NEW ISSUE-BOOK-ENTRY ONLY S&P: "AA" See "RATING" herein. In the opinion of Jones Han A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 2017 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, interest on the 2017 Bonds is exempt from California personal income taxes. For a more complete discussion ofthe tax aspects, see "TAX MATTERS" herein. $9,785,000 BUENA PARK PUBLIC FINANCING AUTHORITY 2017 LEASE REVENUE BONDS (FIRE STATION HEADQUARTERS PROJECT) Dated: Date of Delivery Due: May 1, as shown on the inside front cover The Buena Park Public Financing Authority (the "Authority") will issue its 2017 Lease Revenue Bonds (Fire Station Headquarters Project) (the "2017 Bonds") under an Indenture of Trust, dated as of April 1, 2017 (the "Indenture"), by and between the Authority and MUFG Union Bank, N.A, as trustee (the "Trustee"). Proceeds of the 2017 Bonds will be used to (i) finance a portion of the costs of acquisition, construction and improvement of a new City-owned Fire Station No. 61 to be located at 7740 La Palma Avenue in the City, in replacement for the existing fire station located at 8081 Western Avenue in the City, as well the costs of construction and installation of additional improvements to Fire Station No. 63 located at 9120 Holder Street in the City (collectively, the "Fire Station Projects"), (ii) fund capitalized interest on the 2017 Bonds through and including May 1, 2019, and (iii) pay costs of issuance of the 2017 Bonds. The 2017 Bonds will be payable solely from and secured by Revenues and certain funds and accounts held under the Indenture. Revenues consist primarily of certain lease payments (the "Lease Payments") to be made by the City to the Authority pursuant to a Lease Agreement, dated as of April 1, 2017 (the "Lease"), by and between the Authority, as lessor, and the City, as lessee, for subleasing of certain real property (the "Leased Property"). The City covenants under the Lease to take such action as necessary to include the Lease Payments and Additional Rental Payments (as defined in the Lease) in its annual budget and to make all necessary appropriations therefor, subject to abatement of such payments. The 2017 Bonds will be subject to optional redemption and special mandatory redemption prior to their maturity as described in this Official Statement. The 2017 Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DIC"). DIC will act as securities depository of the 2017 Bonds. Individual purchases of the 2017 Bonds may be made in book-entry form only, in denominations of $5,000 each or any integral multiple thereof Purchasers will not receive certificates representing their interest in the 2017 Bonds purchased. Principal of and interest on the 2017 Bonds will be paid directly to DIC by the Trustee. Principal of the 2017 Bonds will be payable on their maturity dates set forth on the inside front cover hereof Interest on the 2017 Bonds will be payable on May 1 and November 1 of each year, commencing November 1, 2017. Upon its receipt of payments of principal and interest, DIC will in turn be obligated to remit such principal and interest to DIC participants for subsequent disbursement to the beneficial owners of the 2017 Bonds as described herein. THE 2017 BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE THE AUTHORITY HAS NO TAXING POWER THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS AND ADDITIONAL RENTAL PAYMENTS UNDER THE LEASE WILL NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION OR THE CITY WILL BE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION. NEITHER THE 2017 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS AND ADDITIONAL RENTAL PAYMENTS UNDER THE LEASE WILL CONSTITUTE AN INDEBTEDNESS OF THE CITY, STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS. See the section of this Official Statement entitled "BONDOWNERS' RISKS" for a discussion of certain of the risk factors that should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the 2017 Bonds. This cover page contains information for quick reference only. It is not a summary of this issue. Potential purchasers must read the entire Official Statement to obtain information essential to making an informed investment decision. The 2017 Bonds are offered when, as and if issued, subject to the approval as to their legality by Jones Han A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed on for the Authority and the City by Richards, Watson & Gershon, Disclosure Counsel, and as Authority General Counsel and City Attorney. It is anticipated that the 2017 Bonds will be available for delivery in book-entry form through the facilities ofDTC on or about April 18, 2017.
Dated: March 23, 2017 MATURITY SCHEDULE
$9,785,000 BUENA PARK PUBLIC F1NANCING AUTHORITY 2017 LEASE REVENUE BONDS (TIRE STATION HEADQUARTERS PROJECT)
Maturity Date Principal Interest CUSIP1 (May 1) Amount Rate Yield Price (Base: 119175) 2020 $ 375,000 3000% 1380% 104.800% AAS 2021 385,000 4.000 1.580 109.425 AB3 2022 400,000 5.000 1.840 115.131 AC! 2023 425,000 5.000 2.050 116.667 AD9 2024 445,000 5.000 2.230 117.944 AE7 2025 465,000 5.000 2.370 119.140 AF4 2026 490,000 5.000 2.500 120.107 AG2 2027 515,000 5.000 2.650 120.589 AHO 2028 540,000 4.000 2.80Q(l) 110.435 (l) AJ6 2029 560,000 3.000 3 080 99.199 AK3 2030 580,000 3.000 3.230 97.567 ALI 2031 595,000 3.125 3.340 97.605 AM9 2032 615,000 3.250 3.470 97.438 AN7 2033 635,000 3.375 3.560 97.753 AP2 2034 655,000 3.500 3.650 98.108 AQO 2035 680,000 3.500 3.700 97.383 AR8 2036 700,000 3.625 3.750 98.308 AS6 2037 725,000 3.750 3.786 99.496 AT4
(1) Yield and price calculated to first optional redemption date of May 1, 2027, at par. t CUSIP is a registered trademark of the American Bankers Association. CUSIP data in this Official Statement is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association. CU SIP © 2017 CUSIP Global Services. All rights reserved. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers are provided for convenience of reference only. None of the Authority, the City nor the Undenvriter take any responsibility for the accuracy of such numbers. BUENA PARK PUBLIC FINANCING AUTHORITY
CITY OF BUENA PARK, CALIFORNIA
City Couucil/Authority Board of Directors Elizabeth Swift, Ed.D., Mayor/Chair of the Authority Virginia Vaughn, Mayor Pro Tem/Vice Chair ofthe Authority Steve Berry, Councilmember/Director Arthur C. Brown, Councilmember/Director Fred R. Smith, Councilmember/Director
City/Authority Staff
James B. Vanderpool, City Manager/Executive Director Patrick K. Bobko, City Attorney/General Counsel Sung Hyun, Director ofFinance-City Treasurer/Authority Treasurer David Jacobs, PE, LS, Director ofPublic Works Shalice Tilton, City Clerk/Secretary
SPECIAL SERVICES
Bond Counsel
Jones Hall, A Professional Law Corporation San Francisco, California
Disclosure Counsel and City Attorney
Richards Watson & Gershon, A Professional Corporation Los Angeles, California
Trustee
MUFG Union Bank, N.A. Los Angeles, California
Municipal Advisor & Dissemination Agent
Harrell & Company Advisors, LLC Orange, California No dealer, broker, salesperson or other person has been authorized by the Authority or the City to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy any 2017 Bonds by any person in any jurisdiction in which such offer of solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful for such person to make such an offer, solicitation or sale. This Official Statern ent is not to be construed as a contract with the purchasers of the 2017 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matter of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of fact.
Certain statements included or incorporated by reference in this Official Statement constitute "forward looking statements." Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget," or other similar words and include, but are not limited to, statements under the captions "THE CITY," "CITY FINANCIAL INFORMATION" and "BONDOWNERS' RISKS - State Finances." The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. While the City has agreed to provide certain on-going financial and other data pursuant to a continuing disclosure agreement (see "CONTINUING DISCLOSURE"), neither the Authority nor the City plans to issue any updates or revisions to those forward-looking statements if or when their expectations or events, conditions or circumstances on which such statements are based change.
The information set forth in this Official Statement has been obtained from the Authority, the City and other sources that are believed to be reliable, but it is not guaranteed as to its accuracy or completeness. The information and expressions of opinions herein are subject to change without notice, and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the City since the date hereof All summaries of the resolutions, the Indenture, laws and statutes or other documents are made subject to the provisions of such documents, respectively, and do not purport to be complete statements of any or all of such provisions.
Hilltop Securities Inc. (the "Underwriter") has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, the Underwriter's responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
This Official Statement is submitted in connection with the sale of the 2017 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.
The 2017 Bonds have not been registered under the Securities Act of 1933, as amended, nor has the Indenture been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon an exception from the registration requirements contained in such acts. The 2017 Bonds have not been registered or qualified under the securities laws of any state.
IN CONNECTION WITH THE OFFERING OF THE 2017 BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANYTIME.
THE UNDERWRITER MAY OFFER AND SELL 2017 BONDS TO CERTAIN DEALERS AND OTHERS AT A PRICE LOWER THAN THE OFFERING PRICE. THE OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE ORIGINAL PURCHASERS.
The City maintains a website. The information on such website is not part of this Official Statement and is not intended to be relied on by investors with respect to the 2017 Bonds unless specifically set forth or incorporated herein. TABLE OF CONTENTS
INTRODUCTION...... 1 General ...... 1 Security for 2017 Bonds ...... 1 No Debt Service Reserve for 2017 Bonds ...... 2 City ...... 2 Professionals Involved in the Offering ...... 3 Continuing Disclosure ...... 3 Summaries of Documents ...... 3 Other Information ...... 3 PLAN OF FINANCE ...... 4 SOURCES AND USES OF FUNDS ...... 5 ANNUAL DEBT SERVICE ...... 6 2017 BONDS ...... 6 General ...... 6 Transfer, Registration, and Exchange ...... 7 Redemption ...... 8 Book-Entry Only System ...... 10 SECURITYFOR2017BONDS ...... 11 Pledge of Revenues Under Indenture ...... 11 Assigmnent to Trustee ...... 11 Bond Fund ...... 12 Capitalized Interest ...... 12 Lease Payments; Covenant to Appropriate ...... 12 Abatement; Insurance ...... 13 Substitution or Release of Leased Property ...... 15 Additional Bonds ...... 16 LEASED PROPERTY ...... 17 THE CITY ...... 17 General ...... 17 City Govermnent ...... 17 Population ...... 19 Employment and Industry ...... 20 Largest Employers ...... 21 Per Capital Personal Income ...... 21 Taxable Transactions ...... 22 Building Activity ...... 23 Govermnent Services and Community Facilities ...... 24 Transportation ...... 24 CITY FINANCIAL INFORMATION ...... 25 General ...... 25 Fiscal Policies ...... 26 Financial Statements (General Fund) ...... 28 Budgetary Process; General Fund Budget...... 31 Primary General Fund Tax Revenue Sources ...... 33 Significant General Fund Revenue Source: Charges for Services ...... 43 Investment Policy and Portfolio ...... 43 Long-Term Liabilities ...... 45 Direct and Overlapping Debt...... 47
-1- TABLE OF CONTENTS (cont.)
Pension Plans ...... 48 Other Post-Employment Benefits (Other Than Pensions) ...... 57 Employee Relations ...... 59 Risk Management ...... 60 THE AUTHORITY ...... 60 BONDOWNERS' RISKS ...... 61 Limited Obligations with Respect to 2017 Bonds ...... 61 No Reserve Fund ...... 61 Abatement ...... 61 Risk of Uninsured Loss ...... 62 Limited Recourse on Lease Default; No Right of Acceleration ...... 62 Limitations on Remedies ...... 62 City General Fund ...... 63 State Finances ...... 63 Natural Calamities; Earthquakes; Flood Hazard Zone Designation ...... 64 Bankruptcy ...... 65 Investment of Funds ...... 66 Future Initiative and Legislation ...... 66 Loss of Tax Exemption for 2017 Bonds ...... 66 Secondary Market ...... 67 STATE CONSTITUTIONAL LIMITATIONS ON CITY REVENUES AND APPROPRIATIONS ...... 67 State Initiative Measures Generally ...... 67 Property Tax Limitations - Article XIIIA ...... 67 Article XIIIA Implementing Legislation ...... 68 Challenges to Article XIIIA ...... 68 Appropriations Limitations - Article XIIIB ...... 68 Propositions 218 and 26 - Article XIIIC and Article XIIID ...... 69 Proposition 62 ...... 70 Proposition lA ...... 71 Future Initiatives ...... 71 NO LITIGATION ...... 71 CONTINUING DISCLOSURE ...... 71 CERTAIN LEGAL MATTERS ...... 73 TAX MATTERS ...... 73 Tax Exemption ...... 73 Other Tax Considerations ...... 74 UNDERWRITING ...... 74 RATING ...... 75 MISCELLANEOUS ...... 75
APPENDIX A- CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016 ...... A-1 APPENDIX B - FORM OF BOND COUNSEL OPINION ...... B-1 APPENDIX C-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ...... C-1 APPENDIXD-DTC'S BOOK-ENTRY ONLY SYSTEM...... D-1 APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT ...... E-1
-11- $9,785,000 BUENA PARK PUBLIC FINANCING AUTHORITY 2017 LEASE REVENUE BONDS (FIRE STATION HEADQUARTERS PROJECT)
INTRODUCTION
This introduction does not purport to be complete, and reference is made to the body of this Official Statement, appendices and the documents referred to herein for more complete information with respect to matters concerning the 2017 Bonds. Potential investors are encouraged to read the entire Official Statement. Capitalized terms used in this Official Statement and not defined herein shall have the meanings set forth in "APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
General
This Official Statement, including the cover page, inside front cover and appendices, is provided to furnish information in connection with the sale by the Buena Park Public Financing Authority (the "Authority") of its $9,785,000 aggregate principal amount of 2017 Lease Revenue Bonds (Fire Station Headquarters Project) (the "Bonds"). The 2017 Bonds are being issued pursuant to the provisions relating to the joint exercise of powers found in Chapter 5 of Division 7 of Title 1 of the California Govermuent Code, including the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 thereof (the "Law"), and an Indenture of Trust, dated as of April 1, 2017 (the "Indenture"), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee").
Proceeds of the 2017 Bonds will be used to (i) finance a portion of the costs of acquisition, construction and improvement of a new City-owned Fire Station No. 61 to be located at 7740 La Pahna Avenue in the City, in replacement for the existing fire station located at 8081 Western Avenue in the City, as well as the costs of construction and installation of additional improvements to Fire Station No. 63 located at 9120 Holder Street in the City ( collectively, the "Fire Station Projects"), (ii) fund capitalized interest on the 2017 Bonds through and including May 1, 2019, and (iii) pay costs of issuance of the 2017 Bonds.
Interest on the 2017 Bonds will be payable on May 1 and November 1 of each year, commencing November 1, 2017. The 2017 Bonds will mature in the amounts and on the dates and bear interest at rates shown on the inside front cover of this Official Statement.
The 2017 Bonds will be issued in fully registered form only and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York, New York ("DTC"). DTC will act as the depository for the 2017 Bonds and all payments due on the 2017 Bonds will be made to Cede & Co. Ownership interests in the 2017 Bonds may be purchased only in book-entry form. See "2017 BONDS - Book-Entry Only System" and "APPENDIX D - DTC'S BOOK ENTRY ONLY SYSTEM."
Security for 2017 Bonds
The 2017 Bonds will be payable solely from and secured by a pledge of Revenues (defined below, see "SECURITY FOR 2017 BONDS") and moneys in certain funds and accounts held under the Indenture. Revenues consist primarily of certain lease payments (the "Lease Payments") to be made by the City to the Authority pursuant to a Lease Agreement, dated as of April 1, 2017 (the "Lease"), by and
-1- between the Authority and the City for subleasing of the Leased Property ( as defined herein - see "PLAN OF FINANCE" and "LEASED PROPERTY").
Concurrently with the issuance of the 2017 Bonds, the Authority will lease the Leased Property (see "LEASED PROPERTY") from the City under a Site Lease, dated as of April I, 2017 (the "Site Lease"). The City will sublease the Leased Property from the Authority and agree to make Lease Payments under the Lease.
THE 2017 BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS AND ADDITIONAL PAYMENTS UNDER THE LEASE WILL NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION OR THE CITY WILL BE OBLIGATED TO LEVY OR PLEDGE ANY FORM OFT AXATION.
The Authority may issue additional bonds, notes or other indebtedness which are payable out of the Revenues in whole or in part, as provided in the Indenture. See "SECURITY FOR THE 2017 BONDS -Additional Bonds."
As security for payment of the 2017 Bonds and pursuant to an Assigmnent Agreement, dated as of April I, 2017 (the "Assigmnent Agreement"), by and between the Authority and the Trustee, the Authority will assign to the Trustee the Authority's rights, title and interest in the Lease (with certain exceptions), including the right to receive Lease Payments to be made by the City under the Lease. The City will covenant under the Lease to take such action as necessary to include the Lease Payments and Additional Rental Payments (as defined therein) in its annual budget and to make all necessary appropriations therefor (subject to abatement under certain circumstances described in the Lease).
The 2017 Bonds will be subject to special mandatory redemption, as a whole or in part, from a condenmation award or from insurance proceeds as described in the Lease and the Indenture.
See "SECURITY FOR 2017 BONDS," "2017 BONDS - Redemption - Special Mandatory Redemption From Insurance or Condemnation Proceeds," and "BONDOWNERS' RISKS."
No Debt Service Reserve for 2017 Bonds
No debt service reserve fund or account will be established for the 2017 Bonds under the Indenture. See "BONDOWNERS' RISKS -No Reserve Fund."
City
The City of Buena Park (the "City"), California, encompasses approximately ten square miles and is located at the northwest border of Orange County (the "County"), bordering Los Angeles County. It is 25 miles southeast of downtown Los Angeles. Neighboring communities include Anaheim, Cerritos, Cypress, Fullerton, La Mirada, and La Pahna. Based on an estimate by the California Department of Finance, the City's population was 83,347, as of January 1, 2016.
The City was incorporated in 1953 as a general law city. In November 2008, the qualified electors within the City voted to convert the City to a charter city. The City Council's five members provide the policy-setting and legislative functions of the City for four-year overlapping terms. The Mayor is elected by City Council for a one-year term and is the presiding officer of the Council.
-2- The City has a Council-Manager form of municipal govermnent. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. The City's Fiscal Year 2016-17 budget provides authorization for employment of 264 full-time equivalent City employees, in addition to authorization in the budget for the five members of the City Council.
Professionals Involved in the Offering
MUFG Union Bank, N.A., Los Angeles, California, will act as Trustee with respect to the 2017 Bonds.
The City has retained Harrell & Company Advisors, LLC, Orange, California, as municipal advisor (the "Municipal Advisor") in connection with the issuance of the 2017 Bonds. The Municipal Advisor has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Municipal Advisor is an independent advisory firm and a registered Municipal Advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as amended) and is not engaged in the business of underwriting, trading or distributing municipal or other securities public or otherwise.
All proceedings in connection with the issuance of the 2017 Bonds will be subject to the approval of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will also be passed on for the Authority by Richards, Watson & Gershon, as Disclosure Counsel. Certain legal matters will also be passed on for the City and the Authority by Richards, Watson & Gershon, as City Attorney and General Counsel to the Authority.
Continuing Disclosure
The City will covenant in a Continuing Disclosure Agreement (the "Continuing Disclosure Agreement"), for the benefit of the beneficial holders of the 2017 Bonds, to prepare and deliver an annual report of certain fmancial information regarding the City and to provide notices of the occurrence of certain enumerated events in compliance with Rule 15c2-12 of the Securities and Exchange Commission. See "CONTINUING DISCLOSURE" and "APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT."
Summaries of Documents
There follows in this Official Statement descriptions of the 2017 Bonds, the Indenture, the Site Lease, the Lease, the Assigrnnent Agreement, and various other agreements and documents. The descriptions and summaries of documents herein do not purport to be comprehensive or definitive, and reference is made to each such document for the complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document and, with respect to certain rights and remedies, to laws and principles of equity relating to or affecting creditors' rights generally. Capitalized terms not defined herein shall have the meanings set forth in the Indenture. Copies of the Indenture, the Site Lease, the Lease, and the Assigrnnent Agreement are available for inspection during business hours at the corporate trust office of the Trustee in Los Angeles, California.
Other Information
This Official Statement speaks only as of its date as set forth on the cover hereof, and the information and expressions of opinion herein are subject to change without notice, and neither the
-3- delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the City since the date hereof.
Unless otherwise expressly noted, all references to internet websites in this Official Statement, including without limitation, the City's website, are shown for reference and convenience only, and none of their content is incorporated herein by reference. The information contained within such websites has not been reviewed by the City and the City makes no representation regarding the information therein.
PLAN OF FINANCE
The 2017 Bonds are being issued to finance a portion of the costs of acquisition, construction and improvement of the Fire Station Projects, which consist of (i) a new City-owned Fire Station No. 61 to be located at 7740 La Palma Avenue in the City (the "Fire Station No. 61 Project"), in replacement for the existing fire station located at 8081 Western Avenue in the City, and (ii) additional improvements to Fire Station No. 63 located at 9120 Holder Street in the City.
The Fire Station No. 61 Project consists of a new City-owned fire station ( of approximately 18,000 square feet, to be located on a City-owned parcel of approximately 1.25 acres at 7440 La Pahna Avenue in the City. Based on present engineering estimates, the costs of the construction of the Fire Station No. 61 Project are expected to be approximately $13.6 million. A portion of the proceeds of the 2017 Bonds will be used to pay, or reimburse the City for, approximately $8,760,000 of the acquisition, construction and improvement costs of the Fire Station No. 61 Project, including all or a portion of the design and engineering costs associated therewith. The City will fund the balance of the cost of the Fire Station No. 61 Project in the estimated amount of approximately $4,830,000 from General Fund monies on hand. The City presently expects to award the contract for construction of the Fire Station No. 61 Project at the end of March 2017. Construction is projected to commence on the Fire Station No. 61 Project in April 2017 and to be completed by March 2018.
Upon completion of construction, the City will lease the Fire Station No. 61 Project to the Orange County Fire Authority, a joint exercise of powers authority and regional fire service agency whose current member public agencies consist of the County and 23 cities located within the County, including the City. From 71 fire stations located throughout the County, the Orange County Fire Authority provides fire protection services to the City and its other 22 member cities, as well as all unincorporated areas of the County. Fire Station No. 61 primarily serves the City of Buena Park The City presently leases Fire Station No. 63, as well as its two other existing fire stations, to the Orange County Fire Authority. See "THE CITY - Services and Community Facilities" herein for additional information regarding the public safety services provided within the City.
In addition, the City expects to expend approximately $500,000 in proceeds of the 2017 Bonds to construct and install additional improvements to Fire Station No. 63.
As consideration for the issuance of the 2017 Bonds and the payment by the Authority to the City of the Site Lease Payment, constituting the net proceeds of the 2017 Bonds remaining after setting aside amounts for capitalized interest and costs of issuance, the City will lease that certain City-owned police facility located at 6640 Beach Boulevard (the "Leased Property") to the Authority. Simultaneously therewith, the Authority will sublease the Leased Property to the City pursuant to the terms of the Lease. For additional information, see the discussions under the captions "SOURCES AND USES OF FUNDS," "LEASED PROPERTY," and "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - SITE LEASE" and " - LEASE AGREEMENT" herein.
-4- SOURCES AND USES OF FUNDS
The following is a summary of the anticipated sources and uses of funds relating to the issuance of the 2017 Bonds:
Sources: Principal Amount $ 9,785,000.00 Plus: Net original issue premium 506,845.25 Less: Underwriter's discount (76,079.41) Total Sources $10,215,765.84
Uses: Deposit to Project Fund $ 9,260,000.00 Deposit to Interest Account of the Bond Fund (l) 771,177.08 Costs oflssuance (zJ 184,588.76 Total Uses $10,215,765.84
(1) An amount equal to capitalized interest on the 2017 Bonds accrued from their date of delivery through and including May 1, 2019. (2) Costs of Issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Municipal Advisor, Trustee, printing expenses, title insurance, rating fees and other costs.
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-5- ANNUAL DEBT SERVICE
The following table shows the annualized debt service for the 2017 Bonds by Fiscal Year (assuming no optional redemption or special mandatory redemption prior to scheduled maturity):
Fiscal Year Ending Annual Debt June 30 Principal Interest Service 2018 $ 392,427.08 $ 392,427.08 2019 378,750.00 378,750.00 2020 $ 375,000.00 378,750.00 753,750.00 2021 385,000.00 367,500.00 752,500.00 2022 400,000.00 352,100.00 752,100.00 2023 425,000.00 332,100.00 757,100.00 2024 445,000.00 310,850.00 755,850.00 2025 465,000.00 288,600.00 753,600.00 2026 490,000.00 265,350.00 755,350.00 2027 515,000.00 240,850.00 755,850.00 2028 540,000.00 215,100.00 755,100.00 2029 560,000.00 193,500.00 753,500.00 2030 580,000.00 176,700.00 756,700.00 2031 595,000.00 159,300.00 754,300.00 2032 615,000.00 140,706.26 755,706.26 2033 635,000.00 120,718.76 755,718.76 2034 655,000.00 99,287.50 754,287.50 2035 680,000.00 76,362.50 756,362.50 2036 700,000.00 52,562.50 752,562.50 2037 725,000.00 27,187.50 752,187.50 TOTAL $9,785,000.00 $4,568,702.10 $14,353,702.10
2017 BONDS
General
The 2017 Bonds will be issued in the aggregate principal amount and will mature on the dates and bear interest at the rates per annum as set forth on the inside front cover of this Official Statement. The 2017 Bonds will be issued in authorized denominations of $5,000 or integral multiples thereof and will be dated their date of delivery. The 2017 Bonds will be initially delivered as one fully registered certificate for each maturity (unless the 2017 Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and will be delivered by means of the book-entry system ofDTC. See "-Book-Entry Only System" below and "APPENDIX D -DTC'S BOOK ENTRY ONLY SYSTEM'' herein.
Payments ofPrincipal and Interest. Interest on the 2017 Bonds will be calculated on the basis of a 360-day year of twelve 30-day months and payable on May 1 and November 1 of each year, commencing November 1, 2017 ( each an "Interest Payment Date"), until maturity or earlier redemption thereof.
While the 2017 Bonds are subject to the book-entry system, the principal and interest with respect to the 201 7 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of
-6- the 2017 Bonds. See "-Book-Entry Only System" below and "APPENDIX D -DTC'S BOOK ENTRY ONLY SYSTEM" herein.
Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the 2017 Bonds is registered on the Registration Books at the close of business on the fifteenth calendar day of the month immediately preceding such Interest Payment Date ( each, a "Record Date"), except as provided below. Interest on any 2017 Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such 2017 Bond is registered on the Registration Books at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than IO days prior to such special record date.
The Trustee will pay interest on the 2017 Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the 2017 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of 2017 Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such 2017 Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a fmancial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner.
The Trustee will pay principal of the 2017 Bonds in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee.
Calculntion o(Interest. Interest on the 2017 Bonds is payable from the Interest Payment Date next preceding the date of its authentication unless:
(a) a 2017 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date,
(b) a 2017 Bond is authenticated on or before October 15, 2017, in which event interest thereon will be payable from the Closing Date, or
( c) interest on any Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date.
Transfer, Registration, and Exchange
The following provisions regarding the exchange and transfer of the 201 7 Bonds apply only during any period in which the 2017 Bonds are not subject to DTC's book-entry system. While the 2017 Bonds are subject to DTC 's book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC. See "-Book-Entry Only System" below and "APPENDIX D -DTC'S BOOK ENTRY-ONLY SYSTEM" herein.
Bond Register. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the 2017 Bonds, which will upon reasonable notice as agreed to by the Trustee, be open to inspection during regular business hours by the Authority; and, upon presentation for such purpose, the Trustee will, under such reasonable regulations as it may
-7- prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the 2017 Bonds as provided in the Indenture.
Transfer. Any 2017 Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such 2017 Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee will require the Owner requesting such transfer to pay any tax or other govermnental charge required to be paid with respect to such transfer.
Whenever any 2017 Bond is or 2017 Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver to the transferee a new 2017 Bond or 2017 Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority will pay the cost of printing 2017 Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of 2017 Bonds.
Exchange. The 2017 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of 2017 Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee will require the Owner requesting such exchange to pay any tax or other govermnental charge required to be paid with respect to such exchange. The Authority will pay the cost of printing 2017 Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of2017 Bonds.
Limitations. The Trustee may refuse to transfer or exchange, under the prov1s10ns of the Indenture described above, any 2017 Bonds selected by the Trustee for redemption under the Indenture, or any 2017 Bonds during the period established by the Trustee for the selection of 2017 Bonds for redemption.
Redemption
Optional Redemption. The 2017 Bonds maturing on or before May 1, 2027 will not be subject to optional redemption prior to their respective stated maturities. The 2017 Bonds maturing on or after May 1, 2028 will be subject to redemption prior to their respective maturity dates, as a whole or in part, at the election of the Authority among maturities on such basis as designated by the Authority and by lot within a maturity, from prepayments of Lease Payments made at the option of the City under the Lease or any other available source of funds, on any date on or after May 1, 2027. The 2017 Bonds called for optional redemption will be redeemed at a redemption price equal to 100 percent of the principal amount thereof to be redeemed, together with accrued interest thereon to the date of redemption, without premium.
Special Mandatory Redemption From Insurance or Condemnation Proceeds. The 2017 Bonds and Additional Bonds, if any, are also subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, from Net Proceeds required or permitted to be used for such purpose as provided in the provisions of the Indenture pertaining to the Insurance and Condemnation Fund established and held by the Trustee thereunder, at a redemption price equal to 100 percent of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. As provided in the Indenture, in the event any Additional Bonds are then outstanding, the Additional Bonds shall also be subject to special mandatory redemption from such Net Proceeds, on a pro rata basis with the outstanding 2017 Bonds.
As defined in the Indenture and the Lease Agreement, "Net Proceeds" means amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Property, or the
-8- proceeds of any taking of the Leased Property or portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof. There can be no assurance that such Net Proceeds will be adequate to redeem all of the 2017 Bonds and Additional Bonds, if any. In the event that Net Proceeds are to be applied to the redemption of 2017 Bonds, and Additional Bonds (if any are issued pursuant to the terms and conditions of the Indenture) are outstanding, the Net Proceeds will be applied to redeem a proportionate amount of 2017 Bonds and Additional Bonds, based on the outstanding principal amount.
See "SECURITY FOR THE 2017 BONDS - Abatement; Insurance - Insurance and Condemnation Funcf' herein for further discussion regarding the provisions of the Indenture pertaining to the Insurance and Condemnation Fund.
Selection of2017 Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2017 Bonds of a single maturity, the Trustee will select the 2017 Bonds of that maturity to be redeemed by lot. For purposes of such selection, the Trustee will treat each 2017 Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate 2017 Bond.
Notice of Redemption. The Trustee will mail notice of redemption of the 2017 Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any 2017 Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board.
Neither the failure to receive any notice nor any defect therein will affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice ofredemption of2017 Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority.
However, while the 2017 Bonds are subject to DTC's book-entry system, the Trustee will be required to give notice ofredemption only to DTC as provided in the letter ofrepresentations executed by the Authority and received and accepted by DTC. DTC and the Participants will have sole responsibility for providing any such notice of redemption to the beneficial owners of the 201 7 Bonds to be redeemed. Any failure of DTC to notify any Participant, or any failure ofParticipants to notify the Beneficial Owner of any Bonds to be redeemed, of a notice of redemption or its content or effect will not affect the validity ofthe notice ofredemption, or alter the effect of redemption set forth in the Indenture. See "-Book-Entry Only System" below and "APPENDIX D -DTC'S BOOK ENTRY-ONLY SYSTEM" herein.
Rescission of Redemption Notice. The Authority has the right to rescind any notice of the optional or special mandatory redemption of 2017 Bonds under the Indenture by written notice to the Trustee on or prior to the dated fixed for redemption.
Any such notice of redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2017 Bonds then called for redemption, and such cancellation will not constitute an Event of Default under the Indenture. The Authority, the City, and the Trustee will have no liability to the 2017 Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as that prescribed for the original notice of redemption under the Indenture.
-9- Effect of Redemption. When notice of redemption has been duly given as set forth in the Indenture, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on the 2017 Bonds ( or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2017 Bonds ( or portions thereof) so called for redemption will become due and payable, interest on the 2017 Bonds so called for redemption will cease to accrue, those Bonds ( or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of those Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. All moneys held by or on behalf of the Trustee for the payment of principal of or interest on 2017 Bonds, whether at redemption or maturity, will be held in trust for the account of the Owners thereof and the Trustee will not be required to pay Owners any interest on, or be liable to Owners for any interest earned on, moneys so held.
Book-Entry Only System
The 2017 Bonds will be issued as one fully registered bond certificate without coupons for each maturity (unless the 2017 Bonds of such maturity bear different interest rates, then one certificate for each interest rate among such maturity) and, when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the 2017 Bonds. Individual purchases of the 2017 Bonds may be made in book-entry form only, in the principal amount of $5,000 and integral multiples thereof. Purchasers will not receive certificates representing their interest in the 2017 Bonds purchased. Principal and interest will be paid to DTC, which will in turn remit such principal and interest to its participants for subsequent disbursement to the beneficial owners of the 2017 Bonds as described in this Official Statement. So long as DTC's book-entry system is in effect with respect to the 2017 Bonds, notices to Owners of the 2017 Bonds by the Authority or the Trustee will be sent to DTC. Notices and communication by DTC to its participants, and then to the beneficial owners of the 2017 Bonds, will be governed by arrangements among them, subject to then effective statutory or regulatory requirements. See "APPENDIX D - DTC'S BOOK-ENTRY ONLY SYSTEM" for further information regarding DTC and the book-entry system.
In the event that such book-entry system is discontinued with respect to the 2017 Bonds, the Authority will execute and deliver replacements in the form of registered certificates and, thereafter, such 2017 Bonds will be transferable and exchangeable on the terms and conditions provided in the Indenture. In addition, the following provisions would then apply: The principal of the 2017 Bonds will be payable on the surrender thereof at maturity or the redemption date, as applicable, at the corporate trust office of the Trustee in Los Angeles, California, or such other office as the Trustee may designate in writing to the Authority. The interest on the 2017 Bonds will be payable by check mailed each Interest Payment Date to the Owners of the 2017 Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date (i.e., the 15th calendar day of the month immediately preceding the Interest Payment Date); provided, at the written request of the Owner of Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such 2017 Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a fmancial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner.
-10- SECURITY FOR 2017 BONDS
Pledge ofRevennes Under lndentnre
Concurrently with the issuance of the 2017 Bonds, the Authority will lease the Leased Property (see "LEASED PROPERTY") from the City under the Site Lease. The City will sublease the Leased Property back from the Authority and agree to make Lease Payments under the Lease. Upon satisfaction of certain conditions set forth in the Lease, the City may substitute the Leased Property with other property or release a portion of the Leased Property from the Lease. See "Substitution or Release of Leased Property" below.
All 2017 Bonds and Additional Bonds, if any, issued and Outstanding under the Indenture will be payable from and secured by a pledge of Revenues and certain funds and accounts established and held by the Trustee. "Revenues," as defined in the Indenture, means the following:
(a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), other than Additional Rental Payments;
(b) all Supplemental Lease Payments (if any) to the extent such Supplemental Lease Payments are pledged to the payment of Additional Bonds;
(c) all Net Proceeds of insurance or eminent domain proceedings which are required to be applied to the payment of the 2017 Bonds and any Additional Bonds under the Lease and the Indenture; and
( d) all interest, profits or other income derived from the investment of amounts in any fund or account ( excluding the Project Fund) established under the Indenture.
As defmed in the Indenture, "Supplemental Lease Payments" means the amounts payable by the City as additional amounts of rental for the use and occupancy of the Leased Property and pledged or assigned for the payment of any bonds, notes or other obligations, including but not limited to an issue of Additional Bonds, the proceeds of which are applied to finance or refinance the acquisition or construction of any real or personal property for which the City is authorized to expend funds subject to its control, including any prepayment of any such Supplemental Lease Payments and including any amounts payable upon a delinquency in the payment of such Supplemental Lease Payments, subject to the terms and conditions of the Lease.
Assignment to Trustee
Pursuant to the Assigmnent Agreement, the Authority will assign to the Trustee, for the benefit of the Owners of the 2017 Bonds, its rights under the Lease including its rights to receive Lease Payments for the purpose of securing the payment of debt service on the 2017 Bonds (but excluding the rights of the Authority under the provisions of the Lease regarding Additional Rental Payments, repayment of advances, indemnification, and the payment of attorneys' fees). The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and will immediately be paid by the Authority to the Trustee. The Trustee is also entitled to and will, subject to the provisions of the Indenture regarding duties of the Trustee, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the
-11- Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease.
THE 2017 BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY THE PLEDGE OF REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER. THE OBLIGATION OF THE CITY TO MAI Bond Fund Pursuant to the Indenture, the Trustee will establish and hold in trust a fund designated as the "Bond Fund." The Trustee will deposit all Revenues received by it, including but not limited to Lease Payments, in the Bond Fund promptly upon receipt. On or before each Interest Payment Date, the Trustee will transfer from the Bond Fund and deposit into the respective accounts therein amounts for application toward interest and principal payments on the 2017 Bonds and Additional Bonds, if any, as provided in the Indenture. See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - INDENTURE OF TRUST - Establishment of Funds and Accounts; Flow of Funds." Under the Indenture, no debt service reserve fund or account will be established for the 2017 Bonds. See "BONDOWNERS' RISKS - No Reserve Fund" herein. Capitalized Interest There will an initial deposit by the Trustee to the Interest Account of the Bond Fund from proceeds of the 2017 Bonds. The amount deposited has been calculated to be sufficient to make interest payments on the 2017 Bonds through and including May I, 2019. To the extent interest on the 2017 Bonds has been capitalized, the City is not obligated to pay Lease Payments from any other source. Lease Payments; Covenant to Appropriate The City will agree, under the Lease, to make Lease Payments for the subleasing of the Leased Property. The scheduled Lease Payments will be in amounts sufficient for payment of debt service on the 2017 Bonds. Lease Payments will be paid by the City semiannually to the Trustee on the fifth Business Day immediately preceding each Interest Payment Date ( each, a "Lease Payment Date"). The City has covenanted under the Lease to take all actions required to include the Lease Payments and Additional Rental Payments in each of its budgets during the Term of the Lease and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. Under certain circumstances described under the Lease, however, Lease Payments are subject to abatement during periods of substantial interference with the City's use and occupancy of the Leased Property or any portion thereof. See "Abatement; Insurance" below. See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - LEASE AGREEMENT -Lease Payments" and "-Budget and Appropriation." -12- Abatement; Insnrance Termination or Abatement Due to Eminent Domain. Under the Lease, if the Leased Property is taken permanently under the power of eminent domain or sold to a govermnent threatening to exercise the power of eminent domain, the Term of the Lease thereupon ceases as of the day possession is taken. If less than all of the Leased Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, then: (a) the Lease will continue in full force and effect with respect thereto and does not terminate by virtue of such taking, and the parties waive the benefit of any law to the contrary; and (b) the Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. Abatement Due to Damage or Destruction. The Lease Payments are subject to abatement during any period in which by reason of damage or destruction ( other than by eminent domain as described above) there is substantial interference with the use and occupancy by the City of the Leased Property or any portion thereof. The Lease Payments are subject to abatement in an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property not damaged or destroyed. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of such abatement, the City will have no obligation to pay abated Lease Payments. See "BONDOWNERS' RISKS - Abatement" herein. If any such damage or destruction occurs, the Lease continues in full force and effect and the City waives any right to terminate the Lease by virtue of any such damage and destruction Rental Interruption Insurance. In the event of an abatement of Lease Payments, debt service on the 2017 Bonds may, to a certain limited extent, be covered by insurance proceeds. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the casualty insurance requirements described above, in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as they become due and payable. Liabili1v and Property Damage Insurance. Under the Lease, the City is required to maintain or cause to be maintained throughout the Term of the Lease, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard commercial general -13- liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Such policy or policies must provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies must provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of the Lease regarding self-insurance, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid. Casualtv Insurance. Under the Lease, the City is required to procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100 percent of the replacement value of the insured buildings, or (b) 100 percent of the aggregate principal amount of the Outstanding 2017 Bonds. Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, excluding earthquake insurance. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance must be applied as provided in the Lease and the Indenture. Recordation and Title Insurance. On or before the Closing Date the City shall, at its expense, (a) cause the Site Lease, the Assigmnent Agreement and the Lease, or a memorandum thereof or thereof in form and substance approved by Bond Counsel, to be recorded in the office of the Orange County Recorder, and (b) obtain a CLTA title insurance policy insuring the City's leasehold estate in the Leased Property, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the 2017 Bonds. All Net Proceeds received under any such title insurance policy must be deposited with the Trustee in the Bond Fund to be credited towards the prepayment of the remaining Lease Payments under the Lease. Insurance and Condemnation Fund. Under the Indenture, any Net Proceeds of insurance or condenmation awards with respect to the Leased Property will be deposited in the Insurance and Condenmation Fund established and held by the Trustee under the Indenture. Any such Net Proceeds so deposited into the Insurance and Condemnation Fund will be used, as directed by the City, either (i) to replace, repair, restore, modify or improve the Leased Property if the City determines that such is economically feasible or in the best interests of the City; or (ii) to the extent not so used, to prepay the Lease Payments and thereby redeem outstanding 2017 Bonds, or be applied to the redemption of any Additional Bonds in accordance with the documents authorizing the issuance thereof. -14- If the City fails to determine and notify the Trustee in writing of its determination, within 45 days following the date of such deposit, to replace, repair, restore, modify or improve the Leased Property which has been damaged or destroyed, then such Net Proceeds shall be promptly transferred by the trustee to the Redemption Fund and applied to the redemption of 2017 Bonds and any Additional Bonds on the next available special mandatory redemption date. Notwithstanding the foregoing, however, in the event of damage or destruction of the Leased Property in full, the Net Proceeds of such insurance are required to be used by the City to rebuild or replace the Leased Property if such proceeds are not sufficient to redeem outstanding 2017 Bonds and outstanding Additional Bonds, on a pro rata basis, equal in aggregate principal amount to the then unpaid Lease Payments and Supplemental Lease Payments, if any. See "2017 BONDS - Redemption - Special Mandatory Redemption From Insurance or Condemnation Proceeds." See also "BONDOWNERS' RISKS - Abatement" and "- Risk of Uninsured Loss;" and "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - LEASE AGREEMENT - Abatement of Lease Payments" and "- Insurance" and "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - INDENTURE OF TRUST - Establishment of Funds and Accounts; Flow of Funds - Insurance and Condemnation Fund; Application of Net Proceeds." Substitution or Release of Leased Property Substitution of Propertv. The City has the option at any time and from time to time during the term of the Lease to substitute other land, facilities or improvements (the "Substitute Property") for the Leased Property or portion thereof (the "Former Property"), provided that the City must satisfy all of the requirements set forth in the Lease Agreement, including the following: (a) No Event of Default has occurred and is continuing under the Lease; (b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Orange County Recorder sufficient memorialization of, an amendment to the Lease which adds the legal description of the Substitute Property to the Lease and deletes therefrom the legal description of the F orrner Property; (c) The City has obtained a CLTA policy of title insurance insuring the City's leasehold estate in the Substitute Property, subject only to Permitted Encumbrances, in an amount at least equal to the estimated value thereof; (d) The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City; ( e) The Substitute Property does not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement; (f) The City has filed with the Authority and the Trustee a written certification of the City stating that the estimated value of the Substitute Property is at least equal to the estimated value of the Former Property, and that the useful life of the Substitute Property at least extends to the fmal maturity date of the 2017 Bonds; and -15- (g) The City has mailed written notice of such substitution to each rating agency which then maintains a rating on the 2017 Bonds. Upon the satisfaction of all such conditions precedent, the term of the Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all references in the Site Lease and the Lease to the Former Property will apply with full force and effect to the Substitute Property. The City will not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution. See "APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -LEASE AGREEMENT - Substitution of Property." Release of Property. The City has the option at any time and from time to time during the term of the Lease to release any portion of the Leased Property from the Lease (the "Released Property") provided that the City has satisfied all of the requirements set forth in the Lease, including the following (a) No Event of Default has occurred and is continuing under the Lease; (b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Orange County Recorder sufficient memorialization of, an amendment which removes the Released Property from the Site Lease and the Lease; (c) The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease following such release is at least equal to the aggregate original principal amount of the 2017 Bonds and any Additional Bonds, and the fair rental value of the property which remains subject to the Lease following such release is at least equal to the Lease Payments thereafter coming due and payable thereunder; (d) The City has mailed written notice of such release to each rating agency which then maintains a rating on the 2017 Bonds. Upon the satisfaction of all such conditions precedent, the term of the Site Lease and the Lease will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the City will execute, deliver and cause to be recorded all documents required to discharge the Site Lease, the Lease and the Assignment Agreement of record against the Released Property. See "APPENDIX C -SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -LEASE AGREEMENT -Release of Property." Additional Bonds In addition to the 2017 Bonds, the Authority has the right under the Indenture to issue any notes, bonds, or other obligations payable from and secured by a pledge of and lien on the Revenues on a parity with the pledge and lien which secure the 2017 Bonds (the "Additional Bonds") pursuant to a Supplemental Indenture, subject to the following conditions precedent: (a) No Event of Default (or no event with respect to which notice has been given and which, once all notice of grace periods have passed, would constitute an Event of Default) has occurred and is continuing; -16- (b) The City and the Authority have entered into an amendment or supplement to the Lease under the applicable provisions thereof, pursuant to which the City has agreed to pay Supplemental Lease Payments for the use and occupancy of the Leased Property under the Lease, which Supplemental Lease Payments provide additional Revenues which are sufficient to pay the principal of and interest on such Additional Bonds when due; ( c) The City and the Authority have filed a written certificate with the Trustee stating that the estimated value of the Leased Property is at least equal to the sum of the aggregate original principal amount of the 2017 Bonds plus the aggregate original principal amount of such Additional Bonds; (d) Interest on such Additional Bonds will be payable solely on May I and November I, and the principal of such Additional Bonds shall be payable solely on May I; and (e) The Authority will deliver to the Trustee a Written Certificate of the Authority certifying, and an opinion of Bond Counsel stating, that the conditions precedent to the issuance of such Additional Bonds set forth in the Indenture have been satisfied. See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -INDENTURE OF TRUST - Covenants of the Authority." LEASED PROPERTY Lease Payments will be made by the City to the Authority under the Lease for the use and occupancy of the Leased Property, consisting of the real property described in the Lease Agreement, together with all improvements and facilities at any time situated thereon, and described generally as that certain City-owned police facility located at 6640 Beach Boulevard in the City. The Leased Property is comprised of approximately 2. 7 acres located at 6640 Beach Boulevard in the City, adjacent to the City Hall, just south of the Beach Boulevard off-ramp from the Interstate 5 freeway. A two-story, 73,052 square-foot police station facility was constructed on this property in 2009. The insured value of the Leased Property, as of the City's property insurance schedule dated January 13, 2016, which excludes land value, is $22,808,266. The Leased Property is not located in a FEMA 100- y ear Flood Plain. As described under the caption "SECURITY FOR THE 2017 BONDS - Substitution or Release of Leased Property," the City has the right to substitute other facilities, or release portions of the Leased Property after complying with the conditions of the Lease. THE CITY General Incorporated in 1953, the City of Buena Park encompasses approximately ten square miles and is located at the northwest border of Orange County, bordering Los Angeles County. It is 25 miles southeast of downtown Los Angeles. Neighboring communities include Anaheim, Cerritos, Cypress, Fullerton, La Mirada, and La Palma. City Government The City originally was incorporated in 1953 as a general law city. In November 2008, the qualified electors within the City voted to convert the City to a charter city. -17- In 2016, the City adopted a new by-district voting system. The by-district voting system replaces the previous at-large electoral voting system. The new system includes five voting districts, which will ultimately be represented by elected council members that live in each area. The City Council's five members provide the policy-setting and legislative functions of the City for four-year overlapping terms. Elections are held in November of even-numbered years, with either two or three seats to be filled. In 2016, the City Council seats for District 3 and District 4 were up for election. In 2018, the City Council seats for District 1, District 2, and District 5 will be up for election. The Mayor is elected by City Council for a one-year term and is the presiding officer of the City Council. The City has a Council-Manager form of municipal govermnent. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. The City's Fiscal Year 2016-17 budget provides authorization for employment of 264 full-time equivalent City employees, in addition to authorization in the budget for the five members of the City Council. The current City Council members and their respective term expiration dates are as follows: Name and Office Term Expires Elizabeth Swift, Ed.D., Mayor December, 2018 Virginia Vaughn,Mayor Pro Tem December, 2018 Steve Berry, Council Member December, 2018 Arthur C. Brown, Council Member December, 2020 Fred R. Smith, Council Member December, 2020 James B. Vanderpool is the City Manager of the City and the Executive Director of the Authority. The City Manager is appointed by the City Council as the administrative head of the City. Mr. Vanderpool was appointed City Manager effective July 13, 2012 and is responsible to direct the daily operations of the City, enforce City laws, to prepare the municipal budget, and to implement the policies and programs initiated by the City Council. The City Manager appoints all of the department heads and directly oversees their operations. Mr. Vanderpool has been with the City for over 21 years and served as Deputy City Manager prior to his appointment. In his capacity as Deputy City Manager, he directed the Internal Support Services Department, inclusive of the Human Resources!R.isk Management and Purchasing Divisions. As City Manager, he is the Chief Labor Negotiator for the City. Prior to his role as Deputy City Manager, Mr. Vanderpool was Assistant to the City Manager, overseeing the Orange County Fire Authority and Animal Control Services contracts. He was also responsible for legislative advocacy, working closely with County, State, and Federal representatives. Originally hired by the City in the Public Works Department, Mr. Vanderpool administered the City's capital improvement projects and assisted with the administration of the City's maintenance operations. Mr. Vanderpool holds a Bachelor of Arts Degree in Public Administration from Purdue University and a Master of Business Administration degree from University of Phoenix. Sung Hyun is the Director of Finance-City Treasurer for the City and the Treasurer of the Authority, and he is responsible for the financial affairs of the City and the Authority. Mr. Hyun has been with the City since 2006 and has worked in municipal finance for over 22 years and has also held positions in the cities of Downey, Redondo Beach, and Santa Monica. He received his Bachelor of Science Degree in Accounting from California State University at Long Beach and is a member of the California Society of Municipal Finance Officers and the Govermnent Finance Officers Association. David Jacobs, PE, LS, is the Director of Public Works of the City and responsible for the design, maintenance, and construction of the City's streets, water, sewer, and storm drain systems. He is also responsible for the maintenance and repairs to the City's buildings and vehicle fleet. Mr. Jacobs has been -18- with the City since 2015 and has worked in the civil engineering field for over 29 years. He received his Bachelor of Science Degree in Civil Engineering from University Nevada at Las Vegas and is a member of American Public Works Association. Sha/ice Tilton is the Authority Secretary and City Clerk and was appointed by the City Council to serve in this capacity in October of 1997. Responsibilities include serving as the City's election official; compliance officer for the Political Reform Act, the Brown Act ( open meeting law), and the Public Records Act; and recorder for legislative actions of both the City Council and the Authority. Ms. Tilton received her Bachelor of Science Degree in Business Administration from Grand Canyon University in Phoenix, Arizona, and is a candidate for Master of Public Administration from National University (June 2017). She holds designations of Master Municipal Clerk and Certified Municipal Clerk from the International Institute of Municipal Clerks, and she is an active member in the City Clerk's Association of California (Board Member 2001-2010), the International Institute of Municipal Clerks (IIMC), IIMC Ethical Standards Committee (Board Member 2008-2011), League of California Cities (Board Member 2008-2010), and the Buena Park Historical Society (Board Member 1992-98. Population The following table shows the population for the City and Orange County for the years shown: TABLE 1 City of Buena Park City and County Population c•JczJ Calendar Years 2007-2016 Calendar Year City County 2007 79,028 2,960,659 2008 79,302 2,974,321 2009 79,923 2,990,805 2010 80,477 3,008,855 2011 81,021 3,035,167 2012 81,834 3,069,454 2013 82,571 3,103,654 2014 82,739 3,127,403 2015 82,947 3,151,910 2016 83,347 3,183,011 (1) As of January 1 of each year. (2) Based on 2000 & 2010 census benchmark. Source: Demographic Research Unit, California State Department of Finance. -19- Employment and lndnstry The following table shows certain employment statistics and the unemployment rate for the City, the County and the State, for calendar years 2012 through 2016. TABLE2 City of Buena Park City, County and State Average Annual Employment Statistics (lJ Calendar Years 2012 through 2016 Cit County State Labor Unemployment Unemployment Unemployment Year Force Employed Rate Rate Rate 2012 39,500 36,800 6.8% 7.9% 104% 2013 39,600 37,400 5.7 6.6 8.9 2014 39,600 37,800 4.7 5.5 7.5 2015 40,200 38,600 3.8 4.5 6.2 2016 40,100 38,900 3.0 4.0 54 (I) Not seasonally adjusted. Figures represent the 12-month average for each such year. Source: California Employment Development Department, Labor Market Information Division. The following table shows the distribution of the labor force in the County from 2012 through 2016. TABLE3 County of Orange Annual Average Employment by Industry Calendar Years 2012-2016 2012 2013 2014 2015 2016 (l) Total Farm 2,800 2,900 2,800 2,500 2,800 Natural Resources and Mining 71,900 77,500 82,700 91,100 97,400 Construction 71,300 76,800 82,000 90,400 96,900 Manufacturing 158,300 158,000 157,400 156,900 156,400 Trade, Transportation and Utilities 249,200 252,400 255,900 259,100 260,600 Information 24,300 25,000 24,500 25,500 26,000 Financial Activities 108,300 113,100 113,600 116,800 117,400 Professional and Business Services 260,600 267,300 276,600 285,400 296,200 Educational and Health Services 177,000 186,000 190,800 198,800 203,700 Leisure and Hospitality 180,600 187,800 194,500 204,000 211,800 Other Services 44,600 45,600 47,300 48,800 50,300 Government 147,900 148,700 152,200 156,200 160,100 Total All Industries (lJ 1,425,600 1,464,100 1,498,200 1,545,200 1,582,600 Total Civilian Labor F orce(JJ 1,564,500 1,569,200 1,578,200 1,597,100 1,602,400 (I) Most recent year for which annual data is available (as of March 14, 2017). (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers and workers on strike. (3) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers and workers on strike. Source: California Employment Development Department, Labor Market Information Division. -20- Largest Employers The following table lists the principal employers in the City as of June 30, 2016. The City is not aware of any significant changes since June 30, 2016 to the principal employers shown in Table 4. TABLE 4 City of Buena Park Principal Employers as of June 30, 2016 Number of Percent of Total Employer Employees Employment(') Knott's Berry Farm 5,071 12.71% J.C. Permy 526 1.32 Leach Corporation 483 1.21 Access Business Group, LLC 479 1.20 Pepsi 477 1.20 Select Staffing Real Time Staffing Services 403 1.01 Heritage Foods, LLC 394 0.99 RIA Financial/ AFEX Money Express 387 0.97 SYSCO Riverside, Inc. 375 0.94 Yamaha Corporation of America 350 0.88 Total Employment Listed 9,702 24.75% (1) Based on U.S. Department of Labor's estimate of 39 .900 residents employed in 2015-16. Source: City of Buena Park, as shmvn in the Comprehensive Arnmal Financial Report for the Fiscal Year ended June 30, 2016. Per Capital Personal Income The following table shows the annual per capita personal income for the County, the State, and the United States of America from 2010 through 2015: TABLE 5 County of Orange, State of California, and the United States of America Per Capita Personal Incomec•JczJ Calendar Years 2010 through 2015 Year City County State U.S. 2010 $22,438 $49,534 $43,315 $40,277 2011 21,663 51,383 45,820 42,453 2012 22,482 54,893 48,312 44,267 2013 22,972 53,321 48,471 44,462 2014 22,924 55,470 50,988 46,414 3 3 3 2015 23,390 57,749 ( ) 53,741 ( ) 48,112 ( ) (1) Dollar estimates in current dollars (not adjusted for inflation). (2) Computed using U.S. Bureau of the Census midyear population estimates. Estimates for 2010-2015 reflect county population estimates available as of May 2016. (3) Most recent year for which data is available (as of March 14, 2017). Source: O.ty of Buena Park, as shmvn in the Comprehensive Annual Financial Report for the Fiscal Year ended June 30, 2016, for City data; U.S. Department of Commerce, Bureau of Economic Analysis for data for County, State, and U.S. -21- Taxable Transactions A summary of taxable sales within the City, by twe of business, during the past five years for which data is available is shown in the following table. As noted under the captions "CITY FINANCIAL INFORMATION - Primary General Fund Tax Revenues Sources - Sales and Use Tax" and"- Long Term Liabilities," a major sales tax producer relocated out of the City in August 2014. TABLE 6 City of Buena Park Taxable Transaction Valuation c•J Calendar Years 2010-2014 Business 2010 2011 2012 2013 2014 (Z) Motor Vehicle and Parts Dealers $ 462,423 $ 524,155 $ 589,295 $ 609,870 $ 646,689 Home Furnishings and Appliance Stores 606,140 # (3) 714,417 808,929 # (3) Building Material, Garden Equip & Supplies # (JJ # (JJ # (JJ # (JJ # (JJ Food and Beverage Stores 39,850 41,353 41,463 37,824 41,051 Gasoline Stations 64,633 80,731 84,795 82,000 81,148 Clothing and Clothing Accessories Stores 38,202 38,516 40,538 42,973 47,927 General Merchandise Stores 116,801 117,717 119,219 119,708 119,650 Food Services and Drinking Places 142,590 149,154 160,873 173,967 199,329 3 3 3 Other Retail Group 90,791 ( ) 737,605 ( ) 96,408 ( ) 105,116QJ 675,956 Q) Total Retail and Food Services $1,561,429 $1,689,232 $1,847,009 $1,980,387 $1,811,749 All Other Outlets 319,511 375,014 370,934 394,968 452,645 Total All Outlets $1,880,940 $2,064,247 $2,217,943 $2,375,355 $2,264,394 (1) In thousands of dollars (1,000s). (2) Most recent year for which taxable sales data by industry is available (as of March 6, 2017). (3) Omitted from Business category with"#" notation, because per the California Board of Equalization, the publication of such data would result in the disclosure of confidential information; omitted dollar amounts included in "Other Retail Group" Business category. Source: California Board of Equalization [The remainder of this page is intentionally left blank] -22- The number of sales permits and the valuation of taxable transaction in the City subject to sales tax are presented in the following table. TABLE 7 City of Buena Park Permit Numbers and Taxable Transaction Valuation Calendar Years 2010-2015 No. ofRetail and Retail and Food No. of Total Year Food Permits Outlets (lJ Permits Total All Outlets (lJ 2010 1,072 $1,561,429 1,755 $1,880,940 2011 1,085 1,689,232 1,747 2,064,247 2012 1,138 1,847,009 1,800 2,217,943 2013 1,188 1,980,387 1,858 2,375,355 2014 1,315 1,811,749 1,992 2,264,394 (3)(4) 3 (3)(4) 3 2015 (Z) 1, 345 , 823 ( ) 1, 791 , 525 ( ) (I) In thousands of dollars ('000s) (2) Most recent year for which data is available ( as of March 6, 2017). (3) Due to revisions in the North American Industry Classification System (NAICS) being implemented in 2017, industry-level data published for calendar year 2015 is not comparable to that of prior calendar years. Therefore, number of Retail and Food Outlets also may not be comprarable to that of prior calendar years. ( 4) Data not available. (5) As noted under the captions "CITY FINANCIAL INFORMATION - Primary General Fund Tax Revenues Sources - Sales and Use Tax" and"- Long Tenn Liabilities," a major sales tax producer relocated out of the City in August 2014. Source: California Board of Equalization. Building Activity The following table provides a summary of the types and number of building permits authorized in the City from past five calendar years. TABLE 8 City of Buena Park Annual New Privately-Owned Residential Building Permits Calendar Years 2012-2016 2012 2013 2014 2015 2016 Construction cost Single Family $12,930,870 $3,237,852 $ 278,543 $37,991,110 $9,253,060 Multi-Family 8,867,166 0 8,952,661 0 0 Total Residential $21,798,036 $3,237,852 $9,231,204 $37,991,110 $9,253,060 No. of Units Single Family 42 16 176 44 Multi-Family 78 0 70 0 0 Total Units 120 16 71 176 44 Source: 2012-2015 data from US. Census Bureau; 2016 data from City of Buena Park. -23- Government Services and Commnnity Facilities The City provides police protection, sewer maintenance, water, trash collection, street sweeping, park maintenance and building inspection. It cooperates with Orange County in the provisions of flood control and contracts with the Orange County Fire Authority for fire protection and emergency paramedic services. The City's Police Department has 127 full-time personnel, including 89 sworn officers and 38 non-sworn full-time personnel, and 28 part-time personnel serving the community. Six elementary school districts and two high school districts serve the students living within the City: Anaheim Elementary School District, Buena Park School District, Centralia School District, Cypress Elementary School District, Magnolia Elementary School District, Savanna School District, Anaheim Union High School District, and Fullerton Joint Union High School District. In addition, there are six special education schools and five private schools in the City. Nearby are Cypress Community College, Fullerton College, and California State University, Fullerton, as well as several other junior and state colleges and universities within an easy commuting distance of the City. Cultural facilities include numerous churches, a library, 11 parks, live theatre, an 18-screen movie theater at the Buena Park Mall, and numerous entertainment venues, including the City's Entertainment Corridor - the stretch of Beach Boulevard on which entertainment venues Knott's Berry Farm, Knott's Soak City, Medieval Times Dinner and Tournament, and Pirate's Dinner Adventure are situated, and which also extends down La Pahna Avenue to the Buena Park Mall in the City's downtown area. In the Entertainment Corridor, The Source at Beach is currently under construction (with several tenants open), consisting of a 500,000 square foot multi-experiential entertainment space with special events, live entertainment, and dining, retail, technology and hotel facilities. See also "CITY FINANCIAL INFORMATION - General." Transportation Highways: The Santa Ana Freeway (Interstate 5), a major northwest-southeast corridor and the Artesia Freeway (State Highway 91) and east-west highway both intersect the City. State Highway 39 (Beach Boulevard) is the major north-south thoroughfare through the City. Buena Park is also within minutes of the San Gabriel River Freeway (Interstate 605), a north-south freeway to the west, and the San Diego Freeway (Interstate 405) a northwest southwest freeway south of the City. Rail: Rail freight service is available from Southern Pacific, national Amtrak, Metrolink and Atchison, Topeka & Santa Fe Railroads. Water transportation is available at Long Beach and Los Angeles harbors, one hour west. In addition, truck freight service is available from both local and national trucking companies. Bus: Bus service is provided by Orange County Rapid Transit District and Southern California Rapid Transit District. Overland bus service is available with Greyhound Busline. Air: Air cargo and passenger flight services are provided at Los Angeles International Airport, 25 miles west, which is served by all major airlines; Long Beach Airport, 12 miles southwest; John Wayne Airport in Orange County, 18 miles southeast of the City. All of these airports provide regional service. Fullerton Municipal Airport, I mile to the east, also provides freight services as well as commuter services to Los Angeles International Airport. -24- CITY FINANCIAL INFORMATION General The City is home to Knott's Berry Farm, a large theme amusement park, which also benefits from the City's proximity to Disneyland in the neighboring City of Anaheim. Also located in the City are the Medieval Times Dinner and Tournament, Pirate's Dinner Adventure, and Knott's Soak City. These attractions drive the tourism industry in the City. In addition to the entertaimuent-type businesses, Buena Park also offers a wide selection of hotels, restaurants, commercial centers, office complexes, business parks, and Downtown Buena Park, with over 1.2 million square feet of regional retail uses. Major nationally recognized employers in the City of Buena Park include Nutrilite, Yamaha, and Georgia Pacific. The City's Auto Center includes dealers of BMW, Buick/GMC, Chevrolet, Ford, Honda, Mercedes-Benz, Nissan, Tesla, and Toyota vehicles, as well as a CarMax Auto Superstore. The City continues to experience positive economic growth, including healthy tourism activity, resulting in increased Transient Occupancy Tax revenues as of Fiscal Year ended June 30, 2016, for the sixth consecutive year since Fiscal Year ended June 30, 2010. Construction and development activity is also continuing to increase, as evidenced by the number of building permits issued by the City. The City's 2035 General Plan establishes policy direction for the long-range planning and growth of the City. As a part of the General Plan, the City adopted the following economic principles and goals: • Fiscal stability: fiscal stability and continued financial growth; • Tax base revenue growth: continued collaboration between the City and the business community to facilitate economic growth, development, and infrastructure improvements that benefit residents and businesses alike; • Diversity: retention and expansion of employment diversity of office, retail, manufacturing, and industrial businesses in the City; • Business retention and attraction: top priorities to continue the long, established history of the many business establishments in the City; • Jobs-housing balance: future mixed-use development in focus areas of the City to provide greater opportunity for jobs-housing balancing; • Entertainment Corridor and tourism: continued opportumbes to grow and expand the experience for tourists who visit the City, including the Entertaimuent Corridor along Beach Boulevard, which provides multiple attractions and destinations for visitors to the City, with plans for new restaurants, hotels, and venues along the Entertainment Corridor; • Revitalization of aging centers: revitalization of the City's older commercial areas and support of reinvestment and business growth in these areas, with the goal also of helping to meeting identified community needs; • Retail sector: promotion of stability and growth of the retail sector for continued economic well being of the City and to respond to both residents and visitors of the City; and • Mix of industrial and office uses: revitalization and reinvention of industrial and office uses to respond to the needs and interests that seek these uses. The total assets of the City exceeded its liabilities at the close of Fiscal Year 2015-16 by $284,020,000. Net position represents the difference between all of the City's assets and liabilities, including infrastructure (roads, bridges, storm drains, sewers, traffic signals, and water system mains and -25- lines) and other capital assets (buildings and improvements, vehicles, furniture, and equipment). Infrastructure and capital assets represent the largest portion of the City's net position, $242,551,000. These assets are costly yet essential to the functioning of City's business and residential populations. The restricted portion of net position are for resources earmarked for specific programs, and therefore unavailable for general use. The unrestricted portion may be utilized for the City's ongoing obligations to its citizens and creditors. Governmental activities net pos1hon in Fiscal Year 2015-16 has decreased by $9,307,000 compared to the prior Fiscal Year, while the business-type activities has increased by $2,237,000. The changes in net position in governmental and business-type activities are primarily due to the current year change in employee pension liability pursuant to Governmental Accounting Standards Board (GASB) Statement No. 68. As of June 30, 2016, the City's governmental funds reported combined ending fund balances of $112,382,000, an increase of $148,000 in comparison with the prior Fiscal Year. Approximately 46 percent of the fund balance, or $51,615,000, is unassigned and available for use at the government's discretion. The City intends to use amounts from the unassigned fund balance to backfill sates tax revenues to be withheld by the State Board of Equalization for a sales tax obligation of the City. During Fiscal Year 2015-16, the City reached a settlement agreement with the State Board of Equalization and other interested parties with regard to sales taxes that were previously remitted to the City related to a point-of sale dispute. As a result of the agreement, the State Board of Equalization performed a reallocation that requires the City to repay $31,158,473 of previously remitted sales tax revenue, which will be withheld by the State Board of Equalization until the obligation is repaid. The City intends to backfill the amounts withheld by the State Board of Equalization with amounts from unassigned fund balance. See the discussions below under the subcaption "-Sales and Use Tax," the caption "-Long Term Liabilities" and in Note 7 of "APPENDIX A- CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016." Additional information can be found in the "Management's Discussion and Analysis" and the Director of Finance's cover letter included the City's Comprehensive Annual Financial Report for the Fiscal Year ending June 30, 2016 ("FY 2015-16 CAFR") included in Appendix A. The discussions of this "CITY FINANCIAL INFORMATION" section of this Official Statement and the FY 2015-16 CAFR contain "forward-looking statements" based on the City's current expectations and assumptions. While the City believes that these expectations and assumptions are reasonable, there is no guarantee that future circumstances and the actual results will not materially differ from current expectations. Fiscal Policies Budget Policv. The City has adopted a Budget Appropriations policy. The policy states that (a) on-going or permanent programs or expenditures require that permanent or on-going funding sources are identified and (b) one-time or non-recurring funding sources should only be utilized to fund one-time expenditures, such as capital improvement projects or to increase fund balance assignments. Fund Balance Policv. It is the policy of the City Council to assign fund balance for various purposes. The City's criteria and standards for classifying funds as "assigned" for purposes of its fund balance policy are internal standards and, therefore, different from the criteria and standards for classifying funds as "assigned" for purposes of its audited financial statements. Accordingly, the assigned fund balances described in this "- Fiscal Policies" section may not necessarily correspond to fund balances shown in the City's audited financial statements in Appendix A or Tables 9, 10, and 11 herein. -26- The following is the City's current policy on fund balance assignments. • General Fund Assignment for Economic Uncertainties. It is the City's policy to assign fund balance in an amount equivalent to between 20 and 25 percent of the current General Fund expenditure budget for the purpose of addressing catastrophic events or extraordinary financial hardships. City Council may temporarily suspend this assigmnent with a majority vote. Fund balance that exceeds the stated thresholds may be assigned with City Council approval. City Council may elect to utilize excess fund balance to acquire other assets, such as real property. Such acquisitions shall be solely for public benefit purposes, including economic development. While such assets are held by the City, the value of the assets may be considered when determining compliance with the stated thresholds. As of June 30, 2016, the General Fund Assignment for Economic Uncertainties was $17,879,476, which is 27.1 percent of the Fiscal Year 16-17 Adopted Expenditure Budget for the City's General Fund. See Table 11 herein for the City's Fiscal Year 2016-17 General Fund budget information. • Assignment for Employee Leave Benefits. It is the City's policy to assign fund balance in an amount equivalent to a least 50 percent of the liability for employee leave benefits. The City maintains the employee leave benefit funds in a separate fund from the General Fund. As of June 30, 2016, the balance in the fund for employee leave benefits was $1,046,931, which is 49 percent of the liability for employee leave benefits. • Assignment for Capital Projects. It is the City's policy to assign fund balance for approved, but not yet expended Capital Improvement Projects. • Assignment for Carryover Expenditures. It is the City's policy to assign fund balance for prior year appropriations which have been approved by City Council to be expended in the current year. • Assignment for Specific Purposes. It is the City's policy to assign fund balance for a specific purpose as approved by a majority vote of the City Council. Pursuant to this policy, the City's fund balance for future projects was $34,829,665 as of June 30, 2016, from which amounts have been allocated toward the backfill of sales tax revenues being withheld by the State Board of Equalization pursuant to a sales tax settlement agreement. As of June 30, 2016, the sum of the City's fund balance for future projects ($34,829,665) and the General Fund Assignment for Economic Uncertainties described above ($17,879,476) is $52,709,141, which is 79.8% of the Fiscal Year 16-17 Adopted Expenditure Budget for the City's General Fund. See Table 11 herein for the City's Fiscal Year 2016-17 General Fund budget information. For discussions of amounts from unassigned fund balance being applied by the City to backfill sales tax revenues being withheld by the State Board of Equalization pursuant to a sales tax settlement agreement that are projected to continue for the next approximately 15 months, see the discussions below under"- Financial Statements (General Fund),""- Sales and Use Tax,""- Long Term Liabilities" and in Note 7 of "APPENDIX A- CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016." -27- Financial Statements (General Fnnd) Set forth in the following pages are the City's General Fund Balance Sheets and Statements of Revenues, Expenditures and Changes in General Fund Balance for Fiscal Years 2011-12 through 2015- 16, based on the City's audited financial statements. The Balance Sheets and Statements of Revenues, Expenditures and Changes in General Fund Balance presented in this Official Statement are subject to the various notes attached to the City's audited financial statements for the respective years. A complete copy of the City's FY 2015-16 CAFR, which includes the City's 2015-16 audited financial statements and the Independent Auditor's Report issued by Badawi & Associates (the "Auditors") regarding such financial statements, is set forth in Appendix A. The Auditor was not requested to consent to the inclusion of its report in Appendix A and it has not undertaken to update financial statements included in Appendix A. No opinion is expressed by the Auditor with respect to any event subsequent to its report. Complete copies of the City's Comprehensive Annual Financial Report for prior years can be obtained from the City's Finance Department and are currently posted on the City's website. The City's audited financial statement have been prepared in conformity with the accounting principles generally accepted in the United States as applied to government units, and pursuant to the accounting and financial principles established by the Govermuental Accounting Standards Board ("GASB"). A summary of the significant accounting policies applied in the City's Fiscal Year 2015-16 audited financial statements, including the adoption of GASB Statement No. 73 (Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions ofGASB Statements 67 and 68) and GASB Statement No. 82 (Pension Issues - An Amendment of GASB Statement No. 67, No. 68, and No. 73), can be found in Note No. 1 to such financial statements. At the close of Fiscal Year 2015-16, the General Fund reported an ending balance of approximately $68.15 million, up approximately $2.145 in comparison to the ending balance of the prior Fiscal Year. Approximately 86 percent ($58.8 million) of the $68.15 million was available for spending at the City's discretion (unassigned, assigned or restricted). Unassigned fund balance was approximately $51. 7 million, a decrease of approximately $4.0 million from the prior Fiscal Year. This decrease was due to the City's acquisition of properties held for resale and does not reflect the remaining $28.9 anticipated backfill to be made by the City from unassigned fund balance for sates tax revenues to be withheld by the State Board of Equalization for a sales tax obligation of the City. See the discussions below under the subcaption "- Sales and Use Tax," the caption"- Long Term Liabilities" and in Note 7 of "APPENDIX A - CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016." The "assigned" fund balance was approximately $5.7 million, an increase of approximately $580,000 from the prior Fiscal Year. The increase was the result of an increase in residual property tax distributed to the City and attributable to the incremental value of the redevelopment project area in the City. See " - Redevelopment-Related Property Tax Considerations" and Table 16 below. The "restricted" fund balance totaled approximately $1.4 million, remaining constant with the prior three Fiscal Years. The remaining $9.3 million in non-spendable fund balance represents resources that cannot be spent because they are not in spendable form. At the end of Fiscal Year 2015-16, the City's non-spendable fund balance consisted of prepaid expenses, inventory, properties held for resale, and a portion of the City loans outstanding to the Former Redevelopment Agency ( as defined below - see "THE AUTHORITY"). -28- TABLE 9 City ofBueua Park Geueral Fuud Balauce Sheets Fiscal Years 2011-12 through 2015-16 2011-12 2012-13 2013-14 2014-15 2015-16 Assets 1 1 1 Cash and investments $36,570,492 $36,586,999( ) $49, 149,155(1) $58,600,579' ) $54,150,712' ) Accmmt<:: receivable 2,186,052 2,173,619 2,181,725 2,558, 11 7'') 20,069,697 Interest receivable 114,195 113,667 102,124 92,621 91,878 Taxes receivable 145,607 87,114 90,968 74,432 160,135 Due from other government<:: 3,657,068 3,992,876 3,956,829 2,724,173 4,085,084 Prepaid items 197,346 19,633 99,009 30,192 65,149 Inventory 81,747 88,089 92,292 98,953 88,867 Property held for resale 3,397,951 Due from other fi.mds 371,190 543,121 557,484 240,499 181,155 Due from Successor Agency(") 7,071,318 7,071,318 7,191,489 7,191,489 Total assets $43,323,697 $50,676,436 $63,300,904 $71,611,055 $89,482,117 Liabilities, Deferred Inflow of Resources and Fund Balance Liabilities: Accmmt<:: payable $ 1,263,802 $ 866,096 $ 867,034 $ 725,287 $ 1,120,777 Accrued liabilities 697,568 525,109 601,589 813,161 1,090,709 Deposits payable 1,104,064 815,999 959,658 1,122,688 1,241,302 Retention payable 15,730 Unemned revenue 269,666 59,041 4 Due to fiduciary fi.md C> 9,860,594 Deferred revenue 817,018 Total liabilities $13,743,046 $ 2,207,204 $ 2,428,281 $ 2,930,802 $ 3,527,559 Deferred Inflows of Resources: Unavailable revenue $ 1,469,015 $ 1,139,715 $ 536,648 $17,808,808 Total deferred inflows of resources Fund Balances: Nornpendable $ 279,093 $ 5,764,776 $ 5,848,355 $ 5,882,336 $ 9,305,158 Restricted 1,414,264 1,414,264 1,438,298 1,438,298 Assigned 4,043,025 5,125,774 5,704,972 Unassigned 29,301,558 39,821,177 48,427,264 55,697,197 51,697,322 Total fund balance $29,580,651 $47,000,217 $59,732,908 $68,143,605 $68,145,750 Total liabilities, deferred inflows of resources, and fund $43,323,697 $50,676,436 $63,300,904 $71,611,055 $89,482,117 balances (1) Increases between Fiscal Years 2012-13 and 2013-14 and Fiscal Years 2013-14 and 2014-15 due to increased tax revenues in both years. Decrease beti.veen Fiscal Years 2014-15 and 2015-16 due to the City's acquisition of properties held for resale and relocation of a major sales tax producer out of the City in August 2014. See the subcaption "- Sal.es and Use Tax," under the caption "- Long Term Liabilities" and in Note 7 of "APPENDIX A - CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016." (2) Increase in accounts receivable between Fiscal Years 2014-15 and 2015-16 due to recording of revenues owed by a developer for contractual overpayments, offset by deferred inflow of resources. (3) Commencing Fiscal Year 2012-13, represents City loans outstanding to the Fonner Redevelopment Agency (as defined herein- see "THE AUTHORITY"). ( 4) For Fiscal Year 2011-12, represents City loans outstanding to the Fonner Redevelopment Agency. Source: City of Buena Park audited financial statements for Fiscal Years 2011-12 through 2015-16, as included in the City's Comprehensive Annual Financial Reports for the respective Fiscal Years; footnotes from City of Buena Park Finance Department. -29- TABLE 10 City ofBueua Park Statemeuts ofReveuues, Expeuditures aud Chauges iu Geueral Fuud Balauce Fiscal Years 2011-12 through 2015-16 2011-12 2012-13 2013-14 2014-15 2015-16 Revenues Taxes (I) $39,381,384 $46,458,215 $45,978,079 $44,418,622 $43,045,136 Licenses and permits 545,545 514,727 495,798 789,638 903,194 Fines and forfeitures 874,265 710,403 736,235 852,091 811,614 Intergovernmental 6,474,552 6,684,313 8,062,396 7,369,116 7,508,842 Charges for services 6,718,626 6,641,760 6,880,083 7,066,874 7,699,530 Investment income 496,674 169,259 433,011 510,183 851,462 Miscellaneous 135,354 388,705 1,064,625 411,081 829,409 Total revenues $54,626,400 $61,567,382 $63,650,227 $61,417,605 $61,649,187 Expenditures Current General government $ 4,943,166 $ 6,016,41 i 2J $ 5,851,978 $ 6,492,886 $ 7,282,013 Leisure 2,131,919 2,362,381 2,447,507 2,481,187 2,881,917 Health 2,777,457 2,780,370 2,959,883 2,962,010 3,028,750 Transportation 4,977,718 4,119,589 4,196,522 4,149,871 4,686,149 Public protection 27,705,642 27,725,332 27,941,438 28,726,996 32,404,362 Development 1,316,545 1,549,997 1,533,647 1,981,565 2,433,549 Environmental 2,723,902 2,847,128 2,846,951 2,939,970 3,045,715 Capital outlay 386 64,328 87,506 118,393 647,728 Debt Service Principal retirement 1,700,630 1,567,761 1,633,379 1,701,870 4,058,6Ji4J Interest and other charges 525,656 487,276 421,658 353,167 280,606 Total expenditures $48,803,021 $49,520,579 $49,920,469 $51,907,915 $60,749,401 Revenues over (under) $ 5,823,379 $12,046,803 $13,729,758 $ 9,509,690 $ 899,786 expenditures Other financing sources (uses) Transfers in $ 179,670 $ 79,670 $ 79,670 $ 79,670 $ 257,946 3 Transfers out ( ) (10,881,183) (1,228,690) (1,163,220) (1,178,890) (1,683,000) Proceeds from long term debt 526,000 Proceeds from sale of capital 3,331 86,483 227 1,413 assets Total other sources (uses) (10,701,513) (1,145,689) (997,067) (1,098,993) (897,641) Net change in fund balance (4,878,134) 10,901,114 12,732,691 8,410,697 2,145 Fund Balances: Beginning of year $34,458,785 $36,099,103 $47,000,217 $59,732,908 $68,143,605 End of year $29,580,651 $47,000,217 $59,732,908 $68,143,605 $68,145,750 (1) See "Primary General Fund Tax Revenue Sources" for a discussion regarding certain top tax revenues sources. (2) Increase between Fiscal Years 2011-12 and 2012-13 due to the General Fund assuming the operating costs related to the Former Redevelopment Agency. (3) For Fiscal Year 2011-12, Transfers Out include repayment to the Successor Agency (as defined herein - see ''THE AUTHORITY") of City loans to the Fonner Redevelopment Agency of $9.8 million due to State legislation. See, also, description of AB Xl 26 under the subcaption "-Redevelopment-Related Property Tax Considerations." (4) Includes $2,284,181 \Vl.thheld by the State Boord of Equalization pursuant to a settlement agreement. See the subcaption " Sales and Use Tax," under the caption"- Long Term Liabilities" and in Note 7 of "APPENDIX A - CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016." Source: City of Buena Park audited financial statements for Fiscal Years 2011-12 through 2015-16, as included in the City's Comprehensive Armual Financial Reports for the respective Fiscal Years; footnotes from City of Buena Park Finance Department. -30- Budgetary Process; General Fund Budget The annual budget serves as the foundation for the City's financial planning and policy making. The budget is prepared according to fund, function (e.g., public safety), and department (e.g., police). Starting in Fiscal Year 2008-09, the City went to a two year budget process. The City adopts two separate annual budgets for each respective Fiscal Year. The items for consideration for the second Fiscal Year are limited to an exception basis. Prior to the beginning of the first Fiscal Year of the two year budget cycle, the City Manager communicates the priorities, goals, and outlook for the upcoming two Fiscal Years to all the Department Directors and their managers. Based on these objectives, the Departments prepare revenue estimates and expenditure requests. These requests are reviewed by the City Manager and the Director of Finance. Meetings are conducted with the City Manager, the Director of Finance, and each individual Department to analyze and revise, as necessary, all budget requests. The City Manager's recommendations are compiled into a Preliminary Budget document and submitted to the City Council in May. The City Council then holds one or more Study Session workshops to study and approve any revisions to the City Manager's recommendations. A public hearing is held in June for budget adoption. In the second year of the two year budget cycle, review and analysis is limited to revisions to the adopted budget. The following table shows the City's final budget and actual results for General Fund revenues and expenditures for the two most recently completed Fiscal Years, as well as the City's budget for Fiscal Year 2016-17. [The remainder of this page is intentionally left blank] -31- TABLE 11 City ofBueua Park Geueral Fuud Budget Summary Fiscal Years 2014-15 through 2016-17 FY 2015-16 FY 2014-15 FY 2014-15 Adopted FY 2015-16 FY 2016-17 Adopted Audited Revised Audited Adopted Budget (IJ Actual Budget ~l Actual Budget ~l Revenues Taxes $39,386,800 $44,418,622 $40,560,800 $43,045,136 $44,285,300 Licenses and permits 680,200 789,638 1,081,000 903,194 790,500 Fines and forfeitures 705,500 852,091 751,500 811,614 888,050 Intergovernmental 6,531,000 7,369,116 7,198,600 7,508,842 7,379,730 Charges for services 6,713,470 7,066,874 7,129,780 7,699,530 9,988,210 Investment income 475,000 510,183 488,200 851,462 496,000 Miscellaneous 246,720 411,081 326,150 829,409 Total Revenues $54,720,690 $61,417,605 $57,536,030 $61,649,187 $63,827,790 Expenditures Current General government $ 6,633,180 $ 6,492,886 $6,906,140 $ 7,282,013 $ 6,993,370 Leisure 2,514,160 2,481,187 2,662,940 2,881,917 3,844,550 Health 3,049,040 2,962,010 3,059,040 3,028,750 3,168,310 Transportation 4,768,180 4,149,871 5,063,690 4,686,149 5,928,860 Public protection 30,489,030 28,726,996 32,800,850 32,404,362 35,810,780 Development 2,006,730 1,981,565 2,299,250 2,433,549 3,076,570 Environmental 3,024,060 2,939,970 3,125,670 3,045,715 3,631,970 Capital outlay 193,050 118,393 156,310 647,728 437,010 Debt Service 4 Principal retirement 1,703,150 1,701,870 1,774,430 4,058,612 1,955,400 ( ) Interest and other charges 351,890 353,167 280,610 280,606 215,370 Total Expenditures $54,732,470 $51,907,915 $58,128,930 $60,749,401 $65,062,190 Revenues over (under) 9,509,690 (592,900) 899,786 (1,234,400) expenditures (11,780) Other financing sources (uses) Transfers in 226,440 79,670 137,670 257,946 79,670 Transfers out (1,222,890) (1,178,890) (1,213,460) (1,683,000) (1,028,970) Proceeds from long term debt -- -- 526,000 Proceeds from sale of capital 2,000 227 2,000 1,413 assets Total other sources (uses) (994,450) (1,098,993) (1,073,790) (897,641) (949,300) Net change in fund balance (1,006,230) 8,410,697 (1,666,690) 2,145 (2,183,700) Fund Balances: Beginning of year $59,732,908 $59,732,908 $68,143,605 $68,143,605 $68,145,750 End of year $58 726 678 $68 143 605 $66 476 915 $68 145 750 $65 962 050 (1) Original Fiscal Year 2014-15 budget as adopted by the City Council on June 24, 2014. (2) Adopted Revised Budget for Fiscal Year 2015-16 as approved by the City Council on June 23, 2015 to revise the Original Fiscal Year 2015-16 budget adopted by the City Council on June 24, 2014 as part of a two-year budget (3) Original Fiscal Year 2016-17 budget as adopted by the City Council on June 28, 2016. ( 4) Although not yet reflected in a formal budget amendment for the Fiscal Year 2016-17 budget, the City expects approximately $22 million in outstanding principal to be retired in Fiscal Year 2016-17 due to State Board of Equalization \Vl.thholding of sales tax allocable to the City, on account of the sales tax settlement agreement and to backfill such amounts \Vl.thheld \VJ.th by unassigned fund balance amounts. See the subcaption "- Sal.es and Use Tax," under the caption"- Long Term Liabilities" and in Note 7 of "APPENDIX A - CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016." Source: City of Buena Park Comprehensive Arnmal Financial Reports for Fiscal Years 2014-15 and 2015-16; City of Buena Park, Adopted Budget for Fiscal Years 2016-2017 and 2017-2018 and Finance Department as to FY 2016-17 Adopted Budget figures. -32- Primary General Fnnd Tax Revenne Sonrces As shown in Table 12, the largest source of the City's General Fund revenues is from tax revenues. Such revenues are based on various types of taxes, such as sales tax, property tax, transient occupancy tax, franchise tax, documentary transfer tax, and utility users taxes. Among the largest tax revenues sources, consistently from Fiscal Years 2011-12 through 2015-16, are the sales tax, property tax, and motor vehicle license fees, including in-lieu property tax. The table below provides the amount of various tax revenues and the share of General Fund revenues that each represents for Fiscal Years 2011-12 through 2015-16. TABLE 12 City of Buena Park Primary General Fund Tax Revenues Sources Fiscal Years 2011-12 through 2015-16 2011-12 2012-13 2013-14 2014-15 2015-16 % of % of % of % of % of General General General General General Fund Fund Fund Fund Fund Tax Revenue Source Revenues Revenues Revenues Revenues Revenues Revenues Revenues Revenues Revenues Revenues Sales and Use Tax(l)(z) $23,476,000 430% $24,947,000 40.5% $27,262,000 42.8% $23,244,000 37.8% $20,234,000 32.8% Property TaxQJ 6,840,000 12.5 12,041,000 19.6 8,156,000 12.8 9,709,000 15.8 10,661,000 17.3 VLF (Motor Vehicle License Fees & in- Lieu Property TaxJC'l 6,113,995 11.2 6,206,000 JO.I 6,424,000 10. I 6,769,000 11.0 7,137,000 11.6 Transient Occupancy Tax 4,050,000 7.4 4,403,000 7.2 5,007,000 7.9 5,686,000 9.3 6,442,000 10.4 Utility Users Tax 2,305,000 4.2 2,355,000 3.8 2,497,000 3.9 2,649,000 4.3 2,722,000 4.4 Franchise Tax 1,697,000 3.1 1,729,000 2.8 1,700,000 2.7 2,002,000 3.3 1,776,000 2.9 Other Taxes('! 1,013,384 1.9 983,215 1.6 1,356,079 2.1 I, 129,000 1.8 1,210,000 2.0 Subtotal All Tax Revenues $45,495,379 83.3% $52,664,215 85.5% $52,402,079 82.3% $51,188,000 83.3% $50,182,000 81.4% Total General Fund 6 Revenues( ) $54,626,400 1000% $61,567,382 100 0% $63,650,227 100 0% $61,417,605 1000% $61,649,187 1000% (1) Includes amounts received by the City as property tax in lieu of sales tax pursuant to the "Triple Flip." See "-Sal.es and Use Tax-Triple Flip" below. (2) For Fiscal Year 2015-16, Sales and Use Tax Revenues shmvn are gross of State Board of Equalization withholdings for sales tax payable due to point-of-sale dispute resolution, based on City's backfill of such amounts \VJ.th amounts from unassigned fund balance. See "-Sales and Use Tax" and "-Long Term Liabilities" below, and Appendix A hereto, including Note 7 therein. (3) Property Tax revenues shmvn include fluctuations for one-time distributions of property tax as a result of statutory dissolution of the City's redevelopment agency. See "- Redevelopment Related Property Tax Considerations" and Table 16. (4) VLF (Motor Vehicle License Fees & in-Lieu Property Tax) are included in Intergovernmental Revenues in Tables 10 and 11 and in the City's Comprehensive Arnmal Financial Reports but are paid to the City as a property tax. (5) Consists of business license taxes and property transfer taxes. (6) See Table 10 (Statement of Revenues, Expenditures and Changes in General Fund Balance) above. Source: City of Buena Park. -33- As set forth in the original Fiscal Year 2016-17 budget as adopted by the City Council on June 28, 2016, the City's projections for tax revenues are as follows: 2016-17 Budget % of General Fund Tax Revenue Source Projected/Budgeted Revenues Revenues Sales and Use Tax (lJ $22,025,000 34.5% Property Tax 9,947,500 15.6 VLF (Motor Vehicle License Fees & in-Lieu Property Tax) (z) 7,000,000 110 Transient Occupancy Tax 6,125,000 9.6 Utility Users Tax 2,900,000 4.5 Franchise Tax 2,140,800 3.4 Other Taxes 1,146,000 1.8 Subtotal All Tax Revenues $51,284,300 80.3% Total General Fund Revenues (3J $63,826,790 100 0% (1) Sales and Use Tax Revenues shmvn are gross of State Board of Equalization \Vl.thholdings for sales tax payable due to point of-sale dispute resolution, based on City's plan to backfill of such amounts \Vl.th amounts from unassigned fund balance. See "- Sal.es and Use Tax" and"- Long Tenn Liabilities" below, and Appendix A hereto, including Note 7 therein. (2) VLF (Motor Vehicle License Fees & in-Lieu Property Tax) are included in Intergovernmental Revenues in Table 11 and in the City's Comprehensive Arnmal Financial Reports but are paid to the City as a property tax. (3) See Table 11 (General Fund Budget Summary) above. Source: City of Buena Park. Sales and Use Tax. A sales and use tax is imposed on retail sales or consumption of personal property. As shown in Table 12, sales and use tax revenues represented the top source of tax revenues for the City's General Fund in each of Fiscal Years 2011-12 through 2015-16, comprising approximately 32.8 percent of the City's total General Fund Revenues in Fiscal Year 2015-16 (inclusive of property tax in lieu of sales tax and the City's receipts of regular sales and use taxes). As discussed further under the subcaption "- Triple Flip" below, the final Fiscal Year in which property tax in lieu of sales tax was distributed to the City is Fiscal Year 2015-16. Based on the City's 2016-17 budget as originally adopted on in June 2016, the sales tax revenues are projected at $22,025,000, representing approximately 34.5 percent of the City's total budgeted General Fund Revenues in Fiscal Year 2016-17. See Tables 6 and 7 under the caption "THE CITY - Taxable Transactions" for information regarding taxable transactions in the City for calendar years 2010 through 2014 and 2010 through 2015, respectively. As discussed below under the caption, "- Long Term Liabilities" and in Note 7 of "APPENDIX A - CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016," during fiscal year 2016, the City reached a settlement agreement with the State Board of Equalization and other interested parties with regard to sales taxes that were previously remitted to the City related to a point-of-sale dispute. As a result of the agreement, the State Board of Equalization performed a reallocation that resulted in the City requiring to repay $31,158,473 of previously remitted sales tax revenue. One hundred percent (100%) of sales tax revenues are to be withheld by the State Board of Equalization until the obligation is repaid. During fiscal year 2016, the State Board of Equalization withheld $2,284,181 of sales tax revenues generated by the City. As of June 30, 2016, the outstanding balance of the obligation was $28,874,692. -34- For Fiscal Year 2015-16, the City has accounted for such withholding by recording sales tax revenue as if the City had received its allocation and concurrently recording an expenditure for the payment of the sales tax liability. The City intends to backfill the amounts withheld by the State Board of Equalization with amounts from unassigned fund balance. The City expects to continue this accounting practice until the sales tax liability is paid in full. Projections of sales tax revenues performed for the City estimate approximately $22 million in sales tax to be allocated to the City in Fiscal Year 2016-17. Based on amounts already withheld by the State Board of Equalization in Fiscal Year 2015-16, described above, and the sales tax projections for Fiscal Year 2016-17, the City expects that the State Board of Equalization will continue to withhold sales tax revenues generated by the City for approximately 15 months before the $31,158,473 obligation is paid in full, at which time the City will start receiving its usual sales tax allocation. Sales Tax Rates The City's sales tax revenue represents the City's share of the sales and use tax, imposed on taxable transactions occurring within the City's boundaries. The sales tax is governed by the Bradley Bums Uniform Local Sales and Use Tax Law, set forth in California Revenue and Taxation Code Section 7200 et seq. As of January 1, 2017, the local sales tax rate in the City is 7. 75 percent, of which the City is allocated 1 percent. The State collects and administers the tax, and makes distributions on taxes collected within the City. Businesses remit sale tax collections to the State Board of Equalization at the end of each month. The BOE makes distribution to the City and the County, after deduction of the State's administrative costs, three months after the end of each fiscal quarter, based on the following base and voter-approved sales tax rates: TABLE 13 City of Buena Park Sales Tax Rate As of January 1, 2017 Jurisdiction Rate State of California 6.00% County of Orange (including Orange County Local Transportation Authority) 1.75 City of Buena Park Total 7.75% Source: State of California, Board of Equalization. Triple Flip The figures shown in Table 12 for sales tax revenues include property tax that the City received in lieu of sales tax because of the "Triple Flip." In 2004, state voters approved the "California Economic Recovery Act," which authorized the issuance of $15 billion in bonds (the "Economic Recovery Bonds") to finance state budget deficits. $11.3 billion of the Economic Recovery Bonds were issued in 2004 and an additional $3.3 billion were issued in 2008. To repay the Economic Recovery Bonds, the State pledged one quarter cent of the local government's share of sales tax revenues. In such connection, the State instituted a complex series of revenue exchanges commonly referred to as the "Triple Flip" which generally consisted of the following steps: -35- Flip I: Shifted one-quarter cent of the cities' and counties' portion of the sales and use tax rate imposed by the Bradley-Burns Uniform Local Sales and Use Tax Law to the State to repay the Economic Recovery Bonds, Flip 2: Replaced the diverted local sales taxes, dollar-for-dollar, with property taxes shifted from school and community college districts - specifically, from county Education Revenue Augmentation Funds ("ERAF"), and Flip 3: Offset the school and community college district tax losses from the redirection of ERAF to cities and counties by increased State education aid under Proposition 98 minimum guarantee. On August 5, 2015, the State Department of Finance announced the final repayment of the Economic Recovery Bonds. Consequently, the process of unwinding of the Triple Flip was completed by the end of Fiscal Year 2015-16, subject to any fmal settle-up amounts attributable to sales taxes received in to the Fiscal Recovery Fund (i.e., debt service fund for the Economic Recovery Bonds) after repayment of the Economic Recovery Bonds in full. Property Taxes. Property taxes represent a significant source of the City's General Fund revenues. As shown in Table 12, property tax revenues represented the second largest source of tax revenues for the City's General Fund in each of Fiscal Years 2011-12 through 2015-16, comprising approximately 17.3 percent of the City's total General Fund Revenues in Fiscal Year 2015-16. The figures shown in Table 12 for property tax revenues include neither: (i) property tax that the City received in lieu of sales tax because of the "Triple Flip" (see "Sales and Use Tax - Triple Flip" above), and (ii) property tax that the City received in lieu of vehicle license tax (see"- Vehicle License Fees (including in-Lieu Property Taxes)" below). Based on the City's 2016-17 budget as originally adopted on in June 2016, property tax revenues are projected at $9,947,500, representing approximately 15.6 percent of the City's total budgeted General Fund Revenues in Fiscal Year 2016-17. As reflected in Table 14 below, the City's assessed value increased by approximately $73.9 million, or 0. 8 percent, between Fiscal Years 2015-16 and 2016-17. See Table 14 for a ten-year history of the assessed valuation of taxable property within the City. Proposition 13 Limitations. Article XIIIA of the State of California Constitution imposes limits on annual adjustments to real property assessed values and to the amount of ad valorem tax that may be levied on real property. See "LIMITATIONS ON TAX REVENUES AND APPROPRIATIONS - Article XIIIA." Tax Levies and Delinquencies. Taxes are levied by the County for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. Effective July 1, 1983, real property that changes ownership or is newly constructed is reassessed at the time the change in ownership occurs or the new construction is completed. If the property is reassessed at a higher value, one or more supplemental tax statements will be added to the annual tax bill. If the property is reassessed at a lower value, the property owner may receive a refund. Property taxes on the secured roll are due in two instalhnents, on November 1 and February 1 of each fiscal year, and if unpaid become delinquent on December 10 and April 10, respectively. If the first instalhnent is not paid by December 10, a ten percent delinquent penalty is added to any unpaid balance. If the second installment is not paid by April 10, a ten percent penalty plus a charge of $10 is added to the unpaid balance. Since supplemental tax bills are mailed throughout the year, they may or may not be due -36- or delinquent at the same time as annual tax bills. The same penalties and charges accrue for delinquent supplemental taxes as for delinquent annual taxes. Property on the secured roll with respect to which taxes are delinquent becomes tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5 percent of the unpaid tax per month to the time of redemption, plus costs and a redemption fee. If taxes remain unpaid for a period of five years following tax default, the property becomes subject to the County Tax Collector's power of sale. Properties may be redeemed under an installment plan by paying the current year's taxes, plus an initial payment of twenty percent of the redemption amount and an instalhnent setup fee. The instalhnent plan of redemption allows for the payment of delinquent taxes over a five-year period beginning the date the installment plan account is opened. An instalhnent plan account can be opened anytime after the property becomes tax defaulted and within five years of that date. After the five-year period an installment plan account may not be opened, as the property becomes subject to the County Tax Collector's power of sale. Property taxes on the unsecured roll are due as of the January 1 lien date and, in general, become delinquent on August 31 and are thereafter subject to a ten percent penalty plus a collection fee. If unsecured taxes are unpaid on October 31, an additional penalty of 1.5 percent attaches to them on the first day of each month until paid. The City has four ways of collecting delinquent unsecured personal property taxes: ( 1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the clerk of the court specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county recorder's office, in order to obtain a lien on certain property of the taxpayer; and ( 4) seizing and selling personal property, improvements or possessory interests belonging or assessed to the assessee. County Teeter Plan. The County has implemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), which applies to property taxes levied for the City. Under the Teeter Plan, the County guarantees that the City will receive 100 percent of the taxes levied for it. Any delinquencies are borne by the County, which in return collects and retains all penalties and interest which accrue on the delinquent taxes. Consequently, the City's tax receipts do not reflect any delinquencies. If, however, the County Board of Supervisors were to determine to discontinue the Teeter Plan, the City's receipt of property tax revenues would reflect actual delinquencies and the actual collection rate. [The remainder of this page is intentionally left blank] -37- Assessed Valuation. A ten-year history of the City's assessed valuation is as follows: TABLE 14 City of Buena Park Assessed Value of Taxable Property (dollar amounts expressed in thousands (000's)) Fiscal Years 2007-08 through 2016-17 Fiscal Year Less: Total Ended Residential Commercial Industrial Other Tax-Exempt Taxable June 30 Property Property Property Property (IJ Property Assessed Value 2008 $4,774,547 $1,191,585 $ 659,512 $835,226 $137,704 $7,598,574 2009 4,911,052 1,236,725 771,025 810,115 163,420 7,892,337 2010 4,685,423 1,366,864 958,560 558,019 183,480 7,752,346 2011 4,766,232 1,459,433 936,848 447,890 222,581 7,832,984 2012 4,827,360 1,451,380 941,195 400,690 228,963 7,849,588 2013 4,912,135 1,468,514 961,969 406,360 238,873 7,987,851 2014 5,042,078 1,432,849 1,112,097 451,647 236,998 8,275,669 2015 5,415,224 1,456,247 1,122,370 474,918 226,042 8,694,801 2016 5,734,199 1,590,478 1,165,617 468,840 191,295 9,150,429 2017 5,901,370 1,676,798 1,162,335 483,858 0 9,224,361 (1) "Other Property" includes recreational, institutional, vacant, and miscellaneous property. Source: City of Buena Park, based on information compiled by from Orange County Assessor. Redevelopment-Related Property Tax Considerations. The State's Community Redevelopment Law ( codified in Part 1 of Division 24 of the California Health and Safety Code) authorized the redevelopment agency of any city or county to receive an allocation of tax revenues resulting from increases in assessed values of properties within designated redevelopment project areas (the "incremental value'') occurring after the year the project area is formed. In effect, local taxing agencies, such as the City, realize tax revenues only in the assessed value of such property at the time the redevelopment project is created for the duration of such redevelopment project. Although Assembly Bill No. 26 ("AB Xl 26''), enacted on June 29, 2011 as Chapter 5 of Statutes of 2011, statutorily dissolved redevelopment agencies as of February 1, 2012, the enforceable obligations of dissolved redevelopment agencies, continue to be paid from property taxes derived from such incremental value until the enforceable obligations are paid in full in accordance with Parts 1.8 (commencing with Section 34161) and 1. 85 ( commencing with Section 34170) of Division 24 of the California Health and Safety Code ( as such statutory provisions may be amended from time to time the "Dissolution Act''). There is one merged redevelopment project in the City, the Consolidated Redevelopment Project (the "Consolidated Redevelopment Project Area''), which is comprised of four constituent underlying project areas (the Central Business District Redevelopment Project (which includes an original territory and an amendment area), Project Area II, Buena Park Redevelopment Project Area III, and Buena Park Redevelopment Project Area IV). The table below sets forth the total assessed valuations within the City and redevelopment agency incremental values for the Consolidated Redevelopment Project Area from Fiscal Years 2007-08 through 2016-17: -38- TABLE 15 City ofBueua Park Total aud Net Property Tax Valuatious (dollar amouuts expressed iu thousauds (OOO's)) Fiscal Years 2007-08 through 2016-17 Total Taxable Fiscal Year Assessed Value Redevelopment Percent Change in Ended June 30 within City Increment Value Net Value Net Value 2008 $7,598,574 $2,394,595 $5,203,979 2009 7,892,337 2,631,436 5,260,901 11% 2010 7,752,346 2,576,322 5,176,024 (1.6) 2011 7,832,984 2,597,895 5,235,089 11 2012 7,849,588 2,587,741 5,261,847 0.5 2013 7,987,851 2,659,081 5,328,770 1.3 2014 8,275,669 2,795,202 5,480,467 2.8 2015 8,694,801 3,019,452 5,675,349 3.6 2016 9,150,429 3,301,783 5,848,646 3.1 2017(!) 9,229,491 3,605,619 5,623,872 (3.8) (1) Fiscal Year 2016-17 data is based on the 2016-17 equalized Orange County tax rolls published by the County at the begimring of the Fiscal Year, prior to adjustments; data for prior Fiscal Years is based on year-end data for the corresponding Fiscal Year, after adjustments made by the County. Source: City of Buena Park and Successor Agency to the Community Redevelopment Agency of the City of Buena Park, based on information compiled from Orange County Auditor-Controller and Orange County tax rolls. In the first year after redevelopment agencies were statutorily dissolved, the Dissolution Act established a process for determining the liquid assets that redevelopment agencies should have shifted to their successor agencies when they were dissolved, and the amount that should be available for remittance by the successor agencies to their respective county auditor-controller for distribution to affected taxing entities within the project areas of the former redevelopment agencies. This determination process is commonly known as the "due diligence review process" and was required to be completed through the final step (review by the State Department of Finance) by November 9, 2012 with respect to affordable housing funds and by April 1, 2013 with respect to non-housing funds. Generally, within five business days of receiving notification from the State Department of Finance, redevelopment agencies were required to remit to their respective county auditor-controller the amount of unobligated balances determined by the State Department of Finance. In turn, such remitted unobligated balances were distributed to taxing entities within the applicable redevelopment project area (including the City with respect to the Consolidated Redevelopment Project Area) in proportion to such taxing entity's share of property tax revenues in the tax rate area for the applicable fiscal year. The Dissolution Act also provides for proceeds of the sale of land owned by redevelopment agencies at the time of their statutory dissolution to be remitted to the applicable county auditor-controller for distribution to the affected taxing entities within the applicable redevelopment project area (including the City with respect to the Consolidated Redevelopment Project Area) in proportion to such taxing entity's share of property tax revenues in the tax rate area for the applicable fiscal year. Further, under the Dissolution Act, taxing entities within the Consolidated Redevelopment Project Area, such as the City, are to receive distributions (in proportion to such taxing entity's share of property tax revenues in the tax rate area for the applicable fiscal year) of residual amounts of property taxes attributable to incremental value of the Consolidated Redevelopment Project Area on each June 1 and January 2, commencing June 1, 2012, after payment of: (i) tax sharing obligations established previously pursuant to the Community Redevelopment Law, (ii) enforceable obligations of the successor -39- agency to the former redevelopment agency, and (iii) an administrative cost allowance to such successor agency. As enforceable obligations of the former redevelopment agency and its successor agency are paid and retired, residual amounts of property tax revenues attributable to redevelopment project area incremental value are expected to increase over time. The table below summarizes the distributions received by the City of its share of (i) unobligated balances determined pursuant to the due diligence review process described above, (ii) proceeds of the sale of land owned by the City's redevelopment agency at the time of its dissolution, and (iii) residual amounts of property taxes derived from the Consolidated Redevelopment Project Area since the statutory dissolution of the City's redevelopment agency on February I, 2012. These amounts are included in property tax revenues in Table 12. TABLE 16 City of Buena Park City Share of Due Diligence Review Proceeds, Land Sale Proceeds, and Residual Property Taxes Attributable to the Consolidated Redevelopment Project Area Residual Property Taxes Land Sale/Due Diligence Fiscal Year Received by City Review Proceeds 2012-13 $3,365,873 2013-14 $ 782,224 303,307 2014-15 2,370,223 123,246 2015-16 2,115,048 803,812 2016-17' 2,215,340 32,160 * Estimated. Source: City of Buena Park and Successor Agency to the Community Redevelopment Agency of the City of Buena Park, based on information compiled from Orange County Auditor-Controller. [The remainder of this page is intentionally left blank] -40- Top Tax Pavers. The top ten property tax payers, based on assessed values of taxable property in the City, as shown on the 2016-17 tax roll, are set forth in the following table: TABLE 17 City of Buena Park Top Ten Taxpayers Based on Assessed Value Fiscal Year 2016-17 Taxable % of Property Owner Land Use Assessed Value Total I. Knoll's Berry Farm Commercial $324,263,653 3.52% 2. Comref So California Industrial Sub LLC Industrial 132,362,708 1.43 3. Alticor Inc Industrial 98,207,141 1.06 4. PR! Buena Park Industrial CA LLC Industrial 92,421,246 1.00 5. The Source at Beach, LLC Commercial 89,188,409 0.97 6. NewkoaLLC Commercial 85,329,829 0.93 7. Westcore So-Cal I LLC Industrial 65,544,642 071 8. Coventry II DDR Buena Park Place LP Commercial 49,567,757 0.54 9. J C Penney Properties, Inc. Commercial 49,019,035 0.53 10. Bottling Group LLC Industrial 45 929 811 0.50 Total: $1,031,834,231 11.19% Source: City of Buena Park, based on information compiled from Orange County tax rolls. Vehicle License Fees (including in-Lieu Property Taxes). The motor vehicle license fee ("VLF") is an annual fee on the ownership of a registered vehicle in California. Automobiles, motorcycles, pick-up trucks, commercial trucks and trailers, rental cars and taxicabs are all subject to the VLF. This fee is collected by the State's Department of Motor Vehicles and disbursed to other governmental agencies by the State Controller. Cities and counties receive a portion of this revenue based on population. 100% of the VLF revenues the City receives from the State can be used for City general purposes. Prior to 1999, State residents paid a VLF of2% of the market value of their respective vehicles to the Department of Motor Vehicles. This VLF funding is passed through to cities and counties throughout California. The State legislature reduced the VLF tax rate from 2% to 0.65%, commencing in 1999. The same legislation also guaranteed cities and counties that the State would "backfill" the difference between the two rates. On June 19, 2003, due to the State budget crisis, the VLF tax rate was restored to the pre-1999 rate of 2%. Due to the increase of the VLF tax rate, the need for the State to backfill local governments was eliminated. On November 17, 2003, the then new Governor of the State issued an executive order lowering the rate back down to 0.65% and reinstating the backfill to local governments. During the time it took the DMV to initiate the increase (approximately three months), the State did not make VLF backfill payments to local governments. The State Legislature characterized the amount of VLF backfill revenues it failed to pay to cities and counties during this three-month period as a loan, which was repaid on August 15, 2006. -41- The 2004-05 State budget permanently reduced the VLF tax rate from 2% to 0.65% and deleted the requirement for backfill payments, providing, instead, that the amount of the backfill requirement will be met by an increase in the property tax allocation to cities and counties. In fiscal year 2015-16, the City received approximately $7,137,000 in VLF revenues and property tax revenues in lieu of VLF combined, representing approximately 11.6 percent of the City's General Fund revenues for Fiscal Year 2015-16. Based on the City's 2016-17 budget as originally adopted on in June 2016, combined VLF revenues and property tax revenues in lieu of VLF are projected at $7,000,000, representing approximately I 1.0 percent of the City's total budgeted General Fund Revenues in Fiscal Year 2016-17. Transient Occupancv Tax. The authority to levy a transient occupancy tax is granted to the legislative bodies of cities and counties in the State by the California Revenue and Taxation Code. The tax may be levied for the privilege of occupying a room or rooms, or other living space, in a hotel, inn, tourist home or house, motel, or other lodging unless the occupancy is for a period of more than 30 days. As shown in Table 12, transient occupancy tax revenues represented the fourth largest single source of tax revenues for the City's General Fund in each of Fiscal Years 2011-12 through 2015-16, comprising approximately 10.4 percent of the City's total General Fund Revenues in Fiscal Year 2015-16. Based on the City's 2016-17 budget as originally adopted on in June 2016, transient occupancy tax revenues are projected at $6,125,000, representing approximately 9.6 percent of the City's total budgeted General Fund Revenues in Fiscal Year 2016-17. The City's transient occupancy tax ordinance was adopted in 1993 and is codified as Chapter 3.16 of the City's Municipal Code. The ordinance provides that the City's transient occupancy tax rate is twelve percent of the rent charged by the proprietor of the premises. The City's Director of Finance serves as the tax administrator, and proprietors of properties subject to the City's transient occupancy tax remit the tax directly to tax administrator, together with completed reporting forms, on or before the last day of the month following the close of each calendar quarter. A delinquent penalty of 10 percent attaches to delinquent transient occupancy taxes on the first day of each month after the tax is due. Interest accrues on delinquent transient occupancy taxes at the rate of 0.5 percent per month or fraction thereof on the amount of the unpaid tax, exclusive of penalties, until paid. Utilitv Users Taxes. Revenues from the utility users taxes represent a significant source of revenues for the General Fund. Pursuant to State law, the City may impose utility users tax on consumption of utilities services. The current tax rate of the City's utility users tax on electricity and gas is three percent, which is imposed by Sections 3.24.020 and 3.24.030 of the City's Municipal Code (as renumbered from the prior, 1960 Buena Park City Code). The City's utility users taxes constitute taxes levied for general govermnental purposes, are not considered restricted funds, and can be used by the City for any General Fund purpose. As shown in Table 12, utility users taxes represented the fifth largest single source of tax revenues for the City's General Fund in each of Fiscal Years 2011-12 through 2015-16, comprising approximately 4.4 percent of the City's total General Fund Revenues in Fiscal Year 2015-16. Based on the City's 2016-17 budget as originally adopted on in June 2016, utility users taxes are projected at $2,900,000, representing approximately 4.5 percent of the City's total budgeted General Fund Revenues in Fiscal Year 2016-17. -42- Franchise Tax. The City has franchise agreements with a number of companies delivering services to the community. Under the terms of these agreements, the City receives: • from the natural gas utility franchise (Southern Counties Gas Company of California ("Southern Counties Gas"), a fee of 2% of gross annual receipts (provided, such payment shall not be less than I% of Southern Counties Gas' gross annual receipts derived from the sale of gas within the City limits); • from the electricity utility franchise (Southern California Edison ("SCE")), a fee of 2% of gross annual receipts (provided, such payment shall not be less than 1% of SCE's gross annual receipts derived from the sale of electricity within the City limits); and • from the trash and recycling company (EDCO Disposal Corporation, d/b/ a Park Disposal Service ("EDCO")) a fee of 5% of gross revenues with respect to commercial, industrial, and business establishment accounts, together with an additional yearly sum of $118,000, payable in twelve equal monthly installments. In addition, the Digital Infrastructure and Video Competition Act of 2006 ("DIV CA"), California Public Utilities Code Section 5800 et seq., established a procedure for the issuance of state franchises for the provision of cable and video service. Under DIVCA, the holder of a state franchise offering cable and video service within the City must remit to the City a state franchise fee equal to 5% of gross revenues derived from the operation of the franchise holder's cable or video service network in the City's jurisdiction. DIVCA provides that utility users taxes may be used by the City for any lawful purpose (including any lawful purposes of the City's General Fund). The City receives franchise fees pursuant to DIV CA from Time Warner Cable, Pacific Bell Telephone Company, and AT&T. As shown in Table 12, franchise tax revenues represented the sixth largest single source of tax revenues for the City's General Fund in each of Fiscal Years 2011-12 through 2015-16, comprising approximately 2.9 percent of the City's total General Fund Revenues in Fiscal Year 2015-16. Based on the City's 2016-17 budget as originally adopted on in June 2016, franchise tax revenues are projected at $2,140,800, representing approximately 3.4 percent of the City's total budgeted General Fund Revenues in Fiscal Year 2016-17. Significant General Fund Revenue Source: Charges for Services As shown in Table 10 (Statements of Revenues, Expenditures and Charges in General Fund Balance), "Charges for services" represent a category of significant source of General Fund Revenues. The City imposes fees and charges to help offset the cost of services that benefit an individual or a group, such as various safety inspections, officers assigned to schools or other facilities, ambulance services and the administration of local assessment districts. Investment Policy and Portfolio The City's current investment policy (the "Investment Policy"), rendered annually to the City Council by the City Treasurer pursuant to Section 53646 of the Government Code of the State was approved by the City Council on August 23, 2016. The City may amend or update its Investment Policy from time to time, as permitted by State law. The City and its related entities invest their monies on a pooled basis, which are accounted for separately by respective fund. As permitted under State law, the Investment Policy delegates responsibility for the cash management of City funds to the Director of -43- Finance-City Treasurer of the City. Also as permitted under State law, the Investment Policy provides that the City may engage the services of one or more external investment managers registered under the Investment Advisers Act of 1940 to assist in the management of the City's investment portfolio in a manner consistent with the City's objectives, who may be granted discretion to purchase and sell investment securities in accordance with the policy. Irrespective of whether an external investment manager's assistance is utilized, the Investment Policy provides that the Director of Finance-City Treasurer is responsible for all transactions undertaken and must establish a system of procedures and controls to regulate the investment activities. The City presently contracts with Chandler Asset Management to manage the City's investment portfolio. The Investment Policy sets forth the City's objective that the level of investment of all idle funds be maintained as near 100 percent as possible through daily and projected cash flow determinations, with the Director of Finance-City Treasurer having responsibility over idle cash management and investment transactions. Criteria under the Investment Policy for selecting investments and the respective order of priority are as follows: (i) safety, (ii) liquidity, and (iii) yield. The Investment Policy provides that all investment shall be made in accordance with Sections 53600 et seq. of the Government Code and as described within the policy. Under the current Investment Policy, the City may invest in the following investments, subject to provisions of the Government Code and the limitations set forth in the policy (including certain credit quality requirements and concentration limitations): U.S. treasury securities; U.S. government agency obligations; corporate medium term notes; banker's acceptances; mortgage pass through securities, collateralized mortgage obligations, and asset-backed securities; negotiable certificates of deposit; federally insured time deposits (non-negotiable certificates of deposit); time deposits (non negotiable certificates of deposit); commercial paper, repurchase agreements, money market mutual funds, and the State of California's Local Agency Investment Fund (LAIF). The par value, market value, costs basis, and percent of total investments by market value for each category of the City's investments, as of the quarter ended January 31, 2017, are set forth in the following table: TABLE 18 City of Buena Park Schedule oflnvestments as of January 31, 2017 c•J Par Value as% of Total Investment Type Par Value C2l Market Value C2l Cost Value C2l Investments Local Agency Investment Fund (LAIF) $ 25,298,70101 $ 25,298,70101 $ 25,298,70101 23.86% Government agency securities 36,975,000.00 36,874,465.53 37,077,24165 34.87 Commercial paper 1,650,000.00 1,635,225.92 1,635,225.92 1.56 Money market mutual funds 3, 740,43147 3,740,431.47 3, 740,43147 3.53 US. Corporate 19,495,000.00 19,532,896.19 19,576,189.00 18.39 US. Treasury 18,875,000.00 18,788,479.65 18,737,374.77 17.80 Totals $106,034,132.48 $105,870,199.77 $106,065,163.82 100 00% (1) Includes investments of the City's General Fund and other funds, as well as investments of the related entities of the City for which financial information is reported in the City's Comprehensive Annual Financial Report. See Appendix A (2) Par value, market value, and cost value from month-end statements provided to the City by Chandler Asset Management. Source: City of Buena Park Department of Finance, Treasurer's Report for the month ended January 31, 2017. -44- Long-Term Liabilities In addition to the 2017 Bonds, the City makes scheduled periodic payments pursuant to certain other outstanding long term agreements. Below are descriptions of the City's outstanding long-term agreements, in connection with which General Fund appropriations are made annually. This excludes bonds payable by the City or its related entities from special revenues, such as special tax bonds and tax allocation bonds. For additional information, see the notes to the City's 2015-16 audited financial statements included in the FY 2015-16 CAFR set forth in Appendix A. Pension Note Payable On May 28, 2009, the City issued a note to Union bank in exchange for $16,780,000, which the City borrowed to prepay the unfunded actuarial accrued liability related to the City's defined benefit plan for safety employees. The ten-year note matures on May 28, 2019, and bears interest at a rate of 4.16%. Principal and interest are due and payable m monthly installments of $171,253 commencing July 1, 2009. As of June 30, 2016, $5,780,092 in principal amount remained outstanding. Note Payable - Orange County In April 2009, the City entered into an agreement with the Transportation Authority (OCTA) Orange County Transportation Authority ("OCT A") to purchase three vacant parcels of land located on Auto Center Drive for the purposes of resale. The total purchase price of the land was $1,040,000, which included a $514,000 down payment and a promissory note in the amount of $526,000. The promissory note is secured by a lien on the parcels, is to be repaid over a five-year period commencing Fiscal Year 2016-17 in annual principal installments of $105,200, and accrues interest at a rate of two percent adjusted for OCT A's short-term portfolio rate of return for the prior fiscal year. As of June 30, 2016, $526,000 in principal amount remained outstanding. Sales Tax Payable During fiscal year 2016, the City reached a settlement agreement with the State Board of Equalization and other interested parties with regard to sales taxes that were previously remitted to the City related to a point-of-sale dispute. As a result of the agreement, the State Board of Equalization performed a reallocation that resulted 111 the City requmng to repay $31,158,473 of previously remitted sales tax revenue. One hundred percent ( 100%) of sales tax revenues are to be withheld by the State Board of Equalization until the obligation is repaid. During fiscal year 2016, the State Board of Equalization withheld $2,284,181 of sales tax revenues generated by the City. As of June 30, 2016, the outstanding balance of the obligation was $28,874,692. -45- Sales Tax Payable Projections of sales tax revenues performed for the City estimate (continued from prior page) approximately $22 million in sales tax to be allocated to the City this year. Based on amounts already withheld by the State Board of Equalization in Fiscal Year 2015-16, described above, and the sales tax projections for this year, the City expects that the State Board of Equalization will continue to withhold sales tax revenues generated by the City for approximately 12 months before the $31,158,473 obligation is paid in full, at which time the City will start receiving its usual sales tax allocation. Employee Leave Benefits Employee leave benefits are payable to employees upon termination, in accordance with the City's policies as discussed in the notes to the fmancial statements set forth in Appendix A. The employee leave benefits liability as of June 30, 2016, in the amount of $2,560,221, is expected to be paid primarily by General Fund transfers to the accrued leave internal service fund in future years. There is no fixed schedule for the employee leave benefits liability. [The remainder of this page is intentionally left blank] -46- Direct and Overlapping Debt The following is a direct and overlapping debt report as of March 1, 2017, prepared by California Municipal Statistics, Inc. This report is included for informational purposes only. The Authority and the City have not reviewed the report for completeness or accuracy and make no representation in connection therewith. TABLE 19 City of Buena Park Direct and Overlapping Debt As of March 1, 2017 (amounts expressed in thousands ('000s)) 2016-17 Assessed Valuation: $9,229,491,055 OVERLAPPING TAX AND ASSESSMENT DEBT % Applicable Debt 3/1/17 Metropolitan Water District 0.357% $ 267,411 North Orange County Joint Community College District 7.802 18,746,958 Anaheim Unim High School District 9.777 12,775,015 Fullerton Joint Union High School District 16.665 14,471,538 Anaheim School District 0.008 14,059 Buena Park School District 81.853 25,072,503 Centralia School District 68 009 7,969,363 Cypress School District 5.390 2,209,546 Magnolia School District 1.583 352,824 Savanna School District 7.761 3,210,879 Fullerton Joint Union High School District Community Facilities District No. 2005-1 100. 1,435,000 City of Buena Park Community Facilities District No. 2001-1 100. 6 135 000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $92,660,096 DIRECT AND OVERLAPPING GENERAL FUND DEBT Orange County General Fund Obligations 1.758% $ 1,516,468 Orange County Pension Obligation Bonds 1.758 9,159,840 Orange County Board of Educatim Certificates of Participation 1.758 260,887 North Orange County Regional Occupation Program Certificates of Participatim 8 033 796,070 Anaheim Unim High School District Certificates of Participation 9.777 3,871,203 Fullerton Joint Union High School District Certificates of Participation 16.665 3,319,668 Cypress School District Certificates of Participation 5.390 396,974 City of Buena Park General Fund Obligations 100. 0 (I) TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $19,321,110 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100. % $76,110,000 COMBINED TOTAL DEBT $188,091,206 (2) (I) Excludes lease revenue bonds to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations. Qualified Zone Academy Bonds are included based on principal due at maturity. Ratios to 2016-17 Assessed Valuation: Total Overlapping Tax and Assessment Debt...... 1.00% Total Direct Debt ...... 0.00% Combined Total Debt ...... 2.04% Ratios to Redevelopmentlncremental Valuation ($3,605,619,401): Total Overlapping Tax Increment Debt ...... 2.11 % Source: California Municipal Statistics, Inc. -47- Pension Plans All qualified City employees are eligible to participate in the Public Employee's Retirement Fund of the California Public Employees' Retirement System ("CalPERS" or "PERS"). CalPERS is an agent multiple employer public employee retirement system and issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. CalPERS acts as a common investment and administrative agent for participating public entities within the State. A menu of benefit provisions as well as other requirements of the CalPERS program are established by the Public Employees' Retirement Law set forth in California Govermnent Code ( commencing with Section 20000). The City selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance ( or other local methods). Contribution requirements of the plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS. CalPERS participants are required to make contribution to the CalPERS fund based on a percentage of their covered annual salary. All miscellaneous qualified permanent and probationary employees are eligible to participate in the City's Miscellaneous Plan (agent multiple-employer defined benefit pension plan) (the 'Miscellaneous Plan") administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers. All safety qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (the "Safety Plan", and together with the Miscellaneous Plan, the "Plan") administered by the CalPERS. The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other). Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous risk pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. Within the Plan, the City sponsors three safety rate plans. See schedules relating to the City's Plan, which consists of the Safety Plan (cost sharing-multiple employer defined benefit pension plan) and the City's Miscellaneous Plan (agent multiple-employer defined pension plan), under the "Required Supplementary Information" section of the City's FY 2015-16 CAFR set forth in Appendix A. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. California Governor Jerry Brown signed the California Public Employee's Pension Reform Act of 2013 ("PEPRA") into law on September 12, 2012. For non-safety CalPERS participants hired after January 1, 2013 (the "Implementation Date"), the Reform Act changes the normal retirement age by increasing the eligibility for the 2 percent age factor from age 55 to 62 and also increases the eligibility requirement for the maximum age factor of 2.5 percent to age 67. PEPRA also implements certain other changes to CalPERS including the following: (a) all new participants ernolled in CalPERS after the Implementation Date are required to contribute at least 50 percent of the total annual normal cost of their pension benefit each year as determined by an actuary, (b) CalPERS is required to determine the fmal -48- compensation amount for employees based upon the highest annual compensation earnable averaged over a consecutive 36-month period as the basis for calculating retirement benefits for new participants enrolled after the Implementation Date, and ( c) "pensionable compensation" is capped for new participants enrolled after the Implementation Date at 100 percent of the federal Social Security contribution and benefit base for members participating in Social Security or 120 percent for Ca!PERS members not participating in social security. The Plan's provisions and benefits in effect at June 30, 2016, are summarized as follows: City Miscellaneous Plan City Safety Plan Classic PEPRA Tier 1 Tier 2 PEPRA Prior to On or after Prior to On or after On or after Hire Date 1/1/2013 1/1/2013 1/1/2013 1/1/2013 1/1/2013 Benefit formula 2.5%@55 20%@62 30%@50 20%@50 2.7%@57 Benefit vesting schedule 5 years of 5 years of 5 years of 5 years of 5 years of service service service service service Benefit payments monthly monthly monthly monthly monthly for life for life for life for life for life Retirement age 55 62 50 50 57 Monthly benefits, 2.5% 20% 30% 20% 20% to 2.7% as a% of eligible compensation Required employee contribution rate 8 00% 6.25% 900% 900% 12.25% Required employer contribution rate 21.288% 12.500% 20.230% 15.373% 11.923% The California Public Employees' Retirement Law requires that the employer contribution rates for all public employers shall be determined on an annual basis by the actuary and shall be effective on tlie July I following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by Ca!PERS. The actuarially determined rate is the estimated amount necessary to fmance the costs of benefits earned by employees during tlie fiscal year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Summary ofPension Plan Balances Pension related balances presented on tlie Statement of Net Position as of June 30, 2016 by Miscellaneous Plan and Safety Plan are described in tlie following table: Deferred Net Deferred Deferred Employer Outflows Pension Inflows - Contributions Pension Liability Pension CALPERS Miscellaneous Agent Multiple Employer Plan $ 2,622,395 $ 31,660,452 $ 2,927,197 CALPERS Safety Cost Sharing Plan 3,615,462 572,079 46,420,099 8,173,466 Total $ 6,237,857 $ 572,079 $ 78,080,551 $ 11,100,663 -49- For the year ended June 30, 2016, the City recognized pension expense of $1,032,661 for the Miscellaneous Plan. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to the Miscellaneous Plan from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Pension contributions subsequent to measurement date $2,622,395 Differences between actual and expected experience $ 745,116 Changes in assumptions 1,220,284 Net differences between projected and actual earnings on plan investments 961,797 Total $2,622,395 $2,927,197 The $2,286,752 of deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the Miscellaneous Plan in the Fiscal Year 2015-16. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the Miscellaneous Plan will be recognized as pension expense as follows: -$2,056,778 for Fiscal Year 2016-17, -$1,214,466 for Fiscal Year 2017-2018, -$652,920 for Fiscal Year 2018-19, and $996,967 for Fiscal Year 2019-2020. As of June 30, 2016, the City reported a net pension liability for its proportionate share of the net pension liability of the Safety Plan of $46,420,099. The City's net pension liability for the Safety Plan is measured as the proportionate share of the total net pension liability of the Safety Plan. The net pension liability of the Safety Plan is measured as of June 30, 2015, and the total pension liability for the Safety Plan used to calculate the net pension liability was determined by actuarial valuations as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. The City's proportionate of the net pension liability was based on the City's Safety Plan liability and asset-related information where available, and proportional allocations of individual plan amounts as of the valuation date where not available. The City's proportionate share of the net pension liability for the Safety Plan as of June 30, 2014 and 2015 were as follows: Proportion - June 30, 2014 0.64148% Proportion - June 30, 2015 0.67629% Change - Increase (Decrease) 0.03481 % [The remainder of this page is intentionally left blank] -50- For the year ended June 30, 2016, the City recognized pension expense of $4,628,284 for the Safety Plan. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Pension contributions subsequent to measurement date $3,615,462 Changes in assumptions $1,392,027 Differences between expected and actual experience 302,656 Changes in employer's proportion 572,079 2,183,068 Differences between the employer's contribution and the employer's 3,590,226 proportionate share of contributions Net differences between projected and actual earnings on plan investments 705,488 Total $3,615,462 $8,173,465 The $3,615,462 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the Safety Plan in the Fiscal Year ending June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: -$3,114,344 for Fiscal Year 2016-17, -$3,042,842 for Fiscal Year 2017-2018, -$2,310,232 for Fiscal Year 2018-19, and $866,032 for Fiscal Year 2019-2020. Net Pension Liabilav The City's net pension liability for the Miscellaneous Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Miscellaneous Plan is measured as of June 30, 2015, using an annual actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. Below is a summary of principal assumptions and methods used to determine the net pension liability for the Miscellaneous Plan: Valuatim Date June 30, 2013 Measurement Date June 30, 2014 Actuarial Cost Method Entry-Age Normal Cost Actuarial Assumptions: Discount Rate 7.65% Inflation 2.75% Salary Increases Varies by Entry Age and Service Projected Salary Increase 3.3% - 14.2% Investment Rate of Return (1) 7.65% Mortality (2) Derived using CalPERS' Membership Data for all Post Retirement Benefit Increase Protection Allowance Floor on Purchasing Power applies, 2. 75% thereafter (1) Net of pension plan investment expenses, including inflation. (2) The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. -51- Below is a summary of principal assumptions and methods used to determine the net pension liability for the Safety Plan: Valuatim Date June 30, 2014 Measurement Date June 30, 2015 Actuarial Cost Method Entry-Age Normal Cost Method Actuarial Assumptions: Discount Rate 7.65% Inflation 2.75% Salary Increases Varies by entry age and service Projected Salary Increase 7.65% Investment Rate of Return (1) Derived by CalPERS membership data for all funds Mortality June 30, 2014 (1) Net of pension plan investment expenses, including inflation. The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2014 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 20 IL Further details of the Experience Study can found on the Ca!PERS website. The changes in the net pension liability for the Miscellaneous Plan are as follows: Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) Balance at June 30, 2014 (1) $ 124,026,783 $ 95,064,945 $ 28,961,838 Changes in the year: Service cost 1,988,943 1,988,943 Interest on the total pension liability 9,046,796 9,046,796 Differences between actual and expected expenence (1,277,341) (1,277,341) Changes in assumptions (2,091,915) (2,091,915) Changes in benefit terms Contribution - employer 2,006,400 (2,006,400) Contribution - employee 951,393 (951,393) Investment income 2,115,027 (2,115,027) Administrative expenses (104,951) 104,951 Benefit payments, including refunds of employee contributions (6,786,470) (6,786,470) Net changes 880,013 (1,818,601) 2,698,614 Balance at June 30, 2015 $ 124,906,796 $ 93,246,344 $ 31,660,452 (1) - The fiduciary net position includes receivables for employee service buyback, deficiency reserve, fiduciary self- insurance, and OPEB expense. Sensitivity of the Net Pension Liability to Changes in the Discount Rate-The following presents the net pension liability of the City for the Miscellaneous Plan, calculated using the discount rate for the -52- Miscellaneous Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is I -percentage point lower or I -percentage point higher than the current rate: 1% Decrease 6.50% Net Pension Liability $ 47,347,150 Current Discount Rate 7.5% Net Pension Liability $ 31,660,452 1% Increase 8.5% Net Pension Liability $ 18,660,717 With respect to the Safety Plan, as of June 30, 2016 the City reported a payable of $0 for outstanding amount of contributions to the pension plan required for the year ended June 30, 2016. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the City's proportionate share of the net pension liability for the Safety Plan, calculated using the discount rate for the Safety Plan, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is I -percentage point lower or I -percentage point higher than the current rate: 1% Decrease 6.65% Net Pension Liability $ 75,040,762 Current Discount Rate 7.65% Net Pension Liability $ 46,420,(!)9 1% Increase 8.65% Net Pension Liability $ 22,951,681 See the discussion under the subcaption " Discount Rate and Certain Ca/PERS Actuarial Assumptions" below. The information included above under the caption "CITY FINANCIAL INFORMATION - Pension Plans" is derived from the City's FY 2015-16 CAFR set forth in Appendix A. Please refer to the Note 9 to the basic financial statements portion and the various related schedules in the required supplementary information section ofthe City's FY 201 5-16 CAFRfor further details. PERS Actuarial Calculations; Plans Funding Status Around each October or November of each year, Ca!PERS provides the City report ( each, a "PERS Report") providing the actuarial valuation ( as of June 30 of the calendar year preceding the year of the PERS Report) for each of the City's Plans. The following information is based on information available from PERS and the PERS Reports. The Authority and the City have not independently verified by the information provided by PERS and express no opinion regarding the accuracy ofsuch information. PERS' actuarial assessments are based various assumptions (including demographic assumptions and economic assumptions) made by PERS, its actuaries, accountants and other consultants. One or more assumptions may not materialize or be changed in the future. The Authority and the City express no opinion regarding the quality such assumptions and cannot provide any guarantee as to the eventual results. Below are definitions for selected terms used in the most recent PERS Reports ( as set forth in the "Glossary" section of the August 2016 PERS Report for the City's Miscellaneous Plan): Accrued Liability - The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. -53- Actuarial Assumptions - Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Valuation - The determination, as of a valuation date, of the Normal Cost, Accrued Liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan prov1s1ons. Entry Age Normal Cost Method - An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member's total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) Normal Cost - The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Present Value of Benefits - The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Unfunded Liability (UAL) - When a plan or pool's Value of Assets is less than its Accrued Liability, the difference is the plan or pool's Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. Begirming with the June 30, 2013 valuation (which set the 2015-16 contribution rates), PERS has used an amortization and smoothing policy that pays for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. PERS no longer uses an actuarial value of assets and only uses the market value of assets. PERS' policies and actuarial assumptions have changed significantly in recent years and can be expected to change or be modified from time to time by PERS in the future. PERS has adopted a four-year Asset Liability Management (ALM) review cycle, and reviews its capital market and economic assumptions, actuarial assumptions and risk mitigation policy every four years. PERS is next scheduled to review its actuarial assumptions in February 2018. Per the PERS Reports received by the City in August 2016 (for the valuation date of June 30, 2015), the City's Fiscal Year 2017-18 required contributions, before any cost sharing and assuming Ca!PERS earns 0.0 percent for Fiscal Year 2015-16 and 7.50 percent for every fiscal year thereafter, for the Plans are as follows: (i) Miscellaneous Plan- 8.900 percent (classic) or 12.500 percent (PEPRA) of payroll, plus $175,733 of monthly employer dollar UAL payment (or $2,033,899 annual lump sum UAL prepayment option as of July 31, 2017); (ii) Safety (Tier I) Plan - 21.418 percent of payroll, plus $248,666.43 of monthly employer dollar UAL payment (or $2,878,022 annual lump sum UAL prepayment option as of July 31, 2017); -54- (iii) Safety (Tier 2) Plan - 16.498 percent of payroll, plus $24.29 of monthly employer dollar UAL payment (or $281 annual lump sum UAL prepayment option as of July 31, 2017); and (iv) Safety (PEPRA) Plan - 12. 729 percent of payroll, plus $23.23 of monthly employer dollar UAL payment (or $269 annual lump sum UAL prepayment option as of July 31, 2017). The calculation of the funding requirement is based on various Actuarial Assumptions and adjustments such as, among others, the actuarial smoothing of losses and gains over multiple years. Thus, the UAL reflects an actuarial estimate and not as a fixed expression of the liability the City owes to Ca!PERS under its PERS plans. The table below shows the funding status for the City's Miscellaneous Plan as of the most recent six valuation dates, as shown in the relevant PERS Report received by the City in August 2016: Miscellaneous Plan Annual Accrued Market Value Unfunded Covered Valuation Date Liability of Assets Liability (UAL) Funded Ratio Payroll 6/30/2010 $101,638,636 $68,345,080 $33,293,556 67.2% $14,722,601 6/30/2011 106,925,990 80,642,418 26,283,572 75.4 13,749,224 6/30/2012 109,953,460 77,968,001 31,985,459 70.9 13,282,075 6/30/2013 114,039,180 84,450,927 29,588,253 74.1 10,963,930 6/30/2014 122,749,442 94,920,184 27,829,258 77.3 11,710,914 6/30/2015 125,594,281 93,110,292 32,483,989 74.1 11,960,173 The table below shows the funding status for the City's Safety (Tier I) Plan as of the most recent five valuation dates, as shown in the relevant PERS Report received by the City in August 2016: Safety (Tier I) Plan Plan's Shared Plan's Share of of Pooled Annual Accrued Pool's Market Unfunded Covered Valuation Date Liability Value of Assets Liability (UAL) Funded Ratio Payroll 6/30/2011 $177,547,080 $140,116,132 $37,430,948 78.9% $9,045,639 6/30/2012 185,001,886 136,426,394 45,575,492 73.7 9,086,014 6/30/2013 189,907,682 147,223,501 42,684,181 77.5 8,397,023 6/30/2014 203,016,193 162,329,221 40,686,972 80.0 7,423,012 6/30/2015 208,297, 899 156,858,910 51,438,989 75.3 7,305,397 The tables below show the funding status for the City's Safety (Tier 2) Plan and the City's Safety (PEPRA) Plan as of the most recent three valuation dates (i.e., the only three thus far for such Plans), as shown in the relevant PERS Reports received by the City in August 2016: -55- Safety (Tier 2) Plan Plan's Shared Plan's Share of of Pooled Accrued Pool's Market Unfunded Annual Valuation Date Liability Value of Assets Liability (UAL) Funded Ratio Covered Payroll 6/30/2013 $ 27,010 $ 21,296 $5,714 78.8% $112,887 6/30/2014 97,949 101,565 (3,616) 103.7 215,260 6/30/2015 188,349 186,315 2,034 98.9 311,644 Safety (PEPRA) Plan Plan's Shared Plan's Share of of Pooled Accrued Pool's Market Unfunded Annual Valuation Date Liability Value of Assets Liability (UAL) Funded Ratio Covered Payroll 6/30/2013 $ 9,743 $ 14,300 $( 4,557) 146.8% $112,919 6/30/2014 59,796 67,677 (7,881) 113.2 270,915 6/30/2015 128,133 126,840 1,293 99.0 390,581 Discount Rate and Certain CalPERS Actuarial Assumptions The Ca!PERS actuary uses a smoothing technique to determine Actuarial Value that is calculated based on certain policies. As described below, these policies and actuarial assumptions have changed significantly in recent years and are expected to change or be modified further by Ca!PERS in the future. Certain significant recent changes in assumptions include the following. L On March 14, 2012, the Ca!PERS Board approved a change in the inflation assumption used in the actuarial assumptions used to determine employer contribution rates. This reduced the assumed investment return from 7.75% to 7.50%, reduced the long-term payroll growth assumption from 3.25% to 3.0%, and adjusted the inflation component of individual salary scales from 3.25% to a merit scale varying by duration of employment, an assumed annual inflation component of 3% and an annual production growth of 0.25%. Although the full impact of such changes is not yet clear, Ca!PERS has estimated that they could result in net increases in future contribution levels of approximately I% to 2%. 2. On April 17, 2013, the Ca!PERS Board of Administration approved a plan: (i) to replace the current 15-year asset-smoothing policy with a 5-year direct-rate smoothing process; and (ii) to replace the current 30-year rolling amortization of unfunded liabilities with a 30-year fixed amortization period. Ca!PERS' Chief Actuary has stated that the revised approach provides a single measure of funded status and unfunded liabilities, less rate volatility in extreme years, a faster path to full funding and more transparency to employers such as the City about future contribution rates. These changes are expected to accelerate the repayment of unfunded liabilities (including Ca!PERS' Fiscal Year 2009 market losses described above) of the City's plans in the near term; the exact magnitude of the potential contribution rate increases is not known at this time, but may be significant. These changes are reflected beginning with the June 30, 2014 actuarial valuation affecting contribution rates for Fiscal Year 2016 and thereafter. 3. On February 19, 2014, the Ca!PERS Board approved changes to actuarial assumptions and methods based upon a recently completed experience study. These changes include: moving from using smoothing of the market value of assets to obtain the actuarial value of assets to direct smoothing of -56- employer contribution rates; increased life expectancy; changes to retirement ages ( earlier for some groups and later for others); lower rates of disability retirement; and other changes. 4. On December 21, 2016, the Ca!PERS Board of Administration approved an incremental lowering of the discount rate from 7.5% to 7.0% over the next three Fiscal Years. For Fiscal Years 2017- 18, 2018-19 and 2019-20, the Board of Administration approved discount rates of 7.375%, 7.25% and 7.0%, respectively. While the full impact of the discount rate changes on the City is not yet clear, Ca!PERS expects such changes to increase average employer rates by approximately I% to 3% of normal cost as a percent of payroll for most miscellaneous retirement plans and by approximately 2% to 5% for most safety plans. Ca!PERS also expects the discount rate changes to result in increased unfunded accrued liability payments for employers, and estimates that many employers will see such payments increase by 30% to 40%. Information regarding Ca!PERS' administration of the plans, actuarial methods assumptions and asset valuation can be obtained from Ca!PERS at Lincoln Plaza North, 400 Q Street, Sacramento, California 95811 or (888) 225-7377. The comprehensive annual financial reports of Ca!PERS are available on Ca!PERS' website at www.calpers.ca.gov. The website reference is for informational purposes only. None of the content of the website is any way incorporated into this Official Statement. The City and the Authority make no representation concerning, and do not take any responsibility for, the accuracy or timeliness of information posted on such website or the continued maintenance of such website. Other Post-Employment Benefits (Other Than Pensions) GASB issued Statement No. 45 entitled "Accounting and Financial Reporting By Employers for Post Employment Benefits Other Than Pensions" ("GASB 45"), which addresses how state and local govermnents should account for and report their costs and obligations related to post employment healthcare and other non-pension benefits, known collectively as "Other Post-Employment Benefits" or "OPEBs." GASB 45 generally requires state and local governmental employers to account for and report the cost of OPEBs and outstanding obligations and commitments related to OPEBs in essentially the same manner as they currently do for pensions. Annual OPEB cost for most employers are based on actuarially determined amounts that, if paid on an ongoing basis, would provide sufficient resources to pay benefits as they come due. The provisions of GASB 45 may be applied prospectively and do not require govermnents to fund their OPEB plans. An employer may establish its OPEB liability at zero as of the beginning of their initial year of implementation; however, the unfunded actuarial liability is required to be amortized over future periods. The first Fiscal Year that the City was required to implement GASB 45 reporting was Fiscal Year 2008-09. In addition to providing pension benefits, the City provides post-retirement medical benefits to retirees through the California Public Employees' Retirement System California Employer's Retiree Benefit Trust Fund (the "PERS CERBT" fund). The program is an agent multiple-employer defined benefit health care plan (the "OPEB Plan") that provides health care insurance for eligible retirees. These benefits are available to employees who retire with the City at age 50 or older with at least 5 years of Ca!PERS service or those who satisfy certain disability requirements. The City pays monthly medical premiums ranging from $126 to $420 for each employees depending upon which group the employee belongs to and the number of individual covered by the policy. The OPEB Plan does not provide a publicly available fmancial report. The contribution requirements of the OPEB Plan members and the City are established and may be amended by the City, City Council, and/or the employee associations. Currently, contributions are not required from the plan members. During the Fiscal Year ended June 30, 2016, the City elected to fund -57- 97% of the annual required contribution of the employer ("ARC"), an amount actuarially determined in accordance with the parameters of GASB Statement 45. According to the City's audited financial statements for Fiscal Year 2015-16, the ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded liabilities over a period not to exceed thirty years. The ARC for Fiscal Year 2015-16 was $807,741. For Fiscal Year 2015-2016, the City's annual OPEB cost (expense) of $806,682 was less than the ARC. The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation (asset) for 2016 and the two preceding years, were as follows: Percentage of Annual Fiscal Year Ended Annual OPEB ARC OPEB ARC Contributed Net OPEB Asset 6/30/2014 $674,674 117% $412,530 6/30/2015 667,053 127 595,078 6/30/2016 806,682 97 568,667 The City's annual OPEB cost, net OPEB obligation (asset), and the related information for Fiscal Year 2015-16 were as follows: Annual required contribution $ 807,741 Interest on net OPEB obligation (41,655) Amortization of net OPEB obligation 40,596 Annual OPEB cost 806,682 Payments made (780,271) Increase in net OPEB obligation 26,411 Net OPEB obligation - beginning of the year (595,078) Net OPEB obligation- ending of year $ (568,667) For Fiscal Year 2015-16, the City's annual OPEB cost was $806,682 and more than the City's required contribution. The City's actual contribution during the Fiscal Year was $780,271. The required contribution for the Fiscal Year 2014-15 was determined as part of the July I, 2015 actuarial valuation, and the entry age normal cost method was used. The actuarial assumptions included: (a) 7.00% investment rate of return (net of administrative expenses), (b) projected annual salary increases of 2. 75%, (c) inflation rate of 2.75% and (d) medical plan premium cost will increase at a rate ranging from 4.0% per annum. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets consistent with the long-term perspective of the calculations. As of July I, 2015, the most current actuarial valuation date, the OPEB Plan was 12.3% funded. The actuarial accrued liability for benefits was $10.6 million and the actuarial value of assets was $1.3 million, resulting in an unfunded actuarial accrued liability of $9.3 million. The covered payroll (annual payroll of active employees covered by the plan) was $21.5 million and the ratio of the unfunded actuarial accrued liability to the covered payroll was 45.2%. The City's intends to amortize the unfunded actuarial accrued OPEB liability as a level percentage of pay over a closed period of 23 years. In connection therewith, the City engaged a consultant, Total Compensation Systems, Inc., to analyze liabilities associated with the City's OPEB Plan -58- as of July I, 2015, which resulted in a report issued in November 2016 (the "2016 OPEB Report"). Among the findings contained in the report are the following: • The estimated "pay-as-you-go" cost of providing retiree health benefits in Fiscal Year 2015-16 is $607,801. • For current employees, the value of benefits "accrued" in Fiscal Year 2015-16 is $105,813 (also known as the "normal cost"). Assuming that the City began accruing retiree health benefits when each current City employee and retiree was hired, the 2016 OPEB Report estimates that the actuarial accrued liability (AAL) for OPEB obligations is $8,071,768. The remaining, unamortized balance of the initial unfunded AAL (UAAL) is $8,815,280, thereby resulting in a "residual" AAL of negative $743,512 (i.e,. asset). • Combining the actuarial value of the PERS CERBT assets as of June 30, 2015 in the amount of $1,314,059, together with the negative AAL of $743,512, the City has a residual UAAL of negative $2,057,571 512 (i.e,. asset). • Residual U AAL amortization at 7% over 23 years results in an offset against the ARC requirements of $140,368. Combining the normal cost with both the initial and residual UAAL amortization costs produces an ARC of $583,363, as follows: 2016 OPEB Report Annual Required Contribution (ARC) Year Beginning July 1, 2015 Total Normal Cost $105,813 Initial UAAL Amortization 617,918 Residual U AAL Amortization ($140,368) Annual Required Contribution (ARC): $583,363 Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about rates of employee turnover, retirement, mortality, as well as economic assumptions regarding claim costs per retiree, healthcare inflation and interest rates. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. A complete copy of the 2016 OPEB Report can be obtained from the City's Finance Department. See Note 10 to the City's Fiscal Year 2015-16 audited financial statements set forth in Appendix A for more information. Employee Relations The City has existing agreements with each of its four bargaining groups: (i) Buena Park City Employees' Association, (ii) Buena Park Technical, Office & Professionals Association, (iii) Buena Park Police Association, and (iv) Buena Park Police Management Association. The current contracts with all four labor groups expire on June 29, 2018. -59- The City has incorporated budget increases attendant to the labor agreements for all four labor groups in its budgets for Fiscal Year 2015-16 and 2017-18. For Fiscal Year 2016-17, salaries and benefits represent 55.8% of General Fund expenditures and are budgeted to increase from Fiscal Year 2015-16 amounts by 2.5% or $862,090. For Fiscal Year 2017-18 salaries and benefits represent 57.9% of General Fund expenditures are budgeted to increase from Fiscal Year 2016-17 amounts by 4.8% or $1,693,130. See "CITY FINANCIAL INFORMATION - Budgetary Process; General Fund Budget" herein. Accordingly, the City does not expect the implementation of the existing labor contracts to adversely impact City finances. Risk Management The City is a member of the California Joint Powers Insurance Authority (the "Insurance Authority"). The purpose of the Insurance Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other coverages. The Insurance Authority's pool began covering claims of its members in 1978. Each member government has an elected official as its representative on the Insurance Authority's Board of Directors. In the self-insurance internal service funds, the City has recorded liabilities in the amount of $8,170,792 for lawsuits and other claims arising in the ordinary course of City operations. The City is self-insured in both workers' compensation and general liability for the first $500,000 per claim. The City maintains coverage in excess of this self-insured retention limit through the California Insurance Pool Authority ("CIPA)" for workers' compensation and general liability claims. CIP A is a public entity risk pool which operates a risk management and insurance program for 13 member cities within California, and is self-sustaining through member premiums. CIPA was established in 1978 for the purpose of reducing insurance costs through the joint purchase of liability insurance. In 1986, the liability program shifted to a pooling format. CIP A has group purchased excess workers' compensation insurance since 1986. In response to adverse market conditions, CIPA established a workers' compensation pool beginning June I, 2002. The members of CIPA operate within the guidelines of the joint powers agreement which is approved by each member's elected officials. The financial and operating responsibilities are shared by all members through a system of committees. See Note 8 to the City's Fiscal Year 2015-16 audited financial statements set forth in Appendix A for more information regarding the City's insurance coverage. THE AUTHORITY The Authority was established pursuant to Article I ( commencing with Section 6500) of Chapter 5, Division 7, Title I of the California Government Code and a Joint Exercise of Powers Agreement, dated September 12, 1988, by and between the City and the Community Redevelopment Agency of the City of Buena Park (the "Former Redevelopment Agency"), as amended by that certain First Supplemental Agreement to Joint Exercise of Powers Agreement, dated as of December I, 2015, by and among the City, the Successor Agency to the Community Redevelopment Agency of the City of Buena Park, as successor to the Former Redevelopment Agency (the "Successor Agency"), and the Parking Authority of the City of Buena Park (the "Parking Authority). Pursuant to the First Supplemental Agreement to Joint Exercise of Powers Agreement, the Parking Authority was added to as a member to the Authority and the Successor Agency withdrew from the Authority. The Board of Directors of the Authority is comprised of all of the individuals who currently are members of the City Council of the City. The Authority is qualified to assist in the financing of certain public improvements and to issue the -60- 2017 Bonds under the Law. The Authority has no taxing power. The Authority and the City are each separate and distinct legal entities, and the debts and obligations of each such entity are not debts or obligations of the other entity. BONDOWNERS' RISKS Investment in the 2017 Bonds involves elements of risk. The following section describes certain specific risk factors affecting the payment and security of the 2017 Bonds. The following discussion of risks is not meant to be an exhaustive list of the risks associated with the purchase of the 2017 Bonds and the order of discussion of such risks does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the 2017 Bonds. There can be no assurance that other risk factors not discussed under this caption will not become material in the future. Limited Obligations with Respect to 2017 Bonds The 2017 Bonds will be limited obligations of the Authority payable solely from and secured by a pledge of Revenues and certain funds and accounts held under the Indenture. Revenues consist primarily of Lease Payments payable by the City under the Lease and amounts on deposit from time to time in the funds and accounts held by the Trustee. If for any of the reasons described in this Official Statement, or for any other reason, the Revenues collected under the Lease are not sufficient to pay debt service on the Outstanding 2017 Bonds under the Indenture, the Authority will not be obligated to utilize any other of its funds, other than certain amounts on deposit in the funds and accounts established under the Indenture, to pay debt service on the 2017 Bonds. The Authority has no taxing power. The obligation of the City to make Lease Payments under the Lease will not constitute an obligation of the City for which the City has levied or pledged any form of taxation or the City will be obligated to levy or pledge any form of taxation. Neither the 2017 Bonds nor the obligation of the City to make Lease Payments under the Lease will constitute an indebtedness of the City, the State or any of its political subdivisions in violation of any constitutional or statutory debt limitations. No Reserve Fund No reserve fund or account will be established and maintained with respect to the 2017 Bonds. As a result, in the event of non-appropriation or non-payment of the Lease Payments in full when due, no other source of funds will be available to make payments of debt service on the 2017 Bonds while remedial actions are taken with respect to such non-appropriation or non-payment. Abatement Pursuant to the Lease, the obligation of the City to pay Lease Payments will be abated during any period in which, by reason of any damage, destruction or condemnation, there is substantial interference with the use and occupancy of the Leased Property or any portion thereof by the City. Such abatement will continue until the restoration of the Leased Property to tenantable condition. See "SECURITY FOR 2017 BONDS -Abatement; Insurance." The City will be required under the Lease to obtain and maintain in effect rental interruption insurance insuring against any loss of Lease Payments for a period of two Fiscal Years from the date of damage or destruction of the Leased Property. Under the Lease, the City will waive any right to terminate the Lease by virtue of an abatement event. Notwithstanding the provisions of the Lease specifying the extent of abatement in the event of the City's failure to have use and possession of the Leased Property, such provisions may be superseded by operation of law. In the -61- event that the Leased Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the City's rental interruption insurance will be available in lieu of Lease Payments, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of the Leased Property or a redemption of the 2017 Bonds and Additional Bonds, if any, in whole (see "2017 BONDS - Redemption - Special Mandatory Redemption From Insurance or Condemnation Proceeds"), a default on the 2017 Bonds may occur. Risk of Uninsured Loss The City will covenant under the Lease to maintain certain insurance policies on the Leased Property. These insurance policies do not cover all types of risk. The Lease does not require the City to maintain earthquake insurance on the Leased Property. The Leased Property could be damaged or destroyed due to a casualty for which the Leased Property is uninsured. Additionally, the Leased Property could be the subject of an eminent domain proceeding. Under these circumstances an abatement of Lease Payments could occur and could continue indefinitely. There can be no assurance that the providers of the City's liability and rental interruption insurance will in all events be able or willing to make payments under the respective policies for such loss should a claim be made under such policies. There can be no assurances that amounts received as proceeds from insurance or from condemnation of the Leased Property will be sufficient to redeem the 2017 Bonds and Additional Bonds, if any. Limited Recourse on Lease Default; No Right of Acceleration If an event of default occurs and is continuing under the Lease, there will be no remedy of acceleration of any Lease Payment which has not come due. The remedies provided for in the Lease include, in addition to all other remedies provided at law, reletting the Leased Property or, without terminating the Lease, collecting each installment of rent as it becomes due and holding the City liable therefor. If the Trustee does not terminate the Lease, the Trustee may be required to seek a separate judgment each year for that year's defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against cities in California, including a limitation on enforcement of judgments against funds or property needed to serve the public welfare and interest could prove both expensive and time-consuming. The Lease will permit the Trustee, as the Authority's assignee, to take possession of and re-let the Leased Property in the event of a default by the City under the Lease. To the extent that the Leased Property serves essential govermnental purposes, a court may determine to not permit such remedy to be exercised. Even if such remedy may be exercised, no assurance can be given that the Trustee could readily relet the Leased Property for rents which are sufficient to enable it to pay debt service on the 2017 Bonds in full when due. Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the 2017 Bonds or to preserve the tax-exempt status of interest on the 2017 Bonds. Enforceability of the rights and remedies of the owners of the 2017 Bonds, and the obligations incurred by the Authority, may become subject to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor's rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the -62- powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against governmental entities in the State. Bond Counsel will limited its opm10ns as to the enforceability of the 2017 Bonds and the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditor's rights, by equitable principles and by the exercise of judicial discretion. Additionally, the 2017 Bonds will not be subject to acceleration in the event of the breach of any covenant or duty under the Indenture. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay in the exercise of, or limitations on or modifications to, the rights of the Owners. City General Fund The Lease Payments and other payments due under the Lease ( including payment of costs of repair and maintenance of, and taxes and other governmental charges levied against, the Leased Property) will be payable from funds lawfully available to the City. A variety of national, state or regional factors, which are beyond the control of the City could reduce the City's General Fund revenues or increase the City's General Fund expenditures. The City is permitted to enter into other obligations which constitute additional charges against its revenues without the consent of Owners of the 2017 Bonds. If the amounts which the City is obligated to pay in a Fiscal Year exceed the City's revenues for such year, the City may choose to make some payments rather than making other payments, including Lease Payments, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare. See "STATE CONSTITUTION LIMITATIONS ON CITY REVENUES AND APPROPRIATIONS." State Finances The State's financial condition and budget policies affect communities and local public agencies throughout California. State budgets are affected by regional, national or even international economic conditions and a multitude of other factors over which the City has no control. The City cannot give any assurances regarding the financial conditions of the State during any period of time. Some of the State's budget solutions have caused in the past, and may cause in the future, increased financial stress to cities, counties and other local governments by: (i) decreasing local revenues (for example, the property tax, road improvement funding, public safety or other categorical funded initiatives), or (ii) increasing directly or indirectly demand for local programs (such as public safety or indigent health programs). In recent years, the State has faced significant financial and budgetary stress. AB XI 26 enacted in 2011, pursuant to which all redevelopment agencies in the State were dissolved, was enacted during the fiscal year 2011- 12 budget process and was just one example where cities and counties throughout the State were significantly impacted. Even though California has experienced significantly improved fiscal condition during the past few fiscal years, the State is still facing continuing financial challenges and unfunded long-term liabilities. According to the State Constitution, the Governor is required to propose a budget to the State Legislature by no later than January 10 of each year, and a fmal budget must be adopted by the vote of each house of the Legislature no later than June 15, although this deadline has been frequently breached in the past. Before fiscal year 2010-11, the State budget had to be adopted by a two-thirds vote of each house of the State Legislature. However, in November 2010, the voters of the State passed Proposition 25, which reduced the vote required to adopt a budget to a majority vote of each house and which -63- provided that there would be no appropriation from the current budget or future budget to pay any salary or reimbursement for travel or living expenses for members of the Legislature for the period during which the budget was presented late to the Governor. The State budget becomes law upon the signature of the Governor, who may veto specific items of expenditure. Governor Brown released his proposed fiscal year 2017-18 budget for the State on January 10, 2017. The City does not anticipate any material adverse effect on the City's finances based on this proposed fiscal year 2017-18 State budget. However, the City can make no predictions regarding the changes, if any, that will be made to proposed budget before it is finally adopted. The City also cannot predict what measures the State will adopt to respond to any future financial difficulties. The City can provide no guarantees regarding the outcome of future State budget negotiations, the actions that will be taken in the future by the State Legislature and Governor to deal with changing State revenues and expenditures, or the impact that such budgets or actions will have on the City's finances and operations. Information about the State budget and State spending is available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the State Department of Finance, www.dofca.gov. An analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various official statements for State-issued bonds, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov. None of the websites referenced above are in any way incorporated into this Official Statement. They are cited for informational purposes only. The City makes no representation concerning, and does not take any responsibility for, the accuracy or timeliness of information posted on such websites or the continued maintenance of such websites by the respective entities. Natural Calamities; Earthquakes; Flood Hazard Zone Designation From time to time, the City is subject to natural calamities that may adversely affect economic activity in the City which therefore may have a negative impact on City finances. Such natural occurrences include, without limitation, geological conditions such as earthquakes, landslides, floods, wildfires, urban fires, droughts or tornadoes. Although a portion of the City is located in Federal Emergency Management Agency (FEMA) Flood Zone X, which is defined as 0.2 percent annual chance flood hazard (500-year), the Leased Property is not located in a FEMA flood zone or a fire hazard zone. The Safety Element of the City's General Plan identifies four dams upstream of the City which present inundation hazards: Prado Dam, Fullerton Dam, Brea Dam, and Carbon Canyon Dam. The City, like most regions in the State, is located in an area of seismic activity and, therefore, could be subject to potentially destructive earthquakes. Numerous active and inactive fault lines pass through, or near, the area in which the City is located. The Norwalk Fault is the only fault located within the City, though no surface faulting has been associated with this fault. According to the Safety Element of the City's General Plan, the City's proximity to the Norwalk, Whittier-Elsinore, Newport-Inglewood and other regional faults, along with a medium-to-high potential for ground failure due to liquefaction in some areas, present a known risk. Seismic hazards encompass ground rupture, shaking, lurching, blind thrust faults that lack surface breaks, liquefaction, and ground failure. For more information see "Buena Park 2035 General Plan - Safety Element" on file with the Buena Park City Clerk or available on the City's website. The occurrence of one or more natural disasters could occur and could result in damage to improvements and property within the City of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. -64- The casualty and liability insurance may not cover losses due to earthquake damage. The City is not required to maintain earthquake insurance under the Lease. Rental interruption insurance will not cover interruption of Lease Payments due to an earthquake. According to the Safety Element of the City's General Plan, urban fires are most likely to occur within the City due to the urbanized nature of the City. Because the City's climate includes long periods of hot, dry weather combined with sometimes high-velocity winds, the potential exists for large, spreading fires. The northeastern-most portion of the City, adjacent to the City of Fullerton, has been identified in draft maps prepared by the California Department of Fire and Forestry protection as located within Fire Hazard Severity Zones. The California Building Commission adopted the Wildland-Urban Interface codes, which became effective in 2008 and include provisions to improve the ignition resistance of buildings. The updated fire hazard severity zones are used by the City's building officials to determine appropriate construction materials for new buildings in the Wildland-Urban Interface. On January 12, 2017, a fire erupted at one of the three existing fire station buildings owned by the City, also known as existing Fire Station No. 61 located at 8061 Western Avenue. This existing Fire Station No. 61 is under lease by the City to the Orange County Fire Authority, consists of approximately 17,672 square feet, and sustained significant damage as a result of the fire. The cause of the fire is under investigation. The City is insured for the loss and is working with the insurance company on the claim. The City will use a portion of the proceeds of the 2017 Bonds to construction a new Fire Station No. 61. The occurrence of any natural calamity, including but not limited to an earthquake, uncontrolled fire or a major flood, may result in the substantial interference with the use and occupancy of the Leased Property, which could result in Lease Payments being subject to abatement. Under such circumstances, although the City maintains property insurance and rental interruption insurance and is required to continue to maintain such insurance under the Lease (see "SECURITY FOR 2017 BONDS -Abatement; Insurance"), no assurance can be given that the insurance or other resources would be available to make repairs to the Leased Property or to make Lease Payments under the Lease. For more information, see the Safety Element of the City's General Plan on file with the City Clerk or available on the City's website. Bankruptcy The rights and remedies provided in the Indenture and the Lease may be limited by and are subject to the provisions of federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of creditors' rights. The City and the Authority are govermnental units and therefore cannot be the subject of an involuntary case under the United States Bankruptcy Code (the "Bankruptcy Code"). However, the City and the Authority may seek voluntary protection from its creditors pursuant to Chapter 9 of the Bankruptcy Code for purposes of adjusting its debts. The City or the Authority, upon become a debtor under the Bankruptcy Code, would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 case. The ability of the Trustee or the Owners of the 2017 Bonds to recover any claim in such case, as well as the timing and amount relating such recovery, will be subject to the uncertainty presented by the bankruptcy proceedings. Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the affected entity, or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the affected entity, or otherwise enforcing the obligations of the affected entity, and could prevent the Trustee from making payments from funds in its possession; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or secured debt which may have a priority of payment superior to that of the Owners of the 2017 Bonds; and (iv) the possibility of the adoption of a plan (a "Plan") for the adjustment of the affected entity's various obligations without the consent of the Trustee or all of the Owners of the 2017 Bonds, which Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners of the -65- 2017 Bonds if the Bankruptcy Court finds that the Plan is fair and equitable and in the best interest of creditors. Neither the City nor the Authority is currently considering any filing for protection under the Bankruptcy Code. Investment of Funds The funds held under the Indenture are required to be invested in Permitted Investments as provided under the Indenture, respectively. See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS." All investments, including Permitted Investments, authorized by law from time to time for investments by the Authority contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, decline in market value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Indenture could have a material adverse effect on the security for the 2017 Bonds. Future Initiative and Legislation As discussed herein under "STATE CONSTITUTION LIMITATIONS ON CITY REVENUES AND APPROPRIATIONS," the California's Constitutional initiative process has resulted in the adoption of measures which pose certain limits on the ability of cities and local agencies to generate revenues, through property taxes or otherwise. From time to time, other initiative measures could be adopted, affecting the City's ability to generate revenues and to increase appropriations. No assurances can be given as to the potential impact of any future initiative or legislation on the finances and operations of the City. Loss of Tax Exemption for 2017 Bonds Compliance by Authority and City. In order to maintain the exclusion of interest on the 2017 Bonds from gross income for federal income tax purposes, the Authority and the City have covenanted to comply with the applicable requirements of Section 148 and certain other sections of the Internal Revenue Code of 1986, as amended, relative to arbitrage and avoidance of characterization as hedge bonds or private activity bonds, among other things. Interest on the 2017 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the 2017 Bonds as a result of acts or omissions of the Authority and the City in violation of these covenants. See "TAX MATTERS." Future Legislation or Court Decisions. Legislation affecting the tax exemption of interest on the 2017 Bonds may be considered by the United States Congress and the State legislature. Federal and state court proceedings and the outcome of such proceedings could also affect the tax exemption of interest on the 2017 Bonds. No assurance can be given that legislation enacted or proposed, or actions by a court, after the date of issuance of the 2017 Bonds will not have an adverse effect on the tax exemption of interest on the 2017 Bonds or the market value of the 2017 Bonds. IRS Audit of Tax-Exempt Bonds. The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2017 Bonds will be selected for audit by the Internal Revenue Service. It is possible that the market value of the 2017 Bonds might be affected as a result of such an audit of the 2017 Bonds or by an audit of similar bonds. -66- Secondary Market There can be no assurance that there will be a secondary market for the 2017 Bonds, or if a secondary market exists, that such 2017 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, pricing of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could substantially differ from the original purchase price. STATE CONSTITUTIONAL LIMITATIONS ON CITY REVENUES AND APPROPRIATIONS State Initiative Measures Generally Under the California Constitution, the power of initiative is reserved to the voters for the purpose of enacting statutes and constitutional amendments. Voters have exercised this power through the adoption of Proposition 13 ("Article XIIIA") and similar measures, some of which are discussed below. Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies such as the City. Subject to overriding federal constitutional principles, such collection may be materially and adversely affected by voter-approved initiatives, possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as the Lease. Property Tax Limitations - Article XIIIA California voters, on June 6, 1978, approved an amendment ( commonly referred to as "Proposition 13" or the "Jarvis-Gann Initiative") to the California Constitution. This amendment, which added Article XIIIA to the California Constitution, among other things, affects the valuation of real property for the purpose of taxation in that it defines the full cash value of property to mean "the county assessor's valuation ofreal property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed two percent per year, or any reduction in the consumer price index or comparable local data, or any reduction in the event of declining property value caused by damage, destruction or other factors. Article XIIIA further limits the amount of any ad valorem tax on real property to one percent of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978. In addition, an amendment to Article XIII was adopted in August 1986 by initiative that exempts from the one percent limitation any bonded indebtedness approved by two-thirds of the votes cast by voters for the acquisition or improvement of real property. On December 22, 1978, the California Supreme Court upheld the amendment over challenges on several state and federal constitutional grounds (Amador Valley Joint Union School District v. State Board of Equalization). In the general election held on November 4, 1986, voters of the State of California approved two measures, Propositions 58 and 60, which further amended Article XIIIA. Proposition 58 amended Article XIIIA to provide that the terms "purchased" and "change of ownership," for purposes of determining full cash value of property under Article XIIIA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children. Proposition 60 amended Article XIIIA to permit the Legislature to allow persons over age 55 who sell their residence to buy or build another of equal or lesser value within two years in the same county, to transfer the old residence's assessed value to the new residence. Pursuant to -67- Proposition 60, the Legislature has enacted legislation permitting counties to implement the provisions of Proposition 60. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in certain other minor or technical ways. Article XIIIA Implementing Legislation Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax ( except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1978. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the "taxing area" based on their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. Since the 1981-82 fiscal year, legislation enacted by the Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above and under the caption "- Property Tax Limitations, Article XIIIA." In conformity with this procedure, all taxable property value included in this Official Statement is shown at 100% of assessed value and all general tax rates reflect the $1 per $100 of taxable value (except as noted). Tax rates for voter-approved bonded indebtedness and pension liabilities, if any, are also applied to 100% of assessed value. Challenges to Article XIIIA California trial and appellate courts have upheld the constitutionality of Article XIIIA's assessment rules in three significant cases. The United States Supreme Court, in an appeal to one of these cases, upheld the constitutionality of Article XIIIA's tax assessment system. The City cannot predict whether there will be any future challenges to California's present system of property tax assessment and cannot evaluate the ultimate effect on the City's receipt of property tax revenues should a future decision hold unconstitutional the method of assessing property. Appropriations Limitations - Article XIIIB On November 6, 1979, California voters approved Proposition 4, the so-called Gann Initiative, which added Article XIIIB to the California Constitution. Article XIIIB limits the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of living, population and services rendered by the govermnent entity. The "base year" for establishing such appropriations limit is the 1978-79 fiscal year, and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Revenues received in excess of the appropriations limit must be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. Appropriations subject to Article XIIIB include generally any authorization to expend during the fiscal year the "proceeds of taxes" levied by the State or other entity of local govermnent, exclusive of -68- certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not include debt service on indebtedness existing or legally authorized as of January I, 1979, on bonded indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in an election for such purpose, appropriations required to comply with mandates of courts or the Federal govermnent, appropriations for qualified outlay projects, and appropriations by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January I, 1990 levels. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to any entity of govermnent from (i) regulatory licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service or regulation, (ii) the investment of tax revenues and (iii) certain State subventions received by local govermnents. Section 7910 of the Government Code requires the City to adopt a formal appropriations limit for each fiscal year. The City's appropriations limit for Fiscal Year 2016-17 is $238,796,891. The dollar amount of the City's budgeted appropriations subject to the limit for Fiscal Year 2016-17 is approximately $56.5 million, comprising ofan approximate 23.68 percent of the City's Fiscal Year 2016- 17 appropriation limit. Propositions 218 and 26 - Article XIIIC and Article XIIID On November 5, 1996, California voters approved Proposition 218, "the Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the California Constitution, providing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments, and property-related fees and charges. Provisions of Article XIIIC (i) require taxes for general governmental purposes to be submitted to the electorate and approved by a majority vote, and taxes for specific purposes, even if deposited into the General Fund, to be submitted to the electorate and approved by two-thirds vote, (ii) require any general purpose tax which the City imposed, extended or increased, without voter approval, after December 31, 1994, to be submitted to the electorate and approved by majority vote on November 5, 1998 and (iii) provide that all taxes, assessments, fees and charges to reduction or repeal at any time through the initiative process, subject to overriding constitutional principles relating to the impairment of contracts. Provisions of Article XIIID that affect the ability of the City to fund certain services or programs that it may be required or choose to fund include (ii) adding notice, hearing, protest and, in some cases, voter approval requirements to impose, increase or extend certain assessments, fees and charges and (ii) adding stricter requirements for fmding individualized benefits associated with such levies. On November 2, 2010, California voters approved Proposition 26, the "Supermajority Vote to Pass New Taxes and Fees Act." Relevant to local govermnents, Proposition 26 amended Article XIIIC of the California Constitution by adding an expansive definition for the term "tax," which previously was not defined under the California Constitution. As a result, Proposition 26 requires a local govermnent to obtain two-thirds voter approval for many fees, charges and levies that a local government was previously authorized to adopt by a majority vote of its legislative body. Specifically, Proposition 26 defines a "tax" as any levy, charge, or exaction of any kind imposed by a local govermnent except those enumerated in seven specified exceptions, as follows: (I) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local govermnent of conferring the benefit or granting the privilege. -69- (2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local govermnent of providing the service or product. (3) A charge imposed for the reasonable regulatory costs to a local govermnent for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof. ( 4) A charge imposed for entrance to or use of local govermnent property, or the purchase, rental, or lease of local govermnent property. (5) A fine, penalty, or other monetary charge imposed by the judicial branch of govermnent or a local government, as a result of a violation of law. (6) A charge imposed as a condition of property development. (7) Assessments and property-related fees imposed in accordance with the provisions of Article XIII D. In the event that charges included in the definition of a "tax" in Article XIIIC cannot be appropriately increased, the City may have to choose whether to reduce or eliminate the service financed by such taxes or fmance such service from its General Fund. Further, no assurance can be given that the City mayor will be able to reduce or eliminate such services in the event the fees and charges that presently fmance them are reduced or repealed. The foregoing discussion of Propositions 218 and 26 should not be considered an exhaustive or authoritative treatment of the provisions of Propositions 218 and 26 or the possible effects of Propositions 218 and 26. Interim rulings, final decisions, legislative proposals and legislative enactments affecting Propositions 218 and 26 may impact the City's ability to make Lease Payments and Additional Rental Payments. The City does not expect to be in a position to control the consideration or disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity related to these issues. The City does not believe any of the fees or charges constituting City General Fund revenues, including without limitation the transient occupancy tax and the utility users tax, are imposed in violation of Propositions 218 or 26. Pro position 62 On November 4, 1986, California voters adopted Proposition 62, which requires that (i) any local tax for general govermnental purposes (a "general tax") must be submitted to the electorate and approved by a majority vote; (ii) any local tax for specific purposes (a "special tax") must be submitted to the electorate and approved by a two-thirds vote; (iii) any general tax must be proposed for a vote by two thirds of the legislative body; and (iv) proceeds of any tax imposed in violation of the vote requirements must be deducted from the local agency's property tax allocation. Most of the provisions of Proposition 62 were affirmed by the 1995 California Supreme Court decision in Santa Clara County Local Transportation Authority v. Guardino, which invalidated a special sales tax for transportation purposes because fewer than two-thirds of the voters voting on the measure had approved the tax. The City does not believe any of the taxes constituting City revenues are levied in violation of Proposition 62. -70- Pro position lA Proposition lA ("Proposition lA"), proposed by the State Legislature in connection with the State Budget Act for fiscal year 2004-05 and approved by the voters in November 2004, restricts State authority to reduce major local tax revenues such as the tax shifts permitted to take place in fiscal years 2004-05 and 2005-06. Proposition lA provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition lA generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a City must be approved by two-thirds of both houses of the State Legislature. Proposition lA provides, however, that beginning in fiscal year 2008-09, the State may shift to schools and community colleges up to eight percent of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. Such a shift may not occur more than twice in any 10-year period. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition lA also provides that if the State reduces the vehicle license fee rate below 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition lA requires the State to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. Future Initiatives From time to time other initiative measures could be adopted, affecting the ability of the City to increase revenues and appropriations. NO LITIGATION To the Authority's and the City's knowledge, there is no litigation pending or threatened to restrain or enjoin the issuance, execution or delivery of the 2017 Bonds, to contest the validity of the 2017 Bonds, the Indenture, the Site Lease, the Lease or any proceedings of the City or the Authority with respect thereto. To the knowledge of the Authority and its counsel, there is no lawsuit or claim pending against the Authority which will materially impair the Authority's ability to enter into the Indenture or restrain or enjoin the collection of Revenues as contemplated therein. To the knowledge of the City and the City Attorney, there is no lawsuit or claim pending against the City which will materially impair the City's ability to enter into the Lease or restrain or enjoin the payment of Lease Payments. CONTINUING DISCLOSURE Pursuant to the Continuing Disclosure Agreement, the City has undertaken for the benefit of holders and beneficial owners of the 2017 Bonds to provide certain financial information relating to the City and other data by not later nine months after the end of the City's Fiscal Year (which Fiscal Year currently commences on July 1 and ends on June 30 of each year) (the "Annual Report"), commencing March 31, 2018 Fiscal Year with the report for the 2016-17 Fiscal Year, and to provide notices of the occurrence of certain enumerated events. The Annual Report, and any notice of material event will be -71- filed by the City or Harrell & Company Advisors, LLC, as the Dissemination Agent on behalf of the City, with the Municipal Securities Rulemaking Board, through its Electronic Municipal Market Access System (referred to as "EMMA"), at www.emma.msrb.org. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in "APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT." This undertaking has been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the "Rule") promulgated by the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended. Five-Year Continuing Disclosure History The City, on behalf of the City of Buena Park Community Facilities District No. 2001-1 (Buena Park Mall) (the "District"), previously entered into two continuing disclosure agreements (the "Prior Continuing Disclosure Agreements") in connection with (i) certain bonds issued by the District in 2003, and (ii) certain bonds issued in 2013 by the Buena Park Public Financing Authority to refund the District's 2003 bonds (collectively, the "District Bonds"). With respect to information required under the Prior Continuing Disclosure Agreements that is provided in addition to the City's annual financial statements (generally comprised of updating information regarding the District Bonds, funds and accounts established in under the applicable fiscal agent agreement or indenture (including the reserve fund held thereunder), special tax delinquencies, and assessed valuation), the City has not failed to comply with its prior continuing disclosure undertakings under the Rule in any material respect in the last five years. With respect to the requirement under the Prior Continuing Disclosure Agreements to file annual fmancial statements of the City, within the past five years the City's financial statements in two instances have been filed later than the filing deadline specified in the Prior Continuing Disclosure Agreements. As to financial statements for Fiscal Years 2011-12 and 2014-15, the City only filed audited financial statements when such audits were complete, and the City did not file any unaudited financial statements. Accordingly, the City's financial statements for Fiscal Year 2011-12 were filed 58 days late, and the fmancial statements for Fiscal Year 2014-15 were filed 12 days late. The District Bonds were issued as limited obligations, payable only from special tax revenues, and the City has had no obligation to advance its own funds to cover any delinquencies in special tax revenues that have secured the District Bonds; therefore, the filing of audited financial statements after the December 31 or January 15 filing date, as applicable, in prior years did not adversely affect the dissemination of material information. As noted above, the filing deadline for the Annual Report with respect to the 2017 Bonds, including the portion comprised of the City's financial statements, under the Continuing Disclosure Agreement is nine months after the end of the City's Fiscal Year (i.e., March 31), commencing March 31, 2018 Fiscal Year with the report for the 2016-17 Fiscal Year. As the City's fmal audited financial statements are usually published and available in January of each year, the City believes that this March 31 filing deadline will provide ample time for the City's audited fmancial statements to be completed and available for filing on a timely basis. A failure by the City to comply with the provisions of the Continuing Disclosure Agreement is not an event of default under the Indenture ( although the holders and beneficial owners of the 2017 Bonds do have remedies at law and in equity). However, a failure to comply with the provisions of the Continuing Disclosure Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the 2017 Bonds. Therefore, a failure by the City to comply with the provisions of the Continuing Disclosure Agreement may adversely affect the marketability of the 2017 Bonds on the secondary market. -72- CERTAIN LEGAL MATTERS The legality of the issuance of the 2017 Bonds is subject to the approval of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Bond Counsel's opinion with respect to the 2017 Bonds will be substantially in the form set forth in APPENDIX B of this Official Statement. Certain legal matters will also be passed on for the Authority by Richards, Watson & Gershon, as Disclosure Counsel. Certain legal matters will also be passed on for the City and the Authority by Richards, Watson & Gershon, as City Attorney and General Counsel to the Authority. TAX MATTERS Tax Exemption Federal Tax Status. In the opm10n of Jones Hali A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2017 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. The opinions set forth in the preceding paragraph are subject to the condition that the Authority and the City comply with all requirements of the Tax Code that must be satisfied subsequent to the issuance of the 2017 Bonds. The Authority and the City have covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the 2017 Bonds. Bond Counsel expresses no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the 2017 Bonds, or the amount, accrual or receipt of interest on the 2017 Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public ( excluding bond houses and brokers) at which a 2017 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a 2017 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minim is original issue discount and original issue premium is disregarded. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of a 2017 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2017 Bond to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2017 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2017 Bonds who purchase the 2017 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2017 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of the 2017 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the -73- original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such 2017 Bonds under federal individual and corporate alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2017 Bonds (said term being the shorter of a 2017 Bonds maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the 2017 Bonds for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a 2017 Bond is amortized each year over the term to maturity of such 2017 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized bond premium is not deductible for federal income tax purposes. Owners of premium 2017 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2017 Bonds. California Tax Status. In the further opinion of Bond Counsel, interest on the 2017 Bonds is exempt from California personal income taxes. Form of Opinion. The proposed form of opinion of Bond Counsel 1s attached hereto as Appendix B. Other Tax Considerations Owners of the 2017 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2017 Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the 2017 Bonds other than as expressly described above, including any federal tax consequences arising with respect to the ownership, sale or disposition of the 2017 Bonds, or the amount, accrual or receipt of interest on the 2017 Bonds. Future legislation, if enacted into law, or clarification of the Tax Code may cause interest on the 2017 Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the 2017 Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Tax Code may also affect the market price for, or marketability of, the 2017 Bonds. Prospective purchasers of the 2017 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion. UNDERWRITING The 2017 Bonds were purchased for reoffering by Hilltop Securities Inc. (the "Underwriter") at a competitive sale. The Underwriter has agreed to purchase the 2017 Bonds for $10,215,765.84 (representing the aggregate principal amount of the 2017 Bonds less an underwriter's discount of $76,079.41 and plus net original issue premium of $506,845.25. The Underwriter may offer and sell the 2017 Bonds to certain dealers and others at prices different from the prices stated on the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter. -74- RATING S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), has assigned their municipal rating of "AA" the 2017 Bonds. This rating reflects the view of S&P as to the credit quality of the 2017 Bonds. The rating reflects only the view of S&P, and explanation of the significance of the rating may be obtained from S&P Global Ratings, 55 Water Street, New York, New York 10041 (212) 483-2000. There is no assurance that the rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the marketability or market price of the 2017 Bonds. MISCELLANEOUS All of the preceding description and summaries of the 2017 Bonds, the Indenture and the Lease, other applicable agreements, legislation and other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. This Official Statement does not constitute a contract with the purchasers of the 2017 Bonds. Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The Authority and the City have duly authorized the execution and delivery of this Official Statement by their duly authorized officers. BUENA PARK PUBLIC FINANCING AUTHORITY By: __/s_/_J_am_es_B_._V_a_n_d_erp~o_o_l ___ Executive Director CITY OF BUENA PARK By: __/s_/ _E_li_za_b_e_th_Sw_ift____ _ Mayor -75- [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A CITY OF BUENA PARK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016 A-1 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] City of Buena Park, California Comprehensive Annual Financial Report With Report on Audit by Independent Certified Public Accountants For the Year Ended J une 30, 2016 Pre pared by: Finance Department Sung Hyun, Director [THIS PAGE INTENTIONALLY LEFT BLANK] City of Buena Park Comprehensive Annual Financial Report For the year ended June 30, 2016 Table of Contents INTRODUCTORY SECTION Table of Contents ...... i Transmittal Lener ...... v Organization Chart ...... x Directory of City Officials ...... xi GFOA Certificate of Excellence in Financial Reporting ...... xii FINANCIAL SECTION Independent Auditors' Report ...... 1 Management's Discussion and Analysis ...... 5 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position ...... 31 Statement of Activities ...... 32 Fund Financial Statements: Governmental Fund Financial Statements: Ba lance Sheet ...... 38 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position ...... 41 Statement of Revenues, Expenditures and Changes in Fund Balances ...... 42 Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities ...... 44 City of Buena Park Comprehensive Annual Financial Report For the year ended June 30, 2016 Table of Contents, Continued FINANCIAL SECTION, Continued Proprietary Fund Financial Statements: Statement of Net Position ...... 46 Statement of Revenues, Expenses and Changes in Net Position ...... 47 Statement of Cash Flows ...... 48 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position ...... 50 Statement of Changes in Fiduciary Net Position ...... 51 Notes to Basic Financial Statements ...... 53 Required Supplementary Information (Unaudited): Budgets and Budgetary Accounting ...... 104 Defined Benefit Pension Plan ...... 109 Other Post Employment Benefits (OPEB) ...... 111 Supplementary Information: Non-Major Governmental Funds: Combining Balance Sheet ...... 118 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 120 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual: Asset Forfeiture Special Revenue Fund ...... 125 Proposition 172 Police Augmentation Special Revenue Fund ...... 126 Measure M2 Special Revenue Fund ...... 127 ii City of Buena Park Comprehensive Annual Financial Report For the year ended June 30, 2016 Table of Contents, Continued FINANCIAL SECTION, Continued Local Law Enforcement Block Grant Special Revenue Fund ...... 128 Orange County Anti-Drug Abuse Special Revenue Fund ...... 129 Traffic Congestion Relief Special Revenue Fund ...... 130 State OCATT Special Revenue Fund ...... 131 COPS /S LES F Special Revenue Fund ...... 132 Housing and Community Development Special Revenue Fund ...... 133 AB 2766/AQMD Special Revenue Fund ...... 134 HOME Special Revenue Fund ...... 135 Park-in-lieu Capital Projects Fund ...... 136 City Capital Projects Fund ...... 137 Internal Service Funds: Combining Statement of Net Position ...... 140 Combining Statement of Revenues, Expenses and Changes in Net Position ...... 142 Combining Statement of Cash Flows ...... 144 Agency Funds: Combining Statement of Changes in Assets and Liabilities ...... 149 STATISTICAL SECTION (Unaudited) Net Position by Component ...... 152 Changes in Net Position ...... 154 Fund Balances of Governmental Funds ...... 158 Changes in Fund Ba lances of Governmental Funds ...... 160 Governmental Activities Tax Revenues by Source ...... 163 Direct and Overlapping Property Tax Rates ...... 164 Principal Property Taxpayers ...... 165 Secured Property Tax Levies and Collections ...... 166 Assessed Value and Estimated Actual Value of Taxable Property ...... 167 Ratios of Outstanding Debt by Type ...... 168 Direct and Overlapping Governmental Activities Debt ...... 169 Legal Debt Margin Information ...... 170 Revenue Bond Coverage ...... 172 iii City of Buena Park Comprehensive Annual Financial Report For the year ended June 30, 2016 Table of Contents, Continued STATISTICAL SECTION (Unaudited), Continued Demographic and Economic Statistics ...... 173 Principal Employers ...... 174 Full-Time Equivalent City Government Employees by Function ...... 176 Operating Indicators by Function ...... 178 Capital Asset Statistics by Function ...... 180 iv December 21, 2016 Honorable Mayor and Members of the City Council City of Buena Park Buena Park, California It is my pleasure to submit the Comprehensive Annual Finance Report (CAFR) of the City of Buena Park (the City) forthe fiscal year ended J une 30, 2016. This report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed both to protect the City's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with generally accepted accounting principles (GAAP). Because the cost of internal controls should not outweigh their benefits, internal controls have been designed to provide reasonable rather than absolute assurance thatthe financial statements will be free from material misstatements. The City's financial statements have been audited by Badawi & Associates, a firm of certified public accountants. The independent auditor concluded, based on the audit, that there was a reasonable basis for rendering an unmodified opinion on the City's financial statements for the fiscal year endedJ une 30, 2016. The independent auditor's report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City was part of a broader, federally mandated "Single Audit" designed to meet the specific needs of the federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City's separately issued Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to compliment the MD&A and should be read in conjunction with it. The City of Buena Park's MD&A can be found immediately following the report of the independent auditors. 6bJOBeachBoulev,mJ !-'.0.Bo,)009 I Buena!-'arh.,lA '..l0622JOO'..l [/14]Jb23/l3 la,[/l4]Jb23/28I Burna!-'rnkrnrn City of Buena Park Profile The City of Buena Park was incorporated onJ anuary 27, 1953, as a General Law City. In November 2008, voters adopted a City Charter. The City of Buena Park is located at the northwest edge of Orange County, which is located in the southwestern part of the State of California. It occupies a land area of 10.27 square miles and provides a full range of services, including police protection, street and other infrastructure construction and maintenance, and recreational activities to its population of 83,347. The City of Buena Park operates under the council-manager form of government. In 2016, the City adopted a new by-district voting system. The by-district voting system replaces the previous at-large electoral voting system. The new system includes five voting districts, which will ultimately be represented by elected council members that live in each area. The City Council's five members provide the policy-setting and legislative functions of the City for four-year overlapping terms. Elections are held in November of even-numbered years, with either two or three seats to be filled. In 2016, the Council seats for District 3 and District 4 were up for election. In 2018, the Council seats for District 1, District 2, and District 5 will be up for election. The mayor is elected by City Council for a one-year term and is the presiding officer of the Council. The City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the City Manager, City Clerk, and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the Council, for overseeing the day-to-day operations of the City, and for appointing the heads of the various departments. The annual budget serves as the foundation for the City's financial planning and policy making. The City Manager presents the proposed budget to the City Council for review prior to the beginning of each fiscal year. The budget is prepared according to fund, function (e.g., public safety), and department (e.g., police). The City Manager or Department Heads may make certain transfers of appropriations within a department. However, the City Manager's approval is required to transfer resources from an operating account to a capital account and to transfer appropriations between departments. Starting in fiscal year 2008--09, the City went to a two year budget process with the goals of saving staff resources and providing a longer term financial plan. The City adopts two separate annual budgets for each respective fiscal year. The items for consideration for the second fiscal year are limited to an exception basis. The financial activities of the Buena Park Public Financing Authority, for which the City serves as the governing body, are also included in this report. Local Economy Buena Park is home to the world-famous Knott's Berry Farm, one of the nation's most popular and largest theme amusement parks. Also located in Buena Park are the vi Medieval Times Dinner and Tournament, Pirate's Dinner Adventure, and Knott's Soak City. These attractions drive the tourism industry in the City. In addition to the entertainment-type businesses, Buena Park also offers a complete selection of hotels, restaurants, commercial centers, office complexes, business parks, and the Buena Park Mall. Major nationally recognized employers in the City of Buena Park include Nutrilite, Yamaha, and Georgia Pacific. The City's Auto Center includes dealers of BMW, BuickiGMC, Chevrolet, Ford, Honda, Mercedes-Benz, Nissan, Tesla, and Toyota vehicles, as well as a CarMax Auto Superstore. The economy continues to grow at a steady and modest pace throughout the state and the region. The labor market remains healthy and wage growth is modestly higher. Consumer confidence remains strong and housing trends remain favorable. Locally, Buena Park continues to experience positive economic growth. The City continues to experience healthy tourism activity, resulting in increased Transient Occupancy Tax revenues for the sixth consecutive year. Construction and development activity is also continuing to increase, as evidenced by the number of building permits issued by the City. Major Initiatives The City has completed the following capital improvement projects in FY2015-16: • Annual Pavement Rehabilitation and Slurry Seal • Annual Wheelchair Ramps • Sewer pipe lining • Annual sewer manhole repairs • Bellis Park dugout upgrades • Bellis Park small dog park • Bellis Park wrought iron fence • Beach Boulevard median improvements - Orangethorpe to 10th Street Long-term Financial Planning The City's 2035 General Plan establishes policy direction for the long-range planning and growth of the City. As a part of the General Plan, the City adopted the following economic principles and goals: • FISCAL STABILITY o The City of Buena Park seeks fiscal stability and continued financial growth. Stability will enhance opportunity for economic growth sectors of the community. • TAX BASE REVENUE GROWTH o Economic growth can bring many benefits to the community, including jobs, housing, and new revenue. New growth will lead to higher tax revenue, thus benefiting residents and the community directly by vii enhancing many of the public services the City provides. The City will continue to collaborate with the business community to facilitate growth, development, and infrastructure improvements that benefit residents and businesses alike. • DIVERSITY o Buena Park understands that part of its economic stronghold stems from its employment diversity of office, retail, manufacturing, and industrial businesses. Retaining and expanding these businesses will continue the economic benefits the City maintains, as well as those seeking employment opportunities in Buena Park. • BUSINESS RETENTION AND ATTRACTION o Business retention and attraction are top priorities for Buena Park. The City takes great pride in the long, established history of the many business establishments in the City. • JOBS +iOUS ING BALANCE o Future mixed-use development in focus areas of the City will provide greater opportunity for jobs-housing balancing. • ENTERTAINMENT CORRIDOR AND TOURISM o The Entertainment Corridor along Beach Boulevard provides multiple attractions and destinations for visitors to Buena Park. The City will continue to seek opportunities to grow and expand the experience for tourists who visit Buena Park. • REVITALIZATION OF AGING CENTERS o Buena Park recognizes the need to revitalize its older commercial areas and support reinvestment and business growth in these areas. Encouraging economic growth can also help meet identified community needs. • RETAIL SECTOR o The stability and growth of the retail sector is vital to the economic well being of the City. Retail opportunities need to respond to both the residents and visitors of Buena Park. • MIX OF INDUSTRIAL AND OFFICE USES o A primary factor in identifying focus areas in the City is the need to revitalize and reinvent industrial and office uses to respond to the needs and interests that seek these uses. There are policies within each principle and goal that provide direction for decision making that encourages economic growth while also maintaining and improving the quality of life in the community. Additionally, the City Council updated the City's viii Strategic Plan for 2015-2017. The City continues to identify fiscal stability as a major plan goal. It is one of the many guiding factors when preparing the City's annual budget. The City Council's approved long-term financial planning policies and principles, along with other approved policies and goals, form the basis for allocating resources to provide quality services and sustaining fiscal health. The City's Beach Boulevard S treetscape project is now underway and includes landscape improvements, median enhancements, and monument signs. The continuing enhancement of the City's main corridor, Beach Boulevard, remains a priority, with plans for new restaurants, hotels, and venues. Government Finance Officers Association of the United States and Canada (G FOA) Certificate of Achievement Award The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Buena Park for its comprehensive annual financial report for the year ended June 30, 2015. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. I believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and I am submitting it to the G FOA to determine its eligibility for another certificate. Acknowledgments The preparation and publication of this report could not be accomplished without the dedication, professionalism, and teamwork of the Finance Department staff. I would like to express my sincere appreciation to all the members of the Finance Department. In addition, I want to acknowledge the efforts of the City's independent auditors, Badawi & Associates, who assisted in the preparation of this report. Finally, I would like to thank the City Manager and the City Council for their support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Sung Hyun Director of Finance ix CllY OF BUENA PARK Organizational Chart t~·A1R tl J V Alt City Council City City Attorney Clerk Economic Development/ -~ CllY MANAGER Successor Agency to RDA ,._ Purchasing Citizens Advisory Committee on Beautification- Community - Environmental Development Commission - Visit Buena Park '- Park& Recreation - Cultural & Fine Arts Commission Commission Community Planning - Traffic and Community Services Commission Transportation Development Commission Senior Citizens - Commission Human Resources & Finance Risk Management Police Department Public Works X CllY OF BUENA PARK List of Principal Officials CITY COUNCIL Mayor ...... Fred R. Smith Mayor P ro-Tem ...... Elizabeth Swift, Ed.D. Council Member ...... 5 teve Berry Council Member ...... Arthur C. Brown Council Member ...... Virginia Vaughn ADMINISTRATION AND DEPARTMENT HEADS City Manager ...... J ames B. Vanderpool City Attorney ...... Patrick Bobko City Clerk ...... Shalice Tilton Director of Community Development...... J oel Rosen Director of Community Services ...... Margaret Riley Director of Finance ...... 5 ung Hyun Director of Human Resources and Risk Management ...... Eddie Fenton Police Chief ...... Corey Sianez Director of Public Worksi(:ity Engineer ...... DavidJ acobs xi Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Buena Park California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 Executive Director/CEO xii BADAWI &ASSOCIATES jJ INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council of the City of Buena Park Buena Park, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business type activities, each major fund, and the aggregate remaining fund information of the City of Buena Park, California (City) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Address: Phone: Fax: , To the Honorable Mayor and Members of the City Council of the City of Buena Park Buena Park, California Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of J une 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, pension information and other postemployment benefits, and budgetary comparison information on pages 5-26 and 104-111 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, budgetary comparison schedules on pages 118-149, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and budgetary comparison schedules on pages 118-149 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and budgetary comparison schedules on pages 118- 149 are fairly stated in all material respects in relation to the basic financial statements as a whole. 2 To the Honorable Mayor and Members of the City Council of the City of Buena Park Buena Park, California Page 3 The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2016, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control ewer financial reporting and compliance. Badawi and Associates Certified Public Accountants Oakland, California December 21, 2016 3 This page intentionally left blank 4 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS J une 30, 2016 The following discussion and analysis of the financial performance of the City of Buena Park provides an overview of the City's financial activities for the fiscal year ended J une 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. Financial Highlights • The total assets of the City exceeded its liabilities at the close of fiscal year 2015-16 by $284,020,000. Net position represents the difference between all of the City's assets and liabilities, including infrastructure (roads, bridges, storm drains, sewers, traffic signals, and water system mains and lines) and other capital assets (buildings and improvements, vehicles, furniture, and equipment). Infrastructure and capital assets represent the largest portion of the City's net position, $242,551,000. These assets are costly yet essential to the functioning of City's business and residential populations. The restricted portion of net position are for resources earmarked for specific programs, and therefore unavailable for general use. The unrestricted portion may be utilized for the City's ongoing obligations to its citizens and creditors. • Governmental activities net position has decreased 0y $9,307,000 while the business-type activities has increased by $2,237,000. The changes in net position in governmental and business-type activities are primarily due to the current year change in employee pension liability pursuant to Governmental Accounting Standards Board (GAS B) Statement No. 68. • As of June 30, 2016, the City's governmental funds reported combined ending fund balances of $112,382,000, an increase of $148,000 in comparison with the prior fiscal year. Approximately 46% of the fund balance, or $51,615,000 is unassigned and available for use at the government's discretion. See independent auditors' report. 5 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Using the Accompanying Financial Statements This annual report consists ofa series of financial statements. The Statement of Net Position and the Statement of Activities provide information about the activities of the City as a whole and present a longer-term view of the City's finances. Also included in the accompanying report are fund financial statements. For governmental activities, the fund financial statements tell how these services are financed in the short term as well as what remains for future spending. Fund financial statements also report the City's operations in more detail than the government-wide statements by providing information about the City's most significant funds. Overview of the Financial Statements The annual report consists of four parts - management's discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non-major governmental funds and internal service funds. The basic financial statements comprise three components: • Government-wide financial statements. These statements provide both long-term and short-term information about the City's overall financial status. • Fund financial statements. These statements focus on individual parts of the City government, reporting the City's operations in more detail than the government-wide statements. • The governmental funds statements tell how general government services like public safety are financed in the short-term as well as what remains for future spending. • Proprietary fund statements offer short-term and long-term financial information about the activity the City operates like a business, i.e., the Water Enterprise Fund. • Notes to financial statements. - Explains some of the information in the financial statements and provides more detailed data. The statements are followed by a section of required supplementary information that provides additional financial and budgetary information. Figure A-1 summarizes the major features of the City's financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management's discussion and analysis explains the structure and contents of each of the statements. See independent auditors' report 6 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Overview of the Financial Statements (Continued) Figure A-1 Major Features of the City's Government-wide and Fund Financial Statements Fund Statements Government-wide Governmental Funds P roprie ta ry F u nds Statements Scope Entire City government The activities of the Activities the City and the City's City that are not operates similar to private component units proprietary businesses Required • Statement of net • Balance sheet • Statement of net financial position • Statement of position statements • Statement of revenues, • Statement of activities expenditures and revenues, expenses changes in fund and changes in net balances position • Statement of cash flows Accounting Accrual accounting Modified accrual Accrual accounting and basis and and economic accounting and economic resources measurement resources focus current financial focus focus resources focus Type of asset/ All assets and Only assets expected All assets and liabilities, liability liabilities, both to be used up and both financial and capital, information financial and capital, liabilities that come and short-term and long and short-term and due during the year or term long-term soon thereafter; no capital assets or long term debt included Type of inflow/ All revenues and Revenues for which All revenues and outflow expenses during year, cash is received expenses during the year, information regardless of when during or soon after regardless of when cash cash is received or the end of the year; is received or paid paid expenditures when goods or services have been received and payment is due during the year or soon thereafter See independent auditors' report 7 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Reporting the City as a Whole The accompanying government-wide financial statements include the Statement of Net Position and the Statement of Activities that present financial data for the City as a whole and are designed to provide readers with a broad overview of the City's financial condition. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net position and changes in the net position. The City's net position - the difference between assets and liabilities - is one way to measure the City's financial health, or financial position. Over time, increases and decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. Other nonfinancial factors, however, should be considered, such as changes in the City's property tax base and the condition of the City's roads, to assess the overall health of the City. In the Statement of Net Position and the Statement of Activities, we divide the City into two kinds of activities: • Governmental activities - Most of the City's basic services are reported in this category, such as general government, development, public protection, transportation, environmental, health, and leisure. Sales taxes, property taxes, state subventions, charges for services and other revenues finance most of these activities. • Business-type activity - The City charges a fee to customers to help it cover all or most of the cost of the services accounted for in the Water Enterprise Fund. See independent auditors' report 8 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Reporting the City's Major Funds The fund financial statements provide detailed information about the City's most significant funds - not the City as a whole. Some funds are required to be established by State law or by bond covenants. However, City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting administrative responsibilities for utilizing certain taxes, grants, or other money. The City's three fund types - governmental, proprietary, and fiduciary, utilize different accounting approaches. • Governmental funds - Most of the City's basic services are reported in governmental funds, which focus on near-term inflows and outflows of resources available for spending, as well as balances of resources available for expenditure at the end of the fiscal year. These funds are reported using the modified accrual basis of accounting, which measures cash and all other current financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The relationship or differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is described in a reconciliation following the fund financial statements. The City maintains 16 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the State Gasoline Tax Fund, and the Housing Successor Special Revenue Fund, all of which are considered to be major funds. Data from the remaining 14 funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in a combining statement elsewhere in this report. • Proprietary funds - When the City charges customers for the services it pro.tides - whether to outside customers or to other units of the City - these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the City's enterprise fund (a component of proprietary funds) is the same as the business-type activities we report in the government-wide statements but provides more detail and additional information, such as cash flows, for proprietary funds. The City's one enterprise fund, the Water Enterprise Fund, is considered to be a major fund of the City. The City uses internal service funds (the other component of proprietary funds) to account for its self-insurance, equipment replacement and maintenance, building maintenance, employee benefits, and information technology support. Because these services predominantly benefit governmental rather than business-type functions, they have been included with governmental activities in the government-wide financial statements. See independent auditors' report 9 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 • Fiduciary funds -When the City holds assets and acts as a custodian on behalf of another agency, this is reported as a fiduciary fund. Fiduciary funds are similar to governmental funds in that they are reported using the modified accrual basis of accounting. They differ from governmental funds in that they cannot be used to support the City's functions, and must be used only for those purposes required by that agency. The City has two fiduciary funds -the Successor Agency Fund and the CFD Mall Agency Fund. The Successor Agency Fund is a private-purpose trust fund used to account for the assets and liabilities of the former Redevelopment Agency. When the Redevelopment Agency was dissolved in 2012, a fund was established to handle the remaining assets that were required to meet the long-term debts and other enforceable obligations of the former Redevelopment Agency. The CFD Mall Agency Fund was established to hold investments for the debt service related to the mall development. Although the City acts as a fiscal agent for this trust fund and holds the reserve funds for future debt payments, the City has no debt service obligation. Fiduciary funds are presented separately, and are not included in the government-wide financial statements as they do not support the City's programs. GOVERNMENT-WIDE FINANCIAL ANALYSIS Below is a summary of the City's government-wide financial information (in thousands): Total Governmental and Business-tv[:>e Activities Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Assets $ 420,768 $ 398,496 $ 22,272 5.59% Liabilities (132,457) (92,387) (40,070) (43.37)% Deferred Outfiow of Resources 6,810 5,250 1,560 29.72% Deferred Inflow of Resources (11,101) (20,270) 9169 45.23% Net Position $ 284,020 $ 291,089 $ (7,069) (2.43)% Unrestricted net assets $ (3,963) $ 7,839 $ (11,802) (150.56)% Long-term debt $ 33,225 $ 5,785 $ 27,440 474.33% Program revenues $ 35 325 $ 33 991 $ 1 334 3.93% Taxes $ 50.538 $ 51.582 $ (1,044) (2.02)% Other general revenues $ 1,336 $ 861 $ 475 55.17% Expenses $ 80.304 $ 84.854 $ (4,550) (5.36)% See independent auditors' report 10 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) As noted earlier, the net position is a useful indicator ofa government's financial position. A surnrnary of the S taternent of Net Position (in thousands) atJ une 30, 2016 and 2015 is as follows: Governmental Activities: Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Assets: Current and other Assets $ 110,493 $ 133,349 $ (22,856) (17.14)% Capital Assets, net 260 260 216 987 43 277 19.95% Total Assets 370 753 350 336 20 417 5.83% Deferred Outflows 6 468 4979 1 489 29.91% Liabilities: Current Liabilities 6,341 5,940 401 6.75% Noncurrent Liabilities 118 915 78965 39 950 50.59% Total Liabilities 125 256 84905 19 857 47.53% Deferred Inflows 10 719 19 857 (9,138) 46.02% Net Position: Net Investment in Capital Assets 219,881 216,987 2,894 1.33% Restricted 45,437 45,733 (296) (.65)% U n restricted (24,072) (12,168) (11,904) (97.83)% Total Net Position $ 241,246 $ 250,553 $ (9,307) (3.72)% See independent auditors' report 11 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Business-type Activities: Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Assets: Current and other Assets $ 27,345 $ 27,614 $ (269) (.98)% Capital Assets, net 22 670 20 545 2 125 10.34% Total Assets 50 015 48159 1 856 3.85% Deferred Outflows 342 271 71 26.20% Liabilities: Current liabilities 2,977 2,503 474 18.94% Noncurrent liabilities 4 224 4978 (754) (15.18)% Total Liabilities 7 201 7 481 (280) (3.74)% Deferred Inflows 382 412 (30) (7.28)% Net Position: Net Investment in Capital Assets 22,665 20,530 2,135 10.40% Unrestricted 20 109 20007 102 .51% Total Net Position $ 42,774 $ 40,537 $ 2,237 5.52% The largest portion of the City's assets reflects its investment in capital assets (i.e., land, buildings, machinery, equipment, and infrastructure) less any related debt utilized to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its citizens; consequently, these assets are not available for future expenditure. Although the City's investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City's resources, $45,437,000 for governmental activities, are subject to external (legally imposed or statutory) restrictions on how they may be used. This amount represents 19% of the net position for governmental activities. The unrestricted portion ($24,072,000) for governmental activities and $20,109,000 for business-type activities, are the resources that can be 12 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) used to finance day-to-day operations without constraints. Unrestricted net position represents (10)% and 47% of net position for governmental and business-type activities, respectively. For governmental and business-type activities, net position decreased by $7,070,000. This decrease is primarily attributable to the GAS B Statement No. 68 requirement to record the current year change of pension liability, deferred inflows, and deferred outflows of pension resources. (Refer to note 1O of the financial statements). The pension liability is the present value estimate of future benefits. Retirement benefits remain the largest liability for rnost municipalities, but it is important to note that the payment of this liability extends over decades. The City of Buena Park provides pension benefits to all qualified employees through pension plans administered by the California Public E rnployees' Retirement System (CalPERS). The City currently has three tiers of pension plans based on the date of hire. Most of the City's current employees are on the rnost costly tier. The City's retirement plans available to new employees are less costly and, over a period of rnany years, will greatly reduce the pension liability. Restricted net position totals $45,437,000. These assets are cornrnined for special programs or projects, and for contractor and vendor obligations. Unrestricted net position decreased by $11,803,000, which resulted frorn the current year change of pension liability. See independent auditors' report 13 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Government-Wide Revenues Sales and use Other taxes ar1d taxes revenue 21) 3% 270% Charges for ser',lices 31.3% Cap ital grants and Operating grants oontnbutioni, and oontrib~ioos 2.8% 6.3% Total government-wide revenue for governmental and business-type activities is $87,198,000 in FY 1 5-16, an increase of $765,000, or 1% , compared to $86,433,000 in prior year. Prograrn revenue is $35,325,000, or 41%, of the total revenue, which represents charges for services and grants revenues. General revenue is the remainder $51,873,000, or 59%, which is primarily comprised of various tax revenues. See independent auditors' report 14 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Public 44.6% Weter 15.9% Environmental 39% Leisure Health 44% lnteresl expense 3.9% 0.3% Total government-wide expenses for governmental and business-type activities is $80,304,000 in FY 15-16, a decrease of $4,551,000, or 5%, compared to $84,855,000 in prior year. Consistent to the past years, the public protection expenses are the largest expense for the City, which is $35,851,000, or 45%, of the total expenses. The water utility cost is the second largest expense, which represents $12,753,000, or 16%, of the total expenses. See independent auditors' report 15 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Change in net position ofGovernrnental Activities (in thousands) is as follows: Amount Percent J une 30, J une 30, Increase Increase 2016 201 5 (Decrease) (Decrease) Revenues: Program Revenues: Charges for services $ 13,195 $ 10,465 $ 2,730 26.09% Operating grants and contributions 5,521 6,121 (600) (9.80)% Capital grants and contributions 2 485 2 134 351 16.45% Total Program Revenues 21 201 18 720 2 481 13.25% General Revenues: P rope rty taxes 10,661 9,709 952 9.81% Sales and use taxes 17,701 15,889 1,812 11.41% Property taxes in lieu of sales and use taxes 2,533 7,355 (4,822) (65.56)% Transient occupancy taxes 6,442 5,686 756 13.30% Franchise taxes 1,776 2,002 (226) (11.29)% Othertaxes 11,424 10,940 484 4.43% Investment income 1,025 591 434 73.44% Other revenue 11 136 (125) (91.91)% Total General Revenues 51 573 52 308 (735) (1.41)% Total Revenues 72 774 71 028 1 746 2.46% Expenses: General government 8,098 7,125 973 13.66% Leisure 3,570 3,071 499 16.25% Health 3,155 3,000 155 5.17% Transportation 8,380 9,875 (1,495) (15.14)% P u bl ic prate ct ion 35,851 31,841 4,010 12.59 % Deve loprne nt 5,055 12,700 (7,645) 60.20% E nvi ron rne nta I 3,167 2,987 180 6.03% Interest expense 275 347 (72l (20.75)% Total Expenses 67 551 70946 (3,395 4.79% Increase in Net Position before transfers 5 223 82 5 141 6269.51% Transfers 98 76 22 28.95% Change in Net Position 5,321 158 5,163 3267.72% Net Position -Beginning of Year -as Restated 235 925 250 395 (14,470) (5.78)% Net Position -End of Year $ 241,246 $ 250,553 ec$~~cc>(~9,se3~07'±) (3.72)% See independent auditors' report 16 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) The cost of all governmental activities for fiscal year 2015-16 is $67,551,000. However, as shown in the Statement of Activities, the arnount that the taxpayers ultimately financed for these activities is $46,350,000, because sorne of the cost is paid by those who directly benefited frorn the programs, $13,195,000, or by other governments and organizations that subsidized certain programs with operating grants and contributions, $5,521,000, and capital grants and contributions, $2,485,000. The City's governmental program revenues are $21,201,000. The City paid for the remaining "public benefit'' portion of governmental activities with $50,538,000 in taxes and general revenue (sorne of which could only be used for certain programs) and with $1,035,000 other revenues, such as interest and general entitlements. Total resources available during the year to finance governmental operations are $308,797,000, consisting of net position - restated at J uly 1, 2015 of $235,925,000, program revenues of $21,201,000, general revenues of $51,573,000, and transfers of $98,000. Total expenses for governmental activities during the year are $67,551,000, thus creating a net position of $241,246,000 as ofJ une 30, 2016. P rograrn revenues increased $2,481,000, a change of 13% frorn the prior year. This is primarily due to an increase in development charges due to new housing projects. Total general revenues decreased by $735,000, a change of 1% frorn the previous year. This decrease is the result of the $3,010,000 drop in total sales and use taxes revenue (i.e., "sales and use taxes" revenue and "property taxes in lieu of sales and use taxes" revenue) due to the relocation of one of the City's rnajor retailers. Before 2012-13, rnost California cities had tools to attract out-of-state businesses with sales and/or property tax incentives. These tools were unavailable once the State of California eliminated redevelopment. As the contracts between the forrner redevelopment agencies and businesses expire, the result for sorne cities is the loss of jobs and a decline in sales tax when businesses depart California for other states providing sales tax/property tax incentives. Fortunately, this decrease in sales and use taxes revenues has been offset by increases in other general revenues because of an improving economy. Property taxes have improved by 10% due to a rebound in the housing rnarket. Buena Park's transient occupancy taxes have improved by 13%, an indication of the buoyed tourism rnarket in this city due to the rnany new attractions available. Total expenses decreased $3,395,000, or 5%. This decrease in expense is largely due to the $7,645,000 decrease in development expenses. Compared to the prior year, there was substantially less transfer of City land inventory to developers for the creation of low and moderate incorne housing in the current year. Offsetting the decrease in development expenses, public protection expenses increased by $4,010,000 frorn the previous year due to an increase in police department expenditures, the Orange County Fire Authority's annual contract, purchases of equipment frorn asset forfeiture rnonies, and increase in pension expense pursuant to GAS B Statement No. 68. See independent auditors' report. 17 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Change in net position of Business-type Activities (in thousands) is as follows: Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Revenues: Program Revenues: Charges for services $ 14 123 $ 15 270 $ (1,147) (7.51)% Total Program Revenues 14 123 15 270 (1,147) (7.51)% General Revenues: Investment income 300 135 165 122.22% Total General Revenues 300 135 165 122.22% Total Revenues 14 423 15 405 (982) (6.38)% Expenses: Water utility 12 753 13 908 (1,155) (8.31)% Total Expenses 12 753 13 908 (1,155) (8.31)% Increase in Net Position before transfers 1 670 1 497 173 11.56% Transfers (98) (76) (22) (28.95)% Change in Net Position 1,572 1,421 1 51 10.63% Net Position -Beginning of Year -As Restated 41 202 39 116 2 086 5.33% Net Position -End of Year $ 42,774 $ 40,537 $ 2,237 5.52% See independent auditors' report 18 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) The cost of all proprietary (business-type) activities in 2015-16 was $12,753,000. As shown in the Statement of Activities and Changes in Net Position, the amount paid by users of the system was $14,123,000, investment income totaled $300,000, and transfers are $98,000. Beginning net position was restated to $41,202,000 and ending net position was $42,774,000. Of the ending net position, $22,665,000, or 53%, was invested in capital assets and $20,109,000, or 47%, was unrestricted. Total water revenues decreased by $982,000 from the previous year, or 6%. This decrease in revenues is due to our customers' continuing efforts to conserve water as mandated by the State. Water utility costs decreased by $1,155,000, or 8%. The total water utility costs decreased due to the decrease in water consumption.Water utility costs include all the costs to provide water to the public. These costs include labor, materials and supplies, water production and water distribution charges. There are two methods of water production: Pumping water from the ground, and purchasing water from the Metropolitan Water District. Pumping water is 40% cheaper than purchasing water. However, there are restrictions that limit the amount of water that can be pumped. These restrictions take into account various factors including water demand, drought, rainfall, levels of groundwater, and conservation demands. Net interfund transfers are $98,000. Of that amount, $72,000 is transferred to the General Fund for rent payment for City-owned well sites, and $30,000 to the Public Liability Fund for the Water Fund's portion of liability insurance. A transfer in of $4,000 from the State Gas Tax Fund supplemented the Water Fund's cost to update the City-wide G IS project. Activity for the 2015-16 fiscal year increased net position by $2,237,000. See independent auditors' report. 19 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Financial Analysis of the City's Governmental Funds Below is an analysis of the City's governmental fund activities for the year (in thousands): Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Total Fund Balances: General Fund $ 68,146 $ 68,143 $ 3 .01% State Gas Tax Fund 3,413 4,586 (1,173) (25.58)% Housing Successor Fund 23,845 23,502 343 1.46% Other Governmental Funds 16 978 16 003 975 6.09% Total Fund Balances $ 112,382 $ 112,234 $ 148 .13% At the close of the current fiscal year, the City's governmental fund balances reported a combined ending balance of $112,382,000, an increase of $148,000, in comparison to the prior year. The fund balance for the General Fund is $68,146,000, an increase of $3,000 from the previous year. General fund revenues continue to outpace expenditures, primarily due to the improving economy resulting in greater tax revenues. The State Gas Tax Fund has a fund balance of $3,413,000, a $1,173,000 decrease from the previous fiscal year. The State Gas Tax Fund operates with revenues collected from a supplemental tax on gasoline sales and is used to maintain and improve streets and highways. The balance of this fund will vary from year to year depending on the amount spent on street projects. The Housing Successor Fund is a remnant of the previous Redevelopment Agency that was eliminated in 2012. The Housing Successor's purpose is to provide low and moderate income housing to the population of Buena Park. The fund balance increase of $343,000 is primarily due to the accrued interest income of the outstanding loans. Other Governmental Funds show an increase in fund balance of $975,000. Other Governmental Funds consists of multiple funds, the largest fund balances are from the Measure M2 Fund, the Housing and Community Development Fund, the HOME Loans Fund, and the Park-in-lieu Fund. Measure M2 funds are derived from a portion of sales tax and distributed by Orange County Transportation Authority for the purpose of street projects and improvements. The Housing and Community Development Fund is supported by the federal Community Development Block Grant and assists community programs and issues home improvement loans and grants to qualified homeowners. The HOME Loans Fund is a federal and state funded program with the purpose of assisting first time homebuyers and providing home improvement loans to current qualified See independent auditors' report 20 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 homeowners. The Park-in-lieu Fund operates from the collection of developer fees that are used to improve the City's public parks. Spending for the Housing and Community Development Fund and for the HOME Loans Fund are "grant driven", so these funds must be spent before they collect grant revenues. Measure M2 and Park-in-lieu cannot spend in excess of the revenues they collect, so spending may vary from year to year. The $975,000 increase in fund balance of Other Governmental Funds is primarily due to $1,106,000 higher in the Park-in-lieu Fund's net revenue and increase in fund balance in the current year compared to prior year. Financial Analysis of the City's Proprietary Funds Below is an analysis of the net position of the City's proprietary funds (in thousands): Amount Percent June 30, J une 30, 201 5 Increase Increase 2016 As Restated (Decrease) (Decrease) Total Net Position: Water Fund $ 42,774 $ 41,201 $ 1,573 3.82% Internal Service Funds 6 208 7198 (990) (13.75)% Total Net Position $ 48,982 $ 48,399 $ 583 1.21% Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Unrestricted Net Position: Water Fund $ 20,109 $ 20,671 $ 562 2.72% Internal Service Funds 3 709 4973 (1,264) (25.42)% Total Unrestricted Net Position $ 23,818 $ 25,644 $ (1,826) (7.12)% Total net position of the Water Enterprise Fund increased $1,573,000, and the unrestricted portion increased $562,000. The increase in the net position is because the charges for services are higher than the total expenses, and that the pension expenses and the current year increase in pension liability for the enterprise fund is lower compared to prior year. The function of the Internal Service Funds is to provide services to other City departments. These services include the following: equipment and vehicle maintenance and replacement, worker's compensation, public liability, employee benefits, building and grounds maintenance, and information technology support. The Internal Service Funds total net position decreased by $990,000, and the See independent auditors' report 21 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 unrestricted portion decreased by $1,264,000. This is primarily due to the current year increase in employee pension liability. Debt Administration Below is a schedule of the changes to the City's long-term debt (in thousands). Additional information on the City's long-term debt is shown in note 8 of the financial statements. Balance at Balance at July 1, 2015 June 30, As Restated Additions Deletions 2016 Governmental Activities: Claims payable $ 8,071 $ 2,879 $ (1,648) $ 9,302 Employee leave benefits 2,244 515 (199) 2,560 Pension note payable 7,554 (1,774) 5,780 Note payable -OCTA 526 526 Sales tax payable 31 158 (2,284) 28 874 Total Governmental Activities 49 028 3 920 (5,905) 47042 Business-type Activities: Loans payable 15 (10) 5 Employee leave benefits 118 27 (11) 134 Total Business-type Activities 133 27 (21) 139 Total Long-Term Obligations $ 49 161 $ 3 947 $ (5,926) $ 47 181 As ofJ une 30, 2016 the City's total debt decreased by $1,980,000. See independent auditors' report 22 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Capital Assets The capital assets of the City are the assets having a historic cost of more than $1,000 and a useful life of greater than two years that are used in the performance of the City's functions, including infrastructure assets. The City has elected to use the "Basic Approach" as defined by GASB Statement No. 34 for infrastructure reporting. The following infrastructure networks are recorded as capital assets in the government-wide financial statements: • Road system, which includes street and alley rights-of-way, pavement, alleys, medians, curbs, gutters, sidewalks, traffic signals, interconnect cables, and bridges. • Storm drain system, which includes storm drain lines and storm drain catch basins. • Sewer system, which includes sewer lines. • Water system, which includes water lines, water wells, and booster pump stations. Below is a schedule of the City's capital assets, net of accumulated depreciation (in thousands): Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Governmental Activities: Rights-of-Way $ 48,678 $ 48,677 $ .00% Land 11,784 11,784 Construction in progress 3,571 968 2,603 268.91% Buildings 73,344 74,571 (1,227) (1.65)% Improvements 7,360 7,127 233 3.27% Machinery and equipment 8,257 8,006 251 3.14% Furniture and fixtures 687 739 (52) (7.04)% Infrastructure: Road system 62,681 62,563 118 .19% Storm drain system 3 519 2 552 967 37.89% Total Governmental Activities 219 881 216 987 2 894 1.33% See independent auditors' report 23 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Capital Assets (Continued) Amount Percent June 30, June 30, Increase Increase 2016 2015 (Decrease) (Decrease) Business-type Activities: Land $ 2 $ 2 $ Construction in progress 2,402 996 1,406 141.17% Buildings 50 3 47 1566.67% Improvements 793 625 168 26.88% Pumps and reservoirs 894 931 (37) (3.98)% Hydrants, meters and connections 863 597 266 44.56% Machinery and equipment 380 396 (16) (4.04)% Infrastructure: Wells 2,433 2,540 (107) (4.21)% Water and sewer lines 14 853 14 455 398 2.75% Total Business-type Activities 22 670 20 545 2 125 10.34% Total Capital Assets$ 242 551 $ 237,532 $ 5 019 2.11% Capital assets from governmental activities increased $2,894,000, or 1%, and business-type activities increased $2,125,000, or 10%. There were multiple projects started in 2015-16, so the primary reason for the net increases in both the governmental and business-type activities is the increase in construction in progress. Further information on the City's capital assets can be found in note 7 of the financial statements. Capital asset and infrastructure projects completed in 2015-16 totaled $6,549,000. These improvements include: • Annual Pavement Rehabilitation and Slurry Seal • Annual Wheelchair Ramps • Sewer Pipe Lining • Annual Sewer Manhole Repairs • Bellis Park Dugout Upgrades • Bellis Park Small Dog Park • Bellis Park Wrought Iron Fence • Beach Boulevard Median Improvements - Orangethorpe to 10th Street See independent auditors' report 24 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 General Fund Budgetary Highlights Actual General Fund revenues are $3,712,000 higher than the $57,937,000 budgeted for 2015-16. This increase is from tax revenues. The original budget for the General Fund increased from $57,536,000 to $57,937,000. This increase of $401,000 is from the intergovernmental revenues. Actual expenditures for the General Fund are $2,925,000 below budget. $2,267,000 of the savings is due to numerous vacant and unfilled positions citywide. The remaining savings of $658,000 are temporary, as they are budgeted for professional services and capital improvement costs that are not spent in the 2015-16 fiscal year but will be carried forward into the next fiscal year. Comparing the fiscal year 2015-16 General Fund original budget for expenditures and transfers amount of $58,129,000 to the final budgeted amount of $63,675,000 shows a net increase of $5,546,000. The net increase from the total original budgeted expenditures to the final budget primarily comprises the following appropriation adjustments: • Appropriations of $2,336,000 for general government • Appropriations of $222,000 for leisure • Appropriations of $295,000 for transportation • Appropriations of $1,210,000 for public protection • Appropriations of $112,000 for development • Appropriations of $75,000 for environmental The changes between the original and the amended budget are due to budget carryovers for contractual fees and services. In addition, there are increases and adjustments for capital improvement projects, police protection programs and other public work projects. Economic Factors and Next Year's Budgets and Rates The key assumptions in the General Fund forecast for fiscal year 2016-17 are: • Steady and moderate economic growth • Moderate increase in tourism • Moderate increase in Sales Tax • Moderate increase in Property Tax revenues • Increase in development and construction activity See independent auditors' report 25 CITY OF BUENA PARK MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) J une 30, 2016 Contacting the City's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report, separate reports of the City's component units or need additional financial information, contact the Finance Director's Office, at City of Buena Park, 6650 Beach Boulevard, Buena Park, California 90622. See independent auditors' report 26 BASIC FINANCIAL STATEMENTS 27 This page intentionally left blank 28 GOVERNMENT-WIDE FINANCIAL STATEMENTS 29 This page intentionally left blank 30 City of Buena Park Statement of Net Position J une 30, 2016 Primary Govemrrent Governmental Business-Type Activities Activities Total ASSETS Current assets Cash and investrrents $ 84,219,766 $ 24,936,923 $ l 09, l 56,689 Accounts receivable 21,222,486 2,355,194 23,577,680 Interest receivable 143,531 42,718 186,249 Taxes receivable 160,135 160,135 Due from other governments 4,592,548 4,592,548 Prep:i.id items 65,149 l 0,CXX) 75,149 Inventory 88,867 88,867 Total current assets 110,492,482 27,344,835 137,837,317 Noncunent assets P ror:,erty held for resale 7,575,052 7,575,052 Due from Successor Agency 7,191,489 7,191,489 Loans receivable, net 25,044,363 25,044,363 Net OP EB Asset 568,667 568,667 Capital assets Non-depreciable 64,032,884 2,404,498 66,437,382 Depreciable, net 155,847,784 20,265,6% 176,113,480 Total capital asset 219,880,668 22,670,194 242,550,862 Total non current assets 260,260,239 22,670,194 282,930,433 Total assets 370,752,721 50,015,029 420,767,750 DEFERRED OUTFLOWS OF RESOURCES Deferred err-player pension conttibutions 5,895,642 342,215 6,237,857 Deferred outfkms of resources pension 572,079 572,079 Total deferred outflows of resources 6,467,721 342,215 6,809,936 LIABILITIES Current liabilities Accounts p:i.yable 1,639,773 2,454,575 4,094,348 Accrued liabilities 1,274,671 107,660 1,382,331 Interest payable 19,701 368,551 388,252 Der:osits p:i.yable 1,241,302 1,241,302 Retention payable 29,751 29,751 Unearned revenue 59,041 59,041 E rr-ployee leave benefits -due within l year 21,CXX) 42,CXX) 63,CXX) Claims p:i.yable-due within l year 100,CXX) 100,CXX) Long-terrn dett - due within one year 1,955,393 4,764 1,%0,157 Total current liabilities 6,340,632 2,977,550 9,318,182 Noncurrent liabilities E rr-ployee leave benefits -due in rnore than l yr 2,539,221 91,971 2,631,192 Claims p:i.yable-due in rnore than l yr 9,201,<:XX) 9,201,<:XX) Long-terrn dett-due in nnre than one year 33,224,991 33,224,991 Net pension liability 73,948,956 4,131,595 78,080,551 Total noncurrent liabilities 118,915,CXJB 4,223,566 123, l 38,634 Total liabilities 125,255,700 7,201,116 132,456,816 DEFERRED INFLOWS OF RESOURCES Deferred infkms of resources - pension l 0,718,672 381,991 11,100,663 Total deferred inflows of resources 10,718,672 381,991 11,100,663 NET POSITION Net investment in capital assets 219,880,668 22,665,430 242,546,098 Restricted for Residential housing 32,991,9)2 32,991,9)2 Transr:ottation 7,CX52, 193 7,CX52, 193 Developrrent 4,035,491 4,035,491 Environment 367,0% 367,096 Public protection 980,578 980,578 Total restticted 45,437,260 45,437,260 Unrestricted (24,071,858) 20,108,707 (3,963,151) Total net rnsition $ 241 246 070 $ 42774137 $ 284 020 207 See accotyp1.nying Notes to Basic Financial S taterrents. 31 City of Buena Park Statement of Activities FortheyearendedJ une 30, 2016 Program Revenues Operating Capital Charges for Grants and Grants and Functions JP rag rams Expenses Services Contributions Contributions Total Primary Government Governmental activities General government $ 8,098,002 $ 207,035 $ 51,938 $ $ 258,973 Leisure 3,569,607 892,971 30,486 923,457 Health 3,155,191 3,227,243 3,227,243 Transportation 8,380,252 226,639 1,797,806 2,461,799 4,486,244 Public protection 35,851,177 3,315,077 652,697 22,917 3,990,691 Development 5,054,674 5,098,927 2,987,859 8,086,786 Environmental 3,167,221 227,4 ll 227,4 ll Interest on long-term debt 274,674 Total governmental activities 67,550,798 13,195,303 5,520,786 2,484,716 21,200,805 B usiness--type activities Water 12,753,278 14,123,897 14,123,897 Total business-type activities 12,753,278 14,123,897 14,123,897 Total primary government $ 80,304,076 $ 27,319,200 $ 5,520,786 $ 2,484,716 $ 35,324,702 General Revenues Taxes Property taxes Sales taxes Property taxes in lieu of sales and use taxes Transient occupancy taxes Franchise taxes Other taxes Total taxes Investment income Other Transfers Total general revenues and transfers Change in net position Net position -beginning of year, as restated Net position -end of year See accompanying Notes to Basic Financial Statements. 32 Net (Expense) Revenue and Changes in Net Position Governmental Business-Type Activities Activities Total $ (7,839,029) $ $ (7,839,029) (2,646,150) (2,646, l 50) 72,052 72,052 (3,894,008) (3,894,008) (31,860,486) (31,860,486) 3,032,112 3,032,112 (2,939,810) (2,939,810) (274,674) (274,674) (46,349,993) (46,349,993) 1,370,619 1,370,619 1,370,619 1,370,619 (46,349,993) 1,370,619 (44,979,374) 10,660,600 10,660,600 17,701,370 17,701,370 2,533,447 2,533,447 6,442,461 6,442,461 1,776,161 1,776,161 11,423,680 11,423,680 50,537,719 50,537,719 1,024,947 300,219 1,325,166 10,370 10,370 98,331 (98,331) 51,671,367 201,888 51,873,255 5,321,374 1,572,507 6,893,881 235,924,696 41,201,630 277,126,326 $ 241,246,070 $ 42,774,137 $ 284,020,207 33 This page intentionally left blank 34 FUND FINANCIAL STATEMENTS Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements 35 This page intentionally left blank 36 GOVERNMENTAL FUND FINANCIAL STATEMENTS General Fund accounts for resources traditionally associated with governmental which are not required legally or by sound financial rnanagernent to be accounted for in another fund. State Gas Tax Special Revenue Fund accounts for street and maintenance projects of the public works department. Financing is provided by the City's allocation of State gasoline taxes. Housing Successor Special Revenue Fund accounts for future affordable housing projects. Non-Major Governmental Funds is the aggregate of all the non-major governmental funds. 37 City of Buena Park Balance Sheet Governmental Funds June30,2016 Major Funds State Other Gasoline Tax Housing Successor Governmental General Special Revenue Special Revenue Funds ASSETS Cash and investments $ 54,150,712 $ 3,350,031 $ 2,416,112 $ 9,379,736 Accounts receivable 20,069,697 323,478 829,311 Interest receivable 91,878 5,725 4,148 16,068 Taxes receivable 160,135 Loans receivable, net 17,863,601 7,157,480 Due from other governments 4,085,084 130,350 377,114 Prepaid items 65,149 Inventory 88,867 Property held for resale 3,397,951 3,566,153 610,948 Due from other funds 181,155 Due from Successor Agency 7,191,489 Total assets $ 89,482,117 $ 3,809,584 $ 23,850,0l 4 $ 18,370,657 LIABILITIES, DEFERRED INFLOW OF RESOURCES AND FUND BALANCES Liabilities Accounts payable $ 1,120,777 $ 72,700 $ $ 247,917 Accrued liabilities 1,090,709 8,857 5,420 139,654 Deposits payable 1,241,302 Retention payable 15,730 6,329 7,692 Unearned revenue 59,041 Due to other funds 181,155 Total liabilities 3,527,559 87,886 5,420 576,418 Deferred Inflows of Resources Unavailable revenue 17,808,808 308,552 815,684 Total deferred inflows of resources 17,808,808 308,552 815,684 Fund Balances: (Note 12) Nonspendable 9,305,158 Restricted 1,438,298 3,413,146 23,844,594 16,501,184 Assigned 5,704,972 559,976 Unassigned 51,697,322 (82,605) Total fund balances 68,145,750 3,413,146 23,844,594 16,978,555 Total liabilities, deferred inflows of resources, and fund balances $ 89,482,117 $ 3,809,584 $ 23,850,0l 4 $ 18,370,657 See accompanying Notes to Basic Financial Statements. 38 Total Governmental Funds $ 69,296,591 21,222,486 117,819 160,135 25,021,081 4,592,548 65,149 88,867 7,575,052 181,155 7,191,489 $ 135,512,372 $ 1,441,394 1,244,640 1,241,302 29,751 59,041 181,155 4,197,283 18,933,044 18,933,044 9,305,158 45,197,222 6,264,948 51,614,717 112,382,045 $ 135,512,372 39 This page intentionally left blank 40 City of Buena Park Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position June30,2016 Total Fund Balances - Total Governmental Funds $ 112,382,045 Amounts reported for governmental activities in the Statement of Net Position were different because Capital assets used in governmental activities were not current financial resources. Government- Therefore, they were not reported in the Governmental Funds Balance Sheet. Except for Wide Statement Internal the internal service funds reported below, the capital assets were adjusted as follows of Net Pas ition Service Funds Total Non-depreciable $ 64,032,884 $ $ 64,032,884 Depreciable, net 155,847,784 (2,498,403) l 53,349,381 Total capital assets $ 219,880,668 $ (2,498,403) 217,382,265 Unavailable revenue recorded in the fund financial statements resulting from activities 1n which revenues were earned but funds were not available are reclassified as revenues in the Government-Wide Financial Statements. 18,933,044 Interest payable on long-terrn debt did not require current financial resources. Therefore, interest payable was not reported as a liability in Governmental Funds Balance Sheet. (19,701) Internal service funds were used by management to charge the costs of certain activities, such as insurance, to individual funds. The assets and liabilities of the Internal service funds were included in governmental activities in the Government-Wide Statement of Net Position. 6,207,618 Governmental funds report all contributions in relation to the Annual Required Contribution (ARC) for OPEB as expenditures, but in the Statement of Net Position any excess or deficiencies in relation to the ARC are recorded as an asset or a liability 568,667 E rnployer contributions for pension were recorded as expenditures in the governmental funds. However, in the Government-Wide Financial Statements these contributions are deferred. 5,759,909 In the Government-Wide Financial Statements, certain differences between actuarial amounts and actual results for pension are deferred and amortized over a period of time, ho.,vever these differences do not impact the Governmental Funds Balance Sheet Deferred outHows of resources -pension 572,079 Deferred inflows of resources -pension (10,567,164) Long-terrn liabilities were not due and payable in the current period. Therefore, they were not reported in the G overnrnental Funds Balance Sheet. Governrnent Wide S taternent Internal of Net Position Service Funds Total Claims andjudgrnents payable -due within one year $ (100,000) $ 100,000 $ E rnployee leave benefits -due within one year (21,000) 21,000 Bonds payable -due within one year (1,955,393) (1,955,393) Net pension liability (73,948,956) 1,638,709 (72,310,247) Long terrn liabilities -due in rnore than one year (44,966,112) 9,259,060 (35,707,052) Total long-terrn liabilities $ (120,991,461) $ 11,018,769 (109,972,692) Net Position of G overnrnental Activities $ 241,246,070 See accompanying Notes to Basic Financial Statements. 41 City of Buena Park Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds FortheyearendedJ une 30, 2016 Major Funds State Non---fvlajor Gasoline Tax Housing Successor Governmental General Special Revenue Special Revenue Funds REVENUES Taxes $ 43,045,136 $ $ $ 355,319 Licenses and permits 903,194 Fines and forfeitures 811,614 Intergovernmental 7,508,842 2,499,018 677,978 4,867,148 Charges for services 7,699,530 8,930 2,114,667 Investment income 851,462 39,601 121,678 124,612 Miscellaneous 829,409 120,000 8,930 8,107 Total revenues 61,649,187 2,658,619 817,516 7,469,853 EXPENDITURES Current General government 7,282,013 Leisure 2,881,917 Health 3,028,750 Transportation 4,686,149 586,649 381,558 Public protection 32,404,362 932,898 Development 2,433,549 474,659 1,918,967 Environmental 3,045,715 Capital outlay 647,728 4,204,073 2,831,486 Debt Service Principal retirement 4,058,612 Interest and other charges 280,606 118 Total expenditures 60,749,401 4,790,722 474,659 6,065,027 REVENUES OVER (UNDER) EXPENDITURES 899,786 (2,132, l 03) 342,857 1,404,826 OTHER FINANCING SOURCES (USES) Transfers in 257,946 1,000,820 254,196 Transfers out (1,683,000) (41,339) (683,532) Proceeds from long term debt 526,000 Proceeds from sale of capital assets 1,413 Total other financing sources (uses) (897,641) 959,481 (429,336) Net change in fund balances 2,145 (l, 172,622) 342,857 975,490 FUND BALANCES Beginning of year, 68,143,605 4,585,768 23,501,737 16,003,065 End of year $ 68,145,750 $ 3,413,146 $ 23,844,594 $ 16,978,555 See accompanying Notes to Basic Financial Statements. 42 Total Governmental Funds $ 43,400,455 903,194 811,614 15,552,986 9,823,127 1,137,353 966,446 72,595,175 7,282,013 2,881,917 3,028,750 5,654,356 33,337,260 4,827,175 3,045,715 7,683,287 4,058,612 280,724 72,079,809 515,366 1,512,962 (2,407,871) 526,000 1,413 (367,496) 147,870 112,234,175 $ 112,382,045 43 City of Buena Park Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities FortheyearendedJ une 30, 2016 Net Change in Fund Balances - Total Governmental Funds $ 147,870 Amounts reJX)rted for governmental activities in the Statement of Activities were different because Governmental funds reJX)rted capital outlay as expenditures. However, in the Government-Wide Statement of Activities, the cost of those assets was allocated over their estimated useful lives as depreciation expense. This was the amount of capital assets recorded in the current period, net of Internal Service Funds of $690,796 8,406,604 Depreciation expense on capital assets was reJX)rted in the Government-Wide Statement of Activities, but they did not require the use of current financial resources. Therefore, depreciation expense was not reported as expenditures in the governmental funds, net of Internal Service Funds of $417,449 (5,763,163) In the statement of activities, only the gain or (loss) on the sale of capital assets is reported, whereas in the governmental funds proceeds from sales increases financial resources. The difference between proceeds and the loss on disposal of capital assets (22,865) Accrued compensated leave payable was an expenditure in governmental funds, but the accrued payable increased compensated leave liabilities in the Govemment--W ide Statement of Net Position. (318,584) OPE B expenses reJX)rted in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (26,411) Bond proceeds provided current financial resources to governmental funds, but issuing debt increased long-term liabilities in the Govemment--W ide Statement of Net Position. Repayment of bond principal was an expenditure in governmental funds, but the repayment reduced long-tenn liabilities in the Government-Wide Statement of Net Position. Long-tenn debt proceeds (526,000) Long-term debt repayments 4,058,612 Long tenn receivables that did not meet the revenue recognition criteria in the governmental funds but were recognized as revenue in the Government-Wide Financial Statements. 95,176 Pension expense related to the net pension liability does not require the use of current financial resources and therefore was not included in the Governmental Funds but should be recognized in the Statement of Net Position for full accrual - Pens ion contributions in current year are reported as deferred outflow of resource~ 5,759,900 -Pension expense as a result of the change in pension liabilit\- (5,505,725) lnterest expense on long-tenn debt is reJX)rted on the accrual basis on the Government-Wide Statements, but expenditures on long-tenn debt in the governmental funds statements are recorded when paid. The following amount represents the change in accrued interest from the prior year. 6,050 Internal service funds were used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The net revenue of the internal service funds was reported with governmental activities. (990,099) Change in Net Position of Governmental Activities $ 5,321,374 See accompanying Notes to Basic Financial Statements. 44 PROPRIETARY FUND FINANCIAL STATEMENTS Water Fund accounts for the activities of the water utilities system, which provides service to the residents of the City and some neighboring cities. Internal Service Funds are used to account for the financing of goods and services provided by one department or agency to other departments or agencies on a cost reimbursement basis. 45 City of Buena Park Statement of Net Position Proprietary Funds June30,2016 Business-type Governmental Acitivies Activities Water Internal Enterprise Fund Service Funds ASSETS Current assets Cash and investments $ 24,936,923 $ 14,923,175 Accounts receivable, net 2,355,194 Interest receivable 42,718 25,712 Loans receivable 23,282 P repaids items 10,000 Total current assets 27,344,835 14,972,169 Noncurrent assets Capital assets Non-depreciable 2,404,498 Depreciable, net 20,265,696 2,498,403 Total capital assets 22,670,194 2,498,403 Total noncurrent assets 22,670,194 2,498,403 Total assets 50,0l 5,029 17,470,572 DEFERRED OUTFLOWS OF RESOURCES Deferred employer pension contributions 342,215 135,733 Total deferred outflows of resources 342,215 135,733 LIABILITIES Current Liabilities Accounts payable 2,454,575 198,379 Accrued liabilities 107,660 30,031 Deposits payable 368,551 Employee leave benefits -due within one year 42,000 21,000 Loans payable -due within one year 4,764 Claims payable -due within one year 100,000 Total current liabilities 2,977,550 349,410 Noncurrent liabilities Employee leave benefits -due in more than one year 91,971 57,160 Claims payable -due in more than one year 9,201,900 Net pension liability 4,131,595 1,638,709 Total noncurrent liabilities 4,223,566 10,897,769 Total liabilities 7,201,116 11,247,179 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources -pension 381,991 151,508 Total deferred inflows of resources 381,991 151,508 NET POSITION Net investment in capital assets 22,665,430 2,498,403 Unrestricted 20,108,707 3,709,215 Total net position $ 42,774,137 $ 6,207,618 See accompanying Notes to Basic Financial Statements. 46 City of Buena Park Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds FortheyearendedJ une 30, 2016 Business-Type Governmental Activities Activities Water Internal Enterprise Fund Service Funds OPERATING REVENUES Charges for services $ 14,123,897 $ 5,915,878 Total operating revenues 14,123,897 5,915,878 OPERATING EXPENSES Self-insurance 3,771,275 Employee benefits 218,156 Maintence and supplies 3,377,438 Information systems 320,165 Water services 11,056,179 Health services 774,334 Depreciation 878,797 417,449 Total operating expenses 12,709,310 8,104,483 OPERATING INCOME (LOSS) 1,414,587 (2,188,605) NONOPERATING REVENUES (EXPENSES) Investment income 300,219 178,666 Gain (loss) on sale of property (43,220) 26,600 Interest expense (748) Total nonoperating revenues (expenses) 256,251 205,266 INCOME (LOSS) BEFORE TRANSFERS 1,670,838 (1,983,339) Transfers in 3,839 1,008,240 Transfers out (102,170) (15,000) Total transfers (98,331) 993,240 Change in net position 1,572,507 (990,099) NET POSITION Beginning of year, as restated 41,201,630 7,197,717 End of year $ 42,774,137 $ 6,207,618 See accompanying Notes to Basic Financial Statements. 47 City of Buena Park Statement of Cash Flows Proprietary Funds FortheyearendedJ une 30, 2016 B usiness--type G ovemmental Acitivies Activities Water Internal Enterprise Fund Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from other funds $ $ 5,953,921 Cash received from customers 13,989,153 Cash payments to suppliers for goods and services (9,195,461) (5,768,751) Cash paid to employees (2,385,012) (967,746) Net cash provided by (used in) operating activities 2,408,680 (782,576) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 3,839 1,008,240 Transfers out (102,170) (15,000) Net cash provided by (used in) noncapital financing activities (98,331) 993,240 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (3,050,034) (690,796) Proceed from sale of capital assets 3,081 27,031 Long-term debt repayment (10,195) Interest paid and fiscal charges (748) Net cash (used in) capital and related financing activities (3,057,896) (663,765) CASH FLOWS FROM INVESTING ACTIVITIES Investment income received 297,911 177,193 Net cash provided by investing activities 297,911 177,193 NET INCREASE INCAS HAND CASH EQUIVALENTS (449,636) (275,908) CASH AND CASH EQUIVALENTS -Beginning of year 25,386,559 15,199,083 CASH AND CASH EQUIVALENTS -End of year $ 24,936,923 $ 14,923,175 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 1,414,587 $ (2,188,605) Adjustments to reconcile operating income to net cash provided by operating activities Depreciation 878,797 417,449 Changes in assets and liabilities Accounts receivable (177,849) 24,722 Loans receivable 13,321 Prepaid items 53,631 Deferred employer pension contributions (70,842) (29,988) Accounts payable 386,658 (259,729) Accrued liabilities 49,605 7,820 DeJX)sits payable 43,105 Employee leave benefits 15,969 (2,099) Claims payable 1,231,108 Net pension liability I 101,3021 (41,158) Deferred inflows of resources -pension (30,048) (9,048) Total adjustments 994,093 1,406,029 Net cash provided by (used in) operating activities $ 2,408,680 $ (782,576) See accompanying Notes to Basic Financial Statements. 48 FIDUCIARY FUND FINANCIAL STATEMENTS Private Purpose Trust Funds Successor Agency Trust Fund accounts for assets and liabilities transferred from the City to the Successor Agency Trust Fund. Agency Funds CFD Mall Agency Fund accounts for assets and liabilities related to the Community Facilities District Buena Park Mall. 49 City of Buena Park Statement of Fiduciary Net Position Fiduciary Funds June30,2016 Successor Agency P rivate--P urpose CFD Mall Trust Fund Agency Fund ASSETS Cash and Investments $ 9,447,878 $ Interest receivable 16,184 Restricted cash and Investments 7,866,638 7,128,923 Loans Receivable 162,970 Property Held for Resale 6,129,609 Construction in progress 2,669,822 Total assets 26,293,101 7,128,923 LIABILITIES Liabilities Accounts Payable 257,938 Accrued Liabilities 6,459 Retention payable 59,137 Interest Payable 1,454,528 Unearned revenue 13,129 Bonds Payable, due within one year 3,750,000 Bonds Payable, due in more than one year 76,203,775 Due to the City of Buena Park 7,191,489 Due to bondholders 7,128,923 Total liabilities 88,936,455 7,128,923 NET POSITION Net Position held in trust for Successor Agency $ (62,643,354) See accompanying Notes to Basic Financial Statements. 50 City of Buena Park Statement of Changes in Fiduciary Net Position Fiduciary Fund Year EndedJ une 30, 2016 Successor Agency Trust Fund ADDITIONS Taxes $ 8,343,211 Interest income 84,649 Program income 147,900 Total additions 8,575,760 DEDUCTIONS Administrative cost 576,866 Contractual obligations 264,239 Contribution of land to developers 31,007,654 Interest on bonds 4,390,200 Total Deductions 36,238,959 Change in net position (27,663,199) NET POSITION Beginning of year, (34,980,155) End of year $ (62,643,354) See accompanying Notes to Basic Financial Statements. 51 This page intentionally left blank 52 NOTES TO BAS IC FINANCIAL STATEMENTS 53 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Buena Park, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. A. Financial Reporting Entity The City of Buena Park was incorporated January 27, 1953 under the general laws of the State of California. The City became a charter City in November 2008. The accounting policies of the City of Buena Park (the "City") conform to accounting principles generally accepted in the United States of America as applicable to governments. As required by accounting principles generally accepted in the United States of America, these financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent upon the City (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City's financial statements to be misleading or incomplete. The accompanying financial statements include the financial activities of the City, and its component unit, the Buena Park Public Financing Authority. The Buena Park Public Financing Authority (PFA) was formed for the purpose of financing acquisitions and infrastructure improvements. The PFA and the City have a financial and operational relationship, which requires that the PFA's financial statements be blended into the City's financial statements. The PF A's Board consists exclusively of all five members of the City Council. Separately issued financial statements of the P FA are not available. B. Basis of Accounting and Measurement Focus The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar programs are recognized as revenue as soon as all eligibility requirements imposed by providers have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. Amounts are considered measurable when they can be estimated, or otherwise determined. Revenues are considered to be available if they are collected within the current period or soon enough thereafter to pay for liabilities in the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. 54 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Sales taxes, property taxes, franchise taxes, gas taxes, motor vehicle in lieu, transient occupancy taxes, grants and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period to the extent normally collected within the availability period. Other revenue items are considered to be measurable and available when cash is received by the City. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise fund and internal service funds are charges to customers for services provided. Operating expenses for the City's enterprise fund and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The City's internal service funds are presented in the proprietary funds financial statements. Because the principal users of the internal services are the City's governmental activities, the financial statements of the internal service fund are consolidated in the governmental activities column when presented in the government-wide financial statements. To the extent possible, the cost of these services is reported in the appropriate functional activity (general government, public protection, development, etc.). As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. lnterfund services provided and used are not eliminated in the process of consolidation. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are combined and are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Government-wide and Fund Financial Statements The basic financial statements of the City are composed of the following: • Government-wide financial statements • Fund financial statements • Notes to financial statements 55 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued The City's basic financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Governmental Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America. Government-wide Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates the degree to which direct expenses of a given function are offset by program revenues. Direct expenses are expenses that are clearly identifiable with a specific program, project, function or segment. Program revenues of the City include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items that are not properly included among program revenues are reported instead as general revenues. Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. Major governmental funds are reported as separate columns in the fund financial statements. Fund Classifications The City reports the following major gcwernmental funds: The General Fund -is the general operating fund of the City. This fund is used to account for all financial resources of the City, except for those required to be accounted for in another fund. The State Gasoline Tax Fund is used to account for street and maintenance projects of the public works department. Financing is provided by the City's allocation of State gasoline taxes. The Housing Successor Fund -is used to account for future affordable housing projects. The majority of revenues recorded in the fund are loan repayments and proceeds for sale of properties held for low and moderate income housing purposes. 56 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued The City reports the following major proprietary fund: The Water Enterprise Fund -is used to account for the costs (including depreciation) of providing water services to the general public and to account for the user charges by which these costs are recovered. Additionally, the City reports the following fund types: The Internal Service Funds - are used to finance and account for activities involved in rendering management information, equipment replacement and maintenance, building maintenance, employee benefits and self-insurance services to departments within the City. Costs of materials and services used are accumulated in these funds and charged to the user departments as such goods are delivered or services are rendered. Fiduciary fund financial statements consist of a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. The City has two types of fiduciary funds, an agency fund and a private-purpose trust fund. Agency funds are used to account for the assets held for distribution by the City as an agent for another entity for which the City has custodial responsibility and accounts for the flow of assets. Private-purpose trust funds account for resources of all other trust arrangements in which principal and income benefit individuals, private organizations, or other governments (i.e. unclaimed property;escheat property). Fiduciary funds are accounted for using the accrual basis of accounting. The City reports the follcwing fiduciary funds: Buena Park Mall Community Facilities District Agency Fund - accounts for assets held by the City forthe Buena Park Mall Community Facilities District. Successor Agency Private Purpose Trust Fund - accounts for assets and liabilities transferred in fiscal year 2012 from the Redevelopment Agency of the City of Buena Park to the Successor Agency Trust Fund. C. Cash, Cash Equivalents and Investments The City pools cash resources from all funds in order to facilitate the management of cash. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms. 57 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Cash, Cash Equivalents and Investments, Continued In accordance with GAS B Statement No. 40, Deposit and Investment Disclosures (Amendment of GAS B No. 3), certain disclosure requirements for Deposits and Investment Risks were made in the following areas: • Interest Rate Risk • CreditRisk o Overall o Custodial Credit Risk o Concentrations of Credit Risk In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end, and other disclosures. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset's fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City does not have any investments that are measured using Level 3 inputs. The City participates in an investment pool managed by the State of California entitled Local Agency Investment Fund (LAIF) which has invested a portion of the pooled funds in Structured Notes and Asset Backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as to the change in interest rates. Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity date within three months of the date acquired by the City and are presented as "Cash and Investments" in the accompanying Basic Financial Statements. For purposes of the statement of cash flows, cash equivalents are defined as investments with original maturities of 90 days or less, which are readily convertible to known amounts of cash. The City considers all pooled cash and investments (consisting of cash and investments and restricted cash and investments) held by the City as cash and cash equivalents because the pool is used essentially as a demand deposit account from the standpoint of the funds. The City also considers all non-pooled cash and investments (consisting of cash with fiscal agent and restricted cash and investments held by fiscal agent) as cash and cash equivalents because investments meet the criteria for cash equivalents defined above. D. Inventories Inventories held by the General Fund are stated at cost on a first-in, first-out basis. The General Fund inventories are recorded as an expenditure when used (consumption method). 58 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued E. Property Held for Resale Property held for resale held in the Fiduciary Fund represents land, structures and their related improvements that were acquired for resale in accordance with the objectives of the Central Business District Redevelopment Project. Property held for resale is also reported in the Housing and Community Development special revenue fund and General Fund. Property held for resale is valued at the lower of cost or expected net realizable value. F. Capital Assets Capital assets, which include land, buildings, improvements, equipment, furniture, and infrastructure assets (e.g. roads, sidewalks, and similar items), are reported in the applicable governmental or business-type activities in the Government-Wide Financial Statements. Capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Donated assets are valued at their estimated fair value on the date donated. Generally, capital asset purchases in excess of $1,000 are capitalized if they have an expected useful life of two years or more. For capital assets, depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Buildings 25 -45 years Pumping Plant, Reservoir, Wells 15 -50 years Distribution System 25 - 50 years Sewer Lines 75 years Water System 20 - 75 years Improvements 10- 40years Machinery and Equipment 2 - 20years Furniture and Fixtures 2 - 20 years Infrastructure 25 - 75 years The City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure reporting. The City conducted a valuation of its infrastructure assets as of July 1, 2002. This valuation determined the original cost using one of the follcwing methods: • Use of historical records where available . • Standard unit costs appropriate for the construction/acquisition date . • Present cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the current date. Accumulated depreciation is defined as the total depreciation from the date of construction/acquisition to the current date on a straight line method using industry accepted life expectancies for each infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation from the original cost. Interest accrued during capital assets construction, if any, is capitalized for the business-type activities as part of the asset cost. 59 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Interest Payable In the Government-Wide Financial Statements, interest payable on long-terrn debt is recognized as the liability is incurred for governmental fund types and proprietary fund types. In the Fund Financial Statements, proprietary fund types recognize the interest payable when the liability is incurred. H. Unearned revenue In the Government-Wide Financial Statements, unearned revenue is recognized for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues in the Government-Wide Financial Statements are prepaid charges for services. I. Claims andJ udgments The City records a liability for litigation, judgments and claims when it is probable that an asset has been impaired or a liability has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. This liability is recorded in the internal service funds which account for the City's self-insurance activities. J. Deferred Outflows~nflows of Resources In addition to assets, the statement of net position or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. The government reports, deferred employer pension contributions, and other pension plan related deferrals in this category in the government-wide and enterprise statements of net position. Employer pension contributions made during period between the measurement date and the report date are deferred and reflected as a reduction in the net pension liability in the subsequent fiscal year. Other pension related deferrals are described in Note 10. In addition to liabilities, the statement of net position or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government reports two items in this category, unavailable revenue and amounts related to changes in the City's net pension liability that are deferred and amortized over a stated period. Unavailable revenue arises only under a modified accrual basis of accounting and accordingly is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: grant revenues and other contractual revenues due from third parties. These amounts are deferred and will be recognized as an inflow of resources in the period that the amounts become available. Certain changes in the City's net pension liability are required to be deferred and reflected in pension expense over a closed amortization period. Pension related deferrals are described in Note 10. 60 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued K. Long-Term Debt Government-Wide Financial Statements - Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bonds payable is reported net of the applicable bond premium or discount. Issuance costs, except for prepaid bond insurance are expensed at the time of debt issuance. Fund Financial Statements - The governmental fund financial statements do not present long-term debt. As such, long-term debt is shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position. Bond premiums and discounts, as well as issuance costs, are recognized during the current period as other financing sources or uses. Bond proceeds are reported as other financing sources. Proprietary Fund Financial Statements use the same principles as those used in the Government-Wide Financial Statements. L. Property Taxes Property taxes are reported on the modified accrual basis. Accordingly, they are recognized as levied provided they meet the modified accrual criteria. Property taxes not meeting the criteria are deferred until they are received or otherwise meet the criteria. Property taxes were levied on assessed valuations on March 1 and became a lien on the property assessed on that date. Taxes on the secured rolls are payable in two installments on November 1 and February 1 and become delinquent on December 1O and April 10, respectively. Taxes on unsecured property were assessed and payable on March 1 and became delinquent the following August 31. All property taxes are collected by the County of Orange Tax Collector and are apportioned to participating agencies in accordance with a prearranged schedule of apportionments as follows: Lien Date January 1 Levy Date July 1 toJ une 30 Due Date Ncwember 1 -1st Installment March 1 -2nd Installment Collection Date December 10 -1st Installment April 10 -2nd Installment The state constitutional amendment Proposition 13 (now Article XIIIA to the Constitution) which became effective July 1, 1978, altered the method of property tax assessment. This amendment essentially reduces the total property tax levy to one percent of full cash value on the 1975-76 assessment adjusted upward by the lesser of the increase in CPI or per capita income indices or two percent compounded for each succeeding year except that property changing ownership subsequent to July 1, 1978 and improvements are reassessed at the time of the exchange or improvement and adjusted each year thereafter at the appropriate rate. 61 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued M. Net Position Government-Wide Financial Statements In the Government-Wide Financial Statements, net position are classified in the following categories: Net Investment in Capital Assets - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. Restricted - This amount is restricted by external creditors, grantors, contributors, or laws or regulations of governments. Unrestricted - This amount is all net position that do not meet the definition of"net investment in capital assets" or "restricted net position" as defined above. When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City's policy is to apply restricted net position first. N. Fund Balances Fund Financial Statements In February 2009, the Governmental Accounting Standards Board (GASB) issued Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions (GAS B 54). The new classification of fund balances is as follows: Nonspendable Fund Balances These include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact, e.g., the principal of an endowment fund. Examples of "not in spendable form" include inventory, prepaid amounts, long-term notes and loans, property held for resale and other items not expected to be converted to cash. However, if the proceeds from the eventual sale or liquidation of the items would be considered restricted, committed or assigned (as defined further on) then these amounts would be included in the restricted, committed or assigned instead of the nonspendable classification. A debt service reserve fund held by a trustee is an example of fund balance in nonspendable form that is classified as restricted instead of nonspendable since the reserve is eventually liquidated to make the final debt service principal payment. 62 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued N. Fund Balances, Continued Restricted Fund Balances Restricted fund balances have externally enforceable limitations on use. The limitations on use can be imposed by creditors, grantors, or contributors as well as by constitutional provisions, City charter, enabling legislation, laws and government regulations. Committed Fund Balances Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action (Resolution) of the City Council are classified as committed fund balances. Assigned Fund Balances Fund balance amounts for which the City Council has expressed intent for use but not taken formal action to commit are reported as assigned under GASB 54. Unassigned Fund Balance These are either residual positive net resources of the General Fund in excess of what can properly be classified in one of the other four categories, or negative balances. For all funds other than the General Fund, amounts expended in excess of resources that are restricted, committed, or assigned, negative unassigned fund balance may be necessary to report. Hierarchy of Expenditures to Classify Fund Balance Amounts To determine the composition of ending fund balances, the Council established the order in which restricted and unrestricted (committed, assigned and unassigned) funds are to be expended. To this purpose, for expenditures made in any governmental fund, the restricted amounts will be reduced first, followed by committed amounts, assigned amounts, and then unassigned amounts. The City uses encumbrance accounting throughout the fiscal year to encumber appropriations based upon purchase orders issued to the City's vendors. Encumbrances outstanding at year-end are reported as expenditures in the budgetary financial statements reported in the Required Supplementary Information and the Supplementary Information. General fund encumbrances not lapsed at year-end are reported as assigned amounts. For all other funds, encumbrances not lapsed at year-end are reported as part of the funds' restricted or committed balances according to the original source of funds. 63 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued 0. Compensated Leave Payable For governmental funds, compensated leave payable is recorded as current and noncurrent liabilities and as expenses only on the Government-Wide Financial Statements. For proprietary funds, current and non-current liabilities for compensated leave payable are recorded as expenses in both the Government-Wide Financial Statement and the Fund Financial Statement. P. Use of Estimates The preparation of the Basic Financial Statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions. Q. Pension For purposes of measuring the net pension liability and deferred outflowsfinflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CalPERS) plans (Plans) and additions to;tleductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by Ca IP ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. R. New Pronouncements In 2016, the City adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: Y GASB Statement No. 72, Fair Value Measurement and Application - This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. There was no impact on beginning net position as part of implementation of this accounting standard. Y GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GAS B Statement 68, and Amendments to Certain Provisions ofGASB Statements 67 and 68-The objective of this Statement is to improve the usefulness of information about pensions included in the general purpose external financial reports of state and local governments for making decisions and assessing accountability. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. There was no impact on beginning net position as part of implementation of this accounting standard. 64 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued R. New Pronouncements, Continued Y GASB Statement No. 76,The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments - The objective of this Statement is to identify-in the context of the current governmental financial reporting environment-the hierarchy of generally accepted accounting principles (GAAP). The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. There was no impact on beginning net position as part of implementation of this accounting standard. Y GASB Statement No. 79, Certain External Investment Pools and Pool Participants - This Statement addresses accounting and financial reporting for certain external investment pools and pool participants. Specifically, it establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for financial reporting purposes. An external investment pool qualifies for that reporting if it meets all of the applicable criteria established in this Statement. The specific criteria address (1) how the external investment pool transacts with participants; (2) requirements for portfolio maturity, quality, diversification, and liquidity; and (3) calculation and requirements of a shadow price. Significant noncompliance prevents the external investment pool from measuring all of its investments at amortized cost for financial reporting purposes. Professional judgment is required to determine if instances of noncompliance with the criteria established by this Statement during the reporting period, individually or in the aggregate, were significant. There was no impact on beginning net position as part of implementation of this accounting standard. Y GASB Statement No. 82, Pension Issues - An Amendment ofGASB Statement No. 67, No. 68, and No. 73 - This Statement addresses certain issues that had been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GAS B 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll,elated measures in the required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The City updated covered employee payroll information in the required supplementary information as part of implementation of this accounting standard. 65 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 2. CASH AND INVESTMENTS The City maintains a cash and investment pool for all funds. Certain restricted funds that are held and invested by independent outside custodians through contractual agreements are not pooled. These restricted funds include cash and investment held by trustees. A. Summary of Cash and Investments The following is a summary of cash and investments atJ une 30, 2016: C overnment-W ide Statement of Net Position Governmental Business-Type Fiduciary Activities Activities Funds Total Cash and investments $ 84.219.766 $ 24.936.923 $ 9.447.878 $ l 18.604.567 Restricted cash and investments 14.995.561 14.995.561 Total cash and investment~ $ 84.219.766 $ 24.936.923 $ 24.443.439 $ 133.600.128 Cash and investments as ofJ une 30, 2016 consist of the following: Cash on hand $ 24.348 Deposits with financial institution 2.006.836 Total cash on hand and dep:Jsits 2.031.184 Local Agency Investment funds 34.206.254 Investments 82.367.129 Total investments 116.573.383 Total City Treasury 118.604.567 Cash with fiscal agent 14.995.561 Total cash and investments $ 133.600.128 B. Deposits The carrying amount of the City's cash deposit was a positive amount of $2,006,836 atJ une 30, 2016. Bank balances before reconciling items were a positive amount of $4,513,286 atJ une 30, 2016. The City has waived the collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The remaining amount was collateralized with securities held by the pledging financial institutions in the City's name. The California Government Code (Code) requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. The Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. 66 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 2. CASH AND INVESTMENTS, Continued B. Deposits, Continued The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City's total cash deposits. The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund. C. Investments Under the provisions of the City's investment policy, and in accordance with the Code, the following investments are authorized: Maximum Maximum Maximum Percentage of Investment in Authorized Investment Type Maturity Portfolio One Issuer Securities issued by the U.S. Treasury 5 years No limit No limit U.S. Agency Securities and lnstrumentalies 5 years No limit No limit Banker's acceptances 180 days 20!6 30!6 of portfolio Negotiable Certificates of Deposit 5 years 30!6 No limit Repurchase Agreements 10 days 15% No limit Medium-term Notes 5 years 30!6 No limit Commercial Paper 270 days 20!6 l OYo of portfolio Local Agency Investment Fund (LAIF) N/A 35% No limit Mutual Funds 5 years 15% No limit 67 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 2. CASH AND INVESTMENTS, Continued C. Investments, Continued Investments are stated at fair value using the aggregate method in all funds, resulting in the following investment income in all funds: Interest income $ 609,299 Unrealized loss in changes in fair value of investments 757,651 Total investment income $ 1,366,950 The City's portfolio value fluctuates in an inverse relationship to any change in interest rate. Accordingly, if interest rates rise, the portfolio value will decline. If interest rates fall, the portfolio value will rise. The portfolio for year-end reporting purposes is treated as if it were all sold. Therefore, fund balance must reflect the portfolio's change in value. These portfolio value changes are unrealized unless sold. Generally the City's practice is to buy and hold investments until maturity dates. Consequently, the City's investments are carried at fair value. The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City's investments with LAIF at June 30, 2016, include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following: Structured Notes - are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and;br have embedded forwards or options. Asset-Backed Securities - the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables. As of June 30, 2016, the City had $34,206,254 invested in LAIF, which had invested 2.81% of the pool investment funds in Structured Notes and Asset-Backed Securities as compared to 2.08% in the previous year. The LAIF fair value factor of 1.000621222 was used to calculate the fair value of the investments in LAIF. 68 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 2. CASH AND INVESTMENTS, Continued D. Risk Disclosures Interest Risk: Interest rate risk is the market value fluctuation due to overall changes in the interest rates. It is mitigated by limiting the average maturity of the City's portfolio not to exceed three years. Investments held in the City Treasury grouped by maturity date atJ une 30, 2016, are shown below: Total 12 month or less 13-36 m:mths 37--60 months Investment Type United States Treasury S ecuriries $ 18.174.011 $ 4.610.541 $ 9.030.649 $ 4.532.821 United States Government Span sored Enterprise Securities 39.302.039 12.737.013 11.210.515 15.354.511 Medium-Term Corporate Notes (MTN) 19.584.956 2.331.234 13.164.438 4.089.284 Money Market Mutual Funds 5.306. 123 5.306. 123 Local Agency Investment Fund (LAIF) 34.206.254 34.206.254 Total $ l 16.573.383 ~$~~59ee•1~9~1 "Sel 6~5~ $ 33.405.602 $ 23.976.616 Credit Risk: Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligations to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the Standard and Poor's rating as of year-end for each investment type. AtJ une 30, 2016, the City's deposits and investments were rated as follows: M1n1mum Total Legal Rating AM AA+ AA AA- A+ A A- Unrated Investment Type United States Treasury Secunt1es 18,174,011 N~ 18,174,011 United Stales Gavemment Sr:onsored Enterpnse S ecunt1es 39,302,039 N~ 39,302,039 Med1um-Tetlll Corporate Notes (MTN) 19,584,956 A 449,041 2,033,507 556,384 4,277,416 5,077,417 6,181,874 1,000,317 Money Market Mutual Funds 5,306,123 N~ 5,305,123 Local Agency Investment Fund 34,206,254 N~ 34,206,254 Total 116,573,383 5,755,164 59,500,557 556,384 4,277,416 5,077,417 6,181,874 1,000,317 34,206,254 69 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 2. CASH AND INVESTMENTS, Continued D. Risk Disclosures, Continued Custodial Credit Risk: Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. AtJ une 30, 2016, the City deposits (bank balances) were insured by the Federal Depository Insurance Corporation up to $250,000 and the remaining balances were collateralized under California law. Concentration of Credit Risks: The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represent 5% or more of total City's investments (excluding held by bond trustee) are as fol lo.vs: Rer:nrted Percent of Issuer Investment Type Amount Investment Government of United Stales United States Treasury Securities $ 18, 174,01 l 23% Federal Home Loan Bank S r:onsored Enterprise Securities United Stales Government 12,764,392 16% Federal National Mortgage Association S r:onsored Enterprise Secutities United States Government 11,520,672 15% Federal Home Loan Mortgage Corp. S r:onsored Enterprise S ecutities United Stales Government 8,181,707 l()¼ Federal Farm Credit Bank S r:onsored Enterprise S ecutities United Stales Government 6,835,221 9¾ E. Fair Value of Investments Investments (except those that may be reported at amortized cost) are measured at fair value on a recurring basis. Recurring fair value measurements, are those that Governmental Accounting Standards Board (GAS B) Statements require or permit in the statement of net position at the end of each reporting period. Fair value measurements are categorized based on the valuation inputs used to measure an asset's fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Investment fair value measurements atJ une 30, 2016 are described on the following page. Investments included in restricted cash and investments included money market accounts and guaranteed investment contracts are not subject to fair value measurement. 70 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 2. CASH AND INVESTMENTS, Continued E. Fair Value of Investments, Continued Fair Value Measurement Using lnvestmentTyr=e Total Levell Level 2 Level 3 Securities of U .S . G overnerrent United States Treasury Securities 18,174,011 $ 18,174,011 United States Govemrrent Sr=onsored Enterprise Securities 39,302,039 39,302,039 Medium-Tenn CotµJrate Notes 19,584,956 19,584,956 Local Agency lnvestrrent Fund 34,206,254 34,206,254 ---- Total investrrents subject to leveling 111,267,260 $ 18,174,011 $ 93,093,249 $ ==== lnvestrrents not subject to leveling Money Market Funds 20,301,684 Total Investments $ 131,568,944 lnvestrrents held O)I the City $ 116,573,383 lnvestrrents held O)I fiscal agent 14,995,561 Total Investments $ 131,568,944 Treasury securities categorized as Level 1 are valued based on prices quoted in active markets for those securities. Federal Agriculture Mortgage Corporation, Federal Farm Credit Bank Bonds, Federal Home Loan Banks, Federal Home Loan Mortgage Corporate Notes and Federal National Mortgage Association Notes categorized as Level 2 are valued based on matrix pricing which use observable market inputs such as yield curves and market indices that are derived principally from or corroborated by observable market data by correlation to other means. The City's fair value for its investment in the State of California Local Agency Investment Fund (LAIF) is based on the fair market value factors provided by LAIF that are calculated based on the total fair market value of the pool. LAIF includes investments categorized as Level 1 such as United States Treasury securities, Federal Agency securities, and supranational debentures that are valued based on prices quoted in active markets and investments categorized as Level 2 such as negotiable certificates of deposit and bank notes that are based on market corroborated pricing utilizing inputs such as yield curves and indices that are derived principally from or corroborated by observable market data by correlation to other means. 71 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 3. INTERFUND TRANSACTIONS A. Due To;from Other Funds AtJ une 30, 2016, the City had the following due to/from other funds: Due To General Fund Due From Other Funds Non-Major Governmental Funds $ 181,155 Total $ 181,155 The amounts due to the General Fund from other funds represent reclassified temporary negative cash balances pending grant reimbursements or other receivables. Current interfund balances arise in the normal course of operations and are expected to be repaid shortly after the end of the fiscal year. B. Transfers At June 30, 2016, the City had the following transfers in;but which arise in the normal course of operations. Transfers In Non----lVlajor Water Internal State Govt Enterprise Service Transfers Out General Gas Tax Funds Fund Funds Total MaJor Govt Funds General Fund $ $ 578.000 $275.000 $ $ 890.000 $ 7 .683.000 State Gas Tax 22.500 3.839 7 5.000 47.339 Non-major Govt! Funds 163.276 422.820 39.196 58.240 683.532 Total Govt Funds 785.776 7 .000.820 254.196 3.839 963.240 2.407.877 Water Enterprise Fund 72.170 30.000 702.170 Internal Service Funds 7 5.000 7 5.000 Total $ 257.946 $ 7 .000.820 $ 254.196 $ 3.839 $ 7 .008.240 $ 2.525.04 7 Transfers from the General Fund to the internal service fund were to cover public liability claims. Transfers from the General Fund to non major governmental funds were to supplement activities for special revenue funds as deficits were anticipated in those funds, to fund a fire building replacement. Transfers within non major funds were to cover anticipated deficits and for capital improvement projects. Transfers from the Water Enterprise fund were to compensate the General Fund for rent of City owned property and public liability claims. Transfers within internal service funds were to cover public liability claims. 72 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 4. LOANS AND NOTES RECEIVABLE The City acting as the successor agency of the former redevelopment agency engages in programs designed to encourage construction or improvement in low-to-moderate income housing or other projects. Under these programs, loans are provided under favorable terms to homeowners or developers who agree to spend these funds in accordance with the City's terms. In the governmental fund financial statements, these loans have been offset by deferred inflows of resources as they are not expected to be repaid immediately. Loans and notes receivable, including accrued interest and related deferred inflows of resources, comprised balances from the following programs, all of which are discussed below: Balance Description J une 30. 2016 Governmental Funds Home Improvement Loans $ 2.153.344 L0\1\1 and Moderate Income Housing Loans 23.869.244 First Time Home Buyer Loans 5.004.136 Subtotal 31.026.724 AIIO\i\lance for uncollectible loans (6.005.643) Total governmental funds $ 25.021.081 Internal Service Funds Employee Computer Loans $ 23.282 Total Primary Government $ 25.044.363 Fiduciary Funds Successor Agency -Redevelopment Loans $ 162.970 $ 162.970 5. UNEARNED REVENUE Unearned revenues in the Government-Wide Financial Statements represent cash collected prior to June 30, 2016 for community classes and other activities that take place in the future. AtJ une 30, 2016, unearned revenues in the Government-Wide Financial Statements were $59,041. 73 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 6. CAPITAL ASSETS A. Government-Wide Financial Statements The following is a summary of changes in the capital assets for the governmental activities during the fiscal year: Balance Balance July l. 2015 Additions Retirements June 30. 2016 Capital assets, rot being depreciated Rights-of-way $ 48.677.665 $ $ $ 48.677.665 Land ll.783.793 ll.783.793 Construction in progress 968.447 7.251 .849 (4.648.870) 3.571 .426 Total non-depreciable assets 61.429.905 7.251 .849 (4.648.870) 64.032.884 Depreciable assets Buildirgs 86.612.709 573.223 87. 185.932 Improvements l 5.693.040 788.397 (57.102) 16.424.335 Machinery and equipment 19.456.016 l.273.530 (309.098) 20.420.448 Furniture and fixtures l.339.040 6.976 l.346.016 lnfrastru:::ture Road system 103.863.578 2.812.313 (296.683) 106.379.208 5 torm drain system 4.306.280 l.040.368 5.346.648 Total depreciable assets 231.270.663 6.494.807 (662.883) 237. 102.587 Less accumulated depreciation Buildirgs (12.042.134) (l.799.632) (13.841 .766) Improvements (8.565.626) (555.737) 57. 102 (9.064.261) Machinery and equipment (ll .450.321) (l .021 .600) 308.283 (l 2.163.638) Furniture and fixtures (600.444) (58.473) (658.917) lnfrastru:::ture Road system (41.300.938) (2.670.782) 273.816 (43.697.904) 5 torm drain system (l.753.929) (74.388) (l.828.317) Total accumulated depreciation (75.713.392) (6.180.612) 639.201 (81.254.803) Total depreciable assets, net 155.557.271 314.195 (23.682) 155.847.784 Total capital assets $ 216.987.176 $ 7.566.044 $ (4.672.552) $ 219.880.668 Depreciation expense by program for capital assets forthe year endedJ une 30, 2016 was as follows: General government $ 549.257 Leisure 580.661 Transportation 3.313. l 07 Public Protection l.275.949 Development 44.189 Internal Service Fund Depreciation charged to Programs 417.449 Total depreciation expense $ 6.180.612 74 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 6. CAPITAL ASSETS, Continued A. Government-Wide Financial Statements, Continued The following is a summary of changes in the capital assets for business-type activities during the fiscal year: Balance Balance July l. 2015 Additions Retirements June 30. 2016 Non-depreciable assets Land $ 2.500 $ $ $ 2.500 Construction in progress 996.397 3.305.567 (l.899.966) 2.401.998 Total ron--depreciable assets 998.897 3.305.567 (l .899.966) 2.404.498 Depreciable assets Buildings 43.672 48.906 92.578 Improvements 698.751 202.545 901.296 Pumps and reservoirs 2.394.883 2.394.883 Hydrants, meters, and conrections 4.923.485 307.544 5.231.029 Machinery and equipment l.304.934 39.724 l.344.658 Infrastructure Wells 4.691.845 4.691.845 Water and sewer lines 30.254.410 l.D42.633 (185.372) 31.lll.671 Total depreciable assets 44.311.980 l.641.352 (185.372) 45.767.960 Less accumulated depreciation Buildings (41.359) (l. l 57) (42.516) Improvements (73.413) (34.938) (108.351) Pumps and reservoirs (l .463.354) (37.570) (l .500.924) Hydrants, meters, and conrections (4.326.229) (41.581) (4.367.810) Machinery and equipment (908.673) (56.067) (964.740) Infrastructure Wells (2.151.855) (107.531) (2.259.386) Water and sewer lines (l 5.800.736) (599.953) 142.152 (16.258.537) Total accumulated depreciation (24.765.619) (878.797) 142.152 (25.502.264) Total depreciable assets, ret 19.546.361 762.555 (43.220) 20.265.696 Total capital assets $ 20.545.258 $ 4.068. l 22 $ (l.943.186) $ 22.670.194 Depreciation expense for the year endedJ une 30, 2016 was as follows: Water $ 878,797 Total depreciation expense $ 878,797 75 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 6. CAPITAL ASSETS, Continued B. Governmental Fund Financial Statements The governmental fund financial statements do not present general government capital assets but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position. 7. LONG-TERM DEBT A. Governmental Activities The following is a summary of long-term debt transactions including amortization for the year ended J une 30, 2016: Balance June 30, 2015 Balance Due Within Due in more than (as restated) Additions Deletions June 30, 2016 One Year One Year Governmental Activities Claims Payable $ 8,070,792 $ 2,879,118 $ (1,648,010) $ 9,301,900 $ 100,000 $ 9,201,900 Employee Leave Benefits 2,243,736 515,038 (198,553) 2,560,221 21,000 2,539,221 Pension Note Payable 7,554,523 (1,774,431) 5,780,092 1,850,193 3,929,899 Note payable -OCTA 526,000 526,000 105,200 420,800 Sales tax payable 31,158,473 (2,284,181) 28,874,292 28,874,292 Subtotal 38,712,996 526,000 (4,058,612) 35, 180,384 1,955,393 33,224,991 Total G overnrrental Activities Long-Term Liabilities $ 49,027,524 $ 3,920,156 $ (5,905,175) $ 47,042,505 $ 2,076,393 $ 44,966,112 Pension Note Payable In April 2009, the City entered into a credit agreement with Union Bank, whereby the City could borrow up to $17,000,000. On May 28, 2009, the City issued a note to the bank in exchange for $16,780,000. These funds were used to prepay the unfunded actuarial accrued liability related to the City's defined benefit plan for safety employees. This 10-year note matures on May 28, 2019 and bears interest at a rate of 4.16%. Principal and interest are due in monthly installments of $171,253 commencing July 1, 2009. The annual debt service requirements on this note are as follows: Year Ending June 30, Principal Interest Total 2017 $ 1,850,193 $ 204,844 $ 2,055,037 2018 1,928,428 126,610 2,055,038 2019 2,001,471 44,995 2,046,466 Total $ 5,780,092 $ 376,449 $ 6,156,541 76 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 7. LONG-TERM DEBT, Continued A. Governmental Activities, Continued Note Payable - OCTA In April 2009, the City entered into an agreement with Orange County Transportation Authority (OCTA) to purchase three vacant parcels of land located on Auto Center Drive for the purposes of resale. The total purchase price of the land was $1,040,000, which included a $514,000 down payment and a promissory note of $526,000. The promissory note is secured by a lien on the parcels. The promissory note is to be repaid over a five (5) year period in annual principal installments of $105,200, and accrues interest at a rate of two percent (2%) adjusted for OCTA's short-term portfolio rate of return for the prior fiscal year. The annual debt service requirements (assuming a 2% interest rate) are as follows: Year Ending June 30, Principal Interest Total 2017 $ 105,200 $ 10,520 $ 115,720 2018 105,200 8,416 113,616 2019 105,200 6,312 l l l,512 2020 105,200 4,208 109,408 2021 105,200 2,104 107,304 Total $ 526,000 $ 31,560 $ 557,560 Sales Tax Payable During fiscal year 2016, the City reached a settlement agreement with the Board of Equalization and other interested parties with regard to sales taxes that were previously remitted to the City related to a point-of-sale dispute. As a result of the agreement, the Board of Equalization performed a reallocation that resulted in the City requiring to repay $31,158,473 of previously remitted sales tax revenue. One hundred percent (100%) of sales tax revenues are to be withheld by the Board of Equalization until the obligation is repaid. During fiscal year 2016, the Board of Equalization withheld $2,284,181 of sales tax revenues generated by the City. As of June 30, 2016, the outstanding balance of the obligation was $28,874,692. Claims Payable Claims payable are typically paid from the Workers' Compensation Self--lnsurance Fund and the Public Liability Self--lnsurance Fund. There is no fixed payment schedule for claims liabilities. Employee Leave Benefits Employee leave benefits payable to employees upon termination. The City's policies relating to the payment of these benefits are discussed in Note 1 of the notes to the financial statements. The liability at June 30, 2016, in the amount of $2,560,221 is expected to be paid primarily by the general fund transfers to the accrued leave internal service fund in future years. There is no fixed schedule for the employee leave benefits liability. 77 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 7. LONG-TERM DEBT, Continued B. Business-Type Activities Due Due in Balance Balance Within more than Ju~l.2015 Additions Deletions June 30, 2016 One Year One Year Business-Type Activities Loan Payable $ 14.959 $ $ (l0.195) $ 4.764 $ 4.764 $ Employee Leave Benefits 118.002 27.463 (11.494) 133.971 42.000 91.971 Total $ 132.961 $ 27.463 $ (21.689) $ 138.735 $ 46.764 $ 91.971 Loan Payable-Economic Development Administration Loan The Economic Development Administration (EDA) ofthe U.S. Department of Commerce loan commitment recorded in the enterprise fund requires equal annual payments of principal and interest at 5% throughJ uly 1, 2017. As ofJ une 30, 2016 the principal amount outstanding was $4,764. The annual debt service requirements on the loan are as follows: Year Ending June 30. Principal Interest Total 2017 $ 4.764 $ 183 $ 4.947 Total $ 4.764 $ 183 $ 4.947 Employee Leave Benefits Employee leave benefits payable to employees upon termination. The City's policies relating to the payment of these benefits are discussed in Note 1 of the notes to the financial statements. The liability at June 30, 2016 was $133,971. There is no fixed payment schedule for the employee leave benefits liability. The general fund is normally used to liquidate employee leave benefit obligations. C. Fiduciary Funds Activities Due Due in Balance Balance Within rmre than Julyl,2015 Ad::litions Deletions Armrtization June 30, 2016 One Year One Year Fiduciary Funds Activities TaxAllocation Bonds 2003 TaxAllocation Bonds 13,557,435 (I, 140,00'l) (2,994) 12,414,441 l, 180,0CX'J l l ,234,44 l 2008 Tax Allocation Bonds, Series A 47,867,952 (500,00'l) (3,618) 47,364,334 540,0CX'J 46,824,334 2008 Tax Allocation Bonds, Series B 22,0()),CXX) (1,915,00'l) 20, 175,CXX) 2,030,000 18,145,000 Total Tax Allocation Bonds 83,515,387 (3,555,00'l) (6,612) 79,953,775 3,750,CXX) 76,203,775 Total 83,515,387 (3,555,00'l) (6,612) 79,953,775 3,750,CXX) 76,203,775 78 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 7. LONG-TERM DEBT, Continued C. Fiduciary Funds Activities Series 2003 Tax Allocation Refunding Bonds On July 2, 2003, the Redevelopment Agency of the City of Buena Park issued $24,055,000 of Tax Allocation Bonds to provide funds to advance refund the 1992 Refunding Tax Allocation Bond Series A and B issued by the Agency. The 2003 Bonds were issued at a premium of $63,363. This premium is being amortized on a straight-line basis as interest expense through 2024. The advance refunding met the requirements of an in-substance defeasance and the 1992 Tax Allocation Bonds were removed from the Agency's long-term debt. The principal balance on the 1992 Tax Allocation Bonds was paid off on September 2, 2003. The 2003 Tax Allocation Bonds are special obligations of the Agency secured by tax increment revenues on parity with the Agency's $8,265,000 aggregate principal amount of the 2000 Refunding Tax Allocation Bonds issued for redevelopment purposes. The reserve requirement of $1,658,129 is covered by $1,672,038 held by the Successor Agency Private Purpose Trust. The Bonds are payable in annual installments through maturity on September 1, 2004. Interest is payable semiannually on March 1 and September 1, with rates ranging from 2.0% to 4.2% per annum. Bonds outstanding atJ une 30, 2016 were $12,414,441. The advance refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $495,798. As of J une 30, 2016 the unamortized balance of the deferred loss on refunding was $0. Future debt services requirements on these bonds are as follows: Year Ending June 30, Principal Interest Total 2017 $ I, 180,000 $ 468,345 $ 1,648,345 2018 1,220,000 424,535 1,644,535 2019 1,270,000 377,835 1,647,835 2020 1,315,000 328,063 1,643,063 2021 1,365,000 275, 120 1,640,120 2022-2024 6,040,000 512,470 6,552,470 5 ubtotal 12,390,000 $ 2,386,368 $ 14,776,368 Bond premium 24,441 Total $ 12,414,441 79 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 7. LONG-TERM DEBT, Continued C. Fiduciary Funds Activities, Continued 2008 Tax Allocation Bonds, Series A On February 26, 2008, Redevelopment Agency of the City of Buena Park issued $48,800,000 Tax Allocation Bonds, Series A for redevelopment purposes. The 2008 Bonds were issued at a premium of $99,183. This premium is being amortized on a straight-line basis as interest expense through 2035. The 2008 Tax Allocation Bonds, Series A, are special obligation of the Agency secured by tax increment revenues on a parity with the Agency's $8,265,000 and $20,635,000 aggregate principal amount of the Tax Allocation Bonds, Series 2000 and 2003 Tax Allocation Refunding Bonds, respectively. The reserve requirement of $3,700,972 is covered by $3,701,211 held in a reserve fund by the fiscal agent for the bonds. The Bonds are payable in annual installments through maturity on September 1, 2035. Interest is payable semiannually on March 1 and September 1, with rates ranging from 3.0% to 6.25% per annum. Bonds outstanding atJ une 30, 2016 were $47,364,334. Future debt service requirements on these bonds are as folio.vs: Year Ending June 30, Principal Interest Total 2017 $ 540,000 $ 2,612,483 $ 3,152,483 2018 575,000 2,588,223 3,163,223 2019 625,000 2,561,510 3,186,510 2020 680,000 2,531,468 3,211,468 2021 750,000 2,497,675 3,247,675 2022-2026 7,430,000 11,736,995 19,166,995 2027-2031 17,955,000 8,071,541 26,026,541 2032-3036 18,740,000 2,726,922 21,466,922 Subtotal 47,295,000 $ 35,326,817 $ 82,621,817 Bond premium 69,334 Total $ 47,364,334 80 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 7. LONG-TERM DEBT, Continued C. Fiduciary Funds Activities, Continued 2008 Tax Allocation Bonds, Series B On June 4, 2008, Redevelopment Agency of the City of Buena Park issued $26,920,000 Tax Allocation Bonds, Series B for redevelopment purposes. The 2008 Tax Allocation Bonds, Series B, are a special obligation of the Agency secured by tax increment revenues on a parity with the Agency's $8,265,000, $20,635,000, and $48,800,000 aggregate principal amount of the Tax Allocation Bonds, Series 2000, 2003 Tax Allocation Refunding Bonds, and 2008 Tax Allocation Bonds, Series A, respectively. The reserve requirement of $2,493,224 is covered by $2,493,390 held in a reserve fund by the fiscal agent for the bonds. The Bonds are payable in annual installments through maturity on September 1, 2023. Interest is payable semiannually on March 1 and September 1, with rates ranging from 5.093% to 6.253% per annum. Bonds outstanding atJ une 30, 2016 were $20,175,000. Future debt service requirements on these bonds are as folio.vs: Year Ending June 30, Principal Interest Total 2017 $ 2,030,000 $ I, 188,265 $ 3,218,265 2018 2, 155,000 1,061,187 3,216,187 2019 2,280,000 926,519 3,206,519 2020 2,425,000 781,469 3,206,469 2021 2,575,000 625,144 3,200,144 2021-2024 8,710,000 838,840 9,548,840 Total $ 20,175,000 $ 5,421,424 $ 25,596,424 8. RISK MANAGEMENT A. Coverage In the self-insurance internal service funds, the City has recorded liabilities in the amount of $8,170,792 for lawsuits and other claims arising in the ordinary course of City operations. The City is self-insured in both workers' compensation and general liability for the first $500,000 per claim. The City maintains coverage in excess of this self-insured retention limit through the California Insurance Pool Authority (CIPA) for workers' compensation and general liability claims. CIPA is a public entity risk pool which operates a risk management and insurance program for 13 member cities within California, and is self sustaining through member premiums 81 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 8. RISK MANAGEMENT, Continued A. Coverage, Continued The City has entered into contracts with claims administrators to process claims against the City for workers' compensation and general liability claims. Liabilities have been recorded for estimated losses from claims and judgments in the amount of $7,274,402 for workers' compensation and $2,027,498 for general liability. Losses for claims incurred but not reported are recorded when the probable amount of loss can be reasonably estimated. B. Claims Activity For the past three fiscal years, the City settled no cases at amounts in excess of the policy limits of applicable insurance coverage. Fiscal Year Claims Claims and Claims Due in For the Years Payable Changes in Claim Payable Due Within more than Ended June 30, July l Estimates Payments June 30 One Year One Year 2013-2014 $ 7,426,069 $ l, 992,721 $ (l ,648,010) $ 7,770,780 $ 100,000 $ 7,670,780 2014-2015 $ 7,770,780 $ 1,667,878 $ (1,367,866) $ 8,070,792 $ 100,000 $ 7,970,792 2015-2016 $ 8,070,792 $ 2,726,773 $ (1,495,665) $ 9,301,900 $ 100,000 $ 9,201,900 9. EMPLOYEE RETIREMENT PLANS A. Summary of Pension Plan Balances Pension related balances presented on the Statement of Net Position as ofJ une 30, 2016 by individual plan are described in the following table: Deferred Deferred Net Deferred E mpbyer Outfbws - Pension lnfbws - Contributions Pension Liability Pension CALPERS Miscellaneous Agent Multiple E mpbyer P Ian $ 2,622,395 $ $ 31,660,452 $ 2,927,197 CALPERS CostSharingPlan 3,615,462 572,079 46,420,099 8,173,466 Total $ 6,237,857 $ 572,079 $ 78,080,551 $ I I ,I 00,663 82 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan - CalPERS Miscellaneous Plan I. General Information about the Pension Plan Plan Description - All miscellaneous qualified permanent and probationary employees are eligible to participate in the City's Miscellaneous Plan, agent multiple-employer defined benefit pension plan administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and Local Gcwernment resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the Ca IP ERS website. Benefits Provided - CalPE RS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 1O years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. The Plan's provisions and benefits in effect atJ une 30, 2016, are summarized as follows: Miscellaneous Benefit\esting schedule 5 years of service Benefit payments monthly for life Earliest retirement age 50 Benefit factor for each year of service as a% of annual salary 2.5% atage 55 Required employee contribution rates 8% Required employer contribution rates 21.288% * On January 1, 2013, the Public Employee Pension Reform Act (PE P RA) went into effect. This State law applies to employees hired after January 1, 2013 who are new to PE RS. These employees are termed PEP RA members and employees that were enrolled in PERS (without significant separation) prior to January 1, 2013 are now referred to as classic members. PE PRA miscellaneous members will be enrolled in a 2% at 62 plan. The City contributes 6.25% for PE PRA members, and employees' contribute 6. 2 5% . 83 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan -CalPERS Miscellaneous Plan, Continued I. General Information about the Pension Plan, Continued Employees Covered - At June 30, 2016, the following employees were covered by the benefit terms for each Plan: Inactive employees or beneficiaries currently 353 receiving benefits Inactive employees entitled to but not yet 221 receiving benefits Active employees 181 Total 755 Contributions - Section 20814(C) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as ofJ une 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ended June 30, 2015 (the measurement date), the average active employee contribution rate is 8.00 percent of annual pay for the Miscellaneous Plan, and employer contribution rate is 17.291 percent of annual payroll for the Miscellaneous Plan. II. Net Pension Liability The City's net pension liability for the Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of the Plan is measured as ofJ une 30, 2015, using an annual actuarial valuation as ofJ une 30, 2014 rolled forward toJ une 30, 2015 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below: 84 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan -Cal PERS Miscellaneous Plan, Continued II. Net Pension Liability, Continued Actuarial Assumptions - The total pension liabilities in the June 30, 2014 actuarial valuations were determined using the following actuarial assumptions: Valuation Date J une 30, 2013 Measurement Date J une 30, 2014 Actuarial Cost Method Entry-Age Normal Cost Actuarial Assumptions: Discount Rate 7.65% Inflation 2.75% Salary Increases Varies by Entry Age and Service Projected Salary Increase 3.3% -14.2% Investment Rate of Return (1) 7.65% Mortality (2) Derived using Ca IP ERS' Membership Data for all Post Retirement Benefit Increase Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter (1) Net of pension plan investment expenses, including inflation. (2) The mortality table used was developed based on CalP E RS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2014 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 2011. Further details of the Experience Study can found on the CalPE RS website. Discount Rate - The discount rate used to measure the total pension liability was 7.65% for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the plan, CalPE RS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.65 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website. The long-term expected rate of return on pension plan investments was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. 85 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan -CalPERS Miscellaneous Plan, Continued II. Net Pension Liability, Continued Discount Rate, Continued - In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 1O years) and the long-term (11--60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. New Straregic Real Return Real Return Asset Class Allocation Years I - I O(a) Years l l -tjb) Global Equity 51.0(J,16 5.25% 5.71% Global Fixed Income 19.0(J,16 0.99% 2.43% Inflation 5 ensitive 6.0(J,16 0.45% 3.36% Private Equity IO.O(J,16 6.83% 6.95% Real Es1ate IO.O(J,16 4.5(!16 5.13% Infrastructure and Forestland 2.0(J,16 4.5(!16 5.09% Liquidity 2.0(J,16 --0.55% -I.OS% To1al IO(J,16 (a) An expected inflation of2.5% used for this period. (b) An expected inflation of3.Cf/o used for this period. 86 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan -CalPERS Miscellaneous Plan, Continued Ill. Changes in the Net Pension Liability The changes in the Net Pension Liability forthe Plan follow: Miscellaneous Plan: Increase (Decrease) Total Pension P Ian Fiduciary Net Pension Liability Net Position Liability AAsset) Balance atJ une 30, 2014 (I) $ 124,026,783 $ 95,064,945 $ 28,961,838 Changes in the year: Service cost 1,988,943 1,988,943 Interest on the total pension liability 9,046,796 9,046,796 Differences between actual and expected experience (1,277,341) (1,277,341) Changes in assumptions (2,091,915) (2,091,915) Changes in benefit terms Contribution -employer 2,006,400 (2,006,400) Contribution -employee 951,393 (951,393) Investment income 2,115,027 (2,115,027) Administrative expenses (104,951) 104,951 Benefit payments , including refunds of employee contributions (6,786,470) (6,786,470) Net changes 880,013 (1,818,601) 2,698,614 Balance atJ une 30, 2015 $ 124,906,796 $ 93,246,344 $ 31,660,452 (1) - The fiduciary net position includes receivables for employee service buyback, deficiency reserve, fiduciary self-insurance, and OPEB expense. 87 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan -Cal PERS Miscellaneous Plan, Continued Ill. Changes in the Net Pension Liability, Continued Sensitivity of the Net Pension Liability to Changes in the Discount Rate - The following presents the net pension liability of the City for the Plan, calculated using the discount rate for the Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1--percentage point lower or 1--percentage point higher than the current rate: 1% Decrease 6. 5()'/4 Net Pension Liability $ 47,347,150 Current Discount Rate 7."!/o' Net Pension Liability $ 31,660,452 1% Increase 8.5% Net Pension Liability $ 18,660,717 Pension Plan Fiduciary Net Position - Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPE RS financial reports. IV. Pension Expenses and Deferred Outflows~nflows of Resources Related to Pensions For the year ended June 30, 2016, the City recognized pension expense of $1,032,661. At J une 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to the pension plan from the following sources: Deferred Outflows of Deferred Inflows of Resources Resources Pension contributions subsequent to measurement date $ 2,622,395 Differences between actual and expected experience $ 745,116 Changes in assumptions 1,220,284 Net differences between projected and actual earnings on plan investments 961,797 Total $ 2,622,395 $ 2,927,197 88 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued B. Agent Multiple-Employer Defined Benefit Plan -Cal PERS Miscellaneous Plan, Continued IV. Pension Expenses and Deferred Outflows~nflows of Resources Related to Pensions, Continued $2,622,395 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year endingJ une 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension plan will be recognized as pension expense as follows: Fiscal Year Ending June 30: 2017 $ (2,056,778) 2018 (1,214,466) 2019 (652,920) 2020 996,967 V. Payable to Pension Plan As ofJ une 30, 2016, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year endedJ une 30, 2016. C. Cost Sharing Multiple-Employer Defined Benefit Plans -CalPERS Safety Plans I. Plan Description All safety qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (Plan) administered by the California Public Employees' Retirement System (Ca IP ERS). The P Ian consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other). P Ian assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous risk pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors three miscellaneous rate plans. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions, and membership information that can be found on the CalPERS website. 89 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued C. Cost Sharing Multiple-Employer Defined Benefit Plans -CalPERS Safety Plans II. Benefits Provided Ca IP E RS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty are eligible for non-duty disability benefits after 1O years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employee's Retirement Law. The rate plan provisions and benefits in effect atJ une 30, 2016 are summarized as follows: Safety-Tierl Hire Date PriortoJ anuary l, 2013 Benefitvesting schedule 5 years service Benefit payment Monthly for life Retirement age 50 Monthlybenefits,as a% ofannual salary 3.00"/o Required employee contribution rates 9.00"/o Required employercontribution rates 20.230"/o Required UAL payment $ 2,048,478 Safety-Tier2 Hire Date On or after January l, 2013 Benefitvesting schedule 5 years service Benefit payments Monthly for life Retirement age 50 Monthlybenefits,as a% ofannual salary 2.00"/o Required employee contribution rates 9.00"/o Required employercontribution rates 15.373% Required UAL payment $ Safety-PEPRA Hire Date On or after January l, 2013 Benefitvesting schedule 5 years service Benefit payments Monthly for life Retirement age 57 Monthly benefits, as a% ofannual salary 2 .70"/o Required employee contribution rates 12.25% Required employercontribution rates 11.92% Required UAL payment $ 90 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued C. Cost Sharing Multiple-Employer Defined Benefit Plans -CalPERS Safety Plans, Continued II. Benefits Provided, Continued Contributions - Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers are to be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plan is determined annually on an actuarial basis as ofJ une 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The City's contributions to the P Ian for the year endedJ une 30, 2015 were $2,299,785. Ill. Pension Liabilities, Pension Expenses, and Deferred Outflows~nflows of Resources Related to Pens ions As of June 30, 2016, the City reported a net pension liability for its proportionate share of the net pension liability of the P Ian of $46,420,099. The City's net pension liability for the Plan is measured as the proportionate share of the total net pension liability of the Plan. The net pension liability of the Plan is measured as ofJ une 30, 2015, and the total pension liability for the Plan used to calculate the net pension liability was determined by actuarial valuations as of J une 30, 2014 rolled forward to J une 30, 2015 using standard update procedures. The City's proportionate of the net pension liability was based on the City's plan liability and asseHelated information where available, and proportional allocations of individual plan amounts as of the valuation date where not available. The City's proportionate share of the net pension liability for the Plan as of June 30, 2014 and 2015 were as follows: Proportion-June 30, 2014 0.64148"/o Proportion-June 30, 2015 0.67629'/o Change -Increase (Decrease) 0.03481% 91 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued C. Cost Sharing Multiple-Employer Defined Benefit Plans -CalPERS Safety Plans, Continued Ill. Pension Liabilities, Pension Expenses, and Deferred Outflows~nflows of Resources Related to Pensions, Continued For the year ended J une 30, 2016, the City recognized pension expense of $4,628,284. At J une 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources Deferred Outflows of Deferred Inflows of Resources Resources Pens ion contributions subsequent to measurement date $ 3,615,462 $ Changes of assumptions 1,392,027 Differences between expected and actual experience 302,656 Changes in employer's proportion 572,079 2,183,068 Differences between the employer's contribution and the employer's proportionate share of contributions 3,590,226 Net differences between projected and actual earnings on plan investments 705,488 To1al $ 3,615,462 $ 8, 173,465 $3,615,462 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year endingJ une 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Fiscal Year Ending June 30: 2017 $ (3,114,344) 2018 (3,042,842) 2019 (2,310,232) 2020 866,032 92 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued C. Cost Sharing Multiple-Employer Defined Benefit Plans -Cal PERS Safety Plans, Continued Ill. Pension Liabilities, Pension Expenses, and Deferred Outflows~nflows of Resources Related to Pensions, Continued Actuarial Assumptions - The total pension liability in the June 30, 2014 actuarial valuations was determined using the following actuarial assumptions: Valuation Date J une 30, 2014 Measurement Date June 30, 2015 Actuarial Cost Method Entry-Age Normal Cost Method Actuarial Assumptions Discount Rate 7.65% Inflation 2.75% Projected Salary Increase Varies by entry age and service Investment Rate of Return (l) 7.65% Derived byCalPERS membership Mortalrty data for all funds (l) Net of r=ens ion Jjan inves trrent e;,q=:enses, including inflation The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2014 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 2011. Further details of the Experience Study can found on the CalPE RS website. Discount Rate - The discount rate used to measure the total pension liability was 7.65% for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the plan, CalPE RS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.65 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website. The long-term expected rate of return on pension plan investments was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPE RS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flews. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 1O years) and the long-term (11--60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 93 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued C. Cost Sharing Multiple-Employer Defined Benefit Plans -CalPERS Safety Plans, Continued Ill. Pension Liabilities, Pension Expenses, and Deferred Outflows~nflows of Resources Related to Pensions, Continued The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. New Straregic Real Return Real Return Asset Class Allocation Years I - IO(a) Years 11 +{b) Global Equity 51.0(l,)6 5.25% 5.71% Global Fixed Income 19.0(l,)6 0.99% 2.43% Inflation Sensitive 6.0ce6 0.45% 3.36% Privare Equity 10.0(l,)6 6.83% 6.95% Real Esta1e 10.0(l,)6 4.Sce6 5.13% Infrastructure and Forestland 2.0ce6 4.Sce6 5.09% Liquidity 2.0ce6 --0.55% -I.OS% Total 10(1,)6 (a) An expected inflation of2.5% used for this period. (b) An expected inflation of3.Cf/o used for this period. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the City's proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1- percentage point higher than the current rate: 1% Decrease 6.65% Net Pension Liability $ 75,040,762 Current Discount Rate 7.65% Net Pension Liability $ 46,420,099 1% Increase 8.65% Net Pension Liability $ 22,951,681 Pension Plan Fiduciary Net Position - Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPE RS financial reports. 94 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 9. EMPLOYEE RETIREMENT PLANS, Continued C. Cost Sharing Multiple-Employer Defined Benefit Plans -CalPERS Safety Plans, Continued Ill. Pension Liabilities, Pension Expenses, and Deferred Outflows~nflows of Resources Related to Pensions, Continued Pension Plan Fiduciary Net Position - Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. Payable to the Pension Plan At June 30, 2016 the City reported a payable of $0 for outstanding amount of contributions to the pension plan required for the year endedJ une 30, 2016. 10. OTHER POST EMPLOYMENT BENEFITS (OPEB) PIan Description The City provides post-retirement medical benefits to retirees through the California Public Employees' Retirement System California Employer's Retiree Benefit Trust Fund (the PE RS CE RBT fund). The program is an agent multiple-employer defined benefit health care plan that provides health care insurance for eligible retirees. These benefits are available to employees who retire with the City at age 50 or older with at least 5 years of CalPE RS service or those who satisfy certain disability requirements. The City pays monthly medical premiums ranging from $126 to $420 for each employees depending upon which group the employee belongs to and the number of individual covered by the policy. The Plan does not provide a publicly available financial report. 95 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 10. OTHER POST EMPLOYMENT BENEFITS (OPEB), Continued Funding Policy The contribution requirements of plan members and the City are established and may be amended by the City, City Council, and;br the employee associations. Currently, contributions are not required from the plan members. During the fiscal year endedJ une 30, 2016, the City elected to fund 97% of the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded liabilities over a period not to exceed thirty years. The ARC for fiscal year 2015-16 was $807,741. Annual OPEB Cost The City's annual OPEB cost, net OPEB obligation (asset) and the related information for 2016 were as follows: Mnual required contribution $ 807.74 7 lntereston netOPEB obligation (4 7 .655) AmortJzabon of net OPE B obligabon 40.596 Annual OPE B cost 806.682 Payments made (780.277) Increase in netOPEB obligation 26.4 ll NetOPEB obligabon -beginning ofthe year (595.078) NetOPEB obligabon -ending ofyear $ (568.667) For fiscal year 2016, the City's annual OPEB cost was $806,682 and more than the City's required contribution. The City's actual contribution during the fiscal year was $780,271. The required contribution for the fiscal year 2015 was determined as part of the July 1, 2015 actuarial valuation, and the entry age normal cost method was used. The actuarial assumptions included: (a) 7.00% investment rate of return (net of administrative expenses), (b) projected annual salary increases of 2.75%, (c) inflation rate of 2.75% and (d) medical plan premium cost will increase at a rate ranging from 4.0% per annum. The City's unfunded actuarial accrued liability will be amortized as a level percentage of pay over a closed period of 23 years. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets consistent with the long-term perspective of the calculations. 96 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 10. OTHER POST EMPLOYMENT BENEFITS (OPEB), Continued Three Year Trend Information For fiscal year 2016, the City's annual OPE B cost (expense) of $806,682 was less than the ARC. The City's annual OPE B cost, the percentage of annual OPE B cost contributed to the plan, and the net OPE B obligation (asset) for 2016 and the two preceding years, were as follows: Percentage of Annual Net Annual OPEB Cost OPEB Fiscal Year OPEB Cost Contributed Asset 6;30;2014 674,674 117% 412,530 6;30;2015 667,053 127% 595,078 6;30;2016 806,682 97% 568,667 Funding Status and Funding Progress As of July 1, 2015, the most current actuarial valuation date, the plan was 12.3% funded. The actuarial accrued liability for benefits was $10.6 million and the actuarial value of assets was $1.3 million, resulting in an unfunded actuarial accrued liability (UAAL) of $9.3 million. The covered payroll (annual payroll of active employees covered by the plan) was $21.5 million and the ratio of the UAAL to the covered payroll was 45.2%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about rates of employee turnover, retirement, mortality, as well as economic assumptions regarding claim costs per retiree, healthcare inflation and interest rates. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 97 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 11. CLASSIFICATION OF FUND BALANCES In the fund financial statements, fund balances are classified in the follcwing categories: Major Governmental Funds Non Major State Housing Government Total General Gas Tax Successor Funds Government Fund Balances Nonspendable fund balance Pre pa ids $ 65,149 $ - $ - $ - $ 65,149 Inventory 88,867 88,867 Property held for resale 3,397,951 3,397,951 Receivable from Successor Agency 5,753,191 5,753,191 9,305,158 9,305,158 Restricted fund balance for Lcw;Mod Housing 1,438,298 23,844,594 8,587,332 33,870,224 Public Protection 1,063, I 83 1,063,183 Environmental 367,096 367,096 Transportation 3,413,146 2,448,082 5,861,228 Development 4,035,491 4,035,491 1,438,298 3,413,146 23,844,594 16,501,184 45,197,222 Assigned fund balance for Lcw;Mod Housing 5,704,972 5,704,972 Capital proj2cts 559,976 559,976 5,704,972 559,976 6,264,948 Unassigned fund balance 51,697,322 (82,605) 51,614,717 51,697,322 (82,605) 51,614,717 Total Fund Balances $ 68,145,750 $ 3,413,146 $ 23,844,594 $ 16,978,555 $ 112,382,045 12. DEFICIT FUND BALANCES The following funds reported deficits in fund balances atJ une 30, 2016: State OCATT Special Revenue Fund $ 82,609 Worker's Compensation Self Insurance Internal Service Fund 852,653 Public Liability Self Insurance Internal Service Fund 575,712 Buildings and Grounds Maintenance Internal Service Fund 442,487 98 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 13. MORTGAGE REVENUE BONDS In J uly 2000, the city of Buena Park issued, in conjunction with Walden Glen, LP, Variable Rate Demand Multifamily Housing Revenue Bonds, Series 2000 to provide funds for rehabilitation and permanent financing for a multifamily housing facility located in the City. The debt is a special obligation of the limited partnership and is payable solely from payments made on mortgage loans and are secured by a pledge of such mortgage loans. Neither the faith nor the taxing power of the City of Buena Park has been pledged to the payment of the bonds. Accordingly, the debt is not reported a liability in the accompanying financial statements. 14. SUCCESSOR AGENCY PRIVATE PURPOSE TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY On December 29, 2011, the California Supreme Court upheld Assembly Bill lX 26 ("the Bill") that provides for the dissolution of all redevelopment agencies in the State of California. Many cities (and some counties) in California had established a redevelopment agency. In many cases, such redevelopment agencies were included within the reporting entity of the city or county as a blended component unit (since the governing board of the city or county, in many cases, also served as the governing board of the redevelopment agency). The Bill provides that upon dissolution of a redevelopment agency, the entity that established the redevelopment agency may elect to serve as the "Successor Agency" to hold the assets of the former redevelopment agency until they are distributed to other units of state and local government after the payment of enforceable obligations that were in effect as of the signing of the Bill. If the entity that established the redevelopment agency declines to accept the role of Successor Agency, other local agencies may elect to perform this role. If no local agency accepts the role of Successor Agency, the Governor is empowered by the Bill to establish a "designated local authority" to perform this role. The City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City Resolution No. 12685 After enactment of the law, which occurred on J une 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the approval of a newly established Oversight Board, remaining assets can only be used to pay enforceable obligations in existence as of February 1, 2012, the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). The Bill sets forth a process for each agency to identify and report these enforceable obligations on an Enforceable Obligation Payment Schedule (EOPS) and a Recognized Obligation Payment Schedule (ROPS). 99 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 14. SUCCESSOR AGENCY PRIVATE PURPOSE TRUST FOR ASSETS OF FORMER REDEVELOPMENTAGENCY,CONTINUED Upon the date of the dissolution (February 1, 2012), significant matters previously controlled by the city councils of the cities that created each redevelopment agency are now subject to the approval of a seven member Oversight Board, including the following: • Approval of the sale and distribution of all assets • Approval of any change in obligation terms • Approval of any prepayment or defeasance of debt • Approval of acceptance of grants • Approval of funding of debt service reserves • Approval of the budget for any remaining activities Many of these actions and determinations of the Successor Agency also require the approval of the California Department of Finance (DOF). In future fiscal years, Successor Agencies will only be allocated property tax revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. Under AB lX 26, agencies that accept the role of Successor Agency will serve as custodian for the assets of the dissolved redevelopment agency pending distribution to the appropriate taxing entities after the payment of enforceable obligations. Accordingly, the net position of the dissolved redevelopment agency that are held pending distribution are accounted for in a private-purpose trust fund. In J une 2012, the California legislature passed AB 1484. AB 1484 provided clarification regarding the dissolution process and imposed new requirements. AB 1484 declared that Successor Agencies are separate legal entities distinct from the sponsoring government, clarified matters pertaining to the affordable housing programs previously performed by the former redevelopment agency, clarified matters pertaining to EOPS and ROPS, established the requirement for all Successor Agencies to have a due diligence review, established a process to receive a Finding of Completion that will provide significant benefits to local agencies (allowing them to begin spending debt proceeds and providing a formula for the repayment of money previously borrowed from the sponsoring government), and made a number of other significant changes in the dissolution process and the post-dissolution activities of Successor Agencies. 100 City of Buena Park Notes to Basic Financial Statements For the year endedJ une 30, 2016 15. PRIOR PERIOD ADJUSTMENT The City recorded prior period adjustments to correct the allocations of deferred outflows of resources, deferred inflows of resources and net pension liability to enterprise and internal service funds, to record receivables and related unavailable revenues in the general fund for amounts owed by a developer to the City for contractual overpayments due to a subsequent agreement with the State of California Board of Equalization, and to record a long term liability for amounts due back to the State of California Board of Equalization as a result ofa sales tax revenue reallocation correction for distributions received by the City in prior years. Government-wide Statements Prior Periocl Adjustrrents Net Positbn I\Jet Position as Previousty Pens ion Related Long Term as Rer:orted Armunts Receivables Liablities Restated Governrrent---Wide S taterrents Gwernrrental Activities 250,552,363 $ (664,626) $ 17,195,432 $(31,158,473) $ 235,924,6% Business-type Actfv'ities 40,537,004 $ 664,626 $ $ $ 41,201,630 Fund Statements Prbr PerioclAdjustrrents Fund Balance, Fund Balance, as Previousty Pens ion Related Unavailat.le as Rer:orted Armunts Receivables Revenues Restated Fund S taterrents Governrrental Funds General Fund 68,143,605 $ $ 17,195,432 $ (17,195,432) $ 68,143,605 Enterprise Fund Water Enterprise Fund 44,302,609 $ 664,626 $ $ $ 44,%7,235 Internal Service Funds Equiprrent rvllintenance ancl Replacerrent $ 4,774,738 $ 113,560 $ $ $ 4,888,298 Buildings ancl Grounds rvllintenance (410,860) $ (16,530) $ $ $ (427,3'Xl) rvllna~rrent lnfonrntion Sys tern; $ 1,585,530 $ 25,429 $ $ $ 1,610,959 101 This page intentionally left blank 102 REQUIRED SUPPLEMENTARY INFORMATION 103 City of Buena Park Required Supplementary Information For the year endedJ une 30, 2016 1. BUDGETS AND BUDGETARY ACCOUNTING A. Budgetary Control and Budgetary Accounting Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for governmental funds. The City's budget ordinance requires that inJ une of each year the City Administrator must submit a preliminary budget that includes projected expenditures and the means of financing them to the City Council for the fiscal year commencing the followingJ uly 1. As modified during public study sessions, the preliminary budget becomes the proposed budget. Fallowing public hearings on the proposed budget, the final annual budget is adopted by the City Council in J une of the fiscal year. After adoption of the final budget, transfers of appropriations within the general fund departments may be done by the City Manager. Budget transfers within a department/fund may be done by department heads. Budget modifications between funds and increases or decreases to a fund's overall budget must be approved by the City Council. Numerous properly authorized amendments are made during the fiscal year. Budgetary control is enhanced by integrating the budget into the general ledger accounts. Encumbrance accounting (e.g. purchase orders) is employed by the City. 104 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 1. BUDGETS AND BUDGETARY ACCOUNTING, Continued B. Budgetary Comparison Schedules The following are the budget comparison schedules for all major Governmental Funds. Budgetarv Com[:)arison Schedule, General Fund Variance with Final Budget B Ldgeted Amounts Actual Positive Original Final Arrounts (Negative) REVENUES: Taxes $ 40,560,800 $ 40,560,800 $ 43,045,136 $ 2,484,336 Licenses and permits 1,081,000 1,081,000 903,194 (177,806) Fines and forfeitures 751,500 751,500 811,614 60,114 lntergovernrrental 7,198,600 7,533,199 7,508,842 (24,357) Charges for services 7,129,780 7,142,230 7,699,530 557,300 lnvestrrent income 488,200 488,200 851,462 363,262 Miscellaneous 326,150 380,149 829,409 449,260 Total revenues 57,536,030 57,937,078 61,649,187 3,712,109 EXPENDITURES: Current: General government City Council 311,600 311,600 307,627 3,973 City Manager 733,670 827,688 840,183 (12,495) Comrrunity Support Services 597,880 662,630 634,252 28,378 City Attorney 212,580 212,580 574,973 (362,393) City Clerk 432,900 462,900 457,168 5,732 Internal Support Services l, 129,500 l, 189,500 1,190,867 (1,367) Finance 979,690 1,047,190 913,088 134,102 Public Works 1,486,320 1,553,565 1,464,777 88,788 Non-der::amnental 1,022,000 1,022,000 899,078 122,922 T ctal General Government 6,906,140 7,289,653 7,282,013 7,640 Leisure: Recreation Administration 2,662,940 2,781,148 2,881,917 (100,769) Health: Public Works 3,059,040 3,059,040 3,028,750 30,290 Transportation Police Der::artrrent 91,350 91,350 67,322 24,028 Public Works 4,972,340 5,267,198 4,618,827 648,371 Tctal Transportation 5,063,690 5,358,548 4,686,149 672,399 Public Protection: Comnunity Developrrent Services 570,660 605,744 630,347 (24,603) Fire Der::amnent 10,163,130 10,163,130 10,094,334 68,796 Police Der::artrrent 22,067,060 23,170,562 21,679,681 1,490,881 Total Public P rctection 32,800,850 33,939,436 32,404,362 1,535,074 Developrrent Comnunity Developrrent Services 2,102,020 2,493,982 2,324,257 169,725 Public Works 197,230 204,730 109,292 95,438 T ctal Developrrent 2,299,250 2,698,712 2,433,549 265,163 Environmental: Recreation, Parks, and Corrnunity Services 3,125,670 3,200,405 3,045,715 154,690 105 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 1. BUDGETS AND BUDGETARY ACCOUNTING, Continued B. Budgetary Comparison Schedules, Continued Budgetary Comparison Schedule, General Fund, Continued Variance with Final Budget Budgeted Am::>unts Actual Positive Original Final Arrounts (Negative) EXPENDITURES: Continued Capital Outlay 156,310 3,292,805 647,728 2,645,077 Detl Service: Principal 1,774,430 1,774,430 4,058,612 (2,284,182) lnteres t and Other Charges 280,610 280,610 280,606 4 Total expenditures 58,128,930 63,674,787 60,749,401 2,925,386 REVENUES OVER (UNDER) EXPENDITURES (592,900) (5,737,709) 899,786 6,637,495 OTHER FINANCING SOURCES (USES): Transfers in 137,670 542,670 253,946 (288,724) Transfers out (1,213,460) (2,533,460) (1,679,000) 854,460 Pn:x:eeds from long termdetl 526,000 526,000 Pn:x:eeds from sale of capital assets 2,000 2,000 1,413 (587) Total other financing sources (uses) (1,073,790) (1,988,790) (897,641) 1,091,149 Net change in fund balance $ (1,666,690) $ (7,726,499) 2,145 $ 7,728,644 FUND BALANCE: Beginning of year 68,143,605 End of year $ 68,145,750 106 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 1. BUDGETS AND BUDGETARY ACCOUNTING, Continued B. Budgetary Comparison Schedules, Continued Budgetary Comparison Schedule, Gasoline Tax Special Revenue Fund Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 1,818,830 $ 2,241,230 $ 2,499,018 $ 257,788 Investment income 25,000 25,000 39,601 (14,601) Miscellaneous 119,985 120,000 (l 5) Total revenues 1,843,830 2,386,215 2,658,619 243,172 EXPENDITURES: Current: Transportation 583,490 641,622 586,649 54,973 Capital ou~ay 1,715,000 8,160,979 4,204,073 3,956,906 Total expenditures 2,298,490 8,802,601 4,790,722 4,011,879 REVENUES OVER (UNDER) EXPENDITURES (454,660) (6,416,386) (2, 132, l 03) 4,284,283 Oll-lER FINANCING SOURCES (USES): Transfers in 350,000 550,000 1,000,820 450,820 Transfers out (42,500) (57,500) (41,339) 98,839 Total other financing sources (uses) 307,500 492,500 959,481 549,659 Net change in fund balance $ (147,160) $ (5,923,886) (l, 172,622) $ 4,833,942 FUND BALANCE: Beginning of year 4,585,768 End of year $ 3,413,146 107 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 1. BUDGETS AND BUDGETARY ACCOUNTING, Continued B. Budgetary Comparison Schedules, Continued Budgetary Comparison Schedule, Housing Successor Special Revenue Fund Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ $ $ 677,978 $ 677,978 Charges for services 8,930 (8,930) Investment income 121,678 121,678 Miscellaneous 100,000 100,000 8,930 Total revenues 100,000 100,000 817,516 790,726 EXPENDITURES: Current: Development 285,870 292,980 474,659 (181,679) Total expenditures 285,870 292,980 474,659 (181,679) Net change in fund balance $ (185,870) $ (l 92,980) 342,857 $ 535,837 FUND BALANCE: Beginning of year 23,501,737 End of year $ 23,844,594 108 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 2. DEFINED PENSION PLAN -AGENT MULTIPLE EMPLOYER PLAN A. Schedule of Changes in Net Pension Liability and Related Ratios During the Measurement Period Miscellaneous Plan Measurement Period '" 2014-15 2013-14 TOTAL PENSION LIABILITY Service Cost $ 1,988,943 $ 1,913,799 Interest 9,046,796 8,817,350 Changes ofBenefitTerms Difference Between Expected and Actual Experience (1,277,341) Changes of Assumptions (2,091,915) Benefit Payments, Including Refunds of Employee Contributions (6,786,470) (6,624,277) Net Change in Total Pension Liability 880,013 4, l06,872 Total Pension Liability-Beginning 124,026,783 119,919,911 Total Pension Liability-Ending (a) $ 124,906,796 $ 124,026,783 PLAN FIDUCIARY NET POSITION Contributions -Employer $ 2,006,400 $ 1,815,454 Contributions -Employee 951,393 887,335 Net Investment Income 2,115,027 14,422,158 Benefit Payments, Including Refunds of Employee Contributions (6,786,470) (6,624,277) Administrative Expense ( I 04,951) Net Change in Fiduciary Net Position (1,818,601) 10,500,670 Plan Fiduciary Net Position -Beginning 95,064,945 84,564,275 Plan Fiduciary Net Position -Ending (b) $ 93,246,344 $ 95,064,945 Plan Net Position Liability~Asset) -Ending (a) -(b) $ 31,660,452 $ 28,961,838 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 74.65% 76.65% Covered Payroll $ 11,636,737 $ 11,292,848 Plan Net Pension Liability~Asset) as a Percentage of Covered Payroll 272.07% 256.46% (1) - Historical information is required only for measurement periods for which GAS B 68 is applicable. Notes to Schedules Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2014. This applies for voluntary benefit changes as well as any offers ofTwo Years Additional Service Credit (a.k.a Golden Handshakes). Changes of Assumptions: The discount rate was changed from 7.5 percent (net of administrative expense) to 7.65 percent. 109 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 2. DEFINED BENEFIT PENSION PLANS -AGENT MULTIPLE EMPLOYER PLAN, Continued B. Schedule of Plan Contributions Miscellaneous P Ian Fiscal Year Fiscal Year 2015-l 6 2014-l 5 (l) ktuariallydetErmined contribution $ 2,622,395 $ 2,046,712 Contribution in relation to the actuarially determined contributions (2,622,395) (2,046,712) Contribution deficiency(ex:ess) $ $ Covered payroll $ 12,045,152 $ 11,636,737 Contributions as a percentage of covered payroll 2 l. 77% 17.59% (l) -Historical inrormation is required onlyror measurement periods ror which GAS B 68 is applicable 3. DEFINED BENEFIT PENSION PLANS - COST SHARING PLAN A. Schedule of the City's Proportionate Share of the Net Pension Liability- Last l0Years* Fiscal year: 2016 2015 Measurement dare: 6/30/2015 6/30/2014 Proportion of the neq:ension liability 0.67629% 0.64148% P roportiona1E share ofthe net pens ion liability $ 46,420,099 $ 38,926,454 Covered payroll $ 8,024,373 $ 8,881,515 P roportiona1E share ofthe net pens ion liability as a percentage of covered payroll 578.49% 438.29% P Ian's share of fiduciary net pas ~ion as a percentage of total pens ion liability 83.34% 83.39% '' Fiscal year 2015 was the lstyearof implementation. 110 City of Buena Park Required Supplementary Information, Continued For the year endedJ une 30, 2016 3. DEFINED BENEFIT PENSION PLANS - COST SHARING PLAN, Continued B. Schedule of Contributions - Last l0Years* 2016 2015 Contractually required contribution (actuariallydete rm ined) $ 3,615,462 $ 2,299,785 Contribution in relation to the actuarially determined contributions (3,615,462) (2,299,785) Contribution deficiency (ex:es s) $ $ Co\ered payroll $ 8,412,906 $ 8,024,373 Contributions as a percentage ofco\ered payroll 42.98% 28.66% Note to 5 c hedule Valuation date: 6;30;2013 6;30;2012 * Fiscal ~ar 2015 was the l st~ar ofimplemen1ation 4. OTHER POST EMPLOYMENT BENEFITS (OPEB) A schedule of funding progress for the actuarial valuation of July 1, 2015 and the two preceding valuations is presented below. Unfunded Actuarial Unfunded Liability as Actuarial Actuarial Actuarial Actuarial Percentage of Valuation Asset Accrued Accrued Funded Covered Covered Date* Value Liability Liability Ratio Payroll AA Payroll 7/1;2015 $ 1,314,059 $ 10,587,386 $ 9,273,327 12.41% $ 20,518,252 45.2(1,16 7/1;2013 $ 881,813 $ 7,631,630 $ 6,749,817 l l.55% $ 21,661,546 31.16% 6;30;201 l $ 481,847 $ 7,554,954 $ 7,073,107 6.38% $ 21,683,514 32.62% '' Based on the most recent acruarial valuation available ll l This page intentionally left blank 112 SUPPLEMENTARY INFORMATION 113 This page intentionally left blank 114 NON-MAJ OR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Asset Forfeiture Fund accounts forthe assets seized as a result of drug enforcement activities. Proposition 172 Police Augmentation Fund accounts for the half-cent sales tax remitted to the City from other governmental agencies to be expended for public safety. Measure M2 Fund accounts for Measure M2 funds restricted for transportation facility and service improvements. Local Law Enforcement Block Grant Fund accounts for grant monies received for local law enforcement activities. Orange County Anti-Drug Abuse Fund accounts for revenue received for multi-:jurisdiction anti drug task force. Traffic Congestion Relief Fund accounts for the Governor's transportation congestion relief program revenue received for the repair and reconstruction of streets. State OCATT Fund accounts for revenue received for investigation and prosecution of criminals belonging to major auto theft rings. COPS;SLESF Fund accounts for COPS;SLESF revenue received for policing and law enforcement activities. Haus ing and Community Development Fund accounts for commercial and residential improvement projects of the planning, economic development, and public works departments. Financing is provided by a federal grant from the Department of Housing and Urban Development. AB 2766/AQMD Fund accounts for AB 2766/AQMD revenue received for air quality improvement projects. HOME Loans Special Revenue Fund accounts for grant monies received from the first-time home buyer down payment assistance program. 115 CAPITAL PRO! ECT FUND Park-in-lieu Fund accounts for recreational development projects financed by developer fees paid in-lieu of park development. City Capital Projects Fund accounts for the acquisition or construction of major capital facilities in the City. 116 This page intentionally left blank 117 City of Buena Park Combining Balance Sheet Non-Major Governmental Funds June30,2016 Special Revenue Proposition 172 Local Law Orange County Asset Police Measure Enforcement Anti-Drug Forfeiture Augmentation M2 Block Grant Abuse ASSETS Cash and investments $ 640,156 $ 323,333 $ 2,074,875 $ 72,958 $ 20,154 Accounts receivable 229 12,302 334,839 Interest receivable 1,096 554 3,554 125 35 Loans receivable, net Due from other governments 39,393 275,492 Property held for resale Total assets $ 641,481 $ 375,582 $ 2,688,760 $ 73,083 $ 20,189 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts payable $ 67,691 $ $ 93,950 $ $ Accrued liabilities 101,808 7,424 5,519 Retention payable 897 6,795 Due to other funds Total liabilities 170,396 7,424 106,264 Deferred Inflows of Resources Unavailable revenue 334,839 Total deferred inflows of resources 334,839 Fund Balances (Note 12) Restricted 471,085 368,158 2,247,657 73,083 20,189 Assigned Unassigned Total fund balances 471,085 368,158 2,247,657 73,083 20,189 Total liabilities, deferred inflows of resources, and fund balances $ 641,481 $ 375,582 $ 2,688,760 $ 73,083 $ 20,189 118 Special Revenue Traffic Housing and Congestion State Community AB 2766/ HOME Loans Relief OCATT COPSt,LESF Development AQMD Special Revenue $ 200,082 $ $ 135,767 $ $ 366,468 $ 886,544 196,444 55,327 28,319 343 233 628 1,519 2,153,344 5,004,136 38,594 23,635 610,948 $ 200,425 $ 196,444 $ 174,594 $ 2,843,254 $ 395,415 $ 5,892,199 $ $ $ $ 11,623 $ $ 2,740 3,822 5,989 15,092 117,816 63,339 121,638 5,989 90,054 2,740 157,411 37,937 55,327 28,319 157,411 37,937 55,327 28,319 200,425 130,668 2,697,873 367,096 5,889,459 (82,605) 200,425 (82,605) 130,668 2,697,873 367,096 5,889,459 $ 200,425 $ 196,444 $ 174,594 $ 2,843,254 $ 395,415 $ 5,892,199 119 City of Buena Park Combining Balance Sheet Non-Major Governmental Funds June30,2016 Capital Projects Total Non---fv1ajor Park City Governmental In-lieu Capital Projects Funds ASSETS Cash and investments $ 4,080,422 $ 578,977 $ 9,379,736 Accounts receivable 201,851 829,3 ll Interest receivable 6,989 992 16,068 Loans receivable 7,157,480 Due from other governments 377,114 Property held for resale 610,948 Total assets $ 4,289,262 $ 579,969 $ 18,370,657 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts payable $ 51,920 $ 19,993 $ 247,917 Accrued liabilities 139,654 Retention payable 7,692 Due to other funds 181,155 Total liabilities 51,920 19,993 576,418 Deferred Inflows of Resources Unavailable revenue 201,851 815,684 Total deferred inflows of resources 201,851 815,684 Fund Balances (Note 9) Restricted 4,035,491 16,501,184 Assigned 559,976 559,976 Unassigned (82,605) Total fund balances 4,035,491 559,976 16,978,555 Total liabilities, deferred inflows of resources, and fund balances $ 4,289,262 $ 579,969 $ 18,370,657 120 This page intentionally left blank 121 City of Buena Park Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds FortheyearendedJ une 30, 2016 Special Revenue Proposition 172 Local Law Orange County Asset Police Measure Enforcement Anti-Drug Forfeiture Augmentation M2 Block Grant Abuse REVENUES Taxes $ $ 355,319 $ $ $ Intergovernmental 34,318 12,302 1,547,419 3,394 Charges for Services Investment income 8,914 4,428 25,752 765 243 Miscellaneous 3,303 Total revenues 46,535 372,049 1,573,171 4,159 243 EXPENDITURES Current Transportation 381,558 Public Protection 153,132 297,344 25,944 Development Capital Outlay 226,172 334,840 Debt Service Interest and Other Charges 118 Total expenditures 379,422 297,344 716,398 25,944 REVENUES OVER (UNDER) EXPENDITURES (332,887) 74,705 856,773 (21,785) 243 OTHER FINANCING SOURCES (USES) Transfers in 26,000 Transfers out (99,276) (422,820) Total other financing sources (uses) (99,276) (422,820) 26,000 Net change in fund balances (332,887) (24,571) 433,953 4,215 243 FUND BALANCES Beginning of year 803,972 392,729 1,813,704 68,868 19,946 End of year $ 471,085 $ 368,158 $ 2,247,657 $ 73,083 $ 20,189 122 Special Revenue Traffic Housing and Congestion State Community AB 2766/ HOME Loans Relief OCATT COPSt,LESF Development AQMD Special Revenue $ $ $ $ $ $ 109,737 149,951 839,049 75,668 1,540,371 32,473 1,442 2,274 1,220 20,286 4,438 6,136 4,804 34,747 109,737 151,171 860,777 84,910 1,546,507 192,346 264,132 758,534 1,160,433 164,488 192,346 264,132 923,022 1,160,433 34,747 (82,609) (112,961) (62,245) 84,910 386,074 115,000 (71,436) 115,000 (71,436) 34,747 (82,609) 2,039 (62,245) 13,474 386,074 165,678 4 128,629 2,760,118 353,622 5,503,385 $ 200,425 $ (82,605) $ 130,668 $ 2,697,873 $ 367,096 =$===5=,8=89=,4=5=9= 123 City of Buena Park Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds FortheyearendedJ une 30, 2016 Capital Projects Total Non---fvlajor Park City Governmental In-lieu Capital Projects Funds REVENUES Taxes $ $ $ 355,319 Intergovernmental 554,939 4,867,148 Charges for Services 2,080,752 2,114,667 Investment income 42,833 7,323 124,612 Miscellaneous 8,107 Total revenues 2,678,524 7,323 7,469,853 EXPENDITURES Current Transportation 381,558 Public Protection 932,898 Development 1,918,967 Capital Outlay 1,894,829 211,157 2,831,486 Debt Service Interest and Other Charges 118 Total expenditures 1,894,829 211,157 6,065,027 REVENUES OVER (UNDER) EXPENDITURES 783,695 (203,834) 1,404,826 OTHER FINANCING SOURCES (USES) Transfers in 13,196 100,000 254,196 Transfers out (90,000) (683,532) Total other financing sources (uses) (76,804) 100,000 (429,336) Net change in fund balances 706,891 (l 03,834) 975,490 FUND BALANCES Beginning of year 3,328,600 663,810 16,003,065 End ofyear $ 4,035,491 $ 559,976 $ 16,978,555 124 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Asset Forfeiture Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 195,000 $ 195,000 $ 34,318 $ (160,682) Investment income 8,000 8,000 8,914 914 Miscellaneous 3,303 3,303 Total revenues 203,000 203,000 46,535 (156,465) EXPENDITURES: Current: Public protection 145,900 145,900 153,132 (7,232) Capital ou~ay 306,000 326,708 226,172 100,536 Debt service: Interest and other charges 1,000 1,000 118 882 Total expenditures 452,900 473,608 379,422 94,186 Net change in fund balance $ (249,900) $ (270,608) (332,887) $ (62,280) FUND BALANCE: Beginning of year 803,972 End of year $ 471,085 125 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Proposition 172 Police Augmentation Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Taxes $ 300,000 $ 300,000 $ 355,319 $ 55,319 Intergovernmental 12,302 12,302 Investment income 2,600 2,600 4,428 1,828 Total revenues 302,600 314,902 372,049 57,147 EXPENDITURES: Current: Public protection 269,990 284,990 297,344 (12,354) Total expenditures 269,990 284,990 297,344 (12,354) REVENUES OVER (UNDER) EXPENDITURES 32 610 29 912 74 705 44 793 OTHER FINANCING SOURCES (USES): Transfers out (54,860) (354,860) (99,276) 255,584 Total other financing sources (uses) (54,860) (354,860) (99,276) 255,584 Net change in fund balance $ (22,250) $ (324,948) (24,571) $ 300,377 FUND BALANCE: Beginning of year 392,729 End of year $ 368,158 126 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Measure M2 Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 2,971,500 $ 3,370,331 $ 1,547,419 $ (1,822,912) Investment income 15,000 15,000 25,752 10,752 Total revenues 2,986,500 3,385,331 1,573,171 (1,812,160) EXPENDITURES: Current: Transportation 455,240 446,358 381,558 64,800 Capital ou~ay 1,967,000 2,365,831 334,840 2,030,991 Total expenditures 2,422,240 2,812,189 716,398 2,095,791 REVENUES OVER (UNDER) EXPENDITURES 564,260 573,142 856,773 283,631 OTHER FINANCING SOURCES (USES): Transfers out (350,000) (350,000) (422,820) (72,820) Total other financing sources (uses) (350,000) (350,000) (422,820) (72,820) Net change in fund balance $ 214,260 $ 223,142 433,953 $ 210,81 l FUND BALANCE: Beginning of year 1,813,704 End of year $ 2,247,657 127 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Local Law Enforcement Block Grant Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ $ $ 3,394 $ 3,394 Investment income 765 765 Miscellaneous Total revenues 4,159 4,159 EXPENDITURES: Current: Public protection 54,860 54,860 25,944 28,916 Total expenditures 54,860 54,860 25,944 28,916 REVENUES OVER (UNDER) EXPENDITURES (54,860) (54,860) (21,785) 33,075 OTHER FINANCING SOURCES (USES): Transfers in 54,860 54,860 26,000 (28,860) Total other financing sources (uses) 54,860 54,860 26,000 (28,860) Net change in fund balance $ $ 4,215 $ 4,215 FUND BALANCE: Beginning of year 68,868 End of year $ 73,083 128 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Orange County Anti-Drug Abuse Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Investment income $ $ $ 243 $ 243 Total revenues 243 243 Net change in fund balance $ $ 243 $ 243 FUND BALANCE: Beginning of year 19,946 End of year $ 20,189 129 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Traffic Congestion Relief Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Charges for services $ 20,000 $ 20,000 $ 32,473 $ 12,473 Investment income 1,000 1,000 2,274 1,274 Total revenues 21,000 21,000 34,747 13,747 Net change in fund balance $ 21,000 $ 21,000 34,747 $ 13,747 FUND BALANCE: Beginning of year 165,678 End of year $ 200,425 130 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual State OCATT Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 200,200 $ 200,200 $ 109,737 $ (90,463) Total revenues 200,200 200,200 109,737 (90,463) EXPENDITURES: Current: Public protection 200,200 207,700 192,346 15,354 Total expenditures 200,200 207,700 192,346 15,354 Net change in fund balance $ $ (7,500) (82,609) $ (75, l 09) FUND BALANCE: Beginning of year 4 End of year $ (82,605) 131 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual COPSpLESF Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 120,000 $ 120,000 $ 149,951 $ 29,951 Investment income 1,220 1,220 Total revenues 120,000 120,000 151,171 31,171 EXPENDITURES: Current: Public protection 285,460 300,460 264,132 36,328 Total expenditures 285,460 300,460 264,132 36,328 REVENUES OVER (UNDER) EXPENDITURES (165,460) (180,460) (112,961) 67499 OTHER FINANCING SOURCES (USES): Transfers in 165,460 165,460 115,000 (50,460) Total other financing sources (uses) 165,460 165,460 115,000 (50,460) Net change in fund balance $ $ (15,000) 2,039 $ 17,039 FUND BALANCE: Beginning of year 128,629 End of year $ 130,668 132 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Housing and Community Development Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 790,230 $ 790,230 $ 839,049 $ 48,819 Charges for services 1,442 1,442 Investment income 20,286 20,286 Total revenues 790,230 790,230 860,777 70,547 EXPENDITURES: Current: Development 790,230 822,810 758,534 64,276 Capital ou~ay 177,075 164,488 12,587 Total expenditures 790,230 999,885 923,022 76,863 Net change in fund balance $ $ (209,655) (62,245) $ 147,410 FUND BALANCE: Beginning of year, as restated 2,760,118 End of year $ 2,697,873 133 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual AB 2766/AQMD Special Revenue Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 100,000 $ 529,462 $ 75,668 $ (453,794) Investment income 1,800 1,800 4,438 2,638 Miscellaneous 4,804 4,804 Total revenues 101,800 531,262 84,910 (446,352) REVENUES OVER (UNDER) EXPENDITURES 101 800 531 262 84 910 (446,352) OTHER FINANCING SOURCES (USES): Transfers out (487,702) (71,436) 416,266 Total other financing sources (uses) (487,702) (71,436) 416,266 Net change in fund balance $ 101,800 $ 43,560 13,474 $ (30,086) FUND BALANCE: Beginning of year 353,622 End of year $ 367,096 134 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual HOME Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 1,328,000 $ 1,328,000 $ 1,540,371 $ 212,371 Investment income 22,000 22,000 6,136 (15,864) Total revenues 1,350,000 1,350,000 1,546,507 196,507 EXPENDITURES: Current: Development 1,350,000 1,350,000 l, 160,433 189,567 Total expenditures 1,350,000 1,350,000 l, 160,433 189,567 Net change in fund balance $ $ 386,074 $ 386,074 FUND BALANCE: Beginning of year, as restated 5,503,385 End of year $ 5,889,459 135 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Park-in-lieu Capital Projects Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ $ 734,000 $ 554,939 $ (179,061) Charges for services 1,500,000 1,500,000 2,080,752 580,752 Investment income 50,000 50,000 42,833 (7, 167) Total revenues 1,550,000 2,284,000 2,678,524 394,524 EXPENDITURES: Capital ou~ay 1,776,430 7,554,848 1,894,829 5,660,019 Total expenditures 1,776,430 7,554,848 1,894,829 5,660,019 REVENUES OVER (UNDER) EXPENDITURES (226,430) (5,270,848) 783,695 6,054,543 OTHER FINANCING SOURCES (USES): Transfers in 429,462 13,196 (416,266) Transfers out (90,000) (90,000) Total other financing sources (uses) 339,462 (76,804) (416,266) Net change in fund balance $ (226,430) $ (4, 93 l, 386) 706,891 $ 5,638,277 FUND BALANCE: Beginning of year 3,328,600 End of year $ 4,035,491 136 City of Buena Park Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual City Capital Projects Fund FortheyearendedJ une 30, 2016 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Investment income $ 3,500 $ 3,500 $ 7,323 $ 3,823 Total revenues 3,500 3,500 7,323 3,823 EXPENDITURES: Current: Capital ou~ay 1,891,252 21 l, 157 1,680,095 Total expenditures 1,891,252 21 l, 157 1,680,095 REVENUES OVER (UNDER) EXPENDITURES 3,500 (1,887,752) (203,834) 1,683,918 OTHER FINANCING SOURCES (USES): Transfers in 100,000 1,220,000 100,000 (l, 120,000) Total other financing sources (uses) 100,000 1,220,000 100,000 (l, 120,000) Net change in fund balance $ 103,500 $ (667,752) (103,834) $ 563,918 FUND BALANCE: Beginning of year 663,810 End of year $ 559,976 137 This page intentionally left blank 138 INTERNAL SERVICE FUNDS Workers' Compensation Insurance Fund accounts for all workers' compensation self-insurance activities. Public Liability Self-insurance Fund accounts for the cost of providing general liability insurance coverage to the various City departments. Such costs are charged to the departments at a fixed rate. Accrued Leave Fund accounts for vacation and sick leave pay-out to retiring employees. Equipment Maintenance and Replacement Fund accounts for the costs of movable equipment used by other City departments.Such costs are based upon actual usage at a fixed rate throughout the year. Buildings and Grounds Maintenance Fund accounts for the costs of maintaining City buildings and grounds. Such costs are charged to the various departments based upon each department's estimated usage of the buildings and surrounding grounds. Management Information Systems Fund accounts for the the costs of providing computer equipment and maintenance to the various City departments. Such costs are based upon the number of computer users in each department. 139 City of Buena Park Combining Statement of Net Position Internal Service Funds Year EndedJ une 30, 2016 Workers' Compensation Public Liability Accrued Insurance Self --Insurance Leave ASSETS Current assets Cash and investments $ 6,429,225 $ 1,479,498 $ 1,045,139 Accounts receivable, net Interest receivable ll, 161 2,534 1,792 Loans receivable Prepaid items Total current assets 6,440,386 1,482,032 1,046,931 Noncurrent assets Capital assets Depreciable, net Total capital assets Total noncurrent assets Total assets 6,440,386 1,482,032 1,046,931 DEFERRED OUTFLOWS OF RESOURCES Deferred employer pension contributions Total deferred outflows of resources LIABILITIES Current liabilities Accounts payable 18,637 30,246 Accrued liabilities Employee leave benefits -due within one year Claims payable -due within one year 100,000 Total current liabilities 118,637 30,246 Noncurrent liabilities Employee leave benefits -due in more than one year Claims payable -due in more than one year 7,174,402 2,027,498 Net pension liability Total noncurrent liabilities 7,174,402 2,027,498 Total liabilities 7,293,039 2,057,744 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources -pension Total deferred inflows of resources NET POSITION Investment in capital assets Unrestricted (852,653) (575,712) 1,046,931 Total Net Position $ (852,653) $ (575,712) $ 1,046,931 140 Equipment Buildings and Management Maintenance Grounds Information & Replacement Maintenance System Total $ 4,114,005 $ 312,679 $ 1,542,629 $ 14,923,175 7,047 536 2,642 25,712 23,282 23,282 4,144,334 313,215 1,545,271 14,972,169 2,202,041 8,310 288,052 2,498,403 2,202,041 8,310 288,052 2,498,403 2,202,041 8,310 288,052 2,498,403 6,346,375 321,525 1,833,323 17,470,572 66,110 53,096 16,527 135,733 66,110 53,096 16,527 135,733 41,908 72,627 34,961 198,379 14,584 11,706 3,741 30,031 11,000 10,000 21,000 100,000 67,492 94,333 38,702 349,410 34,680 22,480 57,160 9,201,900 798,154 641,028 199,527 1,638,709 832,834 663,508 199,527 10,897,769 900,326 757,84 l 238,229 11,247,179 73,794 59,267 18,447 151,508 73,794 59,267 18,447 151,508 2,202,041 8,310 288,052 2,498,403 3,236,324 (450,797) 1,305,122 3,709,215 $ 5,438,365 $ (442,487) $ 1,593,174 $ 6,207,618 141 City of Buena Park Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Year Ended J u ne 30, 2016 Workers' Compensation Public Liability Accrued Insurance Self --Insurance Benefits OPERATING REVENUES Charges for Services $ 1,267,625 $ $ 158,733 Total operating revenues 1,267,625 158,733 OPERATING EXPENSES Self-insurance 2,716,699 1,054,576 Employee benefits 218,156 Maintence and supplies Information systems Depreciation Total operating expenses 2,716,699 1,054,576 218,156 Operating income (loss) ( l ,449,07 4) (1,054,576) (59,423) NONOPERATING REVENUES Investment income 78,638 13,965 13,186 Gain(loss) on sale of property Total nonoperating revenues (expenses) 78,638 13,965 13,186 INCOME (LOSS) BEFORE TRANSFERS (1,370,436) (1,040,611) (46,237) Transfers in 950,000 Transfers out Total transfers 950,000 Change in net position (1,370,436) (90,611) (46,237) NET POSITION Beginning of year, as restated 517,783 (485,101) 1,093,168 End of Year $ (852,653) $ (575,712) $ 1,046,931 142 Equipment Buildings and Management Maintenance Grounds Information & Replacement Maintenance System Total $ 2,154,524 $ 1,952,652 $ 382,344 $ 5,915,878 2,154,524 1,952,652 382,344 5,915,878 3,771,275 218,156 1,422,196 1,955,242 3,377,438 320,165 320,165 317,583 1,759 98,107 417,449 1,739,779 1,957,001 418,272 8,104,483 414,745 (4,349) (35,928) (2,188,605) 50,482 4,252 18,143 178,666 26,600 26,600 77,082 4,252 18,143 205,266 491,827 (97) (17,785) (1,983,339) 58,240 1,008,240 (15,000) (15,000) 58,240 (15,000) 993,240 550,067 (15,097) (17,785) (990,099) 4,888,298 (427,390) 1,610,959 7,197,717 $ 5,438,365 $ (442,487) $ 1,593,174 $ 6,207,618 143 City of Buena Park Combining Statement of Cash Flows All Internal Service Funds FortheyearendedJ une 30, 2016 Workers' Compensation Public Liability Accrued Insurance Self --Insurance Benefits CASH FLOWS FROM OPERATING ACTIVITIES Cash received from other funds $ 1,285,404 $ $ 158,733 Cash payments to suppliers for goods and services (1,662,293) (950,271) (218,156) Cash paid to employees Net cash provided by (used in) operating activities (376,889) (950,271) (59,423) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 950,000 Transfers out Net cash provided by (used in) noncapital financing activities 950,000 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets Proceeds from sale of capital assets Net cash (used in) capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Interest income received 78,206 13,769 13,136 Net cash provided by investing activities 78,206 13,769 13,136 Net increase (decrease) in cash and cash equivalents (298,683) 13,498 (46,287) CASH AND CASH EQUIVALENTS Beginning of year 6,727,908 1,466,000 1,091,426 End of year $ 6,429,225 $ 1,479,498 $ 1,045,139 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ ( l ,449,07 4) $ (1,054,576) $ (59,423) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities Depreciation Changes in assets and liabilities Accounts receivable 17,779 Loans receivable Prepaid items 8,270 Deferred employer pension contributions Accounts payable (3,850) (76,817) Accrued liabilities Employee leave benefits Claims payable 1,049,986 181,122 Net pension liability Deferred inflows ofresources -pension Total adjustments 1,072,185 104,305 Net cash provided by (used in) operating activities $ (376,889) $ (950,271) $ (59,423) 144 Equipment Buildings and Management Maintenance Grounds Information & Replacement Maintenance System Total $ 2,167,845 $ 1,959,595 $ 382,344 $ 5,953,921 (1,058,642) (1,719,727) (159,662) (5,768,751) (472,675) (380,310) (114,761) (967,746) 636,528 (140,442) 107,921 (782,576) 58,240 1,008,240 (15,000) (15,000) 58,240 (15,000) 993,240 (670,834) (19,962) (690,796) 27,031 27,031 (643,803) (19,962) (663,765) 49,835 4,455 17,792 177,193 49,835 4,455 17,792 177,193 100,800 (150,987) 105,751 (275,908) 4,013,205 463,666 1,436,878 15,199,083 $ 4,114,005 $ 312,679 $ 1,542,629 14,923,175 $ 414,745 $ (4,349) $ (35,928) $ (2,188,605) 317,583 1,759 98,107 417,449 6,943 24,722 13,321 13,321 45,361 53,631 (14,665) (11,484) (3,839) (29,988) (70,537) (117,609) 9,084 (259,729) 3,729 3,029 1,062 7,820 (3,253) 1,154 (2,099) 1,231,108 (20,078) (15,972) (5,108) (41,158) (4,317) (3,913) (818) (9,048) 246,178 (116,208) 149,775 1,406,029 $ 636,528 $ (140,442) $ 107,921 $ (782,576) 145 This page intentionally left blank 146 AGENCY FUND CFD Mall Agency Fund accounts for assets and liabilities related to the Community Facilities District Buena Park Mall. 147 This page intentionally left blank 148 City of Buena Park Combining Statement of Changes in Assets and Liabilities Agency Funds For the year ended June 30, 2016 Balance Balance July 1, 2015 Additions Deductions June 30, 2016 CFD Mall Agency Fund Assets: Cash and investments with fiscal agents $ 7,392,723 $ $ 263,800 $ 7,128,923 Total assets $ 7,392,723 $ $ 263,800 $ 7,128,923 Liabilities: Due to bondholders $ 7,392,723 $ $ 263,800 $ 7,128,923 Total liabilities $ 7,392,723 $ $ 263,800 $ 7,128,923 149 This page intentionally left blank 150 S tati sti cal Section This part of the City ofBuena Park's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 152-161 Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. 163-167 Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. 168-172 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. 173-174 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. 176-181 151 City ofBuena Park Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) Fiscal Year 2006-D7 2007-DS 2008-D9 2009-10 Governmental Activities Net investment in capital assets $ 115,185 $ 46,057 $ 114,928 $ 105,023 Restricted 92,175 183,500 146,683 170,117 Unrestricted 40,045 48,731 35,482 20,221 Total governmental activities net position $ 247,405 $ 278,288 $ 297,093 $ 295,361 Business-type Activities Net investment in capital assets $ 10,804 $ 16,884 $ 18,726 $ 19,287 Restricted Unrestricted 6,223 7,888 9,145 12,499 Total business-type activities net position $ 17,027 $ 24,772 $ 27,871 $ 31,786 Primary Government Net investment in capital assets $ 125,989 $ 62,941 $ 133,654 $ 124,310 Restricted 92,175 183,500 146,683 170,117 Unrestricted 46,268 56,619 44,627 32,720 Total primary government net position $ 264,432 $ 303,060 $ 324,964 $ 327,147 Source: City of Buena Park Finance Department 152 Fiscal Year 2010-ll 2011-12 2012-13 2013-14 2014-15 2015-16 $ 200,780 $ 214,554 $ 215,872 $ 218,671 $ 216,987 $ 219,881 66,102 25,378 23,696 45,392 45,733 45,437 21,066 22,020 41,891 56,334 (12,168) (24,072) $ 287,948 $ 261,952 $ 281,459 $ 320,397 $ 250,552 $ 241,246 $ 19,708 $ 20,068 $ 20,113 $ 20,612 $ 20,530 $ 22,665 15,041 18,261 21,253 23,691 20,007 20,109 $ 34,749 $ 38,329 $ 41,366 $ 44,303 $ 40,537 $ 42,774 $ 220,488 $ 234,622 $ 235,985 $ 239,283 $ 237,517 $ 242,546 66,102 25,378 23,696 45,392 45,733 45,437 36,107 40,281 63,144 80,025 7,839 (3,963) $ 322,697 $ 300,281 $ 322,825 $ 364,700 $ 291,089 $ 284,020 153 City of Buena Park Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) Fiscal Year 2006-07 2007-08 2008-09 2009-10 2010-11 Expenses Govermnental activities General government $ 6,328 $ 6,259 $ 6,634 $ 6,361 $ 7,161 Leisure 2,649 3,226 2,525 2,561 2,514 Health 2,686 2,830 3,176 2,780 2,776 Transportation 8,094 8,815 8,388 8,774 8,295 Public Protection 27,856 29,208 31,195 30,707 29,074 Development 11,229 15,028 15,512 24,516 19,530 Environmental 2,504 2,635 2,949 3,118 2,832 Interest 1,627 2,384 5,828 5,954 6,271 Total governmental activities net expenses 62,973 70,385 76,207 84,771 78,453 Business-type activities Water $ 11,129 $ 10,783 $ 11,410 $ 11,682 $ 11,341 Total business-type activities net assets 11,129 10,783 11,410 11,682 11,341 Total primary government expenses $ 74,102 $ 81,168 $ 87,617 $ 96,453 $ 89,794 Program Revenues Governmental activities Charges for services General government $ 488 $ 496 $ 782 $ 702 $ 100 Leisure 584 555 585 738 1,003 Health 2,457 2,606 2,828 2,949 2,946 Transportation 328 313 271 295 231 Public Protection 1,922 2,130 2,170 2,291 2,561 Development 1,104 921 700 1,354 l, 178 Environmental 19 60 l Operating contributions and grants 5,071 3,692 4,706 7,613 5,594 Capital contributions and grants 12,067 7,384 3,871 2,749 2,095 Total governmental activities program revenues 24,040 18,157 15,913 18,692 15,708 Business-type activities Charges for services Water utility 12,559 12,772 13,846 14,769 14,904 Capital contributions and grants 588 5,553 554 890 Total business-type activities program revenues 13,147 18,325 14,400 15,659 14,904 Primary government program revenues $ 37,187 $ 36,482 $ 30,313 $ 34,351 $ 30,612 Net (Expense);Revenue Governmental activities $ (38,933) $ (52,228) $ (60,294) $ (66,079) $ (62,745) Business-type activities 2,018 7,542 2,990 3,977 3,563 Total primary government net expensE $ (36,915) $ (44,686) $ (57,304) $ (62,102) $ (59,182) Source: City of Buena Park Finance Department 154 Fiscal Year 2011-12 2012-13 2013-14 2014-15 201 5-16 $ 6,145 $ 6,551 $ 6,491 $ 7,125 $ 8,098 2,626 2,905 3,048 3,071 3,570 2,777 2,796 3,018 3,000 3,155 8,041 7,727 8,696 9,875 8,380 29,780 30,531 30,563 31,841 35,851 9,217 3,166 2,763 12,700 5,055 2,724 2,952 2,979 2,987 3,167 3,537 482 416 347 275 64,847 57,110 57,974 70,946 67,551 $ 12,596 $ 13,461 $ 13,611 $ 13,908 $ 12,753 12,596 13,461 13,611 13,908 12,753 $ 77,443 $ 70,571 $ 71,585 $ 84,854 $ 80,304 $ 221 $ 174 $ 132 $ 198 $ 207 1,334 733 824 774 893 3,016 2,972 3,118 3,130 3,227 413 163 226 213 227 2,650 2,685 3,649 2,642 3,315 1,683 1,844 1,839 3,299 5,099 160 183 209 227 7,032 5,226 6,506 6,122 5,521 3,668 2,924 3,492 2,134 2,485 20,017 16,881 19,969 18,721 21,201 16,223 16,562 16,462 15,270 14,124 16,223 16,562 16,462 15,270 14,124 $ 36,240 $ 33,443 $ 36,431 $ 33,991 $ 35,325 $ (44,830) $ (40,229) $ (38,005) $ (52,225) $ (46,350) 3,627 3,101 2,851 1,362 1,371 $ (41,203) $ (37,128) $ (35,154) $ (50,863) $ (44,979) 155 City of Buena Park Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) Fiscal Year 2006-07 2007-08 2008-09 2009-10 2010-11 General Revenues and Other Changes in Net Position Govermnental activities Property taxes $ 30,936 $ 33,107 $ 33,819 $ 32,643 $ 33,351 Sales taxes 17,476 21,697 13,801 14,886 19,848 Property taxes in lieu of sales taxes 5,521 4,804 6,563 4,888 6,450 Transient occupancy taxes 4,938 4,784 3,909 3,663 3,816 Franchise taxes 1,590 1,773 1,756 1,618 1,757 Other taxes 9,962 10,228 10,175 9,873 3,446 Investment income 5,210 5,533 8,023 2,086 1,545 Other 578 580 1,063 30 42 Transfers 330 334 350 377 849 Gain~oss on sale of property 136 Extraordinary item Total governmental activities 76,677 82,840 79,459 70,064 71,104 Business-type activities Investment income 312 347 395 315 247 Other 190 64 Transfers (330) (334) (350) (377) (849) Total business-type activities (18) 203 109 (62) (602) Total primary government $ 76,659 $ 83,043 $ 79,568 $ 70,002 $ 70,502 Change in Net Position Governmental activities $ 37,744 $ 30,612 $ 19,165 $ 3,985 $ 8,359 Business-type activities 2,000 7,745 3,099 3,915 2,961 Total primary government $ 39,744 $ 38,357 $ 22,264 $ 7,900 $ 11,320 Source: City of Buena Park Finance Department 156 Fiscal Year 2011-12 2012-13 2013-14 2014-15 201 5-16 $ 21,564 $ 12,041 $ 8,156 $ 9,709 10,661 18,520 18,913 20,420 15,889 17,701 4,956 6,035 6,842 7,355 2,533 4,050 4,403 5,007 5,686 6,443 1,697 1,729 1,700 2,002 1,776 9,330 9,943 10,388 10,940 11,424 963 151 609 590 1,025 96 10 26 136 10 289 102 102 76 98 (42,631) 18,834 53,327 53,250 52,383 51,671 242 37 188 135 300 (289) (102) (102) (76) (98) (47) (65) 86 59 202 $ 18,787 $ 53,262 $ 53,336 $ 52,442 $ 51,873 $ (25,996) $ 13,098 $ 15,245 $ 158 $ 5,321 3,580 3,036 2,937 1,421 1,573 $ (22,416) $ 16,134 $ 18,182 $ 1,579 $ 6,894 157 City ofBuena Park Fund Balances -Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (amounts expressed in thousands) Fiscal Year 2006-Dl 2007-D8 2008-D9 2009-10 2010-ll General Fund Reserved $ 3,797 $ 4,790 $ 6,347 $ 4,018 Unreserved, designated 3,917 9,926 1,206 5,016 Unreserved, undesignated 23,998 26,930 20,983 15,777 Non spendable $ 458 Restricted Assigned 242 Unassigned 33,758 Total general fund $ 31,712 $ 41,646 $ 28,536 $ 24,811 $ 34,458 All Other Governmental Funds Reserved $ 72,044 $ 139,427 $ 146,544 $ 132,108 $ Unreserved, designated reported in Capital projects funds 1,500 Unreserved, undesignated reported in Special revenue funds 5,155 3,585 8,187 10,103 Capital projects funds 3,020 20,711 21,750 15,727 Nonspendable 611 Restricted 147,330 Assigned 331 Unassigned (1,712) Total all other governmental funds $ 80,219 $ 165,223 $ 176,481 $ 157,938 $ 146,560 Effective June 30, 201 l the City implemented GAS B Statement No. 54 (refer to Notes to Financial Statements item 1-N). Fund balances in governmental funds are reported in the following classifications Nonspendable, Restricted, Committee Assigned, and Unassigned. Source: City of Buena Park Finance Department 158 Fiscal Year 2011-12 2012-13 2013-14 2014-15 2015-16 $ 279 $ 5,765 $ 5,848 $ 5,882 $ 9,305 1,414 1,414 1,438 1,439 4,043 5,126 5,705 29,302 39,821 48,428 55,697 51,697 $ 29,581 $ 47,000 $ 59,733 $ 68,143 $ 68,146 $ $ $ $ $ 612 14 16,940 15,164 27,554 43,427 43,759 370 494 609 664 560 (331) (266) (237) (83) $ 17,591 $ 15,406 $ 27,926 $ 44,091 $ 44,236 I, 159 City of Buena Park Changes in Fund Balances -Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (amounts expressed in thousands) Fiscal Years 2006-07 2007-08 2008-09 2009-10 2010-11 Revenues Taxes 63,079 71,149 65,899 60,868 63,523 Licenses and permits 492 475 446 487 386 Fines and forfeitures 879 958 917 976 1,110 Intergovernmental 22,181 16,626 15,176 14,264 12,921 Charges for services 5,326 5,631 5,972 6,183 6,193 Investment income 5,088 5,916 7,066 3,391 8,526 Miscellaneous 2,697 1,698 3,479 2,639 1,044 Total revenues 99,742 102,453 98,955 88,808 93,703 Expenditures General government 5,441 5,567 5,727 5,540 4,507 Leisure 2,317 2,962 2,138 2,177 2,140 Health 2,687 2,654 2,853 2,999 2,832 Transportation 4,863 2,830 3,176 2,780 2,776 Public protection 27,918 5,497 5,865 5,776 5,711 Development 12,657 28,883 47,024 28,861 28,732 Environmental 2,589 18,277 16,686 25,360 26,839 Debt service Principal retirement 1,547 1,601 1,656 4,162 4,327 Interest and other charges 1,895 1,929 5,612 6,468 6,093 Bond issuance costs 2,085 143 Advance refunding escrow Capital Outlay 15,999 10,173 26,687 24,424 11,393 Total expenditures 77,913 82,458 117,567 108,547 95,350 Excess (deficiency) of revenues over (under) expenditures 21,829 19,995 (18,612) (19,739) (1,647) Other Financing Sources (Uses) Transfers in 24,802 73,079 40,472 19,226 15,205 Transfers out (25,007) (74,530) (40,462) (19,733) (15,291) Issuance of debt 75,720 16,780 Bond Premium 99 Proceeds from sale of property 575 2 2 Loss on sale of property held for resale Proceeds from long term debt Proceeds from sale of capital assets Total other financing sources (uses) (205) 74,943 16,790 (505) (84) Extraordinary item Net change in fund balances 21,624 94,938 (1,822) (20,244) (1,731) Fund balances -July l, restated 90,307 111,961 206,838 202,993 182,749 Fund balances -June 30 111,931 206,899 205,016 182,749 181,018 Debt service as a percentage of noncapital expenditures 5.45% 3.48% 7.97% 12.64% 13.25% Source: City of Buena Park Finance Department 160 Fis cal Years 2011-12 2012-13 2013-14 2014-15 201 5-16 54,422 46,806 46,390 44,811 43,401 545 515 496 790 903 874 710 736 852 812 15,295 14,344 16,257 15,401 15,553 6,719 7,000 7,243 7,774 9,823 1,386 244 763 789 l, 137 2,147 411 1,400 532 966 81,388 70,030 73,285 70,949 72,595 5,041 6,016 5,852 6,493 7,282 2,132 2,362 2,448 2,481 2,882 2,777 2,780 2,960 2,962 3,029 5,369 4,877 5,008 5,066 5,654 28,695 28,813 28,754 29,642 33,337 12,786 2,756 2,676 3,907 4,827 2,724 2,935 2,920 2,945 3,046 4,481 1,568 1,633 1,702 4,059 3,030 487 422 353 281 13,663 7,794 8,662 5,464 7,683 80,698 60,388 61,335 61,015 72,080 690 9,642 11,950 9,934 515 20,537 2,604 2,292 1,403 1,513 (21,131) (3,437) (3,124) (2,262) (2,407) (8,686) 526 3 86 (594) (830) (746) (9,545) (367) (133,942) 96 8,812 11,204 389 148 181,018 53,594 76,456 104,145 112,234 47,172 62,406 87,660 104,534 112,382 12.00% 3.85% 3.87% 3.61% 6.82% 161 This page intentionally left blank 162 City ofBuena Park Governmental Activities Tax Revenues By Source Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) Property Tax Transient Fiscal Property Sales and in Lieu of Occupancy Franchise Other Year Tax Use Tax Sales Tax Tax Tax Taxes 2006-07 30,936 17,476 5,521 4,938 1,590 9,962 2007-08 33,107 21,697 4,804 4,784 1,773 10,228 2008-09 33,818 13,801 6,563 3,909 1,756 10,175 2009-10 32,643 14,886 4,888 3,663 1,618 9,873 2010-11 33,351 14,892 4,956 3,816 1,757 9,896 2011-12 21,564 18,520 4,956 4,050 1,697 9,330 2012-13 12,041 18,913 6,034 4,403 1,729 9,943 2013-14 8,156 20,420 6,842 5,007 1,700 10,388 2014-15 9,709 15,889 7,355 5,686 2,002 10,940 2015-16 10,661 17,701 2,533 6,442 1,776 11,424 Source: City of Buena Park Finance Department 163 City ofBuena Park Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $1,000 of assessed value) Overlapping Rates City Metro Fiscal Direct Buena Park Water Year Rate Schools District 2006-07 1.0000 0.0448 0.0047 2007-08 1.0000 0.0459 0.0045 2008-09 1.0000 0.1317 0.0043 2009-10 1.0000 0.1998 0.0043 201 0-11 1.0000 0.2121 0.0037 2011-12 1.0000 0.2222 0.0037 2012-1 3 1.0000 0.0529 0.0035 2013-14 1.0000 0.2679 0.0035 2014-1 5 1.0000 0.2585 0.0035 201 5-16 1.0000 0.2771 0.0035 Source: Orange County Auditor,Controller 164 City of Buena Park Principal Property Tax Payers Current Year and Nine Years Ago 2015-16 2006-07 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Knott's Berry Farm $ 317,624,486 l 3.62% $ 290,0l 1,356 l 4.30% Com ref So California I ndustiral Sub 145,207,567 2 l.66% Alticor Inc 101,133,613 3 1.15% PRI Buena Park lndl California LLC 91,032,994 4 l.04% Westcore So-Cal I LLC 65,224,975 5 0.74% Newkoa LLC 59,595,090 6 0.68% J C Penney Properties, Inc. 50,657,036 7 0.58% 41,642,674 6 0.62% Bottling Group LLC 45,946,212 8 0.52% Georgia-Pacific Corrugated LLC 44,737,112 9 0.51% The Source at Beach, LLC. 44,473,985 lO 0.51% Coventry II DOR Buena Park Place LP 97,0l 5,132 2 1.44% P rologis California I LLC 66,222,176 3 0.98% OMP Commerce Center BP 59,822,997 4 0.89% LBA Realty Fund Holding Co. 43,020,532 5 0.64% Sears Roebuck and Company 35,133,411 7 0.52% Amvvay Corporation 34,274,472 8 0.51% Amcor S unclipse North Ame 33,618,879 9 0.50% Alticor Inc 29,039,309 lO 0.43% $ 965,633,070 l l.01% $ 729,800,938 10.83% Source Hdl Companies Excludes government and tax-exempt property owners 165 City ofBuena Park Secured Property Tax Levies and Collections (l) Last Ten Fiscal Years Fiscal year Total Collected within the ended Tax fiscal year of the levy Collections in Total collections to date June 30 Levy Amount % of Levy Subsequent Years Amount % of Levy 2006-Dl 5,972,094 5,885,260 98.55% 86,834 5,972,094 100.0C/Yo 2007-DS 6,144,400 5,927,041 96.46% 217,359 6,144,400 100.0C/Yo 2008-D9 6,254,724 6,032,374 96.45% 83,392 6,115,766 97.7&¾ 2009-10 6,199,970 4,489,359 72.41% 133,84 l 4,623,200 74.57% 2010-ll 6,197,224 6,056,832 97.73% 92,138 6,148,970 99.22% 2011-12 6,204,221 6,048,762 97.49% 87,455 6,136,217 98.9C/Yo 2012-13 6,265,913 6,160,983 98.33% 61,657 6,222,640 99.31% 2013-14 6,445,329 6,291,083 97.61% 50,680 6,341,763 98.39% 2014-15 6,615,614 6,444,393 97.41% 46,784 6,491,177 98.12% 2015-16 6,807,398 6,672,282 98.02% (2) 6,672,282 98.02% (l) Property tax totals are net of 1915 act bond (2) Information not available Source: Orange County Auditor;Controller 166 City ofBuena Park Assessed Value and Actual Value of Taxable Property Last Ten Fiscal Years (rate per $1,000 of assessed value) Total Total Taxable Direct Fiscal Residential Commercial Industrial Other* Tax-Exempt Assessed Tax Year Property Property Property Property Property Value Rate 2006--07 4,361,702 1,129,515 585,221 769,675 132,101 6,978,214 1.00 2007--08 4,774,547 1,191,585 659,512 835,226 137,704 7,598,574 1.00 2008--09 4,911,052 1,236,725 771,025 810,115 163,420 7,892,337 1.00 2009-10 4,685,423 1,366,864 958,560 558,019 183,480 7,752,346 1.00 2010-11 4,766,232 1,459,433 936,848 447,890 222,581 7,832,984 1.00 2011-12 4,827,360 1,451,380 941,195 400,690 228,963 7,849,588 1.00 2012-13 4,912,135 1,468,514 961,969 406,360 238,873 7,987,851 1.00 2013-14 5,042,078 1,432,849 1,112,097 451,647 236,998 8,275,669 1.00 2014-15 5,415,224 1,456,247 1,122,370 474,918 226,042 8,694,801 1.00 2015-16 5,734,199 1,590,478 1,165,617 468,840 191,295 9,150,429 1.00 *Other property includes recreational, institutional, vacant, and miscellaneous property. Note: In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2% ). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Source: Orange County Assessor, Hdl Coren & Cone 167 City ofBuena Park Ratios of Outstanding Debt by Type Last Ten Fiscal Years (amounts expressed in thousands, except per capita amounts) G ovemmental Activities B usiness-Ty!E Activities Total Restricted Net % of Fiscal Revenue Section 108 Notes Revenue Notes Primary for Bonded Personal Per Year Bonds Loans Payable Bonds Payable Government Debt Service Debt Income (1) Capita (1) 2006-07 27,181 4,319 551 1,074 33,125 25,107 32,051 l.80¼ 395 2007-08 101,440 4,319 452 928 107,139 47,317 106,211 5.68% 1,299 2008-09 99,822 4,319 16,780 348 777 122,046 54,653 104,489 5.49¼ 1,269 2009-10 97,075 4,319 15,403 238 621 117,656 65,254 101,632 5.44% 1,220 2010-11 94,283 4,319 13,960 122 459 113,143 8,262 98,724 5.42% l, 173 2011-12 12,458 291 12,749 0.70¼ 157 2012-13 10,890 117 11,007 0.58% 134 2013-14 9,255 25 9,280 0.49¼ 113 2014-15 7,552 15 7,567 0.39¼ 90 2015-16 5,780 5 5,785 0.29¼ 69 Note: Due to the dissolution of the Redevelopment Agency, outstanding revenue bonds and section l 08 loans are no longer included in the governmental activities (see Note l 5). Details regarding the outstanding debt can be found in the notes to the financial statements. ( l) See the Schedule of Demographic and Economic Statistics on page 173 for personal income and population data. Source: City of Buena Park Finance Department 168 City ofBuena Park Direct and Overlapping Governmental Activities Debt As of June 30, 2016 (amounts expressed in thousands) E stirnated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable 111 Debt City ofB ue na Park dire ct debt Police Pension Obligation Loan $ 5,780 l 00.00"/o $ 5,780 Total Direct Debt 5,780 Overlapping debt Metropolitan Water District 18,880 l.23% 231 Orange County and School District 735,325 9.99% 73,471 Total Overlapping Debt 73,703 Total direct and ave rlapping debt $ 79,483 Source: Orange County Assessor, Hdl Coren & Cone Note: Overlapping governments are those that coincide, at least in part, w~h the geographic boundaries of the City. This schedule estimates the portion ofoutstanding debt of those overlapping governments that is borne by the residents and businesses of the City ofBuena Park. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for re paying the debt, of each overlapping government. 111 The percentage ofoverlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the county's taxable assessed value that is within the government's boundaries and dividing~ by the county's total taxable assessed value. 169 City ofBuena Park Legal Debt Margin Information LastTen Fiscal Years (amounts expressed in thousands) Fiscal Year 2007 2008 2009 2010 2011 Debt limit $1,026,917 $ 1, 117,886 $1,159,337 $1,135,269 $1,141,557 Total net debt applicable to limit Legal debt margin $1,026,917 $ 1, 117,886 $1,159,337 $1,135,269 $1,141,557 Total net debt applicable to the limit as a percentage of debt limit Legal Debt Margin Calculation for Fiscal Year 2015-16: Assessed value $8,766,876 Add back exempt real property $ 192,259 Total assessed value $8,959,135 Debt limit (15% of total assessed value) $1,343,870 Debt applicable to limit Legal debt margin $1,343,870 Note: Understate finance law, the City ofBuena Park's outstanding general obligation debt should not exceed 1 5 percent of total assessed property value. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds. Source: Orange County Assessor, HdL Coren & Cone 170 Fiscal Year 2012 2013 2014 2015 2016 $ 1,143,040 $ 1,183,672 $ 1,205,801 $ 1,270,314 $ 1,343,870 $ 1,143,040 $ 1,183,672 $ 1,205,801 $ 1,270,314 $ 1,343,870 171 City ofBuena Park Revenue Bond Coverage 1996 Revenue Bonds LastTen Fiscal Years Fiscal Gross Year Revenue 111 Principal Interest Total Coverage 2007 53,703,477 245,000 87,683 332,683 16143% 2008 61,137,010 260,000 74,170 334,170 18295% 2009 54,742,230 275,000 59,587 334,587 16361% 2010 49,234,955 290,000 43,905 333,905 14745% 2011 58,077,593 305,000 27,093 332,093 17488% 2012 54,626,400 320,000 18,400 338,400 16143% 2013 2014 2015 2016 111 Total General Fund revenues Note: The information for the 2000, 2003, 2008 Series A, and 2008 Series B Tax Allocation Refunding Bonds are no longer included in the financial and statistical section of the City ofBuena Park's Comprehensive Annual Financial Report Effective February 1, 2012 the State of California dissolved all redevelopment agencies, including the Redevelopment Agency of the City of Buena Park. AS uccessor Agency was set up to handle the ongoing debt service obligations of the former redevelopment agency. The Successor Agency acts in a fiduciary capacity only and is therefore excluded from the government-wide financial statements because any resources of this Agency cannot be used to support the government's programs. Likewise, the liabilities, including the debt service are not included in the financial or statisical sections. 172 City of Buena Park Demographic and Economic Sta tis tics Last Ten Fiscal Years Per Personal Capita Fiscal Income Personal Unemployment Year Population (in thousands) Income Rate 2006--07 81,082 1,782,020 21,978 4.3% 2007--08 81,775 1,871,503 22,886 4.9% 2008--09 82,332 1,901,540 23,096 6.6% 2009-10 83,281 1,868,659 22,438 11.2% 2010-11 84,141 1,822,746 21,663 11.9% 2011-12 81,460 1,831,384 22,482 10.8% 2012-13 81,953 1,882,624 22,972 7.1% 2013-14 82,344 1,887,654 22,924 6.3% 2014-15 82,330 1,925,699 23,390 4.7% 2015-16 83,347 2,015,754 24,185 3.8% Source: Hdl, Coren & Cone 173 City of Buena Park Principal Employers Current Year and Nine Years Ago 2015-16 2006-07 % of Total % ofTotal City City Employer Employees Rank Employment* Employees Rank Employment Knott's Berry Farm 5,071 12.71% 2,900 7.25% J.C. Penney 526 2 1.32% Leach Coqxiration 483 3 1.21% 610 4 1.53% Access Business Group, LLC 479 4 1.20¼ Pepsi 477 5 1.20¼ 410 7 1.03% Select Staffing Real Time Staffing Services 403 6 1.01% Heritage Foods, LLC. 394 7 0.99¼ RIA Financial/AF EX Money Express 387 8 0.97% SYSCO Riverside, Inc. 375 9 0.94% Yamaha Corporation of America 350 10 0.88% 400 8 1.00¼ Nutrilite 479 900 2 2.25% Georgia Pacific 690 3 1.73% S erviceC raft Distributors 480 5 1.20¼ Ultra Wheel Company 475 6 1.19% City of Buena Park 278 0.70¼ 314 9 0.79% Amada 192 10 0.48% Total 9,702 24.75% 7,371 18.43% * Based upon U.S. Department of Lalxir's estimate of 39,900 residents employed in 201 5-16 and 40,000 employed in 2006--07. Sources: City of Buena Park Finance Department, State of California Employment Development Department 174 This page intentionally left blank 175 City of Buena Park Full-Time Equivalent City Employees by Function Last Ten Fiscal Years Function 2006-07 2007-08 2008-09 2009-10 2010-ll General Government 41 37 38 38 38 Public Safety 143 143 143 143 143 Public Works 46 47 47 47 47 Community Services 25 26 26 26 26 Community Development 30 28 28 28 28 Water 29 29 29 29 28 Total 314 310 311 311 310 Source: City of Buena Park Budget 176 2011-12 2012-13 2013-14 2014-15 2015-16 38 31 34 43 43 142 141 138 126 126 47 41 40 41 41 26 19 19 25 25 28 21 16 16 16 28 27 27 27 27 309 280 274 278 278 177 CityofBuena Park Operating Indicators by Function Last Ten Fiscal Years Function: 2006--07 2007--08 2008--09 2009-10 2010-l l Police Calls dispatched 32,646 37,154 38,704 36,499 35,139 Crime re ports 4,617 9,900 5,784 9,741 9,535 Moving citations 5,737 7,198 2,519 10,151 9,344 Parking citations 19,506 19,764 6,190 17,055 14,980 Streets and Highways As pha It repair (in tons) 454 316 326 330 297 Curb & gutter re pair (lineal ft.) 2,428 1,699 1,858 1,860 1,256 S idewa lk repair (linea I ft.) 1,832 3,322 2,988 3,000 2,616 Water Number of customer accounts 19,300 19,300 19,300 19,300 19,300 Average daily consumption (millions of gallons) 15 15 15 15 15 Water samples taken (annual) 1,200 1,200 1,200 1,200 1,200 Sewers Feetofsewermains rootcut/ chemically treated 25,000 22,000 22,000 22,000 22,000 Ma inte na nee G ra ffiti re mova Is 5,191 5,100 5,032 5,600 5,600 S treetswee ping miles 23,000 23,000 23,000 23,000 23,000 Trees pruned per year 4,785 4,834 5,294 5,200 4,887 Culture and Recreation Youths ports 1,380 1,390 l, 100 1,050 1,050 Aquatics 27,974 28,570 29,550 27,500 29,000 Picnic rentals 10,400 9,500 14,745 12,500 12,500 Leisure classes 8,294 8,622 8,370 9,402 9,434 Senior Center participants 87,801 132,849 136,888 136,000 130,000 Source: CityofBuenaPark 178 2011-12 2012-13 2013-14 2014-15 2015-16 34,031 32,126 43,650 43,051 56,163 8,617 8,251 9,883 9,540 9,831 7,389 7,044 5,572 8,973 8,803 12,477 12,548 14,560 16,221 14,589 343 293 269 270 283 919 887 1,022 1,000 422 1,483 1,211 1,324 1,300 3,893 19,300 18,921 19,300 19,300 19,481 12.5 13.6 13.6 10.9 10.6 1,200 1,200 1,200 1,200 1,200 22,000 29,405 29,274 29,000 52,630 5,600 10,000 9,240 7,172 8,160 23,000 23,000 23,000 23,000 2,300 5,000 5,975 5,344 5,300 5,400 l, 100 1,000 900 1,300 1,302 29,500 29,500 25,749 23,617 25,751 12,500 15,000 17,000 20,000 18,700 9,450 4,832 5,095 3,752 3,655 102,803 l l l,366 110,410 116,112 122,216 179 City of Buena Park Capital Asset Statistics by Function Last Ten Fiscal Years Function 2006-07 2007-08 2008-09 2009-10 2010-ll 2011-12 Public Safety Police stations l l l l l l Number of patrol units 28 30 30 30 30 30 Highways and streets Miles of streets 147.6 147.6 147.6 147.6 147.6 147.6 Traffic Signals 70 70 70 70 70 70 Water Number of active water wells 7 8 8 8 8 8 Number of reservoirs Miles of lines & mains 220 220 220 220 220 220 Sewer Miles of sanitary sewers 168 168 168 168 168 168 Miles offload control channel 21 21 21 21 21 21 Culture and Recreation Number of parks ll ll ll ll ll ll Number of community facilities l l l 2 2 3 Source: City of Buena Park 180 2012-13 2013-14 2014-15 2015-16 30 ~ ~ 32 lV~ lV~ lV~ 1~6 70 70 70 73 8 8 8 8 l l l l 220 220 220 220 l~ l~ l~ l~ 21 21 21 21 ll ll ll ll 3 3 3 3 181 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX B FORM OF BOND COUNSEL OPINION Upon issuance and delivery of the 2017 Bonds, Jones Hall, A Professional Law Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: April_, 2017 Buena Park Public Financing Authority 6650 Beach Boulevard Buena Park, California 90622-5009 OPINION: $9,785,000 Buena Park Public Financing Authority 2017 Lease Revenue Bonds (Fire Station Headquarters Project) Members of the Authority: We have acted as bond counsel to the Buena Park Public Financing Authority (the "Authority") in connection with the issuance by the Authority of its Buena Park Public Financing Authority 2017 Lease Revenue Bonds (Fire Station Headquarters Project) in the aggregate principal amount of $9,785,000 (the "Bonds"), under an Indenture of Trust dated as of April 1, 2017 (the "Indenture"), between the Authority and MUFG Union Bank, N.A., as trustee, and under the provisions of Article 4 (commencing with Section 6584) of Chapter 5, Division 7, Title 1 of the California Government Code (the "Bond Law"). The Bonds are secured by Revenues as defined in the Indenture, including certain lease payments made by the City of Buena Park (the "City") under a Lease Agreement dated as of April 1, 2017 (the "Lease") between the Authority as lessor and the City as lessee. We have examined the Indenture, the Lease, the Bond Law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority and the City contained in the Indenture, the Lease and in the certified proceedings, and upon other certifications furnished to us, without undertaking to verify the same by independent investigation. Based upon our examination, we are of the opinion, under existing law, as follows: 1. The Authority is a joint exercise of powers agency duly organized and existing under the laws of the State of California, with power to enter into the Indenture and the Lease, to perform the agreements on its part contained therein and to issue the Bonds. 2. The Bonds constitute legal, valid and binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture. 3. The Indenture and the Lease have been duly approved by the Authority and constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms. B-1 4. The Indenture establishes a valid first and exclusive lien on and pledge of the Revenues (as that term is defined in the Indenture) and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture. 5. The City is a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, with power to enter into the Lease and to perform the agreements on its part contained therein. The Lease has been duly approved by the City and constitutes a legal, valid and binding obligation of the City enforceable against the City in accordance with its terms. 6. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on such corporations ( as defined for federal income tax purposes), such interest is required to be taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended, which must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Authority and the City have covenanted in the Indenture, the Lease and in other instruments relating to the Bonds to comply with each of such requirements, and the Authority and the City have full legal authority to make and comply with such covenants. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds. 7. Interest on the Bonds is exempt from California personal income taxation. The rights of the owners of the Bonds and the enforceability of the Bonds, the Indenture and the Lease may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Respectfully submitted, Jones Hall, A Professional Law Corporation B-2 APPENDIXC SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following is a brief summary of the provisions of the Site Lease, the Lease Agreement and the Indenture of Trust relating to the Bonds. Such summary is not intended to be definitive, and reference is made to the complete documents for the complete terms thereof. DEFINITIONS Except as otherwise defined in this summary, the terms previously defined in this Official Statement have the respective meanings previously given. In addition, the following terms have the following meanings when used in this summary: "Additional Bonds" means any notes, bonds or other obligations of the Authority issued under Section 6.06, which are payable from and secured by a pledge of and lien on the Revenues on a parity with the Bonds. "Additional Rental Payments" means the amounts of additional rental which are payable by the City under the Lease. "Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. "Bond Fund" means the fund by that name established and held by the Trustee under the Indenture. "Bonds" means the Buena Park Public Financing Authority 2017 Lease Revenue Bonds (Fire Station Headquarters Project) authorized by and at any time Outstanding under the Indenture. The term "Bonds" includes any Additional Bonds to the extent set forth in the Supplemental Indenture authorizing the issuance thereof. "Business Day" means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the city in which the Office of the Trustee is located. "Closing Date" means the date of original issuance of the Bonds. "Event of Default" means (a) with respect to the Bonds, any of the events specified as such in the Indenture, and (b) with respect to the Lease, any of the events specified as such in the Lease. "Federal Securities" means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full C-1 faith and credit of the United States of America are pledged; (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America. "Fiscal Year" means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the Authority as its official fiscal year period. "Lease Payment Date" means, with respect to any Interest Payment Date, the fifth Business Day immediately preceding such Interest Payment Date. "Lease Payments" means the amounts payable by the City under the Lease as rental for the Leased Property, including any prepayment thereof and including any amounts payable upon a delinquency in the payment thereof, but excluding Additional Rental Payments and Supplemental Lease Payments. "Leased Property" means the real property described in Appendix A to the Lease, together with all improvements and facilities at any time situated thereon, consisting generally of the land and improvements which constitute an existing police station of the City which is located at 6640 Beach Boulevard in the City. "Net Proceeds" means amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Property, or the proceeds of any taking of the Leased Property or portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof. "Office" means the corporate trust office of the Trustee in Los Angeles, California, or such other or additional offices as the Trustee may designate in writing to the Authority from time to time as the corporate trust office for purposes of the Indenture; except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business is conducted. "Owner", when used with respect to any Bond, means the person in whose name the ownership of such Bond is registered on the Bond registration books of the Trustee. "Permitted Encumbrances" means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid under the Lease; (b) the Site Lease, the Lease and the Assignment Agreement; (c) any right or claim of any mechanic, laborer, material man, supplier or vendor not filed or perfected in the manner prescribed by law; ( d) the exceptions disclosed in the title insurance policy with respect to the Leased Property issued as of the Closing Date by Steward Guaranty Title Company; and (e) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Leased Property for its intended purposes. C-2 "Permitted Investments" means any of the following: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged. (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America. (c) Any direct or indirect obligations of an agency or department of the United States of America whose obligations represent the full faith and credit of the United States of America, or which are rated A or better by S&P at the time of purchase. ( d) Interest-bearing deposit accounts (including certificates of deposit) in federal or State chartered savings and loan associations or in federal or State of California banks (including the Trustee), provided that: (i) the unsecured obligations of such commercial bank or savings and loan association are rated A or better by S&P at the time of purchase; or (ii) such deposits are fully insured by the Federal Deposit Insurance Corporation; or (iii) such deposits are collateralized by Permitted Investments described in clause (a) for amounts above FDIC insurance. (e) Commercial paper rated "A-1+" or better by S&P at the time of purchase. (f) Federal funds or bankers acceptances with a maximum term of one year of any bank which an unsecured, uninsured and unguaranteed obligation rating of "A-1 +" or better by S&P at the time of purchase. (g) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of at least AMm-G, AMm or Mm at the time of purchase, which funds may include funds for which the Trustee, its affiliates, parent or subsidiaries provide investment advisory or other management services, but excluding such funds with a floating net asset value. (h) Obligations the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code and which are either (a) rated A or better by S&P at the time of purchase, or (b) fully secured as to the payment of principal and interest by Permitted Investments described in clauses (a) or (b). (i) Obligations issued by any corporation organized and operating within the United States of America having assets in excess of C-3 $500,000,000, which obligations are rated A or better by S&P at the time of purchase. U) Bonds or notes issued by any state or municipality which are rated A or better by S&P at the time of purchase. (k) Any investment agreement with, or guaranteed by, a financial institution the long-term unsecured obligations or the claims paying ability of which are rated AA or better by S&P at the time of initial investment, by the terms of which all amounts invested thereunder are required to be withdrawn and paid to the Trustee in the event either of such ratings at any time falls below AA-. (I) The Local Agency Investment Fund of the State of California, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name. "Projects" means, collectively, (a) the acquisition, construction and improvement of public fire station facilities known as Fire Station No. 61 located at 7740 La Palma Avenue, including the costs of demolition of the existing Fire Station No. 61 and remediation of the property located at 8081 Western Avenue, and (b) the acquisition and construction of improvements to Fire Station No. 63 which is located at 9120 Holder Street in the City. The exact description and scope of the Projects shall be subject to modification by the City from time to time. "Revenues" means: (a) all amounts received by the Authority or the Trustee under or with respect to the Lease, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), other than Additional Rental Payments; (b) all Supplemental Lease Payments to the extent such Supplemental Lease Payments are pledged to the payment of Additional Bonds; (c) all Net Proceeds of insurance or eminent domain proceedings which are required to be applied to the payment of the Bonds and any Additional Bonds under the Lease and the Indenture, and (d) all interest, profits or other income derived from the investment of amounts in any fund or account (excluding the Project Fund) established under the Indenture. "Site Lease Payment" means the amount of $9,260,000 which is payable by the Authority to the City on the Closing Date under the Site Lease. "S&P" means Standard & Poor's Global Ratings, a business unit of Standard & Poor's Financial Services LLC, its successors and assigns. "Supplemental Lease Payments" means the amounts payable by the City under the Lease as additional rental for the use and occupancy of the Leased Property, including any prepayment thereof and including any amounts payable upon a delinquency in the payment thereof. "Tax Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date or as it may be amended to apply to obligations issued on the Closing Date, C-4 together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under said Code. SITE LEASE Under the Site Lease, the City agrees to lease the Leased Property to the Authority in consideration of the payment by the Authority of the Site Lease Payment on the Closing Date. The Authority agrees to cause the full amount of the Site Lease Payment to be raised from the proceeds of the Bonds, and to cause the Site Lease Payment to be deposited with the Trustee in the Project Fund to be applied to finance the acquisition and construction of the Projects. No further rent payment is due by the Authority for the lease of the Leased Property under the Site Lease. The Site Lease is for a term commencing on the Closing Date and extending to the date on which no Bonds remain outstanding under the Indenture. In the event of any release or substitution of property under the Lease as described below, the description of the property leased under the Site Lease will be modified accordingly. LEASE AGREEMENT Lease of Leased Property; Term Under the Lease, the Authority leases the Leased Property back to the City. The Lease is for a term commencing on the Closing Date and extending to the date on which no Bonds remain outstanding under the Indenture. Acquisition and Construction of Projects The City agrees under the Lease to supervise and to complete the acquisition and construction of the Projects from amounts deposited in the Project Fund, in accordance with the provisions of the Indenture and in accordance with all applicable provisions of law. The City has the right to amend the description and scope of the Projects from time to time, without prior notice to the Authority or the Trustee. Lease Payments The City agrees to pay semiannual Lease Payments, subject to abatement as described below, as the rental for the use and occupancy of the Leased Property. On each Lease Payment Date, the City is obligated to deposit with the Trustee the full amount of the Lease Payments coming due and payable on the next Interest Payment Date, to the extent required to be paid by the City under the Lease. Any amount held in the Bond Fund, the Interest Account or the Principal Account on any Lease Payment Date (other than amounts specifically required to be credited to the prepayment of Lease Payments), will be credited towards the Lease Payment then coming due and payable. Source of Payments The Lease Payments are payable from any source of available funds of the City, subject to the provisions of the Lease relating to abatement. C-5 Budget and Appropriation The City covenants to take all actions required to include the Lease Payments and Additional Rental Payments in each of its budgets during the term of the Lease and to make the necessary appropriations for all Lease Payments and Additional Rental Payments. Such covenant constitutes a duty imposed by law and each and every public official of the City is required to take all actions required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease agreed to be carried out and performed by the City. Abatement of Lease Payments The Lease Payments will be abated under the Lease during any period in which there is substantial interference with the City's use and occupancy of all or any portion of the Leased Property, including interference due to: (a) damage or destruction of the Leased Property in whole or in part or (b) eminent domain proceedings with respect to the Leased Property or any portion thereof. The amount of such abatement is required to be an amount determined by the City such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. In the event of such abatement, the City will have no obligation to pay abated Lease Payments and there is no remedy available to the Trustee or the Bond Owners arising from such abatement. Option to Prepay The City has the option to prepay the principal components of the Lease Payments in whole, or in part in any integral multiple of $5,000, from any source of legally available funds, on any date on which the Bonds are subject to optional redemption, at a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with the interest component of the Lease Payment required to be paid on such date. Substitution of Property The City has the option at any time and from time to time during the term of the Lease to substitute other land, facilities or improvements (the "Substitute Property") for the Leased Property or portion thereof (the "Former Property") provided that the City must satisfy all of the requirements set forth in the Lease, including the following: (a) No Event of Default has occurred and is continuing. (b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Orange County Recorder sufficient memorialization of, an amendment to the Lease which adds the legal description of the Substitute Property to the Lease and deletes therefrom the legal description of the Former Property. (c) The City has obtained a CLTA policy of title insurance insuring the City's leasehold estate in the Substitute Property, subject only to C-6 Permitted Encumbrances, in an amount at least equal to the estimated value thereof. (d) The City has certified in writing to the Authority and the Trustee that the Substitute Property serves the municipal purposes of the City and constitutes property which the City is permitted to lease under the laws of the State of California, and has been determined to be essential to the proper, efficient and economic operation of the City and to serve an essential governmental function of the City. (e) The Substitute Property does not cause the City to violate any of its covenants, representations and warranties made in the Lease. (f) The City has filed with the Authority and the Trustee a written certification of the City stating that the estimated value of the Substitute Property is at least equal to the estimated value of the Former Property, and that the useful life of the Substitute Property at least extends to the final maturity date of the Bonds. (g) The City has mailed written notice of such substitution to each rating agency which then maintains a rating on the Bonds. Upon the satisfaction of all such conditions precedent, the term of the Lease will thereupon end as to the Former Property and commence as to the Substitute Property, and all references in the Site Lease and the Lease to the Former Property will apply with full force and effect to the Substitute Property. The City will not be entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution. Release of Property The City has the option at any time and from time to time during the term of the Lease to release any portion of the Leased Property from the Lease (the "Released Property") provided that the City has satisfied all of the requirements set forth in the Lease, including the following: (a) No Event of Default has occurred and is continuing. (b) The City has filed with the Authority and the Trustee, and caused to be recorded in the office of the Orange County Recorder sufficient memorialization of, an amendment which removes the Released Property from the Site Lease and the Lease. (c) The City has certified in writing to the Authority and the Trustee that the value of the property which remains subject to the Lease following such release is at least equal to the aggregate original principal amount of the Bonds and any Additional Bonds, and the fair rental value of the property which remains subject to the Lease following such release is at least equal to the Lease Payments thereafter coming due and payable hereunder. C-7 (d) The City has mailed written notice of such release to each rating agency which then maintains a rating on the Bonds. Upon the satisfaction of all such conditions precedent, the term of the Site Lease and the Lease will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the City will execute, deliver and cause to be recorded all documents required to discharge the Site Lease, the Lease and the Assignment Agreement of record against the Released Property. Maintenance, Utilities, Taxes and Modifications The City, at its own expense, has agreed to maintain or cause to be maintained the Leased Property in good repair; the Authority has no responsibility for such maintenance. The City is also obligated to pay all taxes and assessments charged to the Leased Property. The City has the right under the Lease to remodel the Leased Property and to make additions, modifications and improvements to the Leased Property, provided that such additions, modifications and improvements do not in any way damage the Leased Property or cause the Leased Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of such additions, modifications and improvements, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or to remain against the Leased Property, except that the City has the right in good faith to contest any such lien. Insurance The Lease requires the City to maintain or cause to be maintained the following insurance against risk of physical damage to the Leased Property and other risks for the protection of the Bond Owners, the Authority and the Trustee: Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the term of the Lease, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard commercial general liability insurance policy or policies in protection of the Authority, the City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance must be applied toward extinguishment or satisfaction of the liability with respect to which paid. C-8 If any insurance required pursuant to this provision is provided in the form of self insurance, the City must file with the Trustee annually, within 90 days following the close of each Fiscal Year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. If any such insurance is provided in the form of self-insurance by the City, the City has no obligation to make any payment with respect to any insured event except from those reserves. Casualty Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the term of the Lease, casualty insurance against loss or damage to all buildings situated on the Leased Property, in an amount at least equal to the lesser of (a) 100% of the replacement value of the insured buildings, or (b) 100% of the aggregate principal amount of the Outstanding Bonds. Such insurance must, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, excluding earthquake insurance. Such insurance may be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance shall be applied as provided in the Lease. Rental Interruption Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the term of the Lease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any portion of the Leased Property constituting buildings or other improvements as a result of any of the hazards covered in the insurance required by the casualty insurance described above in an amount at least equal to the maximum such Lease Payments coming due and payable during any consecutive two Fiscal Years. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance, if any, must be paid to the Trustee and deposited in the Bond Fund, to be applied as a credit towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable. Recordation and Title Insurance. On or before the Closing Date the City shall, at its expense, (a) cause the Site Lease, the Assignment Agreement and the Lease, or a memorandum thereof or thereof in form and substance approved by Bond Counsel, to be recorded in the office of the Orange County Recorder, and (b) obtain a CL TA title insurance policy from Stewart Guaranty Title Company insuring the City's leasehold estate in the Leased Property, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. All Net Proceeds received under any such title insurance policy shall be deposited with the Trustee to be credited towards the prepayment of the remaining Lease Payments under the Lease. C-9 Assignment; Subleases The Authority has assigned certain of its rights under the Lease to the Trustee under the Assignment Agreement. The City may not assign any of its rights in the Lease. The City may sublease all or a portion of the Property, but only under the conditions contained in the Lease, including the condition that such sublease not cause interest on the Bonds to become subject to federal or State of California personal income taxes. Amendment of Lease Agreement The Authority and the City may at any time amend or modify any of the provisions of the Lease, but only: (a) with the prior written consents of the Owners of a majority in aggregate principal amount of the outstanding Bonds; or (b) without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: • to add to the covenants and agreements of the City contained in the Lease, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power therein reserved to or conferred upon the City; • to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained therein, to conform to the original intention of the City and the Authority; • to modify, amend or supplement the Lease in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code; • to amend the description of the Leased Property to reflect accurately the property originally intended to be included therein; • to obligate the City to pay Supplemental Lease Payments which constitute additional amounts of rental for the use and occupancy of the Leased Property, but only if (a) such Supplemental Lease Payments are pledged or assigned for the payment of any bonds, notes or other obligations, including but not limited to an issue of Additional Bonds, the proceeds of which are applied to finance or refinance the acquisition or construction of any real or personal property for which the City is authorized to expend funds subject to its control, (b) the City has filed with the Trustee a written certificate of the City stating that the estimated value of the Leased Property is, or following the completion of the acquisition and construction of any improvements to be financed from the proceeds of such bonds, notes or other obligations will be, at least equal to the aggregate original principal amount of the Bonds and all such other bonds, notes or other obligations, and (c) the City has filed with the Trustee written evidence that the amendments made under this clause will not of C-10 themselves cause a reduction or withdrawal of any rating then assigned to the Bonds; or • in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds. Events of Default Each of the following constitutes an Event of Default under and as defined in the Lease: • Failure by the City to pay any Lease Payment or other payment required to be paid under the Lease at the time specified therein. • Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Lease, other than as referred to in the preceding paragraph, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 30-day period, such failure will not constitute an Event of Default if the City commences to cure such failure within such 30-day period and thereafter diligently and in good faith cures such failure in a reasonable period of time. • Certain events relating to the insolvency or bankruptcy of the City. Remedies on Default Upon the occurrence and continuance of any Event of Default, the Authority has the right to terminate the Lease or, with or without such termination, re-enter, take possession of and re-let the Leased Property. When the Authority does not elect to terminate the Lease, the City remains liable to pay all Lease Payments as they come due and liable for damages resulting from such Event of Default. Any amounts collected by the Authority from the re-letting of the Leased Property will be credited towards the unpaid Lease Payments. Any net proceeds of re-leasing or other disposition of the Leased Property are required to be applied as set forth in the Indenture. Under the Assignment, the Authority assigns all of its rights with respect to remedies in an Event of Default to the Trustee, so that all such remedies will be exercised by the Trustee and by the Bond Owners as provided in the Indenture. The Trustee has no right to accelerate Lease Payments and, due to the governmental nature of the Leased Property, it is uncertain whether a court would permit the exercise of the remedies of re-entry, repossession or re-letting. C-11 INDENTURE OF TRUST Establishment of Funds and Accounts; Flow of Funds Costs of Issuance Fund. A portion of the proceeds of the Bonds will be deposited by the Trustee in the Costs of Issuance Fund on the Closing Date. The moneys in the Costs of Issuance Fund will be disbursed to pay costs of issuing the Bonds and other related financing costs from time to time upon receipt of written requests of the Authority. On July 1, 2017, or upon the earlier written request of the Authority, the Trustee shall transfer all amounts remaining in the Costs of Issuance Fund to the Interest Account and shall thereupon close the Costs of Issuance Fund. Capitalized Interest. A portion of the proceeds of the Bonds will be deposited in the Interest Account, representing capitalized interest coming due and payable through May 1, 2019. Project Fund. The portion of the proceeds of the Bonds representing the Site Lease Payment will be deposited into the Project Fund on the Closing Date. The Project Fund will be held by the Trustee and will be applied solely for the payment of the costs of acquisition and construction of the Projects. The Trustee shall disburse amounts in the Project Fund from time to time to pay acquisition and construction costs of the Projects upon submission of written requisitions of the City stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. Any amounts remaining on deposit in the Project Fund and not required to complete the acquisition and construction of the Projects, as evidenced by a written certificate of the City filed with the Authority and the Trustee, will be transferred by the Trustee to the Interest Account and the Trustee shall thereupon close the Project Fund. The City is required to maintain accurate records showing the amount of each disbursement from the Project Fund, including the purpose for which each such disbursement has been made. Bond Fund; Deposit and Transfer of Amounts Therein. All Revenues will be deposited by the Trustee in the Bond Fund promptly upon receipt. On or before each Interest Payment Date, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee will establish and maintain within the Bond Fund), the following amounts in the following order of priority: (a) Interest Account. The Trustee will deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest coming due and payable on such date on all outstanding Bonds. All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it comes due and payable, including accrued interest on any Bonds redeemed prior to maturity. (b) Principal Account. The Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such Interest Payment Date. All C-12 moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds at the maturity thereof. Redemption Fund. The Trustee will establish and maintain a Redemption Fund, amounts in which will be used and withdrawn by the Trustee solely for the purpose of paying the principal of on the Bonds to be redeemed. At any time prior to giving notice of redemption of any such Bonds, the Trustee may apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as the Authority directs, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Insurance and Condemnation Fund; Application of Net Proceeds. Any Net Proceeds of insurance or condemnation awards with respect to the Leased Property will be deposited in the Insurance and Condemnation Fund. In the event of an insurance or eminent domain award, the Net Proceeds on deposit in the Insurance and Condemnation Fund will be used, as directed by the City, either: • to replace, repair, restore, modify or improve the Leased Property if the City determines that such is economically feasible or in the best interests of the City, or • to the extent not so used, to prepay the Lease Payments and thereby redeem outstanding Bonds and Additional Bonds, on a pro rata basis between the Bonds and any Additional Bonds. If the City fails to determine and notify the Trustee in writing of its determination, within 45 days following the date of such deposit, to replace, repair, restore, modify or improve the Leased Property which has been damaged or destroyed, then such Net Proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds and Additional Bonds on the next available redemption date, on a pro rata basis between the Bonds and any Additional Bonds. Notwithstanding the foregoing, however, in the event of damage or destruction of the Leased Property in full, the Net Proceeds of such insurance are required to be used by the City to rebuild or replace the Leased Property if such proceeds are not sufficient to redeem outstanding Bonds and Additional Bonds equal in aggregate principal amount to the unpaid Lease Payments. Investment of Funds; Determination of Value of Investments All moneys in any of the funds or accounts held by the Trustee under the Indenture will be invested by the Trustee solely in Permitted Investments as directed by the Authority in advance of the making of such investments. In the absence of any such direction of the Authority, the Trustee will invest any such moneys in Permitted Investments consisting of money market funds. Obligations purchased as an investment of moneys in any fund will be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established under the Indenture will be deposited in the Bond Fund. For the C-13 purpose of determining the amount in any fund or account established under the Indenture, the value of investments credited to such fund will be calculated at the market value thereof, in accordance with the procedures specified in the Indenture. Covenants of the Authority Payment of Bonds. The Authority will punctually pay or cause to be paid the principal of and interest on the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, but only out of the Revenues and other assets pledged for such payment as provided in the Indenture. The Authority will not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are outstanding, except the pledge and assignment created by the Indenture. Accounting Records and Financial Statements. The Trustee will at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with industry standards, in which complete and accurate entries will be made of all transactions relating to the proceeds of the Bonds, the Revenues, the Lease and all funds and accounts established pursuant to the Indenture. Such books of record and account will be available for inspection by the Authority and the City during regular business hours and upon reasonable prior notice. Issuance of Additional Bonds. The Authority has the right to issue Additional Bonds pursuant to a Supplemental Indenture, which are payable from and secured by a pledge of and lien on the Revenues on a parity with the pledge and lien which secure the Bonds, subject to the following conditions precedent: (a) No Event of Default (or no event with respect to which notice has been given and which, once all notice of grace periods have passed, would constitute an Event of Default) has occurred and is continuing. (b) The City and the Authority have entered into an amendment or supplement to the Lease under the terms thereof, pursuant to which the City has agreed to pay Supplemental Lease Payments for the use and occupancy of the Leased Property under the Lease, which Supplemental Lease Payments provide additional Revenues which are sufficient to pay the principal of and interest on such Additional Bonds when due; (c) The City and the Authority have filed a written certificate with the Trustee stating that the estimated value of the Leased Property is at least equal to the sum of the aggregate original principal amount of the Bonds plus the aggregate original principal amount of such Additional Bonds; (d) Interest on such Additional Bonds shall be payable solely on May 1 and November 1, and the principal of such Additional Bonds shall be payable solely on May 1; and C-14 (e) The Authority shall deliver to the Trustee a written certificate of the Authority certifying, and an opinion of Bond Counsel stating, that the conditions precedent to the issuance of such Additional Bonds set forth above have been satisfied. Tax Covenants. The Authority will not take, nor permit nor suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of any of the Bonds which would cause any of the Bonds to be "arbitrage bonds" or "private activity bonds" within the meaning of the Tax Code. The Authority will cause to be calculated annually all excess investment earnings which are required to be rebated to the United States of America under the Tax Code, and will cause all required amounts to be rebated from payments made by the City for such purpose under the Lease. Enforcement of the Lease. The Trustee will promptly collect all amounts due from the City pursuant to the Lease. Subject to the provisions of the Indenture governing the enforcement of remedies upon the occurrence of an Event of Default, the Trustee is required to enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the City under the Lease. Amendment of Indenture The Indenture may be modified or amended at any time by a supplemental indenture with the prior written consents of the Owners of a majority in aggregate principal amount of the Bonds then outstanding. No such modification or amendment may (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal or interest at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. The Indenture may also be modified or amended at any time by a supplemental indenture, without the consent of any Bond Owners, to the extent permitted by law, but only for any one or more of the following purposes: • To add to the covenants and agreements of the Authority contained in the Indenture, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power therein reserved to or conferred upon the Authority. • To cure any ambiguity, inconsistency or omission in the Indenture, or correct any defective provision in the Indenture, or in any other respect whatsoever as the Authority may deem necessary or desirable, so long as such modification or amendment does not materially adversely affect the interests of the Bond Owners in the opinion of Bond Counsel filed with the Trustee. C-15 • To modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939 or any similar federal statute at any time in effect. • To modify, amend or supplement the Indenture so as to cause interest on the Bonds to remain excludable from gross income under the Tax Code. • to facilitate the payment of Supplemental Lease Payments by the City under the Lease as provided therein, and to facilitate the issuance of any Additional Bonds which are secured by Revenues resulting from such Supplemental Lease Payments. See "LEASE AGREEMENT - Amendment of Lease Agreement" above. • to facilitate the issuance of Additional Bonds under the Indenture. Events of Default Events of Default Defined. The following events constitute events of default under the Indenture: • Failure to pay any installment of the principal of any Bonds when due, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. • Failure to pay any installment of interest on the Bonds when due. • Failure by the Authority to observe and perform any of the other covenants, agreements or conditions on its part contained in the Indenture or in the Bonds, if such failure has continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, has been given to the Authority by the Trustee; provided, however, if in the reasonable opinion of the Authority the failure stated in the notice can be corrected, but not within such 30-day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within such 30-day period and thereafter diligently and in good faith cures the failure in a reasonable period of time. • The commencement by the Authority of a voluntary case under Title 11 of the United States Code or any substitute or successor statute. • The occurrence and continuation of any Event of Default under and as defined in the Lease. See "LEASE AGREEMENT - Events of Default" above. • The occurrence and continuation of an event of default under and as defined in the documents authorizing the issuance of any Additional Bonds. C-16 Remedies. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then outstanding, and upon being indemnified to its satisfaction therefor, the Trustee shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it deems most effectual to protect and enforce any such right, at law or in equity, including but not limited to enforcement of any and all rights granted to the Authority or the Trustee under the Lease. No delay or omission to exercise any right or power accruing upon any Event of Default will impair any such right or power or will be construed to be a waiver of any such Event of Default or acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient. Application of Revenues and Other Funds After Default. If an Event of Default has occurred and is continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture will be applied by the Trustee as follows and in the following order: (1) To the payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture; (2) To the payment of the principal of and interest then due on the Bonds and any Additional Bonds (upon presentation of the Bonds and Additional Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of the Indenture, as follows: First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds and Additional Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds and Additional Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds and Additional Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference. C-17 Limitation on Bond Owners' Right to Sue. No Owner of any Bond has the right to institute any suit, action or proceeding at law or in equity, for any remedy under the Indenture, unless: • such Owner has previously given to the Trustee written notice of the occurrence of an Event of Default; • the Owners of a majority in aggregate principal amount of all the Bonds then outstanding have requested the Trustee in writing to exercise its powers under the Indenture; • said Owners have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; • the Trustee has refused or failed to comply with such request for a period of 60 days after such written request has been received by the Trustee and said tender of indemnity is made to the Trustee; and • no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Owners of a majority in aggregate principal amount of the Bonds then outstanding. Discharge of Indenture The Authority may pay and discharge the indebtedness on any or all of the outstanding Bonds in any one or more of the following ways: • by paying or causing to be paid the principal of and interest on the Bonds, as and when the same become due and payable; • by irrevocably depositing with the Trustee, in trust, at or before maturity, cash and/or non-callable Federal Securities which, together with the investment earnings to be received thereon, have been verified by an independent accountant to be sufficient to pay or redeem such Bonds when and as the same become due and payable; or • by delivering to the Trustee, for cancellation by it, all of such Bonds. Upon such payment, and notwithstanding that any Bonds have not been surrendered for payment, the pledge of the Revenues and other funds provided for in the Indenture with respect to such Bonds, and all other obligations of the Authority under the Indenture with respect to such Bonds, will cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose. Any funds thereafter held by the Trustee, which are not required for said purposes, will be paid over to the Authority. C-18 APPENDIXD DTC'S BOOK-ENTRY ONLY SYSTEM The information in this Appendix D concerning The Depository Trust Company ("DTC "), New York, New York, and DTC's book-entry system has been obtained from DTC. The Authority and the City take no responsibility for the completeness or accuracy thereof The City and the Authority cannot give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners: (z) payments of interest and principal with respect to the 2017 Bonds, (ii) certificates representing ownership interest in or other confirmation or ownership interest in the 2017 Bonds, or (iii) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2017 Bonds, or that they will so do on a timely basis without error, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company ("DTC''), New York, NY, will act as securities depository for the 2017 Bonds. The 2017 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the 2017 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-US. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-US. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC''). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-US. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants''). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2017 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2017 Bond ("Beneficial Owner'') is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2017 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants D-1 acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in 2017 Bonds, except in the event that use of the book-entry system for the 2017 Bonds is discontinued. To facilitate subsequent transfers, all 2017 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2017 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2017 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2017 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2017 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2017 Bond documents. For example, Beneficial Owners of2017 Bonds may wish to ascertain that the nominee holding the 2017 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the 2017 Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2017 Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts 2017 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the 2017 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative ofDTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal and interest payments with respect to the 2017 Bonds to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the 2017 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event D-2 that a successor depository is not obtained, certificates representing the 2017 Bonds are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, representing the 2017 Bonds will be printed and delivered to DTC in accordance with the provisions of the Indenture. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City and the Authority believe to be reliable, but the City and the Authority take no responsibility for the accuracy thereof. D-3 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of April 18, 2017 is executed and delivered by the City of Buena Park (the "City") and Harrell & Company Advisors, LLC, as dissemination agent (the "Dissemination Agent") in connection with the issuance by the Buena Park Public Financing Authority (the "Authority") of its $9,785,000 aggregate initial principal amount 2017 Lease Revenue Bonds (Fire Station Headquarters Project) (the "Bonds"). The Bonds are being issued pursuant to an Indenture of Trust, dated as of April 1, 2017 (the "Indenture"), by and between the City and MUFG Union Bank, N.A., as trustee (the "Trustee"). The City and the Dissemination Agent covenant and agree as follows: Section I. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule (as defined below). Section 2. Defmitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement, unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Dissemination Agent" shall mean Harrell & Company Advisors, LLC, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5( a) of this Disclosure Agreement. 'MSRB" shall mean the Municipal Securities Rulemaking Board. "Obligated Person" shall mean any person, including an issuer of municipal securities, who is either generally or through an enterprise, fund, or account of such person committed by contract or other arrangement to support payment of all, or part of the obligations on the Bonds ( other than providers of municipal bond insurance, letters of credit, or other liquidity facilities). "Official Statement" shall mean the final Official Statement, dated March 23, 2017, relating to the Bonds. "Participating Underwriter" shall mean Hilltop Securities Inc., the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. E-1 Section 3. Provisions of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City's Fiscal Year (which Fiscal Year currently commences on July I and ends on June 30 of each year), commencing March 31, 2018 with the report for the 2016-17 Fiscal Year, provide to the MSRB, in an electronic format accompanied by identifying information as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City for the Fiscal Year may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(b ). (b) Not later than 5 business days prior to the applicable date specified in subsection (a) above for providing the Annual Report to the MSRB, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the first sentence of this subsection (b ). The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the MSRB by the date required in subsection (a), the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A, or in such other form as prescribed by, or acceptable to, the MSRB. (d) The Dissemination Agent (if other than the City) shall, if and to the extent, the City has provided an Annual Report in final form to the Dissemination Agent for dissemination, file a report with the City certifying that the Annual Report has been provided to the MSRB pursuant to this Disclosure Agreement, and stating the date it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements of the City prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3( a), the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The tabular financial information and operating data contained in the Official Statement under the following section headings presented on an annual basis, for the most recently completed Fiscal Year: (i) Table 9 (General Fund Balance Sheets); (ii) Table 10 (Statements of Revenues, Expenditures and Changes in General Fund Balance); E-2 (iii) Table 12 (Primary General Fund Tax Revenue Sources); and (iv) Table 16 (City Share of Due Diligence Review Proceeds, Land Sale Proceeds, and Residual Property Taxes Attributable to the Consolidated Redevelopment Project Area). ( c) To the extent not contained in the audited financial statements filed pursuant to paragraph (a) above, information for the most recent year provided by Ca!PERS for the net pension liability of the City's Miscellaneous Plan and Safety Plans, in the format provided from Ca!PERS (which format may change from time to time compared to the information currently provided to the City and disclosed in the Official Statement and the FY 2015-16 CAFR (as defined in the Official Statement)). Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been available to the public on the MSRB's internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds, which notice shall be given in a timely manner, not in excess of ten (10) business days after the occurrence of such Listed Event: I) Principal and interest payment delinquencies; 2) Non-payment related defaults, if material; 3) Unscheduled draws on debt service reserves reflecting financial difficulties; 4) Unscheduled draws on credit enhancements reflecting financial difficulties; 5) Substitution of credit or liquidity providers, or their failure to perform; 6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or fmal determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; 7) Modifications to rights of security holders, if material; 8) Bond calls, if material, and tender offers; 9) Defeasances; 10) Release, substitution, or sale of property securmg repayment of the Bonds, if material; 11) Rating changes; E-3 12) Bankruptcy, insolvency, receivership or similar event of the Obligated Person; 13) The consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and 14) Appointment of a successor or additional trustee or the change of name of a trustee, if material. (b) The Dissemination Agent shall, within one (1) business day after obtaining knowledge of the occurrence of any of the events listed in Section 5(a) (1), (3), (4), (5), (6), (9), (11) or (12), inform the City of the occurrence of such event. As soon as reasonably practicable after obtaining know ledge of the occurrence of such event, the City shall, or shall cause the Dissemination Agent to, file in a timely manner, not in excess often (10) business days after the occurrence of any such event, a notice of such occurrence with the MSRB, in an electronic format accompanied by identifying information as prescribed by the MSRB. (c) The Dissemination Agent shall, within one (1) business day after obtaining knowledge of the occurrence of any of any of the events listed in Section 5(a) (2), (7), (8), (10), (13) or (14), inform the City of the occurrence of such event and request that the City promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection ( d). (d) Whenever the City obtains knowledge of the occurrence of any event specified in Section 5(a) (2), (7), (8), (10), (13) or (14), the City shall as soon as possible, in order to meet the ten (10) business day deadline to file notices required under the Rule and pursuant to the following sentence, determine if such event would be material under applicable Federal securities law. If the City determines that knowledge of the occurrence of such event would be material under applicable Federal securities law, the City shall, or shall cause the Dissemination Agent to, file in a timely manner, not in excess of ten ( 10) business days after the occurrence of any such event, a notice of such occurrence with the MSRB, in an electronic format accompanied by identifying information as prescribed by the MSRB. Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all the Bonds. Section 7. Dissemination Agent. (a) The City hereby appoints and engages Harrell & Company Advisors, LLC as the Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. The City may replace the Dissemination Agent with or without cause. If at the time there is no designated Dissemination Agent appointed by the City, the City shall be the Dissemination Agent and undertake or assume its obligations hereunder. Any company succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent hereunder without the E-4 execution or filing of any paper or any further act. The Dissemination Agent may resign its duties hereunder by giving 30-days written notice to the City. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees agreed to between the Dissemination Agent and the City from time to time and for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, holders or beneficial owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the City or an opinion of nationally recognized bond counsel. Section 8. Amendment; Waiver. Notwithstanding any other prov1s1on of this Disclosure Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an Obligated Person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual fmancial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or fmancial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or fmancial information being provided. For purposes of this paragraph, "impact" has the meaning as that word is used in the letter from the staff of the Securities and Exchange Commission to the National Association of Bond Lawyers dated June 23, 1995. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB in the same manner as for a Listed Event under Section 5(b ). E-5 No amendment to this Agreement which modifies the duties or rights of the Dissemination Agent shall be made without the prior written consent of the Dissemination Agent. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section I I. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Owners, or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the City or an opinion of nationally recognized bond counsel. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach of this Agreement. Section 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the City: City of Buena Park 6650 Beach Boulevard Buena Park, California 90622 (714) 562-3550 (714) 562-3559 Fax Attention: City Manager E-6 To the Dissemination Agent: Harrell & Company Advisors, LLC 333 City Boulevard West, Suite 1215 Orange, California 92868 (714) 939-1464 Attention: Suzanne Harrell Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first written above. CITY OF BUENA PARK By:------City Manager HARRELL & COMP ANY ADVISORS, LLC as Dissemination Agent By: ------Authorized Representative E-7 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name oflssuer: Buena Park Public Financing Authority Name of Bond Issues: $9,785,000 (initial principal amount) 2017 Lease Revenue Bonds (Fire Station Headquarters Project) Date oflssuance: April 18, 2017 NOTICE IS HEREBY GIVEN that the City of Buena Park (the "City") has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of April 18, 2017, by and between the City and Harrell & Company Advisors, LLC, as dissemination agent. The City anticipates that the Annual Report will be filed by ------20 Date: ______~ 20 Harrell & Company Advisors, LLC as Dissemination Agent By: ______ Title: ------ cc: City Manager of the City of Buena Park E-8