FY 2022-23 Puente Hills Habitat Preservation Authority

PUENTE HILLS HABITAT PRESERVATION AUTHORITY ANNUAL FINANCIAL REPORT June 30, 2023 PUENTE HILLS HABITAT PRESERVATION AUTHORITY JUNE 30, 2023 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor’s Report ..................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ................................................. 4 Basic Financial Statements: Statement of Net Position ..................................................................................... 7 Statement of Revenues, Expenses, and Changes in Net Position ....................... 8 Statement of Cash Flows ...................................................................................... 9 Notes to the Basic Financial Statements ............................................................ 10 PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES CRAIG A HARTZHEIM, CPA 8383 WILSHIRE BLVD., SUITE 800 5800 HANNUM AVE., SUITE E HADLEY Y HUI, CPA BEVERLY HILLS, CA 90211 CULVER CITY, CA 90230 ALEXANDER C HOM, CPA TEL: 310.670.2745 TEL: 310.670.2745 ADAM V GUISE, CPA FAX: 310.670.1689 FAX: 310.670.1689 TRAVIS J HOLE, CPA www.mlhcpas.com www.mlhcpas.com WILSON LAM, CPA Independent Auditor’s Report To the Honorable Board of Directors Puente Hills Habitat Preservation Authority Whittier, California Report on the Audit of the Financial Statements Opinion We have audited the accompanying basic financial statements of the Puente Hills Habitat Preservation Authority (the Authority) as of and for the fiscal year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority, as of June 30, 2023, and the changes in its financial position and its cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s 1 OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit 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 Authority’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 6 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. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 31, 2024, on our consideration of the Authority’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance. Moss, Levy & Hartzheim, LLP Culver City, California May 31, 2024 3 PUENTE HILLS HABITAT PRESERVATION AUTHORITY Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Management's discussion and analysis (MD&A) of the Puente Hills Habitat Preservation Authority (the Authority) provides a narrative overview of the Authority's financial activities for the fiscal year ended June 30, 2023. Please read it in conjunction with the accompanying financial statements, footnotes, and supplementary information. Financial Highlights  During the current fiscal year, the Authority's net position decreased by $3.86 million to $64.14 million.  The Authority has investments of $25.69 million in various government securities that have interest rates ranging from 2.00% to 5.00%.  Operating revenues decreased by $0.28 million to $0.33 million and operating expenses decreased by $0.12 million to $2.02 million. Overview of Financial Statements This MD&A serves as an introduction to the Authority’s basic financial statements. The basic financial statements include four components: 1) Statement of Net Position; 2) Statement of Revenues, Expenses, and Changes in Net Position; 3) Statement of Cash Flows; and 4) Notes to the Financial Statements.  The Statement of Net Position presents all the Authority's assets and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator to determine whether the financial position of the Authority is improving or deteriorating.  The Statement of Revenues, Expenses, and Changes in Net Position presents information showing how the Authority's net position changed during the fiscal year. All changes in net position (revenues and expenses) are reported when the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Accordingly, revenues and expenses are reported in this statement for items that will result in cash flows in future fiscal periods (e.g. accrued but unpaid contract and professional service fees).  The Statement of Cash Flows presents information regarding the Authority’s use of cash during the fiscal year and is an indicator of whether or not sufficient cash flow is being generated during the fiscal year to meet the operating needs of the Authority.  The notes provide additional information that is essential for a full understanding of the data provided in the financial statements. 4 PUENTE HILLS HABITAT PRESERVATION AUTHORITY Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 Financial Statement Analysis Since its formation, Net Position of the Authority has gradually grown from $1.8 million to about $64.14 million. Most of the growth in Net Position has been attributable to the Authority’s acquisition of land and related capital assets. Operating revenues decreased from $0.61 million as of June 30, 2022, to $0.33 million as of June 30, 2023. The operating revenues consisted primarily of state grants, donations, and site mitigation fees. Operating expenses decreased from $2.14 million as of June 30, 2022, to $2.02 million as of June 30, 2023. Operating expenses consisted primarily of contract and professional service fees, salaries and benefits, and administrative expenses. The Authority’s Net Position was $64.14 million as of June 30, 2023, compared to $68.01 million as of June 30, 2022. Net Investments in Capital Assets accounted for $35.76 million of the total Net Position. Liabilities were $0.80 million as of June 30, 2023, compared to $0.78 million as of June 30, 2022. Capital Assets As of June 30, 2023, the Authority’s capital assets consisted of $35.76 million in land, $0.43 million in buildings, and $0.43 million in accumulated depreciation. Debt Administration As of June 30, 2023, the Authority had no outstanding debt. Economic Factors Due to the global pandemic and subsequent economic crisis, the Authority’s specific portfolio investments have been significantly affected resulting in a significant revenue decrease for the Authority. As a result, the operating budget of the Authority has been decreased to partially mitigate the impact. The Authority is seeking and exploring additional revenue streams such as environmental mitigation fees from regional projects, a financing mechanism, grants, and short- term portfolio investments. The Authority was successful in obtaining one-time state grants. In fiscal year 2022-2023, it relied on funding from the Rivers and Mountains Conservancy (RMC) and CalFire to help to mitigate partial revenue shortfalls. Also, in fiscal year 2022-2023, the Authority was allocated $1.3 million from the state budget administered by Caltrans to close its funding gap; this is a multi-year funding source. The Authority is trying to adjust to the grant guideline amendments made by Los Angeles County Regional Parks and Open Space District regarding Measure A Maintenance and Services (M&S) funding. Measure A grant guideline amendments made over the years now prohibit the Authority from using its annually allocated M&S funds on Proposition A purchased property that it manages (City of Whittier-own property). In response, the City of Whitter has committed to partial 5 PUENTE HILLS HABITAT PRESERVATION AUTHORITY Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2023 reimbursement through the City’s M&S allocation on expenditures on their land which is managed by the Authority, which will assist in a limited capacity. Additionally, the Authority is responding to information from the County to correct its qualification for accessing its M&S funding on land it owns, Sycamore Canyon. The Proposition A grant used to acquire Sycamore Canyon needs to be closed by the Santa Monica Mountains Conservancy (grantor of the Prop. A funds) before the Authority can claim M&S reimbursement costs. The budget, investments, other revenue sources, and expenditures will be closely monitored by the Authority moving forward to maintain solvency. Contacting the Authority’s Financial Management This financial report is designed to provide our citizens and other interested parties with a general overview of the Authority's finances and to demonstrate the Authority's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the County of Los Angeles, Department of Auditor-Controller, 500 West Temple Street Room 525, Los Angeles, CA 90012. 6 Puente Hills Habitat Preservation Authority Statement of Net Position June 30, 2023 Assets Cash on deposit (Note 2) $ 2,829,238 Restricted cash on deposit with County Treasurer (Note 2) 263,179 Investments (Note 2) 25,686,715 Receivables: Accrued interest 42,435 Accounts receivable 315,011 Prepaid expense 51,809 Capital Assets: (Note 4) Land - nondepreciable 35,759,977 Buildings and improvements 428,480 Accumulated depreciation ( 428,480) Total Assets 64,948,364 Liabilities Accrued liabilities 803,922 Total Liabilities 803,922 Net Position (Note 3) Net investment in capital assets 35,759,977 Restricted 263,179 Unrestricted 28,121,286 Total Net Position $ 64,144,442 See accompanying notes to the basic financial statements 7 Puente Hills Habitat Preservation Authority Statement of Revenues, Expenses, and Changes in Net Position For the Fiscal Year Ended June 30, 2023 Operating Revenues: Oil Revenue $ 7 3,330 State Grants 2 26,656 Miscellaneous 29,803 Total Operating Revenues 3 29,789 Operating Expenses: Contract and Professional Service Fees 1 ,517,961 Salaries and Benefits 3 51,885 Insurance 52,142 Rent (Note 5) 1,003 Taxes and Assessments 5,502 Treasurer and Tax Collector - Management Fees 17,293 Auditor-Controller Services 32,000 Utilities, Supplies, and Other Charges 42,893 Total Operating Expenses 2 ,020,679 Operating Income (Loss) (1,690,890) Non-Operating Revenues (Expenses): Interest on Deposited Funds 1 29,036 Investment Income (Loss) (2,300,527) Total Non-Operating Revenues (Expenses) (2,171,491) Change in Net Position (3,862,381) Net Position, beginning of the fiscal year 6 8,006,823 Net Position, end of the fiscal year (Note 3) $ 64,144,442 See accompanying notes to the basic financial statements 8 Puente Hills Habitat Preservation Authority Statement of Cash Flows For the Fiscal Year Ended June 30, 2023 Cash Flows from Operating Activities: Cash received from other governmental agencies $ 3 42,270 Cash received from other agencies 1 02,510 Cash paid to employees for services (345,911) Cash paid to suppliers for goods and services (1,650,293) Net Cash (Used) by Operating Activities (1,551,424) Cash Flows from Investing Activities: Investment purchases (7,814,258) Investment sales 3 ,914,258 Investment income 8 42,617 Interest received 1 07,890 Net Cash (Used) by Investing Activities (2,949,493) Net Decrease in Cash and Cash Equivalents (4,500,917) Cash and Cash Equivalents, Beginning of Fiscal Year 7 ,593,334 Cash and Cash Equivalents, End of Fiscal Year $ 3 ,092,417 Reconciliation of Cash and Cash Equivalents to amounts reported on the statement of net position Cash on deposit (Note 2) $ 2 ,829,238 Restricted cash on deposit with County Treasurer (Note 2) 2 63,179 Cash and Cash Equivalents, End of Fiscal Year $ 3,092,417 Reconciliation of Operating Income (Loss) to Net Cash Used by Operating Activities: Operating Income (Loss) $ (1,690,890) Change in assets and liabilities Decrease in accounts receivable 1 14,992 (Increase) in prepaid expense (2,997) Increase in accrued liabilities 27,471 Net Cash Used by Operating Activities $ (1,551,424) See accompanying notes to the basic financial statements 9 NOTES TO THE BASIC FINANCIAL STATEMENTS 10 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization The Puente Hills Habitat Preservation Authority (Authority) was formed on February 15, 1994, as a joint powers authority by the County of Los Angeles, certain County Sanitation Districts, and the City of Whittier. The Authority was established for the purpose of acquiring, restoring, and/or maintaining additional open space lands in the La Puente/Whittier Hills area in order to create or preserve native habitat areas. Additionally, the Authority will give special consideration to land acquisitions, habitat restoration, trailhead construction, and recreational and/or educational amenities on open space lands within and for the benefit of the community of Hacienda Heights. It serves as a condition of approval to address impacts on oak tree resources and natural open space resulting from the operation of the Puente Hills Landfill. The term of the Authority will continue indefinitely unless cancelled by the County of Los Angeles (County), certain County Sanitation Districts, and the City of Whittier. The Authority is governed by a Board of Directors composed of four appointed directors: one by the Board of Directors of the Sanitation Districts, one by the County, one by the supervisor representing the Supervisorial District which geographically includes the Puente Hills Landfill, and one by the City of Whittier. The Authority is legally separate and fiscally independent from each of the member entities. This means it can incur debt, set, and modify its own budget and fees, enter into contracts, and sue and be sued in its own name. The accompanying financial statements reflect the financial activities of the Authority. The Authority has no component units. B. Significant Accounting Policies The Authority’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America 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. Basis of Accounting and Measurement Focus The Authority is accounted for as an enterprise fund (proprietary fund type). A fund is an accounting entity with a self-balancing set of accounts established to record the financial position and results of operations of a specific governmental activity. The activities of enterprise funds closely resemble those of ongoing businesses in which the purpose is to conserve and add to basic resources while meeting operating expenses from current revenues. Enterprise funds account for operations that provide services on a continuous basis and are substantially financed by revenues derived from user charges. The Authority utilizes the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when the liability is incurred. 11 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Significant Accounting Policies (Continued) Proprietary funds distinguish operating revenues and expenses from nonoperating items. The principal operating revenues of the Authority are contributions from state grants, donations, and site mitigation fees. Operating expenses include administrative expenses and contract and professional service fees. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Authority’s policy to use restricted resources first, then unrestricted resources as they are needed. The Authority’s financial statements are presented in accordance with the provisions of GASB Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments and GASB Statement No. 63 – Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Statement No. 34 established standards for external financial reporting for all state and local governmental entities and Statement No. 63 established standards for reporting deferred outflows of resources, deferred inflow of resources, and net position in a statement of financial position. The net position is required to be classified into three components – net investment in capital assets; restricted; and unrestricted. These classifications are defined as follows: Net investment in capital assets – This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and is reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at fiscal year-end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. Restricted net position – This component of net position represents restricted assets net of liabilities that relate to those specific restricted assets. A restricted asset is an asset for which constraints have been placed on the asset’s use by creditors, contributors, laws, or regulations of other governments, or as a governing body at the time a particular fee, charge, levy, or assessment was approved. These restrictions must be narrower than the general purposes for which the reporting government can use its resources. 12 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Significant Accounting Policies (Continued) Unrestricted net position – This component of net position consists of net position that does not meet the definition of “restricted” or “net investment in capital assets.” See note 3 for additional disclosures regarding net position. C. Revenue Recognition Revenue is recognized on the accrual basis of accounting and donation revenue is recognized according to the conditions of the promise. D. Land Acquisition of land and buildings and improvements are recorded at cost or, if donated, at fair value at date of donation. Land basically consists of open space acquired in accordance with the joint powers agreement that created the Authority. Buildings and improvements consist of houses and improvements that were located on the land at the time of purchase or donation. When land and buildings and improvements are sold or otherwise disposed of, related costs are removed from the accounts and any gain or loss is reported in the statement of revenues, expenses, and changes in net position. E. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. F. Cash and Cash Equivalents For the purposes of the statement of cash flows, cash represents balances that can be readily withdrawn without substantial notice or penalty. Cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates and have an original maturity date of three months or less. G. Lease Liability As a lessee, a lease is defined as a contractual agreement that conveys control of the right-to-use another entity’s nonfinancial asset, for a minimum contractual period of greater than one year, in an exchange or exchange-like transaction. The Authority has no lease liabilities that meet the criteria to be recognized at June, 30, 2023. 13 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 2 CASH AND INVESTMENTS In accordance with the Joint Powers Authority (JPA) agreement and Government Code, cash balances of the Authority are deposited and pooled and invested by the County Treasurer and Tax Collector (Treasurer) for the purpose of increasing interest earnings through investment activities. Interest earned on pooled investments is deposited to participating funds based upon each fund’s average daily balance during the allocation period. The Authority maintains a deposit account for donations with Wells Fargo Bank which at June 30, 2023 had a balance of $790. California Government Code Sections 53601 and 53635 authorize the Treasurer to invest the External Investment Pool (Pool) and Specific Purpose Investment (SPI) funds in obligations of the United States Treasury, federal agencies, municipalities, asset-backed securities, bankers’ acceptances, commercial paper, negotiable certificates of deposit, medium-term notes, corporate notes, repurchase agreements, reverse repurchase agreements, forwards, futures, options, shares of beneficial interest issued by diversified management companies known as money market mutual funds registered with the Securities and Exchange Commission, securities lending agreements, the State of California’s Local Agency Investment Fund, and supranational institutions. California Government Code Section 53534 authorizes the Treasurer to enter into interest rate swap agreements. However, these agreements should only be used in conjunction with the sale of the bonds approved by the Board of Supervisors. As permitted by the California Government Code, the Treasurer developed, and the Board of Supervisors adopted, an Investment Policy that further defines and restricts the limits within which the Treasurer may invest. The investments are managed by the Treasurer, which reports investment activity to the Board of Supervisors on a monthly basis. In addition, the Treasurer's investment activity is subject to an annual investment policy review, compliance oversight, quarterly financial review, and annual financial reporting by the County. The Treasurer also maintains Other Specific Investments, which are invested pursuant to Section 1300.76.1, Title 28, California Code of Regulations. The County has not provided nor obtained any legally binding guarantees during the fiscal year ended June 30, 2023, to support the value of shares in the Pool. Also, the Authority’s Memorandum of Understanding (MOU) with the Treasurer, executed in May 2011, enables the County to make investments for the Authority using the SPI program that is within the guidelines of the County’s investment policy. Section III of that MOU instructs the Authority to create its own investment policy or adopt that of the County, either of which shall be approved by the Authority on an annual basis. The investment policy needs to comply with the California Government Code and Education Code and may not be less restrictive than the Treasurer’s investment policy. The Authority’s Board annually adopts the County’s investment policy. The investments are managed by the Treasurer, which reports investment activity to the Authority’s Board on a monthly basis. Disclosures Relating to Interest Rate Risk Cash and investments as of June 30, 2023, are classified in the accompanying financial statements as follows: 14 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 2 CASH AND INVESTMENTS (Continued) Statement of Net Position: Cash on deposit $ 2 ,829,238 Restricted cash on deposit with County Treasurer 2 63,179 Investments 2 5,686,715 Total cash and investments $ 2 8,779,132 Cash and investments as of June 30, 2023, consist of the following: Demand deposits - outside bank $ 7 90 Total demand deposits 7 90 Cash and investments with County Treasurer 2 ,828,448 Restricted cash and investments on deposit with County Treasurer 2 63,179 Investments 2 5,686,715 Total Investments 2 8,778,342 Total cash and investments $ 2 8,779,132 Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Authority manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair value of the Authority’s investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Authority’s investments by maturity: Remaining Maturity (in Months) 12 Months 13 - 60 More than Investment Type Fair Value or Less Months 60 Months Cash and Investments with County Treasurer $ 3,091,627 $ 3,091,627 $ - $ - Federal Agency Securities 2 5,686,715 25,686,715 Total $ 2 8,778,342 $ 3,091,627 $ - $ 25,686,715 15 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 2 CASH AND INVESTMENTS (Continued) Disclosures Relating to 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 Authority’s investment policy, and the actual rating as of fiscal year end for each investment type (Standard & Poor’s). Ratings as of Fiscal Year End Minimum Investment Fair Legal Not Type Value Rating AA+ Rated Cash and Investments with County Treasurer $ 3,091,627 N / A $ - $ 3,091,627 Federal Agency Securities 25,686,715 N / A 25,686,715 Total $ 28,778,342 $ 25,686,715 $ 3,091,627 Concentration of Credit Risk The investment policy of the Authority contains limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments (other than external investment pools) in any one issuer that represent 5% or more of total Authority’s investments are as follows: Reported Interest Issuer Investment Type Amount Maturity Rate Federal Farm Credit Bank Federal Agency Securities $ 15,948,235 2042 2.50% Federal Home Loan Banks Federal Agency Securities 3 ,925,240 2024 5.00% Federal Home Loan Mortgage Corporation Federal Agency Securities 5 ,813,240 2044 2.00% Investments are stated at fair value and are valued on a monthly basis. The Treasurer categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. Securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Securities classified in Level 2 of the fair value hierarchy are valued using other observable inputs such as matrix pricing techniques or based on quoted prices for assets in markets that are not active. Matrix pricing is used to value securities based on securities’ relationship to benchmark quoted prices. Level 3 inputs are significant unobservable inputs. Securities classified in Level 3 are valued using the income approach such as discounted cash flow techniques. Investments in an external government investment pool are not subject to reporting within the level hierarchy. 16 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 2 CASH AND INVESTMENTS (Continued) See the County’s Annual Comprehensive Financial Report for disclosures related to cash and investments and the related interest rate risk, credit rate risk, custodial risk, and concentration risk. Funds deposited in the County Treasury Pool amounted to $3,091,627 as of June 30, 2023; however, this external pool is not measured under Level 1, 2, or 3. This represents less than 0.02% of the total Treasury Pool. Fair Value Measurements The Authority categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. These principles recognize a three-tiered fair value hierarchy as follows:  Level 1: Investments reflect prices quoted in active markets;  Level 2: Investments reflect prices that are based on a similar observable asset either directly or indirectly, which may include inputs in markets that are not considered active; and  Level 3: Investments reflect prices based on unobservable sources. The Authority has the following recurring fair value measurements as of June 30, 2023: Fair Value Measurement Using Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs Investments by Fair Value Total (Level 1) (Level 2) (Level 3) Federal Agency Securities $ 25,686,715 $ - $ 25,686,715 $ - Total investments measured at fair value $ 25,686,715 $ - $ 25,686,715 $ - The investment activity of the Authority with the County Treasurer occurs separately from the County’s investment pool and is reported as a Specific Purpose Investment on behalf of the Authority. NOTE 3 NET POSITION Net position at June 30, 2023 consisted of the following: Net Investment in Capital Assets $ 3 5,759,977 Restricted Net Position * 2 63,179 Unrestricted Net Position 2 8,121,286 Total Net Position $ 6 4,144,442 17 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 3 NET POSITION (Continued) *Under the purchase agreement for the Brearley/Malkenhorst/Turnbull Property, the Authority agreed to pledge $263,179 of the funds on deposit with the County Treasurer as security for obligations, including street improvements that would need to be made in the event that the property ceases to be used for open space, habitat restoration, or other biological preservation activities consistent with open space management, and passive recreational use. NOTE 4 CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2023, is as follows: Balance at Balance at June 30, 2022 Additions Deletions June 30, 2023 Capital Assets, Non-depreciable: Land (Acquired by the Authority) $ 34,520,585 $ - $ - $ 34,520,585 Land (Donated to the Authority) 1,239,392 1,239,392 Total Capital Assets, Non-depreciable 35,759,977 35,759,977 Capital Assets, Depreciable: Buildings and improvements 428,480 428,480 Accumulated depreciation (428,480) (428,480) Total Capital Assets, Depreciable Total Capital Assets, net $ 35,759,977 $ - $ - $ 35,759,977 18 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 4 CAPITAL ASSETS (Continued) Capital assets, at cost, or fair value at the time of donation, for the fiscal year ended June 30, 2023, consist of the following: Land Building Construction Property Name Amount Amount In Progress Assets Acquired by the Authority a. Powder Canyon $ 2,398,188 $ - $ - b. Hacienda Hills Property 790,467 c. Unocal Properties 46,524 d. Davies Property 726,100 e. Weisel/Sanders Property 352,363 300,000 f. Old Coach Property 3 ,616,020 g. Pellkofer Properties 236,699 h. Lim Property 450,875 i. Roberts/Pellkofer Property 769,550 j. Fan/Huang/Chen Property 481,921 k. Newbre II Property 501,868 l. Shuey Property 75,877 m. Canlas Property 396,151 n. Rose Hills Foundation Property 14,213,405 o. Kou Property 650,854 p. Javaid Property 2 ,204,100 q. Viola Berg Property 355,737 r. Public Works Property - La Habra Heights 320,302 s. Gibson Property 790,440 t. Ranney Property 2,729 u. Brearley/Malkenhorst 2 ,124,500 v. Corona Property 438,175 w. Maico Property 601,200 x. Sycamore Canyon Property 1 ,505,032 128,480 y. Seirafi Parcel No. 8239-045-903 3,987 z. Housely Parcel No. 8239-045-904 21,026 aa. Easement on Parcel No. 8126-024-004 2,800 bb. Moravek APN 8221-026-010 22,156 cc. Johns APN 8221-004-013, 014, 015 421,539 Total Assets Acquired by the Authority 34,520,585 428,480 Assets donated to the Authority a. Benson Ford Donation 104,000 b. J. Grimont Donation 100,000 c. Newbre Property 316,394 d. Gale Property 708,667 e. OCWR Project easement 9,401 f. Ridgewood/BroadrockBrea/ Power II easement 9 30 Total Assets Donated to the Authority 1 ,239,392 Total Capital Assets as of June 30, 2023 $ 35,759,977 $ 4 28,480 $ - 19 PUENTE HILLS HABITAT PRESERVATION AUTHORITY NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2023 NOTE 5 COMMITMENTS AND CONTINGENCIES The Authority leases its office space from the City of Whittier (City). In August 2021, the Authority signed a lease renewal for the office space in the City, effective from August 1, 2021 through July 31, 2026, with an option to renew for two consecutive five year terms. According to the lease agreement, the base rent will start at $471.68 per month and will be adjusted annually, based on the Authority’s proportionate share of the operating expenses incurred by the City. On August 23, 2022, the lease agreement was amended to change the base rent to $1 annually, commencing August 23, 2022. The lease does not meet the criteria for being recorded under Governmental Accounting Standards Board Statement No. 87 “Leases”. The Authority’s personnel are employees of the City. Their CalPERS benefits and related pension liabilities are disclosed in the City’s financial statements. NOTE 6 CONTINGENT LIABILITIES Claims and suits have been filed against the Authority in the normal course of business. The outcome of these matters is not presently determinable. However, in the opinion of management, the resolution of these matters is not expected to have a significant impact on the financial condition of the Authority. NOTE 7 SUBSEQUENT EVENTS The Authority entered into a mitigation agreement in January 2024 with Metro Heights Montebello LLC (Metro Heights) related to the removal of 12 acres of coastal sage scrub for the Montebello Hills Development project. Metro Heights is contracting with the Authority to prepare and establish specific guidelines for a restoration contractor to follow during the installation, maintenance, and monitoring of the mitigation site. The Authority will be paid approximately $3.6 million for the mitigation work. 20