.6% * 70.4% * 69.8%* 2016–17 65.8% * 68.7% * 69.5% * 68.0%* 2015–16 62.3% 67.8% 66.2% 68.3% 2014–15 69.4% 77.5% 74.5% 73.1% 2013–14 72.1% 82.0% 77.9% 76.3% 2012–13 66.1% 76.2% 70.5% 69.8% 2011–12 66.1% 75.4% 70.1% 69.6% * Based on a 7.0% discount rate and includes the terminated agency pool and 1959 survivor benefit plan. Contributions, 10-Year Review (in thousands) Employer Member Investment Contributions Contributions & Other Income 2019–20 $22,039,561 $4,901,000 $18,516,994 2018–19 $15,612,678 $4,664,618 $22,969,664 2017–18 $19,917,796 * $4,415,129 $27,448,098 2016–17 $12,329,837 $4,214,578 $32,977,020 2015–16 10,892,489 4,015,754 1,548,442 2014–15 9,997,705 3,826,072 6,702,997 2013–14 8,777,602 3,775,038 45,598,044 2012–13 8,123,833 3,897,078 30,291,983 2011–12 7,772,913 3,598,437 (196,014) 2010–11 7,465,397 3,600,089 43,907,436 * Amount includes an additional $6 billion dollar contribution by the state. Funded Status Total PERF 30+70+H70.2% 2018–19*30+70+H70.6% 2019–20** * The PERF is the Public Employees' Retirement Fund. This percentage includes the terminated agency pool and the 1959 survivor benefit plan. Percentage based on a 7.0% discount rate. ** This estimate percentage does not include the terminated agency pool and the 1959 survivor benefit plan. Percetange based on a 7.0% discount rate. Total Employer Contributions 44+43+13+H$22 bil School districts and Charter Schools $2.9 billion / 13% State of California $9.8 billion  / 44% Public agencies $9.3 billion / 43% Shared Responsibility Every dollar paid to CalPERS retirees comes from three sources*: 32+13+55+H$1 Investment earnings 55¢ CalPERS employers 32¢ CalPERS members 13¢ * Income over the last 20 years. CALPERS ACTUARIAL VALUATION - June 30, 2019 Miscellaneous Plan of the City of La Quinta CalPERS ID: 2186535078 Rate Plan belonging to the Miscellaneous Risk Pool Page 11 Schedule of Plan’s Amortization Bases Note that there is a two-year lag between the valuation date and the start of the contribution fiscal year. •The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2019. •The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2021-22. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, a nd the need to provide public agencies with their required employer contribution well in advance of the start of the fiscal year. The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two ye ars ago and the contribution for the second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency. Reason for Base Date Est. Ramp Level 2021-22 Ramp Shape Escala- tion Rate Amort. Period Balance 6/30/19 Expected Payment 2019-20 Balance 6/30/20 Expected Payment 2020-21 Balance 6/30/21 Minimum Required Payment 2021-22 Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.75% 15 4,668,054 389,618 4,591,794 395,381 4,504,234 406,254 Non-Investment (Gain)/Loss 6/30/13 100% Up/Down 2.75% 24 (42,644) (2,860) (42,671) (2,895) (42,663) (2,974) Investment (Gain)/Loss 6/30/13 100% Up/Down 2.75% 24 4,623,390 310,123 4,626,234 313,830 4,625,442 322,460 Non-Investment (Gain)/Loss 6/30/14 100% Up/Down 2.75% 25 3,896 207 3,955 262 3,961 269 Investment (Gain)/Loss 6/30/14 100% Up/Down 2.75% 25 (3,430,258) (182,085) (3,482,026) (230,256) (3,487,589) (236,588) Assumption Change 6/30/14 100% Up/Down 2.75% 15 2,184,693 162,485 2,169,546 206,300 2,108,016 211,974 Non-Investment (Gain)/Loss 6/30/15 100% Up/Down 2.75% 26 (176,354) (7,038) (181,419) (9,489) (184,303) (12,187) Investment (Gain)/Loss 6/30/15 100% Up/Down 2.75% 26 2,084,746 83,199 2,144,617 112,172 2,178,709 144,071 Non-Investment (Gain)/Loss 6/30/16 80% Up/Down 2.75% 27 (329,390) (8,898) (343,243) (13,489) (353,317) (18,480) Investment (Gain)/Loss 6/30/16 80% Up/Down 2.75% 27 2,580,570 69,714 2,689,097 105,678 2,768,020 144,779 Assumption Change 6/30/16 80% Up/Down 2.75% 17 811,167 29,941 836,977 45,569 848,428 62,430 Non-Investment (Gain)/Loss 6/30/17 60% Up/Down 2.75% 28 (69,068) (960)(72,910)(1,938) (76,009) (2,987) Investment (Gain)/Loss 6/30/17 60% Up/Down 2.75% 28 (1,298,061) (18,034) (1,370,271) (36,424) (1,428,513) (56,139) Assumption Change 6/30/17 60% Up/Down 2.75% 18 899,515 16,991 944,905 34,456 975,407 53,106 Non-Investment (Gain)/Loss 6/30/18 40% Up/Down 2.75% 29 198,381 0 212,268 2,899 224,128 5,958 Investment (Gain)/Loss 6/30/18 40% Up/Down 2.75% 29 (387,128) 0 (414,227) (5,657) (437,371) (11,626) Assumption Change 6/30/18 40% Up/Down 2.75% 19 1,380,003 (21,113) 1,498,443 27,938 1,574,435 57,412 EXHIBIT B CALPERS ACTUARIAL VALUATION - June 30, 2019 Miscellaneous Plan of the City of La Quinta CalPERS ID: 2186535078 Rate Plan belonging to the Miscellaneous Risk Pool Page 12 Schedule of Plan’s Amortization Bases (continued) Reason for Base Date Est. Ramp Level 2021-22 Ramp Shape Escala- tion Rate Amort. Period Balance 6/30/19 Expected Payment 2019-20 Balance 6/30/20 Expected Payment 2020-21 Balance 6/30/21 Minimum Required Payment 2021-22 Method Change 6/30/18 40% Up/Down 2.75% 19 387,543 (1,397) 416,116 7,758 437,219 15,943 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 20 194,568 0 208,188 0 222,761 20,328 Investment (Gain)/Loss 6/30/19 20% Up Only 0.00% 20 176,712 0 189,082 0 202,318 4,423 Total 14,460,335 819,893 14,624,455 952,095 14,663,313 1,108,426 The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established. Fiscal Year Cost (in $M)1,000,000$ Miscellaneous Pool 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 Payroll 7,160,000$ 7,360,000$ 7,560,000$ 7,770,000$ 7,980,000$ 8,200,000$ 8,430,000$ 8,660,000$ 8,900,000$ 9,140,000$ 9,390,000$ 9,650,000$ 9,920,000$ 10,190,000$ Baseline Normal Cost 720,000$ 720,000$ 730,000$ 730,000$ 740,000$ 750,000$ 760,000$ 770,000$ 780,000$ 790,000$ 790,000$ 800,000$ 810,000$ 820,000$ UAL Payment 980,000$ 1,130,000$ 1,240,000$ 1,310,000$ 1,390,000$ 1,430,000$ 1,450,000$ 1,490,000$ 1,530,000$ 1,570,000$ 1,610,000$ 1,650,000$ 1,640,000$ 1,630,000$ Total Employer Cost 1,700,000$ 1,850,000$ 1,970,000$ 2,050,000$ 2,130,000$ 2,180,000$ 2,210,000$ 2,260,000$ 2,310,000$ 2,350,000$ 2,400,000$ 2,460,000$ 2,450,000$ 2,440,000$ Total Employer Rate 23.77%25.07%26.04%26.37%26.73%26.62%26.22%26.07%25.91%25.75%25.60%25.44%24.71%23.98% Scenario Normal Cost 720,000$ 720,000$ 730,000$ 730,000$ 740,000$ 750,000$ 760,000$ 770,000$ 780,000$ 790,000$ 790,000$ 800,000$ 810,000$ 820,000$ UAL Payment 980,000$ 1,070,000$ 1,170,000$ 1,240,000$ 1,320,000$ 1,360,000$ 1,370,000$ 1,410,000$ 1,450,000$ 1,480,000$ 1,520,000$ 1,560,000$ 1,550,000$ 1,530,000$ Total Employer Cost 1,700,000$ 1,790,000$ 1,900,000$ 1,980,000$ 2,060,000$ 2,110,000$ 2,130,000$ 2,180,000$ 2,220,000$ 2,270,000$ 2,320,000$ 2,370,000$ 2,360,000$ 2,350,000$ Total Employer Rate 23.77%24.33%25.12%25.45%25.81%25.70%25.30%25.15%24.99%24.83%24.68%24.52%23.79%23.06% Impact on Cost Employer Cost Savings -$ (60,000)$ (70,000)$ (70,000)$ (70,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (80,000)$ (90,000)$ (90,000)$ (90,000)$ (90,000)$ Total Employer Rate 0.00%-0.74%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92% 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 6/30/2025 6/30/2026 6/30/2027 6/30/2028 6/30/2029 6/30/2030 6/30/2031 6/30/2032 6/30/2033 Baseline Accrued Liability 54,810,000$ 57,470,000$ 60,280,000$ 63,240,000$ 66,360,000$ 69,660,000$ 73,150,000$ 76,830,000$ 80,720,000$ 84,840,000$ 89,190,000$ 93,790,000$ 98,650,000$ 103,810,000$ Market Value of Assets 40,090,000$ 42,730,000$ 45,670,000$ 48,890,000$ 52,370,000$ 56,130,000$ 60,150,000$ 64,420,000$ 68,980,000$ 73,850,000$ 79,060,000$ 84,610,000$ 90,550,000$ 96,830,000$ UAL - Baseline 14,720,000$ 14,750,000$ 14,610,000$ 14,350,000$ 13,990,000$ 13,530,000$ 13,000,000$ 12,410,000$ 11,740,000$ 10,980,000$ 10,130,000$ 9,170,000$ 8,110,000$ 6,980,000$ Funded Ratio 73.14%74.34%75.76%77.31%78.91%80.57%82.23%83.84%85.45%87.05%88.64%90.22%91.78%93.28% Scenario Accrued Liability 54,810,000$ 57,470,000$ 60,280,000$ 63,240,000$ 66,360,000$ 69,660,000$ 73,150,000$ 76,830,000$ 80,720,000$ 84,840,000$ 89,190,000$ 93,790,000$ 98,650,000$ 103,810,000$ Market Value of Assets 40,090,000$ 43,760,000$ 46,720,000$ 49,940,000$ 53,420,000$ 57,180,000$ 61,190,000$ 65,460,000$ 70,010,000$ 74,870,000$ 80,060,000$ 85,600,000$ 91,510,000$ 97,760,000$ UAL - Scenario 14,720,000$ 13,710,000$ 13,560,000$ 13,300,000$ 12,940,000$ 12,480,000$ 11,960,000$ 11,370,000$ 10,710,000$ 9,970,000$ 9,130,000$ 8,190,000$ 7,150,000$ 6,040,000$ Funded Ratio 73.14%76.14%77.50%78.98%80.50%82.08%83.66%85.20%86.73%88.25%89.76%91.27%92.76%94.18% Impact on UAL -$ (1,040,000)$ (1,050,000)$ (1,050,000)$ (1,050,000)$ (1,050,000)$ (1,050,000)$ (1,040,000)$ (1,030,000)$ (1,020,000)$ (1,000,000)$ (980,000)$ (960,000)$ (930,000)$ EXHIBIT C Fiscal Year Cost (in $M) Miscellaneous Pool Payroll Baseline Normal Cost UAL Payment Total Employer Cost Total Employer Rate Scenario Normal Cost UAL Payment Total Employer Cost Total Employer Rate Impact on Cost Employer Cost Savings Total Employer Rate Baseline Accrued Liability Market Value of Assets UAL - Baseline Funded Ratio Scenario Accrued Liability Market Value of Assets UAL - Scenario Funded Ratio Impact on UAL 2034-35 2035-36 2036-37 2037-38 2038-39 2039-40 2040-41 2041-42 2042-43 2043-44 2044-45 10,470,000$ 10,760,000$ 11,050,000$ 11,360,000$ 11,670,000$ 11,990,000$ 12,320,000$ 12,660,000$ 13,010,000$ 13,370,000$ 13,730,000$ 820,000$ 830,000$ 840,000$ 860,000$ 890,000$ 910,000$ 940,000$ 960,000$ 990,000$ 1,010,000$ 1,040,000$ 1,590,000$ 1,520,000$ 780,000$ 690,000$ 600,000$ 530,000$ 480,000$ 340,000$ 320,000$ 250,000$ 120,000$ 2,410,000$ 2,350,000$ 1,620,000$ 1,550,000$ 1,490,000$ 1,440,000$ 1,410,000$ 1,300,000$ 1,300,000$ 1,260,000$ 1,160,000$ 23.04%21.85%14.65%13.69%12.73%11.98%11.47%10.26%10.03%9.45%8.43% 820,000$ 830,000$ 840,000$ 860,000$ 890,000$ 910,000$ 940,000$ 960,000$ 990,000$ 1,010,000$ 1,040,000$ 1,490,000$ 1,420,000$ 680,000$ 590,000$ 490,000$ 420,000$ 360,000$ 220,000$ 200,000$ -$ -$ 2,320,000$ 2,250,000$ 1,520,000$ 1,450,000$ 1,380,000$ 1,330,000$ 1,300,000$ 1,180,000$ 1,190,000$ 1,010,000$ 1,040,000$ 22.12%20.93%13.73%12.77%11.81%11.06%10.55%9.34%9.11%7.59%7.59% (100,000)$ (100,000)$ (100,000)$ (100,000)$ (110,000)$ (110,000)$ (110,000)$ (120,000)$ (120,000)$ (250,000)$ (120,000)$ -0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-0.92%-1.86%-0.84% 6/30/2034 6/30/2035 6/30/2036 6/30/2037 6/30/2038 6/30/2039 6/30/2040 6/30/2041 6/30/2042 6/30/2043 6/30/2044 109,260,000$ 115,030,000$ 121,160,000$ 127,680,000$ 134,610,000$ 141,980,000$ 149,820,000$ 158,160,000$ 167,030,000$ 176,480,000$ 186,530,000$ 103,480,000$ 110,490,000$ 117,870,000$ 124,970,000$ 132,420,000$ 140,260,000$ 148,520,000$ 157,270,000$ 166,430,000$ 176,160,000$ 186,450,000$ 5,780,000$ 4,540,000$ 3,290,000$ 2,720,000$ 2,190,000$ 1,720,000$ 1,300,000$ 890,000$ 610,000$ 320,000$ 90,000$ 94.71%96.05%97.28%97.87%98.37%98.79%99.13%99.43%99.64%99.82%99.95% 109,260,000$ 115,030,000$ 121,160,000$ 127,680,000$ 134,610,000$ 141,980,000$ 149,820,000$ 158,160,000$ 167,030,000$ 176,480,000$ 186,530,000$ 104,380,000$ 111,350,000$ 118,690,000$ 125,740,000$ 133,140,000$ 140,920,000$ 149,120,000$ 157,780,000$ 166,860,000$ 176,500,000$ 186,680,000$ 4,880,000$ 3,680,000$ 2,470,000$ 1,940,000$ 1,470,000$ 1,060,000$ 710,000$ 380,000$ 180,000$ (20,000)$ (150,000)$ 95.53%96.80%97.96%98.48%98.91%99.25%99.53%99.76%99.89%100.01%100.08% (900,000)$ (860,000)$ (820,000)$ (770,000)$ (720,000)$ (660,000)$ (590,000)$ (520,000)$ (430,000)$ (340,000)$ (230,000)$ Total Employer Cost Savings (2,370,000)$ City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING DEPARTMENT REPORT TO: Financial Advisory Commissioners FROM: Claudia Martinez, Accounting Manager DATE: April 7, 2021 SUBJECT: SHORT-TERM VACATION RENTAL (STVR) PROGRAM UPDATE The Short-Term Vacation Rental (STVR) program has been exhaustively studied over the past year by an Ad-Hoc committee and City Council, with significant public input. Any Council changes to the program have been thoroughly discussed in numerous public meetings, and Staff is aware of changes that may affect the City's budget. The STVR Program changes are not anticipated to significantly impact revenue or expenditures beyond what has already been studied by the STVR Ad-Hoc, Staff, our third-party fee-study vendor, and City Council. Therefore, a separate committee to study fiscal impacts will not be needed at this time. The latest update from the February 25, 2021 Special City Council Meeting can be found in the video recording below: La Quinta, CA : City Council Meeting - 2/25/2021 (12milesout.com) Attachment: 1. February 25, 2021 Special City Council Meeting Staff Report DEPARTMENTAL REPORT ITEM NO. 2 City of La Quinta SPECIAL CITY COUNCIL MEETING: February 25, 2021 STAFF REPORT AGENDA TITLE: INTRODUCE FOR FIRST READING AN ORDINANCE AMENDING CHAPTER 3.25 OF LA QUINTA MUNICIPAL CODE RELATED TO SHORT-TERM VACATION RENTALS; AND DISCUSS SHORT-TERM VACATION RENTAL PROGRAM AD-HOC COMMITTEE RECOMMENDATIONS RECOMMENDATION A. Move to take up Ordinance No. ___ by title and number only and waive further reading. B. Move to introduce at first reading, Ordinance No. ____to amend chapter 3.25 of the Municipal Code relating to Short-Term Vacation Rentals. C. Discuss and provide direction on Short-Term Vacation Rental Program Ad- hoc Committee recommendations. EXECUTIVE SUMMARY On January 27, 2021, Council reviewed the Short-Term Vacation Rental Program (STVR) Ad-Hoc Committee (Committee) recommendations, and a comparison of other recommendations and regulations from Neighbors for Neighborhoods (N4N) and Palm Springs. Council expressed general support for several changes to the STVR permitting and operational standards including adding a Homeshare permit, adding a permit for STVRs with 5 bedrooms or more, and conducting a noise monitoring devices pilot program. A redline draft ordinance has been prepared reflecting these changes. Other items were tabled for further discussion, including establishing a limit to the number of bookings per year, limit on the number of STVR permits per owner, adding a Primary Residence STVR permit, and contract between owner and renter acknowledging the rules and regulations and securing a deposit from the renter. BUSINESS SESSION ITEM NO. 1 5 ATTACHMENT 1 FISCAL IMPACT A cost of service analysis has been prepared to update and establish fees for the different types of STVR permits, which will be presented to Council for review and consideration under the Public Hearing portion of this meeting. BACKGROUND/ANALYSIS At the January 27, 2021 special meeting, Council reviewed the STVR Committee recommendations, a comparison of regulations from N4N and Palm Springs (Attachment 1), discussed several changes to STVR permits and operational standards, and tabled other items for further discussion. A draft ordinance has been prepared with proposed code amendments shown as redline changes. The items that were tabled for further discussion are not included as proposed code amendments; and are identified as discussion items in this report . The items below provide a general summary of the proposed code amendments to Chapter 3.25, including a recap of other items discussed at the January 27 special meeting:  Homeshare STVR Permit Homeshare permit is defined and added as a type of STVR permit whereby the owner hosts visitors in the owner’s home, for compensation, while the owner lives on-site and in the home, throughout the visitor’s stay. Homeshare permits do not have any limits on the number of bookings per year.  Estate Home STVR Permit – STVRs with five bedrooms or more An Estate Home permit is a type of STVR permit for homes with five or more bedrooms, subject to meeting evaluation criteria regarding adequate on-site parking and available street parking, potential noise impacts, and sufficient physical distance from adjacent properties, i.e., outdoor gathering spaces, pools, and other living spaces, to ensure that the STVR will not create conditions detrimental to the public health, safety and general welfare of the surrounding neighborhood. Inspection of the property to evaluate the above criteria and to verify the number of bedrooms is required, and installation of noise monitoring devices will be required as a condition of approval of the permit. There are 73 STVRs with five bedrooms or more, out of which 32 are in PGA West. The 73 STVRs with five or more bedrooms represent 6% of all STVRs. Prior to their annual renewal dates, a new STVR permit would be required and subject to meeting the evaluation and inspection criteria. Existing STVRs with five bedrooms or more will not be grandfathered. 6  Adequate onsite parking Clarification language is added to Section 3.25.050(F) regarding adequate onsite parking. Clarification is added that adequate onsite parking is based on the number of overnight occupants allowed, not based on the number of daytime occupants allowed which permits a higher number of occupants. Adequate onsite parking is calculated at a ratio of 4:1 - for every four occupants, one onsite parking space is required, and two street parking spaces may count towards the “adequate onsite parking” standard.  Noise Devices Pilot Program Council reached a consensus and directed staff to conduct a Noise Monitoring Device Pilot Program, which is scheduled to commence on March 1, 2021.  Daytime/Overnight Occupancy Limits No change; maintain existing limits with ranges to allow for flexibility and for the discretion of Code Compliance. The items below are for further discussion and direction:  Limit on the number of bookings per year Council discussed imposing a limit of no more than 32 bookings (+ 4 in the summer months July/Aug/Sept) per calendar year for vacation rental use of a property, thereby reducing the frequency (incentivizing longer stays) and also reducing the density of STVR activity, although the number of bookings/year (32) was not yet decided. This limit is used in Palm Springs. Staff checked with Palm Springs and the rationale for the 32+4 (total 36) limit is because it represents about two-thirds of the weekends in a calendar year (there are 52 weekends in a year). Palm Springs staff commented that the 4 “bonus” bookings in the summer months have been difficult for staff to track and that the summer months are no longer a problem for rental activity as more and more people are visiting the Valley year-round. Council may wish to consider a fixed number limit rather than adding bonus numbers for the summer months. STVRs in Tourist Commercial (CT) zones, Village Commercial (VC) zones (Embassy Suites), and STVRs that are issued Homeshare permits would be exempt and would have no limit on the number of bookings per calendar year. 7 64% of STVRs have 32 bookings or less per year, with an average of 26 bookings per year. The number of bookings range from 2 to 32 in a year. 36% of STVRs have more than 32 bookings per year, with an average of 47 bookings per year. The number of bookings range from 33-96 per year.  Limit on Number of STVR permits per Owner. Limiting the number of STVR permits per Owner would eliminate owners and business entities from operating multiple STVRs and would therefore control the number and density of STVRs in La Quinta. Currently, 96% of STVRs are single- unit STVR owners, and 4% are multi-unit STVR owners. A total of 34 STVR owners, comprised of both private individuals and business entities, own 2 properties; and a total of 9 STVR owners own more than 2 properties. 64% 36% DATA ON NUMBER OF STVR BOOKINGS PER YEAR 32 bookings or less More than 32 bookings Avg. 26 bookings/yr.  Avg. 47 bookings/yr.   8 Palm Springs established their limit of one STVR per owner in 2017 as part of a Code (ordinance) update, and grandfathered owners with more than one STVR that had pre-existing permits as of the effective date of the 2017 Code update, as long as they were in compliance with the Code.  Primary Residence STVR Permit A primary residence permit is a type of STVR permit whereby the dwelling is the owner’s primary residence. Primary residence can mean a dwelling where an owner spends the majority of the calendar year on the property used as a STVR, and the property is identified in the Riverside County Assessor’s record as the owner’s primary residence. Council discussed that this type of permit could be limited to a lower number of bookings per year or to tie the limit to the number of the events that occur in a calendar year (i.e., Coachella Music festival, Amex Golf, Tennis, etc.).  Contract between owner and renter acknowledging regulations The STVR Committee recommendations included recommendations for host training and best practices to improve hosting and guest management and to reduce complaints and achieve compliance. Staff is working with Marketing to update the good neighbor brochure that will be especially informative to the owner and renter when the orders are lifted and when updated regulations are in effect. Additionally, staff is preparing video training content on the rules and regulations for both hosts and renters. A requirement can be added that an owner/renter agreement must be executed at the time of booking, and that the signed agreement be made available to Code Compliance upon demand. Palm Springs provides a “Vacation Rental Statement of Rules and Regulations” (Attachment 2) that is to be signed by the renters acknowledging that they have read and will comply with all the rules and regulations. Staff can prepare a similar document.  Owner requiring a security deposit from renter The City cannot require that the owner to obtain a security deposit from the renter, to be used in case a fine is imposed for a violation. It has been La Quinta’s practice that fines for violations are imposed on the owner, not on the renter. However, it has been discussed that the renter (occupant) should be fined, for example, for noise violations because it is the occupant that is causing the violation. The City’s ordinance states that an occupant may be issued an administrative citation. Section 3.25.090.E (Violation) states that “The city may issue an administrative citation to any applicant, occupant, responsible person, local contact person, owner, or owner’s authorized agent or representative.” Occupant means any person(s) occupying the dwelling at any time. For example, the occupant violating 9 a noise regulation would receive a fine of $1,000, and a strike would go against the owner. Three strikes within one year will result in an immediate suspension of the permit. Staff researched Pacific Grove and their ordinance does not include any provisions that require an owner/host to obtain a security deposit from their renter. Staff has learned that there are some owners/hosts that opt to require their renters to provide a security deposit to be used in case a fine is imposed for a violation, and other owners/hosts do not impose this requirement on their renters. ALTERNATIVES Council may elect to adopt some of the changes; instruct Staff to make additional/different amendments; and/or amend certain sections of these chapters of the Code. Prepared by: Danny Castro, Design and Development Director Approved by: Jon McMillen, City Manager Attachments: 1. Comparison of Regulations 2. Statement of Rules and Regulations (Palm Springs) 10 ORDINANCE NO. XXX AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, AMENDING CHAPTER 3.25 OF THE LA QUINTA MUNICIPAL CODE RELATED TO SHORT TERM VACATION RENTALS WHEREAS, Chapter 3.25 of the La Quinta Municipal Code (LQMC) relates to short-term vacation rentals; and WHEREAS, the City has the authority to regulate businesses operating within the City; and WHEREAS, Chapter 3.25 of the LQMC addresses permitted uses, short- term vacation rental process and permitting procedures; and WHEREAS, the proposed amendments are necessary to clarify regulations, process, and standards for short-term vacation rentals under the City’s short-term vacation rental program, as more particularly set forth in this Ordinance. NOW, THEREFORE, the City Council of the City of La Quinta does ordain as follows: SECTION 1. Chapter 3.25 shall be amended as written in "Exhibit A" attached hereto and incorporated herein by reference. SECTION 2. The City Council does hereby grant the City Clerk the ability to make minor amendments to "Exhibit A" to ensure consistency of all approved text amendments prior to the publication in the La Quinta Municipal Code. SECTION 3. Posting: The City Clerk shall, within 15 days after passage of this Ordinance, cause it to be posted in at least three public places designated by resolution of the City Council, shall certify to the adoption and posting of this Ordinance, and shall cause this Ordinance and its certification, together with proof of posting to be entered into the Book of Ordinances of the City of La Quinta. SECTION 4. Effective Date: This Ordinance shall be in full force and effect thirty (30) days after its adoption. SECTION 5. Severability: If any section, subsection, subdivision, sentence, clause, phrase, or portion of this Ordinance is, for any reason, held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the 11 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 2 of 17 remaining portions of this Ordinance. The City Council hereby declares that it would have adopted this Ordinance and each and every section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more section, subsections, subdivisions, sentences, clauses, phrases, or portions thereof be declared unconstitutional. PASSED, APPROVED and ADOPTED, at a regular meeting of the La Quinta City Council held this ____ day of ____________, 2021 by the following vote: AYES: NOES: ABSENT: ABSTAIN: ________________________ LINDA EVANS, Mayor City of La Quinta, California ATTEST: _______________________ MONIKA RADEVA, City Clerk City of La Quinta, California (CITY SEAL) APPROVED AS TO FORM: ___________________________ WILLIAM H. IHRKE, City Attorney City of La Quinta, California 12 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 3 of 17 Chapter 3.25 SHORT-TERM VACATION RENTALS Chapter 3.25 SHORT-TERM VACATION RENTALS 3.25.010 Title. This chapter shall be referred to as the “Short-Term Vacation Rental Regulations.” (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.020 Purpose. A. The purpose of this chapter is to establish regulations for the use of privately owned residential dwellings as short-term vacation rentals that ensure the collection and payment of transient occupancy taxes (TOT) as provided in Chapter 3.24 of this code, and minimize the negative secondary effects of such use on surrounding residential neighborhoods. B. This chapter is not intended to provide any owner of residential property with the right or privilege to violate any private conditions, covenants and restrictions applicable to the owner’s property that may prohibit the use of such owner’s residential property for short-term vacation rental purposes as defined in this chapter. (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) C. The requirements of this chapter shall be presumed to apply to any residential dwelling that has received a short-term vacation rental permit. A rebuttable presumption arises that, whenever there is an occupant(s), paying rent or not, of a residential dwelling that has received a short-term vacation rental permit, the requirements of this chapter shall apply, including but not limited to any suspension or other modifications imposed on a short-term vacation rental permit as set forth in this chapter. The city manager or authorized designee shall have the authority to implement any necessary or appropriate policies and procedures to implement the rebuttable presumption set forth in this section. 3.25.030 Definitions. For purposes of this chapter, the following words and phrases shall have the meaning respectively ascribed to them by this section: “Advertise,” “advertisement,” “advertising,” “publish,” and “publication” mean any and all means, whether verbal or written, through any media whatsoever whether in use prior to, at the time of, or after the enactment of the ordinance amending this chapter, used for conveying to any member or members of the public the ability or availability to rent a short-term vacation rental unit as defined in this section, or used for conveying to any member or members of the public a notice of an intention to rent a short-term vacation rental unit as defined in this section. For purposes of this definition, the following media are listed as examples, which are not and shall not be construed as exhaustive: Verbal or written announcements by proclamation or outcry, newspaper advertisement, magazine advertisement, handbill, written or printed notice, printed or poster display, billboard display, e-mail or other electronic/digital messaging platform, electronic commerce/commercial Internet websites, and any and all other electronic media, television, radio, satellite-based, or Internet website. “Applicable laws, rules and regulations” means any laws, rules, regulations and codes (whether local, state or federal) pertaining to the use and occupancy of a privately owned dwelling unit as a short- term vacation rental.   EXHIBIT A 13 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 4 of 17 “Applicant” means the owner of the short-term vacation rental unit. “Authorized agent or representative” means a designated agent or representative who is appointed by the owner and also is responsible for compliance with this chapter with respect to the short-term vacation rental unit. “Booking transaction” means any reservation or payment service provided by a person or entity who facilitates a home-sharing or vacation rental (including short-term vacation rental) transaction between a prospective occupant and an owner or owner’s authorized agent or representative. “City manager” means that person acting in the capacity of the city manager of the city of La Quinta or authorized designee. “Declaration of non-use” means the declaration described in Section 3.25.050. “Dwelling” has the same meaning as set forth in Section 9.280.030 (or successor provision, as may be amended from time to time) of this code; “dwelling” does not include any impermanent, transitory, or mobile means of temporary lodging, including but not limited to mobile homes, recreational vehicles (RVs), car trailers, and camping tents. “Estate home” means a single-family detached residence with five or more bedrooms. “Estate home permit” is a type of short-term vacation rental permit that is issued to a short-term vacation rental unit with five or more bedrooms, subject to evaluation criteria and inspection of the property pursuant to Section 3.25.060.D. “Good neighbor brochure” means a document prepared by the city that summarizes the general rules of conduct, consideration, and respect, including, without limitation, provisions of this code and other applicable laws, rules or regulations pertaining to the use and occupancy of short-term vacation rental units. “Homeshare permit” is a type of short-term vacation rental permit whereby the Owner hosts visitors in the Owner’s home, for compensation, for periods of thirty (30) consecutive calendar days or less, while the Owner lives on-site and in the home, throughout the visitor’s stay. “Hosting platform” means a person or entity who participates in the home-sharing or vacation rental (including short-term vacation rental) business by collecting or receiving a fee, directly or indirectly through an agent or intermediary, for conducting a booking transaction using any medium of facilitation, including but not limited to the Internet. “Local contact person” means the person designated by the owner or the owner’s authorized agent or representative who shall be available twenty-four hours per day, seven days per week with the ability to respond to the location within forty-five minutes for the purpose of: (1) taking remedial action to resolve any such complaints; and (2) responding to complaints regarding the condition, operation, or conduct of occupants of the short-term vacation rental unit. A designated local contact person must obtain a business license otherwise required by Sections 3.24.060 and 3.28.020 (or successor provisions, as may be amended from time to time) of this code. “Notice of permit modification, suspension or revocation” means the notice the city may issue to an applicant, authorized agent or representative, local contact person, occupant, owner, responsible person, or any other person or entity authorized to be issued such notice under this code for a short- term vacation rental unit, upon a determination by the city of a violation of this chapter or other provisions of this code relating to authorized uses of property subject to this chapter. 14 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 5 of 17 “Occupant” means any person(s) occupying the dwelling at any time. “Owner” means the person(s) or entity(ies) that hold(s) legal and/or equitable title to the subject short- term vacation rental. “Primary residence” means a dwelling where an Owner spends the majority of the calendar year on the property used as a short-term vacation rental unit, and the property is identified in the Riverside County Assessor’s record as the Owner’s primary residence. “Primary residence permit” is a type of short-term vacation rental permit whereby the short-term vacation rental unit is the Owner’s primary residence, as defined herein in this Section. “Property” means a residential legal lot of record on which a short-term vacation rental unit is located. “Rent” has the same meaning as set forth in Section 3.24.020 (or successor provision, as may be amended from time to time) of this code. “Rental agreement” means a written or verbal agreement for use and occupancy of a privately-owned residential dwelling that has been issued a short-term vacation rental permit, including a dwelling that may have a permit which has been or is under suspension. “Responsible person” means the signatory of an agreement for the rental, use and occupancy of a short-term vacation rental unit, and/or any person(s) occupying the short-term vacation rental unit without a rental agreement, including the owner(s), owner’s authorized agent(s) or representative(s), local contact(s), and their guests, who shall be an occupant of that short-term vacation rental unit, who is at least twenty-one years of age, and who is legally responsible for ensuring that all occupants of the short-term vacation rental unit and/or their guests comply with all applicable laws, rules and regulations pertaining to the use and occupancy of the subject short-term vacation rental unit. “Short-term vacation rental permit” means a permit that permits the use of a privately owned residential dwelling as a short-term vacation rental unit pursuant to the provisions of this chapter, and which incorporates by consolidation a transient occupancy permit and a business license otherwise required by Sections 3.24.060 and 3.28.020 (or successor provisions, as may be amended from time to time) of this code. Short-term vacation rental permit includes the following subtypes: Homeshare permit, Primary Residence permit, and Estate Home permit, as defined herein in this Section. “Short-term vacation rental unit” means a privately owned residential dwelling, such as, but not limited to, a single-family detached or multiple-family attached unit, apartment house, condominium, cooperative apartment, duplex, or any portion of such dwellings and/or property and/or yard features appurtenant thereto, rented for occupancy and/or occupied for dwelling, lodging, or any transient use, including but not limited to sleeping overnight purposes for a period of thirty (30) consecutive calendar days or less, counting portions of calendar days as full days, by any person(s) with or without a rental agreement. “STVR” may be used by city officials as an abbreviation for “short-term vacation rental.” “Suspension” means that short-term vacation rental permit that is suspended pursuant to Section 3.25.090. “Tenant” or “transient,” for purposes of this chapter, means any person who seeks to rent or who does rent, or who occupies or seeks to occupy, for thirty (30) consecutive calendar days or less, a short- term vacation rental unit. (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 15 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 6 of 17 3.25.040 Authorized agent or representative. A. Except for the completion of an application for a short-term vacation rental permit and business license, the owner may designate an authorized agent or representative to ensure compliance with the requirements of this chapter with respect to the short-term vacation rental unit on his, her or their behalf. Nevertheless, the owner shall not be relieved from any personal responsibility and personal liability for noncompliance with any applicable law, rule or regulation pertaining to the use and occupancy of the subject short-term vacation rental unit, regardless of whether such noncompliance was committed by the owner’s authorized agent or representative or the occupants of the owner’s short-term vacation rental unit or their guests. B. The owner must be the applicant for and holder of a short-term vacation rental permit and business license and shall not authorize an agent or a representative to apply for or hold a short-term vacation rental permit and business license on the owner’s behalf. The owner’s signature is required on all short-term vacation rental application forms, and the city may prescribe reasonable requirements to verify that an applicant or purported owner is the owner in fact. (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.050 Short-term vacation rental permit—Required. A. The owner is required to obtain a short-term vacation rental permit and a business license from the city before the owner or the owner’s authorized agent or representative may rent or advertise a short-term vacation rental unit. No short-term vacation rental use may occur in the city except in compliance with this chapter. No property in the city may be issued a short-term vacation rental permit or used as a short-term vacation rental unit unless the property is a residential dwelling that complies with the requirements of this chapter. B. A short-term vacation rental permit and business license shall be valid for one (1) year and renewed on an annual basis in order to remain valid. 1. A short-term vacation rental permit and business license renewal application shall be submitted no earlier than sixty (60) calendar days but no later than thirty (30) calendar days prior to the permit’s expiration date. Failure to renew a short-term vacation rental permit as prescribed in this section may result in the short-term vacation rental permit being terminated. 2. A new owner of a property (or a new person and/or new entity that owns or controls a business or organization or other entity of any kind, such as a limited liability company, which is the owner of a property) previously operated as a short-term vacation rental unit by the former owner (or by a former person or entity that owned or controlled the business or organization or other entity of any kind that continues to be the owner of the property) may not renew the previous owner’s short-term vacation rental permit and shall apply for a new short-term vacation rental permit, pursuant to this chapter, if the new owner (or new person and/or new entity that owns or controls a business or organization or other entity of any kind that continues to be the owner of a property) wants to continue to use the residential dwelling as a short-term vacation rental unit. 3. If an owner or an owner’s authorized agent or representative, pursuant to all applicable laws, constructs additional bedrooms to an existing residential dwelling or converts non-bedroom spaces and areas in an existing residential dwelling into additional bedrooms, the owner or 16 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 7 of 17 owner’s authorized agent or representative shall notify the city and update the short-term vacation rental unit’s online registration profile upon city approval of the addition or conversion so that the city may confirm that such conversion is consistent with this chapter and the code, including all applicable provisions in Title 8 of the code, and reissue the short- term vacation rental permit so that it accurately identifies the number of approved bedrooms, if the owner wants to continue to use the dwelling as a short-term vacation rental unit. The city may conduct an onsite inspection of the property to verify compliance with this chapter and the code. Code compliance inspections may be billed for full cost recovery at one hour for initial inspection and in thirty-minute increments for each follow-up inspection pursuant to subsection D. For purposes of this chapter, “reissue” or “reissuance” of a short-term vacation rental permit means a permit that is reissued by the city, with corrected information, as applicable, to be valid for the balance of the existing one (1)-year permit and license period. C. A short-term vacation rental permit and business license shall be valid only for the number of bedrooms in a residential dwelling equal to the number of bedrooms the city establishes as eligible for listing as a short-term vacation rental unit and shall not exceed the number of bedrooms allowable for the number of occupants as set forth in Section 3.25.070. The allowable number of bedrooms shall meet all applicable requirements under federal, state and city codes, including, but not limited to, the provisions of Section 9.50.100 (or successor provision, as may be amended from time to time) governing “additional bedrooms” and all applicable building and construction codes in Title 8 of this code. A short-term vacation rental permit shall not issue for, or otherwise authorize the use of, additional bedrooms converted from non-bedroom spaces or areas in an existing residential dwelling except upon express city approval for the additional bedrooms in compliance with this code, including Section 9.50.100 (or successor provision, as may be amended from time to time), and upon approval of an application for a new or renewed short-term vacation rental permit as provided in subsection B. D. A short-term vacation rental permit and business license shall not be issued or renewed, and may be suspended or permanently revoked, if the property, or any building, structure, or use or land use on the property is in violation of this code. The city may conduct an inspection of the property prior to the issuance or renewal of a short-term vacation rental permit and/or business license. Code compliance inspections may be billed for full cost recovery at one hour for initial inspection and in thirty-minute increments for each follow-up inspection. For purposes of this subsection, a code violation exists if, at the time of the submittal of an application for a new or renewed short-term vacation rental permit or business license, the city has commenced administrative proceedings by issuing written communication and/or official notice to the owner or owner’s responsible agent or representative of one or more code violations. For purposes of this chapter, “building,” “structure,” and “use or land use” have the same meanings as set forth in Section 9.280.030 (or successor provisions, as may be amended from time to time) of this code. E. A short-term vacation rental permit and business license shall not be issued or renewed, and may be suspended or permanently revoked, if any portion of transient occupancy tax has not been reported and/or remitted to the city for the previous calendar year by the applicable deadline for the reporting and/or remittance of the transient occupancy tax. F. A short-term vacation rental permit and business license shall not be issued or renewed, and may be suspended or permanently revoked, if the residential dwelling to be used as a short-term rental unit lacks adequate onsite parking. For purposes of this subsection, “adequate onsite parking” shall be 17 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 8 of 17 determined by dividing the total number of overnight occupants commensurate with the approved number of bedrooms as provided in the table under Section 3.25.070 by four, such that the ratio of the total number of overnight occupants to onsite parking spots does not exceed four to one (4:1). For example, a residential dwelling with five bedrooms may permissibly host a total number of ten overnight occupants and therefore requires three on-site parking spots. Onsite parking shall be on an approved driveway, garage, and/or carport areas only in accordance with Section 3.25.070(R), and no more than two street parking spots may count towards the number of on-site parking spots necessary to meet the “adequate onsite parking” requirement under this subsection. G. An owner or owner’s authorized agent or representative who claims not to be operating a short- term vacation rental unit or who has obtained a valid short-term vacation rental permit and business license pursuant to this chapter, may voluntarily opt-out of the requirements of this chapter, prior to the issuance or expiration of a short-term vacation rental permit and business license that are applicable to the short-term vacation rental unit, only upon the owner, the owner’s authorized agent or representative and/or the owner’s designated local contact person executing, under penalty of perjury, a declaration of non-use as a short-term vacation rental unit, in a form prescribed by the city (for purposes of this chapter, a “declaration of non-use”). Upon the receipt and filing by the city of a fully executed declaration of non-use, the owner or owner’s authorized agent representative shall be released from complying with this chapter as long as the property is not used as a short-term vacation rental unit. Use of the property as a short-term vacation unit after the city’s receipt and filing of a declaration of non-use, is a violation of this chapter. If, after a declaration of non-use has been received and filed by the city, the owner or owner’s authorized agent or representative wants to use that property as a short-term vacation rental unit, the owner shall apply for a new short-term vacation rental permit and business license and fully comply with the requirements of this chapter and the code; provided, however, that if a short-term vacation rental permit is or will be suspended on the date an owner or owner’s authorized agent or representative submits to the city a declaration of non-use for the short-term vacation rental unit under suspension, then the owner may apply for a new short-term vacation rental permit and business license only after twelve (12) consecutive months have elapsed from the date of the declaration of non-use, and the owner and owner’s authorized agent or representative otherwise shall fully comply with the requirements of this chapter and the code. (Ord. 577 § 1, 2019; Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.060 Short-term vacation rental permit—Application requirements. A. The owner or the owner’s authorized agent or representative must submit the information required on the city’s short-term vacation rental permit application form provided by the city, which may include any or all of the following: 1. The name, address, and telephone number of the owner of the subject short-term vacation rental unit; 2. The name, address, and telephone number of the owner’s authorized agent or representative, if any; 3. The name, address, and twenty-four-hour telephone number of the local contact person; 4. The address of the proposed short-term vacation rental unit, Internet listing site and listing number; 18 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 9 of 17 5. The number of bedrooms shall not exceed the number of bedrooms allowable for the number of occupants as set forth in Section 3.25.070. The allowable number of bedrooms shall meet all applicable building and construction requirements under federal, state and city codes, including, but not limited to, the provisions of Section 9.50.100 (or successor provision, as may be amended from time to time) governing “additional bedrooms” and all applicable building and construction codes in Title 8 of this code; 6. Acknowledgement of receipt of all electronically distributed short-term vacation rental information from the city, including any good neighbor brochure; 7. The owner or owner’s authorized agent or representative who has applied for a short-term vacation rental permit shall provide the city with written authorization that issuance of a short- term vacation rental permit pursuant to this chapter is not inconsistent with any recorded or unrecorded restrictive covenant, document, or other policy of a homeowner association (HOA) or other person or entity which has governing authority over the property on which a short-term vacation rental unit will be operated; in furtherance of this requirement, there shall be a rebuttable presumption that an owner or owner’s authorized agent or representative does not have written authorization for the issuance of a short-term vacation rental permit if a HOA or other person or entity which has governing authority over the property has submitted to the city a duly-authorized official writing, which informs the city that short-term vacation rentals of thirty (30) consecutive days or less are not permitted on the property applying for a short-term vacation rental permit; and 8. Such other information as the city manager or authorized designee deems reasonably necessary to administer this chapter. B. The short-term vacation rental permit application shall be accompanied by an application fee as set by resolution of the city council. A short-term vacation rental permit and business license shall not be issued or renewed while any check or other payment method cannot be processed for insufficient funds. C. The city may determine the maximum number of bedrooms in a residential dwelling with multiple bedrooms eligible for use as a short-term vacation rental unit upon issuance of a short-term vacation rental permit. When determining the maximum number of bedrooms eligible for use as short-term vacation rentals, the city shall consider the public health, safety, and welfare, shall comply with building and residential codes, and may rely on public records relating to planned and approved living space within the residential dwellings, including, but not limited to, title insurance reports, official county records, and tax assessor records. Owners of residential dwellings that exceed five thousand square feet of developed space on a lot may apply for additional bedrooms. An owner and/or owner’s authorized agent or representative may not advertise availability for occupancy of a short-term vacation rental unit for more than the approved number of bedrooms listed in the short-term vacation rental permit issued by the city pursuant to this chapter. In addition to any other rights and remedies available to the city under this chapter, the first violation for failing to advertise the approved number of bedrooms may be subject to a fine by an administrative citation, and a second or subsequent violation for failing to advertise the approved number of bedrooms may result in a revocation (which may include permanent revocation) of the short-term vacation rental permit and/or any affiliated licenses or permits pursuant to the provisions set forth in Section 3.25.100. D. Short-term vacation rental permit applications shall comply with the following: 19 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 10 of 17 1. A short-term vacation rental permit application for an Estate home shall be subject to evaluation and inspection of the property to ensure that the short-term vacation rental unit will not create conditions materially detrimental to the public health, safety and general welfare or injurious to or incompatible with other properties in the vicinity. Evaluation and inspection shall include, but not be limited to: verification of the number of bedrooms, adequate on-site parking spaces, availability of nearby street parking, physical distance of the Estate home from adjacent properties, such as location and distance of outdoor gathering spaces, pools, and other living spaces from neighboring properties. The city manager, or designee, shall have the authority to impose additional conditions on the use of the Estate home as a short-term vacation rental unit to ensure that any potential secondary effects unique to the subject short-term vacation rental unit are avoided or adequately mitigated. 2.. A short-term vacation rental permit application may be denied if the applicant has failed to comply with application requirements in this chapter, or has had a prior short-term vacation rental permit for the same unit revoked within the past twelve (12) calendar months. In addition, upon adoption of a resolution pursuant to subsection H, the city may limit the number of short-term vacation rental units in a given geographic area based on a high concentration of short-term vacation rental units. The city shall maintain a waiting list of short-term vacation rental permit applications for such geographic areas where the city determines, based on substantial evidence after a noticed public hearing and public hearing, there is a higher than average concentration of short-term vacation rental units that either affects the public health, safety, and welfare or significantly negatively impacts the character and standard of living in a neighborhood within that geographic area, or both. E. Short-term vacation rental permit applications may take up to, and the city shall have, thirty (30) calendar days to process. An application for a renewal of a short-term vacation rental permit and business license should be submitted at least thirty (30) calendar days prior to the existing permit’s expiration to allow sufficient time for the city to process the renewal application. Nothing in this subsection or chapter shall be construed as requiring the city to issue or deny a short-term vacation rental permit in less than thirty (30) calendar days, as no permit shall be issued until such time as application review is complete. No short-term vacation rental use may occur in the city without a valid short-term vacation rental permit is issued in accordance with this chapter. F. Upon a change of ownership of a property (or upon a new person and/or new entity owning or controlling a business or organization or other entity of any kind, such as a limited liability company, which is the owner of a property) licensed to operate as a short-term vacation rental unit, the owner or owner’s authorized agent or representative shall notify the city of such change immediately. The existing short-term vacation rental permit shall be terminated and the property must cease operating as a short-term vacation rental immediately. Failure to comply may result in a fine of $1,000 per day for a continuing violation of this subsection F. G. Immediately upon a change of an owner’s authorized agent or representative, local contact, or any other change pertaining to the information contained in the short-term vacation rental application, the owner or owner’s authorized agent or representative shall update the short-term vacation rental unit’s online registration profile used by the city for the implementation of the short-term vacation rental regulations. Failure to update immediately this information may result in a violation of this chapter, including but not limited to a suspension or revocation of a short-term vacation rental permit, until all information is updated. 20 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 11 of 17 H. The city manager or authorized designee shall prepare, for adoption by resolution by the city council, a review procedure and criteria to evaluate the limitation for issuance of STVR permits and/or STVR applications for geographic areas within the city as set forth in subsection D. (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.070 Operational requirements and standard conditions. A. A. The owner and/or owner’s authorized agent or representative shall use reasonably prudent business practices to ensure that the short-term vacation rental unit is used in a manner that complies with all applicable laws, rules and regulations pertaining to the use and occupancy of the subject short-term vacation rental unit. 1. 1. No more than thirty-two (32) booking transactions for vacation rental use of a short-term vacation rental unit shall be allowed or provided in any calendar year. A booking transaction includes any occupancy of a property subject to the provision of this chapter by persons other than the Owner when the Owner is not present during such occupancy, regardless of whether compensation is paid for such occupancy or whether occupancy is evidenced in an agreement or document. For the first year a short-term vacation rental permit is in effect, the thirty-two (32) booking transactions shall be prorated based on the number of months that elapse prior to the subsequent calendar year. Short-term vacation rental units with valid short-term vacation rental permits and business licenses in the Tourist Commercial (CT) and Village Commercial (VC) zones, or with a valid Homeshare permit, are exempt from this subparagraph. 22. An Estate home may be established for short-term vacation rental use subject to evaluation and inspection of the property pursuant to Section 3.25.060.D. 3. An Estate Home established for short-term vacation rental use is required to be equipped with a noise monitoring device(s) that is operable at all times. B. The responsible person(s) shall be an occupant(s) of the short-term vacation rental unit for which he, she or they signed a rental agreement for such rental, use and occupancy, and/or any person(s) occupying the short-term vacation rental unit without a rental agreement, including the owner, owner’s authorized agent or representative, local contact(s) and their guests. No non-permanent improvements to the property, such as tents, trailers, or other mobile units, may be used as short-term vacation rentals. The total number of occupants, including the responsible person(s), allowed to occupy any given short-term vacation rental unit may be within the ranges set forth in the table below. By the issuance of a short-term vacation rental permit, the city or its authorized designees, including police, shall have the right to conduct a count of all persons occupying the short-term vacation rental unit in response to a complaint or any other legal grounds to conduct an inspection resulting from the use of the short-term vacation rental unit, and the failure to allow the city or its authorized designees the ability to conduct such a count may constitute a violation of this chapter. The city council may by resolution further restrict occupancy levels provided those restrictions are within the occupancy ranges set forth below. Number of Bedrooms Total of Overnight* Occupants Total Daytime** Occupants (Including Number of Overnight Occupants) 0 – Studio 2 2—8 21 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 12 of 17 1 2—4 2—8 2 4—6 4—8 3 6—8 6—12 4 8—10 8—16 5 10—12 10—18 6 12—14 12—20 7 14 14—20 8 16 16—22 9 18 18—24 * Overnight (10:01 p.m. – 6:59 a.m.) ** Daytime (7:00 a.m. – 10:00 p.m.) C. The person(s) listed as the local contact person in the short-term vacation rental unit’s online registration profile shall be available twenty-four (24) hours per day, seven (7) days per week, with the ability to respond to the location within thirty (30) minutes to complaints regarding the condition, operation, or conduct of occupants of the short-term vacation rental unit or their guests. The person(s) listed as a local contact person shall be able to respond personally to the location, or to contact the owner or the owner’s authorized agent or representative to respond personally to the location, within thirty (30) minutes of notification or attempted notification by the city or its authorized short-term vacation rental designated hotline service provider. No provision in this section shall obligate the city or its authorized short-term vacation rental designated hotline service provider to attempt to contact any person or entity other than the person(s) listed as the local contact person. D. The owner, the owner’s authorized agent or representative and/or the owner’s designated local contact person shall use reasonably prudent business practices to ensure that the occupants and/or guests of the short-term vacation rental unit do not create unreasonable or unlawful noise or disturbances, engage in disorderly conduct, or violate any applicable law, rule or regulation pertaining to the use and occupancy of the subject short-term vacation rental unit. E. Occupants of the short-term vacation rental unit shall comply with the standards and regulations for allowable noise at the property in accordance with Section 9.100.210 and 11.08.040 (or successor provision, as may be amended from time to time) of this code. No radio receiver, musical instrument, phonograph, compact disk player, loudspeaker, karaoke machine, sound amplifier, or any machine, device or equipment that produces or reproduces any sound shall be used outside or be audible from the outside of any short-term vacation rental unit between the hours of 10:00 p.m. and 7:00 a.m. Pacific Standard Time. Observations of noise related violations shall be made by the city or its authorized designee from any location at which a city official or authorized designee may lawfully be, including but not limited to any public right-of-way, any city-owned public property, and any private property to which the city or its authorized designee has been granted access. F. Prior to occupancy of a short-term vacation rental unit, the owner or the owner’s authorized agent or representative shall: 1. Obtain the contact information of the responsible person; 22 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 13 of 17 2. Provide copies of all electronically distributed short-term vacation rental information from the city, including any good neighbor brochure to the responsible person and post in a conspicuous location within the short-term vacation rental unit, in a manner that allows for the information to be viewed in its entirety; and require such responsible person to execute a formal acknowledgement that he or she is legally responsible for compliance by all occupants of the short-term vacation rental unit and their guests with all applicable laws, rules and regulations pertaining to the use and occupancy of the short-term vacation rental unit. This information shall be maintained by the owner or the owner’s authorized agent or representative for a period of three years and be made readily available upon request of any officer of the city responsible for the enforcement of any provision of this code or any other applicable law, rule or regulation pertaining to the use and occupancy of the short-term vacation rental unit. G. The owner, the owner’s authorized agent or representative and/or the owner’s designated local contact person shall, upon notification or attempted notification that the responsible person and/or any occupant and/or guest of the short-term vacation rental unit has created unreasonable or unlawful noise or disturbances, engaged in disorderly conduct, or committed violations of any applicable law, rule or regulation pertaining to the use and occupancy of the subject short-term vacation rental unit, promptly respond within thirty (30) minutes to immediately halt and prevent a recurrence of such conduct by the responsible person and/or any occupants and/or guests. Failure of the owner, the owner’s authorized agent or representative and/or the owner’s designated local contact person to respond to calls or complaints regarding the condition, operation, or conduct of occupants and/or guests of the short-term vacation rental unit within thirty (30) minutes, shall be subject to all administrative, legal and equitable remedies available to the city. H. [reserved] I. Trash and refuse shall not be left stored within public view, except in proper containers for the purpose of collection by the city’s authorized waste hauler on scheduled trash collection days. The owner, the owner’s authorized agent or representative shall use reasonably prudent business practices to ensure compliance with all the provisions of Chapter 6.04 (Solid Waste Collection and Disposal) (or successor provision, as may be amended from time to time) of this code. J. Signs may be posted on the premises to advertise the availability of the short-term vacation rental unit as provided for in Chapter 9.160 (Signs) (or successor provision, as may be amended from time to time) of this code. K. The owner, authorized agent or representative and/or the owner’s designated local contact person shall post a copy of the short-term vacation rental permit and a copy of the good neighbor brochure in a conspicuous place within the short-term vacation rental unit, and a copy of the good neighbor brochure shall be provided to each occupant of the subject short-term vacation rental unit. L. Unless otherwise provided in this chapter, the owner and/or the owner’s authorized agent or representative shall comply with all provisions of Chapter 3.24 concerning transient occupancy taxes, including, but not limited to, submission of a monthly return in accordance with Section 3.24.080 (or successor provisions, as may be amended from time to time) of this code, which shall be filed monthly even if the short-term vacation rental unit was not rented during each such month. M. Guesthouses, detached from the primary residential dwelling on the property, or the primary residential dwelling on the property, may be rented pursuant to this chapter as long as the guesthouse and the primary residential dwelling are rented to one party. 23 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 14 of 17 N. The owner and/or the owner’s authorized agent or representative shall post the number of authorized bedrooms and the current short-term vacation rental permit number at the beginning or top of any advertisement that promotes the availability or existence of a short-term vacation rental unit. In the instance of audio-only advertising of the same, the short-term vacation rental permit number shall be read as part of the advertisement. O. The owner and/or owner’s authorized agent or representative shall operate a short-term vacation rental unit in compliance with any other permits or licenses that apply to the property, including, but not limited to, any permit or license needed to operate a special event pursuant to Section 9.60.170 (or successor provision, as may be amended from time to time) of this code. The city may limit the number of special event permits issued per year on residential dwellings pursuant to Section 9.60.170 (or successor provision, as may be amended from time to time). P. The city manager, or designee, shall have the authority to impose additional conditions on the use of any given short-term vacation rental unit to ensure that any potential secondary effects unique to the subject short-term vacation rental unit are avoided or adequately mitigated, including, but not limited to, a mitigating condition that would require the installation of a noise monitoring device to keep time-stamped noise level data from the property that will be made available to the city upon city’s reasonable request. Q. The standard conditions set forth herein may be modified by the city manager, or designee, upon request of the owner or the owner’s authorized agent or representative based on site-specific circumstances for the purpose of allowing reasonable accommodation of a short-term vacation rental. All requests must be in writing and shall identify how the strict application of the standard conditions creates an unreasonable hardship to a property such that, if the requirement is not modified, reasonable use of the property for a short-term vacation rental would not be allowed. Any hardships identified must relate to physical constraints to the subject site and shall not be self-induced or economic. Any modifications of the standard conditions shall not further exacerbate an already existing problem. R. On-site parking shall be on an approved driveway, garage, and/or carport areas only; this section does not impose restrictions on public street parking regulations. Recreational vehicles may be parked in accordance with the provisions set forth in Section 9.60.130 (or successor provision, as may be amended from time to time) of this code. (Ord. 577 § 1, 2019; Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.080 Recordkeeping and hosting platform duties. A. The owner or the owner’s authorized agent or representative shall maintain for a period of three years, records in such form as the tax administrator (as defined in Chapter 3.24) may require to determine the amount of transient occupancy tax owed to the city. The tax administrator shall have the right to inspect such records at all reasonable times, which may be subject to the subpoena by the tax administrator pursuant to Section 3.24.140 (Records) (Transient Occupancy Tax) (or successor provisions, as may be amended from time to time) of this code. B. Hosting platforms shall not complete any booking transaction for any residential dwelling or other property purporting to be a short-term vacation rental unit in the city unless the dwelling or property has a current and valid short-term vacation rental permit issued pursuant to this chapter, which is not under suspension, for the dates and times proposed as part of the booking transaction. 24 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 15 of 17 1. The city shall maintain an online registry of active and suspended short-term vacation rental permits, which hosting platforms may reference and rely upon for purposes of complying with subsection B. If a residential dwelling or other property purporting to be a short-term vacation rental unit matches with an address, permit number, and/or current and valid permit dates (not under suspension) set forth in the city’s online registry, the hosting platforms may presume that the dwelling or other property has a current and valid short-term vacation rental permit. 2. The provisions of this subsection B shall be interpreted in accordance with otherwise applicable state and federal law(s) and will not apply if determined by the city to be in violation of, or preempted by, any such law(s). (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.090 Violations. A. Additional Conditions. A violation of any provision of this chapter or this code by any applicant, occupant, responsible person, local contact person, owner, or owner’s authorized agent or representative, shall authorize the city manager, or designee, to impose additional conditions on the use of any given short-term vacation rental unit to ensure that any potential additional violations are avoided. B. Permit Modification, Suspension and Revocation. A violation of any provision of this chapter, this code, California Vehicle Code, or any other applicable federal, state, or local laws or codes, including, but not limited to, applicable fire codes and the building and construction codes as set forth in Title 8 of this code, by any applicant, occupant, responsible person, local contact person, owner, or owner’s authorized agent or representative, shall constitute grounds for modification, suspension and/or revocation (which may include permanent revocation) of the short-term vacation rental permit and/or any affiliated licenses or permits pursuant to the provisions set forth in Section 3.25.100. C. Notice of Violation. The city may issue a notice of violation to any applicant, occupant, responsible person, local contact person, owner, owner’s authorized agent or representative, or hosting platform, pursuant to Section 1.01.300 (or successor provisions, as may be amended from time to time) of this code, if there is any violation of this chapter committed, caused or maintained by any of the above parties. D. Three Strikes Policy. Three violations of any provision of this chapter or this code within one (1) year by any applicant, occupant, responsible person, local contact person, owner, or owner’s authorized agent or representative, with respect to any one residential dwelling will result in an immediate suspension of the short-term vacation rental permit with subsequent ability to have a hearing before the city, pursuant to this chapter, to request a lifting of the suspension. E. Administrative and Misdemeanor Citations. The city may issue an administrative citation to any applicant, occupant, responsible person, local contact person, owner, owner’s authorized agent or representative, or hosting platform, pursuant to Chapter 1.09 (Administrative Citations) (or successor provisions, as may be amended from time to time) of this code, if there is any violation of this chapter committed, caused or maintained by any of the above parties. Nothing in this section shall preclude the city from also issuing an infraction citation upon the occurrence of the same offense on a separate day. An administrative citation may impose a fine for one or more violations of this chapter in the maximum amount allowed by state law or this code in which the latter amount shall be as follows: 25 Ordinance No. XXX Amendments to Chapter 3.25 Short-Term Vacation Rentals Adopted: Month & Date, 2021 Page 16 of 17 1. General STVR Violations (Occupancy/Noise/Parking). a. First violation: one thousand dollars; b. Second violation: two thousand dollars; c.Third violation: three thousand dollars. 2.Operating a STVR Without a Valid Short-Term Vacation Rental Permit. a. First violation: three thousand dollars; b.Second or more violations: five thousand dollars; c.In addition to the fine set forth above, the first violation of operating a STVR without a valid short-term vacation rental permit shall be cause for an owner (or person and/or entity that owns or controls a business or organization or other entity of any kind, such as a limited liability company, which is the owner of a property) to be prohibited for all time from being eligible to be issued a short-term vacation rental permit and/or business license for use of a property as a short-term vacation rental unit. 3. Hosting a Special Event at a STVR Without a Special Event Permit as Required by Section 9.60.170 (or Successor Provision, as May Be Amended From Time to Time) of This Code. a. First violation: five thousand dollars; b. Second violation: five thousand dollars. F. Public Nuisance. In addition to any and all rights and remedies available to the city, it shall be a public nuisance for any person or entity to commit, cause or maintain a violation of this chapter, which shall be subject to the provisions of Section 1.01.250 (Violations public nuisances) (or successor provisions, as may be amended from time to time) of this code. (Ord. 578 § 1, 2019; Ord. 572 § 1, 2018; Ord. 563 § 1, 2017; Ord. 501 § 2, 2012) 3.25.100 Appeals. A. Any person aggrieved by any decision of a city officer made pursuant to this chapter may request a hearing before the city manager in accordance with Chapter 2.08 (or successor provisions, as may be amended from time to time) of this code. B. Notwithstanding any provisions in Section 2.08.230 or otherwise in the code, the decision by the city manager of an appeal brought under this chapter shall be the final decision by the city for any violation of a short-term vacation rental permit issued under this order, except for any administrative citation imposing a fine, which shall be processed and subject to an administrative appeal pursuant to Chapter 1.09 of the code. (Ord. 572 § 1, 2018; Ord. 563 § 1, 2017) 26 Comparison of Regulations  Regulation Ad Hoc Committee Recommendation N4N Recommendation Palm Springs La Quinta ‐ Code update or for Consideration       Density/Overconcentration  (Measured Standard) 300’ radius distance for single family residence; 2 STVR within 300’ radius for condo complex.   Agrees with Ad Hoc Committee recommendation for 300’ radius distance;   None, 1 STVR per owner  None; other considerations to minimize density and frequency or rentals provided in staff report:   limit percentage by zone or area, limit number of days/yr, limit number of STVR per owner, different permit types. Permit Types Two types of permits: 1) Homeshare, 2) STVR Permit Three types of permits: 1) Homeshare 2) STVR Commercial (TC Zone) 3) STVR ‐ Residential Three types of permits: 1)Homeshare, 2) Vacation Rental 3) Estate Home Application (5‐6 bedrooms) Different permit types for consideration: 1) Homeshare, 2) Primary Residence Permit Limited, 3) STVR Permit Limited, 4) STVR Permit No Limit (TC zones) 5) Special Permit for 5 bedrooms or more  Limited rental times Minimum 2 nights stay; Does not apply to Homeshare or STVR located in TC zones Minimum 3 nights stay; phasing in longer min. nightly stay to min 10 nights 18 months after new ordinance adopted; consider min 28 days 36 months after new ordinance adopted.    No min. night stay; Limited rental 32 times/calendar year + 4 rentals times allowed July/Aug/Sept.  Prorated rental times for first year.    Consideration:  limited rental 90 or 120 days/year 5 bedroom or more None.   None Requires Estate Home Application Addendum (5‐6 bedrooms); 7 or more bedrooms not allowed. Consideration:  Special Permit for STVR with 5 bedrooms or more ATTACHMENT 127 Standard Ad Hoc Committee Recommendation N4N REcommendation Palm Springs La Quinta – Code Update or for Consideration Limit on Number of STVR permits per Owner  No recommendation.  None.  One STVR per Owner  No limit. Cap number of STVR permits None.  Cap the maximum number of STVR permits for Homeshares, TC (to be set by Council); STVRs in residential zones not to exceed 3% of homes in zone (freeze issuance of new permits until 3% is achieved).  None  None  Local contact person available Local contact person available at property within 30 minutes None  Local contact person available at property within 30 minutes Code updated:  Local contact person to be available at property within 30 minutes 3 Strikes Rule 2 strikes  None  3 strikes:  City Manager has discretion to suspend permit forever.  Third strike can be appealed and if appeal is in favor, strike is pardoned.   Exec Order 9: 2 strikes, min 30 day suspension Current Code: 3 strikes, immediate suspension and can request appeal hearing. Operating without permit ineligible for permit forever.  Amplified noise Quiet hours shall be between the hours of 10 p.m. and 8 a.m. No amplified noise from 8pm to 8am. None.  No outside amplified music allowed while being rented. Indoor amplified music shall not be heard at the property line.  Exec Order 9 – no outside sound amplification at any time.   Current Ordinance:   no noise amplification from 10pm‐7am. 90 day Noise monitoring pilot program to be implemented   28  City of Palm Springs 3200 E. 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Also removed redundant wording regarding yield maximization. Section IX Authorized Financial Dealers: Added “or designee” to the review of documentation provided by broker/dealers Section IX Authorized Financial Dealers: Removed reference to SSAE 16, as this has been superseded by SSAE 18,and the reports that are issued under the standard are System and Organizational Control (SOC) reports. Section X Permissible Deposits and Investments: Replaced specific amounts noted under Prime Commercial Paper Section with reference to the State Code Commissioner Comments and Discussion 5 6 4/7/2021 4 Financial Advisory Commission Special Meeting 04/07/2021 Business Session Item No. 2 Recommend Outstanding Pension Obligation Funding Options Reviewed and Discussed CalPERS  Actuarial  Reports  Asset  Liability  Management  Cycle Historical  Performance  of CalPERS City Financial  Statements Pension Trust  Assets Accelerated  Payment  Savings Consultant  Analysis  7 8 4/7/2021 5 Findings Summarized • Has the greatest liability and lowest funded ratio The Classic Tier • Currently underway, expected completion 11/2021, changes effective in 7/2022 CalPERS ALM process may increase future unfunded liability payments • If the discount rate decreases the obligation increases • If the discount rate increases the obligation decreases Financial statement pension disclosures include sensitivity analysis  • Balance as of 12/31/2020 is $11,025,029 Pension Trust is fully funded at the target rate CalPERS Amortization Schedules •15‐year and 10‐year savings are  presented  –15‐year amortization saves $2,804,240 –10‐year amortization saves $5,967,437 9 10 4/7/2021 6 CalPERS Pension Outlook Tool •Example of one‐time $1.0 additional payment •Saves $350,000 over just the first five years Present Value Example 11 12 4/7/2021 7 Recommendations •Accelerate payments directly to CalPERS when  fiscally feasible  •Review annually •Retain current balance in pension trust Discussion & Questions 13 14 4/7/2021 8 Financial Advisory Commission Special Meeting 04/07/2021 Departmental Report Item No. 1 Short-Term Vacation Rental Committee (STVR) Recommendations - Update STVR Update •STVR Ad‐Hoc Committee work ongoing for  over a year •Numerous public meetings have been held •Fee study completed by ClearSource Financial •Council has adopted new fees and also passed  an ordinance for a stay on new permits 15 16 4/7/2021 9 Permit Revenue Estimates •Revenue may increase from  $230K to $900K  •New fees are higher, the  unknown is whether this will  affect renewals •Current stay on new permits,  with exceptions for tourist  commercial areas STVR TOT  Revenue •2020/21 number is  projected based on current  activity •2021/22 number is  proposed budget 17 18 4/7/2021 10 Financial Advisory Commission Special Meeting 04/07/2021 Departmental Report Item No. 2 FAC Sub-Committee Update Ad Hoc Committee Fiscal Year Commissioner Commissioner Commissioner Status Police Services Review FY 2020-21 Steven Rosen George Batavick ------ Complete for now. Potential for future collaboration as may be needed by Community Resources. RFP for Actuarial Services FY 2020-21 Corry Hunter Daniel Twohey ------ Completed. Library Interfund Loan Analysis FY 2020-21 John Hoffner W. Richard Mills ------ Completed. SilverRock Event Site Funding FY 2020-21 Steven Rosen Ellen Way W. Richard Mills Completed. Annual Review of Pension Liability FY 2020-21 Twohey Way ------ Completed. Short-Term Vacation Rental Program Fiscal Analysis FY 2020-21 John Hoffner Corry Hunter W. Richard Mills Not required at this time. 2021/22 Operating Budget FY 2020-21 Corry Hunter Steven Rosen ----- One remaining meeting to discuss numbers before first Study Sessions begin. CIP Budget Overview for 2021/22 through 2025/26 FY 2020-21 Hoffner Batavick ----- Completed. 10-year Financial Projections Task Force FY 2020-21 Batavick Way ----- Estimated start work late Summer/early Fall. Long-Range Strategic Planning Task Force FY 2020-21 Rosen Hoffner Mills Commissioner item, no update at this time. 19 20 4/7/2021 11 Financial Advisory Commission Special Meeting 04/07/2021 Commissioner Items: 1. Commissioner standby at City Council Meetings 2. Farewell to Finance Director Karla Romero The Next Regular Quarterly Financial Advisory Commission Meeting will be on May 12, 2021 21 22 4/7/2021 12 23