Fiscal Year Ending 2019

CITY OF TEMECULA CALIFORNIA

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CITY OF TEMECULA CALIFORNIA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

Fiscal Year Ended June 30, 2019

Prepared by: Finance Department 41000 Main Street Temecula, CA 92590 (951) 694-6430 www.TemeculaCA.gov

Mayor Naggar states, “It took 30 years of dedication, hard work and a lot of love from our community, engaged citizens, families and businesses to build our City, so this year we are shining a spotlight on what, exactly, we all LOVE about our beautiful City.”

There are infinite reasons to LOVE Temecula. Its picturesque vineyards, award-winning wineries, themed City parks, championship golf courses, charming Old Town, rolling hills, morning mist, afternoon ocean breezes, the shopping experience at Promenade Temecula, world-class entertainment at Pechanga Resort & Casino, diverse restaurant choices, family-friendly citywide events, quaint neighborhoods, friendly neighbors, equestrian trails, fun parades, community theater, museums, top rated schools, maximum public safety, the people, inclusiveness, cultured tourists, generous business community, scenic mountainous backdrop, proximity to the ocean, hiking, biking, the weather and endless hometown LOVE.

“I love it all in Temecula, but what melts my heart is our uniquely close-knit inclusive community of individuals and families with special needs; and I am so very proud to be their advocate,” adds Mayor Naggar. The City of Temecula will be emphasizing the special talents that these individuals and emerging adults can bring to the workforce throughout the year, including a special needs workforce luncheon scheduled for the Spring. “Their special abilities far exceed their special needs, and it’s exciting to see our business community recognize this as well. That’s what I LOVE most about Temecula,” Naggar adds.

City of Temecula Fiscal Year 2018-19 Comprehensive Annual Financial Report

TABLE OF CONTENTS

Letter of Transmittal ------7 Government Finance Officers Association Award ------22 City Organizational Chart ------23 Staff Directory ------24 FINANCIAL SECTION

INDEPENDENT AUDITOR’S REPORT ------26 MANAGEMENT’S DISCUSSION AND ANALYSIS ------29 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position ------44 Statement of Activities ------45 Fund Financial Statements: Balance Sheet – Governmental Funds ------46 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ------48 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ------50 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ------52 Budgetary Comparison Statement - General Fund ------54 Budgetary Comparison Statement - Community Services District ------55 Budgetary Comparison Statement – City Housing ------56 Budgetary Comparison Statement – Measure A ------57 Statement of Fund Net Position – Proprietary Funds ------58 Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds------59 Statement of Cash Flows – Proprietary Funds ------60 Statement of Fiduciary Net Position – Fiduciary Funds ------61 Statement of Changes in Fiduciary Net Position – Fiduciary Funds ------62 Notes to Financial Statements------64

Fiscal Year 2018-19 Comprehensive Annual Financial Report 3 City of Temecula Fiscal Year 2018-19 Comprehensive Annual Financial Report

SUPPLEMENTAL SCHEDULES REQUIRED SUPPLEMENTAL INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios ------104 Schedule of Contributions ------105 Schedule of Changes in the Net Other Postemployment Benefits and Related Ratios ------106 Schedule of Contributions-Other Postemployment Benefits ------107 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES: Non-Major Funds: Definitions of Non-Major Governmental Funds ------110 Combining Balance Sheet ------112 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ------118 Special Revenue Funds - Budgetary Comparison Schedules: Gas Tax ------124 Development Impact ------125 CDBG ------126 AB 2766 ------127 AB 3229 COPS ------128 Temecula Major Crimes Reward Fund ------129 Temecula Energy Efficiency and Asset Management (TEAM) ------130 Public, Education & Government Fees (PEG) Fund ------131 Road Maintenance Rehab Act (RMRA) ------132 Street Maintenance Fund ------133 Capital Projects Funds - Budgetary Comparison Schedule: Capital Outlay ------134 Debt Service Funds - Budgetary Comparison Schedule: Financing Lease ------135 Internal Service Funds: Definitions of Internal Service Funds ------137 Combining Statement of Net Position ------138 Combining Statement of Revenues, Expenses and Changes In Fund Net Position ------140 Combining Statement of Cash Flows ------142 Agency Funds: Definition of Agency Funds ------145 Combining Balance Sheet ------146 Combining Statement of Changes in Assets and Liabilities------147

Fiscal Year 2018-19 Comprehensive Annual Financial Report 4 City of Temecula Fiscal Year 2018-19 Comprehensive Annual Financial Report

STATISTICAL SECTION Contents of Statistical Section ------149 Locator Map ------150 Financial Trends: Net Position by Component – Last Ten Fiscal Years ------152 Changes in Net Position – Last Ten Fiscal years ------154 Fund Balances of Governmental Funds – Last Ten Fiscal Years ------156 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years ------158 Government-Wide Revenues – Last Ten Fiscal Years ------160 Government-Wide Expenses by Program – Last Ten Fiscal Years ------161 General Governmental Revenues by Source – Last Ten Fiscal Years ------162 General Governmental Expenditures by Function – Last Ten Fiscal Years ------163 Revenue Capacity: Principal Secured Property Owners – Last Ten Fiscal Years ------166 Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years ------168 Property Tax Levies and Collections – Last Ten Fiscal Years ------169 Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ------170 Taxable Sales by Industry – Last Ten Calendar Years ------172 Sales Tax Rates – Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years ------174 Top 25 Sales Tax Producers ------176 Debt Capacity: Computation of Direct and Overlapping Bonded Debt ------178 Ratio of Outstanding Debt by Type – Last Ten Fiscal Years ------180 Ratio of General Bonded Debt – Last Ten Fiscal Years ------181 Legal Debt Margin – Last Ten Fiscal Years ------182 Pledged Revenue Coverage – Last Ten Fiscal Years------184 Demographic and Economic Information: Demographic and Economic Statistics – Last Ten Calendar Years ------186 Largest Employers by Number of Employees ------187 Operating Information: Operating Indicators by Function – Last Ten Fiscal Years ------190 Full-Time City Employees – Last Ten Fiscal Years ------191 Capital Asset Statistics by Function – Last Ten Fiscal Years ------192 Comparative City Information –Last Five Fiscal Years ------193 Miscellaneous Statistics ------194

Fiscal Year 2018-19 Comprehensive Annual Financial Report 5 6 Fiscal Year 2018-19 Comprehensive Annual Financial Report

TRANSMITTAL MESSAGE

December 23, 2019

Honorable Mayor, Members of the City Council, and City Manager:

Enclosed is the Comprehensive Annual Financial Report of the City of Temecula (City) for the Fiscal Year ended June 30, 2019, which has been prepared by the Finance Department. The responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. The enclosed data is accurate in all material respects and is reported in a manner designed to fairly present the financial position and results of operations of the various major funds and fund types of the City. This report includes all City funds and disclosures necessary to enable the reader to gain an understanding of the City's financial activities.

Management of the City is responsible for establishing and maintaining an internal control structure designed to ensure the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data is compiled to allow the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of the control should not exceed the benefits likely to be derived; and, (2) the valuation of costs and benefits requires management estimates and judgment.

Budgets are adopted annually by the City Council through resolution. As provided by City ordinance, the Director of Finance is responsible for preparing the budget and for its implementation after adoption. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the annual budget adopted by the City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the department level.

All appropriations lapse at year-end, except those approved for carryover through encumbrances or by Council resolution. The City Manager has the legal authority to transfer operating budget appropriations within a department. Changes to total departmental appropriations require the majority approval of City Council.

It is the policy of the City to have an audit performed annually by an independent certified public accountant. Eide Bailly, LLP, performed the independent audit of the June 30, 2019 financial statements. Their opinion is included with the basic financial statements.

The Management’s Discussion and Analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this Letter of Transmittal and should be read in conjunction with it.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

PROFILE OF THE CITY

Following a vote by the residents on November 7, 1989, the City incorporated under the general laws of the State of California on December 1, 1989. Temecula is located approximately 55 miles northeast of San Diego and approximately 80 miles southeast of Los Angeles in southwestern Riverside County. Currently, the population is 113,826 and the city limits cover 37.19 square miles. Temecula is a General Law City and five Temecula citizens make up the Temecula City Council with each member currently elected, by District, to a four year term of office. The Mayor is appointed annually by and from the City Council.

The Temecula Community Services District (TCSD), which was also established in 1989, is responsible for providing parks, recreation, and library services to the citizens of Temecula. The activities of the TCSD are included with the activities of the City for financial reporting purposes because the City Council, serving as the Board of Directors, has full accountability for the TCSD’s fiscal matters.

The County of Riverside transferred responsibility for the Temecula Redevelopment Agency (RDA) to the City on July 1, 1991. The County established the Redevelopment project area in 1988. In June 2011, the Governor of California signed ABx1 26, which dissolved redevelopment agencies, including the Temecula Redevelopment Agency, effective February 1, 2012, and provided for the designation of successor agencies to oversee the completion of previously obligated redevelopment activities. As a result, all assets of the Redevelopment Agency were transferred to the Successor Agency of the former Redevelopment Agency of the City of Temecula (SARDA) on February 1, 2012, and the City Council began serving as the Successor Agency.

The Temecula Public Financing Authority (TPFA) was established pursuant to a Joint Exercise of Powers Agreement, dated April 24, 2001, by and between the City and the former Redevelopment Agency. The City and the former Redevelopment Agency formed the TPFA for the primary purpose of assisting in the financing and refinancing of a community facilities district and the issuance of bonds necessary to finance the public improvements. The TPFA may establish other community facilities districts in the future in connection with the financing of public improvements in the City and could also be used in connection with other City and Agency financings. Council approved an amendment to the TPFA to provide for the withdrawal of SARDA as a member and add both TCSD and Temecula Housing Authority as new members.

The Temecula Housing Authority (THA) was established on February 22, 2011. The THA was activated pursuant to State law Section 34240 of the California Health and Safety Code, which allows for every City to establish a housing authority. The THA is designed to help protect local housing funds and programs, provide new revenue opportunities for affordable housing programs, serve the public interest, promote public safety and welfare, and ensure decent, safe, sanitary and affordable housing accommodations to persons with low income. The City of Temecula City Council serves as the THA’s Commissioners.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

LOCAL ECONOMY

As San Diego County has become increasingly built out, the inland migration of families and enterprises has made Temecula a prosperous City. Based on the latest available information from HDL Companies, for Fiscal Year 2019-20, it is expected that City net taxable values of real property will increase approximately 4.1% from the prior year, while Countywide net taxable values are expected to increase 5.7%. In calendar year 2018, the number of single family residential sales totaled 1,687, a decrease of approximately 11.1% compared to the prior year, while the median price of a single family residence was $455,000, an increase of 4.6% compared to the prior year.

According to data from the Employment Development Department (EDD), the City’s unemployment rate as of September 2019 has improved at 2.6% compared to 3.2% from the same time prior year. This rate compares favorably to the County and State Unemployment rates of 3.8% and 3.5%, respectively.

According to the most recently received Claritas Report, the City’s current average household income is estimated at $116,464, which is 6.2% higher than the prior year.

The City continues to maintain a strong and diverse sales tax base by promoting economic development in areas such as advanced manufacturing, light industrial, biotech/bioscience and retail businesses. Sales tax is the single largest General Fund revenue source for the City, comprising approximately 50% of total revenue, including transfers in, for Fiscal Year ended June 30, 2019. Total Bradley-Burns sales tax revenue for Fiscal Year 2018-19 was approximately $38.1 million, an increase of approximately 1.6% from the previous year. This increase is primarily attributed to growth in various categories such as automobiles, fuel, and buildings and construction.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

Temecula continues to exceed the State, County, and surrounding areas with respect to sales tax per capita:

QUARTERLY SALES TAX PER CAPITA

$9,000 Temecula

$8,000 Riverside County

$7,000 Southern California

$6,000 California

$5,000

$4,000

$3,000 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 '16 '16 '16 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19

Source: HDL Companies

During Fiscal Year 2018-19, a Best Western Hotel and a Home 2 Suites by Hilton Hotel opened in Temecula. This added 180 new hotel rooms in the City. As a result of the new hotels, total transient occupancy tax revenue in Fiscal Year 2018-19 was approximately 2% higher than the previous year. Also, based on data provided by the Temecula Valley Convention and Visitors Bureau, 2019 hotel occupancy decreased 3.4% from the prior year, while average daily room rates decreased 0.7% from the prior year, while hotel room demand increased 1.7%. The impact of a recent expansion of the Pechanga Resort and Casino, as well as the influx of short term rentals, has impacted the City’s transient occupancy tax revenues.

On December 6th, 2016, the Riverside County Registrar of Voters certified the passage of the City’s general tax measure (Measure S). Measure S established a one-cent transactions use tax to maintain essential City services, including police and fire protection, school safety patrols, traffic mitigation, and youth, senior and disabled services. In accordance with the City Council’s approved spending guidelines, Measure S revenue is to be appropriated in the following order: Public Safety; Asset Management; Capital Improvement Projects; and General Services. The Measure S one-cent transactions use tax became effective April 1, 2017.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

ECONOMIC DEVELOPMENT

Temecula’s slogan of “Old Traditions and New Opportunities” is alive and well and has been a top priority since incorporation. Temecula has strived to create a future enriched with higher education opportunities, maintaining the highest levels of public safety, expanded job growth, a wide variety of retail, food and entertainment opportunities, and keeping well maintained roads, landscaped medians and beautiful parks at the forefront of our efforts. Community special events have become long-time traditions that help define who we are as a City and are important contributors to the high quality of life that our residents have come to know and love.

With approximately 54,400 jobs within the city limits, Temecula is the job center for southwest Riverside County. Our strong industry clusters include:

• Biomedical/Biotech/Life Science • Technology • Advanced Manufacturing Technology • Tourism • Retail

Recently ranked in the top 10% of America’s Safest Cities, per FBI statistics, as well as Temecula Unified School District’s students’ test scores being the highest in Riverside County, Temecula is the ideal place for families to relocate and raise their children. Families have room to explore with over 40 public parks and over 7,000 acres of open space, which encompasses 29% of the City. Nearly 98% of housing stock in Temecula is within ½ mile or closer to a public park. A mountain gap that allows ocean breezes to flow into the City provides a moderate climate, by inland standards, has led to the development of sophisticated wineries.

The City continues its efforts to grow and sustain the economy of Temecula through business attraction, retention, workforce development, higher education, and tourism. The City partners with the Temecula Valley Chamber of Commerce, Temecula Valley Convention and Visitors Bureau (Visit Temecula Valley), Small Business Development Center, Riverside County Economic Development Agency, Riverside County Workforce Development Agency, and the Economic Development Coalition of Southwest California. These alliances leverage the assets and resources necessary to reinforce our market.

Some of the more favorable attributes of Temecula include a business friendly atmosphere, a high standard of living and high quality of life, a well-educated workforce, competitive housing prices, access to the major ports of Southern California, convenient freeway access, and centralized location between Los Angeles, San Diego, and Orange counties. Part of Temecula’s businesses attraction strategy is to be business-friendly in terms of costs. As a result, Temecula is among the top 5% lowest cost cities to do business in California based on a recent study conducted by the Rose Institute of State and Local Government.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

The City has experienced an increase in hotel projects, several of which are in various stages of project development, for a total of approximately 900 proposed rooms. One noteworthy hotel project is the Truax Hotel, a six story 175,000 square foot hotel, and parking structure, proposed to be constructed in Old Town. This project was approved by both Planning Commission and City Council during Fiscal Year 2018-19. The adjacent “Old Town Market Place,” proposes to add two commercial buildings for restaurant and retail totaling approximately 87,000 square feet on the 2 lots in front of City Hall.

The Temecula Valley Craft Brewers Guild, in partnership with California State University San Marcos and the City of Temecula, released a report revealing the City’s 10 craft breweries produced an economic output of approximately $35 million last year. The research shows that Temecula Valley’s brewers increased barrel production by 55% since 2016 and anticipate continued growth over the next 12 months. In 2018, Temecula craft brewers also made a significant impact on the local community, donating over $80,000 to various local organizations and employing more than 130 people.

The City is having a record year with the highest reported number of jobs within limits in its 30 year history. With continued growth of a diverse economic base, Temecula’s job numbers are creating a positive impact for Southwest Riverside County. Temecula accounts for roughly 40% of all jobs in Southwest Riverside County, making it the job center of the region with job counts up nearly 4,000 since 2017.

Companies continue to relocate and expand in Temecula. American Specialty Health Inc., a large health services company, recently moved into a new technology center located in the City and are looking to fill many information technology related positions. The Target store recently completed an 11,000 square foot expansion and exterior renovation. A significant number of local companies are expanding their operations in Temecula. Many reuse projects are also underway to maximize the use of vacant tenant space.

Luxury auto dealers are taking note of Temecula’s retail success. In 2014, Mercedes Benz of Temecula was opened and, according to the President of Mercedes Benz North America, it was the most successful start-up in the history of Mercedes Benz. Hoehn Motors Audi opened in Spring 2017. Toyota of Temecula Valley dealership previously announced their corporate approval to be a point for Lexus and construct a new Lexus dealership in the City’s auto mall, and the dealership’s application is currently in review by the City. The dealership is expected to be completed by the end of 2020.

The City also serves as the retail hub for southwest Riverside County and home to the Promenade Mall, a regional shopping mall featuring over 1 million square feet of eating, dining and entertainment opportunities. The City remains engaged in business retention and expansion efforts and actively supports the Temecula Valley Chamber of Commerce’s “Shop Temecula First” campaign.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

Temecula residents now have news, events, information, and services in the palm of their hands with the new City of Temecula App. This app is designed to enhance citizen engagement by streamlining access to City information, such as contact information, parks and facilities, event calendars, and social media feeds. In addition to providing information, the App allows access to certain City services.

The City continues to grow and expand in order to provide even more services to its community. The City continues to work with colleges and universities to develop multiple higher education opportunities. For over a decade now, California State University San Marcos (CSUSM) has offered degrees, classes and certificates at its satellite campus on Margarita Road in Temecula. CSUSM at Temecula is the only public higher education beyond community college in Southwest Riverside County. In FY18-19, Mount San Jacinto Community College (MSJC) acquired two buildings totaling approximately 350,000 square feet. This gives MSJC a permanent home in Temecula and will address the shortage of classroom space. This new space is anticipated to reduce traffic since residents will have a local option to pursue higher education, with classes expected to start the Fall of 2020.

With the medical needs of Temecula’s growing population, the City formed a Regional Cancer Services Task Force with other southwest cities, hospitals, and healthcare professionals. The goal is to continue to attract high quality additional cancer medical services to the local area.

The City recently completed the Temecula Parkway Interchange project. This project reconfigured the on and off ramps to/from southbound Interstate 15 and will reduce traffic congestion and make way for increased economic development by providing smoother access to business and retail commerce located on Temecula Parkway, as well as provide faster access to emergency and health services at Temecula Valley Hospital.

The Cheesecake Factory recently opened a location at the Promenade Mall. Also, Round 1 Bowling and Amusement entertainment center occupying nearly 50,000 square feet recently opened inside the Promenade Mall. This demonstrates how the Promenade Mall is evolving with current trends, providing a well-balanced mix of retailers, restaurants offerings, and entertainment.

The City is currently pursuing high-end and luxury development projects in various business categories for this desired industry sector. Council recently approved an economic development incentive policy to help attract businesses and support Temecula’s high quality of life, with the City expecting several brand name businesses to open in Fiscal Year 2019-20.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

LONG TERM FINANCIAL PLANNING

The City’s continued control over expenditure growth has been and will continue to be a key factor in maintaining the City’s strong financial position. The City continues to search for opportunities to streamline its workload and operations, while ensuring adequate staffing levels to maintain service levels without reducing essential public services. Through its budget process, the City has also maintained its policy of designating 25% of General Fund appropriations as reserves for economic uncertainties and contingencies.

Pursuant to City policy, the five-year financial projection is developed as part of the budget process. This five-year financial forecast was developed to assist in long range planning and policy development. The five-year forecast provides a tool to evaluate the ability of the City to fund proposed programs, operating and maintenance costs, capital expenditures, as well as operating costs related to future capital improvement projects.

The value of long-range fiscal planning is to proactively alert decision makers early enough to course-correct, and implement the necessary measures to ensure long-term fiscal solvency. The City of Temecula is fortunate to have a strong revenue base.

With the recent passage of Measure S (one-cent transactions and use tax) combined with ongoing fiscal restraint, the City is in a strong fiscal position over the coming five-year period, with all funds balanced, reserves fully-funded and available fund balance in both the General Fund and the Measure S Fund.

The Fiscal Year 2019-20 General Fund Forecast over the coming five years is balanced with both the Reserve for Economic Uncertainty and the Secondary Reserve fully-funded in all five years. Ending Fund Balance for FY2019-20 is projected to be $26,308,619. Total Reserves, at 25% of Expenditures, totals $19,577,948, with another $460,305 to cover costs committed for FY2020-21 including the Police Officer funded by the Pechanga Tribe, leaving an Unassigned (available) Fund Balance of $6,270,366. FY2019-20 General Fund Revenue is projected to increase by 1.3% over the prior year with a total of $80,127,628, of which $5,735,418 was transferred in from the new Measure S Fund to primarily cover the costs associated with additional Public Safety personnel. Total FY2019-20 General Fund Operating Expenditures totals $78,311,792, which represents a 4.5% increase over the prior fiscal year. The majority of the increase is reflected in the Police and Fire departments, due to contractual increases, in addition to a 3% cost of living adjustment provided to City employees on July 1, 2019, in accordance with the City’s labor agreements.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

As illustrated below in the most recent financial projections completed during the FY2019-20 budget process, General Fund Revenues are projected to continually exceed Operating Expenditures over the ensuing five years.

General Fund 5-Year Projections Revenues over Expenditures 100,000,000 Actuals Projected 95,000,000 90,000,000 85,000,000 80,000,000 75,000,000 70,000,000 65,000,000 60,000,000 55,000,000 FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 Expenditures Revenues

The largest expenditure of the General Fund is Public Safety, which has grown from 56% of total expenditures in the prior fiscal year, to 57% in Fiscal Year 2019-20. In accordance with the Measure S ballot language and City Council appropriation guidelines, the City has invested heavily in Public Safety over the past year and continues to hold Public Safety as its highest priority. A total of $5.8 million, or 19%, of Measure S revenue is dedicated to Public Safety expenditures for FY2019-20 including the funding of the following:

• Eleven Sworn Police Officers ($3.7 million) • Fire Station No. 95 Staffing ($1.7 million) • Funding for future replacement of a Fire Ladder Truck and Fire safety vehicles ($170,390) • Operations and maintenance of Citywide Surveillance Camera systems ($160,000)

In addition to the ongoing Measure S-funded Public Safety expenditures, the Police Department will maintain 112 sworn officers and the Fire Department will continue to provide four firefighter personnel per engine at all five fire stations.

Revenues were projected using a conservative approach, and are based on historical trends, stable residential development projections, and commercial growth that incorporates known development projects. Separate sets of assumptions were developed for major revenue types such as sales tax, property tax, community development fees, transient occupancy taxes, and investment income.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

Departmental expenditure projections are developed using anticipated cost of living increases for general and administrative operating costs. Additional assumptions were incorporated for major expenditure categories such as public safety to ensure that commercial and residential growth projections were addressed to maintain current service levels. The five-year capital improvement program was also reviewed with the annual operating and maintenance costs of each proposed project identified and included in the forecast. During FY17-18, the City Council adopted Policy XII. Pension Rate Stabilization Policy that outlines the establishment of an Internal Revenue Code (IRC) Section 115 Irrevocable Trust. The City Council initially approved an appropriation of $8 million in seed funding to be set aside into the Trust in Fiscal Year 2017-18 that could "pre-fund" its CalPERS unfunded liability. This has provided the City with an alternative to sending funds to CalPERS that allows for greater local control over assets, investment by a professional fund management team selected and monitored by the City, with future excess contributions transferred to the Trust at the City's discretion. Consistent with this Policy, the City Council recently approved an additional transfer of $2 million, using FY2018-19 surplus. To date, the Trust’s performance has exceeded the City’s initial expectations.

With the recent passage of Measure S in November 2016 (one-cent transactions and use tax) combined with ongoing fiscal restraint, the City is in a strong fiscal position over the coming five- year period, with all funds balanced, and reserves fully-funded.

As illustrated below in the most recent 5 Year Projection completed during the development of the FY2019-20 budget process, the General Fund Ending Balance over the ensuing five-year period is sufficient to meet the operational needs of the City as well as fully fund the Reserve for Economic Uncertainty (20% of Operating Expenditures) and the Secondary Reserve (5% of Operating Expenditures). As mentioned previously, the Section 115 Irrevocable Pension Trust Reserves as a tertiary reserve, in addition to the aforementioned General Fund Reserves.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

IMPACTS OF STATE/COUNTY LEGISLATION

Assembly Bill 213 – Annexation Financing: If passed, this bill will restore funding to 140 cities, including Temecula, that lost Vehicle License Fee revenue related to the annexation of inhabited territory, as a result of the passage of Senate Bill 89 in 2011. The City of Temecula could potentially recoup the $428,745 in lost Vehicle License Fee revenue. Proposition 64: Control, Regulate and Tax Adult Use of Marijuana Act (AUMA) In November 2016, California voters approved Proposition 64 by a margin of 56% to 44% to legalize recreational use of cannabis for persons 21 years of age and over. Under Proposition 64, local governments have the ability to regulate, license or prohibit commercial cannabis. The City of Temecula currently prohibits all commercial cannabis and has joined the County of Riverside’s Cannabis Regulatory Task Force. Code Enforcement, Police, and the City Attorney’s Office coordinate to shut down any marijuana retailers operating within the City.

2017 State of California Housing Package In 2017, the State adopted a comprehensive housing package of 15 bills designed to increase the supply of housing in California, including the number of affordable homes. Currently there are approximately 200 housing related bills going through the legislative process. Generally, the bills stated aim is to address the state’s housing shortfall by directly financing affordable housing production; facilitate private-market housing production by streamlining local review processes; increasing local accountability for accommodating a fair share of new housing development; harnessing private funding to pay for affordable housing; and preserving the affordability of existing subsidized housing. While the City is eligible for some of the direct sources of funding to facilitate the production of housing, including funding from SB 2, the Building Jobs and Homes Act, it is anticipated that the City will be subject to a number of unfunded mandates as a result of the passage of any number of the current proposed housing related bills.

State Water Resources Control Board 13383 Order On April 7, 2015, the State Water Resources Control Board (State Water Board) adopted statewide Trash Provisions to address the pervasive impacts trash has on the beneficial uses of surface waters. The Trash Provisions establish a statewide water quality objective for trash and a prohibition of trash discharge, or deposition where it may be discharged, to surface waters of the State. As a result of this Order, the City must install, operate and maintain full capture systems for the storm drain network that capture runoff. It is estimated that a total of 500 catch basin inlet filters will be installed over a 10-year period, beginning in 2020.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

CAPITAL IMPROVEMENT PROGRAM

The City’s five-year Capital Improvement Program (CIP) is presented to the City Council in June of each year. This program provides a five-year plan for capital improvements that is updated annually to ensure compliance with the program. The impact of capital projects on maintenance and operating costs were taken into consideration in the development of the operating budget. Circulation, infrastructure, parks, affordable housing, and other various projects are identified in the CIP budget.

Overall, the Fiscal Years 2020-24 CIP includes 68 separate projects with total cost to complete estimated at $435,270,888, as outlined in the table below:

Revenue from various identified sources for the Five-Year Capital Improvement Program is projected to be $334,305,104. The City’s CIP is a project planning and delivery document which includes several projects with unidentified funding sources in the third, fourth, and fifth years of the five-year program, totaling $102,797,737. The City is continually exploring and applying for federal, state and regional funding opportunities to enable the delivery of these currently unfunded projects. The five-year CIP is updated annually and newly secured revenues are programmed toward prioritized projects that may be shown as unfunded at this time. Although total project costs to complete for the entire five-year CIP is over $388,709,091, a total of $289,205,918, or 74%, of the total funding has been secured.

Number of Cost of Type of Project Projects Projects Circulation 22 $345,956,136

Infrastructure/ 34 61,363,635 Other Parks and 11 15,097,397 Recreation SARDA/ Housing 1 12,853,720

TOTAL 68 $435,270,888

Some of the notable CIP projects include:

• Diaz Road Expansion • French Valley Parkway/Interstate-15 Over-Crossing and Interchange Improvements- Phase II • Murrieta Creek Bridge at Overland Drive • Pavement Rehabilitation Program – Citywide • Medians and Parkways - Citywide • Traffic Cameras and Communication Equipment -Citywide • Library Parking Phase II • Nicholas Road Extension and Improvements

Fiscal Year 2018-19 Comprehensive Annual Financial Report

RELEVANT FINANCIAL POLICIES

The Fund Balance Policy pursuant to Governmental Accounting Standards Board (GASB) Statement No. 54, authorizes the Director of Finance to work with the City Manager to assign fund balance classifications for the purpose of annual financial reporting. The Interfund Transfers and Loans Policy distinguishes between Interfund Transfers and Interfund Loans and allows for loans within appropriate funds whenever repayment is expected within the immediate future.

Restricted fund balance should be spent first when an expenditure is incurred for which both restricted and unrestricted fund balance is available. When an expenditure is incurred for purposes where amounts in any of the unrestricted classifications of fund balance could be used, committed amounts are considered to be spent first, followed by assigned amounts and then unassigned amounts.

It is City policy to maintain total reserves of 25% of Annual General Fund appropriations. This reserve would be used to finance any significant unanticipated revenue shortfalls, significant unanticipated expenditures, negative State budget impacts, impacts from natural disasters or other catastrophic events, significant payouts of Comprehensive Annual Leave, or making one- time investments in infrastructure that will create financial benefit to the City.

The City’s fiscal policies define a balanced budget as one where operating revenues are equal to or greater than operating expenditures. Budgeted ending fund balance in the General Fund for Fiscal Year 2019-20 meets the minimum policy level of 25% of operating expenditures. It is allowable for total expenditures to exceed revenues in a given year, but beginning fund balance can only be used to finance expenditures such as Capital Improvement Plan projects or one-time expenditure projects.

MAJOR INITIATIVES

Beginning in November 2018, the transition to district based elections took place with three of the five council members running within districts. In November 2020, the remaining two at large elected council members will be elected from districts.

The Rose Institute recently ranked Temecula within the top 5% of Cities with the “Lowest Cost for Businesses in the State of California”, and Temecula is within the top 10% of Cities with the Lowest Cost for Business within the entire Western United States. Temecula also has the lowest annual business license fee among all cities in Riverside County.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

The City Council recently adopted its Uptown Temecula Specific Plan. Formerly known as the Jefferson Avenue area, Uptown Temecula is located just north of Old Town in Temecula and encompasses approximately 560 acres north of Rancho California Road and west of Interstate 15, with Jefferson Avenue being the primary corridor. The future vision of Uptown Temecula is a vibrant, pedestrian-friendly, urban area within the City that allows for a mix of uses ranging from full service hotels to multi-level residential, mixed use, and commercial uses; depending on the designated zoning district. This is a long term plan with expanded land uses to stimulate redevelopment. Streetscape and Sidewalk Improvement Standards and proposed amendments are expected to be reviewed by the Planning Commission and City Council in 2020.

The City has begun efforts to develop a short term rental ordinance. This has included community outreach to evaluate interest and community perspective regarding short term rentals. City Council has directed staff to begin working on policy development and an ordinance, which is expected to be completed in 2020.

The City is working with a consultant to update the 2010 Old Town Parking Management Plan. This study will take a detailed look at existing parking policies and standards, supply and demand within the study area, as well as the effect that planned future development and recently approved and pending projects for the area will have on future demand. Staff is currently in the process of reviewing the study.

The City Council recently made appointments to the Move I-15 Through Temecula Valley Task Force. The Task Force initiated conversations with local jurisdictions, and regional transportation partners, to address the daily I-15 freeway traffic congestion between the I-15/215 Junction and the San Diego County line. The City invited the Cities of Murrieta, Lake Elsinore, Wildomar, Menifee and the Pechanga Tribe to participate in discussions. Every jurisdiction shares the same, strong sentiment that traffic on I-15 through Temecula Valley is a major economic and quality of life concern for the region, and beyond. This is not a Temecula-only issue as residents, visitors, businesses and commuters from all cities in Southwest Riverside County are traveling to and from San Diego County and are significantly delayed by the bottleneck of traffic through Temecula Valley on I-15. Nationwide, the interstate connects Southern California to Canada passing through the states of California, Nevada, Arizona, Utah, Idaho, and Montana and is the major corridor for freight and commerce throughout Western United States.

As a result of the Task Force’s work, the City was successful in its Federal Grant application (INFRA “Infrastructure for Rebuilding America”) to the US Department of Transportation requesting $50 Million to close the gap on a total of $137 Million needed to complete Phase 2 of the French Valley Parkway project. Temecula is among a small group of INFRA Grant recipients across the country carefully selected to receive this highly competitive Federal Grant. According to a US Department of Transportation press conference, approximately 200 eligible applications seeking a total of $9.8 Billion were submitted nationwide. With approximately $856 Million of available funding, 20 applications were awarded, including Temecula.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

The City’s most recent Community Opinion Survey Research Report, an integral part of the Quality of Life Master Plan process to help ensure the City’s priorities and goals remain aligned with citizen input, found that 95% of residents rated the quality of life in Temecula as excellent or good. The most common response for what residents liked most about living in Temecula was its small town feel and community involvement, followed by low crime rate and cleanliness. Also, 93% of residents indicated they were satisfied with the City’s performance of municipal services, while 78% reported being satisfied with the City’s efforts to communicate with them.

According to the Survey, traffic congestion is the primary concern, and the priority for future City spending should be for infrastructure improvements to improve traffic circulation, followed by providing incentives to attract new employers and jobs to the City.

ACKNOWLEDGMENTS

Preparation of the City's Comprehensive Annual Financial Report is an undertaking of the Finance Department. Special credit is due to Rudy J. Graciano, Fiscal Services Manager; Pascale Brown, Fiscal Services Manager; Tricia Hawk, Budget Manager; Jordan Snider, Accountant; Jada Shafe, Accounting Technician II; Lauren Garcia, Accounting Assistant, as well as the entire Finance Department staff. Their year-long hard work and dedication have made this report possible.

I would like to express my appreciation to the City Manager, City Council, and the Finance Committee for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner.

This CAFR is dedicated to Pascale Brown, Fiscal Services Manager, who retired after 20 years of faithful and distinguished public service to the City of Temecula’s Finance Department. Pascale’s contributions will always be a part of the Finance Department and her influence shines through its team members.

Sincerely,

Jennifer Hennessy

Jennifer Hennessy Director of Finance

Fiscal Year 2018-19 Comprehensive Annual Financial Report

GOVERNMENT FINANCE OFFICERS ASSOCIATION AWARD

Fiscal Year 2018-19 Comprehensive Annual Financial Report 22

Fiscal Year 2018-19 Comprehensive Annual Financial Report CITY ORGANIZATIONAL CHART

Citizens of Temecula

City Council

City Attorney Commissions

City Manager

Community City Clerk Development

Information Finance Technology/Support Services

Community Public Works Services

Human Resources Police / Fire [Contract]

Economic Emergency Development Management

Fiscal Year 2018-19 Comprehensive Annual Financial Report 23 City of Temecula Fiscal Year 2018-19 Comprehensive Annual Financial Report

STAFF DIRECTORY EXECUTIVE MANAGEMENT: City Manager ...... Aaron Adams

Assistant City Manager ...... Greg Butler

City Clerk ...... Randi Johl

City Attorney ...... Peter M. Thorson

Director of Finance ...... Jennifer Hennessy

Director of Community Development ...... Luke Watson

Director Public Works/City Engineer ...... Patrick Thomas

Director of Community Services ...... Kevin Hawkins

Director of Information Systems ...... Michael Heslin

Human Resources Manager ...... Isaac Garibay

Chief of Police ...... Lisa McConnell

Fire Chief ...... Bill Weiser

CITY OF TEMECULA CAFR TEAM: Director of Finance ...... Jennifer Hennessy

Fiscal Services Manager ...... Rudy J. Graciano

Fiscal Services Manager ...... Pascale Brown

Budget Manager ...... Tricia Hawk

Accounting Technician II ...... Jada Shafe

Accountant I ...... Jordan Snider

Accounting Assistant ...... Lauren Garcia

Fiscal Year 2018-19 Comprehensive Annual Financial Report

INDEPENDENT AUDITOR’S REPORT

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KƉŝŶŝŽŶƐ /ŶŽƵƌŽƉŝŶŝŽŶ͕ƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƌĞĨĞƌƌĞĚƚŽĂďŽǀĞƉƌĞƐĞŶƚĨĂŝƌůǇ͕ŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐ͕ƚŚĞ ƌĞƐƉĞĐƚŝǀĞĨŝŶĂŶĐŝĂůƉŽƐŝƚŝŽŶŽĨƚŚĞŐŽǀĞƌŶŵĞŶƚĂůĂĐƚŝǀŝƚŝĞƐ͕ĞĂĐŚŵĂũŽƌĨƵŶĚ͕ĂŶĚƚŚĞĂŐŐƌĞŐĂƚĞ ƌĞŵĂŝŶŝŶŐĨƵŶĚŝŶĨŽƌŵĂƚŝŽŶŽĨƚŚĞŝƚǇ͕ĂƐŽĨ:ƵŶĞϯϬ͕ϮϬϭϵ͕ĂŶĚƚŚĞƌĞƐƉĞĐƚŝǀĞĐŚĂŶŐĞƐŝŶĨŝŶĂŶĐŝĂů ƉŽƐŝƚŝŽŶ͕ĂŶĚ͕ǁŚĞƌĞĂƉƉůŝĐĂďůĞ͕ĐĂƐŚĨůŽǁƐƚŚĞƌĞŽĨĂŶĚƚŚĞƌĞƐƉĞĐƚŝǀĞďƵĚŐĞƚĂƌǇĐŽŵƉĂƌŝƐŽŶ ƐƚĂƚĞŵĞŶƚƐĨŽƌƚŚĞ'ĞŶĞƌĂů&ƵŶĚĂŶĚĞĂĐŚŽĨƚŚĞŵĂũŽƌƐƉĞĐŝĂůƌĞǀĞŶƵĞĨƵŶĚƐĨŽƌƚŚĞǇĞĂƌƚŚĞŶĞŶĚĞĚŝŶ ĂĐĐŽƌĚĂŶĐĞǁŝƚŚĂĐĐŽƵŶƚŝŶŐƉƌŝŶĐŝƉůĞƐŐĞŶĞƌĂůůǇĂĐĐĞƉƚĞĚŝŶƚŚĞhŶŝƚĞĚ^ƚĂƚĞƐŽĨŵĞƌŝĐĂ͘ KƚŚĞƌDĂƚƚĞƌƐ ZĞƋƵŝƌĞĚ^ƵƉƉůĞŵĞŶƚĂƌǇ/ŶĨŽƌŵĂƚŝŽŶ ĐĐŽƵŶƚŝŶŐƉƌŝŶĐŝƉůĞƐŐĞŶĞƌĂůůǇĂĐĐĞƉƚĞĚŝŶƚŚĞhŶŝƚĞĚ^ƚĂƚĞƐŽĨŵĞƌŝĐĂƌĞƋƵŝƌĞƚŚĂƚƚŚĞŵĂŶĂŐĞŵĞŶƚ͛Ɛ ĚŝƐĐƵƐƐŝŽŶĂŶĚĂŶĂůǇƐŝƐ͕ƐĐŚĞĚƵůĞŽĨĐŚĂŶŐĞƐŝŶƚŚĞŶĞƚƉĞŶƐŝŽŶůŝĂďŝůŝƚǇĂŶĚƌĞůĂƚĞĚƌĂƚŝŽƐ͕ƐĐŚĞĚƵůĞŽĨ ƉĞŶƐŝŽŶĐŽŶƚƌŝďƵƚŝŽŶƐ͕ƐĐŚĞĚƵůĞŽĨĐŚĂŶŐĞƐŝŶƚŚĞŶĞƚŽƚŚĞƌƉŽƐƚͲĞŵƉůŽǇŵĞŶƚďĞŶĞĨŝƚƐ;KWͿůŝĂďŝůŝƚǇ ĂŶĚƌĞůĂƚĞĚƌĂƚŝŽƐ͕ĂŶĚƐĐŚĞĚƵůĞŽĨKWĐŽŶƚƌŝďƵƚŝŽŶƐĂƐůŝƐƚĞĚŝŶƚŚĞƚĂďůĞŽĨĐŽŶƚĞŶƚƐ͕ďĞƉƌĞƐĞŶƚĞĚƚŽ ƐƵƉƉůĞŵĞŶƚƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘^ƵĐŚŝŶĨŽƌŵĂƚŝŽŶ͕ĂůƚŚŽƵŐŚŶŽƚĂƉĂƌƚŽĨƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂů ƐƚĂƚĞŵĞŶƚƐ͕ŝƐƌĞƋƵŝƌĞĚďǇƚŚĞ'ŽǀĞƌŶŵĞŶƚĂůĐĐŽƵŶƚŝŶŐ^ƚĂŶĚĂƌĚƐŽĂƌĚǁŚŽĐŽŶƐŝĚĞƌƐŝƚƚŽďĞĂŶ ĞƐƐĞŶƚŝĂůƉĂƌƚŽĨĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĨŽƌƉůĂĐŝŶŐƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶĂŶĂƉƉƌŽƉƌŝĂƚĞ ŽƉĞƌĂƚŝŽŶĂů͕ĞĐŽŶŽŵŝĐ͕ŽƌŚŝƐƚŽƌŝĐĂůĐŽŶƚĞǆƚ͘tĞŚĂǀĞĂƉƉůŝĞĚĐĞƌƚĂŝŶůŝŵŝƚĞĚƉƌŽĐĞĚƵƌĞƐƚŽƚŚĞ ƌĞƋƵŝƌĞĚƐƵƉƉůĞŵĞŶƚĂƌǇŝŶĨŽƌŵĂƚŝŽŶŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚĂƵĚŝƚŝŶŐƐƚĂŶĚĂƌĚƐŐĞŶĞƌĂůůǇĂĐĐĞƉƚĞĚŝŶƚŚĞ hŶŝƚĞĚ^ƚĂƚĞƐŽĨŵĞƌŝĐĂ͕ǁŚŝĐŚĐŽŶƐŝƐƚĞĚŽĨŝŶƋƵŝƌŝĞƐŽĨŵĂŶĂŐĞŵĞŶƚĂďŽƵƚƚŚĞŵĞƚŚŽĚƐŽĨƉƌĞƉĂƌŝŶŐ ƚŚĞŝŶĨŽƌŵĂƚŝŽŶĂŶĚĐŽŵƉĂƌŝŶŐƚŚĞŝŶĨŽƌŵĂƚŝŽŶĨŽƌĐŽŶƐŝƐƚĞŶĐǇǁŝƚŚŵĂŶĂŐĞŵĞŶƚ͛ƐƌĞƐƉŽŶƐĞƐƚŽŽƵƌ ŝŶƋƵŝƌŝĞƐ͕ƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͕ĂŶĚŽƚŚĞƌŬŶŽǁůĞĚŐĞǁĞŽďƚĂŝŶĞĚĚƵƌŝŶŐŽƵƌĂƵĚŝƚŽĨƚŚĞďĂƐŝĐ ĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘tĞĚŽŶŽƚĞǆƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽƌƉƌŽǀŝĚĞĂŶǇĂƐƐƵƌĂŶĐĞŽŶƚŚĞŝŶĨŽƌŵĂƚŝŽŶ ďĞĐĂƵƐĞƚŚĞůŝŵŝƚĞĚƉƌŽĐĞĚƵƌĞƐĚŽŶŽƚƉƌŽǀŝĚĞƵƐǁŝƚŚƐƵĨĨŝĐŝĞŶƚĞǀŝĚĞŶĐĞƚŽĞǆƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽƌ ƉƌŽǀŝĚĞĂŶǇĂƐƐƵƌĂŶĐĞ͘ KƚŚĞƌ/ŶĨŽƌŵĂƚŝŽŶ KƵƌĂƵĚŝƚǁĂƐĐŽŶĚƵĐƚĞĚĨŽƌƚŚĞƉƵƌƉŽƐĞŽĨĨŽƌŵŝŶŐŽƉŝŶŝŽŶƐŽŶƚŚĞĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƚŚĂƚ ĐŽůůĞĐƚŝǀĞůǇĐŽŵƉƌŝƐĞƚŚĞŝƚǇ͛ƐďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘dŚĞŝŶƚƌŽĚƵĐƚŽƌǇƐĞĐƚŝŽŶ͕ĐŽŵďŝŶŝŶŐĂŶĚ ŝŶĚŝǀŝĚƵĂůŶŽŶŵĂũŽƌĨƵŶĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂŶĚƐĐŚĞĚƵůĞƐ͕ĂŶĚƐƚĂƚŝƐƚŝĐĂůƐĞĐƚŝŽŶ͕ĂƌĞƉƌĞƐĞŶƚĞĚĨŽƌ ƉƵƌƉŽƐĞƐŽĨĂĚĚŝƚŝŽŶĂůĂŶĂůǇƐŝƐĂŶĚĂƌĞŶŽƚĂƌĞƋƵŝƌĞĚƉĂƌƚŽĨƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘ dŚĞĐŽŵďŝŶŝŶŐĂŶĚŝŶĚŝǀŝĚƵĂůŶŽŶŵĂũŽƌĨƵŶĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂŶĚƐĐŚĞĚƵůĞƐĂƌĞƚŚĞƌĞƐƉŽŶƐŝďŝůŝƚǇŽĨ ŵĂŶĂŐĞŵĞŶƚĂŶĚǁĞƌĞĚĞƌŝǀĞĚĨƌŽŵĂŶĚƌĞůĂƚĞĚŝƌĞĐƚůǇƚŽƚŚĞƵŶĚĞƌůǇŝŶŐĂĐĐŽƵŶƚŝŶŐĂŶĚŽƚŚĞƌƌĞĐŽƌĚƐ ƵƐĞĚƚŽƉƌĞƉĂƌĞƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ͘^ƵĐŚŝŶĨŽƌŵĂƚŝŽŶŚĂƐďĞĞŶƐƵďũĞĐƚĞĚƚŽƚŚĞĂƵĚŝƚŝŶŐ ƉƌŽĐĞĚƵƌĞƐĂƉƉůŝĞĚŝŶƚŚĞĂƵĚŝƚŽĨƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂŶĚĐĞƌƚĂŝŶĂĚĚŝƚŝŽŶĂůƉƌŽĐĞĚƵƌĞƐ͕ ŝŶĐůƵĚŝŶŐĐŽŵƉĂƌŝŶŐĂŶĚƌĞĐŽŶĐŝůŝŶŐƐƵĐŚŝŶĨŽƌŵĂƚŝŽŶĚŝƌĞĐƚůǇƚŽƚŚĞƵŶĚĞƌůǇŝŶŐĂĐĐŽƵŶƚŝŶŐĂŶĚŽƚŚĞƌ ƌĞĐŽƌĚƐƵƐĞĚƚŽƉƌĞƉĂƌĞƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŽƌƚŽƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐƚŚĞŵƐĞůǀĞƐ͕ ĂŶĚŽƚŚĞƌĂĚĚŝƚŝŽŶĂůƉƌŽĐĞĚƵƌĞƐŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚĂƵĚŝƚŝŶŐƐƚĂŶĚĂƌĚƐŐĞŶĞƌĂůůǇĂĐĐĞƉƚĞĚŝŶƚŚĞhŶŝƚĞĚ ^ƚĂƚĞƐŽĨŵĞƌŝĐĂ͘/ŶŽƵƌŽƉŝŶŝŽŶ͕ƚŚĞĐŽŵďŝŶŝŶŐĂŶĚŝŶĚŝǀŝĚƵĂůŶŽŶŵĂũŽƌĨƵŶĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂŶĚ ƐĐŚĞĚƵůĞƐĂƌĞĨĂŝƌůǇƐƚĂƚĞĚŝŶĂůůŵĂƚĞƌŝĂůƌĞƐƉĞĐƚƐŝŶƌĞůĂƚŝŽŶƚŽƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂƐĂ ǁŚŽůĞ͘ dŚĞŝŶƚƌŽĚƵĐƚŽƌǇĂŶĚƐƚĂƚŝƐƚŝĐĂůƐĞĐƚŝŽŶƐŚĂǀĞŶŽƚďĞĞŶƐƵďũĞĐƚĞĚƚŽƚŚĞĂƵĚŝƚŝŶŐƉƌŽĐĞĚƵƌĞƐĂƉƉůŝĞĚŝŶ ƚŚĞĂƵĚŝƚŽĨƚŚĞďĂƐŝĐĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐĂŶĚ͕ĂĐĐŽƌĚŝŶŐůǇ͕ǁĞĚŽŶŽƚĞǆƉƌĞƐƐĂŶŽƉŝŶŝŽŶŽƌƉƌŽǀŝĚĞĂŶǇ ĂƐƐƵƌĂŶĐĞŽŶƚŚĞŵ͘

KƚŚĞƌZĞƉŽƌƚŝŶŐZĞƋƵŝƌĞĚďǇ'ŽǀĞƌŶŵĞŶƚƵĚŝƚŝŶŐ^ƚĂŶĚĂƌĚƐ /ŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ'ŽǀĞƌŶŵĞŶƚƵĚŝƚŝŶŐ^ƚĂŶĚĂƌĚƐ͕ǁĞŚĂǀĞĂůƐŽŝƐƐƵĞĚŽƵƌƌĞƉŽƌƚĚĂƚĞĚĞĐĞŵďĞƌϮϯ͕ ϮϬϭϵ͕ŽŶŽƵƌĐŽŶƐŝĚĞƌĂƚŝŽŶŽĨƚŚĞŝƚǇ͛ƐŝŶƚĞƌŶĂůĐŽŶƚƌŽůŽǀĞƌĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĂŶĚŽŶŽƵƌƚĞƐƚƐŽĨŝƚƐ ĐŽŵƉůŝĂŶĐĞǁŝƚŚĐĞƌƚĂŝŶƉƌŽǀŝƐŝŽŶƐŽĨůĂǁƐ͕ƌĞŐƵůĂƚŝŽŶƐ͕ĐŽŶƚƌĂĐƚƐ͕ĂŶĚŐƌĂŶƚĂŐƌĞĞŵĞŶƚƐĂŶĚŽƚŚĞƌ ŵĂƚƚĞƌƐ͘dŚĞƉƵƌƉŽƐĞŽĨƚŚĂƚƌĞƉŽƌƚŝƐƐŽůĞůǇƚŽĚĞƐĐƌŝďĞƚŚĞƐĐŽƉĞŽĨŽƵƌƚĞƐƚŝŶŐŽĨŝŶƚĞƌŶĂůĐŽŶƚƌŽůŽǀĞƌ ĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĂŶĚĐŽŵƉůŝĂŶĐĞĂŶĚƚŚĞƌĞƐƵůƚƐŽĨƚŚĂƚƚĞƐƚŝŶŐ͕ĂŶĚŶŽƚƚŽƉƌŽǀŝĚĞĂŶŽƉŝŶŝŽŶŽŶƚŚĞ ĞĨĨĞĐƚŝǀĞŶĞƐƐŽĨƚŚĞŝƚǇ͛ƐŝŶƚĞƌŶĂůĐŽŶƚƌŽůŽǀĞƌĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐŽƌŽŶĐŽŵƉůŝĂŶĐĞ͘dŚĂƚƌĞƉŽƌƚŝƐĂŶ ŝŶƚĞŐƌĂůƉĂƌƚŽĨĂŶĂƵĚŝƚƉĞƌĨŽƌŵĞĚŝŶĂĐĐŽƌĚĂŶĐĞǁŝƚŚ'ŽǀĞƌŶŵĞŶƚƵĚŝƚŝŶŐ^ƚĂŶĚĂƌĚƐŝŶĐŽŶƐŝĚĞƌŝŶŐ ƚŚĞŝƚǇ͛ƐŝŶƚĞƌŶĂůĐŽŶƚƌŽůŽǀĞƌĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĂŶĚĐŽŵƉůŝĂŶĐĞ͘ ZŝǀĞƌƐŝĚĞ͕ĂůŝĨŽƌŶŝĂ ĞĐĞŵďĞƌϮϯ͕ϮϬϭϵ

Fiscal Year 2018-19 Comprehensive Annual Financial Report MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)

As management of the City of Temecula (City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2019. 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, and with the City’s financial statements which follow this discussion.

FINANCIAL HIGHLIGHTS Government Wide Financial Highlights

• The assets of the City exceeded its liabilities at June 30, 2019, by $804 million (net position). • The City’s total net position increased by approximately $39 million. This increase was the result of total revenues of governmental activities of $145.3 million ($49.4 million in program revenues and $95.9 million in general revenues) offset by $106.3 million in total costs of governmental activities. • As of June 30, 2019, the City’s governmental funds had reported combined ending fund balances of $121.3 million, an increase of $8.7 million as compared to the prior year. Of this total, approximately $59.8 million, or 49% of the total fund balance, is either nonspendable or restricted due to the nature of the restriction. • The City’s total long-term liabilities increased by approximately $4.8 million during Fiscal Year 2018-19. This increase was primarily due to the new 2018 Financing Lease agreement offset with debt service paid on the 2011 Financing Lease.

OVERVIEW OF THE FINANCIAL STATEMENTS

The Management’s Discussion and Analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) Government-Wide Financial Statements; 2) Fund Financial Statements; and, 3) Notes to the Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances in a manner similar to a private-sector business.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 29

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

The statement of net position presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying events giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

The government-wide financial statements present information about the functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the City include general government, public safety, public works, community services, and community development.

The government-wide financial statements can be found on pages 44 – 45 of this report.

FUND FINANCIAL STATEMENTS A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds; proprietary funds; and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds are narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental funds’ balance sheet and governmental funds’ statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 30

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

The City maintains various individual government 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, Community Services District Special Revenue Fund, City Housing Special Revenue Fund, Measure A Special Revenue Fund, Capital Outlay Capital Projects Fund, and Roripaugh Ranch Capital Projects Fund, all of which are considered to be major funds. Data from other governmental funds are combined into a single, aggregate presentation. Individual fund data for each of these other governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 46 – 47 and 50 – 51 of this report. The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. Proprietary Funds. The City maintains various internal service funds. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its self-insurance activities, workers’ compensation activities, vehicles, information technology, technology replacement, support services, facilities, support services replacement, and facilities replacement. Because these services benefit governmental functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 58 – 60 of this report. Fiduciary Funds. Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The basic fiduciary fund financial statements can be found on page 61 of this report.

NOTES TO THE FINANCIAL STATEMENTS The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 64 – 102 of this report.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 31

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

OTHER INFORMATION The combining statements referred to earlier in connection with other governmental funds, internal service funds, and schedules of revenues, expenditures, and changes in fund balance-budget and actual can be found beginning on page 112 of this report.

Summary of Net Position as of June 30, 2019 and June 30, 2018:

Governmental Governmental Activities for 2019 Activities for 2018 Current and Other Assets $ 189,723,582 $ 161,983,224 Capital Assets 697,227,070 678,930,887 TOTAL ASSETS 886,950,652 840,914,111

Deferred Amounts on Pension and Other Post Employment Benefits 9,671,840 11,823,485 TOTAL DEFERRED OUTFLOWS 9,671,840 11,823,485

Current and Other Liabilities 18,242,998 17,144,003 Long Term Liabilities 72,581,871 69,888,544 TOTAL LIABILITIES 90,824,869 87,032,547

Deferred Amounts on Pension and Other Post Employment Benefits 1,799,968 745,686 TOTAL DEFERRED INFLOWS 1,799,968 745,686

NET POSITION: Net Investment in Capital Assets 673,103,252 659,453,306 Restricted 77,316,157 73,806,195 Unrestricted 53,578,246 31,699,862 TOTAL NET POSITION $ 803,997,655 $ 764,959,363

Fiscal Year 2018-19 Comprehensive Annual Financial Report 32

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Total Current and Other Assets increased by $27.7 million primarily due to the proceeds received from the 2018 lease, increased reserves in the General Fund as a result of budgetary savings, and the accumulation of reserves in the Capital Outlay, RMRA, and Street Maintenance Funds to finance future projects, as well as new internal service replacement funds to finance the eventual replacement of internal service fund capital assets. Capital assets increased by $18.3 million primarily due to additions of infrastructure projects and construction work in progress, offset by current year depreciation. Total liabilities increased by $3.8 million primarily due to the 2018 Financing Lease.

The net position of the City increased by approximately $39 million, at June 30, 2019 due to total governmental revenues of $145.3 million exceeding total governmental expenses of $106.3 million. The government-wide financial statements provide long-term and short-term information about the City’s overall financial condition. This analysis addresses the City’s financial statements as a whole.

The largest portion of the City’s net position (83.7%) reflects the investment in capital assets (e.g., buildings, machinery and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City’s net position (9.6%) represents resources that are subject to external restrictions on how they may be used.

The remaining balance of the City’s net position (6.7%) may be used to meet the City’s ongoing obligations to citizens and creditors.

GOVERNMENTAL ACTIVITIES Governmental activities increased the City’s net position by approximately $39 million thereby accounting for 100% percent of the total change in the net position of the City. Key elements of this change are as follows:

Fiscal Year 2018-19 Comprehensive Annual Financial Report 33

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Summary of Changes in Net Position for the years ended June 30, 2019 and June 30, 2018:

Governmental Governmental Activities for Activities for 2019 2018 REVENUES: Program Revenues: Charges for Services $ 24,073,835 $ 22,683,088 Operating Grants and Contributions 5,109,875 4,585,120 Capital Grants and Contributions 20,220,310 23,418,381 General Revenues: Taxes: Property Taxes 20,628,104 19,670,307 Transient Occupancy Taxes 3,409,553 3,344,984 Sales Taxes 64,955,761 63,873,060 Franchise Taxes 3,527,849 3,617,095 Intergovernmental Revenue-Motor Vehicles in Lieu 54,328 58,441 Use of Money and Property 3,239,727 560,404 Other 117,169 215,042 TOTAL REVENUES 145,336,511 142,025,922

EXPENSES: General Government 10,104,845 16,335,701 Public Safety 41,757,169 39,510,108 Community Development 6,870,872 6,735,083 Community Services 24,364,695 24,838,757 Public Works 22,289,064 27,016,937 Interest on Long Term Debt 911,574 741,890 TOTAL EXPENSES 106,298,219 115,178,476

Increase in Net Position 39,038,292 26,847,446

Net Position - Beginning of Year 764,959,363 738,111,917

Net Position - End of Year $ 803,997,655 $ 764,959,363

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Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) • Charges for services increased by approximately 6.1% primarily due to increased community development activities.

• Operating grants and contributions increased by approximately 11.4% primarily due to increased allocations of gasoline excise revenues.

• Capital grants and contributions decreased by approximately 13.6% primarily due to capital grants received from the U.S. Department of Transportation for construction of the I-15 / SR79S Ultimate Interchange project in the prior year. • Property tax revenue increased by approximately 4.8% primarily due to higher assessed valuations on properties within the City. • Sales taxes revenue increased by approximately 1.7% primarily due to growth in various business sectors. • Use of Money and Property increased by approximately 478.5% primarily due to higher interest rates impacting the fair value of investments as these investments get closer to maturity. • Other revenue decreased by approximately 45.5% primarily due to monies received from property damage claims in the prior year. • General Government expenses decreased approximately 38.1% primarily due to additional contributions made to the retiree health care plan in the prior year. as well as changes in net pension liabilities and pension deferred inflow/outflows. • Public Safety expenses increased by approximately 5.7% primarily due to the first full year opening of Fire Station 95, as well an additional police officer and continued implementation of the fire inspection program. • Public Works expenses decreased by approximately 17.5% primarily due to changes in net pension liabilities and pension deferred inflow/outflows.

• Interest on Long Term Debt increased by approximately 22.9% primarily due to additional interest expense related to the new 2018 Financing Lease.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 35

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the government’s net resources available for spending at the end of the fiscal year. Proprietary Funds. The City’s proprietary funds are the internal service funds, which are used to account for activities and services performed for other departments within the City on a cost reimbursement basis.

The major factors in fund balance changes for each of the City’s major funds are as follows: • The General Fund recognized an increase of approximately $5 million primarily due to higher sales taxes, as well as operating savings in various departments due to vacant positions, lower than anticipated public safety contract rates, as well as lower election and litigation costs. • The Community Services District Special Revenue Fund recognized a decrease of approximately $752,000 primarily due to utilizing FY17-18 fund balance as part of balancing the FY18-19 budget. • The City Housing Fund Special Revenue Fund recognized an increase of approximately $79,000 primarily due to savings in legal and consulting services. • The Measure A Special Revenue Fund recognized a increase of approximately $775,000 primarily due to lower transfers to the CIP fund to finance various pavement rehab projects. • The Capital Outlay Capital Projects Fund recognized an increase of approximately $796,000 primarily due to the transfers from other governmental funds to finance capital projects underway in the Capital Outlay Fund in order to finance various public improvements. • The Roripaugh Ranch Capital Projects Fund recognized an increase of approximately $332,000 primarily due to increased interest earnings. • Other Governmental Funds, which are nonmajor funds, recognized a combined increase of approximately $2,538,000. This increase is primarily due to new funds, RMRA and Streets Maintenance funds, which are accumulating monies for future projects. Also, fund balances are often accumulated in source funds prior to their transfer to the Capital Outlay fund, where they are used to pay for capital improvement construction costs. These funds are further detailed beginning on page 112 of this report.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 36

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

GENERAL FUND BUDGET HIGHLIGHTS The difference between the original budget and the final amended budget reflects a $6,289,695 increase in appropriations, including operating transfers out, and can be briefly summarized as follows: • The net increase of $61,157 in City Manager is primarily due to the City contributing matching funds towards donations made for tenant improvement for Michelle’s Place, a local non-profit dedicated to providing cancer-related services. • The net increase of $14,737 in Economic Development is primarily due to increased costs related to Medical Scribe classes. • The net increase of $162,000 in City Attorney is primarily due to an increase in contract legal expenditures as result of ongoing litigation cases related to cannabis and new programs requiring Ordinance creation and review. • The net increase of $87,623 in Personnel is primarily due to an increase in contract legal expenditures as a result of increased employee relations projects. • The net decrease of $283,322 in Fire is primarily due to adjustments of the Fire tax credit. • The net increase of $350,998 in Community Development is primarily due to higher consulting services. • The net increase of $365,580 in Public Works is primarily due to emergency repair work related to storm damages, as well as increased utility and landscape maintenance related to the Skyview Park and the new Park and Ride facility. • The net increase of $5,365,252 in Transfers Out is primarily due to higher transfers to the CIP fund for various projects, including the Margarita Recreation Center, street light acquisition, Community Recreation Center pool site enhancement, Library Parking, French Valley, and the Old Town Boardwalk enhancement projects. Additional transfers contributing to the increase include transfers made for emergency repair work related to storm damages, and Information Technology projects, as well as transfers to establish the Interstate 15 Congestion Relief Capital Project.

Actual revenues, excluding transfers in, received for the General Fund were $3,025,140 higher than budget and are summarized as follows: • Taxes exceeded the budget by $1,720,709 primarily due to higher than anticipated sales taxes as a result of Measure S transactions and use tax, as well as higher property taxes as a result of increased assessed valuations. • Use of Money and Property exceeded the budget by $1,179,445 primarily due to increased fair value of investments. • Charges for Services exceeded the budget by $212,601 primarily due to higher onsite inspections and improvements offset by lower capital projects reimbursements due to the timing of projects.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 37

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued) Actual expenditures, excluding transfers out, were $6,946,311 less than budget as follows: • Economic Development had expenditure savings of $165,230 primarily due to vacant positions that resulted in salary savings, as well as savings in internal service allocations.

• City Clerk had expenditure savings of $188,603 primarily due to lower than anticipated election costs and a vacant position.

• City Attorney had expenditure savings of $145,619 due to lower than anticipated litigation/legal support costs. • Finance had expenditure savings of $166,528 due to savings in salaries, consulting, and capital outlay. • Personnel had expenditure savings of $122,918 primarily due to savings in legal services, training, and consulting services. • Police had expenditure savings of $2,633,226 primarily due to lower than anticipated contract rates and vacant positions, coupled with lower operational costs associated with equipment, records management systems, and booking fees. • Fire had expenditure savings of $568,483 primarily due to savings in the Prevention and Paramedic Divisions, combined with lower allocation form the Vehicle Replacement Fund due to the delay in the purchasing of a replacement ladder truck. • Community Development had expenditure savings of $1,136,168 primarily due to less consultant services due to a project delay as well as savings due to vacancies and weed abatement services. • Public Works had expenditure savings of $1,554,762 primarily due to less consultant services, lower costs related to the NPDES filter project, as well as vacant positions that resulted in salaries savings and internal service fund allocation savings. • Non Departmental had expenditure savings of $122,440 primarily due to savings in the staffing continuity reserve.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 38

Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets. The City’s capital assets for its governmental activities as of June 30, 2019, amounts to approximately $697.2 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, park facilities, roads, highways, and bridges. The total net increase in the City’s capital assets for the current fiscal year was 2.7%.

Major capital asset investments during the current fiscal year include the following:

• I15/79S Interchange Ultimate Interchange • Citywide Streetlight Acquisition & LED Retrofit • Citywide Surveillance Cameras • Community Recreation Center Pool Site Enhancement • Pavement Rehabilitation Program Citywide • French Valley Parkway/I15 Off Ramp-Phase II • Temecula Park and Ride • Pechanga Parkway Widening

Additional information on Construction Commitments is available in Note 12 to the financial statements on page 89.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 39 Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Summary of Changes in Capital Assets for the year ending June 30, 2019:

Balance at Balance at June 30, 2018 Increase Decrease June 30, 2019 GOVERNMENTAL ACTIVITIES Capital Assets Not Being Depreciated: Land $ 79,959,502 $ 14,142 $ - $ 79,973,644 Right of Way 68,738,629 - - 68,738,629 Construction in Progress 80,589,305 29,776,282 - 110,365,587 Total 229,287,436 29,790,424 - 259,077,860

Capital Assets Being Depreciated: Building 133,153,698 758,281 - 133,911,979 Improvements other than Buildings 51,856,373 523,334 - 52,379,707 Vehicles, Machinery, and Equipment 18,149,112 2,307,590 (1,922,163) 18,534,539 Furniture and Fixtures 6,287,377 11,305 (6,405) 6,292,277 Infrastructure 574,882,507 7,792,789 (636,699) 582,038,597 Total 784,329,067 11,393,299 (2,565,267) 793,157,099

Less Accumulated Depreciation for: Buildings (33,382,461) (2,982,181) - (36,364,642) Improvements other than Buildings (22,987,701) (2,062,240) - (25,049,941) Vehicles, Machinery, and Equipment (15,320,681) (1,553,960) 1,605,065 (15,269,576) Furniture and Fixtures (6,063,648) (49,376) 6,405 (6,106,619) Infrastructure (256,931,125) (15,625,013) 339,027 (272,217,111) Total (334,685,616) (22,272,770) 1,950,497 (355,007,889)

Total Capital Assets Being Depreciated: 449,643,451 (10,879,471) (614,770) 438,149,210 Total Capital Assets-Net $ 678,930,887 $ 18,910,953 $ (614,770) $ 697,227,070

Additional detail on capital assets is available in Note 4 to the financial statements on page 79.

Long-Term Debt. At the end of the current fiscal year, the City had a total long-term debt outstanding of approximately $24.1 million, which is comprised of financing and capital leases. During the current fiscal year, long-term debt increased approximately $4.6 million primarily due to the 2018 Financing Lease, less debt service payments on the 2011 Financing Lease and lease obligations.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 40 Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

Summary of Changes in Long Term Debt for the year ended June 30, 2019:

Balance Balance Due Within June 30, 2018 Additions Deletions June 30, 2019 One Year

Financing Leases: 2011 Financing Lease $ 19,027,000 $ - $ 1,439,000 $ 17,588,000 $ 1,493,000 2018 Financing Lease - 6,500,000 251,647 6,248,353 346,526

Total Financing Leases $ 19,027,000 $ 6,500,000 $ 1,690,647 $ 23,836,353 $ 1,839,526

Additional information on long-term debt is available in Note 6 to the financial statements on pages 81 – 82.

Economic Factors and Next Year’s Budgets and Rates

The key assumptions in the General Fund revenue budget for Fiscal Year 2019-20 were:

Total General Fund estimated revenues, net of operating transfers in, are estimated to reach $110,495,159, which is an increase of $19,261,689 from Fiscal Year 2018-19 actual revenues. This increase is primarily due to:

1. Sales and Use Tax revenues, which represent approximately 66% of total FY19-20 estimated General Fund revenues, are estimated to decrease by $375,686, or .6% from Fiscal Year 2018-19 actual revenue. This decrease is primarily due to a leveling in both the Business/Industry and Autos/Transportation sections, as well as expected reductions is gasoline prices.

2. Intergovernmental revenues are estimated to increase $341,597, or 4.2%, from Fiscal Year 2018-19 primarily due to projected increases in assessed valuation of citywide property.

3. Total property taxes are estimated to increase $327,639, or 4.4%, from Fiscal Year 2018- 19 primarily due to an anticipated increase in assessed valuations as property values are restored to pre-recessionary levels. 4. Community development revenues are estimated to decrease $1,544,188, or 27.7%, from Fiscal Year 2018-19 primarily due to the timing of the Sommers Bend residential development project.

All of these factors were considered in preparing the City annual operating budget for Fiscal Year 2019-20.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 41 Fiscal Year 2018-19 Comprehensive Annual Financial Report

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to City of Temecula Finance Department, 41000 Main Street, Temecula, California 92590. The City’s Comprehensive Annual Financial Report can also be found on the City’s website at http://temeculaca.gov/309/Financial-Reports.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 42 Fiscal Year 2018-19 Comprehensive Annual Financial Report

BASIC FINANCIAL STATEMENTS

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107 108

Fiscal Year 2018-19 Comprehensive Annual Financial Report

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

109

Fiscal Year 2018-19 Comprehensive Annual Financial Report

DEFINITIONS OF NON-MAJOR GOVERNMENTAL FUNDS NON-MAJOR SPECIAL REVENUE FUNDS: Used to account for specific revenues that are legally restricted to expenditure for particular purposes.

 GAS TAX: This fund is used to account for revenues apportioned under the Streets and Highways Code of the State of California.

 DEVELOPMENT IMPACT: This fund is used to account for the proceeds of developmental impact fees restricted for capital improvement projects.

 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG): This fund is used to account for grants received from the U.S. Department of Housing and Urban Development (HUD). The grants are used for the redevelopment of a viable community by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for persons of low and moderate income.

 AB 2766: This fund is used to account for the City’s share of revenues received under AB 2766 to be used to reduce air pollution from motor vehicles pursuant to the California Clean Air Act of 1988.

 AB 3229 COPS: This fund is used to account for the revenues and law enforcement expenditures of the AB 3229 COPS grant.

 TEMECULA MAJOR CRIMES REWARD FUND: This fund was set up to account for a reward for information that leads to the capture and conviction of the person(s) responsible for the murder of Larry Robinson. The General Fund contributed $25,000 and the public can also contribute to this fund.

 TEMECULA ENERGY EFFICIENCY AND ASSET MANAGEMENT FUND (TEAM): This fund was set up to subsidize energy efficiency and rehabilitation projects at municipal facilities. Approximately $120,000 in energy efficiency related rebates initially established the fund and it is sustained by continued rebates and energy cost savings from TEAM implemented projects that maximize measured energy savings identified in routine energy audits conducted in ongoing efforts to further energy conservation.

 PUBLIC, EDUCATION & GOVERNMENT FEES FUND (PEG): This fund was established to track the collection and expenditures of a 1% fee collected by local cable operators for the sole purpose of supporting the access facilities and activities within the City.

 ROAD MAINTENANCE REHAB ACT (RMRA): This fund is used to account for gasoline and vehicle registration taxes pursuant to the Road Repair and Accountability Act of 2017 (SB1 Beall).

 STREET MAINTENANCE FUND: This fund was established to accumulate resources for the future replacement of streets and roads throughout the City.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 110

Fiscal Year 2018-19 Comprehensive Annual Financial Report

DEFINITIONS OF NON-MAJOR GOVERNMENTAL FUNDS (CONTINUED) NON-MAJOR CAPTIAL PROJECTS FUNDS: Used to account for the acquisition and construction of major capital facilities.

 CROWNE HILL COMMUNITY FACILITIES DISTRICT #03-1: This fund is used to account for bond proceeds which were used for capital improvements in Crowne Hill Community Facilities District #03-1.

 WOLF CREEK COMMUNITY FACILITIES DISTRICT #03-3: This fund is used to account for bond proceeds which were used for capital improvements in Wolf Creek Community Facilities District #03-3.

NON-MAJOR DEBT SERVICE FUNDS: Used to account for the accumulation of resources for and the payment of, principal and interest on long-term liabilities.

 FINANCING LEASE: This fund is used to account for the payment of principal and interest on the outstanding 2011 and 2018 Financing Leases.

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135 136 Fiscal Year 2018-19 Comprehensive Annual Financial Report

DEFINITIONS OF INTERNAL SERVICE FUNDS

Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the City on a cost reimbursement basis.

INSURANCE: This fund is used to finance and account for the City’s risk management and insurance programs.

WORKER’S COMPENSATION: This fund is used to finance and account for the City to administer its self-insured retention related to worker’s compensation liability claims.

VEHICLES: This fund is used to account for the replacement of the City’s vehicles.

INFORMATION SYSTEMS: This fund is used to account for the cost of providing electronic data processing equipment and software and central telephone services.

TECHNOLOGY REPLACEMENT: This fund is used to finance and account for the City’s replacement of technology equipment and software upon the end of the assets’ useful life.

SUPPORT SERVICES: This fund is used to account for the cost of providing central mailing and reprographic services.

FACILITIES: This fund is used to account for the cost of City Hall and City Maintenance Facility operations and maintenance.

SUPPORT SERVICES REPLACEMENT: This fund was established to accumulate resources for the future replacement of the City’s duplicating equipment.

FACILITY REPLACEMENT: This fund was established to accumulate resources for the future replacement of equipment, systems, and fixtures within the City-owned facilities.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 137 &,7<2)7(0(&8/$&$/,)251,$ &20%,1,1*67$7(0(172)1(7326,7,21 ,17(51$/6(59,&()81'6 -81( *RYHUQPHQWDO$FWLYLWLHV,QWHUQDO6HUYLFH)XQGV

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143 144 Fiscal Year 2018-19 Comprehensive Annual Financial Report

DEFINITIONS OF AGENCY FUNDS

Agency funds are used to account for assets held by the City, as an agent for individuals, private organizations and other governments.

COMMUNITY FACILITIES DISTRICTS: This fund is used to account for monies held by the City, collected by special taxes to service debt issued by the districts.

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147 148

Fiscal Year 2018-19 Comprehensive Annual Financial Report CONTENTS OF STATISTICAL SECTION

This part of the City of Temecula’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 say about the government’s overall financial health.

Page No. Description

150 Locator Map

151 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.

165 Revenue Capacity – these schedules contain information to help the reader assess the City’s most significant local revenue sources, property and sales tax.

177 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.

185 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.

189 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.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 149 City of Temecula Fiscal Year 2018-19 Comprehensive Annual Financial Report

LOCATOR MAP

The City of Temecula is a General Law City located in southwestern California, United States, with a population of 113,826. The City was incorporated on December 1, 1989.

Temecula is one of the most historic communities in Southern California. The name Temecula comes from the Luiseño Indian word “Temecunga” – “temet” meaning “sun” and “-ngna” which means “place of”. The Spanish interpreted and spelled the word as “Temecula” translated to mean “Where the sun breaks through the mist.”

Temecula, known as the Heart of Southern California Wine Country, is conveniently located off the I-15 freeway, approximately one hour north of San Diego. Temecula's central location attracts visitors from popular Southern California locales like Palm Springs, Los Angeles, Anaheim, Irvine, Carlsbad and San Diego.

Fiscal Year 2018-19 Comprehensive Annual Financial Report

150 Fiscal Year 2018-19 Comprehensive Annual Financial Report

FINANCIAL TRENDS

151 Fiscal Year 2018-19 Comprehensive Annual Financial Report NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting)

Fiscal Year 2010 (As 2012 (As 2013 (As Restated) 2011 Restated) Restated) Governmental Activities: Net Investment in Capital Assets $ 629,206,256 $ 644,802,424 $ 621,391,785 $ 641,857,265 Restricted 108,036,903 95,402,130 79,561,526 44,747,890 Unrestricted (11,712,664) (9,262,370) 54,087,452 69,751,824

Total Government Net Position: $ 725,530,495 $ 730,942,184 $ 755,040,763 $ 756,356,979

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 152 Fiscal Year 2018-19 Comprehensive Annual Financial Report NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting)

Fiscal Year

2014 2015 2016 2017 2018 2019

$ 6 60,695,733 $ 653,887,810 $ 652,338,794 $ 641,728,737 $ 659,453,306 $ 673,103,252 37,184,909 35,846,917 40,102,473 76,492,505 73,806,195 77,316,157 66,113,985 43,120,602 40,019,411 31,506,377 31,699,862 53,578,246

$ 763,994,627 $ 732,855,329 $ 732,460,678 $ 749,727,619 $ 764,959,363 $ 803,997,655

Fiscal Year 2018-19 Comprehensive Annual Financial Report 153 Fiscal Year 2018-19 Comprehensive Annual Financial Report CHANGES IN NET POSITION Last Ten Fiscal Years (accrual basis of accounting)

Fiscal Year 2010 (As 2012 (As 2013 (As Restated) 2011 Restated) Restated) 2014 EXPENSES: GOVERNMENT ACTIVITIES: General Government $ 15,626,816 $ 13,669,474 $ 13,649,168 $ 8,672,963 $ 9,189,203 Public Safety 24,842,123 23,234,398 26,283,511 27,704,560 28,501,674 Community Development 38,378,782 20,637,467 23,682,621 19,089,897 19,730,017 Community Services 23,267,301 22,605,557 23,629,080 18,054,896 18,868,246 Public Works 19,311,995 19,801,378 17,129,875 20,604,789 12,851,618 Interest on Long Term Debt 4,932,985 5,936,927 3,110,690 979,384 933,468 TOTAL EXPENSES: $ 126,360,002 $ 105,885,201 $ 107,484,945 $ 95,106,489 $ 90,074,226 PROGRAM REVENUES: GOVERNMENT ACTIVITIES: Charges for Services: General Government $ - $ - $ - $ - $ - Public Safety 1,520,718 1,637,770 1,723,360 1,836,863 1,916,774 Community Development 4,879,851 5,898,500 5,829,585 6,323,202 4,651,706 Community Services 19,994,844 19,915,194 20,425,552 11,504,164 11,396,780 Public Works 1,661,564 1,607,188 1,486,894 1,534,647 3,890,285 Operating Contributions and Grants 9,420,299 7,254,914 4,520,508 4,085,807 4,590,883 Capital Contributions and Grants 22,164,262 13,782,751 10,395,357 20,462,014 18,187,293 TOTAL PROGRAM REVENUES: $ 59,641,538 $ 50,096,317 $ 44,381,256 $ 45,746,697 $ 44,633,721

Net Revenues (Expenses): $ (66,718,464) $ (55,788,884) $ (63,103,689) $ (49,359,792) $ (45,440,505)

GENERAL REVENUES AND OTHER CHANGES IN NET POSITION: GOVERNMENT ACTIVITIES: Taxes: Property Taxes $ 31,931,299 $ 30,815,540 $ 20,477,479 $ 15,051,588 $ 15,809,284 Sales Taxes 23,503,682 24,926,072 27,112,311 27,749,883 29,576,765 Other Taxes 6,593,459 6,583,637 6,600,874 6,917,853 7,326,884 Use of Money and Property 1,161,980 449,055 474,927 107,240 163,537 Other 267,123 3,196,237 633,318 849,444 201,683 Special Item - (4,769,968) - - - TOTAL GOVERNMENT REVENUES: $ 63,457,543 $ 61,200,573 $ 55,298,909 $ 50,676,008 $ 53,078,153 Extraordinary Gain / (Loss) - - 32,106,918 - - CHANGES IN NET POSITION: $ (3,260,921) $ 5,411,689 $ 24,302,138 $ 1,316,216 $ 7,637,648

Source: City of Temecula - Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 154 Fiscal Year 2018-19 Comprehensive Annual Financial Report

Fiscal Year

2015 2016 2017 2018 2019

$ 10,131,815 $ 8,982,725 $ 11,837,495 $ 16,335,701 $ 10,104,845 29,532,079 31,107,607 32,809,044 39,510,108 41,757,169 20,429,335 20,119,306 5,857,499 6,735,083 6,870,872 18,819,798 18,919,505 21,570,625 24,838,757 24,364,695 15,570,577 13,902,922 21,490,169 27,016,937 22,289,064 890,953 841,867 792,778 741,890 911,574 $ 95,374,557 $ 93,873,932 $ 94,357,610 $ 115,178,476 $ 106,298,219

$ - $ - $ - $ - $ 263,684 1,757,949 1,686,485 1,724,499 1,675,564 1,800,532 4,541,176 4,012,311 4,244,301 3,947,984 4,891,845 11,738,954 12,577,838 12,732,744 12,956,839 13,008,084 3,657,640 3,564,406 3,891,621 3,823,954 4,109,690 4,516,067 4,104,939 3,592,167 4,585,120 5,109,875 8,117,128 10,130,756 16,976,433 23,418,381 20,220,310 $ 34,328,914 $ 36,076,735 $ 43,161,765 $ 50,407,842 $ 49,404,020

$ (61,045,643) $ (57,797,197) $ (51,195,845) $ (64,770,634) $ (56,894,199)

$ 16,802,422 $ 17,485,712 $ 18,162,327 $ 18,922,624 $ 20,628,104 32,395,358 31,466,457 42,143,580 63,873,060 64,955,761 7,847,491 7,961,047 7,873,073 7,988,509 6,991,730 159,425 310,350 135,195 560,404 3,239,727 595,054 178,980 148,611 273,483 117,169 - - $ 57,799,750 $ 57,402,546 $ 68,462,786 $ 91,618,080 $ 95,932,491 - - $ (3,245,893) $ (394,651) $ 17,266,941 $ 26,847,446 $ 39,038,292

Fiscal Year 2018-19 Comprehensive Annual Financial Report 155 Fiscal Year 2018-19 Comprehensive Annual Financial Report FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting)

Fiscal Year 2010 (As Restated) 2011 2012 2013 GENERAL FUND: (1) Reserved $ 12,985,989 $ - $ - $ - Unreserved 32,358,447 - - - Nonspendable - 589,064 6 5,590 75,641 Restricted - 150,000 1 50,000 - Committed - 10,782, 816 12,080,977 306,074 Assigned - 20,556, 436 13,085,339 6,896,447 Unassigned - - 4,338, 969 20,343,588

TOTAL GENERAL FUND: $ 45,344,436 $ 32,078,316 $ 29,720,875 $ 27,621,750

ALL OTHER GOVERNMENTAL FUNDS: (1) Reserved $ 37,002,971 $ - $ - $ - Unreserved, reported in: - - - - Special Revenue Funds 23,591,691 - - - Capital Projects Funds 30,574,986 - - - Debt Service Funds 715,660 - - - Nonspendable - 12,321, 142 10,008,502 82,622 Restricted - 83,039, 180 48,032,766 44,941,010 Committed - 40,835 - 604 ,815 Assigned - 17,656, 412 13,919,190 8,611,653 Unassigned - (4,461,127) - - TOTAL ALL OTHER GOVERNMENTAL FUNDS: $ 91,885,308 $ 108,596,442 $ 71,960,458 $ 54,240,100

Notes: (1) Substantial increases or decreases in fund balance components are explained in the Management's Discussion and Analysis (MD&A)

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 156 Fiscal Year 2018-19 Comprehensive Annual Financial Report

Fiscal Year

2014 2015 2016 2017 2018 2019

$ - $ - $ - $ - $ - $ ------94,857 4,383 4 ,383 4 ,383 4 ,383 4 ,383 - - - - 8 ,009,354 9,912,021 163,295 549,754 202,742 - - - 996,648 - - - - - 24,046,303 25,506,754 31,994,795 33,934,560 37,404,384 40,473,578

$ 25,301,103 $ 26,060,891 $ 32,201,920 $ 33,938,943 $ 45,418,121 $ 50,389,982

$ - $ - $ - $ - $ - $ ------4,994 - - - - - 3 7,676,100 36,837,597 40,359,641 49,989,754 46,869,082 49,841,026 ------6,627,678 7,163,455 11,325,254 17,758,937 20,236,009 21,031,912 ------

$ 44,308,772 $ 44,001,052 $ 51,684,895 $ 67,748,691 $ 67,105,091 $ 70,872,938

Fiscal Year 2018-19 Comprehensive Annual Financial Report 157 Fiscal Year 2018-19 Comprehensive Annual Financial Report CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting)

Fiscal Year 2010 (As Restated) 2011 2012 2013 REVENUES: Taxes $ 63,405,871 $ 65,579,175 $ 57,221,043 $ 49,262,776 Licenses and Permits 1,756,586 1,786,528 1,814,309 2,362,575 Intergovernmental 10,216,302 12,794,003 7,173,033 22,108,391 Charges for Services 20,074,306 20,824,914 21,124,634 20,366,131 Use of Money and Property 2,119,985 1,207,757 797,561 423,032 Fine and Forfeitures 896,096 960,239 829,875 854,991 Developer participation 1,005,246 2,562,079 2,328,732 3,698,306 Contributions - - 125,000 250,000 Miscellaneous 2,048,697 7,876,526 2,407,410 624,764 TOTAL REVENUES: $ 101,523,089 $ 113,591,221 $ 93,821,597 $ 99,950,966 EXPENDITURES: Current: General Government $ 14,520,872 $ 12,825,887 $ 12,919,308 $ 12,386,569 Public Safety 24,489,716 25,431,463 25,925,613 27,339,158 Community Development 26,417,627 9,247,454 18,235,289 5,204,608 Community Services 20,271,018 19,806,297 20,584,128 17,872,194 Public Works 6,983,347 6,668,130 7,999,950 11,413,940 Capital Outlay 57,748,273 29,453,976 18,019,717 42,851,737 Debt Services: Principal Retirement 1,415,000 1,705,000 2,279,000 1,153,000 Interest and Fiscal Charges 4,517,341 5,317,659 3,620,501 982,987 Cost of Issuance 368,090 392,459 207,243 - Passthroughs 11,676,392 11,211,870 5,335,555 - TOTAL EXPENDITURES: $ 168,407,676 $ 122,060,195 $ 115,126,304 $ 119,204,193 Excess (deficiency) of Revenues over (under) Expenditures $ (66,884,587) $ (8,468,974) $ (21,304,707) $ (19,253,227) OTHER FINANCING SOURCES (uses): Transfers In $ 37,119,117 $ 24,488,322 $ 47,643,296 $ 20,141,510 Transfers Out (37,119,117) (24,488,322) (47,756,556) (20,707,766) Capital Debt Issued 13,755,000 17,035,000 - - Financing Lease Issued - - 26,835,000 - Bond Discount (89,756) (358,320) - - Sales of Property - 7,276 - - Payment to Refunded Bond Escrow Agent - - (27,421,633) - TOTAL OTHER FINANCING: $ 13,665,244 $ 16,683,956 $ (699,893) $ (566,256) Special Item $ - $ (4,769,968) $ - $ - Extraordinary Gain / (Loss) $ - $ - $ (16,988,825) $ - Net Change in Fund Balances $ (53,219,343) $ 3,445,014 $ (38,993,425) $ (19,819,483) Debt Service as a Percentage of Noncapital Expenditures 5.34% 7.79% 6.48% 2.59%

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 158 Fiscal Year 2018-19 Comprehensive Annual Financial Report FUN

Fiscal Year

2014 2015 2016 2017 2018 2019

$ 51,850,112 $ 55,936,413 $ 61,333,016 $ 67,875,967 $ 90,479,473 $ 92,505,398 2,540,449 2,294,934 2,191,273 2,010,010 2,103,845 1,875,669 21,101,943 10,377,791 12,227,503 7,203,154 26,530,479 9,580,311 16,162,421 15,714,807 17,098,574 17,057,158 17,160,954 18,980,173 438,303 482,888 609,411 442,554 901,784 3,058,691 849,030 810,332 717,728 776,425 756,471 816,021 3,099,926 2,032,153 3,096,232 2,259,654 2,728,650 3,547,577 250,000 250,000 250,000 11,407,604 250,000 450,000 538,364 1,774,963 247,934 1,413,339 746,015 1,880,053 $ 96,830,548 $ 89,674,281 $ 97,771,671 $ 110,445,865 $ 141,657,671 $ 132,693,893

$ 8,183,998 $ 9,798,217 $ 8,128,763 $ 10,680,842 $ 13,037,727 $ 11,326,227 28,123,219 29,148,761 30,721,054 32,544,145 39,129,480 41,511,191 5,354,821 5,875,037 5,658,392 5,736,921 6,520,223 6,736,033 18,701,986 18,664,551 18,949,581 19,419,668 21,208,823 22,656,534 11,347,898 12,557,744 10,837,047 11,423,960 12,553,061 12,941,918 35,232,735 11,040,713 7,265,061 10,454,884 35,280,269 30,107,200

1,199,000 1,244,000 1,291,000 1,343,000 1,389,000 1,690,647 938,866 893,190 845,901 796,975 746,231 903,099 ------$ 109,082,523 $ 89,222,213 $ 83,696,799 $ 92,400,395 $ 129,864,814 $ 127,872,849

$ (12,251,975) $ 452,068 $ 14,074,872 $ 18,045,470 $ 11,792,857 $ 4,821,044

$ 29,891,683 $ 17,755,711 $ 15,583,960 $ 22,569,815 $ 28,844,028 $ 35,338,674 (29,891,683) (17,755,711) (15,833,960) (22,814,466) (29,801,307) (37,920,010) ------6,500,000 ------$ - $ - $ (250,000) $ (244,651) $ (957,279) $ 3,918,664 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ (12,251,975) $ 452,068 $ 13,824,872 $ 17,800,819 $ 10,835,578 $ 8,739,708

2.96% 2.74% 2.84% 3.23% 2.30% 2.94%

Fiscal Year 2018-19 Comprehensive Annual Financial Report 159 Fiscal Year 2018-19 Comprehensive Annual Financial Report GOVERNMENT-WIDE REVENUES Last Ten Fiscal Years

Program Revenues General Revenues

Operating Capital Fiscal Charges for Contributions and Contributions and Use of Money and Year Services Grants Grants Taxes Property Other Total

2010 $ 28,056,977 $ 9,420,299 $ 22,164,262 $ 62,028,440 $ 1,161,980 $ 267,123 $ 123,099,081 2011 $ 29,058,652 $ 7,254,914 $ 13,782,751 $ 62,325,249 $ 449,055 $ 3,196,237 $ 116,066,858 2012 $ 29,465,391 $ 4,520,508 $ 10,395,357 $ 54,190,664 $ 474,927 $ 32,740,236 $ 131,787,083 2013 $ 21,198,876 $ 4,085,807 $ 20,462,014 $ 49,773,164 $ 107,240 $ 795,604 $ 96,422,705 2014 $ 21,855,545 $ 4,590,883 $ 18,187,293 $ 52,757,492 $ 163,537 $ 157,124 $ 97,711,874 2015 $ 21,695,719 $ 4,516,067 $ 8,117,128 $ 57,088,829 $ 159,425 $ 551,496 $ 92,128,664 2016 $ 21,841,040 $ 4,104,939 $ 10,130,756 $ 56,957,163 $ 310,350 $ 135,033 $ 93,479,281 2017 $ 22,593,165 $ 3,592,167 $ 16,976,433 $ 68,227,839 $ 135,195 $ 99,752 $ 111,624,551 2018 $ 22,404,341 $ 4,585,120 $ 23,418,381 $ 90,842,634 $ 560,404 $ 215,042 $ 142,025,922 2019 $ 24,073,835 $ 5,109,875 $ 20,220,310 $ 92,575,595 $ 3,239,727 $ 117,169 $ 145,336,511

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 160 Fiscal Year 2018-19 Comprehensive Annual Financial Report GOVERNMENT-WIDE EXPENSES BY PROGRAM Last Ten Fiscal Years

Interest on Fiscal General Community Community Long Term Year Government Public Safety Development Services Public Works Debt Total

2010 $ 15,626,816 $ 24,842,123 $ 38,378,782 $ 23,267,301 $ 19,311,995 $ 4,932,985 $ 126,360,002 2011 $ 13,669,474 $ 23,234,398 $ 20,637,467 $ 22,605,557 $ 19,801,378 $ 5,936,927 $ 105,885,201 2012 $ 13,649,168 $ 26,283,511 $ 23,682,621 $ 23,629,080 $ 17,129,875 $ 3,110,690 $ 107,484,945 2013 $ 8,672,963 $ 27,704,560 $ 19,089,897 $ 18,054,896 $ 20,604,789 $ 979,384 $ 95,106,489 2014 $ 9,189,203 $ 28,501,674 $ 19,730,017 $ 18,868,246 $ 12,851,618 $ 933,468 $ 90,074,226 2015 $ 10,131,815 $ 29,532,079 $ 20,429,335 $ 18,819,798 $ 15,570,577 $ 890,953 $ 95,374,557 2016 $ 8,982,725 $ 31,107,607 $ 20,119,306 $ 18,919,505 $ 13,902,922 $ 841,867 $ 93,873,932 2017 $ 11,837,495 $ 32,809,044 $ 5,857,499 $ 21,570,625 $ 21,490,169 $ 792,778 $ 94,357,610 2018 $ 16,335,701 $ 39,510,108 $ 6,735,083 $ 24,838,757 $ 27,016,937 $ 741,890 $ 115,178,476 2019 $ 10,104,845 $ 41,757,169 $ 6,870,872 $ 24,364,695 $ 22,289,064 $ 911,574 $ 106,298,219

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 161 Fiscal Year 2018-19 Comprehensive Annual Financial Report GENERAL GOVERNMENTAL REVENUES BY SOURCE Last Ten Fiscal Years

Fiscal Licenses and Inter- Charges for Fines and Use of Money Year Taxes Permits governmental Services Forfeitures and Property Misc. Total

2010 $ 63,405,871 $ 1,756,586 $ 10,216,302 $ 20,074,306 $ 896,096 $ 2,119,985 $ 3,053,943 $ 101,523,089 2011 $ 65,579,175 $ 1,786,528 $ 12,794,003 $ 20,824,914 $ 960,239 $ 1,207,757 $ 10,438,605 $ 113,591,221 2012 $ 57,221,043 $ 1,814,309 $ 7,173,033 $ 21,124,634 $ 829,875 $ 797,561 $ 4,861,142 $ 93,821,597 2013 $ 49,262,776 $ 2,362,575 $ 22,108,391 $ 20,366,131 $ 854,991 $ 423,032 $ 4,573,070 $ 99,950,966 2014 $ 51,850,112 $ 2,540,449 $ 21,101,943 $ 16,162,421 $ 849,030 $ 438,303 $ 3,888,290 $ 96,830,548 2015 $ 55,936,413 $ 2,294,934 $ 10,377,791 $ 15,714,807 $ 810,332 $ 482,888 $ 4,057,116 $ 89,674,281 2016 $ 61,333,016 $ 2,191,273 $ 12,227,503 $ 17,098,574 $ 717,728 $ 609,411 $ 3,594,166 $ 97,771,671 2017 $ 67,875,967 $ 2,010,010 $ 7,203,154 $ 17,057,158 $ 776,425 $ 442,554 $ 15,080,597 $ 110,445,865 2018 $ 90,479,473 $ 2,103,845 $ 26,530,479 $ 17,160,954 $ 756,471 $ 901,784 $ 3,724,665 $ 141,657,671 2019 $ 92,505,398 $ 1,875,669 $ 9,580,311 $ 18,980,173 $ 816,021 $ 3,058,691 $ 5,877,630 $ 132,693,893

$160,000,000 Miscellaneous

$140,000,000 Use of Money and Property $120,000,000 Fines and Forfeitures $100,000,000 Charges for Services $80,000,000

Intergovernmental $60,000,000

Licenses and Permits $40,000,000

$20,000,000 Taxes

$0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 162 Fiscal Year 2018-19 Comprehensive Annual Financial Report GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION Last Ten Fiscal Years

Fiscal General Community Community Year Government Public Safety Public Works Development* Services Capital Outlay Debt Service Total

2010 $ 14,520,872 $ 24,489,716 $ 6,983,347 $ 38,094,019 $ 20,271,018 $ 57,748,273 $ 6,300,431 $ 168,407,676 2011 $ 12,825,887 $ 25,431,463 $ 6,668,130 $ 20,459,324 $ 19,806,297 $ 29,453,976 $ 7,415,118 $ 122,060,195 2012 $ 12,919,308 $ 25,925,613 $ 7,999,950 $ 18,235,289 $ 20,584,128 $ 18,019,717 $ 11,442,299 $ 115,126,304 2013 $ 12,386,569 $ 27,339,158 $ 11,413,940 $ 5,204,608 $ 17,872,194 $ 42,851,737 $ 2,135,987 $ 119,204,193 2014 $ 8,183,998 $ 28,123,219 $ 11,347,898 $ 5,354,821 $ 18,701,986 $ 35,232,735 $ 2,137,866 $ 109,082,523 2015 $ 9,798,217 $ 29,148,761 $ 12,557,744 $ 5,875,037 $ 18,664,551 $ 11,040,713 $ 2,137,190 $ 89,222,213 2016 $ 8,128,763 $ 30,721,054 $ 10,837,047 $ 5,658,392 $ 18,949,581 $ 7,265,061 $ 2,136,901 $ 83,696,799 2017 $ 10,680,842 $ 32,544,145 $ 11,423,960 $ 5,736,921 $ 19,419,668 $ 10,454,884 $ 2,139,975 $ 92,400,395 2018 $ 13,037,727 $ 39,129,480 $ 12,553,061 $ 6,520,223 $ 21,208,823 $ 35,280,269 $ 2,135,231 $ 129,864,814 2019 $ 11,326,227 $ 41,511,191 $ 12,941,918 $ 6,736,033 $ 22,656,534 $ 30,107,200 $ 2,593,746 $ 127,872,849

$180,000,000 Debt Service

$160,000,000 Capital Outlay $140,000,000

$120,000,000 Community Services

$100,000,000 Community Development

$80,000,000 Public Works $60,000,000

$40,000,000 Public Safety

$20,000,000 General Government

$0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Includes general, transportation and parks maintenance special revenue and debt service funds. *Includes Pass-Through

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 163 164 Fiscal Year 2018-19 Comprehensive Annual Financial Report

REVENUE CAPACITY

165 Fiscal Year 2018-19 Comprehensive Annual Financial Report PRINCIPAL SECURED PROPERTY OWNERS Last Ten Fiscal Years

(Value in Thousands)

TAXPAYER 2010 2011 2012 2013 Abbott Cardiovascular System, Inc. $ 205,037 $ 205,759 $ 207,308 $ 211,454 International Rectifier Corporation 88,617 81,401 86,702 87,296 Temecula Towne Center Associates 116,419 147,752 148,865 144,813 Temecula Valley Hospital Inc. - - - - Cape May Temecula Apartments LLC - - - - Lakha Properties Temecula TC 52,890 - - - Vineyards Temecula Apartments - - - 48,938 Kimco Palm Plaza 46,272 - - 47,440 Solana Ridge - - - - Redhawk Towne Center - - - 55,476 Inland Valley Regional Medical Center - - - - Inland Western Temecula Common 55,784 75,461 59,730 55,223 Federal National Mortgage Association - 63,068 5 1,426 - Temecula Properties - 54,287 5 4,696 52,760 BACM 2006-5 Rancho California - 52,765 5 3,162 - Breit MF Campanula Way - - - - Alexander and Baldwin, Inc - - 48,639 44,855 Temecula Villa Apartments - - 48,058 - MG Sage Canyon Apartments LP - - - - Foothills at Old Town LLC - - - - LIPT Winchester Road Inc. - - - - FG Temecula Senior Apartments 45,251 - - - Macy's Department Stores Inc. - 37,559 3 7,841 38,598 Medline Industries Inc. - - - - Universe at Temecula Park 55,878 55,720 - - Mt San Jacinto Community College - - - - Cape May Harveston Company Inc. 49,441 49,323 - - Temecula Redevelopment Agency 44,773 - - - Campanula Way Owner LLC - - - - Temecula Town Center Owner LLC - - - - Fairfield Solana Ridge - - - - Top Ten Totals$ 760,362 $ 823,095 $ 796,427 $ 786,853 Total Assessed Valuation$ 11,133,227 $ 11,700,673 $ 11,167,952 $ 11,131,110

Source: City of Temecula Finance Department and HdL Companies

Fiscal Year 2018-19 Comprehensive Annual Financial Report 166 Fiscal Year 2018-19 Comprehensive Annual Financial Report PRINCIPAL SECURED PROPERTY OWNERS Last Ten Fiscal Years

(Value in Thousands)

2014 2015 2016 2017 2018 2019 $ 215,683 $ 216,662 $ 205,984 $ 137,091 $ 73,000 $ 73,000 108,459 91,362 79,630 - - - 147,709 148,379 151,344 153,652 156,725 159,859 - 98,427 100,393 101,925 103,963 106,042 - - - - 74,150 74,311 ------58,118 - - - - - 48,389 ------58,267 56,557 56,807 57,986 58,924 - 61,926 55,869 - - - - - 55,291 57,885 75,203 58,609 61,998 63,285 ------72,463 ------60,477 - - - - - 58,469 59,526 71,495 72,821 74,227 50,604 57,000 61,199 62,132 - - 50,639 ------54,545 59,669 60,579 61,790 ------63,095 ------69,650 71,043 - - - - 64,168 68,799 62,267 - - 55,108 - - - $ 847,318 $ 900,013 $ 906,042 $ 838,225 $ 807,384 $ 805,647 $ 11,778,504 $ 12,720,924 $ 13,472,075 $ 14,096,747 $ 14,777,475 $ 15,466,417

Fiscal Year 2018-19 Comprehensive Annual Financial Report 167 Fiscal Year 2018-19 Comprehensive Annual Financial Report PROPERTY TAX RATES (per $100 assessed valuation)

DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Direct Rates: Basic County, City and School Levy 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0493 1.0000

Overlapping Rates: Various Water Districts 0.0807 0.0793 0.0796 0.0785 0.0774 0.0764 0.0766 0.0758 0.0793 0.3055 School District 0.3932 0.4079 0.4186 0.3707 0.2729 0.2871 0.2833 0.2635 0.2636 0.0426

Total Overlapping Rates 0.4739 0.4873 0.4982 0.4492 0.3503 0.3635 0.3600 0.3393 0.3429 0.3481

COMBINED TOTAL 1.4739 1.4873 1.4982 1.4492 1.3503 1.3635 1.3600 1.3393 1.3922 1.3481

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 168 Fiscal Year 2018-19 Comprehensive Annual Financial Report PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years

Collected within the Fiscal Year of the Levy Total Collections to Date

Fiscal Taxes Collections Year Levied for in Ended the Fiscal Percentage Subsequent Percentage June 30 Year Amount of Levy Years Amount of Levy

2010 $ 5,052,858 $ 4,567,207 90.39% $ 324,371 $ 4,891,578 96.81% 2011 $ 4,999,012 $ 4,633,112 92.68% $ 215,922 $ 4,849,034 97.00% 2012 $ 5,040,082 $ 4,775,460 94.75% $ 174,247 $ 4,949,707 98.21% 2013 $ 5,048,493 $ 4,841,988 95.91% $ 138,051 $ 4,980,039 98.64% 2014 $ 5,364,377 $ 5,282,045 98.47% $ 128,692 $ 5,410,737 100.86% 2015 $ 5,880,910 $ 5,942,394 101.05% $ 118,383 $ 6,060,777 103.06% 2016 $ 6,225,930 $ 6,266,731 100.66% $ 126,284 $ 6,393,015 102.68% 2017 $ 6,564,098 $ 6,665,418 101.54% $ 119,050 $ 6,784,468 103.36% 2018 $ 6,880,178 $ 6,933,718 100.78% $ 116,632 $ 7,050,350 102.47% 2019 $ 7,183,984 $ 7,269,992 101.20% $ 132,310 $ 7,402,302 103.04%

NOTE: Since the fiscal year ended June 30, 1994, the City of Temecula has received its property tax revenues in accordance with the Teeter Plan. Under the Teeter Plan, the City is paid in full each year for the actual amount of property taxes levied, regardless of the amount of delinquencies. As delinquent property taxes are collected, they are kept by the County including any penalties and interest. After 1994, any differences between the total tax levy and total collections are due to tax roll adjustments made during the year.

Source: City of Temecula Finance Department, HdL Companies, and Riverside County Auditor-Controller

Fiscal Year 2018-19 Comprehensive Annual Financial Report

169 Fiscal Year 2018-19 Comprehensive Annual Financial Report ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years

(Value in Thousands) Total Secured Exemptions Net Total and Veteran Net Assessed Exemptions Assessed Total Direct Fiscal Year Unsecured Church, etc. Value Homeowners Value Rate

2010 $ 12,003,561 $ (112,286) $ 11,891,275 $ (115,783) $ 11,775,492 0.20989% 2011 $ 11,932,655 $ (116,038) $ 11,816,617 $ (115,944) $ 11,700,673 0.20865% 2012 $ 11,971,877 $ (129,004) $ 11,842,873 $ (114,451) $ 11,728,422 0.20136% 2013 $ 11,996,227 $ (145,041) $ 11,851,186 $ (112,450) $ 11,738,736 0.20101% 2014 $ 12,581,717 $ (153,544) $ 12,428,173 $ (109,890) $ 12,318,283 0.06776% 2015 $ 13,547,737 $ (182,877) $ 13,364,860 $ (108,001) $ 13,256,859 0.06753% 2016 $ 14,268,280 $ (204,291) $ 14,063,989 $ (107,401) $ 13,956,588 0.06774% 2017 $ 14,978,638 $ (211,399) $ 14,767,239 $ (107,239) $ 14,660,000 0.06779% 2018 $ 15,679,713 $ (261,352) $ 15,418,361 $ (107,152) $ 15,311,209 0.05098% 2019 $ 16,376,826 $ (281,515) $ 16,095,311 $ (105,164) $ 15,990,147 0.05099%

Source: Riverside County Assessor’s Oﬃce and the HdL Companies

Fiscal Year 2018-19 Comprehensive Annual Financial Report 170 171 Fiscal Year 2018-19 Comprehensive Annual Financial Report TAXABLE SALES BY INDUSTRY Last Ten Calendar Years

(Value in Thousands)

MAJOR INDUSTRY 2009 2010 2011 2012 Apparel Stores $ 100,019 $ 105,924 $ 117,918 $ 127,563 General Merchandise 337,509 361,870 377,194 398,227 Food Stores 62,736 59,260 60,502 61,794 Eating and Drinking Places 233,236 244,193 253,012 267,409 Building Materials 133,884 132,402 141,014 142,379 Auto Dealers and Supplies 307,082 329,194 394,332 495,086 Service Stations 172,674 196,533 246,336 251,225 Other Retail Stores 274,053 297,910 322,906 339,708 All Other Outlets 639,786 674,993 703,416 717,992 Total $ 2,260,979 $ 2,402,280 $ 2,616,630 $ 2,801,382

Note: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the City's revenue.

Sources: State Board of Equalization, California Department of Tax and Fee Administration, State Controller's Office, the HdL Companies.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 172 Fiscal Year 2018-19 Comprehensive Annual Financial Report

(Value in Thousands)

2013 2014 2015 2016 2017 2018 $ 131,181 $ 135,530 $ 148,097 $ 150,748 $ 147,035 $ 153,321 407,184 414,198 428,787 425,392 437,767 429,040 65,764 69,543 74,635 78,575 80,979 84,328 282,819 303,394 334,723 352,399 361,584 369,484 155,771 165,929 179,809 193,675 209,192 219,046 544,301 643,927 764,310 828,603 899,659 857,499 236,301 228,206 199,561 175,905 182,860 212,151 369,386 389,020 401,906 407,803 387,864 397,925 702,616 744,487 820,418 1,090,170 942,983 1,092,253 $ 2,895,323 $ 3,094,235 $ 3,352,245 $ 3,703,272 $ 3,649,924 $ 3,815,047

Fiscal Year 2018-19 Comprehensive Annual Financial Report 173 Fiscal Year 2018-19 Comprehensive Annual Financial Report DIRECT AND OVERLAPPING SALES TAX RATES Last Ten Fiscal Years

2009-10 2010-11 2011-12 2012-13 State General Fund 6.00% 6.00% 3.9375% (a) 4.1875% Fiscal Recovery (Triple Flip) 0.25% 0.25% 0.25% 0.25% City/County General Fund (Bradley Burns) 0.75% 0.75% 0.75% 0.75% County Public Safety (Prop 172) 0.50% 0.50% 0.50% 0.50% Realignment 1991 0.50% 0.50% 0.00% 0.00% County Realignment (Mental 0.00% 0.00% 1.5625% 1.5625% Health/Welfare/Public Safety) Countywide Transportation Fund 0.25% 0.25% 0.25% 0.25% Riverside County Transportation 0.50% 0.50% 0.50% 0.50% Commission (RCTC) Measure A Temecula Transactions & Use Tax 0.00% 0.00% 0.00% 0.00% (TEMG) District Tax- Measure S Total Rate 8.75% 8.75% 7.75% 8.00%

(a) July 1, 2011 the State decreased the State Rate by 2.0625% (b) January 1, 2013 the State increased the State Rate by .25% (c) January 1, 2016 the Triple Flip ended and the Bradley Burns rate reverted to its original 1% (d) January 1, 2017 the State decreased the State Rate by .25% (e) April 1, 2017 the resident approved Temecula Transactions & Use Tax (Measure S) District Tax went into effect at 1%

Note: The State sales tax rate may change only with approval of the State Legislature. A District Tax may only be imposed by way of 2/3 vote of City Council and voter approval. A General Purpose tax requires a majority vote while a Specific Purpose tax requires a 2/3 supermajority vote.

Sources : The HdL Companies, California Department of Tax and Fee Administration

Fiscal Year 2018-19 Comprehensive Annual Financial Report 174 Fiscal Year 2018-19 Comprehensive Annual Financial Report

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 4.1875% 4.1875% 4.1875% 3.9375% (d) 3.9375% 3.9375% 0.25% 0.25% 0.00% 0.00% 0.00% 0.00% 0.75% 0.75% 1.00% (c) 1.00% 1.00% 1.00% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.5625% 1.5625% 1.5625% 1.5625% 1.5625% 1.5625%

0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%

0.00% 0.00% 0.00% 1.00% (e) 1.00% 1.00%

8.00% 8.00% 8.00% 8.75% 8.75% 8.75%

Fiscal Year 2018-19 Comprehensive Annual Financial Report 175 Fiscal Year 2018-19 Comprehensive Annual Financial Report

TOP 25 SALES TAX PRODUCERS IN ALPHABETICAL ORDER

FOR FISCAL YEAR 2018-19 FOR FISCAL YEAR 2009-10

Apple Albertsons Arco AM PM American Material Purchasing Audi Temecula Best Buy Best Buy Chevron Chevron Comtronix Communications Circle K Costco Costco Creekside Shell Dch Chysler Dodge Jeep Ram Fiat Of Dch Chysler Dodge Jeep Ram Fiat Of Temecula Temecula DCH Kia Gosch Ford Temecula Gosch Ford Temecula Home Depot Home Depot Honda Honda JC Penney John Hine Temecula Mazda John Hine Temecula Mazda Lowes Kohls Macys Lowes Medline Industries Macys Mercedes Benz of Temecula Mobile Oil Milgard Windows & Doors Paradise Chevrolet Cadillac Paradise Buick GMC Professinal Hospital Supply Paradise Chevrolet Cadillac Quality Nissan Target Sears Temecula Hyundai Target Temecula Nissan Tesoro Refining & Marketing Temecula Valley Toyota Toyota Walmart Supercenter Walmart Supercenter

Sources: State Board of Equalization, California Department of Taxes and Fees Administration, State Controller'sOﬃce, and the HdL Companies.

Fiscal Year 2018-19 Comprehensive Annual Financial Report 176 Fiscal Year 2018-19 Comprehensive Annual Financial Report

DEBT CAPACITY

177 Fiscal Year 2018-19 Comprehensive Annual Financial Report COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT

2018-19 Assessed Valuation: $ 16,106,715,019 $ 16,106,715,019 Redevelopment Successor Agency Incremental Valuation: 1,952,723,562 1,952,723,562 Adjusted Assessed Valuation: $ 14,153,991,457 $ 14,153,991,457

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable (1) Debt 6/30/19 Metropolitan Water District 0.55% 265,236 Eastern Municipal Water District, I.D. No. U-8 85.39% 3,185,938 Mt. San Jacinto Community College District 17.67% 30,503,802 Murrieta Valley Unified School District 0.01% 15,773 Temecula Valley Unified School District 68.71% 74,143,805 Rancho California Water District Community Facilities District No. 88-3 100.00% 520,000 Eastern Municipal Water District Community Facilities District No. 2002-04 100.00% 2,240,000 Eastern Municipal Water District Community Facilities District No. 2002-08 100.00% 530,000 Eastern Municipal Water District Community Facilities District No. 2005-38, I.A. B 100.00% 2,520,000 Eastern Municipal Water District Community Facilities District No. 2010-60 100.00% 12,310,000 Temecula Public Financing Authority Community Facilities District No. 01-2 100.00% 9,510,000 Temecula Public Financing Authority Community Facilities District No. 03-1 100.00% 9,260,000 Temecula Public Financing Authority Community Facilities District No. 03-2 100.00% 20,840,000 Temecula Public Financing Authority Community Facilities District No. 03-3 100.00% 3,495,000 Temecula Public Financing Authority Community Facilities District No. 03-6 100.00% 42,250,000 Temecula Valley Unified School District Community Facilities District No. 89-1 100.00% 4,120,000 Temecula Valley Unified School District CFD No. 2002-1, I.A. No. 1 27.65% 1,471,193 Temecula Valley Unified School District CFD No. 2002-2 100.00% 14,285,000 Temecula Valley Unified School District CFD No. 2004-1, I.A. A and B 100.00% 20,165,000 Temecula Valley Unified School District CFD No. 2005-1 28.72% 2,339,244 City of Temecula 1915 Act Bonds (Assessment District No. 03-04) 100.00% 260,000

TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $ 254,229,991

Fiscal Year 2018-19 Comprehensive Annual Financial Report 178 Fiscal Year 2018-19 Comprehensive Annual Financial Report COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT (continued)

DIRECT AND OVERLAPPING GENERAL FUND DEBT: % Applicable (1) Debt 6/30/19 Riverside County General Fund Obligations 5.75% 43,677,277 Riverside County Pension Obligation Bonds 5.75% 14,011,621 Murrieta Valley Unified School District Certificates of Participation 0.01% 2,333 City of Temecula General Fund Obligations 100.00% 24,123,818 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 81,815,049 Less: Riverside County supported obligations 99,814 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $81,715,235

OVERLAPPING TAX INCREMENT DEBT: 100.00% $75,545,000

TOTAL DIRECT DEBT $24,123,818 TOTAL GROSS OVERLAPPING DEBT $387,466,222 TOTAL NET OVERLAPPING DEBT $387,366,408

GROSS COMBINED TOTAL DEBT $411,590,040 (2) NET COMBINED TOTAL DEBT $411,490,226

(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, and mortgage revenue obligations.

Ratios to 2018-19 Assessed Valuation: Total Overlapping Tax and Assessment Debt...... 1.58% Total Direct Debt ($24,123,818)...... 0.15% Gross Combined Total Debt...... 2.56% Net Combined Total Debt...... 2.56%

Ratios to Redevelopment Successor Agency Incremental Valuation ($1,952,723,562): Total Overlapping Tax Increment Debt...... 3.87%

Fiscal Year 2018-19 Comprehensive Annual Financial Report 179 Fiscal Year 2018-19 Comprehensive Annual Financial Report RATIO OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years

Fiscal Year Total Percentage of Debt Ended Certificates of Tax Allocation Financing Capital Lease Notes Governmental Personal per June 30 Participation Bonds Lease Payable Payable Activities Income Capita 2010$ 28,550,000 $ 75,575,000 $ - $ - $ - $ 104,125,000 2.77% 1,014 2011$ 27,825,000 $ 91,630,000 $ - $ - $ - $ 119,455,000 2.28% 1,137 2012 $ - $ - $ 26,646,000 $ 112,908 $ - $ 26,758,908 10.42% 260 2013 $ - $ - $ 25,493,000 $ 145,762 $ - $ 25,638,762 10.83% 244 2014 $ - $ - $ 24,294,000 $ 122,710 $ - $ 24,416,710 11.65% 230 2015 $ - $ - $ 23,050,000 $ 106,200 $ - $ 23,156,200 12.41% 213 2016 $ - $ - $ 21,759,000 $ 803,534 $ - $ 22,562,534 13.32% 207 2017 $ - $ - $ 20,416,000 $ 643,393 $ - $ 21,059,393 14.77% 190 2018 $ - $ - $ 19,027,000 $ 450,581 $ - $ 19,477,581 17.01% 172 2019 $ - $ - $ 23,836,353 $ 287,465 $ - $ 24,123,818 14.96% 212

NOTE: Details regarding the City's outstanding debt can be found in the notes to the financial statements.

Source: City of Temecula - Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 180 Fiscal Year 2018-19 Comprehensive Annual Financial Report RATIO OF GENERAL BONDED DEBT Last Ten Fiscal Years

Fiscal Year Certificates Tax Percent of Ended of Allocation Financing Capital Lease Assessed Per June 30 Participation Bonds Lease Payable Total Value* Capita 2010$ 28,550,000 $ 75,575,000 $ - $ - $ 104,125,000 0.88% 1,014 2011$ 27,825,000 $ 91,630,000 $ - $ - $ 119,455,000 1.02% 1,137 2012 $ - $ - $ 26,646,000 $ 112,908 $ 26,758,908 0.23% 260 2013 $ - $ - $ 25,493,000 $ 145,762 $ 25,638,762 0.22% 244 2014 $ - $ - $ 24,294,000 $ 122,710 $ 24,416,710 0.20% 230 2015 $ - $ - $ 23,050,000 $ 106,200 $ 23,156,200 0.17% 213 2016 $ - $ - $ 21,759,000 $ 803,534 $ 22,562,534 0.16% 207 2017 $ - $ - $ 20,416,000 $ 643,393 $ 21,059,393 0.14% 190 2018 $ - $ - $ 19,027,000 $ 450,581 $ 19,477,581 0.13% 172 2019 $ - $ - $ 23,836,353 $ 287,465 $ 24,123,818 0.15% 212

*Assessed value has been used because the actual value of taxable property is not readily available in the State of California.

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 181 Fiscal Year 2018-19 Comprehensive Annual Financial Report LEGAL DEBT MARGIN Last Ten Fiscal Years

FISCAL YEAR ENDED JUNE 30 (Values in Thousands)

2010 2011 2012 2013

Net Assessed Value $ 11,775,492 $ 11,700,673 $ 11,728,422 $ 11,738,736

Plus Exempt Property 115,783 115,944 114,451 112,450

Total Assessed Value $ 11,891,275 $ 11,816,617 $ 11,842,873 $ 11,851,186

Debt Limit – 15% of total assessed value 1,783,691 1,772,493 1,776,431 1,777,678

Amount of Debt Applicable to Debt Limit 24,105 23,665 26,646 25,493

Less Assets in Debt Service Funds Available for Payment of Principal (794) (796) - -

Total Amount of Debt Applicable to Debt Limit 23,311 22,869 26,646 25,493

Legal Debt Margin (Debt Limit - Applicable Debt) $ 1,760,380 $ 1,749,624 $ 1,749,785 $ 1,752,185

Total Net Debt Applicable to the Limit as a Percentage of Debt Limit 1.31% 1.29% 1.50% 1.43%

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 182 Fiscal Year 2018-19 Comprehensive Annual Financial Report LEGAL DEBT MARGIN Last Ten Fiscal Yea

FISCAL YEAR ENDED JUNE 30 (Values in Thousands)

2014 2015 2016 2017 2018 2019

$ 12,318,283 $ 13,256,859 $ 13,956,588 $ 14,660,000 $ 15,311,209 $ 15,990,147

109,890 108,001 107,401 107,239 107,152 105,164

$ 12,428,173 $ 13,364,860 $ 14,063,989 $ 14,767,239 $ 15,418,361 $ 16,095,311

1,864,226 2,004,729 2,109,598 2,215,086 2,312,754 2,414,297

24,294 23,050 21,759 20,416 19,027 23,836

------

24,294 23,050 21,759 20,416 19,027 23,836

$ 1,839,932 $ 1,981,679 $ 2,087,839 $ 2,194,670 $ 2,293,727 $ 2,390,461

1.30% 1.15% 1.03% 0.92% 0.82% 0.99%

Fiscal Year 2018-19 Comprehensive Annual Financial Report 183 Fiscal Year 2018-19 Comprehensive Annual Financial Report PLEDGED REVENUE COVERAGE Last Ten Fiscal Years

Fiscal Year Tax Ended Tax Allocation June 30 Increment Principal Interest Coverage Bonds 2010$ 20,684,073 $ 710,000 $ 3,051,121 5.50 $ 75,575,000 2011$ 19,809,410 $ 980,000 $ 3,915,543 4.05 $ 91,630,000 2012 $ 9,442,075 $ 1,335,000 $ 2,458,141 2.49 $ - 2013 $ - $ - $ - - $ - 2014 $ - $ - $ - - $ - 2015 $ - $ - $ - - $ - 2016 $ - $ - $ - - $ - 2017 $ - $ - $ - - $ - 2018 $ - $ - $ - - $ - 2019 $ - $ - $ - - $ -

Note: Information presented is of the former Temecula Redevelopment Agency, which was disolved by the State of California in FY2011-12.

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 184 Fiscal Year 2018-19 Comprehensive Annual Financial Report

DEMOGRAPHIC AND ECONOMIC STATISTICS

185 Fiscal Year 2018-19 Comprehensive Annual Financial Report DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years

Personal Per Capita Calendar Income (In Personal Unemployment Year Population Thousands) Income Rate 2010 102,713$ 2,883,377 $ 28,072 9.3% 2011 105,029$ 2,718,676 $ 25,885 10.1% 2012 103,092$ 2,787,505 $ 27,039 9.3% 2013 104,879$ 2,776,147 $ 26,470 6.5% 2014 106,289$ 2,845,250 $ 26,769 5.6% 2015 108,920$ 2,874,756 $ 26,393 4.7% 2016 109,064$ 3,004,878 $ 27,552 4.8% 2017 111,024$ 3,111,249 $ 28,023 4.4% 2018 113,181$ 3,312,178 $ 29,264 3.7% 2019 113,826$ 3,609,859 $ 31,714 3.5%

Source: The HdL Companies

Fiscal Year 2018-19 Comprehensive Annual Financial Report 186 Fiscal Year 2018-19 Comprehensive Annual Financial Report LARGEST EMPLOYERS BY NUMBER OF EMPLOYEES Current Year and Nine Years Ago

Percent of Percent of Number of Total Number of Total NAME OF EMPLOYER Employees Employment Employees Employment As of June 2010 As of June 2019

Temecula Valley Unified School District 2,696 6.60% 3,096 4.99% Abbott Laboratories (aka Guidant) 3,120 7.63% 1,500 2.42%0 00% Temecula Valley Hospital - 0.00% 9100.00% 1.47% PHS Medline (aka Professional Hospital Supply) 1,200 2.94% 900 1.45% Infineon Technologies (aka International Rectifier) 584 1.43% 670 1.08% Walmart - 0.00% 648 1.04% Southwest Traders, Inc 250 0.61%0 00% 4580 0.74% 00% Milgard Manufacturing Inc.(DBA Milgard Windows & Doors) 250 0.61% 450 0.73% Costco Wholesale 318 0.78%0 00% 4040 0.65% 00% EMD Millipore (DBA Milliporesigma) 272 0.67%0 00% 3500 0.56% 00% DCH Auto Group Temecula (aka Norm Reeves Auto) 212 0.52% 326 0.53% Channell Corporation 180 0.44% 320 0.52% FFF Enterprises 184 0.45%0 00% 3150 0.51% 00% City of Temecula 158 0.39%0 00% 3100 0.50% 00% Macy's 319 0.78% 309 0.50% The Scotts Company - 0.00% 289 0.47% Paradise Chevrolet Cadillac - 0.00% 272 0.44% Temecula Valley Toyota 160 0.39% 240 0.39% SoutHome Depot est #1028ade s 140 00.34% 00% 2250 0.36% 00% Air Bus DS Communications - 0.00% 190 0.31% Securitas Security Services USA, Inc. - 0.00% 175 0.28% Lowe's #775 134 0.33% 169 0.27% Target 176 0.43% 168 0.27% Rancho Family Medical Group - 0.00% 167 0.27% National Merchants Association - 0.00% 160 0.26% WinCo Foods - 00.00% 00% 154 0.25% BJ's Restaurant & Brewery - 0.00% 150 0.24% JC Penney 165 0.40% 150 0.24% Opto 22 170 0.53% 150 0.16% Pacific Hydraulic Services/MWA - 00.00% 00% 1500 0.24% 00% Temecula Valley Winery Management - 0.00% 150 0.24% Rancho California Water District 151 0.37% 146 0.24% Gosh Ford Lincoln Mercury (AKA Rancho Ford) - 00.00% 00% 1250 0.20% 00% Stater Brothers Market 170 0.42% 118 0.19%

Source: City of Temecula - Finance Department, Temecula Valley Chamber of Commerce

Fiscal Year 2018-19 Comprehensive Annual Financial Report 187 188 Fiscal Year 2018-19 Comprehensive Annual Financial Report

OPERATING INFORMATION

189 Fiscal Year 2018-19 Comprehensive Annual Financial Report OPERATING INDICATORS BY FUNCTION Last Ten Fiscal Years

FISCAL YEAR FUNCTION 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Police: Total Citations 16,348 19,071 19,065 20,420 19,248 20,766 17,549 15,667 20,139 16,023 Red Light Citations 2,007 1,825 1,660 1,046 590 807 1,006 1,246 2,534 2,093 DUI Arrests 357 400 341 387 259 188 211 234 343 419 Traffic Collisions 767 930 763 724 876 867 861 934 943 786

Fire: Number of Emergency Calls 6,333 6,583 6,890 7,202 7,194 7,5 86 8,051 8,839 8,507 9,158 Inspections 3,134 2,408 2,731 3,503 3,144 2,610 2,746 3,206 4,565 5,286

Public Works: Miles of City Streets Slurry Sealed 14 7.8 22 15 - 28 - 19.31 67.48 27.8

Parks and Recreation: Number of Recreation Classes 1000 1150 1,350 1,300 1,600 1,3 00 1,500 2,000 1,900 2,800 Number of Parks 39 39 39 39 39 39 40 40 40 41

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 190 Fiscal Year 2018-19 Comprehensive Annual Financial Report FULL-TIME CITY EMPLOYEES Last Ten Fiscal Years

FUNCTION 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

City Council 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 City Manager City Manager 5.00 4.50 4.50 4.00 5.00 3.75 3.75 3.75 3.75 3.75 Human Resources 2.50 2.50 2.50 2.00 2.75 3.50 3.25 3.25 4.35 4.25 Economic Development 2.50 3.00 1.00 4.00 4.00 4.00 3.30 3.30 3.80 4.50 Emergency Management - - - 0.00 0.00 0.00 0.50 0.50 0.40 0.70 City Clerk 7.00 7.00 7.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Finance Strategic Budgeting & Operations - - - 4.00 0.00 0.00 0.00 0.00 0.00 0.00 Finance 14.00 13.50 13.00 9.00 12.50 12.50 12.40 12.40 12.40 12.35 Community Development Planning 11.70 4.90 9.15 9.00 9.75 6.50 7.00 8.08 9.16 9.54 Building and Safety 16.90 15.90 13.00 13.25 10.75 14.25 15.00 13.78 13.38 15.93 Public Works Land Development 9.80 7.95 6.60 6.70 6.70 7.25 7.25 7.58 9.06 8.03 Public Works 19.80 19.60 18.60 18.90 18.90 19.40 19.20 19.20 19.80 18.18 CIP Administration 15.40 13.25 13.60 13.05 13.05 11.80 11.20 11.20 10.15 12.05 Parks Maintenance - - - 8.00 8.00 8.20 8.00 8.00 6.87 7.10 Police 0.50 0.50 0.50 0.50 0.50 0.50 0.38 0.38 0.38 0.40 Fire 3.00 3.00 3.00 2.50 3.00 3.00 3.00 3.00 4.00 4.00 Community Services 35.65 33.15 32.05 26.55 30.30 29.30 29.30 29.40 38.28 39.07

Business Incubator Resource - - - 0.00 0.00 0.00 0.70 0.60 0.00 0.00

Community Development Block Grant - - - 0.70 0.70 0.85 0.80 0.13 0.13 0.20 Redevelopment Agency 4.40 6.45 ------Successor to the Redevelopment Agency - - 4.25 ------Affordable Housing - - - 2.55 2.05 1.65 1.45 1.03 1.02 1.55 Community Facility District - - - 0.00 0.00 0.00 0.22 0.22 0.22 0.25 Internal Services Funds Internal Service Funds - - - 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Insurance 0.50 0.50 0.50 0.50 1.25 0.75 0.50 0.50 0.60 0.30 Information Technology 10.00 10.00 9.00 9.00 9.50 9.70 9.70 9.90 10.50 10.60 Central Services 3.00 3.00 3.00 2.00 0.00 0.00 0.00 0.00 0.00 0.00 Support Services - - - 2.00 3.50 3.30 3.50 3.30 2.70 2.60 Facilities 4.35 4.30 5.75 4.80 4.80 4.80 4.80 4.70 4.25 3.35 171.00 158.00 152.00 154.00 158.00 156.00 156.20 155.20 166.20 169.70

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 191 Fiscal Year 2018-19 Comprehensive Annual Financial Report CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years

Function 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Police: Stations 1 1 1 1 1 1 1 1 1 1 Storefronts 2 2 2 2 2 2 2 2 2 2

Fire: Stations 5 5 5 5 5 5 5 5 5 5

Public Works: Miles of Streets 300.68 299.19 301.44 307.18 309.3 313.49 315.48 315.47 322.31 322 Traffic Signals 113 118 121 122 122 122 122 122 123 123

Parks and Recreation: Number of Parks 39 39 39 39 39 39 40 40 40 41

Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 192 Fiscal Year 2018-19 Comprehensive Annual Financial Report COMPARATIVE CITY INFORMATION

ESTIMATED BUDGETED NUMBER OF GENERAL FUND GENERAL FUND EXPENDITURES NAME OF CITY YEAR EMPLOYEES POPULATION REVENUES EXPENDITURES PER CAPITA

TEMECULA 2019 176* 113,826$ 80,127,628 $ 78,311,792 $ 688 2018 172* 113,181$ 78,359,478 $ 76,055,739 $ 672 2017 157* 111,024$ 69,409,540 $ 69,139,252 $ 623 2016 158* 109,064$ 69,558,281 $ 65,986,844 $ 605 2015 158* 108,920$ 65,853,760 $ 65,418,521 $ 601 2014 156* 106,289$ 61,977,909 $ 61,639,375 $ 580

ESCONDIDO 2019 950 152,739$ 105,388,885 $ 106,803,545 $ 699 2018 955 151,478$ 101,109,750 $ 102,630,230 $ 678 2017 978 151,492$ 93,508,000 $ 93,508,000 $ 617 2016 978 150,760$ 91,416,000 $ 92,644,125 $ 615 2015 1,000 147,294$ 89,213,910 $ 90,468,505 $ 614 2014 1,116 147,102$ 86,278,100 $ 87,586,765 $ 595

MORENO VALLEY 2019 362 212,682$ 112,930,034 $ 112,921,104 $ 531 2018 358 209,826$ 104,816,445 $ 104,746,641 $ 499 2017 354 206,750$ 92,881,528 $ 91,165,357 $ 441 2016 354 201,175$ 91,885,401 $ 90,909,226 $ 452 2015 354 202,976$ 89,392,559 $ 87,509,843 $ 431 2014 361 199,258$ 79,960,000 $ 80,840,000 $ 406

HEMET 2019 340 84,854$ 52,778,750 $ 53,732,643 $ 633 2018 339 83,166$ 51,253,537 $ 44,885,960 $ 540 2017 286 81,868$ 38,446,697 $ 38,795,215 $ 474 2016 293 83,032$ 36,792,685 $ 40,958,937 $ 493 2015 291 82,253$ 35,914,300 $ 39,298,385 $ 478 2014 288 81,537$ 34,600,000 $ 39,065,000 $ 479

LAKE ELSINORE 2019 139 63,365$ 45,917,250 $ 46,547,750 $ 735 2018 136 63,365$ 43,532,726 $ 45,178,560 $ 713 2017 130 62,092$ 40,447,406 $ 41,526,344 $ 669 2016 130 58,426$ 38,179,983 $ 41,526,344 $ 711 2015 131 60,029$ 38,126,132 $ 38,952,583 $ 649 2014 111 56,718$ 35,872,965 $ 37,675,788 $ 664

MURRIETA 2019 380 115,231$ 48,211,093 $ 47,356,028 $ 411 2018 320 114,904$ 45,555,562 $ 42,953,642 $ 374 2017 315 114,914$ 41,456,896 $ 41,256,896 $ 359 2016 310 113,795$ 41,456,896 $ 39,970,664 $ 351 2015 310 108,368$ 39,954,041 $ 38,824,448 $ 358 2014 312 106,425$ 34,775,900 $ 35,785,826 $ 336

Note - City of Temecula General Fund excludes Measure S. *Denotes funded positions within the City of Temecula Source: City of Temecula Finance Department

Fiscal Year 2018-19 Comprehensive Annual Financial Report 193 Fiscal Year 2018-19 Comprehensive Annual Financial Report MISCELLANEOUS STATISTICS

June 30, 2019

Incorporation Date December 1, 1989 Form of Government Council / City Manager Number of Authorized City Employees (full-time equivalent) 176.5 Number of Registered Voters 54,659 Personal Family Income $116,464 Area in Square Miles 37.19 Altitude 1000-1200 Feet Rainfall 15.43 inches per year (avg)*** Location 55 miles north of San Diego; 85 miles southeast of Los Angeles Miles of streets 322.31 Park sites 41 Park Acreage (total) 597 Park Acreage (developed) 316 Education: Number of Schools 32 Number of Teachers 1,392 Number of Students Enrolled 27,991 Libraries (contracted with Riverside County): Number of Libraries 2 Number of Volumes 2 million Fire Protection (contracted with Riverside County): Number of Stations 5 Number of Firefighters 71 Number of Volunteer Firefighters 0 Police Protection (contracted with Riverside County): Number of Stations 3 Number of Sworn Officers 112 Supervision / Management 20

Public School Fiscal Year Population* Enrollment** 2010 105,029 29,492 2011 101,657 24,835 2012 103,092 25,671 2013 104,879 28,752 2014 106,289 28,509 2015 108,920 28,426 2016 109,064 27,700 2017 111,024 27,700 2018 113,181 28,679 2019 113,826 27,991

SOURCE: *State of California, Department of Finance **Temecula Valley Unified School District ***Riverside County Flood Control and Water Conservation District

Fiscal Year 2018-19 Comprehensive Annual Financial Report 194