HomeMy WebLinkAbout01.29.2025@400 SP Budget CCWednesday, January 29, 2025
4:00 PM
City of South San Francisco
P.O. Box 711 (City Hall, 400 Grand Avenue)
South San Francisco, CA
City Manager's Conference Room, 400 Grand Avenue
South San Francisco, CA 94080
Budget Standing Committee of the City Council
EDDIE FLORES, Mayor
MARK ADDIEGO, Councilmember
Special Meeting Agenda
1
January 29, 2025Budget Standing Committee of the
City Council
Special Meeting Agenda
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Page 2 City of South San Francisco Printed on 1/30/2025
2
January 29, 2025Budget Standing Committee of the
City Council
Special Meeting Agenda
CALL TO ORDER
ROLL CALL
AGENDA REVIEW
PUBLIC COMMENTS: Comments are limited to items on the Special Meeting Agenda.
MATTERS FOR CONSIDERATION
Motion to approve the Minutes for the meeting of May 8, 2024.1.
Report presenting Fiscal Year (FY) 2024-25 Mid-Year Financial Report as of
December 31, 2024, and proposed budget amendments for FY 2024-25 Operating and
Capital Improvement Program (CIP) Budgets (Karen Chang, Director of Finance)
2.
Staff Report for Discussion on Pension Funding Policy and update on pension and
OPEB liabilities (Karen Chang, Director of Finance)
3.
Preliminary information regarding federal aid freeze and implications for existing City
contracts and subgrantees. (Sharon Ranals, City Manager)
4.
ADJOURNMENT
Page 3 City of South San Francisco Printed on 1/30/2025
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City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #:25-110 Agenda Date:1/29/2025
Version:1 Item #:1.
Motion to approve the Minutes for the meeting of May 8, 2024.
City of South San Francisco Printed on 1/28/2025Page 1 of 1
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CALL TO ORDER TIME: 1:00 p.m.
ROLL CALL PRESENT: Mayor Coleman
Councilmember Addiego
AGENDA REVIEW
None.
PUBLIC COMMENTS
None.
MATTERS FOR CONSIDERATION
1. Motion to approve the Minutes for the meeting of April 9, 2024.
Motion – Councilmember Addiego / Second – Mayor Coleman: to approve the minutes. The motion
carried unanimously.
2. Report regarding the City of South San Francisco Operating Budget for Fiscal Year 2024-25
(Karen Chang, Director of Finance)
Director Chang presented the report and reviewed the 2024-2025 budget, the general fund proposed
budget, balancing strategies to include five percent department reductions, and balancing measures
to include the use of Measure W funds to balance out the general fund. She also indicated that the
potential ballot measure for November was not included in the presentation.
Mayor Coleman inquired about the impacts of the ballot measure to the 2024-2025 budget and
Director Chang noted the biggest impact would be to the 2024-2025 budget.
Department representatives reviewed and discussed their proposed cuts and responded to questions
from the subcommittee.
Director Chang concluded with reviewing the projected City reserves, recommendations, and next
steps.
3. Report regarding proposed Capital Improvement Program for the Fiscal Year 2024-25.
(Eunejune Kim, Director of Public Works/City Engineer, and Matthew Ruble, Principal
Engineer)
MINUTES
SPECIAL MEETING
BUDGET STANDING COMMITTEE
OF THE CITY OF SOUTH SAN FRANCISCO
WEDNESDAY, MAY 8, 2024
1:00 p.m.
City Hall, City Manager’s Conference Room
400 Grand Avenue, South San Francisco, CA
5
SPECIAL BUDGET STANDING COMMITTEE MEETING MAY 8, 2024
MINUTES PAGE 2
Principal Engineer Ruble presented the proposed Capital Improvement Program and reviewed new
appropriation requests and refunds.
Information Technology Director Barrera provided an update to the downtown wi-fi project, noting
that we may pivot and move in a different direction.
Director Chang noted that the business license tax study session will be brought directly to the Council
for direction as the timeline does not permit for scheduling a meeting with the subcommittee.
ADJOURNMENT
Being no further business, Mayor Coleman adjourned the meeting at 2:23 p.m.
Submitted by: Approved by:
Jazmine Miranda James Coleman
Assistant City Clerk Mayor
Approved by the Budget Standing Committee: / /
6
City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #:25-54 Agenda Date:1/29/2025
Version:1 Item #:2.
Report presenting Fiscal Year (FY)2024-25 Mid-Year Financial Report as of December 31,2024,and proposed budget
amendments for FY 2024-25 Operating and Capital Improvement Program (CIP)Budgets (Karen Chang,Director of
Finance)
CONCLUSION
Due to the formatting limitations of the City’s Agenda Management platform,the full staff report accompanying this
agenda item is being attached as Attachment 1 of this report.
City of South San Francisco Printed on 1/28/2025Page 1 of 1
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City of South San Francisco Page 1 of 13
File#: 25-54 Agenda Date: 1/29/2025
Version: 1 Item #:
Report presenting Fiscal Year (FY) 2024-25 Mid-Year Financial Report as of December 31, 2024,
and proposed budget amendments for FY 2024-25 Operating and Capital Improvement Program
(CIP) Budgets (Karen Chang, Director of Finance)
RECOMMENDATION
Staff requests that the Budget Standing Subcommittee of the City of South San Francisco
(“City”) review the FY 2024-25 Mid-Year Financial Report and the proposed budget
amendments for FY 2024-25; and refer the items to the February 12, 2025, City Council
meeting for full Council consideration and approval.
BACKGROUND/DISCUSSION
The City Council adopted the FY 2024-25 General, Enterprise and Internal Service Fund budgets
on June 12, 2024. The adopted budget features the annual expenditure and resource allocation plan
that guides the implementation of City Council budget policies and priorities. The budget provides
funding direction for the broad range of services that meet the needs of the community in
accordance with City Council policy.
This financial review provides the mid-year budget update to the City Council for the current fiscal
year. Analysis of the revenues collected and all expenditures through December 31, 2024 measures
operational adherence to the budgetary allocation plan.
The adjusted budget incorporates current estimates for revenue and expenditure appropriations for
all funds as of December 31, 2024. The Mid-Year Financial Report as of December 31, 2024,
provides comparisons to the prior year and focuses on variances from the revenue and expenditure
plans and allocations contemplated in the budget.
I. Current Fiscal Year (FY 2024-25) Update
A. General Fund Revenues – 2nd Quarter and Revenue Amendment Requests
B. Additional General Fund Revenue Amendment Request
C. General Fund Expenditures – 2nd Quarter
D. General Fund Appropriations Request
E. Non-General Fund Appropriations Request
F. Additional Adjustment – Utilities
G. Mid-Year Capital Improvement Plan Request (CIP)
City of South San Francisco
Legislation Text
P.O. Box 711
(City Hall, 400 Grand Avenue)
South San Francisco, CA
8
City of South San Francisco Page 2 of 13
II. Reserves Overview & Considerations
I. CURRENT FISCAL YEAR (FY 2024-25) UPDATE
The General Fund accounts for the operations of the City and for basic municipal services. The
adjusted FY 2024-25 General Fund budget projects revenues totaling $139.1 million, and
expenditures totaling $155.2 million, including purchase order encumbrances from FY 2024-25
approved carryover amounts, $6.0 million salary and expenditure attrition and several City Council
approved appropriation amendments prior to December 2024.
The following sections show the revenue and expenditure results as of December 31, 2024.
A. GENERAL FUND REVENUES – 2ND QUARTER AND REVENUE AMENDMENT
REQUESTS
Table 1, shown below, indicates actual revenues as of December 31, 2024, with a comparative
view of where the City’s revenues were at the same time last year (December 31, 2023):
Table 1. FY2023-24 vs. FY2024-25 Revenues as of December 31
REVENUES FY 2023-24 FY 2024-25
(in millions) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
Taxes
Property Tax $48.0 $26.2 55% $50.2 $30.3 60%
Sales Tax 23.4 7.9 34% 23.2 7.2 31%
Transient Occupancy Tax 14.9 5.7 38% 14.5 6.6 46%
Other Tax 7.0 2.1 30% 6.7 2.4 36%
Franchise Fees 4.6 1.3 28% 6.2 1.4 23%
License and Permits
Building 13.9 5.9 42% 10.9 4.7 44%
Fire 3.0 1.8 59% 2.3 1.4 61%
Other 0.0 0.0 0% 0.0 0.0 0%
Fines & Forfeitures 0.7 0.2 28% 0.9 0.1 16%
Intergovernmental 4.4 2.3 53% 3.7 1.9 50%
Charges for Services
Planning 0.5 0.3 58% 0.4 0.7 177%
Fire 2.7 2.1 76% 3.7 2.4 64%
Parks & Recreation 3.7 1.7 46% 3.4 1.8 52%
Police 1.2 0.6 44% 1.1 0.6 54%
Other 0.0 0.0 86% 0.0 0.0 118%
Inter-Fund Admin Charge 2.0 1.0 50% 2.0 1.0 50%
Use of Money & Property 3.9 1.7 43% 4.5 2.6 58%
Other Revenues 0.3 0.1 25% 0.3 0.4 130%
Transfers In 8.7 0.8 9% 5.3 0.5 10%
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REVENUES FY 2023-24 FY 2024-25
(in millions) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
TOTAL REVENUES $143.1 $61.5 43% $139.1 $66.0 47%
As shown in the above Table 1, the adjusted revenue budget for FY 2024-25 as of December 31 is
$139.1 million – approximately $4 million less than the FY 2023-24 adjusted budget. The primary
culprit in the overall difference in adjusted revenue budget between last fiscal year and the current
fiscal year is building permit revenues, which were budgeted at $13.9 million in 2023-24 and $10.9
million in 2024-25. Actual revenue collections for the two quarters ending December 31, 2024 is
$4.5 million higher when compared with the prior year.
The following narrative highlights the recommended adjustments to the FY 2024-25 revenue
budget.
The following provides an overview of each revenue category and presents staff recommendations
for General Fund revenue amendment requests totaling $4.4 million.
1. Property Tax. Bay Area home values experienced a modest increase last year as interest
rates briefly dropped before rising again. However, property taxes are expected to remain
stable due to the enduring effects of Proposition 13, passed in 1978. Proposition 13 limits
the annual increase in assessed property value to 2%, protecting homeowners from steep
tax hikes as property values appreciate. Properties are reassessed at market value only upon
sale or significant renovation.
Property tax accounts for 35% of the General Fund revenue in the current budget. The City
receives property tax revenues in two major installments, typically in December and April.
As of December 31, 2024, property tax collections have reached 60.3% of the City's
projection.
The mid-year budget adjustment includes a proposed $6.9 million increase in property tax
revenue projections. This adjustment, driven by several factors, is proposed as follows:
a. Updated County Projections: The October 2025 levy letter from the County
Controller’s Office included an upward revision to projected property tax revenues.
Staff recommends a $1 million increase in budgeted ERAF property tax.
b. Shifted Revenues: The FY 2022-23 shortfall payment for Property Tax In Lieu of
Vehicle License Fees (VLF) was delayed and is now reflected in FY 2024-25,
boosting current-year projections. The recommended budget amendment is due to
the appropriation in the State’s FY 2024-25 adopted budget, which reflects the
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lobbying efforts of San Mateo County officials, the City’s lobbying firm, and major
efforts by state delegates to ensure that San Mateo County’s FY 2022-23 VLF
shortfall was included in the state budget. However, ongoing efforts are needed in
a collaborative effort between every local city and the County of San Mateo to work
towards a legislative amendment to address this long-term issue. The City’s
Assistant City Manager represents its interests in the County’s VLF Task Force.
Staff recommends a $2.8 million increase in budgeted Property Tax In Lieu of VLF.
c. Former Redevelopment Area (RDA) Allocation: Staff has seen a consistent increase
in revenue in this category during the past couple of years. After discussing the
trend with the San Mateo County Controller’s office, staff determines that this trend
is likely to stay. Therefore, staff proposes to update the baseline.
Staff recommends a $3.1 million increase in budgeted Former RDA property tax.
While these adjustments reflect optimistic projections, particularly for the RDA allocation,
the approach carries some inherent risks, especially the VLF shortfall. Staff will continue
to closely monitor revenue trends and reassess projections if necessary to ensure budget
stability.
2. Sales Tax. There is a two-month delay between when businesses remit sales taxes to the
California Department of Tax and Fee Administration (CDTFA) and when the CDTFA
distributes the City’s share of these revenues. As with the second quarter of FY 2023-24,
the City has received approximately one-third of the projected sales tax revenue for the
entire fiscal year. Since the adoption of the FY 2024-25 budget, the City’s sales tax
consultant has revised their projection downward. This adjustment reflects the impact of
lower gas prices and a continued downward trend in purchasing, and other adjustments and
reallocations.
Staff recommends a $2 million decrease in budgeted sales tax revenue, which aligns with
the City’s sales tax consultant’s revised projection.
3. Transient Occupancy Tax (TOT). Post-pandemic travel has leveled off. As of December
31, 2024, the City recorded TOT revenues of $6.2 million. However, due to the delay in
when TOT is due, this does not include December revenues. Staff expect revenues to
remain stable but have received a back payment for prior fiscal years.
Staff recommends a $336,000 increase in budgeted TOT revenues.
4. Other Taxes. Other taxes include real property transfer tax, business license tax, and
commercial parking tax. Second quarter year-to-date collection of business license tax and
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commercial parking tax are in-line with prior year’s amounts. Business license taxes are
generally due on January 31. However, due to the passage of Measure W in November,
staff have adjusted this year’s due date to February 28, 2025, to allow for businesses to
adjust to the updated tax. Staff expect some large businesses to pay their business license
tax throughout February. Real property transfer tax is projected flat.
Staff recommends a $1.0 million budget increase due to the changes in the business license
tax approved by the voters in the most recent Measure W.
5. Licenses & Permits. The Federal Reserve Bank has started easing interest rates with the
current rate of 4.25% down from the high of 5.25%. In general, when the rate is lower,
there is an increase in new project starts, driving an increase in license and permit revenue.
While the City has seen an increase in some licenses and permits, it is not consistent across
all departments.
Please refer to the department requests below for the budget adjustments in this category.
6. Service Charges. This revenue stream includes fees charges by various departments for
services provided to the public. Due to the increase in paramedic call volume and changes
to the California Department of Health Care Services supplemental program, Fire
anticipates an increase of $0.2 million in paramedic service fees, which include an
adjustment for prior years.
Please refer to the department requests below for the budget adjustments in this category.
7. Intergovernmental. The City received $1.7 million in grants and program reimbursement
from other governmental entities for the 2nd quarter year-to-date.
Staff recommends no adjustment to the budget in this category.
8. Use of Money and Property. With the higher interest rate environment, the City projects
additional interest earnings from investments. The City does not expect any sale of property
in FY 2024-25. Rental income is within budget expectations, however, a back payment on
rental property was made.
Staff recommends a $1.2 million budget increase in this category.
9. Transfers In. With the expected additional revenue, staff are proposing that the scheduled
transfer of $3 million from Measure W to cover the General Fund FY 2024-25 deficit be
eliminated.
Staff recommends a $3 million budget decrease in Transfers In.
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B. ADDITIONAL GENERAL FUND REVENUE AMENDMENT REQUEST
The following are additional General Fund revenue amendment requests totaling $910,000.
• Economic and Community Development ($985,000)
Building Permit Fee Decrease - ($1,000,000)
Donations for Bio Conference 2025 - $15,000
• Fire Department $1,345,000
Paramedic Service Fee Increase - $195,000
Fire Plan Check Fee - $600,000
Mutual Aide Support Reimbursement- $550,000
• Public Works $550,000
Engineering Permit Fee - $550,000
If approved by the Council, the above changes would result in an increase to the overall revenue
budget for FY2024-25 by $5.4 million from $139.1 million to $144.5 million.
C. GENERAL FUND EXPENDITURES – 2ND QUARTER
Table 2 below shows the actual expenditures by Department that have been recorded through
December 31, 2024. As part of the mid-year budget review process, staff conducted a
comprehensive analysis of expenditures across all departments. This included collaborating
closely with departmental leadership to assess current spending trends, identify areas requiring
adjustment, and ensure alignment with the City's fiscal priorities. As shown in Table 2, citywide
payroll expenditures are on track, particularly when factoring in the partial position freezes
incorporated into the budget. Notably, all savings associated with these temporary freezes were
realized during the first half of the fiscal year.
Table 2. FY2023-24 vs. FY2024-25 Expenditures as of December 31
EXPENDITURES FY 2023-24 FY 2024-25
(in thousands) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
City Council
Payroll $189.0 $78.3 41% $192.9 $66.9 35%
Supplies & Services 36.6 31.1 85% 61.6 7.5 12%
Interdepartmental 43.9 21.5 49% 43.9 22.0 50%
Total 269.5 130.9 49% 298.4 96.3 32%
City Clerk
Payroll 1,001.3 399.2 40% 988.8 409.3 41%
Supplies & Services 208.4 38.0 18% 237.7 59.5 25%
Interdepartmental 55.3 26.8 48% 55.3 27.6 50%
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EXPENDITURES FY 2023-24 FY 2024-25
(in thousands) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
Total 1,265.0 463.9 37% 1,281.8 496.4 39%
City Treasurer
Payroll 31.2 11.7 37% 34.1 15.1 44%
Supplies & Services 102.1 44.7 44% 140.1 23.3 17%
Interdepartmental 0.1 0.1 50% 0.1 0.1 50%
Total 133.4 56.5 42% 174.3 38.4 22%
City Attorney
Supplies & Services 1,100.7 530.5 48% 1,450.7 816.8 56%
Interdepartmental 8.1 3.9 49% 8.1 4.1 50%
Total 1,108.8 534.4 48% 1,458.8 820.9 56%
City Manager
Payroll 3,243.1 1,248.6 39% 2,599.5 1,191.0 46%
Supplies & Services 1,633.7 352.6 22% 1,185.1 231.9 20%
Interdepartmental 144.4 70.8 49% 144.4 72.2 50%
Total 5,021.1 1,672.0 33% 3,928.9 1,495.1 38%
Finance
Payroll 3,333.3 1,324.0 40% 3,273.0 1,365.4 42%
Supplies & Services 1,047.9 81.9 8% 905.6 132.7 15%
Interdepartmental 138.5 65.5 47% 138.5 69.2 50%
Total 4,519.7 1,471.4 33% 4,317.2 1,567.3 36%
Non-Expense/Dept
Supplies & Services 1,394.4 824.2 59% 1,685.6 1,162.5 69%
Transfers 500.0 250.0 50% 500.0 250.0 50%
Total 1,894.4 1,074.2 57% 2,185.6 1,412.5 65%
Human Resources
Payroll 2,365.0 1,110.8 47% 2,389.0 1,164.7 49%
Supplies & Services 575.1 103.4 18% 512.6 210.3 41%
Interdepartmental 55.2 26.3 48% 55.2 27.6 50%
Total 2,995.4 1,240.4 41% 2,956.8 1,402.5 47%
Economic & Comm
Development
Payroll 5,487.1 3,139.9 57% 6,112.7 2,786.2 46%
Supplies & Services 6,469.6 2,007.5 31% 5,046.8 1,129.0 22%
Capital Outlay 113.4 0.0 0% 60.0 0.0 0%
Interdepartmental 368.6 175.7 48% 368.6 184.3 50%
Total 12,438.6 5,323.1 43% 11,588.1 4,099.6 35%
Fire
Payroll 28,172.9 17,482.7 62% 30,819.7 15,751.8 51%
Supplies & Services 2,825.9 1,311.9 46% 3,680.9 1,065.9 29%
Capital Outlay 400.0 0.0 0% 374.0 0.0 0%
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EXPENDITURES FY 2023-24 FY 2024-25
(in thousands) Adjusted
Budget
Actual as of
12/31/2023
% of
Budget
Adjusted
Budget
Actual as of
12/31/2024
% of
Budget
Interdepartmental 2,251.0 1,101.4 49% 2,251.0 1,125.5 50%
Total 33,649.8 19,896.0 59% 37,125.7 17,943.2 48%
Police
Payroll 32,464.2 18,209.0 56% 33,195.9 15,224.3 46%
Supplies & Services 1,857.1 747.1 40% 2,438.5 882.4 36%
Interdepartmental 2,630.4 1,284.7 49% 2,630.4 1,315.2 50%
Total 36,951.7 20,240.9 55% 38,264.9 17,421.9 46%
Public Works
Payroll 4,765.8 2,612.9 55% 5,428.3 2,559.7 47%
Supplies & Services 7,020.4 1,315.9 19% 5,960.8 1,491.1 25%
Capital Outlay 271.6 0.0 0% 226.6 0.0 0%
Interdepartmental 1,763.8 874.3 50% 1,763.8 881.9 50%
Total 13,821.5 4,803.1 35% 13,379.5 4,932.7 37%
Library
Payroll 6,503.2 3,032.8 47% 7,413.5 2,670.1 36%
Supplies & Services 1,051.6 572.7 54% 839.4 498.2 59%
Interdepartmental 743.8 340.0 46% 743.8 371.9 50%
Total 8,298.6 3,945.5 48% 8,996.7 3,540.2 39%
Parks and Recreation
Payroll 19,171.7 8,664.6 45% 21,081.9 8,668.8 41%
Supplies & Services 6,556.9 2,087.6 32% 6,198.0 2,087.5 34%
Capital Outlay 79.1 108.7 137% 0.0 0.0 0%
Interdepartmental 1,301.7 644.9 50% 1,301.7 650.8 50%
Total 27,109.4 11,505.8 42% 28,581.7 11,407.1 40%
CIP
Transfers 4,375.9 346.1 8% 695.2 9.0 1%
Total 4,375.9 346.1 8% 695.2 9.0 1%
Total General Fund
Expenditures 153,852.9 72,704.1 47% 155,233.4 66,683.1 43%
Information Technology*
Payroll 2,298.9 1,039.2 45% 2,230.4 1,082.3 49%
Supplies & Services 2,726.0 1,014.7 37% 2,306.9 764.2 33%
Interdepartmental 12.9 6.4 50% 12.9 6.4 50%
Total 5,037.8 2,060.3 41% 4,550.2 1,852.9 41%
* Non-General Fund: budgeted as internal service fund in Fund 785
D. GENERAL FUND APPROPRIATIONS REQUESTS
The following are General Fund expenditure appropriation requests totaling $2,919,000. The
proposed adjustments address identified needs and reflect updated projections, enabling the City
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to maintain balanced operations while adapting to changing conditions.
• City Attorney $800,000
Litigation Expenses - $765,000
Labor Negotiation - $35,000
• City Clerk $79,000
Additional Election ballot measure for November election - $79,000
• City Manager’s Office $360,000
Abandoned/Derelict Vessel Removal - $150,000
Unfreeze of Administrative Assistant I position - $60,000
Bond Council for Community Facilities District development - $150,000
• Economic and Community Development $175,000
Bio 2025 increase back to original budget - $75,000
CEQA Analysis for alternative housing element to replace MSB - $100,000
• Finance ($90,000)
Reallocate Bond Council original budget to CMO - ($90,000)
• Fire Department $950,000
Contracts for Fire Plan Reviews (offset by higher revenue)- $400,000
Overtime due to mutual aid support (offset by reimbursement)- $550,000
• Human Resources $40,000
Additional contract services - $40,000
• Library $38,000
Grand Library Wireless Access Point Replacement - $6,000
Peninsula Libraries Automated Network service increase - $18,000
LPR Digital media software renewal - $4,000
Patron Chromebook maintenance upgrades - $7,000
Patron Chromebook management software - $3,000
Unfreeze 0.69 FTEs with no fiscal impact in FY2024-25, as there is sufficient salary
savings in the Library to fund this increase. Positions:
o 0.20 FTE - Library Assistant I
o 0.25 FTE - Library Clerk
o 0.09 FTE - Librarian II
o 0.06 FTE - Librarian I
o 0.04 FTE - Library Page
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o 0.05 FTE - Office Specialist
• Parks and Recreation Department $17,000
Uniforms - budget amount has not been adjusted to account for inflation. - $17,000
• Public Works $550,000
Contracts for Public Works Plan Reviews (offset by revenue)- $550,000
The ongoing fiscal impact of the proposed mid-year budget requests beyond FY2024-25 is
estimated at $2,309,000 in supplies and professional services. This increase is primarily
attributable to additional plan review support across multiple departments. Notably, these costs are
offset by corresponding revenues generated from the services provided, ensuring minimal net
impact on the General Fund. Additionally, there is a $610,000 increase in payroll expenses. This
is primarily an increase in the Fire Department’s overtime, being offset with mutual aid funding.
Finally, there is a 1.0 FTE increase in the City Manager’s office ($60,000 in the current fiscal year)
with an ongoing expense of $160,000.
E. NON-GENERAL FUND APPROPRIATIONS REQUEST
The following are the additional non-General Fund appropriations requests totaling ($1,460,000)
from various sources.
• Measure W Sales Tax Fund (101) ($1,500,000)
Elimination of Transfer Out to the General Fund - ($3,000,000)
Decrease in budgeted sales tax revenue, which aligns with the City’s sales tax
consultant’s revised projection - $1,500,000
• Information Technology Internal Service Fund (785) $40,000
Overtime Budget - $14,000
Standby Pay Budget - $26,000
F. ADDITIONAL ADJUSTMENT - UTILTIES
To address rising utility costs, we are adjusting utility budgets across all funds to reflect recently
implemented rate increases. These adjustments ensure that sufficient funding is allocated to cover
the higher expenses for electricity, gas, and water required to maintain City operations and
services. By aligning the budget with current utility rates, we ensure that financial projections
accurately reflect the true cost of operations. Table 3 below show the recommended adjustment by
fund.
17
City of South San Francisco Page 11 of 13
Table 3. Recommended Increase in Utilities by Fund
Fund
(in thousands) Electric/Gas Water Total
General Fund $951.0 $152.0 $1,103.0
West Park Maint Dist 3 13.0 44.0 57.0
Stonegate Ridge Maint 1.0 5.0 6.0
West Park Maint Dist 1&2 2.0 4.0 6.0
Special Tax Levy B (CFD) 0.0 111.0 111.0
Sewer Enterprise Fund 657.0 0.0 657.0
Parking District Fund 160.0 1.0 161.0
Storm Water Fund 4.0 0.0 4.0
Total $1,788.0 $317.0 $2,105.0
G. MID-YEAR CAPITAL IMPROVEMENT PLAN REQUEST (CIP)
The following is an additional CIP project appropriation request, with their corresponding funding
sources, amounting to ($2,000,000):
1. Linden Park (Existing project pk2305) $2,000,000
Funding Source: $1 million Park Construction Fund (806), $1 million Developer
Contributions
The increase covers construction costs with the expectation that the contract for
construction will be awarded in FY 2024-25.
II. RESERVES OVERVIEW & CONSIDERATIONS
Table 4. Projected City Reserves Summary as of 06-30-2025
Reserve Amount (in millions)
General Reserves (20%) $29.7
Pension Stabilization Reserves 5.8
Infrastructure Reserves 6.7
Total Reserve Levels $42.2
Available Unassigned GF Fund Balance 34.8
FY 2024-25 Projected Deficit (7.0)
Reserves & Surplus Fund Balance $70.0
Table 5 below shows the impact of the General Fund budget for FY 2024-25, the effect of year-
to-date budget amendments already approved by Council, the mid-year appropriations requests
18
City of South San Francisco Page 12 of 13
and revenue updates detailed in this report. The recommended revenue and expenditure budget
updates are projected to result in a deficit of approximately $7.0 million.
Table 5. Projected General Fund Revenue and Expenditure Summary (in millions)
Reserve for Encumbrances rollover $7.8
Adopted Budget Shortfall (8.0)
- FY2024-25 Net Budget Adjustments (8.1)
+ Mid-Year Revenue Adjustments 5.4
- Mid-Year Appropriation Requests (4.0)
Total Adjustments $ (14.7)
FY2024-25 Projected Deficit $ (7.0)
As shown in Table 5, the City experiences an annual rollover of unspent purchasing authority,
referred to as the encumbrance rollover. Historically, this amount has averaged approximately
$7.5 million. The encumbrance rollover is a routine City process designed to account for
contracts or other multi-year initiatives that extend beyond the current fiscal year. This practice
ensures continuity of funding for ongoing commitments and aligns with the City’s financial
management policies.
The practice of encumbrances rollover is a major contributing factor to the General Fund
experiencing a year over year surplus. Since the rollovers are unspent funds, this means that at
year-end, General Fund actual revenues less its actual expenditures might have a break-even
result instead of a deficit as projected in Table 5, which assumes all encumbered funds are fully
expended.
Staff will continue to monitor encumbrance levels and evaluate their impact as part of the
ongoing budget review process to ensure fiscal stability and accurate forecasting.
Conclusion
In general, this mid-year is good news, however, the projected deficit is broadly unchanged in the
General Fund. The Measure W sales tax fund is made whole, with those funds retained for future
use. Additionally, for departments with requests for additional expenditures, the majority of the
additional budget appropriations are offset by an increase in projected revenue, resulting in a
positive or no impact to the bottom line.
The macro-economic trends are uncertain and at the micro level for the City, some revenues are
up, while others are in decline, making projections more uncertain. However, staff remain
cautiously optimistic and believe the revenue streams in decline will level off somewhat from the
current continued downward trajectory, particularly in TOT and sales tax. As always, Finance has
communicated to the other departments to close purchase orders for projects that have already
19
City of South San Francisco Page 13 of 13
been completed, review existing encumbrances, and use salary savings from vacancies to monitor
department expenditures.
However, the City will continue to face significant fiscal challenges that require careful planning.
When staff developed the FY 2024-25 adopted budget, departments had taken a 5% (~$6M)
reduction to get us down to the current deficit position. Over $4 million of the 5% reduction was
a one-time saving that may not be available in the upcoming year.
Further, rising utility costs, driven by rate increases, pose a growing burden on operational budgets.
Similarly, Unfunded Actuarial Liability (UAL) pension payments are expected to continue to
increase in the near term, further straining financial resources. Healthcare costs for employees are
also projected to climb due to rising premiums and healthcare service costs. For all three of these
cost areas, the City has a limited ability to influence or control the increased costs and must seek
relief elsewhere.
Additionally, deferred maintenance on City facilities and infrastructure continues to accumulate,
necessitating future investments to prevent further deterioration. These pressures underscore the
importance of balancing immediate budgetary needs with strategic planning for fiscal
sustainability.
The City has healthy financial reserves, as well as an unassigned fund balance available in the
General Fund which can be used to fund the short-term shortfall. Staff will continue to closely
monitor the revenue and expenditure status in the coming months. Finance will evaluate the
revenue enhancement options and cost cutting measures that can help to achieve long-term fiscal
sustainability. Staff will incorporate the findings into the FY 2025-26 budget preparation.
Staff recommends that the Budget Standing Committee accept the FY 2024-25 Mid-year financial
update and budget amendment requests, and refer this report to the February 12, 2025, Council
meeting for full Council consideration and approval.
20
Attachment 2
FY 2024-25 General Fund Proposed Budget Adjustments
(in millions)
Actual as of
12/31/24
Adopted
Budget
Encumb.
Carry-
Fwrd
Approved
Budget
Adjustment
Per Council
Action
Adjusted
Budget
Proposed
Mid-Year
Adjustment
Proposed
Amended
Budget
Revenues
Taxes
Property Tax $30.3 $50.2 - - $50.2 $6.9 $57.1
Sales Tax 7.2 23.2 - - 23.2 (2.0) 21.2
Transient Occupancy Tax 6.6 14.5 - - 14.5 0.3 14.8
Other Tax 2.4 6.7 - - 6.7 1.0 7.7
Franchise Fees 1.4 6.2 - - 6.2 - 6.2
License and Permits
Building 4.7 10.9 - - 10.9 (1.0) 9.9
Fire 1.4 2.3 - - 2.3 0.6 2.9
Other 0.0 - - - - 0.6 0.6
Fines & Forfeitures 0.1 0.9 - - 0.9 - 0.9
Intergovernmental 1.9 2.7 - 1.1 3.7 0.6 4.3
Charges for Services
Planning 0.7 0.4 - - 0.4 - 0.4
Fire 2.4 3.7 - - 3.7 0.2 3.9
Parks & Recreation 1.8 3.4 - 0.0 3.4 - 3.4
Police 0.6 1.1 - - 1.1 - 1.1
Other 0.0 0.0 - 0.0 0.0 - 0.0
Inter-Fund Admin Charge 1.0 2.0 - - 2.0 - 2.0
Use of Money & Property 2.6 4.5 - - 4.5 1.2 5.7
Other Revenues 0.4 0.3 - - 0.3 0.0 0.3
Transfers In 0.5 4.7 - 0.7 5.3 (3.0) 2.3
TOTAL REVENUES $66.0 $137.4 - $1.7 $139.1 $5.4 $144.5
Expenditures
City Attorney 0.8 1.5 - - 1.5 0.8 2.3
City Clerk 0.5 1.3 - - 1.3 0.1 1.4
City Council $0.1 $0.3 - - $0.3 - $0.3
City Manager 1.5 3.9 0.0 - 3.9 0.4 4.3
City Treasurer 0.0 0.2 - - 0.2 - 0.2
Finance 1.6 3.9 0.4 - 4.3 (0.1) 4.2
Human Resources 1.4 2.7 0.2 - 3.0 0.0 3.0
Non expense/Dept 1.4 1.9 0.3 - 2.2 - 2.2
Econ & Comm Develop 4.1 8.9 2.7 - 11.6 0.2 11.8
Fire 17.9 36.4 0.6 0.1 37.1 1.0 38.1
Library 3.5 8.9 0.0 0.1 9.0 0.0 9.0
Parks and Recreation 11.4 26.3 2.2 0.0 28.6 0.9 29.5
Police 17.4 38.2 0.0 0.1 38.3 0.0 38.3
Public Works 4.9 11.1 1.3 1.0 13.4 0.7 14.1
CIP 0.0 - - 0.7 0.7 - 0.7
TOTAL EXPENDITURES $66.7 $145.4 $7.8 $2.0 $155.2 $4.0 $159.3
Revenue in excess
of Expenditures (0.7) (8.0) (7.8) (0.3) (16.1) 1.3 (14.8)
Information Technology*1.9 4.3 0.3 0.0 4.6 0.0 4.6
* Non-General Fund: budgeted as internal service fund in Fund 785
21
Attachment 3
FY2024-25 Mid-Year (Expense Requests)
Dept Funding Source Fund
Description of
Item/Service Costs +/(-) Justification/Purpose
CITY ATTORNEY General Fund 100 Legal Services 35,000$ Additional Attorney Services - Labor negotiations
CITY ATTORNEY General Fund 100 Legal Services 765,000 Expected budget for current litigation, mediation.
CITY CLERK General Fund 100 Election Services 79,000 Estimated election cost with ballot measure is $221,000 - additional
funding required to cover complete cost of election.
CITY MANAGER General Fund 100 Abandoned/Derelict
Vessel Removal 150,000 Removal of these vessels is critical for public health and safety. Will
be pursuing grants to help offset additional costs.
CITY MANAGER General Fund 100 Administrative
Assistant I 60,000 Operational need to fill vacant/unfunded position, We need to fill this
position to provide operational coverage
CITY MANAGER General Fund 100 Bond Council 150,000 For CFD
CITY MANAGER General Fund 100 Utility Adjustment (1,200) Expense assigned to another department.
ECD General Fund 100 BIO 2025 75,000
Budget was reduced by 50% or $75,000 in this fiscal year. Staff will
continue a sponsorship program to fund the cost of the booth and an
event. Last year, staff raised $18,500 for sponsorships and we hope to
continue sponsorships this year. With the additional funding, as
Boston will be more expensive logistically, it would be less of a
challenge to deliver a successful conference exhibit booth and outside
stakeholder event. In addition, the local cluster is seeing some
significant challenges with market conditions and a change in the
federal administration, which may put additional strain on the local
industry. It is becoming even more meaningful for the City to support
the biotech industry, especially in our competitors backyard.
ECD General Fund 100
Ceqa Analysis For
Alternative Housing
Element Opportunity
Sites To Replace The
Msb
100,000
If alternative sites are studied to replace the Municipal Services
Building at 33 Arroyo Drive in the Housing Element as an opportunity
site, there will be consulting/CEQA costs. This is an estimate of the
amount that could be required to analyze alternative sites that
represent good replacements but do not have underlying high density
zoning. New zoning would require CEQA analysis and clearance prior
to full acceptance by the Housing and Community Development
Department.
ECD General Fund 100 Utility Increase 17,000 Due to an increase in the utility rate.
FINANCE General Fund 100 Bond Council Offset (90,000) Original Budget location
FIRE General Fund 100 Permit Tech And Plan
Review Services 400,000
Plan check review has increased and is exceeding current staffing
capabilities to process in a timely manner, meeting the expectations of
our customers. This request will allow us to reduce plan review
timeframes by outsourcing plan reviews and align us with other city
departments. This mid-year request is expected to carry us through the
remainder of the fiscal year. This funding is intended to be cost neutral
as it is offset by the revenue received from the permit fees collected
for this service.
FIRE General Fund 100 Overtime 550,000
Fire is already at 98% of their budgeted overtime. This anticipated
overage is due in part to the City’s response to mutual aide both
locally and nationally. Since those costs are recoverable, the
adjustment to increase revenue can be used to increase the Overtime
budget with no net impact to the general fund. Staff recommend an
increase of $550,000 in both OT and mutual aide revenue, resulting in
no net change to the General Fund.
HUMAN RESOURCES General Fund 100 Personnel Investigations 40,000 Additional funding requested due to higher than anticipated
costs/volume
Page 1 22
Attachment 3
FY2024-25 Mid-Year (Expense Requests)
Dept Funding Source Fund
Description of
Item/Service Costs +/(-) Justification/Purpose
IT Information
Technology 785 Overtime 14,000
IT provides after hour support for all departments and respond to any
network issues. Also provide support for all meetings and events
including Council Meetings, Planning Commissions. This was not
included in the budget.
IT Information
Technology 785 Standby Pay Expense 26,000 One IT tech is on-call every week and are required to be on stand-by
to respond to after hour calls. This was not included in the budget..
LIBRARY General Fund 100
Grand Library Wireless
Access Points
Replacement
6,000 Library system-wide replacement of end-of-life equipment
LIBRARY General Fund 100
Peninsula Libraries
Automated Network
Service Increases
18,000
Increases in the number of resources connected to the PLAN network
as a result of the move to the new main library; delivery cost increases
due to community's increased usage of library collections
LIBRARY General Fund 100 Adobe Creative Cloud
Renewal 4,000 LPR Digital media lab software renewal
LIBRARY General Fund 100
Maintenance Costs For
Envisionware Upgrades
At New Main Library
And Grand Library
7,000
Software to manage use of Chromebooks by library patrons; allows IT
Department to push out updates, works with laptop vending software;
allows CLS staff to assign Chromebook
LIBRARY General Fund 100 Google Workspace
Software Renewal 3,000
Software to manage use of Chromebooks by library patrons; allows IT
Department to push out updates, works with laptop vending software;
allows CLC staff to assign Chromebook
LIBRARY General Fund 100 Utility Increase 1,200 Due to an increase in the utility rate.
NON-DEPT Measure W 101 Measure W Transfer (3,000,000) Eliminate transfer from Measure W.
PARKS & REC General Fund 100 Clothing & Personal
Expenditure 17,000
Budgeted amount has only increased by 5% over the past 7 years.
Requests for increases have not been submitted as the division had
been understaffed up to 50% at times. Two reasons to consider for
justification is that the division is now 80% staffed as well as a new
contract with uniform company with updated pricing. Adjustment
amount is for this FY. New year request will be made for on-going
cost increase(s).
PARKS & REC General Fund 100 Utility Increase 895,000 Due to an increase in the utility rate.
PARKS & REC West Park Maint
Dist 3 231 Utility Increase 57,000 Due to an increase in the utility rate.
PARKS & REC Stonegate Ridge
Maint 232 Utility Increase 6,000 Due to an increase in the utility rate.
PARKS & REC West Park Maint
Dist 1&2 234 Utility Increase 6,000 Due to an increase in the utility rate.
PARKS & REC Special Tax Levy B
(CFD)236 Utility Increase 111,000 Due to an increase in the utility rate.
POLICE General Fund 100 Utility Increase 16,000 Due to an increase in the utility rate.
Page 2 23
Attachment 3
FY2024-25 Mid-Year (Expense Requests)
Dept Funding Source Fund
Description of
Item/Service Costs +/(-) Justification/Purpose
PUBLIC WORKS General Fund 100 Permit Tech And Plan
Review Services 550,000
Plan check review has increased and is exceeding current staffing
capabilities to process in a timely manner, meeting the expectations of
our customers. This request will allow us to reduce plan review
timeframes by outsourcing plan reviews and align us with other city
departments. This mid-year request is expected to carry us through the
remainder of the fiscal year. This funding is intended to be cost neutral
as it is offset by the revenue received from the permit fees collected
for this service.
PUBLIC WORKS General Fund 100 Utility Increase 175,000 Due to an increase in the utility rate.
PUBLIC WORKS Sewer Enterprise
Fund 710 Utility Increase 657,000 Due to an increase in the utility rate.
PUBLIC WORKS Parking District
Fund 720 Utility Increase 161,000 Due to an increase in the utility rate.
PUBLIC WORKS Storm Water Fund 740 Utility Increase 4,000 Due to an increase in the utility rate.
Expenses
Funding Sources Yes (ongoing)Yes (one-time)YES Total
General Fund $ 1,212,000 $ 2,810,000 $ 4,022,000
Measure W - (3,000,000) (3,000,000)
Information Technology 40,000 - 40,000
West Park Maint Dist 3 57,000 - 57,000
Stonegate Ridge Maint 6,000 - 6,000
West Park Maint Dist 1&2 6,000 - 6,000
Special Tax Levy B (CFD) 111,000 - 111,000
Sewer Enterprise Fund 657,000 - 657,000
Parking District Fund 161,000 - 161,000
Storm Water Fund 4,000 - 4,000
Total Yes (all funds) $ 2,254,000 $ (190,000) $ 2,064,000
`
Page 3 24
Attachment 4
FY2023-24 Mid-Year (Revenue Amendments)
Dept Fund
Description of
Item/Service Costs +/(-) Justification/Purpose
Non-Dept GF General Fund 100 Property Tax - ERAF 1,000,000 Revision from the County, from $4M to $5M
Non-Dept GF General Fund 100 Property Tax - Former
RDA 3,100,000 Revision from the County & staff review, from $11M to
$14.1M
Non-Dept GF General Fund 100 Property Tax - In Lieu
of VLF 2,800,000 Adjustment to improved accounting procedures, from $7M to
$9.8M
Non-Dept GF General Fund 100 Sales Tax (2,000,000) Revision from Sales Tax Consultant from $22.6 to $20.6M
Non-Dept GF General Fund 100 Business License Tax 1,000,000
Update due to Measure passing. Full amount will likely follow
a collection program which will result in some of the new
revenue being delayed to the next fiscal year. Further, much of
the new funds are tied to contractors on large projects and as
noted below, Building is expecting some delay on that.
Non-Dept GF General Fund 100 Transient Occupancy
Tax 336,000 Days Inn and Remanda Inn paying back taxes. Was not
budgeted.
Non-Dept GF General Fund 100 Rental Revenue 1,204,000 Back payment on contracted. Was not budgeted.
Non-Dept GF General Fund 100 Measure W Transfer (3,000,000) Elimnate transfer from Measure W.
Non-Dept Not GF Measure W 101 Measure W (1,500,000) Revision from Sales Tax Consultant from $16M to $14.5M
ECD General Fund 100 BIO 2025 15,000 projected sponsership
ECD General Fund 100 Rev Adjustment (1,000,000)
Inspection fees are at 30% of budget through December. This
assumption is that revenues will return to expectations in the
remainder of the year but not pick up to cover the shortfall
thus far. Staff know of two large projects that could come
through which would bump this revenue up but can't estimate
the timing.
FIRE General Fund 100 Revenue Increase 600,000
Through Dec. revenue is over 90% of projection. This increase
is roughly 50% of the original budget, an estimate of activity
returning to prior expectations.
FIRE General Fund 100 Mutual Aide Support 550,000 Based on note above.
FIRE General Fund 100 MidiCaid contractors 395,000 Based on current plus $350,000 monthly for remaining
months.
FIRE General Fund 100 GEMT (200,000) 10% reduction in GEMT (prior year).
PW-ENG General Fund 100 Revenue Increase 550,000 Through Dec. revenue is over 70% of projection. This increase
assumes activity remains elevated through the year.
Requests by
Department:
(in thousands)
YES
(ONGOING)YES (One-time)Total Requests
Non-Dept GF 5,900,000 (1,460,000) 4,440,000
ECD - (985,000) (985,000)
FIRE - 1,345,000 1,345,000
PW-ENG - 550,000 550,000
Total GF 5,900,000 (550,000) 5,350,000
Measure W (1,500,000) - (1,500,000)
25
Attachment 5
New
Project
Funding
Source Title
Project
Name
Justification Project Description Amount
Requested
Consequence
(If not funded, what
happens?)
No
Park
Construction
Fees
Linden Park
Project
The increase covers construction costs with the
expectation that the contract for construction will be
awarded in FY2024-25.
Linden Park Project $ 1,000,000
No Developer
Contributions
Linden Park
Project
The increase covers construction costs with the
expectation that the contract for construction will be
awarded in FY2024-25.
Linden Park Project $ 1,000,000
Funding Source Yes
Park Construction Fees 1,000,000
Developer Contributions 1,000,000
Total Funding Requests $2,000,000
FY 2024-25 Mid-Year CIP Requests
26
Attachment 6
City of South San Francisco Projected Fund Balances - FY 2025 (in thousands )
Fund Title
FY 2025
Beginning
Fund Balance
FY 2025
Adopted
Budget
Revenue
FY 2025
Adopted
Budget
Expenditure
FY 2025
Approved
Adjustments
Mid-Year
Proposed
Changes
FY 2025
Projected
Ending Fund
Balance
100 GENERAL FUND 42,576 137,421 (145,441) (8,057) 1,328 27,827
101 MEASURE W 20,724 16,000 (16,368) (9,840) 1,500 12,016
Total GENERAL FUND 63,300 153,421 (161,810) (17,896) 2,828 39,843
201 AMERCIAN RESCUE PLAN ACT FUND ------
205 AFFORDABLE HOUSING TRUST FUND 550 - (244) (22)- 284
206 PARK-IN-LIEU ZONE 1 ------
207 PARK-IN-LIEU ZONE 2 76 ---- 76
208 PARK-IN-LIEU ZONE 3 ------
209 PARK IN-LIEU ZONE 4 984 -- (487)- 497
210 GAS TAX FUND 544 2,100 (1,635) (403)- 606
211 MEASURE A-1/2 TRANSPORTATION SALES TAX 4,932 2,106 (2,181) (2,621)- 2,236
212 ROAD MNTC & REHAB (SB1)1,593 1,696 (900) (1,842)- 547
213 SMC MEASURE W 1/2 CENT SALES TAX 1,712 974 (1,900) (374)- 413
222 COMMUNITY DEVELOPMENT BLOCK GRANT (22) 761 (556) (251)- (68)
231 WEST PARK MAINT DIST 3 464 1,058 (896) (200) (57) 369
232 STONEGATE RIDGE MAINT 1,996 354 (367) (12) (6) 1,964
233 WILLOW GARDENS MAINT 497 116 (132) (50)- 431
234 WEST PARK MAINT DIST 1&2 1,943 691 (768) (200) (6) 1,660
236 OP CFD SPECIAL TAX B (FOR CITY)231 200 (200)- (111) 120
241 CITY HOUSING FUND 3,697 182 (546) (28)- 3,305
250 SOLID WASTE REDUCTION 819 345 (596) (292)- 276
260 SUPPLEMENTAL LAW ENFORCEMENT SERVICES 1 160 (160)-- 1
270 DVLPR FUNDED PLANNING & ENGINR 767 1,594 (1,076) (782)- 502
280 CITY PROGRAMS SPECIAL REV FUND 18,070 - (321) (1,389)- 16,360
290 TRANSIT STATION ENHANCEMENT IN-LIEU FEE 2,903 ---- 2,903
Total SPECIAL REVENUE 41,759 12,337 (12,479) (8,953) (180) 32,484
461 DEBT SERVICE FUND LEASE REVENUE BONDS - 13,232 (13,232)---
Total DEBT SERVICE -13,232 (13,232) ---
510 CAPITAL IMPROVEMENTS 27,213 8,029 (8,029) 354 - 27,566
513 CAPITAL INFRASTRUCTURE RESERVE FUND 10,995 - 562 (4,272)- 7,285
514 OYSTER POINT DEVELOPMENT 36 ---- 36
515 CAPITAL IMPROVEMENTS NEW POLICE STATION 110 140 (140)-- 110
516 CAPITAL IMPROVEMENTS CIVIC CAMPUS PHASE 990 -- 222 - 1,212
517 CAPITAL IMPR STREET PAVEMENT BOND FUNDED -----
518 CAPITAL IMPR SOLAR ROOFS BOND FUNDED 1,710 ---- 1,710
519 CAPITAL IMPR CIVIC CAMPUS BOND FUNDED 1,449 - (960)-- 489
522 CAPITAL IMPR OMP BALLFIELD BOND FUND 827 ---- 827
523 CAPITAL IMPR OMP PLAYGROUND BOND FUNDED 2,200 ---- 2,200
524 CAPITAL IMPR AQUATICS CENTER BOND FUNDED 8,311 - (261)-- 8,050
525 CAPITAL IMPR COLMA CREEK BRIDGE REPLACE 1,500 ---- 1,500
Total CAPITAL FUNDS 55,341 8,169 (8,828) (3,697) -50,985
710 SEWER ENTERPRISE FUND 20,631 32,501 (15,272) (3,153) (657) 34,051
720 PARKING DISTRICT FUND 3,227 900 (1,310) (50) (161) 2,606
740 STORM WATER FUND 1,746 1,557 (2,435) (251) (4) 613
Total PROPIETARY FUNDS 25,604 34,959 (19,017) (3,454) (822) 37,269
781 CITY SERVICE FUND 62 2,718 (2,619)-- 161
782 SELF INSURANCE FUND 2,395 5,300 (7,135)-- 560
783 BENEFITS FUND 1,045 15,952 (15,410)-- 1,587
784 EQUIPMENT REPLACEMENT 6,544 2,570 (1,460) (4,632)- 3,021
785 INFORMATION TECHNOLOGY 2,681 3,945 (4,274) (276) (40) 2,036
786 PEG EQUIPMENT & ACCESS 906 130 (25)-- 1,011
Total INTERNAL SERVICE FUNDS 13,631 30,615 (30,923) (4,909) (40) 8,374
730 SEWER CAPACITY CHARGES 13,608 1,300 (4)-- 14,904
805 PARK LAND ACQUISITION FEE 3,120 -- (2,999)- 121
806 PARK CONSTRUCTION FEE 11,023 - (650) (546)- 9,826
810 E. OF 101 SEWER IMPACT FEES FUND 6,122 - (1,704)-- 4,419
820 E. OF 101 TRAFFIC IMPACT FEES 15,142 - (204) (10,317)- 4,621
821 PUBLIC SAFETY IMPACT FEE 1,098 - (442) (104)- 553
822 BICYCLE AND PEDESTRIAN IMPACT FEE FUND 253 -- (157)- 96
823 COMMERCIAL LINKAGE IMPACT FEE 13,337 - (713) (941)- 11,683
824 LIBRARY IMPACT FEES FUND 44 ---- 44
825 CITYWIDE TRANSPORTATION IMPACT FEE 10,727 - (2,250) (8,643)- (166)
827 PUBLIC ARTS-IN-LIEU FEE FUND 462 - (184)-- 279
830 CHILD CARE IMPACT FEES FUND 2,330 - (4)-- 2,326
840 OYSTER POINT INTERCHANGE IMPACT FEES FUND 30 ---- 30
Total IMPACT FEE FUNDS 77,297 1,300 (6,153) (23,707)- 48,736
Total ALL FUNDS 276,932 267,263 (265,674) (62,617) 1,786 217,692
27
FY 2024-25 Mid-Year
Financial Update
Presentation to Budget Subcommittee
Karen Chang, Director of Finance
JANUARY 29, 2025 28
AGENDA
1 FY 2024-25 Financial Update
(Mid-Year)
2 Reserve & Other Considerations
3 5-Year Projection
22
4 Q&A
29
GF Revenue and Expenditure Mid-Year Summary
1FY 2024-25 Financial Update
3
Reserve for Encumbrances rollover $7.8
Adopted Budget Shortfall $(8.0)
-FY 2024-25 Net Budget Adjustments (8.1)
+Mid-Year Revenue Adjustments 5.4
-Mid-Year Appropriation Requests (4.0)
Total Adjustments $(14.7)
FY 2024-25 Projected Deficit $(7.0)
30
FY 2024-25 General Fund Adjusted Budget -Revenues
▪FY 2024-25 Budgeted Revenues = $139.1 million
▪Total Receipts through December 31 = $66.0 million (47%)
4
REVENUES FY 2023-24 FY2024-25 Recommended
(in millions)Adjusted
Budget
Actuals
as of
12/31/2023
Percent
of
Budget
Adjusted
Budget
Actuals
as of
12/31/2024
Percent
of
Budget
Mid-Year
Adjustments
Property Tax $48.0 $26.2 55%$50.2 $30.3 60%$6.9M →$57.1M
Sales Tax 23.4 7.9 34%23.2 7.2 31%-2.0M →21.2M
All Other Taxes 21.9 7.8 35%21.2 9.1 43%1.3M →22.5M
Licenses & Permits 16.9 7.7 45%13.2 6.2 47%0.2M →13.3M
Intergovernmental 4.4 2.3 53%3.7 1.9 50%0.6M →4.3M
Service Charges 8.2 4.7 57%8.5 5.4 64%0.2M →8.7M
All Other Revenues 11.6 4.2 37%13.8 5.5 40%1.2M →15.1M
Transfers In 8.7 0.8 9%5.3 0.5 10%-3.0M →2.3M
TOTAL $143.1 $61.5 43%$139.1 $66.0 47%$5.4M →$144.5M
1FY 2024-25 Financial Update
31
FY 2024-25 Mid-year Revenue Adjustment Summary
5
1FY 2024-25 Financial Update
Requests by
Department:
(in thousands)
YES (ONGOING)YES (One-time)Total Requests
Non-Dept GF $5,900 $(1,460)$4,440
ECD -(985)(985)
FIRE -1,345 1,345
PW-ENG -550 550
Total GF $5,900 $(550)$5,350
Measure W $(1,500)-$(1,500)
32
Additional GF Revenue Mid-year Request
➢Economic and Community Development ($985,000)
‒Building Permit Fee Decrease $(1,000,000)
‒Donations for Bio Conference 2025 15,000
➢Fire Department $1,345,000
–Paramedic Service Fee Increase $195,000
–Fire Plan Check Fee 600,000
–Mutual Aide Support Reimbursement 550,000
➢Public Works $550,000
–Engineering Permit Fee $550,000
6
1FY 2024-25 Financial Update
33
FY 2024-25 General Fund Adjusted Budget -Expenditures
▪FY 2024-25 Budgeted Expenditures = $155.2 million
▪Total Expenditures through December 31 = $66.7 million (43%)
7
EXPENDITURES FY 2023-24 FY2024-25 Recommended
(in millions)Adjusted
Budget
Actuals
as of
12/31/2023
Percent
of
Budget
Adjusted
Budget
Actuals
as of
12/31/2024
Percent
of
Budget
Mid-Year
Adjustments
City Attorney $1.1 $0.5 48%$1.5 $0.8 56%$0.8M →$2.3M
City Clerk 1.3 0.5 37%1.3 0.5 39%0.1M →1.4M
City Council 0.3 0.1 49%0.3 0.1 32%0.0M →0.3M
City Manager 5.0 1.7 33%3.9 1.5 38%0.4M →4.3M
City Treasurer 0.1 0.1 42%0.2 0.0 22%0.0M →0.2M
Finance 4.5 1.5 33%4.3 1.6 36%(0.1)M →4.2M
Human Resources 3.0 1.2 41%3.0 1.4 47%0.0M →3.0M
Non-Expense/Dept 1.9 1.1 57%2.2 1.4 65%0.0M →2.2M
1FY 2024-25 Financial Update
34
FY 2024-25 General Fund Adjusted Budget -Expenditures
8
EXPENDITURES FY 2023-24 FY2024-25 Recommended
(in millions)Adjusted
Budget
Actuals
as of
12/31/2023
Percent
of
Budget
Adjusted
Budget
Actuals
as of
12/31/2024
Percent
of
Budget
Mid-Year
Adjustments
ECD $12.4 $5.3 43%$11.6 $4.1 35%$0.2M →$11.8M
Fire 33.6 19.9 59%37.1 17.9 48%1.0M →38.1M
Library 8.3 3.9 48%9.0 3.5 39%0.0M →9.0M
Parks & Rec 27.1 11.5 42%28.6 11.4 40%0.9M →29.5M
Police 37.0 20.2 55%38.3 17.4 46%0.0M →38.3M
Public Works 13.8 4.8 35%13.4 4.9 37%0.7M →14.1M
CIP 4.4 0.3 8%0.7 0.0 1%0.0M →0.7M
Total $153.9 $72.7 47%$155.2 $66.7 43%$4.0M →$159.3M
1FY 2024-25 Financial Update
35
FY 2024-25 Mid Year Expenditure Request Summary
9
1FY 2024-25 Financial Update
Funding Sources
(thousands)(ongoing)(one-time)Total
General Fund $1,212*$2,810 $4,022
Measure W -(3,000)(3,000)
Information Technology 40 -40
Total $1,252 $(190)$1,062
*Includes utilities
36
Additional GF Appropriations Request
➢City Attorney $800,000
–Litigation Expenses $765,000
–Labor Negotiation 35,000
➢City Clerk $79,000
–Election ballot measure for March election $79,000
➢City Manager’s Office $360,000
–Abandoned/Derelict Vessel Removal $150,000
–Unfreeze of Administrative Assistant I position 60,000
–Bond Council for Community Facilities District development 150,000
➢Economic & Community Development $175,000
‒Bio 2025 increase back to original budget $75,000
‒CEQA Analysis for alternative housing element to replace
MSB $100,000
10
1FY 2024-25 Financial Update
37
Additional GF Appropriations Request
➢Finance ($90,000)
–Reallocate Bond Council original budget to CMO ($90,000)
➢Fire Department $950,000
–Contracts for Fire Plan Reviews (offset by higher revenue) $400,000
–Overtime due to mutual aide support (offset by reimbursement) 550,000
➢Human Resources $40,000
–Additional contract services $40,000
11
1FY 2024-25 Financial Update
38
Additional GF Appropriations Request
➢Library $38,000
–Grand Library Wireless Access Point Replacement $6,000
–Peninsula Libraries Automated Network service increase 18,000
–LPR Digital media software renewal 4,000
–Patron Chromebook maintenance upgrades 7,000
–Patron Chromebook management software 3,000
–Unfreeze 0.69 FTEs with no fiscal impact in FY2024-25, as there is
sufficient salary savings in the Library to fund this increase.
Positions:
o 0.20 FTE -Library Assistant I
o 0.25 FTE -Library Clerk
o 0.09 FTE -Librarian II
o 0.06 FTE -Librarian I
o 0.04 FTE -Library Page
o 0.05 FTE -Office Specialist
12
1FY 2024-25 Financial Update
39
Additional GF Appropriations Request
➢Parks & Recreation $17,000
–Uniforms -budget amount has not been adjusted to account
for inflation. $17,000
➢Public Works $550,000
–Contracts for Public Works Plan Reviews (offset by revenue)$550,000
➢Utilities $1,103,000
–Parks and Recreation $895,000
–Public Works 175,000
–All Other Depts 33,000
13
1FY 2024-25 Financial Update
40
Additional Non-GF Mid-Year Request
1. Measure W Sales Tax Fund (101) ($1,500,000)
‒Elimination of Transfer Out to the General Fund ($3,000,000)
‒Decrease in budgeted sales tax revenue,
which aligns with the City’s sales tax consultant’s
revised projection 1,500,000
2.Information Technology Internal Service Fund (785)$40,000
–Overtime Budget $14,000
–Standby Pay Budget 26,000
14
1FY 2024-25 Financial Update
41
FY 2024-25 Mid Year Expenditure Request Summary –Other Funds
15
1FY 2024-25 Financial Update
Funding Source
(in thousands)Electric/Gas Water Total
West Park Maint Dist 3 $13.0 $44.0 $57.0
Stonegate Ridge Maint 1.0 5.0 6.0
West Park Maint Dist 1&2 2.0 4.0 6.0
Special Tax Levy B (CFD)0.0 111.0 111.0
Sewer Enterprise Fund 657.0 0.0 657.0
Parking District Fund 160.0 1.0 161.0
Storm Water Fund 4.0 0.0 4.0
Total $837.0 $165.0 $1,002
Ongoing Utilities
42
Mid-Year Capital Improvement Plan (CIP) Request
1. Linden Park (Existing project pk2305)$2,000,000
‒Funding Source: $1 million Park Construction Fund (806),
$1 million Developer Contributions
‒The increase covers construction costs with the expectation
that the contract for construction will be awarded in FY2024-25.
16
1FY 2024-25 Financial Update
43
Projected GF Revenue and Expenditure Summary
2Reserve & Other Considerations
17
Reserve for Encumbrances rollover $7.8
Adopted Budget Shortfall $(8.0)
-FY 2024-25 Net Budget Adjustments (8.1)
+Mid-Year Revenue Adjustments 5.4
-Mid-Year Appropriation Requests (4.0)
Total Adjustments $(14.7)
FY 2024-25 Projected Deficit $(7.0)
44
Projected GF Undesigned F/B (As of June 30, 2025)
2Reserve & Other Considerations
18
Available Unassigned GF Fund Balance (FY 24)$34.8
FY 2024-25 Projected Deficit (7.0)
Available GF Fund Balance (FY 25)$27.8
45
Financial Analysis –5 Year Projection
35 Year Projection
19
Revenues &
Expenditures
(in thousands)
2025
Adopted
Budget
2025
Projected
2026
Forecast
2027
Forecast
2028
Forecast
2029
Forecast
Total Revenue $137,421 $152,267 $146,784 $150,576 $154,523 $158,517
Total
Expenditures 145,441 159,255 157,212 162,311 167,302 173,478
Surplus/(Deficit)$ (8,020)$ (6,988)$(10,428)$(11,735)$(12,779)$(14,961)
46
5 Year Projection -Assumptions
35 Year Projection
20
FY 2025 Adopted-Included $3M from Measure W; Implement 5% (~$6.0M)
expenditure reduction;
FY 2025 Projected -Removed $3M from Measure W; includes preliminary mid-
year adjustment
FY 2026 Forecast -2.75% Revenue & expenditures; 10% medical; projected UAL; 5%
attrition continue
FY 2027 Forecast –2.75% Revenue & Expenditures; 7% medical; projected UAL; 5%
attrition continue
FY 2028-2029 Forecast –2.75% Revenue & Expenditures; 7% medical; projected
UAL; 5% attrition continue;
47
QUESTIONS?
4Q&A
2148
City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #:25-105 Agenda Date:1/29/2025
Version:1 Item #:3.
Staff Report for Discussion on Pension Funding Policy and update on pension and OPEB liabilities (Karen Chang,
Director of Finance)
CONCLUSION
Due to the formatting limitations of the City’s Agenda Management platform, the full staff report accompanying this
agenda item is being attached as Attachment 1 of this report.
City of South San Francisco Printed on 1/28/2025Page 1 of 1
powered by Legistar™49
1
CITY OF SOUTH SAN FRANCISCO
STAFF REPORT
Staff Report for Discussion on Pension Funding Policy and update on pension and OPEB liabilities
(Karen Chang, Director of Finance)
RECOMMENDATION
Staff recommends that the Finance/Budget Committee review and provide feedback on the proposed
Pension Funding policies.
BACKGROUND
A primary City Council priority is ensuring long-term fiscal sustainability for City of South San
Francisco. One component for achieving this goal is reducing the City’s unfunded liabilities related to
employee benefits (i.e. retiree health care and retirement pensions). An unfunded liability is the
monetary difference between the estimated future costs of future benefits and the assets set aside to
pay those benefits.
City unfunded liabilities fall into two categories –
1) Other Post-Employment Benefits (OPEB)- OPEB refers to healthcare benefits for
employees who have retired from the city. The city provides its employees with a retiree
healthcare plan for employees that were hired before April 25, 2010. Employees hired after
that date cannot participate in City medical plans at retirement.
The City has participated in the California Employers’ Retiree Benefit Trust (CERBT), which
is a Section 115 irrevocable trust administered by the California Public Employees Retirement
System (CalPERS). The City has been pre-funding the OPEB since Fiscal Year (FY) 2013-14.
Contributions in that FY were approximately $4.2 million, followed by $11.2 million in FY
2014-15, $1.2 million in 2015-16, and have been contributed $802,000 annually since. The
CERBT account has since grown to $38.2 million. The plan was 37.9% funded on June 30,
2023 valuation date.
Projected Unfunded Liability as of June 30, 2024 was $51.7M.
2) Pension refers to the City employees’ pension plans that are administered by CalPERS. As of
June 30, 2024, unfunded liability was projected to be approximately $264 million.
The City currently has approximately $6 million in the pension stabilization reserve. It is
currently invested in a short-term investment pool with the City’s investment advisor, Chandler
Asset Management. The yield from inception for this investment is about 4.5%.
ANALYSIS
OPEB – The city has continued to pay benefits directly to retirees annually without drawing down on
the CERBT. According to the actuarial valuation statement as of June 30, 2023, the Actuarial
Determined Contribution (ADC) for FY 2025-26 is $6.4 million. As the benefit payments escalate, the
funding policy is expected to exceed the ADC in FY 2027-28. If this trend continues, we can contribute
50
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less than the standard $802,000 to the Trust to offset the benefit payment and still be able to fully fund
the OPEB liability by approximately FY 2036-37 according to the 30-year projection.
51
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Pension -
The City has two retirement plans (Miscellaneous and Safety) and three benefit tiers for each plan
(Classic Tier 1, Classic Tier 2, and PEPRA—Public Employees’ Pension Reform Act, which took
effect in January 2013):
1) Miscellaneous
a. Classic Tier 1: 2.7% @ 55
b. Classic Tier 2: 2.0% @ 60
c. PEPRA: 2.0% @ 62
2) Safety
a. Classic Tier 1: 3.0% @ 50
b. Classic Tier 2: 3.0% @ 55
c. PEPRA: 2.7% @ 57
The City is a contracting member of CalPERS and, as such, the City is obligated to make certain
payments to CalPERS each year. The City’s annual pension obligations are comprised of two primary
components: 1) Normal Costs and 2) Unfunded Accrued Liability (“UAL”) Payments. Normal Costs
represent the pension benefits earned by employees during the current fiscal year and are set by
CalPERS as a percentage of payroll.
The UAL represents pension benefits that have already been earned with past service but not yet
funded. It is a past due payment that is equal to the shortfall between the accrued liability and the
current market value of assets in the pension fund. The creation of this liability stems back to the late
1990’s when CalPERS was super funded and believed that investment returns would conservatively
average 8.25% into the foreseeable future. As a result, State and local governments enhanced pension
benefits (some retroactively) and did not keep up with normal cost payments. The Dot.com crash
ensued shortly thereafter, followed by the Great Recession, and the CalPERS fund has been
underfunded ever since.
CalPERS recalculates the UAL balance every year, and a number of factors impact the accrued liability
(i.e., changes in actuarial assumptions or methodology, actual experience deviating from assumptions,
demographic changes, wage growth, turnover, etc.). Additionally, the market value of assets can
change dramatically from year to year depending on investment performance. As of the most recent
Actuarial Valuation (dated as of June 30, 2023), the City’s UAL was equal to approximately
$264million.
CalPERS allows member agencies to pay off this liability over time. Each year, CalPERS releases a
report for each member agency’s pension plans that includes a fixed dollar UAL payment schedule.
The City’s UAL payment for Fiscal Year 2024-25 was about $27 million. Annual UAL payments are
projected to increase until peaking at an estimated $39 million in Fiscal Year 2030-31, after which the
UAL payments are projected to decline until the current UAL balance is paid off in Fiscal Year 2044-
45. When calculating the accrued liability, CalPERS assumes a 2.75% annual wage growth; actual
annual wage growth above this assumption increases the UAL payments. The chart below is a current
projection of the City’s UAL payment schedule incorporating the most recent investment gain of 9.3%.
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For the City to pay off its UAL with the fixed dollar payment schedule illustrated in the chart above,
CalPERS would need to achieve its assumed annual investment rate of return, or Discount Rate, which
is currently 6.80%, and the actuarial assumptions would need to hold constant. However, actuarial
assumptions change, and investment returns will not be exactly 6.80% every year. That is why the
UAL payment schedule changes every year; and unlike a fixed-rate mortgage, it is not possible to know
the exact repayment schedule (public agencies can only be certain of the payments that are due in the
upcoming budget year). The UAL is a dynamic liability, and the City should anticipate that its UAL
payment schedule will fluctuate as a result of everchanging variables. The existing aggregate funded
ratio for both CalPERS plans is about 65.5%.
Despite this uncertainty, staff believe it is important to provide periodic updates to Council regarding
the general trajectory of UAL payments, so that policies and plans can be implemented to meet pension
obligations while maintaining desired service levels.
The City is currently projected to face a challenging UAL payment schedule through Fiscal Year 2036.
As illustrated in the table below, from Fiscal Year 2024-25 through Fiscal Year 2030-31, UAL
Payments will continue to increase by two to three million each year and slowly return to the FY 2023-
24 level in 2036-37. The cumulative increase through FY 2030-31 will amount to about $12 million.
If the City does not implement a plan to lower or smooth out these payments, the growing UAL
payments will continue to crowd out future budgets.
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
2024202520262027202820292030203120322033203420352036203720382039204020412042204320442045204620472048204920502051205220532054Estimated UAL Payment (in millions)
Safety Misc
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Proposed Pension Funding Policy
Policy Objectives and Goals
• Maintain the City’s sound financial position;
• Ensure the City has the flexibility to respond to changes in future service priorities, revenue
levels, and operating expenditures;
• Provide guidance in making annual budget decisions;
• Protect the City’s creditworthiness;
• Ensure that all pension funding decisions are structured to protect both current and future
taxpayers, ratepayers, employees, and residents of the City; and
• Ensure that the structure of Pension Obligation Bonds, if authorized and issued, is consistent
with the City’s strategic planning goals, objectives, capital improvement program, budget, and
Debt Management Policy.
Additional Discretionary Payments (ADPs) to CalPERS. Although “resetting the table” by making
a large payment to CalPERS with POB proceeds is not currently a feasible strategy, the City can make
smaller Additional Discretionary Payments (ADPs)—payments above and beyond the annually
required contributions (ARC) calculated by CalPERS. These payments can be used to prepay small
amounts of “principal” on the UAL, thereby saving the 6.80% associated “interest” that is charged to
the City. “Slow and steady” ADPs chip away at the City’s pension obligations; and over time, this
strategy can result in significant savings. Although this strategy requires long-term budgetary
discipline and prioritization, it is less risky compared to POBs since the City would not be borrowing
funds to pay CalPERS. Additionally, making smaller ADPs to CalPERS on a regular basis (i.e., dollar
cost averaging) mitigates the market timing risk of a large lump sum deposit with CalPERS that is
invested in the market all at once.
Fiscal Year UAL Payments
Increase in UAL
Above FY 2025
Baseline
Cumulative
Increase
2024 27.39$
2025 30.15$ 2.76$ 2.76$
2026 33.12$ 2.97$ 5.73$
2027 34.33$ 1.21$ 6.94$
2028 35.31$ 0.98$ 7.92$
2029 37.46$ 2.15$ 10.07$
2030 37.84$ 0.38$ 10.45$
2031 38.15$ 0.31$ 10.76$
2032 37.28$ (0.87)$ 9.89$
2033 37.14$ (0.14)$ 9.75$
2034 35.85$ (1.29)$ 8.46$
2035 35.34$ (0.51)$ 7.95$
2036 34.49$ (0.85)$ 7.10$
2037 25.56$ (8.93)$ (1.83)$
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6
There is some associated investment risk if making a big lump sum payment. However, making
periodic payments over time can limit this risk.
Pension Stabilization Reserve Fund. The City currently has $6 million in a Council-designated
Pension Stabilization Reserve Fund. The goal of this reserve fund is to set aside additional funds to
supplement pension costs, including normal costs, offset future unexpected contribution rate increases,
or use as a rainy-day fund when revenues are impaired based on economic or other conditions. Monies
in this reserve fund are subject to California Government Code investment restrictions and the City’s
Investment Policy. These investment restrictions, while resulting in lower anticipated investment
returns, carry lower risk; therefore, the monies can be invested in a manner that doesn’t risk significant
investment losses. Since last discussion, staff have taken advantage of the higher interest rate
environment. As such, the reserve has grown from $5.5 million to $6 million. However, the interest
rate is likely to come down in the next year or so as the Federal Reserve gradually lowers the federal
funds rate. The committee might consider an alternative investment strategy such as a Section 115
Trust.
Section 115 Trust. The timing of when funds are available may not line up with the timing and
amounts of ADPs that the City desires to make to CalPERS. This should not prevent the City from
accumulating funds it has allocated towards paying down its pension obligations, and the City may
consider setting up a Section 115 Trust. Money placed into the trust is irrevocable/legally restricted,
meaning it cannot be withdrawn and used for another type of expenditure of the City other than pension
costs (and OPEB costs if selecting a “combination trust”). Funds in the Section 115 Trust are not
subject to California Government Code investment restrictions and therefore have the opportunity for
greater investment returns (albeit with higher risk) than its General Fund reserves. The Section 115
Trust allows the City to prefund its pension obligations over time while maintaining oversight of
investment management and control over the risk tolerance of the portfolio (i.e., conservative,
moderate, aggressive).
The benefits of a Section 115 Trust include:
1. Assets in the trust will offset liabilities on the City’s balance sheet.
2. Assets held in trust will allow for greater investment flexibility and risk diversification
compared to the City’s investment portfolio.
3. The City will control the risk tolerance of the portfolio. The City should hire an investment
advisor to manage the Section 115 Trust.
4. City will have the flexibility to access trust assets any time, as long as they are used to pay
employer pension obligations (including normal costs).
5. Assets can be used to make “slow and steady” ADPs to achieve UAL savings over time or
pay for additional UAL above and beyond what was projected due to any actuarial or
investment deviations to offset the impact to the General Fund.
The risk associated with a Section 115 Trust is that the investments can be in a negative position at a
time when the City may need to make a large withdrawal to offset pension costs when the City’s
revenues are impaired (i.e., during a recession). Over time, however, if selecting a moderate
investment strategy, the trust should earn more than the City’s General Fund reserves while not
incurring as much risk as CalPERS’ investment strategy. And as mentioned previously, a Section 115
Trust is a good vehicle for accumulating funds while making regular ADPs to CalPERS.
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Potential Funding Sources. Having a plan to make ADPs to CalPERS on a regular basis, retaining a
Pension Stabilization Reserve Fund, and setting up a Section 115 Trust are prudent and straightforward
strategies for chipping away at the City’s UAL and for setting aside funds to offset future pension costs
during recessionary periods. The challenge is in identifying funding sources for the ADPs, Pension
Stabilization Reserve Fund, and Section 115 Trust. The City can explore, and if feasible, pursue the
funding sources identified below:
A. CalPERS Prepayment Savings
Each year, CalPERS gives its member agencies two options for making its UAL payment: 1) make
monthly payments to CalPERS; or 2) make a lower (approximately 3% savings) lump sum payment
for the entire year by July 31st to CalPERS. The City has been implementing the second option to take
advantage of the savings offered by CalPERS. The City could consider budgeting for the full UAL,
continuing to make the annual prepayment every July to CalPERS, and allocate the savings to the
Pension Stabilization Reserve, contribute to a Section 115 Trust, or to make an ADP to CalPERS.
B. Use of Reserves and One-Time Monies
The City could also annually allocate a percentage of operating surplus or one-time monies to the
Pension Stabilization Reserve, contribute to a Section 115 Trust, or to make an ADP to CalPERS.
FISCAL IMPACT
The recommended pension policy would help to formalize the strategy that City would like to utilize
to address long-term unfunded pension liabilities.
RELATIONSHIP TO STRATEGIC PLAN
The approval would meet the City’s Strategic Plan Priority Area 3 – Financial Stability.
CONCLUSION
Staff are seeking the Budget Committee’s input to formalize a pension liability management policy to
address the long-term unfunded liability.
56
City of South San Francisco, California
COUNCIL POLICY
TITLE PENSION LIABILITY
MANAGEMENT POLICY
PAGE
1 of 8
POLICY NUMBER
EFFECTIVE DATE REVISED DATE
APPROVED BY COUNCIL ACTION
POLICY
The City recognizes that its unfunded pension liability can cause financial stress on the
organization and direct resources away from programs and services necessary for the
City’s operations and service to the public. This Pension Liability Management Policy
(“Policy”) is intended to support the decision-making process of the City Council as it
applies to the City’s unfunded pension liability and should be consistent with the City’s
financial goals and policy objectives. Adherence to this Policy signals to the public, City
employees, rating agencies, and capital markets that the City is well-managed and is able
to meet its pension obligations in a timely manner.
This Policy is intended to work in conjunction with the City’s other adopted financial
policies, including the Reserve Policy and Debt Management Policy. This Policy does not
cover other post-employment benefits, known as OPEB, which principally involves retiree
health care benefits and associated liabilities. Nothing in this Policy shall constitute an
obligation upon the City, nor an implied contract. The City Council may revoke or amend
this Policy by resolution at any time.
POLICY OBJECTIVES AND GOALS
The City’s main objective shall be to reduce its unfunded pension liabilities in the most
cost-efficient, fiscally prudent, and sustainable manner possible. As with any fiscally
prudent policy, the City recognizes that this Policy should:
• Maintain the City’s sound financial position;
• Ensure the City has the flexibility to respond to changes in future service priorities,
revenue levels, and operating expenditures;
• Provide guidance in making annual budget decisions;
• Protect the City’s creditworthiness;
• Ensure that all pension funding decisions are structured to protect both current and
future taxpayers, ratepayers, employees, and residents of the City; and
57
City of South San Francisco, California
TITLE PENSION LIABILITY FUNDING
POLICY
PAGE
2 of 8
POLICY NUMBER
• Ensure that the structure of Pension Obligation Bonds, if authorized and issued, is
consistent with the City’s strategic planning goals, objectives, capital improvement
program, budget, and Debt Management Policy.
BACKGROUND
I. RETIREMENT PLANS AND RETIREMENT BENEFITS
CalPERS is an agent multiple-employer public employee defined benefit pension plan
that provides retirement and disability benefits, annual cost of living adjustments, and
death benefits to plan members and beneficiaries. CalPERS acts as a common
investment and administrative agent for participating public entities within the State,
including the City. CalPERS plan benefit provisions and all other requirements are
established by State statute and the City Council. The City contributes to CalPERS on
behalf of active City employees who participate in the City’s Miscellaneous Plan or the
City’s Safety Plan. Benefits are based on years of credited service, equal to ten months
of full-time employment. The City participates in separate CalPERS tiers within the
Miscellaneous and Safety Plans for employees based on hire date.
Miscellaneous Plan – The Miscellaneous Plan has a three-tier benefit plan structure.
Tier 1 employees (hired prior to April 25, 2010) receive a benefit formula equal to 2.7%
@ 55. Tier 2 employees (hired after April 25, 2010 but prior to January 1, 2013) receive
a benefit formula equal to 2.0% @ 60. PEPRA employees (hired on or after January 1,
2013) receive a benefit formula equal to 2.0% @ 62.
Safety Plan – The Safety Plan also has a three-tier benefit plan structure. Tier 1
employees (hired prior to April 25, 2010) receive a benefit formula equal to 3.0% @ 50.
Tier 2 employees (hired after April 25, 2010 but prior to January 1, 2013) receive a benefit
formula equal to 3.0% @ 55. PEPRA employees (hired on or after January 1, 2013)
receive a benefit formula equal to 2.7% @ 57.
Pension costs associated with each Plan are allocated across the City’s various funds
based on payroll.
II. PENSION CONTRIBUTIONS AND AMORTIZATION BASES
The City is statutorily required to make pension contributions on an annual basis to each
plan. The City shall make a commitment to fund the full amount of the annual contribution
each year and pay debt service on Pension Obligation Bonds, if issued. The annual
pension contribution is comprised of two component parts: 1) normal costs; and 2)
unfunded actuarial liability.
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Normal Costs - represent the current year’s pension obligation or the cost of
retirement benefits earned by current employees during the year. Normal Costs
are calculated based on a percentage of payroll.
Unfunded Accrued Liability (UAL) – is the difference between the total pension
liability less the current market value of assets in the pension fund, which
represents the funding shortfall for benefits previously earned by current
employees and City retirees. This amount effectively represents a “past due”
amount.
CalPERS recalculates the UAL balance and payment schedule every year, and a number
of factors impact the accrued liability. Additionally, the market value of assets can change
dramatically from year to year depending on investment performance. To address these
differences, at the end of each year, CalPERS adds new amortization bases to adjust the
UAL for changes to the system. Amortization bases are the component parts of the UAL.
They function like “individual loans” that have distinct payment schedules and terms. The
payment schedule for each amortization base is calculated using the current Discount
Rate. Each base is amortized over specific periods, in accordance with CalPERS
amortization policies. The UAL is a dynamic liability, and the City should anticipate that
its UAL payment schedule will fluctuate as a result of everchanging variables, making the
management of pension liabilities an ongoing evaluation and management process.
GENERAL PROVISIONS
The financial objective of a defined benefit pension plan is to fund the long-term cost of
benefits provided to the plan members. In order to assure that the plan is financially
sustainable, the plan should accumulate adequate resources in a systematic and
disciplined manner over the active service life of benefitting employees.
I. MANAGING PENSION LIABILITIES
A. Additional Discretionary Payments (ADPs) to CalPERS
The City can make Additional Discretionary Payments (ADPs)—payments
above and beyond the annually required contributions (ARC) calculated by
CalPERS. These payments can be used to prepay small amounts of “principal”
on the UAL, thereby saving the associated “interest” (calculated at the Discount
Rate) that is charged to the City. “Slow and steady” ADPs chip away at the
City’s pension obligations; and over time, this strategy improves the Plans’
funding status and can result in significant savings. Additionally, making smaller
ADPs to CalPERS on a regular basis (i.e., dollar cost averaging) mitigates the
market timing risk of a large lump sum deposit with CalPERS that is invested
in the market all at once.
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B. Section 115 Trust
The timing of when funds are available may not line up with the timing and
amounts of ADPs that the City desires to make to CalPERS. This should not
prevent the City from accumulating funds it desires to allocate towards paying
down its pension obligations. A Section 115 Trust allows the City to build its
pension reserve while maintaining oversight of investment management and
control over the risk tolerance and investment return targets of the portfolio.
Money placed into the trust is irrevocable, meaning it cannot be withdrawn and
used for another type of expenditure of the City. The benefits of a Section 115
Trust include:
1. Assets in the trust will offset liabilities on the City’s balance sheet.
2. Assets held in trust will allow for greater investment flexibility and risk
diversification compared to the City’s investment portfolio.
3. The City will control the risk tolerance (i.e., conservative, moderate, or
aggressive) of the portfolio. The City should hire an investment advisor to
manage the Section 115 Trust.
4. City will have the flexibility to access trust assets any time, as long
as they are used to pay employer pension obligations (including normal
costs).
5. Assets can be used to make “slow and steady” ADPs to achieve
UAL savings over time.
C. Pension Stabilization Reserve Fund
Because the City’s UAL payment schedule is projected to increase over the
next 8-10 years, it is important for the City to maintain a reserve to supplement
pension costs, including normal costs, offset future unexpected contribution
rate increases, and use as a rainy-day fund when revenues are impaired based
on economic or other conditions.
It shall be the City’s policy to consider applying available resources to its
Pension Stabilization Reserve Fund with a target balance of [$8 million]. Each
year, staff will assess whether the target balance of [$8 million] remains
suitable. Staff shall seek Council approval for making withdrawals from the
Pension Stabilization Reserve Fund.
It is recognized that monies in this reserve fund are subject to California
Government Code investment restrictions and the City’s Investment Policy and
therefore has a lower investment return risk than a Section 115 Trust.
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D. Accelerate Payment of New Amortization Bases
The City may seek to accelerate the repayment of any new Amortization
Bases added to the UAL, thereby reducing overall “interest” costs.
II. FUNDING SOURCES FOR MANAGING PENSION LIABILITIES
A. Reserves, One-Time Monies, and Savings
To the extent that the City has excess reserves, unspent budget monies at
year-end, unspent proceeds from capital projects, and/or one-time revenues or
any additional resources, the City shall consider applying a portion of such
monies toward its unfunded pension liabilities. The allocation of additional
resources shall be made on a case-by-case basis by the City Council, with input
from the City Manager [or Director of Finance] after all discretionary fund
reserve balances and one-time monies have been reviewed by City staff. There
shall be an annual assessment of allocation of reserves and/or one-time
monies consistent with the City’s Reserve Policy.
1. Reserves
The City seeks to maintain adequate levels of reserves in accordance with
its stated reserve goals and adopted Reserve Policy. To the extent that the
City has reserves in its General Fund or other funds in excess of reserve
targets, the City may consider allocating the excess toward unfunded
pension liabilities.
2. General Fund Surplus
Due to a variety of factors, the City may end a fiscal year with a surplus
of revenues over expenditures, encumbrances, and commitments. On
an annual basis, the City Manager [or Director of Finance] will recommend
allocations to the City Council on the use of budget surplus funds. After
deficits, reserve deficiencies, and other matters of fiscal concern, the City
Manager or his/her designee may recommend that 50 percent (50%) of
remaining budget surplus funds, up to $2 million, be used to address long-
term pension liabilities. The 50% target level is a stated Policy goal;
however, individual funding decisions, shall be made on a case-by-case
basis.
3. Debt Service Refunding Savings
When issuing refunding bonds for savings, the City shall consider setting
aside all or a portion of debt service savings to address long-term pension
liabilities.
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4. Annual Prepayment Option
Each year, CalPERS gives its member agencies two options for making its
UAL payment: 1) make monthly payments to CalPERS; or 2) make a lower
(approximately 3% savings) lump sum payment for the entire year by July
31st to CalPERS. The City has been implementing the second option to take
advantage of the savings offered by CalPERS. The City shall continue to
make the prepayment every July to CalPERS and set aside the savings to
address long-term pension liabilities.
B. Financing Strategies
Because the financing strategies below involve borrowing funds and repaying
them at an interest rate, savings achieved with these strategies should be used
to make ADPs to CalPERS to further leverage the savings.
1. Tax-Exempt Exchange
To the extent the City has pay-go tax-exempt capital projects, the City may
consider financing such projects with tax-exempt bonds and using the
budgeted pay-go funds to make ADPs towards the UAL. In this case, the
City would then use the budgeted UAL payments to pay debt service on the
tax-exempt bonds and realize savings from the differential between the tax-
exempt bond borrowing rate and the Discount Rate.
2. Pension Obligation Bonds (POBs)
Pension obligation bonds (POBs) are taxable bonds that state and local
governments have issued as part of an overall strategy to fund the unfunded
portion of their pension liabilities. The economic benefit of POBs is premised
on the assumption that the bond proceeds, when invested with pension
assets in higher-yielding asset classes, will be able to achieve a rate of
return that is greater than the interest rate owed over the term of the bonds.
The City may opt from time-to-time to use taxable bonds to “refinance” a
portion of its unfunded pension liability. There is risk of failing to achieve the
targeted rate of return that can burden the City with both the debt service
requirements of the taxable bonds and the unfunded pension liabilities that
remain unmet. To mitigate this risk, the City shall undertake the following
measures prior to and during the issuance of pension obligation bonds as
part of a comprehensive strategy to address the City’s unfunded liabilities.
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a. Financial Analysis Required Prior to the Issuance of POBs
The following analysis should be completed prior to the issuance of
POBs:
i. Estimate Savings Achieved with the Issuance of POBs by
Comparing Pension Payments with and without the POB
Issuance
The City shall compare the then current UAL payment schedule
against a new estimated remaining UAL payment schedule
(adjusted for a credit derived from POB proceeds) + POB debt
service. This analysis will indicate if the aggregate pension cost
savings, assuming then current market conditions, meet a
minimum budgetary savings threshold.
[Discuss if City wants to present options for a minimum budgetary
savings threshold.]
ii. Assessment of Risk
The strategy of issuing POBs to pay off all or a portion of
outstanding UAL carries market timing risk (i.e., if investment
returns are lower than interest costs of the POBs). The City shall
identify the level of risk that can be tolerated with this strategy.
b. General Guidelines for the Issuance of POBs
The City shall adhere to the following general guidelines for issuance of
POBs:
i. Retirement Plan funding ratios should not exceed 100% after the
application of bond proceeds.
ii. The bonds shall only be structured with fixed rate current interest
bonds.
iii. The bonds shall not be structured to extend the final maturity date
of the UAL or defer payments.
iv. Bonds shall be structured with the most flexible prepayment option
that can be achieved in the market without interest rate penalty at
the time of issuance.
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v. Bonds shall not finance non-current normal costs; they shall only
be used to refinance unfunded pension liabilities (and current
normal costs).
vi. After the issuance of POBs, the City shall determine an annual
dollar amount, based on the expected savings achieved, for
making ADPs to CalPERS.
[Discuss whether City wants to add level debt service structure or
leave flexible.]
FUNDING GOAL & FUNDING TARGET
While the ultimate goal is to have pension liabilities fully or mostly funded, the City’s
intermediate goal is to have its pension liabilities to be no less than [80%] funded. The
funded status goal may be achieved over a several year time frame. The funding level
should be allowed to fluctuate +/- 10% within a range of 80-100%; however, it should not
fall below 80%. Calculations for funding level should take into consideration any
outstanding pension-related debt, such as pension obligation bonds.
SUPERFUNDING
In the event that either of the City’s pension plans achieve “superfunded” status, where
asset values exceed the accrued liability (i.e., funding level exceeds 100%), excess
amounts shall not be used for contribution holidays or to enhance benefits. Excess
funding amounts should be viewed as reserves to be maintained to protect from future
downturns and negative events.
POLICY REVIEW AND AMENDMENT
Addressing retirement costs is a dynamic process. Adjustments are made annually to
the City’s normal costs and UAL. Therefore, this Policy is intended to serve as a living
document that should be reviewed annually. After the release of the most current annual
actuarial valuations, staff shall present a summary of each plan’s funding status during a
public City Council meeting and will review this Policy to determine if changes are needed
to ensure adequate resources are being accumulated. This Policy will incorporate matters
by which the responsibility of decision is vested in the City Council. Any amendments to
this Policy shall be prepared by the Director of Finance in writing and approved by action
of the City Council.
64
OPEB and Pension Discussion
Presentation to Budget Standing
Committee
Karen Chang, Director of Finance
January 29, 2025
65
AGENDA
1 UPDATE ON CITY’S OTHER POST EMPLOYMENT BENEFITS
(OPEB)
2 UPDATE ON CITY’S PENSION LIABILITY
3 PENSION OBLIGATION FUNDING STRATEGIES
4 DISCUSSION OF PENSION FUNDING POLICY
266
Past Actions Taken by City to Address OPEB
Closed System [hired prior to April 25, 2010]
Participate in CERBT to let fund grow over time
2013/14 (initial investment $4.2M)
2014/15 -$11.2M
2015/16 -$1.2M
Annually thereafter $802K
Current CERBT balance $38.2M
Projected UAL as of June 30, 2024 $51.7M
3 67
OPEB 10 Year Contribution Projection Summary
4 68
OPEB –30 year pay-off projection
5 69
Composition of Pension Funding (CalPERS)
CITY CONTRIBUTION: ~ 34 cents
Based on negotiated agreements
and actuarial valuations
UNFUNDED ACTUARIAL
LIABILITY (“UAL”)
Difference between current value of
City’s assets at CalPERS and
estimated obligations to retirees
South San Francisco UAL as
of June 30, 2024 is estimated
to be $264 million
(65.5% Funded)
EMPLOYEE CONTRIBUTIONS: ~ 11 cents
Based on negotiated agreements
and actuarial valuations
CalPERS INVESTMENT EARNINGS:
~ 55 centsEarnings generated by CalPERS
Effective 7/1/2021, expected rate of return
reduced from 7.0% to 6.8%
6 70
Past Actions Taken by City to Address Pension
Tiered Plans (Classic Tier 1, Classic Tier 2, PEPRA)
Miscellaneous:
Classic Tier 1: 2.7% @ 55 [hired prior to April 25, 2010]
Classic Tier 2: 2.0% @ 60 [hired after April 25, 2010]
PEPRA: 2.0% @ 62 [new hires on or after January 1, 2013]
Safety:
Classic Tier 1: 3.0% @ 50 [hired prior to April 25, 2010]
Classic Tier 2: 3.0% @ 55 [hired after April 25, 2010]
PEPRA: 2.7% @ 57 [new hires on or after January 1, 2013]
Compensation limit ($155,081)
Pension Stabilization Reserve Fund ($5.5 million)
Successful Judicial Validation for Future Pension Obligation Bond Issuances
(tool is now in toolbox but current market is unfavorable)
7 71
Actions Taken by City to Address Pension Liability
Tiered Plans (Classic Tier 1, Classic Tier 2, PEPRA)
Miscellaneous:
Classic Tier 1: 2.7% @ 55 [hired prior to April 25, 2010]
Classic Tier 2: 2.0% @ 60 [hired after April 25, 2010] (City)
PEPRA: 2.0% @ 62 [new hires on or after January 1, 2013] (State)
Safety:
Classic Tier 1: 3.0% @ 50 [hired prior to April 25, 2010]
Classic Tier 2: 3.0% @ 55 [hired after April 25, 2010] (City)
PEPRA: 2.7% @ 57 [new hires on or after January 1, 2013] (State)
Compensation limit ($155,081)
Pension Stabilization Reserve Fund ($5.5 million)
Successful Judicial Validation for Future Pension Obligation Bond Issuances
(tool is now in toolbox but current market is unfavorable)
8 72
Actions Taken by State to Address Pension Liability
Pension Reform
Miscellaneous:
PEPRA: 2.0% @ 62 [new hires on or after January 1, 2013]
Safety:
PEPRA: 2.7% @ 57 [new hires on or after January 1, 2013]
Compensation limit ($155,081)
Ended rolling amortization
Reduced amortization period from 30 years to 20 years
Reduces interest expense
9 73
SSF -Unfunded Pension Liability and Funded Status
1074
CalPERS History of Investment Returns
11Investment return 2024 ~9.3%75
Estimated Annual Payments (NC + UAL)
12Source: CalPERS Outlook tools 76
Comparison of Funded Ratio –San Mateo County
1377
How Does SSF Compare?
14
CalPERS Fund is estimated to be 72% Funded
UAL Balance
%
Funded UAL Balance
%
Funded
Daly City 110,376,411 73%149,590,511 65%
Redwood City 132,369,133 70%195,952,209 62%
San Mateo 101,414,805 70%198,803,821 60%
South San Francisco 111,188,891 63%153,332,993 65%
Safety PlanMiscellaneous Plan
Source: CalPERS Summary of Valuation Results
78
Why Pension Funding Policy
15
Maintain the City’s sound financial position;
Ensure the City has the flexibility to respond to changes in future service priorities, revenue levels, and operating
expenditures;
Provide guidance in making annual budget decisions;
Protect the City’s creditworthiness;
Ensure that all pension funding decisions are structured to protect both current and future taxpayers,
ratepayers, employees, and residents of the City; and
Ensure that the structure of Pension Obligation Bonds, if authorized and issued, is consistent with the City’s
strategic planning goals, objectives, capital improvement program, budget, and Debt Management Policy.
79
Strategies for Addressing Pension Obligations
16
Make Additional
Discretionary
Payments (ADPs)
to CalPERS
1
Pension
Stabilization
Reserve Fund
2
Section 115 Trust
3
Pension
Obligation
Bonds
4
80
Make Additional Discretionary Payments to CalPERS
above and beyond Annually Required Contribution
17
Prepay small amounts of “principal” on the UAL and save the 6.80% associated
“interest” cost
Requires long-term budgetary discipline and prioritization
Benefits of making Additional Discretionary Payments to CalPERS
Chip away at UAL and can result in significant savings over time
Less risky compared to POBs (no borrowing of funds and mitigates market timing risk)
Improves the City’s funded status over time
Cons
•Market Risk if making one-time big payment
1
81
Pension Stabilization Reserve Fund
18
City has created a designated Pension Stabilization Reserve of $5.5M
No impact on UAL unless funds are transferred to CalPERS
Invested with Chandler within California Investment Code
Yield since Inception: 4.5%
Benefits of Pension Reserve
Investment return has lower risk
City has maximum control over assets
Budget stabilization
Available in years with unexpected operating results or recession
Cons:
Lower Investment return
Not receiving credit from CalPERS to reduce Unfunded Liabilities
•reducing interest rate environment
2
82
Section 115 Trust
19
Legally restricted fund -Can only be used for pension costs
No impact on UAL unless funds are transferred to CalPERS
Benefits of 115 Trust
CalPERS CEPPT similar to the OPEB CERBT
Assets in the 115 Trust will offset liabilities on the City’s balance sheet
Investment flexibility (perhaps greater investment return, but higher risk)
City can choose conservative, moderate, or aggressive investments
Long term strategy so the fund can grow over time
City has control over assets
Flexibility to access trust assets at any time if used for pension costs
Addresses unfunded pension liabilities over time when using assets to make “slow and
steady” ADPs to achieve UAL savings
Cons: Investments can be in a negative position at a time when City may need to make a
withdrawal to offset pension costs
3
83
Pension Obligation Bonds (POBS)
20
October 2021: City Council Study Session on Pension Funding Strategies
July 2022: City Obtained Judicial Validation for Issuance of POBs
POBs Refinance the UAL
Benefits of POBs
Significant Budgetary Savings when POB Borrowing Rate is Low
Stabilize UAL Payments (level payments)
Restore Funded Status
Risks of POBs
Market Timing Risk
Impact of Returns is Magnified
Returns in Initial Years Critical
4
Unfavorable Market Conditions 84
Funding strategies
21
CalPERSSection 115
Trust
Recycled Savings Surplus or one-time
monies
Pension
Reserve
Surplus or one-time
monies
(ADPs over time) or
Use to offset
additional pension
costs due to
investment/actuarial
deviation
(UAL or Normal
Costs in
Recessionary Years)
(ADPs)
85
Feedback from Council
22
•Set target funding ratio for UAL
•Preset strategies
•Set Reserves Limits
•Preset criteria for designating a % of General Fund Surplus or one
time revenue to fund pension obligations
•Example: 50% up to cap of $2 million
•Review and oversight by Council
86
Questions/Comments
2387
City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #:25-111 Agenda Date:1/29/2025
Version:1 Item #:4.
Preliminary information regarding federal aid freeze and implications for existing City contracts and
subgrantees. (Sharon Ranals, City Manager)
RECOMMENDATION
Staff is seeking early feedback from the Budget Subcommittee regarding whether to continue paying for
certain contract work and reimbursing subgrantees where the City will eventually be seeking
reimbursement from the federal government.
BACKGROUND
On January 27,2025,President Trump’s Office of Management and Budget released the memorandum included
as Attachment 1 directing all federal departments and agencies to temporarily freeze all federal financial
assistance programs and supporting activities.The order applies to all congressionally approved federal grants
and loans,and excludes all assistance received directly by individuals.The freeze went into effect January 28,
2025 at 5:00 pm.While the memorandum suggests that the freeze is temporary,it is unclear when and whether
the executive branch will release these funds.
DISCUSSION
This wide-ranging order could be used to deny states and communities key federal resources used to provide
for community programs and complete public improvements.Many of these programs and improvements are
delivered by contractors and subgrantees.In these arrangements,the City has a contract with a federal agency
for the grant.The City then enters into contracts with subgrantees and/or contractors.When the work is
completed by the subgrantee or contractor,the City receives an invoice,which it pays.The City then seeks
reimbursement from the federal agency administering the funds.
As this freeze takes effect,the City is caught in the middle with subgrantees and contractors having completed
work and potentially invoiced the City,but the City has not paid yet.Staff is raising this issue to the Budget
Subcommittee and will potentially bring it to City Council to consider whether to pay these invoices to
subgrantees and contractors understanding the City may not be reimbursed.Additionally,staff will seek
feedback as to whether these subgrantees and contractors should be asked to pause work until there is more
certainty as to what will be reimbursed by the federal government and when.Given the sudden emergence of
this action by the Trump administration,the summaries of federal grants that was able to be aggregated by
departments are included as Attachments 2 through 6.
FISCAL IMPACT
Staff is working on preparing a financial impact of this federal assistance freeze.
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File #:25-111 Agenda Date:1/29/2025
Version:1 Item #:4.
CONCLUSION
While little is known at this time about the full cost of this freeze,staff thought it prudent to begin to engage
Council immediately regarding the short-term decision making that needs to occur as we receive invoices for
work that has been completed understanding the federal government may not eventually reimburse those costs.
While the freeze has been messaged as temporary,there is no indication yet of when funds may resume
flowing.
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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
THE DIRECTOR
January 27, 2025
M-25-13
MEMORANDUM FOR HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
FROM: Matthew J. Vaeth, Acting Director, Office of Management and Budget
SUBJECT: Temporary Pause of Agency Grant, Loan, and Other Financial Assistance
Programs
The American people elected Donald J. Trump to be President of the United States and
gave him a mandate to increase the impact of every federal taxpayer dollar. In Fiscal Year 2024,
of the nearly $10 trillion that the Federal Government spent, more than $3 trillion was Federal
financial assistance, such as grants and loans. Career and political appointees in the Executive
Branch have a duty to align Federal spending and action with the will of the American people as
expressed through Presidential priorities. Financial assistance should be dedicated to advancing
Administration priorities, focusing taxpayer dollars to advance a stronger and safer America,
eliminating the financial burden of inflation for citizens, unleashing American energy and
manufacturing, ending “wokeness” and the weaponization of government, promoting efficiency
in government, and Making America Healthy Again. The use of Federal resources to advance
Marxist equity, transgenderism, and green new deal social engineering policies is a waste of
taxpayer dollars that does not improve the day-to-day lives of those we serve.
This memorandum requires Federal agencies to identify and review all Federal financial
assistance1 programs and supporting activities consistent with the President’s policies and
requirements.2 For example, during the initial days of his Administration, President Donald J.
Trump issued a series of executive orders to protect the American people and safeguard valuable
taxpayer resources, including Protecting the American People Against Invasion (Jan. 20, 2025),
Reevaluating and Realigning United States Foreign Aid (Jan. 20, 2025), Putting America First in
International Environmental Agreements (Jan. 20, 2025), Unleashing American Energy (Jan. 20,
2025), Ending Radical and Wasteful Government DEI Programs and Preferencing (Jan. 20,
1 2 CFR 200.1 defines Federal financial assistance to mean “[a]ssistance that recipients or subrecipients receive or
administer” in various forms, but this term does not include assistance provided directly to individuals. For the
purposes of this memorandum, Federal financial assistance includes: (i) all forms of assistance listed in paragraphs
(1) and (2) of the definition of this term at 2 CFR 200.1; and (ii) assistance received or administered by recipients or
subrecipients of any type except for assistance received directly by individuals.
2 Nothing in this memo should be construed to impact Medicare or Social Security benefits.
90
2
2025), Defending Women from Gender Ideology Extremism and Restoring Biological Truth to
the Federal Government (Jan. 20, 2025), and Enforcing the Hyde Amendment (Jan. 24, 2025).
These executive orders ensure that Federal funds are used to support hardworking American
families.
To implement these orders, each agency must complete a comprehensive analysis of all
of their Federal financial assistance programs to identify programs, projects, and activities that
may be implicated by any of the President’s executive orders. In the interim, to the extent
permissible under applicable law, Federal agencies must temporarily pause all activities related
to obligation or disbursement of all Federal financial assistance, and other relevant agency
activities that may be implicated by the executive orders, including, but not limited to, financial
assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the
green new deal.
This temporary pause will provide the Administration time to review agency programs
and determine the best uses of the funding for those programs consistent with the law and the
President’s priorities. The temporary pause will become effective on January 28, 2025, at 5:00
PM. Even before completing their comprehensive analysis, Federal agencies must immediately
identify any legally mandated actions or deadlines for assistance programs arising while the
pause remains in effect. Federal agencies must report this information to OMB along with an
analysis of the requirement. OMB also directs Federal agencies to pause all activities associated
with open NOFOs, such as conducting merit review panels.
No later than February 10, 2025, agencies shall submit to OMB detailed information on
any programs, projects or activities subject to this pause. Each agency must pause: (i) issuance of
new awards; (ii) disbursement of Federal funds under all open awards; and (iii) other relevant
agency actions that may be implicated by the executive orders, to the extent permissible by law,
until OMB has reviewed and provided guidance to your agency with respect to the information
submitted.
OMB may grant exceptions allowing Federal agencies to issue new awards or take other
actions on a case-by-case basis. To the extent required by law, Federal agencies may continue
taking certain administrative actions, such as closeout of Federal awards (2 CFR 200.344), or
recording obligations expressly required by law.
Additionally, agencies must, for each Federal financial assistance program: (i) assign
responsibility and oversight to a senior political appointee to ensure Federal financial assistance
conforms to Administration priorities; (ii) review currently pending Federal financial assistance
announcements to ensure Administration priorities are addressed, and, subject to program
statutory authority, modify unpublished Federal financial assistance announcements, withdraw
any announcements already published, and, to the extent permissible by law, cancel awards
already awarded that are in conflict with Administration priorities, and; (iii) ensure adequate
oversight of Federal financial assistance programs and initiate investigations when warranted to
identify underperforming recipients, and address identified issues up to and including
cancellation of awards.
91
Capital Projects Division
Federal Funds Summary
Description Amount
Community Project Funding (CPF) grant for Centennial Trail 1,666,279$
Housing and Urban Development (HUD) grant for LPR 1,500,000$
Earmark for Westborough Preschool expansion 850,000$
Total 4,016,279$
92
Notes
This was an earmark from Congressman Mullin that was awarded.
This was an earmark from former Congresswoman Speier that was awarded.
This is pending.
93
Economic and Community Development
Federal Funds Summary
A B
Description Amount Billed/ReceivedAmount to be billed/not submitted
Economic Development Administration (EDA) for EAC 1,132,000$
Department of Labor (DOL) for EAC 32,962$
EAC Sub-Total 1,132,000$ 32,962$
Description Billed/Received Remaining Balance
Community Development Block Grant (CDBG) 2024 18,505$ 424,251$
Community Development Block Grant (CDBG) 2023 566,695$
CDBG Sub-Total 18,505$ 990,946$
94
C
Remaining BalanceTotal Impact (B+ C)
193,985$ 193,985$
169,243$ 202,206$
363,229$ 396,191$
Notes
Have not paid out any public service or minor home repairs
Prior year funding reallocated as a part of the 2024 Annual Action Plan Amendment
95
Active Federal Grants
Funding Source
FEMA/Urban Area Security Initative
FEMA/Urban Area Security Initative
FEMA/Urban Area Security Initative
FEMA/Port Security Grant Program
96
Project Amount Status Contract
Station 61/Fire Admin/EOC Security Enhancements $100,000 In Close Out Process Yes
Station 64 Security Enhancements $75,000 In Close Out Process Yes
Rescue Equipment $25,000 In Close Out Process Yes
Fire Boat Pump and Nozzle $40,000 Seeking Reimbursement Yes
Total $240,000
97
Federal Grant Pending Applications
Funding Source Project
FEMA/Urban Area Security Initative Lithium Ion Battery Fire Equipment
FEMA/Assistance to Firefighters Grant Program Portable Radios
FEMA/Urban Area Security Initative Rescue Equipment
Total
98
Amount Status Contract
$175,000 Pending Yes - If Awarded
$300,000 Pending Yes - If Awarded
$25,000 Pending Yes - If Awarded
$500,000
99
Grants funding for 2024 Library Programs and Services
FEDERAL:
Description Amount Notes
Federal Child and Adult Care Food Program via CA Dept. of Education $30,000 Reimbursement estimate for afterschool snacks at the CLC
Daly City Community Development Block Grant $20,000 Project Read adult literacy programs and services
Federal Library Services Technology Act grant for Gene Mullin CLC $47,603 Teens Succeed grant at the CLC
Total $97,603
100
Project
Number
Project Name Agreement status Federal Project
Number
Funding Source Name Funding Type Grant
Description
Funding Source
Category Name
Funding Source Description Project
Status
Funding
Source
Category
Description
Account
Funding
Source
Status
Balance Spent To Date Committed Total Funds Notes
Transportation Projects with Federal funds (information in Columns D - P from e-Builder)
st1703 Bridge Preventative Maintenance
Program
Agreement in place; partially
reimbursed
04-5177F15-
FO28 (Program
Supplement)
Grant-HBP Grant - Federal HBP 150 - Grants Highway Bridge Program - Grant
Federal
Active Grants Active (324,066.70)439,155.70 384,522.13 115,089.00 City has submitted request for funds for
design/construction of the project
st1804 Bridge Preventative Maintenance
Program - Grand Avenue Overpass
Agreement in place; partially
reimbursed
BRLS - 5177
(049)
Grant-HBP Grant - Federal 150 - Grants Highway Bridge Program - Grant
Federal
Active Grants Active 522,073.87 69,926.13 33,920.00 592,000.00
tr2203 East of 101, Quick Strike Bus Stop
Improvements
Agreement in place; partially
reimbursed
N/A Grant-MTC TIP Grant - Federal 150 - Grants Metropolitan Transporation
Commission(MTC) Federal-
Statewide Transportation
Improvement Program (TIP)
Grant
Active Grants Active (163,419.44)639,906.44 642,656.00 476,487.00
st193d FY 2018-19 OBAG 2: Street
Rehabilitation
Agreement in place; fully reimbursed STPL-5177(042) Grant- OBAG2 Grant - Federal OBAG 2 funds -
STP
150 - Grants One Bay Area Grants 2 Complete Grants Active (290,627.67)1,317,627.67 1,315,521.92 1,027,000.00
st1807 Grand Boulevard Project (Arroyo Drive
to Kaiser Way) Phase III
Agreement in place; partially
reimbursed
04-5177F15 Grant- OBAG2 Grant - Federal CMAQ - CML-
5177(040)
150 - Grants One Bay Area Grants 2 Active Grants Active (1,287,269.17)2,287,269.17 3,909,701.84 1,000,000.00
st1602 Linden Ave. Phase 2 and Spruce Ave
Traffic Calming Improvements
Agreement in place; fully reimbursed ATPL-5177(037) Grant- ATP Grant - Federal ATP 150 - Grants Active Transportation Program Complete Grants Active 62,034.55 805,965.45 786,602.59 868,000.00
st2305 OBAG3 School St/Spruce Ave and
Hillside Boulevard Safety and Access
Improvement Project
Programmed no agreement in place Grant-OBAG3 Grant - Federal 150 - Grants One Bay Area Grants 3 Active Grants Active 3,117,169.99 10,830.01 28,720.00 3,128,000.00
st1301 South Airport Boulevard Bridge
Replacement
Agreement in place; fully reimbursed Grant-HBP Grant - Federal HBP 150 - Grants Highway Bridge Program - Grant
Federal
Complete Grants Active 506,574.00 8,612,671.00 8,530,077.75 9,119,245.00
tr1801 Spruce and Commercial Signalized
Intersection
Agreement in place; fully reimbursed HSIPL-
5177(041)
Grants- HSIP Grant - Federal HSIP 150 - Grants Highway Safety Improvement
Program
Complete Grants Active 140,725.02 303,274.98 295,258.12 444,000.00
st1403 SSF Grand Boulevard Project
(Chestnut to Arroyo) Phase I
Agreement in place; fully reimbursed CML-5177(033)Grant-OBAG TCL Grant - Federal CMAQ 150 - Grants One Bay Area Grant-
Transporation for Livable
Communities
Complete Grants Active 114,639.99 885,360.01 1,161,111.70 1,000,000.00
st1502 SSF Grand Boulevard Project (Kaiser
Way to BART) Phase II
Agreement in place; fully reimbursed TCSPL-6014(15) Grant-TSCP Grant - Federal STIP 150 - Grants Transportation, Community,
System Preservation Grant
Complete Grants Active 156,614.12 1,834,385.88 1,858,844.86 1,991,000.00
tr2001 West Orange and Hillside Pedestrian
Crossing Improvements
Agreement in place; fully reimbursed H9-04-031 Grant- HSIP Grant - Federal HSIP-5177
(043)
150 - Grants Highway Safety Improvement
Program
Complete Grants Active 143,808.14 60,191.86 60,705.00 204,000.00
Projects that need further review - GBS doesn't have information about the status of these projects.
sd2201 Francisco Terrace Flood Protection
Levy
NA American Recovery Plan Grant - Federal American
Recovery Plan
150 - Grants American Recovery Plan Active Grants Active 64,380.70 55,619.30 113,309.75 120,000.00
tr1902 East of 101 Traffic Signal IDEA Grant Grant- MTC IDEA Grant - Other 150 - Grants Innovative Deployment to
Enhance Arterials
Complete Grants Active 413,413.79 214,350.21 109,913.52 627,764.00
st2304 FY 2022-23 CDBG Curb Ramp
Replacement
Grant - CDBG Grant - Federal CDBG 150 - Grants CDBG Expenes Active Grants Active (99,974.13)249,974.13 250,000.00 150,000.00 This is an entitlement received annually from
HUD.
Grants that have applications submitted- not in e-Builder
st2506 FY 2024-25 CDBG Curb Ramp
Replacement
Community Development
Block Grant
U.S. Housing and Urban
Development
800,000.00 This is an entitlement received annually from
HUD. Amount awarded in the Total Funds
column.
st2501 Downtown Vision Zero Improvements Programmed no agreement in place SS4A
Safe Streets for All
-Supplemental Planning
and Demonstration
Grants
US DOT 400,000.00 Amount awarded in the Total Funds column.
st1004 South Linden Avenue & Scott Street
Grade Separation
Railroad Crossing
Elimination (RCE)
US DOT 16,000,000.00 Requested amount in the Balance column.
Street lights?Energy Efficiency &
Conservation Block
Grant (EECBG) Program
US DOE Formulaic application, unknown.
101
Programmed no agreement in place
Agreement in place; reimbursement not started
Agreement in place; partially reimbursed
Agreement in place; fully reimbursed
102