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2019 Jun 18 - CC PACKETAGENDA EL SEGUNDO CITY COUNCIL WEST CONFERENCE ROOM - 350 MAIN STREET TELECONFERENCE LOCATIONS: Mayor Boyles 8 Ruette De B rosvi I l e Saint-Etienne-sous-Bailleul 27920 France Phone Number: 310-766-7546 Council Member Pimentel Crowne Plaza Hotel De Mexico 95, Col. Napoles, Del. Benito Juarez Ciudad de Mexico CMX 03810 Mexico Phone Number: 424-301-1762 The City Council, with certain statutory exceptions, can only take action upon properly posted and listed agenda items. Any writings or documents given to a majority of the City Council regarding any matter on this agenda that the City received after issuing the agenda packet are available for public inspection in the City Clerk's office during normal business hours. Such Documents may also be posted on the City's website at www.elsegundo.org and additional copies will be available at the City Council meeting. Unless otherwise noted in the Agenda, the Public can only comment on City -related business that is within the jurisdiction of the City Council and/or items listed on the Agenda during the Public Communications portions of the Meeting. Additionally, the Public can comment on any Public Hearing item on the Agenda during the Public Hearing portion of such item. The time limit for comments is five (5) minutes per person. Before speaking to the City Council, please come to the podium and state: Your name and residence and the organization you represent, if desired. Please respect the time limits. Members of the Public may place items on the Agenda by submitting a Written Request to the City Clerk or City Manager's Office at least six days prior to the City Council Meeting (by 2:00 p.m. the prior Tuesday). The request must include a brief general description of the business to be transacted or discussed at the meeting. Playing of video tapes or use of visual aids may be permitted during meetings if they are submitted to the City Clerk two (2) working days prior to the meeting and they do not exceed five (5) minutes in length. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact City Clerk, 524-2305. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. MEETING OF THE EL SEGUNDO CITY COUNCIL TUESDAY, JUNE 18, 2019 — 4:00 PM 4:00 P.M. SESSION CALL TO ORDER ROLL CALL PUBLIC COMMUNICATION — (Related to Citv Business Only — 5 minute limit per person, 30 minute limit total) individuals who have received value of $50 or more to communicate to the City Council on behalf of another, and employees speaking on behalf of their employer, must so identify themselves prior to addressing the City Council. Failure to do so shall be a misdemeanor and punishable by a fine of $250. SPECIAL ORDER OF BUSINESS: CLOSED SESSION: The City Council may move into a closed session pursuant to applicable law, including the Brown Act (Government Code Section §54960, et seq.) for the purposes of conferring with the City's Real Property Negotiator; and/or conferring with the City Attorney on potential and/or existing litigation; and/or discussing matters covered under Government Code Section §54957 (Personnel); and/or conferring with the City's Labor Negotiators; as follows: CONFERENCE WITH LEGAL COUNSEL — EXISTING LITIGATION (Gov't Code §54956.9(d)(1): -1- matters 1. Earthnell Buckner v. City of EI Segundo, Workers Compensation Appeals Board Case No. ADJ9913996 CONFERENCE WITH LEGAL COUNSEL — ANTICIPATED LITIGATION Significant exposure to litigation pursuant to Government Code §54956.9(d)(2): -0- matters. 6 2 Initiation of litigation pursuant to Government Code §54956.9 (d)(4): -1- matters. DISCUSSION OF PERSONNEL MATTERS (Gov't Code §54957): -1- matters 1. Performance Review Position: City Attorney APPOINTMENT OF PUBLIC EMPLOYEE (Gov't. Code § 54957): -1- matter PUBLIC EMPLOYMENT (Gov't Code § 54957) -1- matter 1. City Manager CONFERENCE WITH REAL PROPERTY NEGOTIATOR (Gov't Code §54956.8): -0- matters CONFERENCE WITH CITY'S LABOR NEGOTIATOR (Gov't Code §54957.6): -5- matters 1. Employee Organizations: Police Management Association; Police Support Services Employees Association; Supervisory, Professional Employees Association; and Executive and Management/Confidential Employees (unrepresented groups). Agency Designated Representative: Irma Moisa Rodriquez, City Manager, Greg Carpenter and Human Resources Director, David Serrano. 2. Labor Negotiator: Gary Phillips Unrepresented Employee: City Manager Candidates 3 3 AGENDA EL SEGUNDO CITY COUNCIL COUNCIL CHAMBER - 350 MAIN STREET TELECONFERENCE LOCATIONS: Mayor Boyles 8 Ruette De Brosville Saint-Etienne-sous-Bailleul 27920 France Phone Number: 310-766-7546 Council Member Pimentel Crowne Plaza Hotel De Mexico 95, Col. Napoles, Del. Benito Juarez Ciudad de Mexico CMX 03810 Mexico Phone Number: 424-301-1762 The City Council, with certain statutory exceptions, can only take action upon properly posted and listed agenda items. Any writings or documents given to a majority of the City Council regarding any matter on this agenda that the City received after issuing the agenda packet, are available for public inspection in the City Clerk's office during normal business hours. Such Documents may also be posted on the City's website at www.elsegundo.org and additional copies will be available at the City Council meeting. Unless otherwise noted in the Agenda, the Public can only comment on City -related business that is within the jurisdiction of the City Council and/or items listed on the Agenda during the Public Communications portions of the Meeting. Additionally, the Public can comment on any Public Hearing item on the Agenda during the Public Hearing portion of such item. The time limit for comments is five (5) minutes per person. Before speaking to the City Council, please come to the podium and state: Your name and residence and the organization you represent, if desired. Please respect the time limits. Members of the Public may place items on the Agenda by submitting a Written Request to the City Clerk or City Manager's Office at least six days prior to the City Council Meeting (by 2:00 p.m. the prior Tuesday). The request must include a brief general description of the business to be transacted or discussed at the meeting. Playing of video tapes or use of visual aids may be permitted during meetings if they are submitted to the City Clerk two (2) working days prior to the meeting and they do not exceed five (5) minutes in length. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact City Clerk, 524-2305. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. 4 n REGULAR MEETING OF THE EL SEGUNDO CITY COUNCIL TUESDAY, JUNE 18, 2019 - 6:00 P.M. 6:00 P.M. SESSION CALL TO ORDER INVOCATION — Pastor Dina Ferguson, St. Michael Episcopal Church PLEDGE OF ALLEGIANCE — Council Member Brann PRESENTATIONS a) Proclamation — July 2019 as Parks and Recreation Month b) Proclamation — The first annual "National Junior Golf Day" ROLL CALL PUBLIC COMMUNICATIONS — (Related to Citv Business Only — 5 minute limit per person, 30 minute limit total) Individuals who have received value of $50 or more to communicate to the City Council on behalf of another, and employees speaking on behalf of their employer, must so identify themselves prior to addressing the City Council. Failure to do so shall be a misdemeanor and punishable by a fine of $250. While all comments are welcome, the Brown Act does not allow Council to take action on any item not on the agenda. The Council will respond to comments after Public Communications is closed. CITY COUNCIL COMMENTS — (Related to Public Communications) A. PROCEDURAL MOTIONS Consideration of a motion to read all ordinances and resolutions on the Agenda by title only. Recommendation — Approval. 5 5 B. SPECIAL ORDERS OF BUSINESS (PUBLIC HEARING) 1. Consideration and possible action regarding approval of an amendment to Environmental Assessment No. EA -1154, amendment to Specific Plan No. SP 16-01, amended and restated conditions of approval and a Second Amendment to Development Agreement No. DA 16-01, amending the requirement that the developer provide six affordable units for low, very low and extremely low qualified households within the residential development to increase the number of affordable units to eight and to allow the eight units to be purchased by qualified moderate income households. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested revision to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Additionally, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. (Applicant: DR Horton CA2, Inc.). (Fiscal Impact: As part of the proposed amendment, the developer has agreed to provide the City an additional $100,000 for the City's costs of administering the program for two additional units.) Recommendation — 1) Continue the public hearing from the April 16, 2019 City Council meeting, 2) Take testimony and other evidence as presented; 3) Introduce by title only and waive further reading of an Ordinance (a Specific Plan amendment) amending the 540 East Imperial Avenue Specific Plan; 4) Schedule second reading and adoption of the Ordinance for July 16, 2019; 5) Adopt Resolution No. , approving amendments to the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement; 6) Alternatively, discuss and take other action related to this item. C. UNFINISHED BUSINESS D. REPORTS OF COMMITTEES, COMMISSIONS AND BOARDS 0 N E. NEW BUSINESS 2. Consideration and possible action regarding the City Council to receive and file the Comprehensive Annual Financial Report (CAFR) for fiscal year ending September 30, 2018. (Fiscal Impact: $0) Recommendation — 1) City Council receive and file the Comprehensive Annual Financial Report (CAFR) for fiscal year ending September 30, 2018 (attachment A); 2) Alternatively, discuss and take other action related to this item. 3. Consideration and possible action to appoint a city manager and approve an employment agreement with the appointed city manager (Fiscal Impact: To Be Announced) Recommendation — 1) City Council to appoint a city manager and approve an employment agreement with the appointed city manager; 2) Alternatively, discuss and take other action related to this item. F. CONSENT AGENDA All items listed are to be adopted by one motion without discussion and passed unanimously. If a call for discussion of an item is made, the item(s) will be considered individually under the next heading of business. 4. Warrant Numbers 3026343 through 3026426 and 9000950 through 9000950 on Register No. 17a in the total amount of $222,164.23 and Wire Transfers from 05/20/19 through 05/26/19 in the total amount of $632,023.20 and Wire Transfers from 5/27/19 through 06/02/19 in the total amount of $69,625.92. Warrant Numbers 3026427 through 3026499 and 9000951 through 9000987 on Register No. 17b in the total amount of $429,438.12 and Wire Transfers from 06/03/19 through 06/09/19 in the total amount of $1,015,294.15 Recommendation — Approve Warrant Demand Register and authorize staff to release. Ratify Payroll and Employee Benefit checks; checks released early due to contracts or agreement; emergency disbursements and/or adjustments; and wire transfers. 5. Regular City Council Meeting Minutes of June 4, 2019, Special City Council Meeting Minutes of June 4, 2019 and EDAC/Council Joint Minutes of May 15, 2019. Recommendation — 1) Approval 7 7 6. Consideration and possible action to accept as complete the Library Wi-Fi and Reading Lounge Renovation Project, No. PW18-04. (Fiscal Impact: $152,445.90) Recommendation — 1) Accept the work as complete; 2) Authorize the City Clerk to file a Notice of Completion in the County Recorder's Office; 3) Alternatively, discuss and take other possible actions related to this item. 7. Consideration and possible action to adopt an ordinance amending Chapter 2 (Garbage and Rubbish) of Title 5 of the EI Segundo Municipal Code in its entirety in order to meet current State mandated requirements. (Fiscal Impact: NIA) Recommendation — 1) Adopt proposed Ordinance No. XX; 2) Alternatively, discuss and take other action related to this item. 8. Consideration and possible action to authorize the City Manager to execute a 3 year agreement with Lanair Group LLC to provide hardware, software and professional services to implement the Storage Area Network and Blade Systems. (Fiscal Impact: $822,040 FY 2019-20) Recommendation - 1) Award a contract to Lanair Group LLC using a Federal government cooperative agreement, General Services Administration (GSA) as an exemption to the City's formal bidding requirements pursuant to EI Segundo Municipal Code § 1-7-9(C), and authorize the City Manager to execute a 3 year agreement with Lanair Group LLC, in a form approved by the City Attorney, to purchase hardware, software, training and professional services for execution of the technical infrastructure upgrade project; 2) Alternatively, discuss and take other action related to this item. 9. Consideration and possible action regarding revision of the Tree Maintenance Worker job classification to modify the requirement for an applicant to possess the certification, International Society of Arboriculture (ISA) Certified Tree Worker/Climber Specialist, to be "preferred" rather than "required" at the time of application. (Fiscal Impact: None) Recommendation - 1) Revise the job classification for Tree Maintenance Worker to include the ISA Certified Tree Worker/Climber Specialist certification from required to preferred; 2) Alternatively, discuss and take other action related to this item. E -*3 FQ 10. Consideration and possible action to authorize the City Manager to execute a contract amendment with RHA Landscape Architects- Planners, Inc. for additional work related to Washington Park construction documents and construction observation. (Fiscal Impact: not to exceed $36,730) Recommendation - 1) Authorize the City Manager to execute a contract amendment with RHA Landscape Architects- Planners, Inc. for additional work related to Washington Park construction documents and observation; 2) Authorize the expenditure not to exceed $36,730; 3) Alternatively, discuss and take other action related to this item. 11. Consideration and possible action to award a professional services contract to Raftelis Financial Consultants for the water and wastewater rate study. (Fiscal Impact: $98,845) Recommendation - 1) Authorize the City Manager to execute a standard professional services agreement, in a form approved by the City Attorney, with Raftelis in an amount not to exceed of $98,845 for the water and wastewater rate study for the City of EI Segundo; 2) Alternatively, discuss and take other action related to this item. G. REPORTS —CITY MANAGER H. REPORTS — CITY ATTORNEY I. REPORTS — CITY CLERK 12. Consideration and possible action regarding Council consensus to cancel the Tuesday, July 2, 2019 City Council Meeting. (Fiscal Impact: None) Recommendation — 1) Approve cancellation of the July 2, 2019 City Council Meeting; 2) Alternatively, discuss and take other action related to this item. J. REPORTS — CITY TREASURER K. REPORTS — CITY COUNCIL MEMBERS Council Member Pimentel — D Council Member Nicol - Council Member Brann - Mayor Pro Tem Pirsztuk - Mayor Boyles - PUBLIC COMMUNICATIONS - (Related to City Business Only - 5 minute limit per person, 30 minute limit total) Individuals who have receive value of $50 or more to communicate to the City Council on behalf of another, and employees speaking on behalf of their employer, must so identify themselves prior to addressing the City Council. Failure to do so shall be a misdemeanor and punishable by a fine of $250. While all comments are welcome, the Brown Act does not allow Council to take action on any item not on the agenda. The Council will respond to comments after Public Communications is closed. MEMORIALS - CLOSED SESSION The City Council may move into a closed session pursuant to applicable law, including the Brown Act (Government Code Section §54960, et sem.) for the purposes of conferring with the City's Real Property Negotiator, and/or conferring with the City Attorney on potential and/or existing litigation; and/or discussing matters covered under Government Code Section §54957 (Personnel); and/or conferring with the City's Labor Negotiators. REPORT OF ACTION TAKEN IN CLOSED SESSION (if required) ADJOURNMENT POSTED: DATE: qePY-1 l/,/, 'AA/ 9 TIME: NAME: 10 WHEREAS, rortamatt'011 Citp of (91 *egunbo, California parks and recreation programs are an integral part of communities throughout this country, including the City of El Segundo; and WHEREAS, our parks and recreation are vitally important to establishing and maintaining the quality of life in our communities, ensuring the health of all citizens, and contributing to the economic and environmental well-being of a community and region; and WHEREAS, parks and recreation programs build healthy, active communities that aid in the prevention of chronic disease, provide therapeutic recreation services for those who are mentally or physically disabled, and also improve the mental and emotional health of all citizens; and WHEREAS, parks and recreation programs increase a community's economic prosperity through increased property values, expansion of local tax base, increased tourism, the attraction and retention of businesses, and crime reduction; and WHEREAS, parks and recreation areas are fundamental to the environmental well-being of our community; and WHEREAS, parks and natural recreation areas improve water quality, protect groundwater, prevent flooding, improve the quality of the air we breathe, provide vegetative buffers to development, and produce habitat for wildlife; and WHEREAS, our parks and natural recreation areas ensure the ecological beauty of our community and provide a place for children and adults to connect with nature and recreate outdoors; and WHEREAS; the City of El Segundo recognizes the benefits derived from parks and recreation resources. NOW, THEREFORE, on this 16th day of July, 2019, the Mayor and the Members the City Council of the City of El Segundo, California hereby proclaims the month of July 2019 as Parks and Recreation Month and in doing so, urges all its citizens to use and enjoy its parks, trails, open space, facilities, and recreation opportunities. 9layor Drew Boy(es %ayor Pro Tem Caro(Tirsztuk Counci(9tember Dr. Don Brann Counci(%ember Chris Pimente( Councif9dember Scot 5vico(11 PLACE HOLDER PRESENTATION b) Proclamation — The first annual "National Junior Golf Day" 12 EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Public Hearing Consideration and possible action regarding approval of an amendment to Environmental Assessment No. EA -1154, amendment to Specific Plan No. SP 16-01, amended and restated conditions of approval and a Second Amendment to Development Agreement No. DA 16-01, amending the requirement that the developer provide six affordable units for low, very low and extremely low qualified households within the residential development to increase the number of affordable units to eight and to allow the eight units to be purchased by qualified moderate income households. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested revision to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Additionally, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. (Applicant: DR Horton CA2, Inc.). (Fiscal Impact: As part of the proposed amendment, the developer has agreed to provide the City an additional $100,000 for the City's costs of administering the program for two additional units.) RECOMMENDED COUNCIL ACTION: 1. Continue the public hearing from the April 16, 2019, City Council meeting; 2. Take testimony and other evidence as presented; and, 3. Introduce by title only and waive further reading of an Ordinance (a Specific Plan amendment) amending the 540 East Imperial Avenue Specific Plan; 4. Schedule second reading and adoption of the Ordinance for July 16, 2019; 5. Adopt Resolution No. , approving amendments to the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement; and/or 6. Alternatively, discuss and take other possible action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Resolution No. , approving amendments to the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement 2. Proposed Ordinance No. 3. City Council Staff Report, dated April 16, 2019 (without attachments) 4. Planning Commission Resolution No. 2858 5. Planning Commission Staff Reports, dated January 24 and February 28, 2019 (without attachments) 6. Affordable Housing Agreement dated October 18, 2018 7. City Council Staff Report dated March 6, 2012 13 1 FISCAL IMPACT: As part of the proposed amendment, the developer has agreed to provide the City an additional $100,000 for the City's costs of administering the program for two additional units. Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A STRATEGIC PLAN: Goal: N/A Objective: N/A PREPARED BY: Eduardo Schonborn, AICP, Principal Planner REVIEWED BY: Gregg McClain, Planning Manager Sam Lee, Planning and Buildinafety Director APPROVED BY: Greg Carpenter, City Manager. EXECUTIVE SUMMARY In 2016, the City Council approved a residential development at the former school site at 540 East Imperial Avenue, consisting of 24 single-family dwelling units and 34 multi -family dwelling units (condominiums). As part of the project's conditions of approval, the developer (DR Horton) agreed to set aside six multi -family units as affordable units, for sale to qualified affordable households. Specifically, two units must be affordable to extremely low income households, two affordable to very low income households, and two affordable to low income households. The developer is now requesting a modification to the requirement and is proposing to provide eight units affordable to moderate income households. BACKGROUND On April 16, 2019, the City Council considered a request by DR Horton to modify the affordable housing requirement to provide eight units affordable to moderate income households rather than six units affordable to extremely low, very low, and low income households. Based on the interest expressed by the public thus far and the forthcoming marketing of the affordable units, it is anticipated that the number of applicants will greatly exceed the number of units available. As such, the City Council directed the applicant and staff to return with information on how the affordable housing program and selection process will work. The City Council continued the public hearing so the applicant can prepare an affordable housing program. After working with staff and the city's housing consultant, on May 28, 2019, the applicant submitted information on how the affordable housing program will work. Although staff will provide a summary of the program within this staff report, the applicant will provide a comprehensive presentation at the City Council meeting. P 14 DISCUSSION Program Overview As stated above, the City Council directed the applicant and staff provide information on how the program would work, how applicants would be selected, and how military personnel would be given preference. As illustrated in the flowchart below, the program begins with marketing the units to the public, with emphasis towards military veterans and school teachers. Mediums to market the units would include social media, the city's website, newspapers, ads, and emails. The marketing campaign would include eligibility information and a time frame for accepting applications that would commence with an information workshop. Since the selection process includes a random • MARKETING drawing in the future (step 5), no preference or special consideration would be given to WL. applications received first or last during the • APPLICATION SUBMITTAL Iapplication submittal period. IV ■ APPLICANT PREQUALIFICATION • CITY VERIFIES APPLICANT IS AN AFFORDABLE HOUSEHOLD • RANDOM SELECTION AT PUBLIC DRAWING EVENT • APPLICANT LOAN . QUALIFICATION Once the application period closes, DRH will review the applications to determine if they prequalify. Prequalification can be effected by credit scores, FICO scores, income -to - debt, and other financial considerations. The applications of those that prequalify would then be submitted to the city. With the aid of its consultant and the use of State and Federal standards and criteria, the City would verify if the applicant is considered a qualified lower-income household that meets the criteria of a moderate income, low income, very low income or extremely low income household. Those that are deemed not to be lower-income households would not proceed to the next step. • ESCROW CLOSES Utilizing only the applicants that are both prequalified (by DRH) and verified as qualified lower-income households (by the City), a drawing event would be conducted by the City's consultant held where names (i.e., ID numbers) are randomly selected and placed on a list in the order they are selected. Further, a separate drawing would also be conducted exclusively for military veterans. Ultimately, the first eight on the list would then be directed to secure a loan through a lender of their choosing within a prescribed time, and would then close escrow on the unit. For those that do not secure a loan or do not pursue purchasing the unit, they are removed from the list and the next applicant on the list is allowed to move forward with the process. 3 15 As indicated above, the applicant will provide a comprehensive presentation at the City Council meeting. Planning Commission Recommendation On February 28, 2019, the Planning Commission adopted a resolution recommending the City Council approve the proposed amendment to provide for a total of eight affordable units at the moderate income category, instead of six at the lower income categories. Staff's Assessment As indicated previously, Staff supports the amendment because it retains affordable housing at the project site, places the responsibility on the applicant, and it is more feasible in light of the current market conditions for "for -sale" units. The current requirement would be detrimental to potential buyers since the financial viability of households in the extremely low, very low and low income categories is likely not sustainable, since the households would not have the financial resources to pay for basic housing costs in addition to any mortgage. In contrast, moderate income household could qualify for a mortgage and continue to have the means to pay for other basic housing costs, and expands the opportunity of homeownership to a larger market. Furthermore, the amendment shows that El Segundo is taking steps to address its RHNA obligation. Lastly, allowing the developer to pay the City an "in lieu" fee is not beneficial to the city for the following reasons: 1. It transfers responsibility of providing affordable housing to the City. 2. Removing the affordable housing requirement entirely from the project increases the number of affordable units the City must identify as part of its Housing Element. 3. Creation of a substitute affordable housing program is not guaranteed. Next Stens If the City Council approves the amendment, DR Horton will finalize a marketing plan that staff will review. In accordance with direction from the City Council when the project was approved, and reiterated by the Planning Commission, staff will work with DR Horton to ensure that members of the military and current residents and workers in the City are given priority for the housing units to the extent permitted by law. CONCLUSION: For the foregoing reasons, Planning Staff recommends that the City Council introduce an Ordinance amending the 540 East Imperial Avenue Specific Plan; schedule second reading and adoption of the Ordinance for July 2 or 16, 2019; and adopt Resolution No. _'approving amending the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement. 0 �W, RESOLUTION NO. APPROVING AMENDMENTS TO THE CONDITIONS OF APPROVAL FOR ENVIRONMENTAL ASSESSMENT NO. EA - 11549 THE 544 EAST IMPERIAL SPECIFIC PLAN AND A SECOND AMENDMENT TO THE DEVELOPMENT AGREEMENT 17 RESOLUTION NO. A RESOLUTION OF THE EL SEGUNDO CITY COUNCIL APPROVING AN AMENDMENT TO ENVIRONMENTAL ASSESSMENT NO. 1154 AND A SECOND AMENDMENT TO THE DEVELOPMENT AGREEMENT TO AMEND THE AFFORDABLE HOUSING REQUIREMENT TO PROVIDE FOR EIGHT AFFORDABLE UNITS FOR QUALIFIED MODERATE INCOME HOUSEHOLDS WITHIN THE RESIDENTIAL DEVELOPMENT. The City Council of the City of EI Segundo does resolve as follows: SECTION 1: The City Council finds and declares that: A. On March 20, 2012, the City Council approved the "540 East Imperial Avenue Specific Plan" (Specific Plan 10-03) and other entitlements, to allow for the construction of one of two possible conceptual options on a 5.65 -acre surplus school site then -owned by the EI Segundo Unified School District. Option 1 consisted of a three-story, 150 unit assisted living complex and a 154 -unit senior apartment/condominium complex. Option 2 consisted of 34 multi -family dwelling units taking access from Imperial Avenue (six of which would be designated for low, very low and extremely low affordable units), and 24 single-family dwelling units taking access from Walnut Avenue, for a total of 58 units; B. On September 28, 2016, the EI Segundo City Council adopted Resolution No. 4999, approving Environmental Assessment No. EA 1154, an amendment to the 540 East Imperial Avenue Specific Plan, and the First Amendment to Development Agreement No. 16-01 for the development of Option 2 described above; C. Pursuant to the conditions of approval contained in Resolution No. 4999, which were agreed to by D.R. Horton CA2, Inc. (either the "Applicant" or "Developer"), the approved residential development must set aside six multi -family units as affordable units, for sale to qualified lower income households. Specifically, two units must be affordable to extremely low income households, two units affordable to very low income households, and two units affordable to low income households. The City Council also conditioned the project on members of the military being given priority for the affordable housing units; D. On August 6, 2018, the Applicant filed an application to amend the affordable housing requirement for the residential development; E. On September 5, 2018, the application was deemed incomplete pending the submittal of additional information, including details about what amendments are being requested; F. On January 10, 2019, a notice was provided to 119 property owners within a 300 - foot radius of the 540 East Imperial Avenue project site, and a notice was also UP published in the EI Segundo Herald on January 10, 2019, indicating that a public hearing was scheduled with the Planning Commission on January 24, 2019; G. On January 22, 2019, the applicant submitted a request to continue the item to a future date; H. On January 24, 2019, the Planning Commission continued the hearing and directed that notice be provided for the Planning Commission hearing; I. On February 11, 2019, the Applicant submitted a letter to amend the affordable housing requirement for the residential development, requesting that the affordability be changed to provide eight units at the moderate income level; J. On February 14, 2019, a notice was provided to 119 property owners within a 300 - foot radius of the 540 East Imperial Avenue project site, and a notice was also published in the EI Segundo Herald on February 14, 2019, indicating that a public hearing was scheduled with the Planning Commission on February 28, 2019; K. The Planning Commission conducted a public hearing on February 28, 2019, at which time all interested parties were given an opportunity to be heard and present evidence regarding said amendments as set forth in the Planning Commission Staff Report of that date and to receive public testimony and other evidence regarding the proposed amendments, including, without limitation, information provided to the Planning Commission by City staff and public testimony; L. On February 28, 2019, the Planning Commission reviewed and considered the proposed amendments, and adopted PC Resolution No. 2858 recommending the City Council approve this ordinance amending Environmental Assessment No. EA - 1054, 540 East Imperial Avenue Specific Plan and Development Agreement No. 16-01; M. On April 16, 2019, the City Council conducted a public hearing to receive public testimony and other evidence regarding the applications including, without limitation, information provided to the City Council by City staff and public testimony, and the applicant; N. On April 16, 2019, the City Council requested additional information from the applicant and continued the item to May 21, 2019; O. On May 21, 2019, the City Council continued the item to the June 18, 2019 City Council meeting; P. On June 18, 2019, the City Council received additional public testimony and other evidence regarding the applications including, without limitation, information provided to the City Council by City staff and public testimony, and the applicant; and, W Q. Concurrently with this resolution, the City Council has also introduced and is expected to adopt an ordinance approving an amendment to the 540 East Imperial Avenue Specific Plan and a Second Amendment to the Development Agreement. SECTION 2: Factual Findings and Conclusions. The City Council finds the following: A. Based upon the income limits for each income category, the financial viability of households in the extremely low, very low and low-income categories is not sustainable, and they would be challenged with paying essential and basic housing costs, including mortgage, HOA fees, property taxes, and housing maintenance costs. Thus, households in these income categories would be placed in a position that make them vulnerable to defaulting on their loans. B. Households in the moderate income category are more appropriate in a "for -sale" development, such as the development at the 540 East Imperial Avenue site. Based on the recommendation of the City's affordable housing consultant, the affordable housing requirement can be amended to require eight units be affordable to qualified moderate income households. C. The amendment is in the City's best interest as it provides for two additional affordable housing units than what was originally required; the amendment makes progress towards meeting the city's regional share of housing in the moderate income category; the amendment expands opportunity of homeownership to a larger group of prospective homebuyers; the amendment is consistent with the City's Housing Element; and, the amendment is consistent with the project approvals that requires affordable housing on-site, within the boundaries of the new development. SECTION 3: Environmental Assessment. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested amendment to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the Council - certified EIR Addendum. Further, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. SECTION 4: General Plan Findings. Amending the affordable housing requirement to require that eight condominium units be affordable to moderate income households is consistent with Housing Element Goal 2 to "Provide sufficient new, affordable housing opportunities in the City to meet the needs of groups with special requirements, including the needs of lower and moderate income households." The amendment is consistent with and furthers Housing Element Policy 3.1 to "Provide for the construction of 69 new housing units during the 2014-2021 planning period in order to meet the goals of the Regional Housing Needs Assessment (RHNA)." The City acknowledges, however, that WE due to the approval of the amendment, additional sites will need to be identified to accommodate the City's RHNA by income level, as discussed in Section 5 below. SECTION 5: Housing Element and "No Net Loss" Finding. The project site was identified as a pending project in the City's certified Housing Element, which would have provided enough affordable housing units to address the City's RHNA allocation of 29 affordable units in the lower income categories. By adopting this resolution, the City is allowing development of the property with fewer units by income category than identified in the Housing Element. Based on a review of the Housing Element, the City does not find that the remaining sites in the Housing Element are adequate to accommodate the City's share of the regional housing need by income level. Accordingly, pursuant to Government Code § 65863(c)(2), the City will, within 180 days, identify and make available additional adequate sites to accommodate the City's share of the regional housing need by income level. SECTION 6: Approvals. Based on the foregoing and subject to the amended and restated conditions listed on the attached Exhibit "A," the City Council hereby: A. Approves an amendment to Environmental Assessment No EA 1154; and B. Authorizes the City Manager to execute an amendment to the Affordable Housing Agreement with the Applicant, in a form approved by the City Attorney's office. SECTION 7: Reliance On Record. Each and every one of the findings and determination in this Resolution are based on the competent and substantial evidence, both oral and written, contained in the entire record relating to the project. The findings and determinations constitute the independent findings and determinations of the City Council in all respects and are fully and completely supported by substantial evidence in the record as a whole. SECTION 8: Limitations. The City Council's analysis and evaluation of the project is based on the best information currently available. It is inevitable that in evaluating a project that absolute and perfect knowledge of all possible aspects of the project will not exist. One of the major limitations on analysis of the project is the City Council's lack of knowledge of future events. In all instances, best efforts have been made to form accurate assumptions. Somewhat related to this are the limitations on the city's ability to solve what are in effect regional, state, and national problems and issues. The City must work within the political framework within which it exists and with the limitations inherent in that framework. SECTION 9: Summaries of Information. All summaries of information in the findings, which precede this section, are based on the substantial evidence in the record. The absence of any particular fact from any such summary is not an indication that a particular finding is not based in part on that fact. 21 SECTION 10: Concurrently with this resolution, the City Council has also introduced and is expected to adopt an ordinance approving an amendment to the 540 East Imperial Avenue Specific Plan and a second amendment to the Development Agreement, amending the affordable housing requirement to provide for eight affordable units for qualified moderate income households within the residential development. In the event that the ordinance is not adopted by the City Council, this resolution will be null and void and of no effect. SECTION 11: Except as otherwise stated in Section 10, this Resolution will become effective immediately upon adoption and will remain effective until superseded by a subsequent resolution. SECTION 12: A copy of this Resolution must be mailed to D.R. Horton Homes CA2, Inc. and to any other person requesting a copy. PASSED, APPROVED AND ADOPTED this ATTEST STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) SS CITY OF EL SEGUNDO ) day of June, 2019. Mayor I, Tracy Weaver, City Clerk of the City of EI Segundo, California, do hereby certify that the whole number of members of the City Council of said City is five; that the foregoing Ordinance No. was duly introduced by said City Council at a regular meeting held on the day of , 2019, and was duly passed and adopted by said City Council, approved and signed by the Mayor, and attested to by the City Clerk, all at a regular meeting of said Council held on the day of 2019, and the same was so passed and adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: 22 Tracy Weaver, City Clerk APPROVED AS TO FORM: Mark D. Hensley, City Attorney 23 CITY COUNCIL RESOLUTION NO. Exhibit A CONDITIONS OF APPROVAL (amended and restated by the City Council on June 18, 2019) In addition to all applicable provisions of the El Segundo Municipal Code ("ESMC"), D.R. Horton Homes CA2, Inc. ("Applicant") agrees to comply with the following provisions as conditions for the City of EI Segundo's approval for Environmental Assessment (EA No. 1154), as amended, 540 East Imperial Avenue Specific Plan, as amended, and a second amendment to Development Agreement No. 16-02 (`Project Conditions"). The proposed revisions to these conditions of approval are illustrated with strikethFougli for existing language that is proposed for elimination and underlined for proposed new language. Planning and Buildinq Safetv Department Before building permits are issued, the applicant must submit plans demonstrating substantial compliance with the plans and conditions of approval on file with the Planning and Building Safety Department. Any subsequent modification to the project as approved, including the site plan, floor plan, elevations, landscaping and materials, must be referred to the Director of Planning and Building Safety to determine whether the Planning Commission should review the proposed modification. 2. Before building permits are issued, the applicant must obtain all the necessary approvals, licenses and permits and pay all the appropriate fees as required by the City. 3. The applicant must comply with all mitigation measures identified in the previously certified Final Environmental Impact Report prepared for the Project. A Mitigation Monitoring and Reporting Program (MMRP) was prepared as part of the environmental review for the project and is attached as Exhibit C to this Resolution. The mitigation measures of the MMRP are incorporated into these conditions of approval by reference. All mitigation measures and conditions of approval must be listed on the plans submitted for plan check and the plans for which a building permit is issued. 4. Any changes to the colors and materials of the exterior fagade of the building must be in compliance with the 540 East Imperial Avenue Specific Plan Amendment Section 4.2(F) Development Standards and approved to the satisfaction of the Director of Planning and Building Safety. 5. Before the City issues a building permit, the applicant must submit final landscaping and irrigation plans to the Planning and Building Safety Department and the Parks and Recreation Department for review and approval to demonstrate 24 compliance with the City's Water Conservation regulations and Guidelines for Water Conservation in Landscaping (ESMC Title 15. Chanter 15-5A). The plant materials used in landscaping must be compatible with the EI Segundo climate pursuant to Sunset Western Garden Book's Zone 24 published by Sunset Books, Inc., Revised and Updated 2001 edition, which is available for review at the Planning and Building Safety Department. Additionally, the landscaping and irrigation must be completely installed before the City issues a final Certificate of Occupancy. Additionally, the final landscaping and irrigation plans must comply with the following: • Reclaimed water must be used as the water source to irrigate landscaped areas, if feasible. To that end, dual water connections must be installed to allow for landscaping to be irrigated by reclaimed water, if feasible. • Efficient irrigation systems must be installed which minimize runoff and evaporation and maximize the water which will reach plant roots (e.g., drip irrigation, automatic sprinklers equipped with moisture sensors). Automatic sprinkler systems must be set to irrigate landscaping during early morning hours or during the evening to reduce water losses from evaporation. Sprinklers must also be reset to water less often in cooler months and during the rainfall season so that water is not wasted by excessive landscaping irrigation. 6. Selection of drought -tolerant, low-water consuming plant varieties must be used to reduce irrigation water consumption, in compliance with ESMC §§ 10-2-1, et seq. 7. The ep9liasnt muct ; rv%�c a cvaffii v*nt number of � ioy43 raolto tc ecoaP.1xiad0o ncring s t bicycloc (CVien 1): [Condition deleted by the City Council on June 18, 2019.] Q. Employ ecu muot 50 prcvideg vArrcnt map*, rcOac and schvd0h3 for public tranS4 Tau#oa se ving tho ci+-_� .clzl;hene nurnbcrs fer ra�3> rsla an trer:,W r,'e:ion nforrn0ian ins&9—inr numbarc fer tN. sagional rid`aharing cgonoy end trsnoit eporstore; ridaah:ring pram. oticncl rnWericic; ent 0-y routo eng fl"Mity infcrme-ticn. Tw-s It Gokc with :uoh infcrmckicn mutt "o ; rcvido� far apticn 1 with one-Kiook Ic"tom in the DQni99DaAicn of tit p,re*ct and the ceccnC kiaay lorweted in the "t*tsc living fc0ity tc the,-safnf"tion 0 the Dir-3ver of Plcnninr ane i L lding gefc y. Qm kicok m.N2 '-\i prvvided in Oocn 2 in +ha --,3nicr -houaing/muN, family pertion of tb3 projoot Bits to tho Dctisfaoian of the Sirocty of -PIcnning end Builg-ing liefc }y. [Condition deleted by the City Council on June 18, 2019] 9. Trash and recycling enclosures must be provided and shown on the site plan that are sufficiently large enough to store the necessary bins required for the regular collection of commercial solid waste and recyclable materials. The site plan with 25 the location and dimensions of the trash and recycling enclosure and an elevation view of the enclosure must be provided to the Planning and Building Safety Department for review and approval before the City issues building permits. Ccperetc tr"h ani rccy0ng fccilitiot r-,vAet be provigee fcr acah of the three cpm-c\nonte of OFtic\n 1 (scnioF houcing, o^riclee living snd m4! family). Separate trash and recycling enclosures must be provided for the multi -family portion of Option 2. [Condition amended by the City Council on June 18, 2019.] 10. Ground level mechanical equipment, refuse collectors, storage tanks, generators, and other similar facilities must be screened from view with dense landscaping and walls of materials and finishes compatible with the overall design of the project and any ancillary buildings. 11. Exterior lighting must be designed to minimize off-site glare. 12. The building must be designed to comply with all ESMC standards for the attenuation of interior noise. 13. All homes must achieve a 15% improvement over the standards established in the 2013 California Energy Standard Codes. 11. The wlicent airs a tc cat aai&- I;VK of the totel number of a -nits c nstrvviies4--fer Cptien 1. Thi anitc mw, be iwistrib toe ev fcl'ows: V% 2f tho totel 1504 fcr thn eretramalry lew inccmc canicr hc�r✓cholg s0oScryl; 31 °/ of the 15 for tha �.c;y lew inoo=—senia� hous0ald ectogery; and 3E% of tho 15% fcr tha lair in"mden e hcc^n"rcld cocgcTy to kc *Flit vgwe4y-#aeWeon tho cecio%� living sni� scne'wninir:m/cpertmcnt ►:nits. R—..reQnWg9c for the Mal number of ►;nits Q\n'j fir cech inoemc ecteg^ry muct by ky re n�ing to the 1.».a_R+ whf,ie 4 bGr net to *i(cco� the mn,v'�mn ripgvirad p:roontegar' The a, _sINri', an in3cme--vWia&\flcn mcnitzring plcn tc the Dira w of PlC\nning Rnd ceding Ecfotl kcf6ro iw.vnec of Co6fioete of Qvcvpeney- [Condition deleted by the City Council on June 18, 2019.] 15. The applicant agrees to set aside 14% of the total number of units constructed for Option 22=B. The mita mvct bs dictftOa: an fellows: 2111 of tha totcl 10% for thv e*tFe, nWy lox*r ;tee hcviheW cite ery; 210/r, of the 1-C% for the ve4y4ow in-oamo nc6:, , OW @ctQgcry; ani ig% of thz 10%, fer the Icer in��Ync hcvv�hcliw c0c� tc lee edit vg6:0 een the rnb:-lti femily smini►m/ crtmcnt a -Any affordable housing units that are required based on the single-family component of Option 22=B may be satisfied by developing the requisite number of units in other components of the project. Percentages for the total number of units and for each income category must be calculated by rounding to the nearest whole number not to exceed the maximum required percentage. The Developer and the City must enter into an Affordable Housing Agreement, which will include an income verification monitoring plan, before issuance of Certificate of Occupancy. The 26 project will fulfill the affordability requirements set forth in the Specific Plan by providing a total of 6 --eight affordable units to qualified moderate income households as defined by the State Income Limits established by the California, Department of Housina and Communitv Develooment, which represents 4 14% of the total 58 units. The units will be provided in the multi -family section of the project and will be dispersed throughout the multi -family section so that no more. than four units will be located in anv one building VywIly Ciotribatod throughgut tl^* onti,m pro -,`W ky Ivcviding ono snit in vsoh mNIti family The "affordable" units must be similar in exterior appearance, interior appointments, and configuration and basic amenities (such as storage space and outdoor living areas) to the "market rate" units in the proposed project. Further, covenants and agreements must be recorded as to the affordable units, which would ensure the units remain affordable for a term of 20 years, concurrently with the recordation of the final map or the issuance of the first certificate of occupancy of the building. (Condition amended by the City Council on June 18, 2019.1 16. The applicant must provide a marketing implementation plan that includes, without limitation, notification to residents of EI Segundo regarding the availability of affordable housing in the project, eligibility requirements, application requirements, and access to application materials to the satisfaction of the Director of Planning and Building Safety. 17. A minimum of two building materials must be provided in each component of each project option (Option 1 and Option 2) to the satisfaction of the Director of Planning and Building Safety. 18. The project must meet all design criteria of the Specific Plan to the satisfaction of the Director of Planning and Building Safety. Building Division Conditions 19. Before building permits are issued, the applicant must submit a geotechnical/soils report, along with an associated grading plan that addresses the current code to the Planning and Building Safety Department for review and approval. 20. Before grading permits are issued, the applicant must submit a soils report to the Planning and Building Safety Department for review and approval. 21. Before grading permits are issued, the applicant must submit a grading plan to the Planning and Building Safety Department for review and approval. Before building permits are issued, plans must show conformance with the 2013 California Building Code, 2013 California Mechanical Code, 2013 California Plumbing Code, 2013 California Electrical Code, and 2013 California Energy Code, all as adopted by the ESMC. For project submitted for plan review after January 1, 2017, the 2016 editions of the uniform codes, as adopted by the City, will apply. 27 22. Before building permits are issued, plans must show compliance with accessibility requirements per the 2013 California Building Code, as adopted by the ESMC. 23. The applicant must provide a complete pool enclosure that encompasses the pool per the 2013 California Building Code, as adopted by the ESMC. 24. The applicant must provide a disabled access lift to access the pool per the 2013 California Building Code, as adopted by the ESMC. 25. At least one stairway must access the roof per the 2013 California Building Code, as adopted by the ESMC. Fire Department Conditions 26. The project must comply with all applicable requirements in the 2013 California Building and Fire Codes, and the 2013 International Fire Code as adopted by the ESMC and EI Segundo Fire Department regulations. For projects submitted for plan review after January 1, 2017, the 2016 editions of the uniform codes, as adopted by the City, will apply. 27. Construction of any cafeteria or kitchen facilities in the assisted living facility must include installation of a grease interceptor capable of removing fats, oils, and grease from the kitchen waste stream. If the Los Angeles County Health Department determines that the food preparation area does not require the installation of grease interceptors, then this condition will not be required. 28. Construction activities must include a storm water pollution prevention plan addressing non -storm water run-off, debris removal, track -out and protection of storm water system. 29. Any diesel -powered generators must be approved by the Fire Department, Environmental Safety Division, and provide for secondary containment, placarding, spill detection and prevention. Underground tanks require additional environmental monitoring requirements. 30. The applicant must provide the Environmental Safety Division of the EI Segundo Fire Department an inventory of any and all chemicals used for laundry, pool or house cleaning, emergency generators or other devices. 31. The applicant, or designee, must contact Underground Service Alert before digging or excavating. 32. Any demolition must be screened for asbestos and lead, with proper notifications to South Coast Air Quality Management District (SCAQMD). Public Works Department Conditions 33. All onsite utilities including, without limitation, water, electricity, gas, sewer and storm drains, must be installed underground. Contact Southern California Edison for required service and underground requirements (Mr. John Deng at (310) 783- 9305). 34. Before the City issues a Certificate of Occupancy, the applicant must ensure that all curb, gutters, A.C. pavement and driveway aprons fronting 540 East Imperial Avenue and the property frontage along Walnut Avenue will be replaced as required by the Public Works Department. 35. Before the City issues a Certificate of Occupancy, all damaged or off -grade curb, sidewalk and pavement must be removed and replaced as required by the Public Works Department. 36. The applicant must secure any required encroachment permits from the Public Works Department before commencing any work in the public right-of-way. 37. The project must comply with the latest National Pollution Discharge Elimination System (NPDES) requirements and provide Best Management Practices (BMPs) for sediment control, construction material control and erosion control. 38. Before the City issues a building permit, the location and sizes of all proposed water meters must be approved by the City's Water Division. 39. Before the City issues a building permit, the applicant must clean and inspect (via remote TV camera) the project sewer lateral. If found impaired, the applicant is responsible for the replacement of the lateral. 40. A registered civil engineer must provide storm (hydrologic and hydraulic) calculations for appropriate storm drain facilities to control on-site drainage and mitigate off-site impacts, as follows, subject to review and approval from the Public Works Department: ■ The design must follow the criteria contained in both the Los Angeles County Department of Public Works Hydrology Manual 2006 and Standard Urban Storm Water Mitigation Plan or most recent editions. Flows must remain in their historical drainage pattern so as not to impact neighboring properties. New development must not increase the rate of flow (cubic feet per second) or velocity (feet per second) of site run-off water to any off-site drainage areas beyond the measured or calculated pre -project rate and velocity. 41. Construction related parking must be provided on-site. M 42. All record drawings (as -built drawings) and supporting documentation must be submitted to the Public Works Department before scheduling the project's final inspection. Police Department Conditions 43. Before the City issues a building permit, the applicant must submit a photometric light study to the Police Department for review and approval. A site plan must be provided showing buildings, parking areas, walkways, and the point -by -point photometric calculation of the required light levels. Foot candles must be measured on a horizontal plane and conform to a uniformity ratio of 4:1 average/minimum. The photometric study must be point -by -point and include the light loss factor (.7). Lighting levels must be adjusted to meet the minimum foot candle requirements within each area of the site. All interior or exterior corridors, passageways and pedestrian walkways and open parking lot shall be illuminated at all times with a minimum maintained one foot-candle of light on the walking surface. 44. A schematic plan of the security camera system must be submitted and approved by the EI Segundo Police Department before the City issues a building permit, and must be included as a page in the stamped approved set of plans. 45. Lighting devices must be enclosed and protected by weather and vandal resistant covers. 46. Stairways must be illuminated with a minimum maintained one foot-candle of light on all landings and stair treads at all times. 47. Recessed areas of building or fences, which have a minimum depth of two feet, a minimum height of five feet, and do not exceed six feet in width and are capable of human concealment, must be illuminated with a minimum maintained 0.25 foot- candles of light at ground level during the hours of darkness. This requirement applies to defined recessed areas which are within six feet of the edge of a designated walking surface with an unobstructed pathway to it, not hindered by walls or hedge row landscaping a minimum of two feet in height. 48. All types of exterior doors must be illuminated during the hours of darkness, with a minimum maintained one foot-candle of light measured within a five-foot radius on each side of the door at ground level. The light source must be controlled by a photocell device or a time -clock with an astronomic clock feature and capable of operating during a power outage. 49. The addressing, open parking lot and trash dumpster must be illuminated with a maintained minimum of one foot-candle of light on the ground surface during hours of darkness. WE 50. Street addressing must be a minimum of 6 inches high and must be visible from the street or driving surface, of contrasting color to the background and illuminated during hours of darkness. Addressing must also be shown on plan elevations. 51. All landscaping must be low profile around perimeter fencing, windows, doors and entryways so as not to limit visibility or provide climbing access. Dense bushes cannot be clumped together in a manner that provides easy concealment. 52. Stairwell doors exiting onto the street must have a minimum 100 -square inch vision panel, with a minimum five -inch width, to provide visibility into the area being entered. Vision panels must meet the requirements of the California Building Code, as adopted by the ESMC. Vision panels must preclude manipulation of the interior locking device from the exterior. 53. Interior stairwell doors must have glazing panels a minimum of five inches wide and 20 inches in height and meet the requirements of the California Building Code, as adopted by the ESMC. Guest rooms must have a deadbolt lock, a secondary security latch and a wide angle (190-200 degree) door viewer, not to be mounted more than 58 inches from the bottom of the door. 54. Exterior mounted ladders are prohibited except: (1) ladders with a minimum 1/8 inch -thick steel plate, securely attached to the ladders edge on each side, and extending to within two inches of the wall for a height of ten feet above ground level. A door and cover must be securely attached to the front of the ladder, and be constructed of minimum 1/8 -inch steel, extending from ground level to at least ten feet high. The ladder must have non -removable hinge pins and be locked securely against the side wall by a locking mechanism with a minimum five pin tumbler operation; or (2) the bottom of the ladder must begin ten feet above the ground surface. 55. All pool entrances must be posted with "No Trespassing" signs. 56. Any pool restroom and shower doors must have access control as reviewed and approved by the EI Segundo Police Department. 57. Exterior gates leading to the pool must be secured by electronic access control. 58. When a specific project option is selected, the ESPD may require the applicant to comply with more specific requirements as they pertain to: doors/hardware, windows, mailboxes, lighting, landscaping, addressing, stairwells, trash dumpsters, parking, other possible requirements they may pertain to a specific assisted living facility layout (access controls). 31 Construction Conditions 59. Before any construction or demolition occurs the perimeter of the property must be fenced with a minimum 6 -foot high fence. The fence must be covered with a material approved by the Planning and Building Safety Department to prevent dust from leaving the site. 59a. Perimeter walls which are common to adjoining properties along Sheldon Avenue, Walnut Avenue, and McCarthy Court, are allowed a maximum height of 8 feet as measured from the highest grade. 59b. The applicant must provide at least a 48 -hours' notification to all adjacent property owners, before any vermin fumigation. 60. Public sidewalks must remain open at all times. 61. All haul trucks hauling soil, sand, and other loose materials must either be covered or maintain two feet of freeboard. 62. NOx emissions during construction must be reduced by limiting the operation of heavy-duty construction equipment to no more than 5 pieces of equipment at any one time. 63. Staging of construction vehicles and vehicle entry and egress to the site must be approved by the Public Works Department. Temporary construction driveways must be approved by the Public Works Department. Temporary construction driveways must be removed before the City issues a certificate of occupancy. 64. Construction vehicles cannot use any route except the City's designated Truck Routes. 65. The applicant must develop and implement a construction management plan, as approved by the Public Works Department, which includes the following measures recommended by the SCAQMD: • Configure construction parking to minimize traffic interference. • Provide temporary traffic controls during all phases of construction activities to maintain traffic flow (e.g., flag person). ■ Re-route construction trucks away from congested streets. • Maintain equipment and vehicles engines in good condition and in proper tune as per manufacturer's specifications and per SCAQMD rules, to minimize dust emissions. • Suspend use of all construction equipment during second stage smog alerts. Contact SCAQMD at (800) 242-4022 for daily forecasts. • Use electricity from temporary power poles rather than temporary diesel or gasoline -powered generators. 32 • Diesel -powered equipment such as booster pumps or generators should be replaced by electric equipment, if feasible. • Catalytic converters must be installed, if feasible. • Equipment must be equipped with two -to -four -degree engine time retard or pre- combustion chamber engines. • Use methanol or natural gas powered mobile equipment and pile drivers instead of diesel if readily available at competitive prices. • Use propane or butane powered on-site mobile equipment instead of gasoline if readily available at competitive prices. 66. During construction and operations, all waste must be disposed in accordance with all applicable laws and regulations. Toxic wastes must be discarded at a licensed, regulated disposal site by a licensed waste hauler. 67. All leaks, drips and spills occurring during construction must be cleaned up promptly and in compliance with all applicable laws and regulations to prevent contaminated soil on paved surfaces that can be washed away into the storm drains. 68. If materials spills occur, they must be cleaned up in a way that will not affect the storm drain system. 69. The project must comply with ESMC Chapter 5-4, which establishes storm water and urban pollution controls. 70. Before anticipated rainfall, construction dumpsters must be covered with tarps or plastic sheeting. 71. Inspections of the project site before and after storm events must be conducted to determine whether Best Management Practices have been implemented to reduce pollutant loadings identified in the Storm Water Prevention Plan. 72. The owner or contractor must conduct daily street sweeping and truck wheel cleaning to prevent dirt in the storm drain system. 73. Storm drain system must be safeguarded at all times during construction. 74. All diesel equipment must be operated with closed engine doors and must be equipped with factory -recommended mufflers. 75. Electrical power must be used to run air compressors and similar power tools. 76. The applicant must provide a telephone number for local residents to call to submit complaints associated with the construction noise. The number must be posted on the project site and must be easily viewed from adjacent public areas. 33 77. During construction, the contractor must store and maintain equipment as far as possible from adjacent residential property locations northwest of the site. 78. As stated in ESMC Chapter 7-2, construction related noise is restricted to the hours of 7:00 a.m. to 6:00 p.m. Monday through Saturday, and prohibited at anytime on Sunday or a Federal holiday. Impact Fee Conditions 79. Pursuant to ESMC §§ 15-27A-1, et seq., and before building permits are issued, the applicant must pay a one-time library services mitigation fee in accordance with Section 5.4 of the Development Agreement and Resolution No. 4687. The fee amount must be based upon the adopted fee at the time the building permit is issued. 80. Pursuant to ESMC §§ 15-27A-1, et seq., and before building permits are issued, the applicant must pay a one-time fire services mitigation fee in accordance with Section 5.4 of the Development Agreement and Resolution No 4687. The fee amount must be based upon the adopted fee at the time the building permit is issued. 81. Pursuant to ESMC §§ 15-27A-1, et seq., and before building permits are issued, the applicant must pay a one-time police services mitigation fee in accordance with Section 5.4 of the Development Agreement and Resolution No. 4687. The fee amount must be based upon the adopted fee at the time the building permit is issued. 82. Pursuant to ESMC §§ 15-27A-1, et seq., and before building permits are issued, the applicant must pay a one-time park services mitigation fee in accordance with Section 5.4 of the Development Agreement and Resolution No. 4687. The fee amount must be based upon the adopted fee at the time the building permit is issued. 83. Before building permits are issued, the applicant must pay the required sewer connection fees (as specified in ESMC Title 12-3). 84. Pursuant to ESMC §§ 15-27A-1, et seq., and before the City issues a certificate of occupancy, the applicant must pay a one time traffic mitigation fee in accordance with Section 5.4 of the Development Agreement and Resolution No. 4443. 85. Before building permits are issued, the applicant must pay the required School Fees. This condition does not limit the applicant's ability to appeal or protest the payment of these fees to the school districts(s). 34 Miscellaneous 86. The tentative map will expire pursuant to Government Code § 66452.6 and ESMC § 14-1-12. 87. D.R. Horton Homes CA2, inc., The €iSegundo Unified-SGTael aist4Gt-, agrees to indemnify and hold the City harmless from and against any claim, action, damages, costs (including, without limitation, attorney's fees), injuries, or liability, arising from the City's approval of Environmental Assessment No. 1154, Specific Plan Amendment No 16-01 for Specific Plan No. 10-03, Development Agreement Amendment No. 16-01 for Development Agreement No. 10-02, and Subdivision Amendment No.16-01 for Vesting Tentative Tract Map no 71582. Should the City be named in any suit, or should any claim be brought against it by suit or otherwise, whether the same be groundless or not, arising out of the City approval of Environmental Assessment No. 1154, D.R. Horton Homes CA2, Inc. the El Sc^' R4 "'^` e c-4G4-D+st +ct— agrees to defend the City (at the City's request and with counsel satisfactory to the City) and will indemnify the City for any judgment rendered against it or any sums paid out in settlement or otherwise. For purposes of this section "the City" includes the City of EI Segundo's elected officials, appointed officials, officers, and employees. [Condition amended by the City Council on June 98, 2099.] By signing this document, , on behalf of D.R. Horton Homes CA2, Inc., certifies that he/she has read, understood, and agrees to the Project Conditions listed in this document. Name, Title D.R. Horton Homes CA2, Inc. 35 PROPOSED ORDINANCE NO. 36 ORDINANCE NO. AN ORDINANCE APPROVING AND ADOPTING AN AMENDMENT TO THE 540 EAST IMPERIAL AVENUE SPECIFIC PLAN AND A SECOND AMENDMENT TO DEVELOPMENT AGREEMENT NO. 16-01, TO AMEND THE AFFORDABLE HOUSING REQUIREMENT TO PROVIDE FOR EIGHT AFFORDABLE UNITS FOR QUALIFIED MODERATE INCOME HOUSEHOLDS WITHIN THE RESIDENTIAL DEVELOPMENT. The City Council of the City of EI Segundo does ordain as follows: SECTION 1: The City Council finds and declares as follows: A. On March 20, 2012, the City Council approved the "540 East Imperial Avenue Specific Plan" (Specific Plan 10-03) and other entitlements, to allow for the construction of one of two possible conceptual options on a 5.65 -acre surplus school site then -owned by the EI Segundo Unified School District. Option 1 consisted of a three-story, 150 unit assisted living complex and a 154 -unit senior apartment/condominium complex. Option 2 consisted of 34 multi -family dwelling units taking access from Imperial Avenue (six of which would be designated for low, very low and extremely low affordable units), and 24 single-family dwelling units taking access from Walnut Avenue, for a total of 58 units; B. On September 28, 2016, the EI Segundo City Council adopted Resolution No. 4999, approving Environmental Assessment No. EA 1154, an amended to the 540 East Imperial Avenue Specific Plan, and the First Amendment to Development Agreement No. 16-01 for the development of Option 2 described above; C. Pursuant to the conditions of approval contained in Resolution No. 4999, which were agreed to by D.R. Horton CA2, Inc. (the "Applicant"), the approved residential development must set aside six multi -family units as affordable units, for sale to qualified lower income households. Specifically, two units must be affordable to extremely low income households, two units affordable to very low income households, and two units affordable to low income households. The City Council also conditioned the project on members of the military being given priority for the affordable housing units; D. On August 6, 2018, the Applicant filed an application to amend the affordable housing requirement for the residential development; 37 E. On September 5, 2018, the application was deemed incomplete pending the submittal of additional information, including details about what amendments are being requested; F. On January 10, 2019, a notice was provided to 119 property owners within a 300 -foot radius of the 540 East Imperial Avenue project site, and a notice was also published in the El Segundo Herald on January 10, 2019, indicating that a public hearing was scheduled with the Planning Commission on January 24, 2019; G. On January 22, 2019, the applicant submitted a request to continue the item to a future date; H. On January 24, 2019, the Planning Commission continued the hearing and directed that notice be provided for the Planning Commission hearing; On February 11, 2019, the Applicant submitted a letter to amend the affordable housing requirement for the residential development, requesting that the affordability be changed to provide eight units at the moderate income level; On February 14, 2019, a notice was provided to 119 property owners within a 300 -foot radius of the 540 East Imperial Avenue project site, and a notice was also published in the El Segundo Herald on February 14, 2019, indicating that a public hearing was scheduled with the Planning Commission on February 28, 2019; K. The Planning Commission conducted a public hearing on February 28, 2019, at which time all interested parties were given an opportunity to be heard and present evidence regarding said amendments as set forth in the Planning Commission Staff Report of that date and to receive public testimony and other evidence regarding the proposed amendments, including, without limitation, information provided to the Planning Commission by City staff and public testimony; L. On February 28, 2019, the Planning Commission reviewed and considered the proposed amendments, and adopted PC Resolution No. 2858 recommending the City Council approve this ordinance amending Environmental Assessment No. EA -1054, 540 East Imperial Avenue Specific Plan and Development Agreement No. 16-01; M. On April 4, 2019, a notice was provided to 119 property owners within a 300 -foot radius of the 540 East Imperial Avenue project site, and a notice was also published in the El Segundo Herald on April 4, 2019, indicating that a public hearing was scheduled with the City Council on April 16, 2019; Wz N. On April 16, 2019, the City Council conducted a public hearing to receive public testimony and other evidence regarding the applications including, without limitation, information provided to the City Council by City staff and public testimony, and the applicant; O. On April 16, 2019, the City Council requested additional information from the applicant and continued the item to May 21, 2019; P. On May 21, 2019, the City Council continued the item to the June 18, 2019 City Council meeting; Q. On June 18, 2019, the City Council received additional public testimony and other evidence regarding the applications including, without limitation, information provided to the City Council by City staff and public testimony, and the applicant; and, R. This Ordinance and its findings are made based upon the testimony and evidence presented to the City Council at its April 16, and June 18, 2019 hearings including, without limitation, the staff reports submitted by the Planning and Building Safety Department. SECTION 2: Environmental Assessment. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested amendment to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Further, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. SECTION 3: General Plan and Specific Plan Findings. After considering the above facts, the City Council finds as follows: A. Following a Specific Plan Amendment, the General Plan Land Use Designation of the project site will remain unchanged; 540 East Imperial Avenue Specific Plan (EIASP). This designation is intended for multi- family housing units consisting of market rate and affordable apartments or condominiums. B. The General Plan contains a number of relevant Goals, Objectives, and Policies in the Land Use Element. Implementation of the proposed project is consistent with Land Use Element Policy LU3-2.1 to "promote high quality Multi -Family Residential developments with ample open space, leisure and recreational facilities." If approved, the development will be W built and maintained in accordance with these requirements and regulations and the requirements and regulations of the 540 East Imperial Avenue Specific Plan. C. The proposed project is consistent with Housing Element Goal 2 to "Provide sufficient new, affordable housing opportunities in the City to meet the needs of groups with special requirements, including the needs of lower and moderate income households," in that the project will provide eight units (14% of the development) set aside of much-needed housing for moderate income households. The City acknowledges, however, that due to the approval of the amendment, additional sites will need to be identified to accommodate the City's Regional Housing Needs Assessment (RHNA) by income level, as discussed in Section 6 below. SECTION 4: Amendment to Development Agreement Findings. Pursuant to City Council Resolution No. 3268 and Government Code §§ 65857.5 and 65858, the City Council finds that: A. The proposed amendment to the Development Agreement is consistent with the objectives, policies, general land uses, and programs specified in the General Plan as described above and the 540 East Imperial Avenue Specific Plan (540EIASP), as amended by this ordinance. B. The proposed amendment to the Development Agreement is compatible with the uses authorized in, and the regulations prescribed for, the land use district in which the real property is located. C. The proposed amendment to the Development Agreement conforms with public convenience, general welfare and good land use practice. The Development Agreement, as amended, provides the following public benefits: Increasing housing, in particular much-needed market rate and affordable housing for area residents. 2. Developing a property that includes affordable housing for the community with a 14% set aside for moderate income qualified households. D. The proposed amendment to the Development Agreement will not be detrimental to the health, safety and general welfare. The Development Agreement includes reimbursement to the City for its set up and oversight of the affordable housing component. E. The proposed amendment to the Development Agreement will not adversely affect the orderly development of property or the preservation E of property values. This project is surrounded by previously -developed neighborhoods and will help improve the value of neighboring properties. The proposed Development Agreement, as amended, will ensure that the project will be developed in an orderly fashion. SECTION 5: Specific Plan. The City Council makes the following findings: A. Specific Plans create "mini -zoning" regulations for land uses within particular areas of the City. All future development plans and entitlements within the Specific Plan boundaries must be consistent with the standards set forth in the adopted Specific Plan, even when they may be different from the general regulations within the ESMC. B. The proposed specific plan amendment is in the public interest, and there will be a community benefit resulting from the specific plan. The Specific Plan will continue to require that six affordable housing units be provided at the development, but affordable to qualified moderate income households. SECTION 6: "No Net Loss" Finding. The project site was identified as a pending project in the City's certified Housing Element, which would have provided enough affordable housing units to address the City's RHNA allocation of 29 affordable units in the lower income categories. By adopting this resolution, the City is allowing development of the property with fewer units by income category than identified in the Housing Element. Based on a review of the Housing Element, the City does not find that the remaining sites in the Housing Element are adequate to accommodate the City's share of the regional housing need by income level. Accordingly, pursuant to Government Code § 65863(c)(2), the City will, within 180 days, identify and make available additional adequate sites to accommodate the City's share of the regional housing need by income level. SECTION 7: Approvals and Authorization. The City Council hereby approves and adopts the amendment to 540 East Imperial Avenue Specific Plan, as set forth in the attached Exhibit "A-1"; and the Second Amendment to Development Agreement No. 16-01, attached to this ordinance as Exhibit "A-2"._Upon the effective date of this Ordinance, the Mayor is authorized to execute the amendment on behalf of the City. The City Manager is hereby authorized and directed to perform all acts and execute all documents needed to effectuate this Ordinance, including but not limited to, execution of an amendment to the Affordable Housing Agreement between the City and the applicant. SECTION 8: Technical Corrections. The City Manager, or designee, is authorized to make technical corrections, in a form approved by the City Attorney, to maps, diagrams, tables, and other, similar, documents (collectively, "Maps") that may be required to reconcile the changes made by this Ordinance with amendments made to the Zoning Map by other City Council action in unrelated land use applications. 41 SECTION 9: Reliance on Record. Each and every one of the findings and determinations in this Ordinance are based on the competent and substantial evidence, both oral and written, contained in the entire record relating to the project. The findings and determinations constitute the independent findings and determinations of the City Council in all respects and are fully and completely supported by substantial evidence in the record as a whole. SECTION 10: Limitations. The City Council's analysis and evaluation of the Project is based on the best information currently available. It is inevitable that in evaluating a project that absolute and perfect knowledge of all possible aspects of the project will not exist. One of the major limitations on analysis of the project is the City Council's knowledge of future events. In all instances, best efforts have been made to form accurate assumptions. Somewhat related to this are the limitations on the City's ability to solve what are in effect regional, state, and national problems and issues. The City must work within the political framework within which it exists and with the limitations inherent in that framework. SECTION 11: Summaries of Information. All summaries of information in the findings which precede this section, are based on the substantial evidence in the record. The absence of any particular fact from any such summary is not an indication that a particular finding, is not based in part on that fact. SECTION 12: Effectiveness of ESMC. Repeal or amendment of any provision of the ESMC will not affect any penalty, forfeiture, or liability incurred before or preclude prosecution and imposition of penalties for any violation occurring before this Ordinance's effective date. Any such repealed part will remain in full force and effect for sustaining action or prosecuting violations occurring before the effective date of this Ordinance. SECTION 13: Recordation. The City Clerk is directed to certify the passage and adoption of this Ordinance; cause it to be entered into the City of EI Segundo's book of original ordinances; make a note of the passage and adoption in the records of this meeting; and, within fifteen (15) days after the passage and adoption of this Ordinance, cause it to be published or posted in accordance with California law. SECTION 14: Severability. If any part of this Ordinance or its application is deemed invalid by a court of competent jurisdiction, the city council intends that such invalidity will not affect the effectiveness of the remaining provisions or applications and, to this end, the provisions of this Ordinance are severable. SECTION 15: Effective Date. This Ordinance will go into effect and be in full force and effect on the thirty-first (31 st) day after its passage and adoption. :A PASSED AND ADOPTED this day of 2019. Mayor ATTEST: STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) SS CITY OF EL SEGUNDO ) I, Tracy Weaver, City Clerk of the City of EI Segundo, California, do hereby certify that the whole number of members of the City Council of said City is five; that the foregoing Ordinance No. was duly introduced by said City Council at a regular meeting held on the day of , 2019, and was duly passed and adopted by said City Council, approved and signed by the Mayor, and attested to by the City Clerk, all at a regular meeting of said Council held on the day of , 2019, and the same was so passed and adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: Tracy Weaver, City Clerk APPROVED AS TO FORM: Mark D. Hensley, City Attorney 43 ORDINANCE NO. Exhibit A-1 AMENDMENT TO 540 EAST IMPERIAL AVENUE SPECIFIC PLAN Section 4.2 (Development Standards) and the paragraph titled "Affordability" on Page 17 of the 540 East Imperial Avenue Specific Plan is modified as follows. The proposed revisions to these conditions of approval are illustrated with GtFikethF9UgI for existing language that is proposed for elimination and underlined for proposed new language. Except as otherwise modified below, the Plan remains unchanged and in effect: AFFORDABILITY The City of EI Segundo 2013 Housing Element identified a need for affordable housing to provide for low- and moderate income first-time homebuyers, senior citizens on fixed incomes, extremely low -,very low-, low-, and moderate -income residents, the disabled, military personnel, and the homeless segments of the population. As envisioned in the element and based on that need, for Option 1, fifteen (15) percent of the total units will be set aside as affordable units; for Option 2, either (Al ten (10) percent of the total units will be set aside as affordable units for extremely low. very low. and low-income residents ("Option 2-A"). or (B) fourteen (14) percent of the total units will be set aside as affordable units for moderate income residents ("Ootion 2-13"). Based on the Regional Housing Needs Assessment (RHNA), EI Segundo is required to provide 69 additional housing units during the current housing cycle (2013-2021). The allocation of the 69 units is broken down into five categories as follows: 9 extremely low income households, 9 very low income households, 11 low income households, 12 moderate income households, and 28 above moderate income households. The units in this project will be used to meet a portion of the need in the extremely low, very low, a;d--low. and moderate income household categoryies. der)ending upon the affordable housing oroaram Option chosen by the Developer which represent a proportional total of 31 percent, 31 percent, and 38 percent. and 17 percent, respectively, of the total RHNA allocation for the household Powe income categories specified above (41 2-9 units). These same percentages were applied to the unit totals for this project cinder Ootion 1 and Ootion 2-A. Thus, if 304 units are built under Option 1, a total of 46 units would be required as follows: 14 units (31% of the total 15%) for the extremely low income senior household category; 14 units (31 % of the total 15%) for the very low income senior household category; and 18 units (38% of the total 15%) for the low income senior household category to be split equally between the assisted living and town home/apa rtment units. If all 58 units are built under Option 2-A, a total of 6 units comprised of 2 units in each income category would be required (extremely low — 31 % of the total 10%; very low — 31 % of the total 10%; and low — 38% of the total 10%). Alternatively. under Option 2-B. the Developer must set aside 14% of the 58 total units constructed for moderate income households (i,e.. 8 unitsl. The Developer must still provide a 15% set aside for the total number of units constructed for Option 1= aPA 10% set aside for the total number of units constructed for Option 2-A. and a 14% set aside for the total number of units constructed for Ootion 2-B, should fewer units than the maximum allowed be constructed. The units must be distributed in the same percentage ratios as specified above in the low, very low, and extremely low income categories. Percentages for the total number of units and for each income category must be calculated by rounding to the nearest whole number not to exceed the maximum required percentage. Any affordable housing units that are required based on the single-family component of Option 2-A or Oution 2-B may be satisfied by developing the requisite number of units in other components of the project. The developer must submit an income and verification monitoring plan to the Director of Planning and Building Safety or designee before building permits are issued. 45 ORDINANCE NO. Exhibit A-2 Second Amendment to the Development Agreement RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: CITY CLERK CITY OF EL SEGUNDO 350 Main Street El Segundo, California 90245 Exempt from recorder's fees Pursuant to Govt. Code §6103 THIS SPACE ABOVE FOR RECORDER'S USE SECOND AMENDMENT OF DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF EL SEGUNDO AND D.R. HORTON CA2, INC. (540 E. IMPERIAL AVENUE SITE) This Second Amendment of Development Agreement ("Second Amendment") is entered into this day of June, 2019, by and between the CITY OF EL SEGUNDO ("City"), a municipal corporation and the D.R. HORTON CA2, INC. ("Developer"). RECITALS A. City and the El Segundo Unified School District entered into that certain Development Agreement dated May 4, 2012 (City Agreement No. 4271, hereafter "Development Agreement"), which was recorded on May 30, 2012, in the Official Records of Los Angeles County as Document No. 20120798461. B. On or about September 28, 2016, the City Council approved a First Amendment to the Development Agreement, which was recorded on January 23, 2017, in the Official Records of Los Angeles County as Document No. 20170088928. C. On or about September 30, 2016, the El Segundo Unified School District sold the 540 E. Imperial Avenue site to Developer. The District assigned all of its interests in the property, including its obligations under the Development Agreement and First Amendment, to Developer. The assignment took effect upon the close of escrow, September 30, 2016. D. City and Developer entered into that certain Affordable Housing Agreement dated October 16, 2018, which was recorded on October 16, 2018, in the Official Records of Los Angeles County as Document No. 20181051979. E. Concurrent with consideration of this Second Amendment, City is processing an Amendment to the 540 East Imperial Avenue Specific Plan ("Specific Plan Amendment") to 47 modify the affordable housing requirements for the project site and Resolution No. _ modifying the Conditions of Approval to Resolution No. 4999. City and Developer desire to enter into this Second Amendment to ensure that the affordable housing units are economically feasible for qualified households. AGREEMENT 1. Amendment of Development Agreement. The following sections and exhibits of the Development Agreement are hereby amended as follows: A. The definition of "Applicable Rules" set forth in Section 1 is hereby amended to also include the Specific Plan Amendment and Resolution No. B. The definition of "Project Approvals" set forth in Section 1 is hereby amended to also include the Specific Plan Amendment, Resolution No. , and this Second Amendment to the Development Agreement. C. All references in subsections 2.3 and 4.6.3 to the "540 East Imperial Avenue Specific Plan" are hereby amended to include the Specific Plan Amendment. D. All references in subsection 4.6.4 to the "Specific Plan" are hereby amended to include the Specific Plan Amendment. E. Section 5.3 is amended to read as follows: "5.3 Affordable Housing. Developer must provide for a 14% set aside for moderate income qualified households as represented in Exhibit D. The Affordable Housing Agreement entered into by and between the City and the Developer, must be amended to reflect the same and must be recorded with the Los Angeles County Register -Recorder's office." F. Subsection 5.3.1 is amended to read as follows: "5.3.1 Preferences for U.S. Militarv. Developer agrees that, all other considerations being equal and as permitted by law, it will give preference to prospective purchasers of the affordable housing units who are active members or veterans of the U.S. military at the time of the purchase." G. Subsections 5.3.2 and 5.3.3 are hereby deleted in their entirety. H. Paragraph 4 of Subsection 5.9 is amended to read as follows: 664. Developer will contribute Four Hundred Thousand Dollars ($400,000) to reimburse the City for its estimated costs of administering and enforcing the affordable housing component of the Project, with Two Hundred Thousand Dollars ($200,000) to be contributed to the City before the first Certificate of Occupancy is issued for the first affordable unit and Two Hundred Thousand Dollars ($200,000) to be contributed to the City before the eighth Certificate of 2 .• Occupancy is issued for the final affordable unit. Notwithstanding the foregoing, the total amount of $400,000 must be contributed to the City no later than five years from the date of the First Amendment." I. Exhibit "D -I" of the Development Agreement is hereby deleted in its entirety and replaced with Exhibit "D-2" attached hereto and incorporated herein. 2. Good Faith Compliance. This Second Amendment shall constitute the City's Periodic Review pursuant to Section 8.1 of the Development Agreement and City's determination that Developer is in substantial compliance with the terms and provisions of the Development Agreement. 3. Effect of Amendment. Except as expressly provided in this Second Amendment, the Development Agreement shall not be amended or otherwise modified. In the event there is a conflict between the terms of the Development Agreement, as amended, and the terms of this Second Amendment, the terms provided in this Second Amendment shall control. On and after the date hereof, each reference in the Development Agreement to "this Agreement," "hereunder," "hereof," "hereto," "herein," or words of like import referring to the Development Agreement shall mean and be a reference to the Development Agreement as amended by the First and Second Amendments. 4. Recordation. This Second Amendment shall be recorded with the County Recorder of the County of Los Angeles by the City Clerk of City. 5. Counterparts. This Second Amendment may be executed in one or more counterparts, each of which, taken together, shall constitute one fully executed original. IN WITNESS WHEREOF, Developer and City of El Segundo have executed this Second Amendment on the date first above written. CITY: CITY OF EL SEGUNDO, a municipal corporation M. ATTEST: Tracy Weaver, City Clerk APPROVED AS TO FORM: Drew Boyles, Mayor Mark D. Hensley, City Attorney DEVELOPER: D.R. HORTON CA2, INC. Its: 50 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of On , before me, , a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of On , before me, , a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature -5- 51 EXHIBIT "D-2" 540 EAST IMPERIAL AVENUE SPECIFIC PLAN HOUSING SET ASIDE —14% Option (Option 2-B) 14% OPTION (58 Total Units) 8 units total Mixed Residential Moderate income Total 14% Set Aside 192 Units Required 8 Units 52 CITY COUNCIL STAFF REPORT, DATED APRIL 16, 2419 (WITHOUT ATTACHMENTS) 53 EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: April 16, 2019 AGENDA HEADING: Public Hearing Consideration and possible action regarding approval of an amendment to Environmental Assessment No. EA -1154, amendment to Specific Plan No. SP 16-01, amended and restated conditions of approval and a Second Amendment to Development Agreement No. DA 16-01, amending the requirement that the developer provide six affordable units for low, very low and extremely low qualified households within the residential development to increase the number of affordable units to eight and to allow the eight units to be purchased by qualified moderate income households. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested revision to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Additionally, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. (Applicant: DR Horton CA2, Inc.). (Fiscal Impact: As part of the proposed amendment, the developer has agreed to provide the City an additional $100,000 for the City's costs of administering the program for two additional units.) RECOMMENDED COUNCIL ACTION: 1. Conduct a public hearing; 2. Take testimony and other evidence as presented; and, 3. Introduce by title only and waive further reading of an Ordinance (a Specific Plan amendment) amending the 540 East Imperial Avenue Specific Plan; 4. Schedule second reading and adoption of the Ordinance for May 7, 2019; 5. Adopt Resolution No. , approving amendments to the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement; and/or 6. Alternatively, discuss and take other possible action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Resolution No. , approving amendments to the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement 2. Proposed Ordinance No. 3. Planning Commission Resolution No. 2858 4. Planning Commission Staff Reports, dated January 24 and February 28, 2019 (without attachments) 5. Affordable Housing Agreement dated October 18, 2018 6. City Council Staff Report dated March 6, 2012 54 FISCAL IMPACT: As part of the proposed amendment, the developer has agreed to provide the City an additional $100,000 for the City's costs of administering the program for two additional units. Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A STRATEGIC PLAN: Goal: N/A Objective: N/A PREPARED BY: Eduardo Schonborn, AICP, Principal Plami REVIEWED BY: Gregg McClain, Planning Manager Sam Lee, Planning and Building Safety Directo , APPROVED BY: Greg Carpenter, City Manager IL. EXECUTIVE SUMMARY In 2016, the City Council approved a residential development at the former school site at 540 East Imperial Avenue, consisting of 24 single-family dwelling units and 34 multi -family dwelling units (condominiums). As part of the project's conditions of approval, the developer (DR Horton) agreed to set aside six multi -family units as affordable units, for sale to qualified affordable households. Specifically, two units must be affordable to extremely low income households, two affordable to very low income households, and two affordable to low income households. The developer is now requesting a modification to the requirement and is proposing to provide eight units affordable to moderate income households. For the reasons stated in this report, staff is recommending the City Council approve the developer's application and the above -referenced entitlements. BACKGROUND On March 20, 2012, the City Council approved the "540 East Imperial Avenue Specific Plan" (Specific Plan 10-03) and other entitlements, to allow for the construction of one of two possible conceptual options on a 5.65 -acre surplus school site then -owned by the El Segundo Unified School District. Option 1 consisted of a three-story, 150 unit assisted living complex and a 154 - unit senior apartment/condominium complex. Option 2 consisted of 34 multi -family dwelling units taking access from Imperial Avenue (six of which would be designated for low, very low and extremely low affordable units), and 24 single-family dwelling units taking access from Walnut Avenue, for a total of 58 units. On September 28, 2016, the City Council approved a residential development at the former school site at 540 Imperial Avenue, consisting of 24 single-family dwelling units and 34 multi -family dwelling units (condominiums). As part of the project's conditions of approval, the developer (DR Horton) agreed to set aside six multi -family units as affordable units, for sale to qualified 0) 6�7 affordable households. Specifically, two units must be affordable to extremely low income households, two affordable to very low income households, and two affordable to low income households. The City Council also directed the applicant and staff to ensure that members of the military be given priority for the affordable housing units. In September 2018, the applicant submitted a request to amend the project, which was augmented in December 2018. Specifically, the developer requested the City eliminate the requirement to provide six affordable units within the residential development, and instead allow the developer to pay the City an "in lieu" fee totaling $3,341,400. This original amendment request would have removed the requirement that the developer provide six affordable condominium units, thereby allowing the developer to sell the six units at market rate and no longer being responsible for providing affordable housing. In response, staff prepared a staff report for the January 24, 2019 Planning Commission (staff report attached) hearing recommending that the Commission not support the proposed amendment and recommended adjusting the affordable housing requirement to allow the six units to be purchased by qualified moderate income households. Prior to the January 24'h meeting, however, the applicant submitted a request to continue the item so that they could meet with staff and modify the amendment. On February 11, 2019, the applicant submitted a revised amendment, requesting that the project's affordable housing requirement be adjusted to provide for a total of eight affordable units instead of six, and that all eight affordable units be available for moderate income households. The request was then considered by the Planning Commission on February 28, 2019 (staff report attached). After discussing the proposed amendments, the Planning Commission on a 5-0 vote adopted Resolution No. 2858 (attached) recommending that the City Council approve the ordinance amending the affordable housing requirement to allow eight affordable units to be purchased by qualified moderate income households, rather than six units affordable to low income households. DISCUSSION State Affordable Housing Reciiiii-ements. Housing Element and RHNA. The State of California mandates every city to adopt a housing element as part of its General Plan. The housing element is highly detailed and is designed to ensure each city recognizes its responsibility to contribute to the state's housing goals. As part of the housing element, cities must identify an inventory of sites suitable for residential development of housing types for all income levels, including low- and moderate -income households. The inventory must meet a city's share of the regional housing need allocation, or "RHNA," which is an allocation made by the State Department of Housing and Community Development (HCD) and the local association of governments (SCAG in El Segundo's case). For example, the City's 2014 Housing Element identifies the City's regional share of housing as a total of 69 units, which includes the following income levels: ■ 9 Extremely Low Income Households • 9 Very Low Income Households • 11 Low Income Households ■ 12 Moderate Income Households 56 0 28 Above Moderate Income Households Under state law, the City is not required to build such affordable units to satisfy the RHNA. Rather, the Housing Element must identify adequate sites to accommodate such units and income levels, and must, when legally possible, remove governmental constraints on the development of such housing units. In 2012, when the 540 East Imperial Avenue Specific Plan was adopted by the City Council, the City included an affordable housing requirement to address the RHNA. The Specific Plan included two options: Option 1: 150 unit assisted living complex and a 154 -unit senior apartment/condominium complex, of which 15% of the units would be designated for extremely low, very low and low income senior households; or Option 2: 24 single-family units and 34 multi -family units, of which 10% of the multi- family units would be designed as affordable units for extremely low, very low and low income households. Between 2012 and 2016, Option 1 appeared to be the more likely option for the site and was referenced in the City's Housing Element. When the project was approved in 2016, however, the developer opted to develop Option 2 instead. In recent years, the California Legislature has adopted several new laws that have put greater emphasis on the housing element requirement to identify sites that provide for a city's share of the RHNA for all income levels. The state has also made it clear, by both legislation and litigation, that it intends to enforce the housing element requirement. For example, in January, the state filed a lawsuit against the City of Huntington Beach due to its alleged noncompliant Housing Element.' The Problem: The "Affordable Emits" are Not Affordable as For -Sale Units to Extremely. Low and Very Low Income Households After the project was approved in 2016, City staff and the developer came to realize that the affordable housing requirement was unworkable as for -sale units to extremely low, very low and low income qualified households. The developer retained an affordable housing consultant to assess the financial viability of having extremely low, very low and low-income households purchase the affordable units. Since the price of the affordable units are based upon the amount for which the household can qualify, a cost analysis was prepared for each income category, which accounted for other housing expenses in addition to mortgage loan payments, such as HOA fees, property taxes, essential housing maintenance costs, etc. Although the two extremely low income units would have to be sold for nothing, extremely low income households would afford to pay basic housing maintenance costs, including HOA fees, property taxes or other property expenses. Further, although very low and low-income households could afford to pay a nominal mortgage, households in these income categories would be challenged in paying essential housing maintenance costs (in addition to mortgage loan payments) and would likely default on their loans. 1 California Department of Housing and Community Development v. City of Huntington Beach et al. (filed January 25, 2019). 4 57 For these reasons, affordable housing programs in other cities that are geared towards lower income households are rentals, not for -sale units. The City's affordable housing consultant, Michael Baker International (MBI), reviewed the applicant's assessments and agreed with the conclusion that the financial viability of households in these income categories is not sustainable, since the households would not have the financial resources to pay for basic housing costs in addition to any mortgage. Develouer's CriRinal In -Lieu lite Proposal As indicated above, the developer initially requested to pay the City an "in lieu" fee totaling $3,341,400 in exchange for eliminating the requirement to provide the required six affordable units within the residential development. This original amendment request would have allowed the developer to sell the six units at market rate and no longer provide any affordable housing. The developer argued that the money can be used to create an affordable housing trust fund, upgrade the Park Vista development, address homelessness, or used to purchase market rate housing and convert to affordable housing. For the following reasons, however, staff did not support the proposed in lieu fee: 1. An in lieu payment would transfer responsibility of providing the affordable housing from the developer to the City. 2. The City remains obligated to identify an adequate number of sites to allow for and facilitate production of the City's regional share of affordable housing. Removing the affordable housing requirement entirely from the project increases the number of affordable units the City must identify as part of its Housing Element. 3. Using the in lieu payment for ongoing operations and expenses at Park Vista will not increase the number of affordable units in the City. 4. Although the in lieu payment has the potential to serve a greater population than the six (or eight) units at this development, future programs are not guaranteed. Any affordable housing program would take a minimum of 18 months to implement since there needs to be agreement and clear direction on the type of affordable housing program, and City staff would have to create the program and obtain City Council approval before it is implemented. A full discussion on staff's position regarding the proposed in -lieu fee is in the attached January 24, 2019 staff report to the Planning Commission. Prom)sed Solution: Moderate Income Housing As indicated above, the applicant submitted a revised amendment on February 11, 2019, requesting that the project's affordable housing requirement be adjusted to provide for a total of eight affordable units instead of six, and that all eight affordable units be available for moderate income households. Staff supports this application because it retains affordable housing at the project and is more feasible in light of the current market conditions for "for -sale" units. MBI analyzed the financial viability of a moderate -income household and determined that a moderate income household could qualify for a substantially higher mortgage and continue to have the means to pay for other basic housing costs. Extremely low, very low and low-income qualified households would still be eligible to purchase the units; however, allowing moderate income qualified 5 WZ households to also purchase the units simply expands the opportunity to a larger group of prospective homebuyers. Importantly, affordable housing is not limited only to low income categories, but also includes households in the "moderate income" category. According to the Department of Housing and Urban Development (HUD) methodology, moderate income in L.A. County is between $77,500 and $116,300 for a 4 -person household. Table No. 1: 2018 HUD Income Limits Income Number of Persons in Household County Category 1 2 3 4 5 6 7 8 Los Angeles Low 54,250 62,000 69,750 77,500 83,700 89,900 96,100 102,300 County 4 -person Area Median Median 48,500 55,450 62,350 69,300 74,850 80,400 85,950 91,500 Income: $69,300 Moderate 81,400 93,000 104,650 116,300 125,600 134,900 144,200 153,500 Plannina Commission Recomme«dation As such, on February 28, 2019, the Planning Commission adopted a resolution recommending the City Council approve the proposed amendment to provide for a total of eight affordable units at the moderate income category, instead of six at the lower income categories. The Planning Commission also recommended that: 1. In addition to priority for members of the military, that El Segundo residents and workers be given priority for the units as much as legally permissible; the City Attorney's office has evaluated this suggestion and will provide a recommendation to the City Council at the meeting. 2. As part of any amended Affordable Housing Agreement between the City and the developer, staff establish an equity share program that will ensure the City's financial interest in the units is realized to the fullest extent. "No Net Loss" Findin-2 Per State Law. As stated above, State law requires that City's provide an adequate number of sites to allow for and facilitate production of the City's regional share of housing. To determine whether the City has sufficient land to accommodate its share of regional housing needs (RHNA) for all income groups, the City must identify "adequate sites." The City's 2014 Housing Element identified Option 1 (a 304 unit senior housing community) that would accommodate the required RHNA. Under state law, if a city allows development with fewer units by income category than identified in the housing element, the city must make written findings as to whether remaining sites identified in the housing element can accommodate the city's share of RHNA. If approval of a project results in fewer units by income category than are identified in the city's housing element, and remaining sites in the housing element cannot accommodate the RFINA for that income category, the city must, within 180 days "identify and make available" additional adequate sites to accommodate the jurisdiction's share of the RHNA by income level. (Gov. Code § 65863(c).) R W Because approval of this project would result in fewer units by income category than those identified in the City's Housing Element, and because it appears that the remaining sites identified in the Housing Element cannot accommodate the City's share of RHNA, the proposed ordinance and proposed resolution include this finding. Staff intends to bring back options for identifying additional adequate sites to the City Council for its consideration at an upcoming meeting. Importantly, state law also provides that although approval of the amendment results in fewer units and the City must identify and make available additional adequate sites, the City is not authorized to disapprove of the project for this reason. (Gov. Code § 65863(c)(2).) Next Stens If the City Council approves the amendment, DR Horton will finalize a marketing plan that staff will review. In accordance with direction from the City Council when the project was approved, and reiterated by the Planning Commission, staff will work with DR Horton to ensure that members of the military and current residents and workers in the City are given priority for the housing units to the extent permitted by law. CONCLUSION: For the foregoing reasons, Planning Staff recommends that the City Council introduce an Ordinance amending the 540 East Imperial Avenue Specific Plan; schedule second reading and adoption of the Ordinance for May 7, 2019; and adopt Resolution No. , approving amending the conditions of approval for Environmental Assessment No. EA -1154, the 540 East Imperial Specific Plan and a second amendment to the Development Agreement. 7 M PLANNING COMMISSION RESOLUTION NO. 2858 61 P.0 RESOLUTION NO. 2858 A RESOLUTION OF THE EL SEGUNDO PLANNING COMMISSION RECOMMENDING THAT THE CITY COUNCIL ADOPT AN ORDINANCE APPROVING AND ADOPTING AN AMENDMENT TO EA -1154, THE 540 EAST IMPERIAL SPECIFIC PLAN, AND A SECOND AMENDMENT TO THE DEVELOPMENT AGREEMENT, THEREBY AMENDING THE AFFORDABLE HOUSING REQUIREMENT TO PROVIDE FOR EIGHT AFFORDABLE UNITS FOR QUALIFIED MODERATE INCOME HOUSEHOLDS WITHIN THE RESIDENTIAL DEVELOPMENT. (EA No. 1154, 540 East Imperial Avenue Specific Plan and Development Agreement No. 16-01) The Planning Commission of the City of EI Segundo does resolve as follows: SECTION 1: The Planning Commission finds and declares that: A. On September 28, 2016, the EI Segundo City Council adopted Resolution No. 4999, approving Environmental Assessment No. EA 1154, the 540 East Imperial Avenue Specific Plan, and Development Agreement No. 16-01 for the development of 34 -multi -family dwelling units and 24 single-family dwelling units at 540 East Imperial Avenue; B. Pursuant to the conditions of approval contained in Resolution No. 4999, which were agreed to by D.R. Horton CA2, Inc. (either the "Applicant" or "Developer"), the approved residential development must set aside six multi -family units as affordable units, for sale to qualified lower income households. Specifically, two units must be affordable to extremely low income households, two units affordable to very low income households, and two units affordable to low income households. The City Council also conditioned the project on members of the military being given priority for the affordable housing units; C. On August 6, 2018, the Applicant filed an application to amend the affordable housing requirement for the residential development; D. On September 5, 2018, the application was deemed incomplete pending the submittal of additional information, including details about what amendments are being requested; E. On September 17, 2018, the Applicant submitted a letter to augment the application, requesting the City to eliminate the requirement that the Applicant provide six affordable condominium units, and instead allow the Applicant to pay the City an "in lieu" fee of $3,341,400. The Applicant also identified various possible uses of the in -lieu fee; .A F. On December 13, 2018, the Applicant submitted additional information to clarify how the City can spend the funds should the City approve the in lieu fee payment; G. On January 10, 2019, a notice was provided to 119 property owners within a 300 - foot radius of the 540 East Imperial Avenue project site, and a notice was also published in the El Segundo Herald on January 10, 2019, indicating that a public hearing was scheduled with the Planning Commission on January 24, 2019; H. On January 22, 2019, the applicant submitted a request to continue the item to a future date; On January 24, 2019, the Planning Commission continued the hearing and directed that notice be provided for the Planning Commission hearing; J. On February 11, 2019, the Applicant submitted a letter to amend the affordable housing requirement for the residential development, requesting that the affordability be changed to provide eight units at the moderate income level; K. On January 14, 2019, a notice was provided to 119 property owners within a 300 - foot radius of the 540 East Imperial Avenue project site, and a notice was also published in the El Segundo Herald on February 14, 2019, indicating that a public hearing was scheduled with the Planning Commission on February 28, 2019; L. The Planning Commission conducted a public hearing on February 28, 2019, at which time all interested parties were given an opportunity to be heard and present evidence regarding said amendments as set forth in the Planning Commission Staff Report of that date and to receive public testimony and other evidence regarding the proposed amendments, including, without limitation, information provided to the Planning Commission by City staff and public testimony; M. On February 28, 2019, the Planning Commission reviewed and considered the proposed amendments, and adopted PC Resolution No. 2858 recommending the City Council approve this ordinance amending Environmental Assessment No. EA - 1054, 540 East Imperial Avenue Specific Plan and Development Agreement No. 16-01; N. This Resolution and its findings are made based upon the evidence presented to the Commission at its February 28, hearing including, without limitation, the staff reports submitted by the Planning and Building Safety Department. SECTION 2: Factual Findings and Conclusions. The Planning Commission finds the following: A. Based upon the income limits for each income category, the financial viability of households in the extremely low, very low and low-income categories is not sustainable, and they would be challenged with paying essential and basic housing 63 costs, including mortgage, HOA fees, property taxes, and housing maintenance costs. Thus, households in these income categories would be placed in a position that make them vulnerable to defaulting on their loans. B. Households in the moderate income category are more appropriate in a "for -sale" development, such as the development at the 540 East Imperial Avenue site. Based on the recommendation of the City's affordable housing consultant, the affordable housing requirement can be amended to require eight units be affordable to qualified moderate income households. C. The amendment is in the City's best interest as it provides for two additional affordable housing units than what was originally required; the amendment makes progress towards meeting the city's regional share of housing in the moderate income category; the amendment expands opportunity of homeownership to a larger group of prospective homebuyers; the amendment is consistent with the City's Housing Element; and, the amendment is consistent with the project approvals that requires affordable housing on-site, within the boundaries of the new development. SECTION 3: Environmental Assessment. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested amendment to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Further, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines; SECTION 4: General Plan Findings. Amending the affordable housing requirement to require that eight condominium units be affordable to moderate income households is consistent with Housing Element Goal 2 to "Provide sufficient new, affordable housing opportunities in the City to meet the needs of groups with special requirements, including the needs of lower and moderate income households." The amendment is also consistent with Housing Element Policy 3.1 to "Provide for the construction of 69 new housing units during the 2014-2021 planning period in order to meet the goals of the Regional Housing Needs Assessment (RHNA)." SECTION 5: Recommendations. The Planning Commission recommends that the City Council adopt an ordinance substantially in the form attached as Exhibit "A," amending the affordable housing requirement to provide for eight affordable units for qualified moderate income households instead of two units affordable to extremely low income households, two units affordable to very low income households, and two units affordable to low income households for the residential development at 540 East Imperial Avenue. In addition, the Planning Commission recommends that Condition of Approval no. 15 contained in Resolution No. 4999 be amended as indicated in Exhibit "B," attached hereto and made part of this resolution by this reference. ME SECTION 6: Reliance On Record. Each and every one of the findings and determination in this Resolution are based on the competent and substantial evidence, both oral and written, contained in the entire record relating to the project. The findings and determinations constitute the independent findings and determinations of the Planning Commission in all respects and are fully and completely supported by substantial evidence in the record as a whole. SECTION 7: Limitations. The Planning Commission's analysis and evaluation of the project is based on the best information currently available. It is inevitable that in evaluating a project that absolute and perfect knowledge of all possible aspects of the project will not exist. One of the major limitations on analysis of the project is the Planning Commission's lack of knowledge of future events. In all instances, best efforts have been made to form accurate assumptions. Somewhat related to this are the limitations on the city's ability to solve what are in effect regional, state, and national problems and issues. The City must work within the political framework within which it exists and with the limitations inherent in that framework. SECTION 8: This Resolution will remain effective until superseded by a subsequent resolution. SECTION 9: The Commission secretary is directed to mail a copy of this Resolution to any person requesting a copy. SECTION 10: This Resolution may be appealed within ten (10) calendar days after its adoption. All appeals must be in writing and filed with the City Clerk within this time period. Failure to file a timely written appeal will constitute a waiver of any right of appeal. 65 PASSED, APPROVED AND ADOPTED this 28th day of February, 2019. Ryan Baltlirie,'Chairpr vn City of Ei"Segundo Planning Commission ATTEST: { •Sam._I-ee,� Secretary Baldino - Aye Newman - Aye Hoeschler - Absent Keldorf - Aye Wingate - Aye APPROVED AS TO FORM: Mark D. Hensley, City Attorney By. j j David ing, Assistant iy Attorney PC Resolution No. 2858, Exhibit A (ORDINANCE) 67 PC Resolution No. 2858, Exhibit B AMENDED CONDITION OF APPROVAL NO. 15 Condition No. 15, approved as part of City Council Resolution No. 4999, is modified as indicated below. The proposed revisions to these conditions of approval are illustrated with stFikethF9u9l4 " for existing language that is proposed for elimination and underlined for proposed new language. Except as otherwise modified below, the conditions of approval attached to Resolution No. 4999 remain unchanged and in effect. 15. The applicant agrees to set aside eight 1Q% of the tcbl nu�mlccr of units constructed for Option 2-B. The units must be distributed as follows: 31 % of the total 10% for the extremely low income senior household category; 31 % of the 10% for the very low income senior household category; and 38% of the 10% for the low income senior household category to be split equally between the multi -family condominium/apartment units. Any affordable housing units that are required based on the single-family component of Option 2 may be satisfied by developing the requisite number of units in other components of the project. Percentages for the total number of units and for each income category must be calculated by rounding to the nearest whole number not to exceed the maximum required percentage. The Developer and the City must enter into an Affordable Housing Agreement, which will include an income verification monitoring plan, before issuance of Certificate of Occupancy. The project will fulfill the affordability requirements set forth in the Specific Plan by providing a total of 6 eight affordable units to qualified moderate income households as defined by the State Income Limits estab lis hed by the California Department of Housing and Communitv Development, which represents 40 14% of the total 58 units. The units will be provided in the multi -family section of the project and will be distaersed throughout the multi -family section so that no more than four units will be located in anv one bui€dingr,,,e-1, thrcvgs v;` the ❑rtim ; rojoet ky prvviding orx) unit in tach melti family b4Ad-iRg. The "affordable" units must be similar in exterior appearance, interior appointments, and configuration and basic amenities (such as storage space and outdoor living areas) to the "market rate" units in the proposed project. Further, covenants and agreements must be recorded as to the affordable units, which would ensure the units remain affordable for a term of 20 -years, concurrently with the recordation of the final map or the issuance of the first certificate of occupancy of the building. .: PLANNING COMMISSION STAFF REPORTS, DATED JANUARY 24 AND FEBRUARY 28, 2019 (WITHOUT ATTACHMENTS) We EL SEGUNDO PLANNING COMMISSION AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: January 24, 2019 AGENDA HEADING: Public Hearing Consideration and possible action regarding approval of an amendment to Environmental Assessment No. EA -1154, Specific Plan No. SP 16-01 and a Second Amendment to Development Agreement No. DA 16-01, amending the requirement that the developer provide six affordable units within the residential development by either (i) allowing the developer to pay the City an in - lieu fee and not provide any affordable units or (ii) adjusting the affordable housing requirement to allow the six units to be purchased by qualified moderate income households. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested revision to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Additionally, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. (Applicant: DR Horton CA2, Inc.). RECOMMENDED PLANNING COMMISSION ACTION: It is recommended that the Planning Commission adopt Resolution No. 2858, recommending the City Council adopt an ordinance amending the affordable housing requirement to allow the six affordable units to be purchased by qualified moderate income households. ATTACHED SUPPORTING DOCUMENTS: 1. Planning Commission Resolution No. 2858 a. Draft Ordinance 2. Amendment Request, dated September 27, 2018 and additional information dated December 13, 2018 3. Letter from Michael Baker International, dated November 8, 2018 ORIGINATED BY: Eduardo Schonborn, AICP, Principal Planne zi�2? REVIEWED BY: Gregg McClain, Planning Manager 0147 APPROVED BY: Sam Lee, Director of Planning and Building Safety I. INTRODUCTION/EXECUTIVE SUMMARY On September 28, 2016, the City Council approved a residential development at the former school site at 540 Imperial Avenue, consisting of 24 single-family dwelling units and 34 multi -family dwelling units (condominiums). As part of the project's conditions of approval, the developer (DR Horton) agreed to set aside six multi -family units as affordable units, for sale to qualified affordable households. Specifically, two units must be affordable to extremely low income households, two affordable to very low income households, and two affordable to low income 70 households. The City Council also directed the applicant and staff to ensure that members of the military be given priority for the affordable housing units. The developer is now seeking to amend this requirement, requesting that the City eliminate the requirement that the developer provide six affordable units within the residential development. Instead, the developer proposes to pay the City an "in lieu" fee and not provide any affordable housing units. Specifically, the developer proposes to pay the City $3,341,400 to remove the requirement that the developer provide six affordable condominium units, thereby allowing the developer to sell the six units at market rate and no longer being responsible for providing affordable housing. Since the requirement to provide six affordable units is contained in the project's conditions of approval, specific plan, and Development Agreement, the City Council has the ultimate authority to approve changes to the approvals. However, according to the conditions of approval, the Planning Commission is tasked with reviewing modifications, and then forwarding a recommendation to the City Council for consideration. II. ANALYSIS The applicant has expressed four fundamental reasons for requesting the amendment to the conditions, specific plan and DA. The applicant's reasons are stated below (in bold), followed by staff's assessment. It is important to note that any in -lieu fee paid to the City should not be used for general services and should be limited to affordable housing, either directly providing housing or programs that assist qualified lower income households. 1. Households with Extremely Low, Very Low and Low Incomes likely cannot afford the basic home costs and will likely default. The developer retained DRA, an affordable housing expert, to assess the financial viability of having extremely low, very low and low-income households purchase the affordable units. Utilizing the Los Angeles County median income, the State's Department of Housing and Community Development (HCD) establishes the income ranges for what constitutes an extremely low, very low and low-income household. Table No. I below are the income ranges, which also fluctuate based on the number of persons in the household. For example, a 4 -person household in Los Angeles County with a combined annual income of less than $29,050 is considered an Extremely Low income household; or considered a Very Low income household if the annual income is greater than $29,050 but less than $48,450; and so on. Table No. 1: 2018 HCD Income Limits Income Number of Persons in Household County Category 1 2 3 4 5 6 7 8 Los Angeles Extremely Low 20350 23250 26150 29050 31400 33740 38060 42380 County 4 -person Very Low (50%) 33950 38800 43650 48450 52350 56250 60100 64000 Area Med'.,. Low (801/o) 54250 62000 69750 77500 83700 89900 96100 102300 Income: $69,300 Median 48500 55450 62350 69300 74850 80400 85950 91500 71 Since the price of the unit is based upon the amount for which the household can qualify, DRA conducted a cost analysis for each income category, which took into account other housing expenses in addition to mortgage loan payments, such as HOA fees, property taxes, essential housing maintenance costs, etc. Although DRA determined that the two units identified for extremely low income households would have to be sold for nothing, an extremely low income household cannot afford to pay basic housing maintenance costs, including HOA fees, property taxes or other property expenses. Further, although very low and low-income households could afford to pay a nominal mortgage, households in these income categories would be challenged in paying essential housing maintenance costs (in addition to mortgage loan payments) and would likely default on their loans. For these reasons, affordable housing programs in other cities that are geared towards lower income households are rentals, not for - sale units. Staff provided the DRA analysis to the City's affordable housing consultant, Michael Baker International (MBI), who agrees with DRA's analysis. MBI and City staff agree that the financial viability of households in these income categories is not sustainable, since the households would not have the financial resources to pay for basic housing costs in addition to any mortgage. It is important to note that affordable housing is not limited only to the low income categories identified above, but also includes households in the "moderate income" category. According to the Department of Housing and Urban Development (HUD) methodology, moderate income in L.A. County is between $77,500 and $116,300 for a 4 -person household. Table No. 2: 2018 HUD Income Limits Income Number of Persons in Household County Category 1 2 3 4 5 6 7 8 Los Angeles Low (80%) 54250 62000 69750 77500 83700 89900 96100 102300 County 4 -person Area Median Median 48500 55450 62350 69300 74850 80400 85950 91500 Income: $69,300 Moderate 81,400 93,000 104,650 116,300 125,600 134,900 144,200 153,500 Although staff agrees that the financial viability of households in the extremely low, very low and low-income categories is likely not sustainable, staff believes this provides an affordable housing opportunity for moderate income households. MBI found that the DRA report did not provide evidence regarding the financial viability of all six units for moderate income households. As such, MBI prepared an analysis illustrating the financial viability of a moderate income household, and determined that a moderate income household could qualify for a substantially higher mortgage and continue to have the means to pay for other basic housing costs. Thus, MBI recommends that the City revise the affordable housing requirement such that DR Horton provides six affordable units at the moderate income level. Staff agrees with the developer that households at the prescribed low income categories could likely not afford the basic housing costs, but does not agree that the developer should be allowed to eliminate the affordable housing requirement. Therefore, based upon the City's 3 72 affordable housing consultant's assessment, at a minimum Staff believes the affordable housing requirement should be amended to require all 6 units to be purchased by moderate income households. It's important to note that extremely low, very low and low-income qualified households would still be eligible to purchase the units; however, allowing moderate income qualified households to also purchase the units simply expands the opportunity to a larger group of prospective homebuyers. 2. The in -lieu fee will create more affordable housing opportunities than setting aside six units that qualified income households cannot afford. The applicant believes that accepting an in -lieu payment will create more opportunities, and can be used to help more lower-income households than the current requirement. The applicant submitted additional information containing four alternatives/options (a through d, below) for use of the money should the City accept the in -lieu fee. a. UnQrade the Park Vista development.. The developer indicates that the proposed in -lieu fee can be used to fund repairs and upgrades to the facility, and enter into an agreement with an affordable housing operator to secure the site in perpetuity as an affordable housing alternative. The Park Vista site is built -out, and contains a 97 -unit independent living facility for seniors. The site is owned by the City and is governed by a council -appointed board. Rents are restricted to levels affordable to very low income households, and occupancy is limited to El Segundo residents with incomes that fall below moderate income levels. The in -lieu may be used to remodel the facility, but it will not create new affordable housing units, which is a goal of the City. According to the City's certified Housing Element (page 7-2), "The City seeks to expand the range of housing opportunities, including those for low- and moderate income first-time homebuyers, senior citizens on fixed incomes, extremely low-, very low-, low- and moderate -income residents, the disabled, military personnel, and the homeless." Hence, utilizing the in -lieu fee to remodel the Park Vista site is not consistent with the Housing Element as no additional units would be created to count towards the City's regional share of housing. Further, since the City owns the property, there is no concern that the facility would not continue to operate as an affordable project in perpetuity. As such, maintaining the requirement that the developer provide affordable units (albeit, at the moderate income level) is consistent with the Housing Element and provides additional units in the City. Thus, staff does not believe this to be an acceptable alternative. b. Creation of an affordable housiniz trust fund.. The developer believes the City can use the proposed in -lieu fee to create an affordable housing trust fund that could be used in the following ways: • Financing developers of affordable housing by providing deferred loans, below market interest rate loans and matching state, federal and private financing. ► Providing deferred loan and closing cost grant programs for first time buyers. • Providing no interest or low-interest loans to non-profit agencies who specialize in developing affordable housing projects to acquire or build affordable housing. 4 73 Donating funds to a land trust that leases properties long-term to qualified tenants. Staff's concern with these approaches is that they would be confined to developments that are intended for and subsidize lower income households. There are very few opportunity sites for residential developments. The subject site at 540 E Imperial Avenue is the only large residential development constructed in El Segundo in approximately 30 -years, and is likely the last large residential development that will be constructed. Further, staff has not been approached by any residential developer inquiring about large-scale residential development. Thus the funds would likely never be utilized since it would be highly unlikely that these approaches would be used; and, since the funds were obtained from an in -lieu payment, use of the funds would be limited to affordable housing projects and programs and could be used for any general purpose. As such, staff does not believe this to be an acceptable alternative. Use of in -lieu fee to address homeless. The developer indicates that the proposed in -lieu fee can be used to provide temporary housing, wellness checks and clean-up of hazardous conditions in homeless encampment sites. According to State housing element law, the elderly, disabled persons, large households, female -headed households, farm workers, extremely low-income households and the homeless are considered special needs groups. In addition, military households are a group with special housing needs in El Segundo. Although the City's certified Housing Element identifies up to 10 homeless persons in the City, the Police Department has not identified encampments. Thus, staff believes that utilizing the monies for temporary housing and services for the homeless population would not be the best use of the funds. Further, staff is not aware of any sites that could be utilized for the provision of temporary housing. Lastly, this option would not address the City's regional share of housing. As such, staff does not believe this to be an acceptable alternative. d. Purchase an off-site (market rate anartmentl facilitv and convert to affordable housing. to be manaized by an affordable housing ooerator. The developer indicates that the money can be used to purchase an existing multi -family complex, and an affordable housing operator would administer the rental and maintenance of the units in perpetuity. Although staff believes this to be a possible solution that could gain support, there are many concerns with this. The developer would have to find an apartment complex with at least six units, it would have to be within El Segundo, and it would have to be at a price point that would make it feasible. It is nearly impossible to determine whether such a real estate opportunity would ever arise; and if it did, the acquisition may not occur. Further, the optics of an entire facility dedicated strictly for lower income housing may not garner community support. Thus, there are too many unknowns with this option that leads staff to believe this not to be an acceptable alternative. 3. The in -lieu fee would result in no appreciable impact to City resources and would obviate having the City manage and monitor compliance with affordable housing covenants for 30 years or longer. The developer believes that maintaining the existing, or a modified version of, affordable housing will require City staff to manage, administer and monitor compliance with the 74 covenants restricting the affordable units to qualified households; screen and qualify all prospective purchasers; ensure all owners' compliance with all obligations they must meet, such as payments of mortgage loans, HOA dues and property taxes; undertake any foreclosure or related proceedings against defaulting owners; and begin the entire process all over again as and when an owner defaults and is foreclosed upon. In effect the City would be thrust into the role of lender, regulator, landlord, asset manager and program administrator for the six affordable units. Staff disagrees with this assertion since the Development Agreement requires the developer to contribute $300,000 to reimburse the City for costs of administering and enforcing the affordable component of the project. Since City staff are not experts on the topic of affordable housing, nor would it be fiscally prudent to hire staff to monitor six affordable units, the City would contract with a firm that has the qualified personnel and expertise in affordable housing. The City's consultant would be tasked with reviewing applications to ensure the applicants are qualified households, assist with preparation of documents, and conduct annual monitoring activities. Thus, the activities the developer indicates above would be managed and administered by the City's consultant under the City's supervision, and the associated costs would be recouped by the developer's required contribution. 4. The proposed alternative to the in -lieu fee, restricting the affordable units to moderate income households, would greatly burden the City and would not produce extremely low, very low or low income units. As indicated above, staff agrees that the financial viability of households in the extremely low, very low and low-income categories is not sustainable; consequently, staff recommends that the six affordable units be designated for sale to qualified moderate income households. The applicant, however, believes this does not create housing opportunities for lower income households (at the identified income categories), and will require City staff to manage, administer and monitor the affordable units. Although staffs recommendation (to designate the six units for sale to qualified moderate income households) does not create housing opportunities for the lower income categories, moderate income is identified by the State as an affordable housing category and is included in the City's certified Housing Element. State law requires a city to provide an adequate number of sites to allow for and facilitate production of the City's regional share of housing for each income category, which includes Extremely Low, Very Low, Low, and Moderate. The City's regional share is a total of 69 units, which is broken down as follows: • 9 Extremely Low Income Households • 9 Very Low Income Households ■ 11 Low Income Households * 12 Moderate Income Households • 28 Above Moderate Income Households Thus, requiring that the six units in the development be made available to qualified moderate income households is consistent with State Law and the City's certified Housing Element. 0 75 Further, it continues to make progress towards meeting the city's regional share of housing in the moderate income category. Regarding the applicant's assertion that requiring the units be made available to moderate income households will burden the city, Staff has already addressed this issue in the previous section. In summary, since the Development Agreement requires the developer to contribute $300,000 to reimburse the City for costs of administering and enforcing the affordable component of the project, and since a consultant would be retained for these purposes, there will be no burden on city staff. III. CONCLUSION Staff does not believe that the developer's request is in the City's best interest as it would transfer responsibility of providing affordable housing to the City, despite the fact that the City remains obligated to provide an adequate number of sites to allow for and facilitate production of the City's regional share of affordable housing. The developer could then sell the units at market rate. Further, accepting the in -lieu payment has restrictions in that the City should only use the money for affordable housing and related affordable housing programs. It is also important to note that the developer agreed to provide affordable housing on-site, within the boundaries of the new development when the entitlements were being considered by the Planning Commission and City Council in 2016. Staff acknowledges that the money has the potential to serve a greater population than the 6 that it would serve at this development; however, future programs are not guaranteed. Any affordable housing program would take a minimum of 18 months to implement since there needs to be agreement and clear direction on the type of affordable housing program, and City staff would have to come up with a program, which may require City Council approval before it is implemented. For example, some of the issues that could arise include trying to determine which income categories to target; or, should market -rate units be purchased and converted to affordable units (this may likely yield less than 6 units). As indicated above, staff acknowledges and agrees with the developer that the financial viability of households in the extremely low, very low and low-income categories is not sustainable. Thus, for the reasons stated above, it is staff's recommendation that the Planning Commission recommend to the City Council that the affordable housing requirement be amended to allow the six affordable units to be purchased by qualified moderate income households. 7 76 EL SEGUNDO PLANNING COMMISSION AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: February 28, 2019 AGENDA HEADING: Public Hearing Consideration and possible action regarding approval of an amendment to Environmental Assessment No. EA -1154, Specific Plan No. SP 16-01, conditions of approval and a Second Amendment to Development Agreement No. DA 16-01, amending the requirement that the developer provide six affordable units within the residential development by adjusting the affordable housing requirement to allow the eight units to be purchased by qualified moderate income households. An Addendum to the Environmental Impact Report (EIR) for the development project was certified by the City Council on September 28, 2016. The requested revision to the affordable housing requirement does not introduce new significant environmental effects or substantially increase the severity of the environmental impacts that previously were identified and analyzed in the certified EIR Addendum. Additionally, the project does not include changed circumstances or new information, which were not known at the time the EIR was certified, that would require the preparation of a subsequent environmental analysis pursuant to CEQA Guidelines. (Applicant: DR Horton CA2, Inc.). RECOMMENDED PLANNING COMMISSION ACTION: It is recommended that the Planning Commission adopt Resolution No. 2858, recommending the City Council adopt an ordinance amending the affordable housing requirement to allow eight affordable units to be purchased by qualified moderate income households. ATTACHED SUPPORTING DOCUMENTS: 1. Planning Commission Resolution No. 2858 a. Draft Ordinance 2. Updated Amendment Request, dated February 11, 2019 3. Letter from Michael Baker International, dated February 19, 2019 4. Staff Report to the Planning Commission, dated January 24, 2019 (without attachments) ORIGINATED BY: Eduardo Schonborn, AICP, Principal Plann REVIEWED BY: Gregg McClain, Planning Manager APPROVED BY: Sam Lee, Director of Planning and Build g Safety I. BACKGROUND On September 28, 2016, the City Council approved a residential development at the former school site at 540 Imperial Avenue, consisting of 24 single-family dwelling units and 34 multi -family dwelling units (condominiums). As part of the project's conditions of approval, the developer (DR Horton) agreed to set aside six multi -family units as affordable units, for sale to qualified affordable households. Specifically, two units must be affordable to extremely low income 77 households, two affordable to very low income households, and two affordable to low income households. The City Council also directed the applicant and staff to ensure that members of the military be given priority for the affordable housing units. In September 2018, the applicant submitted a request to amend the project, which was augmented in December 2018. Specifically, the developer requested the City eliminate the requirement to provide six affordable units within the residential development, and instead allow the developer to pay the City an "in lieu" fee totaling -$3,341,400. This original amendment request would have removed the requirement that the developer provide six affordable condominium units, thereby allowing the developer to sell the six units at market rate and no longer being responsible for providing affordable housing. In response, staff prepared a staff report for the January 24, 2019 Planning Commission hearing recommending that the Planning Commission not support the proposed amendment, and recommended adjusting the affordable housing requirement to allow the six units to be purchased by qualified moderate income households. Prior to the January 20 meeting, however, the applicant submitted a request to continue the item so that they could meet with staff and modify the amendment. On February 11, 2019, the applicant submitted a revised amendment, requesting that the project's affordable housing requirement be adjusted to provide for a total of eight affordable units instead of six, and that all eight affordable units be available for moderate income households. Since the requirement to provide six affordable units is contained in the project's conditions of approval, specific plan, and Development Agreement, the City Council has the ultimate authority to approve changes to the approvals. However, according to the conditions of approval and pursuant to state law, the Planning Commission is tasked with reviewing modifications, and then forwarding a recommendation to the City Council for consideration. II. ANALYSIS The applicant has expressed the following three fundamental reasons for requesting the amendment to the conditions, specific plan and DA: 1. The proposed set aside advances the City's goals of providing new housing construction and fulfilling its housing allocation for the 2013-2021 housing cycle determined by the Regional Housing Needs Assessment (RHNA), which includes housing for moderate income households. 2. The revised program is far more feasible and more likely to meet the City's affordable housing goals than the Six -Unit Set Asides since moderate income households can afford the homes which will be priced for such households, including mortgage loan principal and interest, HOA fees, property taxes, insurance premiums, utilities and other essential household expenses, whereas the extremely low, very low and low income households that would own the Six -Unit Set Asides cannot pay these expenses, even at below market (or zero) purchase prices, and will inevitably default under their mortgage loans, rendering the Six -Unit Set Asides program unsustainable and doomed to failure. 3. This revised 8 -unit moderate income housing program provides more units towards the City's RHNA goals than the Six -Unit Set Asides. 2 Moderate Income Household As specified in the January 24"' staff report, the developer retained the affordable housing consultant DRA to assess the financial viability of having extremely low, very low and low- income households purchase the affordable units. Since the price of the affordable units are based upon the amount for which the household can qualify, DRA conducted a cost analysis for each income category, which took into account other housing expenses in addition to mortgage loan payments, such as HOA fees, property taxes, essential housing maintenance costs, etc. Although DRA determined that the two units identified for extremely low income households would have to be sold for nothing, an extremely low income household cannot afford to pay basic housing maintenance costs, including HOA fees, property taxes or other property expenses. Further, although very low and low-income households could afford to pay a nominal mortgage, households in these income categories would be challenged in paying essential housing maintenance costs (in addition to mortgage loan payments) and would likely default on their loans. For these reasons, affordable housing programs in other cities that are geared towards lower income households are rentals, not for -sale units. Staff provided the DRA analysis to the City's affordable housing consultant, Michael Baker International (MBI), who agreed with DRA's analysis. MBI and City staff agree that the financial viability of households in these income categories is not sustainable, since the households would not have the financial resources to pay for basic housing costs in addition to any mortgage. Since, the financial viability of households in the extremely low, very low and low-income categories is likely not sustainable, this provides an affordable housing opportunity for moderate income households. MBI analyzed the financial viability of a moderate income household, and determined that a moderate income household could qualify for a substantially higher mortgage and continue to have the means to pay for other basic housing costs. It's important to note that extremely low, very low and low-income qualified households would still be eligible to purchase the units; however, allowing moderate income qualified households to also purchase the units simply expands the opportunity to a larger group of prospective homebuyers. RHNA The proposed amendment would allow the units to be purchased by moderate income households, in addition to low, very low and extremely low households. Moderate income is identified by the State as an affordable housing category and is included in the City's certified Housing Element. State law requires a city to provide an adequate number of sites to allow for and facilitate production of the City's regional share of housing for each income category, which includes Extremely Low, Very Low, Low, and Moderate. The City's regional share is a total of 69 units, which is broken down as follows: • 9 Extremely Low Income Households • 9 Very Low Income Households • 11 Low Income Households • 12 Moderate Income Households 3 79 • 28 Above Moderate Income Households The requested amendment to provide eight units in the development available to qualified moderate income households is consistent with State Law and the City's certified Housing Element. Further, it continues to make progress towards meeting the City's regional share of housing in the moderate income category and creates two additional units that can be applied to the City's regional share than previously approved. Thus, staff supports the applicant's amendment for the aforementioned reasons. City's Costs of Administering the Affordable Housing Program When the project was originally approved in September 2016, the applicant provided $300,000 as a public benefit contribution to the City to cover the City's expected costs of administering the affordable housing program for the six units. As of the preparation of this report, the applicant has not offered to reimburse the City's costs in administering the affordable housing program for the two additional units. In addition, the two additional units are intended to address the expected increased profits the applicant will likely receive by changing the affordability levels for the six units. City staff will present options to the Planning Commission as to the City's costs of administering the program and the developer's expected profits, in the event the Commission desires to make a recommendation to the City Council on this issue. III. CONCLUSION Staff believes that the developer's request is in the City's best interest as it makes progress towards meeting the City's regional share of housing in the moderate income category; it expands the opportunity of homeownership to a larger group of prospective homebuyers; it is consistent with the City's Housing Element; and it is consistent with the project approvals that requires affordable housing on-site, within the boundaries of the new development. Thus, for the reasons stated above, it is staff's recommendation that the Planning Commission recommend to the City Council that the affordable housing requirement be amended to allow eight affordable units to be purchased by qualified moderate income households. .N AFFORDABLE HOUSING AGREEMENT, DATED OCTOBER 18, 2418 RI Recording Requested By And When Recorded Mail To: City of EI Segundo 350 Main Street EI Segundo, California 90245 Attention: City Clerk Space Above for Recorder's Use (This document is exempt from the payment of a recording fee pursuant to Government Code §§ 6103 and 273 83) AFFORDABLE HOUSING AGREEMENT AND COVENANT CONCERNING USE, SALE AND RESALE OF RESIDENTIAL UNITS This AFFORDABLE HOUSING AGREEMENT AND COVENANT CONCERNING USS, SALE AND RESALE OF RESIDENTIAL UNITS ("Agreement") is entered into as of the (to_ day of &&rozp-.e_ , 2018, by and between the CITY OF EL SEGUNDO, a general law city and municipal corporation ("City"), and D.R. HORTON CA2, INC., a California corporation ("Developer") (collectively, the "Parties"). RECITALS: A. Developer is the owner of that certain real property consisting of approximately 5.65 acres of land area that is located at 540 East Imperial Avenue in the City of El Segundo, County of Los Angeles, State of California, and that is more particularly described in the legal description attached hereto as Exhibit "A" (the "Property"). B. On September 28, 2016, the El Segundo City Council approved the entitlements authorizing Developer to develop 24 single-family dwelling units and 34 multi -family dwelling units and related improvements on the Property, subject to certain conditions of approval (collectively, the "Project"). C. As part of the approval of the Project, Developer agreed to set aside six multi -family units as affordable units. In particular, two units must be sold to extremely low income households; two units must be sold to very low income households; and two units must be sold to low income households, as defined by state law. To ensure that the affordable units are in fact provided, the City Council conditioned its approval of the Project by requiring Developer to enter into an Affordable Housing Agreement with the City. D. This Agreement is intended to establish the terns and conditions for implementation of the Project's requirement to provide affordable housing units, to ensure that Developer fulfills the conditions of approval relating to such requirement, and to set forth the covenant and conditions upon which Developer agrees to sell the Affordable Housing upon completion of construction, and the resale restrictions that will affect each Affordable Unit during the time such restrictions remain in place. FA 7 Q � tip" x� -- a."• c..`'' 0 1 Y y3. 'i{" 2018105197g* u: oco = A, Space Above for Recorder's Use (This document is exempt from the payment of a recording fee pursuant to Government Code §§ 6103 and 273 83) AFFORDABLE HOUSING AGREEMENT AND COVENANT CONCERNING USE, SALE AND RESALE OF RESIDENTIAL UNITS This AFFORDABLE HOUSING AGREEMENT AND COVENANT CONCERNING USS, SALE AND RESALE OF RESIDENTIAL UNITS ("Agreement") is entered into as of the (to_ day of &&rozp-.e_ , 2018, by and between the CITY OF EL SEGUNDO, a general law city and municipal corporation ("City"), and D.R. HORTON CA2, INC., a California corporation ("Developer") (collectively, the "Parties"). RECITALS: A. Developer is the owner of that certain real property consisting of approximately 5.65 acres of land area that is located at 540 East Imperial Avenue in the City of El Segundo, County of Los Angeles, State of California, and that is more particularly described in the legal description attached hereto as Exhibit "A" (the "Property"). B. On September 28, 2016, the El Segundo City Council approved the entitlements authorizing Developer to develop 24 single-family dwelling units and 34 multi -family dwelling units and related improvements on the Property, subject to certain conditions of approval (collectively, the "Project"). C. As part of the approval of the Project, Developer agreed to set aside six multi -family units as affordable units. In particular, two units must be sold to extremely low income households; two units must be sold to very low income households; and two units must be sold to low income households, as defined by state law. To ensure that the affordable units are in fact provided, the City Council conditioned its approval of the Project by requiring Developer to enter into an Affordable Housing Agreement with the City. D. This Agreement is intended to establish the terns and conditions for implementation of the Project's requirement to provide affordable housing units, to ensure that Developer fulfills the conditions of approval relating to such requirement, and to set forth the covenant and conditions upon which Developer agrees to sell the Affordable Housing upon completion of construction, and the resale restrictions that will affect each Affordable Unit during the time such restrictions remain in place. FA COVENANTS: NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated into this Agreement by this reference, and the mutual benefits and obligations set forth herein, Developer and City agree as follows: 1. Definitions. The following defined terms have the meanings given below: "Affordable Housing Cost" as set forth in Section 50052.5 of the California Health and Safety Code, means the Total Housing Costs paid by a Qualified Household, which do not exceed a specified percentage of the gross monthly income, adjusted for Household Size Appropriate for the Unit, as follows ("Affordable Housing Cost Limits'): For Extremely Low Income Households: the product of 30% of 30% of the Los Angeles County median income. • For Very Low Income Households: the product of 30% of 50% of the Los Angeles County median income. • For Low Income Households: the product of 30% of 70% of the Los Angeles County median income "Affordable Sales Price" means an estimated sales price for an Affordable Unit such that the Total Housing Costs paid by a Qualified Household do not exceed the Affordable Housing Cost Limits. "Affordable Unit" shall mean each of the six units to be developed within the Project that is to be restricted for sale to Qualified Households pursuant to this Agreement. The Parties agree that Developer has the right to designate which of the units in the Project shall be the Affordable Units. "Extremely Low Income" or "Extremely Low Income Households" means households whose incomes do not exceed the extremely low income limits applicable to Los Angeles County, as published and periodically updated by the State Department of Housing and Community Development pursuant to Section 50106 of the California Health and Safety Code. "Household Size Appropriate for the Unit" means the house of three persons in the case of a two-bedroom unit, four persons in the case of a three-bedroom unit and five persons in the case of a four-bedroom unit. "Low I►:come" or "Lower Income Households" means households whose incomes do not exceed the low income limits applicable to Los Angeles County, as published and periodically updated by the State Department of Housing and Community Development pursuant to Sections 50093 and 50079.5 of the California Health and Safety Code. "Qualified Household" means either an Extremely Low Income, Very Low Income or Low Income Household, as applicable. "Qualified Households" means, collectively, Extremely Low Income, Very Low Income and Low Income Households. "Total Housing Costs" means the total monthly or annual recurring expenses required of a household to obtain shelter, and includes the mortgage payment (principal and interest, based on a 2 RI thirty-year term at a combined first mortgage fixed interest rate and mortgage insurance premium of 4.20% with a five percent (5%) down payment), utilities, homeowner's association dues, homeowner insurance, taxes, mortgage insurance and other related assessments. "Very Low Income" or "Very Low Income Households" means households whose incomes do not exceed the very low income limits applicable- to Los Angeles County, as published and periodically updated by the State Department of Housing and Community Development pursuant to Section 50105 of the California Health and Safety Code. 2. Exhibits. The following exhibits, attached hereto, are hereby incorporated by reference into this Agreement: Exhibit A Legal Description of Property Exhibit B Termination and Release of Affordable Housing Agreement Exhibit C Affordable Housing Resale Restriction Exhibit D Affordable Housing Unit Information Form Exhibit E Disclosure of Interest Form 3. Develoner's Covenants Concerninz Affordable U;iits. a. Affordable Units. Developer agrees to construct and market the following designated units (herein, the "Affordable Units") and to only sell those units to a Qualified Household at an Affordable Sales Price: Number/Type of Units (Mixed Eligible Income Group Residential) 2 Three -Bedroom Units Fxtremely Low 2 Three -Bedroom Units Very Low f 2 Three -Bedroom Units Low Total 6 Affordable Units (10% Set Aside per Development Agreement, as amended, and Resolution No. 4999) Developer may permit Extremely Low Households to purchase an Affordable Unit designated for Very Low and Low Income Households, and may permit Very Low Income Households to purchase an Affordable Unit designated for Low Income Households. Developer understands and acknowledges that the determination of Affordable Sales Price can only be made at the time of the proposed transfer, and that the transfer price permitted hereunder may be less than the fair market value of the affordable unit and may not increase or decrease in the same manner as other similar real property which is not encumbered by these restrictions. The Developer further acknowledges that at all times in setting the Affordable Housing Price the primary objective of the City. and this Agreement is to provide housing to Qualified Households at an Affordable Sales Price. :E b. Eligibility. No Affordable Unit may be sold to a prospective purchaser until City has verified that (i) the prospective purchaser is a Qualified Household and (ii) that the sales price for the Affordable Unit does not exceed the Affordable Sales Price. c. Preferences for U.S. Military. The Developer agrees that, all other considerations being equal and as permitted by law, it will give preference to prospective purchasers who are active members or veterans of the U.S. military at the time of the purchase. d. Minimum Development Standards For Affordable Units. Developer agrees and understands that the Affordable Units within the Project shall have the same exterior appearance, interior appointments, and configuration and basic amenities (such as storage space and outdoor living areas) as the market rate units in the Project. e. Timing of Sale of Affordable Units. Developer agrees that the Affordable Unit(s) within a building in the Project must be sold to a Qualified Household in accordance with this Agreement, and escrow must have closed on such unit(s), before the City will issue the final Certificate of Occupancy for the last remaining unsold market rate unit within the same building. f. Transfer Voidable if ProcedureNot Followed. Any transfer of any Affordable Unit by Developer that is not in compliance with the terms and procedures set forth in this Agreement shall be voidable by City at City's election in its sole and unfettered discretion. 4. Marlcetirt2 nrtd financing Assistazice. a. Developer must prepare and obtain City's written approval (which shall not be unreasonably withheld or delayed) of a marketing program, which shall be in compliance with all applicable laws, including but not limited to the Fair Housing Act (42 U.S.C. section 3601 et seq.) (as approved by City, the "Approved Marketing Plan"). Developer agrees to market the Affordable Units in accordance with the Approved Marketing Program, as the same may be amended by the Developer from time to time with the City's prior written approval, which shall not be unreasonably withheld or delayed. Developer must provide the City with a copy of all published or broadcast advertisements. As part of the Approved Marketing Program, the Developer shall use reasonable efforts to assist Qualified Households in locating and obtaining available forms of subsidized or assisted financing or other assistance to enable Qualified Households to qualify for, and minimize the cost of, acquiring the Affordable Units. Such assistance may include, without limitation, Los Angeles County Mortgage Credit Certificates, the Affordable Housing Partnership program, California Housing Finance Authority programs, FHLB Home Ownership program. 5. Execution and Recoi-dation of Affordability Covenants. 4 RR a. This Agreement shall be recorded concurrently with the issuance of Certificates of Occupancy for the Project and the Property. City shall cooperate with Developer in promptly executing in recordable form and causing to be recorded against any common area lots within the Property and against any of the airspace lots for the market rate units (as soon as the market rate units have been designated and identified by Developer). b. As soon as each Affordable Unit within the Project has been identified and in no event later than the close of escrow for the sale of such Affordable Unit by Developer to a Qualified Household, Developer, City and the purchaser shall execute in recordable form originals of both (1) the Termination and Release of Agreement, attached hereto as Exhibit B, and (2) the Affordable Housing Resale Restriction a form of which is attached hereto as Exhibit C as may be revised by the City (hereafter, "Covenants") which Affordable Housing Resale Restriction shall remain in effect until, and shall be void and of no further effect on, the twentieth anniversary of the closing of the sale of each Affordable Unit or City's release of (the "Covenant Period"). The Affordable Housing Resale Restriction must be executed and recorded by the purchaser of the Affordable Unit before the City will execute the Termination and Release of Agreement. c. The Parties acknowledge and agree that none of the obligations of Developer set forth in this Agreement are intended to be binding upon the persons purchasing and occupying either the market rate units or the Affordable Units within the Project or upon the homeowners' association to be formed with respect to the Property, and that Developer's obligations as set forth herein are intended to be personal to Developer and any successors -in -interest of Developer as the developer of the Project. The ongoing covenants of each owner of an Affordable Unit shall be as set forth in the Covenants to be recorded against that owner's airspace lot. d. At the time each escrow for the sale of an Affordable Unit closes, Developer shall cause to be recorded against said Affordable Unit an original of the Covenants in the form attached hereto as Exhibit C, with the unit(household specific information filled in. Developer shall have no obligation to administer or enforce its purchasers' obligations as set forth in the Covenants after the same have been recorded and the escrow has closed. 6. Verification of Income Elip-ibility of Purchasers of Affordable Units, Establisliment of Affordable Sales Price and Delivery of Documents to City Relating to Sale of Affordable Units. a. Prior to the initial sale of each Affordable Unit within the Project, Developer must determine each prospective purchaser's eligibility as a Qualified Household and that the Affordable Unit is being sold at an Affordable Sales Price by requiring the prospective purchaser to complete, certify, and deliver to Developer the following documents: L an Affordable Housing Unit Information Form, a form of which is attached hereto as Exhibit "D" as may be revised by the City and incorporated herein by this reference; ii. complete executed copies of the prospective purchaser's State income tax returns or W -2s and 1099 forms for the two (2) most recent years prior to the purchase; iii. a complete copy of a statement in the form set forth in Exhibit "E" to this Agreement executed by the prospective purchaser under oath attesting that Developer has no direct or indirect familial or business relationship with the prospective purchaser; iv. a completed Disclosure of Interest form, a form of which is attached hereto as Exhibit "E'; v. such other information regarding the prospective purchaser or the sale of the Affordable Unit that City may reasonably require Developer to obtain from time to time by deliver of prior written notice to Developer; and vi. a written statement signed by the prospective purchaser (in a form reasonably acceptable to the City Attorney) that: (1) authorizes Developer to transmit all of the information referred to in this paragraph to City and that authorizes City to inspect, use and rely upon such information in order to verify Developer's and prospective purchaser's compliance with the terms of this Agreement and the Covenants, and (2) waives and releases any right or claim that said prospective purchaser might otherwise have in the absence of such a waiver and release to maintain the privacy or confidentiality of such information and the information described in Section 6.d. hereof. b. Developer may, in good faith, rely upon the accuracy and truthfulness of the information provided to Developer by prospective purchasers and shall not be deemed to be in default under this Agreement to City if any information provided to Developer is false, misleading, or inaccurate, and is relied upon by Developer in good faith. c. Based upon the information submitted by each prospective purchaser of an Affordable Unit, Developer- will determine whether the prospective purchaser constitutes a Qualified Household. If Developer determines that a prospective purchaser constitutes a Qualified Household, Developer then will submit the prospective purchaser's application and all of the documents referenced in this section to City, so that City can verify the Developer's determination and that the Affordable Unit is being sold at an Affordable Sales Price to a Qualified Household. Upon written confirmation by City to the Developer, the Developer may then sell such Affordable Unit to the applicable Qualified Household at the price submitted to and approved by the City. d. Within 10 days after each Affordable Unit closes escrow, Developer shall provide to City true and correct copies of (i) a copy of the escrow closing statement, financing / loan documents and any other information that may be reasonably requested by City to establish that the Affordable Unit was sold at an Affordable Sales Price, (iii) a recorded copy of the Covenants with respect to said Affordable Unit; (iv) a copy of the escrow closing statement for the most recently sold comparable market rate unit within the Project at the time such Affordable Unit is sold upon which Developer based the calculation of the fait- market value of the Affordable Unit, as set forth in the Covenants (provided, however, Developer may redact or omit from such documents personal information regarding the purchaser 6 of the market rate unit that is not needed to enable City to determine the sale price of the market rate unit, as it relates to the Affordable Unit). 7. Maintenance of Records. Developer shall, for one year after the closing of the sale of the last remaining Affordable unit, maintain complete and accurate records pertaining to the development, marketing, and sale of the Affordable Units, and shall permit any duly authorized representative of City upon reasonable prior notice of not less than one business day and during Developer's normal business hours to inspect the books and records of Developer pertaining to the same as City may reasonably determine is necessary and appropriate to enable it to administer and enforce its rights set forth in this Agreement, subject, however, to Developer's right to withhold (i) any confidential business or financial information that constitutes a trade secret under California law and (ii) any personal information regarding prospective purchasers that is not needed to enable City to verify that they qualify as Qualified Households, 8. Defaults. Failure or delay by either Party to perform any term or provision of this Agreement which is not cured within thirty (30) days after receipt of notice from the other Party constitutes a default under this Agreement; provided, however, if such failure or delay is of a nature requiring more than thirty (30) days to cure, the nonperforming Party shall not be deemed to be in default hereunder if it commences to cure within such thirty (30) day period, and thereafter diligently pursues such cure to completion. Upon receipt of such a notice the Party who so fails or delays must immediately commence to cure, correct, or remedy such failure or delay, and shall complete such cure, correction, or remedy with diligence. The injured Party shall give written notice to the Party who has so failed to perform, specifying the nonperformance complained of by the injured Party with reasonable particularity specifying the acts or omissions that the injured Party believes constitute a failure to perform and the terms of this Agreement that it claims have been violated. Except as required to protect against further damages, the injured Party may not institute proceedings against the Party who has failed to perform until thirty (30) days after giving such notice, or if the failure to perform is of a nature requiring more than thirty (30) days to cure, until such time that the Party fails diligently to pursue such a cure to completion. Failure to delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default. 9. Nondiscrimination. Developer covenants by and for itself that there shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, sex, marital status, national origin or ancestry, in the sale, transfer, use, occupancy or enjoyment of the Affordable Unit, nor shall Developer establish or permit any such practice of discrimination or segregation with reference to the selection, location, number, use of occupancy of the Affordable Unit or any portion thereof. Developer shall refrain from restricting the sale of the Affordable Unit on the basis of race, color, creed, religion, sex, marital status, national origin or ancestry of any person. All deed or contracts with respect to the Affordable Unit shall contain or be subject to substantially the following nondiscrimination or non -segregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry, in the sale, transfer, use, occupancy or enjoyment 7 MP of the land herein conveyed nor shall the grantee establish or permit any such practice of discrimination or segregation with reference to the selection, location, number, use or occupancy of the land herein conveyed. The foregoing covenants shall run with the land" b. In contracts: "There shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the sale, transfer, use, occupancy or enjoyment of the premises, nor shall the transferee stablish or permit any such practice of discrimination or segregation with reference to the selection, location, number, use or occupancy of the premises" 10. Indemnification. Developer shall defend, indemnify, and hold harmless City and its officers, officials, agents, employees, representatives, and volunteers from and against any loss, liability, claim, or judgment arising out of Developer's performance or failure to perform its obligations set forth in this Agreement. 11. Miscellaneous. a. Attornevs' Fees and Costs. If any action is brought to enforce the terms of this Agreement, the prevailing Party shall be entitled to reasonable attorneys' fees and costs. b. Controlling Agreement. Developer represents that Developer has not executed and Developer covenants that it will not execute any other agreement with provisions contradictory to or in opposition to the provisions hereof, and that, in any event, Developer understands and agrees that this Agreement shall control the rights and obligations between the Parties with respect to the subject matter set forth herein. c. Severability. If any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision(s) had never been contained herein. d. Time. Time is of the essence of this entire Agreement. Whenever under the terms of this Agreement the deadline for performance falls on a day which is not a business day, such deadline for performance shall be extended to the next day that is a business day. For purposes of this Agreement, business days shall exclude Saturdays, Sundays, and national and State holidays. Notwithstanding the foregoing, the Parties' time for perfonnance hereunder shall be extended if and to the extent that timely performance is delayed due to circumstances that are not the fault and beyond the reasonable control of the Party claiming an extension of time to perform (collectively, "Events of Force Majeure"). In the event of any Event of Force Majeure, the Party claiming an extension of time to perform shall promptly deliver written notice to the other Party describing the Event of Force Majeure and such Party shall thereafter undertake reasonable efforts to minimize the circumstances causing the delay. In no event shall a change in market conditions, interest rates, or financial inability be deemed an Event of Force Majeure for Developer and in no event shall City's unreasonable delay in taking action on any plan, permit, or other item requiring City's consideration or approval be deemed an Event of Force Majeure for City. e. Notices. All notices required to be delivered under this Agreement by one Party to the other Party must be in writing and shall be effective (i) when personally delivered to the other Party; (ii) three (3) business days after deposit in the United States mail, registered or certified, with any such deposit occurring within the State of California; or (iii) one (1) business day after deposit before the daily deadline time with a reputable overnight courier or service; in each case postage fully prepaid and addressed to the respective Parties as set forth below or to such other address and to such other persons as either Party may hereafter designate by written notice to the other Party hereto: If to City: If to Developer: City of EI Segundo Attn: City Manager 350 Main Street El Segundo, California 90245 DR Horton CA2, Inc. Attn: Marianne F. Adriatico, Esq. Vice President and Division Counsel 2280Wardlow Circle, Suite 100 Corona, CA 92880 f. Cantions and Pronouns. The captions and headings of the various Sections of this Agreement are for convenience only and are not to be construed as confirming or limiting in any way the scope or intent of the provisions hereof. Whenever the context requires or permits, the singular shall include the plural, the plural shall include the singular, and masculine, feminine, and neuter shall be freely interchangeable. g. Runninr: of Benefits and Burdens: Remedies,. All conditions, covenants, and restrictions contained in this Agreement, without regard to technical classification or designation, legal or otherwise, shall be, to the fullest extent permitted by law and equity, binding for the benefit and in favor of, and enforceable by, City and its successors and assigns, against Developer, its successors and assigns, to or of the Property conveyed herein or any portion thereof or any interest therein during the Covenant Period for each Affordable Unit only and not beyond. In amplification and not by way of limitation of the foregoing, it is intended and agreed that City shall be deemed a beneficiary of Developer's covenants set forth herein both for and in its own right and also for the purposes of protecting the interests of the community. All covenants of Developer, without regard to technical classification or designation, shall be binding for the benefit of City and such covenants shall run in favor of City for the entire period during which such covenants shall be in force and effect. In the event of any breach of any covenant 0 WE contained in this Agreement, the City may maintain any action at law or suit in equity or any other proper proceeding to enjoin, abate or remedy such breach of agreement or covenant. h. Assipnnrent. Developer's rights and obligations set forth in this Agreement shall be transferable and assignable to any subsequent fee owner of all or any portion of the Property without the need for Developer to obtain any prior City approval or consent; provided, however, that at the time of any such transfer or assignment of Developer's fee interest in all or any portion of the Property Developer shall (i) notify City in writing of the transfer/assignment and (ii) deliver to City an assignment and assumption agreement executed by Developer and its transferee/assignee pursuant to which Developer's transferee/assignee assumes all of Developer's remaining executory obligations set forth herein with respect to the Property or the portion thereof so transferred. The City Attorney shall have the authority on behalf of City to approve the form and content of any such assignment and assumption agreement. After the date that such transfer/assignment occurs and the fully executed assignment and assumption agreement in the form approved by the City Attorney has been delivered to City, the transferor/assignor shall be released from all liabilities and obligations hereunder. As used in this Agreement, the term "Developer" shall be deemed to include any such transferee/assignee after the date such transfer/assignment occurs. i. Construction. The rule of strict construction does not apply to this Agreement. This Agreement shall be given a reasonable construction so that the intention of the Parties is carried out. j. Counterparts. This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. k. Non -Waiver. No delay or omission by either Party in exercising any right or power accruing upon the compliance or failure of performance by the other Party under the provisions of this Agreement shall impair any such right or power or be construed to be a waiver thereof. A waiver by one Party of a breach or failure of performance by the other Party of any of the covenants, conditions, or agreements hereof to be performed by such other Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions, or conditions herein. 1. Goveruim, Law. This Agreement shall be governed by the laws of the State of California. Any legal action brought under this Restriction must be instituted in the Superior Court of the County of Los Angeles, State of California, or in the Federal District Court in the Central District of California in Los Angeles County. [SIGNATURES ON FOLLOWING PAGE] 10 91 IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the date first written above. "CITY" CITY OF EL SEGUNDO, a public b .d , corp and politic By: Greg Ca� tet C' 6utia ,o, A EST: Tracy Weaver, ity Clerk APPROVED AS TO FORM: Lfor Mark D. Hensley, City tt, rney 11 "DEVELOPER" D.R. HORTON CA2, INC. APPROVED AS TO FORM: Developer's Counsel 'A CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT CIVIL CODE § 1189 r�2��. r. —rrr�Fr��=r. r �r sr r rry �cMcccrrt �rrtc� n- ter.-.� - A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of Los Angeles On October 16, 2018 before me, Date personally appeared Estella Cruz, a Notary Public Here Insert Name and Title of the Officer Greg Carpenter Name(s) of Signer(s) who proved to me on the basis of satisfactory evidence to be�persorl(* whose name �s aca. s scribed to the within instrument and ackno ledged to me th/sl�e�tku� executed the same in his/ eal4aiF authorized capacitylies�, and that is taerfttjeir signature(*on the instrument the persoR(s); or the entity upon behalf of which the persor ed, executed the instrument. ESTELLA CRUZ Commission # 2086983 Notary Public - California z Los Angeles County I Comm. Expires Nov 17, 2018 rw'w4 Place Notary Seal Above certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature ` e-1 S re of Notary Public OPTIONAL Though this section is optional, completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Document Date: Numt:5'e_r of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name:Signer's Name: ❑ Corporate Officer — Title(s): / ❑ Corporate Officer — Title(s): ❑ Partner — El Limited ❑Gen ❑Partner — ❑Limited ❑General ❑ Individual ❑ Attorn Mai ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ rdian or Conservator ❑ Trustee ❑ Guardian or Conservator ❑ Other: ❑ Other: Signer Is Re senting: Signer Is Representing: ,.vsys�� t:�t.S:t:.u�.�:sh:�t:�:3n:3�t;�,:,iK.iet:See:�tsn:v,.ve.��-t'.4.r:�.:+�c:�e.•set.3:n:�ri.�,:5:�•r.-1�Ax.:s'�:7rJyew�evseh.,rn'r`yislc✓r�:sx:�t�.s�w�t:, 93 IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the date first written above. "CITY" CITY OF EL SEGUNDO, a public body, corporate and politic M Greg Carpenter, City Manager EST: NTraav City Clerk APPROVED AS TO FORM: Mark D. Hensley, City Attorney II "DEVELOPER"�' D.R. HORTON C _, IN . By: na an R. Srryiti, .P. and Pr sident of the Division APPROVED AS TO FORM: Developer's Counsel A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA COUNTY OF RIVFsRSIDE On October 15, 2018 , before me, Bianca Cervantes , Notary Public, personally appeared Jonathan. R. Smith who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) islare subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under penalty of perjury under the laws oft egoing paragraph is true and correct. 00BIANCA CERVANTES COmmllslon. N 2118066 x Notary Public - oillto(n a WITNESS my hand and official seal. x Los Angeles County My Comm. Expires Apr 1,12020 Signature YA" (Seal} 95 IN WITNESS WHEREOF, the Parties have executed this Agreement to be effective as of the date first written above. "CITY" CITY OF EL SEGUNDO, a public body, corporate and politic By: Greg Carpenter, City Manager ATTEST: Tracy Weaver, City Clerk APPROVED AS TO FORM: Mark D. Hensley, City Attorney 11 "DEVELOPER" D.R. HORTON CA2, INC. APPROVED De'veloper's Counsel 0 EXHIBIT "A" LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of Los Angeles, City of El Segundo, and is described as follows: Module 1, Module 2, Module 3, Module 4, Module 5 and Module 6 as shown on that certain Condominium Plan for Waypointe recorded March 5, 2018 as Document No. 20180213492 in the Office of the County Recorder of Los Angeles County, California, located within Lot 25 of Tract No. 71582, in the City of El Segundo, County of Los Angeles, State of California, as per Map recorded in Book 1398, at Page 82 through 85, inclusive, of Maps, in the Office of the County Recorder of said County. 97 Recording Requested By And When Recorded Mail To: City of El Segundo 350 Main Street El Segundo, California 90245 Attention: City Manager EXHIBIT "B" Space Above for Recorder's Use (This document is exempt from the payment of a recording fee pursuant to Government Code Section 6103 and Government Code Section 273830) TERMINATION AND RELEASE OF AFFORDABLE HOUSING AGREEMENT This TERMINATION AND RELEASE OF AFFORDABLE HOUSING AGREEMENT (the "Termination and Release") is being executed by and between D.R. HORTON CA2, INC., a California corporation (collectively, "Developer"), in favor of the CITY OF EL SEGUNDO, a California municipal corporation ("City"). RECITALS: A. Developer is the owner of that certain real property consisting of approximately 5.65 acres of land area that is located at 540 East Imperial Avenue in the City of El Segundo, County of Los Angeles, State of California, and that is more particularly described in the legal description attached hereto as Attachment "A" (the "Property"). B. On . City and Developer entered into an Affordable Housing Agreement and Covenant Concerning Use, Sale and Resale of Residential Units, which was recorded on the Property (the "Agreement," L.A. County Registrar -Recorder's Number C. Pursuant to Section 5 of the Agreement, City has covenanted to cooperate with Developer in promptly executing and causing to be recorded against certain lots on the Property an original of this Termination and Release. D. The lot described in Attachment "B" has been purchased, and the purchaser of such lot on the Property has entered into and recorded an Affordable Housing Resale Restriction with the City. E. Developer and City desire to record this Termination and Release against the lot identified in Attachment `B" hereto to confirm that the Agreement has no further applicability thereto. tLGREFMEN T: Based upon the foregoing Recitals, which are incorporated herein by this reference, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by both parties, Developer and City agree as follows: I . From and after the date that this Termination and Release is recorded, the lot within the Property listed on Attachment "B" attached hereto shall not be bound or burdened by any of the provisions set forth or referred to in the Agreement. 2. City shall cooperate in executing any further or additional documents, in recordable form as necessary, as may be reasonably requested by any existing or prospective owner or holder of a mortgage or deed of trust of, in, or to the lot referred to in Attachment "B" to this Termination and Release to confirm said Termination and Release. The form of any such additional documents shall be prepared by such existing or prospective owner or holder at no cost to City. Dated: 20 "CITY" CITY OF EL SEGUNDO, a municipal corporation Its: "DEVELOPER" D.R. HORTON CA2, INC. STATE OF CALIFORNIA ) ss COUNTY OF ) On before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] STATE OF CALIFORNIA ) ) ss COUNTY OF ) On before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] Me STATE OF CALIFORNIA ) ) ss COUNTY OF ) On , before me, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. Notary Public [SEAL] 101 ATTACHMENT "A" TO EXHIBIT "B" LEGAL DESCRIPTION The land referred to herein is situated in the State of California, County of Los Angeles, City of El Segundo, and is described as follows: Module 1, Module 2, Module 3, Module 4, Module 5 and Module 6 as shown on that certain Condominium Plan for Waypointe recorded March 5, 2018 as Document No. 20180213492 in the Office of the County Recorder of Los Angeles County, California, located within Lot 25 of Tract No. 71582, in the City of El Segundo, County of Los Angeles, State of California, as per Map recorded in Book 1398, at Page 82 through 85, inclusive, of Maps, in the Office of the County Recorder of said County. 102 ATTACHMENT "B" TO EXHIBIT "B" LEGAL DESCRIPTION OF LOT The land referred to herein is situated in the State of California, County of Los Angeles, City of El Segundo, and is described as follows: I -T -9_k) (J1t s.�r_#4z(11 103 EXHIBIT "C" AFFORDABLE HOUSING RESALE RESTRICTION [Attached] 104 Recording Requested By And When Recorded Mail To: City of El Segundo 350 Main Street El Segundo, California 90245 Attention: City Manager Space Above for Recorder's Use (This document is exempt from the payment of a recording fee pursuant to Goverment Code Section 6103 and Government Code Section 273830) AFFORDABLE HOUSING RESALE RESTRICTION (Conditions, Covenants, and Restrictions Affecting Real Property and the Resale, Ownership, Occupancy, Maintenance, and Other Matters Related to Real Property) This AFFORDABLE HOUSING RESALE RESTRICTION ("Restriction") is made as of ,20 —, 20_, by ("Homebuyer") in favor of the CITY OF EL SEGUNDO, a California municipal corporation ("City"). RECITALS A. Homebuyer has purchased a condominium located at , El Segundo, California, as such real property is more particularly described in Exhibit A attached hereto and incorporated herein ("Property"). B. Homebuyer and City have entered into that certain Homebuyer Loan Agreement (Low Income Onsite Units) ("Agreement") dated of even date herewith, which is incorporated herein by reference and a copy of which is on file with City at its offices and is a public record. Pursuant to the Agreement, City has agreed to cause the Property to be sold to Homebuyer at a Low Income Affordable Housing Cost, which includes financial assistance to Homebuyer ("City Loan") and Homebuyer has agreed to subject the Property to certain conditions, covenants and restrictions. Capitalized terms used herein and not otherwise defined shall have the same meaning as set forth in the Agreement. C. Homebuyer and City desire and intend to restrict the Property and the improvements thereon in accordance with this Restriction to preserve its value for the benefit of Homebuyer, its successors and the surrounding neighborhood. D. Homebuyer is a Low Income Household under the Agreement, as that tern is defined in this Restriction. E. Homebuyer has represented to City that Homebuyer and Homebuyer's household intend to reside in the Property as Homebuyer's principal residence at all times during Homebuyer's ownership of the Property. AFFORDABLE HOUSING RESALE RESTRICTION Page 1 of 16 105 NOW, THEREFORE, for good and valuable consideration, the parties agree as follows: 1. Definitions. "Actual Sales Price" shall mean the unrestricted market price (or appraised fair market value, if an appraisal is necessary) of the Property at the time of sale thereof to Homebuyer; and, upon the resale of the Property the Actual Sales Price shall be the unrestricted market price (or appraised fair market value, if an appraisal is necessary) of the Property at the time of resale thereof to the successive homebuyer. "Affordable Housing Cost" is defined as follows: Each eligible and qualified Homebuyer shall be a Low Income Household with actual household income at the time of purchase of the Property being not more than eighty percent (80%) of AMI for Los Angeles County. "Affordable Housing Cost" for purchase of the Property by a Low Income Household (and all successors thereto during each 20 -year Affordability Period) shall be as defined in H&S Code Section 50052.5 (or its successor statute) and the Regulations, including but not limited to the provisions of 25 CCR Section 6920, taking into consideration the cost of insurance, if any, homeowners association fees (HOA), utilities and estimated annual maintenance costs in addition to the First Lien mortgage payment; provided, however. that for each Low Income Household, Affordable Housing Cost shall mean thirty percent (30%) of seventy five percent (75%) of AMI at a presumed household size appropriate for the unit notwithstanding the references in subsection (b) of Section 50052.5 to thirty percent (30%) of seventy percent (70%) and with a liquid asset limitation of not more than $25,000 or otherwise set in the Program or by the City Manager. Pursuant to Section 50052.5, for two bedroom units the presumed household size for purposes of this Restriction is three persons, and for three bedroom units the presumed household size for purposes of this Restriction is four persons. For the Affordability Period, the City Loan Amount will not become due and payable if Homebuyer sells or otherwise conveys the Property to a Low Income Household at an Affordable Housing Cost ("Eligible Persons or Families"), Homebuyer is not in default (either Ownership Default and/or Maintenance Default) of the Agreement, and Buyer enters into its own new Homebuyer Loan Agreement with City pursuant to the Program. Upon the effective date of such resale, the selling Homebuyer shall no longer be liable for any further obligations under the Agreement or the Note that accrue after the date of such resale, except that Homebuyer shall be obligated to pay the Contingent Equity Participation Amount as set forth in Section 13 hereof and the Housing Trust Fund Contribution as set forth in Section 14 hereof. Notwithstanding any other provision of the Note or the Agreement, the Contingent Equity Participation Amount shall become due and payable if Homebuyer sells or otherwise conveys the Property to an Eligible Person or Family during the Affordability Period. In order to verify a prospective Buyer's status as a Low Income Household, Homebuyer shall submit or cause a proposed Buyer to submit to City the identity of Buyer and adequate information evidencing the income and household size of Buyer. Said income information shall be submitted together with the notice of proposed sale in accordance with Section 2 of the Agreement not less than thirty (30) days prior to the opening of escrow for the proposed sale and shall include original or true copies of pay stubs, income tax records or other financial documents in order that City may determine and verify the household income of the proposed Buyer to assess whether the proposed Buyer is a Low Income Household, calculate the Effective Sales Price and assess Buyer's eligibility to enter into its own Homebuyer Loan Agreement for a City Loan to buy the Property. If City is unable to verify the AFFORDABLE HOUSING RESALE RESTRICTION Page 2 of 16 106 proposed Buyer's income as provided in the Agreement prior to the proposed sale, then the proposed Buyer's income shall be deemed to exceed the maximum allowable Low Income Household income limit for Eligible Persons or Families. "Affordable Housing Subsidy" shall mean the difference between the Actual Sales Price and the Effective Sales Price, and which amount shall be the "City Loan Amount" upon purchase of the Property by Homebuyer pursuant to this Agreement (which along with the Contingent Equity Participation Amount and Housing Trust Fund Contribution will constitute the "Note Amount" under the City Loan Promissory Note.) An example of the calculation of a City Loan Amount as of November 1, 2017 for a three bedroom unit is as follows: "Actual Sales Price" (assumed fair market value) $925,000 "Effective Sales Price" (based upon 30% 75% AMI Los Angeles $198.100 County based on First Lien mortgage at 6% interest rate and a 5% downpayment) Affordable Housing Subsidy (City Loan Amount) $726,900 "Affordability Period" means that period of time commencing upon the Date of this Restriction and terminating on the twentieth (20") anniversary of such date. "City" means the City of El Segundo, California, a California municipal corporation, and City's successors and assigns. "County" means the County of Los Angeles, California. "Date of this Restriction" means the date in the first paragraph of this Restriction. "Default" means the failure of a party to perform any action or covenant required by this Restriction within the time periods provided herein following notice and opportunity to cure. The term default also includes an Ownership Default and a Maintenance Default as more fully defined and described herein. Notwithstanding the foregoing, for purposes of acceleration of the City Loan, payment of the Note Amount (including the Contingent Equity Participation Amount and Housing Trust Fund Contribution) or initiation of foreclosure proceedings, there shall be a distinction between the types of default hereunder, including an "Ownership Default" and a "Maintenance Default". The term "Ownership Default" means the failure of Homebuyer to perform any action or covenant required by this Restriction related to ownership, owner -occupancy, lien priority, and restrictions on sale and resale of the Property under this Restriction and the City Deed of Trust subject to notice and opportunity to cure provisions set forth herein. A default of any obligation secured by the First Lien shall be a cross -default and also constitute an Ownership Default. The term "Maintenance Default" means the failure of Homebuyer to perform any action or covenant required by this Restriction relating to a "Maintenance Deficiency", including the ongoing upkeep, maintenance, and use of the Property in decent, safe, sanitary, clean, and neighborly manner subject to notice and opportunity to cure provisions set forth herein (and expressly excluding an Ownership Default). "Effective Sales Price" shall mean the purchase amount reflected by a monthly payment that is considered to be an "Affordable Housing Cost" based on a formula that is a total monthly housing cost amount of 30% of 75% of AMI for Los Angeles County based on the presumed household size AFFORDABLE HOUSING RESALE RESTRICTION Page 3 of 16 107 for the Property with consideration of the down payment. The Effective Sales Price is determined per H&S Section 50052.5 and 25 CCR 6910, et seq., which applies a formula rather than actual income and applies to a presumed household size based on number of bedrooms in the housing unit. "First Lien" means the lien of the institution making the purchase money mortgage loan to Homebuyer for the purchase of the Property. "Homebuyer" means the person or persons set forth in the first paragraph of this Restriction, and their successors and assigns. "Legal Description" means the legal description of the Property which is attached hereto as Exhibit A and incorporated herein. "Low Income" or "Lower Income Households" means a lower income household as defined in H&S Code Sections 50093 and 50079.5 and shall include those person(s) or households with total combined gross household income that does not exceed eighty percent (80%) of AMI. Income limits for each and all California counties are published by the California Department of Housing and Community Development and are adjusted annually. Gross household income shall be calculated in accordance with Section 6914 of Title 25 of the Regulations; provided, however, that each prospective Buyer shall be subject to a liquid asset limitation of $25,000 or as otherwise established by the Program or approved by the City Manager. The term "Low Income Household" shall also include very low income households, as defined in H&S Code Section 50105, and extremely low income households, as defined in H&S Code Section 50106. (a) Determination of Liquid Assets. In determining the foregoing, liquid assets include assets such as, but not limited to: (i) Cash on hand including funds in safety deposit boxes or held by others including family members; (ii) Cash deposited in bank accounts, savings accounts, money market fund accounts, and similar type accounts; (iii) Value of mutual funds, stocks, bonds, savings certificates, and other investment accounts; (iv) Interest and dividends; (v) Value of trusts available to the household; (vi) Government disbursements such as social security payments; (vii) Any payments or disbursements such as from annuities, retirement accounts, inheritances, lottery winnings, capital gains, insurance settlements, etc.; (viii) Lump sum receipts such as from inheritances, lottery winnings, capital gains, insurance settlements, etc; and the applicant. (ix) Cash gifts to the applicant or the proceeds from gifts in lieu of cash to AFFORDABLE HOUSING RESALE RESTRICTION Page 4 of 16 108 Excluded from liquid assets are: Monies in retirement accounts, such as the principal and/or interest of annuities, IRAs, 401(k) or Keogh plans, that are not periodically disbursed; orovided, however, that any hardship or other non -periodic payments, disbursements, or withdrawals, including in the form of a loan, from any of the foregoing type accounts, or any other accounts, permitted to be used for the purchase of housing shall be considered a liquid asset. "Notice of Intent to Transfer" means the Notice of Intent to Transfer attached hereto as Exhibit B-1 and incorporated herein by reference. "Notice of Proposed Transfer" means the Notice of Proposed Transfer attached hereto as Exhibit B-2 and incorporated herein by reference. "Permitted Transfer" means any Transfer which is permitted pursuant to Section 4 hereof. "Prohibited Transfer" means any Transfer which is not permitted pursuant to Section 4 hereof. "Property" means that certain real property located at the street address set forth in Recital A and legally described in the Legal Description. "Purchase Agreement" means that certain agreement pursuant to which Homebuyer has agreed to purchase the Property from the Developer. "Reimbursement Agreement" means the Reimbursement Agreement to be executed by Homebuyer in favor of City, in the form attached hereto as Exhibit D and incorporated herein. "Reimbursement Agreement Deed of Trust" means the deed of trust to be executed by Homebuyer in favor of City, in the form attached to the Reimbursement Agreement as Exhibit B and incorporated herein. "Request forApproval of Proposed Transferee" means the Request for Approval of Proposed Transferee attached hereto as Exhibit B and incorporated herein. "Request for Notice" means the Request for Notice of Default attached hereto as Exhibit C and incorporated herein. "Restriction" means this Affordable Housing Resale Restriction. "Sales Price" means the sum to be paid by a Transferee for the Transfer of the Property. "Transfer" means any sale, assignment, conveyance, lease or transfer, voluntary or involuntary, of any interest in the Property. Without limiting the generality of the foregoing, a Transfer shall include: (i) a transfer by devise, inheritance or intestacy to a party who does not meet the definition of a Low Income Household; (ii) a life estate; (iii) creation of a joint tenancy interest; (iv) a gift of all or any portion of the Property; or (v) any voluntary conveyance of the Property. Transfer shall not include transfer to a spouse in a dissolution proceeding. "Transferee" means any natural person or entity who obtains ownership or possessory rights in the Property pursuant to a Transfer. AFFORDABLE HOUSING RESALE RESTRICTION Page 5 of 16 109 2. Restrictions on Sales of Property. Homebuyer covenants and agrees that during the Affordability Period, each subsequent resale of the Property by the then -owner thereof shall be to a Low Income Household at an Affordable Housing Cost, except as set forth herein. 3. Homebuyer's Representations and Warranties as to the Sale of the Property to Homebuyer. Homebuyer represents and warrants to City that the financial and other information which Homebuyer has provided to City with respect to Homebuyer's income and the purchase price of the Property was true and correct at the time such information was provided, and remains true and correct as of the Date of this Restriction. 4. Permitted Sales of the Property. City hereby permits sales of the Property in accordance with the procedures set forth in this Section 4, to proposed Transferees who are Low Income Households and are approved in accordance with this Section 4, provided the Sales Price does not exceed an Affordable Housing Cost to such proposed Transferee ("Permitted Transfers"), except as set forth herein. 4.1 First Option. During the Affordability Period, Homebuyer (or Homebuyer's heirs following the death of Homebuyer) shall notify City, not less than thirty (30) days prior to listing the Property for sale through the multiple listing service or otherwise offering the Property for sale, of Homebuyer's intention to offer for sale and sell the Property at an Affordable Housing Cost. Such notice shall be provided by delivering a Notice of Intent to Transfer to City. In such event of a proposed sale, City shall first be given the right to purchase the Property at the price and terms determined by Homebuyer but for not more than an Affordable Housing Cost purchase price as determined at such time of proposed sale. City shall have such right and option ("First Option") for thirty (30) days after City receives notice from Homebuyer, after which, if not exercised, such First Option shall temunate. 4.2 Second Option. If City declines to exercise the First Option and Homebuyer is unable to locate an Eligible Person or Family to purchase the Property after offering the Property for sale for a reasonable period (i.e. the Property is placed in a multiple listing for not less than six (6) months, or a shorter period in the event of Homebuyer's demonstrated hardship approved by City in City's sole and absolute discretion (including, for example and without limitation, transfer of job location, loss of job, health issues or other unexpected major expenses), Homebuyer may offer the Property to City for purchase again for not more than an Affordable Housing Cost. City shall have such right and option ("Second Option") for sixty (60) days after City receives notice from Homebuyer, after which, if not exercised, such Second Option shall terminate. If City declines to exercise the Second Option, Homebuyer may sell the Property to any purchaser, provided that Homebuyer shall pay to City the City Loan Amount, the Contingent Equity Participation Amount, and the Housing Trust Fund Contribution upon sale, and the Restriction shall be released. 4.3 Transfer Procedure. In the event that Homebuyer delivers a Notice of Intent to Transfer to City, the following procedure shall apply: (a) Notice to City. Homebuyer shall send the Notice of Intent to Transfer to City at the address set forth in Section 25 hereof, thereby triggering the First Option. (b) Qualification of Proposed Transferee. In the event that City declines to exercise the First Option, Homebuyer shall send the Notice of Proposed Transfer to City at the address set forth in Section 25 hereof in order to provide City with sufficient information, including without limitation, a certification as to the income and family size of the proposed Transferee, for City AFFORDABLE HOUSING RESALE RESTRICTION Page 6 of 16 110 to determine if the proposed Transferee is a Low Income Household and the purchase price is at an Affordable Housing Cost. In the event that City declines to exercise the First Option and Homebuyer is unable to locate an Eligible Person or Family to purchase the Property after offering the Property for sale on the terms set forth in Section 4.2 hereof, Homebuyer shall send a second Notice of Intent to Transfer to City at the address set forth in Section 25 hereof, thereby triggering the Second Option. If City declines to exercise the Second Option, the proposed Transferee shall provide City with such information as City may reasonably request. (c) Certificates from Parties. The owner and proposed Transferee each shall certify in writing, in a form acceptable to City, that the Transfer shall be closed in accordance with, and only with, the terms of the sales contract and other documents submitted to and approved by City and that all consideration delivered by the proposed Transferee to owner has been fully disclosed to City. The written certificate shall also include a provision that in the event a Transfer is made in violation of the terms of this Restriction or false or misleading statements are made in any documents or certificate submitted to City for its approval of the Transfer, City shall have the right to file an action at law or in equity to make the parties terminate and/or rescind the sales contract and/or declare the sale void notwithstanding the fact that the Transfer may have closed and become final as between owner and its transferee. (d) Written Consent of City Required Before Transfer. During the Affordability Period, the Property, and any interest therein, shall not be conveyed by any Transfer except with the express written consent of City, which consent shall be given only if the Transfer is in accordance with the provisions of this Section 4. This provision shall not prohibit the encumbering of title for the sole purpose of securing financing of the purchase price of the Properly. (e) Notice of Prohibited Transfer. Within twenty (20) days after receiving notification of a proposed Transfer in accordance with Section 4.3(a), City shall determine and give notice to Homebuyer as to whether the proposed Transfer is a Permitted Transfer or Prohibited Transfer. In the event that the proposed Transfer is a Prohibited Transfer, such notice to Homebuyer shall specify the nature of the Prohibited Transfer. If the violation is not corrected to the satisfaction of City within ten (10) days after the date of the notice, or within such further time as City determines is necessary to correct the violation, City may declare a default under this Restriction. Upon the declaration of a default, City may apply to a court of competent jurisdiction for specific performance of this Restriction, for an injunction prohibiting a proposed sale or Transfer in violation of this Restriction, for a declaration that the Prohibited Transfer is void, or for any such other relief as may be appropriate. (f) Delivery of Documents. Upon the close of the proposed Transfer, Homebuyer and Transferee, as applicable, shall provide City with a copy of the final sales contract, settlement statement, escrow instructions, all certificates required by this Section 4 and any other documents which City may request. Encumbrances. (a) Subordination. Except as provided otherwise herein, the provisions of the Agreement, this Restriction, and the City Deed of Trust and Rider, the obligations herein and therein, shall be subordinate only to the First Lien on the Property held by Lender and, if applicable, Other Loan(s) as approved by the City Manager, including lien instruments that secure other homebuyer purchase money and/or down payment assistance, including without limitation Federal, State of AFFORDABLE HOUSING RESALE RESTRICTION Page 7 of 16 111 California, or local affordable housing programs such as Housing Enabled by Local Partnerships (HELP), Building Equity and Growth in Neighborhoods (BEGIN), American Dream Down Initiative (ADDI), CalHome Program, and CaIHFA mortgage funding, which Iiens shall not impair the rights of Lender, or Lender's assignee or successor in interest or City, if applicable, to exercise their remedies under the First Lien in the event of default under the First Lien by Homebuyer. Such remedies under the First Lien include the right of foreclosure or acceptance of a deed or assignment in lieu of foreclosure. If title to the Property is transferred by foreclosure or acceptance of a deed in lieu of foreclosure, or assignment of the First Lien to the Secretary of the Department of Housing and Urban Housing Development (pursuant to Federal programs or regulations), this Restriction, the Reimbursement Agreement Deed of Trust, the Agreement and the City Deed of Trust shall be automatically terminated and shall have no further effect as to the Property or any transferee thereafter. The covenants of this Restriction, the Reimbursement Agreement Deed of Trust and the Agreement shall run with the land during the Affordability Period only and shall be subordinate only to the First Lien for the Property, and, if applicable, Other Loans approved by the City Manager, and shall be secured by the City Deed of Trust securing the City Loan, and other financing documents which secure the financing approved by City pursuant to the Agreement, including but not limited to the Reimbursement Agreement Deed of Trust. The City Manager, or his/her designee, is hereby authorized to execute such subordination agreement(s) and/or such other document(s) as may be reasonably necessary to evidence such subordination, provided that such subordination agreement(s) contain(s) written commitments that City Manager, or his/her designee, finds are reasonably designed to protect City's investment in the event of default, such as any of the following: (a) a right of City to cure a default on the loan prior to foreclosure; (b) a right of City to negotiate with the lender after notice of default from the lender and prior to foreclosure; (c) an agreement that if prior to foreclosure of the loan, City takes title to the Property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of the transfer of title to City; and (d) a right of City to purchase the Property from Homebuyer at any time after a default on the loan. City staff reserves the right to request all documents such as an appraisal and disclosure statement which it deems necessary to review subordination requests. In no event shall this Restriction, the Reimbursement Agreement Deed of Trust, the Agreement, and the City Deed of Trust, be subordinate to any First Lien on the Property securing a loan with provisions which allow negative amortization, or to refinancing of the lien of the First Lien: (i) for a loan amount in excess of the sum of (A) the original loan balance secured by the First Lien and (B) loan closing costs or (ii) for purposes other than (A) funding improvements to the Property, (B) enabling Homebuyer to deal with hardships approved by City in City's sole and absolute discretion, including, for example and without limitation, transfer of job location, loss of job, health issues, the death of an occupant of the Property or other unexpected major expenses, or (C) lowering the interest rate with respect to the loan secured by the First Lien without withdrawal of cash therefrom. (b) Request for Notice of Default. City may cause a Request for Notice to be recorded on the Property subsequent to the recordation of the First Lien deed of trust or mortgage requesting a statutory notice of default as set forth in California Civil Code Section 2924b. A form of a Request for Notice is attached hereto as Exhibit C and incorporated herein. (c) Further Encumbrances. Homebuyer agrees that it shall not record or cause the recordation of any deed of trust ("Further Encumbrance") against the Property except as permitted under the Homebuyer Loan Agreement. AFFORDABLE HOUSING RESALE RESTRICTION Page 8 of 16 112 6. Reimbursement Agreement. Homebuyer and City shall enter into a Reimbursement Agreement, substantially in the form attached hereto as Exhibit D and incorporated herein, which provides that City may make payments to cure a default or delinquency on the First Lien, on the condition that Homebuyer agrees to reimburse City for any payments made to cure a default or delinquency on the First Lien. Homebuyer's repayment obligations pursuant to the Reimbursement Agreement shall be secured by a subordinate Reimbursement Agreement Deed of Trust which encumbers the Property. In the event that Homebuyer refinances the First Lien, Homebuyer and City shall enter into an amendment to the Reimbursement Agreement or a new Reimbursement Agreement. The Transferee of the Property and City shall also enter into a new Reimbursement Agreement upon the Transfer of the Property. City shall execute such subordination agreements as may be reasonably requested by the holder of a First Lien. 7. Uses. Homebuyer covenants and agrees to devote, use and maintain the Property in accordance with this Restriction. All uses conducted on the Property, including, without limitation, all activities undertaken by Homebuyer pursuant to this Restriction, shall conform to all applicable provisions of the El Segundo Municipal Code, and the recorded documents pertaining to and running with the Property. 8. Nondiscrimination Covenants. Homebuyer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property, nor shall Homebuyer itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property. The foregoing covenants shall run with the land. 10. Maintenance of Property. In implementation of Section 6 of the Agreement and in furtherance thereof, Homebuyer shall maintain the improvements and landscaping on the Property in a manner consistent with community standards which will uphold the value of the Property, in accordance with the El Segundo Municipal Code. Homebuyer also agrees to comply with all applicable Federal, state and local laws. (a) Exterior Maintenance. Except as to be maintained by the homeowners' association, as applicable, all exterior, painted surfaces of any structures located on the Property shall be maintained at all times in a clean and good condition. Any such defacing marks shall be cleaned or removed within a reasonable period of time. (b) Front and Side Exteriors. Except as to be maintained by the homeowners' association, as applicable, Homebuyer shall at all times maintain the front exterior, any visible side exteriors, and yards, if any, in a clean, safe and presentable manner. (c) Graffiti Removal. All graffiti and defacement of any type, including but not limited to marks, words and pictures, shall be promptly removed from the Property within two (2) days of the time they were made and any necessary painting or repair completed in a timely and expeditious manner after notice thereof, whichever is less. (d) No Nuisance. Homebuyer shall not maintain, cause to be maintained, or allow to be maintained on or about the Property any public or private nuisance, including without AFFORDABLE HOUSING RESALE RESTRICTION Page 9 of 16 113 limitation, the conduct of criminal activities set forth in the nuisance abatement provisions of the Uniform Controlled Substances Act (Health & Safety Code Sections 11570, et seq.) or the Street Terrorism Enforcement and Prevention Act (Penal Code Sections 186.22 et seq.), or any successor statute or law. 11. Occupancy Standards. The Property shall be used as the principal personal residence of Homebuyer and Homebuyer's household and for no other purpose. Homebuyer shall not enter into an agreement for the rental or lease of the Property or any part or portion thereof. Homebuyer may request a temporary waiver of the foregoing requirement in the event of extreme hardship requiring Homebuyer to move to another geographical area or to less expensive housing, including, for example and without limitation, transfer of job location, loss of job, health issues, the death of an occupant of the Property or unexpected major expenses. City may: (a) approve or disapprove such request in its sole discretion; (b) require as a condition of approval that Homebuyer only rent the Property to Eligible Persons and Families at a maximum rent limit (as defined in Section 50053 of the California Health & Safety Code); and/or (c) place other reasonable conditions on such temporary authorization for non -owner occupancy. City acknowledges that the Housing Quality Standard (HQS) occupancy standard (as defined under Federal law) is occupancy by two (2) persons per living and sleeping area. Homebuyer shall, upon demand by City, submit to City an affidavit of occupancy verifying Homebuyer's compliance with this Section 11. Such affidavit may be required by City on an annual basis or as otherwise reasonably requested by City from Homebuyer. 12. Effect of Violation of the Terms and Provisions of this Restriction. (a) In General. The covenants established in this Restriction shall, without regard to technical classification and designation, be binding for the benefit and in favor of City, its successors and assigns, as to those covenants which are for its benefit. The covenants contained in this Restriction shall remain in effect for the Affordability Period. The covenants against discrimination shall remain in effect in perpetuity. City is deemed the beneficiary of the terms and provisions of this Restriction and of the covenants running with the land, for and in its own rights and for the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit this Restriction and the covenants running with the land have been provided. This Restriction and the covenants herein shall run in favor of City, without regard to whether City has been, remains or is an owner of any land or interest therein in the Property. City shall have the right, if the Restriction or covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other proper proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Restriction and covenants may be entitled. (b) Acceleration. The whole of the Note Amount, the Contingent Equity Participation Amount, as described in Section 13 hereof, the Housing Trust Fund Contribution and all other payments due under the City Loan shall become due and immediately payable to City by Homebuyer upon the occurrence of any one of the following events of acceleration: (i) Homebuyer makes a Prohibited Transfer of title to or any interest in the Property in violation of this Restriction; (ii) Homebuyer refinances the First Lien or any other lien permitted under the Homebuyer Loan Agreement to which the City Loan is subordinate: (A) for a loan amount in excess of the sum of (I) the original loan balance secured by the First Lien and (II) loan closing costs or (B) for purposes other than (I) funding improvements to the Property, (II) enabling Homebuyer to deal AFFORDABLE HOUSING RESALE RESTRICTION Page 10 of 16 114 with hardships approved by City in City's sole and absolute discretion, including, for example and without limitation, transfer of job location, loss of job, health issues, the death of an occupant of the Property or other unexpected major expenses, or (III) lowering the interest rate with respect to the loan secured by the First Lien without withdrawal of cash therefrom; (iii) Homebuyer fails to occupy the Property as Homebuyer's principal residence pursuant to Section 11 hereof or is in default of any other obligation under this Restriction or the Agreement; or (iv) Homebuyer has an Ownership Default violating any affordable housing terms or provisions of this Restriction. At the request of Homebuyer, and for a specific occasion, City may, in its sole and absolute discretion, in writing waive the requirements of this Section 12(b) and defer repayment and/or extend the term of the Note. Any waiver or deferment shall be on a case-by-case basis and subject to the conditions and timing directed by the City Manager and no future rights for waiver or deferment shall arise or be implied. Notwithstanding the foregoing, Homebuyer may, upon prior written approval by City, refinance the First Lien for a loan amount equal to or less than the sum of the original loan balance secured by the First Lien and loan closing costs for the purpose of financing improvements to the Property, enabling Homebuyer to deal with hardships, including, for example and without limitation, transfer of job location, loss of job, health issues, the death of an occupant of the Property or other unexpected major expenses or lowering the interest rate with respect to the First Lien without withdrawal of cash therefrom. 13. Contingent Equity Participation Amount. 13.1 Circumstances when Contingent Equity Participation Amount Due. (a) Unauthorized Sale of Property or Event of Acceleration. If (i) Homebuyer sells the Property to an Eligible Person or Family during the Affordability Period in conformity with Section 4 hereof and such Eligible Person or Family does not enter into its own Homebuyer Loan Agreement; or (ii) an Event of Acceleration occurs as described in Section 12(b) above, then the full Note Amount is due and payable and the Restriction shall not be released and Homebuyer shall pay to City the whole of the City Loan Amount, the Contingent Equity Participation Amount, as hereinafter described, and the Housing Trust Fund Contribution. (b) New Homebuyer Loan Agreement for Eligible Person or Family. If Homebuyer sells the Property to an Eligible Person or Family during the Affordability Period in conformity with Section 4 hereof and such Eligible Person or Family pursuant to the Program enters into its own Homebuyer Loan Agreement, then the City Loan Amount shall be forgiven and Homebuyer shall pay to City only the Contingent Equity Participation Amount and the Housing Trust Fund Contribution. 13.2 Calculation and Payment Due of Contingent Equity Participation Amount. The "Contingent Equity Participation Amount" means an amount equal to a 50% share of the equity appreciation of the Property less deductions for the original Homebuyer's down payment, pay down of principal, and amount payable or paid for the Housing Trust Fund Contribution. As used herein, the term "equity appreciation" shall mean the difference between the Effective Sales Price paid by Homebuyer and the new affordable Effective Sales Price for the prospective new Buyer pursuant AFFORDABLE HOUSING RESALE RESTRICTION Page 11 of 16 115 to its own Homebuyer Loan Agreement. If this calculation results in zero ($0) or a negative number, e.g., the new affordable Effective Sales Price is less than the prior affordable Effective Sales Price, then no Contingent Equity Participation Amount is due, but the City Loan Amount shall be reset for the prospective new Buyer pursuant to such Buyer's Homebuyer Loan Agreement. An example only of a Contingent Equity Participation Amount calculation is as follows: Three Bedroom Property resold New Effective Sales Price $388,250 Prior Effective Sales Price $321,730 Difference $ 66.520 Contribution (5% AMI) $ 3.326 Net Equity for Participation $ 63.194 50% of Equity if any $31,597 plus Housing Trust Fund Contrib. $3,326 Net Payment Due at Closing S 34,923 13.3 No Appreciation or Depreciation in Value of Property. Notwithstanding any other provision of this Restriction, if the Property has not appreciated or the value of the Property has depreciated (i.e., the new Effective Sales Price is less than prior/original Effective Sales Price) at a time when: (a) Homebuyer sells the Property to a qualified Low Income Household during the Affordability Period in conformity with Section 4 hereof; or (b) an Event of Acceleration occurs, then no Contingent Equity Participation Amount is due by Homebuyer to City. 13.4 Credit to Homebuyer for Cash Paid into Property. Notwithstanding the foregoing provisions of this Section 13, calculation of the Contingent Equity Participation Amount is subject to a superior right of Homebuyer to receive credit in calculation of the Effective Sales Price for money paid by Homebuyer at closing and post -acquisition during the term of Homebuyer's ownership of the Property for: (a) Homebuyer's down payment toward the Effective Sales Price; and (b) the principal pay down amount, if any, by Homebuyer on any loan secured by a First Lien on the Property; oroviced, however, that if Homebuyer sells the Property during the Affordability Period, Homebuyer shall not receive credit in calculation of the Effective Sales Price for upgrades or capital improvements that Homebuyer undertakes with respect to the Property, if any. 13.5 Determination of Actual Sales Price; Appraisal. (a) Upon Sale of the Property. In the event of: (i) a proposed sale of the Property to an Eligible Person or Family during the Affordability Period in conformity with the Program and Section 4 hereof; or (ii) a proposed sale of the Property by Homebuyer that does not conform to Section 4 hereof, and not less than thirty (30) days after City receives actual notice of the opening of escrow in connection therewith, City may elect to appoint a certified, independent appraiser to conduct an appraisal of the Property, at Homebuyer's expense, to assist City in determining if the proposed Actual Sales Price is at or near the fair market value of the Property at such time. If the Actual Sales Price is determined by the appraisal to be three percent (3%) or more below the fair market value of the Property as estimated in said appraisal, then the Actual Sales Price for purposes of determining the Contingent Equity Participation Amount shall be the fair market value of the Property established in said appraisal. (b) Upon Refivancing/Failure to Occupy/Default. In the event of refinancing, failure to occupy the Property in accordance with Section 11 hereof, or default or breach AFFORDABLE HOUSING RESALE RESTRICTION Page 12 of 16 116 of any provision of this Restriction that causes an Event of Acceleration and the Note Amount to become immediately due and payable, the "Effective Sales Price" for purposes of determining the Contingent Equity Participation Amount shall be calculated based on determination and calculation of an Affordable Housing Cost as of the time of such refinancing, failure to occupy, or default or breach of this Agreement. Amount. 13.6 Homebuyer's Acknowledgment of Contingent Equity Participation HOMEBUYER ACKNOWLEDGES AND AGREES THAT UPON: (A) SALE OR TRANSFER OF THE PROPERTY TO A QUALIFIED LOW INCOME HOUSEHOLD DURING THE AFFORDABILITY PERIOD IN CONFORMITY WITH SECTION 4 HEREOF; OR (B) SALE, TRANSFER OR REFINANCING OF THE PROPERTY THAT DOES NOT COMPLY WITH SECTION 4 HEREOF WHICH IS A DEFAULT AND CAUSES AN EVENT OF ACCELERATION, HOMEBUYER SHALL PAY TO CITY, IN ADDITION TO THE CITY LOAN AMOUNT, A CONTINGENT EQUITY PARTICIPATION AMOUNT EQUAL TO A PERCENTAGE SHARE OF THE APPRECIATION OF THE PROPERTY AS CALCULATED PURSUANT TO THIS SECTION 13. HOMEBUYER'S INITIALS: 14. Housing Trust Fund Contribution. Upon the closing of each and all escrows in connection with any subsequent sale of the Property (i.e., each sale after the initial sale) each Homebuyer, including the undersigned Homebuyer, shall pay an amount equal to five percent (5%) of AMI appropriate for the presumed family size as an administrative and monitoring contribution ("Housing Trust Fund Contribution"); provided, however, that the Housing Trust Fund Contribution shall not be due if no Contingent Equity Participation Amount is due under Section 13 hereof, e.g., the new affordable Effective Sales Price is less than the prior affordable Effective Sales Price. The Housing Trust Fund Contribution shall be payment to City for the ongoing administration of the Program and shall be a part of the Note Amount due from Homebuyer. (a) An example of calculation of a Housing Trust Fund Contribution is as follows and using 2016 AMI figures from the California Department of Housing and Community Development for a three bedroom unit with presumed household size of four, 5% AMI equals the following: 100% AMI ($86,100 LA) x 5% _ $4,305. 15. Compliance with Laws; Governing Law. Homebuyer hereby agrees to comply with all ordinances, rules, and regulations of City. Nothing herein is intended to be, nor shall it be deemed to be, a waiver of any City ordinance, rule, or regulation. This declaration shall be governed by the laws of the State of California. Any legal action brought under this declaration must be instituted in the Superior Court of the County of Los Angeles, State of California, or in the Federal District Court in the Central District of California. 16. Indemnification. Homebuyer shall pay for, defend, indemnify and hold harmless the City of El Segundo and its respective officers, officials, agents, employees, representatives, and volunteers from and against any loss, liability, claim, or judgment relating in any manner to AFFORDABLE HOUSING RESALE RESTRICTION Page 13 of 16 117 Homebuyer's use of the Property or Homebuyer's violation of this Restriction. Homebuyer shall remain fully obligated for the payment of taxes, liens and assessments related to the Property. There shall be no reduction in taxes for Homebuyer, nor any transfer of responsibility to City to make such payments, by virtue of this Restriction; provided, however, that the County of Los Angeles Assessor and Tax Collector shall take into consideration the 20 -year Restriction and the Affordability Period in determining the assessed value of the Property. 17. Insurance. Homebuyer shall maintain, during the term of this Restriction, an all-risk property insurance policy insuring the Property in an amount equal to the full replacement value of the structures on the Property. The policy shall name City as loss payee and shall contain a statement of obligation on behalf of the carrier to notify City of any material change, cancellation or termination of coverage at least thirty (30) days in advance of the effective date of such material change, cancellation or termination. Homebuyer shall transmit a copy of the certificate of insurance to City within thirty (3 0) days of the effective date of this Restriction, and upon request by City, Homebuyer shall transmit to City further copies of the certificate of insurance and a loss payee endorsement, signed by an authorized agent of the insurance carrier setting forth the general provisions of coverage. Copies of the certificate of insurance and a loss payee endorsement shall be transmitted to City at the address set forth in Section 25 hereof. Any certificate of insurance must be in a form, content and with companies approved by City. 18. Defaults. Failure or delay by either party to perform any term or provision of this Restriction which is not cured within thirty (30) days after receipt of notice from the other party constitutes a default under this Restriction; provided, however, if such default is of the nature requiring more than thirty (30) days to cure, the defaulting party shall avoid default hereunder by commencing to cure within such thirty (30) day period, and thereafter diligently pursuing such cure to completion. The party who so fails or delays must immediately commence to cure, correct or remedy such failure or delay, and shall complete such cure, correction or remedy with diligence. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Except as required to protect against further damages, the injured party may not institute proceedings against the party in default until thirty (30) days after giving such notice. Failure or delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default. 19. Non -Waiver. Failure to exercise any right City may have or be entitled to, in the event of default hereunder, shall not constitute a waiver of such right or any other right in the event of a subsequent default. 20. Further Assurances. Homebuyer shall execute any further documents consistent with the terms of this Restriction, including documents in recordable form, as City shall from time to time find necessary or appropriate to effectuate its purposes in entering into this Restriction. 21. Governing Law. Homebuyer hereby agrees to comply with all ordinances, rules and regulations of City. Nothing in this Restriction is intended to be, nor shall it be deemed to be, a waiver of any City ordinance, rule or regulation. This Restriction shall be governed by the laws of the State of California. Any legal action brought under this Restriction must be instituted in the Superior Court of the County of Los Angeles, State of California, or in the Federal District Court in the Central District of California in Los Angeles County. AFFORDABLE HOUSING RESALE RESTRICTION Page 14 of 16 118 22. Amendment of Restriction. No modification, rescission, waiver, release or amendment of any provision of this Restriction shall be made except by a written agreement executed by Homebuyer and City. 23. City May Assign. City may, at its option, assign its rights hereunder without obtaining the consent of Homebuyer. 24. Homebuyer Assignment Prohibited. In no event shall Homebuyer assign or transfer any portion of this Restriction without the prior express written consent of City, which consent shall be given by City only in the event that City determines that the assignee or transferee is a Low Income Household, that the assignee's or transferee's monthly housing payments are at an Affordable Housing Cost, except as otherwise provided herein, and that the assignee or transferee has expressly assumed this Restriction by execution of a written assignment document to be provided by City. This section shall not affect or diminish City's right to assign all or any portion of its rights hereunder. 25. Notices. Any notices, requests or approvals given under this Restriction from one party to another may be personally delivered or deposited with the United States Postal Service for mailing, postage prepaid, registered or certified mail, return receipt requested to the following address: To Homebuyer: To City: City of El Segundo 350 Main Street El Segundo, California 90245 Attention: City Manager and Community Development Director Either party may change its address for notice by giving written notice thereof to the other party. 26. Attorneys' Fees and Costs. In the event that any action is instituted to enforce payment or performance under this Restriction, the parties agree the non -prevailing party shall be responsible for and shall pay all costs and all attorneys' fees incurred by the prevailing party in enforcing this Restriction. 27. Entire Agreement. This Restriction, together with the Agreement and all attachments thereto and hereto, constitutes the entire understanding and agreement of the parties. This Restriction integrates all of the terms and conditions mentioned herein or incidental thereto, and supersedes all prior negotiations, discussions and previous agreements between City and Homebuyer concerning all or any part of the subject matter of this Restriction, AFFORDABLE HOUSING RESALE RESTRICTION Page 15 of 16 119 IN WITNESS WHEREOF, the parties have executed this Affordable Housing Resale Restriction as of the date set forth above. ATTEST: City Clerk HOMEBUYER: By: Printed Name: By: Printed Name: CITY: CITY OF EL SEGUNDO, a California municipal corporation 0 Its: AFFORDABLE HOUSING RESALE RESTRICTION Page 16 of 16 120 EXHIBIT A TO AFFORDABLE HOUSING RESALE RESTRICTION LEGAL DESCRIPTION OF PROPERTY [to be inserted] Exhibit A to Affordable Housing Resale Restriction LEGAL DESCRIPTION OF PROPERTY Page 1 of 1 121 EXHIBIT B-1 TO AFFORDABLE HOUSING RESALE RESTRICTION NOTICE OF INTENT TO TRANSFER NOTICE OF INTENT TO TRANSFER MUST BE DELIVERED TO THE CITY OF EL SEGUNDO PRIOR TO PROCEEDING WITH ANY TRANSFER OF THE PROPERTY. From: ("Homebuyer") To: City of El Segundo 350 Main Street El Segundo, California 90245 Attention: City Manager and Community Development Director Re: El Segundo, California ("Property") (street address) Circle appropriate words: Homebuyer desires to [sell, convey, transfer by inheritance or devise, lease, gift, otherwise transfer] the Property. If City has a program to help locate a Low Income purchaser, does Homebuyer want City to help look for a Low Income purchaser to buy the Property? Yes: No: Date Signature of Homebuyer (--) daytime telephone number of Homebuyer Exhibit B-1 to Affordable Housing Resale Restriction NOTICE OF INTENT TO TRANSFER Page 1 of 1 122 EXHIBIT B-2 TO AFFORDABLE HOUSING RESALE RESTRICTION NOTICE OF PROPOSED TRANSFER NOTICE OF PROPOSED TRANSFER MUST BE DELIVERED TO THE CITY OF EL SEGUNDO PRIOR TO PROCEEDING WITH ANY TRANSFER OF THE PROPERTY. From: ("Homebuyer") To: City of El Segundo 350 Main Street El Segundo, California 90245 Attention: City Manager and Community Development Director Re: (street address) El Segundo, California ("Property") Homebuyer has previously delivered a Notice of Intent to Transfer to City on Check the appropriate box: _ Thirty (30) days have passed since City's receipt of the Notice of Intent to Transfer and Homebuyer has received no response from City. _ City has notified Homebuyer on that it declines to purchase the Property. Circle appropriate words: Homebuyer desires to [sell, convey, transfer by inheritance or devise, lease, gift, otherwise transfer] the Property. Date Proposed Transferee: Income of Proposed Transferee: Household Size of Proposed Transferee: Proposed Transfer Price: Signature of Homebuyer daytime telephone number of Homebuyer Exhibit B-2 to Affordable Housing Resale Restriction NOTICE OF PROPOSED TRANSFER 123 EXHIBIT C TO AFFORDABLE HOUSING RESALE RESTRICTION REQUEST FOR NOTICE UNDER CIVIL CODE SECTION 2924b [to be inserted] Exhibit C to Affordable Housing Resale Restriction REQUEST FOR NOTICE UNDER CIVIL CODE SECTION 2924b Page 1 of 1 124 EXHIBIT D TO AFFORDABLE HOUSING RESALE RESTRICTION REIMBURSEMENT AGREEMENT [to be inserted] Exhibit D to Affordable Housing Resale Restriction REIMBURSEMENT AGREEMENT Page 1 of 4 125 STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 126 STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the sante in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 127 STATE OF CALIFORNIA ) ss. COUNTY OF ) On before me, Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose names(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal SIGNATURE OF NOTARY PUBLIC 128 EXHIBIT "D" AFFORDABLE HOUSING UNIT INFORMATION FORM The undersigned Applicant ("Applicant") desires to purchase that certain real property located at , El Segundo, CA 90245 (the "Property"). Applicant understands and acknowledges that the current owner of the Property is authorized to sell or transfer the Property only to a Qualified Household at an Affordable Sales Price pursuant to the Affordable Housing Agreement dated between City and Developer. Accordingly, Applicant certifies the following information to [Owner/City] in order to enable [Owner/City] to verify that Applicant is a Qualified Household and that the Property is being sold at an Affordable Sales Price. 1. The Applicant is: Name: Current Address: Telephone Number: 2. The terms of the proposed transfer are as follows: (a) Sales price: $ (b) Price of any personal property being sold by the current owner of the Property to Applicant: $ . (If none, so state.) (c) All other amounts of money or other consideration, if any, concerning the Property or any other matter to be paid by Applicant to the current owner: $ (If none, so state.) (d) Sources of payment of sales price: Sales price $ Cash down payment $ 1 st loan $ 2nd loan $ Other (describe) $ 129 Total $ (e) The financing obtained by Applicant to purchase the Property is as follows: 1st Loan: Loan amount $ Monthly payments: $ Interest rate: If variable interest, describe initial rate and adjustment mechanism: Due date: Balloon payment amount: Points and fees: Lender: Lender's address: 2nd Loan: Loan amount: $ Monthly payments: $ Interest rate: % If variable interest, describe initial rate and adjustment mechanism: Due date: Balloon payment amount: Points and fees: Lender: Lender's address: 130 Oti3er Loans: (describe, if none, so state) (f) The estimated monthly Housing Cost that will be paid by Applicant: 1st loan monthly payment: $ 2nd loan monthly payment: $ Other loans monthly payment: $ Taxes and assessments (1/12 of yearly taxes and $ assessments): Fire and Casualty Insurance and Mortgage Insurance $ premiums (1/12 of yearly premium): Homeowner's Association dues: $ Property Maintenance and Repairs: $ Utility Allowance (including garbage collection, sewer, $ water, electricity, and gas, but excluding telephone service): TOTAL: 3. Applicant represents, warrants, and covenants the following: (a) The Property will be Applicant's principal residence. (b) The combined estimated annual gross income for all adult members of Applicant's household for the twelve (12) months following the date this Information Form is being prepared and executed is $ For purposes of this Affordability Housing Unit Information Form, gross income includes, but is not limited to: (i) the gross amount, before any payroll deductions, of wages and salaries, overtime pay, commissions, fees, tips, and bonuses; (ii) the net income from operation of a business or profession or from rental or real or personal property (for this purpose, expenditures for business expansion of amortization of capital indebtedness shall not be deducted to determine the net income from a business); (iii) interest and dividends; (iv) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts; (v) payments in lieu of earnings, such as unemployment and disability compensation, worker's compensation, and severance pay (but see below); (vi) public assistance payments (excluding any portion thereof specifically designated for shelter and utilities); (vii) periodic and determinable allowances such as alimony and child support payments, and regular contributions or gifts received from persons not residing in the dwelling; (viii) all regular pay, special pay, and allowances of a member of the 131 Armed Forces (whether or not living in the dwelling) who is head of the family or spouse (but see below); (ix) if Applicant has net family assets in excess of $5,000, the actual amount of income, if any, derived from all of the net family assets or 10% of the value of all such assets, whichever is greater (and with the understanding that "net family assets" means the value of equity in real property other than Applicant's full-time residence, savings, stocks, bonds, and other forms of capital investment, but excluding the value of necessary items such as furniture and automobiles); and (x) gifts received which a cumulative value in excess of $5,000 annually. . The following items shall not be considered as part of gross income: (i) casual, sporadic, or irregular gifts which have a cumulative value in excess of $5,000 annually; (ii) amounts which are specifically for or in reimbursement of the cost of medical expenses; (iii) insurance payments (including payments under health and accident insurance and worker's compensation), and capital gains and settlement for personal or property losses; (iv) amounts of educational scholarships paid directly to the student or to the educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books, and equipment; (v) the special pay to a serviceman head of a family away from home and exposed to hostile fire; (vi) relocation payments made pursuant to federal, state, or local relocation law; (vii) foster child care payments; (viii) the value of coupon allotments for the purchase of food pursuant to the Food Stamp Act of 1964 which is in excess of the amount actually charged the eligible household; and (ix) payments received pursuant to participation in National Volunteer Antipoverty Programs (including VISTA, Service Learning Programs, and Special Volunteer Programs) and National Older American Volunteer Programs for persons aged 60 and over (including Retired Senior Volunteer Programs, Foster Grandparent Program, Older American Community Services Program, National Volunteer Program to Assist Small Business Experience, Service Corps of Retired Executive (SCORE), and Active Corps of Executives (ACE)). 4. Applicant's household consists of the following persons who will reside in the Property: Adults (18 or over) (name of each): Minors (under 18) (name of each): 5. A true and correct copy of the most recent tax return of each adult member of Applicant's household filed with the U.S. Internal Revenue Service is attached hereto. 132 I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. APPLICANT: Date Signature Signature Print name Print name Street address Telephone City State Zip code 133 DISCLOSURE OF INTEREST STATEMENT 1. Are you or anyone in the household related to an employee of D.R. Horton, Inc., or any of its subsidiaries? NO YES If YES, identify who and role? 2. Are you or anyone in the household related to an employee or an official of the City of El Segundo? NO YES If YES, identify who and role? I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. APPLICANT: Date Signature 134 CITY COUNCIL STAFF REPORT, DATED MARCH 6, 20'12 135 EL SEGUNDO CITY COUNCIL MEETING DATE: March 6, 2012 AGENDA STATEMENT AGENDA HEADING: Special Orders of Business AGENDA DESCRIPTION: Consideration and possible action to open a public hearing and receive testimony to: 1) approve Environmental Assessment No. 890 certifying the Environmental Impact Report (EIR) for the 540 East Imperial Avenue Specific Plan Project including the Mitigation Monitoring and Reporting Program (MMRP); 2) adopt a Statement of Overriding Considerations; and 3) approve General Plan Amendment No. 10-03, Specific Plan No. 10-03, Zone Change No. 10- 01, Zone Text Amendment No. 10-06, Development Agreement No. 10-02, Subdivision No. 10- 01 for Vesting Tentative Map (VTM) No. 71410 (7 lots) and VTM No. 71582 (31 lots) with conditions. Applicant: El Segundo Unified School District (ESUSD) (Fiscal Impact: N/A) RECOMMENDED COUNCIL ACTION: 1. Open the public hearing; 2. Discussion; 3. Adopt a Resolution certifying the EIR (Environmental Assessment No. EA -890); adopting a Statement of Overriding Considerations (SOC), implementing a Mitigation Monitoring and Reporting Program (MMRP), amending the General Plan (Amendment No. 10-03), and approving Subdivision 10-01 for Vesting Tentative Map (VTM) 71410 and VTM 71582; 4. Introduce, and waive first reading, of Ordinance for Zone Change No. 10-01, Zone Text Amendment No. 10-06, Specific Plan No. 10-03, and Development Agreement No. 10-02; 5. Schedule second reading and adoption of Ordinance on March 20, 2012; and/or, 6. Alternatively, discuss and take other possible action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Draft City Council Resolution and attachments including Mitigation Monitoring and Reporting Program 2. Draft Ordinance and Exhibits including the 540 East Imperial Avenue Specific Plan and the Draft Development Agreement 3. Planning Commission Resolution No. 2714 4. 4`h Quarter 2009 LAX Noise Contour Map 5. Airport Land Use Commission Staff Report and Draft Resolution 6. Settlement Agreement Regarding Aviation Easements 7. Draft Declaration of Conditions and Restrictions Affecting Real Property 8. Park Vista Senior Facility Ad -Hoc Committee Letter (submitted on January 26, 2012) 9. Final EIR and Errata 10. Project Plans FISCAL IMPACT: N/A Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A ORIGINATED BY: Kimberly Christensen, AICP, Planning Manager REVIEWED BY: Greg Carpenter, Interim City Manager APPROVED BY: Greg Carpenter, Interim City Manager 136 I I. Introduction The 5.65 -acre 540 East Imperial Avenue site is comprised of six lots and is currently improved with the Imperial Avenue Elementary School. The site is currently zoned Planned Residential Development (PRD) and is consistent with the current General Plan Land Use Designation of PRD. The PRD Zone limits development to a specific number of residential dwelling units: 29 single-family units and 36 multi -family units. The now unoccupied elementary school was built in 1956. Due to the decline in enrollment in the El Segundo Unified School District (ESUSD), the school campus was closed in 1975. In 1984, it was used as an employee training facility for the Hughes Aircraft Company. In 1997, the school campus was re -opened under a lease to the Los Angeles Unified School District (LAUSD) as a special needs school, but was closed again a few years later. The proposed project site is currently owned by the ESUSD. Between March 2008 and May 2009, the ESUSD held a series of meetings to establish the best use of the property and decided on a plan to re -entitle the site for lease or sale and to develop the property with a new use. Between June 2010 and August 2010, two informational community/neighborhood meetings were held to introduce the concept project and to give residents the opportunity to participate in the preliminary development phase. A third public workshop was held on August 12, 2010 before the Planning Commission as an informational item. An application for the project was filed with the City on September 9, 2010. II. Proiect Avplications The application includes the following: 1) Environmental Assessment (EA) No. 890 California Environmental Oualitv Act (CEOA) and State Clearing House (SCH) No. 2011071019.. — An Environmental Impact Report for Environmental Assessment No 890 (540 East Imperial Avenue Specific Plan) is proposed for this project pursuant to the authority and criteria contained in the California Environmental Quality Act (CEQA) and the CEQA Guidelines. (See Exhibit 9) 2) General Plan Amendment (GPA) No. 10-03, — Amend the General Plan to Re -designate the project site from Planned Residential Development to the 540 East Imperial Avenue Specific Plan (EIASP). The requested General Plan Amendment will allow for one of two conceptual residential options: Option 1, a Senior Housing Community with a Multi -Family Residential (R-3) component (304 units), or Option 2, a Mixed Residential Development (58 units). The requested designation would allow for the proposed Senior Housing Community with an increased maximum floor area ratio (FAR) of 0.75. 3) Specific Pian (SP) No. 10-03 — Addition of the 540 East Imperial Avenue Specific Plan (EIASP) for the project site that establishes the development standards within the Specific Plan (See Exhibit 2). 4) Zone Chance (ZC) No. 10-01. — Amend the Zoning Map to rezone the project site from the Planned Residential Development (PRD) Zone to the 540 East Imperial Avenue Specific Plan (EIASP) Zone. The requested rezoning will allow for consistency with the proposed General Plan Amendment. 2 13 137 5) Zone Text Amendment (ZTA) No. 10-06 - Zone Text Amendment to: 1) delete the Planned Residential (PRD) Zone from ESMC § 15-3-1; 2) add the 540 East Imperial Avenue Specific Plan to ESMC § 15-3-1; 3) add a new ESMC § 15-3-2(A)(7) "540 East Imperial Avenue Specific Plan"; and 4) delete ESMC § 15-4D-1 (Planned Residential Development (PRD) in its entirety. 6) Development Aereement (DA) No. 10-02 - Approve the Development Agreement to provide public benefits in exchange for development rights (ten-year entitlement with the option for a five year extension) (See Exhibit 2). 7) SUB 10-01 for Vesting Tentative Mao (VTM) No. 71410 (Option 1 -7 lots) or VTM No. 71582 (Ootion 2- 31 lots). - A subdivision to allow the division of land from six lots to seven lots under Option 1, or from six lots to 31 lots under Option 2. (See Exhibit 10). III. Background The proposed 540 East Imperial Avenue Specific Plan Project would result in entitlements to develop one of two conceptual project options. Specific Plan Site Plan Option 1 (Option 1) includes a maximum of 150 assisted/independent living units and 150 senior apartments/condominiums (age 55 and older) and four apartments/ condominiums. Specific Plan Site Plan Option 2 (Option 2) includes a residential development with a mix of 24 single- family dwelling units and 34 multiple -family dwelling units. The development standards for the apartments/condominiums in Option 1 are designed to be consistent with the Multi -Family Residential (R-3) Zone standards. The development standards for Option 2 are designed to be consistent with the Single -Family Residential (R-1) Zone standards and the Multi -Family Residential (R-3) Zone standards for the single-family residential uses and the multi -family residential uses respectively. A comparison is provided in Table 1. Project Iie�a Table 1 East Imperial Avenue Specific Plan Option Comparison option 'l Project Construct a three-story, 150 unit Descriptlon4AV.1 Assisted/independent Living Complex and 150 Senior Apartments/Condominiums with 4 market rate Parcel Size Maximum Flogr Arca Ratio (PAR) Apartment/Condominiums 5.65 acres 0.75:1 Option 2 Construct 34 Multi -Family Dwelling Units and 24 Single - Family Dwelling Units 5.65 aces 0.53:1 for Single -Family For Multi -Family: 1 DU/1613 square feet of lot area on property 15,000 square feet or less. A fraction of a lot greater than 1,075 square feet will allow 138 3 is Mmanum Lot. Size: Madura Building bight an additional unit 1 DU/2,420 square feet of lot area on property greater than 15,000 square feet. A fraction of a lot greater than 1,613 square feet will allow an additional unit. Front AIon¢ East Imperial Ave: 20- For Single -Family: In accordance foot minimum with ESMC Chapter 154A. Side: 40 foot minimum Rear: 40 foot minimum between the southern side of the Specific Plan area and the R-3 uses to the south 15,000 square feet 35 feet (three stories) 45 feet for parapets Conimou 54,149 Open Space Pahl g 261 spaces Vestii�g Tentative Tract Map Public`Benet VTM 71410 for 7 lots For Multi -Family: In accordance with ESMC Chapter 15-4B Single -Family: 5,000 gross square feet Multi -Family: 7,000 gross square feet. 35 feet (Multi -Family) 26 feet (Single -Family) 46,950 213 spaces VTM 71582 for 31 lots LEED Certified project. A 15 LEED Certified project. A 10 percent housing set aside for percent housing set aside for affordable units. affordable units. , [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 4 15 139 Site Description The project site is bordered by East Imperial Avenue to the north, multiple -family residential uses to the east, multiple -family residential uses and East Walnut Avenue to the south, and single-family residential uses and a mortuary to the west. The project site is 0.15 mile south of the Los Angeles International Airport (LAX). The project site is also located approximately 0.8 mile west of Sepulveda Boulevard. Site topography is varied with an overall slope from northeast to southwest of roughly five percent. The site is currently developed with eight single -story brick structures (totaling 22,488 square -feet) that at one time served as administrative offices and classrooms for the former Imperial Avenue Elementary School. Existing structures on site extend from the northern to the southern portion of the site, along the eastern property line. A 0.50 acre baseball field, currently utilized for little league baseball on weekends, is also located on the site. Surrounding Land Uses The adjacent area is surrounded primarily with single-family and multi -family residential uses. Additionally, there is a mortuary immediately adjacent to the site at the northeast comer of Sheldon Avenue and East Imperial Avenue. The surrounding uses at the project site are as described in Table 2: 5 16 Table 2 SurroundinE Land Uses Direction Land Use Zone North Imperial Highway, community dog park, and LAX Open Space (O -S) (north of the northern City boundary). R-1 (Single Family East Single -Family and Multi -Family residential uses Residential) and R-3 (Multi -Family Residential) R-1 (Single Family South Single -Family and Multi -Family residential uses. Residential) and R-3 (Multi -Family Residential) R-1 (Single Family West Single -Family residential uses and a Mortuary. Residential) and C-2 Neighborhood Commercial Access and Parking Access for Option 1 includes two 2 -way driveways along Imperial Avenue to serve the assisted/independent living complex and the senior apartments/condominiums. Upon entering the project site from Imperial Avenue, a total of 14 guest parking spaces would be available along the northeast entry. Drive aisles and 90 -degree parking spaces would be located along the perimeter of the project site and between the assisted/independent living complex and senior apartments/condominiums. As proposed, all drive aisles would be 28 feet wide, which would accommodate two-way traffic. A separate driveway would be provided from Walnut Avenue to serve the four condominium units to be located on the southern portion of the project site. No vehicular access would be provided between the senior apartments/condominiums and the four condominiums. An emergency access lane for the assisted/independent living complex portion for Option 1 would be located near the proposed community space area on the eastern portion of the proposed project site. Off-street parking and loading spaces, including parking for employees and visitors must be provided as follows for Option 1: Senior Dwellings (Market Rate): • 1 space per studio/1 bedroom units 2 spaces per 2 bedroom units Senior Dwellings (Affordable): + 0.5 space per studio/1 bedroom units 1 spaces per 2 bedroom units Senior Housine Assisted Livine Units (Market Rate): + 1 space per 2 units/2 beds 141 6 17 Senior HousinE, Assisted Livine Units (Affordable): 1 space per 3 units/3 beds Option 2 includes one 26 -foot -wide two-way driveway along Imperial Avenue to serve the 34 multiple -family residential units. An internal drive aisle would provide access to public parking areas or multiple -family garages. A two-way private street would be provided at the southeast corner of the site, connecting to Walnut Avenue, to provide direct access for the 24 single-family residential units. An internal 36 -foot -wide private loop -street would provide access to the private single-family garages. No vehicular access would be provided between the multiple -family residential and the single-family residential uses located on the northern and southern portions of the project site, respectively. Off-street parking and loading spaces for Option 2 must be provided in accordance with ESMC Chapter 15-15 (Single -Family Residential and Multi -Family Residential standards). Landscaping Landscaping would include a mix of trees and shrubs/vines and ground cover. Specifically, shade canopy trees of various species would be planted along the access drive aisles, throughout the parking lot, and surrounding the perimeter of the property. Evergreen shrubs and ground cover are proposed to be used for property perimeter areas, building perimeter areas, and used for screening or hedging buildings, the parking lot, and pool area. While the plans are still in concept, the project will be conditioned to meet SSMC required minimums for vehicle use areas, and building and perimeter landscape requirements. Architecture and LEED Design The project will be designed with a contemporary architectural style using stucco and siding as the primary building materials with the purpose of being distinct, but compatible with the existing character in the area. The design avoids the appearance of long flat planes through the use of both vertical and horizontal projections and a variety of materials and colors on all building elevations. Overall, the proposed project will enhance the aesthetic appearance of the site and add more interest to the existing site when viewed from Imperial Avenue. The project applicant will be required to work qualify the project for LEED certification. Th LEED certification level or its equivalent. Affordability Component with a consultant that specializes in LEED to building will at a minimum meet the basic The City of El Segundo 2009 Housing Element identified a need for affordable housing to provide for a growing senior population. As envisioned in the Element, based on that need Option 1 would set aside fifteen (15) percent of the total units as affordable units for extremely low, very low, and low income senior households. Fifteen percent of the unit total is 46 units with the allocation of units in each income category provided in Table 3 below. Option 2 would set aside ten (10) percent of the total units as affordable units for extremely low, very low, and low income senior households. Ten percent of the unit total is 6 units (2 units in each 7 is 142 income category as specified in Table 3 below). The set aside amount is characteristic of the 55 and older senior population in the City of El Segundo which (based on the 2000 Census) represents 15.7 percent (2,519) of the total 16,033 population. Based on the Regional Housing Needs Assessment (RHNA), El Segundo is required to provide 168 additional housing units during the current housing cycle (2006-2014). The allocation of the 168 units is broken down into five categories as follows: 22 extremely low income households, 22 very low income households, 27 low income households, 28 moderate income households, and 69 above moderate income households. The City has a total of 43 units that can be credited toward the above moderate income requirements for the current 2006-2014 planning period. Table 3 Affordability Breakdown at Maximum Development i Option 1 (304 Units Max) Opti'oa 2-(58-Vnits Max) Low C 38,9 of unit 18 Units 2 units total Extreiitely Low @ 3I 14 units 2 units % of unit W4. - Very Low Co) 31%v of 14 units 2 units unit total Tota] 'Set Aside Amount ' 46 units 6 units 9 15- * of.unit'total In Option 2, the affordable units may be split evenly between the single-family and multi- family residential uses or be provided only in the multi -family residential units as proposed in the Specific Plan and Development Agreement. The Developer must still provide 15% set aside for the total number of units constructed for Option 1 and 10% set aside for the total number of units constructed for Option 2 should fewer units than the maximum allowed is constructed. The Draft Development Agreement (Exhibit 2) includes an exclusion from paying the development impact fees (traffic, police, library, fire, and parks) for the affordable units. Additionally, in an effort to provide a greater opportunity for El Segundo residents to have priority for the affordable units, a condition of approval is proposed that will require the developer to provide a marketing implementation plan that will focus on notification of residents of the availability of the affordable housing and information regarding the requirements and benefits. General Plan Amendment and Rezoning The proposed General Plan Amendment and Zone Change would establish the 540 East Imperial Avenue Specific Plan (EIASP) as a new land use district. The EIASP will allow a mix of residential uses and a range of densities at the project site similar to the adjacent mix of land uses. Specific Plan A Specific Plan was prepared (see attached Exhibit 2) to allow and encourage development of an assisted living/senior housing project with a multi -family component (Option 1) with a 19 143 maximum FAR of 0.75. The Plan would also allow single-family and multi -family residential uses (Option 2) with a maximum lot coverage and maximum density in conformance with the current ESMC Single -Family (R-1), and Multi -Family (R-3) Zone development standards. The Specific Plan will guide the build -out of the project site in a manner that is consistent with City and State policies and standards and ensures that the project is developed in a coordinated manner. The proposed Specific Plan and conceptual project layouts for either Option 1 or Option 2 are consistent with the General Plan. General Plan Consistency If the General Plan Amendment is approved, the land use designation for the project site will be 540 East Imperial Avenue Specific Plan. This designation permits senior housing, single- family, and multi -family residential uses as specified in either Option 1 or Option 2. The proposed projects, Option 1 or Option 2, are consistent with the General Plan Goals, Policies and Objectives and the Specific Plan as set forth in detail in the draft Resolution. Zoning Consistency If the Zone Change is approved, the zoning designation for the project will be 540 East Imperial Avenue Specific Plan. The Specific Plan would augment the development standards of El Segundo's zoning regulations. When an issue, condition or situation occurs which is not covered or provided for in the Specific Plan, the zoning regulations that are most applicable to the issue, condition or situation will apply. The proposed conceptual project (Option i or Option 2) meets the development standards set forth in the 540 East Imperial Avenue Specific Plan § 4.2 Development Standards. Development Agreement The proposed Development Agreement establishes a 10 -year duration of the Agreement (see attached Exhibit F). The Development Agreement as drafted allows either the developer or the City to unilaterally extend the Agreement for an additional term of five -years. Typical recent Development Agreements approved by the City, including the Agreements for Plaza El Segundo, Campus El Segundo, and the Cambria Suites Hotel project, include similar time frames and extension periods. The development agreement provides vested development rights in exchange for 1) a Leadership in Energy and Environmental Design (LEED) certified project (or equivalent); 2) affordable housing requirements for extremely low, very low, and low income senior households (fifteen percent of the total units under Option 1 and 10% of the total units under Option 2); 3) development impact fees with an exemption for affordable housing units (Option 1 Plan - $895,704; Option 2 Plan -$162,817); 4) procedures for major and minor project modifications; 5) procedures and review criteria for site plan review; 6) established project phasing; and 7) criteria for local purchase of goods for sales and use tax benefit. Vesting Tentative Map If this project is approved allowing for the option of two possible development scenarios, only one of the two Vesting Tentative Maps would be made final; Vesting Tentative Map (VTM) 9 20 144 No. 71410 for seven lots associated with project Option 1, or VTM No. 71582 for 31 lots, associated with project Option 2. IV. Environmental Review The proposed project options were analyzed for environmental impacts and an Initial Study of Environmental Impacts (Exhibit 9) was prepared pursuant to Public Resources Code § 15063 (California Environmental Quality Act). The Initial Study (included in Exhibit 9) was made publicly available on July 7, 2011 concurrent with the publication of a Notice of Preparation of an Environmental Impact Report (EIR) in the El Segundo Herald. The notice was also posted at City Hall, the El Segundo Library, and mailed to property owners in the vicinity of the project sites and, identified interested parties. The purpose of the Initial Study was: 1) to evaluate whether preparation of an ETR was necessary; and, 2) to focus the EIR document on the issue areas determined to be potentially significant. The Initial Study identified that an EIR was necessary to evaluate potentially significant environmental impacts. The Initial Study identified that environmental effects in the following issue areas were determined to not be significant and did not require further evaluation in an EIR: Aesthetics, Agriculture and Forest Resources, Biological Resources, Cultural Resources, Geology and Soils, Hazards/Hazardous Materials, Hydrology/Water Quality, Land Use/Planning, Mineral Resources, Population/Housing, Public Services, and Utilities/Service Systems. The initial study determined that the following issue area has no environmental impact: Agriculture and Forestry Resources. The initial study determined that the following issue areas are less than significant: Hydrology/Water Quality, Land Use/Planning, Mineral Resources, Population/Housing, Public Services, and Utilities/Service Systems. The initial study determined that the following issue areas are less than significant with mitigation: Aesthetics, Biological Resources, Cultural Resources, Geology/Soils, Hazards/Hazardous Materials, and Construction Noise (see mitigation measures in Exhibit 1). Although further study would be conducted in an EIR, the Initial Study identified one mitigation measure that would be required for Transportation/Traffic relating to emergency access and one mitigation measure that would be required to mitigate noise relating to construction. On November 3, 2011 the Notice of Availability of Draft Environmental Impact Report was published in the El Segundo Herald, posted at City Hall and mailed to property owners in the vicinity of the project sites and identified interested parties pursuant to Public Resources Code § 15087. The public review and comment period for the Draft EIR (DEIR) began on November 3, 2011 and ended on December 19, 2011. The DEIR evaluated 5 areas of controversy and issues to be resolved as follows: Air Quality, Greenhouse Gas Emissions, Noise, Recreation, and Transportation/Traffic. The DEIR determined that the following issue areas would be less than significant: Greenhouse Gas Emissions and Recreation. The DEIR determined that the following issue area would be less than significant with mitigation: Transportation/Traffic. The DEIR identified significant and unavoidable environmental impacts in the Construction related Air Quality and Operational Noise issue areas relative to the increases in residential population in an area that exceeds the exterior noise criteria of 65 dBA. The DEIR identified significant, but mitigatible impacts in the issue area of Noise (construction related and groundbome vibration). The Draft EIR also concluded that operational Air Quality would be less than significant. 10 21 145 Three alternatives were studied in the EIR. The alternatives are as follows: Alternative 1: Senior Assisted Living Facility and Single -Family Alternative — This alternative would develop the site with a 150 -unit senior assisted care facility and 17 single- family dwelling units. The senior assisted care facility would include 150 units, 90 parking spaces, and 24,234 square feet of common open space located on the northern portion of the site and accessible from two driveways along Imperial Avenue. The senior assisted care facility portion would be same as that proposed under project Option 1. This alternative would also include 17 single-family dwelling units located on the southern portion of the site and oriented around a private loop road (accessed from Walnut Avenue), 90 parking spaces, and 26,791 square feet of common open space. Alternative 2: Senior Townhome and Single -Family Alternative — This alternative would develop the proposed project site with 34 senior townhome units and 24 single-family dwelling units. Alternative 2 is substantially similar to project Option 2 with the only difference being that the 34 multiple -family dwelling units proposed under project Option 2 would be occupied by eligible seniors (age 55 and older). Alternative 2 would include 34 senior townhome-style condominiums, 92 parking spaces, and 11,704 square feet of common open space located on the northern portion of the site and accessible from one driveway along Imperial Avenue. The design and orientation of the senior townhome-style condominiums would be similar to the multiple -family residential component proposed as part of project Option 2. Alternative 2 would also include 24 single-family dwelling units located on the southern portion of the site and oriented around a private loop road (accessed from Walnut Avenue), 121 parking spaces, and 26,791 square feet of common open space. The single-family dwelling units would be similar to the single-family dwelling units proposed as part of project Option 2. Alternative 3: No Project/No Development Alternative — In addition to alternative development scenarios, CEQA Guidelines Section 15126.6(e) requires the analysis of a "no project" alternative. The purpose of examining such an alternative is to allow decision -makers to compare the effects of approving the project with the effects of not approving the project. For the purposes of this analysis, the "no project" alternative would serve as a "no development" alternative with the site remaining in its existing condition. Under this alternative, all existing development and uses would remain. The Draft EIR provides a comparison of the alternatives, including the No Project Alternative, in Draft EIR Section 6.0. The Draft EIR concluded that Alternative 2 would be the environmentally superior alternative, between project Option 1 and 2, project Option 2 is considered to be the superior project option because the project Option 2 would generate less average daily trips (ADT) than Option 1 (428 ADT versus 926 ADT), and would therefore result in reduced operational air quality, greenhouse gas (GHG), and traffic impacts compared to Option 1. However, Option 2 would not result in the benefit of the construction of new senior housing and assisted living opportunities that would result from Option 1. The following sections summarize the analysis of potentially significant environmental impacts that the Draft EIR identifies as needing mitigation and the impacts found to be significant and unavoidable. The summary applies to project Option 1 and Option 2. 11 22 146 V. Potentially Sienificant Impacts Option 1 and Option 2 Noise -Construction. Temporary construction activates could result in the exposure of people to noise levels that temporarily exceed the noise standards established in the City's General Plan, or applicable standards of other agencies. The DEIR identifies residential uses within 50 feet of the project site as noise "sensitive receptors." Construction related noise is exempt pursuant to ESMC § 7-2-10(D) as long as construction related activities are limited to the hours of 7:00 a.m. and 6:00 p.m. Monday through Saturday, provided the noise levels do not exceed 65dBA at the property line of a receptor site with an increase of up to 85 dBA (SSMC § 7-2-4(C)). The DEIR identifies that construction noise could be as high as 86 dBA at the nearest residential receptor. However, implementation of mitigation measures MM4.3-1 through 4.3-5 would reduce the temporary noise levels to a less than significant level. VI. Siuniificant and Unavoidable Impacts Option 1 and Option 2 To approve the project — both Option 1 and Option 2 — the City Council must adopt a Statement of Overriding Consideration (SOC) for the following impact areas: Air Ouality - Construction. Temporary construction activities for either Option 1 or Option 2 would violate air quality standards for VOC's even with full implementation of the identified mitigation measures (MM4.1-1 through MM4.1-16). Noise - Operation. While neither project (Option 1 or Option 2) would result in a substantial ongoing increase in exterior noise levels during operation, both project Options would increase the permanent, noise sensitive residential population on the project site even with full implementation of MM4.3-6 and MM4.3-7 because of the site's proximity to LAX. It should be noted that subsequent to the preparation of the Draft EIR and conclusion of the public comment period, the 2009 4`" Quarter Noise Standards LAX Quarterly Report was released. The noise levels on the site were reduced from 70 db CNEL to 65 db CNEL (see Exhibit 4). No changes have been made to the FEIR to reflect the change in noise levels, since the changes to the noise contours occurred after the EIR was prepared and made available for public comment. Staff recommends that the Council proceed with the SOC as drafted in an abundance of caution. VII. Public Comments The EIR was circulated for public comment between November 3, 2011 and December 19, 2011. One public agency continent, State of California Native American Heritage Commission (NAHC), was received during the comment period. The agency did not challenge the environmental findings or the recommended mitigation measures of the report. As required by CEQA a full response to all public comments received during the comment period has been prepared and is included in Exhibit 9. VIII. Inter -Departmental Comments The administrative Draft EIR was circulated to all City Departments for review and comment. Comments were received from the Building Safety Division, Recreation and Parks Department, Police Department and the Fire — Environmental Safety Division. The issues identified in the comments received were incorporated in the publicly circulated Draft EIR for the project 12 23 147 and/or where appropriate staff has incorporated those comments that are applicable and demonstrate a legal nexus as conditions of approval in the Resolution. IX. Awlication Findings In order to approve the project, the City Council must take certain actions related to the environmental review, General Plan Amendment land use designation, Zone Change, Zone Text Amendment, Specific Plan, Development Agreement, and Subdivision. The required findings for each application are discussed in detail in the attached draft Resolution and draft Ordinance. Staff believes that the City Council may make the required findings to adopt the Environmental Impact Report (E1R), Statement of Overriding Considerations (SOC) , and the Mitigation Monitoring and Reporting Program (MMRP), and to approve the General Plan Amendment, Zone Change, Zone Text Amendment, Specific Plan, Development Agreement, and Subdivision as outlined in the draft Resolution and draft Ordinance. Specifically, Planning staff recommends to the City Council that the unavoidable significant air quality and noise impacts identified in the EiR are acceptable when balanced against the benefits of the Project. X. Planning Commission Hearing and Public Input, The Planning Commission held its public hearing on the proposed project on January 26, 2012. The applicant and its representative (Mar Ventures Inc), and two residents provided testimony at the public hearing. No written comments were received from other responsible agencies or from the public prior to the Commission hearing. The applicant submitted a comment letter from the Park Vista Senior Facility Ad -Hoc Committee at the Commission hearing in support of the project and more specifically in favor of senior housing and assisted living. The Commission recommended approval. XI. Airport Land Use Commission (ALUC) Review In accordance with the Public Utilities Code (PUC) §21676, the Airport Land Use Commission (ALUC) (the LA County Planning Commission) is responsible for reviewing changes to local jurisdictions' land use policies to determine compatibility with the adopted Airport Land Use Plan (ALUP). The issue areas addressed in the ALUP relevant to the proposed project relate to hazards and noise. Recommendations made by the ALUC are advisory only to local jurisdictions. The final decision to agree or disagree with an ALUC consistency determination is at the discretion of the City Council. On February 22, 2012, the ALUC adopted a resolution making findings of consistency with the Airport Land Use Plan. Although the findings of consistency were adopted, the ALUC expressed concerns about potential litigation relating to the adoption of the proposed resolution and potential existing and future noise impacts. The Commission asked that the City ensure future property owners would waive their rights to legal action relating to the proximity of LAX. However, the City does not believe that it can condition the project in that manner. In an effort to provide greater clarification in the documents of record, the ESUSD, its representatives, and City staff agreed to provide greater clarification in the mitigation measures (MM 4.3-7) and conditions of approval regarding disclosure of noise impacts, mitigation of interior noise levels to 45 db CNEL, and the applicability of restrictive covenants as specified in proposed Condition of Approval No. 26 (see Exhibit 7 for Draft Covenant) that are binding to the property, recorded on the vesting tentative map, and transferable to all subsequent 13 24 WK purchasers. The ALUC also stated a preference for Option I and included a recommendation in their resolution that the City of El Segundo select this option. The City Council is not required to select or limit the approval to one Option and the proposed Specific Plan request is to allow the ESUSD the flexibility to select either Option. XII. Conclusion Planning staff believes that the proposed 540 East Imperial Avenue Specific Plan project meets the mandatory findings as set forth in the staff report and recommends that the City Council: 1) adopt the attached draft Resolution approving Environmental Assessment No. EA -890 certifying the Environmental Impact Report for the 540 East Imperial Avenue Specific Plan Project including the Mitigation Monitoring and Reporting Program (MMRP) and incorporating the Comments and Responses to Comment Section and EIR errata sheet; 2) adopt a Statement of Overriding Considerations; and 3) adopt an Ordinance approving General Plan Amendment No. 10-03, Specific Plan No. 10-03, Zone Change No. 10-01, Zone Text Amendment No. 10-06, Development Agreement No. 10-02, Subdivision 10-01 for Vesting Tentative Map (VTM) No. 71410 (7 lots) and VTM No. 71582 (31 lots) with conditions. PAPlanning & Building SafetyW Planning - Old1PROJECPS (Planning)1876-9001EA-9901City Council March 6 20121EA-890 CC report 03 06 12.doc 14 25 EEO EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: New Business Consideration and possible action regarding the City Council to receive and file the Comprehensive Annual Financial Report (CAFR) for fiscal year ending September 30, 2018. (Fiscal Impact: $0). RECOMMENDED COUNCIL ACTION: 1) City Council receive and file the Comprehensive Annual Financial Report (CAFR) for fiscal year ending September 30, 2018 (attachment A). 2) Alternatively, discuss and take other possible action related to this item. ATTACHED SUPPORTING DOCUMENTS: A) Fiscal Year (FY) 2017-18 CAFR FISCAL IMPACT: N/A Amount Budgeted: $0 Additional Appropriation: $0 Account Number(s): N/A STRATEGIC PLAN: Goal: 5(b) Champion Economic Development and Fiscal Sustainability: El Segundo approaches its work in a financially disciplined and responsible way Objective: 2 The City will maintain a stable, efficient, and transparent financial environment ORIGINATED BY: Joseph Lillio, Director of Finance -?71�. APPROVED BY: Greg Carpenter, City Manager BACKGROUND AND DISCUSSION: The CAFR for FY ending September 30, 2018, is submitted to the City Council for review. A representative from the City's audit firm, The Pun Group LLP, will be providing a brief presentation on the audit and will be available to answer questions. Overview of the Financial Statements This annual report consists of four parts — management's discussion and analysis (MD&A - current portion), the basic financial statements, optional combining statements for non -major governmental funds, and required supplementary information. The MD&A discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government -wide 150 financial statements 2) fund financial statements and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements. The City's net position from governmental activities decreased $2,015,878. The decrease in net position is attributed to an overall increase in revenues compared to the prior year, as well as an increase in overall expenses in all governmental funds compared to the prior year. A major contributing factor to the decrease in net position was the rising pension costs, PERS prepayment, and funding of the section 115 pension trust. • In summary, the following contributing items have impacted the overall net position: o Utility user taxes (WT) increased by $1.46 million due to higher demand for natural gas and cogenerated electric, as well as higher natural gas prices, the other UUT sources (water, electric, and phone) have been steadily declining over the last several years due to conservation efforts, more efficient building codes and appliances, as well as the State's Cap and Trade Climate Change Law (AB 32) which had a negative impact on the utilities' bottom line, which ultimately has a negative impact on UUT; o Property Taxes increased by $1.35 million due to reassessed values granted to properties changing ownership, continuous restorations and remodels that increase the assessed value, and the Prop. 13 CPI increase (maximum of 2%) applied to assessed values by the Assessor's Office. o Transient occupancy taxes increased by $1 million primarily due to new hotels reporting for a full year; o Franchise taxes increased by $1 million due to higher demand for natural gas based commodities, as well as higher commodity prices associated with natural gas; o Business license taxes increased by $223 thousand primarily due to the annual CPI increase; o Sales Tax decreased by $1.56 million primarily due to the continued trend of retail sales moving from brick and mortar sites to online sales, negative audit adjustments which resulted in sales tax received by the City in error and now need to be paid back to the correct jurisdiction, as well as the State has moved to a new reporting system which has caused a three month delay in reconciling receipts. This reconciliation will be caught up in FY 2018-19 and the City will be made whole for approximately $700 thousand; o General government expenditures increased by $1.35 million primarily due to a $1 million contribution to the section 115 pension trust, an additional pension payment of —$600 thousand made to Ca1PERS for the miscellaneous (non -sworn) employees, and increases in contractual and professional services due to the increase in minimum wage and other inflationary pressures; o Public safety expenses increased by $2 million primarily due to the additional pension payment of $1.3 million made to Ca1PERS for the Public Safety (sworn) employees, positions that were vacant in the prior year are now filled, and increases in pension costs; o Public Works expenses increased by $1.9 million. This is attributed to increases in contractual and professional services due to the increase in minimum wage and 151 other inflationary pressures, positions that were vacant in the prior year are now filled, and increases in pension costs. The following table reflects the change in net position from fiscal year 2017 to fiscal year 2018. 152 Governmental Business/Enterprise Total Activities Activities Primary Government 2018 2017 2018 2017 2018 2017 Revenues Program revenues: Charges for services $8,908,937 $8,502,348 $33,779,053 $37,506,159 $42,687,990 $46,008,507 Operating grants and contributions 1,858,256 1,189,900 1,858,256 1,189,900 Capital grants and contributions 1,197,981 1,737,376 - - 1,197,981 1,737,376 General revenues: Property taxes 10,444,931 9,093,796 - - 10,444,931 9,093,796 Transient Occupancy taxes 13,885,312 12,876,631 - - 13,885,312 12,876,631 Sales taxes 10,636,769 12,201,208 - - 10,636,769 12,201,208 Utility user taxes 6,536,876 5,079,447 - - 6,536,876 5,079,447 Franchise taxes 3,823,851 2,866,533 - - 3,823,851 2,866,533 Business license taxes 11,612,760 11,389,796 - - 11,612,760 11,389,796 Other taxes 7,524,580 7,685,799 - - 7,524,580 7,685,799 Motor vehicles in lieu - 7,461 - - - 7,461 Use of money and property, unrestricted 760,598 532,728 176,212 170,178 936,810 702,906 Other 1.954.399 889.337 16.929 142.623 1.97I.329 1.031.9610 Total revenues 79,145,250 74,052,360 33,972,194 37,818,960 113,117,444 111,871,320 Expenses General government 16,215,039 14,869,930 - - 16,215,039 14,869,930 Public safety 44,847,122 42,891,455 - - 44,847,122 42,891,455 Public works 9,413,340 7,474,391 - - 9,413,340 7,474,391 Community & cultural 10,442,877 11,407,811 - - 10,442,877 11,407,811 Interest on long-term debt 242,750 361,470 - - 242,750 361,470 Water - - 27,907,911 26,508,255 27,907,911 26,508,255 Sewer - - 4,164,437 4,048,104 4,164,437 4,048,104 Golf Course - 1.99.0.092 2.017.104 1.990.092 2.017.104 Total expenses 81,161,128 77,005,057 34,062,440 32,573,463 115,223,568 109,578,520 Excess (deficiency) before transfers (2.015.8781 (2.952.69719( 0.246) 5.245.497 f2.106.124) 2.292.80.0 Transfers in/(out) - - - - - - Increase (decrease)in net position (2,015,878) (2,952,697) (90,246) 5,245,497 (2,106,124) 2,292,800 Net position at beginning of year (as restated* due to implementation of GASB 75 in 2018— OPEB obligations) f25.736A431" 11.821.173 41.396.374* 38.242.746 15.659.931 50.063.919 Net position at end of year (27.752.321) 9 96&476 41.306.128 43.488.243 13.553.807 52.356.719 152 *CAFR Note 14 — Prior Period Adjustments The City implemented GASB Statement No. 75 during the year ended September 30, 2018. The beginning net position at October 1, 2017 were related as follows. Governmental Activities Net Position (Deficit) at October 1, 2017 $ 8,868,476 Deferred Outflows of Resources -OPEB contribution during measurement period 3,800,087 Net OPEB Liabilities (38,861,574) Fund not reported in prior year - Measure M 12,766 Capital assets additions from prior year 443.802 Net Position (Deficit) at October 1, 2017, as Restated $ (25,736,443) The cost of all governmental activities for the year was $81.2 million. The taxes that ultimately financed these activities were only $64.5 million and a portion of the costs were paid by those who directly benefited from the programs or by other governments ($8.9 million), organizations that subsidized certain programs with grants and contributions ($3.1 million), other miscellaneous revenues ($2.7 million), and unassigned fund balance ($2.0 million). Overall, the City's governmental revenues totaled $79.1 million. Of these revenues, $13.9 million came from transient occupancy taxes, business license taxes of $11.6 million, $11.4 million came from program revenues, sales and use taxes of $10.6 million, property taxes of $10.4 million, utility user taxes of $6.5 million, franchise taxes of $3.8 million, and other revenues and taxes of $10.9 million. CONCLUSION AND RECOMMENDATION The Pun Group LLP completed the audit of the City and issued an unqualified ("clean") opinion on the City's financial statements for the year ending September 30, 2018. Copies of the audit will be provided to the City Council Members with their agenda packages. Other interested individuals may obtain a copy of the audit from the Finance Department or through the City's website at www.ELSEGUNDO.org. 153 CITY OF ELSEGUNDO /CALIFORNIA .4 Comprehensive Annual Financial Report FISCAL YEAR 2017-2018 154 City of El Segundo Comprehensive Annual Financial Report For the Year Ended September 30, 2018 Table of Contents INTRODUCTORY SECTION (Unaudited) Page Letterof Transmittal................................................................................................................................................ i OrganizationChart ................................................................................................................................................ vi Officials of the City of El Segundo, California.................................................................................................... vii FINANCIAL SECTION Independent Auditors' Report on the Financial Statements............................................................................ 1 Management's Discussion and Analysis (Required Supplementary Information) (Unaudited).. . ............... . 5 Basic Financial Statements: Government -Wide Financial Statements: Statementof Net Position........................................................................................................................ 18 Statementof Activities............................................................................................................................ 20 Fund Financial Statements: Governmental Fund Financial Statements: BalanceSheet.................................................................................................................................... 26 Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of Net Position.................................................................. 27 Statement of Revenues, Expenditures, and Changes in Fund Balances ........................................... 28 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government -Wide Statement of Activities and Changes in Net Position .................................. 29 Proprietary Fund Financial Statements: Statementof Net Position ................ .................................................. ---- .................................. ... 32 Statement of Revenues, Expenses, and Changes in Net Position ..................................................... 35 Statementof Cash Flows.................................................................................................................. 36 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position................................................................................................. 41 Index to Notes to the Basic Financial Statements.......................................................................................... 45 Notes to the Basic Financial Statements........................................................................................................ 47 155 City of El Segundo Comprehensive Annual Financial Report For the Year Ended September 30, 2018 Table of Contents (Continued) Page FINANCIAL SECTION (Continued) Required Supplementary Information (Unaudited): Budgetary Comparison Schedule — General Fund......................................................................................... 97 Budgetary Comparison Schedule — LAWA Special Revenue Fund.............................................................. 98 Budgetary Comparison Schedule — Special Revenues and Donations Special Revenue Fund... ................... 99 Notes to the Budgetary Comparison Schedule............................................................................................ 100 Schedule of Changes in Net Pension Liability and Related Ratios — Ca1PERS Miscellaneous Rate Plan.. 101 Schedule of Changes in Net Pension Liability and Related Ratios — Ca1PERS Safety Rate Plan ............... 102 Schedule of the City's Proportionate Share of the Net Pension Liability Community Development Block Grant Special Revenue Fund ..................................................... and Related Ratios — Ca1PERS Safety Rate Plan............................................................................. 103 Schedule of Changes in Net Pension Liability and Related Ratios — Public Agency PropA Special Revenue Fund........................................................................................................ Retirement System Defined Benefit Plan......................................................................................... 104 Schedule of Contributions — Ca1PERS Miscellaneous Rate Plan................................................................ 105 Schedule of Contributions — Ca1PERS Safety Rate Plan............................................................................. 106 Schedule of Contributions — Public Agency Retirement System Defined Benefit Plan .............................. 107 Schedule of Changes in Total OPEB Liability and Related Ratios............................................................. 108 Scheduleof Contributions — OPEB Plan..................................................................................................•.. 109 Supplementary Information: General Funds: CombiningBalance Sheet..................................................................................................................... 112 Combined Statement of Revenues, Expenditures, and Changes in Fund Balances .............................. 114 Nonmajor Governmental Funds: CombiningBalance Sheet..................................................................................................................... 118 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ............................. 123 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual: State Gas Tax Special Revenue Fund............................................................................................. 128 Residential Sound Insulation Special Revenue Fund..................................................................... 129 Certified Union Program Agencies Special Revenue Fund............................................................ 130 Community Development Block Grant Special Revenue Fund ..................................................... 131 Asset Forfeiture Special Revenue Fund.......................................................................................... 132 PropA Special Revenue Fund........................................................................................................ 133 PropC Special Revenue Fund........................................................................................................ 134 TrafficSafety Special Revenue Fund............................................................................................. 135 Air Pollution Reduction Special Revenue Fund............................................................................. 136 SB821 Special Revenue Fund....................................................................................................... 137 C.O.P.S. Special Revenue Fund...................................................................................................... 138 Measure R Special Revenue Fund.................................................................................................. 139 FederalGrants Special Revenue Fund............................................................................................ 140 StateGrants Special Revenue Fund................................................................................................ 141 PSAF Property Tax Public Safety Special Revenue Fund.............................................................. 142 Senior Housing Special Revenue Fund........................................................................................... 143 156 City of El Segundo Comprehensive Annual Financial Report For the Year Ended September 30, 2018 Table of Contents (Continued) Pate FINANCIAL SECTION (Continued) Supplementary Information (Continued): MeasureM Special Revenue Fund....................................................................... ................._. 144 SB1 Special Revenue Fund.........................................................................................................— 145 Certified Access Specialist Program Special Revenue Fund.......................................................... 146 Facility Lease Debt Service Fund................................................................................................... 147 Capital Improvements Capital Projects Fund ......................................................... 148 Internal Service Funds: CombiningStatement of Net Position. .................................................................................................. 151 Combining Statement of Revenues, Expenses and Changes in Net Position ........................................ 152 CombiningStatement Cash Flows........................................................................................................ 153 Fiduciary Funds: Statement of Changes in Fiduciary Assets and Liabilities..............................................................."... 157 STATISTICAL SECTION (Unaudited) Description of Statistical Section Contents........................................................................................................ 161 Financial Trends: Net Position by Component — Last Ten Fiscal Years......................................................................................... 162 Changes in Net Position — Last Ten Fiscal Years.............................................................................................. 164 Fund Balances of Governmental Funds - Last Ten Fiscal Years....................................................................... 168 Changes in Fund Balances — Governmental Funds - Last Ten Fiscal Years ...................................................... 170 Revenue Capacity: Top25 Sales Tax Producers............................................................................................................................... 173 Principal Property Tax Payers — Current Year and Ten Years Ago................................................................... 174 Assessed Value and Estimated Actual Value of Taxable Property — Last Ten Fiscal Years ............................. 175 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years................................................................ 176 Property Tax Levies and Collections - Last Ten Fiscal Years........................................................................... 178 Debt Capacity: Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years................................................................. 179 Ratio of Outstanding Debt by Type - Last Ten Fiscal Years............................................................................. 180 Direct and Overlapping Bonded Debt.................................................................... 182 LegalDebt Margin Information - Last Ten Fiscal Years................................................................................... 183 Demographic and Economic Information: Demographic and Economic Statistics - Last Ten Calendar Years.................................................................... 185 Ten Principal Employers — Current Year and Eight Years Ago..................................................................... — 186 157 City of El Segundo Comprehensive Annual Financial Report For the Year Ended September 30, 2018 Table of Contents (Continued) Page STATISTICAL SECTION (Unaudited) Operating Information: Full -Time and Part -Time City Employees by Function - Last Ten Fiscal Years ............................................... 187 Operating Indicators by Function - Last Ten Fiscal Years................................................................................. 189 Capital Asset Statistics by Function - Last Ten Fiscal Years............................................................................. 191 158 G1T � �•�* � v May 30, 2019 To the Honorable Mayor, Members of the Governing Council, and Citizens of El Segundo: State law requires that every general-purpose local government publish each fiscal year a complete set of audited financial statements. This report is published to fulfill that requirement for the fiscal year ended September 30, 2018. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive frame -work of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. The Pun Group, LLP, an Independent CPA Firm, has issued an unqualified ("clean") opinion on the City of El Segundo's financial statements for the year ending September 30, 2018. The independent auditor's report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follow the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complement's this letter of transmittal and should be read in conjunction with it. Profile of the government The City of El Segundo is located 14 miles southwest of downtown Los Angeles, adjacent to the City of Los Angeles International Airport. The City was incorporated January 18, 1917, as a general law city, with the Standard Oil Company of California refinery as the major industrial taxpayer and employer. The substantial petroleum base of the local economy remains evident, although the defense industry emerged as a major segment during World War II. Aerospace experienced rapid growth during the early 1980's and accounted for a significant share of El Segundo's industrial growth during those years. A downturn in the aerospace/defense industry began in the late 1980's, and the industry's recovery took place through consolidation and diversification into commercial endeavors. The available commercial/industrial space has been attracting new business -to -business retail services segments, and providing opportunities to diversify and enhance the revenue source of the City. 159 The City of El Segundo has operated under the council-manager form of government since 1917. Policy-making and legislative authority are vested in the governing council (Council) consisting of the mayor and four other members, all elected on a non-partisan basis. The Council appoints the government's city manager, who in turn appoints the heads of the various departments. Council members serve four-year terms and are elected at large. Alternating election schedule with two seats open during one election cycle and three seats open the next election cycle. The Mayor is selected by the seated council every two years. The City of El Segundo provides a full range of municipal services, including police and fire protection; highway, street and infrastructure maintenance and construction; water and sewer operations; library services; planning, zoning and code enforcement; recreational and cultural activities; and general administration. This report includes all funds of the City of El Segundo and those component units controlled by and dependent on the City. Accordingly, this report incorporates financial data for the Park Vista Senior Housing Corporation. The Council is required to adopt a final budget by no later than the close of the fiscal year. This annual budget serves as the foundation for the City of El Segundo's financial planning and control. The budget is prepared by fund, function (e.g., public safety), and department (e.g., police). Department heads may transfer resources within a department as they see fit. Transfers between departments, however, must be approved by the City Manager. Any transfers between funds must be approved by the City Council. Local economy El Segundo celebrated its centennial anniversary in 2017, commemorating 100 years of innovation, leadership, and growth. In 1911, Standard Oil opened its second refinery in California in what is now El Segundo. The city was incorporated 1917 with its foundation as home to workers in the petroleum industry. Over the last 100 years, El Segundo has become a thriving business center, home to AT&T, the Los Angeles Lakers and Los Angeles Kings, DaVita Healthcare, and Mattel. Los Angeles Air Force Base and the Aerospace Corporation are located in El Segundo, and the City has a longstanding tradition of innovation in Aerospace. Boeing, Northrop Grumman, Lockheed Martin and Raytheon, are among the many prestigious Fortune 500 companies with facilities in El Segundo. Over half of all satellites and vehicles in space are manufactured in El Segundo.' Global Positioning Satellite Systems, Global Hawk's unmanned aerial vehicle surveillance aircraft, and the FA -18 are also developed and conceived in El Segundo. In addition to aerospace and petroleum, the local economy is comprised of many high-growth industries, including: bioscience, emerging technology, creative services, sports, entertainment, and professional services. El Segundo is also home to inventive and growing companies that will shape our future economy, such as Kite Pharma, JustFab, Beyond Meat, Milleneum Space Systems, and WPromote. El Segundo has been recognized as the Most Business -Friendly City in Los Angeles County twice, and offers low tax rates, convenient access to transportation, and a highly skilled workforce. ii -re Long-term financial planning The City's financial security is fundamental to the administration of the City's policies and practices. The City Council has always been and continues to take a conservative approach in maintaining a strong financial position by limiting the growth of spending and acquiring additional debt. It has established an Economic Uncertainty Reserve Fund and Capital Improvement Fund to meet the needs of unforeseen circumstances that may occur in the future. The City has traditionally implemented a strategy of adopting a strategic plan that is reviewed and updated each year by the City's management and the City Council. Towards the end of FY 2016-17, the City conducted a series of strategic planning sessions that resulted in the City's first multi-year strategic plan. The strategic plan will be used as a guideline to set priorities and in development of the budget. The City has also begun to focus more closely on the unfunded pension liabilities the City owes to the California Public Employees' Retirement System (CalPERS). The City's total unfunded pension liability at September 30, 2018 was about $132 million. These liabilities have been increasing over the past several years due to: • CalPERS Board approving to lowering the CalPERS Discount Rate (Assumed Rate of Return) on Investment Pool Assets from 7.5% to 7.0%; • The Great Recession and poor CalPERS investment returns; • Increased cash outflows in the CalPERS investment portfolio ($20.5 billion annually); • Revising mortality tables and other actuarial assumptions that have negative impacts on member agencies' rates; • Shrinking ratio of active vs. retired employees; • State Legislatures actions resulting in policy mandates on CalPERS to focus on "social investment" practices that align with the Legislatures ideologies; resulting in divestment from many market sectors that have performed well; and • CalPERS amortization methodology on losses and assumption changes that results in negative amortization City Council is commended for taking a proactive approach to address the City's rising pension costs to reduce the City's overall pension liabilities, saving millions of dollars going from City reserves towards CalPERS pension costs. Here are some of the key strategic actions City Council has taken to help reduce pension liabilities and reduce annual costs: Establishing an ad-hoc Pension Committee to address the rising pension costs Accelerated Funding - Budget additional pension funding to pay down unfunded CalPERS pension liabilities ■ Additional Payment towards Unfunded Pension Liabilities in FY 2017-18 in the amount of $1,901,141 (direct reduction of principal) resulting in a savings of $2,587,000 in interest payments to CalPERS over the next 25 years Pre -paying the Annual Unfunded Liability (UAL) ■ Prepaid the UAL for FY 2017-18, saving $258,000 for the year 161 • Set-up IRS Section 115 Pension Trust —Pension Stabilization Fund • Approved in November 2017 * Initial funding of $1 million during the mid -year update in April 2018 • Complete or Partial Fresh Start (Refinance) +� In December 2017 City Council approved staff recommendations to refinance the Miscellaneous Plan (refinanced from 30 years to 22 years), PD 2nd Tier Plan (refinanced to 10 years), and PD PEPRA Plan (refinanced to 10 years): resulting in a savings of $1.86 million in interest payments to Ca1PERS over the next 30 years. ■ Creation of 2nd Misc Tier (2%@55 to 2% @ 60 was effective 1/1/2013) and 2nd PD Tier (3% @50 to 3% @ 55 was effective Nov. 2012) Relevant financial policies The City's general fund reserve policy in FY 2017-18 was increased from 18% (FY 2016-17 policy level) to 19% of the City's current general fund expenditures for its operating reserves, as well as funding up to $2 million in a separate Economic Uncertainty Reserve Fund. The reserve requirement for the General Fund will eventually increase to 20%, as well as maintaining a reserve of $2 million in the Economic Uncertainty Fund, per the current Council policy direction. The City takes a conservative approach in relation to incurring debt with a "pay-as-you-go" approach. It is currently funding 100% of the actuarial required contribution (ARC) for its other (than pension) post -employment benefits (OPEB). The City Treasurer is charged with managing and investing cash for the City along with support from the Investment Advisory Committee, which meets quarterly. Major initiatives The City currently has a Capital Infrastructure Plan (CIP) that includes the following projects: • Annual Sidewalk, Curb and Gutter Restoration Program + Local street rehabilitation and slurry seal • City-wide facilities assessment and repairs Main and Imperial entryway beautification • McCarthy Court Street improvement • Indiana water main replacement • Walnut Ave drainage improvement • California Street storm drain improvements • Water main improvements on Mariposa Ave. ■ Sewer main repairs • Pump station rehabilitation • Class III bike route improvements • Various smaller projects that have provided enhanced benefits to the community iv 162 Acknowledgements The preparation of this report would not have been possible without the efficient and dedicated service of the entire staff of the Finance Department. We wish to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. Credit also must be given to the mayor and the governing council for their unfailing support for maintaining the highest standards of professionalism in the management of the City of El Segundo's finances. Respectfully submitted, Joseph Lillio: Director of Finance G M�,,rp rater: y nager v 163 CITY OF EL SEGUNDO CITIZENS OF EL SEGUNDO 1 { I CITY CITY TREASURER COUNCIL CITY CITY MANAGER ATTORNEY INFORMATION HHUMAN SYSTEMS RESOURC ES FINANCE POLICE PLANNING FIRE HBUILDING SAFETY J PUBLIC RECREATION WORKS &PARKS LIBRARY vi I CITY CLERK 164 Name Drew Boyles Carol Pirsztuk Dr. Don Brann Chris Pimentel Scot Nicol Greg Carpenter Mark Hensley Crista Binder Tracy Weaver Joseph Lillio David Serrano Bill Whalen Christopher Donovan Melissa McCollum Sam Lee Meredith Petit Ken Berkman Charles Mallory CITY OF EL SEGUNDO September 30, 2018 CITY COUNCIL MEMBERS Mayor Mayor Pro Tem Council Member Council Member Council Member CITY OFFICIALS CITY ADMINISTRATION vii Term Expires April 2020 April 2020 April 2020 April 2022 April 2022 City Manager City Attorney City Treasurer City Clerk Director of Finance Director of Human Resources Chief of Police Fire Chief Director of Library Services Director of Planning and Building Safety Director of Recreation and Parks Director of Public Works Director of Information Systems 165 This page intentionally left blank. 166 THE ��' PUN G 0LIP ACCOUNTANTS & ADVISORS INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and the Members of the City Council of the City of El Segundo El Segundo, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of El Segundo, California (the "City"), as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibilityfor the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the El Segundo Senior Citizen Housing Corporation, a discretely presented component unit which represents 0.56%, 9.42%, and 0.61 %, respectively, of the assets, net position, and revenues of the primary government opinion unit. Those statements for the year ended December 31, 2017 were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for El Segundo Senior Citizen Housing Corporation, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 200 F. Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 • www.pungroup.com 167 To the Honorable Mayor and the Members of the City Council of the City of El Segundo El Segundo, California Page 2 Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City as of September 30, 2018, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Implementation of GASB 75 As discussed in Note IL to the basic financial statements, the City implemented Governmental Accounting Standards Board ("GASB") Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The adoption of the standard required retrospective application of previously reported net position as of Octoberl, 2017 as described in Note 9 to the basic financial statements. In addition, total OPEB liability is reported in the Statement of Net Position in the amount of $41,081,886 as of the measurement date. Total OPEB liability is calculated by actuaries using estimates and actuarial techniques from an actuarial valuation as of June 30, 2017 which was then rolled -forward by the actuaries to June 30, 2018, the measurement date. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Budgetary Comparison Schedules, Schedule of Changes in Net Pension Liabilities and Related Ratios — Ca1PERS Miscellaneous Plan, Schedule of Changes in Net Pension Liabilities and Related Ratios — Ca1PERS Safety Plan, Schedule of Changes in Net Pension Liabilities and Related Ratios — PARS Plan, Schedule of Proportionate Share of Net Pension Liabilities and Related Ratios — CalPERS Safety Plan, Schedules of Contributions — Pensions, Schedule of Changes in Total OPEB Liabilities and Related Ratios and Schedule of Contributions — OPEB on pages 5 through 16 and 97 through 109 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. .: To the Honorable Mayor and the Members of the City Council of the City of El Segundo El Segundo, California Page 3 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The Introductory Section, the Combining General Fund Financial Statements, the Combining and Individual Nonmajor Fund Financial Statements, and the Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining General Fund Financial Statements, Combining and Individual Fund Financial Statements and the Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining General Fund Financial Statements, the Combining and Individual Fund Financial Statements and the Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory and the Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 30, 2019 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Santa Ana, California May 30, 2019 169 This page intentionally left blank. 170 Management's Discussion and Analysis As management of the City of El Segundo, California (City) we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of El Segundo for the fiscal year ended September 30, 2018. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal and the City's financial statements. Financial Highlights The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $13,553,807 (total net position). The City had an unrestricted net position of ($118,904,759). This negative unrestricted net position is the result of GASB 68 implementation in FY 2014-15 that required all government entities to place their unfunded pension liabilities onto their agencies Statement of Net Position. Also GASB 75 implementation in FY 2017-18 required all government entities to place their unfunded post -employment benefit liabilities other than pensions onto their agencies Statement of Net Position. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $43,679,037. Of this amount, $29,540,003 (unrestricted fund balance per GASB 54) is available for spending at the City's discretion. At the end of the current year, unrestricted fund balance per GASB 54 for the general fund was $26,642,651 which represents 41% of total general fund expenditures, net of transfer out, for fiscal year 2017-18. Overview of the Financial Statements This annual report consists of four parts — management's discussion and analysis (MD&A - current portion), the basic financial statements, optional combining statements for non -major governmental funds, and required supplementary information. The MD&A discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government -wide financial statements 2) fund financial statements and 3) notes to the financial statements. This report also contains supplementary information in addition to the basic financial statements. 5 171 Components of the Financial Section I I 1 Management's Basic Required Discussion Financial Supplementary and Statements Information Analysis Government -wide Fund Notes Financial Financial to the Statements Statements Financial Statements Summary Detail 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. These statements include all assets and liabilities of the City. The statement of net position presents information on all of the City's assets and liabilities, with the difference between the two 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 City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event 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 affect cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from functions that are intended to recover some or all of their costs through user fees and charges (business -type activities). Governmental activities: Most of the City's basic services are reported in this category, including the general administration (city manager, city clerk, administrative services, etc.), police and fire protection, public works and community development. Property taxes, sales tax, transient occupancy tax, user fees, interest income, franchise fees, state and federal grants, contributions from other agencies, and other revenues finance these activities. Business -type activities: The City charges a fee to customers to cover all or most of the costs of certain services it provides. The City's Water and Sewer utilities and Golf Course operation are reported in this category. The government -wide financial statements can be found beginning on page 18 of this report. 6 172 Fund Financial Statements: The fund financial statements provide detailed information about the most significant funds and other funds — not the City as a whole. Some funds are required by state law and by bond covenants. However, management has established other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other resources. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds: Most of the City's basic services are reported in governmental funds, which focus on how money flows in and out of those funds and the balances left at year-end that are available for spending. The City's governmental funds in fiscal year 2018 are General Fund, LAWA Fund, Special Revenues / Donations Fund and Non-major Governmental Funds. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The differences between the results in the Governmental Fund financial statements to those in the Government -Wide financial statements are explained in a reconciliation following each Governmental Fund financial statement. In addition to the major funds reported separately on the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances, the City also maintains 20 special revenue funds, one capital project fund and one debt service fund. Data from these funds are combined into a single, aggregated presentation referred to as other governmental funds. Individual fund data for each of these non-major governmental funds are provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for all of its governmental and proprietary funds. A budgetary comparison statement has been provided for the general fund and major special revenue funds to demonstrate compliance with this budget. This comparison can be found on pages 97-99 of this report. The basic governmental fund financial statements can be found on pages 26-29 of this report. Proprietary funds: When the City charges customers for the services it provides, these services are generally reported in proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Water, Sewer and Golf Course activities. 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 equipment replacement cost and general liability and workers' compensation cost. Because these services predominantly benefit governmental rather than business-type functions, these funds have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements except that more detail is presented. The proprietary fund financial statements provide separate information for the Water, Sewer and Golf Course operations, all of which are considered major funds of the City. The City's internal service fund is shown separately under the heading of governmental activities. 173 The basic proprietary fund financial statements can be found on pages 32-37 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 these funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City's fiduciary activities are reported in a separate Statement of Fiduciary Assets and Liabilities. The basic fiduciary fund financial statements can be found on page 41 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 43-93 of this report. Other information: The combining statements referred to earlier in connection with non -major governmental funds and internal service funds are presented immediately following the notes to the financial statements. Combining and individual fund statements and schedules can be found on pages 112-127 of this report. Government -wide Financial Analysis As was referenced earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, total assets exceeded total liabilities by $13,553,807 at the close of 2018 fiscal year. A summary of the government -wide statement of net position follows: It should be kept in mind while reviewing these schedules 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. These assets are used to provide services to its citizens and are not available for future spending. a 174 Governmental Business Total Activities Activities Primary Government 2018 2017 2018 2017 2018 2017 Assets: Current and other assets 5 78,493,373 $ 71,572,839 $ 22,853,213 $ 25,487,213 $ 101,346,586 $ 97,060,052 Capital assets 103,855,426 101,921,954 31,023,904 27,679,609 134,879,330 129,601,563 Total assets 182,348,799 173,494,793 53,877,117 53,166,822 236,225,916 226,661,615 Liabilities: Current and other liabilities 21,939,547 23,842,318 5,767,692 5,490,707 27,707,239 29,333,025 Noncurrent liabilities 197,249,760 156,191,497 6,993,783 4.815.095 204,243,543 161,006,592 Total liabilities 219,189,307 180,033,815 12,761,475 10,305,802 231,950,782 190,339,617 Net assets: Net investment in capital assets 93,775,527 92,615,618 30,800,645 27,679,609 124,576,172 120,295,227 Restricted 7,882,394 7,372,369 - - 7,882,394 7,372,369 Unrestricted (129,410,242) (91,119,511) 10,505,483 15,808,634 (118,904,759) (75,310,877) Total net position $ (27,752,321) $ 8,868,476 $ 41,306,128 $ 43,488,243 $ 13,553,807 $ 52,356,719 It should be kept in mind while reviewing these schedules 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. These assets are used to provide services to its citizens and are not available for future spending. a 174 A summary of the government -wide statement of activities follows: 9 175 Governmental Business Total Activities Activities Primary Government 2018 2017 2018 2017 2018 2017 Revenues Program revenues: Charges for services $ 8,908,937 $ 8,502,348 $ 33,779,053 $ 37,506,159 $ 42,687,990 $ 46,008,507 Operating grants and contributions 1,858,256 1,189,900 - - 1,858,256 1,189,900 Capital grants and contributions 1,197,981 1,737,376 1,197,981 1,737,376 General revenues: - ' Property taxes 10,444,931 9,093,796 - - 10,444,931 9,093,796 Transient Occupancy taxes 13,885,312 12,876,631 - - 13,885,312 12,876,631 Sales taxes 10,636,769 12,201,208 - - 10,636,769 12,201,208 Utility user taxes 6,536,876 5,079,447 - - 6,536,876 5,079,447 Franchise taxes 3,823,851 2,866,533 - 3,823,851 2,866,533 Business license taxes 11,612,760 11,389,796 - - 11,612,760 11,389,796 Othertaxes 7,524,580 7,685,799 - - 7,524,580 7,685,799 Motor vehicles in lieu - 7,461 - - - 7,461 Use of money and property, unrestricted 760,598 532,728 176,212 170,178 936,810 702,906 Other 1,954,399 889,337 16,929 142,623 1,971,328 1,031,960 Total revenues 79,145,250 74,052,360 33,972,194 37,818,960 113,117,444 111,871,320 Expenses General government 16,215,039 14,869,930 - - 16,215,039 14,869,930 Public safety 44,847,122 42,891,455 44,847,122 42,891,455 Public works 9,413,340 7,474,391 9,413,340 7,474,391 Community & cultural 10,442,877 11,407,811 10,442,877 11,407,811 Interest on long-term debt 242,750 361,470 242,750 361,470 Water - - 27,907,911 26,508,255 27,907,911 26,508,255 Sewer 4,164,437 4,048,104 4,164,437 4,048,104 Golf Course - 1,990,092 2,017,104 1,990.092 2,017,104 Total expenses 81,161,128 77,005,057 34,062,440 32,573,463 115,223,568 109,578,520 Excess (deficiency) before transfers (2,015,878) (2,952,697) (90,246) $,345;497 (2.106,124) 2,292,800 Transfers - - - Increase (decrease)in net assets (2,015,878) (2,952,697) (90,246) 5,245,497 (2,106,124) 2,292,800 Net position at beginning of year, (as restated) (25,736,443) 11,821,173 41,396,374 38,242,746 15,659,931 50,063,919 Net position at end of year S (27,752XI) 5 8,868,476 5 41,306,128 S 43.488;243. S 13,557,807 5 52,356,719 9 175 Governmental Activities The City's net position from governmental activities decreased $2,015,878. The decrease in net position is attributed to an increase in revenues and an increase in expenses in all governmental funds. • In summary: o Property taxes increased $1.4 million due to increased property values; o Transient occupancy taxes increased by $1 million primarily due to higher occupancies; o Sales taxes decreased $1.6 million due to the nationwide trend to e-commerce; o Utility user taxes increased by $1.5 million due to increased consumption of utilities; o Franchise taxes increased by almost $1.0 million due to increased gas consumption; o Business license taxes increased by $223 thousand primarily due to a CPI rate increase; o Other miscellaneous revenues increased by $1 million primarily due to higher investment returns, an interfund transfer and an increase in VLF revenues; o Charges for services increased by $407 thousand due to increased activity from the effects of a better economy; o General government expenses increased by $1.4 million mainly due to the prepayment of the unfunded pension liability approved by City Council; o Public safety expenses increased by almost $2 million primarily due to the prepayment of the unfunded pension liability approved by City Council and the filling of vacant positions; o Community & cultural expenses decreased by $965 thousand. This is mainly attributed to position vacancies and reduction of operational costs in Library. The cost of all governmental activities for the year was $81.2 million. The taxes that ultimately financed these activities were only $64.4 million and a portion of the costs were paid by those who directly benefited from the programs ($8.9 million) or by other governments and organizations that subsidized certain programs with grants and contributions ($3.1 million). Overall, the City's governmental program revenues were $12 million; of the remaining "public benefit" governmental activities, $11.6 million were paid with business license taxes, utility user taxes of $6.5 million, sales and use taxes of $10.6 million, property taxes of $10.4 million, franchise taxes of $3.8 million, transient occupancy tax of $13.9 million and other revenues and taxes of $10.2 million. 10 176 GOVERNMENT ACTIVITIES SOURCES OF REVENUE FISCAL YEAR 2017-2018 Use of money and property, lob Operating grants and contributions, Other, 2% Charges for Z Other taxes, 10% I Services, 11 ' 1 Capital grants and contributions, Z.0 Business license r Property taxes, 15% Taxes, I 13% Franchise taxes, Utility user tax, Transient g°y Sales taxes, 130/, occupancy taxes, 18% GOVERNMENT ACTIVITIES EXPENDITURES FISCAL YEAR 2017-2018 Interest on Long-term Debt 1 Doi General P�di, it Government Public Safety 55°/0 I1 177 Business -Type Activities The programs for the business -type activities include the water, sewer and the golf course operations. The City's net position from business -type activities decreased by $90,246. The cost of all Proprietary (Business Type) activities this year was $34,062,440. Charges for services are the major revenue source for the City's business -type activities, accounting for $33,779,053 of total business -type activity revenue. The Water Utility net cost of service of $(128,083) is attributable to a decrease in revenues due to lower sales volume. The Sewer Utility net cost of service of $184,412 is attributable to an increase in revenues due to an increase in sewer charges. The Golf Course net cost of service of ($339,716) is attributable to a decrease in revenues. Financial Analysis of the Government's Funds As noted earlier, 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 a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $43,679,037, an increase of $6.5 million or 18% from the previous year. The City's General Fund increased $5,256,756 due to an increase in revenues and lower expenditures. The LAWA Fund and the Special Revenue / Donations Funds fund balances increased by $187,498 and decreased by $35,365 respectively. The remaining amount is an increase in the non -major Governmental funds of $614,408 which is largely due to unspent funds in the Capital Improvement fund. The portion of fund balance that is unreserved, undesignated for all governmental funds is $24.1 million which represents amounts available for spending at the government's discretion. Additionally, there are portions of the identified combined ending fund balance that are reserved to indicate that it has already been committed (1) to liquidate contracts and purchase orders of the prior period $659,248 (2) to represent amounts committed for advanced to other funds, inventory, receivables and prepaid costs $6,256,640, (3) for a variety of other restricted purposes $13,324,079. More details can be found in Note 13. 12 178 LAWA 1% GOVERNMENTAL FUND BALANCE FISCAL YEAR 2017-2018 Other Governmental Funds Fund Major Funds: There are three major funds on the balance sheet for governmental funds. The first is the general fund, the chief operating fund of the City. At the end of the current fiscal year, the available fund balance (assigned and unassigned) was $26,642,651 which represents 79% of total fund balance of $33,899,291. As a measure of the general fund's available resources, it may be useful to compare restricted and total fund balance to total fund expenditures. The available fund balance represents 41% of total general fund expenditures, net of transfer out, while total general fund balance represents 53% of that same amount. Other major funds on the City's governmental funds balance sheet is the LAWA Fund and the Special Revenue/Donations Funds. The LAWA Fund has a total fund balance of $480,441 which is $187,498 more than the prior year's balance of $292,943. These funds are reimbursable through FAA Grants and Los Angeles World Airport (LAWA) settlement funds. The Special Revenue/Donations Funds has a total fund balance of $476,445 which is a decrease of $35,365 from the prior year's balance. Proprietary Funds: The City's proprietary funds provide the same type of information found in the government -wide financial statements but in greater detail. Ending unrestricted net position for the proprietary funds is $13,644,203 for the Water Utility Fund, $2,933,521 for the Sewer Utility Fund and a negative $6,000,826 for the Golf Course Fund. The total change in net position for the City's three proprietary funds is as follows: The Water Utility's net position increased by $6,025 or an increase of less than .1% over net position of the prior year; o The Sewer Utility's net position increased by $243,445 or an increase of 2% over net position of the prior year; and • The Golf Course net position decreased $339,716 or a net decrease of 7% over the prior year. 13 179 Other factors concerning the finances of these three funds have already been addressed in the discussion of the City's business -type activities. General Fund Budgetary Highlights During the year, with the recommendation from the City's staff, the City Council revised the expenditure City budget several times. Adjustments were made as the City's staff requested additional appropriations to cover the cost of projects that either had change orders for additional work, or the estimated cost at the beginning of the project was underestimated. All amendments that resulted in a net increase in appropriations are approved by the City Council. Appropriations Differences between the original budget and the final amended budget of the General Fund resulted in an increase in appropriations of $2,501,697, or a net decrease in budgetary fund balance of $2,501,697. • $218,965 increase in encumbrances for General Government. • $1,380,913 increase in encumbrances for Public Safety. • $983,662 increase in encumbrances for Community and Cultural. • $86,831 decrease in encumbrances for the Public Works. Over-all, the general fund was under budget when comparing budget to actual. This was accomplished through a strong departmental team effort to develop and implement a prioritized expenditure policy. The most significant savings were in General Government. The reasons for these savings are as follows: • The General Government Departments came in $1,774,458 under budget, primarily in salaries and benefits and operation and maintenance expenditures. • The Public Safety Departments came in $702,310 under budget primarily in salaries and benefits savings due to vacancies. • The Public Works Departments came in $1,459,392 under budget primarily in salaries and benefits savings due to vacancies and savings in and operations and maintenance expenditures. • The Community and Cultural Departments came in $1,544,560 under budget in salaries and benefits due to unfilled vacancies and savings in operations and maintenance expenditures. 14 180 Revenue Differences between the final budget and the actual revenues resulted in an increase of $4,236,299, or a 6.0% increase in budgeted revenues. Some significant variances between the final budget and actual revenues are as follows. • Taxes — A total increase of $2,798,360 above the final budget is mainly attributable to the following: o An increase of $1,449,107 in Gas Utility Taxes above the final budget is due to increased commodity prices for natural gas and an increase in the demand from the prior year; o An increase of $923,851 in Franchise Taxes above the final budget is due to an increase in the franchise tax from The Gas Company related to increased commodity prices for natural gas and an increase in the demand from the prior year. o An increase of $385,312 in Transient Occupancy Tax (T.O.T.) above the final budget is due to an increase in new hotels operating in the City. Charges for Services — The increase of $977,133 above the final budget is mainly attributable to large developments and plan check fees. For the City's general fund, amounts available for appropriation of $71,676,985 was $4,236,299 lower than actual revenues of $75,913,284, not including transfers in. Actual ending expenditures not including transfers out were $67,461,853 which was $5,576,018 less than the final budget of $72,863,827, not including transfers out. The net effect of these variances between actual and budgeted was an increase in budgetary fund balance. Therefore, there was an increase in ending fund balance. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets: The City's investment in capital assets for its governmental and business -type activities as of September 30, 2018 amounts to $129,056,643 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, vehicles and equipment, park facilities, roads, highways, streets and bridges. 15 181 Governmental Business -Type Total Activities Activities Primary Government 2018 2017 2018 2017 2018 2017 Capital assets not being depreciated: Land $ 29,522,040 $ 29,522,040 $ 5,999,980 $ 5,999,980 $ 35,522,020 $ 35,522,020 Construction in progress 1,699,135 4,500,302 3,600,606 972,204 5,299,741 5,472,506 Total capital assets not being depreciated 31,221,175 34,022,342 9,600,586 6,972,184 40,821,761 40,994,526 Capital assets being depreciated, net: Buildings and improvements 19,181,558 18,352,414 2,947,282 3,174,312 22,128,840 21,526,726 Vehicles and equipment 6,899,932 4,470,300 159,608 278,770 7,059,540 4,749,070 Infrastructure 45,552,761 45,076,898 18,316,428 17,254,343 63,869,189 62,331,241 Total capital assets being depreciated, net 71,634,251 67,899,612 21,423,318 20,707,425 93,057,569 88,607,037 Total capital assets, net $ 102,855,426 $ 101,921,954 $ 31,023,904 $ 27,679,609 $ 133,879,330 $ 129,601,563 15 181 Additional information on the City's capital assets can be found in Note 6 of the Notes to Financial Statements in this report. Long-term debt: The City's governmental activities total debt increased by $415,900 mainly due to the net effect of increased workers compensation claim and decreased facility lease. The City's business -type activities total debt decreased by $13,950, which is attributable to a decrease in compensated absences in the Water and Sewer Fund. City-wide, compensated absences decreased by $121,363, capital parking structure lease decreased by $47,402 and facility lease decreased by $308,059. Claims and Judgments increased by $878,774. Additional information on the City's long-term debt can be found in Note 7 of the Notes to Financial Statements in this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS In preparing the budget for 2017-2018 the following economic factors significantly impacted the budget process: • Increase cost in Ca1PERS retirement benefits for employees and funding of GASB 68 liability. • Ongoing monitoring of gas utility users tax due to the fluctuation of the price of natural gas. • Performance of national, state and primarily local economy and its impact on El Segundo's major revenue sources. ■ Ongoing negotiations with all bargaining units. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City of El Segundo's finances and to show the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City's Finance Department at the City of El Segundo, 350 Main Street, El Segundo, CA 90245. 16 182 Governmental Business -Type Total Activities Activities Primary Government 2018 2017 2018 2017 2018 2017 Compensated absences $ 4,347,368 $ 4,454,781 $ 199,721 $ 213,671 $ 4,547,089 $ 4,668,452 Claims and judgments 12,277,006 11,398,232 - - 12,277,006 11,398,232 Capital lease parking structure 2,129,916 2,177,318 - - 2,129,916 2,177,318 Facility lease 6,820,959 7,129,018 - - 6,820,958 7,124,018 Total long-term debt $ 25,575,249 $ 25,159,349 $ 199,721 $ 213,671 $ 25,774,969 $ 25,373,020 Additional information on the City's long-term debt can be found in Note 7 of the Notes to Financial Statements in this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS In preparing the budget for 2017-2018 the following economic factors significantly impacted the budget process: • Increase cost in Ca1PERS retirement benefits for employees and funding of GASB 68 liability. • Ongoing monitoring of gas utility users tax due to the fluctuation of the price of natural gas. • Performance of national, state and primarily local economy and its impact on El Segundo's major revenue sources. ■ Ongoing negotiations with all bargaining units. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City of El Segundo's finances and to show the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City's Finance Department at the City of El Segundo, 350 Main Street, El Segundo, CA 90245. 16 182 BASIC FINANCIAL STATEMENTS 17 183 City of El Segundo Statement of Net Position September 30, 2018 ASSETS Current assets: Cash and investments (Note 3) Receivables: Taxes Accounts Interest Notes and loans (Note 4) Internal balances Due from other governments Inventories Prepaids and other assets Total current assets Noncurrent assets: Restricted cash Capital assets, not being depreciated (Note 6) Capital assets, net of depreciation (Note 6) Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions (Note 8) Deferred outflows of resources related to OPEB (Note 9) Total deferred outflows of resources See accompanying Notes to the Basic Financial Statements. Primary Government Governmental Business -type Activities Activities Total Component Unit Park Vista Senior Housing December 31, 2017 $ 58,346,693 $ 25,307,993 $ 83,654,686 $ 582,477 4,578,726 - 4,578,726 - 642,020 3,339,739 3,981,759 - 327,649 - 327,649 - 100,792 - 100,792 - 6,063,138 (6,063,138) - - 531,086 - 531,086 - 120,737 54,312 175,049 - 7,782,532 214,307 7,996,839 216,856 78,493,373 22,853,213 101,346,586 799,333 1,000,000 - 1,000,000 - 31,221,175 9,600,586 40,821,761 - 71,634,251 21,423,318 93,057,569 533,299 103,855,426 31,023,904 134,879,330 533,299 182,348,799 53,877,117 236,225,916 1,332,632 11,280,014 201,738 11,481,752 - 868,720 51,830 920,550 - 12,148,734 253,568 12,402,302 - 18 City of El Segundo Statement of Net Position (Continued) September 30, 2018 See accompanying Notes to the Basic Financial Statements. 19 185 Primary Government Component Unit Park Vista Governmental Business -type Senior Housing Activities Activities Total December 31, 2017 LIABILITIES Current liabilities: Accounts payable 4,469,984 5,132,834 9,602,818 21595 Accrued liabilities 2,375,188 125,519 2,500,707 - Retention payable 129,024 223,259 352,283 - Accrued interest 32,627 32,627 - Unearned revenue 11,465,985 38,729 11,504,714 4,403 Deposits payable 746,719 75,219 821,938 48,719 Long -tern liabilities - due within one year 2,720,020 172,132 2,892,152 - Total current liabilities 21,939,547 5,767,692 27,707,239 55.717 Noncurrent liabilities: Long -tern liabilities - due in more than one year 22,855,229 27,589 22,882,818 Total other postemployment benefit liability (Note 9) 38,768,828 2,313,058 41,081,886 Aggregate net pension liability (Note 8) 135,625,703 4,653,136 140,278,839 - Total noncurrent liabilities 197,249,760 6;99.3.783 204,243,543 - Total liabilities 219,189,307 12.761.475 231,950,782 55,717 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions (Note 8) 2,877,493 52,161 2,929,654 - Deferred inflows of resources related to OPEB (Note 9) 183,054 10,921 193,975 - Total Deferred Outflows of Resources 3,060,547 63,082 3,123,629 - NET POSITION Net investment in capital assets 93,775,527 30,800,645 124,576,172 533,299 Restricted for: Public safety 1,084,234 - 1,084,234 - Public works 862,952 - 862,952 - Community and cultural 3,910,994 - 3,910,994 - Debt services 1,024,214 - 1,024,214 - Pension 1,000,000 - 1,000,000 - Total restricted 7,882,394 - 7,882,394 - Unrestricted (deficit) (129,410,242) 10,505,483 (118,904,759) 743,616 Total net position $ (27,752,321) $ 41,306,128 $ 13,553,807 $ 1,276,915 See accompanying Notes to the Basic Financial Statements. 19 185 Functions/Programs Governmental activities: General government Public safety Public works Community and cultural Interest on long-term debt Total governmental activities Business -type activities: Water Sewer Golf course Total business -type activities Total primary government Component unit: Park Vista Senior Housing City of El Segundo Statement of Activities Year Ended September 30, 2018 Expenses $ 16,215,039 $ 44,847,122 9,413,340 10,442,877 242,750 81,161,128 Charges for Services 371,345 $ 2,058,888 1,201 6,477,503 8,908,937 Program Revenues Operating Capital Contributions Contributions and Grants and Grants 677,058 511,005 670,193 1,858,256 1,106,001 91,980 1,197,981 Total Program Revenues 371,345 2,735,946 1,618,207 7,239,676 11,965,174 27,907,911 27,779,828 - - 27,779,828 4,164,437 4,348,849 - - 4,348,849 1,990,092 1,650,376 - - 1,650,376 34,062,440 33,779,053 - - 33,779,053 115,223,568 42,687,990 1,858,256 1,197,981 45,744,227 $ 1,409,701 $ 687,433 $ - $ - $ 687,433 See accompanying Notes to the Basic Financial Statements. 20 :% City of El Segundo Statement of Activities (Continued) Year Ended September 30, 2018 Business -type activities: Water Net (Expense) Revenue and Changes in Net Position (128,083) Primary Government Component Unit Sewer - Park Vista 184,412 Governmental Business -Type Senior Housing Functions/Programs Activities Activities Total December 31, 2017 Governmental activities: Total business -type activities - General government $ (15,843,694) $ - $ (15,843,694) $ - Public safety (42,111,176) - (42,111,176) - Public works (7,795,133) - (7,795,133) - Community and cultural (3,203,201) - (3,203,20I) - Interest on long-term debt (242,750) - (242,750) - Total governmental activities (69,195,954) - (69,195,954) - Business -type activities: Water - (128,083) (128,083) - Sewer - 184,412 184,412 - Golf course - (339,716) (339,716) - Total business -type activities - (283,387) (283,387) - Total primary government (69,195,954) (283,387) (69,479,341) - Component unit: Park Vista Senior Housing - - - (722,268) General revenues: Taxes: Property taxes, levied for general purpose 10,444,931 - 10,444,931 - Transient occupancy taxes 13,885,312 - 13,885,312 - Sales taxes 10,636,769 - 10,636,769 - Utility user taxes 6,536,876 - 6,536,876 - Franchise taxes 3,823,851 - 3,823,851 - Business licenses taxes 11,612,760 - 11,612,760 - Other taxes 7,524,580 - 7,524,580 - Motor vehicles in lieu - - - - Total taxes 64,465,079 - 64,465,079 - Use of money and property, unrestricted 760,598 176,212 936,810 11,357 Other 1,954,399 16,929 1,971,328 - Total general revenues 67,180,076 193,141 67,373,217 11,357 Changes in net position (2,015,878) (90,246) (2,106,124) (710,911) Net position at beginning of year, as restated (Note 14) (25,736,443) 41,396,374 15,659,931 1,987,826 Net position at end of year $ (27,752,321) $ 41,306,128 $ 13,553,807 $ 1,276,915 See accompanying Notes to the Basic Financial Statements. 21 187 This page intentionally left blank. 22 188 FUND FINANCIAL STATEMENTS 23 189 This page intentionally left blank. 24 190 GOVERNMENTAL FUNDS FINANCIAL STATEMENTS General Fund - To account for and report all financial resources not accounted for and reported in another fund. LAWA Fund - To account for additional funding for the City's Residential Sound Insulation Program that is received from Los Angeles World Airports. Special Revenue/Donations Special Revenue Fund - To account for donations received from private individuals or entities that are to be spent on specific activities or programs not funded by the City. Nonmajor Governmental Funds - To account for the aggregate of all the nonmajor governmental funds. 25 191 City of El Segundo Balance Sheet Governmental Funds September 30, 2018 See accompanying Notes to the Basic Financial Statements. 26 192 Special Revenue Special Nonmajor Revenues/ Governmental General LAWA Donations Funds Total ASSETS Cash and investments $ 24,050,707 $ 11,564,611 $ 602,834 $ 11,450,806 $ 47,668,958 Restricted cash 1,000,000 - - - 1,000,000 Receivables: Taxes 4,578,726 - - - 4,578,726 Accounts 532,735 - - 100,871 633,606 Interest 270,638 57,011 - - 327,649 Notes and loans 46,387 - - 54,405 100,792 Due from other funds 1,511,964 - - - 1,511,964 Due from other governments 15,071 - - 516,015 531,086 Inventories 120,737 - - - 120,737 Prepaids 6,089,517 - - 54,268 6,143,785 Total assets $ 38,216,482 $ 11,621,622 $ 602,834 $ 12,176-365 $ 62,617,303 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 1,577,558 $ 282 $ 221,803 $ 1,355,073 $ 3,154,716 Accrued liabilities 2,036,987 - 22,847 206,072 2,265,906 Retentions payable 15 - - 129,009 129,024 Due to other funds 27,181 - - 1,148,735 1,175,916 Unearned revenue 30,868 11,140,899 - 294,218 11,465,985 Deposits payable 644,582 - (118,261) 220,398 746,719 Total Liabilities 4,317,191 11,141,181 126,389 3,353,505 18,938,266 Fund balances: Nonspendable 6,256,640 - - - 6,256,640 Restricted 1,000,000 480,441 - 6,401,953 7,882,394 Assigned 2,210,602 - - 3,231,083 5,441,685 Unassigned (deficit) 24,432,049 - 476,445 (810,176) 24,098,318 Total fund balances 33,899,291 480,441 476,445 8,822,860 41679,037 Total liabilities and fund balances $ 38,216,482 $ 11,621,622 $ 602,834 $ 12,176,365 $ 62,617,303 See accompanying Notes to the Basic Financial Statements. 26 192 City of E1 Segundo Reconciliation of the Governmental Funds Balance Sheet to the Government -Wide Statement of Net Position September 30, 2018 Total Fund Balances -Total Governmental Funds $ 43,679,037 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds: Amount reported in government -wide statement of position: Capital assets, nondepreciable $ 31,221,175 Capital assets, depreciable (net of $12,757,900 reported in ISF) 136,294,800 Less accumulated depreciation (net of $8,158,472 reported in ISF) (69,259,977) 98,255,998 Interest is recognized when due, and therefore, interest payable is not reported in the governmental funds. (32,627) Long-term liabilities were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds' Balance Sheet. Capital lease and facility lease (8,950,875) Compensated absences (4,347,368) Total OPEB liability is not due and payable in the current period and therefore is not reported in the governmental funds. (net of $182,268 reported in ISF) (38,586,560) OPEB related deferred outflows of resources are not reported in the governmental funds but are reported in the government -wide financial statements. (net of $4,084 reported in ISF) 864,636 OPEB related deferred inflows of resources are not reported in the governmental funds but are reported in government- wide financial statements. (net of $860 reported in ISF) (182,194) Aggregate net pension liability is not due and payable in the current period and therefore is not reported in the governmental funds. (net of $301,025 reported in ISF) (135,324,678) Pensions related deferred outflows of resources are not reported in the governmental funds but are reported in the government -wide financial statements. (net of $12,121 reported in ISF) 11,267,893 Pensions related deferred inflows of resources are not reported in the governmental funds but are reported in government- wide financial statements. (net of $3,344 reported in ISF) (2,874,149) Internal service funds are used by management to charge the costs of general liability, workers' compensation and health benefit claims to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the Government -Wide Statement of Net Position. (net of $71,415 reported in the business -type activities) 8,478,566 Net position of governmental activities $ (27,752.321) See accompanying Notes to the Basic Financial Statements. 27 193 City of El Segundo Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2018 Special Revenue See accompanying Notes to the Basic Financial Statements. 28 194 Special Nonmajor Revenues/ Governmental General LAWA Donations Funds Total REVENUES: Taxes $ 53,092,545 $ - $ - $ 33,308 $ 53,125,853 Licenses and permits 13,695,476 - - - 13,695,476 Intergovernmental - - 2,400,010 2,400,010 Charges for services 5,744,333 - 4,500 304,781 6,053,614 Use of money and property 555,735 187,498 - 38,169 781,402 Fines and forfeitures 451,366 - - 379,701 831,067 Developer Fees 262,346 - - - 262,346 Miscellaneous 2,111,483 - 6,127 423,504 2,541,114 Total revenues 75,913,284 187,498 10,627 3,579,473 79,690,882 EXPENDITURES: Current: General government 15,491,127 - - 247,429 15,738,556 Public safety 37,489,644 - 364 105,750 37,595,758 Public works 6,325,231 - - 208,732 6,533,963 Community and cultural 8,004,156 - 45,628 1,224,599 9,274,383 Capital outlay 64,673 - - 3,361,529 3,426,202 Debt Service: Principal retirement 47,402 - - 308,059 355,461 Interest 39,620 - - 204,603 244,223 Total expenditures 67,461,853 45,992 5.660.701 73,168,546 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 8,451,431 187,498 (35,365) (2,081,228) 6,522,336 OTHER FINANCING SOURCES (USES): Transfers in 346,446 - - 3,210,375 3,556,821 Transfers out (3,541,121) - (15,700) (3,556,821) Total other financing sources (uses) (3,194,675) - - 3,194,675 - NET CHANGE IN FUND BALANCES 5,256,756 187,498 (35,365) 1,113,447 6,522,336 FUND BALANCES: Beginning of year 28,642,535 292,943 511,810 7,709,413 37,156,701 End of year $ 33,899,291 $ 480,441 $ 476,445 $ 8,822,860 $ 43,679,037 See accompanying Notes to the Basic Financial Statements. 28 194 City of El Segundo Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government -Wide Statement of Activities and Changes in Net Position For the Year Ended September 30, 2018 Net change in fund balances - total governmental funds $ 6,522,336 Amounts reported for governmental activities in the Statement of Activities are different because: Acquisition of capital assets was reported as expenditures in the governmental funds. However, in the Government -Wide Statement of Activities, the cost of those assets was allocated over the estimated useful lives as depreciation expense. The following was the amount of capital assets recorded in the current period: Capital outlay (net of $1,681,288 reported in Internal Service Funds) $ 3,371,646 Depreciation expense on capital assets was reported in the Government -Wide Statement of Activities, but they did not require the use of current financial resources. Therefore, depreciation expense was not reported as an expenditure in the governmental funds. (net of $631,582 reported (3,472,393) in Internal Service Funds) Long-term compensated absences expense was reported in the Government -Wide Statement of Activities, but it did not require the use of current financial resources. Therefore, the increase in long-term compensated absences was not reported as an expenditure in the governmental funds. 107,413 Other postemployment benefits and pension expenses were reported in the Government -Wide Statement of Activities, but it did not require the use of current financial resources. Therefore, the increase in other postemployment benefits liability and net pension liabilities were not reported as an expenditure in the governmental funds. OPEB credit (expense) net of reporting contribution made after measurement date reported in deferred outflows of resources in the Government -Wide Statement of Net Position but reported as pension expense in the governmental fund in the amount of $14,205. (3,007,470) Pension credit (expense) net of reporting contribution made after measurement date reported in deferred outflows of resources in the Government -Wide Statement of Net Position but reported as pension expense in the governmental fund in the amount of $1,099,221. (5,737,339) (8,745,009) Proceeds from long-term debt provided current financial resources to governmental funds, but issuing debt increased long-term liabilities in the Government -Wide Statement of Net Position. Principal repayment of leases was an expenditure in the governmental funds, but the repayment reduced long-term liabilities in the Government -Wide Statement of Net Position. Principal repayments of long-term debt 355,461 Interest accrual on capital lease and facility lease 1,473 356,934 Internal service funds were used by management to charge the costs of certain activities, such as insurance, to individual funds. The net revenue of the internal service funds was reported with governmental activities (net of $18,039 allocated to business -type activities). 388,827 Unavailable revenue is not recognized as revenue in the governmental funds since the revenue is not available to fund expenditures of the current year. (545,632) Change in net position of governmental activities $ (2,015,878) See accompanying Notes to the Basic Financial Statements. 29 195 This page intentionally left blank. 30 196 PROPRIETARY FUNDS FINANCIAL STATEMENTS Water Fund - To account for water utility revenues, including service fees and installation charges, and all expenses related to the construction and maintenance of the City's water distribution system. Sewer Fund - To account for user charges, fees and all operating costs associated with the operation, maintenance, upgrade and periodic reconstructions of the City's wastewater collection system. Golf Course Fund (Nonmajor) - To account for revenues from user fees and expenses incurred for the operation and maintenance of "The Lakes at El Segundo" golf facility. Internal Service Funds - To account for financing of goods and services provided by one department to other departments of the City on a cost -reimbursement basis. 31 197 City of El Segundo Statement of Net Position Proprietary Funds September 30, 2018 See accompanying Notes to the Basic Financial Statements. 32 (Continued) Business -Type Activities - Enterprise Funds Governmental Nonmajor Activities - Golf Internal Water Sewer Course Total Service Funds ASSETS Current assets: Cash and investments $ 19,843,140 $ 5,451,041 $ 13,812 $ 25,307,993 $ 10,677,735 Accounts Receivable 2,923,615 415,000 1,124 3,339,739 8,414 Inventories 9,207 - 45,105 54,312 - Prepaid items 143,622 70,685 - 214,307 1,638,747 Total current assets 22,919,584 5,936,726 60,041 28,916,351 12,324.896 Noncurrent assets: Advances to other funds - - - - 5,655,675 Capital assets, net 9,724,274 10,764,358 10,535,272 31,023.,904 4,599,428 Total noncurrent assets 9,724,274 10,764,358 10,535,272 31,023,904 10,255,103 Total assets 32,643,858 16,701,084 10,595,313 59,940,255 22,579,999 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pension (Note 8) 137,770 63,968 - 201,738 12,121 Deferred outflows of resources related to OPEB 33,339 18,491 - 51,830 4,084 Total deferred outflows of resources 171,109 82,459 - 253,568 16,205 See accompanying Notes to the Basic Financial Statements. 32 (Continued) City of El Segundo Statement of Net Position (Continued) Proprietary Funds September 30, 2018 LIABILITIES Current liabilities: Accounts payable Accrued liabilities Retentions payable Unearned revenue Deposits payable Due to other funds (Note 5) Claims and judgments, current portion Compensated absences, current portion Capital leases payable, current portion Total current liabilities Noncurrent liabilities: Advances from other funds (Note 5) Claims and judgments, net of current Compensated absences, net of current Aggregate net pension liability (Note 8) Total other postemployment benefit liability Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF REOSURCES Deferred inflows of resources related to pensions Deferred inflows of resources related to OPEB Total deferred inflows of resources NET POSITION Net investment in capital assets Unrestricted (deficit) Total net position Business -Type Activities - Enterprise Funds Governmental Nonmajor Activities - Golf Internal Water Sewer Course Total Service Funds 4,598,831 527,366 6,637 5,132,834 1,315,268 63,842 32,045 29,632 125,519 109,282 77,806 139,809 5,644 223,259 - - - 38,729 38,729 81,073 - (5,854) 75,219 - - - 336,048 336,048 - - - - - 2,069,000 98,219 73,913 - 172,132 - 4,919,771 773,133 410,836 6,103,740 3,493,550 - - 5,655,675 5,655,675 - - - - - 10,208,006 10,538 17,051 - 27,589 - 3,064,599 1,588,537 - 4,653,136 301,025 1,487,854 825,204 - 2,313,058 182,268 4,562,991 2,430,792 5,655,675 12,649,458 10,691,299 9,482,762 3,203,925 6,066,511 18,753,198 14,184,849 34,509 17,652 - 52,161 3,344 7,025 3,896 10,921 860 41,534 21,548 - 63,082 4,204 9,646,468 10,624,549 10,529,628 30,800,645 4,599,428 13,644,203 2,933,521 (6,000,826) 10,576,898 3,807,723 $ 23,290,671 $ 13,558,070 $ 4,528,802 $ 41,377,543 $ 8.407,151 Reconciliation of Net Position to the Statements ofNel Position: Net position of proprietary funds Adjustments to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business -type activities Net position related to governmental activities See accompanying Notes to the Basic Financial Statements. 33 $ 41,377,543 $ 8,407,151 (71,415) 71,415 $ 41,306,128 $ 8,478,566 (Concluded) This page intentionally left blank. 34 200 City of El Segundo 1,093,634 Statement of Revenues, Expenses and Changes in Net Position 3,860,625 Proprietary Funds 81,958 For the Year Ended September 30, 2018 273,343 Business Type Activities - Enterprise Funds Governmental Nonmajor Activities - Golf Internal Water Sewer Course Total Service Funds OPERATING REVENUES: Sales and service charges $ 27,779,828 $ 4,348,849 $ 1,650,376 $ 33,779,053 $ - Interdepartmental charges - - - - 6,130,304 Miscellaneous 16,929 - - 16,929 726,836 Total operating revenues 27,796,757 4,348,849 1,650,376 33,795,982 6,857,140 OPERATING EXPENSES: Personnel services Materials and supplies Purchased water/utilities Insurance and claims Contractual services Repairs and maintenance Administrative cost Depreciation Total operating expenses OPERATING INCOME (LOSS) NONOPERATING REVENUES (EXPENSES) Interest revenue Gain (loss) on disposal of capital assets Total nonoperating revenues (expenses) 2,027,348 1,093,634 739,643 3,860,625 248,853 81,958 89,543 273,343 444,844 671,740 23,399,695 - 181,620 23,581,315 - 1,146,300 308,100 144,020 1,598,420 4,900,651 91,494 1,626,974 - 1,718,468 - 224,595 205,979 177,198 607,772 - 623,063 202,300 269,376 1,094,739 - 313,458 637,907 204,892 1,156,257 631,582 27,907,911 4,164,437 1,990,092 34,062,440 6,452,826 (111,154) 184,412 (339,716) (266,458) 404,314 117,179 59,033 - 176,212 - - - (15,487) 117.179 59,033 - 176,212 (15.487) CHANGES IN NET POSITION 6,025 243,445 (339,716) (90,246) 388,827 NET POSITION: Beginning of the year, as restated (Note 14) 23,284,646 13,314,625 4,868,518 41,467,789 8,018,324 End of year $ 23.290.671 $ 13,558,070 $ 4,528,802 $ 41,377,543 $ 8,407,151 Change in netposition reconciliation: Change in net position of proprietary funds Adjustment to reflect the consolidation of internal service activities related to enterprise funds Changes in net position of business -type activities Changes in net position related to governmental activities See accompanying Notes to the Basic Financial Statements. 35 $ (90,246) $ 388,827 $ (90,246) 5 388.827 201 City of E1 Segundo Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2018 Business -Type Activities - Enterprise Funds Nonmajor Golf Water Sewer Course CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users Payments for insurance claims Payments to suppliers Payments to employees Net cash provided by (used in) operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Advance to other funds Advance from other funds Due to other funds Net cash provided by (used in) noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets Retention payment collected from (paid to) contractors Proceeds from sale of assets Net cash (used in) capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Interest received Net cash provided by investing activities Net change in cash and cash equivalents CASH AND CASH EQUIVALENTS Beginning of year End of year See accompanying Notes to the Basic Financial Statements. Total Governmental Activities Internal Service Funds $ 29,735,047 $ 4,466,797 $ 1,701,160 $ 35,903,004 $ 6,878,045 - - - - (4,021,877) (25,337,381) (2,552,638) (1,025,858) (28,915,877) (71,946) (1,656,160) (894,242) (739,643) (3,290,045) (213,889) 2,741,506 1,019,917 (64,341) 3,697,082 2,570,333 (1,762,421) - - (257,895) (257,895) - - - 336,048 336,048 (242,985) - - 78,153 78,153 (2,005,406) (440,046) (4,060,506) - (4,500,552) (1,681,288) (11,614) 107,717 - 96,103 - - - 443,796 (451,660) (3,952,789) - (4,404,449) (1,237,492) 117,179 59,033 - 176,212 - 117,179 59,033 - 176,212 - 2,407,025 (2,873,839) 13,812 (453,002) (672,565) 17,436,115 8.32.4,980 - 25,760,995 11,350,300 S 19,843,140 $ 5,451,041 $ 13-812 $ 25,307,993 $ 10.677.735 (Continued) 36 202 City of El Segundo Statement of Cash Flows (Continued) Proprietary Funds For the Year Ended September 30, 2018 Business -Type Activities - Enterprise Funds Nonmajor Golf Water Sewer Course RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Total Governmental Activities Internal Service Funds Operating income (loss) $ (111,154) $ 184,412 $ (339,716) $ (266,458) $ 404,314 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 313,458 637,907 204,892 1,156,257 631,582 (Increase) decrease in: Accounts receivable 1,938,290 117,948 34,934 2,091,172 20,905 Inventory 17,833 - 2,814 20,647 - Prepaid items (21,845) (12,644) 25,514 (8,975) (88,032) Deferred outflows of resources - pension 321,409 183,922 - 505,331 33,470 Deferred outflows of resources - OPEB (33,339) (18,491) - (51,830) (4,084) Increase (decrease) in: Accounts payable 238,212 (107,024) (10,252) 120,936 683,317 Accrued liabilities 16,625 7,826 7,477 31,928 4,509 Unearned revenue - - 15,850 15,850 - Deposits payable (21,101) - (5,854) (26,955) - Claims and judgements - - - - 878,774 Compensated absences payable (23,420) 9,470 - (13,950) - Netpensionliability (1,370,486) (56,387) - (1,426,873) (10,685) Net other postemployment liability 1,487,854 78,912 - 1,566,766 17,429 Deferred inflows of resources - pension (17,855) (9,830) - (27,685) (2,026) Deferred inflows of resources - OPEB 7,025 3,896 - 10,921 860 Total adjustment 2,852,660 835,505 275,375 3,963,540 2,166,019 Net cash provided by (used in) operating activities $ 2,741,506 $ 1,019,917 S (64,341) $ 3,697,082 $ 2,570,333 (Concluded) See accompanying Notes to the Basic Financial Statements. 37 203 This page intentionally left blank. 38 204 FIDUCIARY FUND FINANCIAL STATEMENTS Agency Fund Project Deposits Fund (Refundable) - Accounts for project deposits from developers which will be refundable after the projects are done. 39 205 This page intentionally left blank. 40 206 City of El Segundo Statement of Fiduciary Net Position Agency Fund September 30, 2018 Agency Funds ASSETS: Cash and investments (Note 3) $ 287,138 Total assets $ 287,138 LIABILITIES: Accounts payable $ 14,030 Deposits payable 273,108 Total liabilities $ 287,138 See accompanying Notes to the Basic Financial Statements. 41 207 This page intentionally left blank. 42 208 NOTES TO THE BASIC FINANCIAL STATEMENTS 43 209 This page intentionally left blank. 44 210 City of El Segundo Index to the Notes to the Basic Financial Statements For the Year Ended September 30, 2018 Pace Note 1— Organization and Summary of Significant Accounting Policies - - � . - - • • ... ...... . . • • • . • • .. "' ' . 47 A. Financial Reporting Entity ............................................... :.......... ............................. - 7 B. Basis of Accounting and Measurement Focus.......••.........-•••...... " """""-"•""••""`•'""'-"••"••48 ..................... ....... ..................... ............................ .-......... •61 C. Cash and Investments..................................................•................................... .................... .................. .... ...._. -................................. D. Fair Value Measurement ................................ ....................................... ....... ................... . ... ......................................... . .................. •....................-• E. Interfund Transactions........................................:..1 _........................................... _ ......... 5 F. Inventories and Prepaid Items...................................... _.::..............:................................... G. Capital Assets.............................................................................................................. 52 H. Interest Payable.............................................................................................................. 52 I. Unearned Revenue .................................... ............. ........................... ............................... 52 J. Compensated Absences........................................... ..................... ............ ..................... 53 K. Pensions....................................................................................... ......... - ....... L. Other Postemployment Benefits ("OPEB") Plan ................... • •" • •.............- ' "' •."' •"".......... M. 54 M. Claims Payable............................................................................................................ N. Long -Term Debt.................................................................................................a......... 54 O. Property Taxes............................................................................................................. 55 P. Net Position and Fund Balances ............................................... .......... .......... .......... ............ 55 Q. Use of Estimate........................................................................ ... ....._.................. 56 R. Accounting Changes.................................................................................................. 57 Note 2 — Budgetary Compliance and Deficit Fund Balances - - � • •. • • •• • •• • • • 58 A. Excess of Expenditures Over Appropriations .. • • .. 58 B. Deficit Net Positions and Fund Balances ............ • • .... • •' • •. • •' • •' "--'..."" • 59 Note 3 — Cash and Investments .................................:................:..................--- .................... 59 A. Deposits..................... ...................... .................. ............................ ....................... .... 60 B. Investments ................ ....... ..................... ....... ..................... ............................ .-......... •61 C. Fair Value Measurement .................. .... ...._. -................................. 62 D. Risk Disclosures ............ . . ... ......................................... . .................. •....................-• 62 Note 4 — Notes and Loans Receivables...........................................,............... .............,................ 63 A. Loans to Employees .................. .... -....................................................................... 63 B. Residential Rehabilitation Program • • . • • • • • • • •• • "•'"""•""""-'" 63 Note 5 — Interfund Activities ....--- ................... ............._....... ..... ............. .- .... ... 64 A. Fund Financial Statements....................................................................................----....... 64 Note6 — Capital Assets ........................................... ......................................................... - - . - - 65 A. Governmental Activities......................................................................................................... 65 B. Business -Type Activities...................................................... .............................. ....... 66 C. Discretely Presented Component Unit ..................................... """......"""""'•" "•"' • 67 45 211 City of El Segundo Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Page Note7 — Long -Term Liabilities........................................................................ a ........................ 67 A. Governmental Activities............................................................................................... B. Business -Type Activities............................................................................................. 69 Note8 — Retirement Plans....................................................................... _ ............................. 70 A. Summary ................................................... .................................................................. 70 B. California Public Employees' Retirement System .................. ................................................. 71 C. Public Agency Retirement System.................................•..................................................... 80 Note 9— Other Post -Employment Health Benefits ......•••..................'•-"'..•......-...." """"" 86 Note10 — Risk Management.........................................................................•....................... 89 Note11 —Joint Venture ..................................... ............................................................ 90 Note 12 — Commitments and Contingencies ................. , ............ ' • •""^•' 91 Note 13 — Classification of Fund Balances . . . . . . . . • . . . . . . ............ ` "''"`""`"""' """"" "" 92 Note 14 — Prior Period Adjustments ........................................................................................ 93 46 212 City of El Segundo Notes to the Basic Financial Statements For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies The basic financial statements of the City of El Segundo, California, (the "City") have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") as applied to governmental agencies. The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the significant policies: A. Financial Reporting Entity The City was incorporated on January 18, 1917, under the laws of the State of California and enjoys all the rights and privileges applicable to a general law city. The City is governed by an elected five -member board. In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The primary criteria for including a potential component unit within the reporting entity are the governing body's financial accountability and a financial benefit or burden relationship and whether it is misleading to exclude. A primary government is financially accountable and shares a financial benefit or burden relationship, if it appoints a voting majority of an organization's governing body and it is able to impose its will on the organization, or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government. A primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board, a governing board appointed by a higher level of government, or a jointly appointed board, and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government. Blended Component Unit Although the following is legally separate from the City, it has been "blended" as though it is part of the City because the component unit's governing body is substantially the same as the City's and there is a financial benefit or burden relationship between the City and the component unit; management of the City has operational responsibilities for the component unit; and/or the component unit provides services entirely, or almost entirely, to the City or otherwise exclusively, or almost exclusively, benefits the City, even though it does not provide services directly to it. Data from these units are combined with data of the primary government The El Segundo Capital Improvement Corporation ("the Corporation") was established July 1, 1988, pursuant to the Nonprofit Public Benefit Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporations Code) solely for the purpose of providing financial assistance to the City by acquiring, constructing, improving and developing certain real and personal property. Activities of the Corporation are recorded in the Capital Projects and Debt Service Funds. The City Council of the City is the governing board for the Corporation. During the year ended September 30, 2018, the Corporation was dissolved. Discretely Presented Cannanent Unit Discretely presented component units are entities that are legally separate from the primary government but for which omission would cause the primary government's financial statements to be misleading or incomplete. The component units below do not meet the criteria for blended presentation and therefore, they are reported separately from the primary government. 47 213 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) A. Financial Reporting Entity (Continued) Discretely Presenter:! Component Unit (Continued) The El Segundo Senior Citizen Housing Corporation, dba Park Vista ("the Corporation"), is a California nonprofit public benefit corporation created by the City of El Segundo in 1984 to operate a low income senior apartment complex. The apartment complex was built and funded by the City. In 1987, the complex was ready for occupancy. Rather than operate the complex as a fund of the City, the City elected to form the Corporation to facilitate better communication with the residents who live there. The Corporation is managed by a seven - member Board of Directors, which is appointed by the City Council. The City is financially accountable and has the ability to impose its will on the Corporation which has the potential to provide specific financial benefits to, or impose specific financial burdens on, the City. As a result, the activities of the Corporation have been discretely presented. All members of the Board of Directors are unpaid volunteers. The Corporation's fiscal year end is December 31, which is different than the City's fiscal year end. Additionally, the financial statements are audited by other independent auditors. Separate financial statements may be obtained at City Hall, City of El Segundo, 350 Main Street, El Segundo, CA 90245. B. Basis of Accounting and Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. City resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The statement of net position reports separate sections for Deferred Outflows of Resources and Deferred Inflows of Resources, when applicable. Deferred Outfloivs of Resources represent outflows of resources (consumption of net position) that apply to future periods and that, therefore, will not be recognized as an expense until that time. Deferred Inflo)vs of Re.vources represent inflows of resources (acquisition of net position) that apply to future periods and that, therefore, are not recognized as revenue until that time. Government — Wide Financial Statements The Government -Wide Financial Statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Fiduciary activities are not included in these statements. Certain types of transactions are reported as program revenues for the City in three categories: • Charges for services • Operating grants and contributions • Capital grants and contributions 48 214 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Government — Wide Financial Statements (Continued) Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business -type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business -type activities have not been eliminated. The following interfund activities have been eliminated: • Due from and to other funds • Transfers in and out Governmental Fund Financial Statements All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recognized as soon as they are both "measurable" and "available". Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For these purposes, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property taxes, other local taxes, franchise fees, forfeitures and penalties, motor license fees, rents and concessions, interest revenue, and state and federal grants and subventions. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Reconciliations of the fund financial statements to the Government -Wide Financial Statements are provided to explain the differences. Certain indirect costs are included as part of the program expenses reported for individual functions and activities. The City reports the following major governmental funds: General Fund - The General Fund is used to account for and report all financial resources not accounted for and reported in another fund. LAWA Fund — The Los Angeles World Airports ("LAWA") Fund accounts for additional funding for the City's Residential Sound Insulation Program that is received from Los Angeles World Airports. Special RevenueslDonations Fuad - The Special Revenues/Donations Fund is used to account for donations received from private individuals or entities that are to be spent on specific activities or programs not funded by the City. 49 215 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Proarielary Fund Financial Statements Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the proprietary funds are charges to customers for sales and services. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities and business -type activities in the Government -Wide Financial Statements. The City's internal service funds include three individual funds which provide services directly to other City funds. These areas of service include general liability, workers' compensation, and equipment replacement. The City reports the following proprietary funds: Water Fund - The Water Fund accounts for water utility revenues, including service fees and installation charges, and all expenses related to the construction and maintenance of the City's water distribution system. Sewer Fund - The Sewer Fund accounts for user charges, fees and all operating costs associated with the operation, maintenance, upgrade and periodic reconstructions of the City's wastewater collection system. ➢ Golf Course Fund (nonmaior) — The Golf Course Fund accounts for revenues from user fees and expenses incurred for the operation and maintenance of "The Lakes at El Segundo" golf facility. Internal Service Funds — The Internal Service Funds account for financing of goods and services provided by one department to other departments of the City on a cost -reimbursement basis. Fiduciary Fund Financial Statements Fiduciary fund financial statements include a Statement of Net Position and Statement of Changes in Assets and Liabilities. The City's fiduciary fund is an agency fund, which is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. The agency fund is accounted for using the accrual basis of accounting. 50 216 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) C. Cash and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. All cash and investments of proprietary funds are held in the City's investment pool. These cash pools have the general characteristics of a demand deposit account, therefore, all cash and investments in the proprietary funds are considered cash and cash equivalents for Statement of Cash Flows purposes. Investments are stated at fair value (quoted market price or best available estimate thereof). D. Fair Value Measurement U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosure about fair value measurement. Investments, unless otherwise specified at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Levels of inputs are as follows: ➢ Level 1 — Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. ➢ Level 2 — Inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date. ➢ Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the assets or liabilities at the measurement date. E. Interfund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due from/to other funds" (i.e., current portion of interfund loans). Any residual balances outstanding between the governmental activities and business -type activities are reported in the Government -Wide Financial Statements as "internal balances". F. Inventories and Prepaid Items Inventories within the various fund types consist of materials and supplies which are valued at cost on a first -in, first -out basis. Reported expenditures reflect the consumption method of recognizing inventory -related expenditures. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government -wide and fund financial statements by using purchase method. A nonspendable fund balance has been reported in the governmental funds to show that inventories and prepaid items do not constitute "available spendable resources", even though they are a component of current assets. 51 217 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) G. Capital Assets In the Government -Wide Financial Statements, capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Donated capital assets are valued at their acquisition value. City policy has set the capitalization threshold for reporting capital assets at $5,000. The City defines infrastructure assets as the basic physical assets that allow the City to function. The assets include streets, bridges, sidewalks, drainage systems, and lighting systems, etc. Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, landscaping and land. These subsystems were not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest on construction -related debt incurred during the period of construction for business -type assets is capitalized as a cost of the constructed assets. Capital assets acquired under capital lease are capitalized at the net present value of the total lease payments. For all infrastructure systems, the City elected to use the "Basic Approach". Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method. The lives used for depreciation purposes are as follows: Buildings/structures and improvements 50 years Vehicles and equipment 5-50 years Infrastructure 25-100 years H. Interest Payable In the Government -Wide Financial Statements, interest payable on long-term debt is recognized as the liability is incurred for governmental activities and business -type activities. In the Fund Financial Statements, only proprietary fund types recognize the interest payable when the liability is incurred. I. Unearned Revenue Unearned revenue is recognized for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues are prepaid charges for services and grants received but not yet earned. 52 218 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) J. Compensated Absences It is the City's policy to accrue annual leave when incurred in the Government -Wide Financial Statements and the proprietary funds. In governmental funds, the costs for annual leave that are expected to be liquidated with expendable available financial resources are reported as an expenditure and reported as a liability of the governmental fund only if they have matured. A liability is recorded for unused sick leave balances only to the extent that it is probable that the unused balances will result in termination payments. This is estimated by including in the liability the unused balances of employees currently entitled to receive termination benefits, as well as those who are expected to become eligible to receive termination benefits as a result of continuing their employment with the City. Other amounts of unused sick leave are excluded from the liability since their payment is contingent solely upon the occurrence of a future event (illness) which is outside the control of the City and the employee. K Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans' fiduciary net position have been determined on the same basis as they are reported by the plans (Note 8). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. The following timeframes are used for pension reporting: CalPERS Valuation Date Measurement Date Measurement Period PARS Valuation Date Measurement Date Measurement Period June 30, 2017 June 30, 2018 July 1, 2017 to June 30, 2018 June 30, 2016 September 30, 2017 October 1, 2016 to September 30, 2017 Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period. 53 219 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) L. Other Postemployment Benefits ("OPEB") Plan For the purpose of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City's OPEB Plan and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis as they are reported by the Plan (Note 9). For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments, which are reported at amortized cost. The following timeframes are reported OPEB reporting: OPEB Valuation Date June 30, 2017 Measurement Date June 30, 2018 Measurement Period July 1, 2017 to June 30, 2018 Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the sources of gain or loss. The difference between projected and actual earnings is amortized on a straight-line basis over 5 years. All other amounts are amortized on a straight-line basis over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) at the beginning of the measurement period. M. Claims Payable Claims payable in the Internal Service Fund represents estimates of claims against the City. The estimated claims payable represents the City's best estimate of the amount to be paid on workers' compensation and general liability claims. Losses for claims incurred but not reported are also recorded if the probable amount of loss can be reasonably estimated. N. Long -Term Debt In the Government -Wide Financial Statements and Proprietary Fund Financial Statements, long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bond premium and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed when incurred. The governmental fund financial statements do not present long-term liabilities. Consequently, long-term debt is shown as a reconciling item in the Reconciliation of the Governmental Funds Balance Sheet to the Government - Wide Statement of Net Position. 54 220 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) O. Property Taxes Property taxes are attached as an enforceable lien on property at January 1. Taxes are levied on July I and are payable in two installments on December 10 and April 10. Any unpaid amounts at the end of the fiscal year are recorded as accounts receivable. The County of Los Angeles bills and collects the property taxes and substantially remits the amount due to the City in installments during the year. Historically, the City has received substantially all of the taxes levied within two years from the date they are levied. The County is permitted by state law (Article XIIIA of the California Constitution) to levy taxes at one percent (M) of full market value (at time of purchase) and can increase the property's value no more than two percent (2%) per year. P. Net Position and Fund Balances In the Government -Wide Financial Statements and proprietary fund financial statements, net position is classified as follows: Net Inveslmeni in Capital Assets — This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets. Restricted — This component of net position consists of restricted assets reduced by liabilities and deferred outflows and inflows of resources related to those assets. Unrestricted — This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. In the Governmental Fund Financial Statements, fund balances are classified as follows: Nonspendable — Nonspendable fund balances are items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, or items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds. Reslricled — Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributors, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation. 55 221 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) P. Net Position and Fund Balances (Continued) Committed — Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body, and that remain binding unless removed in the same manner. The City Council is considered the highest authority for the City. Adoption of a resolution by the City Council is required to commit resources or to rescind the commitment. Assiened — Assigned fund balances encompass the portion of net fund resources reflecting the government's intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The City Council has authorized by resolution the City Finance Officer for that purpose. Unassumed — This amount is for any portion of the fund balances that do not fall into one of the above categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund. Spending Policy Government -Wide Financial Statements and the Pronrietary Fund Financial Statements When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the City's policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed. Governmental Fund Financial Statements When expenditures are incurred for purposes for which all restricted, committed, assigned and unassigned fund balances are available, the City's policy is to apply in the following order, except for instances wherein an ordinance specifies the fund balance: ➢ Restricted ➢ Committed ➢ Assigned ➢ Unassigned Q. Use of Estimates The preparation of the basic financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 56 222 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 1 — Organization and Summary of Significant Accounting Policies (Continued) R. Accounting Changes GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision -useful information, supporting assessments of accountability and inter -period equity, and creating additional transparency. This Statement had a significant impact on the City's financial statements for the year ended September 30, 2018. See Note 9 for further details. GASB Statement No. 81, Irrevocable Split -Interest Agreement. This Statement requires that a government that receives resources pursuant to an irrevocable split -interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this Statement requires that a government recognize assets representing its beneficial interests in irrevocable split -interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This Statement requires that a government recognize revenue when the resources become applicable to the reporting period. This statement did not have a significant impact on the City's financial statements for the year ended September 30, 2018. GASB Statement No. 85, Omnibus 2017. This Statement addresses practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits). This statement did not have a significant impact on the City's financial statements for the year ended September 30, 2018. GASB Statement No. 86, Certain Debt Extinguishment Issues Statement No. 7, Advance Refundings Resulting in Defeasance of Debt, requires that debt be considered defeased in substance when the debtor irrevocably places cash or other monetary assets acquired with refunding debt proceeds in a trust to be used solely for satisfying scheduled payments of both principal and interest of the defeased debt. The trust also is required to meet certain conditions for the transaction to qualify as an in -substance defeasance. This Statement establishes essentially the same requirements for when a government places cash and other monetary assets acquired with only existing resources in an irrevocable trust to extinguish the debt. However, in financial statements using the economic resources measurement focus, governments should recognize any difference between the reacquisition price (the amount required to be placed in the trust) and the net carrying amount of the debt defeased in substance using only existing resources as a separately identified gain or loss in the period of the defeasance. This statement did not have a significant impact on the City's financial statements for the year ended September 30, 2018. 57 223 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 2 — Budgetary Compliance and Deficit Fund Balances A. Excess of Expenditures Over Appropriations The following funds had expenditures in excess of appropriations: Fund Major Governmental Funds: General Fund General government: City attorney Planning Building and Safety Public Safety: Fire Animal control Public works: Administration Special Revenues and Donations Sepcial Revenue Fund Public safety Community and cultural Nonmajor Governmental Funds: C.O.P.S. Special Revenue Fund Public safety State Grants Special Revenue Fund Public safety Facility Lease Debt Service Fund Debt service: Excess of Expenditures over Appropriations Expenditures Appropriations $ 565,300 $ 802,137 $ (236,837) 1,181,730 1,220,357 (38,627) 1,444,083 1,463,472 (19,389) 16,072,905 16,220,310 (147,405) 157,131 213,252 (56,121) 138,284 139,023 (739) - 364 (364) - 45,628 (45,628) - 1,402 (1,402) - 22,000 (22,000) Principal retirement 299,500 308,059 (8,559) The excess expenditures were coved by carryover funds from the prior year, sufficient revenues, and/or transfers from other available funds. 58 224 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 2 — Budgetary Compliance and Deficit Fund Balances (Continued) B. Deficit Net Positions and Fund Balance: Funds with deficit fund balances and net position at September 30, 2018 are as follows: Deficit Residential Sound Insulation Special Revenue Fund $ (671,540) Federal Grants Special Revenue Fund (86,107) State Grants Special Revenue Fund (52,529) Liability Insurance Internal Service Fund (67,974) Workers' Compensation Internal Service Fund (4,452,383) The City expects to eliminate the Special Revenue Fund deficits when future reimbursements are received from granting agencies. The Liability Insurance Fund Workers' Compensation Fund deficits are expected to be eliminated through future interdepartmental charges. For the fiscal year ended September 30, 2018, the Governmental Activities of the City reported a deficit unrestricted net position of $(129,410,242). This deficit is largely a result of the implementation of GASB Statement No. 68 in 2015 and GASB Statement No. 75 in 2018 that required the City to report aggregate net pension liabilities and total OPEB liabilities on the financial statements. The City's aggregate net pension liability at September 30, 2018 is $140,278,839, of which $135,625,703 is payable from Governmental Activities. The City's total OPEB liabilities at September 30, 2018 is $41,081,886, of which $38,768,828 is payable from Governmental Activities. Note 3 — Cash and Investments The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds. Primary Government The City had the following cash and investments at September 30, 2018: Government -Wide Statement of Net Position Fiduciary Governmental Business -Type Fund Statement Activities Activities of Net Position Total Cash and investments $ 58,346,693 $ 25,307,993 $ 287,138 $ 83,941,824 Restricted cash 1,000,000 - - 1,000,000 Total cash and investments $ 59,346,693 $ 25,307,993 $ 287,138 $ 84,941,824 59 225 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 3 — Cash and Investments (Continued) Primary Government (Continued) The City's cash and investments at September 30, 2018, in more detail: Cash and cash equivalents: Petty cash $ 24,241 Demand deposits 11,283,437 Restricted cash in PARS 115 Trust 1,000,000 Total cash and cash equivalents 12,307,678 Investments: Money market mutual fund 7,015,978 Corporate notes 10,862,267 Negotiable certificates of deposit 16,345,618 Local Agency Investment Fund 14,625,417 State obligations 545,523 Supranational obligations 1,955,485 U.S. Government sponsored enterprise securities 21,283,858 Total investments 72,634,146 Total cash and investments $ 84,941,824 Discretely Presented Contnonent Unit Cash and investments of the discretely presented component unit as of December 31, 2017 consist of the following: Deposits with financial institutions A. Deposits 5592.477 The carrying amounts of the City's demand deposits were $11,283,437 at September 30, 2018. Bank balances at that date were $11,799,029, the total amount of which was collateralized or insured with accounts held by the pledging financial institutions in the City's name as discussed below. The California Government Code requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City's total cash deposits. The City may waive collateral requirements for cash deposits, deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation ("FDIC"). The City did not waive the collateral requirement for deposits insured by FDIC. The City follows the practice of pooling cash and investments of all funds. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period -end cash and investment balances. 60 226 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 3 — Cash and Investments (Continued) B. Investments Under the provision of the City's investment policy, and in accordance with California Government Code, the following investments are authorized: The City is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City's investments with LAIF at September 30, 2018, included a portion of the pool funds invested in Structured Notes and Asset -Baked Securities: Structured Notes: debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset -Backed Securities: generally mortgage-backed securities that entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (for example, Collateralized Mortgage Obligations) or credit card receivables. As of September 30, 2018, the City had $14,625,417 invested in LAIF, which had invested 2.52% of the pool investment funds in Structured Notes and Asset -Backed Securities. The fair value of the City's portion in the pool is the same as the value of the pool shares. 61 227 Maximum Maximum M aximum Percentage Investment in Authorized Investment Type Maturity of Portfolio * One Issuer United States Treasury Obligations 5 years No Limit No Limit U.S. Government Sponsored Enterprise Securities 5 years No Limit No Limit Bankers' Acceptances 180 days 40% No Limit Commercial paper 270 days 10% 3% Negotiable certificates of deposit 5 years 30% No Limit Local Agency Investment Fund ("LAIF") N/A No Limit No Limit Non-negotiable certificates of deposits 5 years No Limit No Limit Medium-term notes 5 years 30% 3% Mutual funds N/A 20% 5% Money market mutual funds N/A 20% 5% Supranational obligations 5 years 30% 10% N/A - Not Applicable * Excluding amounts held by bond trustees that are not subject to California Government Code restrictions. The City is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City's investments with LAIF at September 30, 2018, included a portion of the pool funds invested in Structured Notes and Asset -Baked Securities: Structured Notes: debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset -Backed Securities: generally mortgage-backed securities that entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (for example, Collateralized Mortgage Obligations) or credit card receivables. As of September 30, 2018, the City had $14,625,417 invested in LAIF, which had invested 2.52% of the pool investment funds in Structured Notes and Asset -Backed Securities. The fair value of the City's portion in the pool is the same as the value of the pool shares. 61 227 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 3 — Cash and Investments (Continued) C. Fair Value Measurement As of September 30, 2018, investment are reported at fair value. The following table presents the fair value measurements of investments on a recurring basis and the levels with GASB 72 fair value hierarchy in which the fair value measurements fall at September 30, 2018: (') Pricing based on Interactive Data Corporation D. Risk Disclosures Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits investments to a maximum maturity of five years. At September 30, 2018, the City had the following investment maturities: Measurement Input Investment Maturities (in Years) Significant Investment Type Fair Value Less Than 1 Year Other Observable 2 to 3 Years 3 to 4 Years 4 to 5 Years Inputs $ 7,015,978 $ 7,015,978 Investment Type (Level 2) Uncategorized Total Money market mutual fund $ - $ 7,015,978 $ 7,015,978 Corporate notes (') 10,862,267 621,173 10,862,267 Negotiable certificates of deposit 16,345,618 - 16,345,618 Local Agency Investment Fund - 14,625,417 14,625,417 State obligations t't 545,523 - 545,523 Supranational obligations �'� 1,955,485 - 1,955,485 U.S. Government sponsored enterprise securities �'� 21,283,858 - 21,283,858 Total $ 50,992,751 $ 21,641,395 $ 72,634,146 (') Pricing based on Interactive Data Corporation D. Risk Disclosures Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits investments to a maximum maturity of five years. At September 30, 2018, the City had the following investment maturities: Custodial Credit Risk - For deposits, custodial credit risk is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer), the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. 62 228 Investment Maturities (in Years) Investment Type Fair Value Less Than 1 Year 1 to 2 Years 2 to 3 Years 3 to 4 Years 4 to 5 Years Money market mutual fund $ 7,015,978 $ 7,015,978 $ - $ - $ - $ Corporate notes 10,862,267 1,986,525 4,865,454 1,934,060 1,455,055 621,173 Negotiable certificates of deposit 16,345,618 2,926,824 3,397,854 4,575,872 3,988,656 1,456,412 Local Agency Investment Fund 14,625,417 14,625,417 - - State obligations 545,523 - - - 545,523 Supranational obligations 1,955,485 - 1,480,130 475,355 - U.S. Government sponsored enterprise securities 21,283,858 7,354,944 4,915,190 3,891,945 1,951,590 3,170,189 Total $ 72,634,146 $ 33,909,688 $ 14,658,628 $ 10,877,232 $ 7,940,824 $ 5,247,774 Custodial Credit Risk - For deposits, custodial credit risk is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer), the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. 62 228 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 3 — Cash and Investments (Continued) D. Risk Disclosures (Continued) _Credit Risk - Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code or the City's investment policy and the actual rating as of year and for each investment type: Note 4 — Notes and Loans Receivables A. Loans to Employees AA- to AA+ A- to A+ Unrated 4,056,378 6,312,299 - 16,345,618 - 14,625,417 545,523 - - - - 475,355 19,110,524 - 2,173,334 $ 23,712,425 $ 6,312,299 $ 33,619,724 The balance of notes receivable in the General Fund consists of loans made to employees for computer purchases. Participants in the computer loan program is eligible for an initial, interest free loan in the amount of $4,000. Subsequent loans or amount in excess of the above maximum interest free loan, would be at the currently interest rate of 3%. All loans would include a 36 -month repayment term. The balance at September 30, 2018 was $46,387. B. Residential Rehabilitation Program The balance of notes receivable in the other governmental funds consists of minor home repair loans made to qualifying homeowners residing within the City. The balance at September 30, 2018 was $54,405. Balance October 1, 2017 Additions Deletions Residential Rehabilitation Program CDBG Loans $ 54,405 $ - $ - $ Total $ 54,405 $ - $ - $ 63 Balance Allowance September 30, 2018 $ 54,405 $ 54,405 229 Minimum Legal Investment Type Rating Total AAA Money market mutual fund N/A $ 7,015,978 $ 7,015,978 Corporate notes A 10,862,267 493,590 Negotiable certificates of deposit A 16,345,618 - Local Agency Investment Fund N/A 14,625,417 - State obligations N/A 545,523 - Supranational obligations AA 1,955,485 1,480,130 U.S. Government sponsored enterprise securities N/A 21,283,858 - Total $72,634,146 $ 8,989,698 Note 4 — Notes and Loans Receivables A. Loans to Employees AA- to AA+ A- to A+ Unrated 4,056,378 6,312,299 - 16,345,618 - 14,625,417 545,523 - - - - 475,355 19,110,524 - 2,173,334 $ 23,712,425 $ 6,312,299 $ 33,619,724 The balance of notes receivable in the General Fund consists of loans made to employees for computer purchases. Participants in the computer loan program is eligible for an initial, interest free loan in the amount of $4,000. Subsequent loans or amount in excess of the above maximum interest free loan, would be at the currently interest rate of 3%. All loans would include a 36 -month repayment term. The balance at September 30, 2018 was $46,387. B. Residential Rehabilitation Program The balance of notes receivable in the other governmental funds consists of minor home repair loans made to qualifying homeowners residing within the City. The balance at September 30, 2018 was $54,405. Balance October 1, 2017 Additions Deletions Residential Rehabilitation Program CDBG Loans $ 54,405 $ - $ - $ Total $ 54,405 $ - $ - $ 63 Balance Allowance September 30, 2018 $ 54,405 $ 54,405 229 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 5 — Interfund Activities A. Fund Financial Statements Due From/To Other Funds - At September 30, 2018, the City had the following due from/to other funds: Due To Other Funds Nonmajor Governmental Fund Nonmajor Enterprise Fund Total Due From Other Funds General Fund $ 1,175,916 336,048 $ 1,511,964 Advance From/To Other Funds - At September 30, 2018, the City has the following advance from/advance to other funds, which represent advance to the Golf Course Fund during the year to negative cash in the Golf Course Fund and internal service charges between governmental activities and business -type activities: Advance From Other Funds ! Advance To Other Fundy General Fund Internal Service Funds Equipment Replacement Internal Service Fund Nonmajor Golf Course Enterprise Fund Enterprise Funds $ 336,048 $ - 71,415 5,655,675 $ 5,991,723 $ 71,415 Transfers In/Out - At September 30, 2018, the City had the following transfers in/out, which arise in the normal course of operations: Transfers Out Governmental Funds: General Fund Nonmajor Governmental Funds Total Transfers In Governmental Funds Nonmajor General Governmental Fund Funds Total $ 346,446 $ 3,194,675 $ 3,541,121 - 15,700 15,700 $ 346,446 $ 3,210,375 $ 3,556,821 Administratively, resources may be transferred from one City fund to another. The purpose of the majority of transfers was for subsidizing other funds with the City Council's approvals, such as debt service, capital projects and internal service funds. 64 230 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 6 — Capital Assets A. Governmental Activities A summary of changes in capital assets for the governmental activities for the year ended September 30, 2018 was as follows: Capital assets, not being depreciated: Land and rights of way Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Vehicles and equipment Infrastructure Total capital assets, being depreciated Less accumulated depreciation: Buildings and improvements Vehicles and equipment Infrastructure Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities Governmental Activities Balance Balance September 301 2017 Additions Deletions Transfers September 30, 2018 $ 29,522,040 $ - $ 4,500,302 2,960.781 34,022,342 2,960,781 $ - $ 29,522,040 (5,761,948) 1,699,135 (5,761,948) 31,221,175 36,488,330 - - 1,598,295 38,086,625 18,947,311 2,092,153 (777,753) 1,274,304 21,536,015 86,540,711 - - 2,889,349 89,430,060 141,976,352 2,092,153 (777,753) 5,761,948 149,052,700 (18,135,916) (769,151) - - (18,905,067) (14,477,011) (921,338) 762,266 - (14,636,083) (41,463,813) (2,413,486) - - (43,877,299) (74,076,740) (4,103,975) 762,266 - (77,418,449) 67,899,612 (2,011,822) (15,487) 5,761,948 71,634,251 capital assets, net $ 101,921,954 $ 948,959 $ (15,487) $ - $ 102,855,426 Depreciation expenses were charged to functions/programs of the governmental activities for the fiscal year ended September 30, 2018 as follows: General govemment $ 35,522 Public safety 224,765 Public works 2,433,140 Community and cultural 778,966 Internal service funds 631,582 Total depreciation expense $ 4,103,975 65 231 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 6 — Capital Assets (Continued) B. Business -Type Activities A summary of changes in capital assets for the business -type activities for the year ended September 30, 2018 was as follows: Water $ 313,458 Sewer 637,907 Golf course 204,892 Total depreciation expense $1,156,257 66 232 Business -Type Activities Balance Balance September 30, 2017 Additions Deletions Transfers September 30, 2018 Capital assets, not being depreciated: Land $ 5,999,980 $ - $ - $ - $ 5,999,980 Construction in progress 972,204 4,500,552 - (1,872,150) 3,600,606 Total capital assets, not being depreciated 6,972,184 4,500,552 - (1,872,150) 9,600,586 Capital assets, being depreciated: Buildings and improvements 8,755,787 - - - 8,755,787 Improvements other than buildings 418,161 - - - 418,161 Vehicles and equipment 1,095,337 - - 1,095,337 Infrastructure 57,229,497 - (69,379) 1,872,150 59,032,268 Total capital assets, being depreciated 67,498,782 - (69,379) 1,872,150 69,301,553 Less accumulated depreciation: Buildings and improvements (5,888,479) (206,123) - - (6,094,602) Improvements other than buildings (111,161) (20,903) - - (132,064) Vehicles and equipment (816,565) (119,164) - - (935,729) Infrastructure (39,975,152) (810,067) 69,379 - (40,715,840) Total accumulated depreciation (46,791,357) (1,156,257) 69,379 - (47,878,235) Total capital assets, being depreciated, net 20,707,425 (1,156,257) - 1,872,150 21,423,318 Business -type activities capital assets, net $ 27,679,609 $ 3,344,295 $ - $ - $ 31,023,904 Depreciation expenses for business -type activities for the fiscal year ended September 30, 2018 was charged as follows: Water $ 313,458 Sewer 637,907 Golf course 204,892 Total depreciation expense $1,156,257 66 232 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 6 — Capital Assets (Continued) C. Discretely Presented Component Unit A summary of changes in capital assets for the discretely presented component unit for the year ended December 31, 2018 was as follows: Depreciation expenses for the discretely presented component unit for the fiscal year ended December 31, 2018 was charged as follows: Park Vista Note 7 — Long -Term Liabilities A. Governmental Activities $ 41,038 A summary of changes in long-term liabilities for governmental activities for the year ended September 30, 2018 was as follows: Balance Discretely Presented Component Unit Balance gwance Due in more Balance October 1, 2017 January 1, 2017 Additions Deletions Transfers December 31, 2017 Capital assets, being depreciated: than One Year Capital Lease Obligation Buildings and improvements $ 1,031,873 $ 14,168 $ - $ - $ 1,046,041 Furniture and equipment 298,542 - - - 298,542 Total capital assets, being depreciated 1,330,415 14,168 - - 1,344,583 Less accumulated depreciation: Buildings and improvements (511,099) (41,038) - - (552,137) Furniture and equipment (259,147) - - - (259,147) Total accumulated depreciation (770,246) (41,038) - - (811,284) Total capital assets, being depreciated, net 560,169 (26,870) - - 533,299 Total capital assets, net $ 560,169 $ (26,870) $ $ - $ 533,299 Depreciation expenses for the discretely presented component unit for the fiscal year ended December 31, 2018 was charged as follows: Park Vista Note 7 — Long -Term Liabilities A. Governmental Activities $ 41,038 A summary of changes in long-term liabilities for governmental activities for the year ended September 30, 2018 was as follows: Typically, the General Fund has been used to liquidate the liability for compensated absences, claims payable, and net other postemployment benefits. 67 233 Balance Balance Due within Due in more October 1, 2017 Additions Deletions September 30, 2018 One Year than One Year Capital Lease Obligation 2003 Parking Structure Lease $ 2,177,318 $ - $ (47,402) $ 2,129,916 $ 50,727 $ 2,079,189 Facility Lease Obligation 2005 Douglas Street Gap Closure Project 7,129,018 (308,059) 6,820,959 316,900 6,504,059 Claims payable 11,398,232 1,801,303 (922,529) 12,277,006 2,069,000 10,208,006 Compensated absences 4,454,781 202,350 (309.7633) 4,347,368 283,393 4,063,975 Sub Total $ 25,159,349 $ 2,003,653 $ (1,587,753) $ 25,575,249 $ 2,720,020 $22,855,229 Typically, the General Fund has been used to liquidate the liability for compensated absences, claims payable, and net other postemployment benefits. 67 233 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 7 — Long -Term Liabilities (Continued) A. Governmental Activities (Continued) Capital Lease Oblieation 2003 Parki na Structure Lease On June 18, 2002, the City entered into a capital lease agreement with 612 Twin Holdings, LLC to acquire a two story, three level parking structure and certain retail space. The terms of the lease include an initial payment of $1,100,000, monthly lease payments of $16,167 with an imputed interest rate of 6.80% for 408 months, and a purchase option for $200,000 due on January 1, 2039. The capital asset acquired had a present value of $3,688,222 ($1,659,700 and $2,028,522 for the building structure and the land, respectively) with an annual depreciation of $33,194. The amount outstanding at September 30, 2018 totaled $2,129,916. The annual debt service requirements on the capital lease is as follows: Fiscal Year Princi awl_ Interest Total 2019 $ 50,727 $ 143,273 $ 194,000 2020 54,286 139,714 194,000 2021 58,095 135,905 194,000 2022 62,171 131,829 194,000 2023 66,533 127,467 194,000 2024-2028 409,589 560,412 970,001 2029-2033 574,899 395,102 970,001 2034-2038 853,616 156,719 1,010,335 Total $ 2,129,916 $ 1,790,421 $ 3,920,337 Facility Lease Obligation 2005 Douelas Street Gan Closure Proiect On September 1, 2005, the City entered into a facility lease agreement with the California Infrastructure and Economic Development Bank ("CIEDB") whereby CIEDB issued bonds in the amount of $10,000,000 to finance the Douglas Street Gap Closure Project. The City will make rental lease payments over a 30 -year period starting on February 1, 2006, at an interest rate of 2.87% per annum. Interest payments on the lease obligation are due on February 1 and August 1 of each year. Base rental payment billing staternents will be mailed to the City reflecting the actual amount owed prior to each base rental payment due date. 68 234 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 7 — Long -Term Liabilities (Continued) A. Governmental Activities (Continued) The amount outstanding at September 30, 2018 totaled $6,820,959. The annual debt service requirements on the capital lease is as follows: Fiscal Year Principal Interest Total 2019 $ 316,900 $ 195,762 $ 512,662 2020 325,995 186,666 512,661 2021 335,351 177,310 512,661 2022 344,975 167,686 512,661 2023 354,876 157,785 512,661 2024-2028 1,933,129 630,178 2,563,307 2029-2033 2,226,920 336,387 2,563,307 2034-2035 982,813 42,510 52,531 Total $ 6,820,959 $ 1,894,284 $ 7,742,451 B. Business -Type Activities The following is a summary of changes in long-term liabilities for business -type activities for the year ended September 30, 2018: Balance October 1, 2017 Additions Compensated absences $ 213,671 $ 39,123 $ Total $ 213,671 $ 39,123 $ Balance Deletions September 30, 2018 (53,073) $ 199,721 (53,073) $ 199,721 Due within Due in more One Year than One Year $ 172,132 $ 27,589 $ 172,132 $ 27,589 69 235 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 - Retirement Plans A. Summary The following is the summary of net pension liability and related deferred outflows of resources and deferred inflows of resources at September 30, 2018 and pension expense for the year then ended. 70 236 Governmental Business -Type Activities Activities Total Deferred outflows of resources: Pension contribution made after measurement date: Miscellaneous $ 234,984 $ 38,652 $ 273,636 Safety 661,463 - 661,463 PARS 293,452 11,274 304,726 Total pension contribution made after measurement date 1,189,899 49,926 1,239,825 Difference between City's contribution and proportionate share of contributions: Safety 563,042 - 563,042 Differences between expected and actual experience on pension investments: M iscellaneous 3,841 632 4,473 Safety 1,620,712 - 1,620,712 PARS 33,431 2,569 36,000 Total differences between expected and actual experience on pension investments 1,657,984 3,201 1,661,185 Difference in projected and actual earnings on pension investments: Miscellaneous 186,027 30,599 216,626 Safety 512,634 - 512,634 PARS - - Total difference in projected and actual earnings on pension investments 698,661 30,599 729,260 Change in assumptions: Miscellaneous 694,452 114,230 808,682 Safety 6,426,758 - 6,426,758 PARS 49,218 3,782 53,000 Total change in assumptions 7,170,428 118,012 7,288,440 Total deferred outflows of resources $ 11,280,014 $ 201,738 5 11.481,752 Aggregate net pension liabilities: Miscellaneous $ (27,796,119) $ (4,572,147) $ (32,368,266) Safety (106,775,573) - (106,775,573) PARS (1,054,011) (80,989) (1,135,000) Total aggregate net pension liabilities _ $ (135,625,703) $ (4,653,136) $ (140,278,839) Deferred inflows of Resources: Change in assumptions: Miscellaneous $ (217,700) $ (35,810) $ (253,510) Total change in assumption (217,700) (35,810) (253,510) Adjustment due to difference proportion: Safety (2,550,992) - (2,550,992) Difference in projected and actual earnings on pension investments: PARS (17,644) (1,356) (19,000) Differences between expected and actual experience on pension investments: Miscellaneous (91,157) (14,995) (106,152) Total deferred inflows of resources $ (2,877,493) $ (52,161) $ (2,929,654) 70 236 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) A. Summary (Continued) Pension Expense: Miscellaneous Safety PARS Total pension expense B. California Public Employees' Retirement System ("Ca1PERS") General Information about the Pension Plan Plon Description Governmental Business -Type Activities Activities Total $ 2,068,272 $ 437,712 $ 2,505,984 4,768,488 - 4,768,488 111,437 8,563 120,000 $ 6,836,760 $ 446,275 $ 7,394,472 The City contribution to the California Public Employees Retirement System ("Ca1PERS"), an agent multiple - employer defined benefit pension plan for miscellaneous employees and a cost-sharing multiple -employer defined benefit plan for safety employees. Ca1PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statue and City ordinance. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the June 30, 2017 Annual Actuarial Valuation Report. This report and Ca1PERS' audited financial statements are publicly available reports that can be obtained at Ca1PERS' website under Forms and Publications. Benefits Provided Ca1PERS provides retirement and disability benefits, annual cost -of -living adjustments, and death benefits to plan members and beneficiaries. A classic CalPERS member or PEPRA Safety member becomes eligible for service retirement upon attainment of age 50 with at least 5 years of credited service. During the year ended June 30, 2013, the California's Public Employees' Pension Reform Act ("PEPRA") went into effect. Employees hired after January 1, 2013 who are new to the Ca1PERS system are part of the PEPRA plan. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 52 with at least 5 years of service. The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The final compensation is the monthly average of the member's highest 36 or 12 consecutive months' full-time equivalent monthly pay. Retirement benefits for classic miscellaneous employees are calculated as 2% of average final 12 months compensation. Retirement benefit for PEPRA miscellaneous employees are calculated as 2% of the average final 36 months compensation. Retirement benefits for classic safety employees are calculated as 3% of the average final 12 months compensation. Retirement benefits for PEPRA safety employees are calculated as 2.7% of average final 36 months. 71 237 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("Ca1PERS") (Continued) General Information about the Pension Plan Benefits Provided Following are the benefit provision for each plan: Participants are eligible for non -industrial disability retirement if the participant becomes disabled and has at lease 5 years of credited service. There is no special age requirement. The standard non -industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service. Industrial disability benefits are not offered to miscellaneous employees. The City provides industrial disability retirement benefit to safety employees. The industrial disability retirement benefit is a monthly allowance equal to 50 percent of final compensation. 72 238 Miscellaneous Miscellaneous PEPRA Miscellaneous Second Tier Miscellaneous Rate Plan Rate Plan Rate Plan Hire date Prior to On or after Prior to January 1, 2013 January 1, 2013 January 1, 2013 Classic Member New Member Benefit formula 2% @ 55 2% @ 60 2% @ 62 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age minimum 50 yrs minimum 50 yrs minimum 52 yrs Safety - Police/Fire Safety PEPRA Safety Second Tier Safety Rate Plan Rate Plan Rate Plan Hire date Between October 6, 2012 to On or after Prior to December 31, 2012 January 1, 2013 October 6, 2012 Classic Member New M ember Benefit formula Police - 3% @ 50 Police - 3% @ 55 2.7% @ 57 Fire - 3% @ 55 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age minimum 50 yrs minimum 50 yrs minimum 50 yrs Participants are eligible for non -industrial disability retirement if the participant becomes disabled and has at lease 5 years of credited service. There is no special age requirement. The standard non -industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service. Industrial disability benefits are not offered to miscellaneous employees. The City provides industrial disability retirement benefit to safety employees. The industrial disability retirement benefit is a monthly allowance equal to 50 percent of final compensation. 72 238 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("CaIPERS") (Continued) General Information about the Pension Plan (Continued) Benefits Provided (Continued) An employee's beneficiary may receive the basic death benefit if the employee becomes deceased while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre -retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree's designated survivor(s), or to the retiree's estate. Benefit terms provide for annual cost -of -living adjustments to each employee's retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2 percent. Emnlovee Covered by Benefit Terms At June 30, 2017, the valuation date, the following employees were covered by the benefit terms: Plans Miscellaneous Safcri_ First Tier Second Tier PEPRA Classic PEPRA Active employees 95 14 59 86 11 Transferred and terminated employees 263 4 26 53 6 Retired Employees and Beneficiaries 343 - - 225 - Total 701 18 85 364 17 Contributions Section 20814(c) of the California Public Employees' Retirement Law ("PERL") requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaIPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The required contribution rates are as follow: 73 239 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("Ca1PERS") (Continued) General information about the Pension Plan (Continued), Contributions (Continued) Measurement Period Ended June 30, 2018 Plans Employer Contribution Rate Employee Contribution Rate Miscellaneous Classic PEPRA 7.840% 7.840% 7.000% 6.250% Safety Classic PEPRA 19.011% 19.011% 9.000% 10.750% Current Fiscal Year Ended September 30, 2018 Plans Miscellaneous Safety Classic PEPRA Classic PEPRA Employer Contribution Rate 7.840% 7.840% 19.011% 19.011% Employee Contribution Rate 7.000% 6.250% 9.000% 10.750% Actuarial Methods and Assumodon Used to Determine Total Pension Liability, The June 30, 2017 valuation was rolled forward to determine the June 30, 2018 total pension liability, based on following actuarial methods and assumptions: Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Discount Rate 7.15% Inflation 2.50% Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.15% includes inflation Mortality Rate Table Derived using Ca1PERS' Membership Data for all Funds. The mortality table used was developed based on Ca1PERS' specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 90% of scale MP 2016. Post Retirement Benefit Increase Contract COLA up to 2.0% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.50% thereafter. 74 240 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("CaIPERS") (Continued) General Information about the Pension Plan (Continued) Lora -term Exuected Rate ofRelurn The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, Ca1PERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The expected real rates of return by asset class are as followed: Z An expected inflation of 2.0% and 2.92% used for years 1-10 and years 11+, respectively. Discount Rate The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be tnade at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 75 241 New Strategic Real Return Real Return Asset Class Allocation Years 1 - 102 Years 11+2 Global Equity 50.00% 4.80% 5.98% Fixed Income 28.00% 1.00% 2.62% Inflation Assets 0.00% 0.77% 1.81% Private Equity 8.00% 6.30% 7.23% Real Assets 13.00% 3.75% 4.93% Liquidity 1.00% 0.00% -0.92% 100.00% In the System's CAFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities. Z An expected inflation of 2.0% and 2.92% used for years 1-10 and years 11+, respectively. Discount Rate The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be tnade at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 75 241 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("CaIPERS") (Continued) Chances in the Net Pension Liability The following table shows the changes in net pension liability for the City's Miscellaneous Plan recognized over the measurement period. Miscellaneous Plan Balance at June 30, 2017 (Valuation Date) Changes recognized for the measurement period: Service Cost Interest on the total pension liability Changes of benefit terms Difference between expected and actual experience Changes of assumptions Plan to plan resource movement Contributions from the employer Contributions from employees Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other miscellaneous (income)/expense Net changes during July 1, 2017 to June 30, 2018 Balance at June 30, 2018 (Measurement Date) Total Pension Liability (a) $ 114,201,292 2,002,276 7,976,930 8,203 (464,769) (6,360,824) 3.161,816 $ 117,363,108 Proportionate Share oflVet Pension Liabiliry and Pension Expense Increase (Decrease) Plan Fiduciary Net Position (b) $ 80,684,162 (198) 3,291,215 905,313 6,839,662 (6,360,824) (125,728) (238,760) 4,310,680 $ 84,994,842 Net Pension Liability/(Asset) (c) _ (a) - (b) 6 33,517,130 2,002,276 7,976,930 8,203 (464,769) 198 (3,291,215) (905,313) (6,839,662) 125,728 238,760 (1,148,864) $ 32,368,266 The following table shows the City's safety plan's proportionate share of the risk pool collective net pension liability over the measure period. Balance at June 30, 2017 (Valuation Date) Balance at June 30, 2018 (Measurement Date) Net Changes during 2017-2018 Safety Plan 76 Net Pension liability/(Asset) (c) _ (a) - (b) 6 73,234,545 106,775,573 33,541,028 242 Increase (Decrease) Total Pension Plan Fiduciary Net Liability Position (a) (b) $ 165,812,953 $ 92,578,408 284,585,604 177, 810,031 118, 772,651 85,231,623 76 Net Pension liability/(Asset) (c) _ (a) - (b) 6 73,234,545 106,775,573 33,541,028 242 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("CaIPERS") (Continued) Chances in the Net Pension Liability (Continued) 11'ro,vortionate Share of Net Pension Liabilitv and Pension Exvense (Continued) The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan's proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2017). The risk pool's fiduciary net position ("FNP") subtracted from its total pension liability ("TPL") determines the net pension liability ("NPL") at the valuation date. (2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2018). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool's FNP at the measurement date denotes the aggregate risk pool's FNP at June 30, 2018 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2017-18). (3) The individual plan's TPL, FNP and NPL are also calculated at the valuation date. TPL is allocated based on the rate plan's share of the actuarial accrued liability. FNP is allocated based on the rate plan's share of market value assets. (4) Two ratios are created by dividing the plan's individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool's total TPL and FNP, respectively. (5) The plan's TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan's FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan's NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5). Deferred outflows of resources, deferred inflows of resources, and pension expense are allocated based on the City's share of contributions made during the measurement period. The City's proportionate share of the net pension liability was as follows: Safety Plan June 30, 2017 0.7385% June 30, 2018 1.1081% Change - Increase (Decrease) 0.3646% 77 243 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("Ca1PERS") (Continued) Changes in the Net Pension Liability (Continued) Sensitivity of the Net Pension Liabilitv to Chanees in the Discount Rate The following presents the net pension liability of the plans as of the measurement date, calculated using the discount rate of 7.15%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage -point lower (6.15%) or 1 percentage -point higher (8.15%) than the current rate: Plan's Net Pension Liability/(Asset) Discount Rate -1% Current Discount Discount Rate + 1% (6.150/6) Rate (7.159/6) (8.15%) Miscellaneous Plan $ 47,207,544 $ 32,368,266 $ 20,079,637 Safety Plan $ 162,100,822 $ 106,775,573 $ 61,446,438 Pension Plan Fiduciary Net Position Detailed information about the plan's fiduciary net position is available in the separately issued CaIPERS financial report. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions. For the year ended September 30, 2018, the City recognized pension expense in the amounts of $2,505,984 and $4,768,488 for the miscellaneous plan and safety plan, respectively. As of measurement date of June 30, 2018, the City has deferred outflows and deferred inflows of resources related to pensions as follows: Miscellaneous Plan Deferred outflows Deferred inflows of Resources of Resources Pension contribution made after measurement date $ 273,636 $ - Difference between expected and actual experience 4,473 106,152 Changes ofassumptions 808,682 253,510 Net difference between projected and actual earning on pension plan investments 216,626 - Total $ 1,303,417 $ 359,662 Safety Plan Deferred outflows Deferred inflows of Resources of Resources Pension contribution made after measurement date $ 661,463 $ Difference between City contributions and proportionate share of contributions 563,042 Difference between expected and actual experience 1,620,712 Changes of assumptions 6,426,758 Difference between projected and actual earnings on pension plan investments 512,634 - Adjustment due to differences in proportions - 2,550,992 Total $ 9,784,609 $ 2,550,992 The amounts above are net of outflows and inflows recognized in the 2017-2018 measurement period expense. 78 244 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) B. California Public Employees' Retirement System ("Ca1PERS') (Continued) Pension Exnense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions (Continued) The expected average remaining service lifetime ("EARSL") is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the miscellaneous plan and the safety risk pool for the 2017-18 measurement period is 2.2 and 3.8 years, which was obtained by dividing the total service years of 1,758 and 516,147 (the sum of remaining service lifetimes of the active employees) by 804 and 135,474 (the total number of participants: active, inactive, and retired), respectively. $273,636 and $5,983,280 reported as deferred outflows of resources related to pensions for miscellaneous plan and safety plan, respectively, resulting from the City's contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2019. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in the future pension expense as follows: 79 245 Deferred Outflows/ Deferred Outflows/ (Inflows) of Resources (Inflows) of Resources Ended June 30 Miscellaneous Plan Safety Plan 2019 $ 1,552,048 $ 5,773,173 2020 197,622 3,215,898 2021 (843,648) (1,892,469) 2022 (235,903) (524,448) 2023 - - Thereafter - - $ 670,119 $ 6,572,154 79 245 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") General ]Information about the Pension Plan Plan Description On September 1, 2008, the City approved the establishment of a Retirement Enhancement Plan (the "Plan") for eligible employees of the Supervisory and Professional Employees' Association of the City, effective October 1, 2008. Effective November 3, 2015 ("Freeze Date"), both benefits service and final pay are frozen. The Plan provides a supplemental retirement benefit in addition to the employees' current Ca1PERS retirement plan. The Plan is a single -employer defined benefit plan. The Plan will provide for 0.5% at age 55 for employees who retire from the City under Ca1PERS on or after September 30, 2008 and have 15 years of continuous City service. The City's Finance Director is the Plan Administrator and is responsible for taking the necessary actions to implement and administer the Plan in compliance with the Plan Document and applicable legal requirements. Public Agency Retirement Services ("PARS") is the Trust Administrator and is responsible for Plan accounting, coordinating benefit distributions with the Trustee, and communicating Plan provisions. Union Bank of California is the Trustee and is responsible for receiving and investing Plan contributions, safeguarding Plan assets, and distributing benefits to eligible Plan participants or beneficiaries at the direction of the Plan Administrator and pursuant to the Plan Document. The amounts of the benefit payments are calculated by the Trust Administrator and all accounting and reporting functions are performed by the Trust Administrator. Plan assets are considered to be held by the third -party administrator on behalf of the employees and are therefore excluded from the accompanying financial statements. The City's responsibilities for this Plan are not sufficient administrative involvement to constitute a "holding of assets" by the City in a pension trust fund. The year ended September 30, 2009, was the first year of the Plan. The Plan issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by contacting the Trust Administrator at the following address or telephone number: Public Agency Retirement Services, PARS Trust Administrator PO Box 12919 Newport Beach, CA 92658-2919 (800) 540-6369 80 246 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") (Continued) General Information about the Pension Plan Benefits Provided Below is the benefits summary provided by the Plan. Eligibility Retirement Benefit Final Pay COLA Normal Form of Benefit Termination/Disability/ Pre -Retirement Death Benefit Emnlavees Covered by Benefit Terms Supervisory and Professional employees Full-time employees in the group between August 5, 2008 and October 1, 2012 Before Plan Freeze: ■ Retire from City under CalPERS on or after September 30, 2008 ■ Age 55 with 15 years continuous City service After Plan Freeze: ■ Retire from Ca1PERS •Age 55 • Does not need to retire directly from the City. Target of 2.5%@55 less CalPERS 2%@55 City service from hire date through Freeze Date Highest consecutive 12 -month pay as of Freeze Date PERSable pay including EPM C 2% after retirement Single life annuity 100% vesting as of Freeze Date Greater of the following. • Refund of employee contributions with 4.25% interest • Deferred retirement benefit At June 30, 2016, the valuation date, the following employees were covered by the benefit terms: Active employees 19 Terminated employees l l Retired Employment and Beneficiaries S Total 38 81 247 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") (Continued) General Information about the Pension Plan (Continued) Contributions The City's funding policy is to make the contribution as determined by the Plan's actuary. There was no employee contribution after Freeze Date. Members may elect to receive lump sum refund of employee contributions with 4.25% interest in lieu of annuity upon termination / retirement / disability / death. Employer contributions are determined by actuarial study performed at least every two years. The Plan's annual pension contribution for the fiscal year ended September 30, 2018, was based on an actuarial valuation as of June 30, 2016. For the fiscal year ended September 30, 2018, the City's annual pension expense was $120,000 and the City made contributions of $158,000 to the Plan. Net Pension Liabilitv Actuarial Methods and Assumptions Used to Determine Total Pension Liabilitv The June 30, 2016 valuation was rolled forward to determine the September 30, 2017, total pension liability, based on the following actuarial methods and assumptions. Actuarial Cost Method Actuarial Assumptions: Discount Rate Investment Return Inflation Mortality and Disability Termination Service Retirement Post Retirement Cost of Living Adjustment Discount Rate Entry Age Normal 5.50% 5.50% 3.00% CalPERS 1997-2011 experience study. Projected fully generational with Scale MP -2014 modified to converge to ultimate rates in 2022. 5 RSI employees: terminate in 2020. Ca1PERS 1997-2011 Experience Study. Benefit: Modified 2.5%@55 Adding 1/3 of sum of the rates for ages 50-54 to the rate for age 55. 2.00% The discount rate used to measure the total pension liability was 5.50 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, the actuary stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 5.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. 82 248 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") (Continued) Net Pension Liability (Continued) Discount Rate (Continued) According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 5.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 50 basis points. An investment return excluding administrative expenses would have been 6.00 percent. Using this lower discount rate has resulted in a slightly higher Total Pension Liability and Net Pension Liability. The table below reflects target allocation by asset classes for the moderate portfolio selected by the City: Target Asset Class Allocation Global Equity 48.00% Fixed Income 45.00% Cash 5.00% REITs 2.00% 100.00% The City elected to use 5.50 percent investment return assumption. Confidence Level 50% 55% Net Return after Expenses 6.00% 5.75% Plan Non -Investment Expense' -0.50% -0.50% Net Return 5.50% 5.25% ' Based on expected long term non investment expenses. 83 249 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") (Continued) Chances in Net Pension Liabilitv The table on the following page shows the changes in net pension liability recognized over the measurement period: Balance at September 30, 2016 Changes recognized for the measurement period: Service Cost Interest on the total pension liability Changes of benefit terms Difference between expected and actual experience Changes of assumptions Plan to plan resource movement Contributions from the employer Contributions from employees Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other miscellaneous (income)/expense Net changes during October 1, 2016 to September 30, 2017 Balance at September 30, 2017 (Measurement Date) Increase (Decrease) Total Pension Plan Fiduciary Net Net Pension Liability Position Liability/(Asset) (a) (b) (c) = (a) - (b) $ 2,252,000 $ 914,000 $ 1,338,000 119,000 119,000 236,000 (236,000) 91,000 (91,000) (174,000) (174,000) - (5,000) 5,000 (55,000) 148,000 (203,000) $ 2,197,000 $ 1,062,000 $ 1,135,000 Sensitivity ofNet Pension Liabihiv to Chan-ees in the Discount Rate The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 5.50 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage -point lower (4.50 percent) or 1 percentage- point higher (6.50 percent) than the current rate: Discount Rate -1% (4.50%) Plan's Net Pension Liability $ 1,460,000 84 Current Discount Discount Rate + 1% Rate (5.501/6) (6.500/6) $ 1,135,000 $ 870,000 250 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") (Continued) Changes in Net Pension Liabilitv (Continued) Pension Plan Fiduciary Net Position. Detailed information about the plan's fiduciary net position is available upon request. Pension Expense, Deferred Outflows and Deferred Inflows of Resources Related to Pensions. For the measurement period ended September 30, 2017, the City incurred a pension expense of $120,000 As of measurement date of September 30, 2017, the City has deferred outflows and deferred inflows of resources related to pensions as follows: The amounts above are net of outflows and inflows recognized in the 2016-17 measurement period expense. Pension Expense, Deferred Outflows and Deferred Inflows of Resources Related to Pensions (Continued). The $158,000 reported as deferred outflows of resources related to pension resulting from the City's contribution subsequent to the measurement date during the year ended September 30, 2018 will be recognized as a reduction of the net pension liability in the year ending September 30, 2019. Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Measurement Period Ended September 30 2018 2019 2020 2021 2022 Thereafter Deferred Outflows/ (Inflows) of Resources $ 49,000 43,000 (14,000) (8,000) $ 70,000 85 251 Deferred outflows Deferred inflows of Resources of Resources Pension contribution made after measurement date $ 304,726 $ - Difference between expected and actual experience 36,000 - Changes of assumptions 53,000 - Net difference between projected and actual earning on pension plan investments - 19,000 Total $ 393,726 $ 19,000 The amounts above are net of outflows and inflows recognized in the 2016-17 measurement period expense. Pension Expense, Deferred Outflows and Deferred Inflows of Resources Related to Pensions (Continued). The $158,000 reported as deferred outflows of resources related to pension resulting from the City's contribution subsequent to the measurement date during the year ended September 30, 2018 will be recognized as a reduction of the net pension liability in the year ending September 30, 2019. Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Measurement Period Ended September 30 2018 2019 2020 2021 2022 Thereafter Deferred Outflows/ (Inflows) of Resources $ 49,000 43,000 (14,000) (8,000) $ 70,000 85 251 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 8 — Retirement Plans (Continued) C. Public Agency Retirement System ("PARS") (Continued) Pavable to the Pension Plan At September 30, 2018, the City reported a payable of $158,000 for the outstanding amount of contributions to the pension plan required for the year ended September 30, 2018. Note 9 — Other Post -Employment Health Benefits At September 30, 2018, net OPEB liability and related deferred outflows of resources and deferred inflows of resources are as follows: Deferred outflows of resources: OPEB contribution made after measurement date Total deferred outflows of resources Total other postemployment benefit liability Deferred inflows of Resources: Net difference between projected and actual eaming on on investments Total deferred inflows of resources OPEB expense General Information About the OPF.B Plan Plan DescriDlion Governmental Business -Type Activities Activities Total $ 868,720 $ 51,830 $ 920,550 $ 868,720 $ 51,830 $ 920,550 $ (38,768,828) $ (2,313,058) $ (41,081,886) $ (183,054) $ (10,921) $ (193,975) $ (183,054) $ (10,921) $ (193,975) $ 3,021,675 $ 180,281 $ 3,201,956 The City provides postretirement medical benefits to employees under a single -employer plan who retire directly from the City under CalPERS, with age and service requirements that vary by bargaining unit. For eligible retirees, the City contributes a portion of the premium for the medical plan selected by the retiree. Benefit provisions for CalPERS are established and amended through negotiations between the city and the respective unions. The plan issues a publicly available financial report that includes financial statements and required supplementary information for that plan. Those reports may be obtained by writing or calling the plans at the following address or telephone number: CalPERS Member Services Division P.O. Box 942704 Sacramento, CA 94229-2704 1-888-225-7377 86 252 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 9 — Other Post -Employment Health Benefits (Continued) Eninlovee Covered by Benefit Term At June 30, 2018, the measurement date, membership in the Plan consisted of the following: Inactive plan member currently receiving benefits 321 Inactive plan members entitled to but not yet receiving benefits 35 Active plan members 281 Total 637 Contribution The City currently finances benefits on a pay-as-you-go basis. Net OPEB .Liability The City's Net OPEB Liability was measured as of June 30, 2018 and the Total OPEB Liability used to calculate the Net OPEB Liability was determined by an actuarial valuation as of June 30, 2017. Standard actuarial update procedures were used to project/discount from June 30, 2017 to the measurement dates. Actuarial Methods and Assumptions Used to Determine Total OPER Liabilitv The total OPEB liability was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Actuarial Cost method Actuarial Assumption: Discount Rate Inflation Salary Increases Mortality Improvement Medical Trend Discount Rate Entry Age Method 6.75%- Pre -funded through Ca1PERS CERBT Asset Strategy 41 2.75% 3.00% per year. Post-retirement mortality projected fully generational with Scale MP -2017 Non -Medicare: 7.5% for 2019, decreasing to an ultimate rate of 4.0% in 2076. Medicare: 6.5% for 2019, decreasing to an ultimate rate of 4.0% in 2076. The discount rate used to measure the total OPEB liability was 6.75%. The discount rate is based on the Stochastic simulations of geometric average returns over 20 years. 87 253 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 9 — Other Post -Employment Health Benefits (Continued) Change in Net OPER Liability Sensitivity ofthe Net OPER Liability to Chanzes in the Discount Rate The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1 -percentage point lower (5.75 percent) or 1 -percentage -point higher (7.75 percent) than the current discount rate: Plan's Net OPEB liability (Assets) Discount Rate -1% Current Discount Discount Rate + 1% (5.75%) Rate (6.759/6) (7.750/6) $ 48,696,046 $ 41,081,886 $ 34,717,541 Sensitivity of the Net OPER Liability to Changes in the Healthcare Cost Trend Rates. The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 -percentage -point lower (6.50 percent decreasing to 5.50 percent) or ]- percentage -point higher (6.50 percent increasing to 7.50 percent) than the current healthcare cost trend rates: Plan's Net OPEB Liability (.assets) Healthcare Cost Healthcare Cost Trend Rate -1% Current Trend Rate + 1% (5.50%) Rate (6.50°l0) (7.50%) $ 36,668,126 $ 41,081,886 $ 45,127,869 88 254 Increase (Decrease) Total Pension Plan Fiduciary Net Net Pension Liability Position Liability/(Asset) (a) (b) (c) = (a) - (b) Balance at September 30, 2017 (Valuation Date June 30, 2017) $ 61,715,164 $ 20,534,998 $ 41,180,166 Changes recognized for the measurement period: Service Cost 1,387,266 - 1,387,266 Interest on the total OPEB liability 4,137,853 - 4,137,853 Changes of benefit terms - Difference between expected and actual experience - - - Changes of assumptions Plan to plan resource movement - - - Contributions from the employer - 4,026,811 (4,026,811) Contributions from employees - Net investment income - 1,634,752 (1,634,752) Benefit payments, including refunds of employee contributions (3,601,811) (3,601,811) - Administrative expense (38,164) 38,164 Other miscellaneous (income)/expense - - - Net changes during October 1, 2017 to September 30, 2018 1,923,308 2,021,588 (98,280) Balance at September 30, 2018 (Measurement Date June 30, 2018) $ 63.638,472 $ 22,556,586 $ 41,081,886 Sensitivity ofthe Net OPER Liability to Chanzes in the Discount Rate The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1 -percentage point lower (5.75 percent) or 1 -percentage -point higher (7.75 percent) than the current discount rate: Plan's Net OPEB liability (Assets) Discount Rate -1% Current Discount Discount Rate + 1% (5.75%) Rate (6.759/6) (7.750/6) $ 48,696,046 $ 41,081,886 $ 34,717,541 Sensitivity of the Net OPER Liability to Changes in the Healthcare Cost Trend Rates. The following presents the net OPEB liability, as well as what the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 -percentage -point lower (6.50 percent decreasing to 5.50 percent) or ]- percentage -point higher (6.50 percent increasing to 7.50 percent) than the current healthcare cost trend rates: Plan's Net OPEB Liability (.assets) Healthcare Cost Healthcare Cost Trend Rate -1% Current Trend Rate + 1% (5.50%) Rate (6.50°l0) (7.50%) $ 36,668,126 $ 41,081,886 $ 45,127,869 88 254 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 9 — Other Post -Employment Health Benefits (Continued) OPEB Exoense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2018, the City' recognized OPEB expense of $3,201,956. At September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Contribution made after measurement date Difference between expected and actual experience Changes of assumptions Net difference between projected and actual earning on pension plan investments Total Deferred outflows Deferred inflows of Resources of Resources $ 920,550 $ 193,975 920,550 $ 193,975 The difference between projected OPEB plan investment earnings and actual earnings is amortized over a five year period. Amount reported as deferred inflows of resources related to OPEB will be recognized as future OPEB expense as follows: Note 10 — Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City maintains self-insurance programs for workers' compensation and general liability up to a maximum of $350,000 and $750,000 per occurrence, respectively. General liability claims, which exceed the limit, are insured through Independent Cities Risk Management Authority ("ICRMA") up to a maximum per incident of $27,000,000. Workers compensation claims that exceed the limit are insured by ICRMA up to the California statutory limits for workers' compensation. The City is a member of the ICRMA, a public entity risk pool currently operating as a common risk management and insurance program for 15 California cities. The City pays an annual premium to the pool for its excess general liability insurance coverage. The agreement for information of the ICRMA provides that the pool will be self- sustaining through member premiums. The City continues to carry commercial companies for all other risks of loss, which include property insurance, and cyber liability insurance. 89 255 Deferred Outflows/ Measurement Period (Inflows) of Resources Ended June 30 OPEB Plan 2019 $ (48,494) 2020 (48,494) 2021 (48,494) 2022 (49,493) $ (193,975) Note 10 — Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City maintains self-insurance programs for workers' compensation and general liability up to a maximum of $350,000 and $750,000 per occurrence, respectively. General liability claims, which exceed the limit, are insured through Independent Cities Risk Management Authority ("ICRMA") up to a maximum per incident of $27,000,000. Workers compensation claims that exceed the limit are insured by ICRMA up to the California statutory limits for workers' compensation. The City is a member of the ICRMA, a public entity risk pool currently operating as a common risk management and insurance program for 15 California cities. The City pays an annual premium to the pool for its excess general liability insurance coverage. The agreement for information of the ICRMA provides that the pool will be self- sustaining through member premiums. The City continues to carry commercial companies for all other risks of loss, which include property insurance, and cyber liability insurance. 89 255 City of E1 Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 10 —Risk Management (Continued) Estimates for all liabilities, up to the self-insured levels, have been accrued in the Workers' Compensation and the General Liability Self -Insurance Internal Service Funds including an estimate for incurred but not reported claims. Estimates are based on recommended reserves established by the City's third -party administrators who administer the City's claims and insurance programs. There have been no significant changes in insurance coverage as compared to last year and settlements have not exceeded coverage in each of the past three fiscal years. The ICRMA has published its own financial report for the year ended June 30, 2018, which can be obtained from Independent Cities Risk Management Authority, 14156 Magnolia Park, Sherman Oaks, California. Changes in the balances of claims liabilities for the current and the last two fiscal years follow: Annual Current Year Fiscal Year Claims Payable Claims and Changes Ended October 1 in Estimates Claims Payable Current Year Claims Balance Due within Payments September 30 One Year September 30, 2016 $ 8,131,222 $ 4,273,519 $ (1,796,940) $ 10,607,801 $ 2,081,434 September 30, 2017 10,607,801 3,412,494 (2,622,063) 11,398,232 1,931,009 September 30, 2018 11,398,232 1,801,303 (922,529) 12,277,006 2,069,000 Note 11 —Joint Venture Los Angeles Interagency Metropolitan Police Apprehension Crime Task Force The City is a member of the Los Angeles Interagency Metropolitan Police Apprehension Crime Task Force (L.A. IMPACT), a joint powers authority of the police departments of cities and other institutions in Los Angeles County. L.A. Impact was formed July 1, 1991, with the mission to promote coordinated law enforcement efforts and to address emerging criminal justice issues, mainly in the areas of drug trafficking and money laundering. The Executive Council consists of 14 police chiefs and other various police officers. All financial decisions were made by the Executive Council. The members received monetary distributions from asset seizures based on their respective resource contribution to the effort. The City does not have a measurable equity interest in LA IMPACT. The net position of LA IMPACT represents a temporary holding of finds to be distributed to various law enforcement jurisdictions. The distribution of these funds is not determinable until action has been taken by the courts or the LA IMPACT board of directors with respect to the use of these funds. L.A. IMPACT's latest summary financial information as of June 30, 2017 is as follows: Total Asset $13,919,317 Total Liabilities $ 3,182,228 L.A. IMPACT net position 10,737,089 Total liabilities, and LA. IMPACT net position $13,919,317 Total revenues $ 8,767,338 Total expenses (7,610,794) Change in net position $ 1,156,544 90 256 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 11 —Joint Venture (Continued) Complete financial statements for L.A. IMPACT may be obtained at its administrative office: L.A. IMPACT 5700 South Eastern Avenue Commerce, CA 90040-2924 Note 12 — Commitments and Contingencies Litization The City is currently a party to various claims and legal proceedings. In management's opinion, the ultimate liabilities, if any, resulting from such claims and proceedings, will not materially affect the City's financial position. Federal and State Grants The City participates in a number of federal and state assisted grant programs, which are subject to program compliance audits by the grantors or their representatives. Final closeout audits of these programs have not yet been completed. Accordingly, the City's ultimate compliance with applicable grant requirements will be established at some future date. Expenditures, if any, which may be disallowed by the granting agencies cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. 91 257 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 13 — Classification of Fund Balances At September 30, 2018, fund balances are classified in the governmental funds as follows: Special Nonmajor General Revenues/ Govermental Fund LAWA Fund Donations Fund Funds Nonspendable: Total Governmental Funds Employee receivables $ 46,386 $ - $ - $ - $ 46,386 Inventories 120,737 - - - 120,737 Prepaid items and deposits 6,089,517 - - - 6,089,517 Advance to other funds - - - - - Total nonspendable 6,256,640 - - 6,256,640 Restricted: Police - - - 1,084,234 1,084,234 Fire - - - Public works - - - 862,952 862,952 Community and cultural - 480,441 - 3,430,553 3,910,994 Debt service - - - 1,024,214 1,024,214 Pension 1,000,000 - - - 1,000,000 Total restricted 1,000,000 480,441 6,401,953 7,882,394 Assigned: Police 210,911 - - - 210,911 Fire 235,627 - - - 235,627 Public works 56,926 - - - 56,926 Economic development 531,695 - - - 531,695 Parks and recreation 136,521 - - - 136,521 Library 22,380 - - - 22,380 Computer refresh 357,294 - - - 357,294 Encumbrances 639,248 - - 639,248 Continuing appropriation 20,000 - - - 20,000 Capital outlay - - - 3,231,083 3,231,083 Total assigned 2,210,602 - - 3,231,083 5,441,685 Unassigned: 24,432,049 - 476,445 (810,176) 24,098,318 Total fund balance $ 33,899,291 $ 480,441 $ 476,445 $ 8,822,860 $ 43,679,037 92 258 City of El Segundo Notes to the Basic Financial Statements (Continued) For the Year Ended September 30, 2018 Note 14 — Prior Period Adjustments The City implemented GASB Statement No. 75 during the year ended September 30, 2018. The beginning net position at October 1, 2017 were related as fellows. 93 259 Enterprise Funds Govemmental Internal Service Business -Type Water Sewer Activities Fund Activities Fund Fund Net Position (Deficit) at October 1, 2017 $ 8,868,476 $ 8,183,163 $ 43,559,657 $24,630,222 $14,060,917 (1) Deferred Outflows of Resources - OPEB contribution during meansurement period 3,800,087 17,865 226,724 145,838 80,886 (2) Net OPEB Liabilities (38,861,574) (182,704) (2,318,592) (1,491,414) (827,178) (3) Fund not reported in prior year- Measure M 12,766 - - - - (4) Capital assets additions in ISF that should have been capitalizaed in Governmental Activities in prior year 443,802 - - - Net Position (Deficit) at October 1, 2017, as Restated $ (25,736,443) $ 8,018,324 $ 41,467,789 $23,284,646 $13,314,625 93 259 This page intentionally left blank. 94 260 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) 95 261 This page intentionally left blank. 96 262 City of El Segundo Required Supplementary Information (Unaudited) Budgetary Comparison Schedule - General Fund For the Year Ended September 30, 2018 97 263 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Taxes $ 47,961,990 $ 50,294,185 $ 53,092,545 $ 2,798,360 Licenses and permits 13,144,400 13,144,400 13,695,476 551,076 Intergovernmental 16,000 16,000 - (16,000) Charges for services 4,767,200 4,767,200 5,744,333 977,133 Use of money and property 625,500 625,500 555,735 (69,765) Fines and forfeitures 308,500 308,500 451,366 142,866 Developer fees - - 262,346 262,346 Miscellaneous 2,521,200 2,521200 2,111,483 (409,717) Total revenues 69,344,790 71,676,985 75,913,284 4,236,299 EXPENDITURES: Current: General government: City Council 263,790 263,790 259,149 4,641 City Treasurer 315,333 270,333 252,515 17,818 City Clerk 527,609 527,609 517,128 10,481 City Manager 1,388,124 1,488,124 1,382,217 105,907 City Attorney 565,300 565,300 802,137 (236,837) Planning 1,107,277 1,181,730 1,220,357 (38,627) Building and Safety 1,372,404 1,444,083 1,463,472 (19,389) Administrative Services 4,705,546 4,833,979 4,212,956 621,023 Non -departmental 6,801,238 6,690,638 5,381,197 1,309,441 Public safety: Police 19,687,884 20,450,194 19,598,203 851,991 Fire 15,454,302 16,072,905 16,220,310 (147,405) Animal Control 157,131 157,131 213,252 (56,121) Communications Center 1,511,724 1,511,724 1,457,879 53,845 Public Works: Administration 138,284 138,284 139,023 (739) Government Buildings 2,263,812 2,196,593 1,796,990 399,603 Engineering 991,876 998,414 828,076 170,338 Streets 1,887,473 1,897,473 1,651,616 245,857 Solid Waste 568,497 568,497 527,516 40,981 Storm drain 737,679 701,529 297,055 404,474 Equipment Maintenance 1,283,833 1,283,833 1,084,955 198,878 Community and cultural: Recreation and Parks 6,319,132 7,393,532 5,865,703 1,527,829 Library 2,245,921 2,155,183 2,138,452 16,731 Capital outlay 67,961 72,949 64,673 8,276 Debt service: Principal retirement - - 47,402 47,402 Interest - - 39,620 39,620 Total expenditures 70,362,130 72,863,827 67,461,853 5,576,018 Excess (deficiency) of revenues over expenditures (1,017,340) (1,186,842) 8,451,431 (1,339,719) OTHER FINANCING SOURCES (USES): Transfers in - - 346,446 (346,446) Transfers out (3,174,000) (2,949,000) (3,541,121) 592,121 Total other financing sources (uses) (3,174.000) (2,949,000) (3,194,675) 245,675 Net change in fund balances $ (4,191,340) $ (4,135,842) 5,256,756 $ (1,094,044) FUND BALANCE: Beginning of Year 28,642,535 End of Year $ 33,899,291 97 263 City of El Segundo Required Supplementary Information (Unaudited) Major Special Revenue Fund Budgetary Comparison Schedule - LAWA Fund For the Year Ended September 30, 2018 Variance with Final Budget Budeeted Amounts Positive Original Final Actual (Neeative) REVENUES: Use of money and property $ - $ - $ 187,498 $ 187,498 Total revenues - - 187,498 187.498 NET CHANGE IN FUND BALANCE $ - $ 187,498 $ 187.498 FUND BALANCES: Beginning of year 292.943 End of year $ 480,441 98 264 City of El Segundo Required Supplementary Information (Unaudited) Major Special Revenue Fund Budgetary Comparison Schedule - Special Revenues and Donations Special Revenues Fund For the Year Ended September 30, 2018 99 265 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Charges for services $ - $ $ 4,500 $ 4,500 Miscellaneous - 6,127 6,127 Total revenues - 10,627 10,627 EXPENDITURES: Current: Public safety - - 364 (364) Community and cultural - - 45,628 (45,628) Total expenditures - - 45,992 (45,992) NET CHANGE IN FUND BALANCE $ $ - 56,619 $ 56,619 FUND BALANCES: Beginning of year 511,810 End of year $ 568,429 99 265 City of El Segundo Required Supplementary Information (Unaudited) Notes to the Budgetary Comparison Schedule For the Year Ended September 30, 2018 Note 1 - Budgetary Control and Accounting Policy Budget are adopted on a basis consistent with accountign principles generally accepted in the United States of America and are used as a management control device. Annual budgets are adopted for the General Fund, Special Revenue Funds, Debt Service Funds and the Capital Projects Funds. The Ctiy Council approves each year's budget submitted by the City Manager prior to the beginning of the new fiscal year. Public hearings are conducted prior to its adoption by the City Council. Budgets and adopted supplemental appropriations, where required during the period, are also approved by the City Council. Intradepartmental budget changes are approved by the City Manager. The legal level of control, that is defined as the level at which City Council approval is required for changes, is at the department level for the General Fund and functional level for all other funds. During the year, several supplementary appropriations were necessary. All operating budget appropriations lapse at year-end. 100 266 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Changes in Net Pension Liability and Related Ratios September 30, 2018 Last Ten Fiscal Years California Public Employees' Retirement System ("Ca1PERS") - Miscellaneous Rate Plan Measurement period Total pension liability Service cost Interest Changes of benefit terms Changes of assumptions Differences between expected and actual experience Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Pension fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Net plan to plan resource movement Administrative expense Other miscellaneous expense Net change in plan fiduciary net position Plan fiduciary net position - beginnings Plan fiduciary net position - ending (b) Plan net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Plan net pension liability as a percentage of covered payroll 2017-18 2016-17 2015-16 2014-15 2013-14 $ 2,002,276 $ 2,022,687 $ 1,836,590 $ 1,892,820 $ 1,992,358 7,976,930 7,747,566 7,584,214 7,355,288 7,137,756 (464,769) 6,199,889 - (1,728,307) 5,679,530 8,203 (813,832) (899,552) (1,400,892) (6,360,824) (5,830,361) (5,534,415) (5,121,477) (4,825,880) 3,161,816 9,325,949 2,986,837 997,432 4,304,234 114,201,292 104,875,343 101,888,506 100,891,074 96,586,840 $ 117,363,108 $ 114,201,292 $ 104,875,343 $ 101,888,506 $ 100,891,074 $ 3,291,215 $ 2,381,409 $ 2,189,606 $ 905,313 975,818 850,845 6,839,662 8,294,674 375,088 (6,360,824) (5,830,361) (5,534,415) (198) (31,271) (256) (125,728) (110,739) (47,032) (238,760) - - 4,310,680 5,679,530 (2,166,164) 1,990,762 $ 2,229,759 883,340 1,271,008 1,743,059 11,605,717 (5,121,477) (4,825,880) 161,952 - (86,704) - (429,068) 10,280,604 80,684,162 75,004,632 77,170,796 77,599,864 67,319,260 $ 84,994,842 $ 80,684,162 $ 75,004,632 $ 77,170.796 $ 77,599,864 $ 32,368,266 $ 33,517,130 $ 29,870,711 $ 24,717,710 $ 23,291,210 72.42% 70.65% 71.52% 75.74% 76 91% $ 12,794,914 $ 13,007,635 $ 12,983,105 $ 13,129,083 $ 13,163,041 252.98% 257.67% 230.07% 188.27% 17694% 1 Historical information is presented for measurement periods for which GASB 68 is applicable. Additional years' information will be displayed as it becomes available. Notes to Schedule: Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2017 valuation date This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (aka. Golden Handshakes). Changes of Assumptions: In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7 65 percent to 7.15 percent. In 2016, there were no changes In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense_) In 2014, amounts reported were based on the 7,5 percent discount rate. 101 267 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Changes in Net Pension Liability and Related Ratios September 30, 2018 Last Ten Fiscal Years' California Public Employees' Retirement System ("Ca1PERS") - Safety Rate Plan Measurement period 2015-16 Total pension liability Service cost Interest Changes of benefit terms Changes of assumptions Differences between expected and actual experience Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Pension fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Net plan to plan resource movement Administrative expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Plan net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Plan net pension liability as a percentage of covered payroll $ 3,906,152 18,561,546 (2,593,008) (13,146,807) 6,727,883 249,847,921 $ 256,575,804 2014-15 $ 4,017,009 18,050,364 (4,336,187) (4,610,542) (12,326,846) 793,798 249,054,123 $ 249,847,921 2013-14 $ 4,084,900 17,643,395 (11,753,968) 9,974,327 239,079,796 $ 249,054,123 $ 6,497,421 $ 6,155,214 $ 5,466,181 1,288,776 1,697,612 1,556,189 792,070 3,716,152 25,110,451 (13,146,807) (12,326,846) (11,753,968) 256 568 (101,008) (186,524) - (4,669,292) (943,824) 20,378,853 165,737,083 166,680,907 146,302,054 $ 161,067,791 $ 165,737,083 $ 166,680,907 $ 95,508,013 $ 84,110,838 $ 82,373,216 62.78% 66.34% 66.93% $ 14,438,355 $ 14.977301 $ 14,757,054 661.49% 561.60% 558.20% 1 The City's Safety Plan was converted from an Agent Multiple Employer Defined Plan to a Cost Sharing Multiple Employer Defined Benefit Plan starting from the measurement period June 30, 2017. Information is only displayed for years GASB 68 were in effect and prior to the conversion of the plan Notes to Schedule: Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2015 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes of Assumptions: In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense,) In 2014, amounts reported were based on the 7.5 percent discount rate, 102 268 City of E1 Segundo Required Supplementary Information (Unaudited) Schedule of the City's Proportionate Share of the Net Pension Liability and Related Ratios September 30, 2018 Last Ten Fiscal Years' California Public Employees' Retirement System ("CalPERS") - Safety Rate Plan Measurement period ended City Proportion of the Net Pension Liability/(Asset) City's Proportionate Share of the net Pension Liability/(Asset) City's Covered Payroll City's Proportionate Share of the Net Pension Liability/(Asset) as a Percentage of Its Covered Payroll Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Total Pension Liability June 30, 2018 June 30, 2017 1.1081% 1.0764% $ 106,775,573 $ 106,751,685 $ 13,078,753 $ 12,697,818 816.40% 840.71% 62.48% 7331% 1 The City's Safety Plan was converted from an Agent Multiple Employer Defined Plan to a Cost Sharing Multiple Employer Defined Benefit Plan starting from the measurement period June 30, 2017. Information is only displayed for years the plan was converted to a cost sharing plan - 2 Payroll from 2017-18 of $13,078,753 was assumed to increase by the 3.00 percent payroll growth assumption. 103 269 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Changes in Net Pension Liability and Related Ratios September 30, 2018 Last Ten Fiscal Years Public Agency Retirement System Defined Benefit Plan Measurement period 2017-18 2016-17 Total pension liability Service cost Interest Changes of benefit terms Changes of assumptions Differences between expected and actual experience Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Pension fiduciary net position 2015-16 2014-15 $ - $ - $ - $ 54,000 119,000 121,000 113,000 110,000 167,000 - 140,000 - 72,000 - 93,000 - (174,000) (141,000) (81,000) (37,000) (55,000) (20,000) 265,000 127,000 2,252,000 2,272,000 2,007,000 1,880,000 $ 2,197,000 $ 2,252,000 $ 2,272,000 $ 2,007,000 Contributions - employer $ 236,000 $ - $ - $ - Contributions - employee - 16,000 167,000 193,000 Net investment income 91,000 72,000 (11,000) 52,000 Benefit payments, including refunds of employee contributions (174,000) (141,000) (81,000) (37,000) Net plan to plan resource movement Administrative expense (5,000) (5,000) (5,000) (5,000) Other miscellaneous expense - Net change in plan fiduciary net position 148,000 (58,000) 70,000 203,000 Plan fiduciary net position - beginning7' 914.000 972,000 902,000 699,000 Plan fiduciary net position - ending (b) $ 1,062,000 $ 914,000 $ 972,000 $ 902,000 Plan net pension liability - ending (a) - (b) $ 1,135,000 $ 1,338,000 $ 1.300,000 $ 1,105,000 Plan fiduciary net position as a percentage of the total pension liability 48.34% 40.59% 42.78% 44.94% Covered payroll N/A N/A N/A N/A Plan net pension liability as a percentage of covered payroll N/A N/A N/A N/A 1 Historical information is presented only for measurement periods for which GASB 68 is applicable. Additional years' information will be displayed as it becomes available. 104 270 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Contributions For the Year Ended September 30, 2018 Last Ten Fiscal Years California Public Employees' Retirement System ("CaIPERS") - Miscellaneous Rate Plan Fiscal year Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payrole Contributions as a percentage of covered payroll3 2017-18 2016-17 2015-16 $ 2,712,223 $ 2,360,497 $ 2,267,956 (3,291,215) (2,360,497) (2,267,956) *� (578.992) $ $ - $ 12,794,914 $ 11,980,872 $ 12,484,558 25.72% 19.70% 18.17% 2014-15 $ 2,047,988 (2,047.988) $ 12,279,995 16.68% 2013-14 $ 2,631,370 (2,631,370} $ 12,782.090 20.59% 1 Historical information is presented for measurement periods for which GASB 68 is applicable. Additional years' information will be displayed as it becomes available. Z Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to make additional contributions towards their unfunded bability. Employer contributions for such plans exceed the actuarially determined contributions. 3 Includes one year's payroll growth using 2 75 percent payroll assumption for fiscal year ended June 30, 2018, 3. 00 percent payroll assumption for fiscal years ended June 30, 2014-17. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2017-18 were derived from the June 30, 2015 funding valuation report Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method Level percentage of payroll Asset valuation method Market value Inflation 275% Salary increases Varies by entry age and service Payroll Growth 3.00% Investment rate of return 7.50% Net of Pension Plan Investment and Administrative Expenses; includes Inflation, The probabilities of Retirement are based on the 2014 CaIPERS Experience Study for the period from 1997 to Retirement age 2011. The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2011. Pre -retirement and Post-retirement mortality rates include 20 years of projected mortality improvement Mortality using Scale BB published by the Society of Actuaries. 105 271 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Contributions (Continued) For the Year Ended September 30, 2018 Last Ten Fiscal Years California Public Employees' Retirement System ("CaIPERS") - Safety Rate Plan Fiscal year 2017-18 2016-17 2015-16 2014-15 2013-14 Actuarially determined contribution $ 2,675,418 $ 5,282,029 $ 6,581,713 $ 6,355,099 $ 6,316,752 Contributions in relation to the actuarially determined contribution (8,017,771) (5,282,029) (6,581,713) (6,355,099) (6,316,752) Contribution deficiency (excess) $ (5,342,353) $ - $ - $ - $ - Covered payroll $ 13,078,753 $ 12.410.252 $ 13,711,733 $ 13,863,160 $ 14,420,062 Contributions as a percentage of covered payroll 61.30% 42.56% 48,00% 45.84% 43.81% 1 Historical information is presented for measurement periods for which GASB 68 is applicable. Additional years' information will be displayed as it becomes available. 2 Payroll from 2017-18 of $13,078,753 was assumed to increase by the 3.00 percent payroll growth assumption. Notes to Schedule: Change in Benefit Terms: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2017 as they have minimal cost impact. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k_a Golden Handshakes). Changes of Assumptions: In 2018, demographic assumptions and inflation rate were changed in accordance to the CaIPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7,5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate. 106 272 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Contributions (Continued) For the Year Ended September 30, 2018 Last Ten Fiscal Years Public Agency Retirement System Defined Benefit Plan Fiscal year 2017-18 2016-17 2015-16 2014-15 Actuarially determined contribution $ 158,000 $ 118,000 $ 118,000 $ - Contributions in relation to the actuarially determined contribution (158,000) (236,000) - Contribution deficiency (excess) $ - $ (118,000) $ 118,000 $ Covered payro113 N/A N/A N/A N/A Contributions as a percentage of covered payrol13 N/A N/A N/A N/A 1 Historical information is presented for measurement periods for which GASB 68 is applicable Additional years' information will be displayed as it becomes available. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2017-18 were derived from the June 30, 2016 funding valuation report. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Normal Amortization method Level Dollar, Closed Asset valuation method Market value Inflation 3.00% Salary increases Varies by entry age and service Payroll Growth 3.00% Cost of Living Adjustment 2.00% Investment rate of return 550% The probabilities of Retirement are based on the 2014 CalPERS Experience Study for the period from 1997 to Service Retirement 2011. Based on the 2014 CalPERS Experience Study for the period from 1997 to 2011, Mortality projected fully Mortality generational with Scale MP -2014 modified to converge to ultimate rates in 2022. 107 273 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Changes in Total OPEB Liability and Related Ratios September 30, 2018 Last Ten Fiscal Years Other Postemployment Benefits ("OPEB") Plan Measurement period 2017-18 Total OPEB liability $ 22.556,596 Service cost $ 1,387,266 Interest 4,137,853 Changes of benefit terms - Changes of assumptions ' Differences between expected and actual experience ` Benefit payments, including refunds (3,601,811) Other - funding rates used by benefits paid Net change in total OPEB liability 1,923,308 Total OPEB liability - beginning 61,715,164 Total OPEB liability - ending (a) $ 63,638,472 OPEB fiduciary net position Contributions - employer $ 4,026,811 Contributions - employee Net investment income 1,634,752 Benefit payments, including refunds of employee contributions (3,601,811) Administrative expense (38,164) Net change in plan fiduciary net position 2,021,588 Plan fiduciary net position - beginning 20,534,998 Plan fiduciary net position - ending (b) $ 22.556,596 Plan net OPEB liability - ending (a) - (b) $ 41,081,886 Plan fiduciary net position as a percentage of the total OPEB liability 35.44% Covered payroll' $ 30,022,722 Plan net OPEB liability as a percentage of covered payroll 136.84% ' For the 12 -month period ended on June 30, 2018 (Measurement Date). 108 274 City of El Segundo Required Supplementary Information (Unaudited) Schedule of Contributions For the Year Ended September 30, 2018 Last Ten Fiscal Years Other Postemployment Benerits ("OPEB") Plan Fiscal years 2017-18 Actuarially determined contribution $ 3,876,000 Contributions in relation to the actuarially determined contribution (4,044,912) Contribution deficiency (excess) $ (168,912) Covered payrolF $ 30,135,271 Contributions as a percentage of covered payroll2 1342% 1 Historical information is presented for measurement periods for which GASB 75 is applicable. Additional years' information will be displayed as it becomes available. 2 Determined for the 12 month period ending on September 30, 2018 (fiscal year end). Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2017-18 were derived from the June 30, 2017 funding valuation report. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Nirmal Cost Method Amortization method Level percentage of payroll Amortization period 25 -year fixed period for FY2017-18 Asset valuation method Investment gains and losses spread over 5 -year rolling period Discount rate 7.50% General inflation 3.00% Non -Medicare - 6.5% for 2018, decreasing to an ultimate rate of 5.0% in 2021. Medical trend Medicare - 6.7% for 2018, decreasing to an ultimate rate of 5.0% in 2021. Mortality CaIPERS 1997-2011 experience syudy Mortality Improvement Scale MP -2014 modified to converge to ultimate mortality Mortality improvement improvement rates in 2022. 109 275 This page intentionally left blank. 110 276 SUPPLEMENTARY INFORMATION 277 City of El Segundo Combining Balance Sheet General Funds September 30, 2018 ASSETS Cash and investments Restricted cash Receivables: Taxes Accounts Interest Notes and loans Due from other funds (Note 7) Due from other governments Advances to other agencies Inventories Prepaids Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Retentions payable Due to other funds Unearned revenue Deposits payable Total liabilities Fund balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances Economic Hyperion Uncertainty Mitigation General Fund Fund $ 20,589,540 $ 2,000,004 $ 114,086 1,000,000 - - 4,578,726 - 526,888 - 270,638 - - 46,387 - - 1,511,964 - 15,071 - 120,737 - 6,089,517 - - $ 34,749,468 $ 2,000,004 $ 114.086 $ 1,579,342 $ - $ 401 2,036,987 15 - 30,868 - 570,890 - - 4,218,102 - 401 6,256,640 - - 1,000,000 - 2,210,602 - 21,064,124 2,000,004 113,685 30,531,366 2,000,004 113,685 $ 34,749,468 $ 2,000,004 $ 114,086 112 278 City of El Segundo Combining Balance Sheet (Continued) General Funds September 30, 2018 ASSETS Cash and investments Receivables: Taxes Accounts Interest Notes and loans Due from other funds (Note 7) Due from other governments Advances to other agencies Inventories Prepaids Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Retentions payable Due to other funds Unearned revenue Deposits payable Total liabilities Fund balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances Facilities Project Maintenance Deposits Fund Fund Total $ - $ 1,347,077 $ 24,050,707 - 1,000,000 4,578,726 - 5,847 532,735 - 270,638 46,387 1,511,964 15,071 120,737 - 6,089,517 $ - $ 1,352,924 $ 38.216.482 $ $ (2,185) $ 1,577,558 2,036,987 - 15 27,181 27,181 - - 30,868 73,692 644,582 98,688 4,317,191 6,256,640 1,000,000 2,210,602 1,254,236 24,432,049 1,254,236 33,899,291 $ - $ 1,352,924 $ 38,216,482 113 279 City of El Segundo Combining Statement of Revenues, Expenditures, and Changes in Fund Balances General Funds For the Year Ended September 30, 2018 REVENUES: Taxes Licenses and permits Intergovernmental Charges for services Use of money and property Fines and forfeitures Developer Fees Miscellaneous Total revenues EXPENDITURES: Current: General government Public safety Public works Community and cultural Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES: Beginning of year End of year Economic Hyperion Uncertainty Mitigation General Fund Fund $ 53,092,545 $ $ - 13,695,476 - 5,433,178 - 554,868 - 867 451,366 - - 262,346 - - 2,111,483 - - 75,601,262 - 867 15,373,018 37,489,644 6,319,351 - 5,671 8,004,156 - 64,673 - 47,402 - 39,620 - - 67,337,864 - 5,671 8.263,398 (4,804) 346,446 - - (2,824,675) - (2,478,229) 5,785,169 - (4,804) 24,746,197 2,000,004 118.489 $ 30,531,366 $ 2,000,004 $ 113,685 114 280 City of El Segundo Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) General Funds For the Year Ended September 30, 2018 Facilities Project Maintenance Deposits Fund Fund Total REVENUES: Taxes $ $ - $ 53,092,545 Licenses and permits - - 13,695,476 Intergovernmental - - Charges for services - 311,155 5,744,333 Use of money and property - - 555,735 Fines and forfeitures - - 451,366 Developer Fees - - 262,346 Miscellaneous - - 2,111,483 Total revenues 311,155 75,913,284 EXPENDITURES: Current: General government 118,109 15,491,127 Public safety - 37,489,644 Public works 209 - 6,325,231 Community and cultural - 8,004,156 Capital outlay - - 64,673 Debt service: Principal retirement - - 47,402 Interest and fiscal charges - - 39,620 Total expenditures 209 118,109 67,461,853 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (209) 193,046 8,451,431 OTHER FINANCING SOURCES (USES): Transfers in - - 346,446 Transfers out (346,446) (370,000) (3,541.121) Total other financing sources (uses) (346,446) (370,000) (3.19075) NET CHANGE IN FUND BALANCES (346,655) (176,954) 5,256,756 FUND BALANCES: Beginning of year 346,655 1,431,190 28,642,535 End of year $ - $ 1,254,236 $ 33,899,291 115 281 NON -MAJOR GOVERNMENTAL FUNDS Special Revenue Funds: State Gas Tax Fund - Accounts for a share of revenues derived from the State Highway Users' Tax under Sections 2105, 2106, 2107, and 2107.5. The revenue is derived from a share of the gasoline taxes and is used for the construction and maintenance of the road network system of the City. Residential Sound Insulation Program Fund - Accounts for the grants received from the Federal Aviation Administration (FAA) and the Los Angeles World Airports (LAWA). The fund is used to provide acoustical treatment of homes in El Segundo that are within the extreme airport noise impact zone, in order to create a better sound environment inside the home. Certified Union Program Agencies - Accounts for revenues and expenditures for the Endorsement and Emergency Response Program (EERP), a consolidation of six environmental programs at the local level. Community Development Block Grant (CDBG) - Accounts for revenues received from the Department of Housing & Urban Development (HUD). These revenues must be expended to accomplish one of the following objectives: elimination of slum or blight to low and moderate income persons; or, to meet certain urgent community development needs. The City of El Segundo uses this revenue to fund eligible senior activities such as in-home care; art classes; counseling; and home delivered meals, administered by the Planning & Building Safety Department. (Note: Beginning in fiscal year 2015-2016, the City decided to fund urgent community development needs such as senior in-home care, delivered meals, etc. from the General Fund and to solely use CDBG funds to build access ramps to comply with the Americans with Disabilities Act (ADA). Asset Forfeiture Fund - Accounts for receipt and disbursement of narcotic forfeitures received from the County, State, and Federal agencies pursuant to Section 11470 of State Health & Safety Code and Federal Statute 21 USC Section 881. Prop "A" Transportation Fund - Accounts for the one-half (1/2) cent Sales Tax approved by the voters of Los Angeles County to be used for local transportation purposes. These revenues are collected by the State and a portion is funneled to the City through the Los Angeles County Transportation Commission. The City of El Segundo uses this fund to participate in CTIP/MAX, a regional commuter service and to provide Dial -a -Ride; beach shuttles; and various transportation services. Prop "C" Transportation Fund - Accounts for the one-half (1/2) cent Sales Tax approved by the voters of Los Angeles County in November 1990. Collection of the tax began in April 1991. Proceeds are to be used to improve transit services and operations; reduce traffic congestion; improve air quality; operate and improve the condition of the streets and freeways utilized by public transit; and reduce foreign oil dependence. Traffic Safety Fund - Accounts for a portion of the Vehicle Code violation fines and penalties collected by the Los Angeles County Municipal Court. By State law, this money must be used for traffic safety related expenditures including traffic enforcement and capital projects. Air Pollution Reduction Fund - Accounts for the City's share of funds received under the Health & Safety Code Section 44223 (AB 2766) to finance mobile source air pollution reduction programs consistent with the California Clean Air Act of 1988. The fund, derived from additional vehicle registration fee, is used to support the South Coast Air Quality Management District's (SCAQMD) program to reduce air pollution from motor vehicles. TDA Article 3/SB 821 Bikeway Fund - Accounts for the monies the City receives from the Transportation Development Act Article 3 which are to be specifically used for construction or repair of bikeways, sidewalks, or handicapped accesses. 116 282 NON -MAJOR GOVERNMENTAL FUNDS COPS Fund - Accounts for receipt and disbursement of funds received under the State Citizens' Option for Public Safety (COPS) program allocated pursuant to Government Code Section 30061 enacted by AB 3229, Chapter 134 of the 1996 Statues. This fund, also known as the Supplemental Law Enforcement Services Fund (SLESF), is allocated based on population and can only be spent for "front line municipal police services" such as local crime prevention and community -oriented policing, per Government Code Section 30061 (c)(2). MTA Grant Fund - Accounts for receipt and disbursement of funds received from the exchange of Federal Surface Trasnportation Program - Local Funds for Local Transportation Funds from Los Angeles County Metropolitan Transportaation Authority. Measure R Fund - Accounts for the one-half (1/2) Sales Tax approved by the voters of Los Angeles County to be used for local transportation needs. These revenues are received by the State and a portion is funneled to the City through the Los Angeles Country Metropolitan Transportation Authority. The City of El Segundo uses these funds for street improvements. Federal Grants Fund - Accounts for revenues and expenditures for each Federal grant awarded to the City. Stale & County Grants Fund - Accounts for revenues and expenditures for each State or County grant awarded to the City. PSAF Property Tax Public Safety Fund - Accounts for the one-half (1/2) cent Sales Tax approved by the voters in November 1993 under Prop 172. These revenues must be spent for public safety (police and fire services) purposes only. Senior Housing Fund - Accounts for the revenues and expenditures from the EI Segundo Senior Citizen Housing Corporation. Measure M Fund - Accounts for the one-half (1/2) cent Sales Tax approved by the voters in November 2016. These revenues must be spent to ease traffic congestion. SB 1 Fund - Accounts for the revenues and expenditures from the Road Repair and Accountability Act of 2017. These revenues must be spent for local streets and roads. Certified Access Specialist Program ("CASP") - Accounts for the fees collected to increase disability access and compliance with construction related accessibility requirements. Debt Service Funds: Facility Lease Fund - Accounts for the lease agreement with the California Infrastructure and Economic Development Bank (CIEDB) whereby CIEDB issued bonds in the amount of $10 million to finance the Douglas Street Gap Closure Project. The City will make rental lease payments over a 30 -year period starting February 1, 2006, at an interest rate of 2.87% per annum. Interest payments on the lease obligation are due on February 1 and August 1 of each year. Base rental payments will be mailed to the City reflecting the actual amount owed prior to each base rental payment due date. Capital Projects Fund: Capital Improvement Fund - Accounts for the construction of capital facilities typically financed by the City's General Fund and any grant not accounted for in a special revenue fund. 117 283 City of El Segundo Combining Balance Sheet Nonmajor Governmental Funds September 30, 2018 ASSETS Cash and investments Receivables: Accounts Interest Notes and loans Due from other governments Prepaids Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Retentions payable Due to other funds Unearned revenue Deposits payable Total liabilities Fund balances: Restricted Assigned Unassigned (deficit) Total Fund Balances Total Liabilities and Fund Balances Special Revenue Funds Certified Residential Union Community State Sound Program Development Asset Gas Tax Insulation Agencies . Block Grant Forfeiture $ 1,114,723 $ 176 31,906 19.931 $ 1,166.736 S - $ 253,293 $ 156 - 27,226 - 34,337 27.382 $ 287.630 $ $ 951,427 54,405 - 54,405 $ 951.427 $ 739,710 $ 13 $ 28,002 $ - $ 35,882 3,684 126 195,436 - 21 7,731 - - - 691,052 - 10,664 743,394 698,922 223,438 10,664 35,903 423,342 - 64,192 (671,540) - 423,342 (671,540) 64,192 $ 1.166.736 $ 27,382 $ 287,630 $ 43,741 915,524 43,741 915.524 54.405 $ 951,427 118 284 City of El Segundo Combining Balance Sheet (Continued) Nonmajor Governmental Funds September 30, 2018 Special Revenue Funds Air Traffic Pollution SB 821 Prop A Prop C Safety Reduction Bikeway ASSETS Cash and investments $ 693,711 $ 618,154 $ 77,271 $ 78,336 $ 43,633 Receivables: Accounts - - - - Interest - - - - - Notes and loans - - - - - Due from other governments 32,446 - 2,712 - - Prepaids - - - - - Total assets $ 726.157 $ 618,154 $ 79,983 $ 78,336 $ 43.633 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 2,297 $ 513 $ - $ - $ 1,264 Accrued liabilities 3,925 1,210 - - - Retentions payable - - - - Due to other funds - - - - - Unearned revenue - - - - Deposits payable - - - - - Total liabilities 6,222 1,723 - - 1,264 Fund balances: Restricted 719,935 616,431 79,983 78,336 42,369 Assigned - - - - Unassigned (deficit) - - - - - Total Fund Balances 719,935 616,431 79,983 78,336 42,369 Total Liabilities and Fund Balances $ 726,157 $ 618,154 $ 79,983 $ 78.336 $ 43,633 119 285 City of El Segundo Combining Balance Sheet (Continued) Nonmajor Governmental Funds September 30, 2018 ASSETS Cash and investments Receivables: Accounts Interest Notes and loans Due from other governments Prepaids Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Retentions payable Due to other funds Unearned revenue Deposits payable Total liabilities Fund balances: Restricted Assigned Unassigned (deficit) Total Fund Balances Total Liabilities and Fund Balances Special Revenue Funds MTA C.O.P.S. Grant Measurc R $ 39,981 $ 294,218 $ 1,042,706 $ 48,747 20,246 $ 88,728 $ 294.218 $ 1.062,952 $ Federal State Grants Grants 327,713 $ 327,713 $ - $ - $ 200,000 $ 18,000 $ 392 1 _ _ - 938 68,107 378,912 294,218 - - 294,218 200,000 86,107 380.242 88,727 - 862,952 - (86,107) (52,529) 88,727 - 862,952 (86,107) (52,529) S 88.728 S 294.218 S 1,062.952 S - $ 327.713 120 286 City of El Segundo Combining Balance Sheet (Continued) Nonmajor Governmental Funds September 30, 2018 Special Revenue Funds Certified PSAF Access Property Tax Senior Specialist Public Safety Housing Measure M SB 1 Program ASSETS Cash and investments $ 65,094 $ 1,254,315 $ 258,979 5 104,983 S 24,728 Receivables: Accounts - 5,623 - 19,494 - Interest - - Notes and loans - - Due from other governments 2,520 - 22,499 - - Prepaids - Total assets $ 67,614 S 1.259.938 $ 281,478 $ 124,477 $ 24.728 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ - $ 823 $ - $ 94,000 $ 76 Accrued liabilities - - - - 731 Retentions payable Due to other funds - - - - - Unearned revenue - Deposits payable - 220,398 - - - Totalliabilities - 221,221 - 94,000 807 Fund balances: Restricted 67,614 1,038,717 281,478 30,477 23,921 Assigned - - - - Unassigned (deficit) - - - - Total Fund Balances 67,614 1,038,717 281,478 30,477 23,921 Total Liabilities and Fund Balances $ 67,614 $ 1,259,938 S 281.478 $ 124,477 $ 24,728 121 287 City of E1 Segundo Combining Balance Sheet (Continued) Nonmajor Governmental Funds September 30, 2018 ASSETS Cash and investments Receivables: Accounts Interest Notes and loans Due from other governments Prepaids Total assets LIABILITIES AND FUND BALANCES Debt Capital Service Fund Projects Fund Facility Capital Lease Improvement Total $ 1,024,214 $ 3,511,040 $ 11,450,806 75,422 100,871 54,405 516,015 54,268 5 1.024.214 $ 3,586,462 $ 12.176.365 Liabilities: Accounts payable $ - $ 234,101 $ 1,355,073 Accrued liabilities - - 206,072 Retentions payable - 121,278 129,009 Due to other funds - - 1,148,735 Unearned revenue - - 294,218 Deposits payable - - 220,398 Total liabilities - 355,379 3,353,505 Fund balances: Restricted Assigned Unassigned (deficit) Total Fund Balances Total Liabilities and Fund Balances 1,024,214 - 6,401,953 3,231,083 3,231,083 - - (810,176) I,024,214 3,231,083 8,822,860 $ 1,024,214 $ 3,586,462 $ 12,176-365 122 288 City of El Segundo Combined Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2018 Special Revenue Funds Certified Residential Union Community State Sound Program Development Asset Gas Tax Insulation Agencies Fund Block Grant Forfeiture REVENUES: Taxes $ - $ - $ 1,675 $ - $ _ Intergovernmental 314,380 27,226 - 65,204 - Charges for services - - 301,659 - _ Use of money and property 5,362 - (1,240) - 5,259 Fines and forfeitures - - - - 336,644 Miscellaneous _ Total revenues 319,742 27,226 302,094 65,204 341,903 EXPENDITURES: Current: General government Public safety Public works Community and cultural Capital outlay Debt Service: Principal retirement Interest Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES: Beginning of year End of year - - 9,821 - 72,527 118,905 - - 65,150 - - 133,125 321,956 - 919,176 - - - 105,048 1,038,081 133,125 331,777 65,150 177,575 (718,339) (105,899) (29,683) 54 164,328 (718,339) (105,899) (29,683) 54 164,328 1,141,681 (565,641) $ 423,342 $ (671,540) $ 93,875 43,687 751,196 64,192 $ 43,741 $ 915,524 123 289 City of El Segundo Combined Statement of Revenues, Expenditures and Changes in Fund Balances (Continued) Nonmajor Governmental Funds For the Year Ended September 30, 2018 Special Revenue Funds Air Traffic Pollution SB 821 Prop A Prop C Safety Reduction Bikeway REVENUES: Taxes Intergovernmental Charges for services Use of money and property Fines and forfeitures Miscellaneous Total revenues EXPENDITURES: Current: General government Public safety Public works Community and cultural Capital outlay Debt Service: Principal retirement Interest Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES: Beginning of year End of year 354,781 264,852 4,892 6,282 359,673 271,134 - 20,127 275 417 436 43,057 - 43,332 20,544 436 272,190 256,453 - - - 18,595 272,190 256,453 - - 18,595 87,483 14,681 43,332 20,544 (18,159) 87,483 14,681 43,332 20,544 (18,159) 632,452 601,750 36,651 57,792 60,528 $ 719,935 $ 616,431 $ 79.983 $ 78,336 $ 42,369 124 290 City of E1 Segundo Combined Statement of Revenues, Expenditures and Changes in Fund Balances (Continued) Nonmajor Governmental Funds For the Year Ended September 30, 2018 Special Revenue Funds REVENUES: Taxes Intergovernmental Charges for services Use of money and property Fines and forfeitures Miscellaneous Total revenues EXPENDITURES: Current: General government Public safety Public works Community and cultural Capital outlay Debt Service: Principal retirement Interest Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES: Beginning of year End of year MTA Federal State C.O.P.S. Grant Measure R Grants Grants 128,451 - 196,629 193,504 366,245 3,613 - 5,544 - 132,064 - 202,173 193,504 366,245 1,402 - - - 22,000 - - (99,323) - 30,000 - - - 214,000 26,875 263,000 - 200,000 - - 264,402 - 100,677 214,000 78,875 (132,338) - 101,496 (20,496) 287,370 - - (15,700) - - - - (15,700) - - (132,338) - 85,796 (20,496) 287,370 221,065 - 777,156 (65,611) (339,899) $ 88,727 $ - $ 862,952 $ (86,107) $ (52,529) 125 291 City of El Segundo Combined Statement of Revenues, Expenditures and Changes in Fund Balances (Continued) Nonmajor Governmental Funds For the Year Ended September 30, 2018 126 292 Special Revenue Funds Certified PSAF Access Property Tax Senior Specialist Public Safety Housing Measure M SB 1 Program REVENUES: Taxes $ 31,633 $ - $ - $ - $ - Intergovernmental - 268,712 124,477 - Charges for services - - - - 3,122 Use of money and property - 7,205 - - 124 Fines and forfeitures - - - - - Miscellaneous - - - - ' Total revenues 31,633 7,205 268,712 124,477 3,246 EXPENDITURES: Current: General government - 22,612 - - - Public safety - - - - Public works - 94,000 - Community and cultural - - Capital outlay - Debt Service: Principal retirement - Interest - - - - Total expenditures - 22,612 - 94,000 - EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 31,633 (15,407) 268,712 30,477 3;246 OTHER FINANCING SOURCES (USES): Transfers in - - - 20,675 Transfers out - - - - Total other financing sources (uses) - - - 20,675 NET CHANGE IN FUND BALANCES 31,633 (15,407) 268,712 30,477 23,921 FUND BALANCES: Beginning of year 35,981 1,054,124 12,766 - - End of year $ 67-614 $ 1,038,717 $ 281,478 $ 30.477 $ 23,921 126 292 City of EI Segundo Combined Statement of Revenues, Expenditures and Changes in Fund Balances (Continued) Nonmajor Governmental Funds For the Year Ended September 30, 2018 Debt Capital Service Fund Projects Fund 127 293 Facility Capital Lease Improvement Total REVENUES: Taxes $ - $ - $ 33,308 Intergovernmental - 75,422 2,400,010 Charges for services - - 304,781 Use of money and property - - 38,169 Fines and forfeitures - 379,701 Miscellaneous 423,504 - 423,504 Total revenues 423,504 75,422 3,579,473 EXPENDITURES: Current: General government 21,386 203,431 247,429 Public safety - - 105,750 Public works - - 208,732 Community and cultural - - 1,224,599 Capital outlay - 1,855,710 3,361,529 Debt Service: Principal retirement 308,059 - 308,059 Interest 204,603 - 204,603 Total expenditures 534,048 2,059,141 5,660,701 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (110,544) (1,983,719) (2,081,228) OTHER FINANCING SOURCES (USES): Transfers in - 3,189,700 3,210,375 Transfers out - - (15,700) Total other financing sources (uses) - 3,189,700 3,194,675 NET CHANGE IN FUND BALANCES (110,544) 1,205,981 1,113,447 FUND BALANCES: Beginning of year 1,134,758 2,025,102 7,709,413 End of year $ 1,024,214 $ 3,231,083 $ 8,822,860 127 293 City of E1 Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - State Gas Tax Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Use of money and property Total revenues EXPENDITURES: Current: Public Works Capital outlay Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 388,205 $ 388,205 $ 6,000 6,000 394,205 394,205 170,482 170,482 1,459,735 1,459,735 1,630,217 1,630,217 $ (1,236.012) $ (1,236,012) 118,905 919,176 1,038,081 (718,339) $ 1,141,681 $ 423,342 51,577 540,559 592,136 517.673 128 294 Variance with Final Budget Actual Positive Amounts (Negative) 314,380 $ (73,825) 5,362 (638) 319.742 (74,463) 118,905 919,176 1,038,081 (718,339) $ 1,141,681 $ 423,342 51,577 540,559 592,136 517.673 128 294 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Residential Sound Insulation Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Total revenues EXPENDITURES: Current: Community and cultural Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 195,699 $ 195,699 $ 195.699 195,699 195,699 195,699 133.125 62,574 195.699 195,699 133,125 62,574 $ $ - (105,899) 5 (105,899) (565,641) $ (671,540) 129 295 Variance with Final Budget Actual Positive Amounts (Negative) 27,226 $ (168,473) 27,226 (168,473) 195,699 195,699 133.125 62,574 195.699 195,699 133,125 62,574 $ $ - (105,899) 5 (105,899) (565,641) $ (671,540) 129 295 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Certified Union Program Agencies Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Taxes Charges for services Use of money and property Total revenues EXPENDITURES: Current: Public safety Community and cultural Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Oriciital Final $ 1,500 $ 1,500 $ 528,759 528,759 530,259 530,259 14,349 Variance with 9,821 Final Budget Actual Positive Amounts (Negative) 1,675 $ 175 301,659 (227,100) (1,240) (1,240) 302,094 (228,165) 14,349 14,349 9,821 4,528 580.245 580,245 321.956 258.289 594,594 594.594 331,777 262,817 $ (64.335) $ (64,335) (29,683) $ 34.652 93,875 $ 64.192 130 296 City of EI Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Community Development Block Grant Special Revenue Fund For the Year Ended September 30, 2018 131 297 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Integovernmental $ 105,588 $ 105,588 $ 65,204 $ (40,384) Total revenues 105,588 105,588 65,204 (40,384) EXPENDITURES: Current: Public works 100,000 1001.000 65,150 34,850 Total expenditures 100,000 100.000 65.150 34,850 Net change in fund balances $ 5.588 $ 5,588 54 $ (5,534) FUND BALANCE: Beginning of year 43.687 End of year $ 43.741 131 297 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Asset Forfeiture Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Use of money and property Fines and forfeitures Total revenues EXPENDITURES: Current: Public safety Community and cultural Capital outlay Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final 72,527 Variance with 317,200 242,200 280,000 280,000 87,653 162,653 684,853 684,853 $ (684,853) $ (684,853) 72,527 Variance with - Final Budget Actual Positive Amounts (Negative) 5,259 $ 5,259 336.644 336.644 341,903 341.903 72,527 169,673 - 280,000 105.048 57,605 177,575 507,278 164,328 5 839,181 751,196 915,524 132 298 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Prop A Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Use of money and property Total revenues EXPENDITURES: Current: Community and cultural Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 311,793 $ 311,793 $ 4,000 4,000 315,793 315,793 342,184 342,184 272,190 69,994 342,184 342,184 272,190 69,994 $ (26,391) $ (26,391) 87,483 $ 113.874 632,452 $ 719,935 133 299 Variance with Final Budget Actual Positive Amounts (Negative) 354,781 $ 42,988 4.892 892 359,673 43.880 342,184 342,184 272,190 69,994 342,184 342,184 272,190 69,994 $ (26,391) $ (26,391) 87,483 $ 113.874 632,452 $ 719,935 133 299 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Prop C Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Use of money and property Total revenues EXPENDITURES: Current: Community and cultural Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 256,799 $ 256,799 $ 6.000 6,000 262,799 262.799 357.051 357,051 256,453 100,598 357,051 357,051 256,453 100,598 $ (94.252) $ (94,252) 14,681 $ 108,933 601.750 $ 616.431 134 300 Variance with Final Budget Actual Positive Amounts (Negative) 264,852 $ 8,053 6.282 282 271,134 8.335 357.051 357,051 256,453 100,598 357,051 357,051 256,453 100,598 $ (94.252) $ (94,252) 14,681 $ 108,933 601.750 $ 616.431 134 300 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Traffic Safety Special Revenue Fund For the Year Ended September 30, 2018 Budgeted Amounts Original Final REVENUES: Variance with Use of money and property $ 80 $ Fines and forfeitures 35,000 Total revenues 35.080 Net change in fund balances $ 35,080 $ FUND BALANCE: 8.057 Beginning of year 8,252 End of year $ 8,252 135 80 $ 35,000 35.080 35,080 $ 301 Variance with Final Budget Actual Positive Amounts (Negative) 275 $ 195 43.057 8.057 43,332 8,252 43,332 $ 8,252 36,651 7].983 301 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Air Polluction Reduction Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Use of money and property Total revenues EXPENDITURES: Current: Community and cultural Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 21,000 $ 21,000 $ 400 400 21.400 21.400 42,000 42,000 - 42,000 42,000 42.000 - 42,000 $ (20.600) $ (20,600) 20,544 S 41,144 57.792 $ 78.336 136 302 Variance with Final Budget Actual Positive Amounts (Negative) 20,127 $ (873) 417 17 20,544 (856) 42,000 42,000 - 42,000 42,000 42.000 - 42,000 $ (20.600) $ (20,600) 20,544 S 41,144 57.792 $ 78.336 136 302 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - SB 821 Special Revenue Fund For the Year Ended September 30, 2018 137 303 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Integovernmental $ 10,854 $ 10,854 $ - $ (10,854) Use of money and property - - 436 436 Total revenues 10,854 10,854 436 (10,418) EXPENDITURES: Capital outlay 38,500 38,500 18,595 19,905 Total expenditures 38,500 38,500 18,595 19,905 Net change in fund balances $ (27,646) $ (27,646) (18,159) $ 9,487 FUND BALANCE: Beginning of year 60,528 End of year $ 42.369 137 303 City of E1 Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - C.O.P.S. Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Use of money and property Total revenues EXPENDITURES: Current: Public safety Capital outlay Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 100,000 $ 100,000 $ 1,500 1.500 101,500 101,500 263.000 263,000 263,000 263,000 $ (161,500) $ (161,500) 1,402 (1,402) 263.000 264,402 (1,402) (132,338) $ 29,162 221,065 $ 88,727 138 304 Variance with Final Budget Actual Positive Amounts (Negative) 128,451 $ 28,451 3,613 2.113 132,064 30,564 1,402 (1,402) 263.000 264,402 (1,402) (132,338) $ 29,162 221,065 $ 88,727 138 304 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Measure R Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Use of money and property Total revenues EXPENDITURES: Current: Public works Capital outlay Total expenditures OTHER FINANCING USES: Transfers out Total other financing uses Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 192,603 $ 192,603 $ 5,000 5,000 197.603 197,603 - - Variance with 200.000 200,000 Final Budget Actual Positive Amounts (Negative) 196,629 $ 4,026 5,544 544 202,173 4,570 - - (99,323) 99,323 200.000 200,000 200,000 - 200,000 200,000 100,677 99,323 - (15.700) (15,700) - (15,700) (15.700) - $ (2,397) $ (18,097) 85,796 $ 103.893 777,156 862.952 139 305 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Federal Grants Special Revenue Fund For the Year Ended September 30, 2018 140 306 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 100,000 $ 195,000 $ 193,504 $ (1,496) Total revenues 100.000 195,000 193.504 (1,496) EXPENDITURES: Current: Community and cultural 134,000 397,670 214,000 183,670 Capital outlay 11,580 11,580 11,580 Total expenditures 145,580 409.250 214,000 195,250 Net change in fund balances $ (45,580) $ (214,250) (20,496) $ 193.754 FUND BALANCE: Beginning of year (65,611) End of year S (86,107) 140 306 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - State Grants Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Total revenues EXPENDITURES: Current: Public safety Public works Community and cultural Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 35,000 $ 65.000 $ 35,000 65,000 - Variance with 22,000 Final Budget Actual Positive Amounts (Negative) 366,245 $ 301.245 366.245 301,245 - - 22,000 (22,000) 30,767 60,767 30,000 30,767 40,000 40,000 26,875 13,125 70,767 100,767 78,875 21,892 $ (35,767) $ (35,767) 287,370 $ 323.137 (339,899) $ (52,529) 141 307 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - PSAF Property Tax Public Safety Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Taxes Total revenues EXPENDITURES: Current: Public safety Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Ori inti! Final $ 25,000 $ 25.000 $ 25,000 25,000 25,000 25.000 25,000 25,000 25,000 - 25.000 $ - $ - 31,633 $ 31,633 35,981 $ 67.614 142 1:, Variance with Final Budget Actual Positive Amounts (Negative) 31,633 $ 6,633 31,633 6.633 25,000 25.000 25,000 25,000 25,000 - 25.000 $ - $ - 31,633 $ 31,633 35,981 $ 67.614 142 1:, City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Senior Housing Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Use of money and property Total revenues EXPENDITURES: Current: General government Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 10,000 $ 10,000 $ 10,000 10,000 Variance with Final Budget Actual Positive Amounts (Negative) 7,205 $ (2,795) 7,205 (2,795) 24,000 24,000 22,612 1,388 24,000 24,000 22,612 1,388 $ (14,000) $ (14,000) (15,407) $ (1,407) 1.054.124 $ 1,038,717 143 309 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Measure M Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Total revenues EXPENDITURES: Current: Public works Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ 241,500 $ 241.500 $ 268,712 $ 27,212 241.500 241,500 268,712 27.212 241,500 241,500 - 241,500 241,500 241,500 - 241.500 $ - $ - 268,712 $ 268,712 12.766 $ 281,478 144 310 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - SB 1 Special Revenue Fund For the Year Ended September 30, 2018 REVENUES: Intergovernmental Total revenues EXPENDITURES: Current: Public works Total expenditures Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final $ 94,051 $ 94.051 $ 94.051 94,051 94,000 94.000 94,000 94,000 94,000 94.000 - $ 51 $ 51 30,477 $ 30.426 $ 30.477 145 311 Variance with Final Budget Actual Positive Amounts (Negative) 124,477 $ 30,426 124.477 30,426 94,000 94.000 94,000 94,000 94,000 94.000 - $ 51 $ 51 30,477 $ 30.426 $ 30.477 145 311 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Certified Access Specialist Program Special Revenue Fund For the Year Ended September 30, 2018 146 312 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Charges for services $ - $ $ 3,122 $ 3,122 Use of money and property - 124 124 Total revenues - 3.246 3,246 OTHER FINANCING USES: Transfers in - - 20,675 (20,675) Total other financing uses - - 20,675 (20,675) Net change in fund balances $ - $ - 23,921 $ 23.921 FUND BALANCE: Beginning of year - End of year 5 23,921 146 312 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Facility Lease Debt Service Fund For the Year Ended September 30, 2018 147 313 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Miscellaneous $ 180,000 $ 180,000 $ 423,504 $ 243,504 Total revenues 180,000 180,000 423,504 243,504 EXPENDITURES: Current: General government 32,300 32,300 21,386 10,914 Debt Service: Principal retirement 299,500 299,500 308,059 (8,559) Interest 213,200 213,200 204,603 8,597 Total expenditures 545,000 545,000 534,048 10,952 Net change in fund balances $ (365.000) $ (365,000) (110,544) $ 254,456 FUND BALANCE: Beginning of year 1,134,758 End of year $ 1,024,214 147 313 City of El Segundo Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Capital Improvemets Capital Projects Fund For the Year Ended September 30, 2018 REVENUES: Intergovernment Total revenues EXPENDITURES: Current: General government Capital outlay Total expenditures OTHER FINANCING USES: Transfers in Total other financing uses Net change in fund balances FUND BALANCE: Beginning of year End of year Budgeted Amounts Original Final Variance with 1,060,000 1,185,000 4,228,735 4,439,804 5,288,735 5,624,804 3,174,000 3,334,700 3,174,000 3.334.700 $ (2,114,735) $ (2,290,104) 148 203,431 981,569 1,855,710 2,584,094 2,059,141 3,565.663 3,189,700 145,000 3,189,700 145,000 1,205,981 $ 3,496,085 2,025,102 $ 3.231.083 314 Final Budget Actual Positive Amounts (Negative) - $ 75,422 $ 75,422 - 75,422 75,422 1,060,000 1,185,000 4,228,735 4,439,804 5,288,735 5,624,804 3,174,000 3,334,700 3,174,000 3.334.700 $ (2,114,735) $ (2,290,104) 148 203,431 981,569 1,855,710 2,584,094 2,059,141 3,565.663 3,189,700 145,000 3,189,700 145,000 1,205,981 $ 3,496,085 2,025,102 $ 3.231.083 314 INTERNAL SERVICE FUNDS Internal Service Funds: Equipment Replacement Fund - Accounts for in-house charges to City departments to accumulate funding for future replacement of equipment used by the departments. The Fund also accounts for the proceeds from sale of surplus equipment. Liability Insurance Fund - Accounts for charges to departments for their share of general liability claims and the administration cost of the self-insurance program. Workers' Compensation Insurance Fund - Accounts for charges to the departments for their share of workers' compensation claims and administrative costs of the self-insurance program. 149 315 This page intentionally left blank. 150 316 151 317 City of El Segundo Combining Statement of Net Position Internal Service Funds September 30, 2018 Equipment Liability Workers' Replacement Insurance Compensation Fund Fund Fund Total ASSETS Current Assets: Cash and investments $ 3,880,756 $ 162,016 $ 6,634,963 $ 10,677,735 Receivables: Accounts receivable - 80 8,334 8,414 Prepaid items - 999,118 639,629 1,638,747 Total current assets 3,880,756 1,161,214 7,282,926 12,324,896 Noncurrent assets: Advance to other funds 5,655,675 - - 5,655,675 Capital assets, net 4,599,428 - - 4,599,428 Total noncurrent assets 10,255,103 - - 10,255,103 Total assets 14,135,859 1,161,214 7,282,926 22,579,999 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pension - 5,344 6,777 12,121 Deferred outflows of resources related to OPEB - 2,346 1.738 4,084 Total deferred outflows of resources - 7,690 8,515 16,205 LIABILITIES Current liabilities: Accounts payable 1,208,351 100,662 6,255 1,315,268 Accrued liabilities - 3,337 105,945 109,282 Due to other funds - - - Claims and judgments, current portion - - 2;069,000 2,069,000 Total current liabilities 1,208,351 103,999 2,181,200 3,493,550 Noncurrent liabilities: Claims and judgments, net of current - 893,516 9,314,490 10,208,006 Aggregate net pension liability - 132,710 168,315 301,025 Total other postemployment benefit liability - 104,685 77,583 182,268 Total noncurrent liabilities - 1,130,911 9,560,388 10,691,299 Total liabilities 15208,351 1,234,910 11,741,588 14,184,849 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions - 15474 1,870 3,344 Deferred inflows of resources related to OPEB - 494 366 860 Total deferred inflows of resources - 1,968 2,236 4,204 NET POSITION (DEFICIT) Invested in capital assets 4,599,428 - - 4;599,428 Unrestricted (deficit) 8,328,080 (67,974) (4,452,383) 35807,723 Total net position (deficit) $ 12,927,508 $ (67.974) $ (4,452,383) $ 8,407,151 151 317 City of El Segundo Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds For the Year Ended September 30, 2018 Equipment Liability Workers' Replacement Insurance Compensation Fund Fund Fund Total OPERATING REVENUES: Interdepartmental charges $ 1,584,636 $ 1,985,688 $ 2,559,980 $ 6,130,304 Miscellaneous 398,802 44,063 283,971 726,836 Total operating revenues 1,983,438 2,029,751 2,843,951 6,857,140 OPERATING EXPENSES: Personnel services - 156,715 92,138 248,853 Materials and supplies 671,721 - 19 671,740 Insurance and claims - 1,370,624 3,530,027 4,900,651 Depreciation 631,582 - 631,582 Total operating expenses 1,303,303 1,527,339 3,622,184 6,452,826 OPERATING INCOME (LOSS) 680,135 502,412 (778,233) 404,314 NONOPERATING REVENUES: Gain (loss) on disposal of capital assets (15,487) - - (15,487) Total nonoperating revenues (15,487) - - (15,487) CHANGES IN NET POSITION 664,648 502,412 (778,233) 388,827 NET POSITION: Beginning of the year, as restated (Note 14) 12,262,860 (570,386) (3,674,150) 8,018,324 End of the year $ 12,927,508 $ (67,974) $ (4,452,383) $ 8,407,151 152 318 City of El Segundo Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 30, 2018 Equipment Liability Replacement Insurance Fund Fund CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from users Payments for insurance claims Payments to suppliers Payments to employees Net cash provided by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Advance to other funds Due to other funds Net cash (used in) noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets Proceeds from sale of assets Net cash (used in) capital and related financing activities Net increase/(decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of year End of year RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITES: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in prepaid items (Increase) decrease in deferred outflows of resources - pension (Increase) decrease in deferred outflows of resources - OPEB Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase (decrease) in claims and judgments payable Increase (decrease) in net pension liability Increase (decrease) in net other postemployment liability Increase (decrease) in deferred inflows of resources - pension Increase (decrease) in deferred inflows of resources - OPEB Total adjustments Net cash provided by operating activities Workers' Compensation Fund Total $ 1,984,968 $ 2,029,671 $ 2,863,406 $ 6,878,045 - (1,602,183) (2,419,694) (4,021,877) (89,445) 116,918 (99,419) (71,946) - (139,405) (74,484) (213,889) 1,895,523 405,001 269,809 2,570,333 (1,762,421) - - (1,762,421) - (242,985) - (242,985) (1,762,421) (242,985) - (2,005,406) (1,681,288) - - (1,681,288) 443,796 - - 443,796 (1,237,492) - - (1,237,492) (1,104,390) 162,016 269,809 (672,565) 4,985,146 (893) 6,365,154 11,350,300 $ 3,880,756 $ 162,016 $ 6.634.963 S 10.677,735 $ 680,135 $ 502,412 $ (778,233) $ 404,314 631,582 - - 631,582 1,530 (80) 19,455 20,905 - 20,781 (108,813) (88,032) » 14,755 18,715 33,470 - (2,346) (1,738) (4,084) 582,276 95,584 5,457 683,317 - 553 3,956 4,509 - (231,559) 1,110,333 878,774 - (4,710) (5,975) (10,685) - 10,010 7,419 17,429 - (893) (1,133) (2,026) - 494 366 860 1,215,388 (97,411) 1,048,042 2,166,019 $ 1,895,523 $ 405,001 $ 269,809 $ 2,570,333 153 319 This page intentionally left blank. 154 320 FIDUCIARY FUNDS Agency Fund: Project Deposits Fund (Refundable) - Accounts for project deposits from developers which will be refundable after the projects are done. 155 321 This page intentionally left blank. ]56 322 City of El Segundo Statement of Changes in Fiduciary Assets and Liabilities Agency Funds For the Year Ended September 30, 2018 157 Balance Additions Deductions September 30. 2018 343,158 $ (509.263) $ 287.138 343,158 $ (509,263) $ 287,138 315,123 $ 514,988 830,111 $ (324,938) $ (671,278) (996,216) $ 14,030 273.108 287,138 323 Balance October 1. 2017 ASSETS Cash and investments (note 3) $ 453.243 $ Total assets $ 453,243 $ LIABILITIES Accounts payable $ 23,845 $ Deposits payable 429.398 Total liabilities $ 453,243 $ 157 Balance Additions Deductions September 30. 2018 343,158 $ (509.263) $ 287.138 343,158 $ (509,263) $ 287,138 315,123 $ 514,988 830,111 $ (324,938) $ (671,278) (996,216) $ 14,030 273.108 287,138 323 This page intentionally left blank. 158 324 STATISTICAL SECTION 159 325 This page intentionally left blank. 160 326 City of El Segundo Statistical Section This part of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Contents Page Financial Trends 162 These schedules contain trend information to help the reader understand how the city's financial performance and well-being have changed over time. Revenue Capacity 173 These schedules contain information to help the reader assess the city's most significant local revenue source, the property tax. Debt Capacity 179 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. Demographic and Economic Information 185 These schedules offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place. Operating Information 187 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. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in 2003; schedules presenting government -wide information include information beginning in that year. 161 327 City of El Segundo Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2009 2010 2011 2012 2013 Governmental activities: Invested in capital assets, net of related debt $ 101,059,634 $ 97,156,670 $ 94,655,626 $ 92,822,442 $ 94,098,755 Restricted 15,034,440 14,945,583 8,055,325 10,941,373 6,276,645 Unrestricted 26,925,769 19,672,020 22,462,477 14,728,936 15,050,409 Total governmental activities net position 143,019,843 131,774,273 125,173,428 118,192.751 115,425,809 Business -type activities: Invested in capital assets, net of related debt 22,432,525 22,070,122 21,360,061 21,009,889 20,675,297 Restricted - " Unrestricted (2,952,989) (3,948,729) 1,113,161 3,362,263 7,484,917 Total business -type activities net position 19,479,536 18,121,393 22,473.222 24,372,152 28,160,214 Primary government: Invested in capital assets, net of related debt 123,492,159 119,226,792 116,015,687 113,832,331 114,774,052 Restricted 15,034,440 14,945,583 8,055,325 10,941,373 6,276,645 Unrestricted 23,972,780 15,723,291 23,575,638 18,091,199 22,535,326 Total primary government net position $ 162,499,379 $ 149,895,666 $ 147,646,650 $ 142,864,903 $ 143,586,023 The City of EI Segundo implemented GASB 34 for the fiscal year ended September 30, 2003. Information prior to the implementation of GASB 34 is not available. 162 328 Governmental activities: Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net position Business -type activities: Invested in capital assets, net of related debt Restricted Unrestricted Total business -type activities net position Primary government: Invested in capital assets, net of related debt Restricted Unrestricted Total primary government net position City of E1 Segundo Net Position by Component (Continued) Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2014 2015 2016 2017 2018 $ 93,534,776 $ 90,783,595 $ 90,014,262 $ 92,615,618 $ 93,775,527 8,054,083 8,922,448 8,562,915 7,372,369 7,882,394 22,170,866 (89,732,982) (86,756,004) (91,119,511) (129,410,242) 123,759,725 9,973,061 11,821,173 8,868,476 (27,752,321) 21,771,266 22,657,797 25,387,562 27,679,609 30,800,645 11,652,989 12,247,482 12,855,184 15,808,634 10,505,483 33,424,255 34,905,279 38,242,746 43,488,243 41,306,128 115,306,042 113,441,392 115,401,824 120,295,227 124,576,172 8,054,083 8,922,448 8,562,915 7,372,369 7,882,394 33,823,855 (77,485,500) (73,900,820) (75,310,877) (118,904,759) $ 157,183,980 $ 44,878,340 $ 50,063,919 $ 52,356,719 $ 13,553,807 163 329 City of El Segundo Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (Continued) 164 330 Fiscal Year 2009 2010 2011 2012 2013 Expenses: Governmental activities: General government $ 13,852,408 $ 13,165,193 $ 11,882,856 $ 12,537,230 $ 12,048,465 Public safety 34,337,277 31,998,360 31,638,027 32,238,620 32,790,373 Public works 9,178,249 7,692,049 7,903,942 7,988,435 9,123,850 Community development 14,776,778 15,405,013 9,115,175 13,877,815 15,681,868 Interest on long-term debt 382,625 324,119 258,581 16,182 (15,914) Total governmental activities expenses 72,527,337 68,584,734 60,798,581 66,658,282 69,628,642 Business -type activities: Water 16,148,799 21,035,538 19,811,233 22,452,371 21,988,089 Wastewater 2,849,682 3,293,104 2,847,527 2,528,839 2,908,241 Golf Course 2,048,696 2,095,408 2,043,141 1,973,712 2,017,716 Total business -type activities expenses 21,047,177 26,424,050 24,701,901 26,954,922 26,914,046 Total primary government expenses $ 93,574,514 $ 95,008,784 $ 85,500,482 $ 93,613,204 $ 96,542,688 Program revenues: Governmental activities: Charges for services: General government $ 1,021,661 $ 299,202 $ 457,671 $ 581,718 $ 419,008 Public safety 1,563,776 1,677,855 1,743,941 1,568,107 1,663,384 Public works 13,099 20,331 32,102 15,190 14,262 Community development 5,043,717 3,385,519 3,941,316 5,081,885 5,030,006 Operating grants and contributions 3,053,968 2,186,623 2,101,494 1,508,499 2,699,324 Capital grants and contributions 3,264,022 16,013,471 595,807 7,815,458 7,646,118 Total governmental activities program revenues 13,960,243 23,583,001 8,872,331 16,570,857 17,472,102 Business -type activities: Charges for services: Water 15,487,005 19,233,888 22,800,787 23,344,919 25,048,713 Wastewater 3,717,090 3,663,397 4,274,392 3,236,359 3,574,272 Golf Course 2,119,159 1,945,930 1,945,415 1,919,435 2,111,937 Operating grants and contributions - - - - Capital grants and contributions - - - - Total business -type activities program revenues 21,323,254 24,843,215 29,020,594 28,500,713 30,734,922 Total primary government program revenues $ 35,283,497 $ 48,426,216 $ 37.892,925 $ 45,071,570 $ 48,207,024 (Continued) 164 330 City of El Segundo Changes in Net Position (Continued) Last Ten Fiscal Years (accrual basis of accounting) Net revenues (expenses): Governmental activities Business -type activities Total net revenues (expenses) General revenues and other changes in net assets: Governmental activities: Taxes: Property taxes Sales tax Transient occupancy taxes Other taxes Motor vehicle in lieu, unrestricted Investment income Other general revenues Transfers Total governmental activities Business -type activities: Investment income Other Transfers Total business -type activities Total primary government Changes in net position: Governmental activities Business -type activities Total primary government 2012 2013 (50,087,425) (52,156,540) 1,545,791 3,820,876 (48,541,634) (48,335,664) $ 7,616,466 $ 7,752,878 $ Fiscal Year 2009 2010 2011 (58,567,094) (45,001,733) (51,926,250) 276,077 (1,580,835) 4,318,693 (58,291,417) (46,582,568) (47,607,557) 2012 2013 (50,087,425) (52,156,540) 1,545,791 3,820,876 (48,541,634) (48,335,664) $ 7,616,466 $ 7,752,878 $ 7,549,483 $ 7,365,363 $ 7,910;980 12,754,717 10,067,929 11,383,167 10,623,237 9,099,745 4,109,581 3,954,416 4,301,696 4,735,585 5,156,080 19,551,661 18,038,918 18,559,063 18,587,882 25,314,387 48,011 51,543 73,736 8,754 7,245 3,241,784 836,001 925,388 393,719 113,173 333,886 1,003,771 2,532, 872 1,692,208 1,487,988 (6,000) - - - 47,650,106 41,705.456 45,325,405 43,406,748 49,089,598 (109,236) 96,668 - 99,690 21,378 81,882 29,482 33,136 63,795 35,600 6,000 - - - - (21,354) 126,150 33,136 163,485 56,978 47,628,752 41,831,606 45,358,541 43,570,233 49,146,576 (10,916,988) (3,296,277) (6,600,845) (6,680,677) (3,066,942) 254,723 (1,454,685) 4,351,829 1,709,276 3,877,854 S (10,662,265) S (4,750,962) $ (2,249,016) $ (4,971,401) $ 810,912 (Continued) 165 331 City of El Segundo Changes in Net Position (Continued) Last Ten Fiscal Years (accrual basis of accounting) 166 332 Fiscal Year 2014 2015 2016 2017 2018 Expenses: Governmental activities: General government $ 11,813,797 $ 14,984,299 $ 14,165,449 14,869,930 16,215,039 Public safety 31,891,478 41,422,188 35,612,565 42,891,455 44,847,122 Public works 8,459,550 9,150,452 7,440,438 7,474,391 9,413,340 Community development 12,065,582 21,038,253 9,298,275 11,407,811 10,442,877 Interest on long-term debt 457,655 457,994 441,712 361,470 242,750 Total governmental activities expenses 64,688,062 87,053,186 66,95$439 77,005,057 81,161,128 Business -type activities: Water 23,946,676 25,035,801 25,454,732 26,508,255 27,907,911 Wastewater 2,980,026 3,484,104 3,517,640 4,048,104 4,164,437 Golf Course 2,091,413 2,190,195 2,136,456 2,017,104 1,990,092 Total business -type activities expenses 29,018,115 30,710,100 31,108,828 32,573,463 34,062,440 Total primary government expenses $ 93.706.177 $ 117,763,286 $ 98,067,267 109,578,520 115,223,568 Program revenues: Governmental activities: Charges for services: General government $ 421,649 $ 635,350 $ 631,274 445,394 371,345 Public safety 1,522,081 1,948,464 1,637,884 1,523,519 2,058,888 Public works 50,489 267,748 11,199 16,643 1,201 Community development 5,796,983 6,733,395 5,708,772 6,516,792 6,477,503 Operating grants and contributions 2,629,490 2,052,527 1,808,463 1,189,900 1,858,256 Capital grants and contributions 7.469.236 14,487,783 2,174,898 1,737,376 1,197,981 Total governmental activities program revenues 17,889,928 26,125,267 11,972,490 11,429,624 11,965,174 Business -type activities: Charges for services: Water 28,032,902 29,304,012 28,281,456 31,626,637 27,779,828 Wastewater 3,389,450 3,568,042 4,090,187 4,275,264 4,348,849 Golf Course 2,045,652 1,939,165 1,828,549 1,604,258 1,650,376 Operating grants and contributions - - - - - Capital grants and contributions - - - - - Total business -type activities program revenues 33,468,004 34,811,219 34,200,192 37,506.159 33,779,053 Total primary government program revenues $ 51,357,932 $ 60,936,486 $ 46,172,682 48,935,783 45,744,227 (Cominuedj 166 332 City of E1 Segundo Changes in Net Position (Continued) Last Ten Fiscal Years (accrual basis of accounting) Net revenues (expenses): Governmental activities Business -type activities Total net revenues (expenses) General revenues and other changes in net assets: Governmental activities: Taxes: Property taxes Sales tax Transient occupancy taxes Other taxes Motor vehicle in lieu, unrestricted Investment income Other general revenues Transfers Total governmental activities Business -type activities: Investment income Other Transfers Total business -type activities Total primary government Changes in net position: Governmental activities Business -type activities Total primary government Fiscal Year 2014 2015 2016 (46,798,134) (60,927,919) (54,985,949) 4,449,889 4,101,119 3,091,364 (42,348,245) (56,826,800) (51,894,585) $ 8,452,120 $ 8,380,084 $ 8,884,423 10,297,709 11,442,632 12,089,552 5,964,403 5,423,972 7,597,007 28,809,018 27,765,133 26,730,933 6,998 - 6,859 324,825 331,238 646,338 1,277,597 813,211 1,396,608 55,132,670 54,156,270 57,351,720 2017 2018 (65,575,433) (69,195,954) 4,932,696 (283,387) (60,642,737) (69,479,341) 9,093,796 12,201,208 12,876,631 27,021,575 7,461 532,728 889,337 62.62:2,736 10,444,931 10,636,769 13,885,312 29,498,067 760,598 1,954,399 67,180,076 152,874 254,662 222,348 170,178 176,212 42,379 19,730 23,755 142,623 16,929 195,253 274,392 246,103 312,801 193,141 55,327,923 54,430,662 57,597,823 62,935,537 67.373,217 8,334,536 (6,771,649) 2,365,771 4,645,142 4,375,511 3,337,467 $ 12,979,678 $ (2,396,138) $ 5,703,238 (2,952,697) 5,245,497 2,292,800 (2,015,878) (90,246) (2,106,124) (Concluded) 167 333 City of El Segundo Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) All other governmental funds: Reserved $ 9,800,612 $ 4,623,285 $ Fiscal Year - Unreserved, reported in: 2009 2010 20111 2012 2013 General fund: 7,510,316 3,485,711 - - - Reserved $ 5,088,566 $ 326,005 $ - $ _ - Unreserved 8,224,712 11,423,791 - - - Nonspendable - - 6,421,009 1,884,602 1,873,812 Restricted - - - 5,798,068 - Assigned - _ 892,810 445,114 2,049,483 Unassigned - - 5,315,133 7,839,124 12,664,755 Total general fund $ 13,313,278 $ 11,749,796 $ 12,628,952 $ 10,168,840 16,588,050 All other governmental funds: Reserved $ 9,800,612 $ 4,623,285 $ - $ - Unreserved, reported in: Special revenue funds 7,510,316 3,485,711 - - - Debt Service funds 65,477 65,477 - - Capital projects funds (3,242,872) 3,999,778 - - - Nonspendable - - 80 Restricted - - 6,091,731 5,798,068 4,196,184 Assigned - - 4,858,234 3,690,657 1,548,572 Unassigned - - (2,091) (2,752,409) (3,779.255) Total all other governmental funds $ 14,133,533 $ 12,174,251 $ 10,947,874 $ 6,736,316 1,965,581 Notes: 1 The City of El Segundo implemented GASB Statement No. 54 during the fiscal year ended September 30, 2011. This statement eliminated the previous fund balance categories (reserved and unreserved) and replaced them with for new categories (nonspendable, restricted, assigned, unassigned). Fund balance amounts as of September 30, 2011 are stated to present the new categories; however, all previous fiscal years are presented using the old categories. 168 334 City of El Segundo Fund Balances of Governmental Funds (Continued) Last Ten Fiscal Years (modified accrual basis of accounting) All other governmental funds: Reserved $ - $ - $ Fiscal Year - $ - Unreserved, reported in: 2014 2015 2016 2017 2018 General fund: - - - - - Reserved $ - $ - $ - $ - $ - Unreserved - - - - - Nonspendable 3,380,264 2,575,497 2,017,346 7,373,109 6,256,640 Restricted - - - 6,312,687 1,000,000 Assigned 2,876,450 3,378,065 2,939,325 3,608,509 2,210,602 Unassigned 14,075,307 14,338,564 17,987,731 17,660,917 24,432,049 Total general fund $ 20,332,021 $ 20,292,126 $ 22,944,402 $ 28,642,535 $ 33,899,291 All other governmental funds: Reserved $ - $ - $ - $ - $ - Unreserved, reported in: Special revenue funds - - - - - Debt Service funds - Capital projects funds- Nonspendable 5,772 54,405 - - - Restricted 7,373,435 5,105,540 6,963,441 6,312,687 6,882,394 Assigned 1,416,473 5,031,396 3,301,813 3,159,860 3,231,083 Unassigned (1,577,594) (6,511,408) (1,326,041) (971,152) (333,731) Total all other governmental funds $ 7,218,086 $ . ..................... 3,679,933 $ 8,939,213 $ 8,501,395 $ 9,779,746 169 335 Revenues: Taxes Licenses and permits Intergovernmental Charges for services Use of money and property Fines and forfeitures Developers Fees Other Total revenues Expenditures Current: General government Public safety Public works Community and cultural Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from loans Capital leases issued Long-term debt issued Total other financing sources (uses) Net change in fund balances Debt service as a percentage of noncapital expenditures City of E1 Segundo Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 14,472,959 13,698,982 Fiscal Year 12,575,953 11, 724,215 2009 2010 2011 2012 2013 $ 34,727,842 $ 30,557,942 $ 32,094,475 $ 31,218,273 $ 37,452,888 10, 824,480 10,385,074 10,936, 873 11,855,052 11, 624, 026 12,428,031 16,743,693 4,048,295 4,596,724 9,811,864 4,159,268 3,517,010 4,320,364 5,220,234 4,958,310 3,060,556 1,227,521 898,711 452,022 133,291 2,433,868 1,676,572 1,201,110 1,050,832 791,650 1,152,558 1,187,008 3,349,096 1,826,973 2,074,386 68,786,603 65,294,820 56,848,924 56,220,110 66,846,415 14,472,959 13,698,982 12,456,304 12,575,953 11, 724,215 34,703,602 31,435,938 31,359,158 31,291,236 31,145,703 5,927,434 5,711,977 4,991,382 5,126,634 6,300,670 14,304,838 13,476,514 7,748,804 13,190,255 14,451,893 7,362,304 3,550,273 2,040,497 1,607,702 2,015,459 76,771,137 67,873,684 58,596,145 63,791,780 65,637,940 (7,984,534) (2,578.864) (1,747,221) (7,571,670) 1,208,475 13,781,018 10,358,160 3,167,231 3,163,394 8,455,512 (12,131,218) (6,827,610) (1,767,231) (2,263,394) (8,015,512) 1,980,038 - - - 1.649,800 5,510,588 $ (6,334,734) $ 2,931,724 $ 0.00% 0.00% 170 1,400,000 900,000 440,000 (347,221) $ (6,671,670) $ 1,648;475 0.00% 0.00% 0.00% 336 City of El Segundo Changes in Fund Balances of Governmental Funds (Continued) Last Ten Fiscal Years (modified accrual basis of accounting) Revenues: Taxes Licenses and permits Intergovernmental Charges for services Use of money and property Fines and forfeitures Developers Fees Other Total revenues Expenditures Current: General government Public safety Public works Community and cultural Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from loans Capital leases issued Long-term debt issued Total other financing sources (uses) Net change in fund balances Debt service as a percentage of noncapital expenditures Fiscal Year 2014 2015 2016 2017 2018 $ 42,638,899 $ 42,132,274 $ 43,410,318 $ 49,986,183 $ 53,125,853 12,725,503 12,973,204 13,989,221 13,131,485 13,695,476 11,931,067 8,919,841 7,751,363 2,805,424 2,400,010 5,172,579 6,197,552 5,214,048 5,811,835 6,053,614 590,605 615,862 682,140 552,662 781,402 914,036 903,172 1,249,820 444,188 831,067 237,569.000 432,810 296,427 329,474 262,346 1,877,562 2,960,332 1,729,917 2,785,946 2,541,114 75,850,251 75,135,047 74,323,254 75,847,197 79,690,882 12,677,731 14,523,141 14,200,855 14,905,246 15,738,556 33,576,082 33,694,064 33,166,579 34,682,695 37,595,758 5,676,244 5,574,118 6,325,541 6,296,743 6,533,963 12,277,418 19,523,563 8,951,898 10,259,037 9,274,383 2,133,639 1,021,033 3,389,585 3,930,500 3,426,202 275,092.000 282,987 291,109 299,464 355,461 237,569.000 229,674 221,552 213.197 244,223 66,853,775 74,848,580 66,547,119 70,586,882 73,168,546 8,996,476 286,467 7,776,135 5,260,315 6,522,336 3,048,087 10,138,836 2,687,843 2,668,046 3,556,821 (3,048,087) (10,338,840) (2,887,847) (2,668,046) (3,556,821) $ 8,996,476 $ 0.79% 171 (200,004) (200,004) - - 86,463 $ 7,576,131 $ 5,260,315 $ 6,522.336 0.69% 0.81% 0.77% 0.86% 337 This page intentionally left blank. 172 338 City of El Segundo Top 25 Sales Tax Producers September 30, 2018 Business Name Business Category Aerospace Business Service B T Americas Business Service Best Buy Electronics/Appliance Stores Boeing Company Transportation Equipment Manufacturing Chevron Refinery Circle K Service Stations Container Store Specialty Store DDSLAB Health/Medical Dicks Sporting Goods Sporting Goods/Bike Stores En Pointe Technologies Sales InformationTechnology Flemings Steakhouse Restaurant Home Goods Home Furnishings Stores Impex Technologies InformationTechnology Karl Storz Endoscopy America Health/Medical Optiv Security Business Service Patterson Dental Supply Health Medical Primary Color Systems Graphic Arts Services Ralphs Grocery Stores - Liquor Raytheon Business Service Trace 3 Information Technology Whole Foods Market Grocery Stores-Beer/Wine California Pacific Cement Building/Construction PCMall InformationTechnology MURAD Health/Medical In N Out Burgers Restaurant Note: Percent of Fiscal Year Total Paid by Top 25 accounts - 48% 173 339 City of El Segundo Principal Property Tax Payers Current Year and Ten Years Ago Source: County Assessor's Office and HdL Coren & Cone. 174 340 2018 2008 Percent of Percent of Total City Total City Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Chevron Usa Inc. 2,307,464,384 1 18.9% 2,372,353,007 1 24.6% Raytheon Co 465,501,642 2 3.8% 300,418,608 3 3.1% Boeing Company 438,308,377 3 3.6% 373,766,463 2 3.9% Aerospace Corp 300,916,738 4 2.5% Northrop Grumman Systems Corp 209,063,570 5 1.7% 236,660,075 4 2.5% Pacific Corp Towers LLC 178,853,748 6 1.5% 157,861,994 6 1.6% Kilroy Realty Lp 176,360,748 7 164,114,744 5 1.7% Pes Partners LLC 163,985,524 8 1.3% 107,066,439 7 1.1% 800 Apollo Fee Owner Ca LLC 147,195,957 9 1.2% 2121 Park Place Fee Owner Ca L 147,033,000 10 1.2% $ 4,534,683,688 37.1% $ 3,712,241,330 38.6% Source: County Assessor's Office and HdL Coren & Cone. 174 340 City of El Segundo Assessed Value and Estimated Actual Value of Taxable Property (in thousands of dollars) City Year Taxable Total Ended Less: Assessed Direct Tax June 30 Secured Unsecured Exemptions Value Rate 1998 4,079,503 740,517 - 4,820,020 1.0000% 1999 4,420,029 912,275 - 5,332,304 1.0000% 2000 4,880,451 922,228 5,802,679 1.0000% 2001 5,423,715 1,139,883 - 6,563,598 1.0000% 2002 5,828,209 1,590,069 - 7,418,278 1.0000% 2003 6,269,706 1,563,458 - 7,833,164 1.0000% 2004 6,309,413 1,499,983 7,809,396 1.0000% 2005 6,589,892 1,264,390 - 7,854,282 1.0000% 2006 6,938,417 1,118,644 - 8,057,061 1.0000% 2007 7,158,440 1,144,458 - 8,302,898 1.0000% 2008 7,762,424 1,185,813 - 8,948,237 1.0000% 2009 8,359,395 1,300,504 9,659,899 1.0000% 2010 8,571,689 1,338,811 9,910,501 1.0000% 2011 8,187,752 1,423,531 9,611,284 1.0000% 2012 8,082,672 1,241,746 9,324,418 1.0000% 2013 8,278,135 1,423,110 9,701,245 1.0000% 2014 8,446,568 1,862,068 10,308,636 1.0000% 2015 8,433,859 1,604,574 10,038,434 1.0000% 2016 8,919,245 1,736,530 10,655,775 1.0000% 2017 9,408,029 1,565,767 10,973,796 1.0000% 2018 10,779,771 1,480,982 34,491 12,226,262 1.0000% Beginning with the fiscal year ended June 30, 1999, exemptions are netted directly against the individual property categories. NOTE: In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of I% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 29/6). With few exceptions, property is only re -assessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Source: Los Angeles County Assessor's Office 175 341 City of El Segundo Direct and Overlapping Property Tax Rates (Rate per $100 of taxable value) Last Ten Fiscal Years Fiscal Year 2009 2010 2011 2012 2013 City Direct Rates: General 1.00000 1.00000 1.00000 1.00000 1.00000 Total City Direct Rate 1.00000 1.00000 1.00000 1.00000 1.00000 Overlapping Rates: Metropolitan Water District 0.00430 0.00430 0.00370 0.00370 0.00350 County Flood Control 0.00000 0.00000 0.00000 0.00000 0.00000 El Segundo Unified School District 0.11170 0.11170 0.11170 0.11170 0.11170 Community College 0.00000 0.00000 0.00000 0.00000 0.00000 Los Angeles County 0.00000 0.00000 0.00000 0.00000 0.00000 Total Direct Rate 1.11600 1.11600 1.11540 1.11540 1.11520 NOTE: In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of the Example Unified School District bonds. Source: Los Angeles County Assessor's Office 176 342 City of El Segundo Direct and Overlapping Property Tax Rates (Continued) (Rate per $100 of taxable value) Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 City Direct Rates: General Total City Direct Rate Overlapping Rates: Metropolitan Water District County Flood Control El Segundo Unified School District Community College Los Angeles County Total Direct Rate 2018 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 0.00350 0.00350 0.00350 0.00350 0.00350 0.00000 0.00000 0.00000 0.00000 0.00000 0.11170 0.11170 0.11170 0.11170 0.17753 0.00000 0.00000 0.00000 0.00000 0.02120 0.00000 0.00000 0.00000 0.00000 0.00000 1.11520 1.11520 1.11520 1.11520 1.20223 177 343 City of El Segundo Property Tax Levies and Collections Last Ten Fiscal Years Source: Los Angeles County Auditor Controller's Office 178 344 Collected within the Fiscal Taxes Levied Fiscal Year of Lew Collections in Total Collections to Date Year Ended for the Percent Subsequent Percent June 30 Fiscal Year Amount of Levy Years Amount of Lew 2008 $ 5,768,451 $ 5,474,568 94.91% $ 45,822 $ 5,520,390 95.70% 2009 6,202,417 5,904,696 95.20% 260,889 6,165,584 99.41% 2010 6,345,073 6,117,416 96.41% - 6,117,416 96.41% 2011 6,172,420 6,005,643 97.30% - 6,005,643 97.30% 2012 6,006,864 5,990,455 99.73% - 5,990,455 99.73% 2013 6,277,523 6,144,309 97.88% - 6,144,309 97.88% 2014 6,680,795 6,558,427 98.17% - 6,558,427 98.17% 2015 6,538,375 6,438,118 98.47% 55,500 6,493,618 99.32% 2016 6,728,811 6,637,510 98.64% 59,028 6,696,538 99.52% 2017 6,853,422 6,773,927 98.84% 39,950 6,813,877 99.42% 2018 7,672,612 7,659,388 99.83% 7,659,388 99.83% Source: Los Angeles County Auditor Controller's Office 178 344 City of El Segundo Ratio of General Bonded Debt Outstanding Last Ten Fiscal Years (In Thousands, except Per Capita) General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which, the City has none). 1 Fiscal Years 2000 - current are 12 month reporting periods ending on September 30. 2 Assessed value has been used because the actual value of taxable property is not readily available in the State of California. 179 345 Outstanding General Bonded Debt Fiscal Year General Tax Percent of Ended 1 Obligation Allocation Certificates of Assessed Per Septembcr 30 Bonds Bonds Participation Total Value 2 Capita 2009 - - 0.000% 2010 - - - - 0.000% - 2011 - - - 0.000% - 2012 - - - 0.000% - 2013 - - - - 0.000% - 2014 - - - 0.000% - 2015 - - - - 0.000% 2016 - 0.000% 2017 - - - 0.000% - 2018 - 0.000% - General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which, the City has none). 1 Fiscal Years 2000 - current are 12 month reporting periods ending on September 30. 2 Assessed value has been used because the actual value of taxable property is not readily available in the State of California. 179 345 City of El Segundo Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Fiscal Year General Tax Ended Obligation Allocation Certificates of September 30 Bonds Bonds Participation 2009 - - 2010 - - 2011 - - 2012 - - - 2013 - - 2014 - - 2015 - - 2016 - - 2017 - 2018 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 1 Office of Economic Development (data shown is for Los Angeles County) 180 Leases/ Loans 9,783,555 11,490,384 11,208,191 10,916,677 10,615,488 10,303,635 9,982,592 9,650,093 9,306,335 8,950,875 Total Governmental Activities 9,783,555 11,490,384 11,208,191 10,916,677 10,615,488 10,303,635 9,982,592 9,650,093 9,306,335 8,950,875 346 Fiscal Year Ended September 30 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 City of El Segundo Ratios of Outstanding Debt by Type (Continued) Last Ten Fiscal Years Leases/ Loans 1,240,683 777,301 285,58 Business -type Activities Total Certificates of Business -type Participation Activities 1,240,683 777,301 6 285,586 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 1 Office of Economic Development (data shown is for Los Angeles County) Total Percentage Debt Primary of Personal Per Government Income Capitan 11,024,238 1.5% 262 12,267,685 1.8% 304 11,493,777 1.6% 280 10,916,677 1.5% 254 10,615,488 1.4% 239 10,303,635 1.4% 227 9,982,592 1.3% 220 9,650,093 1.2% 207 9,306,335 1.2% 196 8,950,875 1.0% 169 181 347 City of El Segundo Direct and Overlapping Bonded Debt September 30, 2018 2017-18 City Assessed Valuation: $12,241,993,526 Percentage Total Applicable Debt 9/30/18 Exclusions Estimated Share of Direct and Overlapping Debt DIRECT DEBT: TOTAL DIRECT DEBT $ - $ - $ OVERLAPPING DEBT: Metropolitan Water District 0.447% 60,600,000 60,329,118 270,882 El Camino Community College District 11.698% 420,200,103 371,045,095 49,155,008 El Segundo Unified School District 100.000% 33,768,525 - 33,768,525 Manhattan Beach Unified School District 0.003% 147,536,104 147,531,678 4,426 Wiseburn School District 70.880% 127,400,230 37,098,947 90,301,283 Centinela Valley Union High School District 33.090% 235,553,184 157,608,635 77,944,549 Centinela Valley Union High School District School Facilities Improvement District No. 2016-1 33.129% 55,000,000 36,779,050 18,220,950 L.A.County Regional Park and Open Space A.D. 0.859% 26,575,000 26,346,721 228,279 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 1,106,633,146 836,739,244 $ 269,893.902 DIRECT AND OVERLAPPING GENERAL FIIND OBLIGATION DEBT: Los Angeles County General Fund Obligations Los Angeles County Superintendent of Schools COP'S L.A.County Sanitation District No. 5 Authority L.A.County Sanitation District South Bay Cities Authority TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT Net Combined Total Debt 0.859% $ 2,192,759,359 $ 2,173,923,556 $ 18,835,803 0.859% 5,827,868 5,777,807 50,061 6.057% 18,807,503 17,668,333 1,139,170 0.074% 3,205,696 3,203,324 2,372 $ 2,220,600,426 $ 2,200,573,020 $ 20.027.406 $ 3,327,233,572 $ 3,037,312,264 $ 289,921,308 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, mortgage revenue and non -bonded capital lease obligations. Also excludes accreted value of capital appreciation bonds. Ratios to Assessed Valuation: Total Overlapping Tax and Assessment Debt........ 2.20% Total Direct Debt...........................................0.00% Net Combined Total Debt..................................2.37% Source: California Municipal Statistics, Inc. 182 348 Assessed valuation Conversion percentage Assessed valuation Debt limit percentage Debt limit Total net debt applicable to limit: General obligation bonds Legal debt margin Total debt applicable to the limit as a percentage of debt limit City of El Segundo Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2008-09 2009-10 2010-11 2011-12 2012-13 $ 9,659,898,923 $ 9,910,500,695 $ 9,611,283,541 $ 9,324,417,663 $ 9,701,244,855 25% 25% 25% 25% 25% 2,414,974,731 2,477,625,174 2,402,820,885 2,331,104,416 2,425,311,214 15% 15% 15% 15% 15% 362,246,210 371,643,776 360,423,133 349,665,662.36 363,796,682 $ 362,246,210 $ 371,643.776 $ 360,423,133 $ 349,665,662 S 363.796.682 0.0% 0.0% 0.0% 0.0% 0.0% The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). Although the statutory debt limit has not been amended by the State since this change, the percentages presented in the above computations have been proportionately modified to 3.75% (25% of 15%) for the purpose of this calculation in order to be consistent with the computational effect of the debt limit at the time of the state's establishment of the limit. Source: California Municipal Statistics, Inc. Los Angeles County Tax Assessor's Office 183 349 Assessed valuation Conversion percentage Assessed valuation Debt limit percentage Debt limit Total net debt applicable to limit: General obligation bonds Legal debt margin Total debt applicable to the limit as a percentage of debt limit City of El Segundo Legal Debt Margin Information (Continued) Last Ten Fiscal Years Fiscal Year 2013-14 2014-15 2015-16 2016-17 2017-18 $ 10,308,636,196 $ 10,038,433,763 $ 10,655,775,000 $ 10,973,796,359 $ 12,226,261,726 25% 25% 25% 25% 25% 2,577,159,049 2,509,608,441 2,663,943,750 2,743,449,090 3,056,565,432 15% 15% 15% 15% 15% 386,573,857.35 376,441,266 399,591,562.50 411,517,363 458,484,815.00 $ 386,573,857 $ 376,441,266 $ 399,591,563 $ 411,517,363 $ 458,484,815 0.0% 0.0% 0.0% 0.0% 184 350 0.0% City of El Segundo Demographic and Economic Statistics Last Ten Calendar Years Note: The information provided for personal income and per capita personal income is for the county of Los Angeles. Information for the City of El Segundo was not available. Sources: (1) California Department of Finance (2) U.S. Census Bureau (3) EDD Bureau of Labor Statistics 185 351 Per Personal Capita Unemployment Fiscal Population Income Personal Rate Year (1) (in thousands) (2) Income (2) (3) 2008 17,002 716,022 42,114 7.5% 2009 16,999 685,927 40,351 11.6% 2010 17,049 700,936 41,113 12.6% 2011 16,708 717,659 42,953 12.3% 2012 16,720 743,605 44,474 11.0% 2013 16,815 761,888 45,310 9.9% 2014 16,897 787,958 46,633 8.2% 2015 16,646 790,452 47,486 3.7% 2016 16,717 832,029 49,771 2.9% 2017 16,784 888,503 52,938 3.3% Note: The information provided for personal income and per capita personal income is for the county of Los Angeles. Information for the City of El Segundo was not available. Sources: (1) California Department of Finance (2) U.S. Census Bureau (3) EDD Bureau of Labor Statistics 185 351 City of El Segundo Ten Principal Employers Current Year and Eight Years Ago Employer Raytheon Space & Airborne Syst Northrop Grumman Corporation Boeing Satellite Systems Inc. The Aerospace Corporation (Boeing) Accenture Mattel Inc Chevron Products Company/USA inc HealtbCare Partners LLC Time Warner Cable Information Services(CA) LLC Internet Brands Inc Teledyne Controls CBRE Inc Kinecta Federal Credit Union Big 5 Infineon Technologies Americas Corp (formerly International Rectifier) Karl Storz Endoscopy America Inc Stamps.com Inc Universal Protection Service, LP Total City of EI Segundo 56,922 186 352 2017-2018 2008-2009 Percent of Percent of Number of Total Number of Total Employees Employment Rank Employees Employment Rank 5,189 9.12% 1 8,386 15.82% 1 2,960 5.20% 2 5,901 11.13% 2 2,959 5.20% 3 4,571 8.62% 3 2,711 4.76% 4 2,991 5.64% 4 1,685 2.96% 5 597 1.13% 8 1,674 2.94% 6 1,625 3.07% 5 1,103 194% 7 1,253 236% 7 705 1.24% 700 123% 9 399 0.75% 12 588 103% 10 516 0.91% 11 422 0.74% 12 400 0.70% 13 384 0.67% 14 315 0.59% 15 381 0.67% 15 338 0,59% 16 323 0.57% 17 307 0,54% 18 Total City of EI Segundo 56,922 186 352 City of El Segundo Full-time and Part-time City Employees By Function Last Ten Fiscal Years Full-time and Part-time Employees as of September 30 Fiscal Year 2009 2010 2011 2012 2013 Function General Government 65 52 51 51 52 Public Safety 178 177 157 150 153 Public Works 27 18 18 17 18 Community & Cultural 78 73 81 83 77 Water 10 11 11 9 9 Sewer 6 5 5 6 5 Total 364 336 323 316 314 Source: City of El Segundo Payroll Division 187 353 City of El Segundo Full-time and Part-time City Employees By Function (Continued) Last Ten Fiscal Years Full-time and Part-time Employees as of September 30 Fiscal Year 2014 2015 2016 2017 2018 Function General Government 60 69 51 57 53 Public Safety 138 137 123 126 130 Public Works 27 30 31 30 29 Community & Cultural 81 80 76 74 115 Water 11 11 10 10 9 Sewer 6 6 6 10 6 Total 323 333 297 307 342 188 354 City of El Segundo Operating Indicators by Function Last Ten Fiscal Years Source: City of El Segundo 189 355 Fiscal Year 2009 2010 2011 2012 2013 Police: Arrests 1,401 1,316 810 826 795 Parking citations issued 9,662 8,536 7,792 8,698 10,900 Fire: Number of emergency calls 2,323 2,260 2,314 2,403 2,208 Inspections 2,170 2,166 1,985 2,445 2,411 Medical Responses 1,442 1,465 1,533 1,547 1,441 Public Works: Street resurfacing (miles) N/A 1.04 0.83 - 1.87 Reconstruction (miles) N/A - - - New Street (miles) N/A - - - Electronic Recycling (pounds) N/A N/A N/A N/A N/A Paper Shred Recycling (pounds) N/A N/A N/A N/A 17,950 Parks and recreation: Number of recreation classes 1,212 1,344 1,362 1,228 1,191 Class registrations N/A N/A 8,809 8,026 7,950 Recreation Trips participants N/A N/A 840 1,185 1,480 Number of facility rentals 552 248 262 365 411 Number of Reservations N/A 9,686 9,969 9,971 9,041 Shuttles transported (riders) 23,374 14,661 33,990 30,976 27,472 Dial -A -Ride residents 8,769 10,262 7,693 9,085 11,258 Homebound Meals 6,033 6,205 5,935 5,794 5,007 Finance: Business Licenses processed: 6,946 6,757 6,917 7,024 6,686 Purchase Orders processed 267 288 159 341 428 Purchase Change Orders processed 57 67 21 74 139 Invoices processed 13,003 11,315 10,772 9,855 10,008 Checks processed 5,886 5,414 5,068 5,010 5,262 Cash Receipts processed (excluding Water) 37,964 39,117 36,665 36,432 34,120 Source: City of El Segundo 189 355 City of EI Segundo Operating Indicators by Function (Continued) Last Ten Fiscal Years Police: Arrests Parking citations issued Fire: Number of emergency calls Inspections Medical Responses Public Works: Street resurfacing (miles) Reconstruction (miles) New Street (miles) Electronic Recycling (pounds) Paper Shred Recycling (pounds) Parks and recreation: Number of recreation classes Class registrations Recreation Trips participants Number of facility rentals Number of Reservations Shuttles transported (riders) Dial -A -Ride residents Homebound Meals Finance: Business Licenses processed: Purchase Orders processed Purchase Change Orders processed Invoices processed Checks processed Cash Receipts processed (excluding Water) 2014 Fiscal Year 2015 2016 2017 2018 1,468 1,057 721 592 568 11,764 9,404 7,200 8,955 10,227 2,485 2,568 2,632 2,807 2,895 2,326 2,203 1,531 1,209 1,919 1,564 1,644 1,661 1,847 1,930 0.3 1 2 N/A N/A N/A N/A - 9,220 10,080 23,000 23,000 20,000 1,365 1,389 1,056 833 997 7,905 8,021 61657 6,615 7,574 1,560 1,535 89 20 926 496 - - - - 9,238 9,342 4,779 5,624 5,397 29,789 30,052 7,320 4,781 6,252 11,090 11,206 6,841 5,108 5,189 4,957 4,926 5,061 5,497 6,080 6,758 5,812 7,172 7,236 6,992 447 427 476 547 464 129 118 103 136 174 10,367 10,189 10,230 9,566 9,762 5,529 5,326 5,849 5,248 5,258 35,461 35,143 33,075 31,559 27,722 190 356 City of El Segundo Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 2009 2010 2011 2012 2013 Police: Stations 1 1 1 1 1 Fire: Fire stations 2 2 2 2 2 Public works: Streets (miles) 55.1 55.1 55.1 55.1 55.1 Streetlights 1,718 1,718 1,718 1,718 1,718 Traffic signals 55 55 55 55 55 Parks and recreation: Parks 22 22 22 22 22 Recreation Facilities 13 13 13 13 13 Number of Acres 91.2 91.2 91.2 91.2 91.2 Source: City of El Segundo 191 357 City of El Segundo Capital Asset Statistics (Continued) by Function Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 2018 Police: Stations 1 1 l 1 1 Fire: Fire stations 2 2 2 2 2 Public works: Streets (miles) 55.1 55.1 55.1 55.1 55.1 Streetlights 1,718 1,718 1,718 1,718 1,718 Traffic signals 55 55 55 55 55 Parks and recreation: Parks 22 22 22 22 22 Recreation Facilities 13 13 13 13 14 Number of Acres 91.2 91.2 91.2 91.2 91.2 Source: City of El Segundo 192 358 EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: New Business Consideration and possible action regarding 1) Appointment of Scott Mitnick as City Manager, 2) Approval of the Employment Agreement between the City of El Segundo and Scott Mitnick, setting forth terms and conditions of employment; (Fiscal Impact: during the first year of the Employment Contract, the fiscal impact is $379,687-416,970 dependent upon annual bonus amount) RECOMMENDED COUNCIL ACTION: 1. Appointment of Scott Mitnick to serve as the City Manager; 2. Approve the Employment Agreement between the City and Scott Mitnick 3. Alternatively, discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Employment Agreement between the City of El Segundo and City Manager. FISCAL IMPACT: Approximately $94,922 for FY 2018-19 Amount Budgeted: $94,922 Additional Appropriation: None (salary savings from the vacant Senior Executive Assistant position and other vacant positions can be used for the remainder of FYI 8-19) Account Number(s): 001-400-3101-2101 STRATEGIC PLAN: Goal 3A El Segundo is a City employer of choice and consistently hires for the future Objective 2 The City provides a competitive environment and nimble hiring/onboarding process for its employe ORIGINATED BY: David Serrano, Director of Human Resourc REVIEWED BY: Mark Hensley, City Attorney and Joe L�io, Director of Finance APPROVED BY: Greg Carpenter, City Manage BACKGROUND AND DISCUSSION: Following the announcement of retirement of the current City Manager, the City engaged Bob Murray and Associates, an executive recruitment firm to conduct a recruitment for the position. The City Council conducted several rounds of interviews, and upon reaching consensus upon one candidate, conducted extensive background and vetting. Following this research, the City Council is proposing Scott Mitnick to serve as the new City Manager. Scott Mitnick has over 30 years of public service, including 21 years at the executive level. Mr. Mitnick has 11 years of experience as a City Manager for the City of Thousand Oaks, including leading that organization through the Great recession of 2007 -2009. Mr. Mitnick also served two years as the County Administrator for Sutter County. His prior experience includes serving as Assistant City Manager, Deputy City Manager, Administrative Services Director, and Budget Officer. Scott has attained his Master of Public Administration from Syracuse University's Maxwell School of Citizenship and Public Affairs, and his Bachelor of Arts in Political Science from California State University, Fullerton. Scott is active in promoting good government by authoring, contributing to, editing professional articles, books, and serving as guest lecturer with UCLA, USC, Syracuse University, Bristol University (England), including other local Universities The Employment Agreement contains the following terms and conditions: Term: "At -Will" employment, for four (4) year term from July 1, 2019 through June 30, 2023; Base Salary: $245,000 per annum Annual Performance Bonus: up to 15% of base salary tied to performance metrics Deferred Compensation: equal to 10% of monthly base salary paid into deferred compensation account Auto Allowance: $500 per month, with annual inflation adjustment as per IRS, effective July 1 of each year. Health and Welfare Benefits: participate in the same benefits with Executive Series of the Management -Confidential Salary Resolution Life Insurance: City paid term life insurance with policy limits of $500,000 Executive Leave: 80 hours of Executive Leave per year, cannot be cashed -out nor carried over; Vacation Accrual: vacation balance of 100 hours upon appointment; vacation shall accrue same as Executive Series of the Management -Confidential with recognition of total lifetime PERS service, maximum accrual up to 200 hours accrual per year; and Sick Leave: sick leave balance of 100 hours upon appointment; sick leave shall accrue same as Executive Series of the Management -Confidential with recognition of total lifetime PERS service, maximum accrual same as Executive Series of the Management -Confidential The above information is a brief outline of information contained in the Employment Agreement. The attached Employment Agreement contains all elements and details of the City Manager's terms and conditions of employment, including termination clause. N It is recommended the City Council take appropriate action regarding the appointment of Scott Mitnick as City Manager of the City of El Segundo, and authorize and approve the attached Employment Agreement. EMPLOYMENT AGREEMENT BETWEEN CITY OF EL SEGUNDO AND CITY MANAGER This Employment Agreement ("Agreement") is entered into on this day of June, 2019 ("effective Date") between City of EI Segundo ("City") and Scott Mitnick ("City Manager"). RECITALS A. City desires to employ services of Scott Mitnick to serve as its City Manager. B. City desires to establish certain conditions and of employment, provide certain compensation and benefits, and set working conditions for such employment, as authorized by EI Segundo City Council. C. Scott Mitnick desires to accept such employment on terms, as set forth herein. AGREEMENT The parties agree as follows: Section 1. Duties — Exclusive Employment City agrees to employ Scott Mitnick (hereinafter referred to as "City Manager") to serve as the City's chief executive officer and to perform the duties and functions specified in: A) California state law; B) EI Segundo Municipal Code (including having the authority to interview, hire, and dismiss employees, and to direct City work force in accordance with applicable state laws, the EI Segundo Municipal Code and applicable personnel rules and bargaining unit agreements); C) Applicable City ordinances, resolutions, rules, and policies; D) Current City job specification; and, E) Other legally permissible duties and functions as City Council may direct from time to time. City Manager agrees that he will, at all times, be employed exclusively by City to perform all duties and obligations required either expressly or implicitly by this Agreement and may not be employed in any other capacity while employed by City without prior consent of City Council. City Manager shall focus his professional time, ability, and attention to City business during time in which this Agreement is in force. City Manager shall not engage in any other business duties or pursuits whatsoever or, directly or indirectly, render any services of a business, commercial, or professional nature to any other person or organization, whether provided compensation or otherwise, without prior consent of City Council. Notwithstanding the foregoing, the expenditure of reasonable amounts of time not in conflict with City's needs and interests for educational, charitable, community, and/or professional activities shall not be deemed a breach of this Agreement and shall not require prior consent. Page 1 of 11 Section 2. Term and At -Will City Manager Status The term of this Agreement shall be for a period of four (4) years, from July 1 , 2019 to June 30, 2023 and may only be extended by a written amendment to this Agreement. In the event that the Agreement is not renewed but the City Manager continues to be employed by the City, all terms of the Agreement shall remain in effect until terminated as provided under this Agreement except City Manager shall not be entitled to any Severance Payment pursuant to Section 3.F. of this Agreement. City Manager serves as an "at will" employee (as defined in California Labor Code Section 2922 while this agreement has a potential term of four years there is no specified or guaranteed term of employment for the City Manager pursuant to this Agreement), serving at the pleasure of City Council, and nothing in this Agreement shall require cause for removal, or prevent, limit, or otherwise interfere with the right of City Council to terminate the services of City Manager at any time, subject only to the provisions set forth in Section 3 of this Agreement. In addition, nothing in this Agreement shall prevent, limit, or otherwise interfere with the right of City Manager to resign at any time from his position with City, subject only to the provisions set forth in Section 3 of this Agreement. Section 3. Termination of Agreement This Agreement shall become effective on the Effective Date and may thereafter be terminated in any of the following ways: A. By mutual written agreement of the parties. B. The City may terminate this Agreement for Cause or without Cause. For purposes of this Agreement, "Cause" shall mean: (1) City Manager's commission of an act of fraud, embezzlement or misappropriation or a crime of moral turpitude; (2) City Manager's continuing or willful misconduct or failure, refusal or neglect to perform his job functions, adhere to the lawful direction of the City consistent with his position, or adhere to the lawful policies and practices of the City, or (3) Conviction of a crime involving an "Abuse of office or position" as defined in Government Code Section 53243.4. Notwithstanding the foregoing, if the occurrence of an event of "neglect" described in clause (2) above is capable of being cured, such occurrence shall constitute Cause only if written notice specifying in reasonable detail the nature thereof, and the manner in which the City requires cure to be effected, is provided to City Manager within thirty (30) days of the City becoming aware of the alleged event or conduct and City Manager shall have substantially failed to cure such event as soon as reasonably possible but in no event later than fourteen (14) days after receiving such notice. The written notice shall: 1) Specify the particular cause(s) for termination and the facts supporting the decision to terminate for Page 2 of 11 cause; 2) Provide notice of City Manager's right to legal representation; and, 3) Provide notice of City Manager's right to request a hearing before City Council to address the basis for the termination. C. Termination by City Manager. City Manager may terminate this Agreement for any reason upon thirty (30) days' notice. D. Death/Disability of City Manager. This Agreement shall terminate automatically upon City Manager's death. The City may terminate This Agreement upon City Manager's Disability. For purposes of this Agreement, "Disability" means that City Manager has become "disabled" within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended. If the City Manager becomes disabled within the meaning of Government Code Section 20027, then the City will place the City Manager on an unpaid leave of absence and apply for a disability retirement. E. In the event City terminates the Agreement without cause, City shall pay City Manager an amount equal to the lessor of the base salary for the unexpired term of this Agreement or fifty percent (six months) of the City Manager's then Base Salary ("Severance Payment"), less applicable taxes and withholdings and City health, dental vision and other group insurance benefits for the same period of time after the date of termination, to the extent permitted by the then applicable insurance plans and benefit programs. Upon receipt of an executed copy of the applicable Settlement Agreement and Release ("Release") (attached as Exhibit B), City shall make the Severance Payment , at the option of City Manager, in any of the following manner: (1) A lump sum upon date of termination; (2) A lump sum on January 1 of the following year; (3) On the same schedule as the City's normal payroll cycle but not as an employee of the City; or, (4) Any combination of previous three options, as directed by City Manager. If the City Manager elects Severance Payment option (1), City shall make the Severance Payment within 15 days of the date of receipt of the fully executed Release. Page 3 of 11 F. In the event that City, and any time during the period in which this Agreement is in force, reduces the salary and/or other benefits of City Manager in a greater percentage than applicable to an across-the-board reduction for executive management employees of the City, City Manager may, at his option, deem the salary reduction a termination without cause, entitling City Manager to the Severance Payment and Insurance Payment (if applicable) as set forth in section 3(F) above. Section 4: Salary City agrees to pay City Manager for his services rendered an initial base annual salary of $245,000.00 ("Base Salary"), effective July 1 , 2019, payable in the normal payroll installments at the same time as other executive management employees of City are paid. City Council shall review City Manager's salary annually as part of his performance evaluation, as set forth in Section 6, and may provide adjustments as it determines appropriate. City Council may take into consideration annual cost of living and/or merit salary adjustments provided to other executive management employees. Section 5: Annual Performance Bonus City Manager shall be eligible to receive an "Annual Performance Bonus" of up to 15% of the City Manager's Base Salary per year based on City Council's annual performance review. Such bonus, if provided, may be received by the City Manager as regular pay, converted to deferred compensation (401a Plan, 457 Plan, HSA, or other allowed City plan to the extent allowed by law), and/or some other mechanism mutually agreed to by City Council and City Manager. Section 6: Performance Evaluation City Council shall conduct its first initial performance review of City Manager after the completion of his first six months. City Council shall provide input with respect to City Manager's initial performance and alignment with City Council goals and objectives. An adjustment to compensation at this time will be at City Council's discretion. Commencing with the completion of the City Manager's first full year with the City, City Council shall annually review and evaluate his performance and compensation in closed session. If possible, this annual review should take place in July of each year to allow for timely evaluation and payment of the annual salary adjustment and/or one-time performance bonus, if City Council determines in its discretion that City Manager is eligible for either. Said review and evaluation shall be in accordance with specific performance measures and rating criteria mutually agreed to by City Council and City Manager. Page 4 of 11 Section 7: Hours of Work & Designation of "Acting City Manager" It is recognized that City Manager must devote the time necessary even outside City's normal operating hours, and to that end, City Manager may take leave as he deems appropriate. During any such leave, City Manager may designate an "Acting City Manager" to oversee operation of the City in his absence, in compliance with EI Segundo Municipal Code. Section 8: Benefits Benefits provided to City Manager are addressed in Exhibit A. Section 9: Professional Development & General Business Expenses A. City agrees to budget and pay for professional dues, fees, subscriptions, and related expenditures on behalf of City Manager which are necessary for continuation and full participation in international, national, state, regional, and local associations and organizations necessary and desirable for City Manager's continued professional growth and development, and for the good of the City. B. Subject to approval of a budget by the City Council, City agrees to pay for travel and City's normal per diem or expenses of City Manager for professional and official travel, meetings, and occasions necessary to continue the professional development of City Manager and to adequately pursue official and other functions of the City, including but not limited to the International City/County Management Association (ICMA), National League of Cities, League of California Cities, and other such international national, state, regional, and local governmental and professional groups and committees which City and/or City Manager serves as a member. C. Subject to approval of a budget by the City Council, City agrees to pay for the travel and City's normal per diem or expenses of City Manager for multi -day courses, institutes, training, and seminars that are necessary for professional development and for the good of the City, as determined by City Manager. City Manager shall not be entitled to receive reimbursement for mileage so long as the City Manager receives a car allowance pursuant to this Agreement. D. Subject to approval of a budget the City Council, City agrees to pay for one- time and recurring costs of office furniture, equipment, supplies, etc. as City Manager deems necessary to carry out his duties for the City. The City must provide City Manager with the necessary office space, furniture, equipment and supplies necessary and customarily provided to perform the duties of a City Manger Page 5 of 11 Section 10: Moving and Relocation Expenses If City Manager moves his principal residence into or near EI Segundo, City shall reimburse City Manager for actual and reasonable moving and relocation expenses incurred and approved by the City Council. Section 11: Other Terms and Conditions of Employment City Manager shall be entitled to receive all employee benefits provided to executive management employees not specifically addressed herein, including any future benefits provided to executive management employees during the term of this Agreement. Section 12: Notices Any notice required by this Agreement shall be in writing and delivered either personally, via overnight courier, or U.S. First Class Mail. The notice address for the City is: EI Segundo City Council, c/o City Attorney, 350 Main Street, EI Segundo, CA 90245. The notice address for the City Manager is the address supplied by City Manager and on file with the City. Either part may specify an alternate address in accordance with this notice section. Notice shall be effective upon receipt. Section 13. Mediation/Arbitration Any and all disputes of whatever kind or nature arising out of or related to this Agreement or City Manger's employment or separation from the City shall be resolved through mediation and then binding arbitration, if necessary, utilizing Judicial Arbitration and Mediation Services ("JAMS") and shall be conducted in JAMS Century City or downtown Los Angeles offices or such other location mutually agreed upon by the parties. JAMS mediation and arbitration procedures and rules shall be utilized for purposes of conducting the mediation and arbitration. JAMS shall randomly provide the parties with a list of three mediators or arbitrators, depending on which process is being utilized, and each party shall have the right to reject one of the mediators or arbitrators. In the event that more than one mediator or arbitrator is left after the parties have each had the opportunity to reject one of the mediators or arbitrators, JAMS shall randomly select the mediator or arbitrator to mediate or arbitrate the dispute(s). The City will pay the arbitrator's fees and arbitration expenses and any other costs unique to the arbitration, recognizing that each side bears its own deposition, witness, expert and attorney's fees and expenses to the same extent as if the matter were being heard in court. If, however, any party prevails on a statutory claim, which affords the prevailing party attorney's fees and costs, then arbitrator may award reasonable fees and costs to the prevailing party. Any dispute as to who is the prevailing party and/or the reasonableness of any fee or cost shall be resolved by the arbitrator. Page 6 of 11 Section 14. ASSEMBLY BILL 1344 COMPLIANCE. To the extent CITY provides: (i) paid leave to EMPLOYEE pending an investigation; (ii) funds for the legal criminal defense of the EMPLOYEE; and/or (iii) a cash settlement to EMPLOYEE related to the termination of the EMPLOYEE, pursuant to this AGREEMENT and Government Code Section 53243 et seq., EMPLOYEE shall fully reimburse the City for any and all amounts paid by the City which fall within subsections (i) through (iii) in the event that the EMPLOYEE is convicted of a crime involving the abuse of his office or position. Section 15: General Provisions A. All of City Manager's writings, reports, and other documentation generated as part of his day-to-day duties during his employment with the City are the property of the City. B. This Agreement is for professional services that are personal to the City, and the Agreement is not assignable by City Manager. C. The provisions of this Agreement shall be construed as a whole according to its common meaning or purpose of providing a public benefit and not strictly for or against any party. It shall be construed consistent with the provisions hereof, in order to achieve the objectives and purposes of the parties. Wherever required by the context, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine or neutral genders or vice versa. D. This Agreement and the rights and obligations of the parties shall be governed and interpreted in accordance with the laws of the State of California. E. The text herein shall constitute the entire Agreement between the parties and supersedes any other agreements, either oral or in writing, between the parties hereto with respect to rendering these services, compensation matters, or benefits. Any modification of this Agreement shall be effective only if it is in writing and signed by both parties. F. This Agreement shall inure to the benefit of the heir at law and executor(s) of City Manager. G. The captions or headings in this Agreement are for convenience only and in no way define, limit, or describe the scope or intent of any provision or section of this Agreement. H. If any provision, or any portion thereof, contained in this Agreement is held unconstitutional, invalid, or unenforceable by a Court, the remainder of this Agreement, or portion thereof, shall be deemed severable, shall not be affected, and shall remain in full force and effect. Page 7 of 11 Each part of this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which is not embodied herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party. J. The parties acknowledge and agree that the terms and provisions of this Agreement have been negotiated and discussed between the parties, and this Agreement reflects their mutual agreement with respect to the subject matter of this Agreement. Because of the nature of such negotiations and discussions, it would be inappropriate to deem any party to be the drafter of this Agreement. Therefore, no presumption for or against validity or as to any interpretation hereof, based upon the identity of the drafter, shall be applicable in interpreting or enforcing this Agreement. K. Both parties have had sufficient time and opportunity to consult with legal counsel of their own choosing regarding the terms and conditions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. City of EI Segundo Drew Boyles, Mayor. Date Scott Mitnick Scott Mitnick, City Manager Date Attest: City Clerk Date Approved as to form: in City Attorney Date Page 8 of 11 EXHIBIT A CITY OF EL SEGUNDO CITY MANAGER BENEFITS (As of July 1, 2019) Benefits shall be provided as follows: 1. Medical, Dental, and Vision Insurance: City Manager shall be eligible to participate in the health, dental, and vision insurance plans provided to City employees, including the current health plans provided through CalPERS on the same terms and conditions as employees of the executive management group. 2. Retirement: If City Manager's employment is concurrently terminated at the same as retiring from CalPERS, he shall be immediately entitled to City -paid post-retirement medical insurance benefits on the same terms and conditions as the executive management group. 3. Deferred Compensation: Effective July 1, 2019, each pay period City agrees to pay an amount equal to ten (10) percent of City Manager's monthly Base Salary into applicable City Internal Revenue Code Section 401 a and/or Section 457 deferred compensation plan(s). City Manager is also eligible to participate in City's 401a Plan, 457 Plan, Health Savings Plan, Retiree Health Savings Plan, and/or related plans. 4. Life Insurance: City shall provide City Manager with a term life insurance policy in the amount of $500,000, with a separate travel life insurance provision (as per the City's regular policy provisions). City Manager shall be eligible to participate in City's Supplemental Life Insurance Program at his own expense. 5. Long -Term Disability: City shall provide long-term disability income insurance pursuant to the provisions of the City's Executive LTD Plan. 6. Vacation Leave: City Manager shall be entitled to a starting balance of one hundred (100) hours of Vacation Leave on the effective date of this Agreement. Annual hours shall accrue at the same rate used for executive management City employees based on City Page 9 of 11 Manager's total lifetime years of PERS service, which is currently 200 hours per year. City Manager shall receive same annual cash conversion option as executive management employees. City and City Manager shall mutually agree to all vacation periods and such time should be scheduled at least thirty (30) days in advance of the vacation date, unless otherwise allowed by City Council. Upon termination or separation of employment from City, City Manager shall have the option to be paid for unused Vacation Leave hours, to covert the hours to deferred compensation to the extent permitted by law (401a Plan, 457 Plan, HSA, or other allowed plan), and/or to use for other allowed uses for executive management employees. 7. Sick Leave: City Manager shall be entitled to a starting balance of one hundred (100) hours of Sick Leave on the effective date of this Agreement. Annual hours shall accrue at the same rate used for executive management employees, which is currently 8 hours per month. Upon termination or separation of employment from City, City Manager shall on the same terms and conditions as executive management employees (except his years of service shall be based upon his lifetime years of PERS service) have the option to be paid for unused Sick Leave hours, to covert the hours to deferred compensation (401a Plan, 457 Plan, HSA, or other allowed plan), and/or to other allowed uses for executive management employees. 8. Executive Leave: City Manager shall be entitled to 80 hours of Executive Leave per year. Leave cannot be cashed in or otherwise be transferred or converted for value. 9. Holidays & Other Leave: City Manager shall receive the same paid holidays, bereavement leave, etc. as executive management employees. 10. Automobile Allowance: City Manager's duties require that he shall have the unrestricted use, at all times during his employment with City, of an automobile. In lieu of using a City provided automobile, City Manager shall receive a City -provided monthly automobile allowance of $500.00 starting on the effective date of this Agreement. Annual inflation adjustments to this amount shall be provided as per the then current United States Internal Revenue Service (IRS) Standard Mileage Rate for Business Use and will take place at the beginning on July 1St of each year.. City Manager shall at all times keep on file with the City Clerk's Office proof of current automobile insurance with a minimum of three hundred thousand dollars ($300,000.00) of liability coverage. Page 10 of 11 11. Section 125 Flex Plan: City Manager shall be eligible to enroll in City's Section 125 Plan for payment of employee -paid insurance, medical treatment, etc. with pre-tax dollars to the extent permitted by law. City shall pay any administrative fee(s). 12. Employee Assistance Program: City shall pay for the full cost of Employee Assistance Program for City Manager and dependents. Page 11 of 11 EXHIBIT B SEPARATION AND RELEASE AGREEMENT 1. PARTIES This Separation, Severance and General Release Agreement ("AGREEMENT") is made and executed as of , by and between ("EMPLOYEE") and the CITY OF EL SEGUNDO ("CITY"). 2. RECITALS 2.1 EMPLOYEE commenced employment with the CITY as city manager on or about , 2019, pursuant to that EMPLOYMENT AGREEMENT entered into between the parties on or about 12019. 2.2 This AGREEMENT is made to amicably resolve all matters between EMPLOYEE and the CITY regarding EMPLOYEE's employment and the cessation of said employment. 2.3 The parties understand and agree that a material purpose of this AGREEMENT is to resolve any disputes and CLAIMS arising from or relating to EMPLOYEE's employment with CITY, if any, and provide for a separation payment for EMPLOYEE. 3. CONSIDERATION 3.1 In exchange for EMPLOYEE's execution, faithful performance and compliance with this AGREEMENT, including without limitation the granting of the releases set forth herein, and in full satisfaction and settlement of EMPLOYEE's CLAIMS, if any, the CITY shall pay EMPLOYEE the sum of $ [amount equivalent to six month base pay or amount of time left on contract, whichever is less plus medical/dental/vision for the same period of time as specified in the EMPLOYMENT AGREEMENT ] ("SEVERANCE PAYMENT") in the form of a check made payable to , to be in accordance with the schedule the EMPLOYEE chooses from the options set forth in the EMPLOYMENT AGREEMENT. Required tax withholdings and deductions will be made from the SEVERANCE PAYMENT. 3.2 Respecting the SEVERANCE PAYMENT referenced in paragraphs 3.1 above, EMPLOYEE understands and agrees that EMPLOYEE's portion of any federal, state or local taxes, if any, that may be owed or payable on the sums caused to be paid hereunder by the CITY are the sole and exclusive responsibility of EMPLOYEE. 3.3 EMPLOYEE and the CITY shall otherwise each bear their own attorney fees and costs incurred in connection with any disputes and this AGREEMENT. -1- 3.4 Except as set forth in this Paragraph 3, the parties agree that no other monies or benefits are due, owing or unpaid by reason of EMPLOYEE's employment or association with CITY and that no other monies or benefits will be paid or maintained by CITY to/for EMPLOYEE, in EMPLOYEE's name, or on EMPLOYEE's behalf. EMPLOYEE expressly agrees that the SEVERANCE PAYMENT described in Paragraph 3 supersede and are in substitution for any payments or benefits under any employment agreement(s), business agreement(s) or arrangement(s), oral or written promises, or severance policy or plan respecting or regarding his employment or association with CITY. 4. Sneeific Acknowledgement of Waiver of Claims under ADEA and OWSPA The Age Discrimination in Employment Act of 1967 (29 U.S.C. § 626, et. seq.; "ADEA") makes it illegal for an employer to discharge any individual or otherwise discriminate with respect to the nature and privileges of an individual's employment on the basis that the individual is age forty (40) or older. The Older Workers Benefit Protection Act ("OWBPA," Pub. L. 101-433, 104 Stat. 978 (1990)) further augments the ADEA and prohibits the waiver of any right or claim under the ADEA, unless the waiver is knowing and voluntary. By entering into this AGREEMENT, EMPLOYEE acknowledges that he knowingly and voluntarily, for just compensation, waives and releases any rights he may have under the ADEA and/or OWBPA. EMPLOYEE further acknowledges that he has been advised and understands, pursuant to the provisions of the ADEA and OWBPA, that: (a) This waiver/release is written in a manner understood by EMPLOYEE; (b) EMPLOYEE is aware of, and/or has been advised of, his rights under the ADEA and OWBPA, and of the legal significance of his waiver of any possible claims he currently may have under the ADEA, OWBPA and/or similar age discrimination laws; (c) EMPLOYEE is entitled to a reasonable time of at least twenty-one (21) days within which to review and consider this AGREEMENT and the waiver and release of any rights he may have under the ADEA, the OWBPA and similar age discrimination laws; but may, in the exercise of his own discretion, sign or reject this AGREEMENT at any time before the expiration of the twenty-one (2 1) days; (d) The waivers and releases set forth in this AGREEMENT shall not apply to any rights or claims that may arise under the ADEA and/or OWBPA after the EFFECTIVE DATE of this AGREEMENT; (e) EMPLOYEE has been advised by this writing that he should consult with an attorney before executing this AGREEMENT; (f) EMPLOYEE has discussed, or had the opportunity to discuss, this waiver and release with, and been advised with respect thereto by, his counsel of choice, and that he does not need any additional time within which to review and consider this AGREEMENT; (g) EMPLOYEE has seven (7) days following his execution of this AGREEMENT to revoke the AGREEMENT; -2- (h) Notice of revocation within the seven (7) day revocation period must be provided, in writing, to the CITY pursuant to this paragraph and must state, "I hereby revoke my acceptance of our `Separation and Release Agreement"'; and (i) This AGREEMENT shall not be effective until all parties have signed the AGREEMENT and ten (10) days have passed since EMPLOYEE's execution of the AGREEMENT (the "EFFECTIVE DATE"). 5. RELEASE In exchange for the SEVERANCE PAYMENT, representations and covenants made herein, and except only as to such rights or claims as may be created by this AGREEMENT, EMPLOYEE hereby, and for his heirs, representatives, successors, and assigns, releases, acquits, and forever discharges the CITY, and all of its agents, officers, current and former elected and appointed officials, current and former employees, representatives, insurers, attorneys, and all persons acting by, through, under, or in concert with any of them, and each of them, from any and all claims (including without limitation all claims for workers compensation benefits, if any), charges, complaints, liabilities, obligations, promises, benefits, agreements, controversies, costs, losses, debts, expenses, damages, actions, causes of action, suits, rights, and demands of any nature whatsoever, known or unknown, suspected or unsuspected, which EMPLOYEE now has or may acquire in the future, which relate to or arise out of any act, omission, occurrence, condition, event, transaction, or thing which was done, omitted to be done, occurred (including without limitation any circumstance(s) giving rise to liability for workers compensation benefits) or was in effect at any time from the beginning of time up to and including the EFFECTIVE DATE of this AGREEMENT ("CLAIMS"), without regard to whether such CLAIMS arise under the federal, state or local constitutions, statutes, rules, ordinances or regulations, workers compensation statutes or the common law. EMPLOYEE expressly acknowledges that the CLAIMS forever barred by this AGREEMENT specifically include, but are not limited to, claims related to the DISPUTES, his employment with the CITY and its cessation, any claims for wages, overtime or benefits (including without limitation workers compensation benefits), any alleged breach of any duty, any alleged employment discrimination, harassment, retaliation or unlawful discriminatory act, any alleged breach of any express or implied employment contract, breach of any duty arising out of contract, statute, regulation, ordinance or tort, constructive discharge, wrongful termination or constructive discharge in violation of public policy, or any claim or cause of action including, but not limited to, any and all claims whether arising under any federal, state or local law prohibiting or respecting wrongful termination, breach of employment contract, or employment discrimination, employee injury, death, workers compensation, wrongful hiring, harassment or retaliation based upon sex, race, age, color, religion, handicap or disability, national origin or any other protected category or characteristic, including but not limited to the Federal Fair Labor Standards Act, the California Fair Employment and Housing Act, the Americans With Disabilities Act, Title VII of the Civil Rights Act of 1964, and any other federal, state, or local human rights, civil rights, or employment discrimination or employee rights statute, rule, regulation, ordinance or decisional law. Additionally, the CITY hereby agrees not to initiate, or proceed with any actions, causes of action, claims, etc., that could be or that have been asserted against EMPLOYEE -3- arising out of EMPLOYEE's employment with the CITY, in any forum, whatsoever. To the extent that any such actions, causes of action, claims, etc., are, or become pending in any forum whatsoever, the CITY agrees to execute all documents necessary for the withdrawal of such actions, causes of action, claims, with prejudice, forthwith. 6. UNKNOWN CLAIMS 6.1 EMPLOYEE on the one hand, and the CITY, on the other hand, each hereby waive and release any rights which the other and its successors, heirs, executives, administrators, may have directly or indirectly, if any, jointly or severally, directly or indirectly, under the provisions of California Civil Code § 1542, and any similar state or federal statute, which reads in sum, substance or substantial part as follows: "A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party." 6.2 EMPLOYEE and the CITY acknowledge that the facts with respect to which each gives this GENERAL RELEASE may turn out to be different from the facts they now believe to be true. EMPLOYEE and the CITY hereby assume the risk of the facts turning out to be different, and agree that this AGREEMENT shall in all respects be effective and not subject to termination or rescission because of any such difference in facts. 7. WAIVER OF ADDITIONAL CLAIMS EMPLOYEE and the CITY hereby waive any provisions of state or federal law that might require a more detailed specification of the claims being released pursuant hereto. 8. REPRESENTATIONS AND WARRANTIES Each of the parties to this AGREEMENT represent and warrant and agree with each other party as follows: 8.1 No Other Claims: EMPLOYEE and the CITY hereby represent and warrant that EMPLOYEE nor the CITY has not filed, nor will they file in the future, any complaint, charge, claim, legal action, or proceeding arising out of EMPLOYEE' employment with the CITY, the DISPUTES or the CLAIMS released hereby or in any way related to his employment with the CITY or separation therefrom with any court, agency, board, hearing officer or tribunal against the CITY or any of its agents, officers, current and former elected or appointed officials, current and former employees, representatives, insurers, attorneys, and all persons acting by, through, under, or in concert with any of them. EMPLOYEE retains his right to request indemnification from the City pursuant to California Government Code § 825 et seq. with respect to any action brought against EMPLOYEE in his capacity as an employee. 8.2 Advice of Counsel: Each party has received, or has had the opportunity to receive, independent legal advice from their respective attorney(s) with respect to the -4- advisability of making the settlement and releases provided herein, with respect to the advisability of executing this AGREEMENT, and with respect to the meaning of California Civil Code § 1542. 8.3 No Fraud in Inducement: No party (nor any officer, agent, employee, representative, or attorney of or for any party) has made any statement or representation or failed to make any statement or representation to any other party regarding any fact relied upon in entering into this AGREEMENT, and neither party relies upon any statement, representation, omission or promise of any other party (or of any officer, agent, employee, representative, or attorney of or for any party) in executing this AGREEMENT, or in making the settlement provided for herein, except as expressly stated in this AGREEMENT. 8.4IndeDendent Investigation: Each party to this AGREEMENT has made such investigation of the facts pertaining to this severance and settlement and this AGREEMENT and all the matters pertaining hereto as it deems necessary. 8.5 Com-Drehension and Authority: Each party or responsible officer thereof has read this AGREEMENT and understands the contents hereof. Any of the officers executing this AGREEMENT on behalf of the CITY are empowered to do so and thereby bind the entity. 8.6 Mistake Waived: In entering into this AGREEMENT and the severance and settlement provided for herein, each party assumes the risk of any misrepresentation, concealment or mistake. If any party should subsequently discover that any fact relied upon by it in entering into this AGREEMENT was untrue, or that any fact was concealed from it, or that its understanding of the facts or of the law was incorrect, such party shall not be entitled to rescind or set aside the AGREEMENT. This AGREEMENT is intended to be and is final and binding between the parties, regardless of any claims of misrepresentation, promise made without the intent to perform, concealment of fact, mistake of fact or law, or any other circumstance whatsoever. 8.7 Later Discovery: EMPLOYEE and the CITY are aware that they may hereafter discover claims or facts in addition to or different from those they now know or believe to be true with respect to the matters related herein. Nevertheless, it is both parties' intention to fully, finally and forever settle and release all such matters, and all claims relative hereto, which do now exist, may exist or have previously existed between both parties. In furtherance of such intention, the releases given here shall be and remain in effect as full and complete releases of all such matters, notwithstanding the discovery or existence of any additional or different claims or facts relative thereto. 8.8 Ownership of Claims: EMPLOYEE represents and warrants as a material term of this AGREEMENT that he has not heretofore assigned, transferred, released or granted, or purported to assign, transfer, release or grant, any of the CLAIMS disposed of by this AGREEMENT. In executing this AGREEMENT, EMPLOYEE further represents and warrants that none of the CLAIMS released by his hereunder will in the future be assigned, conveyed, or transferred in any fashion to any other person and/or entity. -5- 8.9 Future Cooperation: The parties will execute all such further and additional documents as shall be reasonable or necessary to carry out the provisions of this AGREEMENT. 9. MISCELLANEOUS 9.1 No Admission: Nothing contained herein shall be construed as an admission by the parties of any liability of any kind. The parties each deny any liability in connection with any claim or wrongdoing. Each party also intends hereby solely to amicably resolve all matters between the parties. 9.2 Governine Law: This AGREEMENT and the rights and obligations of the parties shall be construed and enforced in accordance with, and governed by, the laws of the State of California. The venue for any dispute arising out of or relating to this AGREEMENT shall be the Los Angeles Superior Court. 9.3 Full Integration: This AGREEMENT is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This AGREEMENT may be amended only by a further agreement in writing, signed by the parties hereto. 9.4 Continuing Benefit: This AGREEMENT is binding upon and shall inure to the benefit of the parties hereto, their respective agents, employees, representatives, officers, and officials. 9.5 Joint Draftiniz: Each party has cooperated in the drafting and preparation of this AGREEMENT. Hence, in any construction to be made of this AGREEMENT, the same shall not be construed against any party. 9.6 Severabilitv: In the event that any term, covenant, condition, provision or agreement contained in this AGREEMENT is held to be invalid or void by any court of competent jurisdiction, the invalidity of any such term, covenant, condition, provision or agreement shall in no way affect any other term, covenant, condition, provision or agreement and the remainder of this AGREEMENT shall still be in full force and effect. 9.7 Titles: The titles included in this AGREEMENT are for reference only and are not part of the terms of this AGREEMENT, nor do they in any way modify the terms of this AGREEMENT. 9.8 Countemarts: This AGREEMENT may be executed in counterparts, and by facsimile and when each party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterparts, shall constitute one AGREEMENT, which shall be binding upon and effective as to all parties. 192 9.9 Executed Copy: All parties shall receive a fully executed copy of this AGREEMENT. 9.10 Notice: Any and all notices given to any party under this AGREEMENT shall be given as provided in this paragraph. All notices given to either party shall be made by certified or registered United States mail, or personal delivery, at the noticing party's discretion, and addressed to the parties as set forth below. Notices shall be deemed, for all purposes, to have been given on the date of personal service or three (3) consecutive calendar days following deposit of the same in the United States mail. As to EMPLOYEE: Name Address Address As to the CITY: Attn: City Clerk 350 Main Street El Segundo, CA 90245 WHEREFORE, the parties hereto have read all of the foregoing, understand the same, and agree to all of the provisions contained herein. DATED DATED ATTEST: By: City Clerk APPROVED AS TO FORM: By: City Attorney CITY OF EL SEGUNDO By: Mayor EMPLOYEE By: Scott Mitnich -7- W O 3026343 - 3026426 9000950 9000950 001 GENERALFUND 1D4 'T RAFF iC SAFE TY FUND 105 STATE GAS TAX FUND 108 ASSOCIATED RECREATION ACTIVITIES FUND 105 ASSET FORFEITURE FUND 311 COMM. DEVEL BLOCK GRANT 112 PROP "A"TRANSPORTATION 114 PROP"C'TRANSPORTATION 115 AIR QUALITY INVESTMENT PROGRAM 116 HOME SOUND INSTALLATION FUND 117 HYPERION MITIGATION FUND 118 TDA ARTICLE 3. 5B 021 BIKEWAY FUND 119 MTA GRANT 121 FEMA 120 C.O.P.S. FUND 122 LA.W.A FUND 123 PSAF PROPERTY TAX PUBLIC SAFETY 202 ASSESSMENT DISTRICT 973 301 CAPITAL IMPROVEMENT FUND 302 INFRASTRUCTURE REPLACEMENT FUND 405 FACILITIES MAINTENANCE 501 WATER UTILITY FUND 502 WASTEWATER FUND 503 GOLF COURSE FUND 601 EQUIPMENT REPLACEMENT 602 LIABILITY INSURANCE 603 WORKERS COMP. RESERVEIINSURANCE 701 RETIRED EMP. INSURANCE 702 EXPENDABLE TRUST FUND - DEVELOPER FEES 703 EXPENDABLE TRUST FUND -OTHER 700 OUTSIDE SERVICES TRUST TOTAL WARRANTS STATE OF CALIFORNIA COUNTY OF LOS ANGELES Information on actual expenditures Is available in the Director of Finance's office in the City of El Segundo. I certily as l0 the accuracy of the Demands and the availability of fund for payment thereof. For Approval: Regular checks held for City council authorization to release. CODES: CITY OF EL SEGUNDO WARRANTS TOTALS BY FUND 172,176.14 32,437.97 20000 14,393.95 2,948.17 R = Computer generaled checks for all non-emergency/urgency payments for materials, supplies and services In support of City Operations For Ratification: A = Payroll and Employee Benefit checks $ 222,164.23 DATE OF APPROVAL: AS OF 06118119 VOID CHECKS DUE TO ALIGNMENT: IA VOID CHECKS DUE TO INCORRECT CHECK DATE: VOID CHECKS DUE TO COMPUTER SOFTWARE ERROR: B - F = Computer generated Early Release disbursements andror adjustments approved by the City Manager Such as: payments for utility services, petty cash and employee travel expense NOTES reimbursements, various refunds, contract employee services consistent with current contractual agreements, instances where prompt payment discounts can be obtained or late payment penalties can be avoided or when a situation arises that the City Manager approves. H = Handwritten Early - aso dist)ursoajent6 andrar 3tqus3mems approved by the City Manager FINANCE DIRECTOR T „ CITYMANAGER DATE: Y 0�—\ ] DATE; J _;iz 12 REGISTER # 17a CITY OF EL SEGUNDO PAYMENTS BY WIRE TRANSFER 5/20119 THROUGH 5126119 Date Payee Description 5/20/2019 IRS 245,184.58 Federal 941 Deposit 5/20/2019 Employment Development 4,273.37 State SDI payment 5/20/2019 Employment Development 52,874.46 State PIT Withholding 5/21/2019 Joint Council of Teamsters 4.215.00 Vision Insurance payment 612019 5/24/2019 Cal Pers 7,457-33 EFT Retirement Safety-Fire-PEPRA New 25020 5/24/2019 Cal Pers 9,078.76 EFT Retirement Safety-Police-PEPRA New 25021 5/2412019 Cal Pers 29,569.92 EFT Retirement Misc - PEPRA New 26013 5/24/2019 Cal Pers 47,927.63 EFT Retirement Misc - Classic 27 5/24/2019 Cal Pers 71,385.62 EFT Retirement Safety Police Classic - 1st Tier 28 5/24/2019 Cal Pers 48,227.23 EFT Retirement Safety Fire- Classic 30168 5/24/2019 Cal Pers 4,134.99 EFT Retirement Sfty Police Classic -2nd Tier 30169 5/23/2019 Lane Donovan Golf Ptr 21,596.30 Payroll Transfer 5113/19-5/19/19 Workers Comp Activity 46,594.67 SCRMA checks issued 5/13/19-5/19/19 Liability Trust - Claims 37,500.00 Claim checks issued 5/13/19-5/19/19 Retiree Health Insurance 0.00 Health Reimbursment checks issued 5/13/19-5119/19 Flexible Spending Card 2,003.34 Employee Health and DCA card charges 632,023-20 DATE OF RATIFICATION: 5130119 TOTAL PAYMENTS BY WIRE: 632,023.20 Certified as to the accuracy of the wire transfers by: i Deputy City Treasurer II Date L ce za City Man h GIT Date Z,Z/4 Date Information on actual expenditures is available in the City Treasurer's Office of the City of EI Segundo. PACily TreasurerwVire Transfers\Copy of Wire Transfers 10-01-18 to 9-30-19 5/30/2019 1/1 361 CITY OF EL SEGUNDO PAYMENTS BY WIRE TRANSFER 5127119 THROUGH 612/19 Date Payee Despription 5/31/2019 Manufacturers & Traders 25,817.91 457 payment Vantagepoint 5/31/2019 Manufacturers & Traders 800.00 IRA payment Vantagepoint 5120119-5126119 Workers Comp Activity 24,190.50 SCRMA checks issued 5/20/19-5126119 Liability Trust - Claims 0.00 Claim checks issued 5/20/19-5/26/19 Retiree Health Insurance 18,620.00 Health Reimbursment checks issued 5/20/19-5126/19 Flexible Spending Card 197.51 Employee Health and DCA card charges 69,625.92 DATE OF RATIFICATION: 6/3119 TOTAL PAYMENTS BY WIRE: 69,625.92 Certified as to the accuracy of the wire transfers by: Deputy City TreasurDate Director of,64ncvq Date City Mari r mate Information on actual expenditures is available in the City Treasurer's Office of the City of EI Segundo. PACity TreasurerMire Transfers\Copy of Wire Transfers 10-01-18 to 9-30-19 6/3/2019 111 362 W W 3026427 - 3026499 9000951 9000997 001 GENERALFUND 104 TRAFFIC SAFETY FUND 105 STATE GAS TAX FUND 108 ASSOCIATED RECREATION ACTIVITIES FUND 109 ASSET FORFEITURE FUND 111 COMM. DEVEL. BLOCK GRANT 112 PROP "A" TRANSPORTATION 114 PROP'C"TRANSPORTATION 115 AIR QUALITY INVESTMENT PROGRAM 116 HOME SOUND INSTALLATION FUND 117 HYPERION MITIGATION FUND 110 TDA ARTICLE 3 - $a 821 BIKEWAY FUND 119 MTA GRANT 121 FEMA 120 C O.P S FUND 122 L.A.W.A. FUND 123 PSAF PROPERTY TAX PUBLIC SAFETY 202 ASSESSMENT DISTRICT 073 301 CAPITAL IMPROVEMENT FUND 302 INFRASTRUCTURE REPLACEMENT FUND 405 FACILITIES MAINTENANCE 501 WATER UTILITY FUND 502 WASTEWATER FUND 503 GOLF COURSE FUND 601 EQUIPMENT REPLACEMENT 602 LIABILITY INSURANCE 603 WORKERS COMP_ RESERVFJINSURANCE 701 RETIRED EMP. INSURANCE 702 EXPENDABLE TRUST FUND- DEVELOPER FEES 703 EXPENDABLE TRUST FUND - OTHER 70B OUTSIDE SERVICES TRUST TOTAL WARRANTS STATE OF CALIFORNIA COUNTY OF LOS ANGELES Information on actual expenditures is available in the Director of Finance's office in the City of EI Segundo. I certify as to the accuracy of the Demands and the availability of fund for payment thereof. For Approval: Regular checks held for City council au9wrfzation to release. CODES: CITY OF EL SEGUNDO WARRANTS TOTALS BY FUND 372,060.19 8.7804S 3,470.39 2,368.46 1,307.61 8,000.00 0.21 0.42 26,217.87 5, 000.00 R = Computer generated checks for all non-emergency/urgency payments for materials, supplies and services in support of City Operations For Ratification: A = Payroll and Employee Benefit checks DATE OF APPROVAL: 5 429,438.12 V AS OF 06/19119 VOID CHECKS DUE TP ALIGNMENT-- NIA LIGNMENT_NIA VOID CHECKS DUE TO INCORRECT CHECK DATE: VOID CHECKS DUE TO COMPUTER SOFTWARE FRRORt B - F = Computer generated Early Release disbursements and/or adjustments approved by the City Manager Such as: payments for utility services, petty cash and employee travel expense NOTES !) {7 reimbursements, various refunds, contract employee services consistent with current contractual 1J agreements, instances where prompt payment discounts can be obtained Or late payment penalties can be avoided or when a situation arises that the City Manager approves. H = Handwritten Early Rwczse a.souisnrne«'; andfor adjustments approved by the City Manager FINANCE DIRECTOR CITY MANAGER DATE: - I DATE: J -1,4,1091 1Q I REGISTER 9 17b CITY OF EL SEGUNDO PAYMENTS BY WIRE TRANSFER 6/3119 THROUGH 619119 Date Payee Description 6/3/2019 IRS 245,340.76 Federal 941 Deposit 6/3/2019 Employment Development 4,519.84 State SDI payment 6/3/2019 Employment Development 51,489.96 State PIT Withholding 6/4/2019 Nationwide NRS EFT 32,423.61 EFT 457 payment 6/4/2019 State of CA EFT 1,452.91 EFT Child support payment 6/7/2019 Cal Pers 511,729.17 EFT Health Insurance Payment 6/7/2019 Unum 113.70 Long Term Care Premium - May 6/6/2019 Lane Donovan Golf Ptr 22,021.67 Payroll Transfer 5/27/19-6/2/19 Workers Comp Activity 144,543.21 SCRMA checks issued 5/27/19-6/2/19 Liability Trust - Claims 0.00 Claim checks issued 5/27/19-612/19 Retiree Health Insurance 0.00 Health Reimbursment checks issued 5/27/19-6/2/19 Flexible Spending Card 1;659.32 Employee Health and DCA card charges 1,015,294.15 DATE OF RATIFICATION: 6/10/19 TOTAL PAYMENTS BY WIRE: 1,015,294.15 as to the accuracy of the wire transfers by: �Certified Deputy City Treasurer II Date anc Datea t Date Information on actual expenditures is available in the City Treasurer's Office of the City of EI Segundo. PACity TreasurerlWire TransferslCopy of Wire Transfers 10-01-18 to 9-30-19 6/10/2019 1/1 364 MEETING OF THE EL SEGUNDO CITY COUNCIL TUESDAY, JUNE 4, 2019 — 4:00 PM (Revised Agenda) Council Member Chris Pimentel participated in the meeting via teleconference 4:00 P.M. SESSION CALL TO ORDER — Mayor Boyles at 5:02 PM due to a lack of quorum at 4:00 PM ROLL CALL Mayor Boyles Mayor Pro Tem Pirsztuk Council Member Brann Council Member Pimentel Council Member Nicol - Present - Present - Present - Via teleconferencing - Present PUBLIC COMMUNICATION — (Related to City Business Only — 5 minute limit per person, 30 minute limit total) None SPECIAL ORDER OF BUSINESS: Mayor Boyles announced that Council would be meeting in closed session pursuant to the items listed on the Agenda. CLOSED SESSION: The City Council may move into a closed session pursuant to applicable law, including the Brown Act (Government Code Section §54960, et seq.) for the purposes of conferring with the City's Real Property Negotiator; and/or conferring with the City Attorney on potential and/or existing litigation; and/or discussing matters covered under Government Code Section §54957 (Personnel); and/or conferring with the City's Labor Negotiators; as follows: CONFERENCE WITH LEGAL COUNSEL — EXISTING LITIGATION (Gov't Code §54956.9(d)(1): -0- matters CONFERENCE WITH LEGAL COUNSEL — ANTICIPATED LITIGATION Significant exposure to litigation pursuant to Government Code §54956.9(d)(2): -0- matters. Initiation of litigation pursuant to Government Code §54956.9 (d)(4): -1- matters. Is MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 1 365 DISCUSSION OF PERSONNEL MATTERS (Gov't Code §54957): -1- matters Performance Review Position: City Attorney APPOINTMENT OF PUBLIC EMPLOYEE (Gov't. Code § 54957): -1- matter PUBLIC EMPLOYMENT (Gov't Code § 54957) -1- matter City Manager CONFERENCE WITH REAL PROPERTY NEGOTIATOR (Gov't Code §54956.8): -0- matters CONFERENCE WITH CITY'S LABOR NEGOTIATOR (Gov't Code §54957.6): -5 - matters Employee Organizations: Police Management Association; Police Support Services Employees Association; Supervisory, Professional Employees Association; and Executive and Management/Confidential Employees (unrepresented groups). Agency Designated Representative: Irma Moisa Rodriquez, City Manager, Greg Carpenter and Human Resources Director, David Serrano. 2. Labor Negotiator: Gary Phillips Unrepresented Employee: City Manager Candidates Adjournment at 7:57 PM MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 2 366 REGULAR MEETING OF THE EL SEGUNDO CITY COUNCIL TUESDAY, JUNE 4, 2019 - 6:00 P.M. (Revised Agenda) Council Member Chris Pimentel participated in the meeting via teleconference 6:00 P.M. SESSION CALL TO ORDER — Mayor Boyles at 6:00 PM INVOCATION — Tracy Weaver, City Clerk PLEDGE OF ALLEGIANCE — Mayor Pro Tem Pirsztuk PRESENTATIONS a) Presentation by Police Chief Whalen introducing the following new EI Segundo Police Officers; Officer Oscar Haro, Officer Zachary Contreras and Officer Anthony Sanchez. b) Presentation by Crista Binder, Treasurer and Dino Marsocci, Deputy City Treasurer II regarding the Treasury Quarterly Report. ROLL CALL Mayor Boyles Mayor Pro Tem Pirsztuk Council Member Brann Council Member Pimentel Council Member Nicol - Present - Present - Present - Via teleconferencing - Present PUBLIC COMMUNICATIONS — (Related to City Business Only — 5 minute limit per person, 30 minute limit total) Dr. Melissa Moore, ESUSD Superintendent and Melissa McCaverty, PTA Council President, in favor of item #F6, regarding the Run for Education fee waiver. CITY COUNCIL COMMENTS — (Related to Public Communications) None A. PROCEDURAL MOTIONS Consideration of a motion to read all ordinances and resolutions on the Agenda by title only. MOTION by Council Member Brann, SECONDED by Council Member Nicol to read all ordinances and resolutions on the agenda by title only. MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0 B. SPECIAL ORDERS OF BUSINESS (PUBLIC HEARING) MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 3 367 C. UNFINISHED BUSINESS (See Special Agenda of June 4, 2019 for the item and action taken by Council) D. REPORTS OF COMMITTEES, COMMISSIONS AND BOARDS 1. Consideration and possible action to announce the appointment to the Planning Commission. (Fiscal Impact: None) Mayor Boyles announced the appointment of Carol Wingate to the Planning Commission to a term ending June 30, 2023. E. NEW BUSINESS 2. ITEM PULLED DURING AGENDA REVISION Mayor Boyles left the dais due to a possible conflict of interest. 3. Consideration and possible action to adopt an ordinance amending Chapter 2 (Garbage and Rubbish) of Title 5 of the EI Segundo Municipal Code in its entirety in order to meet current State mandated requirements. (Fiscal Impact: N/A) Greg Carpenter, City Manager, introduced the item. Ken Berkman, Public Works Director, reported on the item. Mark Hensley, City Attorney, added language to the proposed Ordinance under Section 5-2-6 C; 12 exemptions are listed, Mr. Hensley added the following exemptions for a total of 14 exemptions; 13. Large bulky or heavy items that are not of a type that the City's franchise provider hauls at all or as a regular part of business and 14. Removal of large amounts of solid waste to address health and safety concerns, such as hoarding. Added the following language to Commercial and Multifamily Zone on first (1St) exemption; large bulky or heavy items that are not customarily generated by the business tenant. Council Discussion Mark Hensley, City Attorney, read by title only: ORDINANCE NO. 1584 AN ORDINANCE AMENDING TITLE 5, CHAPTER 2 OF THE EL SEGUNDO MUNICIPAL CODE TO ESTABLISH COMPREHENSIVE REGULATIONS REGARDING SOLID WASTE MANAGEMENT AND ESTABKLISHING A PERMIT PROCESS FOR, AND REGULATIONS GOVERNING, PROVIDERS OF SOLID WASTE COLLECTION AND TRANSPORTATION SERVICES TO COMMERCIAL PREMISES AND MULTI- FAMILY DWELLINGS. MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 4 •: Council Member Nicol introduced the Ordinance. Second reading of the Ordinance is scheduled for the regular City Council meeting on June 18, 2019. Mayor Boyles returned to the dais. F. CONSENT AGENDA All items listed are to be adopted by one motion without discussion and passed unanimously. If a call for discussion of an item is made, the item(s) will be considered individually under the next heading of business. 4. Approve Warrant Numbers 3026128 through 3026251 and 9000948 through 9000948 on Register No. 16a in the total amount of $392,438.59 and Wire Transfers from 5/13/19 through 5/19/19 in the total amount of $569,907.13. Warrant Numbers 3026232 through 3026342 and 9000949 through 9000949 on Register No. 16b in the total amount of $660,268.29. Ratified Payroll and Employee Benefit checks; checks released early due to contracts or agreement; emergency disbursements and/or adjustments; and wire transfers. 5. Approve Regular City Council Meeting Minutes of May 21, 2019 and Special City Council Meeting Minutes of May 22, 2019. 6. PULLED BY COUNCIL MEMBER BRANN 7. Authorize the City Manager to execute a standard Public Works Contract No. 5714, in a form approved by the City Attorney, with American Asphalt South, Inc., in the amount of $225,374.20, for the FY18/19 Slurry Seal Project and approve an additional project contingency of $22,500.00 for unseen conditions. No. PW 19-19. (Fiscal Impact: $247,874.20) 8 PULLED BY TRACY WEAVER, CITY CLERK, FOR DAVID SERRANO, HUMAN RESOURCES DIRECTOR. 9. ITEM MOVED TO SPECIAL AGENDA UNDER NEW BUSINESS PER HUMAN RESOURCES DEPARTMENT AND THE CITY ATTORNEY'S OFFICE. SEE SPECIAL AGENDA DATED JUNE 4, 2019 FOR ITEM AND ACTION TAKEN BY COUNCIL. MOTION by Mayor Pro Tem Pirsztuk, SECONDED by Council Member Brann to approve Consent Agenda items 4, 5, and 7. MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0. PULLED ITEMS MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 5 369 6. Consideration and possible action to approve an adjustment to the Fee Waiver Scorecard total and thereby increase the fee waiver percentage from 50% to 75% for the EI Segundo Run for Education special event, organized by non-profit organization EI Segundo Council of Parents and Teachers. (Fiscal Impact: approximately $6,000.00) Council Member Brann introduced the item. Council discussion MOTION by Mayor Boyles, SECONDED by Mayor Pro Tem Pirsztuk to approve the adjustment to the Fee Waiver Scorecard total and increase the fee waiver percentage to 75% for the EI Segundo Run for Education special event and receive and file the updated 2018-2019 special event fee waiver list. MOTION PASSED BY VOICE VOTE. 4/1. YES: Boyles Nicol Pimentel Pirsztuk NO: Brann 8. Consideration and possible action regarding 1) Revoking Resolution No. 5147 providing for salary and benefit changes to Chapter 1A2.010 of the EI Segundo Administrative Code; 2) Adoption of Resolution for City -paid salary and benefit changes including City Clerk and City Treasurer positions. (Fiscal Impact: $4,308 for FY 2018-19; $17,232 for FY 2019-20 as it relates to this adjusted action) Greg Carpenter, City Manager, introduced the item David Serrano, Human Resource Director, stated clerical corrections to the proposed Resolution; Section B 2 — Principal Civil Engineer (At -Will), strike the "at will" wording and for Section 4-1 B, the current sentence reads "effective July 1, 2019 all positions listed in Section 1 (B) and (C)" — remove the "and (C)" wording. Council discussion MOTION by Council Member XXX, SECONDED by Council Member XXX to revoke Resolution No. 5147 and adopt Resolution No. 5154, as corrected. MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0. G. REPORTS — CITY MANAGER — Mentioned City Hall will be open Monday through Friday beginning the first Friday in July. Staff will remain on a 9/80 schedule, working alternate Friday's. H. REPORTS — CITY ATTORNEY - Passed I. REPORTS — CITY CLERK 10. Consideration and possible action regarding Council consensus to cancel the Tuesday, July 2, 2019 City Council Meeting. (Fiscal Impact: None) (Item pulled to the regular City Council meeting on June 18, 2019) MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 6 370 J. REPORTS — CITY TREASURER — Gave a presentation earlier in the meeting. H. REPORTS — CITY COUNCIL MEMBERS Council Member Pimentel — Passed Council Member Nicol — Thanked the Police Department for their participation in the Special Olympics Torch Run. Council Member Brann — Encouraged by the introduction of the City's newest Police Officers and attended the mural dedication at the Sue Carter, Friends of the Library room, on Wednesday, May 29, 2019. Mayor Pro Tem Pirsztuk — Attended the LA County Mayor's meeting with Eric Garcetti in EI Monte, the discussion focused on education, wished all those culminating, promoting and graduating the best of luck and commented on the recent success of Civics' Day sponsored by the City and thanked the students for their Teen Center update proposals. Mayor Boyles — Attended the South Bay Council of Governments Board meeting, thanked all the recent CERT attendees, mentioned the City's recent Table Top exercise, met with Dr. Patrick Soon-Shiong, met with a new free form futures company, met with a company that would like to reinvent air transport, met with Second Order Effects, thanked those who attended CPR Saturday on June 1, 2019 and invited the Community to attend the Beach Clean-up on Saturday, June 8, 2019 sponsored by NRG and the Kiwanis Club. 11. Consideration and possible action to temporarily suspend EI Segundo Municipal Code Section 7-6-8 to allow adults over 21 years of age to bring and consume alcohol at Library Park on the days of the Summer Concerts in the Park events, Sundays, June 16, June 30, July 14 and July 28, 2019, from 3:00pm until 7:00pm. (Fiscal Impact: None) Mayor Boyles introduced the item. Council Discussion MOTION by Council Member Brann, SECONDED by Mayor Pro Tem Pirsztuk to suspend EI Segundo Municipal Code Section 7-6-8 during Summer Concerts in the Park events. MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0. 12. Consideration and possible action to direct staff to prepare letters of opposition to various Assembly and Senate bills related to Housing and Accessory Dwelling Units. (Fiscal Impact: None) Greg Carpenter, City Manager, introduced the item. MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 7 371 Gregg McClain, Planning Manager, gave a presentation regarding 6 bills still pending in Sacramento. Mark Hensley, City Attorney, commented SB 13 and mentioned a letter has already been prepared for this pending bill. Council Discussion MOTION by Council Member Brann, SECONDED by Mayor Pro Tem Pirsztuk directing staff to prepare and send letters under the Mayor's name to oppose SB 330 (Skinner), AB 1279 (Bloom), AB 1763 (Chuff), AB 68 (Ting), AB 881 (Bloom), and SB 13 (Wieckowski). MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0. Mayor Pro Tem Pirsztuk directed staff to prepare a Press Release regarding the pending bills for the Community, in order for our residents to understand how these bills could affect the City of EI Segundo. Mayor Pro Tem Pirsztuk thanked Gregg McClain for the work that went into the presentation. PUBLIC COMMUNICATIONS — (Related to City Business Only — 5 minute limit per person, 30 minute limit total) None MEMORIALS — Katherine Marie Motta A moment of silence for the 12 people who lost their lives in the recent Virginia Beach shooting. Council returned to Closed Session ADJOURNMENT at 7:08 PM Tracy Weaver, City Clerk MINUTES OF THE REGULAR COUNCIL MEETING JUNE 04, 2019 PAGE NO. 8 372 SPECIAL MEETING OF THE EL SEGUNDO CITY COUNCIL TUESDAY, JUNE 4, 2019 - 6:00 P.M. (Special Meeting ran simultaneously with Regular Meeting) Council Member Chris Pimentel participated in the meeting via teleconference Ran simultaneously with the Revised Regular Open Session 6:00 P.M. SESSION CALL TO ORDER - Mayor Boyles opened simultaneously with the Open Session at 6:00 PM ROLL CALL Mayor Boyles Mayor Pro Tem Pirsztuk Council Member Brann Council Member Pimentel Council Member Nicol - Present - Present - Present - Via teleconferencing - Present PUBLIC COMMUNICATIONS — (Related to City Business Only — 5 minute limit per person, 30 minute limit total) See Minutes of Regular Open Session C. UNFINISHED BUSINESS Consideration and possible action regarding 1) adoption of an Urgency Ordinance approving an Amendment to the Contract between The Board of Administration California Public Employees' Retirement system and the City Council of EI Segundo relating to the EI Segundo Police Officers Association (POA) and the EI Segundo Firefighters Association (FFA), respectively; and 2) adoption of Ordinance No. 1581 approving the amendment. (Fiscal Impact: None as this item completes final actions on POA and FFA MOU changes) Greg Carpenter, City Manager, introduced the item David Serrano, Human Resources Director, reported on the item. Council Discussion Mark Hensley, City Attorney, read by title only: ORDINANCE NO.1585 AN URGENCY ORDINANCE ADOPTED IN ACCORDANCE WITH GOVERNMENT CODE § 36937(B) APPROVING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF EL SEGUNDO AND THE BOARD OF MINUTES OF THE SPECIAL COUNCIL MEETING JUNE 4, 2019 PAGE NO. 1 OF 2 373 ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM. MOTION by Mayor Boyles, SECONDED by Council Member Nicol adopting Ordinance No. 1585. MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0 Mark Hensley, City Attorney, read by title only: ORDINANCE NO. 1581 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF EL SEGUNDO AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY COUNCIL OF THE CITY OF EL SEGUNDO AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM. MOTION by Mayor Pro Tem Pirsztuk, SECONDED by Mayor Boyles adopting Ordinance No. 1581. MOTION PASSED BY UNANIMOUS VOICE VOTE. 5/0 ADJOURNMENT at 7:08 PM Tracy Weaver, City Clerk MINUTES OF THE SPECIAL COUNCIL MEETING JUNE 4, 2019 PAGE NO. 2 OF 2 374 SPECIAL JOINT MEETING OF THE EL SEGUNDO CITY COUNCIL & ECONOMIC DEVELOPMENT ADVISORY COUNCIL MEETING MINUTES MAY 15, 2019 4:30PM CALL TO ORDER Chair Al Keahi called to order the Joint Meeting of the EI Segundo City Council and Economic Development Advisory Council at 4:35PM on Wednesday, May 15th, 2019 at R6 Distillery 909 E. EI Segundo Blvd., EI Segundo, CA 90245. ROLL CALL The following EI Segundo City Council members were present: • Mayor Drew Boyles • Mayor Pro Tem Carol Pirsztuk • Chris Pimentel The following EI Segundo City Council members were not present: • Dr. Don Brann • Scot Nicol The following EI Segundo City Staff were present: ■ Greg Carpenter • Barbara Voss ■ Tracy Weaver The following Economic Development Advisory Council members were present: • Al Keahi • Vandad Espahbodi • Alex Abad • Shar Franklin • Spencer Bauer • Richard Lundquist ■ Lily Craig • Lance Rails ■ Rob Croxall ■ Lance Giroux • Jim McCaulley The following Economic Development Advisory Council members were not present: • Bob Healey • Tim Harris • Gary Horwitz • Corinne Murat • Rick Yuse Is Matthew Tompkins • Michael Mothner PUBLIC COMMUNICATIONS 375 A. Keahi thanked Rob Rubens for hosting the EDAC meeting at R6 Distillery. A. Keahi announced the Hot Wheels Legends Tour in EI Segundo on May 18th, 2019 Michael Kreski from the Arts & Culture Advisory Committee provided an overview of the Cultural Development Fund (1% Fee for Arts) o The proposed fund would allocate funds for arts and cultural projects in EI Segundo APPROVAL OF MINUTES MOTIONED by Jim McCaulley and SECONDED by Lance Giroux to approve the minutes of the March 20th, 2019 and April 17th, 2019 meeting. PRESENTATION Meaghan Downs, Social Media Strategist, Irma Vega, Account Supervisor, and Rebecca Steadly, Public Relations Coordinator — 9th Wonder Marketing Firm M. Downs presented social media highlights for new business, hospitality and tourism o Instagram and Facebook are platform priorities for marketing EI Segundo community events, insider tips, attractions and activities. o The chef's series on Instagram has been very effective in featuring local chefs and reinforcing EI Segundo as a dining destination. o Linkedln targets the city's new business and economic development + V. Espahbodi commented on partnering with the online restaurant reservations platform Resy to advertise restaurants in EI Segundo ■ D. Boyles commented on the lack of EI Segundo restaurants listings on TripAdvisor + M. Downs responded there are unique online applications where search and social media meet. M. Downs agreed there are opportunities to explore with these companies in addition to social media platforms. • I. Vega discussed newly launched animated ad campaign "Stay Here/Savor Here" and "Indulge Here/Escape Here" targeting LAX visitors + S. Bauer suggested also targeting LAAFB visitors S. Franklin shared that according to Expedia's recent quarterly review, Downtown Los Angeles is expected to offer very competitive prices compared to the South Bay hotels and will be heavily investing in travel ads during the coming months as the city prepares for a slow season due to a lack of events. UNFINISHED BUSINESS EDAC Work Plan ■ B. Voss presented the updated work plan and re -confirmed sub -committees: 376 o Hospitality & Tourism — L. Craig (Chair), S. Franklin (Co -Chair), R. Croxall, and A. Keahi o Business Retention & Expansion —J. McCaulley (Chair), S. Bauer, C. Murat, and L. Rails o New Business Attraction — L. Giroux (Chair), V. Espahbodi, T. Harris, and M. Mothner o Strategic Forward Planning — M. Tompkins (Chair), A. Abad, B. Healey, G. Horwitz, R. Lundquist, and R. Yuse * B. Voss provided an overview of how progress for specific tasks will be tracked and reported on the work plan COUNCIL MEMBER/EDAC COMMENTS • Al Keahi encouraged City Council to share thoughts on how EDAC can help achieve the city's goals for economic development • B. Voss announced the Creative Economy Report is on ElSegundoBusiness.com • A. Abad announced Olympic gold medalist, Kerri Walsh Jennings opened an office in EI Segundo. • V. Espahbodi announced Starburst Space Accelerator Program will kick off in July 2019. • A. Keahi announced an honoree has been selected for the Champions of Business Award o A. Keahi asked for keynote speaker recommendations • A. Keahi asked City Council for an update on Topgolf o C. Pimentel responded an update is not currently available • A. Keahi shared his thoughts on City Hall real estate opportunities PUBLIC COMMUNICATIONS • Deborah Shepard shared information about the services provided by the South Bay Workforce Investment Board o Aero -Flex and Bio -Flex programs, geared to helping business with job ready and workforce pipeline opportunities. ADJOURNMENT The meeting adjourned at 6:11pm Posted on 05/29/2019 Cristina Reveles Economic Development Coordinator 377 EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Consent Agenda Consideration and possible action to accept as complete the Library Wi-Fi and Reading Lounge Renovation Project, No. PW 18-04. (Fiscal Impact: $152,445.90) RECOMMENDED COUNCIL ACTION: 1. Accept the work as complete; 2. Authorize the City Clerk to file a Notice of Completion in the County Recorder's Office; or, 3. Alternatively, discuss and take other possible actions related to this item. ATTACHED SUPPORTING DOCUMENTS: Notice of Completion FISCAL IMPACT: Included in Adopted Budget Amount Budgeted: $153,000 Additional Appropriation: No Account Number(s): 301-400-8201-8417 (Library Wi-Fi Zone) STRATEGIC PLAN: Goal: 4 Objective: (a) Goal: 1 Objective: 2 ORIGINATED BY: REVIEWED BY: APPROVED BY: Develop Quality Infrastructure and Technology El Segundo's physical infrastructure supports an appealing, safe, and effective City Enhance Customer Service and Engagement City services are convenient, efficient and user-friendly for all residents, businesses, and visitors Arianne Bola, Senior Associate Engineer Ab Ken Berkman, Public Works Director Melissa McCollum, Library Director Greg Carpenter, City Manager - 9L C BACKGROUND AND DISCUSSION: On July 17, 2018, the City Council approved the plans and specifications for the Library Wi-Fi and Reading Lounge Renovation Project, No. PW18-04 and authorized staff to purchase library - approved furniture. The original project scope consisted of demolition, construction and 378 IV electrical work within approximately 1,517 SF of the underutilized former reference section, located on the Library's main floor. The additional furniture purchase was executed in concert with a larger -contract with the County of San Bernardino, providing for the cost benefit of economy of scale for our smaller project. Construction bids were opened on August 7, 2018 and the lowest responsible bidder was Corral Construction & Development Inc. (Corral), which was awarded the contract on September 4, 2018. On March 5, 2019, the City Council approved amending the contract with Corral to include repainting most of the interior areas to take advantage of Corral's low bid cost and avoid the future impact of such work upon Library patrons if done separately. Construction began on January 14, 2019 and was successfully completed on April 23, 2019. Staff respectfully recommends that City Council accept the work as complete and authorize the City Clerk to file a Notice of Completion in the County Recorder's Office. Accounting Summarv: Design Plans and Specifications $ 14,550.00 Advertise for bids $ 950.00 Furniture $ 62,482.10 Demo and Construction $ 38,805.31 Interior Painting $ 33,968.00 Construction Contingencv Utilized $ 1.690.49 Total Project Cost $152,455.90 379 Recording Requested by and When Recorded Mail To: City Clerk, City Hall 350 Main Street EI Segundo, CA 90245 NOTICE OF COMPLETION OF CONSTRUCTION PROJECT Project Name: Library Wi-Fi and Reading Lounge Renovation Project Project No.: PW 18-04 Contract No. 5581 Notice is hereby given pursuant to State of California Civil Code Section 3093 et seq that: 1. The undersigned is an officer of the owner of the interest stated below in the property hereinafter described. 2. The full name of the owner is: City of EI Segundo 3. The full address of the owner is: City Library, 111 W. Mariposa Ave., EI Segundo, CA, 90245 4. The nature of the interest of the owner is: Public Facilities 5. A work of improvement on the property hereinafter described was field reviewed by the City Engineer on April 23, 2019. The work done was: Library Renovation. 6. On June 18, 2019, City Council of the City of EI Segundo accepted the work of this contract as being complete and directed the recording of this Notice of Completion in the Office of the County Recorder. 7. The name of the Contractor for such work of improvement was: Corral Construction and Development, Inc. 8. The property on which said work of improvement was completed is in the City of EI Segundo, County of Los Angeles, State of California, and is described as follows: Library Wi-Fi and Reading Lounge Renovation Project 9. The street address of said property is: 111 W. Mariposa Ave. in EI Segundo, CA 90245 Dated: Ken Berkman Public Works Director VERIFICATION I, the undersigned, say: I am the Director of Public Works/City Engineer of the City EI Segundo, the declarant of the foregoing Notice of Completion; I have read said Notice of Completion and know the contents thereof; the same is true of my own knowledge. I declare under penalty of perjury the foregoing is true and correct. Executed on , 2019 at EI Segundo, California. 90245 Ken Berkman Public Works Director .R EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Consent Consideration and possible action to adopt an ordinance amending Chapter 2 (Garbage and Rubbish) of Title 5 of the El Segundo Municipal Code in its entirety in order to meet current State mandated requirements. (Fiscal Impact: N/A) RECOMMENDED COUNCIL ACTION: Adopt proposed Ordinance No. XX; or, Alternatively, discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: Proposed Ordinance FISCAL IMPACT: N/A Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A STRATEGIC PLAN: N/A. ORIGINATED BY: Ken Berkman, Public Works Director REVIEWED BY: Mark Hensley, City Attorney APPROVED BY: Greg Carpenter, City Manager ' BACKGROUND AND DISCUSSION: On June 4th, Council introduced an ordinance that would establish a permitting and regulatory program for commercial and multi -family residential properties. This new ordinance will help the City meet its obligations under the Compliance Order issued upon the City by CalRecycle in January and advance the goals and purposes of all existing solid waste and recycling State regulations. In general, the ordinance will properly establish rules and regulations related to three solid waste sub -programs: • Residential Solid Waste Collections (by Exclusive Franchise) • Commercial and Multi -Family Solid Waste Collections (New City Permit Program) Organics (AB 1826) In addition, the City Attorney revised the ordinance at the June 4th meeting to exempt large, bulky or heavy items that are either not picked up by the City's franchisee or are not picked up on a regular basis by the City's franchisee and the hauling of same from companies commercial 381 business so long as these types of materials are not generated by the business as part of its customary business practices. Also would be exempted is any removal of large amounts of solid waste to address health and safety concerns such as hoarding. If adopted by the City Council, the ordinance will take effect in 30 days. ORDINANCE NO. AN ORDINANCE AMENDING TITLE 5, CHAPTER 2 OF THE EL SEGUNDO MUNICIPAL CODE TO ESTABLISH COMPREHENSIVE REGULATIONS REGARDING SOLID WASTE MANAGEMENT AND ESTABLISHING A PERMIT PROCESS FOR, AND REGULATIONS GOVERNING, PROVIDERS OF SOLID WASTE COLLECTION AND TRANSPORTATION SERVICES TO COMMERCIAL PREMISES AND MULTI -FAMILY DWELLINGS The City Council of the City of EI Segundo does ordain as follows: SECTION 1: The City Council finds and determines as follows: A. The storage, accumulation, collection and disposal of solid waste is a matter of great public concern in that the failure to properly control solid waste can create a public nuisance, lead to air pollution, fire hazards, illegal dumping, insect breeding and vermin infestation, and other problems adversely affecting the public health, safety and general welfare. B. Comprehensive solid waste management is required for the City to comply with minimum diversion and other requirements of the California Integrated Waste Management Act. C. Landfill gas is generated by the anaerobic decomposition of organic materials such as food, paper, wood, and green material. Fifty percent of landfill gas is methane, a GHG with a much shorter life, but much higher global warming potential than CO2 (methane is approximately 25 times more efficient at trapping heat than carbon dioxide over a 100 -year time span). D. Even with advanced methane landfill control systems, however, significant amounts of methane from landfills continue to escape into the atmosphere. According to the Air Resources Board's updated Scoping Plan, approximately eight million tons of CO2 equivalent are released annually by landfills. That number is expected to increase to 8.5 million tons of CO2 equivalent by 2020. E. Recycling organics provides significant GHG emission reductions over landfilling. Composting and other organic processing technologies, including anaerobic digestion, reduce GHG emissions by avoiding the emissions that would be generated by the material's decomposition in a landfill. In the case of anaerobic digestion, the process produces methane from the organics in a controlled environment for use as a renewable fuel, 383 and results in climate benefits by both reducing GHGs from landfills, and displacing fossil fuels. F. Recyclable organics accounts for about 40 percent of the material Californians dispose in landfills annually. Recycling organics can save businesses money by reducing disposal costs while supporting green jobs in the community. G. AB 1826 (2014) imposes statewide organic recycling requirements that will help the State meet its goal to recycle 75 percent of its waste by 2020. The law requires that businesses arrange for recycling services for the following types of organics: food waste, green waste, landscape and pruning waste, nonhazardous wood paste, and food -soiled paper. Multi- family complexes (defined under the State law as a residential dwelling of five units or more) must arrange for recycling services for the same material with the exception of food waste and food -soiled paper. H. A recyclable materials and organics collection and processing program is necessary for the City to achieve the diversion goals mandated by the Integrated Waste Management Act and the failure to comply with the statutory mandate exposes the City and its residents to substantial fines and additional costs. Source separation and the orderly collection of solid waste, recyclable materials, and organics is the most desirable and effective means of achieving these goals. The City is committed to achieving diversion levels that exceed those prescribed by law. Mandatory residential and commercial recycling programs in other cities and counties in California, similar to the one implemented by this chapter, have proven successful in increasing the rates of diversion of solid waste from landfill. J. The EI Segundo Municipal Code does not currently contain permitting or regulatory requirements for solid waste haulers that service commercial premises and multi -family dwellings of more than two units. Approximately 24 businesses are currently providing such services in the City. K. On January 24, 2019, the Department of Resources Recycling and Recovery (CalRecycle) issued a Compliance Order on the City due to inadequately implementing its Source Reduction and Recycling Element and California's Mandatory Commercial Recycling Law. CalRecycle noted program "gaps" related to the commercial solid waste and recycling program, which is designed to keep solid waste from businesses out of the landfills. These included providing sufficiently detailed reports to show all reasonable and feasible efforts are being made to properly implement the program, and ensure monitoring, identification, and education/outreach 2 M activities are occurring in compliance with the Mandatory Commercial Recycling program. L. It is in the public interest to establish a permitting and regulatory scheme for commercial and multi -family residential properties that will ensure the City can meet or exceed its obligations mandated by CalRecycle and State law. M. This ordinance would establish a permitting and regulatory scheme for commercial and multi -family residential properties that will both help the City meet its obligations under the Compliance Order and advance the goals and purposes of all existing solid waste and recycling State regulations and AB 1826's organics recycling mandates. SECTION 2: Chapter 2 of Title 5 of the EI Segundo Municipal Code is amended in its entirety to read as follows: "Chapter 2 SOLID WASTE MANAGEMENT 5-2-1: DEFINITIONS 5-2-2: EXCLUSIVE RIGHTS OF CITY; CITY RESPONSIBILITY 5-2-3: SOLID WASTE COLLECTION; COLLECTION AND PROCESSING OF ORGANICS AND RECYCLABLES-- RESIDENTIAL 5-2-4: COLLECTION CARTS 5-2-5: COLLECTION BY FRANCHISEE 5-2-6: UNLAWFUL COLLECTION 5-2-7: CHARGES FOR SERVICE 5-2-8: BILLING AND PENALTIES 5-2-9: FAILURE TO PAY 5-2-10- SELF -HAULING 5-2-11: PLACEMENT IN CITY WASTE CONTAINERS PROHIBITED 5-2-12: BURNING VEGETATION 5-2-13: RECYCLING OF ORGANICS 5-2-14: SOLID WASTE COLLECTION; COLLECTION AND PROCESSING OF ORGANICS AND RECYCLABLES— COMMERCIAL AND MULTI -FAMILY 5-2-15: COMMERCIAL AND MULTIFAMILY SOLID WASTE COLLECTION AND TRANSPORTATION SERVICES 5-2-1: DEFINITIONS For the purposes of this chapter, the following words and phrases are defined and shall be construed as hereinafter set out, unless it is apparent 385 from the context that they have a different meaning BUSINESS: A commercial or public entity, including, but not limited to, a firm, partnership, proprietorship, joint stock company, corporation, or association that is organized as a for profit or nonprofit entity. CIVIC WASTE: All types of solid waste, recyclables and organics generated by the City, including: solid waste, recyclables, and organics placed in receptacles located in public areas, including but not limited to City public parks, parking lots, and right-of-ways, for collection of waste generated by the public; solid waste, recyclables and organics generated at City -owned facilities including but not limited to City Hall, the City Yard, fire stations, police station, library, recreation centers, etc.; and solid waste, recyclables and organics generated at City events. COMMERCIAL PREMISES: Any commercial, industrial, or office enterprise that generates solid waste, green waste, organics, or recyclable materials. Commercial premises does not include civic waste or any State run school system. ORGANICS: Food waste, green waste, landscape and pruning waste, nonhazardous wood waste, and food soiled paper waste that is mixed in with food waste. RECYCLABLES: Material that can be reused or processed into a form suitable for reuse through reprocessing or remanufacture and includes paper, newsprint, printed matter, pasteboard, paper containers, cardboard, glass, aluminum, PET and other plastics, beverage containers, compostable materials, phone books, used motor oil and such other materials designated by the Public Works Director, or designated as recyclables by the California Department of Resources Recycling and Recovery (CalRecycle), or other agency with jurisdiction. SOLID WASTE: All solid waste as defined in Public Resources Code section 40191 as may be amended from time to time. PUBLIC WORKS DIRECTOR: Public Works Director or his/her designee. 5-2-2: EXCLUSIVE RIGHTS OF CITY; CITY RESPONSIBILITY The City maintains exclusive authority to manage and regulate solid waste, including but not limited to regulations regarding the storage, collection, transportation, processing and disposal of solid waste. Such authority includes the right to determine the methods by which such regulation occurs, for example, through contract, permit, franchise, or another method. The City may enter into exclusive or non-exclusive 4 :. contracts or franchises for the collection and transportation of solid waste including recyclables and organics. No person, entity, organization or firm is authorized to collect such solid waste, organics or recyclables without authorization or permission from the City. 5-2-3: SOLID WASTE COLLECTION; COLLECTION AND PROCESSING OF ORGANICS AND RECYCLABLES— RESIDENTIAL A. Mandatory Arrangements for Collection and Removal. The owner or occupant of each residential premises is required to contract with the City's franchisee for removal of all solid waste, organics, and recyclables accumulated on such premises and must pay for such removal at the rates established by the City Council. In the event the owner elects to have the occupant of its premises take responsibility for contracting with the franchisee for collection service and the occupant fails to make arrangements for collection or fails to pay for collection services provided by the franchisee, the responsibility to contract and pay for collection services shall become the owner's responsibility. No owner or occupant of a residential premises shall employ another, other than the franchisee, to collect solid waste, organics or recyclables generated on the residential premises. For purposes of this section, "residential premises" refers to one- and two- family dwelling units. If a property contains both commercial and residential premises, the owner or occupant of the residential component of the premises must independently contract with the franchisee for the collection and removal of solid waste, organics, and recyclables in accordance with this chapter. B. Exceptions. An exception to the mandatory requirement of subparagraph A can be granted if the owner or occupant meets one of the following criteria: The owner or occupant of the residential premises obtains a self - haul permit in accordance with this chapter and continually remains in compliance with its terms and conditions. 2. The owner or occupant demonstrates to the satisfaction of the Public Works Director or his/her designee that no solid waste of any kind is being generated on the premises. The occupant must consent to an on-site inspection of the premises by the Public Works Director in order to verify that no solid waste of any kind is being generated. If the circumstances that allowed the exception should change, the owner or occupant must immediately initiate regular solid waste, organics, and recyclables collection in 387 accordance with this section. The Public Works Director may require reauthorization of the exception periodically. C. Nothing in this chapter limits the right of any owner or occupant of a residential premises to compost green waste or to donate or sell recyclables generated in or on their residential premises or to transport those recyclables to a recycling facility. A self -haul permit is not required for a generator to transport his or her recyclables to a recycling facility. D. Ownership of Materials. Upon the placement of solid waste, organics or recyclables in a container for collection by the franchisee at the collection point, said materials become the property of franchisee. E. Unlawful Disposal and Collection of Solid Waste, Organics or Recyclables. No person may deposit solid waste or containers upon any street, alley, gutter or parkway, or upon any lot or vacant area or other public place or way other than as provided in this chapter. 2. No person shall tamper with, modify, scavenge from or deposit solid waste, organics, or recyclables in any solid waste, organics or recyclables container which has not been provided for his or her use, without the permission of the occupant of the premises where the container is located. 3. Except as otherwise authorized in this chapter, no person shall collect solid waste, organics or recyclables from residential premises within the City. F. Obstruction of Franchisee Unlawful. It shall be unlawful for any person, their agents or employees to hinder, threaten, impede, or obstruct the franchisee in the performance of its duties. 5-2-4: COLLECTION CARTS A. Solid Waste Carts. Occupants of residential premises receiving individual collection services must place solid waste in the solid waste carts provided by the franchisee. B. Recyclables Carts. Occupants of residential premises shall separate recyclables from solid waste and organics and place recyclables in the recyclables carts provided by the franchisee. In the case where the occupant of the premises is not the owner, the owner is 11 responsible to instruct the occupant in proper separation and placement of recyclable materials from solid waste and organics. C. Organics Carts. Occupants of residential premises shall separate organics from solid waste and recyclables and place organics in the organics carts provided by the franchisee. In the case where the occupant of the premises is not the owner, the owner is responsible to instruct the occupant in proper separation and placement of organics from solid waste and recyclables. D. Filling of Carts and Containers. No occupant of either residential or commercial premises shall fill any cart or container with solid waste, organics or recyclables above the top of the cart or container so as to permit the contents of any container to be blown or otherwise strewn about. E. Proper Placement of Carts for Collection. Carts used at any residential premises for the purpose of collection of solid waste, organics or recyclables shall be placed on the street against the curb in front of the premises occupied by the person depositing the same as directed by the franchisee, unless the owner or occupant has contracted with the franchisee for backyard service or roll-out service. Where no street curb exists, the carts shall be placed not more than two feet from the outside edge of the street nearest the property's entrance. When the premises are adjacent to a paved alley of sufficient width to allow easy passage of the collection trucks, the containers may be placed within two feet of the property line of the premises and must be readily accessible for collection from the alley. F. Timing of Placement and Removal of Carts. Occupants shall not place carts at the curb for collection by franchisee at any time other than the days established by the franchisee for the collection of such solid waste, organics or recyclables, or earlier than 5:00 p.m. on the day preceding the day designated by the franchisee for collection. All carts shall be removed from the place of collection prior to 10:00 p.m. of the day the carts have been emptied and, whenever possible, stored in a location screened from public view. G. Supervision and Cleaning of Carts. Each occupant of a residential premises shall maintain supervision over carts on their premises. Occupants shall maintain carts in a reasonably clean, sanitary condition. H. Unauthorized Tampering and Removal of Contents. No person, other than the waste generator or any waste generator employee, or an officer or employee of the franchisee, or any person holding a City - O issued permit for the collection or disposal of solid waste, shall tamper or meddle with any cart or container or the contents thereof, or remove the contents of the cart or container, or remove the cart or container from the location where the same shall have been placed by the waste generator. 5-2-5: COLLECTION BY FRANCHISEE Collection and removal of solid waste, organics and recyclables from residential premises by the franchisee shall be made in accordance with the terms and conditions of this chapter and the agreement between the City and the franchisee. 5-2-6: UNLAWFUL COLLECTION A. Except as expressly provided in this section, it is unlawful for any person to collect or transport solid waste or organics within the City unless such person is a franchisee or holds a valid commercial/multi- family solid waste collection and transportation permit issued by the City. Additionally, it is unlawful for any person to collect or transport recyclables within the City unless such person is a franchisee, the holder of a valid commercial/multi-family solid waste collection and transportation permit issued by the City, or the recyclables collected are exempt under this section. If recyclables are hauled by other than the franchisee or a permittee, the City may require the generator to provide an affidavit demonstrating that no additional fees relating to the collection of recyclables have been charged. B. It is unlawful for any person to permit, allow or enter into any agreement whatsoever for the collection or transportation of solid waste, organics or recyclables with any person who is not the franchisee or the holder of a valid commercial/multi-family solid waste collection and transportation permit, unless the collection and transportation is exempted under this section. C. The collection and transportation of the following types of solid waste, organics and recyclables are exempted from the requirements of subsections A and B: Green waste, landscape and pruning waste, or nonhazardous wood waste removed from a premises by a gardening, landscaping or tree trimming contractor as an incidental part of a total service offered by that contractor rather than as a transportation service and for no additional or separate fee. 0 2. Tree trimmings, clippings and all similar materials generated at parks and other City -maintained premises, which may be collected and transported by the City to the disposal site or processing facility. 3. Hazardous or dangerous materials; liquid and dry caustics; acids; biohazardous, flammable and explosive materials; insecticides; and similar substances. 4. Infectious medical waste (as defined in California Health and Safety Code Section 25117.5). 5. Byproducts of sewage treatment, including sludge, grit and screenings. 6. Recyclables which are source -separated at any premises by the waste generator and donated to youth, civic, or charitable organizations. 7. Source -separated recyclable materials which are transported by a generator who is recycling under the California Beverage Containers Recycling Litter Reduction Act (Public Resources Code Section 14500 et seq.). 8. Solid waste transported by a generator in accordance with a valid self -haul permit issued pursuant to this chapter. 9. Construction and demolition debris which is removed from any premises by the waste generator, using his/her/its own vehicles and which is transported personally by the owner or occupant of such premises, or by his or her employees. 10. Construction and demolition debris hauled by the property or business owner using their own vehicles and their own employees. 11. A licensed contractor removing items for reuse or recycling which is incidental to work performed at a project construction site and as defined under diversion requirements if the contractor (1) uses his or her own employees and vehicles for this purpose, and (2) maintains no bins or boxes at the site which are detachable from the vehicle. 12. Materials generated by public schools. 391 13. Large, bulky or heavy items that are not picked up by the City's franchisee does not pick up or does not pick up on a weekly basis. 14. Removal of large amounts of solid waste to address health and safety concerns such as hoarding. 5-2-7: CHARGES FOR SERVICE From time to time, the City Council shall establish by resolution rates that franchisees may charge owners or occupants of one- and two-family dwelling units for the collection, processing and/or disposal of solid waste, organics and recyclables. Prior to adopting the resolution establishing the rate, the City Council shall hold a public hearing. 5-2-8: BILLING AND PENALTIES Each owner or occupant receiving collection services from the franchisee shall be billed by the franchisee periodically in accordance with the rates established by the franchise agreement and approved by the City Council. If an owner or occupant fails, refuses or neglects to pay the bill, then a penalty may be added to the bill and the sum, together with any costs incurred by the franchisee, may be recovered by the franchisee as provided by law, including Government Code Section 54348. If an occupant fails to pay the bill, the owner shall be responsible for the payment. 5-2-9: FAILURE TO PAY If there is no payment of a bill after 60 days or more, the franchisee shall undertake collection of the bill (including penalties and expenses of collection) for a period of one year from the invoice date. Franchisee shall make reasonable efforts to obtain payment through issuance of late payment notices, telephone requests for payment, and assistance from collection agencies (who shall make at least two attempts at collection). If the franchisee's collection efforts for a one-year period fail, and franchisee can demonstrate to the City that it attempted on at least five occasions to solicit moneys due from each delinquent account, then the franchisee may assign its rights to collection (including penalties and expenses of collection) to the City. The City may then, at its discretion, initiate any collection procedures authorized by law, including those special assessment procedures authorized by Government Code Sections 38790.1 and 25831. If the City collects the delinquent amount, it shall pay the collected moneys to franchisee after deducting City's administrative costs and costs of collection. 10 392 5-2-10: SELF -HAULING A. Permit required. The person in charge of a residential premises may apply for and obtain a permit to self -haul, and shall not self -haul without a valid self -haul permit issued pursuant to this section unless otherwise expressly authorized in this chapter. Every person in charge of a residential premises who desires to self -haul in lieu of making arrangements with the solid waste franchisee for solid waste handling services shall obtain a self -haul permit from the Public Works Director prior to commencing self -hauling. For purposes of this section, "residential premises" refers to one- and two-family dwelling units. B. Term. A permit to self -haul shall be good for one calendar year, or such part of the calendar year that is remaining after the issuance of the permit. All self -haul permits shall expire on December 31, and may be renewed annually. Application for a renewal permit must be filed at least 60 calendar days prior to the expiration date of the permit to allow adequate time for processing, inspection and verifications required to issue the permit. C. Issuance of permit. An applicant for a self -haul permit shall submit a completed application, on a form approved by the City's Public Works Director, to the Public Works department. The Public Works Director shall determine whether the application is complete within five business days of the receipt of the application. If the Public Works Director finds the application incomplete, the applicant shall be given a list of information needed to complete the application. Once an application for a self -haul permit is complete, the applicant shall produce the items listed in subsections (C)(1) through (7) below. The Public Works Director shall issue a self -haul permit within five working days of the production of all of the required items. The applicant must produce for inspection the vehicle the applicant intends to use for self -hauling, and the vehicle must meet the following standards: a. The vehicle is capable of safely hauling a minimum of 32 gallons (4.3 cubic feet) of solid waste, recyclables and organics in a safe and sanitary manner so that such matter will not spill; and b. If the vehicle is not fully enclosed, the applicant must produce a tarp or other material, device or mechanism that is 11 393 demonstrated to completely secure the materials being self - hauled; 2. The applicant must produce evidence that he or she owns or leases the vehicle produced for inspection or has a written agreement to use the vehicle for self -hauling with the vehicle's owner or lessor; 3. The applicant must produce evidence that he or she has a valid California driver's license to operate the vehicle produced for inspection and that the vehicle is registered in the State of California; 4. The applicant must provide the City with proof of automobile insurance for the vehicle; 5. The vehicle must be operational and meet all applicable Vehicle Code standards; 6. The applicant must provide the City with proof that the applicant has containers for the storage of solid waste, recyclables and organics on the applicant's premises before the materials are hauled to a disposal facility; and 7. The applicant must not have any outstanding charges due to the City's solid waste franchisee for solid waste handling services previously received at the premises for which the self -hauling permit application is being submitted; and 8. The applicant must pay the fee for a self -haul permit authorized by resolution of the City Council. The fee shall reflect the City's reasonable costs of issuing and monitoring compliance with the permit. Permits issued between January 1 and March 31 shall pay 100 percent of the permit fee; permits issued between April 1 and June 30 shall pay 75 percent of the permit fee; permits issued between July 1 and September 30 shall pay 50 percent of the permit fee; permits issued between October 1 and December 31 shall pay 25 percent of the permit fee. D. Appeal of denial. An applicant whose application for a self -haul permit has been denied may appeal that decision to the City Manager. The appeal must be made on a form approved by the Public Works Director. An appeal must be filed within 10 calendar days of the date the applicant was notified of the denial. The City Manager shall issue a written decision within 10 business days of the effective date of the appeal. The decision of the City Manager shall be final. 12 394 E. Operational Standards/Permit Conditions. The permittee must dispose of solid waste weekly at a licensed or permitted landfill or disposal facility and shall procure and retain weekly receipts from such landfill or other disposal facility. Receipts shall be submitted to the City upon request. Failure to show proof of solid waste disposal for each week that a person is permitted to self -haul shall constitute a public health and safety nuisance sufficient to permit City to revoke the permittee's self - haul permit. 2. The permittee must notify the City of any change in the vehicle being used to haul solid waste by the permittee. The permittee must bring the new vehicle in for an inspection and demonstrate compliance with items (1) through (5) of subsection (C) of this section before the new vehicle is used to haul any solid waste under the permit. 3. The permittee must keep on file with the City copies of the current automobile insurance and registration for the vehicle used to self - haul and the permittee's current California driver's license. 4. The permittee must separate and bag solid waste, recyclables and organics. Recyclables must be disposed of at a licensed or permitted recycling center, materials recovery facility, or transfer station. Organics must be disposed of at a licensed or permitted composting facility, organics processing facility, or must be composted on the premises covered by the self -haul permit. 5. The permittee must maintain, on a rolling basis, original records showing, for the immediately preceding twelve months, the type and weight of all solid waste collected (categorized by solid waste, organics, and recyclables) and the disposal site, recycling facility, organics processing facility or other final destination of each load transported (categorized by solid waste, recyclables, and organics). Copies of these records must be submitted to the Public Works Director upon request. 6. The permittee must submit quarterly reports to the Public Works Director showing the type and weight of solid waste collected (categorized by solid waste, recyclables, and organics), the final destination of each type of waste, and the receipt number (provided by the final destination) for each load of solid waste, recyclables, and organics collected. All such reports must be submitted on a form approved by the Public Works Director. 13 395 7. The permittee is liable for any damages and cleanup costs resulting from any solid waste, recyclables or organics spills during the course of the permittee's self -hauling activity. F. Revocation of permit. The self -haul permit shall be subject to revocation if the permittee violates any provision of this chapter. A notice of revocation shall be mailed to the permittee informing him/her that the self -haul permit is being revoked, identifying the violations of this chapter that have occurred, and informing the permittee that he or she has the right to dispute the revocation by an appeal to the City Manager. An appeal of a revocation must be filed within 10 calendar days of the mailing of notice of the revocation. A revocation appeal hearing will be scheduled within 10 business days of the date the City receives the request for an appeal. Revocation of the permit will be stayed upon filing of an appeal in accordance with this section. The stay will remain in place until a final decision is issued by the City Manager. The City Manager will issue a decision on the appeal within five business days of the hearing and provide the permittee written notice of the decision. The decision of the City Manager on the appeal shall be final. A person whose self -haul permit has been revoked pursuant to this subsection may not obtain another self -haul permit for one year from the date of the revocation. 5-2-11: PLACEMENT IN CITY WASTE CONTAINERS PROHIBITED City solid waste, organics and recyclables containers are placed in City parks and other public areas for the use by the public to control trash, litter and garbage generated at their respective locations. Such containers are not to be used as disposal sites for trash or rubbish which is generated off site. It is unlawful for any person to place, dump, deposit, or throw away solid waste, organics or recyclables, or other refuse or debris of any kind or character whatsoever in City containers if such was generated at a location other than where the container is located. 5-2-12: BURNING VEGETATION It is unlawful for any person to set fire to, ignite or burn any standing or uncut dry grass, weeds, brush or vegetation on any lot or premises within the City. 5-2-13: RECYCLING OF ORGANICS A. Mandatory Recycling Services: 14 396 On and after April 1, 2016, a business or a multi -family residential dwelling that generates eight (8) cubic yards or more of organics per week must arrange for recycling services specifically for organics in the manner specified in subsection B of this section. 2. On and after January 1, 2017, a business or a multi -family residential dwelling that generates four (4) cubic yards or more of organics per week must arrange for recycling services specifically for organics in the manner specified in subsection B of this section. 3. On and after January 1, 2019, a business or a multi -family residential dwelling that generates four (4) cubic yards or more of commercial solid waste, as defined in Public Resources Code section 42649.1, per week, must arrange for recycling services specifically for organics in the manner specified in subsection B of this section. 4. On or after January 1, 2020, if the department of resources recycling and recovery determines that statewide disposal of organic waste has not been reduced to fifty percent (50%) of the level of disposal during 2014, a business that generates two (2) cubic yards or more per week of commercial solid waste must arrange for the organics recycling services specified in subsection A3 of this section, unless the department determines that this requirement will not result in significant additional reductions of organics disposal. 5. For purposes of this section, "multi -family residential dwelling" means a dwelling of five units or more, including, without limitation, condominiums, apartments, and townhomes. The term does not include dwellings of four or fewer units. B. Actions Required: A business or a multi -family residential dwelling subject to subsection A of this section must take at least one of the following actions: Source separate organics from other waste and subscribe to a basic level of organics recycling service that includes collection and recycling of organics. 2. Recycle its organics on site or self -haul its own organics for recycling. 3. Subscribe to an organics recycling service that may include mixed waste processing that specifically recycles organics. 15 397 4. Sell or donate its recyclable organics to a person or entity authorized by law to receive such waste. C. Food Waste Generated by Dwelling: Notwithstanding the foregoing, a multi -family residential dwelling is not required to arrange for the organics recycling services specified in subsection B of this section for food waste that is generated by the dwelling. D. Recycling Services Required: Property management companies that contract for trash service for any commercial, institutional, or multi- family properties subject to this chapter are required to contract or otherwise make available recycling services to comply with this section. E. Reports and Policy Compliance Required: Any business or multi- family residential dwelling subject to this chapter must: Report to the City of EI Segundo on an annual basis the action the business or dwelling has taken pursuant to subsection B of this section; the amount of commercial solid waste and organics that the business or dwelling generates per week; the amount of organics recycled per week, and any other information required by the City to comply with its State mandated reporting requirements. 2. Comply with the City's mandatory commercial organics recycling policy, adopted by the City Council and which may be amended by the City Manager. F. Exemptions: Any business or multi -family dwelling subject to this section may apply for an exemption from the requirements of this section. The City Manager or designee may grant either a temporary or permanent exemption for any of the following reasons: a. Lack of sufficient space in multi -family complexes or businesses to provide additional organic material recycling bins. b. The current implementation by a business of actions that result in the recycling of a significant portion of its organics. c. The business or group of businesses does not generate at least one-half (1/2) of a cubic yard of organics per week. 16 .P d. Extraordinary and unforeseen events, in which case a temporary exemption only may be granted. 2. The City Manager's or designee's decision may be appealed to the City Council within ten (10) days of the decision. The City Council's decision shall be final. G. Violation: Any violation of this section is punishable as an infraction pursuant to section 1-2-3 of this code. The City may enforce this section by administrative citation or any other remedy available to the City under law and it is within the discretion of the City to seek cumulative remedies. H. Fees: The City Council may establish fees for its costs of enforcing this section by resolution. 5-2-14: SOLID WASTE COLLECTION; COLLECTION AND PROCESSING OF ORGANICSAND RECYCLABLES— COMMERCIAL AND MULTI -FAMILY A. Mandatory Arrangements for Collection and Removal. The owner or occupant of each commercial and multi -family premises is required to make arrangements for the regular removal of all solid waste, organics, and recyclables accumulated on such premises. Effective January 1, 2020, no owner or occupant of a commercial or multi- family premises shall employ another, other than the holder of a permit issued pursuant to section 5-2-15, to collect solid waste, organics or recyclables generated on the premises. For purposes of this section, "multi -family premises" refers to a building containing three or more dwelling units designed or arranged for occupancy by three or more households living independently in which they may or may not share common entrances and/or other spaces. If a property contains both commercial and multi -family residential premises, the owners or occupants of the residential component of the premises must independently contract with a permittee for the collection and removal of solid waste, organics, and recyclables in accordance with this chapter. 5-2-15: COMMERCIAL AND MULTI -FAMILY SOLID WASTE COLLECTION AND TRANSPORTATION SERVICES A. Permit Requirement. Effective January 1, 2020, no person shall collect solid waste from any commercial or multi -family premises in the City and transport it over the public streets or highways except under a valid permit issued pursuant to this section, unless an 17 exemption set forth in this section applies. For purposes of this section, and unless otherwise specified, "multi -family premises" refers to a building containing three or more dwelling units designed or arranged for occupancy by three or more households living independently in which they may or may not share common entrances and/or other spaces. B. Authorization; Limitations. A permit issued pursuant to this section authorizes the permittee to collect specified types of solid waste from commercial and multi -family premises in the City and to transport it over the public streets and highways of the City, in accordance with the terms and conditions of the permit and this section. 2. A person may obtain a permit under this section to collect solid waste from within the City only to the extent that another person does not have an exclusive privilege or right to collect that solid waste from within the City pursuant to a franchise agreement. 3. A permit issued pursuant to this section does not authorize, and shall not be construed to authorize, the permittee to collect solid waste within the City when another person has an exclusive privilege or right to collect that solid waste within the City pursuant to a franchise agreement. C. Exemptions. The requirement to obtain a permit under this section does not apply to any of the following: The collection and transport of solid waste by the owner or occupant of the real property where the solid waste was generated. 2. The collection and transport of solid waste that is generated on real property in the course of a service provided to the owner or tenant of that property by a building contractor or landscape contractor, if the solid waste is collected and transported by the contractor. 3. The collection and transport of solid waste under a valid federal or State permit if the federal or State permit requirement preempts the permit requirement under this section. 4. The collection and transport of solid waste by the franchisee under a franchise agreement. 18 iol 5. The collection and transport of solid waste generated at a publicly operated wastewater treatment facility. 6. Disposal of large, bulky or heavy items that are not a byproduct of materials generated by a business or tenant or are not customarily part of the property's solid waste generation. 7. Removal of large amounts of solid waste to address health and safety concerns such as hoarding. D. Application. A person may apply for a commercial/multi-family solid waste collection and transportation permit by submitting an application to the Public Works Department and paying an application fee established by resolution of the City Council. The application must be made using a form approved by the Public Works Director and include all of the following: The full legal name, address and telephone number(s) of the applicant. If the applicant is a sole proprietor who will operate under a fictitious business name, the applicant must provide a copy of a valid fictitious business name statement for the business. If the applicant is a business entity, the applicant must provide written documentation that the entity may lawfully conduct business in the City. 2. Identification of all vehicles proposed to be used in the collection and transport of solid waste under the permit, including legible copies of valid California registration cards for each vehicle. If any of the vehicles is equipped to provide roll -off box services, that information must also be provided. The Public Works Director may require inspection of any such vehicles prior to issuing a permit or at any time during the life of the permit. 3. Proof of possession of a valid motor carrier identification number in good standing issued under California Vehicle Code section 34507.5, if applicable. 4. Identification of the types of solid waste, recyclables, and organics to be collected and transported. 5. Identification of the locations to which the solid waste, including recyclables and organics, will be transported. 6. A description of all services to be provided to a customer related to the collection and transport of solid waste (including recyclables and organics) for that customer. 19 401 E. Vehicle Inspections; Standards. All vehicles proposed to be used for collection and transport of solid waste under a permit issued pursuant to this chapter shall be made available for inspection by the Public Works Director or his/her designee at a location within the City determined by the Public Works Director. The vehicle must be made available for inspection within two business days of the inspection request and at a location designated by the Public Works Director. 2. All vehicles proposed to be used for collection and transport of solid waste under the permit must comply with the following minimum standards: a. The vehicle must be designed, constructed and configured for safe handling and to securely contain the type of solid waste proposed to be collected; and b. The vehicle must be prominently marked with the name and telephone number of the applicant. F. Permit Issuance; Grounds for Denial. After receipt of an application, payment of a permit fee established by the City Council by resolution, and a valid certificate of liability insurance issued to the applicant that conforms to the coverage requirement set forth in this section, the Public Works Director shall issue a commercial/multi-family solid waste collection and transportation permit to the applicant unless any of the following grounds for denial exists: a. Another person has an exclusive right or privilege to collect all of the types of solid waste described in Section 5-2- 15(D)(4). b. The application is incomplete or inaccurate. c. A permit issued to the applicant under this section has been revoked within twelve months prior to the date of application. d. The applicant has failed to pay an outstanding fine. e. The Public Works Director determines that a vehicle proposed to be used in the collection and transport of solid waste pursuant to the permit does not conform to the 20 "I. minimum standards set forth in subparagraph (E) of this section. 2. The Public Works Director shall provide written notice to the applicant of any denial of a permit under this section and the reasons for the denial. 3. A permit issued pursuant to this section will include, without limitation: a. The name of the permittee. b. A list of all vehicles, by license place and vehicle identification numbers, that may be used pursuant to the permit. c. Identification of the types of solid waste that may be collected and transported pursuant to the permit and the specific services that must be provided to customers in connection with the collection of specified types of solid waste. d. The effective and expiration dates of the permit. G. Permit Conditions; Responsibilities of Permittees. The following conditions/responsibilities apply to all commercial/multi-family solid waste collection and transportation permits/permittees: The permittee must comply with all applicable laws and regulations. 2. A copy of the permit must be kept in each vehicle used for solid waste collection and transportation under the permit and produced upon request by any peace officer. 3. Each motorized vehicle used for solid waste collection or transportation under the permit must be marked with the name and telephone number of the permittee. Markings must be in sharp contrast to the background and of such size as to be readily visible during daylight hours from a distance of fifty feet. Markings must be applied to each sidewall of a motorized vehicle. 4. Each vehicle used for solid waste collection or transportation under the permit must be regularly maintained and cleaned. Each vehicle must be made available for inspection by the Public Works Director or his/her designee at a location within the City. The vehicle must be made available for inspection within two business days of the inspection request. 21 403 5. Each vehicle used for solid waste collection and transportation under the permit must carry proof of liability insurance coverage in the amounts required by this section. 6. Each container of one cubic yard or more that is used by the permittee in the course of operations under the permit must be marked with the name and telephone number of the permittee. All containers must be maintained in a clean and safe condition. For the purposes of this subsection, containers include trailers but do not include motorized vehicles. 7. The permittee must maintain, on a rolling basis, original records showing, for the immediately preceding twelve months, the type and weight of all solid waste collected (categorized by solid waste, recyclables, and organics), the location where each load of waste was collected, and the final destination of each load collected (categorized by solid waste, recyclables, and organics). Copies of these records must be submitted to the Public Works Director upon request. 8. The permittee must submit quarterly reports to the Public Works Director stating the total number of customers serviced categorized by service type (solid waste, recycling, and organics); the customer list of premises/businesses from which each type of waste was collected; the level of service provided to each customer, including type and weight of solid waste collected (categorized by solid waste, recyclables, and organics); the number of containers; the frequency of service (number of days per week); and the final destination of each type of waste. All such reports must be submitted on a form approved by the Public Works Director. If a property contains both commercial and multi- family premises, and the permittee provides collection services to both, the permittee must independently track the solid waste, organics and recyclables generated by the commercial and multi- family components of the premises. 9. Each permittee shall be required to ensure that organics and recycling services are provided for all of its customers. Each permittee shall, at least once annually, provide educational and informational literature to its customers and the City describing the organics and recycling services to be provided, organics and recyclable materials to be recycled, instructions on how to participate, and instructions on how to properly separate recyclable materials and organics to maximize waste diversion. 22 M 1. 10. The permittee must provide each commercial and multi -family premises it serves with the collection containers necessary to comply with, implement, and achieve State and local diversion and recycling goals, as applicable. This includes, without limitation, containers that allow for the source separation of solid waste, organics and recyclables. 11. Unless an exemption has been granted by the City, the permittee must provide each business and each multi -family residential dwelling of five units or more that it serves with the collection containers necessary to comply with, implement, and achieve state -mandated goals for the recycling of recyclables and organics including, without limitation, AB 341 and AB 1826. For purposes of this subsection, "business" means a commercial or public entity, including, but not limited to, a firm, partnership, proprietorship, joint stock company, corporation, or association that is organized as a for-profit or nonprofit entity. With respect to the businesses and the multi -family residential dwellings of five units or more that it serves, the permittee must provide or arrange for organic waste recycling services consistent with all applicable State laws and regulations and must assist the City in providing related education and outreach to, and monitoring of, such businesses. H. Insurance Requirements. At all times while doing business in the City, each permittee must have and maintain commercial general liability insurance coverage with limits no less than one million dollars per occurrence and one million dollars in the aggregate. Revocation. Grounds for Revocation. A permit issued pursuant to this section may be revoked by the Public Works Director in accordance with the procedures set forth herein if the Public Works Director determines that: a. The permittee has failed to comply with a term or condition of operation under the permit; b. The permittee's conduct under the permit constitutes a nuisance; or c. During the permit period, the permittee collected and transported solid waste that another person had an exclusive right or privilege to collect and transport pursuant to a valid franchise agreement. 23 405 2. Notice. The Public Works Director will provide written notice of intent to revoke a permit to the permittee at the address provided on the permittee's application. The notice will state all applicable grounds for the revocation and the permittee's right to a hearing under this section. 3. Hearing. Within fifteen calendar days after the date of the notice of intent to revoke, the permittee may request a hearing before the Public Works Director by completing and submitting a written hearing request form. The hearing will be set for a date no sooner than twenty days and no later than forty-five days following the date of the written request for hearing. 4. Effective Date. If no hearing is timely requested, the revocation is effective fifteen days after the date of the notice of intent to revoke. If a hearing is held, the Public Works Director shall issue a written decision within ten days of the hearing. Notice of the written decision shall be provided to the permittee by regular mail at the address indicated on the permit and the notice shall be effective two business days after it is deposited in the United States Mail. The decision of the Public Works Director will become effective when the time to appeal to the City Council expires, unless an appeal to the City Council is timely filed. 5. Appeal of Revocation to the City Council. Any permittee whose permit is revoked under this section shall have the right, within ten calendar days after notice of the Public Works Director's decision is provided, to file a written appeal to the City Council. Any such appeal must be made on a form provided by the Public Works Director and must set forth the specific ground or grounds on which it is based. The City Council shall hold a hearing on the appeal within 45 days after its receipt by the City, or at a time thereafter agreed upon, and shall cause the appellant to be given at least ten days' written notice of such hearing. At the hearing, the appellant or its authorized representative will have the right to present evidence and a written or oral argument, or both, in support of its appeal. The determination of the City Council on the appeal shall be final. J. Prohibitions. No person shall engage the service of a person for compensation to collect solid waste from any commercial or multi -family premises in the City and transport it over a public street or highway in the City unless the person whose service is engaged 24 K1. possesses a valid permit issued under this section or is exempt from the permit requirement. 2. Unless specifically exempt from the permit requirement pursuant to this section, no person shall collect solid waste from any commercial or multi -family premises in the City and transport it over a public street or highway in the City without a valid permit issued under this section. 3. No person subject to the permit requirement in this section shall transport solid waste to any location other than: a. A solid waste facility that is lawfully operated under all required State and local permits, registrations and enforcement agency notifications; or b. A recycling facility that, as its principal function, receives wastes that have already been separated for recycling and are not intended for disposal, and is lawfully operated in accordance with all applicable laws and regulations. c. An organics recycling facility that is lawfully operated in accordance with all applicable laws and regulations." SECTION 3: Environmental Review. This ordinance is exempt from environmental review under the California Environmental Quality Act (California Public Resources Code §§ 21000, et seq., "CEQA") and CEQA regulations (14 California Code of Regulations §§ 15000, et seq.) because it establishes rules and procedures to permit operation of existing facilities; consists only of minor revisions and clarifications to existing regulations and specification of procedures related thereto; and consists of actions taken to assure the maintenance, protection and enhancement of the environment. This ordinance, therefore, does not have the potential to cause significant effects on the environment. Consequently, it is categorically exempt from further CEQA review under 14 Cal. Code Regs. §§ 15301, 15305, and 15308. Furthermore, the City Council finds and determines that this ordinance is not subject to CEQA for the following reasons: (1) it will not result in a direct or reasonably foreseeable indirect physical change in the environment (14 Cal. Code Regs. § 15060(c)(2)), (2) there is no possibility that the ordinance may have a significant effect on the environment (14 Cal. Code Regs. § 15061(b)(3), and (3) the ordinance does not constitute a "project" as defined in the CEQA Guidelines (14 Cal. Code Regs. § 15378). SECTION 4: Construction. This Ordinance must be broadly construed in order to achieve the purposes stated in this Ordinance. It is the City Council's intent that the provisions of this Ordinance be interpreted or implemented by the City and others in a manner that facilitates the purposes set forth in this Ordinance. 25 407 SECTION 5: Enforceability. Repeal of any provision of the ESMC does not affect any penalty, forfeiture, or liability incurred before, or preclude prosecution and imposition of penalties for any violation occurring before this Ordinance's effective date. Any such repealed part will remain in full force and effect for sustaining action or prosecuting violations occurring before the effective date of this Ordinance. SECTION 6: Validity of Previous Code Sections. If this entire Ordinance or its application is deemed invalid by a court of competent jurisdiction, any repeal or amendment of the ESMC or other City ordinance by this Ordinance will be rendered void and cause such previous ESMC provision or other the City ordinance to remain in full force and effect for all purposes. SECTION 7: Severability. If any part of this Ordinance or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or applications and, to this end, the provisions of this Ordinance are severable. SECTION 8: The City Clerk is directed to certify the passage and adoption of this Ordinance, cause it to be entered into the City of EI Segundo's book or original ordinances, make a note of the passage and adoption in the records of this meeting, and, within fifteen days after the passage and adoption of this Ordinance, cause it to be published or posted in accordance with California law. SECTION 9: This Ordinance will take effect on the 30th day following its final passage and adoption. PASSED AND ADOPTED this day of 2019 ATTEST: Tracy Sherrill Weaver, City Clerk APPROVED AS TO FORM MARK D. HENSLEY, City Attorney 26 Drew Boyles, Mayor MO EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Consent Consideration and possible action to authorize the City Manager to execute a 3 year agreement with Lanair Group LLC to provide hardware, software and professional services to implement the Storage Area Network and Blade Systems. (Fiscal Impact: $822,040 FY 2019-20) RECOMMENDED COUNCIL ACTION: 1) Award a contract to Lanair Group LLC using a Federal government cooperative agreement, General Services Administration (GSA) as an exemption to the City's formal bidding requirements pursuant to El Segundo Municipal Code § 1-7-9(C), and authorize the City Manager to execute a 3 year agreement with Lanair Group LLC, in a form approved by the City Attorney, to purchase hardware, software, training and professional services for execution of the technical infrastructure upgrade project. 2) Alternatively, discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Lanair Group LLC Price quote 2. Nutanix Statement of Work (SOW) FISCAL IMPACT: $904,665 for FY 2018-19; Cost of $904,665: includes hardware and support cost of $505,571, $44,952 for associated state tax and shipping costs, $210,443 for professional services, $143,699 (20% of project costs) for contingency for all products and services over the life of the contract, The current Equipment Replacement budget will cover costs to be incurred during FY 2018-19. The subsequent years of maintenance costs will be included in future budgets. Amount Budgeted: $1,000,000 for FY2018-19 Additional Appropriation: N/A Account Number(s): 604-400-2505-8108 (Equipment Replacement Fund) STRATEGIC PLAN: Goal: 4 Develop Quality Infrastructure and Technology Objective: A El Segundo's physical infrastructure supports and appealing, safe and effective community. B El Segundo's technology supports effective, efficient, and proactive operations. ORIGINATED BY: Charles Mallory, Information Systems Directo REVIEWED BY: Charles Mallory, Information S tems Director APPROVED BY: Greg Carpenter, City Manager M. BACKGROUND AND VENDOR SELECTION PROCESS: The City of El Segundo (hereafter referred to as "the City") is in need of a refresh of components of the technical infrastructure, as components have reached their end of life usefulness. The infrastructure consists of the hardware, software and services that administer the management and operation of the enterprise business systems. The replacements involve the Blade Servers, which power 500 virtual desktops, 80 virtual servers, document management, financial systems, and other business systems, and the Storage Area Network (SAN) which is used to storage all city data. Refreshing this technology and will supply more processing and storage capacity. The Information Systems Department (ISD) recommends purchasing more robust capabilities by upgrading these components into a hyper -converged infrastructure (HCI) storage system that consolidates the multiple components into one. The City's current legacy technical infrastructure has reached 80% capacity and is at the end of its usable life cycle. With the advances in technology, an upgrade is necessary in order to increase speed, the ability to run more advanced application and databases, to increase security, and to provide both on premises application and cloud management capabilities for our Software as a Service (SAAS) applications. This project will refresh the City's aging technical infrastructure, enhance operational performance by increasing the processing and storage capacity of all city virtual desktops; on premise enterprise applications like Eden, Laserfiche, Exchange, etc. This upgrade will also allow for more local and cloud -based disaster recovery options. The legacy infrastructure which has hardware located in City Hall and the Police Department was implemented approximately 6 to 10 years ago, and has functioned sufficiently up to the components exceeding their expected life. With the age of the City's technical infrastructure, there have been significant developments that render our infrastructure less effective. Furthermore, the maintenance/support resources for the current infrastructure have increased in cost as we have to reach out to third party companies for support and used replacement parts. El Segundo is the home for many companies that are making significant technological advances. The City should not only keep up with technology, but make similar strides to maintain effectiveness of the technical infrastructure. The Information Systems Department (ISD) is responsible for providing the City with technology solutions, maintenance and expertise, to support day to day business operations, process improvement, data management, and strategic initiatives as well. ISD strives to ensure all of the City's technology users consistently receive the highest level of customer service, which in turn results in high external customer satisfaction. The ISD is also responsible for long-range planning of systems in El Segundo, and execution of this project will fulfill this responsibility and serve as the City's next step into the future. The ISD selected Lainair Group, LLC as a GSA certified vendor under federal contract number: GS -35F -0119Y. The contract was entered into on December 20, 2011 and is current through December 19, 2021. Modification 1301 was made to the pricelist on March 15, 2018. El Segundo's Technology Committee has reviewed staff's recommendations for the scope of work and project deliverables and are in agreement that staffs proposal meets the project's objectives. 410 Project Objectives: The objective of this project is to replace the technical infrastructure and its capabilities for higher- level performance: 1. Provide next -generation replacements to the current infrastructure 2. Replace Blade Servers 3. Expand current storage capacity by replacing the existing storage area networks (SAN) 4. Increase processing speed, storage and memory. 5. Handle advanced programs 6. Consolidate data centers (City Hall and Police Department) 7. Increase security 8. Enhance user experience for internal and external customers 9. Increase the ability to manage both cloud and on premises applications 10. Enhance Disaster Recovery capabilities for both on premises and cloud data This project is estimated to take approximately 3 — 6 months from the execution of the contract. 411 ATTACHMENT Project Services Division Copyright© LANAIR Group, LLC. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without written permission from LANAIR Group, LLC. June 2019 Executive Summary OVERVIEW During this engagement, LANAIR will act as Project Management and utilize Nutanix Professional Services for Deployment, Configuration, and Migration to the new Nutanix Infrastructure. Price of Services includes Turn -Key deployment of both Nutanix professional Services and LANAIR Project Management. GOALS 1. LANAIR will install a new Nutanix cluster to host the Clients server & VDI infrastructure at their HQ datacenter 2. LANAIR will use the current switching at the HQ datacenter for the new Nutanix cluster 3. LANAIR will install and configure PRISM Central to manage the new Nutanix cluster 4. LANAIR will install and configure Nutanix Files on the new Nutanix cluster 5. LANAIR will migrate the Clients current file system to the new Nutanix File Server 6. LANAIR will migrate the clients existing server & VDI infrastructure to the new Nutanix cluster BACKGROUND 1. The Client has existing switching for the new Nutanix clusters 2. The Client is currently running a VMware environment 3. The Client is currently running a VMware Horizon View VDI environment 4. The Clients current Domain Function Level is Windows 2008 R2 DESIGN NOTES 1. LANAIR will install, connect, and initialize a new NUTANIX cluster 2. LANAIR will connect the new NUTANIX cluster to the existing SWITCHING 3. LANAIR will migrate the current VDI environment to the new NUTANIX cluster 4. LANAIR will migrate the current SERVER infrastructure to the new NUTANIX cluster 5. LANAIR will install and configure PRISM CENTRAL for managing the new NUTANIX cluster 6. LANAIR will install and configure NUTANIX FILES on the new NUTANIX cluster SITES 1. HQ — 350 Main Street EI Segundo, CA 90245 KEY DELIVERABLES 1. Onsite installation and configuration of the new Nutanix clusters at the HQ datacenter 2. Onsite installation of VMware on new Nutanix cluster at HQ site 3. Onsite installation and configuration of PRISM Central for management of the new Nutanix cluster at the HQ datacenter 4. Onsite installation and configuration of Nutanix Files on the new Nutanix cluster at the HQ datacenter 5. Onsite validation of the new Nutanix cluster at the HQ datacenter 6. Remote migration of the current VDI environment to the new Nutanix cluster at the HQ datacenter 7. Remote migration of the current server infrastructure to the new Nutanix cluster at the HQ datacenter 8. Remote migrate FISMO, DNS and DHCP roles to new virtual Windows 2016 Server Standard Active Directory servers 9. Remote cleanup of Active Directory 10. Remote install and configure Nutanix Data Encryption 11. Remote provide up to 4 hours of As -Built Review on the installed systems 12. Provide the Client with Project Closeout documentation City of EI Segundo 413 June 2019 Nutanix Hardware, Software, Support Price Qty Ext. Price Nutanix NX -8235 -G6 -CTO Block $38,175.70 7 $267,229.90 NX -8035-G6 Series f2 Nodes per 1 Block) • 2x Intel Xeon 6148 Processor • 4x 8TB 3.5" HDD • 2x 3.84TB 3.5" SSD • 24x 32GB DDR4 RAM Nutanix 3yr PRD System Support for NX8035-G6 Nutanix NX -3155G -G6 -CTO Block NX -3055G -G6 Series [1 Nodes oer 1 Block) • 2x Intel Xeon 6148 Processor • 4x 8TB 3.5" HDD • 2x 3.84TB 3.5" SSD • 24x 32GB DDR4 RAM • 2x NVIDIA P40 GPU Cards Nutanix 3yr PRD System Support for NX3155G-G6 Nutanix Professional Services $4,342.60 14 $60,796.40 $84,213.69 2 $168,427.38 $4,558.66 2 $9,117.32 Subtotal: $505,571.00 $172,704.00 1 1 $172,704.00 Subtotal: $172,704.00 Education Price Qty Ext, Price Nutanix - Nutanix Enterprise Cloud Administration Class $3,148.15 3 $9,444.45 Enterprise Cloud Platform Administration 5.0 Customer Course: (Standalone Curriculum) DELIVERY: Instructor -led, 4 Day FORMAT Professional Services I City of EI Segundo Subtotal: $9,444.45 Price Oty Ext, Price $28,296.00 1 $28,296.00 Subtotal: $28,296.00 414 June 2019 IF Statement of Work PROJECT ADMINISTRATION 1. LANAIR will assign a technical lead to the project 2. LANAIR will coordinate and conduct a Project Discovery Meeting with the assigned technical lead to review the project in detail, discuss the existing environment, gather information for Design, and discuss the initial deployment timeline 3. LANAIR will conduct weekly project status calls throughout the Delivery Phases of the project and a weekly technical review call during critical phases of the project 4. CLIENT agrees that all work will be performed during LANAIR business hours and/or starting no later than 6PM Mon—Thurs, unless otherwise specifically stated in the professional services contract 5. CLIENT will assign a business and a technical sponsor for the project 6. CLIENT agrees to grant LANAIR remote access to the environment for the purpose of remote configuration during business hours utilizing the LANAIR secure CPS agent on an existing CLIENT server PRE -INSTALLATION 1. Prior to the installation of equipment, LANAIR will conduct a health and performance check on the existing systems as needed. Remediation of issues on existing system as a result of the health and performance checks is outside of this project scope of work 2. LANAIR will conduct a Pre -Installation Readiness Meeting to verify environment readiness prior to any onsite or remote work 3. The CLIENT will confirm rack space. outlets. oower, cooling. cabling. and staff availability prior to anv onsite. installation of equipment 4. The CLIENT will confirm available costs and configurations are in place on existing network to sunoort the connections from the equipment 5. The CLIENT will provide the required licensing and ISO's forthe software that will be installed with the equipment ONSITE INSTALLATION Detailed Statement of Work for Onsite Services to be provided during discovery by Nutanix Professional Services. REMOTE INSTALLATION Detailed Statement of Work for Remote Services to be provided during discovery by Nutanix Professional Services. PROJECT CLOSEOUT CLOSEOUT 1. LANAIR will provide the CUSTOMER with systems orientation on the installed systems. LANAIR also recommends formal training on the installed systems separate from this scope of work 2. LANAIR will provide the CUSTOMER with a closeout package to include Project Closeout and Completed Project Deliverables forms to be signed by CUSTOMER 3. LANAIR will provide the CUSTOMER with access to the installed systems after approval of all Project Closeout documentation CUSTOMER RESPONSIBILITIES 1. The CUSTOMER will complete any recommendations from health checks or post project observations reports 2. The CUSTOMER will migrate any remaining physical and / or virtual servers to the new environment 3. The CUSTOMER will migrate the existing user profiles to the new system City of El Segundo '-•- 415 June 2019 4. The CUSTOMER will deploy new backup solution agents to remaining servers needing protection 5. The CUSTOMER will complete new backup solution replication to the DR site 6. The CUSTOMER will complete storage replication to the DR site 7. The CUSTOMER will update VMware tools on remaining VMs. 8. The CUSTOMER will configure the SRM fail -over protection profiles and recovery plans for the new and existing virtual servers. 9. The CUSTOMER will be responsible for configuring system maintenance to include monitoring systems, updates, anti-virus, security policies, backups, etc 10. The CUSTOMER will obtain any necessary training from relevant vendors to ensure the ability to manage installed systems 11. The CUSTOMER will configure the existing servers to support the new network and migrate the connections after the close of the project 12. The CUSTOMER migrate the users, data, and profiles to the new VDI system after the close of the project 416 0 Out of Scope Items The below items are excluded from this project scope of work unless otherwise stated in the above "IN SCOPE ITEMS" section: 1. Any services, tasks or activities other than those specifically noted in this SOW. 2. Any LANAIR training or certification services not specifically described in this SOW. 3. Troubleshooting or remediation of any issues with existing systems or hardware 4. Identification of applications compatible with virtualization and analysis of interdependencies other than what is outlined in the scope of work. 5. Software licensing not identified in the professional services or hardware quotes. 6. The project will involve As -Built Review, Proof of Concept, and Product Orientation on the newly configured systems. Customers without previous experience in the technology should not expect to become proficient as a res of the Product Orientation. Proficiency can only be achieved through formal training and experience. 7. Testing or validating performance for remote site user workloads. 8. Physical to virtual (P2V) conversions of existing environment unless stated in the Systems Configuration sections. 9. Application support including installation, de -installation, troubleshooting, and compatibility validation not detailed in the Systems Configuration sections. 10. Consultation for configurations outside of the Key Deliverables section of this scope of work 11. Support for workstation and end point devices 12. Data migration including user data, databases, file shares, applications, and mailboxes unless otherwise stated 13. Support for ISP related issues 14. Customer understands that the performance usability of the quoted system is dependent on existing systems that a outside the control and responsibility of LANAIR. 15. Customer will be responsible for site readiness including server room, racks, power, and cooling for the new system SPECIAL NOTES 1. Prior to the start of this scope of work, Customer will indicate to LANAIR in writing a person to be the single point of contact, according to project plan, to ensure that all tasks can be completed within the specified time period. All Services communications will be addressed to such point of contact. Failure to do so might result in an increase in project hours and/or length in schedule. 2. The Customer will obtain and provide project requirements, information, data, decisions and approvals within one working day of the request, unless both parties agree to a different response time. 3. The Customer will ensure the LANAIR services personnel have reasonable access to the installation site, a safe working environment, an adequate working space, and parking as required. 4. Customer is responsible for providing the necessary hardware, software, internet access, and facilities for the successful completion of the Services. Facilities and power must meet LANAIR's requirements for the products and Services purchased. 5. During the term of this SOW, Customer is responsible for promptly notifying LANAIR in writing of any changes Customer makes to its information technology environment that may impact LANAIR's delivery of the Services 6. Customer will maintain a backup of all data and programs on affected systems prior to LANAIR performing the Services and during the term of the SOW. LANAIR will have no liability for loss or recovery of data, programs or los of use of system(s) arising out of or in connection with the Services provided under this SOW. 7. Customer will provide Domain Administrator access to the network and servers utilized in these Services. 8. Customer is responsible for troubleshooting, resolving, and servicing of issues with existing hardware including warranty support 9. Customer will ensure deployment of connected and dependent systems prior to the start of the project 10. Customer will assign a Business sponsor to the project 11. Customer will ensure staff availability throughout the project schedule 12. Customer will grant LANAIR remote access to the network through the installation of LANAIR's CPS agent 13. Customer will be responsible for disposing of any decommissioned equipment. City of EI Segundo 417 Nutanix Refresh w/LANAIR PM - 3yr Option Prepared by: LANAIR Group, LLC Cadogan Price 877-LANAIR1 (526-2471) Fax 323-908-7266 cprice@lanairgroup.com Quote Summary Prepared for: City of EI Segundo 350 Main Street EI Segundo, CA 90245 Charles Mallory (310) 524-2300 cmallory@elsegundo.org June 2019 Quote Information Quote #: 020823 Version: 6 Delivery Date: 06/10/2019 Expiration Date: 07/31/2019 Description Amount Nutanix Hardware, Software, Support Nutanix Professional Services Education LANAIR Professional Services $505,571.00 $172,704.00 $9,444.45 $28,296.00 Subtotal: $716,015.45 Shipping: $2,475.00 Total: $718,490.45 Thank you for the opportunity to provide your organization with an Estimate from LANAIR Group, LLC. Taxes, shipping, handling and other fees may apply. We reserve the right to cancel orders arising from pricing or other errors. Terms and Conditions are as follows: 1. For projects greater than $1,000, a payment of 50% of the above Price is required to undertake the project. 2. The balance due for Hardware, Software, and Licensing, including any applicable sales tax, is due upon delivery. 3. The balance due for LANAIR Professional Services is due as follows: a. Project Initiation: 10% b. Discovery Phase: 10% c. Design Phase: 10% d. Installation, Implementation: 50% e. Testing: 10% f. Closeout: 10% 4. LANAIR Group, LLC, reserves the right to require a 100% of the Estimate to undertake the project, depending on the Customer's Credit Status. 5. Your signature below signifies acceptance to the above Terms and Conditions City of EI Segundo iNutanix Refresh w/LANAIR PM - 3yr Option June.2019 City of EI Segundo Signature. Name: Charles Mallory Date: City of EI Segundo ATTACHMENT 2 NUTANi 1YM The Enterprise Cloud Company Scope of Fork for Nutanix Services Project Name ("Project") End User ("Customer") Account Manager Advisory Owner Scope Effective Date Approval Status Nutanix Project ID # Nutanix Credits SO #(s) Version Work Location(s) Nutanix and Horizon View Services City of EI Segundo Ben Choi Ravi Boddapati TBD Approved TBD 1920 ITC EI Segundo, CA; remote V@nutanix Document Template: Nutanix Services: Scope of Work (SOW) Template —Flexible Credits Page 1 of 22 Document Revision: Final v2 17 November 2016 WE NUTANL The Enterprise Cloud Company TABLE OF CONTENTS V@a nutanix 1 INTRODUCTION....................................................................................................................... 3 1.1 Preface..............................................................................................................................................3 1.2 Term and Validity.............................................................................................................................3 1.3 Service Summary............................................................................................................................. 3 2 GENERAL PROJECT ACTIVITIES........................................................................................... 4 2.1.1 Pre-Engagement...........................................................................................................................4 2.1.2 Engagement Kickoff....................................................................................................................4 2.1.3 Engagement Closeout................................................................................................................. 4 3 SCOPE OF SERVICE............................................................................................................... 5 3.1 Work Package 1: Nutanix and Horizon View Services.................................................................. 5 3.1.1 Phase 1: Platform Design and Deployment ..................................... 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Bookmark not defined. 3.1.2 Phase 2: Migration Workshop and Validation............................................................................ 5 3.1.3 Phase 3: Workload Migration Assistance............................................................................... 6 3.1.4 Phase 4: Nutanix Horizon View Design Session........................................................................ 7 3.1.5 Phase 5: VMware Horizon View Environment Build................................................................ 10 3.1.6 Phase 6: User Acceptance Testing........................................................................................... 12 3.1.7 Phase 7: VDI Migration Assistance and Onboarding Support................................................13 3.1.8 Phase 8: Unidesk Application Migration Assistance............................................................... 13 3.1.9 Phase 9: Project Close Out....................................................................................................... 14 3.2 Out of Scope..................................................................................................................................14 3.3 Instance List...................................................................................................................................16 4 RESPONSIBILITIES...............................................................................................................17 4.1 Customer Responsibilities............................................................................................................ 17 4.2 Nutanix Responsibilities...............................................................................................................19 4.2.1 Project Management..................................................................................................................19 4.2.2 Assumptions..............................................................................................................................19 4.2.3 Service Hours and Staffing....................................................................................................... 19 4.2.4 Acceptance Criteria...................................................................................................................19 5 Nutanix SERVICES FLEXIBLE CREDITS CONSUMPTION .................................................. 20 5.1 Credits Consumption..................................................................................................................... 20 5.2 Travel and Expenses — Inclusive.................................................................................................. 20 6 CHANGE MANAGEMENT...................................................................................................... 21 7 SIGNATURE............................................................................................................................22 Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 421 Page 2 of 22 NUT NI A.T. The Enterprise Cloud Company 1 INTRODUCTION 1.1 Preface The terms "Nutanix", "Customer", "Work Location", and "Scope Effective Date" have the meanings indicated above. This Statement of Work ("SOW') is between Nutanix Inc. ("Nutanix") and City of EI Segundo ("Customer"). ;&-nutanix The Services will be performed by Nutanix or its agents for the benefit of the Customer. For clarity, the Services will be funded by pre -paid Service Credits ("Flexible Credits"). This document has no bearing on any payment terms, as Flexible Credits are 100% pre -paid before any Services commence. 1.2 Term and Validity The term of this SOW shall begin on the Scope Effective Date and shall expire on (i) the earlier of the date that Nutanix and Customer mutually terminate the SOW in writing or (ii) the completion of Services and acceptance of any named deliverables in accordance with this SOW within the defined Acceptance Period. 1.3 Service Summary Nutanix will provide Professional Services Work Package, to achieve the solution as specifically described herein (the "Services"), which include the following: Work Package 1: Nutanix and Horizon View Services Document Template: Nutanix Services Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 3 of 22 422 NUTANI The Enterprise Cloud Company 11IF ramutanix 2 GENERAL PROJECT ACTIVITIES The following activities will be performed: 2.1.1 Pre -Engagement Key Activities ■ Initiate planning call with Customer and introduce the Nutanix Contact Review project timelines and physical logistics Review engagement scope ■ Review prerequisites, including but not limited to, hardware delivery, software license entitlement, access requests, and network configuration • Identify key Customer Contact and overall project team Deliverables • Pre -engagement planning call, covering key activities. 2.1.2 Engagement Kickoff The Nutanix Contact will lead Customer project sponsors and stakeholders in an engagement kickoff meeting to set the following expectations: • the delivery approach and timelines ■ the amount of time and effort required from the participants ■ the expected activities and work product Objectives • Introduce the Nutanix delivery team, roles and responsibilities ■ Describe the project phases and goals • Validate the project expectations • Confirm scope from a process and/or tools perspective • Confirm that all prerequisites listed in the Pre -Engagement to the Customer project checklist are met prior to engagement start. Deliverables Kickoff meeting, kickoff presentation, resulting actions, and next steps. 2.1.3 Engagement Closeout Nutanix will initiate a closeout meeting with the Customer, after all Services are delivered. The closeout meeting may be remote or onsite. Key Activities Review project activities • Review Deliverables • Present Milestone Completion Form ("MCF") Deliverables ■ Engagement closeout meeting, covering key activities and MCF presentation. Document Template. Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Page 4 of 22 Document Revision: Final v217 November 2016 423 NUTANI AL TM � is nutanix The Enterprise Cloud Company 3 SCOPE OF SERVICE 3.1 Work Package 1: Nutanix and Horizon View Services Nutanix will migrate up to XXX workloads from customer's current Nutanix platform (source) to new Nutanix Hyper Converged Platform (target). In addition, Nutanix will design and build a Virtual Desktop Infrastructure (VDI) solution based on VMWare's Horizon View software for up to 1000 end-users. High level tasks include: • Design and Deploy Net New Nutanix Infrastructure • Conduct a migration workshop and develop a migration strategy and plan • Execute server migration plan • Design and build Horizon View based virtual desktop infrastructure on Nutanix • Support for Customer Executed User Acceptance Testing • Assist with VDI User migrations Engagement success is contingent on Customer adherence to "Customer Responsibilities" as stated in section 4.1 of this document as well as any applicable restrictions in product documentation. 3. 1.1 Phase 1: Plan, Design and Validate Nutanix Infrastructure In this phase, Nutanix Will: • Provide an Assessment Report which will be the input to Nutanix Infrastructure Design o Review Requirements o Review Customer environment — Hypervisor Version, Number of Clusters o Perform Architectural and Operational Review o Document Findings and Recommendations Outcome Conduct a Design Workshop with Key Stakeholders to develop and document Project Success Criteria. Validate Nutanix Infrastructure as per the approved design document Develop a Weekly Project Report Template • Project Success Criteria ■ High-level Design for Nutanix Infrastructure 3.1.2 Phase 2: Migration Workshop and Validation In this phase, Nutanix will: • Conduct a Migration Workshop to determine and document Project Success Criteria and review the available migration options • Validate migration approaches and techniques • Create high level migration plan o Review inventory of assets to be migrated Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 424 Page 5 of 22 NUTANI The Enterprise Cloud Company o Map workloads into target Nutanix environment o Group workloads into logical move waves o Verify migration strategy for moving instances/data o Account for current VMware configuration for Metro Protection • Develop initial migration guide o Document Migration Plan o Test migration process for 10 test virtual machines Outcome • Project Success Criteria o MS Word document that captures the critical success criteria that when met will deem this project a success Migration Plan o MS Excel document that captures all the information about workloads to be migrated and groups them into waves. • Migration Guide o MS Word document that describes the tools, processes, and steps that will be used to migrate individual workloads. 10 Test workloads successfully migrated 3.1.3 Phase 3: Workload Migration Assistance Nutanix Services will provide outcome based remote migration assistance, which will be help the customer migrate servers, as named in Section 3.3 Instance List. This Phase will be delivered in `waves' as defined by the high-level Migration Plan developed in Phase 1. Each wave will consist of workloads that we be migrated and cut -over to production at the same time as a group. A wave cutover will be planned as per the project schedule, with appropriate notice for each cutover. Each wave can have as many workloads included in it as deemed necessary and reasonable by Nutanix and the Customer. The Customer will actively participate in the migration cutover to manage their internal change control process as well as their internal application owners, who will perform post -migration application validation as part of wave migration execution. Any workloads that fail post - migration application validation will be reverted to their original state and added to a future migration wave, and lessons learned from previous attempts will be factored into future migrations. During the migration execution, some workloads may be decommissioned, turned off, or removed from the migration plan for a variety of reasons. These workloads will be counted as complete. The charges for a workload that is decommissioned is the same as the charges for a workload that is migrated to the Nutanix Infrastructure. Tasks In this phase, Nutanix will: Document Template Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 425 Page 6 cf 22 NUTANI The Enterprise Cloud Company ;a nutanix Execute migration plan for a subset of virtual machines, as named in Section 3.3 Instance List. o Review/Validate migration replication groups o Initialize replication groups in a controlled manner, when/where replication approach is required o Collaborate with Customer technical and functional owners to schedule migrations o Migrate workloads from source to target environment hosted on Nutanix o Validate migrated workload up to the successful virtual machine instance boot o Apply virtual configuration changes, when necessary, to comply with Nutanix recommended practices Milestone Assumptions ■ Nutanix is responsible for tracking workload migration progress • Customer is responsible for patching and preparation of the workload before migration in accordance with best practices provided by Nutanix ■ Customer is responsible to schedule and manage application owners who are required to be available for post -migration cutover validation and testing. ■ Customer to provide and execute user acceptance test plans for applications, including application-specific test cases and appropriate resources (e.g. Application Owners) to execute them. ■ Migration is only for attached list of VM and Physical Instances listed in Section 3.3 Instance List • Customer adheres to "Customer Responsibilities" stated below. Milestone Deliverables • Up to XXX workloads identified in Section 3.3 Instance List migrated from current Nutanix environment to the New Nutanix Platform 3.1.4 Phase 4: Nutanix Horizon View Design Session Nutanix Services will work with the Customer to conduct a design workshop for implementing both Nutanix and VMware Horizon products. Nutanix will cover Horizon View and VMware App Volumes for Apps and Desktop provisioning hosted on Nutanix with a single site configuration. Tasks Nutanix will conduct a workshop with the customer to review and discuss the following topics: o Determine and document success criteria for the VDI solution o Gather Requirements ■ Discuss Detailed Use Cases, such as end user groups/populations * Discuss any specific Business driven requirements/goals ■ E.g. Deployment time frame, engagement/alignment Discuss any specific technical goals Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 7 of 22 426 NUT. NIJ-*:T The Enterprise Cloud Company %F+ Mutanix • E.g. Performance, Recoverability, SLAs, etc. o Review existing Desktop Virtualization Infrastructure Design — If Available ■ Suggested Design Topics, Design Elements o Discuss the design and use of VMware vSphere and Horizon View in conjunction with Nutanix best practices for these solutions. o Scalability • Scaling vSphere Clusters, Pod Architectures • Scaling Control Plane Services ■ E.g. vCenter, Horizon, Cloud Pod • Scaling Nutanix Clusters (Inter and Intra cluster) o Resiliency ■ Nutanix Platform Resiliency ■ vSphere Clusters ■ Control Plane HA/Clustering (Scale out vCenter, Horizon, Always on Point of Care, load balancing via F5) o Performance • VDI Instance Deployment/Cloning (E.g. VAAI, VCAI, Linked Clones) • Nutanix Storage Performance Architecture o Manageability and Control Plane Architecture • Control Plane Architecture, Layout, Capabilities • Front end Services, Backend Databases • Lifecycle Management, Hypervisor Patching/Nutanix Integration • Nutanix Prism Element and Prism Central • Template Services (E.g. content catalog) • Live Migration, Shared Nothing Live Migration o Data Protection and Recoverability • Nutanix Data Protection, Snapshots, Replication ■ VMware Snapshots • VSS Integration, Application Aware Snapshots o Compliance and Security ■ Nutanix CVM Security, STIG's • Control Plane Permissions Management o Virtual Machine Design • VM Templates for Various Use Cases ■ Resource Layouts (and associated impacts) • Supported OS's • Ingesting Instances (V2V, P2V) o Virtual Network Design Is Traditional Hypervisor Logical Networking = Distributed Logical Switching • Network Virtualization, as needed o Storage Infrastructure = Nutanix Storage Backend, Containers, Storage Tech (Compression, Dedupe, etc.) • Datastore Connectivity and Capabilities o Platform Capabilities Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 427 Page 8 of 22 NUTANI XT The Enterprise Cloud Company ra%nutanix ■ Discuss Nutanix Platforms • Discuss Impact on DC Environmental (Physical Plant) o Network Infrastructure • Discuss Customer Network Infra, Compare/Contrast Nutanix integrations o Discuss and define the success criteria that will be used to confirm the solution is performing acceptably. o Take into consideration that the design may be extendable in the future for growth and additional location. NOTE: Not all topics may be relevant to every single Customer situation. Most design workshops take a distilled version of the following list and use it as a guideline of topics to cover. These topics are intended to be topics to lead an organic, interactive design discussions, based in the customer's business and technical requirements. Workshop will be onsite, and all subsequent documentation and design work will be done remotely Assumptions • Customer adheres to "Customer Responsibilities" stated below. ■ Customer will be responsible for committing the necessary resources to participate in the design workshops • Customer will be responsible for providing data related to existing environment architecture and design ■ Customer will be responsible for assisting in requirements gathering by making resources available from different teams and/or groups ■ Any third -party tools recommended in this design will need to be purchased by the Customer, at no cost to Nutanix • Customer to provide user acceptance test plans for applications, including test cases where relevant, and the resources to execute them. • Review and provide feedback on customer's Security and Risk Assessment Documentation via e-mail. Deliverables • Requirements Document o This MS Excel document will include a list of requirements that the VDI solution is expected to satisfy • Project Success Criteria o MS Word document that captures the critical success criteria that when met will deem this VDI deployment a success • Solution Architecture and Design Documentation o MS Word document that captures the complete VDI solution architecture and design, including Nutanix, and VMWare Horizon View, specific to customer's solutions. o This document will include architectural diagrams (physical and logical views), Nutanix architecture recommendations, VDI design and configuration recommendations • Solution Test Plan Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 9 of 22 I NUTANI The Enterprise Cloud Company amutanix o MS Excel document that enumerates solution level testing to verify as -designed functionality. Note: This is not a replacement for end-user acceptance testing. 3.1.5 Phase 5: VMware Horizon View Environment Build This phase will continue the delivery of the VDI infrastructure according to the design detailed/developed in Nutanix Horizon View Design Session. Actual component installation will vary based on design and requirements. At the end of this phase, Nutanix expects that the VDI platform will be in a suitable state to be used for a subsequent managed production VDI rollout. Tasks • Horizon View Build o Build and test the Solution Architecture and Design developed in Nutanix Horizon View Design Work Phase. • Install and Configure Horizon View environment o Base configurations for a two -site Horizon View in a fault tolerant configuration, including up to the items below. ■ Two (2) View Connection Servers per Site ■ One (1) View Composer Server per Site ■ Two (2) Unified Access Gateway (UAGs) or Security Servers per Site ■ One (1) Persona Management deployment per Site ■ Two (2) gold desktop/server images per Site ■ Two (2) F5 or NetScaler instances per Site ■ One SQL AAG Cluster (2 servers) protected by VMware HA per Site Appropriate SSL certificate configurations Note: Some items may be determined unnecessary in the design phase. ■ Deploy initial desktop pools o One (1) non-persistent knowledge user desktop pool o One (1) persistent admin desktop pool • Install and Publish up to 5 applications via Remote Desktop Services Host (RDSH) or install up to two Windows templates with up to 5 applications each • Recommend updates to desktop images provided by Customer to meet VDI best practices. Nutanix will provide requisite documentation and up to 8 hours of consultation to assist Customer with implementing these recommendations. • Design policies for Horizon View to meet Customer security and user requirements. Nutanix will provide requisite documentation to assist the Customer with implementing these recommended policies through Customer's Active Directory Group Policies. • Design and deploy VMWare Horizon View App Volumes Collect feedback from the test team, log defects, and perform remediation. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 Page 10 of 22 I NUTANI4 The Enterprise Cloud Company if;a-nutanix • Execute Solution Test Plan deliverable from Nutanix Horizon View Design Session and document results ■ Verification of deployment against best practices • Nutanix will assist with the application installation into the VMWare Horizon View Gold image with up to (20) applications installed ■ Update the Solution Architecture and Design document based on continuous improvement feedback from system testing. • Knowledge Transfer throughout natural project life -cycle Assumptions • Customer adheres to "Customer Responsibilities" stated below. • Customer will create and configure Microsoft server OS VMs required to support the core VDI application components. Windows Server 2012R2 VMs will be created, joined to domain, patched, and assigned IP addresses so that View components are ready to be deployed • Customer's end users are all on internal network with no remote access requirements or configuration necessary • Customer will provide SQL Server Table Space in either existing SQL Farm or will build a SQL Server cluster to support as needed. • Customer will build load balancer, firewall contexts, and DMZ related settings promptly upon request • Customer has space on existing infrastructure to build View infrastructure VMs before the Nutanix hardware arrives • Customer has network hardware configured and datacenter infrastructure ready for the install of (3) Nutanix nodes at each site when hardware is delivered. ■ Customer WAN bandwidth between sites is sufficient (not containing packet loss, jitter, latency) for up to 500 concurrent sessions • Customer is responsible for providing accurate information on: o Applications required for end users o Application requirements o End user lists and groups o Network configuration and diagrams • Customer is responsible for providing high quality infrastructure services required for Horizon View, vSphere and Nutanix, including but not limited to o Active Directory o DNS o DHCP o NTP o SMTP Email server o SNMP Monitoring • Per Customer Requirements: o Technical assistance and knowledge transfer of best practices to end customer's Desktop Support Team as they copy over the existing image from the PoC Document Template Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 11 of 22 M NUTANI ^: The Enterprise Cloud Company V@)nutanix (Windows 7 x64 Pro VDI Image.) The image is based on end customer's security requirements and includes 3rd party technical controls. o Technical assistance and best practices relating to Customer developed Desktop Security Controls, monitoring, and patching processes. Provide all ISO image files including but not limited to: o ESXi ISO o vCenter Appliance o Horizon View o Windows 2012 R2 o Windows 7 or 10 Customer will provide all software licenses and support agreements required to build and operate the solution. Customer will provide a Microsoft KMS server for Microsoft licensing. Customer will provide SME related to: o Customer's identity and access management solutions (AD) to assist with user identity and group policy management. o Networking and security o Database environment o Physical desktop team Customer will perform User Acceptance Testing after Nutanix System Tests are complete ■ Knowledge Transfer throughout natural project life -cycle Deliverables • Updated Solution Architecture and Design Document (As Built) • System Test Summary Results • Working VMWare Horizon View infrastructure complete as per scope and design. 3.1.6 Phase 6: User Acceptance Testing Nutanix will assist and support Customer Executed User Acceptance Testing. The provider will assist the Customer with User Acceptance Testing under the following guidelines. The Customer will be responsible for the following activities: ■ User Acceptance Testing definition, execution, and documentation • Stakeholder communication required to conduct the UAT • End -User support for UAT contributors ■ Customers will identify key Customer Test Users and commit to a scheduled test period. • System Administration, user onboarding, and desktop provisioning related to the UAT Tasks UAT Support for up to 16 hours Troubleshoot solution issues provided by Customer's System Administrators Analysis relating to the success or failure of the UAT Success Criteria defined earlier in this scope. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 431 Page 12 of 22 NUTANi �1 The Enterprise Cloud Company �_A Nutanix to resolve defects identified by Customer UAT in the Nutanix and Horizon View configuration per milestone "VMWare Horizon View Environment Build". Assuming that the success criteria that were established for the UAT are met, Nutanix expects that the VDI platform will be in a suitable state to be used for a subsequent full rollout of the remaining existing desktops. Assumptions • Customer adheres to "Customer Responsibilities" stated below. ■ Nutanix will participate in any required security reviews and implement required system hardening that is consistent with the design solution. • Nutanix and Customer understand there will be Customer deployed and integrated monitoring tools implemented to allow system admins to determine the health of the Nutanix Hardware and VMWare Horizon View environment; and these will be used in troubleshooting as needed Deliverables • Up to 16 hours of UAT support 3.1.7 Phase 7: VDI Migration Assistance and Onboarding Support Nutanix will assist and support users as they commence use of the newly deployed virtual desktop infrastructure. Tasks • Provide up to 80 hours post go -live on-site support to help troubleshoot issues as they arise to be performed remotely over no more than 2 week period. Assumptions ■ Customer adheres to "Customer Responsibilities" stated below. • Adequate network bandwidth exists between end users and data centers (e.g. no less than 1 Gbps and no more than 100ms latency) Deliverables • Up to 80 hours of user onboarding support completed 3.1.8 Phase 8: Unidesk Application Migration Assistance Nutanix will assist with appropriate VMware Horizon View and Citrix Unidesk Configuration to test and validate up to 5 applications on the new Horizon View VDI platform. Tasks ■ Provide up to 80 hours consulting in support of Unidesk migration. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 432 Page 13 of 22 NUTAN1 ,4: The Enterprise Cloud Company Illp ranutanix Assumptions • Customer adheres to "Customer Responsibilities" stated below. • Adequate network bandwidth exists between end users and data centers (e.g. no less than 1 Gbps and no more than 100ms latency) for Metro protection Deliverables ■ Up to 80 hours of Consulting 3.1.9 Phase 9: Project Close Out Nutanix Services will finalize all documents and make them available to the customer as project artifacts. Nutanix will conduct one (1) final capstone knowledge transfer workshop to review all project artifacts and as -built infrastructure. Tasks Documentation (deliverables) Review Knowledge Transfer Project close out Assumptions • Customer adheres to "Customer Responsibilities" stated below. • Customer will be available for close out tasks. ■ Earlier in the project, knowledge transfer was completed through the natural course of the project Deliverables ■ Knowledge Transfer session completed • Project documentation delivered ■ Project MCF signed off 3.2 Out of Scope Customer acknowledges that the following activities are not included in the Services scope. General out of scope items include are listed below. The Customer's specific environment may include other out of scope items. • Any services noted as optional without additional scope purchased, or otherwise overridden by Nutanix in writing ■ Any services, tasks, or activities other than those specifically noted in this service description • Procurement of any third -party hardware and software • Physical or logical configuration of any component(s) not specifically noted in this service description. a. Specific configurations listed below: Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 433 Page 14 of 22 The Enterprise Cloud Company -W camutanix i. Microsoft failover clustering ii. Migration onto Hyper -V, AHV clusters on Nutanix iii. Filer/File level migration including end-user data file server and storage provisioning and migration of user data onto this deployment iv. Migration of source VM version unsupported on vSphere v. Migrations without maintenance windows vi. Migrations for systems with less than 1 Gbps end-to-end network bandwidth vii. Migration of Virtual Desktops, where updating broker registration or desktop agent is required viii. Migration of any VMs with Raw Device Mapping (RDM) storage ix. P2V migrations of Active Directory Domain Controllers 1. Best practice is to build a new AD Domain Controller and leverage native AD replication rather than P2V x. Highly -available Horizon View deployment 1. Data Protection services for desktop and file services A. Two Factor Authentication xii. Support graphics intensive applications with NVIDIA GRID hardware integration xiii. Microsoft Active Directory Infrastructure (Domain Controllers, DNS, DHCP, KMS, CA, etc) Horizon Policy integration xiv. SSL Certificate configuration and acquisition xv. Deploy on configure thin clients with connectivity xvi. Post -deployment benchmark testing using Login VSI xvii. Monitoring or Alerting Software outside of Nutanix and/or Horizon View components (vRealize Operations, SCOM, Nagios, ArcSight, etc) xviii. Configuration Management (e.g. SCCM, Puppet, Chef, etc). xix. Antivirus solution design or build xx. Network Infrastructure aside from F5/NetScaler and logical switching within the Nutanix solution Transformation of VM configurations — Nutanix can provide best practice recommendations and guidance, but manipulation of actual VM configurations is out of scope a. Best Practice for SQL on Nutanix dictates 1/0 be spread across multiple vDisks. For this reason, we recommend a new SQL instance be created and data restored from the source SQL server to the destination VM Any guarantee, explicit or implied, of VDI desktop or Application performance. Nutanix will optimize the platform as per Nutanix, VMware, and Microsoft recommended best practices, however real-world users exercise applications and access data in a chaotic, random manner, sometimes resulting in unpredictable performance and resource utilization. Additionally, most organizations deploy more than a single use case in a VDI environment. Real-world consumption patterns vary from organization to organization. Before deploying any desktop workspace technology it is important to understand the Document Template. Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 Page 15 of 22 434 NUTANI �TM The Enterprise Cloud Company if@nutanix use -case resource requirements. Reference architecture workloads based on lab testing may not precisely match real-world user workloads 3.3 Instance List Nutanix will migrate up to XXX VM's, as named in the instance list below. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 16 of 22 435 NUTANI irw amutanix The Enterprise Cloud Company 4 RESPONSIBILITIES 4.1 Customer Responsibilities The following responsibilities are the obligation of the Customer. • The successful delivery of these Services and the conditions relating to Nutanix's performance are dependent upon assumptions, which Nutanix has made in agreeing to perform the Services, as set forth herein. ■ If any of Customer's responsibilities are not performed or the assumptions prove to be incorrect, it may cause delays to the project schedule, level of effort required, or otherwise impact Nutanix's performance of the Services, and Nutanix will have no liability to Customer or any third party with respect to its inability to perform the Services resulting therefrom. • Prior to the commencement of Services, Customer will indicate to Nutanix in writing a person to be the single point of contact (the "Customer Contact"). The Customer Contact will have the required authority to make project decisions and provide access to stakeholders as necessary. ■ The Customer Contact will have the authority to act for Customer in all aspects of the Service including bringing issues to the attention of the appropriate persons within Customer's organization and resolving conflicting requirements. • The Customer Contact will ensure that any communication between Customer and Nutanix, including any scope -related questions or requests, are made through the Nutanix Contact in writing. ■ Prior to the commencement of Services, Customer will provide technical points -of - contact, who have a working knowledge of the enterprise components to be considered during the Services ("Technical Contact(s)"). Nutanix may request that meetings be scheduled with Technical Contact(s). It is the Customer's responsibility to ensure technical personnel are made available within a reasonable timeframe for requested meetings, document reviews, etc. • Customer Contact, Technical Contact(s), and stakeholders attend the engagement kickoff meeting as necessary. • Customer Contact will distribute information internally to any missing Technical Contacts and stakeholders in a timely manner. • During the performance of Services, Customer is responsible for promptly notifying Nutanix in writing of: o Any changes Customer makes to its technical environment that may impact Nutanix's delivery of the Services o If Customer becomes aware that any of the assumptions set forth herein are incorrect Customer will maintain a backup of all data and programs on affected systems prior to Nutanix performing the Services and during the term of the Services. Nutanix will have no liability for loss or recovery of data, programs or loss of use of system(s) arising out of or in connection with the Services provided hereunder. The Customer Contact will obtain and provide project requirements, information, data, decisions and approvals within a timely manner, as to not delay project delivery. Document Template: Nutanix Services Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 436 Page 17 of 22 NUTAN[ :TM The Enterprise Cloud Company apnutanix • Customer will restrict access to information not related to the Services, including, but not limited to, proprietary customer business/financial information and personally identifiable information ("PII"). ■ Customer may be responsible for developing or providing documentation, materials and assistance to Nutanix and agrees to do so in a timely manner. Nutanix shall not be responsible for any delays in completing its assigned tasks to the extent that they result from Customer's failure to provide such documentation, materials and assistance in a timely manner. • The Customer Contact will ensure the Nutanix personnel have reasonable and safe access to the Work Location(s), a safe working environment, adequate office space, and parking as required. Customer will provide any personal protective gear required while Nutanix personnel are onsite. • Customer will inform Nutanix of all access issues and security measures, and provide access to all necessary hardware and facilities, including but not limited to Network Access, Remote Access, and appropriate access credentials. • Customer is responsible for providing all hardware, software, internet access, and facilities for the successful completion of the Services, including but not limited to 3rd party licensing, networking, facilities, and electrical power that meet Nutanix's requirements for the products and Services purchased. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 18 of 22 437 NUTANI[ �e�'�.TM The Enterprise Cloud Company 4.2 Nutanix Responsibilities Vfa-ntltanix 4.2.1 Project Management Nutanix will provide project coordination tasks to the Customer which may be partly of fully conducted remotely. The Project Manager will provide the following: • Provide a single point of contact (the "Nutanix Contact") and accountability for successful delivery of the Services • Coordinate with the Customer Contact ■ Coordinate and facilitate kick-off, status, outcome review, and closeout meetings • Monitor and manage issues and escalations ■ Provide written notification, which may include email, to Customer Contact for completion of applicable Services. 4.2.2 Assumptions The performance of Services hereunder assumes the following: ■ Nutanix will not perform the Services until a purchase order ("PO") for the Services is received. Upon receipt of fully executed SOW and a PO, a Nutanix Project Manager will contact Customer to begin Services scheduling. The Services do not include the development of any intellectual property created solely and specifically for Customer. Should intellectual property be created, Nutanix retains all right, title and interest in and to such intellectual property. 4.2.3 Service Hours and Staffing Nutanix provides Services between the hours of 8:00 AM and 5:00 PM local Customer time, Monday through Friday, excluding normally observed holidays. Services provided outside these times will be agreed-upon in writing by both parties, in advance and may be subject to additional fees. Some Services may be delivered remotely, as appropriate. 4.2.4 Acceptance Criteria Nutanix will inform Customer Contact in writing upon completion of Services and/or milestones. Nutanix will provide Customer with a Milestone Completion Form ("MCF") to indicate Customer's acceptance of the Services. Customer shall either accept or reject the Services within five (5) business days ("Acceptance Period"). Customer must provide a detailed written notice of rejection specifying any non-conformance for failure of the Services to meet the specifications set forth herein within the Acceptance Period. Upon receipt of a rejection notice, Nutanix will respond promptly and make commercially reasonable efforts to resolve such deficiencies within a reasonable period of time. Failure to provide written rejection of the Services within the Acceptance Period will result in an automatic deemed acceptance and the Services shall be considered complete and closed. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v2 17 November 2016 Page 19 of 22 I NUTA.NI �a nutanix The Enterprise Cloud Company i NUTANIX SERVICES FLEXIBLE CREDITS CONSUMPTION As Services are performed, Nutanix Services Flexible Credits ("Credits") will be consumed from the Customer's Credits balance. Credits balance is not defined within this SOW. The Services defined within this document will consume Credits as listed in Section 5.1. 5.1 Credits Consumption Milestone Description Credits 1 Phase 1: Nutanix Design and Deployment 200 2 Phase 2: Server Migration Workshop and Planning 200 3 Phase 3a: Migration Execution — 50 Workloads complete 100 4 Phase 3b: Migration Execution — 50 Workloads complete 100 5 Nutanix Horizon View Design Session 200 6 VMWare Horizon View Environment Build 400 7 User Acceptance testing 240 8 View Migration Assistance and Onboarding Support 120 9 Unidesk Migration Assistance 240 10 Knowledge transfer and project closeout 120 Total Credits Consumed, FLEX -CST -CR 1920 5.2 Travel and Expenses — Inclusive Travel and related expenses ("T&E") during the SOW Term that are deemed by Nutanix to be necessary and customary in connection with the provision of the Services described herein at the Work Location(s) specified are included in the Charges for Services. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 I Page 20 of 22 NUTANI anutanix The Enterprise Cloud Company CHANGE MANAGEMENT Customer may request modification to the scope of Services upon written notice via a Change Request form. The Change Request form is a document provided by the Nutanix Contact outlining the requested changes. The Change Request form shall describe the requested modifications in sufficient detail. Customer will acknowledge within three (3) business days following the receipt of the completed Change Request form, which will provide an estimate of the cost and scope impact to complete the proposed modified Services. Changes agreed pursuant to the Change Request will not be effective until mutually executed by both parties, which may include issuance of additional payment. Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 Mrs Page 21 of 22 NUTANI � a nutanix The Enterprise Cloud Company 7 SIGNATURE This SOW authorizes Nutanix to provide Customer with Services. The parties indicate their acceptance of the terms outlined herein as of the SOW Effective Date by execution of this SOW by their duly authorized representatives. Nutanix Signature Block Signature Printed Title Date Document Template: Nutanix Services: Scope of Work (SOW) Template — Flexible Credits Document Revision: Final v217 November 2016 Customer Signature Block Signature Printed Title Date 441 Page 22 of 22 EL SEGUNDO CITY COUNCIL AGENDA STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Consent Agenda Consideration and possible action regarding revision of the Tree Maintenance Worker job classification to modify the requirement for an applicant to possess the certification, International Society of Arboriculture (ISA) Certified Tree Worker/Climber Specialist, to be "preferred" rather than "required" at the time of application. (Fiscal Impact: None) RECOMMENDED COUNCIL ACTION: 1. Revise the job classification for Tree Maintenance Worker to include the ISA Certified Tree Worker/Climber Specialist certification from required to preferred; or, 2. Alternatively, discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Redline revision of Class Specification for Tree Maintenance Worker. FISCAL IMPACT: None STRATEGIC PLAN: Goal 3A El Segundo is a City employer of choice and consistently hires for the future Objective 2 The City provides a competitive environment and nimble hiring/onboarding process for its employees. ORIGINATED BY: Lauren Daniels, Human Resources Manager REVIEWED BY: David Serrano, Director of Human Resour s APPROVED BY: Greg Carpenter, City Manager BACKGROUND AND DISCUSSION: The Recreation and Parks Department has a vacant Tree Maintenance Worker, as a result of a resignation in January of 2019. The position is critical to the safe operations of the Tree Crew which performs routine and preventative maintenance, including trimming, removing and planting, to the City's nearly 6,000 urban street and open space trees. The Tree Crew consists of one Supervisor and two Tree Maintenance Workers. Due to OSHA requirements, it is imperative that the crew maintains full staffing as some functions are not able to be performed without the proper number of men to operate certain machinery safely. A recruitment for the position was posted on January 24, 2019, and was originally scheduled to close on February 17, 2019. Due to a low applicant pool, the recruitment was extended and closed on February 24, 2019. The current position classification specifications require the applicant to 442 9 possess certification of the International Society of Arboriculture (ISA) Certified Tree Worker/Climber Specialist. Many applicants demonstrated relevant work history and experience but were not deemed to meet the minimum qualifications due to a lack of a required ISA certification. Consequently, there were no "qualified applicants". In discussions with the Recreation and Parks Department, it was determined that removing the requirement to possess the ISA certification at the time of hiring, would allow the subject matter experts (SME's) to review a larger candidate pool, with many candidates having work history and performance within the tree maintenance area. Further, any candidate hired in this position would be encouraged to seek the ISA Certification. If an individual applicant possesses the certification at the time of application he/she would be ranked more favorably than an individual without; however, by removing the requirement, staff will have more success in the recruitment process and be able to place somebody into the position based on actual work experience. Once in the position, a selected candidate would be encouraged to successfully obtain the certification. This recommendation amends the current job classification to remove the requirement for ISA certification, and to include ISA Certification as highly desirable. Further, the Department will allocate funds for staff training and development to pay for the ISA Certification course for employees hired into this position. 443 CITY OF EL SEGUNDO invites applications for the position of: Tree Maintenance Worker SALARY: l;2,2GG.03 Biweekly $4010.60 x,911.17 Monthly 48;91°3.16 $JJ,9a7-. -Annually OPENING DATE: 01/25 19 CLOSING DATE: 02/17749 11.59 PH DESCRIPTION: The City of EI Segundo Recreation and Parks Department has an outstanding opportunity for a Tree Maintenance Worker. EI Segundo is a Tree City USA community that takes pride in its urban forest of over 6,000 public trees. The Tree Maintenance Worker positions are full-time permanent positions, assigned to the Parks Maintenance Division of the Department and represented by the City Employees' Association (CEA)*. art All properly submitted online applications with completed supplemental questionnaires will be reviewed. Applicants must attach a copy of their 1SA If-applicvnis arc urrub',�e­te at-taeh-f-Hc tc rrplr,cation, cmail ,�c I-/1 to I;an. bc11 _ I gure,o. Prompt application is encouraged as an application cut-off date may be established at any time. Only those applicants agpearinQ best Qualified based upon the application materials submitted will be invited to participate in the testinq process. The testing process will consist of a structured, technical oral interview (weighted 100% for eligible list placement). The interview date is to be determined. Candidates must pass the oral interview with a 70.0% or higher for their name to be placed on the eligibility list. Eligibility lists are normally valid for one year. The eligibility list established for this recruitment will be used to fill the current vacancy and any future vacancies that arise during the life of the eligibility list. All new hires must successfully complete a one-year probationary period to obtain permanent status in this position. ... All properly submitted online applications with completed supplemental questionnaires will be reviewed. Applicants must attach a copy of their 1SA If-applicvnis arc urrub',�e­te at-taeh-f-Hc tc rrplr,cation, cmail ,�c I-/1 to I;an. bc11 _ I gure,o. Prompt application is encouraged as an application cut-off date may be established at any time. Only those applicants agpearinQ best Qualified based upon the application materials submitted will be invited to participate in the testinq process. The testing process will consist of a structured, technical oral interview (weighted 100% for eligible list placement). The interview date is to be determined. Candidates must pass the oral interview with a 70.0% or higher for their name to be placed on the eligibility list. Eligibility lists are normally valid for one year. The eligibility list established for this recruitment will be used to fill the current vacancy and any future vacancies that arise during the life of the eligibility list. All new hires must successfully complete a one-year probationary period to obtain permanent status in this position. ... Under general supervision, performs a variety of semi -skilled and skilled tree maintenance work in City parks and parkways. ESSENTIAL JOB FUNCTIONS: Essential functions, as defined under the Americans with Disabilities Act, may include the following duties and responsibilities, knowledge, skills and other characteristics. This list of duties and responsibilities is ILLUSTRATIVE ONLY, and is not a comprehensive listing of all functions and tasks performed by positions in this class. Characteristic Duties and Resuonsibilities: Uses power tools and equipment and hand tools to perform all aspects of tree installation, maintenance and removal; applies fertilizers and pesticides. Prepares ground; plants, trims, prunes, waters and fertilizes new trees and removes trees, shrubs and hedges; climbs trees using appropriate safety equipment and techniques; removes branches of or entire trees that are dead, diseased or are causing damage to concrete; removes stumps with stump grinder; root prunes trees and completes compensatory tree pruning. QUALIFICATIONS: Knowledoe, Skills and Other Characteristics: Knowledge of the methods, materials, and equipment used in maintenance and care of trees. Knowledge of the operation, maintenance and repair of tools and equipment used in maintenance and care of trees. Knowledge of hazards and applicable safety precautions for equipment operation. Knowledge of equipment capabilities, limitations and safe operating characteristics. Knowledge of OSHA safety standards related to assigned tasks and equipment operation and maintenance. Skill performing skilled and semi -skilled tree maintenance tasks. Skill in operation, maintenance and minor repair of equipment used in tree maintenance. Skill in establishing and maintaining effective working relationships with other department staff, other City employees and the public. Workinci Conditions: 445 Regularly exposed to weather conditions. Regularly required to lift and/or carry up to 50 pounds. Licensiina/Certification Reauirements: A valid Class B California Driver's license. Cer ific+r T.-ccWawa /Ga~; r: ; Spcciall&, Minimum Qualifications: Graduation from high school or GED and two (2) years of grounds and/or tree maintenance experience, or an equivalent combination of education and experience. Desirable Dualifications: ISA Certified Tree Maintenance Worker/Climber preferred. APPLICATIONS MAY BE FILED ONLINE AT: httD://www.elseaundo.orcif OUR OFFICE IS LOCATED AT: 350 Main Street EI Segundo, CA 90245 310-524-2381 Position #2019-00186 TREE MAINTENANCE WORKER LD iii t _ CITY OF EL SEGUNDO invites applications for the position of: Tree Maintenance Worker DESCRIPTION: The City of EI Segundo Recreation and Parks Department has an outstanding opportunity for a Tree Maintenance Worker. EI Segundo is a Tree City USA community that takes pride in its urban forest of over 6,000 public trees. The Tree Maintenance Worker positions are full-time permanent positions, assigned to the Parks Maintenance Division of the Department and represented by the City Employees' Association (CEA)*. All properly submitted online applications with completed supplemental questionnaires will be reviewed. Prompt application is encouraged as an application cut-off date may be established at any time. Onlv those applicants appearing best qualified based upon. the application materials submitted will be invited to oarticigate in the testing, process. The testing process will consist of a structured, technical oral interview (weighted 100% for eligible list placement). The interview date is to be determined. Candidates must pass the oral interview with a 70.0% or higher for their name to be placed on the eligibility list. Eligibility lists are normally valid for one year. The eligibility list established for this recruitment will be used to fill the current vacancy and any future vacancies that arise during the life of the eligibility list. All new hires must successfully complete a one-year probationary period to obtain permanent status in this position. Under general supervision, performs a variety of semi -skilled and skilled tree maintenance work in City parks and parkways. ESSENTIAL JOB FUNCTIONS: Essential functions, as defined under the Americans with Disabilities Act, may include the following duties and responsibilities, knowledge, skills and other characteristics. This list of duties and responsibilities is ILLUSTRATIVE ONLY, and is not a comprehensive listing of all functions and tasks performed by positions in this class. Characteristic Duties and Responsibilities: 447 Uses power tools and equipment and hand tools to perform all aspects of tree installation, maintenance and removal; applies fertilizers and pesticides. Prepares ground; plants, trims, prunes, waters and fertilizes new trees and removes trees, shrubs and hedges; climbs trees using appropriate safety equipment and techniques; removes branches of or entire trees that are dead, diseased or are causing damage to concrete; removes stumps with stump grinder; root prunes trees and completes compensatory tree pruning. QUALIFICATIONS: Knowledge. Skills and Other Characteristics: Knowledge of the methods, materials, and equipment used in maintenance and care of trees. Knowledge of the operation, maintenance and repair of tools and equipment used in maintenance and care of trees. Knowledge of hazards and applicable safety precautions for equipment operation. Knowledge of equipment capabilities, limitations and safe operating characteristics. Knowledge of OSHA safety standards related to assigned tasks and equipment operation and maintenance. Skill performing skilled and semi -skilled tree maintenance tasks. Skill in operation, maintenance and minor repair of equipment used in tree maintenance. Skill in establishing and maintaining effective working relationships with other department staff, other City employees and the public. Workina Conditions: Regularly exposed to weather conditions. Regularly required to lift and/or carry up to 50 pounds. Licensing /Certification Reauirements: A valid Class B California Driver's license. MrP Minimum Qualifications: Graduation from high school or GED and two (2) years of grounds and/or tree maintenance experience, or an equivalent combination of education and experience. Desirable Qualifications: ISA Certified Tree Maintenance Worker/Climber preferred. APPLICATIONS MAY BE FILED ONLINE AT: Position #2019-00186 htto://www.elseoundo.cra/ TREE MAINTENANCE WORKER LD OUR OFFICE IS LOCATED AT: 350 Main Street EI Segundo, CA 90245 310-524-2381 Tree Maintenance Worker Supplemental Questionnaire * 1. The following supplemental questions will be used to evaluate your qualifications for the position for which you are applying. Based upon the application materials and responses to the supplemental questionnaire, the best qualified candidates will be invited to participate in the selection process. Resumes are encouraged but will NOT be used in lieu of the application or supplemental questions. Please read each question carefully and provide a thorough and complete response, detailing your experience. Do NOT state "see resume" or "see application" to respond to any of the following questions. You will not have an opportunity to provide additional information if your application is not selected to proceed in the recruitment process, so you should be sure to detail ALL relevant work experience within your application and supplemental questionnaire. Do you understand and agree to the foregoing? JYes JNo * 2. Do you have a high school diploma, GED certificate, or equivalent? JYes JNo * 3. Do you currently possess a valid Class B License? -JYes JNo * 4. Are you a ISA Certified Tree Worker /Climber Specialist? JYes JNo EM * 5. I understand that the ISA Certification is required as an attachment to my application. If I am unable to attach it to this application, then I may email it to Idaniels@elsegundo.org at the time of application submission. ❑Yes ❑No * Required Question EL SEGUNDO CITY COUNCIL AGENDA ITEM STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Consent Agenda Consideration and possible action to authorize the City Manager to execute a contract amendment with RHA Landscape Architects- Planners, Inc. for additional work related to Washington Park construction documents and construction observation. (Fiscal Impact: not to exceed $36,730) RECOMMENDED COUNCIL ACTION: 1. Authorize the City Manager to execute a contract amendment with RHA Landscape Architects - Planners, Inc. for additional work related to Washington Park construction documents and observation; and, 2. Authorize the expenditure not to exceed $36,730; or, 3. Alternatively, discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: 1. Amendment 2. Scope of Service 3. Fee Proposal FISCAL IMPACT: Not to exceed $36,730 for FY18/19 Amount Budgeted: $270,000 Additional Appropriation: No Account Number(s): 301-400-8152-8213 (Washington Park CIP Fund) ORIGINATED BY: Meredith Petit, Director of Recreation and Parks REVIEWED BY: Meredith Petit, Director of Rec ion and Parks APPROVED BY: Greg Carpenter, City Manage BACKGROUND & DISCUSSION: On October 15, 2018 the City entered into an agreement with RHA Landscape Architects- Planners, Inc. for the purpose of preparing conceptual designs and design development for the Acacia and Washington Park projects. The initial agreement was for $49,385 and included several community meetings and design development for both project sites and was paid for with funds from Developer Impact Fees. As staff proceeds with the Washington Park project, additional work is required for the preparation of the construction documents and observation. RHA Landscape Architects -Planners, Inc. prepared the conceptual designs and are very familiar with the site and proposed improvements. Preparing the construction documents assists the Public Works Department and is a natural extension of the current contract. The additional scope of work is quoted not to exceed $36,730 with a portion of that amount reserved for as -needed services during construction. In total, the contract amount would be $85,385. To accommodate this amendment's scope of work, it is recommended City Council approve the contract amendment for additional $36,730 and extend the term by one year expiring June 30, 2020. The services will be paid for from anticipated CIP fund balance derived from savings from various projects at the end of this fiscal year. 451 FIRST AMENDMENT TO AGREEMENT NO. 5602 BETWEEN THE CITY OF EL SEGUNDO AND RHA LANDSCAPE ARCHITECTS -PLANNERS, INC. FIRST AMENDMENT ("Amendment") is made and entered into this 18th day of June, 2019, by and between the CITY OF EL SEGUNDO, a general law city and municipal corporation existing under the laws of California ("CITY'), and RHA LANDSCAPE ARCHITECTS-PLANNERS,INC. a California limited liability company ("CONSULTANT"). Section 1(C) is amended to allow the CITY to pay CONSULTANT an additional sum, not to exceed Thirty Six Thousand Dollars ($36,000) for the landscape architectural services for Washington Park construction documents. CITY will pay this sum as specified in the attachment Exhibit A which is incorporated by reference. 2. Pursuant to Section 8 of Agreement No. 5602 ("Agreement"), is amended to extend the term of the Agreement to June 30, 2020. 3. This Amendment may be executed in any number or counterparts, each of which will be an original, but all of which together constitutes one instrument executed on the same date. 4. Except as modified by this Amendment, all other terms and conditions of Agreement No. 5602 remain the same. IN WITNESS WHEREOF the parties hereto have executed this Amendment the day and year first hereinabove written. CITY OF EL SEGUNDO Greg Carpenter, City Manager ATTEST: Tracy Weaver, City Clerk RHA LADSCAPE ARCHITECTS PLANNERS, INC. Doug Grove President Taxpayer ID No. 452 APPROVED AS TO FORM: Mark D. Hensley, City Attorney 453 EI Segundo Washington Parks April 25, 2019 Meredith Petit Page 1 of 2 WASHINGTON PARK PROPOSAL - SCOPE OF SERVICES Mr. Greg Meek, Principal, Landscape Architect RLA, CPSC, will be the Principal -in -Charge of the Washington Park project. His extensive experience in Landscape Architecture and park planning and will ensure that no details are overlooked in the preparation of the conceptual designs and design development documents for Acacia park. TASK 1: CONSTRUCTION DOCUMENTS — We will prepare the following construction documents in sufficient detail for competitive bidding and construction: Demolition Plan — RHA will prepare a demolition plan that will identify all existing items within the proposed improvement area and whether they are to be protected -in-place or removed. Construction Plan & Details - RHA will prepare a construction plan that will locate by dimensioning all site elements including, Play Equipment, concrete paving, and site furnishings. Details will be provided to demonstrate proper construction and installation of all the site elements. Irrigation Plan and Details — This plan will layout all piping, valve, control equipment, and sprinkler heads for irrigation of the planted areas. The Irrigation Plan will define water wise irrigation design and equipment including water distribution devices, valves, lines, controllers and all components necessary to operate the irrigation systems. Details in concurrence with the City of EI Segundo standards will be provided. We will prepare the various required water use estimate calculations, peak demand calculations, watering window calculations and pressure loss calculations. Planting Plan and Details — Planting plants will specify all proposed plant material to be installed in the improvement areas. We will provide photos and descriptions of all plant material for review by the city. Details in concurrence with the City of EI Segundo standards will be provided. Soil Management Plan - In accordance with the State of California Model Water Efficient Landscape Ordinance (MWELO) and any City/County specific ordinance we will prepare a Soil Management Plan that will include soil testing after mass grading to identify soil type, texture, infiltration rates and recommendations for soil amendments. Specifications — We will prepare notes/specifications identifying types and qualities of materials and methods to be used in construction. Opinion of Probable Construction Cost — We will prepare an opinion of probable construction cost based upon the construction documents. TASK 2- BIDDING PROCESS We understand that City, RH will disperse the plans and request bids from the appropriate contractors and will receive bids. We will answer questions and provide clarification as necessary and will assist in the evaluation of the bids received as required. RHA LANDSCAPE ARCHITECTS -PLANNERS, INC. Scope of Services and Schedule 454 EI Segundo Washington Parks Meredith Petit April 25, 2019 Page 2 of 2 TASK 3 - CONSTRUCTION OBSERVATION RHA will make weekly field observation visits of the project during construction to review construction progress as requested by the City. The City's inspector will provide the day-to-day inspection, organize the meetings and provide construction administration. We will support the City, advising and making recommendations. 1. A pre -construction conference will be conducted to be attended by the City, Design Team, and the contractor along with major subcontractors for the project. All of the requirements regarding the hours of operation during the length of the construction process will be carefully outlined. All of the required contracts, bonds, and insurance will be reviewed with the contractor. Construction schedules as provided by the contractor along with the schedule of values will be reviewed and approved. 2. Weekly to the job sites will be conducted including meetings with the general contractor and the City to ascertain the progress of the project and its compliance with the contract documents. Meeting minutes will be prepared for distribution. 3. All necessary drawings/specification clarifications will be prepared to further indicate project requirements. 4. Assistance will be provided for the development of change orders as related to the original scope of work along with the review of contractor submittals including reviewing and approving all cost breakdowns. 5. All submittals provided by the contractor as required in the contract documents will be reviewed and approved including shop drawings, samples, and product data. Turnaround time for review of submittals will be one (1) week from receipt of submittals in RHA's office. 6. Assistance will be provided as to the appropriateness of all testing and inspection related to the project. 7. Upon completion of the project, a final punch list will be prepared for items to be corrected on the project by the contractor. Assistance will be provided in coordinating all of the required guarantees and operating manuals for all of the components of the irrigation systems. 8. A final inspection of the project at the conclusion of the landscape maintenance period. We will make recommendations for acceptance by the City as appropriate. 9. We will periodically review the as -built drawings in the field and at project completion for accuracy. RHA LANDSCAPE ARCHITECTS -PLANNERS, INC. Scope of Services and Schedule 455 Washington Park Fee Proposal 4/25/2019 RHA Landscape Architects -Planners RHA Landscape Architects - David Beckwith &Associates Planners, Inc. TASK Principal Project Staff Principal Project Staff TOTAL Manager Manager $150 $115 $95 $200 $165 $125 Construction Document Preparation Project Management 24 16 8 4 2 $ 7,330 Demolition Plan 8 16 16 $ 4,560 Precise Grading Plan 8 8 8 4 8 16 $ 7,000 Construction Plan 8 16 24 $ 5,320 Irrigation Plan and Details 8 8 24 $ 4,400 Planting Plan and Details 8 8 24 $ 4,400 Estimate of Costs 8 8 8 $ 2,880 Specifications 8 16 4 $ 3,420 Meetings with Staff (3) 12 12 8 $ 3,940 Subtotal Hours 56 1 64 1 80 1 8 101 16 1 234 Subtotal Dollars $ 8,400 1 $ 7,360 1 $ 7,600 1 $ 1,600 1 $ 1,650 1 $ 2,000 $ 28,610 Expensesl $500 $200 $ 700 TOTALI $23,860 $5,450 $ 29,310 SupportConstruction As Needed RFI and Submittlal Review 15 26 6 $ 5,810 As-Builts 2 2 6 $ 1,100 Project Close-out 4 2 4 $ 1,210 Subtotal Hoursl 21 1 30 1 16 1 - 1 - 1 - l 67 Subtotal Dollarsl $ 3,150 1 $ 3,450 1 $ 1,520 1 $ - 1 $ - 1 $ - J$ 8,120 Expensed $400 ] $ 400 TOTAL $8,520 $0 $ 8,520 TOTAL EXPENSES $ - TOTAL FEES $ 11,550 I $ 10,810 1 $ 9,120 $ 1,600 1 $ 1,650 1 $ 2,000 I $ 36,730 TOTAL DOLLARS $31,480 $5,250 ENE= EL SEGUNDO CITY COUNCIL AGENDA ITEM STATEMENT AGENDA DESCRIPTION: MEETING DATE: June 18, 2019 AGENDA HEADING: Consent Agenda Consideration and possible action to award a professional services contract to Raftelis Financial Consultants for the water and wastewater rate study. (Fiscal Impact: $98,845) RECOMMENDED COUNCIL ACTION: 1. Authorize the City Manager to execute a standard professional services agreement, in a form approved by the City Attorney, with Raftelis in an amount not to exceed of $98,845 for the water and wastewater rate study for the City of El Segundo. 2. Alternatively, discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: A. Professional Services Agreement for the water and wastewater rate study FISCAL IMPACT: Amount Budgeted: $98,845 - $49,423 in the water fund (fund 501) and $49,422 in the sewer fund (fund 502) Additional Appropriation: N/A Account Number(s): There are sufficient budget savings from vacant positions in the water and sewer funds will be used to cover the cost of the water and wastewater rate study. STRATEGIC PLAN: Goal: 5(b) Champion Economic Development and Fiscal Sustainability: El Segundo approaches its work in a financially disciplined and responsible way Objective: 2 The City will maintain a stable, efficient, and transparent financial environment PREPARED BY: Juliana Demers, Revenue Manager REVIEWED BY: Joseph Lillio, Director of Finance1 APPROVED BY: Greg Carpenter, City Manager DISCUSSION: Water and Wastewater (Sewer) Rate Study The City of El Segundo (the "City") provides water and sewer services to residential, commercial, industrial, and institutional customers located within the City. Staff is recommending to execute an agreement with Raftelis Financial Consultants perform an analysis of the existing water and sewer utilities and to recommend any rate adjustments for Fiscal Years (FY) 2020-2024. 457 Some of the specific elements to be addressed in this study included: • Overall Rate Design — The fairness, equity and impacts of rate increases on customer bills are significant concerns to the City Council and staff and, therefore are critical considerations in evaluating the overall rate design, including the amount of revenue collected from fixed charges vs. volumetric rates. Several alternatives will be evaluated. • Financial Planning Alternatives — The longer -range financial plans and capital improvement funding alternatives for the water and sewer utilities will be closely examined and adjusted to best meet annual operating and longer-term capital improvement costs. A multi-year forecast will be prepared for three financial scenarios: Optimal, Achievable, and Minimal. Rate Study Background The goal of the study is to ensure that the revenues cover the cost of services, meet reserve requirements, and provide revenue for capital improvements. Rate Design Criteria — Several criteria are typically considered in setting rates and developing sound rate structures. The fundamentals of this process have been documented in a number of rate -setting manuals. The most commonly referenced industry standard in California is the AWWA Manual M1. The following is a simplified list of some of the broader attributes of a sound rate structure: ■ Rates should be easy to understand from the customer's perspective. • Rates should be easy to administer from the utility's perspective. • Rates should promote the efficient allocation of the resource. • Rates should be equitable and non -discriminating (that is, cost based). • There should be continuity in the rate making philosophy over time. • Other utility policies should also be considered (for example, encouraging conservation and economic development). • Rates should provide month-to-month and year-to-year revenue stability The last water and sewer rate study was completed in 2014 and the basis of the study was to ensure that the City could cover the cost of service as well as provide a revenue stream for capital improvements that are paid with available funds and not financed. The water and sewer rates were adopted for five years (2015-2019). This last water rate study is the basis for the current tiered rate structure in place today. The rate study was completed by AKM Consulting Engineers and primarily focused on bringing revenue in line with operating and maintenance costs. The rates were adopted for five years (2015-2019) with the last increase scheduled to take effect in July 2019. Why do a rate study? The City of El Segundo operates its water and sewer utilities as a self-sufficient enterprise. In order to continue this, the water and sewer utilities will need to generate sufficient revenues to meet normal and emergency demands in accordance with federal and state requirements, support operations and maintenance, fund its long term facility replacement and capital improvement program, and establish adequate retained earnings to respond to emergencies. M. The City is committed to maintaining critical inftastructure and complying with all applicable laws, rules and regulations to deliver safe, dependable and efficient water and sewer services to our customers. The City strives to maintain the affordability of these services. The City needs to conduct a study of rates for water and sewer services in order to evaluate whether or not the City's water and sewer enterprise funds can cover rising costs as well as planned capital improvements to the water and sewer systems. The rate study will propose water and sewer rates to ensure that the utilities collect sufficient revenue to cover normal and emergency demands in accordance with federal and state requirements, support operations and maintenance, fund its long term facility replacement and capital improvement program, establish adequate retained earnings to respond to emergencies, and fund ongoing repair and replacement of the water and sewer systems to maintain reliable service in future years. If the outcome of the study recommends a rate change and City Council is supportive of this recommendation, a Prop. 218 process will begin. What is Proposition 218? Proposition 218 is the initiative passed by California voters in November 1996 that establishes the process by which public agencies can raise fees for services. It was designed to provide greater public involvement in the entire rate setting process. Among other things, Proposition 218 requires the agency to mail a public notice to every single property owner regarding the proposed rate increase and to then hold a public hearing. It also establishes a protest process for the public to follow if they wish to oppose the proposed rates. What is the protest process? Proposition 218 prohibits an agency from implementing an increase in the rates if a majority of the affected property owners file written protests opposing the rates before the end of the public hearing. Only one written protest per affected property may be counted towards the majority protest. Recommendation Staff reached out to three consulting firms that specialize in the area of water and wastewater rate studies. Of the three firms, Raftelis Financial Consulting was most aligned with the City's objectives: revenue stability, affordability, equity/fairness, simplicity, and conservation. Staff is recommending approval of the professional services contract with Raftelis Financial Consultants for the water and wastewater rate study. 459 Agreement No. PROFESSIONAL SERVICES AGREEMENT �f BETWEEN THE CITY OF EL SEGUNDO AND RAFTELIS FINANCIAL CONSULTANTS, INC. This AGREEMENT is made and entered into this 18th day of June, 2019, by and between the CITY OF EL SEGUNDO, a municipal corporation and general law city ("CITY") and RAFTELIS FINANCIAL CONSULTANTS, INC., ("CONSULTANT"). The parties agree as follows: 1. CONSIDERATION. A. As partial consideration, CONSULTANT agrees to perform the work listed in the SCOPE OF SERVICES, below; B. As additional consideration, CONSULTANT and CITY agree to abide by the terms and conditions contained in this Agreement; C. As additional consideration, CITY agrees to pay CONSULTANT a sum not to exceed Ninety Eight thousand, Eight hundred forty-five dollars ($98,845) for CONSULTANT's services. CITY may modify this amount as set forth below. Unless otherwise specified by written amendment to this Agreement, CITY will pay this sum as specified in the attached Exhibit "A," which is incorporated by reference. 2. SCOPE OF SERVICES. A. CONSULTANT will perform services listed in the attached Exhibit "A," which is incorporated by reference. B. CONSULTANT will, in a professional manner, furnish all of the labor, technical, administrative, professional and other personnel, all supplies and materials, equipment, printing, vehicles, transportation, office space and facilities, and all tests, testing and analyses, calculation, and all other means whatsoever, except as herein otherwise expressly specified to be furnished by CITY, necessary or proper to perform and complete the work and provide the professional services required of CONSULTANT by this Agreement. 3. PERFORMANCE STANDARDS. While performing this Agreement, CONSULTANT will use the appropriate generally accepted professional standards of practice existing at the time of performance utilized by persons engaged in providing similar services. CITY will continuously monitor CONSULTANT's services. CITY will notify CONSULTANT of any deficiencies and CONSULTANT will have fifteen (15) days after such notification to City of EI Segundo Professional Services (REV 2018.05) Page 1 of 11 i -e Agreement No. cure any shortcomings to CITY's satisfaction. Costs associated with curing the deficiencies will be borne by CONSULTANT. 4. PAYMENTS. For CITY to pay CONSULTANT as specified by this Agreement, CONSULTANT must submit a detailed invoice to CITY which lists the hours worked and hourly rates for each personnel category and reimbursable costs (all as set forth in Exhibit "A") the tasks performed, the percentage of the task completed during the billing period, the cumulative percentage completed for each task, the total cost of that work during the preceding billing month and a cumulative cash flow curve showing projected and actual expenditures versus time to date. 5. NON -APPROPRIATION OF FUNDS. Payments due and payable to CONSULTANT for current services are within the current budget and within an available, unexhausted and unencumbered appropriation of the CITY. In the event the CITY has not appropriated sufficient funds for payment of CONSULTANT services beyond the current fiscal year, this Agreement will cover only those costs incurred up to the conclusion of the current fiscal year. 6. FAMILIARITY WITH WORK. A. By executing this Agreement, CONSULTANT agrees that it has: Carefully investigated and considered the scope of services to be performed; Carefully considered how the services should be performed; and iii. Understands the facilities, difficulties, and restrictions attending performance of the services under this Agreement. B. If services involve work upon any site, CONSULTANT agrees that CONSULTANT has or will investigate the site and is or will be fully acquainted with the conditions there existing, before commencing the services hereunder. Should CONSULTANT discover any latent or unknown conditions that may materially affect the performance of the services, CONSULTANT will immediately inform CITY of such fact and will not proceed except at CONSULTANT's own risk until written instructions are received from CITY. 7. TERM. The term of this Agreement will be from June 18, 2019, to September 30, 2020. Unless otherwise determined by written amendment between the parties, this Agreement will terminate in the following instances: A. Completion of the work specified in Exhibit "A"; City of EI Segundo Professional Services (REV 2018.05) Page 2 of 11 461 Agreement No. B. Termination as stated in Section 15. 8. TIME FOR PERFORMANCE. A. CONSULTANT will not perform any work under this Agreement until: CONSULTANT furnishes proof of insurance as required under Section 22 of this Agreement; and ii. CITY gives CONSULTANT a written notice to proceed. B. Should CONSULTANT begin work on any phase in advance of receiving written authorization to proceed, any such professional services are at CONSULTANT's own risk. 9. TIME EXTENSIONS. Should CONSULTANT be delayed by causes beyond CONSULTANT's control, CITY may grant a time extension for the completion of the contracted services. If delay occurs, CONSULTANT must notify the Manager within forty-eight (48) hours, in writing, of the cause and the extent of the delay and how such delay interferes with the Agreement's schedule. The Manager will extend the completion time, when appropriate, for the completion of the contracted services. 10. CONSISTENCY. In interpreting this Agreement and resolving any ambiguities, the main body of this Agreement takes precedence over the attached Exhibit; this Agreement supersedes any conflicting provisions. Any inconsistency between the Exhibits will be resolved in the order in which the Exhibits appear below: A. Exhibit: A: Proposal for Services/Scope of Work. 11. CHANGES. CITY may order changes in the services within the general scope of this Agreement, consisting of additions, deletions, or other revisions, and the contract sum and the contract time will be adjusted accordingly. All such changes must be authorized in writing, executed by CONSULTANT and CITY. The cost or credit to CITY resulting from changes in the services will be determined in accordance with written agreement between the parties. 12. TAXPAYER IDENTIFICATION NUMBER. CONSULTANT will provide CITY with a Taxpayer Identification Number. 13. PERMITS AND LICENSES. CONSULTANT, at its sole expense, will obtain and maintain during the term of this Agreement, all necessary permits, licenses, and certificates that may be required in connection with the performance of services under this Agreement. 14. WAIVER. CITY's review or acceptance of, or payment for, work product prepared by CONSULTANT under this Agreement will not be construed to operate as a waiver of City of EI Segundo Professional Services (REV 2018.05) Page 3 of 11 IVA Agreement No. any rights CITY may have under this Agreement or of any cause of action arising from CONSULTANT's performance. A waiver by CITY of any breach of any term, covenant, or condition contained in this Agreement will not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained in this Agreement, whether of the same or different character. 15. TERMINATION. A. Except as otherwise provided, CITY may terminate this Agreement at any time with or without cause. B. CONSULTANT may terminate this Agreement at any time with CITY's mutual consent. Notice will be in writing at least thirty (30) days before the effective termination date. C. Upon receiving a termination notice, CONSULTANT will immediately cease performance under this Agreement unless otherwise provided in the termination notice. Except as otherwise provided in the termination notice, any additional work performed by CONSULTANT after receiving a termination notice will be performed at CONSULTANT's own cost; CITY will not be obligated to compensate CONSULTANT for such work. D. Should termination occur, all finished or unfinished documents, data, studies, surveys, drawings, maps, reports and other materials prepared by CONSULTANT will, at CITY's option, become CITY's property, and CONSULTANT will receive just and equitable compensation for any work satisfactorily completed up to the effective date of notice of termination, not to exceed the total costs under Section 1(C). E. Should the Agreement be terminated pursuant to this Section, CITY may procure on its own terms services similar to those terminated. F. By executing this document, CONSULTANT waives any and all claims for damages that might otherwise arise from CITY's termination under this Section. 16.OWNERSHIP OF DOCUMENTS. All documents, data, studies, drawings, maps, models, photographs and reports prepared by CONSULTANT under this Agreement are CITY's property. CONSULTANT may retain copies of said documents and materials as desired but will deliver all original materials to CITY upon CITY's written notice. CITY agrees that use of CONSULTANT's completed work product, for purposes other than identified in this Agreement, or use of incomplete work product, is at CITY's own risk. 17. PUBLICATION OF DOCUMENTS. Except as necessary for performance of service under this Agreement, no copies, sketches, or graphs of materials, including graphic art City of EI Segundo Professional Services (REV 2018.05) Page 4 of 11 463 Agreement No. work, prepared pursuant to this Agreement, will be released by CONSULTANT to any other person or public CITY without CITY's prior written approval. All press releases, including graphic display information to be published in newspapers or magazines, will be approved and distributed solely by CITY, unless otherwise provided by written agreement between the parties. 18. INDEMNIFICATION. A. CONSULTANT agrees to the following: Indemnification for Professional Services. CONSULTANT will save harmless and indemnify and at CITY's request reimburse defense costs for CITY and all its officers, volunteers, employees and representatives from and against any and all suits, actions, or claims, of any character whatever, brought for, or on account of, any injuries or damages sustained by any person or property resulting or arising from any negligent or wrongful act, error or omission by CONSULTANT or any of CONSULTANT's officers, agents, employees, or representatives, in the performance of this Agreement, except for such loss or damage arising from CITY's sole negligence or willful misconduct. ii. Indemnification for other Damages. CONSULTANT indemnifies and holds CITY harmless from and against any claim, action, damages, costs (including, without limitation, attorney's fees), injuries, or liability, caused by any negligence, errors or omissions, or failure of performance by Consultant, except for such loss or damage arising from CITY's sole negligence or willful misconduct. Should CITY be named in any suit, or should any claim be brought against it by suit or otherwise, whether the same be groundless or not, arising out of this Agreement, or its performance, CONSULTANT will defend CITY (at CITY's request and with counsel satisfactory to CITY) and will indemnify CITY for any judgment rendered against it or any sums paid out in settlement or otherwise. B. For purposes of this section "CITY" includes CITY's officers, officials, employees, agents, representatives, and certified volunteers. C. It is expressly understood and agreed that the foregoing provisions will survive termination of this Agreement. D. The requirements as to the types and limits of insurance coverage to be maintained by CONSULTANT as required by Section 22, and any City of EI Segundo Professional Services (REV 2018.05) Page 5 of 11 .E Agreement No. approval of said insurance by CITY, are not intended to and will not in any manner limit or qualify the liabilities and obligations otherwise assumed by CONSULTANT pursuant to this Agreement, including, without limitation, to the provisions concerning indemnification. 19. ASSIGNABILITY. This Agreement is for CONSULTANT's professional services. CONSULTANT's attempts to assign the benefits or burdens of this Agreement without CITY's written approval are prohibited and will be null and void. 20. INDEPENDENT CONTRACTOR. CITY and CONSULTANT agree that CONSULTANT will act as an independent contractor and will have control of all work and the manner in which it is performed. CONSULTANT will be free to contract for similar service to be performed for other employers while under contract with CITY. CONSULTANT is not an agent or employee of CITY and is not entitled to participate in any pension plan, insurance, bonus or similar benefits CITY provides for its employees. Any provision in this Agreement that may appear to give CITY the right to direct CONSULTANT as to the details of doing the work or to exercise a measure of control over the work means that CONSULTANT will follow the direction of the CITY as to end results of the work only. 21.AUDIT OF RECORDS. CONSULTANT will maintain full and accurate records with respect to all services and matters covered under this Agreement. CITY will have free access at all reasonable times to such records, and the right to examine and audit the same and to make transcript therefrom, and to inspect all program data, documents, proceedings and activities. CONSULTANT will retain such financial and program service records for at least three (3) years after termination or final payment under this Agreement. 22. INSURANCE. A. Before commencing performance under this Agreement, and at all other times this Agreement is effective, CONSULTANT will procure and maintain the following types of insurance with coverage limits complying, at a minimum, with the limits set forth below: Tvne of Insurance Commercial general liability: Professional Liability Business automobile liability Workers compensation City of EI Segundo Professional Services (REV 2018.05) Page 6 of 11 Limits $2,000,000 $1,000,000 $1,000,000 Statutory requirement 465 Agreement No. B. Commercial general liability insurance will meet or exceed the requirements of the most recent ISO -CGL Form. The amount of insurance set forth above will be a combined single limit per occurrence for bodily injury, personal injury, and property damage for the policy coverage. Liability policies will be endorsed to name CITY, its officials, and employees as "additional insureds" under said insurance coverage and to state that such insurance will be deemed "primary" such that any other insurance that may be carried by CITY will be excess thereto. Such endorsement must be reflected on ISO Form No. CG 20 10 11 85 or 88, or equivalent. Such insurance will be on an "occurrence," not a "claims made," basis and will not be cancelable or subject to reduction except upon thirty (30) days prior written notice to CITY. C. Professional liability coverage will be on an "occurrence basis" if such coverage is available, or on a "claims made" basis if not available. When coverage is provided on a "claims made basis," CONSULTANT will continue to renew the insurance for a period of three (3) years after this Agreement expires or is terminated. Such insurance will have the same coverage and limits as the policy that was in effect during the term of this Agreement and will cover CONSULTANT for all claims made by CITY arising out of any errors or omissions of CONSULTANT, or its officers, employees or agents during the time this Agreement was in effect. D. Automobile coverage will be written on ISO Business Auto Coverage Form CA 00 01 06 92, including symbol 1 (Any Auto). E. CONSULTANT will furnish to CITY duly authenticated Certificates of Insurance evidencing maintenance of the insurance required under this Agreement and such other evidence of insurance or copies of policies as may be reasonably required by CITY from time to time. Insurance must be placed with insurers with a current A.M. Best Company Rating equivalent to at least a Rating of "A:VII." F. Should CONSULTANT, for any reason, fail to obtain and maintain the insurance required by this Agreement, CITY may obtain such coverage at CONSULTANT's expense and deduct the cost of such insurance from payments due to CONSULTANT under this Agreement or terminate pursuant to Section 155. 23. USE OF SUBCONTRACTORS. CONSULTANT must obtain CITY's prior written approval to use any consultants while performing any portion of this Agreement. Such approval must approve of the proposed consultant and the terms of compensation. 24. INCIDENTAL TASKS. CONSULTANT will meet with CITY monthly to provide the status on the project, which will include a schedule update and a short narrative City of EI Segundo Professional Services (REV 2018.05) Page 7 of 11 N.. Agreement No. description of progress during the past month for each major task, a description of the work remaining and a description of the work to be done before the next schedule update. 25. NOTICES. All communications to either party by the other party will be deemed made when received by such party at its respective name and address as follows: If to CONSULTANT: Raftelis Financial Consultants, Inc. 445 S. Figueroa Street, Suite 2270 Los Angeles, CA 90071 Attention: Sanjay Gaur Phone: (213) 262-9304 Email: sgaur@raftelis.com If to CITY: City of EI Segundo 350 Main Street EI Segundo, CA 90245 Attention: Juliana Demers Phone: (310) 524-2332 Email: jdemers@elsegundo.org Any such written communications by mail will be conclusively deemed to have been received by the addressee upon deposit thereof in the United States Mail, postage prepaid and properly addressed as noted above. In all other instances, notices will be deemed given at the time of actual delivery. Changes may be made in the names or addresses of persons to whom notices are to be given by giving notice in the manner prescribed in this paragraph. 26. CONFLICT OF INTEREST. CONSULTANT will comply with all conflict of interest laws and regulations including, without limitation, CITY's conflict of interest regulations. 27. SOLICITATION. CONSULTANT maintains and warrants that it has not employed nor retained any company or person, other than CONSULTANT's bona fide employee, to solicit or secure this Agreement. Further, CONSULTANT warrants that it has not paid nor has it agreed to pay any company or person, other than CONSULTANT's bona fide employee, any fee, commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting from the award or making of this Agreement. Should CONSULTANT breach or violate this warranty, CITY may rescind this Agreement without liability. 28. THIRD PARTY BENEFICIARIES. This Agreement and every provision herein is generally for the exclusive benefit of CONSULTANT and CITY and not for the benefit of any other party. There will be no incidental or other beneficiaries of any of CONSULTANT's or CITY's obligations under this Agreement. 29. INTERPRETATION. This Agreement was drafted in and will be construed in accordance with the laws of the State of California, and exclusive venue for any action involving this agreement will be in Los Angeles County. City of EI Segundo Professional Services (REV 2018.05) Page 8 of 11 467 Agreement No. 30. COMPLIANCE WITH LAW. CONSULTANT agrees to comply with all federal, state, and local laws applicable to this Agreement. 31. ENTIRE AGREEMENT. This Agreement, and its Exhibit(s), sets forth the entire understanding of the parties. There are no other understandings, terms or other agreements expressed or implied, oral or written. This Agreement will bind and inure to the benefit of the parties to this Agreement and any subsequent successors and assigns. 32. RULES OF CONSTRUCTION. Each Party had the opportunity to independently review this Agreement with legal counsel. Accordingly, this Agreement will be construed simply, as a whole, and in accordance with its fair meaning; it will not be interpreted strictly for or against either Party. 33. SEVERABILITY. If any portion of this Agreement is declared by a court of competent jurisdiction to be invalid or unenforceable, then such portion will be deemed modified to the extent necessary in the opinion of the court to render such portion enforceable and, as so modified, such portion and the balance of this Agreement will continue in full force and effect. 34. AUTHORITY/MODIFICATION. The Parties represent and warrant that all necessary action has been taken by the Parties to authorize the undersigned to execute this Agreement and to engage in the actions described herein. This Agreement may be modified by written amendment. 35.ACCEPTANCE OF ELECTRONIC SIGNATURES. The Parties agree that this Agreement, agreements ancillary to this Agreement, and related documents to be entered into in connection with this Agreement will be considered signed when the signature of a party is delivered by electronic (pdf) or facsimile transmission. Such electronic or facsimile signature will be treated in all respects as having the same effect as an original signature. 36. CAPTIONS. The captions of the paragraphs of this Agreement are for convenience of reference only and will not affect the interpretation of this Agreement. 37. TIME IS OF ESSENCE. Time is of the essence for each and every provision of this Agreement. 38. FORCE MAJEURE. Should performance of this Agreement be prevented due to fire, flood, explosion, acts of terrorism, war, embargo, government action, civil or military authority, the natural elements, or other similar causes beyond the Parties' reasonable control, then the Agreement will immediately terminate without obligation of either party to the other. City of EI Segundo Professional Services (REV 2018.05) Page 9 of 11 f.: Agreement No. 39. STATEMENT OF EXPERIENCE. By executing this Agreement, CONSULTANT represents that it has demonstrated trustworthiness and possesses the quality, fitness and capacity to perform the Agreement in a manner satisfactory to CITY. CONSULTANT represents that its financial resources, surety and insurance experience, service experience, completion ability, personnel, current workload, experience in dealing with private consultants, and experience in dealing with public agencies all suggest that CONSULTANT is capable of performing the proposed contract and has a demonstrated capacity to deal fairly and effectively with and to satisfy a public CITY. [Signatures on next page] City of EI Segundo Professional Services (REV 2018.05) Page 10 of 11 Me Agreement No. IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and year first hereinabove written. CITY OF EL SEGUNDO Greg Carpenter, City Manager ATTEST: Tracy Weaver, City Clerk APPROVED AS TO FORM: Mark D. Hensley, City Attorney City of EI Segundo Professional Services (REV 2018.05) Page 11 of 11 RAFTELIS FINANCIAL CONSULTANTS, INC. Sanjay Gaur Vice President WE RAFTELIS February 8, 2019 Mr. Joseph Lillio Director of Finance City of El Segundo 350 Main Street El Segundo, CA 90245 445 S Figueroa Street Phone 213 262 9300 www.raftelis.com Suite 2270 Fax 213 262 9303 Los Angeles, CA 90071 Suhiect: Proposal for Water and Wastewater Rate Study Dear Mr. Lillio: Raftelis Financial Consultants, Inc. (Raftelis) is pleased to submit this proposal to assist the City of El Segundo (City) in conducting the Water and Wastewater Rate Study (Study). Raftelis has a broad range of experience in conducting water and wastewater rate studies. In fact, Raftelis has the largest water and wastewater rate consulting practice in California and the nation. We have assisted numerous utilities throughout California and across the U.S. conducting thousands of such studies. We are excited to have the opportunity to assist the City in this important Study. The scope of services is presented below. Scope of Services TASK 1 -PROJECT INITIATION, MANAGEMENT AND QA/QC Task 1.1 Project Initiation and Data Collection A productive on-site kick-off meeting is the most effective way to begin a rate study. The goals for the kick- off meeting include: ■ Acquainting City Staff with our Project Team • Establishing goals and objectives • Finalizing the work plan and schedule • Discussing the pricing objectives, including equity, affordability, and revenue stability among other ■ Discussing the data request and any additional data requirements Prior to the kick-off meeting, we will prepare a detailed data request that identifies the information needed. If possible, Raftelis will review the initial data before the kick-off meeting and will come prepared with our questions to get the most out of the meeting. 11Page 471 Scope of Services for Water and Wastewater Rate Study City of El Segundo Task 1.2 Project Initiation and Data Collection Competent project management ensures a successful project. The project management task involves client correspondence, progress updates, timely billing, and internal management of Raftelis staff. A well-defined QA/QC program fosters work products that meet or exceed our clients' standards. To ensure robust quality control, one member of the Raftelis team (the Technical Reviewer) reviews the model and results to ensure they are based on sound rate -making principles. The Technical Reviewer provides an outside review and comment from someone who is not involved in the project. Task 1.3 Pricing Objectives with Staff We will complete a pricing objectives exercise with Staff to discuss and identify the goals of the rate structure and to which degree the rate structure achieves the following objectives: 1. Revenue Stability 2. Affordability 3. Perceived Equity/Fairness 4. Simplicity 5. Conservation We will perform an exercise with Staff for each enterprise in which we rank these pricing objectives in order of importance and then identify the rate structures which promote each of these objectives. Meetings: One (1) on-site kick-off meeting with City staff Deliverables: Kick-off meeting agenda materials, meeting minutes, and data request list TASK 2 — POLICY FRAMEWORK WORKSHOPS WITH CITY COUNCII Task 2.1 Policy Framework Inquiry Workshop with City Council Raftelis will begin the discussion with a review of the evolution of rate structures and the benefits and challenges associated with each structure, including uniform rate, seasonal rates, inclining tiered rates, and water budget rate structures. The goal of this discussion and the 'Pricing Objective Exercise' is for the City's elected officials to share with Raftelis its understanding of available rate structures and for Raftelis to provide the City an overview of all applicable alternatives according to the City's priorities and currently observed best management practices. Raftelis will present a list of pricing objectives for the members of the City Council to rank. The pricing objectives exercise and instructions prepared in Task 1 will be provided to the City prior to the Workshop. Note that several of these pricing objectives can conflict with each other, especially with conservation rate structures. For example, a rate philosophy focused on improving revenue stability may conflict with affordability. Raftelis will discuss the implications so that stakeholders can make informed decisions. 21 Page 472 Scope of Services for Water and Wastewater Rate Study City of El Segundo Task 2.2 Policy Framework Review with City Council Based on the City Council's ranking of pricing objectives and other inputs gathered during the preceding workshop, Raftelis will present the results of the pricing objective exercise and provide the City Council with the basis for recommending an alternative rate structure, as appropriate, along with other rate setting principles and policies to be used for the Rate Study. Task 2.3 Rate Setting Principles and Study Framework Memorandum Based on the City Council's ranking of pricing objectives and input regarding rate setting policies, Raftelis will summarize the workshop results in a framework memorandum (Memo) to be used as guiding principles for the Rate Study. Meetings: Two (2) on-site workshops with City Council Deliverables: PowerPoint"' Presentation materials, Pricing Objectives Exercise Packages in electronic format and framework memorandum in Microsoft Word'" TASK 3 - FINANCIAL PLAN DEVELOPMENT We will develop a financial plan for each enterprise - water and wastewater. The financial plans will assess each enterprise's current financial status and suggest revenue adjustments to ensure longterm fiscal sustainability. Raftelis will project expenses and revenue requirements over a 10 - year planning horizon. Projecting revenue adjustments over a 10 -year planning horizon illustrates future rate impacts and potential challenges to each enterprise's financial health so the City can plan expenses, reserve balances, or capital project scheduling to smooth rate impacts. We will project revenue requirements based on the current budget, the City's long-term capital funding strategy, and existing debt service (if applicable). Options for capital financing include rates, debt, grants, SRF loans or infrastructure bank loans. As part of the financial plans we will review and discuss reserves for operating, capital, rate stabilization, and emergency purposes for each enterprise. Raftelis understands the importance of developing a user-friendly, flexible model that the City can use for future financial planning such as inputting actual expenses and assessing the impact on rates. Raftelis builds each client's model from the ground up, carefully tailored to individual needs and preferences. Once completed, the model will serve as a comprehensive, yet flexible, planning tool that will incorporate the City's operating budget, forecasted demand projections, capital financing plan, revenue requirements, revenue projections, reserve balances, and customer impacts The dashboard is the graphical interface which displays the model's results in an easily understandable format. As denoted with corresponding letters in Figure 1 on the following page, the dashboard contains several features, including the ability to show or indicate: 31 Page 473 Scope of Services for Water and Wastewater Rate Study City of El Segundo A. Revenue adjustments required for the Figure 1: Sample Financial Plan Dashboard study period in Raftelis 1vill develop custonlized financial lnndel for the city that incorporates a order to meet Dashboard ro allow city Staff to easily rein scenarios and see the impacts simulated debt coverage and illstontaleousiy target reserve 1n•5.. e»aa4 a eegaroc,.w9 _!"I7.F balance(s) (blue 41.1 —min, - - 11,U. 5,� L4• gawc a.rra.nsr.rlmM�rn ,:n ww477 ;4 > bars in the Revenue Dm,6t-t1 tReroverTseesiedannerY) 75M SIM,°° 50 _ b x V 1J N-1." c M ;., . ps,-- 5:: vn i.a �i,Vipn Adjustments and Mhos 06M CNn -nT1 Debt Coverage mvndl—Revenue Adjustments and Debt Coverage ca ,W UP and Funding Sources for Water Funds chart) 17,056- w� 575 onic BA% $70 B. Projected operating 0.491 2001, f $15 costs and revenue sea $10 2.0% ,S streams (shown in FY2014 FY2015 FY2016. FY2017 FY2019 FY2019 FY 2014 02015 FYM45 FYM17FY 2Du FY 2019 J ar¢r eevaryls rrPgNM1.w .--.0.56 We.IA �r.Iw Aa[n..q E i q0T ✓1cntr Agovie4 :AVParC ■NN_Deht •ToIaIC� the Water Water Operating Financial Plan Projected Ending Fund Balances Operating Financial $0570 Plan chart) $40$15 sm _ -- -- - 2 570 _ � 510 - C. Different funding 'o - 55 $zo so sources of CIP, FY 2014 FY 2015 FY 2016 FY 2017 _ FY 2018 FY 7019 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 PAYGO, or debt r0{NE�""` r �``.,:'—`"dr''""'" so Entlh¢Bahrrcez -Ts¢es MI.— •Nen eav"Qs �•L�ra.x F[. financed (shown in the — CIP and Funding Sources for Water Funds chart) D. Reserve balances and target levels according to District policies (shown in the Projected Ending Fund Balances) with flagging features when projected balances fall below target levels It is an easy -to -understand format which shows the impacts of various assumptions so that decisions regarding revenue adjustments, capital financing through pay -go or debt, and reserve balances can be made quickly and efficiently. Upon the completion of the financial plan model, Raftelis will hold two web -based workshops with City staff to review the model and the assumptions for appropriateness and finalize the financial plans for the City's Water and Wastewater Enterprises to be used for the rate design model. Meetings: Two (2) web -based financial plan workshops with City staff Deliverables: PowerPoint Presentation materials and draft financial plan model in Microsoft Excel'" 41 Page 474 Scope of Services for Water and Wastewater Rate Study City of El Segundo TASK 4 - COST OF SERVICE ANALYSIS FOR WATER AND WASTEWATER SERVICES Task 4.1 Cost of Service Analysis for Water Services The cost of service study (COSS) provides rate defensibility in light of Proposition 218 and determines the total cost to serve each customer class. For water and recycled water, the cost of service analysis will follow industry standards provided in the Manual M1: Principles of Water Rates, Fees and Charges, 6th Edition (Manual M1) published by the American Water Works Association (AWWA). Our cost of service methodology includes three steps: Step 1: Review Customer Class Usage Patterns and Determine Customer Classifications Raftelis will review historical water consumption to assess class water use patterns. Using this data, we will determine peaking characteristics for each customer class and tier and discern whether new classes may be warranted. Step 2: Allocate Costs to Cost Components Raftelis will'functionalize costs into water service functions such as supply, transmission & distribution, storage, and customer service. We will then allocate these functions to cost components such as water supply, base demand, capacity (demand), customer service, and more. From here, we will determine the unit cost for each cost component. Step 3: Distribute Costs to Customer Classes Next, we distribute costs to the customer classes using the unit costs developed in Step 2. This results in the cost to serve each class which is based on how each class uses water. Task 4.2 Cost of Service Analysis for Wastewater Services For the wastewater rate study cost of service analysis, Raftelis will use methodologies set forth by the Water Environment Federation in their Manual of Practice No.27, Financing and Charges for Wastewater Systems (which was co-authored by our staff members, Sudhir Pardiwala & Andrea Boehling). The wastewater COS analysis consists of seven major steps, as outlined below: 1. Determine non-residential customer flow and strength loadings based on water usage 2. Estimate the flow and strength of the residential customer class using plant balance analysis, which takes into consideration infiltration and inflow (I&I) 3. Functionalize 0&M and capital costs into functional categories such as Collection, Treatment, and Billing and Customer Service, etc. 4. Allocate each functional category into cost components such as Flow, Strength, and Billing and Customer Service, etc. 5. Develop customer class characteristics by cost component 51PLige 475 Scope of Services for Water and Wastewater Rate Study City of EI Segundo 6. Calculate the cost component rates by dividing the total cost in each cost component in Step 4 by the customer class characteristics in Step 5 7. Calculate the cost by customer class by multiplying the unit cost in Step 6 by the customer class characteristics in Step 5 Meetings: None Deliverables: Cost of service analyses for water and wastewater services in Microsoft Exce ITM TASK S - WATER AND WASTEWATER RATES DEVELOPMENT Raftelis will calculate the current inclining tiered rates and discuss rate structure modifications as warranted by the pricing objectives exercise in Task 1 and tier breakpoint modifications if warranted and/or desired by City Staff. We will also discuss the current fixed and volumetric components of the rate structure in -light of competing pricing objectives such as revenue stability, conservation signaling, affordability and fairness. We will review the bill impacts of different fixed/volumetric rate structures with City Staff to select the appropriate structure. Our model has the flexibility to instantaneously change tier widths and evaluate different fixed/variable revenue structures to enhance revenue stability. To communicate the cost nexus for tiered rates, the water rates have several cost components for each tier, as shown in the table below, including, but not limited to water supply costs, delivery costs, peaking costs, conservation costs, and revenue offsets (which lower the rates). Water Rates Water Delivery Supply RW Conservation Rev Offset Program Proposed FY 2018 Tier 1 - Essential Use $2.58 $2.58 $0.15 $0.00 $0.00 -$0.21 $2.52 Tier 2 - Efficient Use $0.33 $0.00 $0.00 $0.00 $2.91 Tier 3 - Inefficient Use $2.58 $0.46 $2.55 $0.49 $0.00 $6.08 Tier 4 - Excessive Use 1 $2.58 $0.67 $4.08 1 $0.49 $0.00 $7.82 Uniform - CII Use $2.58 $0.17 $0.26 $0.05 -$0.17 $2.89 The model will calculate water rates under different revenue and rate scenarios as desired by Staff. The Dashboard has proven to be particularly useful when making presentations to City Council, allowing them to fully and instantly appreciate the impacts of their decisions. The City operates a sewage collection system only. We will review the current sewer rates to ensure that they reflect cost causation principles so that customer classes are charged in proportion to their cost causation. 476 Scope of Services for Water and Wastewater Rate Study City of El Segundo We will analyze the bill impacts as a result of the new rates. If the rate structure is identical then this task is straight forward; if we revise the rate structure, we will clearly show who will be impacted and by how much. The model will include a summary of customer bill impacts resulting from the proposed rate structure, using water as an example, is shown in the two figures below. Figure 1 shows Single Family Residential (SFR) bill impacts at various use levels: The model will have the ability to select a particular meter size and see how bills are affected at different usage levels. This tool has proven particularly useful for public outreach campaigns and during the Proposition 218 process. Class wide customer impacts are show in Figure 2: it shows how customers will see changes in their bills if the proposed rate structure is adopted. For example, approximately 68% of the customers (2.7 + 30.2 + 35.0 percent) will see monthly increases of less than $5. This is an invaluable tool to facilitate informed decision making. The assessment of the overall financial impacts on customers is a tool for stakeholders to make informed decisions regarding different policy options and variables. % Blilh Residential Customer Impacts 40% 350% 35% 30 2% 30% 25% 211% 16.5% 15% 119% 10% 5% 27% 37% 076 5$0 $0-$2 $2-$5 $5-$10 $111-$25 >$255 _ . $ chmp in Mwithly Nils Meetings: None Deliverables: Draft water and wastewater rate models in Microsoft ExceITM TASK C - RATE WORKSHOPS Following the completion of the rate model, Raftelis will hold on-site workshop with City Staff to develop different rate scenarios. The goal of this workshop is to identify the water and wastewater rates that will be presented with the City Council. Raftelis will present the interim proposed rates and discuss the benefits and challenges associated with each proposed rate alternative, demonstrated through the water rate model. Changes and suggestions from Staff will be incorporated into the analyses prior to presenting the results to the Council. Upon incorporating City Staff comments from the prior Workshop, Raftelis will present the results of our study during two workshops with the City Council. The presentations will discuss the recommended reserve and fund levels, proposed long-term financial plan, and the proposed rate structure and rates along with the resulting customer impact analysis. If necessary, Raftelis will use 71P�i-e 477 Semple SFR Bills 01 Jt d!{{CSCIIi 11�IIC IE'YL'I: $180 $160 Inside firywith3/4l Wer $140 $120 $100 $80 $60 $40 $20 6 hd 9 hcf 12 hd 20 hd 40 hd Cu ■rrent BBls $27.15 $32.49 $4023 $6087 $14725 P Proposed Bills $2879 $32.93 $4247 $6961 $170.62 Impact $L64 $0.44 $214 j $974 ! $2337 %Impact 6% 1% 6% 14% 16% % Blilh Residential Customer Impacts 40% 350% 35% 30 2% 30% 25% 211% 16.5% 15% 119% 10% 5% 27% 37% 076 5$0 $0-$2 $2-$5 $5-$10 $111-$25 >$255 _ . $ chmp in Mwithly Nils Meetings: None Deliverables: Draft water and wastewater rate models in Microsoft ExceITM TASK C - RATE WORKSHOPS Following the completion of the rate model, Raftelis will hold on-site workshop with City Staff to develop different rate scenarios. The goal of this workshop is to identify the water and wastewater rates that will be presented with the City Council. Raftelis will present the interim proposed rates and discuss the benefits and challenges associated with each proposed rate alternative, demonstrated through the water rate model. Changes and suggestions from Staff will be incorporated into the analyses prior to presenting the results to the Council. Upon incorporating City Staff comments from the prior Workshop, Raftelis will present the results of our study during two workshops with the City Council. The presentations will discuss the recommended reserve and fund levels, proposed long-term financial plan, and the proposed rate structure and rates along with the resulting customer impact analysis. If necessary, Raftelis will use 71P�i-e 477 Scope of Services for Water and Wastewater Rate Study City of El Segundo the models to address any changes, comments, and feedback will then be incorporated into the final models. Meetings: Three (3) on-site Workshop to discuss draft and final water and wastewater rates Deliverables: PowerPoint presentations for the Workshops TASK 7 - ADMINISTRATIVE REPORT (AKA RATE STUDY REPORT) DEVELOPMENT The process for developing the proposed rates will be described in a draft water and wastewater rate study report. This draft report will include an executive summary highlighting the major issues and decisions and an overview of operations, CIP, the financial plan and the final rates resulting from the Study. A comprehensive section on the rate design assumptions and methodologies used to develop the user -rate calculations and financial planning will be included as part of administrative record in compliance with Proposition 218. Comments from City Staff will be incorporated into the Final Report. The Final Report will be submitted to the City and will include appropriate supporting data from the Model to address the requirements of Proposition 218. It is imperative that the Report clearly show the nexus between the proposed charges for service and the cost to provide said service. The Report will lead the reader through Raftelis' methodology to arrive at rates that are equitable, reflect the City's policies and values, and are driven by the City's revenue requirements. The Report's ability to explain the rate development process and in a clear and understandable manner will promote financial transparency, heighten legal defensibility, and uphold the City's strong reputation with the public. Meetings: One (1) webinar with City Staff Deliverables: Draft Report, Final Report in Microsoft Word and pdf TASK 8 - PROPOSITION 218 PUBLIC HEARING Raftelis will prepare a Proposition 218 Public Hearing presentation and present the results of the rate studies at a combined Proposition 218 Public Hearing. Raftelis has presented at hundreds of public hearings and therefore has experience with typical concerns raised by the public. We have cost of service experts that can explain the rate derivation that is needed in this post- San Juan Capistrano rate setting environment. We will incorporate feedback from the City Council presentation in Task 5. The presentation will tell our rate -setting story and justify the need for rate adjustments. Prior to the Public Hearing, Raftelis will conduct one (1) webinar with City Staff to review the presentation materials. Meeting(s): One (1) webinar to discuss the presentation materials with City Staff and one (1) Proposition 218 Public Hearing Deliverable(s): Microsoft PowerPoint" presentation for public hearing meeting 81Page 478 Scope of Services for Water and Wastewater Rate Study City of El Segundo Proiect Fees The following table provides a breakdown of our proposed fees for the Study split into Water and Wastewater portions. This table includes the estimated level of effort required for completing each task described and the hourly billing rates for our project team members. Expenses include costs associated with travel, and a $10 per hour technology charge covering computers, networks, telephones, postage, etc. 9 1 P a g e 479 Hours Total Fees & Expenses Web Number of Tasks Meetings Meetings SG SGn KP Admin Total Water +WW Water WN 1. Kickoff Workshop, Data Collection 8 ' 10 2 8 4 r 24 $5,860 $2.925 $2,925 Project Management 2. Policy Framework Workshops with City 16 - 12 r 30 $8,380 $4,190 $4,190 Council 3. Long Range Finenical Plan 3 6 t 36 45 $10,610 $6,305 $5,305 Development 4. Cost of Service for Water and 4 4 24 32 $7,500 $3,750 $3,750 Wastewater Services S. Waterand Wastewater Rates 12 4 120 136 $31,080 $16,630 $15,630 Development r 6. Rate Workshops 2 3 27 4 16 47 $13,295 $6,647 $6,647 7. Administrative Report Development 12 4 60 8 82 S18,4gD $9,200 $9,200 8. Proposition 218 Public Hearing t 8 t 4 13 $3,750 $1,875 $1,875 Tol at Est innuic d Meetings I Hours 1 97 22 280 10 409 Hourly Billing Rate $295 $240 $210 $80 Total Professional Fce s $28,615 $5,280 $58,800 $800 $93,495 Total Fees $93,495 546,748 $76,746 SG - Sanjay Gaur SGn -Steve Gagnon Total Expenses $5,350 $$675 $2,675 KP-Khanh Phan - -® Ad - Administrative Adminn -Administrative StafF Total Fees 8 Expenses 9 1 P a g e 479 Scope of Services for Water and Wastewater Rate Study City of EI Segundo We appreciate the opportunity to submit this proposal and look forward to assisting the City on this project. Please contact me at (213) 262-9304 regarding any questions. This letter proposal may be used to form an agreement by signing and sending a copy for our records. Respectfully submitted, Accepted by: RAFTELIS FINANCIAL CONSULTANTS, INC. CITY OF EL SEGUNDO By: By: Sanjay Gaur Vice President TiLle: Date: 101Page 480 EL SEGUNDO CITY COUNCIL MEETING DATE: June 18, 2019 AGENDA STATEMENT AGENDA HEADING: Reports: City Clerk AGENDA DESCRIPTION: Consideration and possible action regarding Council consensus to cancel the Tuesday, July 2, 2019 City Council Meeting. (Fiscal Impact: None) RECOMMENDED COUNCIL ACTION: 1. Approve cancellation of the July 2, 2019 City Council Meeting; 2. Alternatively discuss and take other action related to this item. ATTACHED SUPPORTING DOCUMENTS: FISCAL IMPACT: No Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A STRATEGIC PLAN: Goal: 1(a) El Segundo provides unparalleled service to internal and external customers. Objective: 2 City services are convenient, efficient and user-friendly for all residents, businesses and visitors. h ORIGINATED BY: Tracy Weaver, City Cle3rq_ REVIEWED BY: Tracy Weaver, City Clerk APPROVED BY: Greg Carpenter, City Manager BACKGROUND AND DISCUSSION: In the past, the City Council has cancelled the first meeting in July due to conflicts in schedules arising due to the 4th of July holiday. It is therefore requested that Council approve the cancellation of the July 2, 2019 regularly scheduled meeting. 12