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6.1. G. - Page 23 I. Case for Caution Caution must be exercised in drawing firm conclusions abaut the fiscal health af a city or county in isolation, or in cornparison with others, based on any lirnited set of data. This is especially trae given that governmez�ts k�ave sor�ae flexibility wathin G.A,SB rules as to how t.l�ey organize their fnances and report their data. The bes� that can be done is to highlight potential issues for further investigatian. HalfMoon Bay served as an excellent example. Based on the data collected, Half Moon Bay was grouped into the category of cities whose reserves {UGFB) were flat or increased in the 2007-20 i 0 periocE. The data shows an increase of 94%. It has a city poliey eurrently requiring 30% pf annual aperating expenditures be heid as resez and it met that higher than minianum GASB 34 recommended standard each of those years. (The city policy was 2(}% of ann�aal expenditur�s in 2007-2008). Its maximum Running Liquidity of 334 days was the second highest of all cities in the County. Its revenues exceeded its expenditures fhe Iast two years of the recession (not including internal transfers arad one tim� proceeds or paynients}, anc� it made its contractually required CaIPERS payments and is curz on its OPEB retiree healthcare payxnents, wzth no net O�EB obligation as o�7un� 30, 2410. Based on these indicators, one could conciude that Half Moon Bay was fiscally healthy. A rec�nt news report' h�ghligh#ed a"fiscal crisis" and stated that the city could potentially run out of its reserves. While the Grand J�ry avoided tr�aking any judgr�ents about the fiscal soundness of axzy city or the Caunty for the reasons mentioned prewiously, and limited its focus Fn this investigation primarily to the use of reserves, it looked further into Half Moon Bay's pubIic financial statetnents and sought additional clarification from a Halt'Moon Bay offcial to venfy the correctness of the data used and furtl�er undez any limitations. In summary, Half M�on Bay issued Judgment QbligatiQn Bonds to help cover the costs a� a legal settlement. The proeeeds froxr}. the bonds wez°e received and subsequently disbursed in fiscal year 20Q9-20I0 and properly reflected on the appropriate city financial statements. �he full �ayment consisted of $ I S rnillion from the bond proceeds and $3 million from the Genera� Fund . The Adopted Annual Budget for 201(}-2011 shows a proj ected deficit ($504,447) of revenues vs. expenditures, ta be covered by its General �'und Balance. The result is that the city's reserves would :faII below its 30% of annual operating expendptures policy. A waiver permitting a one- year exception had been �ranted by City Council in anticipation of this need. The palicy requires th� City Manager to "prepare a plan foz eonsideration by the City CounciI to implement actions witk�in a twe�ve-montk� pe�iad to rebuild the fund balance." The City also identified key financial impacts in a Five Year �'orecast document included as part of its budget, highlighting its specific challenges. In sumrnary, tk�e data collected by the Grand 7ury was accurate as it related to a Iimited, defined set o� data at a specific point in time. However, the data did not and could not tell the entire '``OuEsoUrcing Safety San Francisco Chronicle Editorial", QJ5/11, pA13 e Approved Half Moon Bay Genera! Fund Budget Surr�mary Comparison, pC2 g Half Moon Bay City Council Resalutian No. C-46-1D adopted 6115/9a 10 Haff Moon 8ay City Council i�esolufion No C-38-Q9, adopted 612109 I8