Fund Financial Statements: Balance Sheet - Governmental Funds

from City of Downey Annual Comprehensive Financial Report For Fiscal Year Ended June 30, 2021

Operating Information: Full-Time and Part-Time City Employees by Function – Last Ten Fiscal Years

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MANAGEMENT'S DISCUSSION AND ANALYSIS

As management of the City of Downey, we offer readers of the City of Downey’s financial statements this narrative overview and analysis of the financial activities of the City of Downey for the fiscal year ended June 30, 2021. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i-viii of this report. All amounts, unless otherwise indicated, are expressed in millions of dollars.

Financial Highlights

 The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources, at June 30, 2021, by $175.7 million (net position). Of this amount, $18.5 million is designated for low- and moderate-income housing, $7.7 million for public works projects, $40.9 million for capital projects; $451 thousand is designated for community development and $2.0 million for public safety.

 At the fiscal year ended June 30, 2021, the government's total net position increased by $10.5 million. The city had an increase of 6.71% of property tax revenue as a result of a thriving housing market. In addition, because of the recovering economy the city saw an increase of 9% in sales tax over last year. Finally, American Rescue Plan Act stimulus revenues assisted the city with loss revenues due to the pandemic.

 The City's total liabilities increased by $127 million during the current fiscal year. The increase is because the City issued Taxable Pension Obligation Bonds, Series 2021 in the amount of 113.5 million. Additionally, $8.5 million dollars classified as unearned revenue from the American Rescue Plan Grant that will be earned in FY21-22 and the inclusion of the special deposit fund in the general fund increased the liability by 1.4 million.

 As of June 30, 2021, the City's governmental funds reported combined ending fund balances of $51.5 million, a decrease of $7.4 million in comparison with the prior year.

The reduction of fund balance is due to the completion of Measure S Capital Improvement

Projects. Measure S Fund depleted 10 million in cash with fiscal agent as the projects were completed. Approximately 49.8% of this total amount, $25.7 million, is available for spending at the government's discretion (committed, assigned, and unassigned fund balance) within the guidelines of the funding sources.

 As of June 30, 2021, assigned and unassigned fund balance for the general fund was $27.1 million or 26.57% of total general fund expenditures. This represents an increase of $1.2 million or 9.12%, from the prior year. The key reason is attributed to a growth in sales and property taxes due to the recovering economy and strong housing market. The unassigned fund balance which is unrestricted in use is designated by City Council for specific purposes at a future City Council meeting.

OVERVIEW OF THE BASIC FINANCIAL STATEMENTS

This 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 basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements

The government-wide financial statements are designed to provide the reader with a broad overview of the City's finances, in a manner similar to a private-sector business.

The Statement of Net Position presents information on all of the City's assets and deferred outflows of resources, and liabilities and deferred inflows of resources, including capital assets and longterm liabilities, with the difference between the two reported as net position. Over time, increases or decreases in the net position may serve as a useful indicator of whether the financial position of the City as a whole 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 result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

The government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the City include general government, public safety, public works, community services, community development, unallocated infrastructure depreciation, and interest on long term debt.

The business-type activities of the City include a water utility. sewer and storm drain utility and golf course. The revenue generated from these functions is intended to recover all or a significant portion of their costs through user fees and charges.

The government-wide financial statements include not only the City itself (known as the primary government), but also four legally separate entities: the City of Downey Public Facilities Financing Corporation, the City of Downey Housing Authority, and the Downey Public Financing Authority. The City is financially accountable for these entities and financial information for these blended component units is reported within the financial information presented for the primary government itself. The government-wide financial statements can be found immediately following this discussion and analysis.