Loading...
HomeMy WebLinkAbout2023/02/07 Post Agenda Packet REGULAR MEETING OF THE CITY COUNCIL **POST AGENDA** Date:Tuesday, February 7, 2023, 5:00 p.m. Location:Council Chambers, 276 Fourth Avenue, Chula Vista, CA View the Meeting Live in English & Spanish: chulavistaca.gov/councilmeetings Cox channel 24 in English only Welcome to your City Council Meeting PUBLIC COMMENTS: Public comments may be submitted to the City Council in the following ways: In-Person. The community is welcome to make public comments at this City Council meeting. Masks or face coverings are recommended in Council Chambers and all City conference and meeting rooms. • Submit an eComment: Visit www.chulavistaca.gov/councilmeetings, locate the meeting and click the comment bubble icon. Select the item and click "Leave Comment." eComments can be submitted until the conclusion of public comments for the item and are viewable online upon submittal. If you have difficulty submitting eComments, email comments to: cityclerk@chulavistaca.gov. • HOW TO WATCH: Live stream is available at www.chulavistaca.gov/councilmeetings. To switch the video to Spanish, please click on "ES" in the bottom right hand corner. Meetings are available anytime on the City's website (English and Spanish). ACCESSIBILITY: Individuals with disabilities or special needs are invited to request modifications or accommodations to access and/or participate in a City meeting by contacting the City Clerk’s Office at cityclerk@chulavistaca.gov or (619) 691-5041 (California Relay Service is available for the hearing impaired by dialing 711) at least forty-eight hours in advance of the meeting. SPEAKER TIME LIMITS: The time allotted for speakers may be adjusted by the Mayor. - Five minutes* for specific items listed on the agenda - Three minutes* for items NOT on the agenda (called to speak during Public Comments) - A group of individuals may select a spokesperson to speak on their behalf on an agenda item, waiving their option to speak individually on the same item. Generally, five minutes are allotted per person, up to a limit of 30 minutes, although the limits may be adjusted. Members of the group must be present. *Individuals who use a translator will be allotted twice the amount of time. GETTING TO KNOW YOUR AGENDA Agenda Sections: CONSENT CALENDAR items are routine items that are not expected to prompt discussion. All items are considered for approval at the same time with one vote. Councilmembers and staff may request items be removed and members of the public may submit a speaker slip if they wish to comment on an item. Items removed from the Consent Calendar are discussed after the vote on the remaining Consent Calendar items. PUBLIC COMMENT provides the public with an opportunity to address the Council on any matter not listed on the agenda that is within the jurisdiction of the Council. In compliance with the Brown Act, the Council cannot take action on matters not listed on the agenda. PUBLIC HEARINGS are held on matters specifically required by law. The Mayor asks for presentations from staff and from the proponent or applicant involved (if applicable) in the matter under discussion. Following questions from the Councilmembers, the Mayor opens the public hearing and asks for public comments. The hearing is closed, and the City Council may discuss and take action. ACTION ITEMS are items that are expected to cause discussion and/or action by the Council but do not legally require a Public Hearing. Staff may make a presentation and Councilmembers may ask questions of staff and the involved parties before the Mayor invites the public to provide input. CLOSED SESSION may only be attended by members of the Council, support staff, and/or legal counsel. The most common purpose of a Closed Session is to avoid revealing confidential information that may prejudice the legal or negotiating position of the City or compromise the privacy interests of employees. Closed sessions may be held only as specifically authorized by law. Council Actions: RESOLUTIONS are formal expressions of opinion or intention of the Council and are usually effective immediately. ORDINANCES are laws adopted by the Council. Ordinances usually amend, repeal or supplement the Municipal Code; provide zoning specifications; or appropriate money for specific purposes. Most ordinances require two hearings: an introductory hearing, generally followed by a second hearing at the next regular meeting. Most ordinances go into effect 30 days after the final approval. PROCLAMATIONS are issued by the City to honor significant achievements by community members, highlight an event, promote awareness of community issues, and recognize City employees. City of Chula Vista City Council February 7, 2023 Post Agenda Page 2 of 222 Pages 1.CALL TO ORDER 2.ROLL CALL 3.PLEDGE OF ALLEGIANCE TO THE FLAG AND MOMENT OF SILENCE 4.PUBLIC COMMENTS 5 The public may address the Council on any matter within the jurisdiction of the Council but not on the agenda. 5.WORKSHOP The following item(s) typically consist of presentations and deliberation of a longer duration than other items on the agenda. Unless otherwise noticed on this agenda, action is limited to referring matters to staff. 5.1 Presentation and Discussion on the Justice, Equity, Diversity, and Inclusion Initiative 18 Department: City Manager Environmental Notice: The activity is not a "Project" as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. RECOMMENDED ACTION: Hear a presentation on the Justice, Equity, Diversity, and Inclusion initiative. 5.2 Presentation and Discussion on the City Budget and Long-Term Financial Plan 32 Department: Finance Environmental Notice: The activity is not a "Project" as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. RECOMMENDED ACTION: Hear presentations from staff on the following: A) An introduction to the City’s budget B) Fiscal Year 2024-33 Long-Term Financial Plan City of Chula Vista City Council February 7, 2023 Post Agenda Page 3 of 222 6.ADJOURNMENT to the regular City Council meeting on February 14, 2023, at 5:00 p.m. in the Council Chambers. Materials provided to the City Council related to an open session item on this agenda are available for public review, please contact the Office of the City Clerk at cityclerk@chulavistaca.gov or (619) 691-5041. Sign up at www.chulavistaca.gov to receive email notifications when City Council agendas are published online. City of Chula Vista City Council February 7, 2023 Post Agenda Page 4 of 222 From: webmaster@chulavistaca.gov <webmaster@chulavistaca.gov> Sent: Friday, January 27, 2023 12:32 PM To: Communications <communications@chulavistaca.gov> Subject: Communications Contact Us - Web Notification A new entry to a form/survey has been submitted. Form Name: Communications Date & Time: 01/27/2023 12:32 PM Response #: 301 Submitter ID: 107147 IP address: 2600:8801:a800:a000:68ae:4f3b:4e65:fe59 Time to complete: 11 min. , 22 sec. Survey Details Page 1 Please feel free to contact us with any comments or questions by filling out the form below. First Name Susan Last Name Faucher Email Address Comments I am disgusted with the possibility of SDANDAG imposing a milage tax on San Diago residents. Is this even leagle?? Shouldn't the voters have a say? Something like this should be put on the ballet. We have already paid for infostructure that never gets done. We certainly don't need more public transportation. All our buses run empty now. Please do not allow this milage tax happen. Thank you, City of Chula Vista This is an automated message generated by Granicus. Please do not reply directly to this email. Warning: External Email Public Comments Faucher - Received 1/30/2023 Page 5 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Additional Information Item # .6C —i Q 00 CHULA VISTA, CA 91910 le-hone City Councilman Jose Preciado February 6, 2023 Thank you your response to my E-mail. Hoping, to update the Chula Vista City Council at tomorrow's meeting (02/07/23) regarding the devastating side effects of Chapter 9.65 of the Chula Vista Municipal Code Ordinance 3527 (commonly known as the "Residential Tenant Protection Act"). There are several clauses within this ordinance which are harmful to Chula Vista renters. I have previously E-mailed all the necessary documentation with a summary of the two most egregious sections of this act. I drew on my fifty years experience as a Chula Vista residential landlord studying this ordinance in great detail. Additionally I have consulted with several real estate professionals of whom I trust and have known for over 35 years. If you doubt the accuracy of my conclusions, please feel free to contact; Jon Miller Reality. 283 "G" St. CV 91910. Personel Cell: Earl Jentz of Balboa Reality 659 Third Ave CV 91910. Personel Cell: Page 1 of 5 Page 6 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Barry L St. Onge of Allstate Insurance 651 Third Ave CV 91910. Initially Jon Miller was unconcerned. Basically he felt that this ordinance would never pass because of its numerous flawed clauses. Earl Jentz, on the other hand, was pessimistic from the beginning. He felt the "Residential Tenant Protection Act" was Mayor Salas's "Baby" and she was determined to push it thru before the end of her term no matter how many people where harmed. Barry L St. Onge, who has been our insurance agent for over 35 years, avoided the political aspects of this ordinance. Since last Autumn, he has simply been advising all his clients to liquidate their Chula Vista residential real estate holdings. Mr St. Onge is certain that, because of this ordinance, it is way too risky being a Chula Vista residential Landlord. I hope I have not breached the confidence by sharing the opinions of these professionals. However, with the fast approaching implementation of this ordinance, and the harmful side effects soon to be experienced by all Chula Vista renters, I felt it was worth taking a chance sharing this info. On a personnel note; Here is how this ordinance effects a couple of tenants I have the privilege of serving. Tony (his real name) has made a home in one of our 1 bedroom 1 bathroom units. Since we have purchased the property many years ago and because I am pretty handy doing most of the maintenance myself, Tony can live in our beautiful community for $1,000 a month. He loves the place. Page 2 of 5 Page 7 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Pam, a Grandmother living on SSAN, has been a wonderful tenant for over eleven years. This past Spring I transformed her 1960's era two bedroom two bathroom condo into a beautiful modern home. Although the rent for identical units in the complex ranges from $2,600 to $2,800, we managed keep her rent at $2,200. Because of this ordinance, all has changed. Mary and I are now forced to raise rents more than we have ever feared was possible. Now all Chula Vista Landlords will be prohibited from charging reasonable rents. As stated many times before, here are just two reasons why. Although most of our tenants are long time residents, sooner or later a tenant will move for what ever reason (Job transfer Etc). Clause 9.65.060E States if a tenant terminates their lease and moves away, "fawners and Tenants shall provide City with information regarding termination of Tenancies at such times) and with such details as shall be required by city in the attendant Administration Regulations." Additionally, if a tenant or landlord makes a procedural error informing City Staff of the details of the move, Clause 9.65.08OC2 States: "Civil penalties for violations of this chapter may be assessed at a rate not to exceed $ 5,000 per violation per day. When a violation occurs it is not required that a warning or notice to cure must first be given before an administrative citation or civil penalty may be issued " Mage 3 of 5 Page 8 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Effective March 1, 2023, not only will Landlords be subject to $5,000.00 daily fines for simple paperwork errors but may also be prohibited from correcting those errors. Using as the example of our previously mentioned tenants and with rent increases capped at 10%, Tony will have to pay an additional $100.00 a month for fifty months in order for Mary and I to simply impound the $5,000.00 required to pay a mere one day fine which is soon to follow. We have also been forced to increase Pam' monthly rent by $220.00. ALL BECAUSE OF SIMPLE POTENTIAL PAPERWORK ERRORS! I have talked to numerous City Staff Members. Staffers insist that it is not their intention to dispense fines for mistakes. However, considering substantial fines can be levied for simple paperwork errors, prudent Landlords will not rely on the "Hope" they will not face fines. A prudent Landlord must be prepared by raising rents. I also have had conversations with the City Attorney who was instrumental in creating this ordinance. She insisted it would be very difficult exempting people from fines for simple errors because "How would one decide who made an error or who purposely ignored the law?" I believe the vast majority Landlords are decent honest people. This whole problem has a common sense solution by replacing "it is not required that a warning or notice to cure must first be given" with the following clause: "upon Page 4 of 5 Page 9 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda notification, Landlords and/or Tenants have 30 days to cure any violation to this ordinance." I could share additional clauses which are detrimental to our community. In the interest of brevity Clauses 9.65.08002 and 9.65.060E are the most egregious. This Ordinance passed last year with 3 council members voting in favor and 1 (Jill Gavez) voting no. Of the 3 who voted in favor, all stated in one form or another: "Although this Ordinance is not perfect,...'' If you check, you will realize all council members had some reservations with this ordinance. It is time to correct the clauses which diversely affects Chula Vista renters. Our City Attorney has advised Mayor McCann to recuse himself in this matter. I am pleading with you to take the lead and encourage our City Council to show compassion for the most vulnerable of our society by placing this item on the Council's agenda and passing the following motion: Implementation of ORDINANCE NO. 3527 (`Residential Tenant Protection Act") to be delayed to give staff sufficient time modify clauses which adversely affects renters and insert language giving "the right to cure" to those who are in violation because of an inadvertent mistake." Thank You Page 5 of 5 Page 10 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Additionjil Information Item # CHULA VISTA, CA 91910 C' ria adoorian February 7, 2023 Regarding the negative side effects of the Chapter 9.65 of the Chula Vista Municipal Code Ordinance 3527 (commonly known as the "Residential Tenant Protection Act") which goes into effect 03/01/23, I had an informal conversation with Chula Vista's City attorney (Glenn Googins) during a break at the 01/17/23 council meeting. He advised me of the proper procedure for getting a motion presented and passed by the City Council. Basically he said to "state my case" and have one individual on the council request another two members of the council to place the matter on the Council Agenda. I will follow Mr. Googins advice. Although I will continue to inform the entire council of my concerns by presenting the facts as I see them, I request Council Member Jose Preciadoto be the individual to move forward with this matter. As you probably are aware, I have been a conscientious Chula Vista landlord for over fifty years and have always been concerned with the welfare of our community's renters. Although, I am sure our previous City Council meant well, there are serious negative side effects of this ordinance, some of which I will outline below. Page 1 of 7 Page 11 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Although the ordinance purports to protect Tenants, there are clauses that punish tenants with $5,000.00 fines for infractions as minor as simple paperwork errors. Additionally, Tenants may be prohibited from correcting inadvertent errors. See Clause 9.65.08002 and Clause 9.65.060E below. Clause 9.65.080C2 States: "Civil penalties for violations of this chapter may be assessed at a rate not to exceed $ 5,000 per violation per day. When a violation occurs it is not required that a warning or notice to cure must first be given before an administrative citation or civil penalty may be issued." Clause 9.65.060E States if a tenant terminates their lease and moves away, "Owners and Tenants shall provide Cityy with information regarding termination of Tenancies at such tirne(s) and with such details as shall be required by city in the attendant Administration Regulations." The confusing verbiage of Clause 9.65.060E above virtually guarantees departing Tenant and Landlord will be in violation and subject to a $5,000.00 daily fine as stated in Clause 9.65.08002. Additionally, language allows $5,000.00 daily fines to be compounded to the point where an individual's entire life's savings may be confiscated. All because of a simple paper error! I have talked to numerous City Staff Members. Staffers insist that it is not their intention to dispense fines for mistakes. Page 2 of 7 Page 12 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Considering substantial fines can be levied for simple paperwork errors, prudent Landlords will not rely on the "Hope" they will not face fines. A prudent Landlord must be prepared by raising rents an average of $304.70 in order to fund potential fines (See documentation #6 & 8 below). Such an increase will force hundreds of our neighbors out of their homes exasperating an already serious homeless problem (see documentation #4, 8, 10, & 11 below). If staff was sincere in their intent to aid tenants, they would have replaced the clause "it is not required that a warning or notice to cure must first be given'' with the following clause: Upon notification, Landlords andfor Tenants have 30 days to cure any violation to this ordinance. " The fact that staff refuses to give an opportunity to correct simple paperwork errors leads many to believe staff places a higher priority on increasing city revenue as opposed to actually assisting tenants. What our previous City Council failed to realize is that many of our rental neighbors are barely hanging on financially. Those who passed this law did not take into account... The average monthly Chula Vista rent now tops *$3,047.00 U.S. Dept of Housing & Urban Development April 2022) ... 42%^ Percentage of CV housing units are rentals. (Data compiled by City Staff} ... Of these households 46% pay more than 50% of their income towards housing costs. (",Data compiled by City Staff). Page 3 of 7 Page 13 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda I am a 12 year CAST (Community Assistance Support Team) Volunteer attached to the Chula Vista Fire Department. CAST members, who are on call 24 hours a day seven days a week, are dispatched by the CVPD to assist members of our community who's loved one has passed away. I have witnessed first hand how the financial bottom rung of our society lives. I feel in my gut the implementation of this ordinance, as written, will absolutely devastate a portion of our community which has already endured all the hardships society can present. I could share additional clauses which are detrimental to our community. In the interest of brevity Clauses 9.65.08002 and 9.65.060E are the most egregious. I am pleading with you to encourage our City Council to show compassion for the most vulnerable of our society by placing this item on the Council's agenda and passing the following motion: Implementation of ORDINANCE NO. 3527 ("Residential Tenant Protection Act") to be delayed to give staff sufficient time modify clauses which adversely affects renters and insert language giving "the right to cure" to those who are in violation because of an inadvertent mistake." Thank You f0601, 79 qlwo Rage 4 of 7 Page 14 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Documentation of the above information: 1) Chula Vista Population: 283,972 Chula lista - U.S. Census Bureau QuickFacts) 2) Average number of individuals in each household: 3.31 Chula Usta - US Census Bureau QuickFacts) 3) Percentage Chula Vista housing which are rentals. 42% Data compiled by City Staff) 4) Number of Chula Vista Rental Units: 36,033 Population of Chula Vista (283, 072) divided by the average number ofpeople residing in each Residence 3.31) equals 85,792 multiplied the percentage of residences which are rentals (42%) equals the approximate number of Chula Lista rental units. (36, 033) 5) Approximate number of Chula Vista renters: 119,268 CV Population 283,9 72 x . 42%) 6) Approximate Average Monthly Chula Vista Rent: $3,047.00 See attached CT Staffprovided "Relocation Assistance" Pic - Average of Line 2nd from bottom) 7) With no right to cure, amount of daily fine levied if Landlord or Tenant inadvertently makes a paperwork error when Tenant terminates lease and moves: $5,000.00 Clauses 9.65.060 E and 9.65.080 C2 of "Residential Landlord and Tenant Ordinance " ) Page 5 of 7 Page 15 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 8) Maxim average monthly rent increase allowed .. $304.70 3047.00 x 10%. California AB -1482 5% plus inflation Max 10%) 9) Average number of months required for Landlord to recoup a one day fine: 16.41 5000.00 divided by $304.70) 10) Approximate total monthly maximum rent increase levied on Chula Vista Renters if Landlords are forced to impound funds to the pay daily fines.. $10,979,255.00 36,033 Rental Units multiplied by $304.70) 11) With rents at an all time high, Credit Card debt at historic levels, and savings at an all time love, pushing a $10,979,255.00 monthly rent increase on the Chula Vista residents who can least afford will be devastating. If less than one half of one percent of Chula Vista renters are "Pushed Over The Edge"and are forced to live on the streets, almost 600 of our neighbors will be left homeless. (119, 268 times . 005 equals 594) Page 6of7 Page 16 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda U.S. Department of Ilousing and Urban Developme ntSniallAreaFairMarketRent (April 2022) Efficienc 1 2 3 Y Bedroom Bedroom Bedroom 4 Bedroom 1,850 2,040 2,620 53,640 4,450 1,430 1,580 2,030 2,820 3,450 1,440 1.600 2.050552,,.8,0 3;490 itAWs0c 2,110 2,340 3,000 4,170 S5,1003 53--40 2,360 2,610 53,350SAOOO54,650 55,700 f s 2,360 2,610 3,350 55.70p Sam 5,,sn0 51,925 2,130 2,733 3,74? 54,548 4 SLOW T 1628_ so Exhibit 2 Comparison of Survey Data vs. SAFMR C- ro rh— ..5._..- ss.+eir •Sa w— Page 7 of 7 Page 17 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda RFP P10-22/23 Justice, Equity, Diversity & Inclusion Action Plan February 7, 2023City of Chula Vista | Office of the City Manager Page 18 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Today's Presentation Justice, Equity, Diversity & Inclusion Strategic Action Plan Equity & Inclusion Efforts Our Why Goals & Scope of Work February 7, 2023City of Chula Vista | Office of the City Manager RFP Process & Selected Consultant City Council Workshop Next Steps Page 19 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Chula Vista February 7, 2023City of Chula Vista | Office of the City Manager Certified Welcoming City Adopted Digital Equity and Inclusion Plan Developed Climate Equity Index Veteran's Park inclusive playspace Additional efforts (e.g., inclusive economic development work with Harvard Bloomberg and elimination of library fines) ARPA Spending Plan allocated funds for this effort Examples of Our Equity & Inclusion Efforts Page 20 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Our Why Foster an inclusive workforce to create an environment where all employees are welcomed and comfortable in who they uniquely are Leads to better collaboration, engagement, morale, diverse perspectives for improved outcomes, increased productivity resulting in better service to the community and all customers working with the City Internal: Operational External: Community-serving Understand the diverse needs and perspectives of all members of our community so that we are better able to serve them, leading to better relationships/trust and improved quality of life Inequities are addressed and responded to in order to improve outcomes and quality of life for underrepresented populations February 7, 2023City of Chula Vista | Office of the City Manager Page 21 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Our Why Budgeting and resource allocation Communication and civic engagement Digital equity and inclusion Education Employment Health Housing and land use Inclusive economic development Internal practices Mobility and transportation Public safety Racial and social justice Sustainability and environmental justice February 7, 2023City of Chula Vista | Office of the City Manager Page 22 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Short Term Goals Baseline report Cultural Assessment Structural Assessment Community outreach Develop an internal JEDI Guidance Council Collaborate to create a statement of intent and unifying definitions Identification of appropriate metrics & KPIs Develop a five-year JEDI Action Plan February 7, 2023City of Chula Vista | Office of the City Manager Page 23 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Long Term Goals Organization-wide commitment to sustain the JEDI strategy Develop a sustainable training strategy Implementation of training strategies Long term monitoring and evaluation measures February 7, 2023City of Chula Vista | Office of the City Manager Page 24 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda RFP Process CVMC Section 2.56.110 R F P a d v e r t i s e d o n P l a n e t B i d s F E B R U A R Y 2 1 , 2 0 2 2 M a n d a t o r y p r e - s u b m i t t a l c o n f e r e n c e S u b m i t t a l d e a d l i n e I n t e r v i e w s N o t i c e o f i n t e n t t o a w a r d C i t y C o u n c i l a w a r d M A R C H 1 4 , 2 0 2 2 M A R C H 2 1 , 2 0 2 2 M A Y 3 1 , 2 0 2 2 J U N E 2 2 , 2 0 2 2 J U L Y 1 9 , 2 0 2 2 February 7, 2023City of Chula Vista | Office of the City Manager Page 25 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Selected Consultant Tribesy is a women-owned general partnership firm with Reena Doyle and Gail Watts as co-founders and the firm’s primary consultants. 30 years experience in diversity, equity and inclusion working for city governments and nonprofits Tribesy has impacted 20 million people through their work with government agencies, the education industry and nonprofits February 7, 2023City of Chula Vista | Office of the City Manager Page 26 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Scope of Work 1 Organizational Assessment 2 Community & External Stakeholder Assessment 3 Training & Coaching 4 Analyze Policies & Systems 5 Strategic Action Plan Key Deliverables February 7, 2023City of Chula Vista | Office of the City Manager Page 27 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Scope of Work 1 Foundation Assessment Phase 2 Foundation Development Phase: Roadmap Creation 3 Foundation Development Phase: JEDI Lens Implementation 4 Ongoing Implementation Phase: Bridge and Align OPTIONAL August 2022 - March 2023 April 2023 - August 2023 Project Phases September 2023 - February 2024 February 2024 - February 2025 February 7, 2023City of Chula Vista | Office of the City Manager Page 28 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Next Steps Cultural Assessment Structural Assessment Additional Community Outreach 1:1s with new Councilmembers JEDI Guidance Council February 7, 2023City of Chula Vista | Office of the City Manager Page 29 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Developing the City of Chula Vista JEDI Lens Soliciting input from colleagues Various JEDI presentations to key stakeholders Developing the City of Chula Vista's Strategic Plan February 7, 2023City of Chula Vista | Office of the City Manager JEDI Guidance Council Page 30 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Questions? Thank you! February 7, 2023City of Chula Vista | Office of the City Manager Page 31 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 32 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda City of Chula Vista Introduction to the the Budget Table of Contents City of Chula Vista Charter - Article X Fiscal Administration 3 City of Chula Vista Charter – Section 505 Director of Finance 9 City of Chula Vista Municipal Code – Chapter 256 Purchasing System 13 City of Chula Vista Purchasing Procedures 33 City Council Policy 159-04 Fund Balance Policy for Governmental Funds 35 City Council Policy 220-01 Investment Policy and Guidelines 39 City Council Policy 220-02 Financial Reporting and Transfer Authority 59 City Council Policy 220-03 General Fund Reserves 63 City Council Policy 220-04 Sewer Service Revenue Fund Reserve Policy 69 City Council Policy 220-05 City Debt Policy 73 City Council Policy 220-06 Interfund Loan Policy 85 City Council Policy 220-09 Pension & OPEB Reserve Fund Policy 89 City Council Policy 220-10 Measure A Reserve Fund Policy 93 Finance Department Policy 100-01 General Financial Policies 97 Page 33 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 34 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA CITY CHARTER  ARTICLE X FISCAL ADMINISTRATION                      Page 35 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda ARTICLE X. FISCAL ADMINISTRATION Sec. 1000. Fiscal Year. The fiscal year of the City shall begin on the first day of July each year and end on the thirtieth day of June of the following year. Sec. 1001. Annual Budget Preparation by the City Manager. The City Manager shall set a date for obtaining from each department head or other responsible City Officer estimates of revenues and expenditures for their department or office for the upcoming fiscal year in such form the City Manager prescribes. In preparing the proposed budget, the City Manager shall review the estimates and confer with the party submitting such estimates and revise such estimates as the City Manager deems appropriate. Sec. 1002. Budget Submission to the City Council. At least thirty-five days prior to the beginning of each fiscal year, the City Manager shall submit the City Manager’s proposed budget to the City Council. After reviewing same and making such revisions as it may deem advisable, the City Council shall (1) conditionally approve such budget as the City Council’s proposed budget, (2) set a public hearing no sooner than ten days thereafter at which the City Council shall hear and consider all public testimony and be authorized then to take final action to approve a final City budget, and (3) direct that copies of the proposed budget be made available for inspection by the public in the office of the City Clerk at least ten days prior to said hearing. Sec. 1003. Public Hearing on the City Council’s Proposed Budget. At the properly noticed time and date for the public hearing, or at any time to which such public hearing shall be continued, the City Council shall hold a public hearing on the proposed budget and consider all public testimony presented. Sec. 1004. Final Budget Consideration and Adoption. After the conclusion of the public hearing the City Council shall (1) further consider the proposed budget, (2) make any revisions thereto they may deem advisable based on any new information, considerations, or testimony Art. X Fiscal Administration | Charter of the City of Chula Vista Page 1 of 5 Latest amendments were approved by the electorate on November 8, 2022. Page 36 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda presented, and (3) adopt the budget with revisions, if any, by the affirmative votes of at least three members. City Council action to approve the budget must be taken by no later than June 30. Upon final adoption, the budget shall be in effect for the ensuing fiscal year. A copy thereof, certified by the City Clerk, shall be placed and shall remain on file in the Office of the City Clerk where it shall be available for inspection. The budget so certified shall be reproduced and copies made available for the use of departments, offices, and agencies of the City. Sec. 1005. Budget Appropriations; Amendment. From the effective date of the budget, the several amounts stated therein as proposed expenditures shall be and become appropriated to the several departments, offices, and agencies for the respective objects and purposes therein named. All appropriations shall lapse at the end of the fiscal year to the extent that they shall not have been expended or lawfully encumbered except appropriations for specific capital projects incomplete at the end of the fiscal year. At any meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by an affirmative four-fifths vote. Sec. 1006. Taxes. (A) Limits. The tax limit for any ad valorem tax on real property shall be as prescribed by Article XIIIA of the Constitution of the State. (B) Procedures. To the extent permitted by the State Constitution, the procedure for the assessment, levy and collection of taxes upon property, taxable for municipal purposes may be prescribed by ordinance of the City Council. Sec. 1008. Bonded Debt Limitations. (A) Assessed Valuation Limits. The City shall not incur an indebtedness evidenced by general obligation bonds which shall in the aggregate exceed the sum of 15% of the total assessed valuation, for the purposes of City taxation, of all the real and personal property within the City. (B) Voting Requirements. No bonded indebtedness which shall constitute a general obligation of the City may be created unless authorized by the affirmative votes of two-thirds of the electors voting on such proposition at any election at which the question is submitted to the electors and unless in full compliance with the provisions of the State Constitution and of this Charter. No bonds payable out of any revenues of the City or of any department thereof, shall be issued without assent of a majority of the voters voting upon the proposition of issuing the same, at an election at which such propositions shall have been duly submitted to the qualified electors of the City, except to the extent State law provides otherwise for general law cities. (C) Special Rules for Public Utilities and Industrial or Commercial Facilities. The City may issue bonds, notes or other obligations, any portions of the proceeds of which will be used to finance in whole or in part the acquisition, construction, equipping or improvement of any public utility, industrial or commercial facility and which will be Art. X Fiscal Administration | Charter of the City of Chula Vista Page 2 of 5 Latest amendments were approved by the electorate on November 8, 2022. Page 37 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda payable in whole or in part out of any revenues derived from the operation of such public utility system or payments received from such industrial or commercial facility without the assent of the voters provided that neither the faith and credit of the City or any department thereof nor the taxing power of the City is pledged to the payment of principal or interest of such bonds, notes or other obligations. (D) Other Limitations. All other limitations, terms and procedures for the City’s issuance of debt shall be governed by State law applicable to Charter cities and/or to the extent allowed by State law or City ordinance. Sec. 1009. Contracts on Public Works. When the City contracts for the construction, reconstruction, improvement or repair (excluding routine maintenance) of public buildings, streets, drains, sewers, utilities, parks, playgrounds and similar public facilities (each a “Public Work” and collectively, “Public Works”), the furnishing of labor, supplies, materials, equipment or other contractual services for same shall be done by written contract approved as to form and legality by the City Attorney. The City Council shall, by ordinance, adopt specific policies and procedures for the award of Public Works contracts. This ordinance must contain provision for the following: (A) City Council reservation of authority to approve what it defines as “major” contracts or “special” contracts, based on factors such as contract cost, value or other relevant factors; (B) competitive bid processes for all contracts, with formal advertisement for bids and sealed bids required for all “major” contracts; (C) the award of contracts to the lowest responsive and responsible bidder; (D) the ability to reject any and all bids, to re-advertise for bids, or to waive minor defects in any bid, where determined by the designated contract-approving authority that such action is necessary or appropriate for the benefit of the public; (E) emergency authority to waive the applicable competitive bid process requirements if the City Manager determines that the work required is of urgent necessity for the preservation of life, health or property; and (F) such other provisions consistent with this section as may be necessary or appropriate to implement a Public Works procurement process that is consistent with best practices. The ordinance may also provide for one or more exceptions to the approval and competitive bid processes described in (A) through (C), above, provided that any such exception is implemented as part of a City-wide policy or program that has been approved and determined to be in the best overall interests of the City by a four-fifths vote of the City Council. Notwithstanding any provisions of this Charter to the contrary, the City may employ a design-build process for the construction, reconstruction or repair of public works. A “design-build process” shall mean a process in which the design and construction of a project are procured from a single entity. Prior to employing the design-build Art. X Fiscal Administration | Charter of the City of Chula Vista Page 3 of 5 Latest amendments were approved by the electorate on November 8, 2022. Page 38 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda process, the City shall establish, by ordinance, specific procedures and standards to be used to solicit, qualify, evaluate and select design-build proposals by competitive bid or negotiation process. Sec. 1010. Procurement System and Competitive Bidding for Non-Public Works. The following provisions shall apply with respect to the procurement of non-public works: (A) A purchasing system shall be established for the purchase, lease or other acquisition of all property, supplies, materials or equipment required by all City departments, offices and agencies. (B) The City Manager shall recommend and the City Council shall consider and adopt, by ordinance, rules and regulations governing the purchase, lease or other acquisition of all such property, supplies, materials and equipment. (C) The ordinance described in Charter Section 1010(B), shall include provisions for competitive bidding. It shall also include such other provisions as may be necessary or appropriate to implement a procurement process that is consistent with best practices. The ordinance may also provide for one or more exceptions to the competitive bidding procedures, provided that any such exception is implemented as part of a City-wide policy or program that has been approved and determined to be in the best overall interests of the City by a four-fifths vote of the City Council. Sec. 1011. Property Storage, Distribution, Inventory and Disposition. The City Manager shall establish a system for the storage, distribution and inventory of all City property. The City Manager shall also prepare and recommend for City Council approval policies and procedures for the disposition of surplus City property. Sec. 1012. Independent Audit. The City Council shall employ, at the beginning of each fiscal year, a qualified accountant who, at such time or times as may be specified by the City Council, shall examine the books, records, inventories and reports of all Officers and employees who receive, handle or disburse public funds and all such other Officers, employees, or departments as the City Council may direct. As soon as practicable after the end of the fiscal year, a final audit and report shall be presented to the City Council at a public meeting and a copy shall be made available to each City Council member, to the City Manager, Director of Finance and City Attorney, respectively. One additional copy shall be placed on file in the office of the City Clerk where it shall be available for inspection by the general public. Art. X Fiscal Administration | Charter of the City of Chula Vista Page 4 of 5 Latest amendments were approved by the electorate on November 8, 2022. Page 39 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Latest amendments were approved by the electorate on November 8, 2022. Recommended by Charter Committee 1949. Approved by a special election, November 8, 1949, with a vote of 2068 YES to 1101 NO, presented to the House by Assemblyman Ralph R. Cloyed and to the Senate by Senator Fred H. Kraft. Ratified by the Legislature of the State of California on December 15, 1949. City Website: www.chulavistaca.gov Code Publishing Company Art. X Fiscal Administration | Charter of the City of Chula Vista Page 5 of 5 Latest amendments were approved by the electorate on November 8, 2022. Page 40 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA CITY CHARTER  SECTION 505 DIRECTOR OF FINANCE                      Page 41 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Sec. 505. Director of Finance; Powers and Duties. There shall be a Finance Department headed by a Director of Finance, who shall have power and be required to: (A) administer the financial affairs of the City under the direction of the City Manager; (B) compile the budget expense and income estimates for the City Manager; (C) supervise and be responsible for the disbursement of all monies and have control over all expenditures to ensure that budget appropriations are not exceeded; review all purchase orders before issuance; review and approve before payment all bills, invoices, payrolls, or demands against the City government and with the advice of the City Attorney, when necessary, determine the regularity, legality and correctness of such claims, demands or charges; (D) maintain a general accounting system for the City government and each of its offices, departments and agencies; (E) keep separate accounts for the items of appropriation contained in the City budget, each of which accounts shall show the amount of the appropriation, the amounts paid therefrom, the unpaid obligations against it and the unencumbered balance; require reports of the receipts and disbursements from each receiving and expending agency of the City government to be made daily or at such intervals as deemed appropriate; (F) submit to the City Council, through the City Manager, a quarterly statement of all receipts and disbursements in sufficient detail to show the exact financial condition of the City; as of the end of each fiscal year and within 120 days thereafter, submit to the City Council a summary statement of receipts and disbursements by departments and funds, including opening and closing fund balances in the treasury, and cause said statement to be made available for inspection by the public; (G) collect all taxes, assessments, license fees and other revenues of the City, or for whose collection the City is responsible, and receive all taxes or other money receivable by the City from the County, State or federal government; or from any court or from any office, department or agency of the City; (H) have custody of all public funds belonging to or under the control of the City or any office, department or agency of the City government and deposit all funds in such depository as may be designated by resolution of the City Council, or if no such resolution be adopted, by the City Manager, and in compliance with all the provisions of the State Constitution and the laws of the State governing the handling, depositing and securing of public funds; and (I) supervise the keeping of current inventories of all personal property of the City by all City departments, offices and agencies. Sec. 505 Director of Finance; Powers and Duties | Charter of the City of Chula Vista Page 1 of 2 Latest amendments were approved by the electorate on November 8, 2022. Page 42 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Latest amendments were approved by the electorate on November 8, 2022. Recommended by Charter Committee 1949. Approved by a special election, November 8, 1949, with a vote of 2068 YES to 1101 NO, presented to the House by Assemblyman Ralph R. Cloyed and to the Senate by Senator Fred H. Kraft. Ratified by the Legislature of the State of California on December 15, 1949. City Website: www.chulavistaca.gov Code Publishing Company Sec. 505 Director of Finance; Powers and Duties | Charter of the City of Chula Vista Page 2 of 2 Latest amendments were approved by the electorate on November 8, 2022. Page 43 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 44 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA MUNICIPAL CODE  CHAPTER 2.56 PURCHASING SYSTEM                      Page 45 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.010 2.56.020 2.56.030 2.56.040 2.56.050 2.56.060 2.56.070 2.56.080 2.56.090 2.56.100 2.56.110 2.56.120 2.56.130 2.56.135 2.56.140 2.56.145 2.56.150 2.56.160 2.56.170 Chapter 2.56 PURCHASING SYSTEM* Sections: Centralized purchasing system established. Purchasing Agent – Appointment – Powers, duties, and authority. Option to delegate authority for purchases of supplies and equipment. Requisitions or estimates – Required revisory changes permitted. Required contract forms – City Attorney. Budget, availability of funds required. Contracts for supplies, equipment, or services exceeding $100,000 – Formal competitive bid procedure. Contracts for supplies, equipment, or services exceeding $100,000 – Competitive bidding process – City Council or City Manager approval required. Contracts for supplies, equipment, or services of $100,000 or less – Open market procedure and Purchasing Agent approval required. Emergency purchases. Professional services exception – Selection process for architectural, engineering, environmental, land surveying, legal, construction project management, and other professional services. Supplies, materials, and equipment no longer used – Disposition procedure. Sale of real property – Procedure. Acquisition of real property interests. Cooperative purchasing agreements. Job order contracts. Reports to City Council. Contracts on public works. Automatic indexed adjustments. *For Charter provisions for centralized purchasing by the City, see § 1010; for Charter provisions regarding City finances generally, see Charter §§ 1000 – 1017; for statutory provisions regarding financial powers of cities generally, see Gov. Code § 37201, et seq. Cross Reference: Lost or Stolen Property, see Ch. 2.60 CVMC. Prior legislation: Prior code §§ 2.501 – 2.516; Ords. 1197, 1821, 1891, 1977, 2310, 2369 and 2517. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 1 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 46 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.010 Centralized purchasing system established. Pursuant to Section 1010 of the City Charter, there is established a centralized purchasing system for City departments, offices, and agencies, in order to (1) establish procedures for the purchase, lease or other acquisition of services, supplies and equipment, at the lowest possible cost commensurate with quality needed, (2) exercise positive financial control over purchases, (3) clearly define authority for the purchasing function, and (4) assure the quality of purchases. Pursuant to Section 1100.7 of the Public Contract Code and the City Charter, except as provided by ordinance or as required by law, the City of Chula Vista is exempt from the requirements of the California Public Contract Code. (Ord. 3420 § 1(A), 2018; Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.020 Purchasing Agent – Appointment – Powers, duties, and authority. The Director of Finance shall appoint, in accordance with Section 507 of the Charter, a Purchasing Agent, who shall be in the unclassified service as provided in Section 500 of the City Charter, and such deputies as may be necessary. The Purchasing Agent shall be the head of the purchasing division of the Finance Department and shall conduct a centralized purchasing system. The Purchasing Agent shall have the power, and it shall be his or her duty, to purchase or contract for all supplies, equipment, and services needed by any and all departments, offices, and agencies of the City, subject to the terms and conditions provided for in this chapter. The Purchasing Agent shall have the authority to: A. Negotiate, purchase, and obtain supplies, equipment, and contractual services used by the City in accordance with City and state law, and such rules and regulations as are prescribed by the Director of Finance, subject to the review of the City Manager or by the City Council; B. Act to procure for the City the needed quality in supplies, equipment, and contractual services, at least expense to the City; C. Endeavor to obtain as full and open competition as possible on all purchases and sales; D. Prepare and recommend to the Director of Finance rules, regulations and procedures governing the purchase of supplies, equipment, and services for the City, and amendments thereto as necessary; E. Keep informed of current developments in the field of purchasing, prices, market conditions, and new products, and secure for the City the benefits of research done in the field of purchasing by other governmental jurisdictions, national technical societies, trade associations having national recognition, and by private businesses and organizations; F. Prescribe and maintain such standardized contracts, subject to the approval of the City Attorney, and other rules and regulations as are reasonably necessary for the operation of the purchasing system; G. Prepare and adopt a standard purchasing nomenclature for City departments and suppliers; Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 2 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 47 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda H. Exploit the possibilities of various cost-effective purchasing strategies, such as buying “in bulk” and cooperative purchasing, to take full advantage of favorable pricing; I. Recommend the transfer of surplus or unused supplies and equipment between departments as needed and the sale of all supplies and equipment which cannot be used by any department or which have become unsuitable for City use and the scrapping or surveying of unsalable surplus items; J. Take such other actions consistent with the provisions of this chapter, all other applicable laws, and current good purchasing practices that are reasonable and appropriate to effectively operate the City’s centralized purchasing system; K. Control and supervise all existing and future storerooms and warehouses of regularly purchased City supplies and equipment. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.030 Option to delegate authority for purchases of supplies and equipment. The Purchasing Agent may authorize a department, office, or City agency to purchase supplies, services and equipment directly when he or she determines that direct purchasing can improve efficiency and/or reduce costs and is in the best overall interests of the City. All direct purchasing authorized by the Purchasing Agent under this section shall be carried out in compliance with the procedures established by this chapter and on such forms or through such purchasing mechanisms as shall be determined by the Purchasing Agent. Direct purchases may be effected through the use of procurement cards or other similar mechanisms. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.040 Requisitions or estimates – Required revisory changes permitted. All City departments and offices shall file with the Purchasing Agent detailed requisitions or written estimates of their requirements for supplies, equipment, and services, in such manner, and at such times, as the Purchasing Agent shall prescribe. The Purchasing Agent shall examine each requisition or estimate and shall have the authority to revise it as to quantity, quality, or estimated cost; provided, however, that a change in quality will not vary substantially from the standards of the using department or office; and provided further, that the using department head, or designee, is first consulted. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.050 Required contract forms – City Attorney. All purchase orders and contracts for purchase of supplies, equipment or services shall be on forms prescribed or approved by the Purchasing Agent and City Attorney. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 3 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 48 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.060 Budget, availability of funds required. For all purchases or contracts for services, the Purchasing Agent shall certify that (1) the required purchase price or compensation is provided for in the budget of the using department or has been approved by the City Council by resolution, and (2) there is to the credit of each using department concerned a sufficient and appropriate unencumbered balance in excess of all unpaid obligations to defray the cost of such purchase or contract. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.070 Contracts for supplies, equipment, or services exceeding $100,000 – Formal competitive bid procedure. A. In General. All supplies, equipment, and services (except professional services per CVMC 2.56.110), when the maximum amount to be paid by the City during the term of the contract (including all optional term extensions and scope of work expansions), as determined by the Purchasing Agent, after consultation with the Director of the procuring department, (the “maximum contract amount”) exceeds $100,000, shall be awarded to the lowest responsive and responsible bidder submitting the best bid in accordance with the competitive bidding process set forth in CVMC 2.56.080. B. Exceptions. The following purchases contain exceptions to the standard competitive bidding requirements: 1. Public Works. Contracts on public works are governed by Section 1009 of the Charter, as implemented by CVMC 2.56.160, City Council policies, and departmental procedures. 2. Professional Services. Contracts for certain professional services that are governed by CVMC 2.56.110. 3. City Council Waiver. The City Council may waive the competitive bidding requirements if determined by resolution of the City Council that the competitive bidding requirements as applied to that contract are impractical, impossible or that City interests would be materially better served by applying a different purchasing procedure approved by the Purchasing Agent as being consistent with good purchasing practices. 4. Single/Sole Source. A commodity or service available from only one known source as the result of unique performance capabilities, manufacturing processes, compatibility requirements or market conditions, or as the result of a single, unsolicited proposal, shall not be subject to competitive bidding requirements, in the discretion of the Purchasing Agent, after consultation with the Director of the procuring department. 5. Emergency. Emergency purchases are governed by CVMC 2.56.100. 6. Design-Build Projects. Projects for which the City is utilizing a design-build process, as defined in Charter Section 1009, shall adhere to the alternative processes set forth in applicable City ordinances, policies, procedures, and standards. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 4 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 49 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.080 Contracts for supplies, equipment, or services exceeding $100,000 – Competitive bidding process – City Council or City Manager approval required. The following competitive bidding and award process shall apply to contracts for supplies, equipment and services with a maximum contract amount in excess of $100,000: A. Notice Inviting Bids. Notices inviting bids shall include a general description of the article or service, and shall be published by the Purchasing Agent at least once on the City’s Internet website, or in a newspaper of general circulation in the City, and any other method of advertising that is determined by the Purchasing Agent to be in the City’s best interest, at least 10 days prior to the bid opening date. B. Bidder’s Security. The Purchasing Agent may require a bidder’s security in an amount equal to 10 percent of the bid, either in cash, certified or cashier’s check, or surety bond approved by the City Attorney and the Risk Manager. In the event a bidder’s security is required, no bid shall be considered unless the required security is submitted therewith. All bidder’s security is refundable, except in the case of a successful bidder who shall forfeit this security if the bidder fails to execute a contract within 10 days after the notice of award has been mailed or personally delivered, or otherwise fails to comply with the requirements to complete the transaction. C. Bid Opening. Sealed bids shall be submitted to the Purchasing Agent, who shall open them in public at the time and place stated in the public notices. A secure, Internet-based system or other appropriate medium may be used in lieu of sealed bids opened in public; provided, that the Purchasing Agent has approved the system for accuracy, confidentiality, and reliability. A tabulation of all bids received shall be available for public inspection in the office of the Purchasing Agent, or on the City’s Internet website, for a period of not less than 30 calendar days after the bid opening. The Purchasing Agent may delegate this responsibility hereunder to responsible assistants and deputies. D. Compilation of Bids and Recommendations. Following the opening of formal bids, the Purchasing Agent shall compile all of the bids and submit them to the requesting department head, together with a recommendation as to which bid he or she considers best, taking into consideration the amount of money bid, compliance with specifications, and responsiveness and responsibility of the bidder. The responsiveness of the bidder shall be determined by comparing the bid to the bid specifications and bid submittal requirements. In determining the responsibility of the bidder, the Purchasing Agent will be guided by, but not limited to, a consideration of the following factors: 1. The experience of the City in dealing with the low bidder; 2. The experience of other governmental agencies known to the Purchasing Agent in their previous transactions with the low bidder; 3. Knowledge of the quality and fitness of the product offered by the low bidder, substantiated by reports of using departments within the City or other governmental agencies; Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 5 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 50 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 4. Options to renew contracts for continuing purchases at the same bid price or with reasonable fixed or capped increases, in those circumstances where price increases are expected or have been experienced in the past; 5. Financial stability and business standing of the low bidder. The requesting department head shall forward the compilation of bids and his or her recommendation with respect to an award to the City Manager, who in turn, will forward a recommendation for award to the City Council. The Purchasing Agent may reject any or all bids, or any one or more commodities or contractual services included in the proposed contract, if it is determined that the public interest will be served thereby. E. Contract Awarding Authority. The City Council shall be the authority responsible for awarding contracts (“awarding authority”) with a maximum contract amount over $250,000; the City Manager shall be the authority responsible for awarding contracts with a maximum contract amount over $100,000 and up to $250,000. (For purposes of this chapter, City Manager authority shall include the City Manager’s designation of authority to the Purchasing Agent, or other designee, in accordance with an administrative City policy.) The awarding authority may make an award of contract to the lowest responsive and responsible bidder submitting the best bid in all respects. F. Rejection of Bids – Alternative Procedures. The awarding authority may reject any or all bids, direct City forces to provide the required commodity or service, authorize the readvertising of bids, or authorize the purchase of supplies or services pursuant to the open market procedure set forth in CVMC 2.56.090. G. Tie Bids. In the event two or more bids are received which are for the same total amount or unit price and in all other respects are equal, the contract shall be awarded to a local bidder. In the event, however, that such tie bids are all from vendors either wholly inside or all outside of the City, then the contract shall be awarded by drawing lots in public. H. Performance Bond. The Purchasing Agent shall have authority to require a performance bond in such amount as he or she shall find reasonably necessary to protect the best interests of the City. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.090 Contracts for supplies, equipment, or services of $100,000 or less – Open market procedure and Purchasing Agent approval required. A. In General. Purchases of supplies, equipment, and services (except professional services, pursuant to CVMC 2.56.110) with a maximum contract amount in the amount of $100,000 or less may be made by the Purchasing Agent in the open market without observing the formal bidding procedure prescribed in CVMC 2.56.080. Notwithstanding the foregoing, for contracts in excess of $10,000, informal bidding shall be required, and, whenever practical, be based on at least three bids. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 6 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 51 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Contracts shall be awarded to the lowest responsive and responsible bidder submitting the best bid in all respects, except as provided below. Responsiveness and responsibility shall be determined pursuant to the standards set forth in CVMC 2.56.080(D). The Purchasing Agent shall keep a record of all open market orders and the bids submitted in competition thereon, and such records shall also be open to public inspection. B. Exceptions. The following purchases shall be exempt from the requirements in subsection (A) of this section: 1. Ten Thousand Dollars or Less. Contracts for a commodity or service costing $10,000 or less, in which case the contract may be awarded by the Purchasing Agent based upon suitability of the item and market rates in the case of a commodity, and demonstrated competence at reasonable fees in the case of services; 2. Impractical or Impossible. When it is determined by the Purchasing Agent that the competitive bidding requirements are impractical, or impossible, or that City interests would be materially better served by applying a different purchasing procedure, the Purchasing Agent may award the contract consistent with best purchasing practices; 3. Certain CVMC 2.56.070 Exemptions. Those exemptions set forth in CVMC 2.56.070(B)(1), (2), (4) and (5) shall also apply to contracts of $100,000 or less. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.100 Emergency purchases. A. By City Manager or Purchasing Agent Permitted When. In case of an emergency which poses an immediate threat to public health, safety or welfare and which requires immediate purchase of supplies, equipment, or contractual services, the City Manager or Purchasing Agent are authorized to secure in the open market at the lowest obtainable price any supplies, equipment, or contractual services, regardless of the amount of the expenditure; provided, however, that a full explanation of the circumstances of such emergency shall be entered in the minutes of the Council at the first available meeting following the commitment to the expenditure and shall be open to public inspection. B. By Using Department – Procedure. In case of an emergency, and with the prior consent of the City Manager or Purchasing Agent, any using department may purchase directly any supplies, equipment, or services when the maximum contract amount thereof does not exceed $100,000, whose immediate procurement is essential to prevent delays in the work of the using department which may affect the life, health, or public safety of citizens. The head of such using department shall send to the Purchasing Agent a copy of the delivery record, together with a full written explanation of the circumstances of the emergency, which shall be filed by the Purchasing Agent as a permanent and public record of the purchase. The Purchasing Agent shall, by rules and regulations, prescribe the procedures under which such emergency purchases may be made. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 7 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 52 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.110 Professional services exception – Selection process for architectural, engineering, environmental, land surveying, legal, construction project management, and other professional services. A. In General. 1. Except as otherwise provided in this section, architectural, engineering, environmental, land surveying, legal, construction project management, and other professional consultant services (collectively “professional services”) provided to the City shall not be governed by the bidding requirements set forth in CVMC 2.56.080 or 2.56.090, but shall be negotiated on the basis of demonstrated competence and qualifications for the services required and at fair and reasonable fees in accordance with the procedures set forth in this section. Notwithstanding the foregoing, once demonstrated competence and qualifications have been established, expense may be considered as one factor in the selection of a consultant hereunder. 2. Notwithstanding the above requirement, the Purchasing Agent may require competitive bidding, pursuant to the requirements of CVMC 2.56.080 or 2.56.090, upon a finding by the Purchasing Agent after consultation with the Director of the procuring department that the professional services required are of more of a technical nature or involve little professional judgment, and requiring bids would be in the public interest. 3. If the maximum contract amount of the professional services contract exceeds $50,000, it shall be awarded by the City Council after compliance with the procedures specified in subsection (C) of this section. Contracts for professional services with a maximum contract amount of $50,000 or less may be awarded pursuant to subsection (D) of this section. The awarding authority for such contracts in excess of $50,000 shall be the City Council; for contracts in the amount of $50,000 or less, the awarding authority shall be the City Manager. B. Definitions. For purposes of this chapter, the following terms have the following meanings: 1. “Architectural, engineering, environmental, and land surveying services” includes those professional services of an architectural, engineering, environmental, or land surveying nature as well as incidental services that members of these professions and those in their employ may logically or justifiably perform. 2. “Construction project management” means those services provided by a licensed architect, registered engineer, or licensed general contractor which meet the requirements of Government Code Section 4529.5 for management and supervision of work performed on construction projects. 3. “Environmental services” means those services performed in connection with project development and permit processing in order to comply with federal and state environmental impact laws, and the analysis of hazardous material. 4. “Legal services” are those of a specialized legal nature as determined by the City Attorney. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 8 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 53 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 5. “Other professional services” include services which provide intellectual products of a specialized nature unique to a given situation or requirement. C. Selection Process for Contracts of Greater than $50,000. 1. Any department head desiring to enter into a contract for professional consultant services whose maximum contract amount exceeds $50,000 shall first analyze the cost effectiveness of having the proposed service completed. 2. Public announcement of all projects of an estimated cost in excess of $50,000 requiring architectural, engineering, environmental, land surveying, construction project management, or other professional consultant services shall be made by the City through notice to the respective professional societies, advertisement on the City’s Internet website, or publication in a newspaper of general circulation, and any other method of advertising that is determined by the Purchasing Agent to be in the City’s best interest. The notice shall invite service providers to submit letters of interest for specific projects. 3. The recommendation to City Council for the award of the contract shall be made by a selection committee. The responsible department head, or designee, and two or more staff members shall perform the duties of the selection committee. 4. After reviewing all proposals submitted, the selection committee may choose the most qualified firms for personal interviews to discuss anticipated concepts and the relative utility of alternative methods of approach for furnishing the required services. The selection committee shall evaluate and rank the firms based upon criteria established in advance by the City. Cost comparisons between service providers may also be considered as a factor. A list containing the ranking information will be sent to the responsible department head. 5. The responsible department head shall negotiate a contract with the firm ranked the highest by the selection committee at a price determined to be fair and reasonable to the City. The agreement shall define the conditions of the contract scope, work plan, schedule, costs, method of payment, duration, insurance, indemnification and other appropriate matters. 6. If the department head is unable to negotiate a satisfactory contract with the highest ranked firm, negotiations shall be formally terminated. 7. The department head shall then undertake negotiations with the next highest ranked firm. This process shall continue until a satisfactory contract is negotiated. 8. If the list of qualified firms is exhausted without a contract being negotiated, the selection committee shall choose additional firms, and the process shall continue until a satisfactory contract is negotiated. D. Selection Process for Contracts of $50,000 or Less. Purchases of professional services with a maximum contract amount of $50,000 or less shall be made after informal solicitation of proposals, in accordance with the same standards and exceptions set forth in CVMC 2.56.090. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 9 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 54 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda E. Prequalification Lists. Solicitations may be made using prequalification lists maintained and approved by the Purchasing Agent. The Purchasing Agent shall review types of services required and determine for which types of services prequalification lists would be appropriate. Prequalification lists may be used in lieu of open advertisement. F. Legal Services. In accordance with Section 503 of the City Charter, the City Attorney oversees contracts for legal and related professional services. Whenever practical, and in consultation with the Purchasing Agent, requests for outside attorney or professional services shall be based on a competitive solicitation of proposals. Otherwise, justification shall be provided based on unique qualifications or performance characteristics of the attorney or consultant recommended. Except for contracts for the retention of special counsel pursuant to Chapter 2.52 CVMC, contracts for legal and related professional services in excess of $50,000 shall be approved by the City Council. Contracts for the retention of special counsel pursuant to Chapter 2.52 CVMC in excess of $100,000 shall be approved by the City Council. G. Unlawful Acts and Conflicts of Interest Prohibited. 1. In the selection and award of professional consultant contracts pursuant to this exception, all unlawful activity, including, but not limited to, rebates, kickbacks, or other unlawful consideration, is prohibited. 2. No City officer or employee shall be a member of a selection committee, or otherwise participate in the selection process, when they have a relationship with a person or business entity seeking a contract which would constitute a conflict of interest under Government Code Section 87100 or under City conflict of interest rules. H. Exceptions. The following purchases shall be exempt from the requirements in subsections (C) and (D) of this section: 1. Ten Thousand Dollars or Less. Contracts for professional service contracts with a maximum contract amount of $10,000 or less may be awarded by the Purchasing Agent based upon demonstrated competence at reasonable fees; 2. Impractical or Impossible. When it is determined by the Purchasing Agent (for contracts with a maximum contract amount of $100,000 or less) or by resolution of the City Council (for contracts with a maximum contract amount in excess of $100,000) that the competitive bidding requirements are impractical, or impossible, or that City interests would be materially better served by applying a different purchasing procedure, the Purchasing Agent or City Council, respectively, may award the contract utilizing alternative procedures consistent with best purchasing practices; 3. Certain CVMC 2.56.070 Exemptions. Those purchases exempted under CVMC 2.56.070(B)(1), (2), (4) and (5). (Ord. 3400 § 1, 2017; Ord. 2956 § 1, 2004; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 10 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 55 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.120 Supplies, materials, and equipment no longer used – Disposition procedure. A. General Procedures. All using departments shall submit to the Purchasing Agent, at such times and in such form as he or she shall prescribe, reports showing stocks of all supplies, materials, and equipment which are no longer used or which have become obsolete, worn out, or scrapped. The Purchasing Agent may transfer such stock to other departments which have need for and can use it. The Purchasing Agent shall also have the power to sell all supplies, materials, and equipment which have been unsuitable for public use, or to exchange for, or trade- in the same on, new supplies, materials, and equipment. B. Approval Required – Competitive Process. Where the value of an item, or a group of items expected to be sold to one bidder, exceeds $100,000, such sale must be approved by resolution of the City Council. Any such sale, exchange, or trade-in shall be made to the highest responsive and responsible bidder, in accordance with the competitive bid procedures established by the Purchasing Agent. C. Donations. Supplies, materials, and equipment, when the estimated value involved is $10,000 or less, may be donated, or sold for less than fair market value, to local civic or social organizations, where it is deemed by the City Manager that such a disposition of property would best serve the City’s public interests. Such donations or discounted sale of items valued in excess of $10,000 must be approved by resolution of the City Council. D. Worthless Property. In the case of scrap or survey items having no estimated or appraised value and which have not been desired by any civic or social organization, the Purchasing Agent may dispose of such items in any manner he or she deems appropriate, keeping full records of such disposition. E. Special Procedures for Disposition of Library Materials. The City Librarian shall submit to the Purchasing Agent reports showing used, damaged, or unneeded library materials and indicating disposition thereof. The Librarian may, at his or her discretion, donate such materials to the Friends of the Chula Vista Public Library for such book sales as they may desire, or he or she may offer such materials to any bona fide charitable or nonprofit institutional organizations serving primarily the interests of the City. If at any time the Librarian chooses to dispose of such materials other than as provided herein, he or she shall follow the general procedures set forth hereinabove. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.130 Sale of real property – Procedure. The Purchasing Agent, with the recommendation of the City Manager and approval of the City Council, shall have the power to sell for fair value any real property owned by the City which has been declared by the City Council to have no present or future use for public purposes. Notice of such sale shall be published at least once on the City’s Internet website, or in a newspaper of general circulation in the City, and any other method of advertising that is determined by the Purchasing Agent to be in the City’s best interest. Real property may be sold for less than fair market value upon a determination by the City Council that such sale will be in the public interest. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 11 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 56 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2.56.135 Acquisition of real property interests. A. CIP Projects. The Public Works Director, or City Engineer, shall have authority to acquire interests in real property that are necessary for the construction, repair, operation, or maintenance of City facilities without City Council approval; provided, that: 1. A CIP project has been established for the construction, repair, operation, or maintenance of City facilities and funds have been appropriated to that CIP budget; 2. Sufficient funds are available in the approved CIP budget to acquire the real property interest(s) and the use of such funds will not materially impact the City’s ability to fully implement the CIP project with the remaining funds; 3. The purchase price for the real property interests being acquired does not exceed $100,000 per parcel; and 4. The purchase price for the real property interests being acquired does not exceed 125 percent of the appraised value of the interests to be acquired. B. Notwithstanding the limitation in subsection (A)(4) of this section, the purchase price may exceed 125 percent of the appraised value of the real property interests to be acquired where subsections (A)(1) through (3) of this section have been satisfied and the purchase is approved by the City Manager. This section does not apply to acquisitions of real property interests by eminent domain. (Ord. 3500 § 1, 2021). 2.56.140 Cooperative purchasing agreements. No provision of this chapter shall be interpreted or construed to prohibit or prevent the City from purchasing supplies, equipment, and services by contracts, arrangements, and agreements for cooperative purchasing programs with the state of California, the county of San Diego, the city of San Diego, or any other public agency, including a joint exercise of powers authority, school district, or water authority within the United States; provided, that such items are purchased through a competitive process that the Purchasing Agent determines to be consistent with good purchasing practices. If the contract, agreement, or arrangement exceeds $2,000,000, then City Council approval is required. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.145 Job order contracts. A. In General. City of Chula Vista Charter Sections 1009, 1010, and 1011 (Measure A), among other things, delegate authority to the City Council to establish procurement policies and procedures for awarding City construction contracts. The purpose of this section is to add job order contracting procurement policies and procedures and to provide definitions and guidelines for the award, use, and evaluation of job order contracts. B. Definitions. “Job order contract” means a construction contract for minor or recurring construction tasks, including repairs, renovations, and alterations, with minimal design requirements, at a fixed price and for an Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 12 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 57 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda indefinite quantity which are awarded on a unit price basis for all necessary labor, materials, and equipment. “Task order” means an authorization to perform construction work under a job order contract. C. Implementation. 1. Job Order Contracts. a. Competitive Process. Job order contracts shall be procured through a competitive process that the Purchasing Agent determines to be consistent with good procurement practices. b. Term. Job order contracts shall have a term of no longer than four years. Job order contracts may have a duration of more than four years only if necessary to complete outstanding task orders issued during the four-year term, or as otherwise approved by the City Council. c. Specifications. The advertisement for bids and specifications shall include line item unit prices and detailed technical specifications for each construction task to be performed under the job order contract. d. Contractor Adjustment. Contractors submitting bids on a job order contract shall state in their bids an adjustment on a percentage basis either increasing or decreasing the preset unit prices for all construction tasks in the bid documents. e. Awarding Authority. The awarding authority for job order contracts shall be as follows: Purchasing Agent for contracts with a maximum contract amount of $2,000,000 or less; City Council for contracts with a maximum contract amount of more than $2,000,000 (“job order contract awarding authority”). f. Periodic Review. The City Manager, or his designee, shall monitor the City’s use of job order contracts and provide periodic informational reports regarding the observed advantages and disadvantages of the use of job order contracts. 2. Task Order(s). a. Scope. Each task order shall include a detailed scope of work and time certain for completion of the work. b. Task Order Price. The task order price shall be no more than the sum of the applicable unit prices and the contractor’s bid adjustment factor. The task order price shall not exceed $2,000,000 (“maximum task order amount”). c. No Subdivision of Work. City staff shall not subdivide work that logically should be performed as a single task order into multiple task orders for purposes of avoiding the task order limits in this section. d. Awarding Authority. The awarding authority for task orders shall be the Purchasing Agent (“task order awarding authority”). e. Change Orders. The task order awarding authority shall have the authority to approve change orders for a task order up to the maximum task order amount. The City Council shall have sole authority to approve change orders that exceed the maximum task order amount. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 13 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 58 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda f. Rejection of Task Order Proposals. The task order awarding authority may reject any and all task order proposals, waive minor defects in any task order proposal, or complete the scope of work contained in a task order proposal by means of other authorized procurement methods, if the task order contract awarding authority determines that such action is necessary or appropriate for the benefit of the public. (Ord. 3420 § 1(B), 2018). 2.56.150 Reports to City Council. The Director of Finance shall provide the City Council with reports regarding City purchasing practices in such form and at such intervals as the City Council may direct. (Ord. 3400 § 1, 2017; Ord. 2899 § 1, 2003; Ord. 2766 § 1, 1998). 2.56.160 Contracts on public works. The provisions of this section shall apply to contracts on public works, as defined in City Charter Section 1009. A. Competitive Bid Processes. The informal bidding process set forth in CVMC 2.56.090(A) shall apply to public works contracts with a maximum contract amount of $250,000 or less. For public works with a maximum contract amount in excess of $250,000, the competitive bidding process set forth in CVMC 2.56.070(A) and 2.56.080 shall apply. B. Contract Awarding Authority. Notwithstanding subsection (A) of this section, the contract awarding authority for public works contracts shall be as follows: maximum contract amount of $100,000 or less: Purchasing Agent; maximum contract amount over $100,000 and up to $250,000: City Manager; maximum contract amount in excess of $250,000: City Council (“public works awarding authority”). C. Capital Improvement Projects (CIP). Notwithstanding anything else in this section, public works contracts for capital improvement projects shall be subject to the following: 1. Awarding Authority. The public works awarding authority shall be: the Purchasing Agent, for public works contracts with a maximum contract amount up to $2,000,000; the City Council for public works contracts with a maximum contract amount in excess of $2,000,000. 2. Change Orders. The Public Works Director, or City Engineer, shall have authority to approve change orders up to the remaining CIP budget available for any CIP project. D. Rejection of Bids. The public works awarding authority may reject any and all bids, authorize the readvertising for bids, or waive minor defects in any bid, if the public works awarding authority determines that such action is necessary or appropriate for the benefit of the public. E. Emergency Waiver. For contracts on public works, emergency purchases shall be authorized pursuant to CVMC 2.56.100. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 14 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 59 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda F. Professional Services. The selection process for professional services for public works projects shall be awarded pursuant to CVMC 2.56.110. G. “Special” Public Works Contracts. The City Council retains the authority to require its approval of the award of any public works contract it defines as “special,” based on factors such as contract cost, value, or other relevant factors, either by amendment to this chapter or adoption of a City Council policy. H. Developer-Performed Public Works. This section shall apply to public works (as defined by the Charter of the City of Chula Vista, as amended) that are to be constructed, or designed and constructed, by or at the direction of a developer or private property owner and subsequently accepted by, dedicated to, or acquired by the City of Chula Vista (“developer-performed public work”). 1. Procurement. A developer-performed public work shall be procured pursuant to one of the following project contracting methods: a. Competitive Bid or Solicitation. A developer may award a contract for a developer-performed public work by competitive bid or solicitation in compliance with all applicable requirements of this section. b. Sole Source. A developer may award a contract for a developer-performed public work on a sole source basis where, in addition to compliance with all applicable requirements of this section: i. City makes findings that an award of a sole source contract is in the best interest of the public because of the particular (A) performance capabilities of the proposed entity or contractor, (B) project characteristics, (C) manufacturing processes, (D) compatibility requirements, and/or (E) market or other conditions/circumstances that render the award of a sole source contract to be in the best interest of the public; and ii. The entity or contractor awarded a contract for a developer-performed public work competitively bids all subcontracts for the developer-performed public work. c. Developer as Design-Build Entity or Prime Contractor. A developer may act as a design-build entity or prime contractor for a developer-performed public work where, in addition to compliance with all applicable requirements of this section: i. Developer provides written notice to City of its intent to act as a design-build entity or prime contractor and provides information demonstrating its competence and qualifications to perform the developer-performed public work; ii. City determines, in City’s sole discretion, that the developer is competent and qualified to complete the developer-performed public work and authorizes the developer to proceed with the developer-performed public work; and iii. Developer competitively bids all subcontracts for the developer-performed public work. 2. Bid and Award. Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 15 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 60 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda a. Authorization to Proceed. If a developer-performed public work is not otherwise authorized by means of an approved agreement with the City or other approved action of the City, a developer shall be required to: (i) obtain prior written approval of the City Manager, or designee, to proceed with a developer-performed public work with an estimated maximum contract value of $2,000,000 or less; or (ii) obtain approval of the City Council, by resolution, to proceed with a developer-performed public work with an estimated maximum contract value of more than $2,000,000. Failure to comply with the procedures in this section may, in City’s discretion, result in a waiver of all claims for payments by City, bond drawdowns, or development credits (as hereinafter defined) to developer in connection with a developer-performed public work. b. Bid and Contract Documents. Developer shall prepare, or cause to be prepared, bid documents (except with respect to prime contracts awarded pursuant to subsection (H)(1)(b) of this section) and contract documents for a developer-performed public work in accordance with all local codes, City design guidelines, and project-specific design guidelines, subject to City approval. The bid and contract documents shall include, without limitation, detailed plans and technical specifications, bonding requirements, insurance requirements, prevailing wage requirements, mandates for timely completion, and remedies for untimely completion. c. Competitive Solicitation of Bids. Developer shall solicit, or cause to be solicited, sealed competitive bids for prime contracts (except for prime contracts awarded pursuant to subsection (H)(1)(b) of this section) and subcontracts for a developer-performed public work on a guaranteed maximum price, lump sum price, or per unit, line item basis and in accordance with industry standard procurement practices as determined by City. A developer may combine into one bid solicitation the construction of a developer- performed public work and other development work, but the bid and contract documents must clearly separate the developer-performed public work from other development work to be performed, in a manner and form as approved by City. Any consultant retained by a developer to assist in the preparation of bid or contract documents (including without limitation preliminary/concept designs), or to assist in the solicitation of bids for a developer-performed public work, shall not be eligible to submit a bid for or be awarded a subsequent contract for that developer-performed public work. d. Award of Contract. Developer shall award contracts (except for contracts awarded pursuant to subsection (H)(1)(b) of this section), and shall award, or shall cause the applicable entity or contractor to award, subcontracts for a developer-performed public work to the lowest responsive and responsible bidder, or the bidder that is determined by developer to be the “best qualified contractor,” subject to City approval. When determining the “best qualified contractor,” developer shall consider, without limitation, a bidder’s demonstrated competence, qualifications, ability to achieve timely completion, capacity, skill, compliance with bid documents, costs, and other relevant criteria. If a developer awards a prime contract or subcontract to a bidder other than the lowest responsive and responsible bidder for an item or unit of work, then all payments, reimbursements, and credits against developer impact fees or other developer fees or obligations (“development credits”) shall not exceed the amount of the lowest responsive bid for that item or unit of work. This not-to-exceed limitation may be waived where: i. The amount of the bid does not exceed the engineer’s estimate or other approved estimate for the developer-performed public work by more than 10 percent; and Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 16 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 61 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda ii. City approves the waiver in accordance with subsection (H)(6) of this section. e. Design-Build Contracts. Where a design-build contract is utilized to complete a developer-performed public work, a developer is not required to comply with subsection (H)(2)(b) or (H)(2)(c) of this section; provided, that developer complies with: i. All remaining requirements of this subsection H; ii. The City’s design-build procurement requirements set forth in CVMC 2.57.030; iii. The City’s qualification and selection process set forth in CVMC 2.57.040; and iv. All other applicable City policies, procedures, and standards for design-build projects. 3. Construction and Acceptance. a. Payments. City shall have the authority to audit and determine the acceptable amounts of all payments by City, bond drawdowns, and/or development credits for a developer-performed public work. b. Change Orders. Any change to the contract documents or improvements for a developer-performed public work (“change order”) shall be subject to City’s prior written approval, except for change orders that: (i) result in no additional payment by City, bond drawdown, or development credits to developer; (ii) result in no additional maintenance or overhead costs to the City; (iii) result in no material delay to the completion date; and (iv) result in no material modifications to the design or construction. City shall have the sole discretion to determine whether subsections (H)(3)(b)(i), (ii), (iii), and (iv) of this section have been satisfied. All change order requests shall be submitted in writing in advance of performing any work or incurring any increased costs for a change order, and substantiated with supporting documentation justifying the request. Cumulative change orders resulting in a total project amount of less than $2,000,000 shall be considered by and subject to approval of the City Manager, or designee. Cumulative change orders resulting in a total project amount of $2,000,000 or more shall be considered by and subject to approval of the City Council. Failure to comply with the procedures in this section may, in City’s discretion, result in a waiver of all claims for additional payments by City, bond drawdowns, or development credits to developer in connection with a change order. c. Post-Construction. City shall have the discretion to accept a developer-performed public work based on City’s determination of compliance with local codes, City’s general design and construction standards, and project-specific design and construction standards. City shall have the discretion to release all bonds for a developer-performed public work. 4. Other Obligations. Nothing in this section shall limit or relieve a developer of other obligations or restrictions applicable to the performance of a developer-performed public work, including, without limitation, obligations or restrictions required by a funding source for the developer-performed public work. 5. Agreement. Where otherwise required or advisable, in City’s sole discretion, City may require a developer to enter into an agreement prior to commencement of a developer-performed public work to implement the developer-performed public work in accordance with the terms of this section and/or in accordance with Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 17 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 62 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda other obligations or restrictions applicable to the developer-performed public work. Such agreement may: (a) clarify or modify the application of and/or waiver of the requirements of this section to a developer- performed public work, and/or (b) clarify, establish, or modify the procedures to be undertaken by developer and City in connection with this section (including but not limited to the procedures and approvals described in subsection (H)(3) of this section). City Council’s approval of an agreement that clarifies and establishes such procedures constitutes the City Council’s determination and finding that such procedures satisfy all applicable requirements of this subsection H. 6. Waiver. The requirements of this section may be waived, in whole or in part, solely as follows: a. For developer-performed public works with an original project award amount of more than $2,000,000, by resolution of the City Council making findings that (i) the waiver is in the best interest of the public after consideration of factors including, without limitation, project costs, time for completion, and other relevant criteria, and (ii) appropriate safeguards are in place to protect the public interest. b. For developer-performed public works with an original project award amount of $2,000,000 or less, by written determination of the City Manager, or designee, that (i) the waiver is in the best interest of the public after consideration of factors including, without limitation, project costs, time for completion, and other relevant criteria, and (ii) appropriate safeguards are in place to protect the public interest. c. For post-award waiver requests, if the estimated total project amount, including all change orders, is more than $2,000,000, post-award waiver requests shall be considered by and subject to approval of the City Council and require the findings stated in subsection (H)(6)(a) of this section. If the estimated total project amount, including all change orders, is $2,000,000 or less, post-award waiver requests shall be considered by and subject to the approval of the City Manager, or designee, and require the findings stated in subsection (H)(6)(b) of this section. Nothing in this section shall subject previously approved waivers to further consideration and/or approval. d. For a “special purpose project,” by resolution of the City Council making findings that: (i) the waiver is in the best interest of the public after consideration of factors including, without limitation, the total project costs, City’s share of project costs, time for project completion, public benefits of the project, and other relevant criteria and circumstances, and (ii) appropriate safeguards are in place to protect the public interest. For purposes of this section, “special purpose project” means a developer-performed public work that is intended to be owned, leased, and/or operated by a party or parties other than the City for a period of no less than 10 years after completion of the developer-performed public work. (Ord. 3420 §§ (1)(C), (D), 2018; Ord. 3400 § 1, 2017). 2.56.170 Automatic indexed adjustments. The limits set forth in CVMC 2.56.140, 2.56.145 and 2.56.160 shall automatically increase annually based on the Engineering News Record (ENR) Construction Index. These limits will increase by administrative action of the City Manager, starting on October 1, 2018, and again on each October 1st thereafter, based on the one-year change Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 18 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 63 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Disclaimer: The City Clerk’s Office has the official version of the Chula Vista Municipal Code. Users should contact the City Clerk’s office for ordinances passed subsequent to the ordinance cited above. To be notified when additions, amendments, or revisions are made to the code, send your e-mail address to (be sure to add "Chula Vista Municipal Code" in the subject line) CPC@codepublishing.com. City Website: www.chulavistaca.gov Code Publishing Company (from July to July) in the Los Angeles Construction Cost Index as published monthly in the Engineering News Record (“LA ENR CCI”) by rounding up to the nearest $1,000. (Ord. 3420 § 1(E), 2018; Ord. 3400 § 1, 2017). Ch. 2.56 Purchasing System | Chula Vista Municipal Code Page 19 of 19 The Chula Vista Municipal Code is current through Ordinance 3527, passed November 1, 2022. Page 64 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda ˃ $ 250kFormal Competitive Bid (2.56.070 & 080)$ 100k+ to ≤ $ 250kFormal Competitive Bid (2.56.070 & 080)$ 10k+ to ≤ $ 100kInformal Bidding/ three bids (2.56.090.A.)≤ $ 10kBased on market rates/competence (2.56.090.B.I.)ALLOpen Market (2.56.100.A.)≤ $ 100kPer Purchasing Agent Procedures (2.56.100.B.)>$ 50kSelection Committee (2.56.110.C.)$ 10 - $ 50kInformal Solicitation (2.56.110.D.)<$ 10kDemostrated Competence (2.56.110.H.1.)$ 50kCompetitive Solicitation (2.56.110.F.)$ 50kCompetitive Solicitation (2.56.110.F.)˃ $ 250kCompetitive Bid (2.56.160.A.; 2.56.070.A. & 2.56.080)$ 100k+ to ≤ $ 250kInformal Bid (2.56.160.A.; 2.56.090.A.)≤ $ 100kInformal Bid (2.56.160.A.; 2.56.090.A.)˃ $ 2 mill.Per 2.56.160.A., based on contract value≤ $ 2 mill.Per 2.56.160.A., based on contract value$ Remaining in CIP Project Quote from existing contractor ˃ $ 2 mill.Per 2.56.140, based on contract value≤ $ 2 mill.Per 2.56.140, based on contract valueMaximum Contract AmountLegal Services - attorney services, court reporting, courier, and arbitration servicesCity Council (2.56.110.F.)Emergency ServicesCity Manager or Puchasing Agent (2.56.100.A.)Using Department, with prior consent ofCity Manager or Purchasing AgentProfessional Services - architectural, engineering, audit, financial and other consulting servicesCity Council (2.56.110.A.3)Bid ProcessAwarding AuthGeneral Supplies, Services & Equipment - service examples include, auto and equipment repair, janitorial and printing services Purchasing Agent (2.56.090.A.)Purchasing Agent (2.56.090.A.)Change Orders - PW CIP ProgramsDirector of Public Works or City Engineer*Subject to automatic annual adjustment based on the Engineering News Record (ENR) Construction Index each fiscal year (rounded to the nearest $1,000)Purchasing Agent (2.56.140)City Council (2.56.080.E.)City Manager (2.56.080.E.)SUMMARY OF CITY PURCHASING PROCEDURES(CVMC 2.56)February 10, 2022Public Works - CIP Programs*City Council (2.56.160.C.1.)Purchasing Agent (2.56.160.C.1.)Cooperative Purchasing AgreementsCity Council (2.56.140)City Attorney (2.56.110.F.)Public Works (non-CIP), Landscape services, construction, building maintenance, painting, electrical servicesCity Council (2.56.160.B.)City Manager (2.56.160.B.)Purchasing Agent (2.56.160.B.)City Manager (2.56.110.A.3)Purchasing Agent (2.56.110.H.1.)Page 65 of 222City of Chula Vista City Council February 7, 2023 Post Agenda Page 66 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   159‐04 FUND BALANCE POLICY FOR GOVERNMENTAL FUNDS                      Page 67 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Fund Balance Policy for Governmental POLICY EFFECTIVE Funds per Governmental Accounting NUMBER DATE PAGE Standards Board Statement No. 54 159-04 06/07/2011 1 OF 3 ADOPTED BY: Resolution No.: 2011-098 DATED: 06/07/11 AMENDED BY: Resolution No. (date of resolution) BACKGROUND In February 2009, the Governmental Accounting Standards Board (GASB) issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This new standard does not change the total amount of a given fund balance, but it substantially alters the categories and terminology used to describe the components that make up a fund balance. The new categories and terminology reflect an approach that focuses, not on financial resources available for appropriation within a fund, but on the extent to which the City is bound to honor constraints on the specific purposes from which amounts in the fund can be spent. The term fund balance is used to describe the difference between assets (what is owned) and liabilities what is owed) reported within a fund. In the past, fund balances have been classified into three separate components: Reserve, Designated and Undesignated. There are almost always important limitations on the purpose for which all or a portion of the resources of a fund can be used. The force of these limitations can vary significantly, depending on their source. The various components of the new fund balance reporting standard are designed to indicate the extent to which the City is bound by these limitations placed upon the resources. PURPOSE This fund balance policy establishes the procedures for reporting the various components of fund balance for the City's governmental funds. This policy does not apply to proprietary funds which were not addressed by GASB 54. The policy also authorizes and directs the Director of Finance to prepare financial reports which accurately categorize fund balance as per Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. POLICY The term fund balance is used to describe the difference between assets (what is owned) and liabilities what is owed) reported within a fund. In the past, fund balances have been classified into three separate components: Reserve, Designated and Undesignated. There are almost always important limitations on the purpose for which all or a portion of the resources of a fund can be used. The force of these limitations can vary significantly, depending on their source. The various components of the new fund balance reporting standard are designed to indicate the extent to which the City is bound by these limitations placed upon the resources. Page 68 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Fund Balance Policy for Governmental POLICY EFFECTIVE Funds per Governmental Accounting NUMBER DATE PAGE Standards Board Statement No. 54 159-04 06/07/2011 2 OF 3 ADOPTED BY: Resolution No.: 2011-098 DATED: 06/ 07/11 AMENDED BY: Resolution No. (date of resolution) GASB Statement No. 54 defines five new components of fund balance that will replace the current existing three components. The five new components are: Nonspendable Fund Balance The portion of a fund balance that includes amounts that cannot be spent because they are either (a) not in a spendable form, such as prepaid items, inventories of supplies, or loans receivable; or (b) legally or contractually required to be maintained intact such as the principal portion of an endowment. This category was traditionally reported as a "reserved" fund balance under the old standard. Restricted Fund Balance The portion of a fund balance that reflects constraints placed on the use of resources (other than nonspendable items) that are either (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by la through constitutional provisions or enabling legislation. This category was traditionally reported as a reserved" fund balance under the old standard. Committed Fund Balance. The City Council, as the City's highest level of decision making authority, may commit fund balance for specific purposes pursuant to constraints imposed by formal actions taken, such as an ordinance or resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to commit fund balance needs to occur within the fiscal reporting period; however that amount can be determined subsequently. This category was traditionally reported as "designated" fund balance under the old standard. Assigned Fund Balance. The portion of a fund balance that includes amounts that are constrained by the government's intent to be used for specific purposes, but that are neither restricted nor committed. Such intent needs to be established at either the highest level of decision making authority, or by an official designated for that purpose. This policy hereby delegates the authority to assign amounts to be used for specific purposes to the Director of Finance for the purpose of reporting these amounts in the annual financial statements. Examples of assigned fund balance follow. Continuing Appropriations. Fund balance levels must be sufficient to meet fundir requirements for projects approved in prior years and which must be carried forward into thr. new year. This would include capital projects and purchase orders. IL Page 69 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Fund Balance Policy for Governmental POLICY EFFECTIVE Funds per Governmental Accounting NUMBER DATE PAGE Standards Board Statement No. 54 159-04 06/ 07/2011 30173 ADOPTED BY: Resolution No.: 2011-098 DATED: 06/07/11 AMENDED BY. Resolution No. (date of resolution) Debt Service. Established to provide for future debt service obligations. Budget Balancing Measures. Funds set aside for the purpose of stabilizing the delivery of City services during natural disasters or periods of operational budget deficits and to mitigate the effects of major economic uncertainties resulting from unforeseen changes in revenues and/or expenditures. Unassigned Fund Balance. The portion of a fund balance that includes amounts that do not fall into one of the above four categories. The General Fund is the only fund that should report a positive balance in this category of fund balance. The general fund, as the principal operating fund of the government, often will have net resources in excess of what can properly be classified in one of the four categories already described. If so, that surplus is presented as unassignedfund balance. If resources were not at least assigned, they could not properly be reported in a fund other than the general fund to begin with. Therefore, only the general fund can report a positive amount of unassigned fund balance. Conversely, any governmental fund in a deficit position could report a negative amount of unassigned fund balance. This category was traditionally reported an "undesignated" fund balance under the old standard. Fund Balance Classification The accounting policies of the City consider restricted fund balance to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance (committed, assigned or unassigned) could be used, the City considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. The policy of the City of Chula Vista is to follow the guidelines of GASB Statement No. 54 and its required practices. No other policy or procedure supersedes the authority and provisions of this policy. Page 70 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐01 INVESTMENT POLICY AND GUIDELINES                      Page 71 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 1 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) 1.0 Purpose: This “Investment Policy and Guidelines” (the “Investment Policy”) Policy is intended to provide guidelines for the prudent investment of the City of Chula Vista’s (the “City”) cash balances, and outline policies to assist in maximizing the efficiency of the City’s cash management system, while meeting the daily cash flow demands of the City. 2.0 Policy: The investment practices and policies of the City of Chula Vista are based upon state law and prudent money management. 3.0 Scope: This Investment Policy applies to all financial assets of the City of Chula Vista, as indicated in 3.1 below. These funds are accounted for in the City’s Comprehensive Annual Financial Report. 3.1 Funds: The Director of Finance/Treasurer is responsible for investing the unexpended cash in the City Treasury for all funds, except for the employee’s retirement funds, which are administered separately, and those funds which are managed separately by trustees appointed under indenture agreements. The Director of Finance/Treasurer will strive to maintain the level of investment of this cash as close as possible to 100%. These funds are described in the City’s annual financial report and include: General Fund Special Revenue Funds Capital Project Funds Enterprise Funds Trust and Agency Funds Any new fund created by the legislative body, unless specifically exempted This Investment Policy applies to all transactions involving the financial assets and related activity of the foregoing funds. Page 72 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 2 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) Bond proceeds shall be invested in the investments permitted by the applicable bond documents. If the bond documents are silent as to the permitted investments, the bond proceeds will be invested in the securities permitted by this Policy. Notwithstanding the other provisions of this Policy, the percentage limitations listed elsewhere in this Policy do not apply to bond proceeds. 4.0 Prudence: The standard of prudence to be used by the Director of Finance/Treasurer shall be the “prudent investor standard”. This shall be applied in the context of managing an overall portfolio. The “prudent investor standard” is applied to local agencies, pursuant to California Government Code Section 53600.3 which provides, in pertinent part: 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…” 4.1 Personal Responsibility: The Director of Finance/Treasurer, Assistant Director of Finance, Treasury Manager and Finance Manager as investment officers acting in accordance with written procedures and the Investment Policy and exercising due diligence, shall be relieved of personal responsibility for an individual security ’s credit risk or market price changes, provided deviations from expectations are reported to the City Council in a timely fashion and appropriate action is taken to control adverse developments. 5.0 Objective: Consistent with this aim, investments are made under the terms and conditions of California Page 73 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 3 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are: 5.1 Safety: Safety of principal is the foremost objective of the investment program. Investments of the City of Chula Vista shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 5.2 Liquidity: The City of Chula Vista’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated and to maintain compliance with any indenture agreement, as applicable. Liquidity is essential to the safety of principal. 5.3 Return on Investments: The City of Chula Vista’s investment portfolio shall be designed with the objective of attaining a market-average rate of return throughout budgetary and economic cycles (market interest rates), within the City’s Investment Policy’s risk parameters and the City’s cash flow needs. See also Section 16.0. 6.0 Delegation of Authority: The City Council delegates responsibility for the investment program to the Director of Finance/Treasurer for a period of one year. Subject to review, the City Council may renew the delegation of authority each year. The Director of Finance/Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls and written procedures to regulate the activities of subordinate officials. The responsibility for the day-to-day investment of City funds will be delegated to the Assistant Director of Finance or their designee. The Director of Finance/Treasurer may delegate day-to-day investment decision making and execution authority to an investment advisor. The advisor shall follow the Investment Policy and such other written instructions as are provided. 7.0 Ethics and Conflicts of Interest: Page 74 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 4 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officers, including investment advisors, are required to file annual disclosure statements as required for “public officials who manage public investments” [as defined and required by the Political Reform Act and related regulations, including Government Code Sections 81000, et seq., and the rules, regulations and guidelines promulgated by California’s Fair Political Practices Commission (FPPC)]. 8.0 Authorized Financial Dealers and Institutions: For any transactions executed by the City, the City’s Director of Finance/Treasurer will maintain a list of the financial institutions and brokers/dealers authorized to provide investment and depository services and will perform an annual review of their financial condition. The City will utilize Moody’s Securities or other such services to determine financially sound institutions with which to do business. The City shall annually send a copy of the current Investment Policy to all financial institutions and brokers/dealers approved to do business with the City. As far as possible, all money belonging to, or in the custody of, a local agency, including money paid to the City’s Director of Finance/Treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for safekeeping in state or national banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in this state selected by the City’s Director of Finance/Treasurer; or may be invested in the investments set forth in Section 9.0. To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California’s communities, including low- and moderate-income neighborhoods. To provide for the optimum yield in the investment of City funds, the City’s investment procedures shall encourage competitive bidding on transactions. Any transactions not executed directly with the issuer shall be made with approved brokers/dealers. In order to be approved by the City, the broker/dealer must meet the following criteria: (i) the broker/dealer must be a “primary” dealer or regional broker/dealer that qualifies under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule); (ii) the broker/dealer must be experienced in institutional trading practices and Page 75 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 5 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) familiar with the California Government Code as related to investments appropriate for the City; and iii) all other applicable criteria, as may be established in the investment procedures. All brokers/dealers and financial institutions who desire to become qualified bidders for investment transactions must submit documents relative to eligibility including U4 form for the broker, proof of Financial Industry Regulatory Authority (FINRA) certification and a certification of having read and understood the City’s Investment Policy and agreeing to comply with the Investment Policy. The City’s Director of Finance/Treasurer shall determine if they are adequately capitalized (i.e. minimum capital requirements of $10,000,000 and five years of operation). If the City has an investment advisor, the investment advisor may use its own list of authorized issuers and broker/dealers to conduct transactions on behalf of the City. 9.0 Authorized and Suitable Investments: The City is authorized by California Government Code Section 53600, et. seq., to invest in specific types of securities. Where this section specifies a percentage limitation for a particular security type, that percentage is applicable only on the date of purchase. Credit criteria listed in this section refers to the credit rating at the time the security is purchased. If an investment’s credit rating falls below the minimum rating required at the time of purchase, the Director of Finance/Treasurer will perform a timely review and decide whether to sell or hold the investment. Investments not specifically listed below are deemed inappropriate and prohibited: A. BANKERS’ ACCEPTANCES. A maximum of 40% of the portfolio may be invested in bankers’ acceptances. The maximum maturity is 180 days. No more than 30% of the agency’s moneys may be invested in the bankers’ acceptances of any one commercial bank. See Government Code Section 53601(g). B. NEGOTIABLE CERTIFICATES OF DEPOSIT. A maximum of 30% of the portfolio may be invested in negotiable certificates of deposit (NCD’s). The maximum maturity of a NCD issue shall be 5 years. These are issued by commercial banks and thrift institutions against funds deposited for specified periods of time and earn specified or variable rates of interest. Negotiable certificates of deposit (NCD’s) differ from other certificates of deposit by their liquidity. NCD’s are traded actively in secondary markets. See Government Code Section 53601(i). Page 76 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 6 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) C. COMMERCIAL PAPER. Per Government Code Section 53601(h), a maximum of 25% of the portfolio may be invested in commercial paper. No more than 10% of the outstanding commercial paper of any single issuer may be purchased. The maximum maturity is 270 days. Commercial paper of prime quality of the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or paragraph (2): 1) The entity meets the following criteria: a. Is organized and operating in the United States as a general corporation. b. Has total assets in excess of five hundred million dollars ($500,000,000). c. Has debt other than commercial paper, if any, that is rated in a rating category of “A” or higher, or the equivalent, by a NRSRO. 2) The entity meets the following criteria: a. Is organized within the United States as a special purpose corporation, trust, or limited liability company. b. Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. c. Has commercial paper that is rated in a rating category of “A-1” or higher, or the equivalent, by a NRSRO. D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF CALIFORNIA. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(a) and 53601(e). E. OBLIGATIONS OF THE UNITED STATES TREASURY. United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(b). F. FEDERAL AGENCIES. Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government -sponsored enterprises. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(f). Page 77 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 7 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) G. REPURCHASE AGREEMENT, maximum term 1 year. Investments in repurchase agreements may be made, on any investment authorized in this section, when the term of the agreement does not exceed 1 year. A Master Repurchase Agreement must be signed with the bank or broker/dealer who is selling the securities to the City. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(j). H. REVERSE-REPURCHASE AGREEMENTS (Requires Council approval for each transaction). Per Government Code Section 53601(j), reverse repurchase agreements or securities lending agreements may be utilized only when all of the following conditions are met: a) The security to be sold on reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale. b) The total of all reverse repurchase agreements and securities lending agreements on investments owned by the local agency does not exceed 20% of the base value of the portfolio. c) The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. d) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a counter party by way of a reverse repurchase agreement or securities lending agreement, shall not be used to purchase another security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase agreement or securities lending agreement, unless the reverse repurchase agreement or securities lending agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. e) Investments in reverse repurchase agreements, securities lending agreements, or similar investments in which the local agency sells securities prior to purchase with a simultaneous agreement to repurchase the security shall only be made with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency. f) For purposes of this policy, “significant banking relationship” means any of the following activities of a bank: Page 78 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 8 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) i. Involvement in the creation, sale, purchase, or retirement of a local agency’s bonds, warrants, notes, or other evidence of indebtedness. ii. Financing of a local agency’s activities. iii. Acceptance of a local agency’s securities or funds as deposits. I. MEDIUM-TERM CORPORATE NOTES. A maximum of 30% of the portfolio may be invested in medium-term corporate notes, with a maximum remaining maturity of five years or less. Notes eligible for investment shall be rated in a rating category of “A,” its equivalent or better by a NRSRO. See Government Code Section 53601(k). No more than 10% of the City’s total investment assets may be invested in the commercial paper and the medium-term notes of any single issuer. J. NON-NEGOTIABLE CERTIFICATES OF DEPOSIT. The maximum maturity is 5 years. Certificates of deposit are required to be collateralized as specified under Government Code Section 53630 et seq. The City, at its discretion, may waive the collateralization requirements for any portion that is covered by Federal Deposit Insurance Corporation (FDIC) insurance. There is no limit on the percentage of the portfolio that can be invested in this category. K. OBLIGATIONS OF THE STATE OF CALIFORNIA. Including bonds payable solely out of revenues from a revenue producing property owned, controlled or operated by the state, or by a department, board, agency or authority of the state. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(d). L. OBLIGATIONS OF THE OTHER 49 STATES. Including bonds payable solely out of revenues from a revenue producing property owned, controlled or operated by any of these states, or by a department, board, agency or authority of the state. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(d). M. MONEY MARKET FUNDS. A maximum of 20% of the portfolio may be invested in money market funds. No more than 10% of the agency’s funds may be invested in shares of beneficial interest of any one mutual fund. Local agencies may invest in “shares of beneficial interest” issued by diversified management companies which invest in the securities and obligations as authorized by California Government Code Section 53601, subdivisions (a) to (k), inclusive, and subdivisions m) to (q), inclusive. They must have the highest rating from two NRSRO’s or have retained an Page 79 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 9 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years of experience managing money market mutual funds and with assets under management in excess of $500,000,000. The purchase price of the shares may not include commission. See Government Code Section 53601(l). N. SAN DIEGO COUNTY TREASURER’S POOLED MONEY FUND. Also known as the San Diego County Investment Pool, the pool is a local government money fund created to invest the assets of the County of San Diego and other public agencies located within the County. The three primary objectives of the County Pool are to safeguard principal; to meet liquidity needs of Pool participants; and to achieve an investment return on the funds within the guidelines of prudent risk management. Investment in the County Pool is highly liquid and the City may invest with no portfolio percentage limit. See Government Code Section 27133. O. THE LOCAL AGENCY INVESTMENT FUND (LAIF). LAIF is a special fund of the California State Treasury through which any local government may pool investments. The City may invest up to $75 million in this fund. Investments in LAIF are highly liquid and may be converted to cash within 24 hours. See Government Code Section 16429.1. P. SHARES OF BENEFICIAL INTEREST ISSUED BY A JOINT POWERS AUTHORITY (Local Government Investment Pools [LGIP]). Per Government Code Section 53601(p), there is no limit on the percentage of the portfolio that can be invested in this category. LGIP’s organized pursuant to Government Code Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (q) of California Government Code Section 53601, inclusive. Each share will represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section the joint powers authority issuing the shares will have retained an investment adviser that meets all of the following criteria: The adviser is registered or exempt from registration with the Securities and Exchange Commission. The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q) Government Code Section 53601, inclusive. The adviser has assets under management in excess of five hundred million dollars 500,000,000). Q. ASSET BACKED SECURITIES (ABS). A maximum of 20% of the portfolio may be invested in ABS. The maximum maturity is five years. Securities eligible for investment under this subdivision Page 80 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 10 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) shall be rated in a rating category of “AA” or its equivalent or better by an NRSRO. ABS constitutes a mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through certificate, or consumer receivable-backed bond. See Government Code Section 53601(o). R. SUPRANATIONALS. A maximum of 30% of the portfolio may be invested in supranationals. The maximum maturity is five years. Securities eligible for purchase under this subdivision shall be United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank that are eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA,” its equivalent or better by an NRSRO. See Government Code Section 53601(q). S. PLACEMENT SERVICE DEPOSITS. A maximum of 30% of the portfolio may be invested in placement service deposits. The maximum maturity is 5 years. Deposits placed through a deposit placement service shall meet the requirements under Government Code Section 53601.8 and 53635.8. The full amount of the principal and the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by federal deposit insurance. T. COLLATERALIZED BANK DEPOSITS. Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in securities of the types listed by California Government Code Section 53651 as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by California Government Code Section 53652 for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the secured obligation. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601(n) and 53630 et seq. 9.1 Investment Pools: The City’s Director of Finance/Treasurer or designee shall be required to investigate all local government investment pools and money market mutual funds prior to investing and performing at least a quarterly review thereafter while the City is invested in the pool or the money market fund. LAIF is Page 81 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 11 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) authorized under provisions in Section 16429.1 of the California Government Code as an allowable investment for local agencies even though some of the individual investments of the pool are not allowed as a direct investment by a local agency. 10.0 Portfolio Adjustments: Should any investment listed in section 9.0 exceed a percentage-of-portfolio limitation due to an incident such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When no loss is indicated, the Director of Finance/Treasurer shall consider reconstructing the portfolio basing his or her decision on the expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified. 11.0 Collateralization: Under provisions of the California Government Code, California banks, and savings and loan associations are required to secure the City’s deposits by pledging letters of credit issued by the Federal Home Loan Bank of San Francisco with a value of 105% of the principal and accrued interest, government securities with a value of 110% of principal and accrued interest or first trust deed mortgage notes having a value of 150% of the City’s total deposits. Collateral will be handled as required by the California Government Code. The Director of Finance/Treasurer, at his or her discretion, may waive the collateral requirement for deposits that are fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The market value of securities that underlay a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance if the value of the underlying securities is brought back up to 102% no later than the next business day. Collateral will always be held by an independent third party. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained. The right of collateral substitution is granted. 12.0 Safekeeping and Custody: All City investments shall identify the City of Chula Vista as the registered owner, and all interest and principal payments and withdrawals shall indicate the City of Chula Vista as the payee. All securities Page 82 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 12 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) shall be safe kept with the City itself or with a qualified financial institution, contracted by the City as a third party. All agreements and statements will be subject to review annually by external auditors in conjunction with their audit. In the event that the City has a financial institution hold the securities, a separate custodial agreement shall be required. All deliverable securities shall be acquired by the safekeeping institution on a “Delivery-Vs-Payment” (DVP) basis. For Repurchase Agreements, the purchase may be delivered by book entry, physical delivery or by third -party custodial agreement consistent with the Government Code. The transfer of securities to the counter party bank’s customer book entry account may be used for book entry delivery. 13.0 Diversification: The City’s investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions. No more than 5% of the investment portfolio shall be in securities of any one issuer except for U.S. Treasuries, U.S. Government Agency issues, and investment pools such as LAIF, the San Diego County Pool, money market funds, and local government investment pools (LGIP’s). A. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be mitigated by investing in those securities with an “A” or above rating and approved in the Investment Policy and by diversifying the investment portfolio so that the failure of any one issuer would not unduly harm the City’s cash flow. B. Market risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by implementing a long-term investment strategy. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return. The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. 14.0 Maximum Maturities: To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. The City will not directly invest in securities maturing more than five (5) years from the date of purchase, unless, the legislative body has granted express authority to make that investment either specifically, or as a part of an investment program approved by the City Council at least three (3) Page 83 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 13 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) months prior to the investment. 15.0 Internal Control: The Director of Finance/Treasurer shall establish a system of internal controls designed to prevent loss of public funds due to fraud, employee error, or misrepresentation by third parties. No investment personnel, including an investment advisor, may engage in an investment transaction except as provided for under the terms of this Investment Policy and the procedure established by the Director of Finance/Treasurer. The external auditors shall annually review the investments with respect to the Investment Policy. This review will provide internal control by assuring compliance with policies and procedures for the investments that are selected for testing. Additionally, account reconciliation and verification of general ledger balances relating to the purchasing or maturing of investments and allocation of investments to fund balances shall be performed by the Finance Department and approved by the Director of Finance/Treasurer. To provide further protection of City funds, written procedures prohibit the wiring of any City funds without the authorization of at least two of the following six designated City staff: 1. Director of Finance/Treasurer 2. Assistant Director of Finance 3. Treasury Manager 4. Finance Manager 5. Revenue Manager 6. Budget and Analysis Manager 16.0 Performance Standards: The investment portfolio shall be managed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the City’s investment risk constraints and cash flow. Investment return becomes a consideration only after the basic requirements of investment safety and liquidity have been met. In evaluating the performance of the City’s portfolio in complying with this policy, the City shall establish an appropriate performance benchmark and compare the return of its portfolio to the return of the benchmark. Page 84 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 14 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) 17.0 Reporting: The Director of Finance/Treasurer shall submit a quarterly investment report to the City Council and City Manager following the end of each quarter. This report will include the following elements: Type of investment Institutional issuer Purchase date Date of maturity Amount of deposit or cost of the investment Face value of the investment Current market value of securities and source of valuation Rate of interest Interest earnings Statement relating the report to its compliance with the Statement of Investment Policy or the manner in which the portfolio is not in compliance Statement on availability of funds to meet the next six month’s obligations Monthly and year-to-date budget amounts for interest income Percentage of portfolio by investment type Days to maturity for all investments Comparative report on interest yields Monthly transactions Compare portfolio total return to market benchmark total return In addition, a commentary on capital markets and economic conditions may be included with the report. 18.0 Investment Policy Review and Adoption: This Investment Policy shall be reviewed at least annually by the Director of Finance/Treasurer to ensure its consistency with the overall objective of preservation of principal, liquidity, and return, and its relevance to current law and financial and economic trends. Each fiscal year, the Finance Director shall provide a copy of the City’s current Investment Policy and Guidelines to the City Council. By virtue of a resolution of the City Council of the City of Chula Vista, the Council shall acknowledge the receipt of the Policy for the respective fiscal year. Page 85 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 15 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) GLOSSARY AGENCIES: Federal agency securities. ASKED: The price at which securities are offered. (The price at which a firm will sell a security to an investor.) 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. The drafts are drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. An acceptance is a high-grade negotiable instrument. BASIS POINT: One one-hundredth of a percent (i.e., 0.01 %). BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) BROKER: A broker brings buyers and sellers together for a commission. He does not take a position. 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 note 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 of America, etc. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. 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 Page 86 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 16 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) of a signed receipt for the securities. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL AGENCIES: Agencies of the Federal government set up to supplycredit to various classes of institutions (e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and exporters). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency that insures bank deposits, currently up to $250,000 per deposit. 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 5,700 commercial banks are members of the system. 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 AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): An investment pool offered by a state or local agency to public entities for the investment of public funds. MARKET VALUE: The price at which a security is trading and could presumable be purchased or sold. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS (NRSROs): Credit rating agencies that issue credit ratings that the Securities and Exchange Commission (SEC) permits other financial firms to use for certain regulatory purposes. Page 87 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 17 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) NEGOTIABLE CERTIFICATES OF DEPOSIT: Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with the promise to pay face value plus accrued interest at maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer). PORTFOLIO: Collection of securities held by an investor. 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. PRUDENT INVESTOR STANDARD: An investment standard. In some states, the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state- the so-called “legal list”. In other states, the trustee may invest in a security if it is one that would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. 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 (SEC): Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See “Uniform Net Capital Rule”. Page 88 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND GUIDELINES POLICY NUMBER EFFECTIVE DATE PAGE 220-01 03/01/2022 18 OF 18 ADOPTED BY: Resolution No. 17578 DATED: 07/26/94 AMENDED BY: Resolution Nos. 18571 (2/4/97); 19375 (2/16/99); 2000-050 (2/15/00); 2001-026 2/13/01); 2002-039 (2/12/02); 2005-184 (6/7/05); 2006-176 (6/13/06); 2008-054 (2/12/08); 2010-045 3/2/10); 2011-020 (2/22/11); 2012-034(3/13/12); 2013-020 (2/26/13); 2014-039 (3/11/14); 2014-191 10/28/14); 2015-041 (3/03/2015); 2016-046 (03/15/2016); 2017-078 (05/23/2017); 2018-090 05/22/2018); 2019-086 (05/21/2019); 2020-024 (02/18/2020); 2021-022 (02/16/2021); 2022-052 03/01/2022) 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 BOND: Long-term U.S. Treasury securities having initial maturities of more than 10 years. TREASURY NOTES: Intermediate-term coupon bearing U.S. Treasury having initial maturities of one year to ten 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. YIELD: The rate of annual income 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. Page 89 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 90 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐02 FINANCIAL REPORT AND TRANSFER AUTHORITY                      Page 91 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: FINANCIAL REPORTING AND POLICY EFFECTIVE TRANSFER AUTHORITY NUMBER DATE PAGE 220-02 11/08/2022 1 OF 2 ADOPTED BY: Resolution No. 18191 (01/23/96) DATED: 1/23/1996 AMENDED BY: 2022-250 (11/08/2022) Purpose To clarify the authority for budget transfers which may be required to fund needed services in each city department within a given fiscal year. Reference City Charter Section 504.c -the Finance Director shall... have control over all expenditures to ensure that budget appropriations are not exceeded... Section 504.f- Submit to the City Council through the City Manager a quarterly statement of all receipts and disbursements in sufficient detail to show the exact financial condition of the City Policy It is the intent of the City Council that the budget authorization be maintained and that transfers should be limited and used only when it is necessary to continue the effective operations of the City. This policy shall establish guidelines for determining the authority level of transfers within the departments. It is the City Manager's responsibility to maintain the integrity of the adopted budget and to allow transfers only as a means for continuing the programs and policies of the City Council as approved via the budgetary process. Department heads shall be held responsible to exercise adequate financial controls to ensure the accomplishment of scheduled work programs within available appropriations. Departments shall maintain budgetary control at the budget category level rather than by line item to give flexibility to operations. Toward this end, the following guidelines are established: 1. Budgetary control shall be established at the budget category level, i.e. Personnel Services, Supplies & Services Utilities, etc., giving departments the flexibility to manage within broader limits, rather than controlling at the individual line item account level. 2. Council approval shall be required for all transfers of appropriations between departments, regardless of the amount. 3. Council approval shall be required for transfers of appropriations that are greater than$75,000 between summary accounts within a department. 4. The City Council delegates authority to the City Manager for approval of transfers of appropriations up to and including$75,000 between budget categories within the same de artment upon certification by the Director of Finance that appropriations are available. Page 92 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: FINANCIAL REPORTING AND POLICY EFFECTIVE TRANSFER AUTHORITY NUMBER DATE PAGE 220-02 11/08/2022 2 OF 2 ADOPTED BY: Resolution No. 18191 (01/23/96) DATED: 1/23/1996 AMENDED BY: 2022-250 (11/08/2022) 5. The City Council shall receive a quarterly status report [required by Charter section 504(f)], from the Director of Finance which provides actual vs. budgetary comparisons by department, as well as projections for the fiscal year. This report will include a listing of any transfers within departments. J Page 93 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 94 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐03 GENERAL FUND RESERVES                      Page 95 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves — Fiscal Health Plan POLICY NUMBER EFFECTIVE DATE PAGE 220-03 11/05/09 1 of 5 ADOPTED BY: Resolution 18358 DATED: 07/09/96 AMENDED BY: Resolution No. 2020-254, November 3, 2020 AMENDED BY: Resolution No. 2009-264, November 5, 2009 The City Council specifically amended this policy on November 3, 2020 with the adoption of Pension & OPEB Reserve Fund Policy No. 220-09, which provides, in relevant part, that: i) Allocations for the Pension Reserve Fund ("PRF") will only occur after the full funding of the 15% General Fund Operating Reserves; and ii) Upon meeting the 15% General Fund Operating Reserves, 75% of all future surplus funds will be transferred to the PRF, and the remaining 25% will be allocated to the Economic Contingency Reserves and Catastrophic Event Reserves in accordance with this Policy; and iii) In the event all three General fund reserve accounts are fully funded at the stated policy percentage, 100% of surplus funds will be transferred to the PRF until it reaches 15% of General Fund Expenses (excluding Measure A & P, identical dollar amount to the General Fund Operating Reserves).. The City Council amended this policy on November 5, 2009 with the acknowledgement that the reserve level established by this policy is a long-term goal. PURPOSE: Public entities purposely accumulate and then maintain adequate reserves to help ensure both financial stability and the continued ability to provide core services in difficult times. Sufficient reserves create financial stability resulting in increased credit quality and allows the public entity to better weather downturns in the economy and the impacts of negative events, both major and minor. Properly funded reserves allow for the continued maintenance of property, the replenishment of vehicles and equipment, and payment of expenses beyond the amount of the funds available for a single fiscal year. BACKGROUND: The General Fund Reserve policy is established to ensure that the City's finances are managed in a manner which will (1) continue to provide for the delivery of quality services, (2) maintain and enhance service delivery as the community grows in accordance with the General Plan, (3) minimize or eliminate the need to raise taxes and fees because of temporary revenue shortfalls, and (4) establish the reserves necessary to meet known and unknown future obligations and ability to respond to unexpected opportunities. Page 96 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves — Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 11/05/09 2 of 5 ADOPTED BY: Resolution 18358 DATED: 07/09/96 AMENDED BY: Resolution No. 2020-254, November 3, 2020 AMENDED BY: Resolution No. 2009-264, November 5, 2009 Fiscal stability is an important factor in operating a City. Establishing certain financial reserves would protect the City against unexpected interruptions in revenues, vulnerability to Federal or State actions, adverse economic conditions, unpredictable one-time costs, and exposure to natural disasters and emergencies. There are additional benefits to establishing a minimum General Fund reserve. Credit rating agencies carefully monitor levels of reserves in a government's General Fund to evaluate a government's continued creditworthiness. A higher credit rating results in savings to the taxpayer when the City issues debt or participates in short-term borrowing. Finally, reserve levels are a crucial consideration in long-term financial planning. The Government Finance Officers Association ( GFOA), an international organization that promotes the professional financial management of governments for the public interest, recommends maintaining a minimum unreserved fund balance (reserves) in the General Fund of no less than 5% to 15% of general fund operating revenues, or no less than one to two months of regular general fund operating expenditures. A government's particular situation may require levels of unreserved fund balance in the general fund significantly in excess of these recommended minimum levels. Cities with higher reserve levels are better positioned to protect public services during economic downturns. GFOA recommends that in establishing a policy governing the level of unreserved fund balance in the general fund, a government should consider a variety of factors, including: The predictability of its revenues and the volatility of its expenditures (i.e. higher levels of unreserved fund balance may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile.) The availability of resources in other funds as well as the potential drain upon general fund resources from other funds (i.e. the availability of resources in other funds may reduce the amount of reserves needed in the general fund, just as deficits in other funds may require that a higher level of reserves be maintained in the general fund). Liquidity (i.e., a disparity between when financial resources actually become available to make payments and the average maturity of related liabilities may require that a higher level of resources be maintained). Designations (i.e. governments may wish to maintain higher levels of unreserved fund balance to compensate for any portion of unreserved fund balance already designated for a specific Page 97 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves — Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 11/05/09 3 of 5 ADOPTED BY: Resolution 18358 DATED: 07/09/96 AMENDED BY: Resolution No. 2020-254, November 3, 2020 AMENDED BY: Resolution No. 2009-264, November 5, 2009 purpose). POLICY: This Policy establishes three (3) distinct General Fund Reserves: 1. General Fund Operating Reserves — minimum 15% 2. Economic Contingency Reserves — minimum 5% 3. Catastrophic Event Reserves — 3% The total recommended minimum reserve level for the three categories combined is 23%. General Fund Operating Reserves The General Fund Operating Reserves represent unrestricted resources available for appropriations by the City Council to address extraordinary needs of an emergency nature. The City shall maintain General Fund Operating Reserve levels of no less than 15% of the annual operating budget. This level of reserves represents approximately 1.8 months of General Fund operating expenditures. The reserves may be used to provide temporary financing for unanticipated extraordinary needs of an emergency nature, such as major storm drain repairs, litigation or settlement costs or an unexpected liability created by Federal or State legislative action. If funds are appropriated (spent) from the operating reserves due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the General Fund Operating Reserves to be deeply reduced, the City Manager and Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum 15% level. Authorized use (mid -year appropriations) of the General Fund Operating Reserves will require approval by four/fifths (4/5) vote of the City Council. Economic Contingency Reserve The Economic Contingency Reserve represents monies set aside to mitigate service impacts during a significant downturn in the economy which impacts City revenues such as sales tax, property tax, Page 98 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves — Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 11/05/09 4 of 5 ADOPTED BY: Resolution 18358 DATED: 07/09/96 AMENDED BY: Resolution No. 2020-254, November 3, 2020 AMENDED BY: Resolution No. 2009-264, November 5, 2009 business license tax etc. The City shall maintain General Fund Economic Contingency Reserve levels of no less than 5% of the annual operating budget to provide for unexpected financial impacts related to a significant economic slowdown. Funds may be appropriated from the Economic Contingency Reserves only after the City Manager and the Finance Director have prepared an analysis providing sufficient evidence that the remaining reserves are adequate to offset potential downturns in revenue sources and provide sufficient cash balance for the daily financial needs of the City for the remainder of the fiscal year. Once the analysis has been presented to the City Council, action to appropriate from the reserves will require a declaration that a fiscal emergency or extraordinary need exists through an affirmative vote by 4/5ths of the City Council. If the Economic Contingency Reserves should ever drop below the minimum reserve level, the City Manager and Finance Director will develop a plan to replenish the reserves. The plan will be included in the adoption of the City's annual operating budget and Long-Term Financial Plan. Catastrophic Event Reserves The Catastrophic Event Reserves are monies set aside to fund unanticipated expenses related to a major natural disaster in the City. A reserve level of 3% of the General Fund operating budget should be maintained as Catastrophic Event Reserves. These funds are associated with the City's Disaster Preparedness Program. The City is susceptible to earthquakes, fires, floods and terrorist threats. In the event that the City Council proclaims a local emergency, the Catastrophic Event Reserves can be utilized to fund recovery costs until reimbursements from federal and/or state agencies can be recovered. Authorized use of the Catastrophic Event Reserves will require a Proclamation of a Local Emergency by the City Council or Director of Emergency Services. In addition, authorized use (mid-year appropriations) of the Catastrophic Event Reserves will require approval by four/fifths (4/5) vote of the City Council. Calculation of Reserves The reserves will be calculated using the following ear's Adopted General Fund budgeted o eratin Page 99 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves — Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 11/05/09 5 of 5 ADOPTED BY: Resolution 18358 DATED: 07/09/96 AMENDED BY: Resolution No. 2020-254, November 3, 2020 AMENDED BY: Resolution No. 2009-264, November 5, 2009 expenditures. Reserves will be evaluated annually in conjunction with the development of the City's 10 Year Financial Forecast and Annual Operating Budget process. There is no maximum reserve level as any additional reserves would provide a greater level of fiscal security. Page 100 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐04 SEWER SERVICE REVENUE FUND RESERVE POLICY                      Page 101 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda SUBJECT: Sewer Service Revenue Fund Reserve POLICY I EFFECTIVE Policy NUMBER DATE PAGE 220-04 04/26/22 1 of 3 ADOPTED BY: Resolution No. 2013-265 1 DATED: December 17,2013 AMENDED BY:Resolution No.2022-093 (4/26/2022) PURPOSE: Public entities accumulate and maintain adequate reserves levels to help ensure both financial stability and the ability to provide core services during difficult times. Adequately funded reserves allow for: 1) funding infrastructure replacement, 2) economic uncertainties and other financial hardships, 3) future debt and capital obligations, 4)cash flow requirements,6) improved credit ratings, 5)unfunded mandates including costly regulatory requirements. BACKGROUND: The City's Sewer Enterprise Funds account for specific services funded directly by fees and charges users of the City's sewer system. These funds are intended to be self-supporting as well as restricted and cannot be used for other City services. They account for revenues and expenses related to the City's sewer programs, including maintenance and expansion of the City's conveyance system and payment of San Diego Metro wastewater treatment costs. The Sewer Service Revenue Enterprise Fund accounts for revenue collected from monthly sewer service charges for all properties that are connected to the City's sewer system. These funds can only be used for sewer related operations and maintenance. The primary use of these funds is payment for the City's annual San Diego Metropolitan Sewer Capacity and to fund maintenance and operational costs associated with the sewer collection system. The Government Finance Officers Association (GFOA), an international organization that promotes the professional financial management of governments for the public interest, recommends maintaining minimum reserve balances. A government's particular situation may require levels of reserves significantly in excess of their recommended minimum levels. Cities with higher reserve levels are better positioned to protect public services during economic downturns. GFOA recommends that in establishing a policy governing the level of reserves or working capital in enterprise funds, a government should consider a variety of factors, including but not limited to the following: The predictability of its revenues and the volatility of its expenditures (i.e. higher levels of reserves may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile). Liquidity (i.e. a disparity between when financial resources actually become available tomake payments and the average maturity of related liabilities may require that a higher level of resources be maintained). Designations (i.e. governments may wish to maintain higher levels of reserves to compensate for any portion of available fund balance alLeldX designated for a specific se). Page 102 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda SUBJECT: Sewer Service Revenue Fund Reserve POLICY EFFECTIVE Policy NUMBER DATE PAGE 220-04 04/26/22 2 of3 ADOPTED BY: Resolution No. 2013-265 DATED: December 17,2013 AMENDED BY:Resolution No. 2022-093 (4/26/2022) POLICY: This Policy establishes four distinct reserves within the Sewer Service Revenue Fund: 1. Working Capital and Rate Stabilization Reserve 2. Emergency Reserve 3. Vehicle Replacement Reserve Working Capital and Rate Stabilization Reserve Working Capital and Rate Stabilization reserves in the Sewer Service Revenue Fond will be restricted to maintaining and operating the wastewater collection system and paying treatment charges to City of San Diego Metropolitan Wastewater ("Metro'). The reserve will be funded from revenues accumulated in the Sewer Service Revenue Fund. It is intended to accommodate any natural variability in revenues and expenditures, including potential disruptions of cash flows due to varied billing methodology, short term fluctuations and annual cycles. The reserve will also assist in addressing shortfalls which may occur due to unanticipated cost increases in labor or energy and other consumption based goods and services, such as wastewater treatment services provided by Metro. The reserves represent unrestricted resources available for appropriation by the City Council addressing unforeseen needs for sewer services. The Working Capital and Rate Stabilization Reserves will assist the City in addressing the following items: Rate Stabilization—the reserves will allow the City the flexibility to "smooth"rates and phase increases in over multiple years, which is prudent given the potential variability in the City's payments to Metro. Revenue Collection Fluctuations - the reserves will be used to protect the City from natural fluctuations in revenue and expenditure cycles which is prudent given that the City bills customers at different points in time but incurs expenses continuously throughout the year. Rates of delinquencies—delays in collection of outstanding revenues. Payroll cycles—the timing of a fixed cash requirement for payroll, as related to the timing of revenue cycles. Unanticipated expenses - expenses whose characteristics make accurate estimation difficult, such as increases in wastewater treatment services provided by the City of San Diego, energy costs,labor benefits and other consumption based goods and services. The City shall maintain a Sewer Revenue reserve equivalent to 90 days of operating expenditures and a Rate Stabilization reserve equivalent to 90 days of operating expenditures for a minimum combined total of 180 days and a maximum reserve balance of 125%of the minimum balance. If funds are appropriated from the Sewer Revenue Working Capital and Rate Stabilization Reserves, Page 103 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda SUBJECT: Sewer Service Revenue Fund Reserve POLICY EFFECTIVE Policy NUMBER DATE PAGE 220-04 04/26/22 3 of 3 ADOPTED BY: Resolution No.2013-265 DATED: December 17, 2013 AMENDED BY: Resolution No. 2022-093 (4/26/2022) the funds should be replenished in the budget process during subsequent fiscal years to the minimum reserve balance. If the magnitude of the event caused the Sewer Revenue Working Capital and a Stabilization Reserves to be less than 30 days of the operating and maintenance budget, the Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the 180 days minimum reserve balance. Emergency Reserve The Sewer Service Revenue Fund Emergency Reserve is necessary to secure funding for insurance deductibles, unforeseen liabilities/litigation and settlement costs related to the City's wastewater system. The City shall maintain a minimum Sewer Service Revenue Fund Emergency Reserve target level of 5% of the operating and maintenance budget and a maximum reserve balance of 125% of the minimum balance. If funds are appropriated from the Sewer Revenue Emergency Reserves due to unanticipated needs, the Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum reserve balance. Vehicle Replacement Reserve The Sewer Service Revenue Fund Vehicle Replacement Reserves represents monies set aside to fund the replacement of aging vehicles. The allocation is funded from revenues accumulated in the Sewer Service Revenue Fund. The City shall maintain a minimum Sewer Service Fund Vehicle Replacement Reserve target of 2% of the operating and maintenance budget. This reserve will ensure that vehicles utilized for sewer operations are replaced as scheduled and available to deploy as needed. To achieve a minimum impact to cost of services and rates, funds will be included in the proposed budget on an annual basis as identified in the City's Vehicle Replacement schedule. The cost of replacing all the vehicles will be averaged over the lifespan of the existing fleet. This will generate a more normalized cost of services by evenly distributing revenue requirements on a year-to-year basis offsetting temporary cash flow deficiencies and avoid significant increases in rates charges to customers in the years the replacement cost are incurred. Page 104 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐05 CITY DEBT POLICY                      Page 105 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 1 of 10 ADOPTED BY: Resolution No. 2014-012 TDATED: January 14, 201 AMENDED BY: Resolution No. 2017-029 (2/07/2017) BACKGROUND The following policies have been developed to provide guidance in the issuance and management of debt by the City of Chula Vista. The main objectives are to establish conditions for the use of debt; to ensure that debt capacity and affordability are adequately considered; to minimize the City's interest and issuance costs; to maintain the highest possible credit rating: to provide complete financial disclosure and reporting and; to maintain financial flexibility for the City. Debt; properly issued and managed, is a critical element in any financial management program. It assists in the City's effort to allocate limited resources to provide the highest quality of service to the public. The City understands that poor debt management can have ripple effects that hurt other areas of the City. On the other hand, a properly managed debt program promotes economic growth and enhances the vitality of the City of Chula Vista for its residents and businesses. This Debt Policy will also apply to any debt issued by the Successor Agency, the Chula Vista Public Financing Authority, the Chula Vista Municipal Financing Authority or any Mello -Roos Community Facilities District formed by the City, as applicable.. The Debt Policy has been developed to provide guidance in the issuance and management of debt by the City of Chula Vista or its related entities and is intended to comply with Government Code Section 8855(i), effective on January 1, 2017. PURPOSE To establish a formal City debt policy. POLICY GENERAL POLICIES The Finance Team All debt issued by the City of Chula Vista or its related entities shall be under the direction of the City Manag,er or Director of Finance /Treasurer, with the Mayor and City Council providing final approval at a public meeting,. The City Manager or Finance Director/Treasurer will determine the composition of the "Finance Team" involved in each issuance. The Finance Team may consist of both City Staff and outside finance professionals. The Finance Director/Treasurer shall decide which City Staff to include on the Finance Team. Critical outside finance professionals include: Underwriter: markets and sells debt to investors Financial Advisor: independent financial expert providing advice to the City on all aspects of debt Page 106 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 2 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) Bond Counsel: legal counsel that prepares the resolutions, ordinances, agreements and other legal documents required Disclosure Counsel: provides legal advice on all disclosure documents and issues in connection to the financing. May be same entity that provides Bond Counsel services. Trustee: typically a commercial bank or trust company responsible for the collection and repayment of principal and interest to bondholders, as well as administering the investment of reserve funds, accounting and disbursement of bond proceeds. District Consultant: provide special district expertise, statistics, data analysis, and disclosure support in the issuance of Special District debt. Selection of Outside Professionals When identifying members of the Financing Team, the selection of underwriters and financial consultants providing professional services shall be based upon qualifications, experience, and cost; typically through a formal Request for Proposal (RFP) process. Procurement of other services related to the issuance of debt shall be through a competitive bidding process whenever reasonable. Depending on circumstances it may be advantageous for the City to participate in a pooled debt issuance with a number of local agencies where issue costs are shared and the underwriters and/or financial consultants are pre- selected by the managing organization. Due to the overall cost savings involved, programs such as the California Statewide Communities Development Authority's "Tax and Revenue Anticipation Note" program are options for the City to consider. Use of Debt The City will consider the use of debt financing primarily for capital improvement projects ( CIP) when the project's useful life will exceed the term of the financing and when resources are identified sufficient to fund the debt service requirements. Some exceptions to this CIP driven focus are the issuance of debt such as Pension Obligation Bonds, where the financial benefits are significantly greater than the costs and where the benefits are determined to be a financially prudent option; and short-term instruments such as tax and revenue anticipation notes, which are to be used for prudent cash management purposes. Bonded debt should not be issued for projects with minimal public benefit or support, or to finance nonnal operating expenses. If a department has any project which is expected to use debt financing, the department director is responsible for expeditiously providing the Finance Department with reasonable cost estimates, including specific revenue accounts that will provide payment for the debt service. This will allow the Finance Department to do an analysis of the project's potential impact on the City's debt capacity and limitations. Relationship of Debt to Capital Improvement Pro6ram and Budget Page 107 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICYLCYI EFFECTIVE DATE PAGE 220-05 2/07/2017 3 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) The City intends to issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City's capital budget and the capital improvement plan. The City shall strive to fund the upkeep and maintenance of its infrastructure and facilities due to normal wear and tear through the expenditure of available operating revenues. The City shall seek to avoid the use of debt to fund infrastructure and facilities improvements that are the result of normal wear and tear, unless a specific revenue source has been identified for this purpose, such -as Gas Tax. The City shall integrate its debt issuances with the goals of its capital improvement program by timing the issuance of debt to ensure that projects are available when needed in furtherance of the City's public purposes. The City shall seek to issue debt in a timely manner to avoid having to make unplanned expenditures for capital improvements or equipment from its general fund. Policy Goals Related to Planning Goals and Objectives The City is committed to financial planning, maintaining appropriate reserves levels and employing prudent practices in governance; management and budget administration. The City intends to issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City's annual operating budget. It is a policy goal of the City to protect taxpayers; ratepayers and constituents by utilizing conservative financing methods and techniques so as to obtain the highest practical credit ratings (if applicable) and the lowest practical borrowing costs. The City will comply with applicable state and federal law as it pertains to the maximum term of debt and the procedures for levying and imposing any related taxes, assessments, rates and charges. Except as described under the caption "DEBT ISSUANCE" below; when refinancing debt. it shall be the policy goal of the City to realize, whenever possible; and subject to any overriding non-financial policy considerations. minimum net present value debt service savings equal to or greater than 5% of y the refunded principal amount. TYPES OF DEBT INSTRUMENTS In order to maximize the financial options available to benefit the public, it is the policy of the City to allow for the consideration of issuing all generally accepted types of debt, including, but not exclusive to the following: General Obligation (GO) Bonds: General Obligation Bonds are suitable for use in the Page 108 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 4 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) construction or acquisition of improvements to real property that benefit the public at large. Examples of projects include libraries, parks, and public safety facilities. All GO bonds require a 2/3 vote in order to pass. Revenue Bonds: Revenue Bonds are limited-liability obligations tied to a specific enterprise revenue stream where the projects financed clearly benefit or relate to the enterprise. An example of projects that would be financed by a Revenue Bond would be improvements to the sewer system, which would be paid back with money raised- from the property owner's sewer bills. Generally, no voter approval is required to issue this type of obligation but must comply with proposition 218 regarding rate adjustments. Lease Revenue Bonds/Certificates of Participation (COP): Lease Revenue(LRB) andBonds COPS are commonly used to allow the City to finance projects. The LRBs and the COPS are secured by a lease from the City pursuant to which lease payments are made and budgeted for annually in an appropriation typically from the General Fund. These lease financings do not constitute indebtedness under the State Constitution or the City Charter and do not require voter approval. Special Assessment/Special District Debt: the City will consider requests from developers for the use of debt financing secured by property based assessments or special taxes in order to provide for necessary infrastructure for new development only under strict guidelines adopted by the City Council, which may include minimum value-to-lien ratios and maximum tax burdens. Examples of this type of debt are Assessment Districts (AD) and Community Facilities Districts (CFD) or more commonly known as Mello-Roos Districts. In order to protect bondholders as well as the City's credit rating, all Rate and Method of Apportionment RMA) documents must include provisions that will result in maximum projected annual special tax revenues equal to but not less than 110% of the projected annual gross debt service on any bonds of the CFD. The City will also comply with all State guidelines regarding the issuance of special district or special assessment debt. For further information, refer to the City of Chula Vista Statement of Goals and Policies Regarding the Establishment of Community Facility Districts. Industrial Development Bonds — Industrial Development Bonds (IDBs) are tax-exempt securities which can fund manufacturing businesses or energy development projects which provides a public benefit. While the authorization to issue IDBs is provided by a state statute, the tax-exempt status of these bonds is derived from federal law (IRS Code Section 103(b) (2). Tax Allocation Bonds — Tax Allocation Bonds are special obligations that are secured by the allocation of tax increment revenues that were generated by increased property taxes in the designated redevelopment area. Tax Allocation Bonds are not debt of the City. Due to changes in the law affecting California Redevelopment agencies with the passage of ABX1 26 as codified in the California Health and Safety Code, the City of Chula Vista Redevelopment Agency (RDA) was dissolved as of February 1; 2012, and its operations substantially eliminated but for the continuation of certain enforceable RDA obligations to be administered by the City of Chula Vista Successor Agency. The terms of ABX 1 26 requires successor Page 109 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 5 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) agencies perform all obligations with respect to enforceable debt obligations, which include y Tax Allocation Bonds. Multi-FamilMortgage Revenue Bonds — The City Housing Authority is authorized to issue mortgage revenue bonds to finance the development; acquisition and rehabilitation of multi- family rental projects. The interest on the bonds can be exempt from Federal and State taxation. As a result, bonds provide below market financing for qualified rental projects. In addition, the bonds issued can qualify projects for allocations of Federal love-income housing tax credits, which can provide a significant portion of the funding necessary to develop affordable housing. For further information, refer to the Chula Vista Housing Authority — Multi-Family Administrative Bond Policies. HUD Section 108 Loan Guarantee Program — The U.S. Department of Housing and Urban Development (HUD) Section 108 Loan Guarantee Program allows cities to use their annual Community Development Block Grant (CDBG) entitlement grants to obtain federally guaranteed funds large enough to stimulate or pay for major community development and economic development projects. The program does not require a pledge of the City's General Fund, only of future CDBG entitlements. By pledging future CDBG entitlement grants as security, the City can borrow at favorable interest rates because of HUD's guarantee of repayment to investors. Pension Obligation Bonds — Pension Obligation Bonds ( POB) are bonds (usually taxable) which are issued to finance an unfunded pension liability of the entity. DEBT AFFORDABILITY AND LIMITATIONS Debt capacity and affordability will be determined by conducting various analyses prior to the issuance of bonds. The analysis of debt capacity should cover a broad range of factors including but limited to the following: Statutory or constitutional limitations affecting the amount that can be issued, such as legally authorized debt limits and tax or expenditure ceilings. Other legal limitations, such as coverage requirements or additional bonds tests imposed by bond covenants. Evaluation of trends relating to the government's financial performance, such as revenues and expenditures, net revenues available after meeting operating requirements, reliability of revenues expected to pay debt service and unreserved fund balance levels. Debt service as a percentage of total General Fund Revenues. The City will attempt to limit the total amount of annual debt service payments payable by the General Fund to no more than 10% of estimated total General Fund revenues. Under state law, general obligation bonds shall not exceed 15% of total assessed valuation within the City. Page 110 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 6 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) An analysis using current market rates and conservative projections showing compliance with the debt affordability limitations included in this Debt Policy shall be conducted before the issuance of any debt with a maturity longer than two years from date of issue. Data showing direct and overlapping debt levels for the City of Chula Vista and surrounding agencies that affect the residents of the City shall be compiled for inclusion in the Comprehensive Annual Financial Report (CAFR) of the City. DEBT STRUCTURING In order to maximize financial flexibility in a constantly -changing debt market, the .City shall be allowed to structure its debt issuances using generally accepted methods. The guiding principal shall be to structure debt issuances so that the City's overall costs are minimized while still maintaining or increasing the City's credit rating. Allowable structures include, but are not limited to the issuance of: Serial and/or Term Bonds: Serial Bonds are those in an issue that mature in consecutive years, whereas Term Bonds come due in a single maturity but are paid in part each year from sinking fund installments. Fixed and Variable Rate Debt: Fixed rate debt is when an interest rate on a security does not change for the remaining life of the security, where Variable rate debt or "floating rate" changes at intervals according to market conditions or a predetermined index or formula. Capital Appreciation/Zero Coupon Bonds: Capital Appreciation/Zero Coupon Bonds are bonds sold at an original issue discount on which no periodic interest payments are made prior to maturity. Interest compounds semiannually at a stated interest rate. At maturity the original principal amount plus all accreted interest is paid to the investor. Bonds with Capitalized Interest: Bonds with capitalized interest have a portion of the proceeds of an issue set aside to pay interest on the bonds for a specified period of time. Senior and Junior Lien Structures: Senior Lien bonds have a priority claim against pledged revenues, while Junior Lien bonds have a subordinate claim against pledged revenues or other security. Debt service should be structured so that annual combined principal and interest payments do not dramatically vary year over year. This provides greater budget stability. Limited exceptions from level debt service will be allowed for individual debt issues when level debt service is unsuitable; for instance in the case of some refunding of debt, or when a policy decision is made to use variable rate debt. Redemption provisions should generally be included in most issuances; providing they are structured in a reasonable and cost-efficient manner as determined by the Director of Finance/Treasurer, or desiunee. Redemption options include but are not limited to: Page 111 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 7 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) Optional Redemption: a call or prepayment provision option that is giving to the issuer; often only on or after a specified date. Mandatory Redemption: a call or prepayment provision requiring the issuer to redeem or call the bond "in -whole" which is all at once, or "in part" which is only a portion on a scheduled basis. Credit enhancement, such as. letters of. credit or bond insurance, may be purchased when the cost of enhancement is more than recovered by the debt service savings created. Entering into a financing utilizing letters of credit or insurance must be planned for and determined to be feasible by the Director of Finance/Treasurer, or designee. Maximum Maturitv Debt obligations shall have a maximum maturity of the earlier of: the reasonably. estimated useful life of the Capital Improvements being financed; or, thirty years; or, in the event they are being issued to refinance outstanding debt obligations the final maturity of the debt obligations being refinanced, unless a longer term is recommended by the Finance Team. Such other terms which meet the financing goals of the debt issuance. DEBT ISSUANCE The City will strive to minimize borrowing costs by: Seeking the highest credit rating possible; Maintaining transparency and excellent communications with credit rating agencies regarding the City's fiscal condition; Purchasing bond insurance or taking action to upgrade the City's current credit rating It shall be the policy of the City to allow the issuance of debt through public sale or private placement, and via competitive or negotiated sales underwriting methods. Consistent with the goal of minimizing costs, competitive sale shall be evaluated and utilized unless the Director of Finance/Treasurer decides that a negotiated sale is warranted. Factors that may impact this decision include: Issuer/Issue Recognition: competitive sales are easier for an issuer that investors and underwriters are familiar with. If extensive marketing is needed to educate the market about the issuer, a negotiated sale maybe more appropriate. Similarl 7, even if the issuer is well- known, if the issue itself has a "story" that needs to be told, a negotiated sale may be needed to enhance the marketing and acceptance of the debt. Issue Size: very large or veru small deals may benefit from a negotiated sale over av competitive sale. Debt Type: GO bonds and other- Lyell -knot -n and accepted debt structures are suitable for Page 112 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 8 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) competitive sales. Others such as CFDs, variable rate, or innovative structures may benefit from a negotiated sale. Credit Ratings: issuers with high credit ratings and insured bonds lend themselves to competitive sales. Uninsured or lower rated issues are often more suitable for negotiated sales. Sale Timing: during times of market uncertainty when conditions are volatile, the flexibility of a negotiated sale may allow an issuer to adjust the sale date and capture additional interest rate savings. The City will seek to issue refunding bonds with the minimum goal of 5% net present value savings of the par value of the proposed bonds. Anything less than an anticipated 5% savings will require additional analysis discussing the benefits of the refunding due to the cost associated with refunding debt. Consideration shall be given to the benefit of delaying a refunding in a declining interest rate environment to capture maximum savings at the least cost. DEBT MANAGEMENT PRACTICES Internal Control Procedures When issuing debt, in addition to complying with the terms of this Debt Policy, the City shall comply with any other applicable policies regarding initial bond disclosure, continuing disclosure, post- issuance compliance, and investment of bond proceeds. The Director of Finance/Treasurer shall be the Officer of the City charged with primary responsibility for administering and implementing these internal control procedures. The City will periodically review the requirements of and will remain in compliance with the following: any continuing disclosure undertakings under Rule 15c2-12 of the Securities and Exchange Commission (SEC)., any federal tax compliance requirements, including without limitation arbitrage and rebate compliance, related to any prior bond issues, and the City's investment policies as they relate to the investment of bond proceeds. Disclosure The City will comply with SEC Rule 15(c) 2- 12 and provide timely disclosure of relevantinformation on an annual basis as well as any event notices as required. The City will fulfill its obligations as covenanted in all the Continuing Disclosure Agreements associated NN,ith any active issuance. Documents are distributed through Electronic Municipal Market Access (EMMA) which can be viewed at an), time by the public. Page 113 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 9 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) The City recognizes the importance of accuracy in disclosure documents and will strive to provide full and complete disclosure. To ensure accuracy of stated facts, directors of any department that originally provided or produced any data appearing in a disclosure document will provide a written statement certifying the accuracy of their department's data along with a statement denying knowledge of any misstatements or material omissions in the remainder of the disclosure document. The City will determine on a case-by-case basis whether or not to retain the services of an independent disclosure counsel. Arbitrage In the past, agencies took advantage of their ability to borrow at tax-exempt rates and invest the proceeds at higher rates, thus earning positive arbitrage. Since 1986, the federal tax code requires issuers of long-term, tax-exempt debt to rebate positive arbitrage to the federal government. The City will diligently monitor its compliance with all federal arbitrage regulations. Due to the complex nature of arbitrage calculations, the City may elect to hire an outside expert consultant to perform this function. Compliance with Tax Law Provisions The City will diligently monitor its compliance with all bond legal covenants, as well as Federal and State requirements, with the assistance of its Finance Team and consultants. Furthermore, recognizing that the smallest of mistakes can lead to the appearance of conflicts of interest or wrongdoing, which in turn may lead to severe consequences, including criminal charges, the City will make every effort to ensure its debt financing conduct is above reproach. Investment of Bond Proceeds The City shall comply with Federal and State regulations governing the investment of bond proceeds. Each issue shall detail allowable investments within the authorizing resolution or Trust Agreements, which the City will adhere to. Where not specifically spelled out, the City will apply the CAN investment policy guiding principal c6mmonly referred to as "SLY"; Safety, Liquidity, and Yield, in that order of priority. Records Retention The City will retain records sufficient to demonstrate compliance with the requirements of federal and State la\ti necessary to preserve the tax-exempt nature of any City Bonds or other debt for the period required by law, presently understood to be the life of the debt obligations or any succeedingy refunding obligations plus 3 years. Page 114 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: City Debt Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-05 2/07/2017 10 of 10 ADOPTED BY: Resolution No. 2014-012 DATED: January 14, 2014 AMENDED BY: Resolution No. 2017-029 (2/07/2017) Other Provisions Bond proceeds, reserve, and repayment funds, should have separate accounting from operating or other funds, at a level distinct enough to facilitate arbitrage compliance calculations and ease debt service and expenditure tracking. Whenever reasonably possible, proceeds of debt will be held by a third -party trustee and the City will submit written requisitions for such .proceeds. The City will submit a requisition only after obtaining the signature of the City Manager or the Director of Finance/Treasurer. If any part of this Debt Policy conflict with Federal or State laws, or the City of Chula Vista Municipal Code, or Charter, such provisions will take precedence over this Debt Policy. RELATIONSHIP TO OTHER POLICIES The City has adopted a Statement of Goals and Policies for the Use of The Mello -Roos Community Facilities Act of 1982, included as Exhibit A hereto. Special Tax Bonds issued on behalf of a CFD will also comply with these policy requirements. WAIVERS OF DEBT POLICY There will be circumstances from time to time when strict adherence to a provision of this Debt Policy is not possible or not in the best interest of the City. If the City Manager or Director of Finance/Treasurer has determined that a waiver of one or more provisions of this Debt Policy should be considered by the City Council, it will include in the agenda bill the rationale for the waiver and the impact of the waiver on the proposed debt issuance and on taxpayers, if applicable. Upon a majority vote of the City Council, one or more provisions of this Debt Policy may be waived for a debt financing. The failure of a debt financing to comply with one or more provisions of this Debt Policy shall in no way affect the validity of any debt issued by the City in accordance with applicable laws. Page 115 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 116 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐06 INTERFUND LOAN POLICY                      Page 117 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Interfund Loan Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-06 2/17/2015 1 of 2 ADOPTED BY: Resolution No. 2015-028 DATED: February 17, 2015 AMENDED BY: BACKGROUND In order to achieve important public policy goals, and in accordance with generally accepted accounting principles (GAAP) and applicable legal requirements, the City has established various special revenue; capital project, debt service, and enterprise funds to account for revenues whose use should be restricted to certain activities. Accordingly. each fund exists as a separate financing entity from other funds, with its own revenue sources, expenditures, and fund equity. On occasion. cash flow constraints in a particular fund may necessitate interim financing of capital projects. Interfund borrowings are an appropriate capital project financing alternative to incurring external debt, provided that the fiduciary purpose of the loaning fund is not negatively impacted. Interfund borrowings should be limited to one-time capital expenditures and are not an appropriate funding source for ongoing operations and maintenance activities. PURPOSE To establish an interfund loan policy, including the standard terms and documentation required for interfund borrowings. POLICY All interfund loans require approval of the City Council. At the time of City Council consideration, the following information shall be provided. at minimum: 1. The purpose of the loan 2. The principal amount borrowed I The expected repayment term 4. The most recent monthly pooled investment earning rate 5. The estimated total financing cost 6. A proposed repayment plan, reflecting the above factors 7. The existing interfund loan and external debt obligations of the borrowing fund 8. The existing balance of interfund loan advances from the loaning fund No fund should profit nor be penalized for internal borrowings. As such. all financing costs shall be calculated using the City's actual pooled investment earning rate, as determined by the Finance Director/Treasurer. Following Council approval, throughout the life of the loan. the actual financing cost shall be calculated based upon the City's actual pooled investment earning rate on a quarterly basis. Page 118 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Interfund Loan Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-06 2/17/2015 2 of 2 ADOPTED BY: Resolution No. 2015-028 DATED: February 17,201 L7,2015 AMENDED BY: In order to limit impacts to loaning funds; the shortest reasonable repayment term is preferred. The repayment of interfund loans shall, therefore; be considered priority expenses for debtor funds during the annual budget process. Page 119 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 120 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda   CITY OF CHULA VISTA COUNCIL POLICY   220‐09 PENSION & OPEB RESERVE FUND POLICY                    Page 121 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA SUBJECT: Pension & OPEB Reserve Fund Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-09 11/3/2020 1 of 2 ADOPTED BY: Resolution No. 2020-254 DATED: November 3, 2020 AMENDED BY: BACKGROUND The following policy has been developed in response to large annual pension cost increases as a result of current and retired employees living longer, lower than anticipated investment returns by Ca1PERS over the last several years, and CalPERS policies adopted that require all cities to payback all unfunded pension liability over the next thirty years for existing unfunded liability and over twenty years for any new unfunded liability. This policy will formalize a funding mechanism for the establishment of a Pension Reserve Fund (PRF) to be used at the City's discretion to help offset future pension cost increases. As of June 30, 2020 the total Miscellaneous plan Unfunded Actuarial Liability (UAL) was 190,478,272 and the total Safety plan UAL was $163,766,889. The City also provides certain Other Pension Employment Benefits (OPEB) in the form of subsidized health care rates for tier 1 retirees. As of June 30, 2019 the total OPEB liability for the City is 15,938,213. The City budgets the implied subsidy amounts on an annual basis. PURPOSE To establish a formal City Pension Reserve Fund Policy and OPEB Reserve Fund Policy. POLICY Allocation Methodology This policy amends the General Fund Reserve Policy — Fiscal Health Plan, all allocations for the PRF will only occur after the full funding of the 15% General Fund Operating Reserves. Upon meeting the 15% General Fund Operating Reserves 75% (seventy-five percent) of all future surplus funds shall be transferred to the PRF for the purposes of that fund while the remaining 25% twenty-five percent) is allocated to the Economic Contingency Reserves and Catastrophic Event Reserves in accordance with the General Fund Reserve Policy- Fiscal Health Plan. In the event all three General fund reserve accounts are fully funded at the stated policy percentage, 100% of surplus funds will be transferred to the PRF until it reaches 15% of General Fund Expenses (excluding Measure A & P, identical dollar amount to the General Fund Operating Reserves). Ongoing surplus funds are determined upon the close of the fiscal year if revenues exceed actual expenditures within the General Fund. Special consideration shall be made by the Finance Director each year when determining potential Surplus Funds so as not to leave any General Fund supported funds (Workers Compensation, Public Liability, Insurance Fund) with a negative fund balance. In addition, if Pension Obligation Bonds are issued, the City shall budget a minimum of 75% of the net annual savings (determined at bond issuance for years 1-10, not adjusted annually for any new unfunded liabilitv or chanize in actuarial assumptions) for bond fiscal years 1 through 10 to be transferred to the Page 122 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA SUBJECT: Pension & OPEB Reserve Fund Policy POLICY EFFECTIVE NUMBER DATE PAGE 220-09 11/3/2020 2 of 2 ADOPTED BY: Resolution No. 2020-254 DATED: November 3,202 AMENDED BY: Pension Reserve Fund on an annual basis. This fund will take the form of a Section 115 Trust and will replace the Pension Reserve Fund described above. Upon full funding of the 15% Pension Reserve Fund in the 115 Trust, all surplus funds will be allocated 50% to an OPEB Reserve Fund and 50% to an POB Bond Call Fund. Once 75% funding of outstanding OPEB liability is achieved, all remaining surplus funds will be deposited into the POB Bond Call Fund. The Finance Department shall provide a comprehensive reserve fund status report, including five-year reserve fund balance projections, annually to the City Council along with the Comprehensive Annual Financial Report. In the event of an economic hardship, or other unanticipated fiscal emergency, the City Council may make an emergency declaration to reduce the annual transfer to the PRF, only if all funds in the Emergency Reserve and Economic Contingency Reserve have been depleted. This declaration will only apply to the fiscal year in which it was made. Ongoing fiscal challenges will require a second or third emergency declaration. Other Provisions PRF funds may be used towards: repayment of future CalPERS unfunded liability in part or whole; the issuance of debt for the purposes of refinancing or issuing pension obligation bonds or other similar debt instruments; establishment of an OPEB reserve fund; to pay off any outstanding POB's; and any other unanticipated pension related cost or charge. The Finance Department shall create the PRF in the fiscal year in which the first scheduled transfer is to occur. It is anticipated that pension fund contributions will eventually stabilize around the year 2030 and will slowly be reduced until the outstanding unfunded pension liability is paid in full by the year 2045. Pension Obligation Bonds may be considered to smooth the impacts over that twenty -four-year period. This PRF will remain in place until such time pension contributions have stabilized and the City has no remaining unfunded liability or projected liability in the future. If any part of this Policy conflicts with Federal or State laws, or the City of Chula Vista Municipal Code, or Charter, those laws will take precedence over this Pension Reserve Fund Policy. Defmitions: Surplus Funds — Actual revenues exceeding expenditures, if applicable, for each fiscal year. The surplus funds determination is typically made around October of each year for the prior fiscal year. Bond Fiscal Year — Begins the first fiscal year immediately following the issuance of pension obligation bonds. Page 123 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 124 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA COUNCIL POLICY   220‐10 MEASURE A RESERVE FUND POLICY             Page 125 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Measure A Reserve Fund Policy POLICY NUMBER EFFECTIVE DATE PAGE 220-10 5/24/2022 1 OF 2 ADOPTED BY: Resolution No. 2022-130 DATED: 5/24/2022 AMENDED BY: Resolution No. (date of resolution) BACKGROUND On June 15, 2018, Chula Vista voters approved Measure A Sales and Use Tax, a one-half (½) cent Public Safety General Transactions and Use Tax (Sales Tax) in the City of Chula Vista. The Measure A Reserve Fund policy is established to avoid any impacts to the General Fund due to temporary sales tax revenue shortfalls, and to establish the reserves necessary to meet known and unknown future obligations for the City’s Police and Fire Departments. PURPOSE To establish a formal Measure A Sales Tax Reserve Fund Policy. POLICY This policy establishes s Measure A Fund Economic Contingency Reserve: Measure A Fund Economic Contingency Reserve The City shall maintain a Measure A Fund Economic Contingency Reserve levels of no less than 60 days (approximately 16% of the annual operating budget) of operations to provide for unexpected financial impacts related to a significant economic slowdown. The reserve level is defined as the number of days of operation in its normal course of business and shall be calculated based on the annual operating budget for the fiscal year, less any budgeted debt service. If funds are appropriated spent) from the operating reserves due to unanticipated needs, the funds should be replenished by that department in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Measure A Fund Economic Contingency Reserve to be deeply reduced, the City Manager and Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum level. Authorized use (mid-year appropriations) of the Measure A Economic Contingency Reserve will require approval by a (4/5) vote of the City Council. Calculation of Reserves The reserves will be calculated using the following year’s Adopted Measure A Fund budgeted operating expenditures. Reserves will be evaluated annually in conjunction with the development of the Annual Budget process. There is no maximum reserve level as any reserves above the required minimum would provide a greater level of fiscal security in the case of an unexpected economic slowdown. Any reserves above the required minimum could also be used to support public safety, consistent with the Measure A Public Safety Expenditure Plan through the application of Measure A sales tax revenues that will ensure the best return on investment in terms of staffing improvements for Page 126 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: Measure A Reserve Fund Policy POLICY NUMBER EFFECTIVE DATE PAGE 220-10 5/24/2022 2 OF 2 ADOPTED BY: Resolution No. 2022-130 DATED: 5/24/2022 AMENDED BY: Resolution No. (date of resolution) the improved deployment of resources and include the used of these non-recurring funds for one-time essential public safety purchases (i.e., capital, consulting, software, etc. Page 127 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Page 128 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CITY OF CHULA VISTA FINANCE DEPARTMENT POLICIES &  PROCEDURES   100‐01 GENERAL FINANCIAL POLICIES         Page 129 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Finance Department Policies & Procedures Financial Planning 100-01 General Financial Policies Revised: 03/01/2015 Purpose: It is the expectation and general understanding the City Council and the citizens of Chula Vista that the City conducts its financial affairs in a thoughtful and prudent manner. The following financial policies are established to provide the direction and limits within which the City is to fulfill its fiscal responsibilities. Background: The City of Chula Vista has historically managed its finances responsibly. Reserves have been established and policies have been developed to overcome economic uncertainty. This Policy establishes guiding principles for future staff, sets forth guidelines against which current budgetary performance can be measured, and provides values to assist with evaluation of future programs. Policy: The City’s financial assets will be managed in a sound and prudent manner in order to ensure the continued viability of the organization. This will be achieved through the implementation of the following policies: I. Balanced Budget 1. A comprehensive operating and capital budget for all City funds will be developed annually and presented to the City Council for approval. The purpose of the annual budget will be to: A. Identify community needs for essential services. B. Identify the programs and specific activities required to provide these essential services. C. Establish program policies and goals that define the nature and level of program services required. D. Identify alternatives for improving the delivery of program services. E. Identify the resources required to fund identified programs and activities, and enable accomplishment of program objectives. F. Set standards to facilitate the measurement and evaluation of program performance. 2. The City will maintain a balanced operating budget. Operating revenues will fully cover operating expenditures, including debt service, each fiscal year. 3. Recurring revenues will fund recurring expenditures. One-time revenues will be used for capital, reserve augmentation, or other non-recurring expenditures. 4. Current expenditures should be paid with current revenues or cash reserves in excess of minimum reserve requirements. 1 of 5 Page 130 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 03/01/2015 General Financial Policy | 100-01 5. Current expenditures should not be balanced by postponing needed expenditures, accruing future revenues, issuing short-term debt, or paying for routine operating costs out of minimum cash reserves. 6. The operating budget should provide for adequate maintenance of fixed assets and equipment and provide for their orderly replacement. 7. City will track revenues and expenditures on an on-going basis, and attempt to anticipate future trends beyond the current budget cycle in order to maintain a balanced budget. 8. Ending fund balance must meet minimum policy levels. See City Council Policies 220-03 and 220-04 (General Fund Reserves – Fiscal Health Plan and Sewer Service Revenue Fund Reserve). II. Budget Development 1. Budget development will take place in an open and publicly accessible forum. 2. Public involvement is encouraged. 3. The City will use a five-year financial plan and a long-term financial forecast model to promote orderly spending patterns, engage in long-range planning, and reduce the time and resources spent preparing annual budgets. III. Financial Reporting 1. The City will contract for an annual audit by a qualified independent certified public accountant and will strive for an unqualified auditor’s opinion. See City Charter § 1017 (Independent Audit). 2. The City’s relationship with its independent public accounting firm will be reviewed every five years, at minimum. 3. Accounting systems will be maintained in accordance with Generally Accepted Accounting Principles (GAAP). 4. The City will adhere to a policy of full and open disclosure of all financial activity and information. 5. The City will strive to meet the requirements of the GFOA awards program for financial reporting. IV. Minimum Fund Balance and Reserves 1. The City will maintain a minimum unreserved, undesignated fund balance as established by City Council Policy 220-03 (General Fund Reserves – Fiscal Health Plan). 2. The City will maintain a minimum unreserved, undesignated fund balance in the sewer enterprise fund as established by City Council Policy 220-04 (Sewer Service Revenue Fund Reserve). V. Revenue Management 1. The City will endeavor to maintain a diversified and stable revenue base in order to minimize the impact to programs from short-term fluctuations in any one source of revenue. 2. Revenue projections will be maintained for the current year and four future fiscal years, and estimates will be based on a conservative, analytical, and objective process. 2 of 5 Page 131 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 100-01 | General Financial Policy 03/01/2015 3. One-time and non-sustainable revenues will be excluded as a source to fund ongoing programs, debt service, or other long-term obligations. 4. In order to maintain flexibility, except as required by law or funding source, the City will avoid earmarking any restricted revenues for specific purpose or program. 5. All available funding from federal and state sources will be pursued to finance appropriate programs, services and capital improvement projects, including those mandated by statute. 6. Fees will be reviewed and updated regularly to ensure that program costs continue to be recovered and that the fees reflect changes in levels of service delivery. 7. The City will make conscious decisions about cost recovery and/or general tax subsidy of those services that benefit only portions of the tax-paying public. See City Council Policy 159-03 (Citywide Cost Recovery Policy). 8. A comprehensive analysis of City costs and fees should be made every 5 to 10 years. 9. The City will recover the cost of new facilities and infrastructure necessitated by new development consistent with State law and the City’s Growth Management Program. Development Impact Fees will be closely monitored and updated to ensure that they are maintained at a level adequate to recover costs. See Chula Vista Municipal Code (CVMC) Chapter 19.09 (Growth Management Ordinance). 10. When considering new development alternatives, the City will attempt to determine the fiscal impact of proposed projects, annexations, etc. to ensure that mechanisms are put in place to provide funding for any projected negative impacts on City operations. See CVMC Chapter 19.09 (Growth Management Ordinance). VI. Fiscal Constraints and Expenditure Management 1. Budgetary control will be exercised at the Department/Category level, meaning that each department is authorized to spend up to the total amount appropriated for that department within the expenditure categories of Personnel Services, Supplies & Services, Other Charges, Utilities, and Capital. Transfers and appropriations between expenditure categories of up to $15,000 may be approved by the City Manager. Transfer of appropriations between expenditure categories in excess of $15,000, or between departments, require City Council approval. See City Charter § 401(b) and City Council Policy 220-02 (Financial Reporting and Transfer Authority). 2. Appropriations, other than for capital projects, remaining unspent at the end of any fiscal year will be cancelled and returned to Available Fund Balance with the exception of any appropriations encumbered as a result of a valid purchase order as approved for a specific project or purpose by the City Council or the City Manager. Appropriations for capital projects will necessarily be carried over from year to year until the project is deemed completed. See City Charter § 1005 (Budget Appropriations). 3. The City will utilize a competitive procurement process as set forth in a purchasing policy. See City Charter § 1011 (Competitive Bidding). 4. The City will continue to search for viable opportunities to privatize or outsource services, where appropriate. 5. The City will track expenditures to evaluate trends and identify potential problems. 6. Acquisition of real property or facilities shall be tied to a specific objective, with adequate funds identified and taking into account long-term fiscal and policy impacts. 3 of 5 Page 132 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 03/01/2015 General Financial Policy | 100-01 7. All agenda staff reports shall include an analysis of current year and ongoing fiscal impacts. 8. All retirement systems should be financed in an actuarially sounds manner in accordance with state law to achieve the goal of systematically funding future liabilities. VII. Enterprise Funds 1. User fees and charges will fully cover direct and indirect costs, including operations, capital outlay, long-term maintenance and debt service. 2. Enterprise funds will not be subsidized by the General Fund without explicit action by the Council. 3. Costs of general government services will be allocated to the enterprise funds based on an approved methodology. VIII. Internal Service Funds 1. The City will establish and maintain equipment replacement and facility maintenance funds as deemed necessary to ensure that monies are set aside and available to fund ongoing replacement needs. 2. Rates shall be established to recover the replacement cost of each piece of equipment at the end of its useful life. 3. Facilities will be amortized to cover ongoing maintenance and cyclical repairs and, to the extent possible, the replacement or expansion of major structures. IX. Debt Management – See Council Policy 220-05 (City Debt Policy) 1. The City will consider the use of debt financing only for one-time capital improvement projects when the project’s useful life will exceed the term of the financing and when resources are identified sufficient to fund the debt service requirements. The only exception to this limitation is the issuance of short-term instruments, such as tax and revenue anticipation notes, which will only be considered in order to meet legitimate cash flow needs occurring within the fiscal year. 2. Debt financing is not appropriate for any recurring purpose, such as operating and maintenance expenditures. 3. The City will evaluate pay-as-you-go versus long-term financing in funding capital improvements. 4. The City will strive to maintain a high reliance on pay-as-you-go financing. This may be accomplished through inter-fund loans to reduce borrowing costs or provide for shorter term loans. When interest is charged on internal loans, it is done so at the same rate the City earns from its pooled investments. 5. The City will attempt to limit the total amount of annual debt service payments guaranteed by the General Fund to no more than ten percent (10%) of estimated General Fund revenues. 6. The City will consider requests from developers for the use of debt financing secured by property based assessments or special taxes in order to provide for necessary infrastructure for new development only under strict guidelines adopted by Council, which may include minimum value-to-lien ratios and maximum tax burdens. See Community Facility District Ordinance. 4 of 5 Page 133 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 100-01 | General Financial Policy 03/01/2015 7. The City will use financing mechanisms that appropriately spread the cost of facilities and services to current and future benefitting residents. 8. The City will strive to minimize borrowing costs by: A. Seeking the highest credit rating possible. B. Procuring credit enhancement, such as letters of credit or insurance, when cost effective. C. Maintaining good communications with credit rating agencies regarding the City’s fiscal condition. 9. The City will diligently monitor its compliance with bond legal covenants, including adherence to continuing disclosure requirements and federal arbitrage regulations. Procedures: Not applicable. Forms: Not applicable. Government Code References: 1. City Charter § 401(b): Financial Reporting 2. City Charter § 1005: Budget Appropriations 3. City Charter § 1011: Competitive Bidding 4. City Charter § 1017: Independent Audit 5. Chula Vista Municipal Code Chapter 19.09: Growth Management 6. City Council Policy 159-03: Citywide Cost Recovery Policy 7. City Council Policy 220-02: Transfer Authority 8. City Council Policy 220-03: General Fund Reserves – Fiscal Health Plan 9. City Council Policy 220-04: Sewer Service Revenue Fund Reserve 10. City Council Policy 220-05: City Debt Policy Policy History: 1. Issued 03/01/2015 5 of 5 Page 134 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda General Fund Long-term Financial Plan FISCAL YEARS 2024 - 2033 Page 135 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 1 EXECUTIVE SUMMARY The City of Chula Vista Fiscal Years 2024 – 2033 General Fund Long-Term Financial Plan (LTFP) serves as a long-range fiscal planning tool to identify financial trends, project budgetary surpluses or shortfalls, and encourage discussion to proactively address the City’s long-range needs. The LTFP will also serve as a guideline for the development of the Fiscal Year (FY) 2024 General Fund budget. The goal of the LTFP is to assess the City’s ability over the term of the plan to:  Maintain current or expand service levels;  Preserve the City’s long-term fiscal health; and  Strategically maintain the City’s reserve funds to meet the City’s reserve policies thresholds. The LTFP only addresses the City’s General Fund. The General Fund serves as the principal pool of revenues and expenditures that finance the City’s core, day-to-day operating expenses. Information related to the City’s non-General Fund funds can be found on the City’s website within the FY 2023 Adopted Budget: https://www.chulavistaca.gov/departments/finance/budget-information The LTFP focuses on baseline revenues and expenditures that are essential for the City to achieve the City’s strategic goals1 over the next ten years. These goals include: • Providing the highest level of municipal services based upon available resources; • Maintaining safe and appealing neighborhoods; • Providing funding for City infrastructure; and • Continuing to expand the City’s economic development and financial base. It is important to emphasize that the LTFP is not a budget. The LTFP does not make expenditure decisions or revise service levels but rather highlights the need to prioritize the allocation of City resources to ensure the continuation of core City services. The purpose of the plan is to provide the City Council, key stakeholders, and the public an overview of the City’s fiscal health based on various financial and service level assumptions over the next ten years, and also allow for the discussion of necessary steps to be initiated during the development and implementation of future budgets. The LTFP is intended to look beyond the annual budget cycle, serving as a planning tool to bring a long-term perspective to the budget process. Should projected expenditures exceed projected revenues in any given year, the City Manager will identify steps to mitigate the shortfalls prior to presenting a balanced budget to the City Council for consideration during the annual budget development process. 1 See the Strategic Plan on the City’s Budget webpage: https://www.chulavistaca.gov/departments/finance/budget- information Page 136 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 2 REPORT OUTLINE The LTFP report includes a brief overview of the current economic environment and information on potential factors that could impact the City’s fiscal position in the near-term and long-term. Following the economic updates, information will be provided on the major revenue/expenditure categories shown within the LTFP. This information will provide brief descriptions of the revenues/expenditures, assumptions, and highlights of certain factors that could impact the revenues/expenditure projections. Financial projections for the term of the LTFP will be presented following the highlighted revenues and expenditures. Significant results of the financial projections will be noted following the financial table. Next, the LTFP presents potential budget mitigation actions for discussion. No single, specific action is identified as a solution to resolving the City’s projected shortfalls. Based upon discussion and input from the City Council and the public, City staff can provide additional information and develop recommendations related to addressing future budget shortfalls. DEPARTMENT POLICY The LFTP report follows guidance from the City’s Finance Department’s 100-01 General Financial Policy in the following areas: Budget Development • Identify the resources required to fund identified programs and activities, and enable accomplishment of program objectives. • Maintain a balanced operating budget. Operating revenues will fully cover operating expenditures, including debt service, each fiscal year. • Track revenues and expenditures on an on-going basis, and attempt to anticipate future trends beyond the current budget cycle in order to maintain a balanced budget. • Utilize a ten-year financial plan and a long-term financial forecast model to promote orderly spending patterns, engage in long-range planning, and reduce the time and resources spent preparing annual budgets. Revenue Management • Endeavor to maintain a diversified and stable revenue base. • Revenue projections will be maintained for the current year and for future fiscal years, and estimates will be based on a conservative, analytical, and objective process. Financial Constraints and Expenditure Management • Track expenditures to evaluate trends and identify potential issues that will affect the budget. Page 137 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 3 SUMMARY OF FINANCIAL PROJECTIONS Staff forecasts primary General Fund revenues and expenditures based on current and known conditions, historical performance, and consultation from subject matter experts. Based on projections from the LTFP, overall General Fund revenues are anticipated to increase from FY 2023 to FY 2027. However, General Fund revenues are anticipated to decrease in FY 2028 from prior years due to the scheduled conclusion of the voter approved Measure P Sales Tax.2 FY 2027 includes a partial year of Measure P revenues and FY 2028 is the first full year of excluding Measure P revenues from the General Fund revenue totals. The projected revenues also include revenues from the Measure A Sales tax approved by Chula Vista voters in FY 2019. Revenues from Measure A continue throughout the term of the LTFP as this sales tax will remain in place until repealed by voters. General Fund revenues resume the trend of moderate increases from prior years in FY 2029. Based on baseline projections for current service levels, growth in expenditures is anticipated to outpace the growth in revenues from Fiscal Year 2024 to Fiscal Year 2031 3. This projected long-term structural shortfall generates budget deficits for eight of the ten-year LTFP period. As shown on the following summary table, the overall General Fund deficits are projected to fluctuate beginning in FY 2024 at approximately $2.6 million and ending in FY 2031 at approximately $4.6 million. In FY 2032 and FY 2033, the General Fund projected revenues are equal to projected expenditures. In development of the LTFP projections, staff reviewed historical budgeted and actual figures, reviewed current data, and researched current financial trends. Based on the information collected, continued growth in revenues and expenditures is anticipated throughout the LTFP period; however, staff employed a conservative approach in developing the projections based on City policy. Uncertainty related to several key factors impacting the economy (discussed in detail later in this report) has led staff to moderate growth expectations. It should be noted that these projections do not incorporate any economic downturn during the LTFP period. Any economic downturn during the term of the LTFP would negatively impact the LFTP projections. Projections within the LTFP will be re-evaluated based upon future economic activity and available data. The following table presents the summary financial forecast for the General Fund for FY 2024 through FY 2033. A detailed table is provided in the 10-Year Projections section of this document. 2 Annual revenues generated from the voter-approved Measure P Sales Tax are reflected in the overall General Fund revenue totals (Ordinance No. 3371, Chula Vista Municipal Code Chapter 3.33). Revenues generated from Measure P are transferred from the General Fund into a separate Measure P Fund for monitoring and accountability. 3 Transfers and expenditures/encumbrances (obligations) related to the Measure P and Measure A Sales tax measures equal the projected revenues each year resulting in a net zero impact to the General Fund for these items. Page 138 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 4 (1) Major Discretionary Revenues is the total of the following budget revenue categories: Property Tax, Sales Tax, Measure P Sales Tax, Measure A Sales Tax, Property Tax in lieu of VLF (VLF), Franchise Fees, Transient Occupancy Tax (TOT), and Utility Users’ Tax (UUT). (2) Other Revenues is the total of the following budget revenue categories: Development Revenue, Licenses and Permits, Fines, Forfeitures & Penalties, Use of Money and Property, Other Local Taxes, Police Grants, Other Agency Revenue, Charges for Services, Interfund Reimbursements, Other Revenues - Miscellaneous, and Transfers from Other Funds. (3) New Development Revenues & New Development Expenditures are for revenues and expenditures projected for the Otay Ranch Village 8 West Development, Cinematic Arts Academic Center & Library, and the Former Sears Site at Chula Vista Center Mixed-Use Development anticipated to come online during the LTFP term. (4) Other Expenditures is the total of the following expenditure categories: Supplies and Services, Utilities, Other Expenses, Equipment, Internal Services, and Transfers/Debt Service. Page 139 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 5 ECONOMIC OVERVIEW Nearly three years have passed since the onset of the COVID-19 pandemic which led to global health and economic crises that continue to impact supply chains, prices, and employment today. Through recovery funds provided by the federal government from the CARES and American Rescue Plan Acts, and other localized efforts, cities like Chula Vista have demonstrated their resiliency and fiscal leadership in responding to COVID-19 and a myriad of challenges such as affordable housing and infrastructure. While heavily impacted industries such as trade and tourism have rebounded to pre-COVID-19 conditions, uncertainties remain in regard to increased labor, materials, and energy costs. Persistent, broad inflationary pressures as well as geopolitical factors like the Russia-Ukraine conflict and COVID-19 shutdowns in China also contribute more uncertainty to our globalized economy overall. Still, the City of Chula Vista’s fiscal outlook remains positive, demonstrated by the growth of the Bayfront, the University Innovation District, and business and residential communities. Economic Growth In the UCLA Anderson Forecast from December 2022 4, economists studied the mixed signals throughout the economy with slowing growth and high inflation. Anderson concluded that a recession is nowhere near certain and would likely be short in duration and depth across sectors. Tellingly, gross domestic product (GDP), a metric for estimating the size of a country’s economy, declined in the first quarters of 2022 but has increased in the last two quarters of 2022. Several promising signs for avoiding a recession include robust employment growth, easing of supply constraints, and consumer confidence. However, inflation remains persistently high and home constructions and sale prices are declining. Real Gross Domestic Product (GDP): Percent Change from Preceding Quarter5 The above chart from the US Bureau of Economic Analysis displays recent quarterly results, with a 1.6% reduction of GDP (economic contraction) in the first quarter of calendar year 2022, a 0.6% reduction of GDP in the second quarter of calendar year 2022, 3.2% increases in the third quarter, and a 2.9% increase in the fourth quarter. Positive growth from quarter-to-quarter decreases concerns that a recession is imminent. 4 UCLA Anderson Forecast. December 2022 Economic Outlook. Accessed 21 Dec 2022 at: https://www.anderson.ucla.edu/about/centers/ucla-anderson-forecast/events/december-2022-economic-outlook 5 Bureau of Economic Analysis. Gross Domestic Product, Fourth Quarter and Year 2022 (Advance Estimate). Accessed 29 Jan 2023 at: https://www.bea.gov/news/2023/gross-domestic-product-fourth-quarter-and-year-2022-advance-estimate Page 140 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 6 Economic Indicators While the economy is recovering and consumer confidence is increasingly positive, there are concerns related to the future growth of the economy for various reasons. Two key indicators staff will continue to monitor as important measures to the City’s financial projections are inflation (measured by the local Consumer Price Index; see below) and housing activity. Inflation is a measure of the increase for the cost of goods and services, which impacts growth of the City’s largest revenue source, sales tax revenues, as well as other revenue categories. Housing activity impacts property tax revenue growth, to a degree. Property Tax is currently the City’s second largest revenue source. Consumer Price Index, San Diego Area Source: US Bureau of Labor Statistics (November 2022)6 6 US Bureau of Labor Statistics. Consumer Price Index, San Diego Area — November 2022. Accessed 31 Jan 2023 at: https://www.bls.gov/regions/west/news-release/consumerpriceindex_sandiego.htm Page 141 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 7 KEY ASSUMPTIONS The following key assumptions were incorporated into the LTFP financial projections. Baseline • The LTFP utilizes the FY 2023 Adopted Budget as the basis for future year forecasted revenues and expenditures, with updates from the FY 2023 Revised Budget and current trend projections. • Future year forecasted figures are adjusted with anticipated growth rates and other inputs based on the FY 2023 Revised Budget, economic conditions, local development activity, one-time revenues and expenditures, and other factors. Staffing • The LTFP maintains current staffing and program levels throughout the term of the plan. No new staffing was included in the projections except for necessary staffing for new facilities becoming operational within the Plan period. The projected expenditures for the additional staff for the new Otay Ranch Village 8 West and Bayfront Fire Stations are included in the New Development Expenditures category as these positions will be necessary to operate the new facilities accommodating City growth. New Revenues • No projections or assumptions are included related to future ballot measures. Healthcare Costs • The City participates in ongoing discussions with the City’s labor groups to manage affordability, while maximizing options for City employees. Due to a constantly changing healthcare environment at the local, state, and national levels, monitoring costs, and exploring alternative cafeteria benefit designs is recommended. Debt Issuances for Capital Projects • The LTFP does not include any future debt issuances for capital projects. Retirement • Projected normal costs for the annual cost of service accrual are included. As a result of the issuance of pension obligation bonds (POB) in February 2021, the LTFP no longer includes the projected Unfunded Actuarial Liability (UAL) expense for the period of the LTFP. The Section 115 Trust is available to pay future UAL costs that may arise in subsequent fiscal years. Pension Obligation Bonds & Pension Reserve Fund • Debt service for the 2021 Pension Obligations Bonds during the LTFP period is included in the Transfers/Debt Service expenditure category. • Consistent with goals of the Pension Reserve, City Council Policy (220-09), contributions to the Pension Reserve Fund’s IRS Section 115 Trust are scheduled throughout the ten-year period of the LTFP. Page 142 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 8 New Development The City generally expects to collect additional revenues and expend additional resources as the City grows and develops new residences and businesses. The General Fund benefits from the additional revenues and also funds a portion of the costs associated with new development based on available resources, policy goals, development agreements and other factors. Staff included several key new development factors in the LTFP based on planned commitments, project status, contractual obligations/terms and General Fund impact. The LTFP was developed based on information available and known at the time of the preparation of the report. • Otay Ranch Village 8 West SPA (Sectional Planning Area) is currently being developed by HomeFed and will include over 2,300 new residential units at completion. A new fire station and expanded City services are anticipated in the next fiscal year. Costs for operating the project’s neighborhood parks will be borne solely by the developer. The LTFP includes projected City revenues as well as expenditures for Otay Ranch Village 8 West starting in FY 2024 and through the term of the LTFP as projected by a fiscal impact analysis from the City’s Finance and Development Services Departments. These figures are estimates; staff will update the LTFP when additional information is made available. • Otay Ranch Village 8 West Fire Station & Bayfront Fire Station: In accordance with the City’s Master Fire Facility Master Plan to address City growth and Fire Department facilities and service needs, operating costs for two additional fire stations are included in the Plan. The Otay Ranch Village 8 West Fire Station is assumed to be operational in Fall 2023, consisting of one engine company and a temporary facility. Permanent facility costs are anticipated to be financed from the Public Facilities Development Impact Fees (“PFDIF”) Fund. The Bayfront Fire Station is assumed to be operational in late 2024, with two engine companies. A portion of operating costs (73.6%) will be funded by Bayfront Project revenues. Facilities costs will be jointly funded by the PFDIF and one-time General Fund monies. • Cinematic Arts Academic Center & Library: The City of Chula Vista expects to break ground on an $89 million, 168,000-square-foot Cinematic Arts Academic Center & Library project in 2023, the City’s first new library built since 1995. The library will be located in the underserved area of east Chula Vista, which has experienced significant population growth in recent years, and aims to meet resident, industry and academic needs. The Academic Center will be home to San Diego State University’s (SDSU) brand new, state-of-the-art Television, Film and New Media Studios (TFNMS). This partnership with SDSU will realize the shared vision of developing a multi-institutional university and innovation district in Figure 3 Cinematics Arts Academic Center & Library Figure 2 Gaylord Bayfront Convention Center Figure 1 Otay Ranch Village 8 West Page 143 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 9 Chula Vista. This project facility is funded partially by a $30 million grant from the California State Library Targeted State Grant Program. The Plan currently includes an estimate for operating costs for the Cinematic Arts Academic Center & Library in East Chula Vista starting in FY 2025. Staff will update the Plan with additional information on revenue and expenditures for this facility as it becomes available. • Former Sears Site at Chula Vista Center Mixed-Use Development: Brookfield Properties has proposed to develop 244 townhomes and future commercials uses at the former Sears building and Auto Center at the Chula Vista Center. As the City’s Planning Commission recently approved the project for design review as part of the City’s Urban Core Specific Plan area, this project status is advanced for inclusion in the LTFP. A Fiscal Impact Analysis prepared for the project compares the costs of public services associated with the subject development against the expected revenues, such as additional property tax and sales tax generated at buildout. Projected revenues are reported under the New Development Revenues line-item and projected expenditures are reported under the New Development Expenditures line-item through the term of the Plan. Page 144 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista General Fund Long-Term Financial Plan 10 MAJOR REVENUES AND EXPENDITURES The following contexts and assumptions were used in the preparation of the ten-year projections of General Fund revenues and expenditures. REVENUES The City’s major revenue sources include: Property Tax, Sales Tax, Measure P Sales Tax, Measure A Sales Tax, Property Tax in lieu of VLF, Franchise Fees, Transient Occupancy Tax (TOT), and Utility Users’ Tax (UUT). The listed revenues account for approximately $201.5 million, or 76.6%, of the City’s General Fund projected revenues for FY 2023. These revenues are categorized as general revenues, or “discretionary revenues,” broadly defined as revenues that are generated not by any given government activity, but by general or specific taxing authority, such as a local sales tax measure (Measure A and Measure P) or state law (Property Tax). Discretionary funds are generally not restricted as to use, and fund the majority of the City’s core, day-to-day and long-term operating expenses. The following are brief descriptions of the listed major General Fund revenue sources. Property Tax Property tax revenue is generated from a 1% ad valorem tax on “real property” (land, buildings, and other permanent structures/improvements), based upon the assessed value of the property within the City as certified by the County of San Diego Assessor. Property tax revenue is the City’s most stable revenue source and is generated from both residential and commercial property. For FY 2023, property tax revenue is projected to total $44.4 million, a $3.5 million increase from the FY 2023 Adopted Budget based on updates from the County property tax roll. The LTFP includes a five percent (5.0%) increase in property tax revenues in FY 2024 and a four percent (4.0%) increase throughout the remaining term of the LTFP based on expected moderate growth in property values. Although property tax growth is limited by Propositions 13 and 15 (tax rate of 1% of assessed property value with a 2% annual increase cap), an increase in property sales will grow property tax revenues as property values are re-assessed to market rate. In addition to the increase in property tax base from property sales, the City is continuing to see new residential and commercial development resulting in additional property tax. The recovery of the economy and labor market from the recessionary impacts of COVID-19 in 2020 and 2021 are anticipated to support continued growth in FY 2023, especially in residential property revenues. However, rising mortgage interest rates and sales declines may temper the growth in the near short-term, with delayed impacts based on the County property tax roll annual process. As shown in the chart below, the City’s assessed value has increased steadily since FY 2014, and this positive trend is anticipated to continue into FY 2024. This positive trend is reflected in the LTFP’s estimated property tax revenue. FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --5.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0% Projection 40.9$ 44.4$ 46.5$ 48.4$ 50.3$ 52.3$ 54.4$ 56.5$ 58.7$ 61.1$ 63.5$ 66.0$ Property Tax Ten-Year Forecast ($ In Millions) Page 145 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 11 Historical Change in Assessed Value City of Chula Vista and Countywide Comparison The chart below shows the distribution of property tax dollars by the County amongst jurisdictions. Property Tax Dollar Distribution by Jurisdiction Fiscal Year 2022 Additionally, with the dissolution of the City of Chula Vista’s Redevelopment Agency (RDA) in FY 2012 via Assembly Bill 26, and the subsequent winddown of the Agency’s activities via the City’s Successor Agency, unallocated property tax increment (Redevelopment Property Tax Trust Fund) returns to the City in the form of additional property tax revenues. These redevelopment revenues are deemed “residual revenues” and amounted to $2.1 million in FY 2022. Residual revenues are expected to slowly increase as the Successor Agency gradually pays off its obligations, providing a potential supplement to the City’s existing General Fund tax base for years to come. -2% 0% 2% 4% 6% 8% 10% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023Percent ChangeChula Vista County Overall Page 146 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 12 Property Tax in lieu of Vehicle License Fee (VLF) VLF revenues are generated from vehicle license fees paid with vehicle registrations to the State of California Department of Motor Vehicles; fees are then allocated back to cities and counties. With the State Budget Act of 2004, the allocation of VLF revenues to cities and counties were substantially changed, permanently reducing the VLF tax and increasing transfers of property tax funds from the State in lieu of VLF. Since 2006, the majority of VLF revenues for each city grew essentially in proportion to the growth in the change in gross property assessed valuation. Due to the new formula by the State, ninety-six (96) percent of the City’s VLF revenues fluctuated with changes in assessed property values within the City. As such, this revenue category reflects a five percent (5.0%) increase in property tax revenues in FY 2024 and four percent (4.0%) increase throughout the remaining term of the LTFP based on expected moderate growth in property values, similar to the Property Tax Revenue category. The City’s VLF revenue is projected to total $28.0 million for FY 2023. Bradley-Burns Uniform Local Sales and Use Tax (Sales Tax) Sales tax revenue is generated from a percentage tax imposed on the sale of retail goods and services that occur within the City of Chula Vista. The total citywide sales tax rate is 8.75%, of which the City’s General Fund receives 1.0% of all the sales transactions within the City. Based on increasing consumer confidence and inflationary impacts in the near-term The General Fund sales tax revenue is anticipated to be approximately $48.0 million in FY 2023, which represents the largest revenue source for the City’s General Fund. The LTFP assumes a two percent (2.0%) growth factor for FY 2024 as compared to the FY 2023 sales tax projection. While FY 2023 is trending significantly above budget it expected that this growth will slow in FY 2024. A conservative three percent (3.0%) growth factor for Sales Tax revenues is utilized over the remainder term of the plan. Inflation may impact this revenue source further as rising prices would generate additional revenue; however, increased prices may also decrease sales of goods and services in the long-term. Staff engages an outside consultant to assist in the monitoring and projections for all sales tax related revenues and will monitor this revenue source for updates to the Plan. In addition to the Bradly Burns Sales Tax, voters approved the Measure P Sales Tax Measure in 2016 which established a temporary ten-year ½ percent sales tax rate upon sales within the City (which is included in the total 8.75% tax rate) FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --5.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0%4.0% Projection 26.9$ 28.0$ 29.5$ 30.7$ 31.9$ 33.2$ 34.5$ 35.9$ 37.3$ 38.8$ 40.4$ 42.0$ Property Tax in lieu of Motor Vehicle License Fees (MVLF) Ten-Year Forecast ($ In Millions) Page 147 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 13 In June 2018, the Measure A Sales Tax was approved by Chula Vista voters. The Measure A Sales Tax is a ½ percent sales tax on goods and services sold within the city to support local public safety needs. This increased the overall sales tax rate to 8.75% as of October 1, 2018, and the ½ percent sales tax will continue until repealed by voters. City of Chula Vista Sales Tax Rate Breakdown Staff continues to monitor areas impacting sales tax revenues, such as the significant shift to online shopping during the COVID-19 shelter-in-place order, and passage of State Assembly Bill 147 for the collection and remittance of sales tax by out-of-state retailers related to the South Dakota v. Wayfair, Inc. Supreme Court decision in 2018. Measure P Sales Tax The Measure P Sales Tax revenue is restricted for supporting repair and replacement of City infrastructure. While the revenue generated from the Measure P Sales tax is collected in the General Fund, the General Fund transfers this revenue to the Measure P Sales Tax Fund for accountability and transparency in the usage of these funds. These actions result in an overall net zero impact to the General Fund. Based on increasing consumer confidence and inflationary impacts in the near-term, Measure P Sales Tax revenues are anticipated to total approximately $27.7 million in FY 2023. Revenues are shown as gross revenues; administration costs to the California Department of Tax and Fee Administration are included in the Other Expenses line of the Plan. The LTFP assumes a two percent (2.0%) growth factor for FY 2024 as compared to the FY 2023 projected revenues. While FY 2023 is trending significantly above budget it expected that this growth will slow in FY 2024. A conservative three percent (3.0%) growth factor for Measure P Sales Tax revenues is utilized over the remainder term of the plan, similar to the Sales Tax Revenue category. State General Fund (includes K-12/Community Colleges)3.94% Public Safety (Prop 172)0.50% County Realignment (Mental Health/Welfare/Public Safety)1.56% Countywide Transportation Fund 0.25% San Diego County Regional Transportation Commission (TransNet)0.50% State and County Subtotal 6.75% Local Jurisdiction (City or County of place sale/use) (City Share)1.00% City Transaction Tax (Measure P)0.50% City Transaction Tax (Measure A)0.50% City Subtotal 2.00% Total Sales Tax Rate – Chula Vista 1 8.75% 1 Total sales tax rates will vary by City due to local sales tax initiatives. Page 148 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 14 Measure A Sales Tax The Measure A Sales Tax revenue is restricted for supporting the public safety needs of the City. While revenue is collected and tracked within the General Fund, the General Fund transfers this revenue to the Measure A Sales Tax Fund for accountability and transparency in the usage of these funds. Separate accounts (one for the Fire department and one for the Police department) were established to support the monitoring and allocation of these funds. These actions result in an overall net zero impact to the General Fund. Based on increasing consumer confidence and inflationary impacts in the near-term, Measure A sales tax revenues are anticipated to total approximately $27.7 million in FY 2023. Revenues are shown as gross revenues; administration costs to the California Department of Tax and Fee Administration are included in the Other Expenses line of the Plan. Based on increasing consumer confidence and inflationary impacts in the near-term, the LTFP assumes a two percent (2.0%) growth factor for FY 2024, which is also in line with recent years’ growth trend. A conservative three percent (3.0%) growth factor for Sales Tax revenues is utilized over the remainder term of the plan, similar to the Sales Tax Revenue category. Franchise Fees Franchise fees are revenue generated from agreements with private utility companies in exchange for use of the City’s rights-of-way. Franchise fees are collected from three primary sources: San Diego Gas & Electric (2% on gas and 1.25% on electricity), Republic Services trash collection franchises (20% fee), and AT&T and Cox Communications cable franchises (5% fee). A rate increase effective July 1, 2022, for trash service related to Senate Bill 1383 for organic waste recycling has been factored into the LTFP. For FY 2023, total franchise fee revenue is projected to be $14.5 million. The LTFP anticipates these revenues, in the aggregate, to grow slightly over the term of the plan, at a rate of two percent (2.0%). FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --2.0%3.0%3.0%3.0%------ Projection 25.9$ 27.7$ 28.2$ 29.1$ 29.9$ 23.1$ -$ -$ -$ -$ -$ -$ * Measure P Sales Tax collection is scheduled to end on March 31, 2027 Measure P Sales Tax Ten-Year Forecast ($ In Millions) FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --2.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0% Projection 25.9$ 27.7$ 28.3$ 29.1$ 30.0$ 30.9$ 31.8$ 32.8$ 33.7$ 34.7$ 35.8$ 36.9$ Measure A Sales Tax Ten-Year Forecast ($ In Millions) Page 149 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 15 Transient Occupancy Tax (TOT) TOT is a tax imposed on occupants of hotel and motel rooms and short-term rentals within the City. The current TOT tax rate in the City is 10%. TOT revenues are projected to generate $7.4 million in FY 2023. Major economic drivers for TOT revenue include room rates, average occupancy rates, and seasonal and non-seasonal tourism. The City of Chula Vista has experienced strong growth in TOT in recent years with a string of new hotel developments on both the west and eastern portions of the City as well a major expansion of the short-term rental compliance program. During the height of the COVID-19 pandemic, TOT revenues dropped 3.6% in FY 2021 from FY 2020 TOT revenues. In FY 2022, TOT revenues increased by nearly 42% from FY 2021, and 50% from pre-pandemic levels (FY 2019). Staff anticipates this dramatic increase in TOT revenues is partially due to pent-up travel demand following the business closures related to the pandemic which will likely not be sustained in the long-term. Staff will monitor this revenue category closely for updates to the LTFP, particularly if a recession were to occur as travel would likely be impacted by declines in consumer confidence and spending. Additionally, it is important to note that the TOT revenue generated from the RV Park in the Bayfront area is transferred out from the General Fund to the Chula Vista Facilities Financing Authority. Transient Occupancy Tax Fiscal Year 2018 to Fiscal Year 2023 It is anticipated that TOT revenues will continue to increase as a result of new hotels being developed within the City over the next several years. Staff expects the Gaylord Pacific Resort & Convention Center project to bring renewed interest in business, recreation and other activity to the Chula Vista Bayfront and surrounding areas. As additional projects advance through the development process, staff will update the LTFP to include additional General Fund impacts. $4.1 $4.3 $4.1 $4.6 $6.5 $4.6 $0.1 $0.1 $0.2 $0.1 $0.2 $0.3 $0.6 $0.7 $0.5 $- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY23 AdoptedMillions TOT Short-Term Rentals TOT RV Park TOT Page 150 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 16 The LTFP projects an annual two percent (2.0%) growth rate for TOT revenues, which is anticipated to be a conservative estimate. In midyear 2024, a hotel in East Chula Vista is expected to come online and generate TOT revenues, increasing the projected TOT baseline revenues. Projections will be updated as planning and development processes advance, and new hotels begin operations. Utility User Tax (UUT) The City adopted its Utility Users Tax (UUT) in 1970. The City of Chula Vista imposes a UUT on the use of telecommunications (cable, telephone) at the rate of 4.75% of gross receipts. The UUT on natural gas services is $0.00919 per therm and $0.00250 per kilowatt on electricity services, which equates to approximately a 1% tax. City staff recently conducted an analysis to project revenues for each utility type; technology, consumer behavior and legislative changes have positioned this revenue category as less secure over the long-term with nearly flat growth. For FY 2023, revenues are projected to total $3.8 million, similar to FY 2022. The LTFP assumes a one-half (0.5%) percent annual increase throughout the term of the plan. FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0%2.0% Projection 5.2$ 7.4$ 7.6$ 7.8$ 8.0$ 8.1$ 8.3$ 8.4$ 8.6$ 8.7$ 8.9$ 9.1$ Transient Occupancy Tax Ten-Year Forecast ($ In Millions) Page 151 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 17 EXPENDITURES The City’s major expenditure categories include: Personnel costs, Retirement Benefits, and Health Insurance. The listed expense categories account for approximately $130.0 million or 49.4% of the City’s General Fund projected expenditures for FY 2023. The following are brief descriptions of the listed expenditure categories. Personnel Services (Salaries/Wages) Since the last economic recession, the City has focused on recovering its staffing levels to support City services. For FY 2023, the total Adopted Budget General Fund staffing is 867.75 FTEs. For FY 2023, personnel costs, including salary/wages but not including retirement benefits or health insurance, were adopted at $102.6 million. Since the beginning of FY 2023, an additional 21.0 FTE (positions) have been added to the General Fund, increasing the projected FY 2023 personnel to 888.75 FTE, a 2.4% increase. This staffing level is assumed to be ongoing and extrapolated out through the remainder of the Plan as the new Personnel Services baseline budget. The projected Personnel Services costs for FY 2023 are $105.3 million, a 2.6% increase over the FY 2023 Adopted Budget. Adopted Budget General Fund Staffing Fiscal Year 2019 to Fiscal Year 2023 (in FTEs) The projected salary expenses are net anticipated salary savings from the City departments. Salary savings is the amount of salary expense that a department saves when a position is vacant for a period of time or filled at a lower salary level than the originally budgeted level. The LTFP includes the annualized costs of negotiated salary increase approved per the current Memoranda of Understanding (MOU) with each of the City’s employee groups. The MOUs vary in negotiated salary annual increases and vary in duration until they expire. Beyond the expiration of the current MOUs, the LTFP assumes wage inflation of three percent (3.0%) per year. 805.25 826.25 846.75 850.25 867.75 770 780 790 800 810 820 830 840 850 860 870 880 FY 2019 FY 2020 FY 2021 FY2022 FY2023Full-Time Equivalent (FTE)FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --2.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0%3.0% Projection 102.6$ 105.3$ 107.4$ 110.6$ 113.7$ 116.9$ 120.2$ 123.6$ 127.1$ 130.7$ 134.4$ 138.2$ Personnel Services Expenditures Ten-Year Forecast ($ In Millions) Page 152 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 18 Health Insurance The City currently offers qualified benefitted employees four medical plan options: Aetna Sharp Accountable Care Organization (ACO), Aetna Full Network HMO, the Aetna PPO, and Kaiser Health Maintenance Organization (HMO). For FY 2023, health insurance expenses are projected to total approximately $14.5 million. This represents an increase of $0.3 million or 2.1% from the fiscal year 2023 Adopted Budget. The expected growth rate for health care insurance costs is five percent (5.0%) through the term of the LTFP. Retirement Benefits California Public Employees’ Retirement System (CalPERS) The City contracts with CalPERS retirement benefits for all full-time benefitted employees. The City has two employee retirement plans (Miscellaneous and Safety), each with three tiers of employees based upon their start date within the CalPERS system and the City of Chula Vista. The Miscellaneous plan covers all qualified City employees except those which are considered public safety employees (Fire and Police departments). The Public Safety plan covers all qualified public safety employees. CalPERS uses the percentage of service credit earned in one year (3%, 2%, etc.) and the full retirement age (60, 50, etc.) to describe their tiers for benefit rates. Normal Costs & Unfunded Accrued Liability The Normal Costs and unfunded accrued liability (UAL) and payment amounts are used to calculate the City’s fiscal year pension contribution amounts. The City’s Normal Cost to CalPERS is the required employer contribution for the annual cost of service accrual for the upcoming fiscal year for active employees. This is amount of money the City will need to contribute for the current fiscal year towards pension costs. For FY 2023, the required estimated employer Normal Cost contribution for the Miscellaneous plan is $4.7 million and the Public Safety plan is $7.9 million, for a total cost of $12.6 million, respectively. For FY 2023 the UAL is $694,420 and is funded by the Section 115 Trust Fund contributions. Pension Obligation Bonds In February 2021, the City issued $350 million in pension obligation bonds (POBs) at historically low interest rates of 2.54% to refund the UAL based on the CalPERS Actuarial Valuation as of June 30, 2019. The issuance of the POBs provides the City several benefits, including: (1) generating cash flow savings to the City through historically low interest rates relative to the CalPERS discount rate assumption; (2) creating a repayment shape for the City’s pension liabilities that increases more gradually than currently mandated by CalPERS; (3) enhancing budget predictability and long-term fiscal sustainability by creating a smoother repayment shape at a lower level; (4) leveraging the projected savings to adequately fund various reserves; and, (5) setting aside a portion of the future savings into a new Section 115 Trust and Bond Call Fund to mitigate future pension and OPEB cost increases and potentially pay off (redeem) the POBs prior to maturity. FY 2023 Adopted FY 2023 Projection FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Growth Rate --4.1%5.0%5.0%5.0%5.0%5.0%5.0%5.0%5.0%5.0% Projection 14.2$ 14.5$ 15.1$ 15.8$ 16.6$ 17.4$ 18.3$ 19.2$ 20.2$ 21.2$ 22.3$ 23.4$ Health Insurance Expenditures Ten-Year Forecast ($ In Millions) Page 153 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 19 The majority of these pension cost savings are being set aside in an Internal Revenue Code Section 115 pension and bond call trust fund which will help mitigate future increases from pension and other post-employment benefits costs, such as a new UAL, or provide the City the opportunity to pay off the bonds earlier. Notably, the POBs were issued with a Standard and Poor’s Global Ratings extremely strong ‘AA’ credit rating. The City’s pension actuary consultant GovInvest recently prepared an analysis for the City that compares the funding status of the City’s CalPERS plans before and after the issuance of the POBs. For the year ended June 30, 2021, the City’s plans are 109.3% funded after the issuance of the POB. Prior to the POB the estimated plan funded status would have been at 78.0%. Based on the latest numbers from CalPERS it is anticipated for the year ended June 30, 2022, the City’s plans will be 98.1% funded, a significant improvement from the pre-issuance estimate of 69.3% funded status had the POBs not been issued. The following table shows the City’s General Fund total retirement costs and Section 115 Trust contributions since FY 2018. Total General Fund Retirement Costs & Section 115 Trust Contributions CalPERS valuation reports also provide the City with a five-year projection of future employer contribution amounts that the City utilizes in making long term projections. Based on the projections within the valuation reports, the City’s General Fund retirement contributions toward its normal costs are projected to increase significantly in FY 2024 followed by increases through the remainder of the LTFP period, shown in the table below. As a result of CalPERS recent investment performance and policy changes, a new unfunded pension $24.4 $27.1 $29.9 $31.8 $11.7 $13.3 $10.8 $9.0 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 FY 2018 Actual FY 2019 Actual FY 2020 Actual FY 2021 Actual FY 2022 Actual FY 2023 AdoptedMillions Retirement Costs Section 115 Trust Contributions Page 154 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 20 liability (UAL) as well as increasing normal pension costs may result. The LTFP will be updated to include the anticipated impacts of this change as CalPERS valuation reports are released. Part-Time Employees Retirement Benefits Part-time employees receive retirement benefits through Public Agency Retirement System (PARS). PARS is an alternative to Social Security for Part-Time, Seasonal, and Temporary employees. The City and employees both currently contribute 3.75% of salary towards the PARS contribution amount of 7.5%. CAPITAL EXPENDITURES To identify the City’s infrastructure and capital needs, the City developed an asset management plan. The asset management plan inventoried all City infrastructure and property assets, conducted condition assessments on each asset, prioritized the assets by risk level and importance, and performed a life cycle cost assessment. This information allowed the City to develop a cost estimate for the capital improvement program. The asset management plan sorted the City assets into three categories: red (high risk), yellow (medium risk), and green (low risk). This allows for the City to make necessary decisions on each asset (repair, replace, renovate, liquidate, shut down, relocate, etc.), and to budget available resources towards the repair and replacement of these assets. In light of the projected costs to repair and replace the City’s capital assets, the City Council placed a temporary ten-year ½ percent sales tax measure (Measure P) on the November 2016 ballot to address the high priority capital needs. In November 2016, Chula Vista voters approved Measure P. The sales tax was projected to generate $178 million in additional revenue over the ten-year period. To guide the expenditure of these revenues, the City developed the Intended Infrastructure, Facilities and Equipment Expenditure Plan (IFEEP) based on information from the City’s asset management plan. As the Measure P Sales Tax has a limited term, the IFEEP focuses on critical one-time items to address deferred maintenance and improve the safety of the City’s infrastructure. As the IFEEP focuses on one-time allocations, any additional operating costs for new or improved facilities, such as fire stations, will need to have an alternative funding source. Examples of ongoing operational costs include additional staff or increased utility costs. The LTFP includes the Measure P revenues as General Fund revenues. These revenues are paired with a corresponding transfer out of the General Fund to the Measure P fund. The transfer of the funds provides for accurate monitoring of the allocation and expenditure of these funds to ensure compliance with the original intent of the sales tax measure. The corresponding transfer results in a net zero impact to the General Fund. The LTFP includes minimal capital expenditures beyond those anticipated to be funded through Measure P funding. Information on Measure P allocations and projects can be found on the City’s website: https://www.chulavistaca.gov/departments/engineering. General Fund alternative funding sources, such as grants and transportation funds, support the City’s capital program. However, as the LTFP only addresses the General Fund, these resources and expenditures are not included in this report. Additional information related to the City’s capital program and funding sources can be found on the City’ website: https://www.chulavistaca.gov/departments/public-works/projects. Page 155 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 21 OUTSTANDING CITY DEBT The City has three outstanding Certificates of Participation (COP) that are funded with General Fund contributions, Public Facilities Development Improvement Funds (PFDIF), and/or the Residential Construction Tax Funds (RCT). The outstanding COPs consist of: the 2014 Refunding COP, the 2015 Refunding COP, and the 2016 Refunding COP. These COPs have refunded the outstanding principal of various earlier COPs which were used to fund the construction of the City’s Police Facility, Civic Center improvements, Corporation Yard?, Western Chula Vista Infrastructure projects, and Nature Center Improvements. In addition to the outstanding COPs, the City has four outstanding lease revenue bond issuances. These include: the Chula Vista Municipal Financing Authority (CVMFA) 2016 Lease Revenue Refunding Bonds (2016 Bonds); the 2017 Lease Revenue Bonds (2017 Bonds); and the CVMFA Lease Revenue Bonds (New Clean Renewable Energy Bonds) Series 2017A and Series 2017B (2017A and 2017B Bonds). The 2016 Bonds refunded earlier COPs that were used to fund Civic Center and Corporation Yard improvements. The 2017 Bonds (Measure P) were issued to finance infrastructure, facilities, and equipment; and the 2017A and 2017B Bonds were issued to finance photovoltaic (solar) energy systems at various City facilities. Funding from the Measure P Sales Tax will address the annual debt service for the 2017 Bonds. It is anticipated that savings in City utility costs will exceed the annual debt service for the 2017A and 2017B bonds, resulting in a positive impact to the General Fund. In 2021, the City issued approximately $350 million in Pension Obligation Bonds (POBs) to refund all or a portion of the UAL based on the CalPERS Actuarial Valuation as of June 30, 2019. More discussion on POBs is provided in the Expenditures section of this document. While the City has several outstanding bond issuances, the General Fund’s portion of the annual debt service payments is approximately $17.2 million for FY 2023. This represents approximately 6.6% of the General Fund revenues for FY 2023. Minimizing the annual General Fund debt service payments supports maintaining flexibility within the General Fund as a low percentage of the General Fund revenue is dedicated to long-term ongoing obligations. Additional information related to the City’s outstanding debt can be found on the City’s website: https://www.chulavistaca.gov/departments/finance/financial-reports. Page 156 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 22 FACTORS NOT INCLUDED IN THE PLAN Development Impacts As new major developments are proposed in the City, each developer is required to submit a fiscal impact analysis to ensure that the City’s revenues generated from the project will meet or exceed the anticipated expenditures. However, the actual timing of the impact from new development in revenues and expenditures is difficult to predict. As the development projects vary, such as new hotels or new housing, various factors influence the impact of the projects. The timing of the revenues related to new development can vary greatly depending on how fast the market can absorb the new inventory and the economic condition throughout the development process. Staff is currently working on developing an updated fiscal impact model to provide projections based on the best information available. Economic Downturn(s) As previously discussed, the potential for an economic downturn is plausible. However, the LTFP does not attempt to incorporate the impact of a downturn as the timing and duration of a downturn is difficult to project. While the growth projections incorporated into the LTFP are conservative, the growth factors will be re-evaluated as needed based upon future economic indicators and as data becomes available. Page 157 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 23 TEN-YEAR PROJECTIONS The following table projects revenue and expenditure categories for the City’s General Fund for Fiscal Years 2024 – 2033. Page 158 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 24 Notes: (1) Major Discretionary Revenues is the total of the following budget revenue categories: Property Tax, Sales Tax, Measure P Sales Tax, Measure A Sales Tax, Property Tax in lieu of VLF (VLF), Franchise Fees, Transient Occupancy Tax (TOT), and Utility Users’ Tax (UUT). (2) Other Revenues is the total of the following budget revenue categories: Development Revenue, Licenses and Permits, Fines, Forfeitures & Penalties, Use of Money and Property, Other Local Taxes, Police Grants, Other Agency Revenue, Charges for Services, Interfund Reimbursements, Other Revenues - Miscellaneous, and Transfers from Other Funds. (3) New Development Revenues & New Development Expenditures are for revenues and expenditures projected for the Otay Ranch Village 8 West Development, Cinematic Arts Academic Center & Library, and the Former Sears Site at Chula Vista Center Mixed-Use Development anticipated to come online during LTFP term. (4) Other Expenditures is the total of the following expenditure categories: Supplies and Services, Utilities, Other Expenses, Equipment, Internal Services, and Transfers/Debt Service. Summary The LTFP projects future structural deficits absent further action by the City to bridge the funding gaps. Based on baseline projections, growth in expenditures is anticipated to outpace the growth in revenues over the LTFP period. This long-term structural shortfall generates deficits the first eight years of the LTFP. The overall General Fund deficits are projected to fluctuate beginning in FY 2024 at approximately $2.6 million and ending in FY 2031 at approximately $4.6 million. Revenues are projected to equal expenditures in FY 2032 and FY2033. GENERAL FUND RESERVES City Council Policy No. 220-03 establishes a General Fund Operating Reserve Fund for the City. The General Fund Operating Reserve (Operating Reserve) represents unrestricted resources or unassigned balance available for appropriations by the City Council to address extraordinary needs. The policy sets the long-term goal of building a General Fund Operating Reserve of no less than 15% of the City’s operating expenditures. Per the policy, the Operating Reserve is to be used to provide temporary financing for unanticipated extraordinary needs of an emergency nature, such as major storm drain repairs, litigation, or settlement costs or an unexpected liability created by Federal or State legislative action. Authorized use of this Operating Reserve requires approval by four/fifths vote of the City Council. In addition to the Operating Reserve, Policy No. 220-03 established the Economic Contingency Reserve (Contingency Reserve) and the Catastrophic Event Reserve (Catastrophic Reserve). The funding goal for these reserves is 5% and 3% of the annual operating budget, respectively. The Contingency Reserve is funding set aside to mitigate a significant downturn in the economy; while the Catastrophic Reserve is to be used to address unexpected expenses related to a major natural disaster in the City. Usage of either of these funds requires authorization by four/fifths of the City Council. It is anticipated that the funding of these reserves would be a long-term goal and would be funded from unanticipated revenues or expenditure savings. The City Council specifically amended this policy on November 3, 2020 with the adoption of Pension & OPEB Reserve Fund Policy No. 220-09, which provides, in relevant part, that: i. Allocations for the Section 115 Trust, referred to as the Pension Reserve Fund (“PRF”), will only occur after the full funding of the 15% General Fund Operating Reserves; and ii. Upon meeting the 15% General Fund Operating Reserves, 75% of all future surplus funds Page 159 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY 2024-2033 City of Chula Vista - General Fund Long-Term Financial Plan 25 will be transferred to the PRF, and the remaining 25% will be allocated to the Economic Contingency Reserves and Catastrophic Event Reserves in accordance with this Policy; and iii. In the event all three General fund reserve accounts are fully funded at the stated policy percentage, 100% of surplus funds will be transferred to the PRF until it reaches 15% of General Fund Expenses (excluding Measure A & P, identical dollar amount to the General Fund Operating Reserves). The annual budget does not include a line item to build reserves; all anticipated revenues have been budgeted in order to balance the budget. Higher reserve levels will help mitigate the negative impact on revenues from economic fluctuations, support debt service coverage ratios, and provide a resource to fund unforeseen expenditure requirements. The following chart depicts the General Fund operating reserves since Fiscal Year 2017 as a percentage of the respective adopted budgets. As the reserve is intended to be a gauge of the General Fund, Measure P, and Measure A funding are not included in the calculation of the General Fund Reserve. General Fund Operating Reserve Fiscal Year 2017 to Fiscal Year 2022 13.2% 15.4%15.1%16.0%15.0%15.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% FY 17 FY 18 FY 19 FY20 FY21 FY 22Reserve PercentageFiscal Year Reserve Percentage Reserve Policy Target Page 160 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY2019 City of Chula Vista General Fund Long-Term Financial Plan 26 POTENTIAL SOLUTIONS FOR ADDRESSING PROJECTED DEFICITS The LTFP projects future deficits throughout the Plan period, with increases in expenditures projected to outpace revenue growth. Below are possible actions that could be further explored in order to develop potential actions to mitigating future deficits. • Technology – Identify and purchase technology that provides a positive return on its public investment. Technology can increase service levels to the constituents without raising costs to the City (ex. Third Party Mobile Applications); create new revenues to the City that exceed its costs; or reduce costs overall through the replacement of manual processes (ex. provide more services with the same number of staff). • Efficiency – Evaluate current City processes for potential efficiencies in delivering City services. Efficiencies could allow for the delivery of City services for less cost or provide greater benefits to the public. • Policies for use of One-Time Funds – Many cities establish policies to guide the usage of one-time funds so that as grants, donations, and unexpected revenues are received, the funds are allocated to the highest priority in the City automatically. A typical one-time funds policy would first allocate additional revenues to a reserve fund until the minimum required reserve is met, a vehicle and equipment replacement fund, and finally a comprehensive asset management program (capital projects). Other potential uses of one-time funds include projects and services that create ongoing revenue streams (ex. solar projects, business attraction incentives, etc.). • Use of Public Private Partnerships – Public private partnerships are cooperative agreements between a government agency (City), and the private sector to deliver a service or a project and can take a variety of forms. One great example of this type of partnership currently taking place in the City of Chula Vista is within the City’s library system. Several non-profit organizations partner with the City to provide services to the public at local libraries at low or no cost. Other creative public-private partnerships that have been used by other cities include adopt-a-park programs where residents or local organizations volunteer to maintain or rehabilitate an existing park (e.g., Living Coast Discovery Center, Olympic Training Center). • Internship/Volunteer Programs – Utilize volunteers and internships to support City staff with one-time projects, special events, research, and analysis. While these individuals will not perform day-to-day duties of current City employees, they are able to add value without significant cost. A robust internship/volunteer program can create significant financial benefits to the City while providing the individuals volunteering valuable experience and skills that can make them more attractive when seeking full-time employment. • Contract Services – Cities commonly contract out for a variety of services including but not limited to: legal; engineering; financial; and specialty services, typically in cases where the City does not possess the in-house expertise to perform the function most efficiently. • Service Levels – Service level can be defined simply as the quantity and quality of the services provided by a City. As economic cycles occur and City revenues rise and fall, the most difficult job for a City is to maintain service levels. The structural deficit detailed in the LTFP demonstrates the severity of the projected fiscal condition of the City and the importance of balancing service levels with financial resources. The City should undertake a comprehensive Page 161 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda FY2019 City of Chula Vista General Fund Long-Term Financial Plan 27 review of all the services provided by the City. By defining these services and setting a minimum standard for the delivery of those services, a model could be developed that prioritizes where potential reductions in service level could take place with the least overall impact to the residents of Chula Vista. • Fees/Cost Recovery – In general, local governments provide many services to the general population at no charge (ex. Police, Fire, Road Maintenance, Park Maintenance, etc.). These services are paid for with general revenues that the City receives including sales tax, property tax, and a variety of other general revenue sources. Cities also provide many services that are a specific benefit to the party requesting the service. The parties benefiting from these special services are charged a fee. Reviewing development plans, inspecting buildings, and renting a park space are all examples of services the City provides that are paid directly by a resident or developer. The City’s current Master Fee Schedule was adopted to set the fees for all services the City provides directly to individuals, and businesses. In practice, fees should be set to recover all costs. Some services are subsidized by the City in order to encourage participation in a program or event. It is important to review all subsidized fees periodically to assess the feasibility of continuing to subsidize these services in the future. POTENTIAL SOLUTIONS TO RESOLVE STRUCTURAL INFRASTRUCTURE DEFICIT The City’s assets continue to age and will require additional repair and rehabilitation in the coming decade and beyond. Measure P, passed in November 2016, continues to provide much needed funding for a significant portion of the City’s Asset Management Program over the next ten years, but will expire in April 2027. While Measure P does address a significant amount of deferred maintenance items, the infrastructure needs of the City identified in the asset management exceed the funding anticipated to be generated from Measure P. The City will need to continue to pursue additional funding sources to address the City’s capital needs. Many of the solutions mentioned in the operating section overlap into the infrastructure section. These include Public/Private Partnerships, Competitive Purchasing, Use of One-Time Funds, and Service Levels. CONCLUSION The LTFP presents a baseline scenario for City General Fund resources over a ten-year period based on currently available information. Based on projections within the LTFP, the City will be facing General Fund structural deficits in the first eight years of the 10-year LTFP period. In the absence of identifying new revenues or reducing ongoing expenditures, the structural deficits will lower the City’s unassigned (fund) balance. In order to preserve and maintain the valuable resources, current service levels, and quality of life the community has enjoyed over the years, the City will need to make a concerted effort to adopt several of the solutions mentioned above. Proactive planning and a commitment to a fiscally sustainable service delivery model will be required. Page 162 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Introduction to the Budget 2023 City Council Workshop Series February 7, 2023 Page 163 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2 Agenda Budget Overview Purpose Timeline Guiding Documents City Charter & Municipal Code Council Policies & Financial Policies Resources & Uses Revenues and Reserves Expenditures Page 164 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 3 The Budget Central policy document Spending plan Management and evaluation tool Communication tool Page 165 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 4 Annual Budget Cycle Budget Cycle Long-Term Financial Plan Budget Development Public Hearings and Workshops Budget Adoption Budget Monitoring Page 166 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 5 Budget Timeline •Long-Term Financial PlanFebruary 7th •FY 2022-23 Second Quarter Financial ReportFebruary 21st •Public community workshopApril 19th •Public community workshopApril 26th •Proposed BudgetMay 9th •Public Hearing and Adoption of BudgetMay 23rd •FY 2022-23 Third Quarter Financial ReportJune 6th •GANN Limit ApprovalJune 13th Page 167 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 6 This Photo by Unknown Author is licensed under CC BY-SA Guiding Documents •City Charter •Municipal Code •Labor Agreements •Council Policies Page 168 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Budget Considerations •Fund restrictions –Fund type (ex: endowments, special purpose funds), grant terms (ex: "Uniform Guidance) •State laws –California Constitution (ex: City personal income tax is illegal) •Gann Limit (1979) –Tax expenditure limits •Proposition 13 (1978) –Limits on property tax growth (2%) and assessment percentage (1%) •Proposition 218 (1996) –Ensure all taxes and most charges on property owners are subject to voter approval •Proposition 26 (2010) –Clarifications on taxes vs. charges, fees, fines benefit assessments •General versus special taxes •Local measures –Measures A & P (sales tax), Q (Cannabis) 7Page 169 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Types of Budgeted Funds 8 Governmental •General Fund •Capital Projects •Debt Service •Special Revenue Proprietary •Enterprise •Internal Service Page 170 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda All Funds Resources –FY 2023 9 Fiscal Year 2023 Adopted Budget (In Millions) Page 171 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda GENERAL FUND REVENUES Page 172 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 11 Major GF Revenues Revenue Source General Fund Adopted FY23 % General Fund Revenues Sales Tax 1% sales tax on tangible goods $42.3M 17.0% Property Tax Property tax roll, based on assessed value $40.9M 16.4% Motor Vehicle License Fee (MVLF) State allocation, additional property tax in lieu of vehicle registration fees $26.9M 10.8% Measure P (Sales Tax)0.5% sales tax on tangible goods $25.9M 10.4% Measure A (Sales Tax)0.5% sales tax on tangible goods $25.9M 10.4% Franchise Fees Agreements with Cox, SDGE, AT&T and Republic Services for use of public right-of- way $14.5M 5.8% Transient Occupancy Tax (TOT) 10% tax on hotel/motel/campsite rental revenues $5.2M 2.1% Utility Users’ Tax (UUT)Tax on usage of natural gas, electric and telecommunications $3.8M 1.5% Total $185.5M 74.5% Page 173 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 12 City Share of Sales Tax Sales Tax (General Fund) •Bradley-Burns Sales Tax •1% City share from County pool •Discretionary use of funds •The County Pool is the tax reported by the taxpayer to be distributed to each jurisdiction in that county on a pro-rata share of taxable sales. Measure A Sales Tax (Measure A Fund) •District Tax •Voters approved in 2018 to begin October 1, 2018 •General Fund passthrough •Restricted funds for public safety staffing and services •Citizen’s Oversight Commission Measure P Sales Tax (Measure P Fund) •District Tax •Voters approved in 2016 to begin April 1, 2017 •General Fund passthrough •Restricted funds for high priority deferred maintenance and capital needs (infrastructure, fleet, technology) •Citizen’s Oversight Commission •Sunsets in 2027 Page 174 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Percent Sales Tax –State & County Pools •Increase from ongoing shift from brick-and-mortar retail to internet purchases, exacerbated by the pandemic •Increase form Wayfair/Assembly Bill 147 legislative change that made additional internet purchases taxable •Decrease from major retailer changed structure, resulting in shift of revenue from pools to fulfillment centers in specific jurisdiction Brick and Mortar County Pool Brick and Mortar Page 175 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 14 Per Capita Sales Page 176 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 15 Sales Taxes vs. District Taxes •District Taxes (Measures A & P) follow the merchandise. •Distributed to the district where the goods are delivered (and presumably used) •Example: Car buyer pays total sales tax rate where vehicle will be registered Sales Tax Allocated to city where dealership is located District Taxes (Measures A & P) Allocated to city where the vehicle is registered (city of residence) Page 177 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda •General Fund revenues (discretionary) •Stays local to County, City, Special Districts, etc. •Includes special taxes, special assessments •City receives property tax allocations monthly •Taxes due November and February, annually 16 Property Tax Page 178 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 17 County of San Diego Allocations Page 179 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda •Taxable Property –Secured property (real property/land), unsecured property (boats, business fixtures, mobile homes), utility property •Tax Assessment –Limited to 1% of assessed value of property; annual maximum increase lesser of 2% or annual CPI (Proposition 13) •Allocation –Assembly Bill 8: City share of the 1% General Property Tax (County pool) is based on property taxes levied in 1970s –Receive what you got prior year, plus the change in current year for population growth in your jurisdiction 18 Property Tax Page 180 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda GENERAL FUND EXPENDITURES Page 181 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2023 General Fund Expenditures by Budget Category (Excludes Transfers Out) 20 Personnel Services, 76% Supplies & Services, 12% Utilities, 4% Other Expenses, 4% Other Capital, 0% Internal Service, 2% Non-CIP Proj Expense, 2% CIP Project Expense, 0%Page 182 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 2023 General Fund Expenditures by Department (Excludes transfers out) 21Page 183 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Police $42.0M Fire $22.8M Parks and Recreation $5.5M Information Technology Srvcs $3.8M Public Works $2.7M Finance $2.4M Administration $2.4M City Attorney $2.4M Human Resources $2.1M Library $2.1M Animal Care Facility $1.6M City Council $1.6M City Clerk $1.3M Economic Development $0.9M Development Services $0.3M Engineering & Capital Projects $0.0M Other $19.9M 22 2023 General Fund Net Cost by Department (Excludes transfers out) Other ($19.9M) Detail Page 184 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Major General Fund Expenditures •Personnel Services –76% of General Fund expenses in FY 2023 when including health insurance and retirement costs –Driven by labor agreements with City bargaining groups –Health care cost increases (“Flex”) –Pension Costs, mitigated in part by POBs –Vacancies / Salary savings •Supplies & Services –Contracts with professional services •Utilities –Water, natural gas, electricity 23Page 185 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 24 City Reserves RESERVE TARGET PERCENTAGE General Fund Operating Reserve 15% Economic Contingency Reserve 5% Catastrophic Event Reserve 3% Pension & Other Post-Employment Benefits Reserve 15% Measure A Reserve 60 days of operating budget Page 186 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda General Fund Operating Reserve 25Page 187 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda OTHER HIGHLIGHTS Page 188 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda City Pension Costs •In recent years, large Unfunded Accrued Liability to CalPERS retirement system •Feb. 2021, City issued $355 million in Pension Obligation Bonds (POBs) at an interest rate of 2.54%, to pay off UAL* •Policy to set aside 75% of any surpluses generated into the Pension Reserve Fund (Section 115 Trust) to fund future liabilities/UAL that may arise •Potential for new UALs to arise based on changes in staffing/labor agreements, CalPERS market performance, other factors 27*as of June 30, 2019 CalPERS valuation report Page 189 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Pension Obligation Bonds 28 -$10,000,000 $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 2022-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 2035-36 2036-37 2037-38 2038-39 2039-40 2040-41 2041-42 2042-43 2043-44 2044-45 2045-46 2046-47 2047-48 2048-49 2049-50Projected UAL/POB Payment Schedule June 30, 2022 UAL Payment Post-POB POB Debt Service UAL Pmt Pre-POB CalPERS schedule Page 190 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Operating Budget vs. Capital Budget •Operating Budget –Ongoing expenditures = ongoing revenues –One-time revenues fund one-time expenditures •Capital Improvement Projects (CIP) Budget –The capital budget is for long-term capital improvements, facilities, and equipment where revenues are collected over time. Capital programs often extend beyond a single fiscal year and because of this capital budgets often include expenditures funded by both current year revenues and funds previously collected. –Procurement, construction or installation of facilities or related equipment which improves, preserves, enhances or modernizes the City’s provision of municipal services –Useful life of at least 5 years, costs in excess of $50K 29Page 191 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CIP Sources –FY 2021-2023 30 Funding Source FY 2021 FY 2022 FY 2023 American Rescue Plan (ARPA) -$ -$ 9,500,000$ Capital Improvement Projects (CIP) Fund 202,052 - 11,700,000 State Gas Tax/Road Maintenance and Rehabilitation 8,092,505 7,751,588 9,860,065 Measure P 3,674,630 27,452,933 9,659,500 Sewer Facility Replacement Fund 2,650,000 2,754,000 782,000 TransNet County Sales Tax 6,224,329 7,204,500 8,799,500 Other 1,031,000 4,057,841 229,940 Total 21,874,516$ 49,220,862$ 50,531,005$ Page 192 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda CIP Uses –FY 2021-2023 31 Project Type FY 2021 FY 2022 FY 2023 Buildings 2,957,582$ 20,720,338$ 26,257,500$ Drainage 50,000 4,124,790 3,414,000 General Government 703,052 764,000 310,000 Parks 717,048 2,825,636 1,359,940 Roadway 14,796,834 16,679,098 18,709,565 Wastewater 2,650,000 4,107,000 480,000 Total 21,874,516$ 49,220,862$ 50,531,005$ Page 193 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda •Quarterly Financial Reports •Mid-year budget amendments •Mid-year personnel changes •Updates to Long-Term Financial Plan 32 Budget Monitoring Page 194 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda 33 Budget Timeline •Long-Term Financial PlanFebruary 7th •FY 2022-23 Second Quarter Financial ReportFebruary 21st •Public community workshopApril 19th •Public community workshopApril 26th •Proposed BudgetMay 9th •Public Hearing and Adoption of BudgetMay 23rd •FY 2022-23 Third Quarter Financial ReportJune 6th •GANN Limit ApprovalJune 13th Page 195 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda COUNCIL FEEDBACK Page 196 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda General Fund Long Term Financial Plan 2023 City Council Workshop Series February 7, 2023 Page 197 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda General Fund Long-Term Financial Plan 2 •Applies to General Fund only •Projects funding surpluses/shortfalls •Encourages discussion to proactively address the City’s long-range funding needs •Not a budget, but highlights the need to plan for the allocation of City resources for continued delivery of core services at current service levels The General Fund Long-Term Financial Plan (LTFP) serves as a long-range fiscal planning tool Page 198 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Key Economic Factors •Gross Domestic Product •Inflation •Federal interest rates •Employment levels 3Page 199 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda National Growth –Gross Domestic Product 4Page 200 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Consumer Prices / Inflation 5Page 201 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Federal Interest Rates 6Page 202 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Housing Market 7Page 203 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Economic Forecast 8Page 204 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda LTFP Framework 9Page 205 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda LTFP Assumptions •Current labor agreements •New facilities •Planned commitments •Sunset of Measure P •Conservative projections •No Economic downturns/recessions 10 This Photo by Unknown Author is licensed under CC BY-SA Page 206 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda REVENUES 11Page 207 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda LTFP Revenue Assumptions 12 Revenue Category FY 2024 Growth Rate FY 2025 –FY 2033 Growth Rate Property Tax 5%4% Motor Vehicle License Fee (MVLF)5%4% Sales Tax 2%3% Measure P (Sales Tax)2%3% Measure A (Sales Tax)2%3% Franchise Fees 2%2% Transient Occupancy Tax (TOT)2%2% Utility Users’ Tax (UUT)0.5%0.5% Page 208 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Revenue Projections (FY 2024 –FY 2027) 13Page 209 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Revenue Projections (FY 2028 –FY2033) 14Page 210 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda EXPENDITURES 15Page 211 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda LTFP Expenditure Assumptions 16 Expenditure Category FY 2024 Growth Rate FY 2025 Growth Rate FY 2026 –FY 2033 Growth Rate Personnel Services 2%3%3% Health Insurance 4.1%5%5% Retirement 14.1%0.1%0.7% -2.8% Supplies and Services 4%3%2% Utilities 5%5%5% Internal Services 2%2%2% Page 212 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Pension Related Costs 17Page 213 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Transfers Out Equal to Revenue Received Measure A Measure P RV Sales Tax Transfers Out Grant Match Debt Service Section 115 Trust Contribution 18Page 214 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda New Development Expenditures •Bayfront Fire Station •Otay Ranch Village 8 West & Fire Station •Cinematic Arts Academic Center & Library •CV Center Sears Site Mixed Use Development 19Page 215 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Expenditure Projections (FY 2024 –FY 2027 in millions) 20Page 216 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Expenditure Projections (FY 2028 –FY 2033 in millions) 21Page 217 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda SUMMARY 22Page 218 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Projection Summary 23Page 219 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Projection Summary 24Page 220 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda Projection Summary 25Page 221 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda General Fund Long Term Financial Plan 2023 City Council Workshop Series February 7, 2023 Page 222 of 222 City of Chula Vista City Council February 7, 2023 Post Agenda