January 13, 2022

Community Update
By Tami Scott, Administrative Services Director

Within six months of the close of each fiscal year (June 30th), state law requires the City of Cathedral City to publish a complete set of financial statements presented in conformance with Generally Accepted Accounting Principles of the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Prepared by the Finance Department according to Municipal Code, Section 2.12.040, this report is referred to as the City’s Annual Comprehensive Financial Report (ACFR).

2021 Comprehensice Annual Financial Report Cover

reasonable basis for making those representations, City management has established a comprehensive internal control framework designed to both protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with U.S. GAAP.

The ACFR consists of management’s representations concerning the finances of the City. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City. To provide a reasonable basis for making those representations, City management has established a comprehensive internal control framework designed to both protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with U.S. GAAP.

Lance, Soll, & Lunghard, LLP, a statewide firm of licensed certified public accountants, is the independent auditor of the City’s finances. Each year, the goal of the independent audit is to provide assurance the financial statements are free of misstatement. The audit involves examining evidence supporting the amounts and disclosures in the financial statements for 50+ funds the City manages; assessing the accounting principles used, the legal and appropriate checks and balances that are in place to minimize risk; and evaluating the overall presentation of the financial statements. Based upon the annual audit that was conducted this past fall, the independent auditors have concluded there is a basis for rendering a favorable opinion of the City’s financial statements as of and for the year ended June 30, 2021.

With the March 19, 2020 State of California statewide Executive Order and Public Health Order to Stay-At-Home, there was a significant impact on the City’s final revenues – most notably with Cannabis Tax, Sales Tax, and Transactions and Use Tax and Transient Occupancy Tax.

CANNABIS TAX

The City of Cathedral City has a young and burgeoning new business cluster with the cannabis industry. During the first five years, more than 200 applications have been received for cannabis businesses including dispensary, cultivation, manufacturing, distribution, transportation, and laboratory testing. As of the end of this fiscal year (FY) 2020/2021, the City has 96 cannabis businesses with 176 licenses, operating 56 sites comprised of 45 generating tax revenues, including 14 dispensaries, 27 cultivators, and 7 manufacturers resulting in almost $5.1 million in tax revenue versus the more than $4.3 million in tax revenue in fiscal year 2019/2020. In the upcoming fiscal year (2021/2022), we anticipate additional cultivation sites opening within our city limits resulting in revenues increasing to an estimated $7.5 million in annual revenues.

SALES TAX AND TRANSACTIONS & USE TAX

Sales Tax and Transaction & Use Tax is the City’s lifeblood. In fiscal year 2020/2021, it accounted for almost 46.1% of the City’s tax revenues and almost 36.5% of the City’s traditional General Fund (Fund 100) revenues. For FY 2020/2021, sales tax and transactions and use tax is $20.5 million versus $16.0 million in FY 2019/2020 reflecting a $4.5 million revenue increase. With the adopted budget projection for FY 2020/2021 being 17.6 million, the City had a $2.9 million revenue surplus this year. Since the 2007-2009 recession, sales tax has shown steady increases as the national and local economies demonstrate continued improvement. In the past ten years from FY 2010/2011 to FY 2020/2021, sales tax and use tax has increased almost $11 million (115%).

TRANSIENT OCCUPANCY TAX (TOT)

The City’s TOT increased almost $300,000 to just under $3.7M in FY 2020/2021 from just under $3.4M in FY 2019/2020, the majority directly attributable to Short-Term Vacation Rentals(“STVRS”). The continued growth in TOT from STVR revenue increased to almost $1.25M in FY 2020/2021 from $750K in FY 2019/2020. With the commencement of the phasing out of some of the STVR properties over the next two years, there will be an adverse financial impact from the reduction in STVR TOT revenue in the upcoming fiscal years.

EVENTS, EVENTS, AND MORE EVENTS

Cathedral City has become the destination for events. The City’s five Signature Events include the Tejano Music Festival (March), Balloon Festival (November), SnowFest (December), Taste of Jalisco (February), and Lesbian, Gay, Bisexual, and Transgender (LGBT) Days (March). There are usually 10 other events scheduled throughout the year, such as the ever-popular annual Fall Festival/Spooktacular/Dia de Los Muertos celebrated during the late October/early November Halloween season. With the March 19, 2020 State of California statewide Executive Order and Public Health Order to Stay-At-Home for COVID-19, events scheduled for FY 2020/2021 were canceled; however, some outdoor City’s events have returned this fall and should continue into the completion of FY 2021/2022.

CONSTRUCTION PROJECTS/ROAD IMPROVEMENTS

This past year has seen the completion of significant road rehabilitation and improvements in Cathedral City to include:

West Whitewater Neighborhood Streets, Phase 2
Cove Neighborhood Street Improvements
Cathedral Canyon Drive Street Improvements
Whispering Palms Neighborhood Streets

RESIDENTIAL CONSTRUCTION

With being a post-Proposition 13 city incorporated after 1978, Cathedral City did not have a separate property tax rate prior to the voter enactment of Proposition 13, the City cannot impose additional taxes without a vote of the citizens. Therefore, additional property tax revenues generated by development projects within the city, but not within the boundaries of the former redevelopment agency, are not solely remitted to the City’s General Fund. Instead, the taxes are also remitted to other taxing agencies such as Riverside County, school districts, and special districts. As a result, the City’s General Fund generally received almost $5.0 million, or just 8.9%, of its total revenue from property tax.

The local housing market in Cathedral City continues to maintain an increase in home values along with new residential construction and a decline in lender-owned (foreclosure) properties, demonstrating the housing market is transitioning toward a healthier marketplace. Although additional housing units increase the amount of property tax the City receives, there is an even greater impact on the City’s sales tax revenues. Generally, new construction is a strong economic driver because growth in this sector usually affects other industries, such as retail, wholesale trade, and transportation services.

During calendar year 2021, the City continued to see more residential housing units in various locations throughout the city. The City issued eight construction/building permits for commercial development. In addition, the City issued 251 construction/building permits (versus 159 in Calendar Year 2019) for single-family development in various infill (empty) lots and primarily three neighborhoods:

The District East at Cree Road and Jones Road
Newport 5 at Date Palm Drive
DR Horton in the Verano neighborhood north of the Rio Vista neighborhood

COMMUNITY ASSISTANCE

In fiscal year 2020/2021, the City Council continued the existing community assistance program supporting the local Boys & Girls Club, the Cathedral City Senior Center, and regional homeless programs through the Coachella Valley Association of Governments (CVAG) and the Coachella Valley Rescue Mission (CVRM). In addition, the City was able to provide additional assistance through the Community Development Block Grant (CDBG) program to organizations such as Angel View, Assistance League of Palm Springs, Inland Fair Housing, and Transgendered Health and Wellness Center.

LONG-TERM FINANCIAL PLANNING

Although we had a better yearend position than planned from the projected COVID-19 impacts, we still must manage our expenditures carefully and thoughtfully. Over the next several years, we will have increased costs to CalPERS for our pension obligations as the planned investment rate of return has been reduced to 7% with the potential for a further decrease to 6.5%, and their planned smoothing techniques for agencies to pay their unfunded liabilities to 100% will cause our PERS obligations to increase more than 50% by FY 2030/2031. If there is a downturn in the economy combined with increased operating costs, there will be an adverse effect on our reserves. In addition, as our OPEB obligations rise due to the growth in the number of retiree and active personnel, it is vital we keep a basic principle in mind, with increased operational expenditures, revenues must continue to grow, e.g., development growth within our community.

To mitigate the potential risk of another downturn in the economy, it is essential we grow our fund balance “savings account”. Of the available fund balance, the City currently strives to set aside a minimum of 33% of budgeted expenditures and transfers out, with a target of 50%, for the following purposes: (1) cash flow reserves (50%); (2) economic uncertainties (40%); and (3) budget-related reserves (10%). These amounts are necessary to alleviate significant unanticipated budget shortfalls and to ensure the orderly provisions of services to citizens. At the end of fiscal year 2020/2021, the City’s General Fund (Fund 100) unassigned fund balance is almost $30.7 million representing 52.3% of budgeted expenditures for the upcoming fiscal year (2021/2022).

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Business Support

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News

“Mexico Lindo” Coming to Cathedral City during the Taste of Jalisco Festival

The 6th Annual Taste of Jalisco Festival in Downtown Cathedral City will have an amazing headline performance at the new outdoor Cathedral City Community Amphitheater entitled, “Mexico Lindo” performed by Ballet Folklorico de Los Angeles (BFLA) and Mariachi Garibaldi de Jaime Cuéllar. These two professional ensembles teamed up in 2017 to recreate “Tale as Old as Time” from Disney’s Beauty … Read more

Photo's of the Week

The Statues of Town Square Park

Events

“City Hall at Your Corner”
Happens January 18th – Register Now

Register now for January's virtual “City Hall at Your Corner” as Mayor Pro Tem Rita Lamb and Councilmember Nancy Ross host the event for an informal discussion of issues in Cathedral City. This virtual event will take place on Tuesday, January 18, 2022 from 3:00 pm to 4:00 pm on Zoom.us. You must register for the event in advance at … Read more

Yoga at the Amphitheater

Professional Yoga Instructor Patti Wexler The Cathedral City Parks and Community Events Commission proudly brings Free Yoga Classes to the new Cathedral City Community Amphitheater in Downtown Cathedral City every Tuesday morning at 10 am starting on February 1, 2022 through April 26, 2022. The free classes will be taught by professional Yoga instructor Patti Wexler. No need to RSVP, … Read more

Emergency Preparedness Make & Take Event

Join Mayor Pro Tem Rita Lamb and Councilmember Nancy Ross along with the Cathedral City Fire Department for a Free Emergency Preparedness – Make and Take Event scheduled for Saturday, February 5, 2022 from 11:00 am to 12:00 pm at the Cathedral City Public Library, Multi-Purpose Room, 33520 Date Palm Drive, Cathedral City. This event will provide information on … Read more

6th Annual Taste of Jalisco

Music, Tequila Tasting, Carnival, Artisan Vendors & Authentic Cuisine The 6th Annual Taste of Jalisco, produced by Soundskilz Inc, celebrates the sister city relationship between the cities of Cathedral City, California (USA) and Tequila, Jalisco (Mexico) through music, fashion, spirits, culture and cuisine in Downtown Cathedral City. Live musical performances throughout the weekend and a special … Read more

Mary Nutter Collegiate Classic

The Mary Nutter Collegiate Classic is the nation’s largest and most prestigious preseason college softball tourney, featuring more than 25 top Division I teams. It has hosted Team USA as an opportunity for preparing our Olympic athletes for the best competition. Celebrating its 17th year, the Cathedral City, California event will occur on February 24-27, 2020. The lineup of teams … Read more

Tejano Music Festival

Tejano PowerHouse Entertainment, City of Cathedral City, and Diaz Enterprises invites you to the 4th annual Tejano Music Fest in Cathedral City featuring the best Tejano music, fiesta food, and spirits on Saturday, March 5, 2022, from 5 pm to 11 pm at our new location, the Cathedral City Community Amphitheater, 68526 Avenida Lalo Guerrero, in Cathedral City … Read more

SoCal Auto Show

Directed by Christian Rendon, attendees will have an opportunity to view up to 300 cars including classic, imports, domestic, off-road, golf carts, and motorcycles. Activities also include food trucks, beer garden, arts and craft vendors, and more. The SoCal Auto Show will take place in Downtown Cathedral City at the Festival Lawn and on the 3rd Floor of the Downtown … Read more