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HomeMy WebLinkAboutReso 18-2019 (19-77)City of South San Francisco P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, CA City Council Resolution: RES 18-2019 File Number: 19-77 Enactment Number: RES 18-2019 RESOLUTION ACKNOWLEDGING RECEIPT OF THE FISCAL YEAR 2017-18 AUDITED FINANCIAL STATEMENTS, INCLUDING THE COMPREHENSIVE ANNUAL FINANCIAL REPORT. WHEREAS, the Budget Standing Committee accepted the Fiscal Year ("FY") 2017-18 year-end financial results on November 5, 2018; and WHEREAS, the City Council accepted the FY 2017-18 year-end financial results on November 15, 2018; and WHEREAS, the City of South San Francisco's independent auditor opined that that the City's financial statements present fairly, in all material respects, the City's financial position; and WHEREAS, the Memorandum on Internal Control indicated that there were no findings in the auditor's review of the City's internal controls; and WHEREAS, the City's FY 2017-18 audited financial statements affirm prudent financial stewardship. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of South San Francisco does hereby accept the FY 2017-18 audited financial statements, attached herein as Exhibits A, B, C, and D. At a meeting of the City Council on 2/13/2019, a motion was made by Richard Garbarino, seconded by Buenaflor Nicolas, that this Resolution be approved. The motion passed. Yes: 4 Mayor Matsumoto, Vice Mayor Garbarino, Boardmember Nagales, and Boardmember Nicolas Absent: 1 Boardmember Addiego Attest by µti osa Govea Acosta City of South San Francisco Page 1 COMPREHENSIVE ANNUAL FINANCIAL REPORT CITY OF SOUTH SAN FRc1NCISCO, CALIFORNIA i YEAR ENDED JUNE 30, 2018 �- :r v :- I �- r_ , . d IiSiT p, P . Art-- CITY OF SOUTH SAN FRANCISCO, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018 Prepared by: Department of Finance This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2018 Table of Contents I INTRODUCTORY SECTION I Table of Contents ................................................................................................................................................. i Letter of Transmittal ........................................................................................................................................... v Certificate of Achievement for Excellence in Financial Reporting ................................................................. ix Organization Chart ............................................................................................................................................. x City Council and Directory of City Officials .................................................................................................... xi I FINANCIAL SECTION I Independent Auditor's Report ........................................................................................................................ 1 Management's Discussion and Analysis ........................................................................................................ 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ................................................................................................................... 27 Statement of Activities ........................................................................................................................ 28 Fund Financial Statements: Major Governmental Funds: Balance Sheet .................................................................................................................................. 32 Reconciliation of Governmental Fund Balances to Net Position of Governmental Activities ..... 34 Statement of Revenues, Expenditures, and Changes in Fund Balances ........................................ 36 Reconciliation of the Net Change in Fund Balances Total Governmental Funds with the Statement of Activities .......................................................................................................... 3 8 Statement of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual- Budgetary Basis: General Fund ......................................................................................................................... 39 Low and Moderate Income Housing Assets ......................................................................... 40 Major Proprietary Funds: Statement of Net Position ............................................................................................................... 42 Statement of Revenues, Expenses, and Changes in Fund Net Position ......................................... 43 Statement of Cash Flows ................................................................................................................. 44 CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2018 Table of Contents I FINANCIAL SECTION (Continued) ! Fiduciary Funds: Statement of Fiduciary Net Position ............................................................................................... 46 Statement of Changes in Fiduciary Net Position ............................................................................ 4 7 Notes to Basic Financial Statements ........................................................................................................ 49 Required Supplementary Information: Schedule of Changes in Net Pension Liability and Related Ratios- Miscellaneous Plan ................................................................................................................ 98 Schedule of Contributions -Miscellaneous Plan ........................................................................... 99 Schedule of Changes in Net Pension Liability and Related Ratios -Safety Plan ....................... 100 Schedule of Contributions -Safety Plan ...................................................................................... 101 Schedule of Changes in the Net OPEB Liability and Related Ratios .......................................... 102 Schedule of Contributions -OPEB Plan ...................................................................................... 103 Notes to Schedule of Employer Contributions ............................................................................. 103 Supplementary Information: General Fund: Combining Balance Sheet. ................................................................................................................ 108 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances ....................................................................................................................... 109 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual -(Non GAPP Legal Basis) ............................................ 110 Major Governmental Funds Other Than the General Fund and Special Revenue Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual: Capital Improvement Capital Projects Fund (Non GAAP Legal Basis) ..................................... 114 East of 101 Sewer Impact Fees Capital Projects Fund (Non GAAP Legal Basis) ................. 115 East of 101 Traffic Impact Fees Capital Projects Fund (Non GAAP Legal Basis) ............... 116 Child Care Impact Fees Capital Projects Fund (Non GAAP Legal Basis) ............................. 117 II CITY OF soum SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2018 Table of Contents I FINANCIAL SECTION (Continued) Developer Deposits Capital Projects Fund (Non GAAP Legal Basis) ................................... 118 Capital Infrastructure Reserve Fund (Non GAAP Legal Basis) ............................................. 119 Non-major Governmental Funds: Combining Balance Sheet. ................................................................................................................ 124 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ....................................................................................................................... 128 Budgeted Non-major Government Funds: Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual .................................................................................... 132 Internal Service Funds: Combining Statement of Net Position .............................................................................................. 142 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ........................ 143 Combining Statement of Cash Flows ............................................................................................... 144 Fiduciary Funds: Statement of Changes in Assets and Liabilities -Agency Fund ................................................... 146 I STATISTICAL SECTION I Net Position by Component -Last Ten Fiscal Years .................................................................... 149 Changes in Net Position-Last Ten Fiscal Years ........................................................................... 150 Fund Balances of Governmental Funds -Last Ten Fiscal Years .................................................. 152 Changes in Fund Balance of Governmental Funds-Last Ten Fiscal Years ................................ 156 Assessed Value of Taxable Property-Last Ten Fiscal Years ....................................................... 158 Direct and Overlapping Governments -Property Tax Rates Last Ten Fiscal Years ................................................................................................................ 159 Principal Property Taxpayers -Current Year and Nine Years Ago .............................................. 160 Twenty Largest Taxable Property Owners for Merged RDA Project Area .................................. 161 Property Tax Levies and Collections-Last Ten Fiscal Years ...................................................... 162 Ill CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2018 Table of Contents I STATISTICAL SECTION (Continued) I Ratio of Outstanding Debt by Type -Last Ten Fiscal Years ........................................................ 163 Computation of Direct and Overlapping Debt ............................................................................... 164 Computation of Legal Bonded Debt Margin .................................................................................. 165 Revenue Bond Coverage Sewer Rental Enterprise Fund -Last Ten Fiscal Years ....................... 166 Sewer Debt Service Coverage Sewer Rental Enterprise Fund-Last Five Fiscal Years .............. 167 Redevelopment Pledged Revenue Coverage -Last Seven Fiscal Years ...................................... 168 Demographic and Economic Statistics -Last Ten Fiscal Years ................................................... 169 Principal Employers -Current Year and Nine Fiscal Years Ago ................................................. 170 Full-Time Equivalent City Governmental Employees by Function -Last Ten Fiscal Years ...... 171 Operating Indicators by Function/Program -Last Five Fiscal Years ........................................... 172 Capital Asset Statistics by Function/Program -Last Ten Fiscal Years ........................................ 173 Miscellaneous Information -Last Three Fiscal Years .................................................................. 17 4 IV Francisco is a full service city which includes public safety (police, fire and paramedics), libraries, parks, cultural and recreational activities, senior citizen services, public works, public improvements, engineering, planning, building regulation, economic development, drainage, street lighting, and general administrative services. Sewer service, downtown parking operations, and storm water management are accounted for in the City's enterprise funds. The Conference Center Authority is included in the financial statements by discrete presentation -that is, the Authority's financial data is reported in a column separate from the financial data of the City. Water and solid waste services are provided by private entities. South San Francisco was incorporated and became a general law city of the State of California on September 19, 1908. The form of government is the Council-Manager plan. The Council is composed of a Mayor and four Council Members who are elected at large. Each Council Member serves a term of four years, with a rotating Mayor chosen by majority vote of the Council, for a term of one year. The City Manager is the administrative head of the government of the City, under the direction of the City Council. The offices of City Clerk and City Treasurer are elected. The City Attorney is appointed by the City Council. All department heads are appointed and serve under the administrative direction of the City Manager. All other officers and employees of the City are appointed by department heads. FINANCIAL INFORMATION In developing and appraising the City's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable but not absolute assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets; and (3) transactions being properly executed in accordance with management's authorization. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. Basic characteristics of sound internal accounting control include segregation of accounting duties, approvals of accounting transactions, and regular reconciliation of detail and control records. All internal control evaluations occur within this framework. We believe that the City's internal accounting controls adequately safeguard assets and provide reasonable assurances of proper recording of financial transactions. Vl The City adopts fiscal year budgets for its general, special revenue, debt service, enterprise, and capital project funds. The government also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbered amounts lapse at year-end. However, encumbrances generally are reappropriated as a part of the following year's budget. At a high level, there are two notable changes to the financial condition of the City compared to the prior fiscal year. The first is due to implementation of GASB 75, which recognized the full liability for other post-employment benefits (OPEB). GASB 75 supplanted GASB 45, which only recognized the amortized OPEB obligation. As such, the OPEB liability increased from $26 million to $59 million. In addition, the City's pension liability, pursuant to GASB 68, increased from $152 million to $183 million, principally due to interest on the total pension liability. The second notable change is in the City's cash balance, which increased from $138 million to $170 million. The change is a manifestation of two factors. The first is the pace of development in South San Francisco, primarily high density residential development in the downtown area, and research and development facilities in the East of 101 area. During FY 2017-18, the City had over 1,100 high density residential units under construction, with another 2,000 units under consideration, which is a reflection of the extreme demand for housing in the San Francisco Bay Area. The City also has over five million square feet of non- residential development that is either entitled, permitted, or under construction in the East of 101 area, which affirms the City's heritage as not only the Birthplace of Biotech, but also its status as the Biotech Capital of the world. There are two financial policies that had a significant impact on the current period's financial statement. The first is the City's Reserves Policy, which is aligned with the Government Finance Officers Association (GFOA) best practices recommendation for reserves, setting aside 15-20 percent of operating revenues. The City's revenue base continues to expand through residential and non- residential development. The palette and depth of taxes were broadened as approved by South San Francisco voters in the November 2018 election via Measure FF and Measure LL, which will increase Transient Occupancy Tax and establish a cannabis business license tax, respectively. As such, the City's General Fund unassigned fund balance will continue to grow commensurately. The second policy that had a significant impact reflected the City Council's alignment with best practices to complete a comprehensive review and update of its fees via a cost allocation plan (CAP) and fee study every five to seven years. The results of the fee study indicated that the City was only recovering 57 percent of its costs through fees due the period of time that had lapsed since the last CAP was completed. The City Council further supported a cost recovery rate of at least 80 percent. As such, the policy, coupled with the record-breaking development climate, increased permit and developer impact fee revenues to an unheralded level. vii Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of South San Francisco California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2017 Executive Director/CEO IX Citizens of South San Francisco City Council City Clerk LIZA NORMANDY, Mayor -KARYL MATSUMOTO, Mayor Pro Tempore City Treasurer Krista Martinelli MARK ADDIEGO, Councilman Frank Risso RICHARD A. GARBARINO, Councilman PRADEEP GUPTA, Councilman City Attorney Jason Rosenberg Assistant City Manager/ City Manager Communications Director Chief Sustainability Officer -- Marian Lee Mike Futrell Leslie Arroyo I Information Technology Department Administrative Departments Operating Departments Finance Director Econ. & Comm. Dev. Dir. Public Works Director ---Richard Lee Alex Greenwood Eunejune Kim Human Resources Director Library Director Fire Chief ---Leah Lockhart Valerie Sommer Jess Magallanes Parks and Recreation Directo1 Chief of Police --Sharon Ranals Jeff Azzopardi X City Council & Directory of Officials City Council Liza Normandy Karyl Matsumoto Mark N. Addiego Richard A. Garbarino Pradeep Gupta, Ph.D. Elected Officials Krista Martinelli Frank Risso Appointed Officials Mike Futrell Marian Lee Leslie Arroyo Richard Lee Leah Lockhart Tony Barrera Alex Greenwood Jess Magallanes Jeff Azzopardi Valerie Sommer Eunejune Kim Sharon Ranals Budget Subcommittee Pradeep Gupta, Ph.D. Liza Normandy Mayor Mayor Pro Tempore Councilmember Councilmember Council member City Clerk City Treasurer City Manager Assistant City Manager/ Chief Sustainability Officer Communication Director Finance Director Human Resources Director Chief Innovation Officer Economic & Community Development Director Fire Chief Chief of Police Library Director Public Works Director Parks & Recreation Director XI This Page Left Intentionally Blank INDEPENDENT AUDITOR'S REPORT Honorable Members of the City Council City of South San Francisco, California Rep ort on Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of South San Francisco (City), California, as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the Table of Contents. We did not audit the component unit financial statements of the South San Francisco Conference Center Authority (Authority), which is discretely presented and represents 1 %, 2%, and 2%, respectively, of the assets, net position, and revenue of the primary government. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. The fmancial statements of the Authority were audited by other auditors, whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for the Authority, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fmancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the fmancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the fmancial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Plea sant Hill , CA 94523 T 925 .930.0902 F 925 ,930 .0135 E maze@mazeassociates .com w mazeassociates.com Opinions In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining information of the City as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisons listed in the Table of Contents as part of the basic financial statements for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principles Management adopted the provisions of Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting/or Postemployment Benefits Other than Pensions, which became effective during the year ended June 30, 2018 and required a prior period adjustment to the financial statements and required the restatement of net position as discussed in Note lS. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management's Discussion and Analysis and other Required Supplementary Information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The Introductory Section, Supplemental Information, and Statistical Section as listed in the Table of Contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The Supplemental Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplemental Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2 The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them . Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 13, 2018 on our consideration of the City 's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. ~ ~ci. j J\/J()o~ Pleasant Hill, California December 13, 2018 3 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Government Accounting Standards Board Statement 34 (GASB 34) requires the City of South San Francisco to provide an overview of its financial activities for the fiscal year. Please read this in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. FISCAL YEAR (FY) 2017-18 FINANCIAL HIGHLIGHTS Summary: The outcome of Fiscal Year 2017-18 largely reflected the robust economic and development climate in South San Francisco. The General Fund, excluding transfers, generated an operating surplus of $26.2 million. General Fund reserves were fully funded in accordance with the City's Reserves Policy, which follows the Government Finance Officers' Association (GFOA) best practice of 15 to 20 percent of operating revenues. After meeting the City's reserves requirement, the City Council authorized transfer of $10.0 million to the Capital Infrastructure Fund to proactively position the City to address future infrastructure funding needs, and $1.0 million to the CalPERS Stabilization Reserve to address escalating pension costs and pension liabilities. General Fund revenues (excluding operating transfers in and $20.6 million in property held for redevelopment from FY 2016-17) increased by $17. 9 million, or 17 .1 percent compared to the prior year. The primary drivers of the year-over-year increase were sales tax and permit revenues. FY 2017-18 represents the second full fiscal year of Measure W, the City's half-cent transactions and use tax. Coupled with growth in nearly every business category, sales and use tax revenues increased $4.3 million, or 17.4 percent compared to the prior year. Permit revenues increased $6.9 million compared to FY 2016-17. The principal contributing factors were the demand for residential and non-residential development in South San Francisco, primarily in the downtown and East of 101 areas, and the City Council's approval of a comprehensive fee study, which improved the City's cost recovery rate from 57 to 81 percent. City-wide financial highlights of the year include the following: • Total Net Position for Governmental Activities in FY 2017-18 remained largely static, decreasing nominally from $222.0 million to $221.1 million. Total assets, driven by a significant increase in cash and investments, increased by $33.7 million. However, total citywide liabilities increased by $53.5 million, largely driven by implementation of Government Accounting Standards Board (GASB) 75, which shifted from an amortized value for the City's Other Post-Employment Benefits (OPEB) obligation, valued at $26.2 million in FY 2016-17 pursuant to GASB 45, to the full OPEB liability of $59.3 million in FY 2017-18 pursuant to GASB 75. • Net pension liability increased from $152.8 million to $182.9 million. The change was largely driven by interest on the Total Pension Liability and changes in actuarial assumptions. • Cash and investments increased and Net Expenses decreased for Governmental Activities significantly compared to the prior year, reflecting a record-breaking development climate in South San Francisco. Cash and investments increased from $116.9 million to $146.6 million, while Net Expenses decreased from $71.2 million to $63.9 million. 5 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information • The City purchased land from the Successor Agency to the Former Redevelopment Agency to serve as the site of the future community civic campus in the amount of $7 .1 million, which increased General Fund expenditures. • Sales tax revenues increased from $24.5 million to $28.7 million, an increase of 17.4 percent, reflecting the diversity and breadth of the City's economy. • Revenue from licenses and permits for Governmental Funds increased from $7.8 million to $14.7 million, which was a manifestation of the active development environment in South San Francisco, primarily non-residential development in the East of 101 area, and high density residential in the downtown area. • Intergovernmental revenues for Governmental Funds increased from $4.0 million to $8.4 million, largely due to the South Airport Bridge project, which the City received federal grant funds through the State of California's Local Highway Bridge Program (HBP). The City also received grant revenue from the County of San Mateo for the US-101 Produce A venue Interchange. The South San Francisco Fire Department responded to a number of mutual aid events throughout the State of California due to a particularly severe fire season. As such, the California Office of Emergency Services (CalOES) reimbursed the City $0.9 million for employee and equipment costs. OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT This Comprehensive Annual Financial Report is in six parts: 1) The Introductory Section, which includes the Transmittal Letter and general information; 2) Management's Discussion and Analysis (this part); 3) The Basic Financial Statements, which include the Government-wide and the Fund Financial Statements, along with the notes accompanying these statements; 4) Required Supplementary Information and the accompanying notes; 5) Other Supplementary Information including combining statements for non-major governmental funds, internal service funds, other budgetary information, and a fiduciary statement of changes in assets and liabilities; and 6) The Statistical Section. Basic Financial Statements The Basic Financial Statements are comprised of the City-wide Financial Statements and the Fund Financial Statements. These two sets of financial statements provide two different views of the City's financial activities and financial position. 6 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information The City-wide Financial Statements provide a longer-term view of the City's activities as a whole, and consist of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities on the full accrual basis, similar to the basis used by corporations. The Statement of Activities provides information about all the City's revenues and all its expenses, also on the full accrual basis, with the emphasis on measuring net revenues or expenses of each the City's programs. The Statement of Activities provides a detailed explanation of the change in net position for the year. All the amounts in the Statement of Net Position and the Statement of Activities are separated into Governmental Activities and Business-type Activities in order to provide a summary of these two activities of the City as a whole. The Fund Financial Statements report the City's operations in more detail than the government- wide statements and focus primarily on the short-term activities of the City's General Fund and other Major Funds. The Fund Financial Statements measure only current revenues, expenditures, and fund balances; they exclude capital assets, long-term debt and other long-term amounts. Major Funds account for the major financial activities of the City and are presented individually, while the activities of Non-major funds are presented in summary, with subordinate schedules presenting the detail for each of these other funds. Major Funds are explained below. The fiduciary statements provide financial information about the activities of Non-Obligated Assessment Districts, for which the City acts solely as agent. Note 1 to the Basic Financial Statements provides a summary of the City's significant accounting policies, fund categories, and fund types. City-wide Financial Statements The Statement of Net Position and the Statement of Activities present information about the following: • Governmental activities -All of the City's basic services are considered to be governmental activities, including general government, fire, police, public works, parks and recreation, library, and economic and community development. These services are supported by general City revenues such as taxes, and by specific program revenues from grants, contributions, and fees. The City's governmental activities also include the City of South San Francisco Capital Improvements Financing Authority, as the City Council also governs this entity. • Business-type activities -All the City's enterprise activities are reported here, including wastewater treatment, parking, and storm water management. Unlike governmental services, user fees fully support most of these services. 7 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information • Component Unit -The City of South San Francisco Conference Center Authority comprises the component unit. The Authority serves the City and other interests and it has a governing body separate from the City Council. Citywide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. Fund Financial Statements The Fund Financial Statements provide detailed information about each of the City's most significant funds, called Major Funds. The concept of major funds, and the determination of which are major funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them in total. Instead, each Major Fund is presented individually, with all Non-major Funds summarized and presented only in a single column. Subordinate schedules present the detail of these Non-major funds. Major Funds present the major activities of the City for the year, and may change from year to year as a result of changes in the pattern of City's activities. Fund Financial Statements include governmental, enterprise and internal service funds as discussed below. Governmental Fund Financial Statements are prepared on the modified accrual basis, which mean they measure only current financial resources and uses. Capital assets and other long-lived assets, along with long-term liabilities, are not presented in the Governmental Fund Financial Statements. Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis, as in the past, and include all their assets and liabilities, current and long-term. Since the City's Internal Service Funds provide goods and services only to the City's governmental and business-type activities, their activities are reported only in total at the Fund level. Internal Service Funds may not be Major Funds because their revenues are derived from other City Funds. These revenues are eliminated in the citywide financial statements and any related profits or losses are returned to the activities which created them, along with any residual net position of the Internal Service Funds. Comparisons of Budget and Actual financial information are required in the Basic Financial Statements only for the General Fund and other Major Funds that are Special Revenue Funds. Fiduciary Statements The City is the agent for certain assessment districts, holding amounts collected from property owners which await transfer to these Districts' bond trustees. The City's fiduciary activities are reported in the separate Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position. These activities are excluded from the City's other financial statements because the City cannot use these assets to finance its own operations. 8 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE This analysis focuses on net position and changes in net position of the City's Governmental Activities (Table and Charts 1 through 3) and Business-type Activities (Tables 4 and 5) presented in the City-wide Statement of Net Position and Statement of Activities. A comparative analysis is presented for fiscal years 2017-18 and 2016-17. Governmental Activities Governmental Net Position Table 1 Governmental Net Position at June 30 (In Millions) 2018 2017 Cash and investments Other assets Capital assets Total assets Total outflows of resources Total outflow of resources Long-term debt outstanding Other liabilities Total liabilities Deferred inflows of resources Total deferred inflow of resources Net position: Net investment in capital assets Restricted Unrestricted Total net position $ 146.6 35.9 255.7 438.2 44.0 44.0 9.1 250.0 259.1 2.0 2.0 254.6 96.3 (129.8) $ 221.1 $ 117.0 31.5 256.0 404.5 28.3 28.3 11.8 193.8 205.6 5.2 5.2 254.3 54.5 (86.8) $ 222.0 The total net position for Governmental Activities nominally decreased by $0.9 million in FY 2017-18 compared to the prior year, reflecting significant increases in assets, primarily in cash and investments, offset by increases in liabilities due to increases in pension and OPEB liabilities. 9 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information The increase in assets was largely within cash and investments, and was due to the robust development in South San Francisco, which generated record-breaking permit revenues and over $18 million in developer impact fees. Pursuant to GASB 75, the City recognized the full OPEB liability of $59.3 million in FY 2017-18. The City's net pension liability also increased from $152.8 million to $182.9 million, an increase of $30.1 million, or 19.7 percent. Table 2 Expense and Program Revenue Comparison in Governmental Activities (In Millions) Expenses General government Fire department Police department Public works department Recreation and community services Library Economic and community development Interest on long-term debt Total expenses Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions Total program revenues General revenues: Taxes: Property taxes Sales taxes Transient occupancy taxes Other taxes Motor vehicle in lieu Property taxes in lieu Investment earnings Miscellaneous· Extraordinary Item Total general revenues Total revenues Excess (deficiency) before transfers Transfers Change in net position Net position -beginning* Net position -ending 10 2017-18 $12.5 30.3 30.7 18.4 17.2 5.9 10.1 $125.1 $52.9 5.8 2.5 $61.2 $29.6 28.4 14.0 10.3 6.4 1.1 5.2 (7.2) $87.8 $149.0 $23.9 (2.0) 21.9 199.2 $221.1 2016-17 $10.3 25.8 25.8 12.4 15.2 5.2 8.9 $103.6 $27.3 4.5 0.6 $32.4 $29.1 24.1 13.6 9.8 6.1 0.6 2.4 45.2 $130.9 $163.3 $59.7 (1.1) 58.6 163.4 $222.0 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Table 3 Net (Expense) Revenue from Services Governmental Activities (In Millions) 2017-18 2016-17 General government Fire department Police department Public works department Recreation and community services Library Economic and community development Interest on long-term debt Total 12 $ $ (9.4) $ (7.7) (24.0) (21.5) (27.8) (23.1) 10.8 1.1 (11.9) (10.7) (5.4) (4.7) 3.8 (4.6) {63.9) $ (71.2) CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Business-type Activities Table 4 Business-type Net Position at June 30 (in Millions) Cash and Investments Other assets Ca pita I assets Total assets Deferred outflows related to pension Total Deferred outflow of resources Long-term liabilities outstanding Other liabilities Total liabilities Deferred inflows related to pension Total deferred inflow of resources Net position: Net investment in capital assets Restricted Unrestricted Total net position 2018 2017 $ 24.3 $ 21.8 0.5 0.2 124.1 124.9 148.9 146.9 4.9 3.1 4.9 3.1 29.3 34.0 31.0 22.1 60.3 56.1 0.2 0.6 0.2 0.6 90.1 86.2 3.2 7.2 $ 93.3 $ 93.4 The total net position for business-type activities decreased slightly by $0.1 million compared to the prior year. Total assets increased by $2.0 million, or 1.4 percent, reflecting the rate increase for sewer service, as manifest through the increase in cash and investments. However, total liabilities increased by $4.2 million as a result of the implementation of GASB 75, which accounted for the full OPEB liability. 13 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Table 5 Change in Business-type Net Position (In Millions) 2017-18 2016-17 Expenses Sewer Enterprise $ 24.4 $ 22.7 Parking District 1.2 0.9 Storm Water 1.0 1.3 Total expenses 26.6 24.9 Revenues Program Revenues Charges for Services 24.2 21.2 Operating grants and contributions 5.8 5.8 Total program revenues 30.0 27.0 General revenues Investment earnings 0.0 0.0 Total general revenues 0.0 0.0 Excess (deficiency) before transfers 3.4 2.1 Transfers 2.0 1.1 Change in net position 5.4 3.2 Net position -beginning (as adjusted) 87.9 90.2 Net position -ending $ 93.3 $ 93.4 Business activity expenses increased $1. 7 million compared to the prior year, particular I y in Sewer Enterprise activities, largely due to the increase in the Sewer Fund's share of the net OPEB liability. The Business-type Activities' share of the Net OPEB liability, in compliance with GASB 75, was $5.9 million. Business activity revenues increased by $3.0 million, reflecting a sanitary sewer service fee rate increase. FINANCIAL ANALYSIS OF THE CITY'S FUNDS Governmental Funds Governmental funds highlight the City's near-term inflows, outflows, and balances of spendable resources. Such information can be helpful in determining the City's financial status. Unrestricted fund balance is a major indicator of designated and uncommitted resources available for spending in future fiscal years. At June 30, 2018, the City's governmental funds reported combined fund balances of $139.9 million, an increase of $28.5 million, or 25.6 percent compared to the prior year. 14 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information The General Fund ending fund balance was $61.3 million, reflecting an increase of $5.0 million, or 8.9 percent. The change in fund balance was largely attributable to the robust development climate in South San Francisco. Total governmental fund revenues increased by $38.1 million, from $118.0 million to $156.1 million, primarily due to increases in sales tax and charges for services, which were indicative of the vitality of the local economy and development environment. Total governmental fund expenditures increased by $17.6 million, from $102.5 million to $120.1, or 17 .2 percent, largely due to the purchase of land from the Successor Agency for the site of the future community civic campus in the amount of $7.1 million. In addition, the City's personnel costs for salaries and pensions increased in accordance with negotiated increases and increases in the cost for various benefits, primarily pensions and healthcare. Comparison of Final Budgets to Original Adopted Budget The budget is initially adopted by the City Council in June, based on revenue projections that are up to date through May. Between May and the end of the fiscal year, there can be major fluctuations in revenues depending on the economy and/or actions by the State of California. There can also be significant changes to departmental expenditure budgets to the extent unforeseen expenses occur. In the Fund Financial Statements, the page titled "Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual" later in this document shows the initial adopted and final budgets for the General Fund. Significant changes between the adopted and final budgets are described below: 15 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Table 6 Comparison of Final Budgets to Original Adopted Budget (in Thousands) Original Final Pct Discussion: Revenues Budget Bu~et Cha~e Cha~e (Items of more than 5% and $100,000 variance} Property taxes $ 26,878 $ 33,761 $ 6,883 25.6% Reflects reclassification of Property Tax In Lieu of VLF from Intergovernmental category Sales taxes 25,448 25,448 Transient occupancy 14,800 14,800 taxes Account for prevalence of transportation network Other taxes 6,043 5,343 (700) -11.6% companies, such as Uber and Lyft, and their impact on the City's commercial parking tax revenues. Franchise Fee 4,000 4,000 Reflects reclassification of Property Tax In Lieu of VLF to Intergovernmental 7,025 2,021 (5,004) -71.2% Property Taxes category offset by cost reimbursement from California Office of Emergency Services (CalOES) for mutual aid provided by the Fire Department Interest and rentals 6,481 7,001 520 8.0% Amended budget to account for sale of a City-owned property. Licenses and permits 9,232 10,232 1,000 10.8% Increased permit revenue due to robust development. Charges for services 8,934 9,329 395 4.4% 16 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Table 6 ( continued) Comparison of Final Budgets to Original Adopted Budget (in Thousands) Original Final Pct Discussion: Expenditures Budget Budget Cha~e Change (Items of more than 5% and $100,000 variance! City Council $ 247 $ 247 $ City Clerk 643 667 24 3.7% City Treasurer 131 136 5 3.8% City Attorney 913 1,038 125 13.7% The robuc;t pace ofbuc;iness required the City Attorney to invest a significant m.unber ofbillable hours to meet demand. City Manager 1,961 3,167 1,206 61.5% Accounts fur carryover purchase orders fur proressional services primarily related to the Oyster Point development. Finance Accounts fur carryover purchase orders fur implementation 2,596 3,424 828 31.9% of the new Human Capital Management System (HCMS). Non-Departmental 1,081 1,108 27 2.5% Human Resources 1,625 1,699 74 4.6% Fire 28,814 29,348 534 1.9% Police 27,865 27,204 (661) -2.4% PublicWotks 4,315 5,340 1,025 23.8% Carryover purchase orders from prior year fur operation of South City Shuttle. Parks and Recreation 15,553 15,929 376 2.4% Library 5,361 5,575 214 4.0% Economic and 7,216 10,773 3,557 49.3% Accounts fur carryover purchase orders from prior year fur Commmity Development plan review and building inspection proressional services. Total $ 98,321 $105,655 $ 7,334 7.5% 17 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Analysis of Major Governmental Funds General Fund In FY 2017-18, total General Fund revenues, excluding transfers in, were $122.9 million, which was $10. 6 million, or 9 .4 percent over the final amended budget. Total General Fund expenditures, excluding transfers out, ended FY 2017-18 at $96.7 million, which was $1.8 million, or 1.7 percent under budget. Overall, including transfers, the General Fund ended FY 2017-18 with a surplus of $5.0 million, predominantly due to the items discussed below. Sales tax revenues, including Measure W, was $3.3 million over budget, which was indicative of the strong economic base in South San Francisco, where each nearly every business category increased its taxable sales on a year-over-year basis. Permit revenues were $4.4 million over budget, setting an all-time record for a fiscal year, largely attributable to non-residential development in the East of 101 area and high density residential development in the downtown area. The increase in revenue also reflected the City Council's approval of a comprehensive fee study that improved the cost recovery rate from 57 to 81 percent. Intergovernmental revenue was $590 thousand over budget largely due to the South San Francisco Fire Department's participation in mutual aid activities during a particularly active fire season. Charges for services was $1.6 million over budget, reflecting the Fire Department's efforts to refine its ambulance billing practices, which generated $3 .2 million in revenue, compared to the $2.2 million in budget. General Fund expenditures, excluding transfers out, were $1.8 million under budget, largely reflecting salary savings due to staff vacancies in the Police Department and Economic and Community Development Department. Compared to the prior year, General Fund expenditures increased from $92.4 million to $103.8 million. However, the latter figure includes the purchase of land from the Successor Agency to the Former Redevelopment Agency in the amount of $7.1 million for the future location of the City's community civic campus. Excluding the latter, General Fund expenditures increased by $4.3 million, or 4.7 percent, largely due to increases in employee salary and benefits. As of June 30, 2018, the General Fund total fund balance was $61.3 million, which included $16.7 million in committed reserves, $20.6 million in restricted reserves, and $19 .6 million in unassigned reserves. The unassigned reserves are designated by the City Council based on the City's Reserves Policy, which follows best practices from the Government Finance Officers' Association (GFOA) of between 15-20 percent of General Fund operating revenue. Within the City's unassigned reserves, the City Council designated funds for economic contingencies, potential catastrophe and budget contingencies. 18 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information City Housing Fund Up until Redevelopment Agencies were abolished in FY 2011-12 by the State of California under ABXl 26, the City set aside 20% of Redevelopment property taxes to fund the provision of new affordable housing units, as well as the operation and maintenance of housing stock that the Redevelopment Agency had already funded. That fund was formerly called the Low/Moderate Income Housing Fund. With its source of funding (20% of Redevelopment property tax dollars) abolished, the City Council voted to take on the operations of the former housing units by becoming the Successor Housing Agency, with activities funded primarily from the rental revenues received by the City for those City-owned occupied housing units. Any shortfall between the rents received and the operations and maintenance costs of those housing units are funded by either one time grants or by the General Fund. Any fund balances will be held for future housing property maintenance needs. In FY 2017-18, the City Housing Fund received for $1.2 million in revenues, which included $171 thousand in rent, $53 thousand in interest income, and $408 thousand in loan repayments. Excluding a year-end entry to account for repayment of a loan that was written off in a prior fiscal year, the fund had $90 thousand in expenses, the majority of which was for administrative staff costs to support the City's Housing Division. Capital Improvement Fund The City consolidates and reports its governmental fund-type capital project expenditures in this fund. Resources consist of transfers from the General Fund, major and non-major funds, developer impact fees, and gasoline taxes and transportation sales taxes from non-major governmental funds. Resources also come from federal, state, and local grants, contributions from other cities, utilities and private developers. Entire capital projects are appropriated in one-year, but expended over multiple years, with unspent appropriations carried forward year-to-year until completion. Developer Impact Fees In FY 2017-18, commensurate with the robust development climate in South San Francisco, and to ensure that new development pays its fair share of the impact on the City's capital and infrastructure, the City accounted for over $18 million in developer impact fees, including $2.3 million in East of 101 Sewer Impact Fees, $5.7 million in East of 101 Traffic Impact Fees, $1.3 million in Child Care Impact Fees, and $2.4 million in Oyster Point Interchange Impact Fees. 19 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Other Governmental Funds Presented as a group in the Basic Financial Statements, these funds are individually presented as Supplementary Information. Enterprise Funds Sewer Enterprise Fund The Sewer Enterprise fund reported operating income (before non-operating revenues and operating transfers) of $4. 8 million in FY 2017-18. Operating revenues increased from $25. 7 million to $28.3 million, an increase of 10.1 percent, which reflected the increase in sewer service fees needed to support significant capital improvements, including wet weather capacity and digester replacement. Operating expenses increased from $21. 5 million to $23. 5 million, primarily within personnel expenses, which increased by $1.8 million, reflecting the impact of negotiated increases in employee salaries as well as pension costs, which is primarily the byproduct of the disparity between CalPERS' discount rate and actual interest earnings. Parking District Fund In FY 2017-18, operating revenues increased from $917 thousand to $1.1 million principally due to additional revenues from parking meters, reflecting the City's investment in smart meter technology. Operating expenses increased from $937 thousand to $1 .3 million due to the purchase and implementation of smart meters. Net position decreased slightly by $115 thousand to $13.8 million. Storm Water Fund The Storm Water Fund is used to account for resources needed to fund storm drain and storm infrastructure operations, maintenance, capital replacement, and compliance with various federal and state regulations regarding storm water runoff. Revenues totaled $406 thousand, primarily from a levy on property owners. Transfers in totaled $2.0 million, which came from the Gas Tax Fund in the amount of $670 thousand, $1.2 million from the General Fund, and $161 thousand from the Solid Waste Fund. Expenses totaled $1.0 million, which was largely static compared to the prior fiscal year. Net position increased from $1.4 million to $3.0 million, an increase of $1.6 million. Service fee revenues remain static in this fund without a ballot measure to increase assessed fees. CAPITAL ASSETS GASB Statement 34 requires the City to add infrastructure to its reportable capital assets. Infrastructure includes streets, drainage systems, and traffic control and safety devices. Previously, governments excluded the value of such property from their reports of capital assets. The City has successfully reported on the depreciated value of all such assets acquired or built since 1980. 20 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information The City reports the depreciated book value of other types of capital assets such as buildings, land, equipment and furniture, on the City-wide Statement of Net Assets. Such information is summarized below and is more completely detailed in Note 3 to the Basic Financial Statements. The City depreciates all its capital assets, except land and construction in progress. At June 30, 2018, the City had $379.9 million in capital assets, net of depreciation, representing a slight decrease of $ 1. 0 million from the prior year, as the depreciation recorded in FY 2017-18 was greater than the capital additions. The City's various capital asset types used in governmental and business-type activities, are illustrated in Table 7 below: Table 7 Capital Assets (in Millions) at June 30 2018 2017 Governmental Activities: Land $ 67.2 $ 70.2 Buildings and improvements 94.9 91.5 Equipment and vehicles 21.9 21.6 Furniture and fixtures 2.6 2.6 Infrastructure -streets* 195.0 195.0 Infrastructure -traffic control devices* 10.1 9.5 Infrastructure -storm drains* 8.9 8.9 Construction in progress 18.0 10.8 Less accumulated depreciation (162.9) (154.1) Totals $ 255.7 $ 256.0 * Additions during the fiscal year only Business-type Activities Land $ 0.8 $ 1.4 Buildings and improvements 66.9 66.7 Clean water facilities and transmission line 75.5 75.5 Infrastructure -storm drains 4.8 4.8 Infrastructure -streets 7.4 7.4 Equipment and vehicles 18.5 18.5 Construction in progress 11.2 6.9 Less accumulated depreciation (61.0) (56.3) Totals $ 124.1 $ 124.9 Total City $ 379.8 $ 380.9 21 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information DEBT ADMINISTRATION Each of the City's debt issuances is discussed in detail in Note 5 to the Basic Financial Statements. A summary of the City's outstanding debt for the past two fiscal years is as follows: Governmental Activities Table 8 Outstanding Debt (In Millions) at June 30 Loan payable to Successor Agency Capital leases Total Governmental Activities Outstanding Debt Business-type Activities State Water Resources Board loans 2005 Sewer Bonds Total Business-type Activities Outstanding Debt $ $ $ $ 2018 2017 8.3 $ 10.7 1.1 1.7 9.4 $ 12.4 30.8 $ 35.1 3.2 3.6 34.0 $ 38.7 The decline in Business-type Activities outstanding debt of $4. 7 million is the result of scheduled repayments. The largest remaining debt obligations are the following: -Three loans to the City's Sewer Enterprise Fund from the State Water Resources Control Board to finance the expansion of the City's water quality control plant and pay for Wet Weather improvements which will improve environmental impacts on the Bay. Principal and interest repayments commence on the loans upon completion of the project related to each loan package. The three current loans outstanding have fixed interest of 2.6%, 2.5% and 2.4% are due in 2022, 2026 and 2028. Because of the regional benefits and equity interest in these projects, the City of San Bruno shares in the loan repayments for the first two of the three current loans. ECONOMIC OUTLOOK AND MAJOR ACCOMPLISHMENTS The economic outlook and major accomplishments of the City are discussed in the accompanying Transmittal Letter. 22 CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information CONTACTING THE CITY'S FINANCIAL MANAGEMENT This Comprehensive Annual Financial Report is intended to provide readers with a general overview of the City's finances. Questions about this report or requests for additional financial information should be directed to the City of South San Francisco Finance Department, P .O. Box 711 , South San Francisco , CA 94083 , and phone (650) 877-8512. The City's website is at www.ssf.net. 23 This Page Left Intentionally Blank This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO STATEMENT OF NET POSffiON JUNE 30, 2018 Component Unit Primary Government South San Francisco Governmental Business-Type Conference Activities Activities Total Center ASSETS Cash and investments (Note 2) $146,586,423 $24,340,291 $170,926,714 $3,844,563 Receivables: Accounts 10,131,428 402,726 10,534,154 315,398 Accrued interest 672,965 95,268 768,233 Loans 1,937,912 1,937,912 Deposit 203,510 203,510 7,397 Inventory 106 106 Other Restricted cash and investments (Note 2) 449,017 40 449,057 482,596 Internal balances (Note 4A) 17,670 (17,670) Properties held for redevelopment (Note lN) 22,482,335 22,482,335 Capital assets (Note 3): Nondepreciable 85,260,542 11,957,484 97,218,026 43,289 Depreciable, net accumulated depreciation 170,444,603 112,185,925 2822630,528 3,534,888 Total Assets 438,186,511 148,964,064 587,150,575 8,228,131 DEFERRED OUTFLOW OF RESOURCES Related to pension (Note 7) 40,301,062 4,477,896 44,778,958 Related to OPEB (Note 9) 3,714,780 412,753 4,127,533 Total Deferred Outflow of Resources 44,015,842 4,890,649 48,906,491 LIABILITIES Accounts payable 3,527,973 691,010 4,218,983 432,698 Accrued salaries and benefits 3,027,256 3,027,256 72,949 Accrued interest payable 572,643 572,643 Other payable 3,220,009 212,419 3,432,428 Deposits 1,721,453 7,500 1,728,953 422,999 Unearned revenue 855,541 855,541 Accrued insurance losses (Note 11 ): Due within one year 660,356 660,356 Due in more than one year 12,133,000 12,133,000 Compensated absences obligation (Note IL}: Due within one year 4,113,425 462,143 4,575,568 Due in more than one year 2,459,623 95,304 2,554,927 Debt and capital lease obligations (Note 5): Due within one year 381,482 4,782,037 5,163,519 460,000 Due in more than one year 9,062,771 29,263,465 38,326,236 Net OPEB Liability• due in more than one year (Note 9) 53,361,000 5,929,000 59,290,000 Net pension liability• due in more than one year (Note 7) 164,584,728 18,287,192 182,871,920 Total Liabilities 259,108,617 60,302,713 319,411,330 1,388,646 DEFERRED INFLOW OF RESOURCES Related to pension (Note 7) 1,610,985 178,998 1,789,983 Related to OPEB (Note 9) 429 300 47,700 477,000 Total Deferred Inflow of Resources 2,040,285 226,698 2,266,983 NET POSmON (Note 6) Net investment in capital assets 254,570,044 90,097,907 344,667,951 3,118,177 Restricted for: Debt service 482,596 Special revenue projects 26,536,005 26,536,005 Capital projects 49,198,648 49,198,648 Redevelopment and community development activities 20,582,335 20,582,335 Total Restricted Net Position 96,316,988 96,316,988 482,596 Unrestricted {129,833,581} 3,227,395 {126,606,186} 3,238,712 Total Net Position $221,053,451 $93,325,302 $314,378,753 $6,839,485 See accompanying notes to financial statements 27 Functions/Programs Primary Government Governmental Activities: General Government Fire Police Public Works Parks and Recreation Library CITY OF SOUTH SAN FRANCISCO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 Expenses $12,506,188 30,352,387 30,732,288 18,379,278 17,162,377 Charges for Services Program Revenues Operating Grants and Contributions $1,121,145 8,748 712,190 Economic and Community Development 5,910,406 10,094,626 $1,966,755 6,327,921 2,230,824 24,727,897 4,489,665 102,124 13,052,441 1,925,278 802,098 438,966 818,724 Total Governmental Activities Business-type Activities Sewer Parking District Storm Water Total Business-type Activities Total Primary Government Component Unit Conference Center 125,137,550 24,397,607 1,202,319 1,026,948 26,626,874 $151,764,424 $3,690,910 General revenues: Taxes: Property taxes Sales taxes 52,897,627 22,417,156 1,084,472 656,315 24,157,943 $77,055,570 $2,146,762 Transient occupancy taxes Franchise Fees Other taxes Motor vehicle in lieu, unrestricted Property taxes in lieu of vehicle license fees Investment earnings Miscellaneous Special Item: 5,827,149 5,834,455 5,834,455 $11,661,604 Remittance of land sale proceeds to taxing entities Transfers (Note 4) Total general revenues, special item and transfers Change in Net Position Net Position -Beginning, as adjusted (Note 1 S) Net Position -Ending See accompanying notes to financial statements 28 Capital Grants and Contributions $2,515,868 2,515,868 $2,515,868 Net (Expenses) Revenues and Changes in Net Position Primary Government Component Unit South San Francisco Governmental Business-Type Conference Activities Activities Total Center ($9,418,288) ($9,418,288) (24,015,718) (24,015,718) (27,789,274) (27,789,274) 10,789,765 10,789,765 (11,870,614) (11,870,614) (5,369,316) (5,369,316) 3,776,539 3,776,539 (63,896,906) (63,896,906) $3,854,004 3,854,004 (117,847) (117,847) (370,633) (370,633) 3,365,524 3,365,524 (63,896,906) 3,365,524 (60,531,382) ($1,544,148) 29,551,445 29,551,445 28,340,393 28,340,393 13,978,533 13,978,533 2,150,818 4,403,493 4,403,493 5,871,096 5,871,096 34,452 34,452 6,438,199 6,438,199 1,097,916 37,072 1,134,988 27,795 5,180,288 5,180,288 (7,154,626) (7,154,626) (1,997,377) 1,997,377 85,743,812 2,034,449 87,778,261 2,178,613 21,846,906 5,399,973 27,246,879 634,465 199,206,545 87,925,329 287,131,874 6,205,020 $221,053,451 $93,325,302 $314,378,753 $6,839,485 29 This Page Left Intentionally Blank FUND FINANCIAL STATEMENTS Major funds are defined generally as having significant activities or balances in the current year. The funds described below were determined to be Major Funds by the City in fiscal 2018. fudividual non-major funds may be found in the Supplemental section. GENERAL FUND This fund accounts for resources traditionally associated with government, such as administration, public safety, library, parks maintenance, and recreation, outside of those accounted for in other funds. LOW AND MODERATE INCOME HOUSING ASSETS SPECIAL REVENUE FUND To account for the activities related to the assets assumed by the City as Housing Successor to the housing activities of the former Redevelopment Agency of the City of South San Francisco. CAPITAL IMPROVEMENT CAPITAL PROJECTS FUND To account for expenditures associated with the acquisition, construction, or improvement of City owned facilities and infrastructure. Funding comes from the general fund, special revenue funds, grants and fees. EAST OF 101 SEWER IMP ACT FEES CAPITAL PROJECTS FUND These fees provide new development's share of new and rehabilitated sewer collection and treatment facilities to serve the East of Highway 101 area. EAST OF 101 TRAFFIC IMPACT FEES CAPITAL PROJECTS FUND These fees are to provide new development's share of new and expanded roadway and intersection improvements to serve the East of Highway 101 area. CHILD CARE IMP ACT FEES CAPITAL PROJECTS FUND These citywide fees provide new development's share of new and expanded childcare facilities to serve the childcare needs of working parents. DEVELOPER DEPOSIT FUND To account for a deposit by a large corporation for various capital projects the developer agreed to fund. CAPITAL INFRASTRUCTURE RESERVE FUND Replacement, upgrade, and maintenance of the City's infrastructure are backlogged, constituting a significant liability. Funds are set aside in this fund as part of the budget process and as part of the City's reserve policy to address the replacement and/or upgrade of the city infrastructure (such as parks, buildings, facilities, streets, sidewalks, and storm water facilities). 31 ASSETS Cash and investments (Note 2) Receivables: Accounts Accrued interest Loans Due from other funds (Note 4B) Inventory Restricted cash and investments (Note 2) Properties held for redevelopment (Note lN) Total Assets LIABILITIES Liabilities: Accounts payable Accrued salaries and benefits Other payable Deposits Unearned revenue Due to other funds (Note 4B) Total Liabilities Fund Balances (Note 6): Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances (Deficits) Total Liabilities and Fund Balances (Deficits) CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2018 Low and Moderate General Income Fund Housing Assets $37,648,050 $4,730,196 7,734,046 6,989 213,239 20,905 1,020,193 70,000 106 200,000 20,582,335 $66,447,776 $5,778,283 $1,307,966 $34 3,027,256 290,552 411,025 124,085 5,160,884 34 106 20,582,335 5,778,249 16,725,897 4,334,322 19,644,232 61,286,892 5,778,249 $66,447,776 $5,778,283 See accompanying notes to basic financial statements 32 CaJ:!ital Projects Funds East oflOl Capital Sewer Improvement Im2act Fees $1,759,943 $2,824,513 1,943,123 14,389 $3,703,066 $2,838,902 $1,649,802 1,855,848 3,505,650 $2,838,902 197,416 197,416 2,838,902 $3,703,066 $2,838,902 East of 101 Traffic Impact Fees $12,404,652 55,153 $12,459,805 $12,459,805 12,459,805 $12,459,805 Capital Projects Funds Child Care Impact Fees $4,670,804 21,607 $4,692,411 $4,692,411 4,692,411 $4,692,411 Developer Deposit $241 4,004 $4,245 $1,000 1,000 3,245 3,245 $4,245 33 Capital Infrastructure Reserve Fund $21,517,290 68,196 $21,585,486 $21,585,486 21,585,486 $21,585,486 Other Governmental Funds $30,837,598 447,270 140,149 917,719 249,017 1,900,000 $34,491,753 $345,271 998,819 1,310,428 731,456 69,000 3,454,974 31,245,268 (208,489} 31,036,779 $34,491,753 Total Governmental Funds $116,393,287 10,131,428 537,642 1,937,912 70,000 106 449,017 22,482,335 $152,001,727 $3,303,073 3,027,256 3,145,219 1,721,453 855,541 70,000 12,122,542 106 99,185,701 16,725,897 4,334,322 19,633,159 139,879,185 $152,001,727 CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS BALANCE SHEET -RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTMTIES JUNE 30, 2018 Total fund balances reported on the governmental funds balance sheet Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds because of the following: Capital assets used in Governmental Activities are not financial resources and, therefore, are not reported in the Governmental Funds. Internal service funds are used by management to charge the cost of management of communication, telephone, building, fleet maintenance, equipment replacement, workers' compensation, employee benefits, insurance, and post-retirement healthcare benefits to individual funds. The assets and liabilities are included in Governmental Activities in the Statement of Net Position. The assets and liabilities below are not due and payable in the current period and therefore are not reported in the funds: Long-term debt Deferred outflows related pension Deferred outflows related to OPEB Net OPEB liability Net pension liability Deferred inflows related to OPEB Deferred inflows related to pension Non-current portion of compensated absences Net position of governmental activities See accompanying notes to financial statements 34 $139,879,185 250,261,241 20,230,623 (8,309,152) 40,301,062 3,714,780 (53,361,000) (164,584,728) (429,300) (1,610,985) (5,038,275) $221,053,451 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2018 CaJ!ital Projects Funds Low and Moderate East ofl0l General Income Capital Sewer Fund Housing Assets Iml!rovement Iml!act Fees REVENUES Property taxes $34,143,627 Sales taxes 28,728,427 Transient occupancy taxes 13,978,533 Franchise Fees 4,403,493 Other taxes 5,871,096 Intergovernmental 2,610,233 $3,079,247 Interest and rentals 2,846,967 $585,166 $2,654 Licenses and permits 14,674,809 Charges for services 10,924,668 2,262,536 Fines and forfeitures 423,604 Other 266,872 625,000 Total Revenues 118,872,329 1,210,166 3,079,247 2,265,190 EXPENDITURES Current: City Council 239,264 City Clerk 660,306 City Treasurer 135,218 City Attorney 996,380 City Manager 2,691,066 Finance 3,080,769 Non-departmental 1,049,187 2,575 Human Resources 1,541,524 Fire 26,059,072 Police 26,639,009 Public Works 5,014,343 13,010,889 Parks and Recreation 15,468,370 Library 5,379,836 Economic and Community Development 7,722,689 90,095 Other Debt service: Principal repayments Total Expenditures 96,677,033 90,095 13,010,889 2,575 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 22,195,296 1,120,071 {9,931,642} 2,262,615 OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets 3,990,605 Transfers in (Note 4C) 6,269,262 10,217,389 Transfers out (Note 4C) {20,317,868) {111,936) Total Other Financing Sources (Uses) {10,058,001) 10,217,389 {111,936} Net Change in Fund Balances before special items 12,137,295 1,120,071 285,747 2,150,679 SPECIAL ITEMS Remittance ofland sale proceeds {7,154,626} Net Change in Fund Balances 4,982,669 1,120,071 285,747 2,150,679 Fund balances (deficits) -July 1 56,304,223 4,658,178 (88,331) 688,223 Fund balances (deficits) -June 30 $61,286,892 $5,778,249 $197,416 $2,838,902 See accompanying notes to financial statements 36 Capital Projects Funds East oflOl Capital Other Total Traffic Child Care Developer Infrastructure Governmental Governmental Impact Fees Impact Fees Deposit Reserve Fund Funds Funds $1,846,017 $35,989,644 28,728,427 13,978,533 4,403,493 1,615,723 7,486,819 2,743,760 8,433,240 $17,423 $5,928 $14,864 51,725 3,524,727 14,674,809 5,698,649 1,289,382 11,786,184 31,961,419 423,604 5,562,588 6,454,460 5,716,072 1,295,310 14,864 23,605,997 156,059,175 239,264 660,306 135,218 996,380 2,691,066 3,080,769 2,575 4,585 1,058,922 1,541,524 26,059,072 331,845 26,970,854 2,575 12 $69,639 5,761,941 23,859,399 15,468,370 5,379,836 1,526,009 9,338,793 256,298 256,298 2,382,000 2,382,000 2,575 2,587 69,639 10,262,678 120,118,071 5,713,497 1,292,723 (69,639) 14,864 13,343,319 35,941,104 3,990,605 10,000,000 26,486,651 (299,685) (2,954,823) (7,111,629) {30,795,941) (299,685) 7,045,177 F,111,629) (318,685) 5,413,812 1,292,723 (69,639) 7,060,041 6,231,690 35,622,419 (7,154,626) 5,413,812 1,292,723 (69,639) 7,060,041 6,231,690 28,467,793 7,045,993 3,399,688 72,884 14,525,445 24,805,089 111,411,392 $12,459,805 $4,692,411 $3,245 $21,585,486 $31,036,779 $139,879,185 37 CITY OF SOUTH SAN FRANCISCO Reconciliation of the NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS with the STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for Governmental Activities in the Statement of Activities are different because of the following: Capital Assets Transactions Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Capital assets additions Retirement and adjustment of capital assets Current year depreciation Long-Term Debt Payments Repayment of principal is an expenditure in the governmental funds, but in the Statement of Net Position the repayment reduces long-term liabilities. Repayment of principal is added back to fund balance Accrual of Non-Current Items The amount below included in the Statement of Activities does not require the use of current financial resources and therefore is not reported as revenue or expenditures in governmental funds (net change): Compensated absences Net pension liability, deferred outflows and inflows ofresources Net OPEB liability, deferred outflows and inflows ofresources Allocation of Internal Service Fund Activity Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service fund is reported with governmental activities. CHANGE IN NET POSITION OF GOVERNMENTAL ACTMTIES See accompanying notes to financial statements 38 $28,467,793 12,294,753 (3,623,353) (8,636,132) 2,382,000 (26,863) (11,500,500) (1,094,820) 3,584,028 $21,846,906 CITY OF SOUTH SAN FRANCISCO GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) Resources (inflows): Property taxes Sales taxes Transient occupancy taxes Franchise fees Other taxes Intergovernmental Interest and rentals Licenses and permits Charges for services Fines and forfeitures Other Amounts available for appropriation Charges to appropriations (outflows) City Council City Clerk City Treasurer City Attorney City Manager Finance Non-departmental Human Resources Fire Police Public Works Parks and Recreation Library Economic and Community Development Total charges to appropriations OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers in (Note 4C) Transfers out (Note 4C) Total Other Financing Sources (Uses) FOR THE YEAR ENDED JUNE 30, 2018 Budgeted Amounts Original $26,877,714 25,448,309 14,800,000 4,000,000 6,043,065 7,024,542 3,010,263 9,232,477 8,934,001 818,500 174,991 106,363,862 246,918 642,681 130,861 913,092 1,960,599 2,595,665 1,080,967 1,625,221 28,814,471 27,864,737 4,315,409 15,553,369 5,361,133 7,216,002 98,321,125 3,470,600 1,772,505 (12,089,033) (6,845,928) Final $33,760,827 25,448,309 14,800,000 4,000,000 5,343,065 2,020,600 3,010,263 10,232,477 9,329,002 163,500 174,991 108,283,034 246,917 666,810 135,861 1,038,092 3,167,257 3,423,768 1,108,503 1,699,257 29,347,734 27,204,237 5,339,637 15,929,220 5,575,195 10,772,828 105,655,316 3,990,600 1,800,705 (20,493,106) (14,701,801) NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS 1,196,809 (12,074,083) Special Item (Note 13G) NET CHANGE IN FUND BALANCE Fund Balance -July 1 Adjustment to budgetary basis: Encumbrance adjustments Fund Balance -June 30 (7,154,626) $1,196,809 ($19,228,709) See accompanying notes to financial statements 39 Actual Amount $34,143,627 28,728,427 13,978,533 4,403,493 5,871,096 2,610,233 2,846,967 14,674,809 10,924,668 423,604 266,872 118,872,329 239,264 660,306 135,218 996,380 2,937,733 3,423,017 1,107,187 1,698,958 26,763,505 26,639,009 5,339,181 15,649,568 5,394,725 10,027,304 101,011,355 3,990,605 6,269,262 (20,317,868) (10,058,001) 7,802,973 (7,154,626) 648,347 56,304,223 4,334,322 $61,286,892 Variance with Final Budget Positive (Negative) $382,800 3,280,118 (821,467) 403,493 528,031 589,633 (163,296) 4,442,332 1,595,666 260,104 91,881 10,589,295 7,653 6,504 643 41,712 229,524 751 1,316 299 2,584,229 565,228 456 279,652 180,470 745,524 4,643,961 5 4,468,557 175,238 4,643,800 19,877,056 $19,877,056 CITY OF SOUTH SAN FRANCISCO LOW AND MODERATE INCOME HOUSING ASSETS SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 REVENUES: Interest and rental Other Total Revenues EXPENDITURES: Current: Economic and Community Development Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES NET CHANGE IN FUND BALANCE Fund balance -July 1 Fund balance -June 30 Budget $167,000 140,000 307,000 543,597 543,597 (236,597) ($236,597) See accompanying notes to financial statements 40 Actual Amounts $585,166 625,000 1,210,166 90,095 90,095 1,120,071 1,120,071 4,658,178 $5,778,249 Variance with Final Budget Positive (Negative) $418,166 485,000 903,166 453,502 453,502 1,356,668 $1,356,668 MAJOR PROPRIETARY FUNDS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges. SEWER ENTERPRISE FUND This fund accounts for user charges and debt proceeds supporting the operation, maintenance, and capital expansion of the wastewater collection and treatment system. PARKING DISTRICT FUND This fund accounts for meter and parking permit fees used to acquire and maintain parking facilities. STORM WATER FUND This fund accounts for user charges sustaining the Storm Water Management Program mandated by state and federal authorities. 41 CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2018 Governmental Business•!l'.l!e Activities -Ente!}!rise Funds Activities Sewer Parking Storm Internal Ente!}!rise District Water Total Service Funds ASSETS Current assets: Cash and investments (Note 2) $20,364,113 $2,906,567 $1,069,611 $24,340,291 $30,193,136 Receivables: Accounts 180,476 222,250 402,726 Accrued interest 77,379 12,295 5,594 95,268 135,323 Deposit 203,510 Restricted cash and investments (Note 2) 40 40 Total current assets 20,622,008 2,918,862 1,297,455 24,838,325 30,531,969 Noncurrent assets: Capital assets (Note 3): Nondepreciable 9,950,018 421,149 1,586,317 11,957,484 Depreciable, net accumulated depreciation 101,379,368 10,525,499 281,058 112,185,925 5,443,904 Total non-current assets 111,329,386 10,946,648 1,867,375 124,143,409 5,443,904 Total Assets 131,951,394 13,865,510 3,164,830 148,981,734 35,975,873 DEFERRED OUTFLOWS OF RESOURCES Related to pension (Note 7) 4,477,896 4,477,896 Related to OPEB (Note 9) 412,753 412,753 Total Deferred Outflows of Resources 4,890,649 4,890,649 LIABILITIES Current liabilities: Accounts payable 548,848 40,799 101,363 691,010 224,900 Other payable 139,325 12,595 60,499 212,419 74,790 Accrued interest payable 572,643 572,643 Deposits payable 7,500 7,500 Accrued insurance loss (Note 11) 660,356 Compensated absences obligation (Note IL) 442,017 3,852 16,274 462,143 782,399 Current portion oflong-term debt (Note 5) 4,782,037 4,782,037 381,482 Total current liabilities 6,492,370 57,246 178,136 6,727,752 2,123,927 Noncurrent liabilities: Accrued insurance losses (Note 11) 12,133,000 Compensated absences obligation (Note IL) 76,860 14,252 4,192 95,304 752,374 Noncurrent portion oflong-term debt (Note 5) 29,263,465 29,263,465 753,619 Net OPEB liability (Note 9) 5,929,000 5,929,000 Net pension liability (Note 7) 18,287,192 18,287,192 Total noncurrent liabilities 53,556,517 14,252 4,192 53,574,961 13,638,993 Total Liabilities 60,048,887 71,498 182,328 60,302,713 15,762,920 DEFERRED INFLOWS OF RESOURCES Related to pension (Note 7) 178,998 178,998 Related to OPEB (Note 9) 47,700 47,700 Total Deferred Inflows ofresources 226,698 226,698 NET POSITION: Net investment in capital assets 77,283,884 10,946,648 1,867,375 90,097,907 4,308,803 Unrestricted (deficit) (717,4262 2,847,364 1,115,127 3,245,065 15,904,150 Total Net Position $76,566,458 $13,794,012 $2,982,502 93,342,972 $20,212,953 Some amounts reported for business-type activities in the statement of net position are different because certain internal service fund assets and liabilities are included in business-type activities (17,6702 $93,325,302 See accompanying notes to financial statements 42 CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2018 OPERATING REVENUES Charges for services Other cities' participation Permit fees Parking fees Total Operating Revenues OPERATING EXPENSES Personnel expenses Professional services OPEB Expenses Program supplies Insurance Self-insurance and claims Repair and maintenance Rents and leases Utilities Administration Depreciation Other Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest income Gain on dispositions of capital assets Interest expense Other Total Nonoperating Revenues (Expenses) Income Ooss) before transfers TRANSFERS Transfers in (Note 4C) Transfers out (Note 4C) Change in Net Position Net Position (Deficits) -July 1, as adjusted (Note lS) Net Position (Deficits) -June 30 Business-type Activities -Enterprise Funds Sewer Parking Storm Enterprise District Water $22,188,154 $406,064 5,834,455 229,002 $1,084,472 28,251,611 1,084,472 406,064 9,994,530 312,306 738,170 1,402,393 545,367 104,526 535,039 1,279,487 34,038 97,758 187,983 3,297 1,266,432 1,639,863 1,369,865 52,317 11,025 1,344,292 103,927 65,422 4,414,042 253,826 14,779 54,056 175 23,487,982 1,301,781 1,035,152 4,763,629 (217,309) (629,088) 31,058 4,071 1,943 4,816 97,829 (964,352) 250,251 ~928,478) 101,900 252,194 3,835,151 (115,409) (376,894) 111,936 2,023,518 (54,549) (83,528) 3,892,538 (115,409) 1,563,096 72,673,920 13,909,421 1,419,406 $76,566,458 $13,794,012 $2,982,502 Change in Net Position Some amounts reported for business-type activities in the statement of activities are different because the net revenue (expense) of certain internal service funds is reported with business-type activities Change in Net Position of Business-Type Activities See accompanying notes to financial statements 43 Total $22,594,218 5,834,455 229,002 1,084,472 29,742,147 11,045,006 2,052,286 535,039 1,411,283 191,280 1,266,432 1,639,863 1,433,207 1,513,641 4,682,647 54,231 25,824,915 3,917,232 37,072 102,645 (964,352) 250,251 (574,384) 3,342,848 2,135,454 (138,077) 5,340,225 88,002,747 $93,342,972 $5,340,225 59,748 $5,399,973 Governmental Activities Internal Service Funds $24,202,306 24,202,306 16,276,600 834,441 1,122,727 1,594,759 1,486,551 424,366 29,271 838,208 351,645 22,958,568 1,243,738 34,256 43,028 (47,430) 58,271 88,125 1,331,863 2,496,000 (184,087) 3,643,776 16,569,177 $20,212,953 CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2018 Governmental Business-type Activities -Enterprise Funds Activities Sewer Parking Storm Internal Enterprise District Water Total Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $28,330,736 $1,084,472 $434,065 $29,849,273 Cash payment to suppliers for goods and services (9,281,263) (101,100) (160,632) (9,542,995) ($4,738,364) Cash payment to employees for services (8,531,421) (313,852) (731,323) (9,576,596) (16,130,836) Cash received from interfund service provided 24,270,705 Cash payment for judgments and claims (1,666,137) Net Cash Provided by (Used in) Operating Activities 10,518,052 669,520 (457,890) 10,729,682 1,735,368 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 111,936 2,023,518 2,135,454 2,496,000 Transfers out (54,549) (83,528) (138,077) (184,087) Net Cash Provided by Noncapital Financing Activities 57,387 1,939,990 1,997,377 2,311,913 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on Jong-term debt (4,660,530) (4,660,530) (538,422) Interest paid on Jong-term debt (1,048,997) (1,048,997) (47,430) Acquisition of capital assets, net (3,162,193) (1,392,298) (4,554,491) (493,263) Proceeds from the sale of capital assets 4,816 97,829 102,645 46,283 Net Cash Used in Capital and Related Financing Activities (8,866,904) 97,829 (1,392,298) (10,161,373) (1,032,832) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 180,692 26,873 12,720 220,285 292,956 Changes in market value of investments (174,303) (27,695) (12,600) (214,598) (304,825) Net Cash Provided by Investing Activities 6,389 (822) 120 5,687 (11,869) Net Increase (Decrease) in cash and cash equivalents 1,714,924 766,527 89,922 2,571,373 3,002,580 Cash and cash equivalents, beginning 18,649,229 2,140,040 979,689 21,768,958 27,190,556 Cash and cash equivalents, ending $20,364,153 $2,906,567 $1,069,611 $24,340,331 $30,193,136 Reconciliation ofoperating income (loss) to net cash provided by operating activities: Operating income (loss) $4,763,629 ($217,309) ($629,088) $3,917,232 $1,243,738 Adjustments to reconcile operating income (loss) to cash flows from operating activities: Depreciation 4,414,042 253,826 14,779 4,682,647 838,208 Other non-operating revenue (expenses) 250,251 250,251 58,271 Net change in assets and liabilities: Accounts and lease receivables 79,125 (222,250) (143,125) 10,128 Accounts payable (160,757) 627,428 61,072 527,743 35,417 Other payable (41,096) 7,121 60,499 26,524 (302,688) Accrued insurance losses (179,586) (Decrease) increase due to OPEB 121,647 121,647 Compensated absence obligations 63,629 (1,546) 6,847 68,930 31,880 (Decrease) increase due to retirement system 1,277,833 1,277,833 Net Cash Provided by (Used in) Operating Activities $10,518,052 $669,520 ($457,890) $10,729,682 $1,735,368 See accompanying notes to basic financial statements 44 FIDUCIARY FUND An agency fund is used to account for assets held by the City acting as an agent for another government entity. The financial activity of this fund, excluded from the Entity-wide financial statements, is presented in a separate Fiduciary Fund financial statement. SUCCESSOR AGENCY PRIVATE PURPOSE TRUST FUND The Fund is used to account for the activities of the Successor Agency to the former Redevelopment Agency of the City of South San Francisco. SSF EMPLOYEE DEFERRED COMP TRUST OVERSIGHT FUND This fund is used to pay for the administrative costs of monitoring the Deferred Compensation Funds on behalf of City employees. 45 CITY OF SOUTH SAN FRANCISCO FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2018 ASSETS Cash and investments (Note 2) Accounts receivable Interest receivable Advances to the City (Note 5) Loans receivable (Note 13B) Restricted cash and investments (Note 2) Capital assets (Note 13C): Nondepreciable Depreciable, net accumulated depreciation Total Assets LIABILITIES Accounts payable Accrued interest payable Deposits Other accrued liabilities Noncurrent portion of pollution remediation (Note 13E) Long-term debt (Note 13D): Due within one year Total Liabilities NET POSITION Held in trust for other purposes Successor Agency Private Purpose Trust Fund $4,334,021 2,943 24,201 8,309,152 189,167 37,087,907 940,534 264,723 $51,152,648 $8,990 4,750 37,519 537,000 285,000 873,259 $50,279,389 See accompanying notes to financial statements 46 Agency Fund SSF Employee Def Comp Trust Oversight $82,265 400 $82,665 $2,602 80,063 $82,665 CITY OF SOUTH SAN FRANCISCO FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2018 ADDITIONS Intergovernmental Interest and rentals Total Additions DEDUCTIONS Economic and Community Development Interest expense Depreciation Total Deductions SPECIAL ITEMS Loss from conveyance of property to County (Note 13C) Total Special Items Change in net position NET POSITION HELD IN TRUST FOR OTHER PURPOSES Beginning of the year End of the year See accompanying notes to financial statements 47 Successor Agency Private Purpose Trust Fund $9,966,945 660,489 10,627,434 3,868,549 18,412 27,408 3,914,369 1,809,008 1,809,008 4,904,057 45,375,332 $50,279,389 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of the Financial Reporting Entity As required by generally accepted accounting principles, the financial statements present the City of South San Francisco (the City) as the Primary Government, with its component units for which the City is considered financially accountable. The component units discussed below are included in the City's reporting entity because of the significance of their operational and financial relationships with the City. B. Description of Blended Component Units The accompanying basic financial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City's blended component units, entities for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is in substance, part of the City's operations and so data from this unit is combined with the City. The City's following blended component units are described below. The City of South San Francisco Capital Improvements Financing Authority is a joint exercise of powers authority created in 1991 between the City and the City of South San Francisco former Redevelopment Agency. The Financing Authority is authorized to borrow money through the purchase or issuance of bonds, notes, or other obligations for the purpose of making loans to the City and other public entities to finance capital improvements. The City Council members serve as the Board of Directors. C. Description of Discrete Component Unit The City of South San Francisco Conference Center Authority was established in 1992 to manage and operate the South San Francisco Conference Center. The Authority is governed by a Board of nine commissioners consisting of two Council members and seven representatives from various businesses appointed by City Council. The Authority does not meet the criteria of a blended component unit, since the City Council is not the component unit's governing body and the Authority does not provide services entirely to the City. However the City is financially accountable and is able to impose its will on the Authority. The Authority is therefore considered a discrete component unit with its financial data reported separately from the financial data of the City. The City of South San Francisco Conference Center Authority financial statements may be obtained from the Authority at 255 South Airport Boulevard, South San Francisco, CA 94080. 49 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Basis of Presentation Government-wide Statements -The Statement of Net Position and the Statement of Activities display information about the primary government (the City) and its component units. These statements include the fmancial activities of the overall City government, except for fiduciary activities. Interfund transfers and amounts owed between funds within the primary government have been eliminated from the statements. Amounts representing interfund services and uses remain in the statements. These statements distinguish between the governmental and business- type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are fmanced in whole or in part by fees charged to external parties. The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and ( c) fees, grants and contributions that are restricted to fmancing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund fmancial statements provide information about the City's funds, including fiduciary funds and blended component units. Separate statements for each fund category -governmental, proprietary, and fiduciary -are presented. The emphasis of fund fmancial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. E. Major Funds Maj or funds are defmed as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds. The City reported the following major governmental funds in the accompanying fmancial statements: General Fund -Accounts for resources traditionally associated with government, such as administration, public safety, library, parks, maintenance, and recreation, outside of those accounted for in other funds. 50 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Low and Moderate Income Housing Asset Special Revenue Fund -This fund was established to account for the activities related to the assets assumed by the City as Housing Successor to the housing activities of the former Redevelopment Agency of the City. Capital Improvement Capital Projects Fund -Accounts for expenditures associated with the acquisition, construction, or improvement of City-owned facilities and infrastructure. Funding comes from the General Fund, Special Revenue funds, grants and fees. East of 101 Sewer Impact Fees Capital Projects Fund -These fees provide new development's share of new and rehabilitated sewer collection and treatment facilities to serve the East of Highway 101 area. East of 101 Traffic Impact Fees Capital Projects Fund -These fees are to provide new developments share of new and expanded roadway and intersection improvements to serve the East of Highway 101 area. Child Care Impact Fees Capital Projects Fund -These citywide fees provide new development's share of new and expanded childcare facilities to serve the City. Developer Deposits Capital Projects Fund -Accounts for a deposit by a large corporation for various capital projects the developer agreed to fund. Capital Infrastructure Reserve Fund -Replacement, upgrade, and maintenance of the City's infrastructure are backlogged, constituting a significant liability. Funds are set aside in this fund as part of the budget process and as part of the City's reserve policy to address the replacement and/or upgrade of the city infrastructure (such as parks, buildings, facilities, streets, sidewalks, and storm water facilities). The City reported all enterprise funds as major funds in the accompanying financial statements. The enterprise funds are: Sewer Enterprise Fund -Accounts for user charges and debt proceeds supporting the operation, maintenance, and capital expansion of the wastewater collection and treatment system. Parking District Fund -Accounts for meter and parking permit fees used to acquire and maintain parking facilities. Storm Water Fund -Accounts for user charges sustaining the Storm Water Management Program mandated by state and federal authorities. The City also reports the following fund types: Internal Service Funds -These funds account for City services, self insurance, health and retirement benefits, and equipment replacement; all of which are provided to other departments on a cost-reimbursement basis. 51 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 J NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fiduciary Funds -An agency fund is used to account for assets held by the City as an agent for SSF Employee Deferred Comp Trust Oversight Fund. The Successor Agency Private-Purpose Trust Fund accounts for the accumulation of resources to be used for payments at appropriate amounts and times in the future. The financial activities of the funds are excluded from the Government-wide financial statements, but are presented in the separate Fiduciary Fund fmancial statements. F. Basis of Accounting The government-wide, proprietary, private-purpose trust fund, and discretely presented component unit fmancial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. The agency funds which only report assets and liabilities and do not have a measurement focus. Governmental funds are reported using the current .financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital leases are reported as other .financing sources. Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues, interest revenue, licenses and permits, charges for services, fmes and forfeitures. Sales taxes collected and held by the state at year end on behalf of the City are also recognized as revenue. Other receipts and taxes are recognized as revenue when the cash is received. Non-exchange transactions, in which the City gives or receives value without directly, receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenue. Thus, both restricted and unrestricted net position may be made available to fmance program expenditures. The City's policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. The City considers restricted shared state revenues such as gasoline taxes and public safety sales taxes, restricted locally imposed transportation sales taxes, fmes, forfeitures, licenses, permits, charges for services, and program grants as program revenues. 52 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 !NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Budgets, Budgetary Accounting, and Encumbrances The City is not legally required to budget any of its funds, but does so to enhance City management's effectiveness in their financial planning efforts and to enhance control over the City's operations. Budgets are adopted on a modified accrual basis, except for encumbrances and for the Capital Improvement Fund. Encumbrances are considered expenditures in the year of the purchase order issuance. The Capital Improvement Fund is adopted on a multi-year project basis with unexpended and unencumbered budgets reappropriated in the following year. The City operates under the general laws of the State of California (the State) and annually adopts a budget effective July 1 for the ensuing fiscal year for the General fund; Special Revenue funds; Capital Projects funds except for the Developer Deposits Capital Projects Fund; and Enterprise funds. The budget is adopted by the City Council and controlled at the department level for the General fund and at the fund level or lower for all other funds with adopted budgets. From the effective date of the budget, the amounts stated therein as proposed expenditures become appropriations to the various City departments. The City Council may amend the budget by resolution during the fiscal year. The department heads may authorize transfers within one object category within the same department within a fund. The City Manager may authorize transfers between object categories and departments within a fund. All appropriations lapse at year-end, except for capital projects and encumbrances. Original adopted budgets and final amended budgets are presented in the basic financial statements. Supplementary budget appropriations were necessary during the year ended June 30, 2018. Encumbrance accounting, under which, purchase orders, contracts and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the budgetary process. Encumbrances outstanding at year-end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Encumbrances are reappropriated in the following year. The budgetary comparison statements present comparisons of the legally adopted budget with actual charges to appropriations on a budgetary basis. In order to provide a meaningful comparison, the actual charges on a budgetary basis include encumbrances, which is a basis that differs significantly from those used to present financial statements in conformity with generally accepted accounting principles. Certain indirect costs are included in program expenses reported for individual functions and activities. H. Cash Equivalents -For purposes of the statement of cash flows, the City considers all highly liquid investments (including all restricted assets) with maturity of three months or less when purchased to be cash equivalents. The City maintains a cash and investment pool that is available for use by all funds. As the proprietary funds' share of this pool is readily available when needed, such share is also considered to be cash equivalent. Deposit assets in the proprietary funds are related to insurance and benefits and are not considered cash equivalents for purposes of the statement of cash flows. 53 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 !NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L Inventory and Prepaid Items -consist of consumable supplies. Inventory is stated at cost (first- in, first-out method). The costs are recorded as expenditures at the time the individual inventory or prepaid item is consumed. Reported inventory and prepaid items are equally offset by a fund balance reservation, which indicates that they do not constitute "available spendable resources" even though they are a component of net current assets. J. Capital Assets -Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are valued at acquisition value. All other capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year's pro rata share of the cost of capital assets. Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The City has assigned the useful lives listed below to capital assets: Buildings Clean water facilities and transmission lines Improvements Machinery and equipment Furniture and fixtures Infrastructure 50 years 40 years 30 years 5-20 years 12 years 20-40 years Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. The capitalization level is $20,000 for vehicles, and $100,000 for all else, including all other equipment that is not a vehicle. K. Vacation and Sick Pay -are accrued as earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. After five to twenty years of employment, one half of accumulated sick leave becomes vested, up to a maximum amount as specified under labor contract provisions. The vested portion is available for current use or, if unused, is payable at termination or retirement. The long-term portion of the liability for compensated absences for governmental fund type operations is recorded as compensated absences in the government-wide financial statements. The portion expected to be permanently liquidated is recorded in the Health and Retirement Benefits Internal Service Fund. Proprietary fund liabilities are recorded within their respective funds. 54 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I The changes of the compensated absences were as follows: Governmental Business-Type Activities Activities Total Beginning Balance $6,514,305 $488,517 $7,002,822 Additions 4,721,179 554,826 5,276,005 Payments (4,662,436) (485,896) (5,148,332) Ending Balance $6,573,048 $557,447 $7,130,495 Current Portion $4,113,425 $462,143 $4,575,568 Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated primarily by the Health and Retirement Benefits Internal Service Fund. L. Property Tax Levy, Collection and Maximum Rates -State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1 % of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1 % tax levy among the counties, cities, school districts and other districts. The County of San Mateo assesses properties, bills for and collects property taxes on the schedule that follows: Valuation/lien dates Levy dates Due dates ( delinquent as of) Secured January 1 July 1 50% on November 1 (December 10) 50% on February 1 (April 10) Unsecured January 1 July 1 July 1 (August 31) The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables when they are collected during the fiscal year of levy or within 60 days of year-end. M. Properties held for redevelopment -is stated at the lower of historical cost or net realizable value ( equal to agreed upon sales price if a disposition and development agreement has been reached with a developer). N. Unbilled Services -for the Sewer Rental Enterprise Fund are accrued at year-end. 55 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I 0. Use of Estimates -The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ •from those estimates. P. Deferred Outflows/Inflows of Resources -In addition to assets, the statement of financial position or balance sheet reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Q. New Accounting Pronouncements Governmental Accounting Standards Board (GASB) Statement No. 75 -Accounting and Financial Reporting for Post-employment Benefits Other than Pensions. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for post-employment benefits other than pensions ( other post-employment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. This statement is effective for the 2017-2018 fiscal year. The City has implemented this statement. See Notes 1 S and 9 for additional information. Governmental Accounting Standards Board (GASB) Statement No. 81 -Irrevocable Split- Interest Agreements. This statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities and deferred inflows of resources at the inception of the agreement. Furthermore, this statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This statement requires that a government recognize revenue when the resources become applicable to the reporting period. This statement is effective for the 2017-2018 fiscal year and had no effect on the City's financial statements. Governmental Accounting Standards Board (GASB) Statement No. 85 -Omnibus 2017. The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). This statement is effective for the 2017-2018 fiscal year. The City has implemented this statement. See Notes 7 and 9 for additional information. 56 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I Governmental Accounting Standards Board (GASB) Statement No. 86 -Certain Debt Extinguishment Issues. The primary objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources- resources other than the proceeds of refunding debt-are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. This statement is effective for the 2017-2018 fiscal year and had no effect on the City's financial statements. R. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs -other than quoted prices included within level I -that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. S. Prior Period Adjustment The implementation of GASB Statement No. 75 required the City to make prior period adjustments. In addition, the City also determined that as of July 1, 2017, OPEB liability will no longer be reported in the Health and Retirement Benefits Internal Service Fund. As a result, as of July 1, 2017, the beginning net position of the Health and Retirement Benefits Internal Service Fund was increased by $26,173,032, the beginning net position of the Governmental Activities was reduced by $22,807,668, the beginning net positions of the Business-type Activities and Sewer Enterprise Fund were both reduced by $5,442,300. See additional information in Note 9. T. OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB For purposes of measure the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City's OPEB Plan and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis as they are reported by the California Employers' Retiree Benefit Trust (CERBT). For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. 57 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 2 -CASH AND INVESTMENTS I The City's goal is to invest at the maximum yield, consistent with safety and liquidity, while individual funds can process payments for expenditures at any time. A. Policies The City invests in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to increase security, the City employs the Trust Department of a bank as the custodian of certain City managed investments, regardless of their form. California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the City's cash on deposit, or first trust deed mortgage notes with a market value of 150% of the deposit, as collateral for these deposits. Under California Law this collateral is held in a separate investment pool by another institution in the City's name and places the City ahead of general creditors of the institution. The City's investments are carried at fair value, as required by generally accepted accounting principles. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. B. Classification Cash and investments as of June 30, 2018 are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of City debt instruments or agency agreements. Financial Statement Presentation: Statement of Net Position: City of South San Francisco: Cash and investments available for operations Restricted cash and investments Total Primary Government cash and investments Statement of Fiduciary Assets: Cash and investments available for operations Restricted cash and investments Total Fiduciary cash and investments Conference Center: Cash and investments available for operations Restricted cash and investments Total South San Francisco Conference Center cash and investments Total cash and investments 58 $170,926,714 449,057 171,375,771 4,416,286 37,087,907 41,504,193 3,844,563 482 596 4,327,159 $217,207,123 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 J NOTE 2 -CASH AND INVESTMENTS (Continued) I The City does not allocate investments by fund. Each proprietary fund's portion of Cash and Investments Available for Operations is in substance a demand deposit available to finance operations, and is considered a cash equivalent in preparing the statement of cash flows. C Investments Authorized by the California Government Code and the City's Investment Policy The City's investment policy and the California Government Code allow the City to invest in the following provided the credit ratings of the issuers are acceptable to the City and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code, or the City's Investment Policy where it is more restrictive: Minimum Maximum Maximum Maximum Credit Percentage Investment Authorized Investment TyPe Maturity Quality (A) of Portfolio in One Issuer U.S. Treasury Obligations 5 years NIA No Limit No Limit U.S. Agency Securities 5 years NIA No Limit 25% Asset-Backed Securities 5 years AA 20% 5% Commercial Paper 270 days Al,Pl 25% 5% Negotiable Certificates of Deposit 5 years A-1 or A 30% 5% Repurchase Agreements NIA AA No Limit No Limit Local Agency Investment Fund (LAIF) Upon Demand NIA $65 million No Limit Money Market Mutual Funds NIA Aaa 20% 10% Corporate Medium-Term Notes 5 years A 30% 5% Supranational Obligations 5 years AA 30% 10% (A) The City's Investment Policy includes credit ratings provided by Standard and Poor's Investment Rating System, or its equivalent. The City of South San Francisco Conference Center Authority (Authority) maintains its cash and investments separately from the City. The investment policy of the Authority contains no limitations on the amount that can be invested in any one issue beyond that stipulated by the California Government Code. 59 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 2 -CASH AND INVESTMENTS (Continued) D. Investments Authorized by Debt Agreements The Successor Agency to the former Redevelopment Agency must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City ordinance bond indentures or State statute. The table below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements: Authorized Investment Type U.S. Treasury Obligations U.S. Agency Securities Connnercial Paper State and Local Investment Pool Guaranteed Investment Contracts (fully collateraliz.ed) (A) Municipal Obligations State Obligations Maximum Maturity NIA NIA 270days NIA NIA NIA NIA Minimum Credit Quality NIA NIA Highest Rating Category Highest Rating Category AAA Highest Rating Category Two Highest Rating Categories Maximum Percentage of Portfolio No Limit No Limit No Limit No Limit No Limit No Limit No Limit (A) Guaranteed Investment Contracts must be fully collateralized with U.S. Treasury Obligations or U.S. Agency Obligations. 60 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 2 -CASH AND INVESTMENTS (Continued) E. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City also manages its interest rate risk is by holding most investments to maturity, thus reversing unrealized market gains and losses. Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity or earliest call date: Remaining maturity Less than One to Five 1 :rear Years City and Fiduciary: U.S. Agency Securities Non-callable $23,963,841 U.S. Treasury Notes 21,446,719 Local Agency Investment Fund $54,780,939 Money Market Funds 33,898,582 Guaranteed Investment Agreements 276,872 Corporate Notes 6,728,488 24,240,569 Commercial Paper 5,978,334 Negotiable Certificates of Deposit 7,079,925 Asset-Backed Securities 69,264 12,580,059 Supranational Obligations 1,759,841 6,621,501 South San Francisco Conference Center: Local Agency Investment Fund 3,167,864 Money Market Funds 482,596 Total Investments $113,9452833 $8921292561 Cash in Banks and on Hand -City of South San Francisco Cash in Banks and on Hand -South San Francisco Conference Center Total Cash and Investments Total $23,963,841 21,446,719 54,780,939 33,898,582 276,872 30,969,057 5,978,334 7,079,925 12,649,323 8,381,342 3,167,864 4822596 203,075,394 13,455,030 676,699 $217,207,123 The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2018, these investments have an average maturity of 193 days. Money market funds are available for withdrawal on demand and as of June 30, 2018 have an average maturity of 24 days. 62 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 2 -CASH AND INVESTMENTS (Continued) I F. Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2017, for each of the Primary Government's investment types as provided by Moody's investment rating system, except as noted: Investment Type Aaa City and Fiduciary: U.S. Agency Securities Non-callable $23,963,841 Money Market Funds Corporate Notes 2,090,329 Commercial Paper Negotiable Certificates of Deposit Asset-Backed Securities 9,112,578 Supranational Obligations 7,902,503 South San Francisco Conference Center: Money Market Funds Totals City and Fiduciary: Not rated: Guaranteed Investment Agreements Asset Backed Securities Supranational Obligations Local Agency Investment Fund Exempt from credit rate disclosure: U.S. Treasury Notes $43,069,251 South San Francisco Conference Center: Not rated: Local Agency Investment Fund Total Investments G. Concentration of Credit Risk Aaa-mf Aal-Aa3 Al-A3 $33,898,582 $3,994,168 $24,884,560 482 596 $34,381,178 $3,994,168 $24,884,560 P-1 $5,978,334 7,079,925 $13,058,259 Total $23,963,841 33,898,582 30,969,057 5,978,334 7,079,925 9,112,578 7,902,503 482 596 119,387,416 276,872 3,536,745 478,839 54,780,939 21,446,719 3 167 864 $203,075,394 The City's investment policy contains limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer, other than U. S. Treasury securities, mutual funds, and external investment pools that represent 5% or more of total Entity-wide investments are as follows at June 30, 2018: Issuer Federal National Mortgage Association 63 Investment Type U.S. Agency Securities Amount $11,182,875 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 2 -CASH AND INVESTMENTS (Continued) H. Fair Value Hierarchy The City categorized its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30, 2018: Investments by Fair Value Level: City and Fiduciary: U.S. Agency Securities Non-callable U.S. Treasury Notes Corporate Notes Commercial Paper Negotiable Certificates of Deposit Asset Backed Securities Supranational Obligations Totals Investments Measured at Amortized Cost: City and Fiduciary: Guaranteed Investment Agreements Money Market Mutual Funds South San Francisco Conference Center: Money Market Mutual Funds Level2 $23,963,841 21,446,719 30,969,057 5,978,334 7,079,925 12,649,323 8,381,342 $110,468,541 Investments Exempt from Fair Value Hierarchy: City and Fiduciary: Local Agency Investment Fund South San Francisco Conference Center: Local Agency Investment Fund Total Investments Total $23,963,841 21,446,719 30,969,057 5,978,334 7,079,925 12,649,323 8,381,342 110,468,541 276,872 33,898,582 482,596 54,780,939 3,167,864 $203,075,394 All Investments classified in Level 2 of the fair value hierarchy are valued using various pricing techniques maintained by Interactive Data Pricing, including benchmark curves, sector groupings and matrix pricing. These prices are obtained from various pricing sources by the City's investment manager. Money market funds and guaranteed investment agreements were reported at amortized cost. 64 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 NOTE 3 -CAPITAL ASSETS A. Capital Asset Changes -Changes in capital assets during the fiscal year consist of: Retirements and Balance 6/30/2017 Additions Adjustments Transfers Balance 6/30/2018 Governmental activities Capital assets not being depreciated: Land $70,235,985 $22,500 ($3,085,484) $67,173,001 Construction in Progress 10,660,336 12,244,942 (213,316) ($4,604,421) 18,087,541 Total capital assets not being depreciated 80,896,321 12,267,442 (3,298,800) (4,604,421) 85,260,542 Capital assets being depreciated: Buildings and Improvements 91,451,509 (543,081) 3,950,732 94,859,160 Infrastructure -Streets 194,928,165 194,928,165 Infrastructure -Storm Drains 8,927,492 8,927,492 Infrastructure -Traffic Control Devices 9,541,649 653,689 10,195,338 Equipment and Vehicle 6,665,053 27,311 (38,043) 6,654,321 Furniture and Fixtures 2,614,215 2,614,215 Total capital assets being depreciated 314,128,083 27,311 (581,124) 4,604,421 318,178,691 Less accumulated depreciation for: Buildings and Improvements (35,174,437) (2,411,933) 255,694 (37,330,676) Infrastructure -Streets (96,012,555) (5,346,412) (101,358,967) Infrastructure -Storm Drains (3,162,061) (204,500) (3,366,561) Infrastructure -Traffic Control Devices (2,879,609) (414,270) (3,293,879) Equipment and Vehicle (6,060,430) (163,231) 877 (6,222,784) Furniture and Fixtures (1,509,339) (95,786) (1,605,125) Total accumulated depreciation (144,798,431) (8,636,132) 256,571 (153,177,992) Net Governmental Fund Capital Assets Being Depreciated 169,329,652 (8,608,821) (324,553) 4,604,421 165,000,699 Internal Service Fund Capital Assets Capital assets not being depreciated: Construction in Progress 162,140 (162,140) Total capital assets not being depreciated 162,140 (162,140) Capital assets being depreciated: Equipment and Vehicle 14,887,438 493,263 (363,652) 162,140 15,179,189 Accumulated depreciation (9,257,474) (838,208) 360,397 (9,735,285) Net Internal Service Fund Capital Assets Being Depreciated 5,629,964 (344,945) (3,255) 162,140 5,443,904 Governmental activity capital assets, net $256,018,077 $3,313,676 ($3,626,608) $255,705,145 65 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 3 -CAPITAL ASSETS (Continued) I Balance June 30, 2017 Additions Retirements Transfers Business--type activities Capital assets, not being depreciated: Land Construction in Progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and Improvements Clean Water Facilities and Lines Infrastructure -Storm Drains Infrastructure -Streets Equipment and Vehicle Furniture and Fixtures Total capital assets being depreciated Less accumulated depreciation for: Buildings and Improvements Clean Water Facilities and Lines Infrastructure -Storm Drains Infrastructure -Streets Equipment and Vehicle Furniture and Fixtures Total accumulated depreciation Net capital assets being depreciated Business-type activity capital assets, net Component Unit: $1,396,758 6,848,544 8,245,302 66,715,639 75,522,774 4,773,977 7,377,546 18,515,002 31,154 172,936,092 (16,155,673) (27,277,883) (875,226) (1,631,121) (10,336,601) $4,554,491 4,554,491 (1,606,327) (1,888,069) (159,132) (209,570) (819,549) __ __,(3:;.;1:.r.;,1.;;.54.) --- (56,307,658) --~;;,;; (4,682,647) 116,628,434 (4,682,647) $124,873,736 ($128,156) Balance June30,2017 South San Francisco Conference Center Construction in Progress Buildings and Improvements $10,822,457 Furniture and Fixtures 781,465 Machinery and equipment 237,557 Total: 11,841,479 Less accumulated depreciation (8,221,906) Component unit, net $3,619,573 ($602,171) ($240,138) (602,171) (240,138) 240,138 (9,496) (9,496) 240,138 9,496 9,496 240 138 ($602,171) Additions Retirements $43,289 325,808 98,703 29,594 497,394 (538,790) ($41,396) Balance June 30, 2018 $794,587 11,162,897 11,957,484 66,955,777 75,522,774 4,773,977 7,377,546 18,505,506 31154 173,166,734 (17,762,000) (29,165,952) (1,034,358) (1,840,691) (11,146,654) (31,154) (60,980,809) 112,185,925 $124,143,409 Balance June 30, 2018 $43,289 11,148,265 880,168 267,151 12,338,873 (8,760,696) $3,578,177 B. Capital Asset Contributions -Some capital assets may have been acquired using federal and State grant funds, or were contributed by developers or other governments. Contributed capital assets are valued at their estimated acquisition value on the date contributed. GASB Statement 34 requires that these contributions be accounted for as revenues at the time the capital assets are contributed. 66 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 !NOTE 3-CAPITAL ASSETS (Continued) I C. Depreciation Allocation -Depreciation expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or program are as follows: Governmental Activities Governmental functions General government Fire Police Public works Parks and recreation Library Economic and community development Total Governmental Functions Internal Service Funds Total Governmental Activities Business-Type Activities Sewer Enterprise Parking District Storm Water Total Business-Type Activities I NOTE 4 -INTER-FUND TRANSACTIONS A. Internal Balances $656,598 378,897 88,310 6,913,360 470,932 60,001 68,034 8,636,132 838,208 $9,474,340 $4,414,042 253,826 14,779 $4,682,647 Internal balances are presented in the Entity-wide financial statements only. They represent the net interfund receivables and payables remaining after the elimination of all such balances within governmental and business-type activities. B. Inter-Jund Receivables and Payables Amounts due to or due from other funds reflect inter-fund balances for services rendered or short- term loans expected to be repaid in the next fiscal year. Due From Other Fund General Fund Due to Other Fund Developer Deposit Capital Projects Fund Non-major Governmental Funds 67 Amount $1,000 69,000 $70,000 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 NOTE 4 -INTER-FUND TRANSACTIONS (Continued) C. Transfers Transfers between funds during the fiscal year ended June 30, 2018 were as follows: FROM FUND (OUT) General Fund East of 101 Sewer Impact Fees Capital Project Fund East of 101 Traffic Impact Fees Capital Project Fund Capital Infrastructure Reserve Capital Projects Fund Sewer Rental Enterprise Fund Storm Water Enterprise Fund Non-major Governmental Funds Internal Service Funds TOFUND(IN) Capital Improvement Capital Projects Fund Capital Infrastructure Reserve Capital Projects Fund Storm Water Enterprise Fund Internal Service Funds Sewer Enterprise Fund Capital Improvement Capital Projects Fund General Fund Capital Improvement Capital Projects Fund Capital Improvement Capital Projects Fund Capital Improvement Capital Projects Fund General Fund Capital Improvement Capital Projects Fund Storm Water Enterprise Fund Internal Service funds Capital Improvement Capital Projects Fund Total 68 AMOUNT $7,400,855 10,000,000 1,192,213 1,724,800 111,936 299,685 2,502,915 451,908 54,549 83,528 3,766,347 1,742,777 831,305 771,200 184,087 $31,118,105 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 5 -LONG-TERM DEBT I A. Current Year Transactions and Balances A summary of governmental and business-type activities transactions for the fiscal year ended June 30, 2018 follows: Authorized and Balance at Balance at Current Issued June 30, 2017 Retirement June 301 2018 Portion Governmental Activities: 2007 Loans Payable to the Successor Agency (1) $10,691,152 $2,382,000 $8,309,152 Total Governmental Activities Debt 10,691,152 2,382,000 8,309,152 Capital Leases (2): 2008 Two Fire Trucks 159,172 105,061 54,111 $54,111 2010 Two Ambulances 44,769 44,769 2010 Two Fire Trucks 442,659 120,353 322,306 125,154 2013 Fire Truck 813,559 126,860 686,699 130,232 2014 Sweeper 213,364 141379 71985 71985 Total Capital Leases 1,673,523 538,422 1,135,101 381,482 Net Governmental Long-Term Debt $12,364,675 $2,920,422 $9,444,253 $381,482 Business-Type Activities: 1999 State Water Resources Loan, 2.6%, due 8/1/22 (3) $47,721,252 $17,970,264 $2,806,194 $15,164,070 $2,879,155 2004 State Water Resources Loan, 2.5%, due 1/1/27 (3) 21,258,529 11,175,566 1,122,663 10,052,903 1,150,729 2008 State Water Resources Loan, 2.4%, (4) 9,164,505 5,990,202 436,673 5,553,529 447,153 2005 Water and Wastewater Revenue Bonds, 2.75 to 4.75%, due 04/30/26 (5) 6 000 000 3 570 000 295 000 3,275,000 305 000 Total Enterprise Fund Long-Term Debt $84,144,286 $38,706,032 $4,660,530 $34,045,502 $4,782,037 Component Unit -Conference Center: 2003 Revenue Bonds, 2.25% to 4.0%, due 9/1/18 (6) $5,865,000 $905,000 $445,000 $460,000 $460,000 Unamortized refunding loss on 2003 bonds (24,304) (24,304) Total Conference Center $5,865,000 $880,696 $420,696 $460,000 $460,000 69 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 5 -LONG-TERM DEBT (Continued) I (1) As of June 30, 2018, the Oyster Point Improvements Impact Fund owed Successor Agency (formerly the Merged Redevelopment Project Area Capital Project Fund) for developer fees in the amount of $8,309,152 for the Flyover and Hookramps Projects that were completed in prior years. The outstanding balance will be paid off from the future developer fees. With the dissolution of the Agency effective January 31, 2012, the Successor Agency assumed the asset which the City is to repay. This payable is recorded as a long-term obligation (see also Note 13). Prior to the dissolution of all Redevelopment Agencies in California by the State, the former Redevelopment Agency (Agency) advanced $12,176,207 to the Oyster Point Improvement Impact Fee Capital Projects Fund (the Oyster Point Fund). The impact fees are collected according to a fee methodology adopted under the terms of AB 1600. The fees are assessed against commercial development in a specific geographic area that is primarily east of Highway 101 to repay the former Agency for the funds it advanced to the Oyster Point Fund to pay for freeway interchange improvements at Highway 101 and Oyster Point Blvd, and are assessed per an adopted Engineering report's formula that measures each new development's impact on the area's trip traffic. While the former Agency advanced the funds, the impact fee was put in place specifically to charge future developers for their share of traffic trips generated prior to the construction of the improvements. When the Agency was dissolved, the Successor Agency, and therefore, all local taxing entities, are entitled to receive future Oyster Point Impact fees collected by the City from developers. Future developers, not the City of South San Francisco, are legally obligated to pay the future fees until the liability owed to the Successor Agency is paid off as long as the fee continues to be levied and is in place. The repayment has significantly slowed since 2007, as development has subsided and fees assessed have therefore dropped. Management believes it may take 10-30 years or more before the Successor Agency is fully paid back. (2) The City has entered into long-term capital leases with various financing agencies. Under these capital leases, all leased assets shall be distributed to the City at the end of the lease terms and shall thereafter remain the sole property of the City. Therefore, these capital leases have been recorded at the present value of the future minimum lease payments at the date of inception of the lease, and the corresponding assets have been included in the Statement of Net Position as appropriate. Capital lease payments are made from revenues of the Equipment Replacement Internal Service Fund and the General Fund. (3) The two loans were authorized by the State Water Resources Control Board to improve and expand the City's wastewater treatment plant. Loan proceeds were issued as the projects progressed and debt service payments commenced one year after project completion. (4) State Water Resources Control Board Loan -In November 2007, the City approved the $11.8 million loan agreement with State Water Resources Control Board (SWRCB) to finance the City's Wet Weather Program project. Under the terms of the contract, the City has agreed to repay $11.8 million to the State in exchange for receiving $9.2 million in proceeds to be used to fund the Project. The difference between the repayment obligation and proceeds amounted to $2.6 million and represents in-substance interest on the outstanding balance. Debt service payments commenced on August 15, 2009. The loan is secured by a pledge of sewer service charge revenues of the City's Sewer Enterprise Fund. Sewer service charge revenues available for debt service amounted to $22.2 million which represented coverage of 42.63 over the $520,536 in debt service. 70 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 5 -LONG-TERM DEBT (Continued) I (5) On October 25, 2005, the California Statewide Communities Development Authority issued 2005D Water and Wastewater Revenue Bonds. The City participated in the pooled bond sale and the City's portion of debt is $6,000,000. Proceeds were used to finance sewer system capital improvement. The principal payment on the debt commenced in October 2006 and is due each October 1. Final principal payment is due on October 1, 2026. Interest payment ranging from the rates of 2.75% to 4.75% is payable semi-annually each April 1 and October 1. The 1999 and 2004 State Water Resources Loans and the 2005 Water and Wastewater Revenue Bonds are secured by a pledge of net revenues of the City's Enterprise system. Net Revenues available for debt service amounted to $9.3 million which represented coverage of 1.8 over the $5,129,089 in total debt service. (6) On June 1, 2003, the City of South San Francisco Capital Improvement Financing Authority (CIFA) issued $5,865,000 of 2003 Revenue Bonds. The CIFA was created through a joint exercise of powers agreement between the City and the City of South San Francisco Financing Authority for the purpose of obtaining financing for capital improvements. The 2003 Revenue Bonds are obligations of the CIF A although the Authority is required to make the bond principal and interest payments in return for the use and ownership of the improvements to the leased buildings that comprise the Conference Center's facilities. The Authority has pledged the $2.50 tax imposed on the City's hotel occupants on a per day per room basis as the sole source of repayment of these obligations. The 2003 revenue bonds are, in substance, obligations of the Authority and have therefore been recorded as such in these discretely presented component unit financial statements. The 2003 revenue bonds were issued for the purpose of refunding the 1993 revenue bonds. The refunding reduced required interest payments and did not extend the maturities on the bonds. The advance refunding reduced the Authority's total debt service payments by $846,859 and resulted in an accounting loss of $401,345, which has been deferred in accordance with GASB Statement No. 23, Accounting and Financial Reporting for Refunding of Debt Reported by Proprietary Activities. This loss is being amortized over the remaining life of the old debt and the remaining balance is reported as a deferred outflow of resources. The 2003 revenue bonds bear interest rates ranging from 2.25% to 4.00% and mature on September 1, 2018. 71 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 5 -LONG-TERM DEBT (Continued) I B. Debt Service Requirements Future debt service requirements, including interest and capital leases, but excludes the 2007 and 2008 Loans payable to the Redevelopment Successor Agency at June 30, 2018, were as follows: Component Unit For the Year Governmental Activities Business-Type Activities Conference Center Authori!l Ended June 30 PrinciEal Interest PrinciEal Interest PrinciEal Interest 2019 $381,483 $30,743 $4,782,037 $475,688 $460,000 $18,400 2020 263,839 20,330 4,906,394 822,328 2021 204,251 11,582 5,038,676 698,146 2022 140,892 6,614 5,173,954 570,292 2023 144,636 2,870 5,312,309 437,457 2024-2028 8,265,301 604,174 2026-2029 566,831 7,936 Totals $1,135,101 $72,139 $34,045,502 $3,616,021 $460,000 $18,400 Certificates of Participation and Capital Leases are issued for the purpose of fmancing the construction or acquisition of projects defmed in each leasing arrangement. Projects are leased to the City for lease payments which, together with unspent proceeds of the leasing arrangement, will be sufficient to meet the debt service obligations of the leasing arrangement. At the termination of the leasing arrangement, title to the project will pass to the City. Leasing arrangements are similar to debt; they allow investors to participate in a share of guaranteed payments which are made by the City. Because they are similar to debt, the present value of the total of the payments to be made by the City is recorded as long-term debt. The City's leasing arrangements are included in long term obligations discussed above. A summary of capital assets leased through the issuance of leasing arrangements follows: Leasing Arrangement Fund/ Activity Capital Leases Governmental Activity 72 Original Cost $5,860,216 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 6 -NET POSITION AND FUND BALANCES A. Net Position Net Position is the excess of all the City's assets and deferred outflows of resources over all its liabilities and deferred inflows of resources, regardless of fund. Net Position are divided into three captions. These captions apply only to Net Position, which is determined only at the Government-wide level, and are described below: Net Investment in Capital Assets describes the portion of Net Position which is represented by the current net book value of the City's capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. Unrestricted describes the portion of Net Position which is not restricted to use. B. Fund Balance The City's fund balances are classified in accordance with Governmental Accounting Standards Board Statement Number 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, which requires the City to classify its fund balances based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the City prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the following hierarchy is ranked according to the degree of spending constraint. Nonspendables represents balances set aside to indicate items do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for redevelopment are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts are required to be presented as a component of the applicable category. Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources. Committed fund balances have constraints imposed by Council Resolution of the City Council which may be altered only by Council Resolution of the City Council. Nonspendable amounts subject to council commitments are included along with spendable resources. 73 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 6 -NET POSITION AND FUND BALANCE (Continued) Assigned fund balances are amounts constrained by the City's intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the City Council or its designee and may be changed at the discretion of the City Council or its designee. The City Council had delegated authority to the Finance Director to assign fund balances which are not otherwise restricted or committed. This category includes nonspendables, when it is the City's intent to use proceeds or collections for a specific purpose, and residual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed. Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual general fund balance and residual fund deficits, if any, of other governmental funds. Minimum Fund Balance Policies -The City's Reserve Policy is to have the General Fund Reserves equal to at least two months of operating revenues of 15% and up to 20%, which is in alignment with GFOA best practices. Included is an emergency reserve that reflects 2% of the general fund operating expenditures budget as well as an economic contingency which is 7% of general fund revenues. Funds in excess of these requirements will continue to be earmarked for paying down long-term liabilities, such as the Retiree Health/Other Post-Employment Benefits (OPEB) or for Infrastructure and Facilities Replacement needs. Detailed classifications of the City's Fund Balances, as of June 30, 2018, are below: Cal!ital Project Funds Low and Moderate Eastof101 General Income Housing Capital Sewer Fund Balance Classifications Fund Assets lml!rovement lml!act Fees Nonspendables: Items not in spendable form: Inventory and prepaid items $106 Total Nonspendable Fund Balances 106 Restricted for: Sewer Impact Fees $2,838,902 Low and moderate housing projects $5,778,249 Redevelopment and community development activities 20,582,335 Total Restricted Fund Balances 20,582,335 5,778 249 2,838,902 Committed for: Capital projects 2,934,541 Local services 13,791,356 Total Committed Fund Balances 16,725,897 Assigned to: Capital projects 4,334,322 Total Assigned Fund Balances 4,334,322 Unassigned: General fund 19,644,232 Capital Improvement Fund $197 416 Total Unassigned Fund Balances 19,644,232 197,416 Total Fund Balances $61,286,892 $5,778,249 $197,416 $2,838,902 ( Continued) 74 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 6 -NET POSITION AND FUND BALANCE (Continued) C. Caeital Project Funds EastoflOl Capital Other Traffic Child Care Developer Infrastructure Governmental Fund Balance Classifications (continued) ImeactFees ImeactFees Deeosit Reserve Fund Funds Restricted for: Traffic impact fees projects $12,459,805 Child Care impact fees projects $4,692,411 Developer deposit fees projects $3,245 Capital infrastructure projects $21,585,486 Gas Tax projects $527,222 Developer contributions projects 6,329,063 Community Development Block Grant projects 269,352 Maintenance districts projects 3,142,104 Transportation sales tax projects 2,965,930 City programs projects 1,375,041 Other Special Revenues projects 6,149,044 Capital projects activities 10,487,512 Total Restricted Fund Balances 12,459,805 4,692 411 3,245 21,585,486 31,245,268 Unassigned: Capital projects activities (208,489) Total Unassigned Fund Balances (208,489) Total Fund Balances $12,459,805 $4,692,411 $3,245 $21,585,486 $31,036,779 Net Deficit The Oyster Point Development Impact Fees Capital Projects Fund had net deficit in the amount of $208,489. Future revenues are expected to offset the deficit. D. Encumbrances The City uses an encumbrance system as an extension of normal budgetary accounting for governmental funds. Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of applicable appropriations. Encumbrances outstanding at year-end are recorded as restricted, committed or assigned fund balance, depending on the classification of the resources to be used to liquidate the encumbrance, since they do not constitute expenditures or liabilities. Unexpended appropriations lapse at year-end and must be reappropriated in the following year. Encumbrances outstanding in governmental funds as of June 30, 2018, were as listed below: Governmental funds: General Fund Capital Improvement Capital Projects Fund Other Governmental Funds Total 75 Aroount $4,334,322 14,197,099 1,876,951 $20,408,372 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 7 -PENSION PLANS I For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. A. General Information about the Pension Plans Plan Descriptions -All qualified permanent and probationary employees are eligible to participate in the City's separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple-employer defined benefit pension plans administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided -CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. 76 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 7 -PENSION PLAN (Continued) ! The Plans' provisions and benefits in effect at June 30, 2018, are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a% of eligible compensation Required employee contribution rates Required employer contribution rates Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a% of eligible compensation Required employee contribution rates Required employer contribution rates Classic Plan Prior to April 25, 2010 2.7%@55 5 years service monthly for life 50-55 2.0%to2.7% 8% 29.191% Classic Plan Prior to April 25, 2010 3%@50 5 years service monthly for life 50 3% 9% 45.051% Miscellaneous Classic Plan PEPRAPlan After Onor after April 25, 2010 January 1,2013 2%@60 2%@62 5 years service 5 years service monthly for life monthly for life 50-67 52-67 1.092% to 2.418% 1.0%to2.5% 7% 6.5% 29.191% 6.5% Safety Classic Plan PEPRAPlan After On or after April 25, 2010 January 1, 2013 3%@55 2.7%@57 5 years service 5 years service monthly for life monthly for life 50-55 50-57 2.4%to 3.0% 2.0%to2.7% 9% 11.5% 45.051% 11.5% Employees Covered -As of the June 30, 2016 actuarial valuation date and the June 30, 2017 measurement date, the following employees were covered by the benefit terms for the Plans: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total Miscellaneous 422 325 277 1,024 Safety 276 109 153 538 Contributions ~ Section 20814( c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective .on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. 77 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 7 -PENSION PLAN (Continued) I B. Net Pension Liability The City's net pension liability for each Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2017, using an annual actuarial valuation as of June 30, 2016 rolled forward to June 30, 2017 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions -For the measurement period ended June 30, 2017, the total pension liabilities were determined by rolling forward the June 30, 2016 total pension liability. The June 30, 2017 total pension liabilities were based on the following actuarial methods and assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Salary Increase Investment Rate of Return Post Retirement Benefit Increase Mortality Miscellaneous and Safety June 30, 2016 June 30, 2017 Entry-Age Normal Cost Method 7.15% 2.75% Varies by Entry Age and Service 7.50% Net of Pension Plan Investment Expenses, includes Inflation Contract COLA up to 2.75% until Purchasing Power applies, 2.75% thereafter Derived using CalPers Membership Data for all Funds (1) (1) The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the CalPERS 2014 experience study report. All other actuarial assumptions used in the June 30, 2016 valuation were based on the results of a January 2015 actuarial experience study for the period 1997 to 2011, including updates to salary increase, mortality and retirement rates. Further details of the Experience Study can be found on the CalPERS website. 78 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 7 -PENSION PLAN (Continued) I Change of Assumptions -For the measurement date of June 3 0, 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. Discount Rate -The discount rate used to measure the total pension liability was 7.15% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7 .15% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.15% will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short- term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds' asset classes, expected compound geometric returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 79 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 7 -PENSION PLAN (Continued) I The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. New Strategic Real Return RealRetum Asset Class Allocation Years 1 -lO(a) Years 11-+{b) Global Equity 47.0% Global Fixed Income 19.0% Inflation Sensitive 6.00/o Private Equity 12.00/o Real&tate 11.00/o Infrastructure and Forestland 3.00/o Liquidity 2.0% Total 1000/o (a) An expected inflation of2.5% used for this period. (b) An expected inflation of3.00/o used for this period. C. Changes in the Net Pension Liability 4.90% 0.800/o 0.60% 6.600/o 2.800/o 3.900/o -0.400/o The changes in the Net Pension Liability for each Plan are as follows: Miscellaneous Plan: Balance at June 30, 2016 Changes in the year: Service cost Interest on the total pension liability Changes ofbenefit terms Chases of assumptions Differences between actual and expected experience Plan to plan resource movement Contribution -employer Contnbution -employees Net investment income Benefit payments, including refunds of employee contributions Administrative expenses Net changes Balance at June 30, 2017 80 Increase (Decrease) Total Pension Plan Fiduciary Liability Net Position $205,260,076 $139,167,698 3,922,518 15,430,998 12,421,358 1,958,164 5,228,454 1,720,600 15,616,363 (11,565,392) (11,565,392) (205,472) 22,167,646 10,794,553 $227,427,722 $149,962,251 5.38% 2.27% 1.39% 6.63% 5.21% 5.36% 0.90% Net Pension Llability/(Asset) $66,092,378 3,922,518 15,430,998 1,958,164 (5,228,454) (1,720,600) (15,616,363) 205,472 11,373,093 $77,465,471 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 7 -PENSION PLAN (Continued) ! Safety Plan: Increase (Decrease) Total Pension Plan Fiduciary Liabili:U: Net Position Balance at June 30, 2016 $278,764,324 $192,070,665 Changes in the year: Service cost 6,264,307 Interest on the total pension liability 21,238,842 Changes of benefit terms Chases of assumptions 18,010,606 Differences between actual and expected experience 4,520,149 Plan to plan resource movement Contribution -employer 8,071,060 Contribution -employees 1,980,507 Net investment income 21,553,126 Benefit payments, including refunds of employee contributions (14,760,979) (14,760,979) Administrative expenses (283,579) Net changes 35,272,925 16,560,135 Balance at June 30, 2017 $314,037,249 $208,630,800 Grand Total Net Pension Liabili!Yf(Asset) $86,693,659 6,264,307 21,238,842 18,010,606 4,520,149 (8,071,060) (1,980,507) (21,553,126) 283,579 18,712,790 $105,406,449 $182,871,920 Sensitivity of the Net Pension Liability to Changes in the Discount Rate -The following presents the net pension liability of the City for each Plan, calculated using the discount rate for each Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is I-percentage point lower or I-percentage point higher than the current rate: Miscellaneous Safety 1% Decrease 6.15% 6.15% Net Pension Liability $107,218,047 $149,176,559 Current Dis count Rate 7.15% 7.15% Net Pension Liability $77,465,471 $105,406,449 1% Increase 8.15% 8.15% Net Pension Liability $52,885,704 $69,609,717 Pension Plan Fiduciary Net Position -Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. 81 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 8 -DEFERRED COMPENSATION PLAN I A. Defe"ed Compensation Plan City employees may defer a portion of their compensation under a City sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan, participants are not taxed on the deferred portion of their compensation until it is distributed to them; distributions may be made only at termination, retirement, death or in an emergency as defined by the Plan. The laws governing deferred compensation plan assets require plan assets to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the City's property and are not subject to City control, they have been excluded from these financial statements. I NOTE 9 -OmER POST-EMPLOYMENT BENEFITS I A. General Information about the City's Other Post Employment Benefit (OPEB) Plan The City provides certain health care benefits for all employees who retire after attaining age 50 with at least five years of service or disability at any age. The City provides certain health care benefits for those employees hired prior to April 25, 2010. In order to reduce the City's OPEB obligations over time, the City changed to a defined contribution post-retirement health plan for employees hired as of April 25, 2010 or after. For those new hires, the City is now providing a medical after retirement health plan (MARA), and contributes 1.5% of salary for those plans. Plan Description -The City's Post Employment Benefit Plan is an agent multiple-employer defined benefit OPEB plan. 83 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 9 -OTHER POST-EMPLOYMENT BENEFITS (continued) Benefits provided-The following is a summary of Plan benefits by employee group as of June 30, 2018: Eligibility •Hired< 4/25/20101 • Retire directly from City and elect coverage: • Age 50 and 5 years City service or • Disability retirement with 5 years City service Benefit • City pays single premium up to largest HMO single premium Cap for 2017/18: -$1,184.63/month pre-65 (Blue Shield) -$649.97/month post-65 Medical eligible (Blue Shield) -$1,746.70/ month post-65 not Medicare eligible (Kaiser) • Medicare ineligible retirees allowed to stay in their pre- Medicare premium plans after age 65 Surviving Spouse • Participation with premium payment Benefit • AFSCME, Local 1569, Mid-Management, IAFF • surviving spouses covered 2 months following death of retiree OtherOPEB • City also reimburses Medicare Part B • No City-paid contribution for dental, vision, or life For the year ended June 30, 2018, the City's contributions to the Plan were $4,127,553. Employees Covered by Benefit Terms -Membership in the plan consisted of the following at the measurement date of June 30, 2017: Active employees Inactive employees or beneficiaries currently receiving benefrt payments Total 84 240 348 588 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 !NOTE 9-OTHERPOST-EMPLOYMENT BENEFITS (continued) I B. Net OPEB Liability Actuarial Methods and Assumptions -The City's net OPEB liability was measured as of June 30, 2017 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2017, based on the following actuarial methods and assumptions: Valuation Date Contribution Policy Actuarial Cost Method Amortization Method Amortization Period Discount Rate and Long-Term Expected Rate ofRetum on Assets Inflation Salary Increases Healthcare/Medical Trend Mortality, Retirem::nt, Disability, Termination Mortality Improvem::nt Healthcare participation for future retirees Actuarial Assumptions • June 30, 2017 Measurem::nt Date • City contributes $802,000 per year into trust • Entry Age Normal, Level Percentage of Payroll • Level dollar • Average of22.5 years remaining for 2017/18 • 6.75% at June 30, 2017 • 6.75% at June 30, 2016 • Expected City contnbutions projected to keep sufficient plan assets to pay all benefits from trust. • 2.75% per annum • Aggregate -3% • Merit -CalPERS 1997-2015 Experience Study • Non-Medicare -7.5% for 2019, decreasing to an ultimate rate of 4.00/o in 2076 and later years • Medicare -6.5% for 2019, decreasing to an ultimate rate of 4.00/o in 2076 and later years • CalPERS 1997-2011 Experience Study • Pre-retirem::nt mortality: projected 15-year static with 900/o ofMP-2016 • Post-retirem::nt mortality: projected fully generational with Scale MP-2017 • 1000/o if covered, 95% if waived 85 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 9-OTHER POST-EMPLOYMENT BENEFITS (continued) I The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which expected future real rates of return ( expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Tenn Target Expected Real Asset Class Allocation Rate ofRetum Global equity 57.0%, 4.9%, Fixed income 27.00/o 1.5% TIPS 5.00/o 1.3% Commodities 3.0% 0.8% REITs 8.00/o 3.8% Total 100.00/o Discount Rate -The discount rate used to measure the total OPEB liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. C. Changes in Net OPEB Liability The changes in the net OPEB liability follows: Balance at June 30, 2016 Measurement Date Changes Recognized for the Measurement Period: Service Cost Interest on the total OPEB liability Changes in benefit terms Differences between expected and actual experience Changes of assumptions Contnbutions from the employer Net investment income Benefit payments Administrative expenses Net changes Balance at June 20, 2017 Measurement Date Increase (Decrease) Amounts in 000's Total OPEB Plan Fiduciary Net OPEB liatility Net Position liatility/(Asset) 00 @ 00·@ $75,240 1,574 5,087 (2,901) 3,760 $79,000 $17,114 3,703 1,803 (2,901) {92 2,596 $19,710 $58,126 1,574 5,087 (3,703) (1,803) 9 1,164 $59,290 The Plan does not issue separate financial statements. 86 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 9 -OTHER POST-EMPLOYMENT BENEFITS (continued) I D. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is I-percentage-point lower ( 5. 7 5%) or I-percentage-point higher (7.75%) than the current discount rate: Net OPEB Liability/(Asset) (Amounts in 0OO's) Discount Rate -1 % (5.75%) Current Discount Rate (6.75%) Discount Rate +1 % (7.75%) $70,593 $59,290 $50,047 The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that are I-percentage-point lower or I-percentage-point higher than the current healthcare cost trend rates as discussed in the assumptions above: Net OPEB Llability/(Asset) (Amounts in 000's) 1% Decrease Current Healthcare Cost Trend Rates 1% Increase $49,237 $59,290 $71,711 E. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2018, the City recognized OPEB expense of $5,322,668. At June 30, 2018, the City reported deferred outflows and inflows of resources related to OPEB from the following sources: Employer contributions made subsequent to the measurement date Differences between actual and expected experience Changes ofassumptions Net differences between projected and actual earnings on plan investments Total 87 Deferred Outflows ofResources $4,127,533 $4,127,533 Deferred Inflows of Resources $477,000 $477,000 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 9 -OTHER POST-EMPLOYMENT BENEFITS (continued) I $4,127,553 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as part of OPEB expense as follows: Year Ended June 30 2019 2020 2021 2022 INOTE 10-JOINTLY GOVERNED ORGANIZATIONS I Annual Amortization ($119,000) (119,000) (119,000) (120,000) The City participates in the jointly governed organizations discussed below through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these entities exercise full powers and authorities within the scope of the related Joint Powers Agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Each joint organization is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint organization, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on that board. Obligations and liabilities of this joint organization are not the City's responsibility and the City does not have an equity interest in the assets of each joint organization except upon dissolution of the joint organization. A. Oyster Point Marina (OPM) was established in 1977 by the City and the San Mateo County Harbor District (Harbor District) for the purpose of expanding, improving and operating the Oyster Point Marina and Park. The governing board consists of two of the City's council members and two Harbor District commissioners. The Harbor District operates OPM. Operation of the Marina provides revenues for the marina's operations. The City retains title to the land; however, the City is not liable for any obligations of the San Mateo County Harbor District. Condensed unaudited fmancial information may be obtained from San Mateo County Harbor District, #1 Johnson Pier, Half Moon Bay, CA 94019. 88 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 !NOTE 10-JOINTLY GOVERNED ORGANIZATIONS (continued) B. Peninsula Traffic Congestion Relief Alliance (PTCRA) was formed from the merger of The Inter City Transportation Systems Management Agency and Multi-City Transportation Systems Management Agency (MCTSMA) in 2000. The members are Cities of South San Francisco, Brisbane, Colma, Daly City, Half Moon Bay, Millbrae, Pacifica and San Bruno and seven other members for the purpose of mitigating traffic congestion. The governing board consists of one council member from each member city. The fmance director of Daly City acts as the treasurer and controller of PTCRA. The individual cities are not liable for the debts, liabilities or obligations of PTCRA. Each member city has an equal interest in PTCRA. Condensed accrual basis unaudited fmancial information may be obtained from the City of San Carlos Finance Department, 666 Elm Street, San Carlos, CA 94070. C City/County Association of Governments (C/CAG) was established in 1990 by the County of San Mateo and the Cities of San Mateo County for preparation, adoption, monitoring and enforcing of Countywide state mandated plans. A Board of Directors consisting of one council member from each member city and one member from the County Board of Supervisors governs C/CAG. The city treasurer of San Carlos acts as the treasurer of C/CAG. The individual cities and the County are not liable for the debts, liabilities, or obligations of C/CAG. Condensed unaudited cash basis fmancial information may be obtained from the City of San Carlos Finance Department, 666 Elm Street, San Carlos, CA 94070. INOTE 11 -RISK MANAGEMENT A. Insurance Coverage The City participates in Association of Bay Area Governments (ABAG) Plan Corporation, a non profit benefit corporation established to provide liability insurance coverage, claims and risk management, and legal defense to its participating members. ABAG Plan provides $5,000,000 of general liability and automobile coverage per occurrence and is responsible for paying claims in excess of the City's $100,000 self-insured retention. The City's liability coverage through ABAG is a total of $30 million, with the first $5 million covered out of ABAG's financial reserves, and with the next $25 million covered from two excess insurance policies acquired by ABAG. The Plan includes a per occurrence or wrongful act or employee benefit wrongful act up to $10,000,000 with two retained limits of $5,000,000. For the year ended June 30, 2018, the City paid ABAG Plan $1,191,434 in premiums and did not receive a refund of premiums paid in prior years. ABAG Plan has not determined the value of the City's interest in its net position. Financial statements may be obtained from ABAG Services, P.O. Box 2050, Oakland, CA 94694- 2050. The City has also purchased excess coverage insurance for worker's compensation claims from CSAC Excess Insurance Authority $500,000 self-insured retention. For the past five fiscal years, general liability and worker compensation settlements did not exceed insurance coverage. 89 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 !NOTE 11 -RISK MANAGEMENT (Continued) B. Liability for Uninsured Claims The City provides for the uninsured portion of claims and judgments in the Self Insurance Internal Service Fund. Claims and judgments, including a provision for claims incurred but not reported, are recorded when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims. The City's liability for uninsured claims is limited to workers' compensation and general liability claims, as discussed above, and was estimated by management based on-prior year's claims experience as follows: June 30, 2018 Fiscal Year Workers' General 2016-2017 Compensation Liability Total Total Balance, beginningofyear $12,695,000 $277,942 $12,972,942 $11,400,947 Current year claims and changes in estimates of prior years claims 1,660,181 190,940 1,851,121 3,563,911 Claims Paid (1,660,181) (370,526) (2,030,707) (1,991,916) Balance, end of year $12,695,000 $98,356 $12,793,356 $12,972,942 Current portion $562,000 $98,356 $660,356 $712,000 j NOTE 12 -COMMITMENTS AND CONTINGENCIES I The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney there is no pending litigation which is likely to have a material adverse effect on the financial position of the City. The City participates in Federal and State grant programs. These programs have been audited by the City's independent auditors in accordance with the provisions of the Federal Single Audit Act as amended and applicable State requirements. No cost disallowances were proposed as a result of these audits; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. The City expects such amounts, if any, to be immaterial. 90 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 12 -COMMITMENTS AND CONTINGENCIES (Continued) A. Rental Revenues From Use of City Property The Conference Center Authority, a discrete component unit, leases land from the City under an operating lease commencing on January 1, 1999, with a 30-year term from February 1, 1999, to January 31, 2029. The rent amount is subject to re-negotiation at the option of either party between January 1 and February 28, 2009 and 2019. These leases are considered for accounting purposes to be operating leases. Property lease revenue from the Conference Center Authority during the year fiscal year ended June 30, 2018, was $420,000. The cost and carrying amount of leased land under this lease receivable is $5,040,000. Future minimum lease payments from the Conference Center Authority land leases are as follows: Year ending June 30 2019 2020 2021 2022 2023 2024-2028 2029 Total Component Unit Conference Center $420,000 420,000 420,000 420,000 420,000 2,100,000 150,000 $4,350,000 Price Club Associates leases the land for the Costco store on South Airport Boulevard from the City. Lease payments are based on a percentage of Costco's gross annual sales, with minimum annual rent set at $400,000, payable in monthly installments of $33,333. In fiscal 2014, Costco exercised the option to extend the lease through fiscal year 2029, with an option for a 6 year extension through fiscal year 2035. In fiscal 2018 lease payments were $400,000. Magnolia Housing leases the land for Magnolia Plaza Senior Apartments from the City. Minimum lease payments are set at $51,800, and are payable through the fiscal year 2062. In fiscal year 2018 lease payments were $51,800. 91 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 I NOTE 12 -COMMITMENTS AND CONTINGENCIES (Continued) I Future minimum lease revenues for the Costco and Magnolia Plaza leases are as follows: Year ending June 30: Costco Magnolia Plaza Total 2019 $400,000 $51,800 $451,800 2020 400,000 51,800 451,800 2021 400,000 51,800 451,800 2022 400,000 51,800 451,800 2023 400,000 51,800 451,800 2024-2028 2,000,000 259,000 2,259,000 2029-2033 2,000,000 259,000 2,259,000 2034-2038 400,000 259,000 659,000 2039-2043 259,000 259,000 2044-2048 259,000 259,000 2049-2053 259,000 259,000 2054-2058 259,000 259,000 2059-2062 207,200 207,200 $6,400,000 $2,279,200 $8,679,200 NOTE 13 -FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES The activities of the Successor Agency are reported in the Successor Agency to the former Redevelopment Agency Private-Purpose Trust Fund as the activities are under the control of the Oversight Board. The City provides administrative services to the Successor Agency to wind down the affairs of the former Redevelopment Agency. Information presented in the following footnotes represents assets and liabilities of the Successor Agency. A. Cash and Investments Cash and investments of the Successor Agency as of June 30, 2018 are discussed in Note 2 to the financial statements. Information presented in the following footnotes represents other assets and liabilities of the Successor Agency as of June 30, 2018. 92 CITY OF soum SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 NOTE 13 -FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES (Continued) B. Loans Receivable The Successor Agency assumed the non-housing loans receivable of the former Redevelopment Agency as of February 1, 2012. The former Redevelopment Agency engaged in programs designed to encourage construction of or improvement to low-to-moderate income housing. Under these programs, grants or loans were provided to homeowners or developers who agreed to expend these funds in accordance with the Agency's terms. C. Capital Assets The Successor Agency assumed the capital assets of the former Redevelopment Agency as of February 1, 2012. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their acquisition value. The Successor Agency's policy is to capitalize all assets with costs exceeding certain minimum thresholds and with useful lives exceeding two years. All capital assets with limited useful lives are depreciated over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year's pro rata share of the cost of capital assets. Depreciation of all capital assets is charged as an expense against operations each year and the total amount of depreciation taken over the years, called accumulated depreciation, is reported on the balance sheet as a reduction in the book value of capital assets. Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The Successor Agency has assigned the useful lives listed below to capital assets: Buildings Improvements Machinery and equipment Furniture and fixtures 50 years 30 years 5-20 years 12 years Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. The capitalization level is $20,000 for vehicles, and $100,000 for all else, including all other equipment that is not a vehicle. 93 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 NOTE 13 -FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTMTIES (Continued) Capital assets recorded at June 30 are comprised of: Fiduciary activities Capital assets not being depreciated: Land Total capital assets not being depreciated Capital assets being depreciated: Buildings and hnprovements Equipment and Vehicle Furniture and Fixtures Total capital assets being depreciated Less accumulated depreciation for: Buildings and hnprovements Equipment and Vehicle Furniture and Fixtures Total accumulated depreciation Net capital assets being depreciated Fiduciary activity capital assets, net Balance June 30, 2017 $2,520,264 2,520,264 927,790 242,190 21,506 1,191,486 (407,484) (241,088) (21,505) (670,077) 521,409 $3,041,673 Additions Retirements ($1,579,730) (1,579,730) (598,119) (598,119) ($26,531) 368,741 (877) (27,408) 368,741 (27,408) (229,378) ($27,408) ($1,809,108) Balance June 30, 2018 $940,534 940,534 329,671 242,190 21,506 593,367 (65,274) (241,965) (21,505) (328,744) 264,623 $1,205,157 Current year retirements represent properties transferred to the County of San Mateo, which has been reported as a Special Item. D. Long-Term Debt All of the long-term debt of the Successor Agency were issued by the former Redevelopment Agency. Current year transactions were as follows: Type of Obligation 1999 Revenue Bonds, 3.3 to 5.0%, due 9/1/18 (1) Total Successor Agency 94 Balance June 30, 2017 $560,000 $560,000 Balance Retirements June 30, 2018 ($275,000) $285,000 ($275,000) $285,000 Current Portion $285,000 $285,000 NOTE 13 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES (Continued) Debt Service Requirements Debt service requirements are shown below for all long-term debt. For the Year Ended June 30 2019 Totals Successor Agency Activities Principal Interest $285,000 $7,125 $285,000 $7,125 (1) On February 1, 1999, the City of South San Francisco Capital Improvements Financing Authority (CIFA) issued $31,720,000 of 1999 Revenue Bonds to provide funds to pay loans (Homart Development), to fmance redevelopment and housing activities and to refund the 1993 Gateway tax allocation bonds, which were due in 2018. The 1999 revenue bonds are obligations of the CIF A although the Redevelopment Agency is required to make bond principal and interest payments from the Gateway increment tax and housing set-aside revenues. The 1999 Revenue Bonds are, in substance, obligations of the Redevelopment Agency, and have therefore been recorded as such in these fmancial statements. On April 16, 2006, the Gateway principal portion of the $23,860,000 was refunded as discussed in (1) above. The housing bonds are now obligations of the Redevelopment Successor Agency. The 1999 Revenue Bonds were issued and net proceeds of $9,614,978 plus an additional $956,470 of 1993 bond reserve funds were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1993 bonds. As a result, the 1993 bonds are considered to be defeased and the liability for those bonds has been removed. Pledged Revenues With the dissolution of the former Redevelopment Agency discussed above, Tax Increment is no longer distributed, and instead the Successor Agency receives payments from the County's Redevelopment Property Tax Trust Fund (RPTTF) that are to be used to fund debt service on the Bonds, with no distinction between housing and non-housing revenues. 95 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2018 NOTE 13 -FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES (Continued) E. POLLUTION REMEDIATION In fiscal 2010, the former Redevelopment Agency purchased an unimproved parcel adjacent to the Caltrain Commuter Rail station from the State of California. The current rail station is among the oldest on the peninsula, is under the freeway, is small, has limited parking, and is not adjacent to the Downtown due to the freeway. The Successor Agency will contribute that site to the County Transportation Agency for the future reconfiguration of that rail station after the County secures necessary funding from other sources. The Successor Agency's contribution will include use of the purchased parcel in order to make the station safer, more visually pleasing, more usable to commuters and business shuttles, and to make the Downtown accessible to pedestrians to and from the train station. As part of that land purchase, the price paid by the former Agency to the State was discounted to give the former Agency credit in the amount of $537,000 against known pollution remediation costs on the site. If the funding from the County for the station reconfiguration does not materialize, and if construction does not occur on that site, the pollution mitigation costs will be much less. F. COMMITMENTS AND CONTINGENCIES State Approval of Enforceable Obligations The Successor Agency prepares a Recognized Obligation Payment Schedule (ROPS) semi- annually that contains all proposed expenditures for the subsequent six-month period. The ROPS is subject to the review and approval of the Oversight Board as well as the State Department of Finance. Although the State Department of Finance may not question items included on the ROPS in one period, they may question the same items in a future period and disallow associated activities. The amount, if any, of current obligations that may be denied by the State Department of Finance cannot be determined at this time. The City expects such amounts, if any, to be immaterial. State Asset Transfer Review The activities of the former Redevelopment Agency and the Successor Agency are subject to further examination by the State of California and the amount, if any, of expenditures which may be disallowed by the State cannot be determined at this time. In addition, the State Controller's Office will be conducting a review of the propriety of asset transfers between the former Redevelopment Agency or the Successor Agency and any public agency that occurred on or after January 1, 2011 and the amount, if any, of assets that may be required to be returned to the Successor Agency cannot be determined at this time. The City expects such amounts, if any, to be immaterial. 96 REQUIRED SUPPLEMENTARY INFORMATION CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2018 Miscellaneous Agent Multiple-Employer Defined Benefit Pension Plans Last 10 Years* SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Measurement Date 6/30/2014 6/30/2015 6/30/2016 Total Pension Liability Service cost $3,449,973 $3,075,813 $3,079,994 Interest on total pension liability 13,930,544 14,393,013 14,870,988 Changes of benefit terms Changes of assumptions (3,374,655) Difference between expected and actual experience (1,567,798) (476,337) Benefit payments, including refunds of employee contributions {9 ,287,97 52 {10,407,243} {11,085,829} Net change in total pension liability 8,092,542 2,119,130 6,388,816 Total pens ion liability -beginning 188,659,588 196,752,130 198,871,260 Total pension liability-ending (a) $196,752,130 $198,871,260 $205,260,076 Plan fiduciary net position Contributions -employer $4,235,454 $4,546,984 $5,726,981 Contributions -employee 1,466,176 1,411,273 1,622,453 Net investment income 21,712,340 3,221,551 687,860 Other miscellaneous income Benefit payments, including refunds of employee contributions (9,287,975) (10,407,243) (11,085,829) Plan to plan resource movement (50,555) 229 Administrative expense (160,268) (86,726} Net change in p.an fiduciary net position 18,125,995 (1,438,258) (3,135,032) Plan fiduciary net position -begi_nning 125,614,993 143,740,988 142,302,730 Plan fiduciary net position -ending (b) $143,740,988 $142,302,730 $139,167,698 Net pension liability -ending (a)-(b) $53,011,142 $56,568,530 $66,092,378 Plan fiduciary net position as a percentage of the total pens ion liability 73.06% 71.56% 67.80% Covered payroll $17,725,581 $17,798,104 $21,409,193 Net pension liability as percentage of covered- employee payroll 299.07% 317.83% 308.71% Notes to Schedule: Benefit chani:es, The figures above do not include any liability impact that may have resulted from plan changes which occurred after the actuarial valuation date. This applies for voluntary benefit changes as well as any offers ofTwo Years Additional Service Credit (a.ka. Golden Handshakes). Chani:es in assumption, In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment ofthe discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate. All other assumptions for the June 30, 2014 measurement date were the same as those used for the June 30, 2015 and 2016 measurement dates. *Fiscal year 2015 was the 1st year of implementation. 98 6/30/2017 $3,922,518 15,430,998 12,421,358 1,958,164 {11,565,392} 22,167,646 205,260,076 $227,427,722 $5,228,454 1,720,600 15,616,363 (11,565,392) {205,472} 10,794,553 139,167,698 $149,962,251 $77,465,471 65.94% $29,390,370 263.57% CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2018 Miscellaneous Agent Multiple-Employer Defined Benefit Pension Plans Last 10 Years* SCHEDULE OF CONTRIBUTIONS Fiscal Year EndedJune 30 2015 2016 Actuarially determined contnbution $4,210,973 $5,399,856 Contnbutions in relation to the actuarially determined contnbutions 4,210,973 5,399,856 Contnbution deficiency (excess) $0 $0 Covered payroll $17,798,104 $21,409,193 Contnbutions as a percentage of covered- employee payroll 23.66% 25.22% Notes to Schedule Valuation date: 6/30/2012 6/30/2013 Methods and assumptions used to determine contribution rates: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate ofretum Retirement age Mortality Entry age Level percentage of payroll 24 years as of the Valuation Date 15-year smoothed market 2.75% Varies by entry age and service 7.500/o net ofadministrative expenses The probabilities ofRetirement are based on the 2010 CalPERS Experience Study for the period from 1997 to 2007 The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2007. Pre- retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale AA published by the Society of Actuaries *Fiscal year 2015 was the 1st year of implementation 99 2017 $5,228,454 52228,454 $0 $29,390,370 17.79% 6/30/2014 2018 $6,166,024 6,166,024 $0 $23,630,354 26.09% 6/30/2015 CITY OF soum SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2018 Safety Agent Multiple-Fmployer Defined Benefit Pension Plans Lastl0Years• SCHEDULE OF CHANGES IN THENEf PENSION LIABILITY AND RELATED RATIOS Measurement Date 6/30/2014 6/30/2015 6/30/2016 Total Pension lialility Service cost $5,143,842 $4,968,087 $5,329,842 Interest on total pension liability 18,899,544 19,398,484 20,134,558 Changes ofbenefit teIIDS Changes ofassumptions (4,789,129) Difference between expected and actual experience (4,226,388) (915,267) Benefit payments, including refunds of employee contributions (13,161,296) (13,556,606) (14,463,995) Net change in total pension lialility 10,882,090 1,794,448 10,085,138 Total pension liability-beginning 256,002,648 266,884,738 268,679,186 Total pension liability-ending (a) $266,884,738 $268,679,186 $278,764,324 Plan fiduciary net position Contnbutions • employer $6,535,399 $7,191,715 $8,535,737 Contnbutions -employee 2,151,163 1,714,039 1,961,907 Net investment income 29,348,051 4,264,997 950,612 Other miscellaneous income Benefit payments, including refunds of employee contributions (13,161,296) (13,556,606) (14,463,995) Plan to plan resource movement (229) Administrative expense (219,696) (118,968) Net change in plan fiduciary net position 24,873,317 (605,551) (3,134,936) Plan fiduciary net position -beginning 170,937,835 195,811,152 195,205,601 Plan fiduciary net position -ending (b) $195,811,152 $195,205,601 $192,070,665 Net pension liability -ending (a)-(b) $71,073,586 $73,473,585 $86,693,659 Plan fiduciary net position as a percentage of the total pension liability 73.37% 72.65% 68.90% Covered payroll $15,994,412 $16,679,857 $18,986,895 Net pension liability as percentage of covered- employee payroll 444.37% 440.49% 456.60"/o Notes to Schedule: 6/30/2017 $6,264,307 21,238,842 18,010,606 4,520,149 (14,760,979) 35,272,925 278,764,324 $314,037~49 $8,071,060 1,980,507 21,553,126 (14,760,979) (283,579) 16,560,135 192,070,665 $208,630,800 $105,406,449 66.44% $19,563,549 538.79% Benefit changes, The figures above do not include any liability impact that may have resulted from plan changes which occurred after the actuarial valuation date. This applies or voluntary benefit changes as well as any offers ofTwo Years Additional Service Credit (a.ka. G:llden Handshakes). Changes jn assumption. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate. All other assumptions for the June 30, 2014 measurement date were the same as those used for the June 30, 2015 and 2016 measurement dates. *Fiscal year 2015 was the 1st year of implementation. 100 CITY OF soum SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2018 Safety Agent Multiple-Employer Defined Benefit Pension Plans last 10 Years* SCHEDULE OF CON1RIBUTIONS Fiscal Year Ended June 30 2015 2016 Actuarially detennined contnbution $7,191,715 $8,538,138 Contributions in relation to the actuarially detennined contnbutions 7191 715 8,538,138 Contribution deficiency (eliCess) $0 $0 2017 $8,071,060 8,071,060 $0 Covered payroll $16,679,857 $18,986,895 $19,563,549 Contributions as a percentage of covered- employee payroll 43.12% 44.97% Notes to Schedule Valuation date: 6/30/2012 6/30/2013 Methods and assumptions used to detennine contribution rates: Actuarial cost method A1IKJrtization method Remaining a1IKJrtization period Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality Entry age Level percentage of payroll 24 years as of the Valuation Date 15-year s1IKJothed market 2.75% Varies by entry age and service 7.50% net ofadministrative eiq:,enses The probabilities of Retirement are based on the 2010 CalPERS Experience Study The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2007. Pre- retirement and Post-retirement mortality rates include 20years of projected mortality improvement using Scale AA published by the Society of Actuaries *Fiscal year 2015 was the 1st year of implementation 101 41.26% 6/30/2014 2018 $9,322,781 9,322,781 $0 $21,932,480 42.51% 6/30/2015 CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2018 SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS Retiree Healthcare OPEB Plan -Agent Multiple Employer Last 10 fiscal years* (Amounts in 000's) Measurement Date Total OPEB Liability Service Cost Interest Changes in benefit terms Differences between expected and actual experience Changes of assumptions Benefit payments Net change in total OPEB liability Total OPEB liability -beginning Total OPEB liability -ending (a) Plan fiduciary net position Contributions -employer Contributions -employee Net investment income Administrative expense Benefit payments Net change in plan fiduciary net position Plan fiduciary net position -beginning Plan fiduciary net position -ending (b) Net OPEB liability-ending (a)-(b) Plan fiduciary net position as a percentage of the total OPEB liability Covered-employee payroll Net OPEB liability as a percentage of covered-employee payroll * Fiscal year 2018 was the first year of implementation. 102 6/30/17 $1,574 5,087 (2,901) 3,760 75,240 $79,000 $3,703 1,803 (9) (2,901) 2,596 17,114 $19,710 $59 290 24.95% $26,539,044 0.22% CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2018 SCHFDULEOFCONTRIBUTIONS Retiree Healthcare OPEB Plan -Agent Multiple Employer Last 10 fiscal years* (Amounts in 000's) Fiscal Year Ended June 30, Actuarially detennined contribution Contributions in relation to the actuarially detennined contnbution 2018 $6,279 4,128 $2,151 Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll $26,986,309 0.01% * Fiscal year 2018 was the first year of implementation. NOTES TO SCHEDULEOFEMPWYER CONTRIBUTION Retiree Healthcare OPEB Plan -Agent Multiple Employer Methods and Assumptions for Actuarially Determined Contribution Valuation Date Actuarial Cost Method Amortization Method Amortization Period Asset Valuation Method Discount Rate General Inflation Medical Trend Mortality, Retirement, Disability, Tennination Mortality Improvement June 30, 2017 Entry Age Normal, level Percentage of Payroll level dollar Average of22.5 years remaining for 2017/18 Investment gains and losses spread over 5-year rolling period Select and Ultimate: 5.22% FYE phasing into 7.25% FYE 2028 2.75% • Non-Medicare -7.5% for 2018, decreasing to an ultimate rate of 5.()0/o in 2021 and later years • Medicare -6.7% for 2018, decreasing to an ultimate rate of 5.0% in 2021 and later years • CalPERS 1997-2011 Experience Study • Mortality projected fully generational with Scale MP-2014, modified to converge to ultimate rates in 2022 103 This Page Left Intentionally Blank SUPPLEMENTARY INFORMATION This Page Left Intentionally Blank GENERAL FUND The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The General Fund is comprised of the following: GENERAL PURPOSE FUND This fund accounts for resources traditionally associated with government, such as administration, public safety, library, parks maintenance, and recreation, outside of those accounted for in other funds. MEASURE W FUND This fund accounts for revenue as the result of the voter-approved one-half percent sales and use tax that was passed on November 3, 2015. The tax went into effect April 1, 2016 and will last for 30 years until March 31, 2046. Revenues are committed for maintenance and enhancement of local services. 107 ASSETS Cash and investments Receivables: Accounts Accrued interest Due from other funds Inventory Restricted cash and investments Properties held for redevelopment Total Assets LIABILITIES Accounts payable Accrued salaries and benefits Other payable Deposits Unearned revenue Total Liabilities FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING BALANCE SHEETS JUNE 30, 2018 General Purpose $25,762,213 5,774,877 213,239 70,000 106 200,000 20,582;335 $52,602,770 $1,307,966 3,027,256 290,552 411,025 124,085 5,160,884 106 20,582,335 2,934,541 4,280,672 19,644,232 47,441,886 Total Liabilities and Fund Balances $52,602,770 108 Measure W Total $11,885,837 $37,648,050 1,959,169 7,734,046 213,239 70,000 106 200,000 20,582,335 $13,845,006 $66,447,776 $1,307,966 3,027,256 290,552 411,025 124,085 5,160,884 106 20,582,335 $13,791,356 16,725,897 53,650 4,334,322 19,644,232 13,845,006 61,286,892 $13,845,006 $66,447,776 CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2018 REVENUES Property taxes Sales taxes Transient occupancy taxes Franchise Fees Other taxes Intergovernmental Interest and rentals Licenses and permits Charges for services Fines and forfeitures Other Total Revenues EXPENDITURES Current: City Council City Clerk City Treasurer City Attorney City Manager Finance Non-departmental Human Resources Fire Police Public Works Parks and Recreation Library Economic and Community Development Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances before special items Special Item Net Change in Fund Balances Fund balances (deficits) -July 1 Fund balances (deficits) -June 30 General Purpose $34,143,627 17,566,189 13,978,533 4,403,493 5,871,096 2,610,233 2,846,967 14,674,809 10,924,668 423,604 266,872 107,710,091 239,264 660,306 135,218 996,380 2,668,715 3,080,769 1,049,187 1,541,524 26,059,072 26,639,009 5,014,343 15,468,370 5,379,836 7,722,689 96,654,682 11,055,409 3,990,605 6,269,262 (13,732,838) (3,472,971) 7,582,438 (7,154,626) 427,812 47,014,074 $47,441,886 109 MeasureW $11,162,238 11,162,238 22,351 22,351 11,139,887 (6,585,030) (6,585,030) 4,554,857 9,290,149 $13,845,006 Intra-Fund Transactions Elimination (2,440,861) 2,440,861 Total $34,143,627 28,728,427 13,978,533 4,403,493 5,871,096 2,610,233 2,846,967 14,674,809 10,924,668 423,604 266,872 118,872,329 239,264 660,306 135,218 996,380 2,691,066 3,080,769 1,049,187 1,541,524 26,059,072 26,639,009 5,014,343 15,468,370 5,379,836 7,722,689 96,677,033 22,195,296 3,990,605 3,828,401 (17,877,007) (10,058,001) 12,137,295 (7,154,626) 4,982,669 56,304,223 $61,286,892 CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 General Purpose Resources (inflows): Property taxes Sales taxes Transient occupancy taxes Franchise fees Other taxes Intergovernmental Interest and rentals Licenses and permits Charges for services Fines and forfeitures Other Amounts available for appropriation Charges to appropriations (outflows) City Council City Clerk City Treasurer City Attorney City Manager Finance Non-departmental Human Resources Fire Police Public Works Parks and Recreation Library Economic and Community Development Total charges to appropriations OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS Special Item Net Change in Fund Balances Fund Balance -July 1 Adjustment to budgetary basis: Encumbrance adjustments Fund Balance -June 30 Budgeted Amounts Actual Original Final Amount $26,877,714 $33,760,827 $34,143,627 16,279,876 16,279,876 17,566,189 14,800,000 14,800,000 13,978,533 4,000,000 4,000,000 4,403,493 6,043,065 5,343,065 5,871,096 7,024,542 2,020,600 2,610,233 3,010,263 3,010,263 2,846,967 9,232,477 10,232,477 14,674,809 8,934,001 9,329,002 10,924,668 818,500 163,500 423,604 174,991 174,991 266,872 97,195,429 99,114,601 107,710,091 246,918 246,917 239,264 642,681 666,810 660,306 130,861 135,861 135,218 913,092 1,038,092 996,380 1,960,599 3,091,257 2,861,732 2,595,665 3,423,768 3,423,017 1,080,967 1,108,503 1,107,187 1,625,221 1,699,257 1,698,958 26,373,610 26,906,873 26,763,505 27,864,737 27,204,237 26,639,009 4,315,409 5,339,637 5,339,181 15,553,369 15,929,220 15,649,568 5,361,133 5,575,195 5,394,725 7,216,002 10,772,828 10,027,304 95,880,264 103,138,455 100,935,354 3,470,600 3,990,600 3,990,605 1,772,505 1,800,705 6,269,262 (2,920,600) (6,592,401) (13,732,838) 2,322,505 (801,096) (3,472,971) 3,637,670 (4,824,950) 3,301,766 (7,154,626) $3,637,670 ($4,824,950) (3,852,860) 47,014,074 4,280,672 $47,441,886 110 Variance with Final Budget Positive (Negative) $382,800 1,286,313 (821,467) 403,493 528,031 589,633 (163,296) 4,442,332 1,595,666 260,104 91,881 8,595,490 7,653 6,504 643 41,712 229,525 751 1,316 299 143,368 565,228 456 279,652 180,470 745,524 2,203,101 5 4,468,557 (7,140,437) (2,671,875) 8,126,716 (7,154,626) $972,090 (Continued) CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 Resources (inflows): Property taxes Sales taxes Transient occupancy taxes Franchise fees Other taxes Intergovernmental Interest and rentals Licenses and permits Charges for services Fines and forfeitures Other Amounts available for appropriation Charges to appropriations (outflows) City Council City Clerk City Treasurer City Attorney City Manager Finance Non-departmental Human Resources Fire Police Public Works Parks and Recreation Library Economic and Community Development Total charges to appropriations OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS Special Item Net Change in Fund Balances Fund Balance -July 1 Adjustment to budgetary basis: Encumbrance adjustments Fund Balance -June 30 MeasureW Budgeted Amounts Original Final $9,168,433 $9,168,433 9,168,433 9,168,433 76,000 2,440,861 2,440,861 2,440,861 2,516,861 (9,168,433) (13,900,705) (9,168,433) (13,900,705) (2,440,861) (7,249,133) ($2,440,861) ($7,249,133) 111 Actual Amount $11,162,238 11,162,238 76,001 76,001 (6,585,030) (6,585,030) 4,501,207 4,501,207 9,290,149 53,650 $13,845,006 Variance with Final Budget Positive (Negative) $1,993,805 1,993,805 (1) 2,440,861 2,440,860 7,315,675 7,315,675 11,750,340 $11,750,340 (Continued) CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 Resources (inflows): Property taxes Sales taxes Transient occupancy taxes Franchise fees Other taxes Intergovernmental Interest and rentals Licenses and permits Charges for services Fines and forfeitures Other Amounts available for appropriation Charges to appropriations (outflows) City Council City Clerk City Treasurer City Attorney City Manager Finance Non-departmental Human Resources Fire Police Public Works Parks and Recreation Library Economic and Community Development Total charges to appropriations OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS Special Item Net Change in Fund Balances Fund Balance -July 1 Adjustment to budgetary basis: Encumbrance adjustments Fund Balance -June 30 Total Budgeted Amounts Original Final $26,877,714 $33,760,827 25,448,309 25,448,309 14,800,000 14,800,000 4,000,000 4,000,000 6,043,065 5,343,065 7,024,542 2,020,600 3,010,263 3,010,263 9,232,477 10,232,477 8,934,001 9,329,002 818,500 163,500 174,991 174,991 106,363,862 I 08,283,034 246,918 246,917 642,681 666,810 130,861 135,861 913,092 1,038,092 1,960,599 3,167,257 2,595,665 3,423,768 1,080,967 1,108,503 1,625,221 1,699,257 28,814,471 29,347,734 27,864,737 27,204,237 4,315,409 5,339,637 15,553,369 15,929,220 5,361,133 5,575,195 7,216,002 10,772,828 98,321,125 105,655,316 3,470,600 3,990,600 1,772,505 1,800,705 (12,089,033) (20,493,106) (6,845,928) (14,701,801) 1,196,809 (12,074,083) $1,196,809 ($12,074,083) 112 Actual Amount $34,143,627 28,728,427 13,978,533 4,403,493 5,871,096 2,610,233 2,846,967 14,674,809 10,924,668 423,604 266,872 118,872,329 239,264 660,306 135,218 996,380 2,937,733 3,423,017 1,107,187 1,698,958 26,763,505 26,639,009 5,339,181 15,649,568 5,394,725 10,027,304 101,011,355 3,990,605 6,269,262 (20,317,868) (10,058,001) 7,802,973 (7,154,626) 648,347 56,304,223 4,334,322 $61,286,892 Variance with Final Budget Positive (Negative) $382,800 3,280,118 (821,467) 403,493 528,031 589,633 (163,296) 4,442,332 1,595,666 260,104 91,881 10,589,295 7,653 6,504 643 41,712 229,524 751 1,316 299 2,584,229 565,228 456 279,652 180,470 745,524 4,643,961 5 4,468,557 175,238 4,643,800 19,877,056 (7,154,626) $12,722,430 MAJORGOVERNMENTALFUNDSOTHERTHAN GENERAL FUND AND SPECIAL REVENUE FUNDS CAPITAL IMPROVEMENT FUND To account for expenditures associated with the acquisition, construction, or improvement of City owned facilities and infrastructure. Funding comes from the general fund, special revenue funds, grants and fees. EAST OF 101 SEWER IMPACT FEES CAPITAL PROJECTS FUND These fees provide new development's share of new and rehabilitated sewer collection and treatment facilities to serve the East of Highway 101 area. EAST OF 101 TRAFFIC IMP ACT FEES CAPITAL PROJECTS FUND These fees are to provide new development's share of new and expanded roadway and intersection improvements to serve the East of Highway 101 area. CHILD CARE IMP ACT FEES CAPITAL PROJECTS FUND These citywide fees provide new development's share of new and expanded childcare facilities to serve the City. DEVELOPER DEPOSIT CAPITAL PROJECTS FUND These fees provide new development's share of funding for the Oyster Point at Highway 101 interchange improvements. CAPITAL INFRASTRUCTURE RESERVE FUND Replacement, upgrade, and maintenance of the City's infrastructure are backlogged, constituting a significant liability. Funds are set aside in this fund as part of the budget process and as part of the City's reserve policy to address the replacement and/or upgrade of the city infrastructure (such as parks, buildings, facilities, streets, sidewalks, and storm water facilities). 113 CITY OF SOUTH SAN FRANCISCO CAPITAL IMPROVEMENT CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 REVENUES: Intergovernmental Other Total Revenues EXPENDITURES: Current: Public works Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) NET CHANGE IN FUND BALANCE Fund balance -July 1 Adjustment to budgetary basis: Encumbrance adjustments Fund balance -June 30 Budget $13,837,689 474,991 14,312,680 52,687,832 52,687,832 (38,375,152) 37,866,546 37,866,546 ($508,606) 114 Variance with Final Budget Positive Actual Amounts (Negative) $3,079,247 ($10,758,442) (474,991) 3,079,247 (11,233,433} 27,207,988 25,479,844 27,207,988 25,479,844 (24,128,741) 14,246,411 10,217,389 (27,649,157) 10,217,389 (27,649,157) (13,911,352) ($13,402,746) (88,331) 14,197,099 $197,416 CITY OF SOUTH SAN FRANCISCO EAST OF 101 SEWER IMPACT FEES CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) REVENUES: Interest and rental Charges for services Total Revenues EXPENDITURES: Current: Non-departmental Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE Fund balance (deficit) -July 1 Fund balance (deficit) -June 30 FOR THE YEAR ENDED JUNE 30, 2018 Budget $2,265,000 2,265,000 2,575 2,575 2,262,425 (339,331) (339,331) $1,923,094 115 Actual Amounts $2,654 2,262,536 2,265,190 2,575 2,575 2,262,615 (111,936) (111,936) 2,150,679 688,223 $2,838,902 Variance with Final Budget Positive (Negative) $2,654 (2,464) 190 190 227,395 227,395 $227,585 CITY OF SOUTH SAN FRANCISCO EAST OF 101 TRAFFIC IMPACT FEES CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 REVENUES: Interest and rental Charges for services Total Revenues EXPENDITURES: Current: Public works Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers (out) Total other financing sources (uses) NET CHANGE IN FUND BALANCE Fund balance -July 1 Fund balance -June 30 Budget $5,716,000 5,716,000 2,575 2,575 5,713,425 (3,539,503) (3,539,503) $2,173,922 116 Variance with Final Budget Positive Actual Amounts (Negative) $17,423 $17,423 5,698,649 (17,351) 5,716,072 72 2,575 2,575 5,713,497 72 (299,685) 3,239,818 (299,685) 3,239,818 5,413,812 $3,239,890 7,045,993 $12,459,805 CITY OF SOUTH SAN FRANCISCO CHILD CARE IMPACT FEES CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) REVENUES: Interest and rental Charges for services Total Revenues EXPENDITIJRES: Current: Non-departmental Public Works Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITIJRES NET CHANGE IN FUND BALANCE Fund balance -July 1 Fund balance -June 30 FOR THE YEAR ENDED JUNE 30, 2018 Budget $1,167,000 1,167,000 2,575 100,000 102,575 1,064,425 $1,064,425 117 Actual Amounts $5,928 1,289,382 1,295,310 2,575 12 2,587 1,292,723 1,292,723 3,399,688 $4,692,411 Variance with Final Budget Positive (Negative) $5,928 122,382 128,310 (99,988) (99,988) 228,298 $228,298 CITY OF SOUTH SAN FRANCISCO DEVELOPER DEPOSIT CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 EXPENDITURES Current: Public works Total Revenues OTHER FINANCING SOURCES (USES) Transfers (out) Total other financing sources (uses) NET CHANGE IN FUND BALANCE Fund balance -July 1 Fund balance -June 30 I 18 Final Budget $69,000 69,000 (1,525,129) (1,525,129) $1,594,129 Actual Amounts $69,639 69,639 (69,639) 72,884 $3,245 Variance with Final Budget Positive (Negative) ($639) (639) 1,525,129 1,525,129 $1,524,490 CITY OF SOUTH SAN FRANCISCO CAPITAL INFRASTRUCTURE RESERVE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 REVENUES: Interest and rental Total Revenues EXPENDITURES Current: Public Works Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE Fund balance -July 1 Fund balance -June 30 Final Budget $14,800 14,800 3,502,915 3,502,915 (3,488,115) 1,220,600 (4,200,015) (2,979,415) ($6,467,530) 119 Variance with Final Budget Positive Actual Amounts (Negative) $14,864 $64 14,864 64 3,502,915 3,502,915 14,864 3,502,979 10,000,000 8,779,400 (2,954,823) 1,245,192 7,045,177 10,024,592 7,060,041 $13,527,571 14,525,445 $21,585,486 This Page Left Intentionally Blank NON-MAJOR GOVERNMENTAL FUNDS Special revenue funds are used to account for revenue sources that are restricted by law or administrative action to expenditures for specified purposes. Special revenue funds used by the City of South San Francisco include: Gas Tax -Accounts for State monies received and expended for street improvements, repairs, engineering, and administration under Streets and Highway Code Sections 2105, 2106, 2107, and 2107.5. Includes sales taxes on gasoline received from the State's Traffic Congestion Relief Fund. Developer Contributions -Accounts for fees deposited for planning and engineering reviews or for future project development. Federal Aviation Grant -This fund accounts for federal monies received for insulating structures against airport noise. Community Development Block Grant -Accounts for Federal monies received to be expended for development of jobs and suitable housing for low-income residents. Maintenance District -Accounts for a portion of property tax dedicated to provide for the maintenance of landscaped areas within housing developments. Transportation Sales Tax -Accounts for the sales tax that provides resources for street improvements and repairs. Solid Waste Reduction -Accounts for revenues and expenditures associated with the waste reduction, recycling, composting and household hazardous waste programs for residents and businesses. Supplemental Law Enforcement Services -Accounts for State monies provided for designated Police department services. City Programs -Organizations and individuals provide revenues that fund certain programs and services. Affordable Housing Trust -The inclusionary housing requirement in the City provides that 20% of new residential housing units (for projects of 4 or more units) be affordable. These in-lieu fees (in-lieu of production of affordable housing units by the developer) provide new residential development's share of affordable housing units. PEG Equipment and Access -Accounts for the one percent of money set-aside from cable franchise fees that are used to support public, educational and governmental (PEG) channels. Transit Station Enhancement in-Lieu Fee -Accounts for revenues that are collected as a negotiated community benefit. Road Maintenance and Rehabilitation -Accounts for State monies received and expended for road maintenance and rehabilitation pursuant to Senate Bill 1, approved in 2017. 121 NON-MAJOR GOVERNMENTAL FUNDS (Continued) Capital projects funds are used to account for resources used for the acquisition and construction of capital facilities or major capital equipment, except for capital improvements financed by proprietary funds. Capital projects funds used at the City of South San Francisco include: Non-obligated Capital Projects -Accounts for the construction of assets financed by non- obligated debt. Public Safety Impact Fee -These fees are to provide new development's share of funding for the replacement of public safety capital equipment, vehicles and facilities. Oyster Point Improvements Impact Fees -These fees provide new development's share of funding for the Oyster Point at Highway 101 interchange improvements. Sewer Capacity Charges -Accounts for cost recovery charged to new development based on proportional benefit, associated with providing sewer collection and treatment capacity to new development, both through existing infrastructure provided, and through future capital projects not funded by other sources. Oyster Point Development Impact Fees -Accounts for expenditures associated with the acquisition, construction, or improvement related to Oyster Point Development. Park Land Acquisition Fee -Accounts for monies received and expended pursuant to SSFMC Chapter 8.67 and Mitigation Fee Act for park land acquisition. Park Construction Fee -Accounts for monies received and expended pursuant to SSFMC Chapter 8.67 and Mitigation Fee Act for park construction. Bicycle and Pedestrian Impact Fee -Accounts for monies received and expended pursuant to SSFMC Chapter 8.68 for mitigation of impacts of new development on bicycle and pedestrian improvements in the City. 122 This Page Left Intentionally Blank ASSETS Cash and investments Receivables: Accounts Accrued interest Loans Restricted cash and investments Land held for resale Total Assets LIABILITIES Liabilities: Accounts payable Other payable Deposits Due to other funds Unearned revenue Total Liabilities Fund Balances: Restricted Unassigned Total Fund Balances Total Liabilities and Fund Balances CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2018 SPECIAL REVENUE FUNDS Federal Developer Aviation Gas Tax Contributions Grant $403,847 $7,668,406 $727,752 119,577 3,798 36,990 3,704 $527,222 $7,705,396 $731,456 $36,059 29,846 1,310,428 $731,456 1,376,333 731,456 $527,222 6,329,063 527,222 6,329,063 $527,222 $7,705,396 $731,456 124 Community Development Maintenance Block Grant Districts $3,154,914 $159,349 898,485 249,017 $1,306,851 $3,154,914 $82,293 $12,810 955,206 1,037,499 12,810 269,352 3,142,104 269,352 3,142,104 $1,306,851 $3,154,914 SPECIAL REVENUE FUNDS Solid Supplemental Affordable PEG Transit Station Transportation Waste Law Enforce-City Housing Equipment and Enhancement Sales Tax Reduction ment Services Programs Trust Access In-Lieu Fee $2,951,683 $422,869 $715 $1,382,014 $1,723,006 $1,089,639 $656,611 16,255 328 47,588 14,247 388 18,486 8,531 5,014 2,919 19,234 1,900,000 $2,965,930 $439,124 $1,103 $1,400,500 $3,651,099 $1,142,241 $659,530 $34 $25,330 $330 $13,638 129 $1,000 13,672 1,000 25,459 330 $2,965,930 425,452 103 1,375,041 $3,651,099 $1,141,911 $659,530 2,965,930 425,452 103 1,375,041 3,651,099 1,141,911 659,530 $2,965,930 $439,124 $1,103 $1,400,500 $3,651,099 $1,142,241 $659,530 (Continued) 125 ASSETS Cash and investments Receivables: Accounts Accrued interest Loans Restricted cash and investments Land held for resale Total Assets LIABILITIES Liabilities: Accounts payable Other payable Deposits Due to other funds Unearned revenue Total Liabilities Fund Balances: Restricted Unassigned Total Fund Balances Total Liabilities and Fund Balances CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2018 SPECIAL REVENUE FUND CAPITAL PROJECTS FUNDS Road Non-obligated Public Oyster Point Maintenance Capital Safety Improvement and Rehabilitation Projects Iml!actFee Iml!act Fees $213,494 $41,857 $831,131 $22,138 56,915 540 4,907 7,673 $270,949 $41,857 $836,038 $29,811 $270,949 $41,857 $836,038 $29,811 270,949 41,857 836,038 29,811 $270,949 $41,857 $836,038 $29,811 126 Sewer Capacity Cha!!es $9,473,922 32,675 $9,506,597 $9,506,597 9,506,597 $9,506,597 CAPITAL PROJECTS FUNDS Total Oyster Point Park Land Park Bicycle and Nonmajor Development Acquisition Construction Pedestrian Governmental ImeactFees Fee Fee ImeactFee Funds $668 $54,466 $17,543 $923 $30,837,598 47,258 447,270 198 76 3 140,149 917,719 249,017 1,900,000 $47,926 $54,664 $17,619 $926 $34,491,753 $188,415 $345,271 998,819 1,310,428 68,000 69,000 731,456 256,415 3,454,974 $54,664 $17,619 $926 31,245,268 (208,489) (208,489) (208,489) 54,664 17,619 926 31,036,779 $47,926 $54,664 $17,619 $926 $34,491,753 127 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2018 SPECIAL REVENUE FUNDS Federal Community Developer Aviation Development Gas Tax Contributions Grants Block Grant REVENUES Property taxes Other taxes Intergovernmental $1,531,782 $5,345 $818,724 Interest and rentals 547 $10,347 880 22,133 Charges for services 2,474,089 Other 32,911 Total Revenues 1,532,329 2,517,347 6,225 840,857 EXPENDITURES Current: Economic and community development 382,193 6,225 1,050,395 Public works Non-departmental Police Other Debt service: Principal repayments Total Expenditures 382,193 6,225 1,050,395 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,532,329 2,135,154 (209,538) OTHER FINANCING SOURCES (USES) Transfers in Transfers out (1,936,652) (683,959) Total Other Financing Sources (Uses) (1,936,652) (683,959) Net Change in Fund Balances (404,323) 1,451,195 (209,538) Fund balance -July 1 931,545 4,877,868 478,890 Fund balance -June 30 $527,222 $6,329,063 $269,352 128 Maintenance Districts $1,846,017 1,846,017 1,266,282 1,266,282 579,735 579,735 2,562,369 $3,142,104 Solid Transportation Waste Sales Tax Reduction $1,476,167 4,544 $195,059 1,480,711 195,059 87,196 87,196 1,480,711 107,863 (704,199) (225,408) (704,199) (225,408) 776,512 (117,545) 2,189,418 542,997 $2,965,930 $425,452 SPECIAL REVENUE FUNDS Supplemental Law Enforce- ment Services $139,556 231 139,787 139,787 139,787 103 $103 City Programs $3,251 780,230 783,481 192,058 255,671 447,729 335,752 (3,096,156) (3,096,156) (2,760,404) 4,135,445 $1,375,041 129 Affordable Housing Trnst $3,372 3,372 3,372 3,372 3,647,727 $3,651,099 PEG Transit Station Equipment and Enhancement Access In-Lien Fee $1,351 $903 599,718 173,849 175,200 600,621 4,585 4,585 170,615 600,621 (72) (72) 170,615 600,549 971,296 58,981 $1,141,911 $659,530 (Continued) CAPITAL PROJECTS FUNDS Oyster Point Park Land Park Development Acquisition Construction Impact Fees Fee Fee $503,827 $54,664 $25,169 3,707,728 4,211,555 54,664 25,169 4,420,044 4,420,044 Bicycle and Pedestrian Impact Fee $926 926 Total Nonmajor Governmental Funds $1,846,017 1,615,723 2,743,760 51,725 11,786,184 5,562,588 23,605,997 1,526,009 5,761,941 4,585 331,845 256,298 2,382,000 10,262,678 ---~(2_0~8,_48_9~) ____ 5~4,~6_64 ______ 2~5,_16_9 ______ ..;_9_26'--____ 13..,_,3_4-'-"3':..;.3....;19_ (7,550) (7,111,629) (7,550) (7,111,629) (208,489) 54,664 17,619 926 6,231,690 24,805,089 ($208,489) $54,664 $17,619 $926 $31,036,779 131 CITY OF SOUTH SAN FRANCISCO NONMAJORGOVERNMENTALFUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 GASTAX DEVELOPER CONTRIBUTIONS Variance Variance Final Positive Final Positive Budget Actual (Negative} Budget Actual (Negative} REVENUES Property taxes Other taxes Intergovernmental $1,674,827 $1,531,782 ($143,045) Interest and rentals 15,000 547 (14,453) $10,347 $10,347 Charges for services $2,517,000 2,474,089 (42,911) Other 32,911 32,911 Total Revenues 1,689,827 1,532,329 {157,498} 2,517,000 2,517,347 347 EXPENDITURES Current: City Council Economic and community development 118,697 479,863 (361,166) Public works Non-departmental Fire Police Other Debt service: Principal repayments Total Expenditures 118,697 479,863 {361,166} EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,689,827 1,5321329 {157,498} 2,398,303 2,037,484 {360,819} OTHER FINANCING SOURCES (USES) Transfers in 50,294 (50,294) Transfers out {3,086,620} {1,936,652} 1,1491968 {4,278,501} {683,959} 3,594,542 Total Other Financing Sources (Uses) {3,036,326} {1,936,652} 1,099,674 {4,278,501} {683,959} 3,594,542 NET CHANGE IN FUND BALANCES ($1,346,499} (404,323) $942,176 {$1,880,198) 1,353,525 $3,233,723 Adjustment to budgetary basis: Encumbrance adjustments 97,670 Fund balance -July 1 931,545 4,877,868 Fund balance -June 30 $527,222 $6,329,063 132 FEDERAL AVIATION COMMUNITY DEVELOPMENT GRANT BLOCK GRANT MAINTENANCE DISTRICTS Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $1,558,558 $1,846,017 $287,459 $5,345 $5,345 $415,000 $818,724 $403,724 $500 880 380 80,000 22,133 (57,867) 11,437 (11,437) 500 6,225 5,725 506 437 840 857 334,420 1,558,558 1,846,017 287,459 10,000 6,225 3,775 658,791 1,363,940 (705,149) 1,526,693 1,266,282 260,411 10,000 6,225 3,775 658 791 1,363,940 {705,149) 1,526,693 1,266,282 260,411 (9,500) 9 500 {152,354) (523,083) (370,729) ___ 3_.1, __ 86_5 ____ 5_7_.9, __ 73_5 ____ 5_4_.7, __ 87_0_ (95,330) 95,330 (76,532) 76,532 (95,330) 95,330 (76,532) 76,532 ($9,500) $9,500 ($247,684) (523,083) ($275,399) ($44,667) 579,735 $624,402 313,545 478,890 2,562,369 $269,352 $3,142,104 (Continued) 133 CITY OF SOUTH SAN FRANCISCO NONMAJORGOVERNMENTALFUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 TRANSPORTATION SALES TAX SOLID WASTE REDUCTION Variance Variance Final Positive Final Positive Bud~et Actual (Ne~ative2 Bud~et Actual (Ne~ative2 REVENUES Property taxes Other taxes $1,468,995 $1,476,167 $7,172 Intergovernmental Interest and rentals 25,000 4,544 (20,456) Charges for services $180,000 $195,059 $15,059 Other Total Revenues 1,493,995 1,480,711 (13,2842 180,000 195,059 15,059 EXPENDITURES Current: City Council Economic and community development 151,563 158,276 (6,713) Public works Non-departmental Fire Police Other Debt service: Principal repayments Total Expenditures 151,563 158,276 {6,7132 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,493,995 1,480,711 {13,2842 28,437 36,783 8,346 OTHER FINANCING SOURCES (USES) Transfers in Transfers out {3,623,6242 {704,1992 2,919,425 {391,3382 {225,4082 165,930 Total Other Financing Sources (Uses) {3,623,6242 {704,1992 2,919,425 {391,3382 {225,4082 165,930 NET CHANGE IN FUND BALANCES ($2,129,629) 776,512 $2,906,141 {$362,9012 (188,625) $174,276 Adjustment to budgetary basis: Encumbrance adjustments 71,080 Fund balance -July 1 2,189,418 542,997 Fund balance -June 30 $2,965,930 $425,452 134 SUPPLEMENTAL LAW ENFORCEMENT SERVICES Variance Final Positive Budget Actual (Negative) $100,000 $139,556 $39,556 231 231 100,000 139,787 39,787 139,787 (139,787) 139,787 (139,787) 100,000 (100,000) 000,000) _____ _.;..10_0._,o_oo_ 000,000) ______ 10_0._,o_oo_ 103 $103 CITY PROGRAMS Final Budget $1,000,000 1,000,000 13,000 2,365,425 2,378,425 (1,378,425) (1,597,106) (1,597,106) ($2,975,531) Actual $3,251 780,230 783,481 192,058 255,671 447,729 335,752 (3,096,156) (3,096,156) (2,760,404) 4,135,445 $1,375,041 135 Variance Positive (Negative) $3,251 (219,770) (216,519) 2,173,367 (255,671) 2,173,367 1,714,177 AFFORDABLE HOUSING TRUST Variance Final Positive Budget Actual (Negative) $3,372 $3,372 3,372 3,372 3,372 3,372 (1,499,050) ------------ (1,499,050) ------------ $215,127 3,372 3,647,727 $3,651,099 $3,372 (Continued) CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 PEG TRANSIT ENHANCEMENT EQUIPMENT AND ACCESS IN-LIEU FEE Variance Variance Final Positive Final Positive Bud~et Actual (Ne~ative2 Bud~et Actual (Ne~ative2 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals $5,000 $1,351 ($3,649) $903 $903 Charges for services $600,000 599,718 (282) Other 1252000 173,849 48,849 Total Revenues 130,000 175,200 45,200 600,000 600,621 621 EXPENDITURES Current: City Council Economic and community development Public works Non-departmental 111,500 73,476 38,024 Fire Police Other Debt service: Principal repayments Total Expenditures 111,500 73,476 38,024 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 18,500 101,724 83,224 600,000 600,621 621 OTHER FINANCJNG SOURCES (USES) Transfers in Transfers out {495,0002 {722 494,928 Total Other Financing Sources (Uses) {495,0002 {722 494,928 NET CHANGE IN FUND BALANCES $18,500 101,724 $83,224 $105,000 600,549 $495,549 Adjustment to budgetary basis: Encumbrance adjustments 68,891 Fund balance -July I 971,296 58,981 Fund balance -June 30 $1,141,911 $659,530 136 ROAD MAINTENANCE NONOBLIGATED PUBLIC SAFETY AND REHABILITATION CAPITAL PROJECTS IMPACT FEE Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $372,444 $301,706 ($70,738) $1,537 $1,537 $869,000 867,870 (1,130) 372,444 301,706 (70,738) ______________ 86_9.._,o_oo ____ 86_9.._,4_07 _____ 4_07_ 6,167 6,167 627 (627) 627 (627) 6,167 (6,167) 372 444 301,079 (71,365) 862,833 869,407 6,574 (30,130) (30,130) (505,224) (427,503) 77,721 p0,130) (30,130) (505,224) (427,503) 77,721 $372,444 270,949 ($101,495) $357,609 441,904 $84,295 $41,857 394,134 $270,949 $41,857 $836,038 (Continued) 137 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 OYSTER POINT SEWER IMPROVEMENT IMPACT FEES CAPACITY CHARGES Variance Variance Final Positive Final Positive Bud!let Actual (Ne!lative 2 Bud!let Actual (Ne!lative2 REVENUES Property taxes Other taxes Intergovernmental $86,203 $86,203 Interest and rentals $2,629 $2,629 Charges for services $2,380,000 2,379,998 (2) $5,600,000 5,552,734 (47,266) Other Total Revenues 2,380,000 2,382,627 2,627 5,600,000 5,638,937 38,937 EXPENDITURES Current: City Council Economic and community development Public works 52,561 52,561 2,575 75,615 (73,040) Non-departmental Fire Police Other Debt service: Principal repayments 21382,000 2,382,000 Total Expenditures 2,434,561 2,382,000 52,561 2,575 75,615 (73,0402 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (54,5612 627 55,188 5,597,425 5,563,322 p4,1032 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES ($54,5612 627 $55,188 $5,597,425 5,563,322 ($34,1032 Adjustment to budgetary basis: Encumbrance adjustments Fund balance -July 1 29,184 3,943,275 Fund balance -June 30 $29,811 $9,506,597 138 OYSTER POINT DEVELOPMENT IMPACT FEES Final Budget $80,500 3,707,000 3,787,500 4,420,000 Actual $503,827 3,707,728 4,211,555 4,666,418 Variance Positive (Negative) $423,327 728 424,055 (246,418) PARKLAND ACQUISITION FEE Final Budget $54,000 54,000 Actual $54,664 54,664 Variance Positive (Negative) $664 664 PARK CONSTRUCTION FEE Final Budget $25,000 25,000 Actual $25,169 25,169 Variance Positive (Negative) $169 169 4,420,000 4,666,418 (246,418) ------------------------------ (632,500) (454,863) 177,637 54,000 54,664 664 25,000 25,169 169 (7,550) (7,550) (7,550) (7,550) ($632,500) (454,863) $177,637 $54,000 54,664 $664 $25,000 17,619 ($7,381) 246,374 ($208,489) $54,664 $17,619 (Continued) 139 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2018 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Charges for services Other Total Revenues EXPENDITURES Current: City Council Economic and co=unity development Public works Non-departmental Fire Police Other Debt service: Principal repayments Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES Adjustment to budgetary basis: Encumbrance adjustments Fund balance -July 1 Fund balance -June 30 BICYCLE AND PEDESTRIAN IMPACT FEE Final Budget Actual $926 926 926 926 $926 140 Variance Positive (Negative) $926 926 926 $926 INTERNAL SERVICE FUNDS Internal service funds account for department services and fmancing performed for other departments within the same governmental jurisdiction. Funding comes from charges assessed to the departments benefiting from the service. Internal service funds used at the City include: City Service -Accounts for vehicle maintenance and information technology services provided to City departments. Self Insurance -Accounts for workers' compensation, general liability and property damage claim activity and fmancing is represented in this fund. Health and Retirement Benefits -Accounts for health and retirement benefits paid on the behalf of eligible City employees. Equipment Replacement -Accounts for resources set-aside for the future replacement of City vehicles and equipment. 141 ASSETS Current assets: Cash and investments Receivables: Accounts Accrued interest Deposit Total current assets Noncurrent assets: Capital assets: CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION JUNE 30, 2018 Health and Self Retirement City Service Insurance Benefits $1,773,110 $13,377,450 $10,985,626 7,876 65,253 50,210 157,500 46,010 1,780,986 13,600,203 11,081,846 Depreciable, net of accumulated depreciation 291 Total Assets 1,781,277 13,600,203 11,081,846 LIABILITIES Current liabilities: Accounts payable 114,658 109,836 406 Other payable 35,772 12,733 Current portion of accrued insurance loss 660,356 Current portion of compensated absences 88,958 693,441 Current portion of long-term debt Total current liabilities 239,388 782,925 693,847 Noncurrent liabilities: Accrued insurance loss 12,133,000 Compensated absences obligation 112,686 639,688 Noncurrent portion oflong-term debt Total noncurrent liabilities 112,686 12,133,000 639,688 Total Liabilities 352,074 12,915,925 1,333,535 NET POSffiON: Net investment in capital assets 291 Unrestricted 1,428,912 684,278 9,748,311 Total Net Position $1,429,203 $684,278 $9,748,311 142 Equipment Replacement Total $4,056,950 $30,193,136 11,984 135,323 203,510 4,068,934 30,531,969 5,443,613 5,443,904 9,512,547 35,975,873 224,900 26,285 74,790 660,356 782,399 381,482 381,482 407,767 2,123,927 12,133,000 752,374 753,619 753,619 753,619 13,638,993 1,161,386 15,762,920 4,308,512 4,308,803 4,042,649 15,904,150 $8,351,161 $20,212,953 CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2018 Health and Self Retirement Equipment City Service Insurance Benefits Re2Iacement Total OPERATING REVENUES Charges for services $4,290,790 $4,206,526 $13,690,768 $2,014,222 $24,202,306 Total Operating Revenues 4,290,790 4,206,526 13,690,768 2,014,222 24,202,306 OPERATING EXPENSES Personnel expenses 1,812,572 1,087,130 13,376,898 16,276,600 Professional services 501,259 332,776 406 834,441 Program supplies 1,037,360 40,000 1,278 44,089 1,122,727 Insurance 11,578 1,583,181 1,594,759 Self-insurance and claims 1,486,551 1,486,551 Repair and maintenance 424,366 424,366 Utilities 29,271 29,271 Depreciation 580 837,628 838,208 Other 10,203 341,442 351,645 Total Operating Expenses 3,827,189 4,529,638 13,720,024 881,717 22,958,568 Operating Income (Loss) 463,601 (323,112~ (29,256~ 1,132,505 1,243,738 NONOPERATING REVENUES (EXPENSES) Interest income 2,368 16,054 12,648 3,186 34,256 Interest expense (47,430) (47,430) Gain from disposal of capital assets 43,028 43,028 Other 58,271 58,271 Total Nonoperating Revenues (Expenses) 2,368 74,325 12,648 (1,216) 88,125 Net income (loss) before transfers 465,969 (248,787) (16,608) 1,131,289 1,331,863 TRANSFERS Transfers in 1,296,000 1,200,000 2,496,000 Transfers out (184,087) (184,087) Change in Net Position 465,969 (248,787) 1,279,392 2,147,202 3,643,776 Net Position -(deficits) July 1, as adjusted 963,234 933,065 8,468,919 6,203,959 16,569,177 Net Position -(deficits) June 30 $1,429,203 $684,278 $9,748,311 $8,351,161 $20,212,953 143 CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2018 Health and Self Retirement City Service Insurance Benefits CASH FLOWS FROM OPERATING ACTIVITIES Cash received from interfund service provided $4,300,918 $4,264,797 $13,690,768 Cash payment to suppliers for goods and services (2,014,037) (1,943,224) (343,126) Cash payment to employees for services (1,749,903) (992,317) (13,388,616) Cash payment for judgments and claims (1,666,137) Net Cash Provided by Operating Activities 536,978 (336,881) (40,974) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 1,296,000 Transfers out Net Cash Provided by Noncapital Financing Activities 1,296,000 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on capital lease Interest payments Acquisition of capital assets, net Proceeds from the sale of capital assets Net Cash Used in Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received 16,597 140,682 107,667 Changes in market values of investments (17,742) (146,988) (113,101) Net Cash Provided by Investing Activities (1,145) (6,306) (5,434) Net Increase (Decrease) in cash and cash equivalents 535,833 (343,187) 1,249,592 Cash and cash equivalents, beginning 1,237,277 13,720,637 9,736,034 Cash and cash equivalents, ending $1,773,110 $13,377,450 $10,985,626 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $463,601 ($323,112) ($29,256) Adjustments to reconcile operating income (loss) to cash flows from operating activities: Depreciation 580 Other non-operating revenue (expenses) 58,271 Net change in assets and liabilities: Accounts and lease receivables 10,128 Accounts payable 37,896 94,813 (18,825) Other payable 12,733 Accrued insurance losses (179,586) Compensated absence obligations 24,773 7,107 Net Cash Provided by (Used in) Operating Activities $536,978 ($336,881) ($40,974) 144 Equipment Re~lacement Total $2,014,222 $24,270,705 (437,977) (4,738,364) (16,130,836) (1,666,137) 1,576,245 1,735,368 1,200,000 2,496,000 (184,087) (184,087) 1,015,913 2,311,913 (538,422) (538,422) (47,430) (47,430) (493,263) (493,263) 46,283 46,283 (1,032,832) (1,032,832) 28,010 292,956 (26,994) (304,825) 1,016 (11,869) 1,560,342 3,002,580 2,496,608 27,190,556 $4,056,950 $30,193,136 $1,132,505 $1,243,738 837,628 838,208 58,271 10,128 (78,467) 35,417 (315,421) (302,688) (179,586) 31,880 $1,576,245 $1,735,368 AGENCYFUND An agency fund is used to account for monies where the City is acting as an agent for another government entity. The agency fund used at the City of South San Francisco consisted of: SSF Employee Deferred Comp Trust Oversight -This fund is used to pay for the administrative costs of monitoring the Deferred Compensation Funds on behalf of City employees. 145 ASSETS Cash and investments Interest receivable Total Assets LIABILITIES Accounts payable Other accrued liabilities Total Liabilities CITY OF SOUTH SAN FRANCISCO AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2018 SSF Employee Deferred Comp Trust Oversight Balance Balance June 30, 2017 Additions Deductions June 30, 2018 $105,663 $82,265 $105,663 $82,265 318 400 318 400 $105,981 $82,665 $105,981 $82,665 $24,492 $2,602 $24,492 $2,602 81,489 80,063 81,489 80,063 $105,981 $82,665 $105,981 $82,665 146 STATISTICAL SECTION This part of the City's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit. Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well being have changed over time: 1. Net Position by Component 2. Changes in Net Position 3. Fund Balances of Governmental Funds 4. Changes in Fund Balance of Governmental Funds Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax: 1. Assessed Value and Estimated Market Value of Taxable Property 2. All Overlapping Property Tax Rates 3. Principal Property Tax Payers 4. Twenty Largest Taxable Property Owners for Merged RDA Project Area 5. Property Tax Levies and Collections Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future: 1. Ratio of Outstanding Debt by Type 2. Computation of Direct and Overlapping Debt 3. Computation of Legal Bonded Debt Margin 4. Continuing Disclosure Requirements: a. Revenue Bond Coverage b. Sewer Debt Service Coverage c. Bonded Debt Pledge Revenue Coverage Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place: 1. Demographic and Economic Statistics 2. Principal Employers 147 STATISTICAL SECTION -(Continued) Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs: 1. Full-Time City Government Employees by Function 2. Operating Indicators by Function/Program 3. Capital Asset Statistics by Function/Program Miscellaneous Information 1. Collection and Use of 1 % Special Transient Occupancy Tax Sources Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. 148 Expenses Governmental Activities: General Government Fire Department Police Department Public Works Park, Recreation and Maintenance Services Library Economic and Community Development Interest on Long -Term Debt Total Governmental Activities Expenses Business-Type Activities: Sewer Rental Parking District Storm Water Total Business-Type Activities Expenses Total Primary Government Expenses Program Revenues Governmental Activities: Charges for Services: General Government Fire Department Police Department Public Works Park, Recreation and Maintenance Services Library Economic and Community Development Operating Grants and Contributions Capital Grants and Contributions Total Government Activities Program Revenues Business-Type Activities: Charges for Services: Sewer Rental Parking District Storm Water Operating Grants and Contributions Capital Grants and Contributions Total Business-Type Activities Program Revenue Total Primary Government Program Revenues Net (Expense)/Revenue Governmental Activities Business-Type Activities Total Primary Government Net Expense CITY OF SOUTH SAN FRANCISCO Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) 2009 2010 $7,140,676 $6,538,052 19,047,877 17,868,050 21,051,263 20,352,570 20,924,132 15,873,783 11,574,808 10,411,821 4,959,138 4,616,658 15,886,834 23,147,877 5,289,818 5,035,780 105,874,546 103,844,591 17,549,690 18,944,267 341,100 338,995 746,316 722,232 18,637,106 20,005,494 $124,511,652 $123,850,085 $2,689,370 $2,539,316 2,415,617 2,851,984 1,650,620 1,479,104 2,462,538 4,412,581 4,872,718 3,032,399 240,542 187,380 4,868,445 4,652,031 13,388,016 5,786,227 182,462 217,877 32,770,328 25,158,899 15,770,470 17,486,418 606,847 616,578 419,446 422,467 10,392,219 5,679,902 162,599 24,720 27,351,581 24,230,085 $60,121,909 $49,388,984 ($73,104,218) ($78,685,692) 8,714,475 4,224,591 {$64,389,743} {$74,461,101} 150 2011 2012 2013 $7,711,156 $7,801,328 $8,360,945 20,032,141 20,749,323 22,746,291 22,429,782 23,330,208 24,756,958 17,127,086 21,269,281 15,773,710 10,866,568 11,641,892 12,570,236 4,664,490 4,754,760 4,615,967 15,018,495 8,702,949 16,126,427 4,249,454 3,328,244 52,139 102,099,172 101,577,985 105,002,673 19,277,959 19,446,739 20,870,522 571,261 769,117 792,609 710,903 1,010,093 1,655,950 20,560,123 21,225,949 23,319,081 $122,659,295 $122,803,934 $128,321,754 $2,688,990 $2,032,292 $1,951,016 3,221,837 3,697,665 2,987,956 1,815,405 2,599,149 2,640,146 3,805,824 3,607,224 2,926,227 3,004,435 3,178,276 3,433,567 168,505 143,971 125,416 4,944,328 4,968,383 3,457,020 5,549,711 5,650,685 5,455,010 2,728,543 1,471,416 4,036,786 27,927,578 27,349,061 27,013,144 18,087,695 19,310,286 19,338,107 722,807 760,248 732,932 406,589 409,498 427,291 5,509,874 5,936,527 6,137,401 31,670 24,758,635 26,416,559 26,635,731 $52,686,213 $53,765,620 $53,648,875 ($74,171,594) ($74,228,924) ($77,989,529) 4,198,512 5,190,610 3,316,650 {$69,973,082} {$69,038,314} {$74,672,879} 2014 2015 2016 2017 2018 $7,155,035 $8,421,857 $9,044,518 $10,253,403 $12,506,188 21,200,903 22,005,883 22,488,964 25,750,126 30,352,387 24,376,379 23,910,436 23,158,168 25,838,242 30,732,288 14,980,417 14,493,039 11,916,572 12,396,998 18,379,278 12,658,309 12,383,880 12,901,657 15,217,677 17,162,377 4,310,550 4,300,885 4,442,577 5,184,282 5,910,406 5,525,541 5,928,316 7,603,275 8,927,162 10,094,626 90,207,134 91,444,296 91,555,731 103,567,890 125,137,550 19,301,103 23,969,579 18,273,580 22,661,768 24,397,607 943,859 503,014 894,769 940,181 1,202,319 1,078,868 1,234,616 1,289,465 1,333,409 1,026,948 21,323,830 25,707,209 20,457,814 24,935,358 26,626,874 $111,530,964 $117,151,505 $112,013,545 $128,503,248 $151,764,424 $5,785,598 $3,946,302 $4,194,563 $2,225,049 $1,966,755 3,304,952 3,520,275 3,450,524 4,242,940 6,327,921 2,805,640 2,370,736 2,076,837 2,146,909 2,230,824 4,734,813 5,071,729 10,361,525 10,869,608 24,727,897 3,571,947 3,708,272 3,744,137 3,756,369 4,489,665 138,827 120,850 164,271 96,987 102,124 5,800,849 5,337,177 6,131,463 3,911,597 13,052,441 5,601,916 5,753,845 5,581,492 4,533,539 5,827,149 1,538,225 632,735 1,147,337 577 995 2,515,868 33,282,767 30,461,921 36,852,149 32,360,993 61,240,644 19,155,467 19,798,033 19,569,341 19,897,769 22,417,156 785,586 819,051 843,199 916,687 1,084,472 409,458 407,640 412,105 418,840 656,315 7,619,601 6,242,687 5,802,788 5,763,645 5,834,455 27,970,112 27,267,411 26,627,433 26,996,941 29,992,398 $61,252,879 $57,729,332 $63,479,582 $59,357,934 $91,233,042 ($56,924,367) ($60,982,375) ($54,703,582) ($71,206,897) ($63,896,906) 6,646,282 1,560,202 6,169,619 2,061,583 3,365,524 ($50,278,085) ($59,422,173) ($48,533,963) ($69,145,314) ($60,531,382) 151 General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property Taxes Sales Taxes Transient Occupancy Tax Franchise fees Other Taxes Motor Vehicle In-Lieu Property taxes in lieu of vehicle license fees Interest Earnings Other Extraordinary Item Transfers Special item Total Government Activities Business-Type Activities: Interest Earnings Transfers Total Business-Type Activities Total Primary Government Change in Net Position Governmental Activities Business-Type Activities Total Primary Government CITY OF SOUTH SAN FRANCISCO Changes in Net Position ( continued) Last Ten Fiscal Years (Accrual Basis of Accounting) 2009 2010 $59,369,550 $55,014,367 11,752,776 9,146,620 6,178,391 5,820,675 6,870,791 6,768,753 183,193 192,035 5,563,165 5,224,547 4,760,345 5,127,255 1,925,666 1,496,744 (423,012) (1,459,296) 96,180,865 87,331,700 244,887 175,188 423,012 1,459,296 667,899 1,634,484 $96,848,764 $88,966,184 $23,076,647 $8,646,008 9,382,374 5,859,075 $32,459,021 $14,505,083 152 2011 2012 2013 $54,323,420 $37,379,175 $26,420,861 11,199,175 11,691,564 12,931,805 7,191,938 8,619,170 9,659,281 7,071,446 7,089,687 7,588,471 211,503 168,214 33,767 5,086,144 5,153,384 4,955,873 3,944,785 2,384,207 809,721 1,891,421 9,300,137 1,965,744 (107,717,428) (11,769,393) (785,309) (906,857) 11,873,226 79,150,439 {26,717,199} 75,331,892 122,283 149,242 95,177 11,769,393 785,309 906 857 11,891,676 934,551 1,002,034 $91,042,115 {$25,782,648} $76,333,926 $4,978,845 ($100,946,123) ($2,657,637) 16,090,188 6,125,161 4,318,684 $21,069,033 {$94,820,962} $1,661,047 2014 2015 2016 2017 2018 $22,890,828 $24,650,648 $24,650,648 $29,023,618 $29,551,445 12,725,141 13,932,125 13,932,125 24,087,776 28,340,393 11,174,017 12,947,473 12,947,473 13,631,507 13,978,533 4,090,073 4,403,493 8,141,010 8,650,056 8,650,056 5,708,187 5,871,096 40,074 26,995 26,995 28,933 34,452 5,319,154 5,551,651 5,551,651 6,133,230 6,438,199 1,108,177 629,036 629,036 622,518 1,097,916 2,012,444 4,577,239 4,577,239 2,365,820 5,180,288 (1,041,120) (1,429,308) (1,429,308) (1,105,038) (1,997,377) 45,205,422 {7,154,626} 62,369,725 69,535,915 69,535,915 129,792,046 85,743,812 153,353 126,874 126,874 27,710 37,072 1,041,120 1,429,308 1,429,308 1,105,038 1 997,377 1194,473 1,556,182 1,556,182 1,132,748 2,034,449 $63,564,198 $71,092,097 $71,092,097 $130,924,794 $87,778,261 $5,445,358 $8,553,540 $8,553,540 $58,585,149 $21,846,906 7,840,755 3,116,384 3,116,384 3,194,331 5,399,973 $13,286,113 $11,669,924 $11,669,924 $61,779,480 $27,246,879 153 Th ou san ds $180,000 $1 60,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 v- v >--- _,t-- _,t-- ,,- v - -- -• F -- >--- >--- >--- -- -- -- -- C ITY OF SOUTH SAN FRANCISCO F und Bal anc es of Governm ental F unds Last Ten F isca l Years (Mo difi ed Accrua l Basis of A ccounting) • -,. "" ~ • ---->--- ->--- I - 2009 2010 20 11 2012 2013 20 14 2015 2016 2009 2010 2011 201 2 2013 201 4 General Fund Reserved $554,692 $889,186 Unreserved 17,509,823 14,84 1,958 Nonspendable $67,129 $90,167 $805,677 $14,163 Restricted Committed 40 1,797 208,054 1,406,430 3,879,45 1 Assigned 771 ,849 840,365 566,104 743,74 6 Unassigned 15,049,168 17,34 7,445 23 ,498,194 15 ,891,899 T otal General Fund $18,064,515 $15,731 ,144 $16,289,943 $18,486,031 $26,276,405 $20,529,259 All Other Governmental Fu nds Reserved $65 ,1 17,971 $64,163 ,373 Unreserved, reported in: Special revenue funds 23 ,826,184 11,079,390 Debt service funds 121 ,764 3,198,600 Capital project funds 5 1,589,538 69,286,2 1 1 Restri cted $163,727,096 $43 ,364,540 $30 ,539,396 $42,392,238 Assigned 2,390,904 2,076,065 1,105,320 0 Unassigned (14,353,252) (1,388,956) (1,379,895) (52 1,604) Total all other governmental funds $140,655,457 $147,727,574 $15 1,764,748 $44,05 1,649 $30 ,264,82 1 $4 1,870,634 (a) The change in total fu nd balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis. (b) In fiscal year 2011, the City implemented GASB 54, Fund Balance Reporting and Governmental Fund T ype D efi nitions, which requires the City to classify its fun d balances based on spending constraints imposed on th e use of resources. 154 •Tot:tl Committed C Total Unassig ned •Tot:tl Assigned - I •Total Rest ri cted •Total Nonspendablc --•Total Unreserved •Total Reserved -• --- ->--- ->--- 2017 2018 2015 201 6 201 7 201 8 $1,134 $33,580 $474 $106 $20,582,335 2,536,790 3,654,283 11,780,724 16,725,897 1,458 ,029 1,578,153 5,244,279 4,334,322 17,285,422 17 ,75 1,169 39,278,746 19,644,232 $21 ,281 ,375 $23 ,017,185 $56,304,223 (a) $6 1,286,892 $43,437,361 $52,938,897 $55,195 ,500 $78,603,366 6,188,554 367,023 0 0 (40,459) 0 (88,33 1) {11 ,073) $4 9,585,456 $53 ,305 ,920 $55,107,1 69 $78 ,592,293 This Page Left Intentionally Blank Revenues Property Taxes Other Taxes Intergovernmental revenues Interest and Rents Licenses and permits Charges for services Fines and forfeitures Other Total Revenues Expenditures Current: General government Fire Department Police Department Public works Recreation and Community Services Library Economic and Community Development Other Capital outlay Debt service: Principal repayment Interest and fiscal charges Total Expenditures Excess (deficiency) ofrevenues over (under) expenditures Other Financing Sources (Uses) Transfers in Transfers ( out) Tax allocation bonds issued Premium on bonds Payments to refunded bond escrow Other debt proceeds Sale of capital assets Total other financing sources (uses) Net Change in fund balances before extraordinary and special items Extraordinary item Special item Net change in fund balances Debt service as a percentage of noncapital expenditures CITY OF SOUTH SAN FRANCISCO Changes in Fund Balance of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) For The Fiscal Year Ended June 30, 2009 2010 2011 2012 $59,369,550 $54,718,916 $54,128,998 $38,174,655 22,755,561 19,771,310 23,412,992 28,866,546 15,088,171 10,609,605 11,860,658 11,580,530 7,625,428 7,680,293 7,612,223 4,955,223 5,957,815 7,270,081 7,004,603 3,056,507 13,644,314 9,986,352 10,010,541 10,088,070 1,013,434 1,054,549 2,133,677 2,184,234 3,722,979 2,542,492 2,261,247 3,000,563 129,177,252 113,633,598 118,424,939 101,906,328 5,752,948 5,916,364 6,407,094 6,485,219 17,724,990 16,790,834 18,140,954 18,812,861 19,989,136 19,359,770 20,272,684 21,217,818 12,360,989 8,416,242 9,856,201 14,253,609 10,700,332 9,960,090 10,168,425 10,101,408 4,679,270 4,342,662 4,231,762 4,272,701 19,554,780 26,279,406 19,894,692 8,184,334 474,805 4,247,021 6,724,022 6,969,052 8,894,514 1,755,426 1,887,434 1,842,000 1,752,000 4,571,150 4,255,050 4,274,170 1,817,764 101,810,847 103,931,874 102,057,034 95,792,228 27,366,405 9,701,724 16,367,905 6,114,100 18,754,214 18,047,351 88,175,882 108,413,018 (19,330,934) (22,175,268) (99,947,814) (109,646,766) 13,784 (562,936) (4,127,917) (11,771,932) (1,233,748) 26,803,469 5,573,807 4,595,973 4,880,352 (110,397,363) $26,803,469 $5,573,807 $4,595,973 ($105,517,011) 6.8% 6.6% 6.7% 4.2% 156 2013 $27,077,697 31,894,811 13,054,594 3,238,089 3,054,451 9,275,724 1,753,682 1,837,675 91,186,723 6,658,532 20,877,917 22,542,135 9,186,493 10,927,433 4,112,570 20,512,545 52,139 94,869,764 (3,683,041) 4,467,530 (6,780,943) (2,313,413) (5,996,454) ($5,996,454) 0.1% For The Fiscal Year Ended June 30, 2014 2015 2016 2017 2018 $23,010,136 $24,650,648 $26,438,620 $35,156,848 $35,989,644 33,931,446 38,275,478 $41,811,097 $49,608,385 54,597,272 10,757,440 10,453,071 12,360,354 4,019,771 8,433,240 3,632,693 3,531,966 4,207,453 3,100,692 3,524,727 4,366,271 4,795,158 6,896,897 7,823,403 14,674,809 16,864,409 13,387,712 15,386,358 14,485,367 31,961,419 1,528,319 1,221,413 791,756 899,118 423,604 2,249,728 4,660,668 2,439,579 2,906,625 6,454,460 96,340,442 100,976,114 110,332,114 118,000,209 156,059,175 5,970,429 7,167,969 8,469,924 9,399,930 10,403,449 20,163,759 21,247,989 24,175,340 25,632,366 26,059,072 23,309,568 23,611,743 25,458,986 25,998,097 26,970,854 16,791,894 15,923,071 14,846,346 12,143,965 23,859,399 11,552,502 11,826,407 13,234,028 14,897,157 15,468,370 3,987,928 4,247,650 4,681,188 5,157,355 5,379,836 5,972,966 5,917,508 7,907,655 8,943,111 9,338,793 480,290 395,749 274,183 256,298 453,381 352,674 656,000 23,000 2,382,000 88,202,427 90,775,301 99,825,216 102,469,164 120,118,071 8,138,015 10,200,813 10,506,898 15,531,045 35,941,104 21,870,234 17,983,227 8,143,075 14,327,130 26,486,651 (24,149,582) (19,717,102) (13,193,699) (16,368,499) (30,795,941) 1,016,276 3,990,605 (2,279,348) (1,733,875) (5,050,624) (1,025,093) (318,685) 5,858,667 8,466,938 5,456,274 14,505,952 35,622,419 20,582,335 (7,154,626) $5,858,667 $8,466,938 $5,456,274 $35,088,287 $28,467,793 0.6% 0.4% 0.7% 0.0% 2.0% 157 $20,000 $18,000 $16 ,000 $14 ,000 "' $12 ,000 " a :§ $10 ,000 $8,000 $6,000 $4 ,000 $2 ,000 $0 Fiscal Residential Year Proeerty 2009 $5,790,070 ,116 2010 5,467 ,563 ,992 2011 5,547 ,292 ,029 2012 5,579 ,044 ,758 2013 5,606,400 ,603 2014 5,900,441 ,192 2015 6,313 ,393 ,048 2016 6,716 ,642 ,000 2017 7,087 ,550 ,257 2018 7,458 ,269 ,085 -=---,. •• ..... --- 2009 2010 2011 CITY OF SOUTH SAN FRANCISCO ASSESSED VALUE -· OF TAXABLE PROPERTY LAST TEN FISCAL YEARS • • [1 - ----- • -- 2012 2013 2014 2015 ---Unsecured • Secured I Real Proeerty Net Taxable value Total Real Commercial Industrial Secured Unsecured Proeerty Proeerty Other Proeerty Proeerty $1 ,368 ,274 ,141 $4,871,255 ,093 $523 ,110,471 $12 ,552 ,709,821 $2 ,373 ,808 ,05 3 1,429 ,401 ,205 5,197 ,739,403 498 ,656 ,817 12,593 ,361 ,417 1,424 ,610 ,941 1,509 ,554 ,164 4,922 ,422 ,763 387,673,530 12,366,942,486 1,279,681 ,193 1,581 ,852 ,456 4,967,158,758 403 ,895,l 19 12 ,531,951 ,091 1,295,085 ,027 1,628 ,754 ,902 5,050,279,321 418 ,927,733 12,704,362 ,559 1,288,434 ,392 1,713 ,575 ,060 4,273,694,531 1,204 ,288 ,116 13,091,998,899 1,212 ,353 ,871 2,402 ,335 ,027 4,588,967 ,014 345,957,716 13,650,652,805 1,244 ,971,467 2,000 ,204 ,271 5,189 ,813 ,366 376 ,874 ,603 14 ,283,534 ,2 40 1,197 ,263 ,526 2,160 ,377 ,671 5,414,028 ,340 412 ,344,220 15 ,074 ,300 ,488 1,381 ,715 ,511 2,171 ,084 ,856 5,838 ,028 ,479 383,589,586 15 ,850,972,006 1,423 ,348 ,02 2 Sourc e: HdL Coren & Cone, San Mateo County Assessor 20 08/09-2017/18 Combin ed Tax Rolls . • --• I • --I I ------ 2016 2017 2018 Total Total Estimated Direct Assessed (a) Full Market (a) Tax Rate (b) $14,926,517,874 $14 ,926,517 ,874 0.34939% 14,017,972,358 14 ,017 ,972,358 0.36462% 13 ,646 ,623 ,679 13,646 ,623 ,679 0.36933% 13,827,036,118 13 ,827,036 ,118 0.37860% 13,992,796 ,951 13 ,992 ,796 ,951 0.42174% 14,304,352 ,770 14 ,304,352,770 0.13474% 14 ,895 ,624 ,2 72 14 ,895,624 ,272 0.13804% 15 ,480 ,797 ,766 15,480,797 ,766 0 .13634% 16,456,015 ,999 16,456 ,015 ,999 0 .13632% 17 ,274 ,320 ,028 17 ,274 ,320,028 0.1 3631% (a) The State Constitution requires property to be assessed at one hundred percent of the mo st recent purchase price, plus an increment ofno more than two percent annually, plus any local over-ride s. These values are considered to be full market value s . (b) California cities do not set their own direct tax rate . The state cons titution establishes the rate at I % and allocates a portion of that amount, by an annual calculation , to all the taxing entities within a tax rate area. 158 CITY OF SOUTH SAN FRANCISCO DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS Fiscal Basic School Total Direct/Overlapping Year Levy Districts Tax Rates 2009 1.000 0.1426 1.1426 (1, 15) 2010 1.000 0.1600 1.1600 (1 ,16) 2011 1.000 0.1707 1.1707 (1,17) 2012 1.000 0.1824 1.1824 ( 1, 18) 2013 1.000 0.1959 1.1959 (1, 19) 2014 1.000 0.2046 1.2046 (1,20) 2015 1.000 0.1822 1.1822 (1,21) 2016 1.000 0.1750 1.1750 (1,22) 2017 1.000 0.1749 1.1749 (1,23) 2018 1.000 0.1642 1.1642 (l,24) Notes: (1) Like other cities, South San Francisco includes several property tax rate areas with different rates . A mean average is indicated. (15) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0327 percent, which includes South San francisco Unified School District bonds and San Mateo Jr. College bond. 2 have the rate of 1.0719 and one has a rate of 1.0689, which includes Jefferson Union School bonds and Brisbane ESD bonds, and one has a rate of 1.0710 which includes San BrunoPark Elementary. (16) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0377 percent, which includes South San francisco Unified School District bonds and San Mateo Jr. College bond. 3 have the rate of 1.0783 and one has a rate of 1.0748, which includes Jefferson Union School bonds, and Brisbane ESD bonds, and one has a rate of 1.0804 which includes San BrunoPark Elementary. (17) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0389 percent, which includes SSFUSD bonds and San mateo Jr College bond. 3 has a rate of 1.0870 percent and one at 1.0832 percent which includes Jefferson Union School bonds and Brisbane ESD bonds . One has a rate of 1.0834 percent which includes San Bruno Park Elementary. (18) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0420 percent, which includes SSFUSD bonds and San mateo Jr College bond. 3 has a rate of 1.0893 percent and one at 1.0854 percent which includes Jefferson Union School bond, Brisbane ESD bonds & San Mateo JR College bonds and one has a rate of 1.0909 percent which includes San Bruno Park Elementary. (19) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0521 percent, which includes SSFUSD bonds, San Mateo Jr College bond, and San Mateo Comm College . 4 has a rate of 1.0921 percent which includes Brisbane ESD Bond, Jefferson High bonds, SM Jr College bond and San Mateo Comm College. 1 has a rate of 1.0905 percent, which includes San Bruno Pk Elem bond, SM Union High , SM Jr College bond and San Mateo Comm Coll bond. (20) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0522 percent, which includes SSFUSD bonds, San Mateo Jr College bond, and San Mateo Comm College. 4 has a rate of 1.1048 percent which includes Brisbane ESD Bond, Jefferson High bonds, SM Jr College bond and San Mateo Comm College. 1 has a rate of 1.0864 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High, and San Mateo Comm College . 1 has a rate of 1.0864 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Comm Coll bond. (21) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0703 percent, which includes SSFUSD bonds, San Mateo Jr College bond, and San Mateo Comm College. 4 has a rate of 1.0991 percent which includes Brisbane ESD Bond, Jefferson High bonds, SM Jr College bond and San Mateo Comm College. 1 has a rate of 1.0983 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High,SM Jr College bond and San Mateo Comm Coll bond. (22) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0707 percent, which includes SSFUSD bonds, San Mateo Jr College bond, and San Mateo Comm College. 3 has a rate of 1.1080 percent and 1 with 1.1068 percent rate which includes College bond Brisbane ESD Bond, Jefferson High bonds, SM Jr and San Mateo Comm College. 1 has a rate of 1.0929 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Comm Coll bond. (23) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0714 percent, which includes SSFUSD bonds & San Mateo Jr College bond. 4 has a rate of 1.1282 percent which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SM Jr College bonds. 1 has a rate of 1.0910 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Comm Coll bond. (24) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0601 percent, which includes SSFUSD bonds & San Mateo Jr College bond. 4 has a rate of 1.1276 percent which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SM Jr College bonds . 1 has a rate of 1.0900 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Comm Coll bond. Source: HDL, Coren & Cone (San mateo County Assessor 2008/09-2017/18 Tax Rate Table). 159 -°' Property Tax Payer Gen en tech Slough SSF LLC DE Britannia Pointe Grand LP ARE San Francisco LLC BMR 180 Oyster Point LLC Gateway Center LLC DE ASN Solaire LLC HCP Inc Costco Wholesale Corp Amgen SFLLC HPTMI II Properties Trust Gateway Boulevard LLC PR 701 Gateway LLC BP Gateway Center LLC Blue Line Transfer Inc. Felcor CMB SSF Holdings LP Areus Inc CRP 6000 Shoreline LLC Theravance Biopharma OCI San Francisco LLC Total ToE Twen~ Percent of AV CITY OF SOUTH SAN FRANCISCO Twenty Largest Taxable Property Owners for Merged RDA Project Area June 30, 2018 Secured $641 ,198,159 683 ,563,157 446 ,937,794 233,684,862 217,408 ,355 146,404 ,145 113 ,178,085 101,628 ,279 42,344 ,580 67 ,514 ,607 62 ,372,093 60,114,250 60,446 ,565 47,956 ,558 40,259 ,080 35,946,914 34,105 ,000 29 ,392 ,581 3 ,064,455 ,064 91.7% Unsecured $102,646 ,681 41 ,633 ,076 72,829 ,868 362,729 32,362,536 26,780,291 276 ,615 ,181 8.3% Total Assessed Value $743 ,844,840 683 ,563,157 446,937,794 233 ,684 ,862 217,408 ,355 146,404,145 113,178,085 101,628,279 83 ,977 ,656 72,829,868 67 ,514,607 62 ,372,093 60 ,476,979 60,446,565 47 ,956 ,558 40,259,080 35 ,946 ,914 34,105 ,000 32,362 ,536 56,172 ,872 3 ,341 ,070 ,245 % of Total AV in Project Area Land Use 16 .02% Industrial, Office , R&D 14 .72% Industrial 9.63% Industrial 5.03% Industrial, Commercial 4.68% Commercial 3 .15% Commercial 2.44% Residential 2.19% Unknown 1.81% Commercial 1.57% Industrial 1.45% Residential , Hotels , Motels 1.34% Industrial 1.30% Commercial 1.30% Commercial, Office , 2+ stories 1.03% Industrial 0.87% Residential, Hotels , Motels 0 .77% Commercial , Office , 2+ stories 0.73% Commercial, Office , 2+ stories 0 .70% Industrial , Office , R&D 0.63% Residential, Hotels , Motels 71.36 % (1) Given the nature of the re search performed at Genentech , a s ignificant portion of the total assessed value of the Genentech Property is likel y equipment. It would appear on the secured roll as that contains the value of personal property/improvements Source: San Mateo County Asses sor , RDA Secured & Unsecured SSF 2017 Tax Roll s Source: Muni Service s NOTE: (a) Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CITY OF SOUTH SAN FRANCISCO COMPUTATION OF LEGAL BONDED DEBT MARGIN JUNE 30, 2018 ASSESSED VALUATION: BONDED DEBT LIMIT (3 .75% OF ASSESSED VALUE) (a) LESS AMOUNT OF DEBT SUBJECT TO LIMIT: LEGAL BONDED DEBT MARGIN Total Net Debt Legal Debt Applicable to Debt Limit Limit Margin $559,744,420 0 $559,744,420 525,673,963 0 525 ,673 ,963 511 ,748 ,388 0 511,748,388 518 ,513 ,854 0 518,513,854 524,729,886 0 524,729 ,886 536 ,413,229 0 536,413 ,229 558 ,585 ,910 0 558 ,585,910 580,561,386 0 580,561,386 617 ,102 ,145 0 617,102,145 647 ,787 ,001 0 647,787,001 $17,274,320,028 647 ,787,001 0 $647 ,787 ,001 Total net debt applicable to the limit as a percentage of debt limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% California Government Code, Section 43605 sets the debt limit at 15%. The Code section was enacted prior to the change in basing assessed value to full market value when it was previously 25% of market value. Thus, the limit shown as 3.75% is one-fourth the limit to account for the adjustment of showing assessed valuation at full cash value. Source: HDL Coren & Cone, San Mateo County Assessor -Combined Tax Rolls 165 CITY OF SOUTH SAN FRANCISCO SEWER DEBT SERVICE COVERAGE SEWER RENTAL ENTERPRISE FUND LAST FIVE FISCAL YEARS Fiscal Year 2014 2015 2016 2017 2018 Revenues Service Charges $19,129,475 $19,758,128 $19,515,093 $19,750,636 $22,188,154 Connection and Other Fees 25,992 122,640 104,283 147,134 229,002 Interest Income 133,248 106,830 238,389 23,552 31,058 Developer Fees Other Cities' Participation (I) 7,619,601 6,159,937 5,752,765 5,763,644 5,834,455 Total Revenues $26,908,316 $26,147,535 $25,610,530 $25,684,966 $28,282,669 Operating Expenses (2) $14,904,225 $18,759,650 $13,514,718 $17,357,276 $19,073,943 Wastewater System Net Revenues $12,004,091 $7,387,885 $12,095,812 $8,327,690 $9,208,726 Parity Debt Service (3) State Water Resources Control Board Loans $6,022,799 $5,445,162 $5,449,692 $5,454,747 $5,469,175 CSCDA Series 2005D Revenue Bonds 197,630 188,148 178,036 167,284 155,706 Total Parity Debt $6,220,429 $5,633,310 $5,627,728 $5,622,031 $5,624,881 Total Parity Debt Service Coverage 1.93 1.31 2.15 1.48 1.64 (I) Primarily consists of payments from the City of San Bruno. The City of San Bruno is a co-owner of the Plant and pays the City in advance on a quarterly basis for the City of San Bruno's share of operating costs. See "Wastewater System" herein. (2) Excludes depreciation, capital expenditures and debt service. (3) Includes Sewer Revenue Bonds and State Water Loan payments (4) Reflects an adopted increase in rates for Fiscal Year 2004-05 of25% per Resolution No. 68-2004, adopted by the City Council on July 14, 2004 and effective on and after July I, 2004 and an adopted increase in rates for Fiscal Year 2005-06 of 9% per Resolution No. 68-2005, adopted by the City Council on June 22, 2005 and effective on and after June 22, 2005. 167 CITY OF SOUTH SAN FRANCISCO Principal Employers Current Year and Nine Years Ago 2017-18 2008-09 Percentage Percentage Number of of Total City Number of of Total City Employer Employees Rank Employment Employees Rank Employment Genentech Inc. 8,637 1 13.2% 8,289 1 13.3% Costco Wholesale (3 stores) 834 2 1.3% 565 5 0.9% Goodwill Industries of SF (3 locations) 701 3 1.1% Life Technologies Corporation 622 4 1.0% Amgen San Francisco LLC 500 5 0.8% 472 7 0.8% Successfactors, Inc. 352 6 0.5% SBM Site Services, LLC 309 7 0.5% ZS Associates, Inc 252 8 0.4% Tobi.com, LLC 227 9 0.3% Holiday Inn 224 10 0.3% Kaiser 2,125 2 3.4% SSF School District 930 3 1.5% Exelixis 610 4 1.0% Astound Broadband, LLC 560 6 0.9% Tularik, Inc. 426 8 0.7% American ETC Inc/Royal Laundry 307 9 0.5% Sugen, Inc 300 10 0.5% Subtotal 12,658 19.3% 14,584 23.3% Total City Population 65,451 62,502 Source: SSF Business License Database-Business licenses expiring 12/31/18. CAFR 2008-09 170 CITY OF SOUTH SA N FRANCISCO Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2009 2010 2011 2012 20 13 2014 201 5 20 16 2017 2018 Function/Program Public safety: Fire stations 5 5 5 5 5 5 5 5 5 5 Police stations 1 1 1 (6) I (6) I I I I I I Police Fleet (2 ) 48 (2) 48 52 51 51 (8) 50 53 53 52 (10) 59 Public works Miles of streets 127 12 7 127 127 127 127 127 127 127 12 7 Street lights 3,779 4,156 4 ,160 4 ,160 (7 ) 4 ,505 4,505 4 ,505 4 ,505 4 ,505 4 ,531 Parking District lights 20 20 20 20 20 20 20 20 (9) 16 16 Traffic Signals 70 73 74 74 74 74 74 76 76 76 Culture and recreation: Community services: City parks 28 28 28 28 28 28 28 28 28 28 City parks acreage 190 190 190 190 190 190 190 190 190 190 Playgrounds 24 24 24 24 24 24 24 24 24 24 City trails 6 6 6 6 6 6 6 6 6 6 Community gardens I I I I I I I I I I Community centers 4 4 4 4 4 4 4 4 4 4 Senior centers 2 2 (4) I I I I I I I I Skate Park (3) I 1 I I I I I I I Dog park (3) I I I I I I I I I Swimming pools 1 1 1 1 I 1 I I 1 I Tennis courts 7 7 7 7 7 7 7 7 7 7 Basketball Courts 12 12 12 12 12 12 12 12 12 12 Baseball/softball diamonds 11 11 II 11 II 11 11 11 11 II Soccer/football fields 5 5 5 5 5 5 5 5 5 5 Library: City Libraries ( 6) 2 2 2 2 2 2 2 2 2 2 Wastewater Miles of sanitary sewers 164 164 164 164 164 164 164 164 164 164 Miles of storm sewers 125 125 125 125 125 125 125 125 125 125 Number of treatment plants 1 1 1 1 I I I 1 1 1 Source: ssf.net/depts/rcs; Director of Rec & Comm Services; Superintendent of parks & Maintenance (1) Police patrol units consists of35 marked/unmarked cars, 6 motorcycles, 1 SWAT and 3 cushman. (2) Year 2009 , the 3 units added are not new. These are units that was not included on the previous Fleet count. (3) Year 2010 , Skate park and dog park was added on the list. (4) The only senior center is Magnolia Center but programming still continues at El Camino. (5) Community Learning Center not included on count as it is only a homework center not a library. ( 6) Police substation located behind Miller parking garage not included. (7) Includes all lights in SSF billed as LS-2 from PG&E (8) One less motorcycle from last year. (9) Lot 6 sold for Rotary Plaza development. (10) 3 Trailers included on the fleet count. 173 CITY OF SOUTH SAN FRANCISCO Miscellaneous Information Last Three Fiscal Years Collection and Use of 1 % Special Transient Occupancy Tax (TOT) Approved by Voters as Measure I* 2016 2017 2018 Transient Occupancy Tax Detail 9% TOT collected 12 ,054,093 12 ,256 ,007 12 ,580,680 I% Measure I Special Tax 1,339,344 1,361 ,779 1,397,853 Total TOT Collection 13 ,393 ,436 13 ,617,786 13 ,978 ,533 I% Measure I Special Tax Use Police 267 ,869 272 ,356 279 ,57 1 Fire 267 ,869 272,356 279,571 Library 267 ,869 272 ,356 279,571 Parks 267,869 2 72 ,356 279,571 Recreation 267,869 272,356 279 ,57 1 Total I% Measure I Special Tax 1,339 ,344 1,361 ,779 1,397,853 * Note: Measure I, a one percent supplemental special tax to the already existing 9% general transient occupancy tax (TOT) was approved on Nov. 2, 2004 and took effect January I , 2005 . Special tax was earmarked for use to supplement Police, Fire, Library, and Parks and Recreation expenditures. 174 CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS Report 011 Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes For the Year Ended June 30, 2018 CITY OF SOUTH SAN FRANCISCO MEASURE A COMPLIANCE For the Year Ended June 30, 2018 Table of Contents Independent Auditor's Report on Management's Assertion ............................................................ 1 Financial Statements: Ba lance Sheet .................................................................................................................................... 2 Schedule of Reven ues, Expenditures and Changes in Measure A Fund Balance .......................... 3 Notes to the Financial Statements .................................................................................................... 4 Management's Report on Compliance With The Agreement For Distribution of San Mateo County Measure A Funds for Local Transportation Purposes .................................................................. 5 M MAZE ,&ASSOCIATES INDEPENDENT AUDITOR'S REPORT ON MANAGEMENT'S ASSERTION Honorable Mayor and Members of City Council of the City of South San Francisco, California We have examined management's assertion, included in accompanying Management's Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes (th e Agreement) between the City and the San Mateo County Transportation Authority dated March 5, 2009 , that the City of South San Francisco complied with the requirements of the Agreement during the year ended June 30, 2018. Management is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on management's assertion about the City's compliance based upon our examination. Our examination was conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants and accordingly, included examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as considered necessary in the circumstances . We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide legal determination of the City's compliance with specified requirements . In our opinion, the City complied, in all material respects, with the aforementioned requirements for the year ended June 30, 2018 . This communication is intended solely for the information and use of the City Council, management and the San Mateo County Transportation Authority Board and Management, and is not intended to be and should not be used by anyone other than these specified parties; however, this restriction is not intended to limit the distribution of this report, which is a m~tter of public record. Pleasant Hill, Californi a December 10, 2018 Accountancy Corporation 3478 Bus kirk Ave nue , Suite 2 15 Pl easa nt Hill , CA 94523 1 T 925.930.0902 F 925 .930.0135 E maze@ mazea ss ociates.com w mazeassociates.com ASSETS: CITY OF SOUTH SAN FRANCISCO MEASURE A FUND BALANCE SHEET JUNE 30, 2018 Cash and investments Accrued interest receivable TOTAL ASSETS FUND BALANCE: Restricted for Measure A capital projects and maintenance TOT AL FUND BALANCE See accompanying notes to the financial statements . 2 $2,951,683 14,247 $2,965,930 $2,965,930 $2,965,930 CITY OF SOUTH SAN FRANCISCO MEASURE A FUND SCHEDULE OF REVENUES , EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2018 REVENUES Sales tax from the County of San Mateo Interest and investment income Total Revenues TRANSFERS OUT Capital Improvements Projects: Dubuque Ave & E Grand Ave Improvement South Airport Blvd Bridge Replacement Sidewalk Gap Closure Project Grand Blvd Project -Chestnut to Alrnyo Grand Blvd Project -Kaiser Way to Bart Linden Ave Complete Streets Cal-Aspen Linden Ave Complete Streets Aspen-Miller E 101 Public Amenities & Row Study Evergreen/Mission Traffic Control Downtown Truck Restriction Project Grand Ave/Magnolia Ave Traffic Signal W Orange/Centennial Way Pedestrian Beacon Junipero Serra/King Dr Intersection SSF Caltrain Station Ped/Bike Underpass Sunshine Gardens Traffic Safety Improvement Total Transfers Net Change in Fund Balance Fund Balance, July I Fund Balance, June 30 See accompanying notes to the financial statements. 3 $1 ,476,167 4,544 1,480,711 9,190 156,472 32,248 8,2 94 90,144 11,288 18,155 74,056 61,035 10,107 54,929 1,291 154,452 2,111 20,427 704,199 776,512 2,189,418 $2,965,930 CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS Notes to Financial Statements For the Year Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A . Reporting Entity At the General Election of June 7, 1988, the voters of City of San Mateo County approved Measure A, which is an ordinance providing for the creation of the San Mateo County Transp01tation Authority for the imposition of a one-half of one percent sales transaction and use tax. Twenty percent of the aforementioned tax is to be a llocated to the cities of San Mateo County and to t he County of San Mateo for the improvement of local transpo1tation, including streets and roads in accordance with Measure A requirements. B . Basis of Accounting The Schedu le of Measure A Funds (Transpo1tation Sales Tax), a special revenue fund of the City of South San Francisco, California, have been prepared in conformity with accounting principles generally accepted in the United States of America as app lied to governmental units. The Governmental Accounting Standards Board is the accepted standard-setting body for estab lishing governmental accounting and financial reporting principles . The Measure A Funds are accounted for using the modified accrual basis of accounting. Under this basis, revenues are recognized when they become both measurable and available to finance expenditures of the fisca l period . Expenditures are recognized when the liability is incurred. 4 FINANCE DEPARTMENT 650-877-8507 December 10, 2018 San Mateo County Transportation Authority 1250 San Carlos Avenue San Carlos, California 94070 Management's Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes The City of South San Francisco is responsible for complying with the Agreement for Distribution of San Mateo County Measure A Funds far Local Transportation Purposes (the Agreement) between the City and the San Mateo County Transportation Authority effective on March 5, 2009 . The Agreement states that in return for receiving an annual allocation of a specified portion of the retail transactions and use tax approved by Measure A -San Mateo County Transportation Expenditure Plan (the Measure), the City agrees that funds, "shall not be used to replace funds previously provided by property tax or other local revenues for public transportation purposes, and that City will limit the use of funds provided pursuant to this agreement to the improvement and maintenance of local transportation, including streets and road improvements." With respect to compliance with the Agreement, management attests to the following for the year ended June 30, 2018: • Management is responsible for establishing and maintaining an effective internal control structure with respect to compliance with the Agreement; • Management is responsible for complying with the Agreement; • Management has evaluated the City's compliance with the requirements of the Agreement; • All Transactions, as summarized in the preceding Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance for the Year Ended June 30, 2018, are in compliance with the Agreement. Richard Lee Director of Finance 400 GRAND AVENUE • P .O . 1;30X 7 1 1 • SOUTH SAN F RANCISCO, CA 9 4 083 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND BASIC FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND Basic Financial Statements For the Years Ended June 30, 2018 and 2017 Table of Contents Independent Auditor's Report ......................................................................................................................... 1 Fund Financial Statements: Comparative Balance Sheets .................................................................................................................... 3 Comparative Statements of Revenues, Expenditures and Changes in Fund Balance ............................ 4 Notes to the Financial Statements ............................................................................................................ 5 Independent Auditor's Report on Internal Control Over Financial Reporting, on Compliance with the Transportation Development Act and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............................................................... 7 This Page Left Intentionally Blank INDEPENDENT AUDITOR'S REPORT Honorable Members of the City Council of the City of South San Francisco South San Francisco, California Report on Financial Statements M MAZE &ASSOCIATES We have audited the accompanying financial statements of the City of South San Francisco Transportation Development Act A1ticle III Fund (TOA Fund), which are included in the Capital Projects Fund of the City of South San Francisco (City), California, as of and for the years ended June 30, 2018 and 2017, and related notes to the financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation , and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Those standards require that we plan and perfonn the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves perfonning procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the TOA Fund's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the TOA Fund's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions . Accountancy Corporation 3478 Buskirk Ave nu e, Suite 215 Pleasant Hill, CA 94523 T 925.930 .0902 F 925.930.0 135 E maze@mazeassociates.com w ma zeassociates.com Opinions In our opinion , the fin a nci a l statements referred to a bove present fairly , in all mat erial respects , the respective financial positions of the TDA Fund as of June 30, 2018 and 2017, and the respective changes in financial positions for the years then ended in confo1mity with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the financial statements present only the TDA Fund and do not purport to, and do not present fairly the financial positions of the City as of June 30 , 2018 and 2017 or the changes in its financial positions for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 10, 2018 on our consideration of the TDA Fund 's internal control over financial repo1iing and on our tests of its compliance with ce1iain provisions of laws , regulations , contracts, and grant agreements and other matters. The purpose of that repo1i is to describe the scope of our testing of internal control over financial rep01iing and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That repo1i is an integral part of an audit performed in accordance with Governm ent Auditing Standards in considering the TDA Fund 's internal control over financial repo1ting and compliance. tW\,C\\1:-i~(j()o~ Pleasant Hill , California December 10, 2018 2 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND COMPARATIVE BALANCE SHEETS JUNE 30 , 2018 AND 2017 2018 Allocation Instruction Number 18001094 2017 ASSETS Due from Metropolitan Transportation Commission $17,306 $39 ,669 Total Assets $17 ,306 $39 ,669 LIABILITIES Due to the City $17,306 $39,669 Total Li abilities 17 ,306 39 ,669 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 17 ,306 Total Deferred Inflows of Resources 17 ,306 FUND BALANCE (17,306) Total Fund Balance (17 ,306) Total Liabilities, Deferred Inflows of Resources and Fund Balance $17,306 $39 ,669 See accompanying note s to financial statements 3 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 REVENUES TDA Article 3.0 (Note 2) Total Revenues EXPENDITURES Linden Ave . Complete Streets Safety Project Total Expenditures Net change in fund balance Fund balance at beginning of year Fund balance at end of year 2018 Allocation Instruction Number 18001094 2017 $37,453 $39,699 37,453 39,699 54,759 39,699 54,759 39,699 (17,306) ($17,306) See accompanying notes to financial statements 4 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND Notes to the Financial Statements For the Years Ended June 30, 2018 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of South San Francisco, California (City), Transpo1tation Development Act A1ticle III Fund (TDA Fund) includes the financial activities associated with the State of California Transp01tation Development Act. The State of California created a local tran spo1tat ion fund for each County funded by a p01tion of the State sales tax . The TDA Fund is distributed through the Metropolitan Transp01tation Commission (MTC) which is the agency responsible for allocation of funds to eligible claimants within the greater San Francisco Bay Area. The TDA Fund is included in a Capital Projects Fund of the Comprehensive Annual Financial Repo1t of the City. The financial statements are intended to present the financial position and results of operation for the TDA Fund, and not those of the City as a whole. B. Basis of Accounting Basis of accounting refers to when revenues and expenditures are reco gnized . The TDA Fund is accounted for in a governmental fund type and the modified accrual basis of accounting is used . Under the modified accrual basis, revenues are recognized when they become measurable and available as net cu1Tent assets. TDA A1ticle 3 .0 revenues are recognized when qualifying project expenditures are incurred . Expenditures are generally recognized when they are incurred. I NOTE 2 -TDA ARTICLE 3.0 REVENUE As of the years ended June 30, 2018 and 2017 the City received allocation instructions from the Metropolitan Transpo1tation Commission for the following projects: Revenue In struction Number Project Name Grant Award 20 18 2017 18001094 Linden Ave Complete Streets Safety Projec t $363 ,300 $37 ,453 16001070 Linden Ave Complete Streets Safety Project $400 ,000 $39,699 $37,453 $39,699 5 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND Notes to the Financial Statements For the Years Ended June 30, 2018 J NOTE 3 -COMMITMENTS AND CONTINGENCIES The City pa1ticipates in several grant programs. These programs have been audited by the City's independent accountants in accordance with the provisions of applicable State requirements . No cost disallowances were proposed as a result of these audits; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be detennined at this time. The City expects such amounts to be immaterial. The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney, there is no pending litigation which is likely to have a material adverse effect on the financial position of the City. 6 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING, ON COMPLIANCE WITH THE TRANSPORTATION DEVELOPMENT ACT AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Members of the City Council of City of South San Francisco South San Francisco, California We have audited , in accordance with the auditing standards ge nerally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States , the financial statements of the Transpo1tation Development Act A1ticle III Fund (the TDA Fund) of the City of South San Francisco (City), California, as of and for the year ended June 30 , 2018, and the related notes to the financial statements, and have issued our report thereon dated December 10 , 2018 . Our repo1t included an emphasis of a matter paragraph disclosing the implementation of new accounting principles. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the TDA Fund's internal control over financial repo1ting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the TDA Fund's internal control. Accordingly, we do not express an opinion on the effectiveness of the TDA Fund's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the TDA Fund's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet impo1tant enough to merit attention by those charged with governance . Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses . However, material weaknesses may exist that have not been identified. Accountancy Corporation 34 78 Buskirk Avenue, Suite 2 15 Pleasant Hill , CA 94523 7 T 925.930.0902 F 925.930.0135 E maze @mazeassociates.com w mazeassociates.com Compliance and Other Matters As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Our procedures included the applicable audit procedures contained in §6666 of Title 21 of California Code of Regulations and tests of compliance with the applicable provisions of the Transp01iation Development Act and the Allocation Instructions and Resolutions of the Metropolitan Transpo1iation Commission. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be repo1ied under Government Auditing Standards. We have also issued a separate Memorandum on Internal Control dated December 10, 2018 which is an integral paii of our audit and should be read in conjunction with this rep01i. Purpose of this Report The purpose of this repo1i is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the TDA Fund's internal control or on compliance. This repo1i is an integral part of an audit performed in accordance with Government Auditing Standards in considering the TDA Fund's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. This repo1i is intended solely for the information and use of the Metropolitan Transportation Commission, management, City Council, others within the City, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties; however, this restriction is not intended to limit the distribution of this rep01i, which is a matter of public record. Pleasant Hill, California December 10, 2018 8 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL FOR THE YEAR ENDED JUNE 30, 2018 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL For the Year Ended June 30, 2018 Table of Contents Page Memorandum on Internal Control.................................................................................................................... l Scheduleof Other Matters........................................................................................................................ 3 This Page Left Intentionally Blank N' MAZE &ASSOCIATES ��TI�����i77�►�il►i [���i ICY 1� �;���� �K��►`Y Y:Z�711 To the City Council of The City of South San Francisco, California We have audited the basic financial statements of the City of South San Francisco for the year ended June 30, 2018, and have issued our report thereon dated December 13, 2018. Our opinions on the basic financial statements and this report, insofar as they relate to the South San Francisco Conference Center Authority, are based solely on the report of other auditors. In planning and performing our audit of the basic financial statements of the City of South San Francisco as of and for the year ended June 30, 2018, in accordance with auditing standards generally accepted in the United States of America, we considered the City's internal control over financial reporting (internal control) as a basis for designing our audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe to be of potential benefit to the City. This communication is intended solely for the information and use of management, City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards and is not intended to be and should not be used by anyone other than these specified parties. 163 Q, 1 J L�,I�✓ �" Pleasant Hill, California December 13, 2018 T 925.930.0902 Accountancy Corporation 1 r 925.930.0135 3478 Buskirk Avenue, Suite 215 E maze@mazeassociates.com Pleasant Hill, CA 94523 w mazeassociates.com This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS New GASB Pronouncements Not Yet Effective The following comment represents new pronouncements taking effect in the next few years. We have cited them here to keep you abreast of developments: Effective in fiscal year 2018-19: GASB 83 -- Certain Asset Retirement Obligations This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. GASB 88 – Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements This Statement defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. This Statement requires that additional essential information related to debt be disclosed in notes to financial statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with fmance-related consequences, significant termination events with finance -related consequences, and significant subjective acceleration clauses. Effective in fiscal year 2019-20: GASB 84 –.Fiduciary Activities This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. GASB 90 - Ma'ori , Equkv Interests—an amendment of GASB Statements No. 14 and No. 611 This Statement defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government's holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. For all other holdings of a majority equity interest in a legally separate organization, a government should report the legally separate organization as a component unit, and the government or fund that holds the equity interest should report an asset related to the majority equity interest using the equity method. This Statement establishes that ownership of a majority equity interest in a legally separate organization results in the government being financially accountable for the legally separate organization and, therefore, the government should report that organization as a component unit. CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS Effective in fiscal year 2020-21: GASB 87 — Leases This Statement will increase the usefulness of governments' financial statements by requiring reporting of certain lease liabilities that currently are not reported. It will enhance comparability of financial statements among governments by requiring lessees and lessors to report leases under a single model. This Statement also will enhance the decision -usefulness of the information provided to financial statement users by requiring notes to financial statements related to the timing, significance, and purpose of a government's leasing arrangements. GASB 89 - Accountinm for Interest Cost Incurred before the End of a Construction Period This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5-22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business -type activity or enterprise fund. This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. 4 CITY OF SOUTH SAN FRANCISCO REQUIRED COMMUNICATIONS FOR THE YEAR ENDED JUNE 30, 2018 This Page Left Intentionally Blank N® MAZE REQUIRED COMMUNICATIONS To the City Council of the City of South San Francisco, California We have audited the basic financial statements of the City of South San Francisco for the year ended June 30, 2018. We have audited the basic financial statements of the City of South San Francisco for the year ended June 30, 2018. We did not audit the financial statements of the South San Francisco Conference Center Authority as of and for the year ended June 30, 2018, which represent 1%, 2%, and 2% of the assets, net position and revenues, respectively, of the entity -wide reporting entity. These component unit financial statements were audited by another auditor, whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for this entity, is based solely on the report of the other auditor. Professional standards require that we communicate to you the following information related to our audit under generally accepted auditing standards and Government Auditing Standards and the Uniform Guidance. Significant Audit Findings Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of South San Francisco are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year, except as follows: GASB 75 — Accounting and Financial Roorting for Post-emploment Benefits Other Than Pensions The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for post -employment benefits other than pensions (other post -employment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all post -employment benefits (pensions and OPEB) with regard to providing decision -useful information, supporting assessments of accountability and inter -period equity, and creating additional transparency. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple -Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. The pronouncement became effective, and as disclosed in Note 1(q) to the financial statements required a prior period restatement for the cumulative effect on the financial statements. T 925.930.0902 Accountancy Corporation 1 F 925.930.0135 3478 Buskirk Avenue, Suite 215 a maze@mazeassociates.com Pleasant Hill, CA 94523 w mazeassociates.com The following pronouncements became effective, but did not have a material effect on the financial statements: GASB 81- Irrevocable Split Interest Agreements GASB 85 - Omnibus 2017 GASB 86 - Certain Debt Extin z uishment Issues Unusual Transactions, Controversial or Emerging Areas We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were: Estimated Fair Value of Investments: As of June 30, 2018, the City held approximately $217 million of cash and investments as measured by fair value as disclosed in Note 2 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2018. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2018. Estimate of Depreciation: Management's estimate of the depreciation is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note lK to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. Estimated Net Pension Assets and Liabilities and Pension -Related Deferred Outflows and Inflows of Resources: Management's estimate of the net pension assets and liabilities and deferred outflows/inflows of resources are disclosed in Note 7 to the financial statements and are based on actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. Estimated Net OPEB Liabilities and OPEB-Related Deferred Outflows and Inflows of Resources: Management's estimate of the net OPEB liabilities and deferred outflows/inflows of resources are disclosed in Note 9 to the financial statements and are based on actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. Disclosures The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in a management representation letter dated December 13, 2018. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Information Accompanying the Financial Statements We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary information. We were engaged to report on the supplementary information which accompany the financial statements, but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. This information is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties. 44a 7� " S"<ka Pleasant Hill, California December 13, 2018