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Home My WebLink AboutReso 16-2024 (24-31)ANNUAL COMPREHENSIVE FINANCIAL REPORT YEARENDEDJUNE30,2023 CITY OF SOUTH SAN FRANCISCO CALIFORNIA CITY OF SOUTH SAN FRANCISCO, CALIFORNIA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2023 Prepared by: Department of Finance This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Annual Comprehensive Financial Report For the Year Ended June 30, 2023 Table of Contents Page INTRODUCTORY SECTION Table of Contents ............................................................................................................................................... i Letter of Transmittal ......................................................................................................................................... v Certificate of Achievement for Excellence in Financial Reporting ................................................................ xi Organization Chart .......................................................................................................................................... xii City Council and Directory of City Officials ................................................................................................ xiii FINANCIAL SECTION Independent Auditor's Report ...................................................................................................................... 1 Management’s Discussion and Analysis ....................................................................................................... 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position .................................................................................................................. 29 Statement of Activities ...................................................................................................................... 30 Fund Financial Statements: Major Governmental Funds: Balance Sheet ................................................................................................................................ 34 Reconciliation of Governmental Fund Balances to Net Position of Governmental Activities .... 36 Statement of Revenues, Expenditures, and Changes in Fund Balances ....................................... 38 Reconciliation of the Net Change in Fund Balances Total Governmental Funds with the Statement of Activities ........................................................................................................ 40 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Budgetary Basis: General Fund ....................................................................................................................... 41 American Rescue Plan Act Special Revenue Fund ............................................................. 42 i CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Annual Comprehensive Financial Report For the Year Ended June 30, 2023 Table of Contents Page FINANCIAL SECTION (Continued) Major Proprietary Funds: Statement of Net Position .............................................................................................................. 44 Statement of Revenues, Expenses, and Changes in Fund Net Position ........................................ 45 Statement of Cash Flows ............................................................................................................... 46 Fiduciary Funds: Statement of Fiduciary Net Position ............................................................................................. 48 Statement of Changes in Fiduciary Net Position .......................................................................... 49 Notes to Basic Financial Statements ...................................................................................................... 51 Required Supplementary Information: Schedule of Changes in Net Pension Liability and Related Ratios – Miscellaneous Plan ............................................................................................................ 106 Schedule of Contributions – Miscellaneous Plan ........................................................................ 107 Schedule of Changes in Net Pension Liability and Related Ratios – Safety Plan ...................... 108 Schedule of Contributions – Safety Plan ..................................................................................... 109 Schedule of Changes in the Net OPEB Liability and Related Ratios ......................................... 110 Schedule of Contributions – Retiree Healthcare OPEB Plan ...................................................... 111 Notes to Schedule of Employer Contributions ............................................................................ 111 Supplementary Information: General Fund: Combining Balance Sheets ............................................................................................................. 116 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances ..................................................................................................................... 117 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - (Non GAAP Legal Basis) ........................................... 118 Li CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Annual Comprehensive Financial Report For the Year Ended June 30, 2023 Table of Contents Page FINANCIAL SECTION (Continued) Non-major Governmental Funds: Combining Balance Sheet ............................................................................................................... 124 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ..................................................................................................................... 130 Budgeted Non-major Government Funds: Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ................................................................................... 136 Internal Service Funds: Combining Statement of Net Position ............................................................................................ 144 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ....................... 145 Combining Statement of Cash Flows ............................................................................................. 146 Custodial Funds: Combining Statement of Net Position ............................................................................................ 148 Combining Statement of Changes in Net Position ......................................................................... 149 STATISTICAL SECTION Net Position by Component – Last Ten Fiscal Years .................................................................... 153 Changes in Net Position – Last Ten Fiscal Years .......................................................................... 154 Fund Balances of Governmental Funds – Last Ten Fiscal Years .................................................. 158 Changes in Fund Balance of Governmental Funds – Last Ten Fiscal Years ................................ 160 Assessed Value of Taxable Property – Last Ten Fiscal Years ...................................................... 162 Direct and Overlapping Governments – Property Tax Rates Last Ten Fiscal Years ................................................................................................................ 163 Principal Property Taxpayers – Current Year and Nine Years Ago .............................................. 164 Property Tax Levies and Collections – Last Ten Fiscal Years ...................................................... 165 LLi CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Annual Comprehensive Financial Report For the Year Ended June 30, 2023 Table of Contents Page STATISTICAL SECTION (Continued) Ratio of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................ 166 Computation of Direct and Overlapping Debt ............................................................................... 167 Computation of Legal Bonded Debt Margin ................................................................................. 168 Revenue Bond Coverage Sewer Rental Enterprise Fund – Last Ten Fiscal Years ....................... 169 Sewer Debt Service Coverage Sewer Rental Enterprise Fund – Last Eight Fiscal Years ............. 170 Redevelopment Pledged Revenue Coverage – Last Ten Fiscal Years .......................................... 171 Demographic and Economic Statistics – Last Ten Calendar Years .............................................. 172 Principal Employers – Current Year and Nine Years Ago ............................................................ 173 Full-Time Equivalent City Governmental Employees by Function – Last Ten Fiscal Years ....... 174 Operating Indicators by Function/Program – Last Nine Fiscal Years ........................................... 175 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years ......................................... 176 Miscellaneous Information – Last Five Fiscal Years ..................................................................... 177 iY December 27, 2023 Honorable Mayor and Members of the City Council City of South San Francisco South San Francisco, California We are pleased to submit the Annual Comprehensive Financial Report (ACFR) for the City of South San Francisco (City) for the fiscal year (FY) ended June 30, 2023. The City of South San Francisco is required to publish a complete set of financial statements presented in conformance with generally accepted accounting principles (GAAP) and audited by an independent, certified public accounting firm. This report is published to fulfill this requirement for the fiscal year ending June 30, 2023. The report presents the finances of the City of South San Francisco. Management assumes full responsibility for the completeness and fairness of the information presented in this report. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included. This report consists of management’s representations concerning the finances of the City. To provide a reasonable basis for making these representations, management established a comprehensive internal control framework designed to both protect the City’s assets from loss, theft, or misuse, compiled sufficient reliable information for the preparation of the City’s financial statements in conformity with the Generally Accepted Accounting Principles (GAAP), and complied with applicable laws and regulations. CITY COUNCIL 2023 FLOR NICOLAS, MAYOR (DIST. 3) MARK NAGALES, VICE MAYOR (DIST. 2) MARK ADDIEGO, MEMBER (DIST. 1) JAMES COLEMAN, MEMBER (DIST. 4) EDDIE FLORES, MEMBER (DIST. 5) SHARON RANALS, CITY MANAGER Y The City contracted with Maze & Associates (Maze), a public accounting firm licensed to perform local government audits in California, to complete the annual audit. Maze concluded that the financial statements present fairly the respective financial position of the government activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, and the respective changes in financial position, and where applicable, cash flows for the year ended June 30, 2023, in accordance with GAAP. This is a favorable conclusion and is commonly referred to as an unmodified opinion. The independent audit of the City’s financial statements is part of a broader, federally mandated “Single Audit” designed to meet the needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the City’s financial statements, but also on the City’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. Maze will issue the Single Audit on or before March of 2024. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statement in the form of the Management’s Discussion & Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A is located immediately following the report of the independent auditor in the financial section. CITY PROFILE The City proudly remains the Industrial City, a reflection of its steel mill and shipbuilding past, redefined to reflect the innovative, entrepreneurial, and industrious spirit which has made South San Francisco the Biotech Capital of the World, with over 250 active biotech companies and growing. The City encompasses approximately 9.5 square miles and has a population of 66,105. The City employs approximately 500 full-time regular employees and 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. Yi 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 City shifted from at-large to district elections in November 2018 for the City Council. Each Councilmember serves a term of four years, with a rotating Mayor chosen by majority vote of the Council, for a term of one year. The Council appoints the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City and appointing department directors. The offices of City Clerk and City Treasurer are elected and will remain at-large. This report includes all financial activities of the City, including financial information for the City, as the primary government, and for its component units, for which the City is considered financially accountable. The blended component units include the City of South San Francisco Capital Improvements Financing Authority, the Parking Authority of the City of South San Francisco, and the City of South San Francisco Public Facilities Financing Authority. The South San Francisco Conference Center is a discretely presented component unit and is included because of the significance of its governing, operational, and/or financial relationships with the City. The Successor Agency that was created due to the Redevelopment Agency dissolution is also included in this report. ASSESSING THE CITY’S ECONOMIC CONDITION The City continued to recover from the economic challenges associated with the global COVID-19 pandemic during Fiscal Year 2022-23. Unemployment rates increased slightly during the year from 2.60% in July 2022 to 3.10% in June 2023. This is in-line with the County of San Mateo’s unemployment rate of 3.10% but better than the State’s unemployment rate of 4.60% as of June 2023. Property tax revenues remained strong in FY 2022-23, continuing a multi-year trend that has been key to the City’s ongoing financial strength. Property taxes rose by 8.56%, supported by stable property sales activity and receipt of an additional $4 million from the Successor Agency Tax allocation. Permit and inspection revenue had seen a 45.5% jump in revenues from FY 2021-22 due to increase in activities. Revenues from transient occupancy taxes have recovered from pandemic levels low and experienced a 34.8% increase in FY 2022-23 as travel activities and tourism rebounded. An exception to these positive trends occurred with sales tax receipts, which declined by 1.1% in FY 2022-23 after an extraordinarily strong performance in FY 2021-22. Much uncertainty remains about the City’s prospects for further economic recovery, largely due to global economic stresses. Widespread inflation and interest rate increases, rising energy costs, protracted war in Europe, and the YLi potential for global recession all weigh heavily on South San Francisco’s fiscal outlook in the wake of FY 2022-23. Amidst these near-term global crises, the City continues to face numerous local challenges including housing affordability, traffic congestion, growth, and crime. To the extent they impact revenue growth, negative global economic trends may also constrain the City’s ability to address such local policy priorities. Despite immediate and longer-term challenges, the City remains well-positioned to take advantage of ongoing regional economic growth. The City remains a desirable location and continues to draw new residents and businesses. South San Francisco is home to the largest biotech cluster in the world, with over 250 biotech companies, and 11.5-million square feet of biotech space on 500-acres. Population growth also appears likely to recover from modest pandemic era declines as residential construction remains robust in a region with continued strong housing demand and a longstanding shortfall of supply. The City’s burgeoning tourism industry is also primed for growth with added hotel capacity in recent years. These strong fundamentals, which propelled South San Francisco’s economy in prior years, appear likely to support renewed growth as the City emerges from the public health crisis. In November 2015, voters in the City passed Measure W, which increased the sales tax rate within the City by 0.50%. The tax is deposited into the City's General Fund and will be used to pay for City services. This tax revenue is primarily used to pay the debt service on lease revenue bonds issued for construction of police station, Civic Campus, a new Aquatic Center and facilities at Orange Memorial Park. The Civic Center and Multi-purpose sports field opened in October 2023. MAJOR CITY SPONSORED INITIATIVES The City is committed to provide innovative, responsive services to enhance the quality of life of the community through which it continued to implement services and programs that are consistent with the community’s mission, vision, values, and strategic goals. Major programs/projects and accomplishments for FY 2022-23 are included as follows: Strategic Plans Completed Master Plans for Centennial Way Trail and Orange Memorial Park City Services In partnership with the South San Francisco Unified School District, expanded free after school programs for transitional kindergarten through sixth grade students as a part of the Expanded Learning Opportunities Program (ELOP) through the California Department of Education Launched the Joint Advisory Committee of the Child Care Master Plan Expanded free South City Shuttle services YLLi Capital Projects Completion of Water Quality Plant’s Wet Weather Digesters Improvement Project Electrification of City’s Fleet with addition of 18 new Electric Vehicles Completion of Oyster Point Development Phase 1C Pavement Management Program – 2021 Surface Seal & Rehab projects South Airport Boulevard Improvement Project West Orange and Hillside Pedestrian Crossing Improvement Project Oyster Point Pump Station Water Quality Control Plant Sludge Dewatering Improvements Bay Trail Improvements at Oyster Point 2C FINANCIAL INFORMATION The City Council is required to adopt a final budget by passing a budget resolution no later than June 30th, following a public hearing process. This annual budget serves as the foundation for the City’s financial planning and control. The budget is prepared by fund, function, and department. The legal level of budgetary control is at the fund level. The City Manager is authorized to transfer budgeted amounts between departments and line items within any fund. Any revisions that alter the total expenditure of any fund must be approved by the City Council. Transfers between funds must be approved by the City Council. At the end of the fiscal year, encumbered appropriations are carried forward and become part of the following year’s budget while appropriations that have not been encumbered lapse, unless otherwise authorized by the City Council and the City Manager. 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, approval of accounting transactions, and regular reconciliation of detail and control records. i[ 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. City continues to receive a triple A credit rating, which is a good indicator of the City's strong financial position, solid executive management, fiscally sound policies and practices, and responsible budgetary performance. The City’s Reserve Policy is aligned with the Government Finance Officers Association (GFOA) best practices recommendation for reserves, setting aside 15- 20 percent of operating revenues. OTHER INFORMATION Award The City’s ACFR for the fiscal year ended June 30, 2022, received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association. The award signified the report’s attainment of easily readable and efficiently organized content and satisfaction of generally accepted accounting principles and legal requirements. The award is valid for a period of one year only. However, the City believes that this current report continues to conform to program eligibility requirements. Acknowledgments The preparation of the ACFR was made possible by the dedicated services of the entire staff of the Finance Department and our auditor. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. Furthermore, we would like to thank the City Council for its leadership and commitment to ensuring the long-term fiscal health of the City. Respectfully submitted, ____________________________ __________________________ Karen Chang Sharon Ranals Director of Finance City Manager __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Sh R l [ Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of South San Francisco California For its Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 Executive Director/CEO [i ŝƚŝǌĞŶƐŽĨ^ŽƵƚŚ^ĂŶ&ƌĂŶĐŝƐĐŽ ŝƚǇŽƵŶĐŝů ŝƚǇůĞƌŬ Rosa Govea Acosta ŝƚǇdƌĞĂƐƵƌĞƌ Frank Risso ŝƚǇDĂŶĂŐĞƌ Sharon Renals ŝƚǇƚƚŽƌŶĞǇ Sky Woodruff ǆĞĐ͘ƐƐŝƐƚĂŶƚƚŽƚŚĞŝƚǇ DĂŶĂŐĞƌ Marie Patea ĚŵŝŶŝƐƚƌĂƚŝǀĞĞƉĂƌƚŵĞŶƚƐ KƉĞƌĂƚŝŶŐĞƉĂƌƚŵĞŶƚƐ &ŝƌĞŚŝĞĨ Jess Magallanes WƵďůŝĐtŽƌŬƐŝƌĞĐƚŽƌ Eunejune Kim >ŝďƌĂƌǇŝƌĞĐƚŽƌ Valerie Sommer WĂƌŬƐĂŶĚZĞĐƌĞĂƚŝŽŶŝƌĞĐƚŽƌ Greg Mediati ĐŽŶ͘ ΘŽŵŵ͘ ĞǀĞůŽƉŵĞŶƚ ŝƌĞĐƚŽƌĞůŽƉŵĞŶƚŝ Nell Selander ŚŝĞĨŽĨWŽůŝĐĞ Scott Campbell ,ƵŵĂŶZĞƐŽƵƌĐĞƐŝƌĞĐƚŽƌ Leah Lockhart &ŝŶĂŶĐĞŝƌĞĐƚŽƌ Karen Chang ƐƐŝƐƚĂŶƚ ŝƚǇ DĂŶĂŐĞƌΎ Richard Lee ĞƉƵƚǇŝƚǇDĂŶĂŐĞƌ Buenaflor Nicolas (District 3), Mayor Mark Nagales (District 2), Vice Mayor Mark Addiego (District 1), Member James Coleman (District 4), Member Eddie Flores (District 5), Member /ŶĨŽƌŵĂƚŝŽŶdĞĐŚŶŽůŽŐǇ ŝƌĞĐƚŽƌ Tony Barrera ĂƉŝƚĂůWƌŽũĞĐƚƐ ŝƌĞĐƚŽƌũ Jacob Gilchrist Phillip Vitale ĞƉ͘ĂƉŝƚĂůWƌŽũĞĐƚƐŝƌĞĐƚŽƌ ŚƌŝƐƚŝŶĂ&ĞƌŶĂŶĚĞǌ Ύ ƐŽĨ:ƵŶĞϯϬ͕ϮϬϮϯ͕ƚŚĞƐƐŝƐƚĂŶƚŝƚǇDĂŶĂŐĞƌƉŽƐŝƚŝŽŶǁĂƐǀĂĐĂŶƚ͘ZŝĐŚ>ĞĞũŽŝŶĞĚƚŚĞŝƚǇŝŶůĂƚĞƵŐƵƐƚϮϬϮϯ [Li CityCouncil&DirectoryofOĸcials* CityCouncil BuenaŇorNicolas(District3)Mayor MarkNagales(District2)ViceMayor MarkAddiego(District1)Councilmember JamesColeman(District4)Councilmember EddieFlores(District5)Councilmember ElectedOĸcials RosaGoveaAcostaCityClerk FrankRissoCityTreasurer AppointedOĸcials SharonRanalsCityManager RichardLeeAssistantCityManager ChrisƟnaFernandezDeputyCityManager KarenChangFinanceDirector ScoƩCampbellChiefofPolice TonyBarreraInformaƟonTechnologyDirector JacobGilchristCapitalProjectsDirector NellSelanderDeputyEconomic&CommunityDevelopmentDirector LeahLockhartHumanResourcesDirector JessMagallanesFireChief EunejuneKimPublicWorksDirector ValerieSommerLibraryDirector GregMediaƟParks&RecreaƟonDirector BudgetSubcommiƩee MarkAddiego BuenaŇorNicolas *AsofNovember15,2023 [LLi This Page Left Intentionally Blank INDEPENDENT AUDITOR’S REPORT Honorable Members of the City Council City of South San Francisco, California Report on the Audit of the Financial Statements Opinions 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, 2023, 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 discretely presented component unit financial statements of the South San Francisco Conference Center Authority (Authority), which represents 0.61%, 0.79%, and 1.32%, respectively, of the assets, net position, and revenue of the primary government. Those financial statements were audited by other auditors, whose report thereon 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. In our opinion, based on our audit and 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 discretely presented component unit, each major fund, and the aggregate remaining fund information of the City as of June 30, 2023, 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. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. 1 In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: •Exercise professional judgment and maintain professional skepticism throughout the audit. •Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. •Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. •Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. •Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. 2 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the 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 is the responsibility of management and, 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. Supplementary 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 accompanying Supplementary Information, as listed in the Table of Contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such 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 Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the Introductory Section and Statistical Section listed in the Table of Contents, but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 27, 2023, 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 solely 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 the effectiveness of the City’s 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. Pleasant Hill, California December 27, 2023 4 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 The Management’s Discussion and Analysis (MD&A) provides an overview of City of South San Francisco’s financial activities and fiscal performance for the year ended June 30, 2023. Please read this in conjunction with the accompanying Transmittal Letter and Basic Financial Statements to obtain a complete picture of the City’s financial condition. FINANCIAL HIGHLIGHTS x Total Net Position for Governmental activities in FY 2022-23 increased by $37.5 million, or 9.5%, from $396.8 million in the prior year, to $434.3 million. The increase in cash and investments of $46 million was mainly due to higher revenues received in the year with a reduction in receivables at the end of the year. The reduction in restricted cash and investments was due to drawing down from bond proceeds to fund capital projects, mainly Orange Memorial Parks and Civic Campus. The decrease in bond trustee account was offset by the capitalization of the Police Station at $53 million. The growth in assets of $28.1 million was offset by a $77.4 million increase in Net Pension Liability. x Total Net Position for Business-Type activities in FY 2022-23 increased by $5 million, or 3.6%, from $137.9 million in the prior year, to $142.9 million. The growth in Net Position was mainly due to recognition of a $4 million loan forgiven stipulated in the State Water Resources Board loan agreement. x City-wide Net Pension Liability to CalPERS for FY 2022-23 increased by $86.0 million, or 59.6%, from $144.4 million in the prior year to $230.4 million. This significant increase in liability was driven by revised actuarial assumption, lowered discount rates imposed by CalPERS, and coupling with weaker investment earnings. x City-wide cash and investments at year end increased $53.3 million, or 20.1%, from $264.8 million in the prior year to $318.1 million. This reflects the underlying strength in the local economy as the City continued to recover from the pandemic and the strong real-estate market. x Revenues from Governmental Activities (excluding transfers and special items) increased by $12.5 million, or 6.1%, to $216.4 million in FY 2022-23 from $203.9 million in the prior year. Revenues from Business-Type Activities (excluding transfers and special items) increased $1.8 million, or 5.35%, to $36.2 million in FY2022-23 from $34.4 million in the prior year. x Expenses from Governmental Activities (excluding transfers and special items) increased by $36.8 million, or 27.32%, to $171.6 million in FY2022-23 from $134.8 million in the prior year due to a greater amount of interest paid on debt (due to additional bonds having been issued in the prior year). Expenses from Business-Type Activities increased by $4.7 million, or 16.4%, to $33.4 million compared to $28.7 million in the prior year. 5 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 x Property tax revenues categorized under Governmental Activities increased in FY 2022-23 by $7.7 million, or 19.3%, to $47.7 million from $40 million in the prior year. This was primarily due to the continued strong real estate market and also from receipt of a higher tax allocation from the Successor Agency. x Transient Occupancy Tax (“TOT”) was the most dramatically impacted revenue category during the height of the pandemic due to the restrictions on travel and shelter-in-place orders. By the beginning of FY 2021-22, these had largely been removed allowing this revenue category to rebound significantly. TOT revenue had increased to $16.3 million, an increase of $4.2 million, or 34.7%, from $12.1 million in the prior year. Total TOT receipts have almost returned to pre-pandemic levels, but there is still some lag in business travel. x Revenue from Property Taxes in Lieu, otherwise known as the California Vehicle Licensing Fee (VLF), had decreased to $8.8 million in FY 2022-23 from $12 million in the prior year, a decrease of $3.2 million or 26.7%. This is a volatile revenue source that is difficult to predict, and the decrease was partially due to a change in the ratio of basic aid to non-basic aid school districts in San Mateo County which affects the availability of VLF. x Total program revenues from the City’s Enterprise Funds increased slightly by $0.7 million, or 2.0% to $35.9 million from $35.2 million in the prior year. This was largely due to the recovery of sewer services charge revenues resulting from the reopening of businesses and more workers returned to work. The City’s Parking Enterprise experienced a $0.07 million, or 6.9%, increase in revenues to $1.06 million in FY2022-23 compared to $0.99 million in the prior year due to a higher level of parking activities as consumers returned to the City following removal of pandemic-related restrictions. 6 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT This Annual Comprehensive Financial Report (ACFR) is in six parts: 1) The Introductory Section, which includes the Transmittal Letter and general information; 2) Management’s Discussion and Analysis; 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, custodial funds, and other budgetary information; 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. 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 a 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 of 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 distinct activities of the City. The Fund Financial Statements report the City’s operations in more detail than the government- wide statements. The Governmental Fund Financial Statements focus primarily on the short-term activities of the City’s General Fund and other Major Funds and measure only current revenues, expenditures, and fund balances; they exclude capital assets, long-term debt, and other long-term amounts. The Proprietary Fund Financial Statements focus on the Business-Type “enterprises” of the City, i.e. activities that are accounted for in a similar way to private sector organizations using the full accrual basis, thereby including both short-term and long-term elements. 7 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 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 details for each of these other funds. The Fiduciary Fund Financial 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: x Governmental activities - All the City’s basic services are considered to be governmental activities, including General Government, Fire, 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 and South San Francisco Public Facilities Financing Authority, as the City Council also governs these entities. x Business-Type Activities - All the City’s enterprise activities are reported here, including Wastewater treatment (or Sewer), Parking, and Storm Water management. Unlike Governmental services, user fees fully support most of these services. x 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. City-wide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole and account for revenues when due and expenses when incurred. 8 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Fund Financial Statements The Fund Financial Statements provide detailed information about each of the City’s most significant funds, called Major Funds. Each Major Fund is presented individually, with all non- Major Funds summarized and presented only in a single column. Subordinate schedules present the details of these non-Major funds. Major Funds present the major activities of the City for the year and may change from year to year because of changes in the pattern of City 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 means 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 and include all their assets, liabilities, and deferred outflows/inflows of resources, 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 city-wide 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 Fund Financial 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. FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE The following analyses focus on the net position and changes in the City’s Governmental Activities (Tables 1 through 3, and Chart 1) and Business-Type Activities (Tables 4 and 5), which are presented in the city-wide Statement of Net Position and Statement of Activities. The comparative results for FY 2022-23 are presented versus FY 2021-22. 9 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Governmental Activities Net position may serve over time as a useful indicator of the City’s financial condition. Table 1 below shows that total assets and deferred outflows of resources exceed the total liabilities and deferred inflows of resources as of June 30, 2023 for Governmental Activities: Governmental Net Position Table 1 Governmental Net Position as of June 30 (In Millions) Increase/(Decrease) 2023 2022 Amount % Cashandinvestments 285.8$239.8$46.0$19.2% Otherassets 117.0 201.9 (84.9) (42.1%) Capitalassets 532.7 465.7 67.0 14.4% Totalassets 935.5 907.4 28.1 3.1% Totaloutflowsofresources 64.6 28.8 35.8 124.3% Totaloutflowofresources 64.6 28.8 35.8 124.3% LongͲtermdebtoutstanding 219.0 223.8 (4.8) (2.1%) Otherliabilities 331.4 253.4 78.0 30.8% Totalliabilities 550.4 477.2 73.2 15.3% Deferredinflowsofresources 15.4 62.1 (46.7) (75.2%) Totaldeferred inflowofresources 15.4 62.1 (46.7) (75.2%) Netposition: Netinvestmentincapitalassets ϯϵϬ͘ϴ ϯϴϰ͘ϴ ϲ͘Ϭ ϭ͘ϲ% Restricted 130.1 139.0 (8.9) (6.4%) Unrestricted (ϴϲ͘ϲ)(1Ϯϳ͘Ϭ)4Ϭ.ϰ (ϯϭ͘ϴ%) Totalnetposition434.3$396.8$37.5$9.5% 10 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 As shown in table 1, the total net position for Governmental Activities increased by $37.5 million in FY 2022-23 compared to the prior year, reflecting significant increases in assets. Cash and investments increased by $46 million. Other assets, which includes receivables, properties held for redevelopment, and restricted cash and investments, decreased by $84.9 million due to reduction of the restricted cash, which represented the bond proceeds for capital assets such as the Civic Campus and Orange Memorial Park that were completed in October 2023. Capital assets increased by $67 million due to capitalization of new Police Station and other bond funded street projects. Pursuant to GASB 75 and GASB 68 requirements, respectively, the City, as in prior years, recognized the Net OPEB liability of $58.4 million and Net Pension Liability of $207.4 million attributable to Governmental Activities. 11 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 The following table shows the changes in net position for Governmental Activities: Table 2 Expense and Program Revenue Comparison in Governmental Activities (In Millions) Increase/(Decrease) 2023 2022 Amount % Revenues Programrevenues: Chargesforservices 53.4$66.7$(13.3)$(19.9%) Operatinggrantsandcontributions 12.910.92.0 18.3% Capitalgrantsandcontributions 2.03.3(1.3) (39.4%) Totalprogramrevenues 68.3$80.9$(12.6)$(15.6%) Generalrevenues: Taxes: Propertytaxes 47.7$40.0$7.7$19.3% Salestaxes 37.7 38.1 (0.4) (1.0%) Transientoccupancytaxes 16.3 12.1 4.2 34.7% Othertaxes 13.4 11.5 1.9 16.5% Propertytaxesinlieu8.812.0 (3.2) (26.7%) Investmentearnings 5.1 (6.7) 11.8 (176.1%) Miscellaneous 19.1 16.0 3.1 19.4% Totalgeneralrevenues 148.1$123.0$25.1$20.4% Totalrevenues 216.4$203.9$12.5$6.1% Expenses Generalgovernment 25.0$20.8$4.2$20.2% Firedepartment 36.9 28.5 8.4 29.5% Policedepartment 37.9 35.7 2.2 6.2% Public Works21.9 7.5 14.4 192.0% ParksandRecreation 23.5 19.5 4.0 20.5% Library 6.6 6.1 0.5 8.2% EconomicandCommunityDevelopment 12.9 12.0 0.9 7.5% InterestonlongͲ termdebt 6.9 4.7 2.2 46.8% Totalexpenses 171.6$134.8$36.8$27.3% Excess/(deficiency)beforetransfers 44.8$69.1$(24.3)$(35.2%) SpecialItem (5.2) (3.0) (2.2) 73.3% Transfers (2.1) (1.4) (0.7) 50.0% Changein netposition 37.5 64.7 (27.2) (42.0%) NetpositionͲbeginning 396.8 332.1 64.7 19.5% NetpositionͲending 434.3$396.8$37.5$9.5% 12 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 As shown in table 2, total Governmental revenues (excluding transfers and special items) increased by $12.5 million, or 6.1%, compared to the prior year. The increase was due to higher investment earnings. However, the increase was offset by a decrease in Charges for services largely resulting from significant reduction in impact fees collected during this fiscal year. These are fees paid by developers on new development projects within the City and revenue levels can vary depending on the timing of such projects. On the other hand, the Charges for Services from facility rentals, and childcare and aquatic programs offered by the City during the year were higher due to the City’s recovery from the COVID-19 pandemic. The recovery also gave rise to a $4.2 million increase in TOT as travel restrictions were removed, hotel occupancy rates increased, and consumer spending patterns normalized. There was also an increase in the property tax primarily due to a continued strong real estate market and also from receipt of a higher tax allocation from the Successor Agency. However, a decrease in revenue was also seen in Property taxes in lieu ($3.2 million), otherwise known as the California Vehicle Licensing Fee (VLF) due to a change in the ratio of basic aid to non-basic aid school districts in San Mateo County which affects the availability of VLF. Investment earnings rose by $11.8 million to 5.1 million, compared to the prior year, due to a continued rising in interest rates. The annual mark-to-market adjustment required by Governmental Accounting Standards Board (GASB) accounting standard #31 results in the recognition of this temporary change in value of the City’s investments. 13 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Chart 1 shows the distribution of revenues from Governmental Activities by category. Chart 1 Revenues by Source - Governmental Activities FY 2022-23 Governmental program expenses increased by $36.8 million, or 27.3%, in comparison to the prior year. Increases were seen in almost all the departments partially due to higher salary and benefit costs as positions were unfrozen during the year but also due to increased spending on operational supplies in response to expanded public services provided as the City continued to recover from the pandemic. Interest on long-term debt increased to $6.9 million, from $4.7 million in the prior year, due to repayments that began on the 2022A bonds which were issued to pay for construction of the Aquatic Center. 14 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Table 3 illustrates the difference between program revenues and program expenses. Program revenues consist of capital and operating grants and contributions, and fees for services. General City revenues, such as property taxes, sales taxes, transient occupancy taxes, licenses and permits, and investment earnings, cover the shortfall between program revenues and program expenses. Table 3 Net (Expense) / Revenue from Services Governmental Activities (In Millions) In FY 2022-23, the net expense for governmental activities increased by $49.4 million from $53.9 million to $103.3 million, due to a $36.8 million increase in Governmental program expenses, as previously discussed, and a $12.6 million decrease in program revenues primarily in charges for services which included reduction in developer impact fees. Increase/(Decrease) 2023 2022 Amount % Generalgovernment (12.9)$(11.2)$(1.7)$15.2% Firedepartment (27.6) (20.7) (6.9) 33.3% Policedepartment (34.7) (32.0) (2.7) 8.4% Public worksdepartment (3.1) 17.3 (20.4) (117.9%) Recreationandcommunityservices (19.1) (15.9) (3.2) 20.1% Library (5.7) (4.4) (1.3) 29.5% Economicandcommunitydevelopment 6.7 17.7 (11.0) (62.1%) InterestonlongͲtermdebt (6.9) (4.7) (2.2) 46.8% Total (103.3)$(53.9)$(49.4)$91.7% 15 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Business-Type Activities Table 4 shows that total assets and deferred outflows of resources exceed the total liabilities and deferred inflows of resources as of June 30, 2023 for Business-Type Activities: Table 4 Business-type Net Position at June 30 (in Millions) The total net position for Business-Type Activities increased by $5 million, or 3.6%, compared to the prior year. Total assets increased slightly by $1.8 million, or 0.8%, reflecting decreases of capital assets related primarily to regular depreciation. This was offset somewhat by higher cash balances due to an additional $6.6 million loan drawdown from State Water Resources Board loan and a lower receivables balance. Total liabilities, on the other hand, increased by $5.8 million due to a higher accounts payable balance at year end and a $5.1 million higher net pension liability due to substantial investment losses during the measurement period. Increase/(Decrease) 2023 2022 Amount % CashandInvestments 32.3$25.0$ 7.3$ 29.2% Otherassets 3.2 5.1 (1.9) (37.3%) Capital assets 192.8 196.4 (3.6) (1.8%) Total assets 228.3 226.5 1.8 0.8% Deferredoutflowsrelatedtopension/OPEB 7.1 3.2 3.9 121.9% Total Deferredoutflowsofresources 7.1 3.2 3.9 121.9% LongͲtermliabilitiesoutstanding 55.7 57.5 (1.8) (3.1%) Otherliabilities 36.7 29.1 7.6 26.1% Total liabilities 92.4 86.6 5.8 6.7% Deferredinflowsrelatedtopension/OPEB 0.2 5.3 (5.1) (96.2%) Total deferredinflowsofresources 0.2 5.3 (5.1) (96.2%) Netposition: Netinvestmentincapital assets 132.8 133.6 (0.8) (0.6%) Restricted 0.0 0.0 0.0 0.0% Unrestricted 10.1 4.3 5.8 100.0% Total netposition 142.9$137.9$5.0$ 3.6% 16 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Similar to Governmental Activities and pursuant to GASB 75 and GASB 68 requirements, respectively, the City, as in prior years, recognized the Net OPEB liability of $6.5 million and Net Pension Liability of $23 million attributable to Business-Type Activities. Table 5 below shows the changes in net position for Business-Type Activities: Table 5 Change in Business-Type Activities Net Position (In Millions) Expenses from Business-Type Activities in FY2022-23 increased by $4.7 million to $33.4 million while total revenues (program and general revenues combined) increased slightly, by $0.7 million to $35.9 million. The total change in net position was an increase of $5 million after transfers compared to the $7.1 million increase in net position in the prior year. Despite revenues remaining stable in FY2022-23 and positive investment earnings, control of expenses and reduced transfers out to other funds helped to ensure an increase in net position, albeit a lower increase than in the prior year. Increase/(Decrease) 2023 2022 Amount % Expenses SewerEnterprise 30.6$26.2$ 4.4$ 16.8% ParkingDistrict 1.3 1.2 0.1 8.3% StormWater 1.5 1.3 0.2 15.4% Total expenses 33.4 28.7 4.7 16.4% Revenues ProgramRevenues ChargesforServices 25.4 24.2 1.2 5.0% OperatingandCapital grantsandcontributions 10.5 11.0 (0.5) (4.5%) Total programrevenues 35.9 35.2 0.7 2.0% General revenues Investmentearnings 0.3 (0.8) 1.1 (137.5%) Total general revenues 0.3 (0.8) 1.1 (137.5%) Excess (deficiency)beforetransfers 2.8 5.7 (2.9) (50.9%) Transfers 2.2 1.4 0.8 57.1% Change innetposition 5.0 7.1 (2.1) (29.6%) NetpositionͲbeginning 137.9 130.8 7.1 5.4% NetpositionͲending 142.9$137.9$5.0$ 3.6% 17 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 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 condition. Unrestricted fund balance is a major indicator of designated and uncommitted resources available for spending in future fiscal years. At June 30, 2023, the City’s Governmental Funds reported combined fund balances of $312.0 million, a decrease of $31.6 million, or 9.21%, compared to the prior year. This was primarily due to near completion of the bond funded capital improvement projects such as Civic Campus, Orange Memorial Park and Street Projects. The General Fund ending fund balance, which includes Measure W, was $88.6 million, reflecting an increase of $12 million, or 15.5%, over the prior year primarily due to stronger revenues in most major revenue categories but also due to expenditures being rolled over to next year. Total Governmental Fund revenues (excluding transfers and special items) increased by $12.9 million, or 6.4%, from $201.8 million to $214.7 million, with increases in all categories except sales tax and property taxes in lieu. City saw a steady increase of property taxes due to strong real estate market, and investment earnings due to continue climbing interest rates and transient occupancy taxes rebound from lifting of the travel restriction. Total Governmental Fund expenditures (excluding transfers and special items) decreased by $3.0 million, or 1.3%, from $236.3 million in the prior year to $233.3 million in FY 2022-23. Most departments saw increases in expenditures as public services expanded during the year as the recovery from the pandemic continued, higher costs of materials and supplies due to high inflation. Personnel costs remained high as a result of annual salary adjustment and increase in headcounts. Debt service increased by $3.2 million due to principal and interest repayment beginning for the 2022A bond issuance. Comparison of General Fund 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 expenditures 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 (including Measure W). Changes between the adopted and final budgets are shown and explained in Table 6: 18 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Comparison of General Fund (excluding transfers) Final Budgets to Original Adopted Budget (in Thousands) Table 6 Original Final Pct Discussion: Revenues Budget Budget Change Change (Items of more than 5% and $100,000 variance) Property taxes 43,805$ 45,805$ 2,000$ 4.6% Sales taxes 34,791 36,191 1,400 4.0% Transient occupancy taxes 11,161 14,161 3,000 26.9% This revenue stream, most impacted by the pandemic imposed travel restrictions, has demonstrated strong recovery, which led to a $3M upward budget revision during mid-year budget cycle. Other taxes 4,893 5,693 800 16.3% Other taxes includes real property transfer tax, business license and commercial parking tax. Revenue streams from new business startups and traffic to the City continues to strengthen, which led to increase in upward budget revision Franchise Fee 4,600 4,600 - Intergovernmental 2,845 4,337 1,492 52.4% Reflects multiple federal, state and local grants applied for during the year, adjustments for Dept of Toxic Substance Control grant, grants to enhance Fire Department security, the Economic Advancement Center and various other projects. Interest and rentals 5,453 5,453 - Licenses and permits 15,500 19,425 3,925 25.3% Revenue from building and electric has demonstrated significant rebound from pandemic, which led to upward budget adjustment during mid-year. Charges for services 8,799 8,265 (534) -6.1% A decrease in projections for Planning division had led to a decision to revise the budget downwards during the mid-year review Fines and forfeitures 711 711 - Other 259 279 20 7.7%The increase was due to receiving support from San Mateo County for City's Promotores Program Total 132,817$ 144,920$ 12,103$ 9.1% Original Final Pct Discussion: Expenditures Budget Budget Change Change (Items of more than 5% and $100,000 variance) City Council 259$ 260$ 1$ 0.4% City Clerk 1,143 1,154 11 1.0% City Treasurer 167 168 1 0.6% City Attorney 940 940 - City Manager 4,927 5,736 809 16.4%Increase due to receipt of DTSC grant and purchase order roll over. Finance 3,893 4,405 512 13.2% Accounts for various purchase orders carried over from the previous FY, e.g. ERP replacement project and other consultant services. Non-Departmental 1,544 2,153 609 39.4% Increase due to contributing additional Pension UAL payment Human Resources 2,518 2,684 166 6.6% Roll over of purchase orders related to summer youth program Economic and Community Development 8,908 15,610 6,702 75.2% Roll over of purchase orders from the previous year for plan review and building inspection services, General Plan update and work related to the Economic Advancement Center and Lindenville PDA Fire 31,313 33,425 2,112 6.7%Increase due to funding for Fire boat purchase, Incentive Pay and increase in GEMT IGT Program Police 32,958 34,511 1,553 4.7% Public Works 7,121 8,604 1,483 20.8%Increase was due to approval of purchase for Mini Street Sweeper and additional consultant costs Library 6,706 7,274 568 8.5%Adjustments for appropriations of multiple state and local grants received for Library programs Parks and Recreation 19,608 22,873 3,265 16.7% Adjustments for appropriations of various projects such as ballfield restrooms repairs, tennis courts repavement, Orange Memorial Park Basketball court maintenance, Telia Senior Center repair. Total 122,005$ 139,797$ 17,792$ 14.6% 19 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Analysis of Major Governmental Funds General Fund In FY 2022-23, total General Fund revenues, excluding transfers in, were $162.1 million which was $18.1 million, or 12.6% higher than the final amended budget. Total General Fund expenditures, excluding transfers out and including encumbrances, ended FY 2022-23 at $133.9 million which was $5.5 million, or 4.1%, lower than the final budget due to carryover of a significant number of purchase orders. As of June 30, 2023, the General Fund total fund balance was $88.6 million, $16.8 million of which was attributable to Measure W. Of the remaining fund balance, $29.3 million was held in reserve in accordance with city policy which is aligned with the Governmental Finance Officers Association (GFOA) recommended reserve practice of between 15-20 percent of General Fund operating revenue. The remaining $42.5 million was held in designation/reserve accounts for various purposes including unassigned fund balance (available for operational use), encumbrances (committed expenditure items), capital projects and land held for development. Revenues. Property tax collections in FY 2022-23 were $54 million, which was $8.2 million or 17.9% over final budget. primarily due to the continued strong real estate market and also from receipt of a higher tax allocation from Successor Agency. Sales tax revenue, including Measure W, was $37.3 million, which was $1.1 million or 3% over final budget, reflecting steady consumer spending with high inflation price. Transient occupancy taxes totaled $16.4 million for the year, which was $3.6 million, or 15.5%, over the final budget. This category was budgeted conservatively due to the expected lingering impacts of the pandemic on the hospitality industry seen in the prior year. However, travel rebounded quickly leading to high hotel occupancy rates and considerably higher final collections than budget. By way of contrast, pre-pandemic TOT levels were approximately $17 million (FY2018-19). Intergovernmental revenues were $3.6 million which was $0.8 million, or 18.6%, lower than final budget mainly due to the timing of receipt of various grants, many of which are on a reimbursement basis so it depends on progress of projects during the year. Licenses and permits revenues were $20.5 million, which was $1 million, or 5% higher than the final budget. This category can be very difficult to budget since receipts depend on the timing of development projects within the City. Charges for services were $11.7 million, which was $3 million or 34.78% above budget. This category was revised downward during the mid-year review due to lower-than-expected receipts at the time for classes, rentals and child care but the year ended much stronger than expected and exceeded the original budget. 20 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Measure W revenue increased slightly from $15.4 million in FY2021-22 to $15.6 million in FY 2022-23 and exceeded budget by $1.9 million primarily due to the City’s prudent budget approach to the volatile revenue category. Expenditures. Higher than expected expenditures in the Fire department are primarily payroll- related, particularly in overtime due to regular staff working additional hours to cover unfilled vacancies. To a lesser extent, the Police department also saw payroll-related expenditures exceed budget, but this was partially offset by underspends in supplies and services. The Non- Departmental category was over budget due to a one-time extra contribution to pension obligation fund. These overspends were offset by savings in other departments, including Finance, Library and Economic and Community Development. Compared to the prior year, General Fund expenditures, excluding transfers and including encumbrances, increased from $129.2 million to $142.3 million. This was driven by the recovery from the pandemic and the commensurate return to a more normal level of services to residents which led to more staffing and operational expenditures. Versus the final budget, the General Fund ended the year with a $1.7 million unfavorable variance. American Rescue Plan Act Fund In response to the COVID-19 pandemic, the federal government passed the American Rescue Plan Act (ARPA) in March 2021 which included financial aid to be provided to cities. The City of South San Francisco was awarded $12.3 million in ARPA funds, received in two equal tranches in June 2021 and June 2022. During FY 2022-23, $2 million was transferred to the General Fund to replace revenues lost as a direct result of pandemic impacts. ARPA funds are held as unearned revenue on the balance sheet, netting off against the cash balance, and recognized as revenue as project expenditures are incurred. This results in a zero-fund balance at year end. Capital Improvement Funds The City consolidates and reports its governmental fund-type capital project expenditures in these funds. 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. From time to time and when financially feasible and prudent to do so, the City issues bonds which generate proceeds for large-scale public facility projects. The Capital Improvement Fund consists of 1) regular capital projects 2) Bond funded Street Projects ($12.4 million) and 3) Bond funded Solar Projects ($4 million). The decrease in fund balance for this fund was mainly due to draw down from bond proceeds to fund the streets projects. 21 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 The reduction in fund balance of $35 million and $12 million for the Capital Improvement for Civic Campus and Orange Memorial Park, respectively, also resulted from significant drawdowns from the bond proceeds for these projects. Civic Campus and Orange Ballfield were both opened in the fall of 2023. Entire capital projects are appropriated in one-year, but expended over multiple years, with unspent appropriations carried forward year-to-year until completion. In FY 2022-23, combined ending fund balance for Capital Improvement Funds was $86.6 million which decreased $63.2 million from the combined ending fund balance of $149.7 million in the prior year. As mentioned above, the decrease was due to the spending down of previous bond proceeds as the new Police Station was completed during the year, the Civic Center Campus and the Capital Improvement Orange Memorial Park Projects were completed in the fall of 2023. Other Governmental Funds Presented as a group in the Basic Financial Statements, these funds are individually presented as Supplementary Information. It’s worth noting that impact fee funds, presented as non-major funds, received considerable developer payments during the year owing to the high level of development activity in the City. This includes $7.4 million in Commercial Linkage Impact Fees which will be used to provide affordable housing and to support the City’s adopted 2015-2023 Housing Element, and $6.6 million in Oyster Point Development Impact Fees to be used for interchange projects in the Oyster Point area. Also worth noting is that the city received $9 million as a Community Benefit for building the New Fire Station. Enterprise Funds Sewer Enterprise Fund The Sewer Enterprise fund reported operating revenue (before non-operating revenues and operating transfers) of $30.1 million in FY2022-23, an increase of $1.7 million, or 6.0%, from $28.4 million in the prior year. This increase in revenue is more water usage and therefore larger sewer effluent volumes on which service charges are based. In addition, the revenue increase was due to Other Cities increase in participation of Operating and Maintenance Cost sharing. Operating expenses increased $2.1million, or 8.0%, from $ 25.8 million to $27.9 million, due to higher payroll-related expenses. 22 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 Parking District Fund In FY 2023, the Parking District fund reported an operating loss (before non-operating revenues and operating transfers) of $0.2 million which was similar to the loss in the prior year of $0.2 million. Operating revenues increased by $0.7 million, or 7.0%, from $1.0 million to $1.1 million, primarily due to increased usage of parking meters as businesses opened up as the City continued to recover from the pandemic and shoppers returned in their cars to the downtown area. Operating expenses increased by $0.1 million, or 9%, from $1.2 million to $1.3 million due to higher program supplies. 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 $0.4 million, which is flat compared to the prior year, primarily from a levy on property owners. Transfers in from other funds totaled $2.5 million - $0.3 million from the General Fund, $0.7 million from non-Major Governmental Funds, and $1.5 million from the Infrastructure Reserve Fund. Operating expenses in this fund totaled $1.5 million, an increase of $0.2 million, or 12.0%, from $1.3 million in the prior year, primarily due to higher payroll-related expenditures. Net position increased $1.7 million from $16.8 million to $18.6 million, largely due to transfers in. CAPITAL ASSETS Generally accepted accounting principles require the City to add infrastructure to its reportable capital assets. Infrastructure includes streets, drainage systems, and traffic control and safety devices. The City has successfully reported on the depreciated value of all such assets acquired or built since 1980. 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 Position. Such information is summarized below and is more completely detailed in Note 3 to the Basic Financial Statements. The City depreciates all of its capital assets, except land and construction in progress. 23 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 At June 30, 2023, the City had $725.5 million in capital assets (as shown in table 7 below), net of depreciation, representing a substantial increase of $63.4 million from the prior year, driven primarily by in-progress construction projects such as the new Civic Center Campus and the completion of the new Police Station. The City’s various capital asset types used in Governmental and Business-Type Activities, are illustrated in Table 7: Table 7 Capital Assets (in Millions) at June 30 Increase/(Decrease) 2023 2022 Amount % GovernmentalActivities: Land 72.2$72.2$ Ͳ$0.0% Buildingsandimprovements 150.6 97.4 53.2 54.6% Equipmentandvehicles 25.9 24.8 1.1 4.4% Furnitureandfixtures 2.6 2.6 0.0 0.0% InfrastructureͲstreets 208.3 205.6 2.7 1.3% InfrastructureͲtrafficcontroldevices 12.6 12.6 0.0 0.0% InfrastructureͲstormdrains 8.9 8.9 0.0 0.0% Constructioninprogress 260.9 241.9 19.0 7.9% Lessaccumulateddepreciation (209.3) (200.3) (9.0) 4.5% Totals 532.7$465.7$67.0$14.4% BusinessͲTypeActivities Land 0.8$0.8$ Ͳ$0.0% Buildingsandimprovements 80.1 80.1 0.0 0.0% Cleanwaterfacilitiesandtransmissionline 79.9 79.9 0.0 0.0% InfrastructureͲstormdrains 6.2 6.2 0.0 0.0% InfrastructureͲstreets 7.4 7.4 0.0 0.0% Equipmentandvehicles 18.5 18.5 0.0 0.0% Constructioninprogress 86.2 84.0 2.2 2.6% Lessaccumulateddepreciation (86.3) (80.5) (5.8) 7.2% Totals 192.8$196.4$(3.6)$(1.8%) TotalCity 725.5$662.1$63.4$9.6% 24 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 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 shown in table 8 (excluding unamortized bond premiums): Table 8 Outstanding Debt (In Millions) at June 30 In June 2022, the City of South San Francisco Public Facilities Financing Authority issued $65.4 million in lease revenue bonds, Series 2022A, for the construction of the new Aquatic Center and ballfields, and the replacement of the playground and two bridges over Colma Creek at Orange Memorial Park. The City received a total of $72.1 million in proceeds from this issuance, of which $49 million, $12.3 million, $2.2 million and $1.5 million was allocated to the four projects respectively, and $7.1 million reserved for capitalized interest and fees. The decrease of $2.7 million in Business-Type Activities outstanding debt stems from the drawdown of an additional $6.6 million State Water Resources Board loan and the retirement of $5.3 million during FY 2022-23. There was also a forgiveness of $4 million in State Water Resources Board Loan. The largest remaining debt obligations are as follows: - 2004, 2008, 2018 State Water Resources Control Board Loans – Original debt: $83,826,034; 1.8% to 2.5% interest rate; due 4/30/26, 7/15/28, 10/3/42. These loans were used to improve and expand the City’s Water Quality Control Plant (WQCP). Loan proceeds were issued as projects progressed. Debt service payment commenced one year after project completion. WQCP user fees support the debt service payments. Because of the regional benefits and equity interest in these projects, the City of San Bruno shares in the loan repayments for the two of the three current loans. Increase/(Decrease) GovernmentalActivities 2023 2022 Amount % LeaseRevenueBonds 188.4$191.6$(3.2)$100.0% Plus:UnamortizedBondPremium 31.8 33.2 (1.4) 100.0% LoanpayabletoSuccessorAgency 2.1 2.2 (0.1) (4.5%) Capitalleases 0.0 0.1 (0.1) (100.0%) TotalGovernmentalActivitiesOutstandingDebt 222.3$227.1$(4.8)$(2.1%) BusinessͲtypeActivities StateWaterResourcesBoardloans 58.4$60.8$(2.4)$(3.9%) 2005SewerBonds 1.6 2.0 (0.4) (20.0%) TotalBusinessͲ typeActivitiesOutstandingDebt 60.0$62.8$(2.8)$(4.5%) 25 CITY OF SOUTH SAN FRANCISCO MANAGEMENT’S DISCUSSION AND ANALYSIS For Fiscal Year Ended June 30, 2023 - 2020A Lease Revenue Bonds - Original debt: $43,905,000; premium received: $10,242,530; 4 - 5% interest rate; due June 1, 2046. The bonds were used for Phase I of the Civic Center Campus project consisting of the planning and construction of a new Police Station and Dispatch Center for the City of South San Francisco. Measure W sales tax revenue will fund the repayments. - 2021A Lease Revenue Bonds - Original debt: $86,410,000; premium received: $18,116,565; 4% interest rate; due June 1, 2046. $78,000,000 of the bond proceeds are to be used for Phase II of the Civic Center Campus project consisting of the design and construction of the new library, parks and recreation center, council chambers and landscaping of the immediate surrounding area. $24,000,000 will be used for road pavement rehabilitation throughout the City, and $2,000,000 will be used for solar roof installation at the City's Corporation Yard. Measure W sales tax revenue will fund the repayments. - 2022A Lease Revenue Bonds - Original debt: $65,420,000; premium received: $6,686,317; 4-5.25% interest rate; due June 1, 2046. $49,000,000 of the bond proceeds are to be used for construction of the new Aquatic Center. $12.3 million will be used for construction of new ballfields. $2.2 million will be used for replacement of the playground at Orange Memorial Park. $1.5 million will be used for the replacement of two bridges over Colma Creek at Orange Memorial Park. Measure W sales tax revenue will fund the repayments. ECONOMIC OUTLOOK AND MAJOR ACCOMPLISHMENTS The economic outlook and major accomplishments of the City are discussed in the accompanying Transmittal Letter. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This Annual Comprehensive 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 addressed to the City of South San Francisco, Finance Department, P.O. Box 711, South San Francisco, CA 94083. 26 CITY OF SOUTH SAN FRANCISCO STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES The Statement of Net Position and the Statement of Activities summarize the entire City’s financial activities and financial position. The Statement of Net Position reports the excess of the City’s total assets and deferred outflows of resources over the City’s total liabilities and deferred inflows of resources, including all the City’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the City’s net position, by subtracting total liabilities and deferred inflows of resources from total assets and deferred outflows of resources. The Statement of Net Position summarizes the financial position of all the City’s Governmental Activities in a single column, and the financial position of all the City’s Business-Type Activities in a single column; these columns are followed by a total column which presents the financial position of the entire City. The City’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City’s Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City’s Business Type Activities include all its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City’s net position. It is also prepared on the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures. The Statement of Activities presents the City’s expenses first, listed by program, and follow these with the expenses of its business-type activities. Program revenues—that is, revenues which are generated directly by these programs—are then deducted from program expenses to arrive at the net expense of each governmental and business-type program. The City’s general revenues are then listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position. Both these Statements include the financial activities of the City, the City of South San Francisco Capital Improvements Financing Authority, the Parking Authority of the City of South San Francisco and the City of South San Francisco Public Facilities Financing Authority that are legally separate but are component units of the City because they are controlled by the City, which is financially accountable for the activities. Data for the South San Francisco Conference Center Authority is reflected as a discretely presented component unit of the City. This data is presented separately from other funds of the City to reflect operations under control of a governing body with a voting majority which is different from the City Council. 27 This Page Left Intentionally Blank Component Unit Primary Government South San Francisco Governmental Business-Type Conference Activities Activities Total Center ASSETS Cash and investments (Note 2) $285,835,659 $32,286,454 $318,122,113 $3,882,598 Receivables: Accounts 17,519,645 2,878,072 20,397,717 354,694 Accrued interest 1,378,841 134,495 1,513,336 Loans 1,192,998 1,192,998 Due from Conference Center 56,072 56,072 Leases (Note 10) 13,940,969 13,940,969 Deposits 309,790 309,790 38,504 Inventory 574 574 Prepaid items 1,358,284 1,358,284 Restricted cash and investments (Note 2) 78,368,796 192,775 78,561,571 Properties held for redevelopment (Note 1O) 2,823,118 2,823,118 Capital assets (Note 3): Nondepreciable 333,152,532 86,985,388 420,137,920 Depreciable, net accumulated depreciation 199,550,902 105,837,920 305,388,822 2,818,855 Total Assets 935,488,180 228,315,104 1,163,803,284 7,094,651 DEFERRED OUTFLOWS OF RESOURCES Related to pension (Note 7) 57,019,161 6,267,907 63,287,068 Related to OPEB (Note 9) 7,615,537 846,171 8,461,708 Total Deferred Outflows of Resources 64,634,698 7,114,078 71,748,776 LIABILITIES Accounts payable 12,796,196 753,939 13,550,135 270,580 Accrued salaries and benefits 2,697,253 2,697,253 74,573 Accrued interest payable 683,778 764,499 1,448,277 Other payables 9,417,825 244,732 9,662,557 Deposits payable 3,975,795 7,500 3,983,295 311,700 Unearned revenue 6,328,095 48,942 6,377,037 Accrued insurance losses (Note 12): Due within one year 3,381,062 3,381,062 Due in more than one year 13,903,000 13,903,000 Compensated absences obligation (Note 1M): Due within one year 6,059,221 656,200 6,715,421 Due in more than one year 3,084,074 281,449 3,365,523 Debt and lease financing obligations (Note 5): Due within one year 3,320,000 4,368,201 7,688,201 Due in more than one year 218,955,229 55,698,877 274,654,106 Lease liability (Note 10): Due within one year 359,990 Due in more than one year 1,699,888 Net pension liability - due in more than one year (Note 7) 207,355,558 23,039,506 230,395,064 Net OPEB Liability - due in more than one year (Note 9) 58,421,069 6,491,230 64,912,299 Total Liabilities 550,378,155 92,355,075 642,733,230 2,716,731 DEFERRED INFLOWS OF RESOURCES Related to pension (Note 7) 937,798 104,200 1,041,998 Related to OPEB (Note 9) 1,035,207 115,023 1,150,230 Related to leases (Note 10) 13,436,558 13,436,558 Total Deferred Inflows of Resources 15,409,563 219,223 15,628,786 NET POSITION (Note 6) Net investment in capital assets 390,845,692 132,756,230 523,601,922 758,977 Restricted for: Debt service Special revenue projects 53,688,315 53,688,315 Capital projects 73,613,451 73,613,451 Redevelopment and community development activities 2,823,118 2,823,118 Total Restricted Net Position 130,124,884 130,124,884 Unrestricted (86,635,416) 10,098,654 (76,536,762) 3,618,943 Total Net Position $434,335,160 $142,854,884 $577,190,044 $4,377,920 See accompanying notes to financial statements CITY OF SOUTH SAN FRANCISCO STATEMENT OF NET POSITION JUNE 30, 2023 29 Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities: General Government $24,977,978 $9,249,087 $2,830,103 Fire 36,852,200 9,231,756 19,969 Police 37,885,983 2,299,209 904,914 Public Works 21,880,934 9,071,365 7,901,412 $1,772,530 Parks and Recreation 23,539,372 3,927,532 553,268 Library 6,639,706 60,300 584,404 258,821 Economic and Community Development 12,923,609 19,532,657 125,590 Interest on long term debt 6,891,224 Total Governmental Activities 171,591,006 53,371,906 12,919,660 2,031,351 Business-type Activities Sewer 30,654,615 23,891,045 6,237,114 4,000,000 Parking District 1,272,157 1,062,751 Storm Water 1,460,610 418,583 276,151 Total Business-type Activities 33,387,382 25,372,379 6,237,114 4,276,151 Total Primary Government $204,978,388 $78,744,285 $19,156,774 $6,307,502 Component Unit Conference Center $3,385,350 $1,324,059 General revenues: Taxes: Property taxes Sales taxes Transient occupancy taxes Franchise Fees Other taxes Motor vehicle in lieu, unrestricted Property taxes in lieu of vehicle license fees Investment earnings Gain on sale of capital assets Miscellaneous Special Item: 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 Net Position - Ending See accompanying notes to financial statements CITY OF SOUTH SAN FRANCISCO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2023 Program Revenues 30 Component Unit South San Francisco Governmental Business-Type Conference Activities Activities Total Center ($12,898,788) ($12,898,788) (27,600,475) (27,600,475) (34,681,860) (34,681,860) (3,135,627) (3,135,627) (19,058,572) (19,058,572) (5,736,181) (5,736,181) 6,734,638 6,734,638 (6,891,224) (6,891,224) (103,268,089) (103,268,089) $3,473,544 3,473,544 (209,406) (209,406) (765,876) (765,876) 2,498,262 2,498,262 (103,268,089) 2,498,262 (100,769,827) ($2,061,291) 47,680,587 47,680,587 37,722,042 37,722,042 16,357,104 16,357,104 1,936,096 5,240,637 5,240,637 8,059,817 8,059,817 67,937 67,937 8,760,770 8,760,770 5,104,060 291,068 5,395,128 79,389 1,807,446 1,807,446 17,335,302 17,335,302 (5,173,366) (5,173,366) (2,195,337) 2,195,337 140,766,999 2,486,405 143,253,404 2,015,485 37,498,910 4,984,667 42,483,577 (45,806) 396,836,250 137,870,217 534,706,467 4,423,726 $434,335,160 $142,854,884 $577,190,044 $4,377,920 Primary Government Net (Expenses) Revenues and Changes in Net Position 31 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 2023. Individual 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. AMERICAN RESCUE PLAN ACT SPECIAL REVENUE FUND To account for the City’s allocation of American Rescue Plan federal stimulus funds, as part of the federal government’s response to the impacts of the COVID-19 pandemic. 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. 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). CAPITAL IMPROVEMENT POLICE STATION CAPITAL PROJECTS FUND To account for expenditures associated with the acquisition, construction, and installation of certain capital improvements constituting the new City police station located within the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2020A Bonds. CAPITAL IMPROVEMENT CIVIC CAMPUS CAPITAL PROJECTS FUND To account for expenditures associated with the acquisition, construction, and installation of certain capital improvements constituting the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2021A Bonds. CAPITAL IMPROVEMENT ORANGE MEMORIAL PARK CAPITAL PROJECTS FUND To account for expenditures associated with the acquisition, construction and installation of certain capital improvements at the City-owned Orange Memorial Park and pay the costs incurred in connection with the issuance of the Series 2022A Bonds. 33 CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2023 Special Revenue Fund Capital Projects Funds American Capital Capital General Rescue Capital Infrastructure Improvement Fund Plan Act Improvement Reserve Police Station ASSETS Cash and investments (Note 2) $80,739,818 $6,267,552 $563,919 $20,115,363 Receivables: Accounts 13,715,846 1,343,145 Accrued interest 423,012 114,100 Due from Conference Center 56,072 Loans Leases (Note 10) 12,759,503 Due from other funds (Note 4B) 480,000 Inventory 574 Restricted cash and investments (Note 2) 4,435,367 $356,833 Properties held for redevelopment (Note 1O) 2,823,118 Total Assets $110,997,943 $6,267,552 $6,342,431 $20,229,463 $356,833 LIABILITIES Liabilities: Accounts payable $5,939,493 $589,353 Accrued salaries and benefits 2,697,253 Other payable 776,211 1,463,713 $25,049 Deposits payable 742,865 Unearned revenue $6,267,552 60,543 Due to other funds (Note 4B) 380,000 Total Liabilities 10,155,822 6,267,552 2,493,609 25,049 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - accounts receivable 1,343,145 Related to leases (Note 10) 12,282,955 Total Deferred Inflows of Resources 12,282,955 1,343,145 FUND BALANCE Fund Balances (Note 6): Nonspendable 477,122 Restricted 2,823,118 3,509,832 331,784 Committed 20,536,653 Assigned 8,661,539 $20,229,463 Unassigned 56,060,734 (1,004,155) Total Fund Balances (Deficits) 88,559,166 2,505,677 20,229,463 331,784 Total Liabilities, Deferred Inflows of Resources and Fund Balances (Deficits) $110,997,943 $6,267,552 $6,342,431 $20,229,463 $356,833 See accompanying notes to basic financial statements 34 Capital Projects Funds Capital Capital Improvement Other Total Improvement Orange Governmental Governmental Civic Campus Memorial Park Funds Funds $1,391,205 $25,859 $137,850,725 $246,954,441 68,871 1,935,467 17,063,329 656,631 1,193,743 56,072 1,192,998 1,192,998 1,181,466 13,940,969 480,000 574 13,890,142 59,684,993 1,461 78,368,796 2,823,118 $15,350,218 $59,710,852 $142,818,748 $362,074,040 $3,658,577 $1,433,694 $841,361 $12,462,478 2,697,253 5,918,975 473,052 583,286 9,240,286 3,232,930 3,975,795 6,328,095 100,000 480,000 9,577,552 1,906,746 4,757,577 35,183,907 68,871 1,412,016 1,153,603 13,436,558 68,871 1,153,603 14,848,574 477,122 5,703,795 57,804,106 136,907,568 207,080,203 20,536,653 28,891,002 55,056,579 5,703,795 57,804,106 136,907,568 312,041,559 $15,350,218 $59,710,852 $142,818,748 $362,074,040 35 CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS BALANCE SHEET - RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2023 Total fund balances reported on the governmental funds balance sheet $312,041,559 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. 527,374,934 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. 26,595,941 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 (222,275,229) Interest payable (683,778) Deferred outflows related pension 57,019,161 Deferred outflows related to OPEB 7,615,537 Net OPEB liability (58,421,069) Net pension liability (207,355,558) Deferred inflows related to OPEB (1,035,207) Deferred inflows related to pension (937,798) Compensated absences (7,015,349) Net position of governmental activities $434,335,160 See accompanying notes to financial statements 36 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, 2023 Special Revenue Fund Capital Projects Funds American Capital Capital General Rescue Capital Infrastructure Improvement Fund Plan Act Improvement Reserve Police Station REVENUES Property taxes $54,041,117 Sales taxes 37,353,784 Transient occupancy taxes 16,357,104 Franchise Fees 5,240,637 Other taxes 8,059,817 Intergovernmental 3,558,742 $1,995,741 $1,824,995 Interest and rentals 4,247,107 $235,482 $5,480 Licenses and permits 20,467,644 Charges for services 11,673,187 434,000 Fines and forfeitures 757,019 Other 353,378 449,976 Total Revenues 162,109,536 1,995,741 2,274,971 669,482 5,480 EXPENDITURES Current: City Council 241,596 City Clerk 1,027,822 City Treasurer 35,279 City Attorney 1,220,059 City Manager 4,107,153 Finance 3,089,869 Non-departmental 3,484,013 Human Resources 2,221,160 Fire 35,512,513 Police 36,282,833 142,478 Public Works 7,936,326 25,995,702 500 Parks and Recreation 20,362,073 Library 6,475,274 Economic and Community Development 11,770,931 Other Capital Outlay 141,250 Debt service: Principal repayments Interest and fiscal charges Total Expenditures 133,908,151 25,995,702 500 142,478 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 28,201,385 1,995,741 (23,720,731) 668,982 (136,998) OTHER FINANCING SOURCES (USES) Gain from sale of property 1,852,123 Loss from sale of property (6,439,913) Issuance of debt Bond premium Transfers in (Note 4C) 5,283,682 10,817,102 Transfers out (Note 4C) (11,811,401) (1,995,741) (5,329,343) Total Other Financing Sources (Uses) (11,115,509) (1,995,741) 10,817,102 (5,329,343) Net Change in Fund Balances before special items 17,085,876 (12,903,629) (4,660,361) (136,998) SPECIAL ITEMS Remittance of land sale proceeds (5,173,366) Net Change in Fund Balances 11,912,510 (12,903,629) (4,660,361) (136,998) Fund balances (deficits) - July 1 76,646,656 15,409,306 24,889,824 468,782 Fund balances (deficits) - June 30 $88,559,166 $2,505,677 $20,229,463 $331,784 See accompanying notes to financial statements 38 Capital Projects Funds Capital Capital Improvement Other Total Improvement Orange Governmental Governmental Civic Campus Memorial Park Funds Funds $2,400,240 $56,441,357 912,453 38,266,237 16,357,104 5,240,637 2,838,448 10,898,265 $2,504,976 9,689,823 19,574,277 636,881 $1,115,571 1,616,678 7,857,199 20,467,644 15,369,853 27,477,040 757,019 10,518,233 11,321,587 3,141,857 1,115,571 43,345,728 214,658,366 241,596 1,027,822 35,279 1,220,059 4,107,153 3,089,869 22,809 3,506,822 2,221,160 129,027 35,641,540 67,741 36,493,052 37,617,159 11,820,253 6,621,939 89,991,879 2,235,977 22,598,050 6,475,274 1,004,730 12,775,661 2,161,116 2,161,116 141,250 3,285,000 3,285,000 8,280,065 8,280,065 37,617,159 11,820,253 23,808,404 233,292,647 (34,475,302) (10,704,682) 19,537,324 (18,634,281) 1,852,123 (6,439,913) 2,898,732 11,465,065 30,464,581 (3,175,615) (11,396,260) (33,708,360) 2,898,732 (3,175,615) 68,805 (7,831,569) (31,576,570) (13,880,297) 19,606,129 (26,465,850) (5,173,366) (31,576,570) (13,880,297) 19,606,129 (31,639,216) 37,280,365 71,684,403 117,301,439 343,680,775 $5,703,795 $57,804,106 $136,907,568 $312,041,559 39 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, 2023 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($31,639,216) 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 75,422,642 Current year depreciation (9,190,597) Current year retirements (149,603) 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 3,285,000 Amortization of premium is added back to fund balance 1,382,613 Accrual of Non-Current Items of current financial resources and therefore is not reported as revenue or expenditures in governmental funds (net change): Unavailable revenue (387,371) Interest payable 6,228 Compensated absences (499,594) Net pension liability, deferred outflows and inflows of resources (2,851,866) Net OPEB liability, deferred outflows and inflows of resources 937,453 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.1,183,221 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $37,498,910 See accompanying notes to financial statements The amount below included in the Statement of Activities does not require the use 40 CITY OF SOUTH SAN FRANCISCO GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2023 Variance with Final Budget Actual Positive Original Final Amount (Negative) Resources (inflows): Property taxes $43,804,769 $45,804,769 $54,041,117 $8,236,348 Sales taxes 34,791,018 36,191,018 37,353,784 1,162,766 Transient occupancy taxes 11,160,752 14,160,752 16,357,104 2,196,352 Franchise fees 4,600,000 4,600,000 5,240,637 640,637 Other taxes 4,893,252 5,693,252 8,059,817 2,366,565 Intergovernmental 2,844,618 4,337,199 3,558,742 (778,457) Interest and rentals 5,453,469 4,556,469 4,247,107 (309,362) Licenses and permits 15,500,000 19,425,400 20,467,644 1,042,244 Charges for services 8,799,097 8,265,097 11,673,187 3,408,090 Fines and forfeitures 710,824 710,824 757,019 46,195 Other 259,383 278,902 353,378 74,476 Amounts available for appropriation 132,817,182 144,023,682 162,109,536 18,085,854 Charges to appropriations (outflows): City Council 258,749 260,650 241,596 19,054 City Clerk 1,143,342 1,154,449 1,027,822 126,627 City Treasurer 167,292 167,904 35,279 132,625 City Attorney 940,290 940,291 1,220,059 (279,768) City Manager 4,926,619 5,735,893 4,197,204 1,538,689 Finance 3,892,875 4,405,085 3,617,322 787,763 Non-departmental 1,544,367 2,152,699 3,486,795 (1,334,096) Human Resources 2,518,004 2,684,109 2,331,987 352,122 Fire 31,313,293 33,424,718 36,400,487 (2,975,769) Police 32,957,662 34,511,302 36,283,110 (1,771,808) Public Works 7,120,654 8,603,705 8,931,895 (328,190) Parks and Recreation 19,608,365 22,873,151 22,225,939 647,212 Library 6,706,110 7,273,746 6,518,982 754,764 Economic and Community Development 8,907,770 15,609,631 15,909,963 (300,332) Capital Outlay 141,250 (141,250) Total charges to appropriations 122,005,392 139,797,333 142,569,690 (2,772,357) OTHER FINANCING SOURCES (USES) Gain from sale of property 897,000 1,852,123 955,123 Loss from sale of property (6,439,913) (6,439,913) Transfers in (Note 4C) 3,245,000 6,151,400 5,283,682 (867,718) Transfers out (Note 4C) (13,344,450) (28,153,088) (11,811,401) 16,341,687 Total Other Financing Sources (Uses) (10,099,450) (21,104,688) (11,115,509) 9,989,179 712,340 (16,878,339) 8,424,337 25,302,676 SPECIAL ITEM Remittance of land sale proceeds (5,173,366) (5,173,366) NET CHANGE IN FUND BALANCE $712,340 ($16,878,339) 3,250,971 $20,129,310 Fund Balance - July 1 76,646,656 Adjustment to budgetary basis: Encumbrance adjustments 8,661,539 Fund Balance - June 30 $88,559,166 See accompanying notes to financial statements Budgeted Amounts NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEM 41 Variance with Final Budget Positive Original Final Actual Amounts (Negative) REVENUES: Intergovernmental $2,270,000 $2,270,000 $1,995,741 ($274,259) Total Revenues 2,270,000 2,270,000 1,995,741 (274,259) EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 2,270,000 2,270,000 1,995,741 (274,259) OTHER FINANCING SOURCES (USES) Transfers out (Note 4C) (2,270,000) (4,025,750) (1,995,741) 2,030,009 NET CHANGE IN FUND BALANCE ($1,755,750) $1,755,750 Fund balance - July 1 Fund balance - June 30 See accompanying notes to financial statements Budgeted Amounts CITY OF SOUTH SAN FRANCISCO AMERICAN RESCUE PLAN ACT SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2023 42 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. 43 CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2023 Governmental Business-type Activities - Enterprise Funds Activities Sewer Parking Storm Internal Enterprise District Water Total Service Funds ASSETS Current assets: Cash and investments (Note 2) $25,369,673 $3,460,545 $3,456,236 $32,286,454 $38,881,218 Receivables: Accounts 2,432,572 9,281 436,219 2,878,072 456,316 Accrued interest 97,652 18,421 18,422 134,495 185,098 Deposits 309,790 Prepaid items 1,358,284 Restricted cash and investments (Note 2) 192,775 192,775 Total current assets 28,092,672 3,488,247 3,910,877 35,491,796 41,190,706 Noncurrent assets: Capital assets (Note 3): Nondepreciable 73,310,803 421,149 13,253,436 86,985,388 Depreciable, net accumulated depreciation 95,039,129 9,259,353 1,539,438 105,837,920 5,328,500 Total non-current assets 168,349,932 9,680,502 14,792,874 192,823,308 5,328,500 Total Assets 196,442,604 13,168,749 18,703,751 228,315,104 46,519,206 DEFERRED OUTFLOWS OF RESOURCES Related to pension (Note 7) 6,267,907 6,267,907 Related to OPEB (Note 9) 846,171 846,171 Total Deferred Outflows of Resources 7,114,078 7,114,078 LIABILITIES Current liabilities: Accounts payable 679,554 8,692 65,693 753,939 333,718 Other payable 244,664 63 5 244,732 177,539 Accrued interest payable 764,499 764,499 Deposits payable 7,500 7,500 Unearned revenue 48,942 48,942 Due to other funds (Note 4B) Accrued insurance loss (Note 12)3,381,062 Compensated absences obligation (Note 1M) 616,326 5,641 34,233 656,200 1,294,533 Current portion of long-term debt (Note 5) 4,368,201 4,368,201 Total current liabilities 6,729,686 14,396 99,931 6,844,013 5,186,852 Noncurrent liabilities: Accrued insurance losses (Note 12)13,903,000 Compensated absences obligation (Note 1M) 267,010 10,226 4,213 281,449 833,413 Noncurrent portion of long-term debt (Note 5) 55,698,877 55,698,877 Net pension liability (Note 7) 23,039,506 23,039,506 Net OPEB liability (Note 9) 6,491,230 6,491,230 Total noncurrent liabilities 85,496,623 10,226 4,213 85,511,062 14,736,413 Total Liabilities 92,226,309 24,622 104,144 92,355,075 19,923,265 DEFERRED INFLOWS OF RESOURCES Related to pension (Note 7) 104,200 104,200 Related to OPEB (Note 9) 115,023 115,023 Total Deferred Inflows of resources 219,223 219,223 NET POSITION: Net investment in capital assets 108,282,854 9,680,502 14,792,874 132,756,230 5,328,500 Unrestricted (deficit) 2,828,296 3,463,625 3,806,733 10,098,654 21,267,441 Total Net Position $111,111,150 $13,144,127 $18,599,607 $142,854,884 $26,595,941 See accompanying notes to financial statements 44 CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2023 Governmental Business-type Activities - Enterprise Funds Activities Sewer Parking Storm Internal Enterprise District Water Total Service Funds OPERATING REVENUES Charges for services $23,180,130 $414,183 $23,594,313 $31,348,296 Other cities' participation 6,237,114 6,237,114 Permit fees 710,915 710,915 Parking fees $1,062,751 1,062,751 Total Operating Revenues 30,128,159 1,062,751 414,183 31,605,093 31,348,296 OPERATING EXPENSES Personnel expenses 10,988,476 346,813 1,207,382 12,542,671 19,852,051 Professional services 2,038,173 284,836 79,489 2,402,498 1,132,997 OPEB Expenses 535,040 1,448 536,488 Program supplies 2,054,330 147,099 57,965 2,259,394 2,244,118 Insurance 210,870 3,698 214,568 2,890,694 Self-insurance and claims 2,807,004 Repair and maintenance 1,402,551 6,003 1,408,554 1,065,000 Rents 1,689,059 1,689,059 Utilities 1,867,151 126,330 17,351 2,010,832 104,991 Administration 1,590,725 113,007 48,535 1,752,267 Depreciation 5,475,767 252,624 33,651 5,762,042 1,045,253 Other 23,346 6,536 29,882 618,144 Total Operating Expenses 27,875,488 1,272,157 1,460,610 30,608,255 31,760,252 Operating Income (Loss) 2,252,671 (209,406) (1,046,427) 996,838 (411,956) NONOPERATING REVENUES (EXPENSES) Loan forgiveness (Note 5) 4,000,000 4,000,000 Interest income 215,397 38,129 37,542 291,068 380,178 Gain on dispositions of capital assets 104,926 Interest expense (2,779,127) (2,779,127) (2,870) Other 4,400 4,400 64,501 Total Nonoperating Revenues (Expenses) 1,436,270 38,129 41,942 1,516,341 546,735 Income (loss) before contributions and transfers 3,688,941 (171,277) (1,004,485) 2,513,179 134,779 TRANSFERS Capital subventions and grants 276,151 276,151 Transfers in (Note 4C) 3,000 2,000 2,494,778 2,499,778 1,048,442 Transfers (out) (Note 4C) (304,441) (304,441) Change in Net Position 3,387,500 (169,277) 1,766,444 4,984,667 1,183,221 Net Position (Deficits) - July 1 107,723,650 13,313,404 16,833,163 137,870,217 25,412,720 Net Position (Deficits) - June 30 $111,111,150 $13,144,127 $18,599,607 $142,854,884 $26,595,941 See accompanying notes to financial statements 45 CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2023 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 $31,312,569 $1,053,470 $3,697,332 $36,063,371 Cash payments to suppliers for goods and services (12,293,207) (679,993) (175,764) (13,148,964) ($7,535,837) Cash payments to employees for services (10,573,920) (331,286) (1,209,620) (12,114,826) (20,265,596) Cash received from interfund service provided 30,956,481 Cash payments for judgments and claims (2,006,200) Net Cash Provided by (Used in) Operating Activities 8,445,442 42,191 2,311,948 10,799,581 1,148,848 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts (630,000) (630,000) Transfers in 3,000 2,000 2,494,778 2,499,778 1,048,442 Transfers in (304,441) (304,441) Net Cash Provided by Noncapital Financing Activities (301,441) 2,000 1,864,778 1,565,337 1,048,442 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from issuance of debt 2,991,637 2,991,637 Principal paid on long-term debt (5,312,308) (5,312,308) (144,637) Interest paid on long-term debt (393,601) (393,601) (2,870) Subventions and grants 276,151 276,151 Acquisition of capital assets, net (1,834,441) (1,020,995) (2,855,436) (1,979,957) Proceeds from the sale of capital assets 113,687 Net Cash Used in Capital and Related Financing Activities (4,548,713) (744,844) (5,293,557) (2,013,777) CASH FLOWS FROM INVESTING ACTIVITIES Interest received (paid) 56,697 8,028 (3,165) 61,560 76,260 Changes in fair value of investments 118,127 22,284 22,285 162,696 223,912 Net Cash Provided by Investing Activities 174,824 30,312 19,120 224,256 300,172 Net Increase (Decrease) in cash and cash equivalents 3,770,112 74,503 3,451,002 7,295,617 483,685 Cash and cash equivalents, beginning 21,792,336 3,386,042 5,234 25,183,612 38,397,533 Cash and cash equivalents, ending $25,562,448 $3,460,545 $3,456,236 $32,479,229 $38,881,218 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $2,252,671 ($209,406) ($1,046,427) $996,838 ($411,956) Adjustments to reconcile operating income (loss) to cash flows from operating activities: Depreciation 5,475,767 252,624 33,651 5,762,042 1,045,253 Other non-operating revenue (expenses) 4,400 4,400 64,501 Net change in assets and liabilities: Accounts and lease receivables 1,168,495 (9,281) 3,278,749 4,437,963 (456,316) Deposit Prepaid items (153,911) Accounts payable 126,737 (7,336) 43,811 163,212 (66,577) Other payable (1,008,699) 63 2 (1,008,634) 148,243 Unearned revenue 15,915 15,915 Accrued insurance losses 800,804 (Decrease) increase due to retirement system 384,430 384,430 (Decrease) increase due to OPEB (104,162) (104,162) Compensated absence obligations 134,288 15,527 (2,238) 147,577 178,807 Net Cash Provided by (Used in) Operating Activities $8,445,442 $42,191 $2,311,948 $10,799,581 $1,148,848 NONCASH TRANSACTIONS Retirement of capital assets ($8,761) Forgiveness of SWRCB loan $4,000,000 $4,000,000 Interest accrued to principal on SWRCB loan ($1,831,943) ($1,831,943) See accompanying notes to basic financial statements 46 FIDUCIARY FUNDS These funds are used to account for assets held by the City as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the government-wide financial statements, but are presented in separate Fiduciary Fund financial statements. 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. CUSTODIAL FUNDS are used to report resources, not in a trust, that are held by the City for other parties outside of the City’s reporting entity. 47 Successor Agency Private Purpose Trust Fund Custodial Funds ASSETS Cash and investments (Note 2) $20,617 $95,626 Accounts receivable 141,362 Interest receivable 18,417 1,399 Prepaid items Advances to the City (Note 5) 2,050,152 Loans receivable (Note 14B) 80,572 Restricted cash and investments (Note 2) 21,245,798 2,255,699 Capital assets (Note 14C): Nondepreciable 111,219 Depreciable, net accumulated depreciation 231,531 Total Assets 23,899,668 2,352,724 LIABILITIES Accounts payable 33,991 Total Liabilities 33,991 NET POSITION Held in trust for other purposes 23,865,677 Restricted for others 96,245 Restricted for bondholders 2,256,479 Total Net Position $23,865,677 $2,352,724 See accompanying notes to financial statements CITY OF SOUTH SAN FRANCISCO STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2023 48 CITY OF SOUTH SAN FRANCISCO FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2023 Successor Agency Private Purpose Trust Fund Custodial Funds ADDITIONS Property taxes $1,013,213 Intergovernmental $6,168,452 Plan contributions 8,225 Interest and rentals 387,064 542,489 Other 141,391 Total Additions 6,696,907 1,563,927 DEDUCTIONS Economic and Community Development 7,000,293 Professional services 18,805,663 Payments to bondholders 764,850 Depreciation 6,593 Total Deductions 7,006,886 19,570,513 Change in net position (309,979) (18,006,586) NET POSITION Beginning of the year 24,175,656 20,359,310 End of the year $23,865,677 $2,352,724 See accompanying notes to financial statements 49 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 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 Capital Improvements 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. The Capital Improvements Financing Authority did not have any activity during fiscal year 2023. Separate financial statements are not issued for the Capital Improvements Financing Authority. The Parking Authority of the City of South San Francisco was formed in October 2019 pursuant to the California Parking Law of 1949, Streets and Highways Code Section 32500, et seq. The City Council members serve as the Board of Directors. The financial activities of the Parking Authority are included in the Parking District Enterprise Fund. Separate financial statements are not issued for the Parking Authority. The City of South San Francisco Public Facilities Financing Authority is a joint exercise of powers authority created in December 2019 between the City and the Parking Authority. The Public Facilities 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 or the Parking Authority and other public or private entities to finance capital improvements. The City Council members serve as the Board of Directors. The financial activities of the Public Facilities Financing Authority are included in the Capital Improvements Police Station, Capital Improvements Civic Campus and Capital Improvement Orange Memorial Park Capital Projects Funds. Separate financial statements are not issued for the Public Facilities Financing Authority. 51 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 Authority’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. D. South San Francisco Housing Authority The South San Francisco Housing Authority was established by the City of South San Francisco in 1955 under the provisions of the State Health and Safety Code to address a shortage of low income housing in the City. Although the City Council appoints the Authority Commissioners, the City Council can only remove those appointed Commissioners for inefficiency, neglect of duty or misconduct. The Housing Authority operates independent of the City and the City is not financially accountable for the Housing Authority. Therefore, the operations of the Housing Authority are not included in the financial reporting entity of the City. E. 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 financial 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 financed 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 financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. 52 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Financial Statements: The fund financial 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 financial 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. F. Major Funds Major funds are defined 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 financial 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. American Rescue Plan Act Special Revenue Fund – This Fund was established to account for the City’s allocation of American Rescue Plan federal stimulus funds, as part of the federal government’s response to the impacts of the COVID-19 pandemic. 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. 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). Capital Improvement Police Station – Accounts for expenditures associated with the acquisition, construction, and installation of certain capital improvements constituting the new City police station located within the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2020A Bonds. 53 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Improvement Civic Campus – Accounts for expenditures associated with the acquisition, construction, and installation of certain capital improvements constituting the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2021A Bonds. Capital Improvement Orange Memorial Park Capital Projects Fund – Accounts for expenditures associated with the acquisition, construction and installation of certain capital improvements at the City-owned Orange Memorial Park and pay the costs incurred in connection with the issuance of the Series 2022A Bonds. 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. Fiduciary Funds – The Fiduciary fund financial statements normally include a Statement of Net Position and a Statement of Changes in Fiduciary Net Position. The financial activities of the funds are excluded from the government-wide financial statements. The City’s fiduciary funds represent a private purpose trust fund and custodial funds. 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. Custodial funds are used to account for assets held by the City on behalf of other agencies for other purposes. The City’s Custodial Funds include the Employee Deferred Comp Trust Oversight Fund and the Community Facilities District 2021- 01, which accounted for payments of special assessment bonds. 54 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Basis of Accounting The government-wide, proprietary, fiduciary, and discretely presented component unit financial 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. 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, including lease liabilities, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions, including entering into contracts giving the City the right to use leased assets and right to use subscription assets, are reported as expenditures in governmental funds. Proceeds from long-term debt and financing through 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, fines 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 finance 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, fines, forfeitures, licenses, permits, charges for services, and program grants as program revenues. 55 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. 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. All Capital Projects Funds are 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, except the American Recovery Plan Act Special Revenue Fund, Developer Contributions Special Revenue Fund, Supplemental Law Enforcement Services Special Revenue Fund, City Programs Special Revenue Fund, Affordable Housing Trust Special Revenue Fund and Transit Station Enhancement In-Lieu Fee Special Revenue Fund; Capital Projects Funds; 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, 2023. 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 a component 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. 56 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Expenditures in Excess of Appropriations – The City’s General Fund had the following departmental expenditures in excess of appropriations and other funds had expenditures in excess of appropriations for the year ended June 30, 2023: Expenditures in Excess of Budget (Non GAAP Legal Basis) General Fund: City Attorney $279,768 Non-departmental 1,334,096 Fire 2,975,769 Police 1,771,808 Public Works 328,190 Economic and Community Development 300,332 Capital Outlay 141,250 Non-Major Funds: Supplemental Law Enforcement Services Special Revenue Fund 67,741 City Programs Special Revenue Fund 550,723 PEG Equipment and Access Special Revenue Fund 17,209 Debt Service Fund 3,175,615 Sufficient resources were available within each fund to finance these excesses. J. 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. K. 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. L. 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 except for intangible right toဨuse lease assets, the measurement of which is discussed in Note 10 below and intangible right to use subscription assets, the measurement of which is discussed in Note 1R below. 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. 57 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 and Authority have assigned the useful lives listed below to capital assets and right to use leased building: Buildings 50 years Clean water facilities and transmission lines 40 years Improvements 30 years Machinery and equipment 5-20 years Furniture and fixtures 12 years Infrastructure 20-40 years Right to use leased building 30 years Major outlays for capital assets and improvements are capitalized as projects are constructed. The capitalization level is $20,000 for vehicles, and $100,000 for all else, including all other equipment that is not a vehicle. M. 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. The changes of the compensated absences were as follows: Governmental Business-Type Activities Activities Total Beginning Balance $8,464,894 $790,072 $9,254,966 Additions 6,754,728 806,022 7,560,750 Payments (6,076,327) (658,445) (6,734,772) Ending Balance $9,143,295 $937,649 $10,080,944 Current Portion $6,059,221 $656,200 $6,715,421 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. 58 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) N. 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: Secured Unsecured Valuation/lien dates January 1 January 1 Levy dates July 1 July 1 Due dates (delinquent as of) 50% on November 1 (December 10) July 1 (August 31) 50% on February 1 (April 10) 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. O. 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). P. Unbilled Services – for the Sewer Rental Enterprise Fund are accrued at year-end. Q. 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 assets 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 assets 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. 59 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 1 – 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. Subscription Based Information Technology Arrangements (SBITAs) A SBITA is a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction. At the commencement of a SBITA, the City initially measures the subscription liability at the present value of payments expected to be made during the contract term. Subsequently, the subscription liability is reduced by the principal portion of payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for payments made at or before the SBITA commencement date, plus certain initial direct costs. Subsequently, the subscription asset is amortized on a straightဨline basis over shorter of the subscription term or the useful life of the underlying IT assets. The City recognizes subscription asset with an initial, individual value of $1,000,000 or more, based on the present value of future subscription payments remaining at the start of the agreement. Key estimates and judgments related to SBITAs include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments as follows: •The City uses the interest rate charged by the IT vendor as the discount rate. When the interest rate charged by the IT vendor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for subscription liabilities. •The subscription term includes the noncancellable period of the subscription. The City monitors changes in circumstances that would require a remeasurement of its subscription and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability. Subscription assets are reported with other capital assets and subscription liabilities are reported in the statement of net position. 60 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) T. 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. U. New Funds In fiscal year 2022-2023, the City established the following funds: The Public Arts In-Lieu Fee Special Revenue Fund accounts for development fee revenues that are collected and are required to be used for public art installations. The Oyster Point CFD Special Tax B Special Revenue Fund accounts for special assessment collections that are to be used for maintenance and administrative fees of the community facilities district. V. New Accounting Pronouncement GASB Statement No. 96 – In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. The objective of this Statement is to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA.. The provisions of this Statement were implemented during fiscal year 2023. The implementation had no effect on the financial statements. GASB Statement No. 94 – In March 2020, GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. Some PPPs meet the definition of a service concession arrangement (SCA), which the Board defines in this Statement as a PPP in which (1) the operator collects and is compensated by fees from third parties; (2) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services; and (3) the transferor is entitled to significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement. This Statement also provides guidance for accounting and financial reporting for availability payment arrangements (APAs). As defined in this Statement, an APA is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction. The provisions of this Statement were implemented during fiscal year 2023. The implementation had no effect on the financial statements. 61 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 2 – CASH AND INVESTMENTS 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 fair value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a fair 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, 2023 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 $318,122,113 Restricted cash and investments 78,561,571 Total Primary Government cash and investments 396,683,684 Statement of Fiduciary Net Position: Cash and investments available for operations 116,243 Restricted cash and investments 23,501,497 Total Fiduciary cash and investments 23,617,740 Conference Center: Cash and investments available for operations 3,882,598 Total South San Francisco Conference Center cash and investments 3,882,598 Total cash and investments $424,184,022 62 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 2 – CASH AND INVESTMENTS (Continued) 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 Securities 5 years N/A No Limit No Limit Federal Agency or U.S. Government Sponsored Enterprise Obligations 5 years N/A No Limit 25% Supranational Obligations 5 years AA 30% 10% Corporate Medium-Term Notes 5 years A 30% 5% Asset-Backed Securities 5 years AA 20% 5% Commercial Paper 270 days A1,P1 25% 5% Negotiable Certificates of Deposit 5 years A-1 or A 30% 5% Repurchase Agreements 90 days AA No Limit No Limit Local Agency Investment Fund (LAIF) Upon Demand N/A $75 million No Limit Money Market Mutual Funds N/A AAAm 20% 10% Rating System, or its equivalent. (A) The City's Investment Policy includes credit ratings provided by Standard and Poor's Investment 63 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 2 – CASH AND INVESTMENTS (Continued) D. Investments Authorized by Debt Agreements The City and 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 or Successor Agency fail 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: Minimum Maximum Maximum Credit Percentage Authorized Investment Type Maturity Quality of Portfolio U.S. Treasury Obligations N/A N/A No Limit Federal Agency or U.S. Government Sponsored Enterprise Obligations N/A N/A No Limit Federal Housing Administration Debentures N/A N/A No Limit Bankers Acceptances 30 days A-1 or A-2 No Limit Commercial Paper 270 days A1,P1 No Limit Negotiable Certificates of Deposit 5 years A-1 or A No Limit Guaranteed Investment Agreements N/A A1,P1 No Limit Municipal Obligations N/A Aaa No Limit State Obligations N/A A2 No Limit Money Market Mutual Funds N/A AAAm No Limit Repurchase Agreements 90 days AA No Limit Local Agency Investment Fund (LAIF) Upon Demand N/A No Limit E. Investments Authorized by the Authority The City of South San Francisco Conference Center Authority follows the California Government Code which authorizes an agency to invest in their own bonds, certain time deposits, obligations of the U.S. Treasury, agencies and instrumentalities, commercial paper, bankers’ acceptances with maturities not to exceed 270 days, and medium-term notes issued by corporations operating within the U.S., commercial paper rated P-1 or higher by Moody’s or A-1 by Standard & Poor’s commercial paper record, repurchase agreements of obligations of the U.S. Government or its agencies for a term of one year or less and the Local Agency Investment Fund. F. 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. 64 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 2 – CASH AND INVESTMENTS (Continued) 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 year Years Total City and Fiduciary: U.S. Treasury Notes $223,922 $58,289,279 $58,513,201 U.S. Treasury Bills 67,543,129 67,543,129 Federal Agency Securities 3,097,484 50,280,270 53,377,754 Local Agency Investment Fund 108,562,894 108,562,894 Money Market Funds 35,086,693 35,086,693 Corporate Medium Term Notes 7,332,998 47,489,676 54,822,674 Negotiable Certificates of Deposit 3,994,592 3,994,592 Asset-Backed Securities 3,582,332 14,745,219 18,327,551 Supranational Obligations 6,093,964 6,093,964 South San Francisco Conference Center: Local Agency Investment Fund 3,505,040 3,505,040 Total Investments $232,929,084 $176,898,408 409,827,492 Cash in Banks and on Hand - City of South San Francisco 13,978,972 Cash in Banks and on Hand - South San Francisco Conference Center 377,558 Total Cash and Investments $424,184,022 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. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction amount of $5,000, a maximum transaction amount of $75 million and at least 24 hours advance notice for withdrawals of $10 million or more. Bond proceeds accounts are subject to a oneဨtime deposit with no cap and are set up with a monthly draw down schedule. 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, 2023, these investments have an average maturity of 260 days. Money market funds are available for withdrawal on demand and as of June 30, 2023 have an average maturity of 13 to 26 days. 65 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 2 – CASH AND INVESTMENTS (Continued) G. 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, 2023, for each of the Primary Government’s investment types as provided by Moody’s investment rating system, except as noted: Investment Type Aaa Aaa-mf Aa1-Aa3 A1-A3 P-1 Total City and Fiduciary: Federal Agency Securities $53,377,754 $53,377,754 Money Market Funds $35,086,693 35,086,693 Corporate Medium Term Notes 4,721,012 $10,400,108 $39,701,554 54,822,674 Negotiable Certificates of Deposit $3,994,592 3,994,592 Asset-Backed Securities 9,853,700 9,853,700 Supranational Obligations 6,093,964 6,093,964 Totals $74,046,430 35,086,693$ 10,400,108$ 39,701,554$ 3,994,592$ 163,229,377 City and Fiduciary: Not rated: Asset-Backed Securities 8,473,851 (A) Local Agency Investment Fund 108,562,894 Exempt from credit rating disclosure: U.S. Treasury Notes 58,513,201 U.S. Treasury Bills 67,543,129 Not rated: Local Agency Investment Fund 3,505,040 Total Investments $409,827,492 South San Francisco Conference Center: (A) Investments are not rated by Moody’s, but are rated AAA by Standard and Poor’s or Fitch investment rating systems. 66 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 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, 2023: Level 2 Total Investments by Fair Value Level: City and Fiduciary: U.S. Treasury Notes $58,513,201 $58,513,201 U.S. Treasury Bills 67,543,129 67,543,129 Federal Agency Securities 53,377,754 53,377,754 Corporate Medium Term Notes 54,822,674 54,822,674 Negotiable Certificates of Deposit 3,994,592 3,994,592 Asset Backed Securities 18,327,551 18,327,551 Supranational Obligations 6,093,964 6,093,964 Totals $262,672,865 262,672,865 Investments Measured at Amortized Cost: City and Fiduciary: Money Market Mutual Funds 35,086,693 Investments Exempt from Fair Value Hierarchy: City and Fiduciary: Local Agency Investment Fund 108,562,894 South San Francisco Conference Center: Local Agency Investment Fund 3,505,040 Total Investments $409,827,492 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 were reported at amortized cost. 67 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 3 – CAPITAL ASSETS A. Capital Asset Changes – Changes in capital assets during the fiscal year consist of: Balance June 30, 2022 Additions Retirements Transfers Balance June 30, 2023 Governmental activities Capital assets not being depreciated: Land $72,249,423 ($11,195) $72,238,228 Construction in Progress 241,858,363 $75,281,392 ($56,225,451) 260,914,304 Total capital assets not being depreciated 314,107,786 75,281,392 (11,195) (56,225,451) 333,152,532 Capital assets being depreciated: Buildings and Improvements 97,370,638 (350,681) 53,472,577 150,492,534 Infrastructure - Streets 205,595,834 2,752,874 208,348,708 Infrastructure - Storm Drains 8,927,492 8,927,492 Infrastructure - Traffic Control Devices 12,591,370 12,591,370 Equipment and Vehicle 7,390,599 141,250 (148,921) 7,382,928 Furniture and Fixtures 2,614,215 2,614,215 Total capital assets being depreciated 334,490,148 141,250 (499,602) 56,225,451 390,357,247 Less accumulated depreciation for: Buildings and Improvements (47,449,864) (3,081,797) 212,273 (50,319,388) Infrastructure - Streets (121,685,176) (5,271,961) (126,957,137) Infrastructure - Storm Drains (4,184,561) (204,500) (4,389,061) Infrastructure - Traffic Control Devices (5,240,019) (503,305) (5,743,324) Equipment and Vehicle (6,767,147) (48,987) 148,921 (6,667,213) Furniture and Fixtures (1,978,675) (80,047) (2,058,722) Total accumulated depreciation (187,305,442) (9,190,597) 361,194 (196,134,845) Net Governmental Fund Capital Assets Being Depreciated 147,184,706 (9,049,347) (138,408) 56,225,451 194,222,402 Internal Service Fund Capital Assets Capital assets being depreciated: Equipment and Vehicle 17,378,330 1,979,957 (855,261) 18,503,026 Accumulated depreciation (12,975,773) (1,045,253) 846,500 (13,174,526) Net Internal Service Fund Capital Assets Being Depreciated 4,402,557 934,704 (8,761) 5,328,500 Governmental activities capital assets, net $465,695,049 $67,166,749 ($158,364) $532,703,434 Total capital assets not being depreciated $314,107,786 $75,281,392 ($11,195) ($56,225,451) $333,152,532 Net capital assets being depreciated 151,587,263 (8,114,643) (147,169) 56,225,451 199,550,902 Governmental activities capital assets, net $465,695,049 $67,166,749 ($158,364) $532,703,434 68 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 3 – CAPITAL ASSETS (Continued) Balance Balance June 30, 2022 Additions June 30, 2023 Business-type activities Capital assets, not being depreciated: Land $794,587 $794,587 Construction in Progress 83,983,455 $2,207,346 86,190,801 Total capital assets not being depreciated 84,778,042 2,207,346 86,985,388 Capital assets being depreciated: Buildings and Improvements 80,173,059 80,173,059 Clean Water Facilities and Lines 79,862,094 79,862,094 Infrastructure - Storm Drains 6,216,365 6,216,365 Infrastructure - Streets 7,377,546 7,377,546 Equipment and Vehicle 18,455,546 18,455,546 Furniture and Fixtures 31,154 31,154 Total capital assets being depreciated 192,115,764 192,115,764 Less accumulated depreciation for: Buildings and Improvements (24,872,437) (2,052,556) (26,924,993) Clean Water Facilities and Lines (36,990,806) (2,649,003) (39,639,809) Infrastructure - Storm Drains (1,758,712) (187,980) (1,946,692) Infrastructure - Streets (2,678,971) (209,570) (2,888,541) Equipment and Vehicle (14,183,722) (662,933) (14,846,655) Furniture and Fixtures (31,154) (31,154) Total accumulated depreciation (80,515,802) (5,762,042) (86,277,844) Net capital assets being depreciated 111,599,962 (5,762,042) 105,837,920 Business-type activities capital assets, net $196,378,004 ($3,554,696) $192,823,308 Balance Balance June 30, 2022 Additions Retirements June 30, 2023 Component Unit: South San Francisco Conference Center Depreciable: Buildings and Improvements $10,909,288 $19,250 $10,928,538 Furniture and Fixtures 932,393 932,393 Machinery and Equipment 599,715 599,715 Total Depreciable 12,441,396 19,250 12,460,646 Right of Use Assets: Leased Land 8,351,928 8,351,928 20,793,324 19,250 20,812,574 Less accumulated depreciation and amortization Depreciable (10,455,226) (578,553) (11,033,779) Leased Land (6,681,543) (278,397) (6,959,940) (17,136,769) (856,950) (17,993,719) Component Unit Capital Assets, Net $3,656,555 ($837,700) $2,818,855 69 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 3 – CAPITAL ASSETS (Continued) 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. Generally accepted accounting principles require that these contributions be accounted for as revenues at the time the capital assets are contributed. 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 $722,769 Fire 314,162 Police 562,031 Public works 6,926,349 Parks and recreation 555,222 Library 58,455 Economic and community development 51,609 Total Governmental Functions 9,190,597 Internal Service Funds 1,045,253 Total Governmental Activities $10,235,850 Business-Type Activities Sewer Enterprise $5,475,767 Parking District 252,624 Storm Water 33,651 Total Business-Type Activities $5,762,042 NOTE 4 – INTER-FUND TRANSACTIONS A. Internal Balances 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. 70 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 4 – INTER-FUND TRANSACTIONS (Continued) B. Inter-Fund 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 Due to Other Fund Amount General Fund Capital Improvement Capital Projects Fund $380,000 Community Development Block Grant Special Revenue Fund 100,000 $480,000 C. Transfers Transfers between funds during the fiscal year ended June 30, 2023 were as follows: FROM FUND (OUT) TO FUND (IN)AMOUNT General Fund Capital Improvement Capital Projects Fund $1,743,360 Capital Improvement Civic Campus Capital Projects Fund 1,078,591 Storm Water Enterprise Fund 250,000 Non-Major Governmental Funds 8,289,450 Retiree Health Benefits Internal Service Fund 450,000 American Rescue Plan Act Fund General Fund 1,970,000 Capital Improvement Capital Projects Fund 25,741 Capital Infrastructure Reserve Capital Projects Fund General Fund 2,056,400 Capital Improvement Capital Projects Fund 1,717,943 Sewer Enterprise Fund 3,000 Parking District Enterprise Fund 2,000 Storm Water Enterprise Fund 1,550,000 Capital Improvements Orange Memorial Park Non-major Governmental Funds 3,175,615 Non-Major Governmental Funds General Fund 1,257,282 Capital Improvement Capital Projects Fund 7,025,617 Storm Water Enterprise Fund 694,778 Equipment Replacement Internal Service Fund 598,442 Capital Improvement Civic Campus Capital Projects Fund 1,820,141 Sewer Enterprise Fund Capital Improvement Capital Projects Fund 304,441 Total $34,012,801 71 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 5 – LONG-TERM DEBT A. Current Year Transactions and Balances A summary of governmental and business-type activities transactions for the fiscal year ended June 30, 2023 follows: Authorized and Balance at Balance at Current Issued June 30, 2022 Additions Retirement June 30, 2023 Portion Governmental Activities Lease Revenue Bonds: 2020A Police Station Project, 4.00 to 5.00% (1)$43,905,000 $41,990,000 $1,030,000 $40,960,000 $1,080,000 Plus: Unamortized bond premium 9,104,471 379,353 8,725,118 2021A Community Civic Campus Project, 4.00% (2)86,410,000 84,200,000 2,155,000 82,045,000 2,240,000 Plus: Unamortized bond premium 17,391,902 724,663 16,667,239 2022A Orange Memorial Park Project, 4.00 to 5.25% (3)65,420,000 65,420,000 65,420,000 Plus: Unamortized bond premium 6,686,317 278,597 6,407,720 Total Lease Revenue Bonds 195,735,000 224,792,690 4,567,613 220,225,077 3,320,000 Direct Borrowing: 2007 Loans Payable to the Successor Agency (4) 2,150,152 100,000 2,050,152 Leases Financings (5): 2013 Fire Truck 144,637 144,637 Total Leases Financings 144,637 144,637 Total Direct Borrowing 2,294,789 244,637 2,050,152 Net Governmental Long-Term Debt $195,735,000 $227,087,479 $4,812,250 $222,275,229 $3,320,000 Business-Type Activities Revenue Bonds: 2005 Water and Wastewater Revenue Bonds, $6,000,000 $1,980,000 $360,000 $1,620,000 $375,000 2.75 to 4.75%, due 04/30/26 (6) Direct Borrowing: 1999 State Water Resources Loan, 2.6%, due 8/1/22 (7) 47,721,252 3,190,468 3,190,468 2004 State Water Resources Loan, 2.5%, due 1/1/27 (7) 21,258,529 5,274,483 1,270,190 4,004,293 1,301,944 2008 State Water Resources Loan, 2.4%, (8) 9,164,505 3,699,492 491,650 3,207,842 503,449 2018 State Water Resources Loan, 1.8% (9) 53,403,000 48,635,007 $6,599,936 4,000,000 51,234,943 2,187,808 Total Direct Borrowing 131,547,286 60,799,450 6,599,936 8,952,308 58,447,078 3,993,201 Net Business-Type Long-Term Debt $137,547,286 $62,779,450 $6,599,936 $9,312,308 $60,067,078 $4,368,201 (1)2020A Lease Revenue Bonds – In February 2020, the City of South San Francisco Public Facilities Financing Authority entered into a $43.9 million lease agreement to finance costs of the acquisition, construction, and installation of certain capital improvements constituting the new City police station, located within the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2020A Bonds. The Series 2020A Bonds are equally and ratably payable from base rental payments to be made by the City for the right to use certain real property consisting of a City-owned parking garage and a City-owned park. The lease agreement contains provisions that in an event of default, the lessor may exercise any and all remedies available to it under the lease agreement, including the right to enforce the terms of the lease. 72 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 5 – LONG-TERM DEBT (Continued) (2) 2021A Lease Revenue Bonds – In May 2021, the City of South San Francisco Public Facilities Financing Authority entered into a $86.4 million lease agreement to finance costs of the acquisition, construction, and installation of certain capital improvements constituting a new City library, council chamber, parks and recreation facilities, and a community theater to be located within the City’s new Civic Center Campus, street and roadway improvements located within the City, solar equipment to be located on City property, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2021A Bonds. The Series 2021A Bonds are equally and ratably payable from base rental payments to be made by the City for the right to use certain real property consisting of the same City-owned parking garage and City-owned park pledged under the 2020A Bonds and six additional properties, including the property on which the first two phases of the Community Civic Campus project is being constructed. The lease agreement contains provisions that in an event of default, the lessor may exercise any and all remedies available to it under the lease agreement, including the right to enforce the terms of the lease. (3) 2022A Lease Revenue Bonds – In May 2022, the City of South San Francisco Public Facilities Financing Authority entered into a $65.4 million lease agreement to finance costs of the acquisition, construction and installation of certain capital improvements of the City to be located at the City-owned Orange Memorial Park and pay the costs incurred in connection with the issuance of the Series 2022A Bonds. The Series 2022A Bonds are equally and ratably payable from base rental payments to be made by the City for the right to use certain real property consisting of the same properties pledged under the 2021A Bonds. The lease agreement contains provisions that in an event of default, the lessor may exercise any and all remedies available to it under the lease agreement, including the right to enforce the terms of the lease. (4) As of June 30, 2023, the Oyster Point Improvements Impact Fund owed the Successor Agency (formerly the Merged Redevelopment Project Area Capital Project Fund) for developer fees in the amount of $2,050,152 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 14). 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. 73 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 5 – LONG-TERM DEBT (Continued) (5) The City has entered into long-term lease financing agreements with various financing agencies. Under these 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 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. Lease financing payments are made from revenues of the Equipment Replacement Internal Service Fund and the General Fund. The lease agreements contain provisions that in an event of default, the lessor may (a) seize the properties, (b) sell or lease the properties or (c) exercise any and all remedies available to it under applicable law, including the right to enforce the terms of the lease, recover damages from the breach of the lease, and rescind the lease as to any portion of or all of the properties. The final payment on the lease financing agreements was made during the year ended June 20, 2023. (6) 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 the debt is $6,000,000. Proceeds were used to finance sewer system capital improvement. The principal payments on the debt commenced in October 2006 and principal is due each October 1. The final principal payment is due on October 1, 2026. Interest payments ranging from the rates of 2.75% to 4.75% are payable semi-annually each April 1 and October 1. As of June 30, 2023, the City is in compliance with the provisions of Article VI of the Installment Purchase Agreement associated with the 2005D Bonds. The 1999 and 2004 State Water Resources Loans and the 2005D Water and Wastewater Revenue Bonds are secured by a pledge of net revenues of the City’s Sewer Enterprise Fund. Net Revenues available for debt service amounted to $7.9 million which represented coverage of 1.52 over the $5,218,915 in total debt service. (7) Two loans were authorized by the State Water Resources Control Board (SWRCB) in 1999 and 2004 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. The loan agreements include provisions that in an event of default, all principal payments shall be immediately due and payable, interests on all amounts owed shall be paid at the highest legal rate, any additional payments shall be made and SWRCB shall enforce its rights under the agreements by any judicial proceeding, whether in law or equity. The final payment on the 1999 loan agreement was made during the year ended June 30, 2023. (8) 2008 State Water Resources Control Board Loan – In November 2007, the City approved the $11.8 million loan agreement with the 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. 74 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 5 – LONG-TERM DEBT (Continued) (9)2018 State Water Resources Control Board Loan – In September 2018, the City entered into a $53.4 million loan agreement with the SWRCB to finance the South San Francisco/San Bruno’s Water Quality Control Plant Wet Weather and Digester Project. A portion of this amount, $4 million, was anticipated to be forgiven on the date of completion of construction. Construction was completed in October 2022, and the $4 million was forgiven during the year ended June 30, 2023. For the remaining $49.4 million, under the terms of the loan agreement the City has agreed to repay $59.2 million to the State. The difference between the repayment obligation and proceeds amounted to $9.8 million and represents in-substance interest on the outstanding balance. As of June 30, 2023, the City has completed the drawn down from SWRCB. There was no debt service payment required in fiscal year 2023, with the first debt service payment due in fiscal year ending 2024. Future debt service is expected to average $3 million per year through fiscal year 2043. In the event default has occurred, the City shall, upon demand, immediately accelerate the payment of all principal owed under this loan agreement, if any, which shall be immediately due and payable; pay interest at the highest legal rate on all amounts owed; and pay any additional payments as defined in the loan agreement. The 2008 and 2018 loans are 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 $23.2 million which represented coverage of 43 over the $543,443 in debt service. B. Debt Service Requirements Annual debt service requirements are shown below for all long-term debt with specified repayment terms: Governmental Activities Business-Type Activities For the Year Lease Revenue Bonds 2005 Water and Wastewater Revenue Bonds Ended June 30 Principal Interest Principal Interest 2024 $3,320,000 $8,205,338 $375,000 $71,625 2025 5,170,000 8,058,737 395,000 52,375 2026 5,410,000 7,826,538 415,000 32,125 2027 5,650,000 7,580,287 435,000 10,875 2028 5,910,000 7,322,988 2029-2033 33,620,000 32,540,187 2034-2038 41,590,000 24,572,888 2039-2043 51,355,000 14,805,087 2044-2048 36,400,000 3,295,475 188,425,000 $114,207,525 $1,620,000 $167,000 Plus: Unamortized bond premium 31,800,077 $220,225,077 75 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 5 – LONG-TERM DEBT (Continued) Future debt service requirements, including interest and leases financings, but excluding the 2007 Loan payable to the Redevelopment Successor Agency at June 30, 2023, were as follows: For the Year Governmental Activities Business-Type Activities Ended June 30 Principal Interest Principal Interest 2024 $3,993,201 $1,028,116 2025 4,038,083 988,269 2026 4,123,204 908,305 2027 2,808,110 826,622 2028 2,861,900 778,239 2029-2033 12,747,012 3,182,288 2034-2038 13,316,573 2,037,956 2039-2043 14,558,995 795,535 Totals 58,447,078 $10,545,330 2007 Loans Payable $2,050,152 $2,050,152 $58,447,078 Direct Borrowings Lease financing agreements are issued for the purpose of financing the construction or acquisition of projects defined 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: Original Leasing Arrangement Fund/Activity Cost Capital Leases Governmental Activity $5,842,799 C. Legal Debt Margin The City is subject to a debt limit that is 3.75% of the total assessed value of property, net of exempt real property. At June 30, 2023, that amount was $1,039,891,525. As of June 30, 2023, the City did not have any outstanding debt applicable to the limit. 76 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 5 – LONG-TERM DEBT (Continued) D. Debt without City Commitment In April 2022 the Community Facilities District No. 2021-01 Special Tax Bonds, Series 2022 in the amount of $19,685,000 were issued by the City of South San Francisco Community Facilities District No. 2021-01. The City is the collecting and paying agent for the debt issued by the District, but has no direct or contingent liability or moral obligation for the payment of this debt. As of June 30, 2023 the outstanding balance of the issue was $19,685,000. 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 is 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 generally accepted accounting principles which require 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. 77 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 6 – NET POSITION AND FUND BALANCE (Continued) 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. 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, 2023, are below: Capital Project Funds Capital Capital Capital General Capital Infrastructure Improvements Improvements Fund Balance Classifications Fund Improvement Reserve Fund Police Station Civic Campus Nonspendables: Items not in spendable form: Inventory and prepaid items $574 Leases 476,548 Total Nonspendable Fund Balances 477,122 Restricted for: Civic campus projects $3,509,832 $5,703,795 Police station projects $331,784 Redevelopment and community development activities 2,823,118 Total Restricted Fund Balances 2,823,118 3,509,832 331,784 5,703,795 Committed for: Capital projects 3,775,873 Local services 16,760,780 Total Committed Fund Balances 20,536,653 Assigned to: Capital projects 8,661,539 Capital infrastructure projects $20,229,463 Total Assigned Fund Balances 8,661,539 20,229,463 Unassigned: General fund 56,060,734 Other fund deficits (1,004,155) Total Unassigned Fund Balances 56,060,734 (1,004,155) Total Fund Balances $88,559,166 $2,505,677 $20,229,463 $331,784 $5,703,795 78 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 6 – NET POSITION AND FUND BALANCE (Continued) Capital Projects Fund Capital Improvements Other Orange Governmental Fund Balance Classifications (continued) Memorial Park Funds Restricted for: Civic campus projects $57,804,106 Gas Tax projects $498,414 Developer contributions projects 8,829,153 Community Development Block Grant projects 44,105 Maintenance districts projects 5,190,723 Transportation sales tax projects 5,678,973 City programs projects 19,935,351 Low and moderate housing projects 2,942,263 Other Special Revenues projects 10,569,333 Capital projects activities 83,219,253 Total Restricted Fund Balances 57,804,106 136,907,568 Total Fund Balances $57,804,106 $136,907,568 C. 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, 2023, were as listed below: Governmental funds: Amount General Fund $8,663,789 Capital Improvement Capital Projects Fund 24,244,690 Capital Infrastructure Reserve Capital Projects Fund 1,617,350 Capital Improvements Police Station Capital Projects Fund 247,048 Capital Improvements Civic Campus Capital Projects Fund 9,970,796 Capital Improvements Orange Memorial Park 4,057,041 Other Governmental Funds 2,901,566 Total $51,702,280 79 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLANS 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. 80 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) The Plans’ provisions and benefits in effect at June 30, 2023, are summarized as follows: Miscellaneous Classic Plan* Tier 2 Plan* PEPRA Plan Prior to After On or after Hire date April 25, 2010 April 25, 2010 January 1,2013 Benefit formula 2.7% @ 55 2% @ 60 2% @ 62 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 - 55 50 - 63 52 - 67 Monthly benefits, as a % of eligible compensation 2.0% to 2.7% 1.092% to 2.418% 1.0% to 2.5% Required employee contribution rates 8% 7% 6.5% Required employer contribution rates 9.53% 9.53% 9.53% Required Unfunded Actuarial Liability Contribution $7,533,535 * Effective July 2021, Classic Plan and Tier 2 Plan members in the Executive Management Unit are required to pay an additional 2% for their share of pension costs. Safety Classic Plan ** Tier 2 Plan ** PEPRA Plan Hire date Prior to April 25, 2010 After April 25, 2010 On or after January 1, 2013 Benefit formula 3% @ 50 3% @ 55 2.7% @ 57 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 50 - 55 50 - 57 Monthly benefits, as a % of eligible compensation 3% 2.4% to 3.0% 2.0% to 2.7% Required employee contribution rates 9% 9% 11.5% Required employer contribution rates 20.45% 20.45% 20.45% Required Unfunded Actuarial Liability Contribution $10,143,798 ** Effective October 2018, Classic Plan and Tier 2 Plan members in the Executive Management Unit are required to pay an additional 2% for their share of pension costs. Beginning in fiscal year 2016, CalPERS collects employer contributions for the Plan as a percentage of payroll for the normal cost portion as noted in the rates above and as a dollar amount for contributions toward the unfunded liability (UAL). The dollar amounts are billed on a monthly basis or the City can elect a lump sum payment option. The City’s required contributions for the unfunded liability in the Miscellaneous and Safety Plans for the year ended June 30, 2023 were $7,533,535 and $10,143,798, respectively, which were made under the lump sum payment option. In addition, the City made additional contributions toward the unfunded liability of $304,000 to each Plan during the year ended June 30, 2023. Employees Covered – As of the June 30, 2021 actuarial valuation date and the June 30, 2022 measurement date, the following employees were covered by the benefit terms for the Plans: Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 496 315 Inactive employees entitled to but not yet receiving benefits 393 99 Active employees 287 152 Total 1,176 566 81 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) 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. Employer contribution rates may change if plan contracts are amended. Payments made by the City to satisfy contribution requirements that are identified by the Plan terms as Plan member contribution requirements are classified as Plan member contributions. 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 Plan is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The long-term portion of governmental activities net pension liability is liquidated primarily by the General Fund. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions – The total pension liabilities as of the June 30, 2022 measurement date were based on the following actuarial assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Payroll Growth Salary Increase Investment Rate of Return Mortality Post Retirement Benefit Increase (1) Actuarial assumptions are the same for all benefi tiers (Classic Tier 1, Classic Tier II, and PEPRA) (2) Depending on age, service and type of employment. (3) Net of pension plan investment expenses, including inflation. Miscellaneous and Safety (1) 6/30/2021 6/30/2022 Entry-Age Normal Cost Method 6.90% (4) The mortality table used was developed based on CalPERS' specific data. The probabilities of mortality are based on the 2021CalPERS Experience Study forthe period from2001to 2019. Pre-retirement and post-retirement mortality rates include generationalmortality improvement using 80% of Scale MP-2020 published by the Society ofActuaries. Formore details on this table,please referto the CalPERSExperience Study and Review ofActuarial Assumptions report from November 2021 that can be found on the CalPERS website. 2.30% (2) 6.90% (3) The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.30% thereafter Derived using CalPERS Membership Data for all Funds (4) 2.80% 82 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation were based on the results of a November 2021 actuarial experience study for the period 2001 to 2019. Further details of the Experience Study can be found on the CalPERS website. Discount Rate – The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate for each Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, each Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members for all plans in the PERF. Therefore, the long- term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability for each Plan. The long- term expected rate of return on pension plan investments was determined using a building- block method in which 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. Using historical returns of all the fund’s asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building- block approach. The expected rate of return was then adjusted for assumed administrative expenses of 10 basis points. 83 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) The expected real rates of return by asset class are as follows: Asset Class (a) Assumed Asset Allocation Real Return (a), (b) Global Equity-Cap Weighted 30.0% 4.54% Global Equity-Non-Cap Weighted 12.0% 3.84% Private Equity 13.0% 7.28% Treasury 5.0% 0.27% Mortgage-backed Securities 5.0% 0.50% Investment Grade Corporates 10.0% 1.56% High Yield 5.0% 2.27% Emerging Market Debt 5.0% 2.48% Private Debt 5.00% 3.57% Real Assets 15.00% 3.21% Leverage -5.00% -0.59% Total 100% (a) An expected inflation of 2.30% used for this period. (b)Figures are based on the 2021 Asset Liability Management study. Changes of Assumptions – Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long- term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. 84 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) C. Changes in the Net Pension Liability The changes in the Net Pension Liability for each Plan are as follows: Miscellaneous Plan: Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability/(Asset) Balance at June 30, 2021 (Measurement Date)$264,236,232 $202,373,505 $61,862,727 Changes in the year: Service cost 4,896,807 4,896,807 Interest on the total pension liability 18,379,820 18,379,820 Changes of benefit terms Changes of assumptions 7,856,877 7,856,877 Differences between actual and expected experience (893,635) (893,635) Plan to plan resource movement Contribution - employer 9,491,964 (9,491,964) Contribution - employees 2,293,651 (2,293,651) Net investment income (15,367,557) 15,367,557 Benefit payments, including refunds of employee contributions (14,547,349) (14,547,349) Administrative expenses (126,067) 126,067 Other Miscellaneous Income/(Expense) Net changes 15,692,520 (18,255,358) 33,947,878 Balance at June 30, 2022 (Measurement Date)$279,928,752 $184,118,147 $95,810,605 Safety Plan: Increase (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability/(Asset) Balance at June 30, 2021 (Measurement Date)$376,140,913 $293,624,138 $82,516,775 Changes in the year: Service cost 7,567,350 7,567,350 Interest on the total pension liability 26,419,737 26,419,737 Changes of benefit terms Changes of assumptions 12,584,955 12,584,955 Differences between actual and expected experience (684,769) (684,769) Plan to plan resource movement Contribution - employer 13,387,919 (13,387,919) Contribution - employees 2,886,541 (2,886,541) Net investment income (22,271,961) 22,271,961 Benefit payments, including refunds of employee contributions (17,860,080) (17,860,080) Administrative expenses (182,910) 182,910 Other Miscellaneous Income/(Expense) Net changes 28,027,193 (24,040,491) 52,067,684 Balance at June 30, 2022 (Measurement Date)$404,168,106 $269,583,647 $134,584,459 Grand Total - Both Plans $684,096,858 $453,701,794 $230,395,064 85 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) 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 1-percentage point lower or 1-percentage point higher than the current rate: Miscellaneous Safety 1% Decrease 5.90% 5.90% Net Pension Liability $132,741,036 $189,849,785 Current Discount Rate 6.90% 6.90% Net Pension Liability $95,810,605 $134,584,459 1% Increase 7.90% 7.90% Net Pension Liability $65,402,680 $89,326,118 Pension Plan Fiduciary Net Position – Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. D. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2023, the City recognized pension expense of $11,577,776 and $17,686,519 for the Miscellaneous and Safety Plans, respectively, for total pension expense of $29,264,295. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Miscellaneous Plan: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date $10,675,386 Changes of assumptions 5,147,609 Differences between actual and expected experience 264,171 ($585,485) Net differences between projected and actual earnings on plan investments 9,222,206 Total $25,309,372 ($585,485) Safety Plan: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date $15,352,613 Changes of assumptions 8,389,970 Differences between actual and expected experience 696,580 ($456,513) Net differences between projected and actual earnings on plan investments 13,538,533 Total $37,977,696 ($456,513) Grand Total $63,287,068 ($1,041,998) 86 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 7 – PENSION PLAN (Continued) $26,027,999 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Miscellaneous Plan: Year Ended Annual June 30 Amortization 2024 $4,133,247 2025 3,461,131 2026 611,256 2027 5,842,867 Safety Plan: Year Ended Annual June 30 Amortization 2024 $6,785,872 2025 5,954,090 2026 936,489 2027 8,492,119 E. Reduction of CalPERS Discount Rate On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2021-22. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the CalPERS Board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021. On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense, but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the CalPERS Board. These new assumptions are reflected in the CalPERS GASB 68 accounting valuation reports for the June 30, 2022 measurement date. 87 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 8 – DEFERRED 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 City does not make any contributions to the Plan. The City has no liability for any losses incurred by the Plan and does not participate in any gains, but does have the duty of due care that would be required of an ordinary prudent investor. The City has a contract with Empower Retirement to manage and invest the assets of the Plan. The assets in the Plan are the sole property of the participants or their beneficiaries. Since the assets held under the Plan are not the City’s property and are not subject to claims by general creditors of the City, they have been excluded from these financial statements. The Plan requires investments to be stated at fair value and it requires all gains and losses on Plan investments to accrue directly to participant accounts. 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. NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS A. General Information about the City’s Other Post Employment Benefit (OPEB) Plans 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 employees. B. Defined Benefit Plan Description The City’s Post Employment Benefit Plan for employees hired prior to April 25, 2010 is an agent multiple-employer defined benefit OPEB plan. The City joined the California Employers’ Retiree Benefit Trust (CERBT), an agent multiple- employer plan administered by CalPERS, consisting of an aggregation of single-employer plans. The CERBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained from the California Public Employees’ Retirement System, CERBT, P.O. Box 942703, Sacramento, CA 94229-2703. 88 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (Continued) Benefits provided – The following is a summary of Plan benefits by employee group as of June 30, 2023: Eligibility • Hired < 4/25/2010 • 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 2022/23: - $1,430.80/month pre-65 (Blue Shield) - $785.04/month post-65 Medicare eligible (Blue Shield) - $1,971.53/ month post-65 not Medicare eligible (Kaiser) • Medicare ineligible retirees allowed to stay in their pre-Medicare premium plans after age 65 Surviving Spouse Benefit • Participation with premium payment • AFSCME, Local 1569, Mid-Management, IAFF • surviving spouses covered 2 months following death of retiree Other OPEB • City also reimburses Medicare Part B • No City-paid contribution for dental, vision, or life For the year ended June 30, 2023, the City’s contributions to the Plan were $5,551,201. Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of the June 30, 2022 measurement date: Active employees 167 Inactive employees or beneficiaries currently receiving benefit payments 360 Total 527 C. OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB For purposes of measuring 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. The long-term portion of governmental activities net OPEB liability is liquidated primarily by the General Fund. 89 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (Continued) D. Net OPEB Liability Actuarial Methods and Assumptions – The City’s net OPEB liability was measured as of June 30, 2022 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2021, rolled forward to June 30, 2022, based on the following actuarial methods and assumptions: Valuation Date • June 30, 2021 Measurement Date • June 30, 2022 Contribution Policy • City contributes $802,000 per year into trust Actuarial Cost Method • Entry Age Normal, Level Percentage of Payroll Amortization Method • Level dollar Amortization Period • Average of 19 years remaining for 2022/23 Asset Valuation Method • Investment gains and losses spread over 5-year rolling period • 6.25% at June 30, 2022 • 6.25% at June 30, 2021 • Expected City contributions projected to keep sufficient plan assets to pay all benefits from trust. Inflation • 2.50% per annum Salary Increases • Aggregate - 2.75% annually • Merit - CalPERS 1997-2015 Experience Study Healthcare/Medical Trend • Non-Medicare - 6.75% for 2022, decreasing to an ultimate rate of 3.75% in 2076 and later years • Medicare (Non-Kaiser) - 5.85% for 2022, decreasing to an ultimate rate of 3.75% in 2076 and later years • Medicare (Kaiser) - 4.75% for 2022, decreasing to an ultimate rate of 3.75% in 2076 and later years Mortality, Retirement, Disability, Termination • CalPERS 1997-2015 Experience Study Mortality Improvement • Mortality projected fully generational with Scale MP-2021 Healthcare participation for future retirees • 100% if covered, 95% if waived Discount Rate and Long-Term Expected Rate of Return on Assets Actuarial Assumptions 90 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (Continued) 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-Term Target Expected Real Asset Class Allocation Rate of Return Global equity 49.0% 4.56% Fixed income 23.0% 1.56% TIPS 5.0% -0.08% Commodities 3.0% 1.22% REITs 20.0% 4.06% Total 100.0% Assumed Long-Term Rate of Inflation 2.50% Expected Long-Term Net Rate of Return, Rounded 6.25% 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. Changes of Assumptions – For the measurement date of June 30, 2022, the discount rate decreased from 6.75% to 6.25%, the inflation rate decreased from 2.75% to 2.50%, the payroll growth rate decreased from 3.00% to 2.75%, the medical trend rate for Kaiser Senior Advantage decreased from 7.0% to 6.75% and the mortality improvement scale was updated to Scale MP- 2021. 91 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (Continued) E. Changes in Net OPEB Liability The changes in the net OPEB liability follows: Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability/(Asset) (a) (b) (a) - (b) Balance at June 30, 2021 Measurement Date $91,920,619 $33,801,461 $58,119,158 Changes Recognized for the Measurement Period: Service Cost 1,374,432 1,374,432 Interest on the total OPEB liability 5,703,844 5,703,844 Changes in benefit terms Differences between expected and actual experience Changes of assumptions Contributions from the employer 4,868,877 (4,868,877) Net investment income (4,575,167) 4,575,167 Benefit payments (4,067,115) (4,067,115) Administrative expenses (8,575) 8,575 Net changes 3,011,161 (3,781,980) 6,793,141 Balance at June 30, 2022 Measurement Date $94,931,780 $30,019,481 $64,912,299 Increase (Decrease) F. 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 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current discount rate: Net OPEB Liability/(Asset) Discount Rate -1% Current Discount Rate Discount Rate +1% (5.25%) (6.25%) (7.25%) $76,947,176 $64,912,299 $54,932,062 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 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates as discussed in the assumptions above: Net OPEB Liability/(Asset) Current Healthcare Cost 1% Decrease Trend Rates 1% Increase $53,974,449 $64,912,299 $78,173,471 92 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 9 – OTHER POST-EMPLOYMENT BENEFITS (Continued) G. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2023, the City recognized OPEB expense of $4,509,586. At June 30, 2023, the City reported deferred outflows and inflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Employer contributions made subsequent to the measurement date $5,551,201 Differences between actual and expected experience ($1,034,056) Changes in assumptions 448,781 (116,174) Net differences between projected and actual earnings on plan investments 2,461,726 Total $8,461,708 ($1,150,230) $5,551,201 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, 2024. 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 Annual Ended June 30 Amortization 2024 ($260,204) 2025 421,246 2026 261,134 2027 1,338,101 H. Defined Contribution Plan The City of South San Francisco funded HRA Plan is a defined contribution OPEB plan for employees hired on or after April 25, 2010. For those new hires, the City provides a medical after retirement health plan (MARA), and contributes 1.5% of salary for those employees. In addition, employees contribute to the MARA plan as directed by their respective bargaining unit’s Memorandum of Understanding or compensation plan. The plan is administered by Matrix Trust Company. Employee contributions for the fiscal year totaled $397,012. Employer contributions of $601,585 were paid into the Defined Contribution Plan. No liability for the defined contribution has been included in the report since the City fully paid the annual required contribution. Since the assets held under this plan are not the City’s property and are not subject to claims by general creditors of the City, the assets have been excluded from these financial statements. 93 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 10 – LEASES A. Policies A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. The City recognizes lease receivable or liabilities with an initial, individual value of $1,000,000 or more, based on the present value of future lease payments remaining at the start of the lease. Lessee – The City does not have any noncancellable leases of nonfinancial assets as of June 30, 2023, other than the financed purchase discussed in Note 5. The Conference Center Authority is a lessee for the noncancellable lease of the Conference Center from the City. At the commencement of a lease, City or Conference Center Authority recognize a lease liability and an intangible rightဨtoဨuse lease asset (lease asset) in the governmentဨwide financial statements. At the commencement of a lease, the City or Conference Center Authority initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straightဨline basis over its useful life. Key estimates and judgments related to leases include how the City or Conference Center Authority determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments as follows: • The City or Conference Center Authority uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City or Conference Center Authority generally uses its respective estimated incremental borrowing rate as the discount rate for leases. • The lease term includes the noncancellable period of the lease. • Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City or Conference Center Authority is reasonably certain to exercise. The City and Conference Center Authority monitor changes in circumstances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability. Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position. Lessor – The City is a lessor for a noncancellable leases of buildings, billboards and facilities. The City recognizes a lease receivable and a deferred inflow of resources in the governmentဨwide and fund financial statements. 94 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 10 – LEASES (Continued) At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts as follows: •The City uses its estimated incremental borrowing rate as the discount rate for leases. •The lease term includes the noncancellable period of the lease. •Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee. The City monitors changes in circumstances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. B. Leases Receivable The balances related to leases receivable and deferred inflows of resources as of June 30, 2023 were: Lease Deferred Inflows Receivable of Resources Governmental Activities Leases Receivable (Lessor) General Fund: Conference Center $2,059,878 $2,061,362 Costco 3,886,329 3,778,655 Billboards 6,813,296 6,442,938 Low and Moderate Income Housing Assets Fund: Magnolia 1,181,466 1,153,603 Total governmental activities leases receivable $13,940,969 $13,436,558 95 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 10 – LEASES (Continued) Conference Center – 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 was subject to re-negotiation at the option of either party between January 1 and February 28, 2009 and 2019. The cost and carrying amount of leased land under this lease receivable is $5,040,000. The City recognized $343,561 in lease revenue and $72,279 in interest revenue during the current fiscal year related to this lease. Also, the City has deferred inflows of resources associated with this lease that will be recognized as revenue over the lease term. Costco – 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. The City recognized $328,579 in lease revenue and $121,142 in interest revenue during the current fiscal year related to this lease. Also, the City has deferred inflows of resources associated with this lease that will be recognized as revenue over the lease term. Billboards – The City leases digital billboard space to third parties under three lease agreements. The original terms of the leases were thirty years and as of June 30, 2023, the leases had 21 to 28 years remaining. The rent is based on a minimum annual guaranteed payment, paid on an annual basis, which increases 15% every five years. The City recognized $252,169 in lease revenue and $206,014 in interest revenue during the current fiscal year related to these leases. Also, the City has deferred inflows of resources associated with these leases that will be recognized as revenue over the lease term. Magnolia – Magnolia Housing leases the land for Magnolia Plaza Senior Apartments from the City. Minimum lease payments are set at $51,800 per year, and are payable through the fiscal year 2062. The City recognized $29,579 in lease revenue and $36,383 in interest revenue during the current fiscal year related to this lease. Also, the City has deferred inflows of resources associated with this lease that will be recognized as revenue over the lease term. C. Lease Payable The Conference Center Authority’s lease payable consists of the following as of June 30, 2023: Balance Balance Current June 30, 2022 Deductions June 30, 2023 Portion Land Lease $2,409,307 $349,429 $2,059,878 $359,990 96 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 10 – LEASES (Continued) The Authority has a property lease agreement with the City of South San Francisco for 30 years expiring in 2029. Under the agreement, the City subleases to the Authority, the property in exchange for the annual lease payment for the use of land. During the fiscal year, the lease payments totaled $420,000. The total principal and interest paid during the year was $80,824 and $339,176, respectively. The initial present value of the right of use asset and lease liability, at a treasury bond rate of 3.00% over the thirty years, was $2,748,483. The balance of the right of use asset as of June 30, 2023 was $1,391,988, net of accumulated amortization, which is reported with the Authority’s capital assets in Note 3. The balance of the lease liability as of June 30, 2023 was $2,059,878. There are termination clauses included in the lease agreement, however management has determined that it is not likely that those clauses will be exercised. Future minimum lease payments as of June 30, 2023 are as follows: Year Ending Principal Interest June 30 Payments Payments Total 2024 $359,990 $60,010 $420,000 2025 370,871 49,129 420,000 2026 382,080 37,920 420,000 2027 393,629 26,371 420,000 2028 - 2029 553,308 16,692 570,000 $2,059,878 $190,122 $2,250,000 NOTE 11 – JOINTLY GOVERNED ORGANIZATIONS 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 financial information may be obtained from San Mateo County Harbor District, #1 Johnson Pier, Half Moon Bay, CA 94019. 97 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 11 – JOINTLY GOVERNED ORGANIZATIONS (Continued) B. Peninsula Traffic Congestion Relief Alliance (PTCRA) 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 the 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 finance director of the City of San Carlos 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 financial 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) 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 financial information may be obtained from the City of San Carlos Finance Department, 666 Elm Street, San Carlos, CA 94070. NOTE 12 – RISK MANAGEMENT A. Insurance Coverage The City participates in Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA), a nonprofit benefit corporation established to provide liability insurance coverage, claims and risk management, and legal defense to its participating members. PLAN JPA provides $1,000,000 of self- funded general liability and automobile coverage (except $250,000 is for the Employee benefits Plan Administration liability) and $29,000,000 excess liability coverage per occurrence and is responsible for paying claims in excess of the City’s $100,000 self-insured retention. 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, 2023, the City paid PLAN JPA $2,263,829 in premiums and did not receive a refund of premiums paid in prior years. Financial statements may be obtained from PLAN JPA 1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833. The City has also purchased excess coverage insurance for worker’s compensation claims from Public Risk, Innovation, Solutions and Management (PRISM) (formerly CSAC Excess Insurance Authority (CSAC-EIA)). PRISM provides coverage up to statutory limits in excess of the City’s $500,000 self-insured retention. For the past five fiscal years, general liability and worker compensation settlements did not exceed insurance coverage. 98 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 12 – 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, 2023 Fiscal Year Workers' General 2021-2022 Compensation Liability Total Total Balance, beginning of year $16,243,000 $240,258 $16,483,258 $15,749,797 Current year claims and changes in estimates of prior years claims 3,329,266 395,130 3,724,396 2,891,287 Claims Paid (2,663,266) (260,326) (2,923,592) (2,157,826) Balance, end of year $16,909,000 $375,062 $17,284,062 $16,483,258 Current portion $3,006,000 $375,062 $3,381,062 $3,047,258 NOTE 13 – COMMITMENTS AND CONTINGENCIES A. Litigation 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. B. Federal and State Grant Programs 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. 99 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 13 – COMMITMENTS AND CONTINGENCIES (Continued) C. Miller Parking Garage The Miller Parking Garage (“Parking Garage)”, constructed in 2011, is located at 329 Miller Avenue in the City. The Parking Garage consists of a five-level open-air concrete structure building of approximately 100,000 square feet with 244 parking spaces. Approximately 14,350 square feet of commercial and office space (the “Commercial Space”) is located on the ground floor of the Parking Garage. In February 2020, the City sold the Commercial Space for $1,247,950. In connection with the sale of the Commercial Space, a condominium map was recorded with the County to create separate assessor parcel numbers for the Commercial Space and the balance of the property included within the Parking Garage. No rights to the parking spaces were granted to the owners of the Commercial Space in connection with its sale. However, the owners of the Commercial Space may use such spaces upon payment to the City of the applicable parking fees. D. Construction Contract Dispute Following a competitive bid process, the City awarded a contract for construction of certain improvements related to the Grand Boulevard Initiative. The project finished well past the contract completion date and the City withheld funds for late completion and to correct incomplete and defective work. The City and the contractor engaged a third-party mediator, but were unable to resolve the dispute at mediation in August 2022. The contractor filed a complaint in San Mateo County Superior Court on September 14, 2022, seeking $6,500,000 in compensatory damages, interest, and costs of suit. No trial date has been set as of November 2023. The City disputes the allegations and intends to vigorously pursue affirmative claims against the contractor. The City may be negatively impacted should the court rule in favor of the contractor, however any such impact cannot be determined at this time. NOTE 14 – 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. On July 1, 2018, the duties of the South San Francisco Oversight Board transferred to a new San Mateo Countywide Oversight Board, which will now be responsible for overseeing the winddown affairs of all Successor Agencies in San Mateo County, including the Successor Agency to the South San Francisco 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, 2023 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, 2023. 100 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 14 – 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 50 years Improvements 30 years Machinery and equipment 5-20 years Furniture and fixtures 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. 101 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 14 – FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES (Continued) Capital assets recorded at June 30 are comprised of: Balance Balance June 30, 2022 Additions June 30, 2023 Fiduciary activities Capital assets not being depreciated: Land $111,219 $111,219 Total capital assets not being depreciated 111,219 111,219 Capital assets being depreciated: Buildings and Improvements 329,671 329,671 Equipment and Vehicle 242,190 242,190 Furniture and Fixtures 21,506 21,506 Total capital assets being depreciated 593,367 593,367 Less accumulated depreciation for: Buildings and Improvements (91,547) ($6,593) (98,140) Equipment and Vehicle (242,190) (242,190) Furniture and Fixtures (21,506) (21,506) Total accumulated depreciation (355,243) (6,593) (361,836) Net capital assets being depreciated 238,124 (6,593) 231,531 Fiduciary activity capital assets, net $349,343 ($6,593) $342,750 D. Defeased Bonds As of June 30, 2023, the outstanding balance of defeased debt was $3,335,000 for the 1997 Downtown /Central Redevelopment Tax Allocation Bonds. E. 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. 102 CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIALS STATEMENTS For the Fiscal Year Ended June 30, 2023 NOTE 14 – FORMER REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES (Continued) State Asset Transfer Review The activities of the former Redevelopment Agency and the Successor Agency were also subject to further examination by the State of California. The State Controller’s Office conducted 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. The results of that review were issued in July 2015 and although the review did identify ineligible transfers of assets from the former Redevelopment Agency to the City, the report reflected the current year and prior year transfers and made no further demands for the return of assets to the Successor Agency. 103 This Page Left Intentionally Blank REQUIRED SUPPLEMENTARY INFORMATION CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2023 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 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 Total Pension Liability Service cost $3,449,973 $3,075,813 $3,079,994 $3,922,518 $4,001,207 $4,118,735 $4,267,487 $4,274,015 $4,896,807 Interest on total pension liability 13,930,544 14,393,013 14,870,988 15,430,998 15,885,315 16,624,514 17,306,781 17,951,111 18,379,820 Changes of benefit terms Changes of assumptions (3,374,655) 12,421,358 (1,361,078) 7,856,877 Difference between expected and actual experience (1,567,798) (476,337) 1,958,164 187,342 2,853,948 1,771,483 1,018,943 (893,635) Benefit payments, including refunds of employee contributions (9,287,975) (10,407,243) (11,085,829) (11,565,392) (12,164,689) (12,756,888) (13,336,957) (13,832,759) (14,547,349) Net change in total pension liability 8,092,542 2,119,130 6,388,816 22,167,646 6,548,097 10,840,309 10,008,794 9,411,310 15,692,520 Total pension liability - beginning 188,659,588 196,752,130 198,871,260 205,260,076 227,427,722 233,975,819 244,816,128 254,824,922 264,236,232 Total pension liability - ending (a)196,752,130 198,871,260 205,260,076 227,427,722 233,975,819 244,816,128 254,824,922 264,236,232 279,928,752 Plan fiduciary net position Contributions - employer $4,235,454 $4,546,984 $5,726,981 $5,228,454 $6,165,764 $6,851,659 $7,823,463 $8,623,876 $9,491,964 Contributions - employee 1,466,176 1,411,273 1,622,453 1,720,600 1,727,041 1,816,507 1,883,698 2,006,497 2,293,651 Net investment income 21,712,340 3,221,551 687,860 15,616,363 12,458,090 10,240,873 8,084,207 38,008,815 (15,367,557) Benefit payments, including refunds of employee contributions (9,287,975) (10,407,243) (11,085,829) (11,565,392) (12,164,689) (12,756,888) (13,336,957) (13,832,759) (14,547,349) Plan to plan resource movement (50,555) 229 (365) (20) (32) Administrative expense (160,268) (86,726) (205,472) (233,683) (112,374) (230,510) (167,557) (126,067) Other miscellaneous income (443,767) 365 Net change in plan fiduciary net position 18,125,995 (1,438,258) (3,135,032) 10,794,553 7,508,391 6,040,122 4,223,869 34,638,872 (18,255,358) Plan fiduciary net position - beginning 125,614,993 143,740,988 142,302,730 139,167,698 149,962,251 157,470,642 163,510,764 167,734,633 202,373,505 Plan fiduciary net position - ending (b)143,740,988 142,302,730 139,167,698 149,962,251 157,470,642 163,510,764 167,734,633 202,373,505 184,118,147 Net pension liability - ending (a)-(b) $53,011,142 $56,568,530 $66,092,378 $77,465,471 $76,505,177 $81,305,364 $87,090,289 $61,862,727 $95,810,605 Plan fiduciary net position as a percentage of the total pension liability 73.06% 71.56% 67.80% 65.94% 67.30% 66.79% 65.82% 76.59% 65.77% Covered payroll $17,725,581 $17,798,104 $21,409,193 $29,390,370 $23,630,354 $24,993,270 $26,275,955 $27,681,286 $28,788,170 Net pension liability as percentage of covered payroll 299.07% 317.83% 308.71% 263.57% 323.76% 325.31% 331.44% 223.48% 332.81% Notes to Schedule: *Fiscal year 2015 was the 1st year of implementation. Benefit changes:The figures above do not include any liability impact that may have resulted fromplan changes which occurred afterthe June 30valuation date.This applies forvoluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes in assumptions : In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, 2018, 2019, 2020, and 2021, there were no changes. In 2022,the accounting discount rate reduced from7.15% to 6.90%. In 2015, amounts reported reflect an adjustment ofthe discount rate form7.5% (net ofadministrative expense)to 7.65% (without a reduction forpension plan administrative expense). In 2014, amounts reported were based on the 7.5% discount rate. 106 CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2023 Miscellaneous Agent Multiple-Employer Defined Benefit Pension Plans Last 10 Years* SCHEDULE OF CONTRIBUTIONS Fiscal Year Ended June 30 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actuarially determined contribution $4,210,973 $5,399,856 $5,228,454 $6,166,024 $6,851,659 $7,831,598 $8,616,536 $9,491,640 $10,675,385 Contributions in relation to the actuarially determined contributions 4,210,973 5,399,856 5,228,454 6,166,024 6,851,659 7,831,598 8,616,536 9,491,640 10,675,385 Contribution deficiency (excess)$0 $0 $0 $0 $0 $0 $0 $0 $0 Covered payroll $17,798,104 $21,409,193 $29,390,370 $23,630,354 $24,993,270 $26,275,955 $27,681,286 $28,788,170 $31,400,311 Contributions as a percentage of covered payroll 23.66% 25.22% 17.79% 26.09% 27.41% 29.81% 31.13% 32.97% 34.00% Notes to Schedule Valuation date: 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age Amortization method Level percentage of payroll Asset valuation method Fair value of assets Inflation 2.75% for 2015 to 2019, 2.625% for 2020, 2.50% for 2021 and 2022 and 2.30% for 2023. Salary increases Investment rate of return Retirement age Mortality *Fiscal year 2015 was the 1st year of implementation Varies by entry age and service 7.50% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020, 7.00% for 2021 and 2022 and 6.80% for 2023, net of administrative expenses, including inflation The probabilities of Retirement are based on the CalPERS Experience Study. The probabilities of mortality are based on the CalPERS Experience Study. Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale AA published by the Society of Actuaries for 2015 to 2018. For 2019, 2020, 2021, and 2022, pre-retirement and post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For 2023, pre-retirement and post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries 107 CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2023 Safety 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 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 Total Pension Liability Service cost $5,143,842 $4,968,087 $5,329,842 $6,264,307 $6,511,672 $6,379,124 $6,880,000 $7,072,216 $7,567,350 Interest on total pension liability 18,899,544 19,398,484 20,134,558 21,238,842 22,129,483 23,249,091 24,284,010 25,441,168 26,419,737 Changes of benefit terms Changes of assumptions (4,789,129) 18,010,606 (1,293,579) 12,584,955 Difference between expected and actual experience (4,226,388) (915,267) 4,520,149 1,318,613 2,853,684 742,624 1,772,836 (684,769) Benefit payments, including refunds of employee contributions (13,161,296) (13,556,606) (14,463,995) (14,760,979) (15,629,698) (15,909,734) (16,384,059) (17,313,787) (17,860,080) Net change in total pension liability 10,882,090 1,794,448 10,085,138 35,272,925 13,036,491 16,572,165 15,522,575 16,972,433 28,027,193 Total pension liability - beginning 256,002,648 266,884,738 268,679,186 278,764,324 314,037,249 327,073,740 343,645,905 359,168,480 376,140,913 Total pension liability - ending (a)266,884,738 268,679,186 278,764,324 314,037,249 327,073,740 343,645,905 359,168,480 376,140,913 404,168,106 Plan fiduciary net position Contributions - employer $6,535,399 $7,191,715 $8,535,737 $8,071,060 $9,323,936 $10,164,921 $11,402,434 $12,413,770 $13,387,919 Contributions - employee 2,151,163 1,714,039 1,961,907 1,980,507 2,134,552 2,486,989 2,890,991 2,893,339 2,886,541 Net investment income 29,348,051 4,264,997 950,612 21,553,126 17,363,158 14,404,633 11,506,885 54,912,645 (22,271,961) Benefit payments, including refunds of employee contributions (13,161,296) (13,556,606) (14,463,995) (14,760,979) (15,629,698) (15,909,734) (16,384,059) (17,313,787) (17,860,080) Plan to plan resource movement (229) (512) 20 32 Administrative expense (219,696) (118,968) (283,579) (325,104) (157,625) (326,879) (240,703) (182,910) Other miscellaneous income (617,378) 512 Net change in plan fiduciary net position 24,873,317 (605,551) (3,134,936) 16,560,135 12,248,954 10,989,716 9,089,404 52,665,264 (24,040,491) Plan fiduciary net position - beginning 170,937,835 195,811,152 195,205,601 192,070,665 208,630,800 220,879,754 231,869,470 240,958,874 293,624,138 Plan fiduciary net position - ending (b)195,811,152 195,205,601 192,070,665 208,630,800 220,879,754 231,869,470 240,958,874 293,624,138 269,583,647 Net pension liability - ending (a)-(b) $71,073,586 $73,473,585 $86,693,659 $105,406,449 $106,193,986 $111,776,435 $118,209,606 $82,516,775 $134,584,459 Plan fiduciary net position as a percentage of the total pension liability 73.37% 72.65% 68.90% 66.44% 67.53% 67.47% 67.09% 78.06% 66.70% Covered payroll $15,994,412 $16,679,857 $18,986,895 $19,563,549 $21,932,480 $22,975,254 $24,264,339 $24,378,494 $24,325,363 Net pension liability as percentage of covered payroll 444.37% 440.49% 456.60% 538.79% 484.19% 486.51% 487.17% 338.48% 553.27% Notes to Schedule: *Fiscal year 2015 was the 1st year of implementation. Benefit changes.The figures above do not include any liability impact that may have resulted fromplan changes which occurred afterthe June 30valuation date.This applies forvoluntary benefit changes as well as any offers of Two Years AdditionalService Credit (a.k.a. Golden Handshakes). Changes in assumptions: In 2017, the accounting discount rate reduced from7.65% to 7.15%.In 2016, 2018, 2019, 2020, and 2021, there were no changes. In 2022, the accounting discount rate reduced from7.15% to 6.90%. In 2015, amounts reported reflect an adjustment of the discount rate form 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5% discount rate. 108 CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2023 Safety Agent Multiple-Employer Defined Benefit Pension Plans Last 10 Years* SCHEDULE OF CONTRIBUTIONS Fiscal Year Ended June 30 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actuarially determined contribution $7,191,715 $8,538,138 $8,071,060 $9,322,781 $10,164,821 $11,401,783 $12,413,770 $13,387,919 $15,352,613 Contributions in relation to the actuarially determined contributions 7,191,715 8,538,138 8,071,060 9,322,781 10,164,821 11,401,783 12,413,770 13,387,919 15,352,613 Contribution deficiency (excess)$0 $0 $0 $0 $0 $0 $0 $0 $0 Covered payroll $16,679,857 $18,986,895 $19,563,549 $21,932,480 $22,975,254 $24,264,339 $24,378,494 $24,325,363 $26,580,095 Contributions as a percentage of covered payroll 43.12% 44.97% 41.26% 42.51% 44.24% 46.99% 50.92% 55.04% 57.76% Notes to Schedule Valuation date: 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age Amortization method Level percentage of payroll Asset valuation method Fair value of assets Inflation 2.75% for 2015 to 2019, 2.625% for 2020, 2.50% for 2021 and 2022 and 2.30% for 2023. Salary increases Varies by entry Investment rate of return Retirement age Mortality *Fiscal year 2015 was the 1st year of implementation 7.50% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020, 7.00% for 2021 and 2022 and 6.80% for 2023, net of administrative expenses, including The probabilities of mortality are based on the CalPERS Experience Study. Pre-retirement and Post-retirement mortality rates include 20 years of projected mortality improvement using Scale AA published by the Society of Actuaries for 2015 to 2018. For 2019, 2020, 2021, and 2022, pre-retirement and post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For 2023, pre-retirement and post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries The probabilities of Retirement are based on the CalPERS Experience 109 CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2023 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 6/30/17 6/30/18 6/30/2019 6/30/2020 6/30/2021 6/30/2022 Total OPEB Liability Service Cost $1,574 $1,535 $1,558 $1,604 $1,516 $1,374 Interest 5,087 5,325 5,568 5,952 6,058 5,704 Changes in benefit terms Differences between expected and actual experience 91 2,895 (3,332) Changes of assumptions (672)(1,859)1,446 Benefit payments (2,901)(3,326)(3,378)(4,052)(4,009)(4,067) Net change in total OPEB liability 3,760 3,625 5,971 1,645 1,679 3,011 Total OPEB liability - beginning 75,240 79,000 82,625 88,596 90,241 91,920 Total OPEB liability - ending (a)$79,000 $82,625 $88,596 $90,241 $91,920 $94,931 Plan fiduciary net position Contributions - employer $3,703 $4,128 $4,180 $4,854 $4,810 $4,869 Contributions - employee Net investment income 1,803 1,566 1,402 838 7,141 (4,575) Administrative expense (9)(37)(5)(12)(9)(9) Benefit payments (2,901)(3,326)(3,378)(4,052)(4,009)(4,067) Net change in plan fiduciary net position 2,596 2,331 2,199 1,628 7,933 (3,782) Plan fiduciary net position - beginning 17,114 19,710 22,041 24,240 25,868 33,801 Plan fiduciary net position - ending (b)$19,710 $22,041 $24,240 $25,868 $33,801 $30,019 Net OPEB liability - ending (a)-(b) $59,290 $60,584 $64,356 $64,373 $58,119 $64,912 Plan fiduciary net position as a percentage of the total OPEB liability 24.95% 26.68% 27.36% 28.67% 36.77% 31.62% Covered-employee payroll $26,539 $26,986 $27,662 $28,215 $26,824 $25,079 Net OPEB liability as a percentage of covered-employee payroll 223.41% 224.50% 232.65% 228.15% 216.67% 258.83% * Fiscal year 2018 was the first year of implementation. 110 CITY OF SOUTH SAN FRANCISCO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2023 SCHEDULE OF CONTRIBUTIONS Retiree Healthcare OPEB Plan - Agent Multiple Employer Last 10 fiscal years* (Amounts in 000's) Fiscal Year Ended June 30, 2018 2019 2020 2021 2022 2023 Actuarially determined contribution $6,279 $6,839 $6,995 $7,253 $7,373 $7,053 Contributions in relation to the actuarially determined contribution 4,128 4,180 4,854 4,810 4,869 5,551 Contribution deficiency (excess) $2,151 $2,659 $2,141 $2,443 $2,504 $1,502 Covered-employee payroll $26,986 $27,662 $28,215 $26,824 $25,079 $24,911 Contributions as a percentage of covered-employee payroll 15.30% 15.11% 17.20% 17.93% 19.41% 22.28% * Fiscal year 2018 was the first year of implementation. Valuation Date • June 30, 2021 Contribution Policy • City contributes $802,000 per year into trust Actuarial Cost Method • Entry Age Normal, Level Percentage of Payroll Amortization Method • Level dollar Amortization Period • Average of 19 years remaining for 2022/23 • 6.25% at June 30, 2022 • 6.25% at June 30, 2021 • Expected City contributions projected to keep sufficient plan assets to pay all benefits from trust. Inflation • 2.50% per annum Salary Increases • Aggregate - 2.75% annually • Merit - CalPERS 1997-2015 Experience Study Healthcare/Medical Trend • Non-Medicare - 6.75% for 2022, decreasing to an ultimate rate of 3.75% in 2076 and later years • Medicare (Non-Kaiser) - 5.85% for 2022, decreasing to an ultimate rate of 3.75% in 2076 and later years • Medicare (Kaiser) - 4.75% for 2022, decreasing to an ultimate rate of 3.75% in 2076 and later years Mortality, Retirement, Disability, Termination • CalPERS 1997-2015 Experience Study Mortality Improvement • Mortality projected fully generational with Scale MP-2021 Healthcare participation for future retirees • 100% if covered, 95% if waived Retiree Healthcare OPEB Plan - Agent Multiple Employer NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTION Methods and Assumptions for Actuarially Determined Contribution Discount Rate and Long-Term Expected Rate of Return on Assets 111 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. 115 General Purpose Measure W Total ASSETS Cash and investments $66,512,172 $14,227,646 $80,739,818 Receivables: Accounts 11,182,712 2,533,134 13,715,846 Accrued interest 423,012 423,012 Leases 12,759,503 12,759,503 Due from other funds 480,000 480,000 Due from Conference Center 56,072 56,072 Inventory 574 574 Restricted cash and investments Properties held for redevelopment 2,823,118 2,823,118 Total Assets $94,237,163 $16,760,780 $110,997,943 LIABILITIES Accounts payable $5,939,493 $5,939,493 Accrued salaries and benefits 2,697,253 2,697,253 Other payable 776,211 776,211 Deposits 742,865 742,865 Total Liabilities 10,155,822 10,155,822 DEFERRED INFLOWS OF RESOURCES Related to leases 12,282,955 12,282,955 FUND BALANCES Nonspendable 477,122 477,122 Restricted 2,823,118 2,823,118 Committed 3,775,873 $16,760,780 20,536,653 Assigned 8,661,539 8,661,539 Unassigned 56,060,734 56,060,734 Total Fund Balances 71,798,386 16,760,780 88,559,166 Total Liabilities and Fund Balances $94,237,163 $16,760,780 $110,997,943 CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING BALANCE SHEETS JUNE 30, 2023 116 General Purpose Measure W Total REVENUES Property taxes $54,041,117 $54,041,117 Sales taxes 21,735,087 $15,618,697 37,353,784 Transient occupancy taxes 16,357,104 16,357,104 Franchise Fees 5,240,637 5,240,637 Other taxes 8,059,817 8,059,817 Intergovernmental 3,558,742 3,558,742 Interest and rentals 4,247,107 4,247,107 Licenses and permits 20,467,644 20,467,644 Charges for services 11,673,187 11,673,187 Fines and forfeitures 757,019 757,019 Other 353,378 353,378 Total Revenues 146,490,839 15,618,697 162,109,536 EXPENDITURES Current: City Council 241,596 241,596 City Clerk 1,027,822 1,027,822 City Treasurer 35,279 35,279 City Attorney 1,220,059 1,220,059 City Manager 3,819,858 287,295 4,107,153 Finance 3,089,869 3,089,869 Non-departmental 3,484,013 3,484,013 Human Resources 2,221,160 2,221,160 Fire 35,512,513 35,512,513 Police 36,282,833 36,282,833 Public Works 7,936,326 7,936,326 Parks and Recreation 20,362,073 20,362,073 Library 6,475,274 6,475,274 Economic and Community Development 11,770,931 11,770,931 Capital Outlay 141,250 141,250 Total Expenditures 133,620,856 287,295 133,908,151 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 12,869,983 15,331,402 28,201,385 OTHER FINANCING SOURCES (USES) Gain from sale of property 1,852,123 1,852,123 Loss from sale of property (6,439,913) (6,439,913) Transfers in 5,283,682 5,283,682 Transfers out (1,388,940) (10,422,461) (11,811,401) Total Other Financing Sources (Uses) (693,048) (10,422,461) (11,115,509) Net Change in Fund Balances before special items 12,176,935 4,908,941 17,085,876 SPECIAL ITEMS Remittance of land sale proceeds (5,173,366) (5,173,366) Net Change in Fund Balances 7,003,569 11,912,510 Fund balance - July 1 64,794,817 11,851,839 76,646,656 Fund balance - June 30 $71,798,386 $16,760,780 $88,559,166 CITY OF SOUTH SAN FRANCISCO GENERAL FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2023 117 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, 2023 Variance with Final Budget Actual Positive Original Final Amount (Negative) Resources (inflows): Property taxes $43,804,769 $45,804,769 $54,041,117 $8,236,348 Sales taxes 20,991,018 22,391,018 21,735,087 (655,931) Transient occupancy taxes 11,160,752 14,160,752 16,357,104 2,196,352 Franchise fees 4,600,000 4,600,000 5,240,637 640,637 Other taxes 4,893,252 5,693,252 8,059,817 2,366,565 Intergovernmental 2,844,618 4,337,199 3,558,742 (778,457) Interest and rentals 5,453,469 4,556,469 4,247,107 (309,362) Licenses and permits 15,500,000 19,425,400 20,467,644 1,042,244 Charges for services 8,799,097 8,265,097 11,673,187 3,408,090 Fines and forfeitures 710,824 710,824 757,019 46,195 Other 259,383 278,902 353,378 74,476 Amounts available for appropriation 119,017,182 130,223,682 146,490,839 16,267,157 Charges to appropriations (outflows) City Council 258,749 260,650 241,596 19,054 City Clerk 1,143,342 1,154,449 1,027,822 126,627 City Treasurer 167,292 167,904 35,279 132,625 City Attorney 940,290 940,291 1,220,059 (279,768) City Manager 4,527,997 5,324,596 3,909,909 1,414,687 Finance 3,892,875 4,405,085 3,617,322 787,763 Non-departmental 1,544,367 2,152,699 3,486,795 (1,334,096) Human Resources 2,518,004 2,684,109 2,331,987 352,122 Fire 31,313,293 33,424,718 36,400,487 (2,975,769) Police 32,957,662 34,511,302 36,283,110 (1,771,808) Public Works 7,120,654 8,603,705 8,931,895 (328,190) Parks and Recreation 19,608,365 22,873,151 22,225,939 647,212 Library 6,706,110 7,273,746 6,518,982 754,764 Economic and Community Development 8,907,770 15,609,631 15,909,963 (300,332) Capital outlay 141,250 (141,250) Total charges to appropriations 121,606,770 139,386,036 142,282,395 (2,896,359) OTHER FINANCING SOURCES (USES) Gain from sale of property 897,000 1,852,123 955,123 Loss from sale of property (6,439,913) (6,439,913) Transfers in 3,245,000 6,151,400 5,283,682 (867,718) Transfers out (600,000) (4,533,270) (1,388,940) 3,144,330 Total Other Financing Sources (Uses) 2,645,000 2,515,130 (693,048) (3,208,178) NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS 55,412 (6,647,224) 3,515,396 10,162,620 SPECIAL ITEMS Remittance of land sale proceeds (5,173,366) (5,173,366) Net Change in Fund Balances $55,412 ($6,647,224) (1,657,970) $4,989,254 Fund Balance - July 1 64,794,817 Adjustment to budgetary basis: Encumbrance adjustments 8,661,539 Fund Balance - June 30 $71,798,386 (Continued) Budgeted Amounts General Purpose 118 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, 2023 Variance with Final Budget Actual Positive Original Final Amount (Negative) Resources (inflows): Property taxes Sales taxes $13,800,000 $13,800,000 $15,618,697 $1,818,697 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 13,800,000 13,800,000 15,618,697 1,818,697 Charges to appropriations (outflows) City Council City Clerk City Treasurer City Attorney City Manager 398,622 411,297 287,295 124,002 Finance Non-departmental Human Resources Fire Police Public Works Parks and Recreation Library Economic and Community Development Capital outlay Total charges to appropriations 398,622 411,297 287,295 124,002 OTHER FINANCING SOURCES (USES) Gain from sale of property Loss from sale of property Transfers in Transfers out (12,744,450) (23,619,818) (10,422,461) 13,197,357 Total Other Financing Sources (Uses) (12,744,450) (23,619,818) (10,422,461) 13,197,357 NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS 656,928 (10,231,115) 4,908,941 15,140,056 SPECIAL ITEMS Remittance of land sale proceeds Net Change in Fund Balances $656,928 ($10,231,115) 4,908,941 $15,140,056 Fund Balance - July 1 11,851,839 Adjustment to budgetary basis: Encumbrance adjustments Fund Balance - June 30 $16,760,780 (Continued) Budgeted Amounts Measure W 119 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, 2023 Variance with Final Budget Actual Positive Original Final Amount (Negative) Resources (inflows): Property taxes $43,804,769 $45,804,769 $54,041,117 $8,236,348 Sales taxes 34,791,018 36,191,018 37,353,784 1,162,766 Transient occupancy taxes 11,160,752 14,160,752 16,357,104 2,196,352 Franchise fees 4,600,000 4,600,000 5,240,637 640,637 Other taxes 4,893,252 5,693,252 8,059,817 2,366,565 Intergovernmental 2,844,618 4,337,199 3,558,742 (778,457) Interest and rentals 5,453,469 4,556,469 4,247,107 (309,362) Licenses and permits 15,500,000 19,425,400 20,467,644 1,042,244 Charges for services 8,799,097 8,265,097 11,673,187 3,408,090 Fines and forfeitures 710,824 710,824 757,019 46,195 Other 259,383 278,902 353,378 74,476 Amounts available for appropriation 132,817,182 144,023,682 162,109,536 18,085,854 Charges to appropriations (outflows) City Council 258,749 260,650 241,596 19,054 City Clerk 1,143,342 1,154,449 1,027,822 126,627 City Treasurer 167,292 167,904 35,279 132,625 City Attorney 940,290 940,291 1,220,059 (279,768) City Manager 4,926,619 5,735,893 4,197,204 1,538,689 Finance 3,892,875 4,405,085 3,617,322 787,763 Non-departmental 1,544,367 2,152,699 3,486,795 (1,334,096) Human Resources 2,518,004 2,684,109 2,331,987 352,122 Fire 31,313,293 33,424,718 36,400,487 (2,975,769) Police 32,957,662 34,511,302 36,283,110 (1,771,808) Public Works 7,120,654 8,603,705 8,931,895 (328,190) Parks and Recreation 19,608,365 22,873,151 22,225,939 647,212 Library 6,706,110 7,273,746 6,518,982 754,764 Economic and Community Development 8,907,770 15,609,631 15,909,963 (300,332) Capital outlay 141,250 (141,250) Total charges to appropriations 122,005,392 139,797,333 142,569,690 (2,772,357) OTHER FINANCING SOURCES (USES) Gain from sale of property 897,000 1,852,123 955,123 Loss from sale of property (6,439,913) (6,439,913) Transfers in 3,245,000 6,151,400 5,283,682 (867,718) Transfers out (13,344,450) (28,153,088) (11,811,401) 16,341,687 Total Other Financing Sources (Uses) (10,099,450) (21,104,688) (11,115,509) 9,989,179 NET CHANGE IN FUND BALANCES BEFORE SPECIAL ITEMS 712,340 (16,878,339) 8,424,337 25,302,676 SPECIAL ITEMS Remittance of land sale proceeds (5,173,366) (5,173,366) Net Change in Fund Balances $712,340 ($16,878,339) 3,250,971 $20,129,310 Fund Balance - July 1 76,646,656 Adjustment to budgetary basis: Encumbrance adjustments 8,661,539 Fund Balance - June 30 $88,559,166 Budgeted Amounts Total 120 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. Community Development Block Grant – Accounts for Federal monies received to be expended for development of jobs and suitable housing for low-income residents. Maintenance Districts – 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. San Mateo County (SMC) Measure W ½ Sales Tax – Accounts for the City’s portion of the special half cent sales tax receipts restricted for congestion relief and transit improvements. Public Arts In-Lieu Fee - Accounts for development fee revenues that are collected and are required to be used for public art installations. 121 NON-MAJOR GOVERNMENTAL FUNDS (Continued) Oyster Point CFD Special Tax B - Accounts for special assessment collections that are to be used for maintenance and administrative fees of the community facilities district. Low and Moderate Income Housing Assets 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. The main source of revenue for this fund is the repayment of loans restricted for housing activities. 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: 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. Commercial Linkage Impact Fee – Accounts for affordable housing funding created by new commercial development. Library Impact Fee – Accounts for citywide fees to provide new development’s share of the expansion, rehabilitation and replacement of library facilities and collections to accommodate the increased demand for library services caused by future development. 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. 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 and other areas within the City. 122 NON-MAJOR GOVERNMENTAL FUNDS (Continued) 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. Debt service funds are used to account for resources used for the payment of debt service on long-term debt. Debt service funds used at the City of South San Francisco include: Debt Service – Accounts for expenditures associated with the acquisition, construction, and installation of certain capital improvements constituting the new City police station located within the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2020A Bonds, as well as capital improvements constituting the City’s new Civic Center Campus, and related improvements, facilities and equipment, and pay the costs incurred in connection with the issuance of the Series 2021A Bonds. 123 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2023 SPECIAL REVENUE FUNDS Community Developer Development Maintenance Transportation Gas Tax Contributions Block Grant Districts Sales Tax ASSETS Cash and investments $349,087 $11,189,187 $4,990,259 $5,486,805 Receivables: Accounts 147,252 1,315,178 $1,948 68,360 166,956 Accrued interest 2,075 58,921 25,212 Loans 667,537 Leases Restricted cash and investments 1,461 Total Assets $498,414 $12,563,286 $670,946 $5,058,619 $5,678,973 LIABILITIES Liabilities: Accounts payable $501,203 $603 $34,650 Other payable 526,238 Deposits 3,232,930 Due to other funds 100,000 Total Liabilities 3,734,133 626,841 34,650 DEFERRED INFLOWS OF RESOURCES Related to leases Fund Balances: Restricted $498,414 8,829,153 44,105 5,023,969 $5,678,973 Total Fund Balances 498,414 8,829,153 44,105 5,023,969 5,678,973 Total Liabilities, Deferred Inflows of Resources and Fund Balances $498,414 $12,563,286 $670,946 $5,058,619 $5,678,973 124 SPECIAL REVENUE FUNDS Road Solid Supplemental Affordable PEG Transit Station Maintenance Waste Law Enforce- City Housing Equipment and Enhancement and Reduction ment Services Programs Trust Access In-Lieu Fee Rehabilitation $1,017,425 $848 $20,005,467 $664,127 $741,784 $2,773,769 $2,948,449 88 52,690 132,750 251 76,348 4,057 9,499 14,301 12,925 14,540 $1,017,425 $1,099 $20,081,815 $682,812 $803,973 $2,788,070 $3,094,124 $146,464 $14,230 $36,723 36,723 146,464 14,230 980,702 $1,099 19,935,351 668,582 $803,973 $2,788,070 $3,094,124 980,702 1,099 19,935,351 668,582 803,973 2,788,070 3,094,124 $1,017,425 $1,099 $20,081,815 $682,812 $803,973 $2,788,070 $3,094,124 (Continued) 125 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2023 CAPITAL PROJECTS SPECIAL REVENUE FUNDS FUND Low and SMC Measure W Oyster Point Moderate Public 1/2 Cent Public Arts CFD Income Safety Sales Tax In-Lieu Fee Special Tax B Housing Assets Impact Fee ASSETS Cash and investments $2,080,865 $142,400 $166,754 $2,467,559 $2,069,797 Receivables: Accounts 5,596 Accrued interest 9,032 486 13,034 14,005 Loans 510,921 1,181,466 Restricted cash and investments Total Assets $2,089,897 $142,886 $166,754 $4,178,576 $2,083,802 LIABILITIES Liabilities: Accounts payable $81,885 Other payable 825 Deposits Due to other funds Total Liabilities 82,710 DEFERRED INFLOWS OF RESOURCES Related to leases 1,153,603 Fund Balances: Restricted $2,089,897 $142,886 $166,754 2,942,263 $2,083,802 Total Fund Balances 2,089,897 142,886 166,754 2,942,263 2,083,802 Total Liabilities, Deferred Inflows of Resources and Fund Balances $2,089,897 $142,886 $166,754 $4,178,576 $2,083,802 126 CAPITAL PROJECTS FUNDS Oyster Point Sewer Oyster Point Park Land Park Bicycle and Commercial Improvement Capacity Development Acquisition Construction Pedestrian Linkage Impact Fees Charges Impact Fees Fee Fee Impact Fee Impact Fee $36,304 $11,576,637 $68,567 $3,278,740 $9,997,204 $225,903 $15,005,231 44,649 467 58,570 17,123 51,044 1,051 54,899 $36,771 $11,635,207 $113,216 $3,295,863 $10,048,248 $226,954 $15,060,130 $50,082 $12,244 19,500 50,082 31,744 $36,771 $11,635,207 63,134 $3,295,863 $10,048,248 $226,954 15,028,386 36,771 11,635,207 63,134 3,295,863 10,048,248 226,954 15,028,386 $36,771 $11,635,207 $113,216 $3,295,863 $10,048,248 $226,954 $15,060,130 (Continued) 127 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2023 DEBT SERVICE CAPITAL PROJECTS FUNDS FUND East of 101 Library Sewer Traffic Child Care Debt Impact Fee Impact Fees Impact Fees Impact Fees Service ASSETS Cash and investments $4,292 $5,249,246 $21,282,308 $14,031,711 Receivables: Accounts Accrued interest 17 26,318 131,163 75,833 Loans Restricted cash and investments Total Assets $4,309 $5,275,564 $21,413,471 $14,107,544 LIABILITIES Liabilities: Accounts payable Other payable Deposits Due to other funds Total Liabilities DEFERRED INFLOWS OF RESOURCES Related to leases Fund Balances: Restricted $4,309 $5,275,564 $21,413,471 $14,107,544 Total Fund Balances 4,309 5,275,564 21,413,471 14,107,544 Total Liabilities, Deferred Inflows of Resources and Fund Balances $4,309 $5,275,564 $21,413,471 $14,107,544 128 Total Nonmajor Governmental Funds $137,850,725 1,935,467 656,631 1,192,998 1,181,466 1,461 $142,818,748 $841,361 583,286 3,232,930 100,000 4,757,577 1,153,603 136,907,568 136,907,568 $142,818,748 129 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2023 SPECIAL REVENUE FUNDS Community Developer Development Maintenance Transportation Gas Tax Contributions Block Grant Districts Sales Tax REVENUES Property taxes $2,400,240 Sales taxes Other taxes $2,256,563 Intergovernmental $1,934,261 $61,500 $214,476 Interest and rentals 4,549 119,796 13,780 53,726 Charges for services 2,014,923 60,669 Other 21,255 21,821 Total Revenues 1,938,810 2,217,474 310,746 2,400,240 2,310,289 EXPENDITURES Current: Fire Police Public works Parks and recreation 2,235,977 Economic and community development 388,662 280,303 Non-departmental Other Debt service: Principal repayments Interest and fiscal charges Total Expenditures 388,662 280,303 2,235,977 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,938,810 1,828,812 30,443 164,263 2,310,289 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (1,728,303) (567,006) (150,000) (344,994) Total Other Financing Sources (Uses) (1,728,303) (567,006) (150,000) (344,994) Net Change in Fund Balances 210,507 1,261,806 (119,557) 164,263 1,965,295 Fund balance - July 1 287,907 7,567,347 163,662 4,859,706 3,713,678 Fund balance - June 30 $498,414 $8,829,153 $44,105 $5,023,969 $5,678,973 130 SPECIAL REVENUE FUNDS Road Solid Supplemental Affordable PEG Transit Station Maintenance Waste Law Enforce- City Housing Equipment and Enhancement and Reduction ment Services Programs Trust Access In-Lieu Fee Rehabilitation $167,130 $217,980 $95,643 $1,463,532 611 $171,462 8,722 $19,737 $29,691 27,462 201,743 55,301 10,040,863 5,384 166,623 262,287 297,386 167,741 10,267,626 232,086 186,360 291,978 1,490,994 67,741 98,694 17,209 564,978 181,247 98,694 67,741 564,978 181,247 17,209 198,692 100,000 9,702,648 50,839 169,151 291,978 1,490,994 (24,778) (100,000) (675,869) (1,100,000) (419,885) (24,778) (100,000) (675,869) (1,100,000) (419,885) 173,914 9,026,779 50,839 (930,849) 291,978 1,071,109 806,788 1,099 10,908,572 617,743 1,734,822 2,496,092 2,023,015 $980,702 $1,099 $19,935,351 $668,582 $803,973 $2,788,070 $3,094,124 (Continued) 131 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2023 CAPITAL PROJECTS SPECIAL REVENUE FUNDS FUND Low and SMC Measure W Oyster Point Moderate Public 1/2 Cent Public Arts CFD Income Safety Sales Tax In-Lieu Fee Special Tax B Housing Assets Impact Fee REVENUES Property taxes Sales taxes $912,453 Other taxes $196,775 Intergovernmental Interest and rentals 19,243 $777 $248,936 $29,006 Charges for services 142,109 419,113 Other Total Revenues 931,696 142,886 196,775 248,936 448,119 EXPENDITURES Current: Fire 129,027 Police Public works Parks and recreation Economic and community development 335,765 Non-departmental Other 30,021 Debt service: Principal repayments Interest and fiscal charges Total Expenditures 30,021 335,765 129,027 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 931,696 142,886 166,754 (86,829) 319,092 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (206,476) (749,827) Total Other Financing Sources (Uses) (206,476) (749,827) Net Change in Fund Balances 725,220 142,886 166,754 (86,829) (430,735) Fund balance - July 1 1,364,677 3,029,092 2,514,537 Fund balance - June 30 $2,089,897 $142,886 $166,754 $2,942,263 $2,083,802 132 CAPITAL PROJECTS FUNDS Oyster Point Sewer Oyster Point Park Land Park Bicycle and Commercial Improvement Capacity Development Acquisition Construction Pedestrian Linkage Impact Fees Charges Impact Fees Fee Fee Impact Fee Impact Fee $5,920,411 $1,022 $121,864 $35,416 $106,858 $2,206 $121,167 105,913 1,107,479 667,352 78,353 1,182,963 38,845 7,377,991 106,935 1,229,343 6,587,763 113,769 1,289,821 41,051 7,499,158 2,800 6,517,645 1,384,870 100,000 100,000 2,800 6,517,645 1,384,870 6,935 1,226,543 70,118 113,769 1,289,821 41,051 6,114,288 (47,978) (156,485) (47,978) (156,485) 6,935 1,226,543 70,118 65,791 1,133,336 41,051 6,114,288 29,836 10,408,664 (6,984) 3,230,072 8,914,912 185,903 8,914,098 $36,771 $11,635,207 $63,134 $3,295,863 $10,048,248 $226,954 $15,028,386 (Continued) 133 CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2023 DEBT SERVICE CAPITAL PROJECTS FUNDS FUND East of 101 Library Sewer Traffic Child Care Debt Impact Fee Impact Fees Impact Fees Impact Fees Service REVENUES Property taxes Sales taxes Other taxes Intergovernmental Interest and rentals $13 $54,612 $268,931 $157,091 Charges for services 3,622 350,946 1,020,442 542,089 Other Total Revenues 3,635 405,558 1,289,373 699,180 EXPENDITURES Current: Fire Police Public works 2,800 Parks and recreation Economic and community development Non-departmental 2,800 2,800 Other Debt service: Principal repayments $3,185,000 Interest and fiscal charges 8,280,065 Total Expenditures 2,800 2,800 2,800 11,465,065 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 3,635 402,758 1,286,573 696,380 (11,465,065) OTHER FINANCING SOURCES (USES) Transfers in 11,465,065 Transfers out (4,634,659) (490,000) Total Other Financing Sources (Uses) (4,634,659) (490,000) 11,465,065 Net Change in Fund Balances 3,635 402,758 (3,348,086) 206,380 Fund balance - July 1 674 4,872,806 24,761,557 13,901,164 Fund balance - June 30 $4,309 $5,275,564 $21,413,471 $14,107,544 134 Total Nonmajor Governmental Funds $2,400,240 912,453 2,838,448 9,689,823 1,616,678 15,369,853 10,518,233 43,345,728 129,027 67,741 6,621,939 2,235,977 1,004,730 22,809 2,161,116 3,285,000 8,280,065 23,808,404 19,537,324 11,465,065 (11,396,260) 68,805 19,606,129 117,301,439 $136,907,568 135 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, 2023 GAS TAX Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes Sales taxes Other taxes Intergovernmental $2,099,642 $1,934,261 ($165,381) $562,000 $214,476 ($347,524) Interest and rentals 15,000 4,549 (10,451) 30,000 13,780 (16,220) Charges for services 172,878 60,669 (112,209) Other 21,821 21,821 Total Revenues 2,114,642 1,938,810 (175,832) 764,878 310,746 (454,132) EXPENDITURES Current: Police Public works Parks and recreation Economic and community development 557,018 551,692 5,326 Non-departmental Other Debt service: Principal repayments Interest and fiscal charges Total Expenditures 557,018 551,692 5,326 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,114,642 1,938,810 (175,832) 207,860 (240,946) (448,806) OTHER FINANCING SOURCES (USES) Transfers in Transfers out (2,565,713) (1,728,303) 837,410 (150,000) (150,000) Total Other Financing Sources (Uses) (2,565,713) (1,728,303) 837,410 (150,000) (150,000) NET CHANGE IN FUND BALANCES ($451,071) 210,507 $661,578 $207,860 (390,946) ($598,806) Adjustment to budgetary basis: Encumbrance adjustments 271,389 Fund balance - July 1 287,907 163,662 Fund balance - June 30 $498,414 $44,105 BLOCK GRANT COMMUNITY DEVELOPMENT 136 MAINTENANCE DISTRICTS SOLID WASTE REDUCTION Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $1,941,928 $2,400,240 $458,312 $1,920,452 $2,256,563 $336,111 $95,643 $95,643 25,000 53,726 28,726 180,000 201,743 $21,743 1,941,928 2,400,240 458,312 1,945,452 2,310,289 364,837 275,643 297,386 21,743 606,498 98,694 507,804 2,344,539 2,235,977 108,562 298,980 (298,980) 2,344,539 2,235,977 108,562 606,498 397,674 208,824 (402,611) 164,263 566,874 1,945,452 2,310,289 364,837 (330,855) (100,288) 230,567 (4,389,003) (344,994) 4,044,009 (78,086) (24,778) 53,308 (4,389,003) (344,994) 4,044,009 (78,086) (24,778) 53,308 ($402,611) 164,263 $566,874 ($2,443,551) 1,965,295 $4,408,846 ($408,941) (125,066) $283,875 298,980 4,859,706 3,713,678 806,788 $5,023,969 $5,678,973 $980,702 (Continued) TRANSPORTATION SALES TAX 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, 2023 Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes Sales taxes Other taxes $100,000 $167,130 $67,130 Intergovernmental Interest and rentals 611 611 $171,462 $171,462 Charges for services 55,301 55,301 Other $4,883,255 10,040,863 5,157,608 Total Revenues 100,000 167,741 67,741 4,883,255 10,267,626 5,384,371 EXPENDITURES Current: Police 67,741 (67,741) Public works Parks and recreation Economic and community development Non-departmental Other 14,255 564,978 (550,723) Debt service: Principal repayments Interest and fiscal charges Total Expenditures 67,741 (67,741) 14,255 564,978 (550,723) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 100,000 100,000 4,869,000 9,702,648 4,833,648 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (100,000) (100,000) (15,569,505) (675,869) 14,893,636 Total Other Financing Sources (Uses) (100,000) (100,000) (15,569,505) (675,869) 14,893,636 NET CHANGE IN FUND BALANCES ($10,700,505) 9,026,779 $19,727,284 Adjustment to budgetary basis: Encumbrance adjustments Fund balance - July 1 1,099 10,908,572 Fund balance - June 30 $1,099 $19,935,351 ENFORCEMENT SERVICES SUPPLEMENTAL LAW CITY PROGRAMS 138 PEG AFFORDABLE HOUSING TRUST EQUIPMENT AND ACCESS Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $217,980 $217,980 $1,300,000 $1,463,532 $163,532 8,722 8,722 $5,000 $19,737 $14,737 27,462 27,462 5,384 5,384 125,000 166,623 41,623 232,086 232,086 130,000 186,360 56,360 1,300,000 1,490,994 190,994 17,209 (17,209) $384,614 262,763 121,851 384,614 262,763 121,851 17,209 (17,209) (384,614) (30,677) 353,937 130,000 169,151 39,151 1,300,000 1,490,994 190,994 (1,125,000) (1,100,000) 25,000 (3,992,025) (419,885) 3,572,140 (1,125,000) (1,100,000) 25,000 (3,992,025) (419,885) 3,572,140 ($384,614) (30,677) $353,937 ($995,000) (930,849) $64,151 ($2,692,025) 1,071,109 $3,763,134 81,516 617,743 1,734,822 2,023,015 $668,582 $803,973 $3,094,124 (Continued) ROAD MAINTENANCE AND REHABILITATION 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, 2023 SPECIAL TAX B Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Property taxes Sales taxes $853,534 $912,453 $58,919 Other taxes $196,775 $196,775 Intergovernmental Interest and rentals 19,243 19,243 Charges for services Other Total Revenues 853,534 931,696 78,162 196,775 196,775 EXPENDITURES Current: Police Public works Parks and recreation Economic and community development Non-departmental Other $71,000 30,021 40,979 Debt service: Principal repayments Interest and fiscal charges Total Expenditures 71,000 30,021 40,979 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 853,534 931,696 78,162 (71,000) 166,754 237,754 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (1,598,291) (206,476) 1,391,815 Total Other Financing Sources (Uses) (1,598,291) (206,476) 1,391,815 NET CHANGE IN FUND BALANCES ($744,757) 725,220 $1,469,977 ($71,000) 166,754 $237,754 Adjustment to budgetary basis: Encumbrance adjustments Fund balance - July 1 1,364,677 Fund balance - June 30 $2,089,897 $166,754 SMC MEASURE W 1/2 CENT SALES TAX OYSTER POINT CFD 140 HOUSING ASSETS Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) $167,000 $248,936 $81,936 15,000 (15,000) 182,000 248,936 66,936 894,001 340,834 553,167 $3,185,000 $3,185,000 5,104,450 8,280,065 ($3,175,615) 894,001 340,834 553,167 8,289,450 11,465,065 (3,175,615) (712,001) (91,898) 620,103 (8,289,450) (11,465,065) (3,175,615) 8,289,450 11,465,065 3,175,615 8,289,450 11,465,065 3,175,615 ($712,001) (91,898) $620,103 5,069 3,029,092 $2,942,263 DEBT SERVICE FUND LOW AND MODERATE INCOME 141 This Page Left Intentionally Blank INTERNAL SERVICE FUNDS Internal service funds account for department services and financing 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 financing 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. 143 CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION JUNE 30, 2023 Health and Self Retirement Equipment City Service Insurance Benefits Replacement Total ASSETS Current assets: Cash and investments $3,022,642 $19,153,892 $10,490,855 $6,213,829 $38,881,218 Receivables: Accounts 357,701 98,615 456,316 Accrued interest 13,495 95,910 43,466 32,227 185,098 Deposit 216,000 93,790 309,790 Prepaid items 1,358,284 1,358,284 Total current assets 3,036,137 19,823,503 12,085,010 6,246,056 41,190,706 Noncurrent assets: Capital assets: Depreciable, net of accumulated depreciation 5,328,500 5,328,500 Total non-current assets 5,328,500 5,328,500 Total Assets 3,036,137 19,823,503 12,085,010 11,574,556 46,519,206 LIABILITIES Current liabilities: Accounts payable 118,382 144,782 70,554 333,718 Other payable 29,264 148,275 177,539 Current portion of accrued insurance loss 3,381,062 3,381,062 Current portion of compensated absences 82,877 1,211,656 1,294,533 Current portion of long-term debt Total current liabilities 230,523 3,525,844 1,430,485 5,186,852 Noncurrent liabilities: Accrued insurance loss 13,903,000 13,903,000 Compensated absences obligation 188,806 644,607 833,413 Total noncurrent liabilities 188,806 13,903,000 644,607 14,736,413 Total Liabilities 419,329 17,428,844 2,075,092 19,923,265 NET POSITION: Net investment in capital assets 5,328,500 5,328,500 Unrestricted 2,616,808 2,394,659 10,009,918 6,246,056 21,267,441 Total Net Position $2,616,808 $2,394,659 $10,009,918 $11,574,556 $26,595,941 144 Health and Self Retirement Equipment City Service Insurance Benefits Replacement Total OPERATING REVENUES Charges for services $6,270,762 $6,574,776 $17,132,515 $1,370,243 $31,348,296 Total Operating Revenues 6,270,762 6,574,776 17,132,515 1,370,243 31,348,296 OPERATING EXPENSES Personnel expenses 2,365,234 666,115 16,820,702 19,852,051 Professional services 872,671 260,326 1,132,997 Program supplies 2,218,013 1,250 24,855 2,244,118 Insurance 12,988 2,877,706 2,890,694 Self-insurance and claims 2,807,004 2,807,004 Repair and maintenance 636,840 428,160 1,065,000 Utilities 104,991 104,991 Depreciation 1,045,253 1,045,253 Other 31,220 586,924 618,144 Total Operating Expenses 6,241,957 6,611,151 17,408,876 1,498,268 31,760,252 Operating Income (Loss) 28,805 (36,375) (276,361) (128,025) (411,956) NONOPERATING REVENUES (EXPENSES) Interest income 27,434 200,866 86,902 64,976 380,178 Interest expense (2,870) (2,870) Gain from disposal of capital assets 104,926 104,926 Other 64,501 64,501 Total Nonoperating Revenues (Expenses) 27,434 265,367 86,902 167,032 546,735 Net income (loss) before transfers 56,239 228,992 (189,459) 39,007 134,779 TRANSFERS Transfers in 450,000 598,442 1,048,442 Change in Net Position 56,239 228,992 260,541 637,449 1,183,221 Net Position - July 1 2,560,569 2,165,667 9,749,377 10,937,107 25,412,720 Net Position - June 30 $2,616,808 $2,394,659 $10,009,918 $11,574,556 $26,595,941 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2023 CITY OF SOUTH SAN FRANCISCO 145 CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2023 Health and Self Retirement Equipment City Service Insurance Benefits Replacement Total CASH FLOWS FROM OPERATING ACTIVITIES Cash received from interfund service provided $6,270,762 $6,281,576 $17,033,900 $1,370,243 $30,956,481 Cash payments to suppliers for goods and services (3,876,723) (3,138,032) (521,082) (7,535,837) Cash payments to employees for services (2,296,124) (550,904) (17,418,568) (20,265,596) Cash payments for judgments and claims (2,006,200) (2,006,200) Net Cash Provided by Operating Activities 97,915 586,440 (384,668) 849,161 1,148,848 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in 450,000 598,442 1,048,442 Net Cash Provided by Noncapital Financing Activities 450,000 598,442 1,048,442 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on capital lease (144,637) (144,637) Interest payments (2,870) (2,870) Acquisition of capital assets, net (1,979,957) (1,979,957) Proceeds from the sale of capital assets 113,687 113,687 Net Cash Used in Capital and Related Financing Activities (2,013,777) (2,013,777) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 6,736 41,242 15,624 12,658 76,260 Changes in fair values of investments 16,325 116,021 52,581 38,985 223,912 Net Cash Provided by Investing Activities 23,061 157,263 68,205 51,643 300,172 Net Increase (Decrease) in cash and cash equivalents 120,976 743,703 133,537 (514,531) 483,685 Cash and cash equivalents, beginning 2,901,666 18,410,189 10,357,318 6,728,360 38,397,533 Cash and cash equivalents, ending $3,022,642 $19,153,892 $10,490,855 $6,213,829 $38,881,218 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $28,805 ($36,375) ($276,361) ($128,025) ($411,956) Adjustments to reconcile operating income (loss) to cash flows from operating activities: Depreciation 1,045,253 1,045,253 Other non-operating revenue (expenses) 64,501 64,501 Net change in assets and liabilities: Accounts receivable (357,701) (98,615) (456,316) Deposit Prepaid items (153,911) (153,911) Accounts payable 22,497 115,211 (136,250) (68,035) (66,577) Other payable 148,275 (32) 148,243 Accrued insurance losses 800,804 800,804 Compensated absence obligations 46,613 132,194 178,807 Net Cash Provided by (Used in) Operating Activities $97,915 $586,440 ($384,668) $849,161 $1,148,848 NONCASH TRANSACTIONS Retirement of capital assets ($8,761) ($8,761) 146 CUSTODIAL FUNDS Custodial Funds report resources, not in a trust, that are held by the City for other parties outside of the City’s reporting entity. 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. The City does not make any contributions to the fund. Oyster Point CFD – Accounts for Community Facilities District No. 2021-01 special assessment collections and debt service payments. 147 CITY OF SOUTH SAN FRANCISCO CUSTODIAL FUNDS COMBINING STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2023 SSF Employee Deferred Comp Trust Oyster Point Oversight CFD TOTAL ASSETS Cash and investments $95,626 $95,626 Interest receivable 619 $780 1,399 Restricted cash and investments 2,255,699 2,255,699 Total Assets 96,245 2,256,479 2,352,724 LIABILITIES Accounts payable Total Liabilities NET POSITION Restricted for others 96,245 96,245 Restricted for bondholders 2,256,479 2,256,479 Total Net Position $96,245 $2,256,479 $2,352,724 148 CITY OF SOUTH SAN FRANCISCO CUSTODIAL FUNDS COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2023 SSF Employee Deferred Comp Trust Oyster Point Oversight CFD TOTAL ADDITIONS Plan contributions $8,225 $8,225 Property taxes $1,013,213 1,013,213 Contribution from property owners Interest and rentals 1,246 541,243 542,489 Total Additions 9,471 1,554,456 1,563,927 DEDUCTIONS Professional services 50,777 18,754,886 18,805,663 Payments to bondholders 764,850 764,850 Total Deductions 50,777 19,519,736 19,570,513 Change in net position (41,306) (17,965,280) (18,006,586) NET POSITION Beginning of the year 137,551 20,221,759 20,359,310 End of the year $96,245 $2,256,479 $2,352,724 149 This Page Left Intentionally Blank STATISTICAL SECTION This part of the City’s Annual Comprehensive 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 of Taxable Property 2. Direct and Overlapping Property Tax Rates 3. Principal Property Tax Payers 4. 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. Redevelopment Pledged 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 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 151 STATISTICAL SECTION - (Continued) 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 Annual Comprehensive Financial Reports for the relevant year. 152 2014 2015 2016 2017 2018 Governmental activities Net investment in capital assets $230,440,390 $230,517,037 $231,142,079 $254,344,554 $254,570,044 Restricted 42,367,623 49,311,828 52,406,602 54,478,093 96,316,988 Unrestricted (12,317,511) (134,389,522) (120,119,617) (86,808,434) (129,833,581) Total governmental activities net position $260,490,502 $145,439,343 $163,429,064 $222,014,213 $221,053,451 Business-type activities Net investment in capital assets $78,045,318 $78,598,277 $83,930,073 $86,167,704 $90,097,907 Restricted Unrestricted 15,367,085 4,196,654 6,243,225 7,199,925 3,227,395 Total business-type activities net position $93,412,403 $82,794,931 $90,173,298 $93,367,629 $93,325,302 Primary government Net investment in capital assets $308,485,708 $309,115,314 $315,072,152 $340,512,258 $344,667,951 Restricted 42,367,623 49,311,828 52,406,602 54,478,093 96,316,988 Unrestricted 3,049,574 (130,192,868) (113,876,392) (79,608,509) (126,606,186) Total primary government net position $353,902,905 $228,234,274 $253,602,362 $315,381,842 $314,378,753 2019 2020 2021 2022 2023 Governmental activities Net investment in capital assets $271,349,364 $296,243,640 $316,169,957 $384,765,508 $390,845,692 Restricted 117,752,590 138,701,991 160,119,056 139,059,768 130,124,884 Unrestricted (114,028,420) (130,288,161) (144,181,245) (126,989,026) (86,635,416) Total governmental activities net position $275,073,534 $304,657,470 $332,107,768 $396,836,250 $434,335,160 Business-type activities Net investment in capital assets $100,463,280 $111,968,328 $123,628,942 $133,598,554 $132,756,230 Restricted Unrestricted 44,966 2,040,842 7,208,752 4,271,663 10,098,654 Total business-type activities net position $100,508,246 $114,009,170 $130,837,694 $137,870,217 $142,854,884 Primary government Net investment in capital assets $371,812,644 $408,211,968 $439,798,899 $518,364,062 $523,601,922 Restricted 117,752,590 138,701,991 160,119,056 139,059,768 130,124,884 Unrestricted (113,983,454) (128,247,319) (136,972,493) (122,717,363) (76,536,762) Total primary government net position $375,581,780 $418,666,640 $462,945,462 $534,706,467 $577,190,044 Source: City of South San Francisco, Department of Finance (a) The City adjusted certain beginning balances during fiscal years 2014-15 and 2017-18 due to the implementation of GASB Statements 68 and 75. Financial data shown for the proceeding year were not adjusted for the presentation. CITY OF SOUTH SAN FRANCISCO (accrual basis of accounting) Last Ten Fiscal Years (a) Net Position by Component ($200) ($100) $0 $100 $200 $300 $400 $500 $600 $700 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Millions Unrestricted Restricted Invested in Capital Assets Net of Related Debt 153 CITY OF SOUTH SAN FRANCISCO Changes in Net Position Last Ten Fiscal Years (Accrual Basis of Accounting) 2014 2015 2016 2017 Expenses Governmental Activities: General Government $7,155,035 $8,421,857 $9,044,518 $10,253,403 Fire Department 21,200,903 22,005,883 22,488,964 25,750,126 Police Department 24,376,379 23,910,436 23,158,168 25,838,242 Public Works 14,980,417 14,493,039 11,916,572 12,396,998 Park, Recreation and Maintenance Services 12,658,309 12,383,880 12,901,657 15,217,677 Library 4,310,550 4,300,885 4,442,577 5,184,282 Economic and Community Development 5,525,541 5,928,316 7,603,275 8,927,162 Interest on Long -Term Debt Total Governmental Activities Expenses 90,207,134 91,444,296 91,555,731 103,567,890 Business-Type Activities: Sewer Rental 19,301,103 23,969,579 18,273,580 22,661,768 Parking District 943,859 503,014 894,769 940,181 Storm Water 1,078,868 1,234,616 1,289,465 1,333,409 Total Business-Type Activities Expenses 21,323,830 25,707,209 20,457,814 24,935,358 Total Primary Government Expenses $111,530,964 $117,151,505 $112,013,545 $128,503,248 Program Revenues Governmental Activities: Charges for Services: General Government $5,785,598 $3,946,302 $4,194,563 $2,225,049 Fire Department 3,304,952 3,520,275 3,450,524 4,242,940 Police Department 2,805,640 2,370,736 2,076,837 2,146,909 Public Works 4,734,813 5,071,729 10,361,525 10,869,608 Park, Recreation and Maintenance Services 3,571,947 3,708,272 3,744,137 3,756,369 Library 138,827 120,850 164,271 96,987 Economic and Community Development 5,800,849 5,337,177 6,131,463 3,911,597 Operating Grants and Contributions 5,601,916 5,753,845 5,581,492 4,533,539 Capital Grants and Contributions 1,538,225 632,735 1,147,337 577,995 Total Government Activities Program Revenues 33,282,767 30,461,921 36,852,149 32,360,993 Business-Type Activities: Charges for Services: Sewer Rental 19,155,467 19,798,033 19,569,341 19,897,769 Parking District 785,586 819,051 843,199 916,687 Storm Water 409,458 407,640 412,105 418,840 Operating Grants and Contributions 7,619,601 6,242,687 5,802,788 5,763,645 Capital Grants and Contributions Total Business-Type Activities Program Revenue 27,970,112 27,267,411 26,627,433 26,996,941 Total Primary Government Program Revenues $61,252,879 $57,729,332 $63,479,582 $59,357,934 Net (Expense)/Revenue Governmental Activities ($56,924,367) ($60,982,375) ($54,703,582) ($71,206,897) Business-Type Activities 6,646,282 1,560,202 6,169,619 2,061,583 Total Primary Government Net Expense ($50,278,085) ($59,422,173) ($48,533,963) ($69,145,314) 154 2018 2019 2020 2021 2022 2023 $12,506,188 $12,139,671 $15,378,452 $19,611,586 $20,793,108 $24,977,978 30,352,387 31,986,738 34,442,874 34,492,838 28,530,628 36,852,200 30,732,288 32,994,122 36,095,698 33,376,962 35,635,007 37,885,983 18,379,278 20,425,958 17,737,243 7,567,745 7,544,142 21,880,934 17,162,377 17,962,298 19,620,848 17,159,696 19,482,582 23,539,372 5,910,406 6,241,093 6,728,102 6,274,811 6,060,920 6,639,706 10,094,626 10,557,116 9,837,938 11,728,168 12,034,671 12,923,609 512,376 2,200,344 4,686,930 6,891,224 125,137,550 132,306,996 140,353,531 132,412,150 134,767,988 171,591,006 24,397,607 25,719,049 26,213,885 26,644,459 26,246,647 30,654,615 1,202,319 896,994 1,116,840 1,338,092 1,170,305 1,272,157 1,026,948 1,188,182 1,206,694 922,057 1,309,360 1,460,610 26,626,874 27,804,225 28,537,419 28,904,608 28,726,312 33,387,382 $151,764,424 $160,111,221 $168,890,950 $161,316,758 $163,494,300 $204,978,388 $1,966,755 $7,930,983 $5,217,199 $6,968,307 $5,413,298 $9,249,087 6,327,921 6,052,804 6,073,247 5,952,872 7,857,602 9,231,756 2,230,824 2,351,491 2,092,791 1,642,726 2,878,353 2,299,209 24,727,897 27,811,701 23,355,636 24,859,635 17,734,041 9,071,365 4,489,665 4,293,474 2,872,786 1,165,630 3,058,826 3,927,532 102,124 105,466 97,603 19,037 1,054,339 60,300 13,052,441 14,214,991 9,067,781 4,275,808 28,676,546 19,532,657 5,827,149 12,091,079 8,757,554 8,021,958 10,852,746 12,919,660 2,515,868 1,629,730 4,930,640 5,498,698 3,342,651 2,031,351 61,240,644 76,481,719 62,465,237 58,404,671 80,868,402 68,322,917 22,417,156 24,078,076 24,296,811 24,705,044 22,778,206 23,891,045 1,084,472 1,180,538 1,003,222 764,514 993,986 1,062,751 656,315 540,679 412,707 410,745 412,842 418,583 5,834,455 6,452,950 7,440,041 14,815,460 5,663,695 6,237,114 5,252,622 4,276,151 29,992,398 32,252,243 33,152,781 40,695,763 35,101,351 35,885,644 $91,233,042 $108,733,962 $95,618,018 $99,100,434 $115,969,753 $104,208,561 ($63,896,906) ($55,825,277) ($77,888,294) ($74,007,479) ($53,899,586) ($103,268,089) 3,365,524 4,448,018 4,615,362 11,791,155 6,375,039 2,498,262 ($60,531,382) ($51,377,259) ($73,272,932) ($62,216,324) ($47,524,547) ($100,769,827) 155 2014 2015 2016 2017 General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property Taxes $22,890,828 $24,650,648 $26,438,620 $29,023,618 Sales Taxes 12,725,141 13,932,125 15,188,686 24,087,776 Transient Occupancy Tax 11,174,017 12,947,473 13,393,437 13,631,507 Franchise fees 3,982,092 4,090,073 Other Taxes 8,141,010 8,650,056 5,124,574 5,708,187 Motor Vehicle In-Lieu 40,074 26,995 26,708 28,933 Property taxes in lieu of vehicle license fees 5,319,154 5,551,651 5,770,060 6,133,230 Interest Earnings 1,108,177 629,036 1,354,266 622,518 Gain from sale of property Other 2,012,444 4,577,239 2,334,407 2,365,820 Extraordinary Item Transfers (1,041,120) (1,429,308) (919,547) (1,105,038) Special items 45,205,422 Total Government Activities 62,369,725 69,535,915 72,693,303 129,792,046 Business-Type Activities: Interest Earnings 153,353 126,874 289,201 27,710 Transfers 1,041,120 1,429,308 919,547 1,105,038 Total Business-Type Activities 1,194,473 1,556,182 1,208,748 1,132,748 Total Primary Government $63,564,198 $71,092,097 $73,902,051 $130,924,794 Change in Net Position Governmental Activities $5,445,358 $8,553,540 $17,989,721 $58,585,149 Business-Type Activities 7,840,755 3,116,384 7,378,367 3,194,331 Total Primary Government $13,286,113 $11,669,924 $25,368,088 $61,779,480 CITY OF SOUTH SAN FRANCISCO Changes in Net Position Last Ten Fiscal Years (continued) (Accrual Basis of Accounting) 156 2018 2019 2020 2021 2022 2023 $29,551,445 $33,446,750 $37,415,367 $41,561,039 $40,011,221 $47,680,587 28,340,393 31,843,568 31,855,027 33,039,229 38,143,689 37,722,042 13,978,533 17,091,222 13,829,025 6,710,271 12,135,638 16,357,104 4,403,493 4,469,808 4,594,577 4,498,202 4,863,076 5,240,637 5,871,096 4,995,404 4,515,376 4,529,764 6,537,423 8,059,817 34,452 32,200 53,089 49,785 77,558 67,937 6,438,199 7,150,867 7,457,005 4,888,696 11,988,715 8,760,770 1,097,916 4,808,664 6,384,253 941,856 (6,724,092) 5,104,060 840,298 1,518,059 1,807,446 5,180,288 7,799,392 9,152,218 11,602,214 14,458,939 17,335,302 (1,997,377) (2,101,222) (8,060,646) (4,984,746) (1,419,235) (2,195,337) (7,154,626) (531,591) 276,939 (1,378,533) (2,962,923) (5,173,366) 85,743,812 109,845,360 107,472,230 101,457,777 118,628,068 140,766,999 37,072 633,704 824,916 52,623 (761,751) 291,068 1,997,377 2,101,222 8,060,646 4,984,746 1,419,235 2,195,337 2,034,449 2,734,926 8,885,562 5,037,369 657,484 2,486,405 $87,778,261 $112,580,286 $116,357,792 $106,495,146 $119,285,552 $143,253,404 $21,846,906 $54,020,083 $29,583,936 $27,450,298 $64,728,482 $37,498,910 5,399,973 7,182,944 13,500,924 16,828,524 7,032,523 4,984,667 $27,246,879 $61,203,027 $43,084,860 $44,278,822 $71,761,005 $42,483,577 157 CITY OF SOUTH SAN FRANCISCO Fund Balances of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Fund Nonspendable $14,163 $1,134 $33,580 $474 $106 $372 $574 $574 $4,099 $477,122 Restricted 20,582,335 19,201,948 18,372,633 18,372,633 14,763,033 2,823,118 Committed 3,879,451 2,536,790 3,654,283 11,780,724 16,725,897 22,619,868 17,723,338 17,723,338 16,083,977 20,536,653 Assigned 743,746 1,458,029 1,578,153 5,244,279 4,334,322 11,881,363 5,720,788 5,720,788 7,482,439 8,661,539 Unassigned 15,891,899 17,285,422 17,751,169 39,278,746 19,644,232 31,239,632 43,296,762 43,296,762 38,313,108 56,060,734 Total General Fund $20,529,259 $21,281,375 $23,017,185 $56,304,223 $61,286,892 $84,943,183 $85,114,095 $85,114,095 $76,646,656 $88,559,166 (a) All Other Governmental Funds Nonspendable $39,205 Restricted $42,392,238 $43,437,361 $52,938,897 $55,195,500 $78,603,366 103,135,202 $140,143,149 $140,143,149 $243,582,187 $204,257,085 Assigned 6,188,554 367,023 29,363,924 29,363,924 24,889,824 20,229,463 Unassigned (521,604) (40,459) (88,331) (11,073) (2,971,345) 235,649 235,649 (1,437,892) (1,004,155) Total all other governmental funds $41,870,634 $49,585,456 $53,305,920 $55,107,169 $78,592,293 $100,203,062 $169,742,722 $169,742,722 $267,034,119 $223,482,393 #REF! #REF! 62,399,893 70,866,831 76,323,105 76,323,105 111,411,392 254,856,817 312,041,559 (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis. $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Thousands Total Committed Total Unassigned Total Assigned Total Restricted Total Nonspendable 158 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO Changes in Fund Balance of Governmental Funds Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2014 2015 2016 2017 Revenues Property Taxes $23,010,136 $24,650,648 $26,438,620 $35,156,848 Other Taxes 33,931,446 38,275,478 41,811,097 49,608,385 Intergovernmental revenues 10,757,440 10,453,071 12,360,354 4,019,771 Interest and Rents 3,632,693 3,531,966 4,207,453 3,100,692 Licenses and permits 4,366,271 4,795,158 6,896,897 7,823,403 Charges for services 16,864,409 13,387,712 15,386,358 14,485,367 Fines and forfeitures 1,528,319 1,221,413 791,756 899,118 Other 2,249,728 4,660,668 2,439,579 2,906,625 Total Revenues 96,340,442 100,976,114 110,332,114 118,000,209 Expenditures Current: General government 5,970,429 7,167,969 8,469,924 9,399,930 Fire Department 20,163,759 21,247,989 24,175,340 25,632,366 Police Department 23,309,568 23,611,743 25,458,986 25,998,097 Public works 16,791,894 15,923,071 14,846,346 12,143,965 Recreation and Community Services 11,552,502 11,826,407 13,234,028 14,897,157 Library 3,987,928 4,247,650 4,681,188 5,157,355 Economic and Community Development 5,972,966 5,917,508 7,907,655 8,943,111 Other 480,290 395,749 274,183 Capital outlay Debt service: Principal repayment 453,381 352,674 656,000 23,000 Interest and fiscal charges Total Expenditures 88,202,427 90,775,301 99,825,216 102,469,164 Excess (deficiency) of revenues over (under) expenditures 8,138,015 10,200,813 10,506,898 15,531,045 Other Financing Sources (Uses) Transfers in 21,870,234 17,983,227 8,143,075 14,327,130 Transfers (out) (24,149,582) (19,717,102) (13,193,699) (16,368,499) Lease revenue bonds issued Premium on bonds Sale of capital assets 1,016,276 Loss on sale of property held for resale Total other financing sources (uses) (2,279,348) (1,733,875) (5,050,624) (1,025,093) Net Change in fund balances before extraordinary and special items 5,858,667 8,466,938 5,456,274 14,505,952 Extraordinary item Special item 20,582,335 Net change in fund balances $5,858,667 $8,466,938 $5,456,274 $35,088,287 Debt service as a percentage of noncapital expenditures 0.6% 0.4% 0.7% 0.0% For The Fiscal Year Ended June 30, 160 2018 2019 2020 2021 2022 2023 $35,989,644 $40,597,617 $44,872,372 $46,449,735 $51,999,936 $56,441,357 54,597,272 60,721,378 57,214,783 51,008,432 64,411,396 70,762,243 8,433,240 13,179,593 18,317,060 17,867,273 24,822,304 19,574,277 3,524,727 7,231,303 8,864,998 3,620,391 (2,537,324) 7,857,199 14,674,809 15,381,416 15,900,500 15,589,002 14,062,474 20,467,644 31,961,419 41,055,659 27,442,005 23,191,413 45,787,046 27,477,040 423,604 926,729 814,354 535,750 700,961 757,019 6,454,460 7,994,701 3,067,691 7,893,148 2,524,116 11,321,587 156,059,175 187,088,396 176,493,763 166,155,144 201,770,909 214,658,366 10,403,449 10,166,977 12,453,262 12,112,319 15,422,722 15,449,760 26,059,072 27,576,879 28,161,459 31,817,325 32,597,540 35,641,540 26,970,854 28,533,292 37,468,430 70,954,323 39,678,917 36,493,052 23,859,399 38,459,963 40,070,330 51,501,254 87,823,372 89,991,879 15,468,370 16,530,603 17,130,302 15,795,645 20,295,842 22,598,050 5,379,836 5,628,693 5,940,870 5,903,883 6,495,279 6,475,274 9,338,793 9,085,390 8,780,903 11,227,503 12,709,167 12,775,661 256,298 333,024 723,901 3,490,091 5,610,278 2,161,116 5,520,422 141,250 2,382,000 3,464,000 1,210,000 975,000 4,635,000 3,285,000 739,146 2,307,460 5,525,760 8,280,065 120,118,071 139,778,821 152,678,603 206,084,803 236,314,299 233,292,647 35,941,104 47,309,575 23,815,160 (39,929,659) (34,543,390) (18,634,281) 26,486,651 22,230,499 38,117,966 37,970,252 36,220,467 30,464,581 (30,795,941) (24,581,721) (46,647,023) (43,202,081) (38,772,007) (33,708,360) 43,905,000 86,410,000 65,420,000 10,242,530 18,116,565 6,686,317 3,990,605 840,298 (2,718,691) 1,507,641 1,852,123 (6,439,913) (318,685) (1,510,924) 45,618,473 96,576,045 71,062,418 (7,831,569) 35,622,419 45,798,651 69,433,633 56,646,386 36,519,028 (26,465,850) (7,154,626) (531,591) 276,939 (1,378,533) (2,962,923) (5,173,366) $28,467,793 $45,267,060 $69,710,572 $55,267,853 $33,556,105 ($31,639,216) 2.2% 3.0% 1.7% 2.9% 7.0% 7.3% For The Fiscal Year Ended June 30, 161 Real Property Net Taxable value Fiscal Year Residential Property Commercial Property Industrial Property Other Total Secured Property Unsecured Property Total Assessed (a) Estimated Full Market (a) Total Direct Tax Rate (b) 2014 5,900,441,192$ 1,713,575,060$ 4,273,694,531$ 1,204,288,116$ 13,091,998,899$ 1,212,353,871$ 14,304,352,770$ 14,304,352,770$ 0.13474% 2015 6,313,393,048$ 2,402,335,027$ 4,588,967,014$ 345,957,716$ 13,650,652,805$ 1,244,971,467$ 14,895,624,272$ 14,895,624,272$ 0.13804% 2016 6,716,642,000$ 2,000,204,271$ 5,189,813,366$ 376,874,603$ 14,283,534,240$ 1,197,263,526$ 15,480,797,766$ 15,480,797,766$ 0.13634% 2017 7,087,550,257$ 2,160,377,671$ 5,414,028,340$ 412,344,220$ 15,074,300,488$ 1,381,715,511$ 16,456,015,999$ 16,456,015,999$ 0.13632% 2018 7,458,269,085$ 2,171,084,856$ 5,838,028,479$ 383,589,586$ 15,850,972,006$ 1,423,348,022$ 17,274,320,028$ 17,274,320,028$ 0.13631% 2019 7,882,766,880$ 2,511,501,574$ 6,673,522,321$ 353,621,189$ 17,421,411,964$ 1,765,066,449$ 19,186,478,413$ 19,186,478,413$ 0.13640% 2020 8,459,303,983$ 2,717,851,133$ 7,535,473,093$ 491,981,925$ 19,204,610,134$ 1,727,590,717$ 20,932,200,851$ 20,932,200,851$ 0.13638% 2021 9,020,710,463$ 2,872,601,136$ 8,744,250,213$ 507,383,957$ 21,144,945,769$ 2,056,800,753$ 23,201,746,522$ 23,201,746,522$ 0.13622% 2022 9,440,006,474$ 4,059,376,407$ 8,650,209,742$ 508,430,937$ 22,658,023,560$ 1,993,694,829$ 24,651,718,389$ 24,651,718,389$ 0.13587% 2023 10,164,770,095$ 4,381,130,308$ 10,124,533,866$ 656,275,416$ 25,326,709,685$ 2,403,730,974$ 27,730,440,659$ 27,730,440,659$ 0.13605% Source: HdL Coren & Cone, San Mateo County Assessor 2013/14-2022/23 Tax Property Values. (a) (b) CITY OF SOUTH SAN FRANCISCO The State Constitution requires property to be assessed at one hundred percent of the most recent purchase price, plus an increment of no more than two percent annually, plus any local over-rides. These values are considered to be full market values. California cities do not set their own direct tax rate. The state constitution establishes the rate at 1% and allocates a portion of that amount, by an annual calculation, to all the taxing entities within a tax rate area. ASSESSED VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Mi l l i o n s TotalSecuredProperty UnsecuredProperty 162 Fiscal Basic School Total Direct/Overlapping Year Levy Districts Tax Rates 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 (1,24) 2019 1.000 0.1548 1.1548 (1,25) 2020 1.000 0.1648 1.1648 (1,26) 2021 1.000 0.1893 1.1893 (1,27) 2022 1.000 0.1542 1.1542 (1,28) 2023 1.000 0.1408 1.1408 (1,29) Notes: Source: HDL, Coren & Cone (San Mateo County Assesor 2013/14 -2022/23 Tax Rate Table (25) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0597 percent, which includes SSFUSD & San Mateo Jr College bond. 4 has a rate of 1.1126 percent which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SM Jr College bonds. 1 has a rate of 1.0801 percent, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Jr. Coll bonds. (26) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0647, which includes SSFUSD & San Mateo Jr College bond. 4 has a rate of 1.1267 which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SM Jr College bonds. 1 has a rate of 1.1148, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Jr. Coll bonds. (27) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0563, which includes SSFUSD & San Mateo Jr College bond. 4 has a rate of 1.1543 which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SM Jr College bonds. 1 has a rate of 1.1112, which includes San Bruno Pk Elem bond, SM Union High, SM High, SM Jr College bond and San Mateo Jr. Coll bonds. (28) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0579, which includes SSFUSD & San Mateo Jr College bond. 4 has a rate of 1.1190 which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SMCCCD 2021 and SM Jr College bonds. 1 has a rate of 1.1103, which includes San Bruno Pk Elem bond, SM Union High, SM High, SMCCCD 2021 and San Mateo Jr. Coll bonds. (29) Of the 68 tax rate areas in the City, 63 have a tax rate of 1.0499, which includes SSFUSD & San Mateo Jr College bond. 4 has a rate of 1.1102 which includes Brisbane ESD Bond, Jefferson High bonds, Jefferson USHD, SMCCCD 2021 and SM Jr College bonds. 1 has a rate of 1.1026, which includes San Bruno Pk Elem bond, SM Union High bond, SM High, SMCCCD 2021 and San Mateo Jr. Coll bonds. CITY OF SOUTH SAN FRANCISCO DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (1) Like other cities, South San Francisco includes several property tax rate areas with different rates. (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. (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. 163 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Genentech Inc.* 3,156,586,644$ 1 11.38% 1,786,247,540$ 1 12.49% HCP Oyster Point III LLC 861,135,005 2 3.11% -- Slough SSF LLC 706,344,528 3 2.55% 1,057,879,509 2 7.40% ARE San Francisco LLC* 560,376,454 4 2.02% 227,558,340 4 1.59% GNS North Tower LP* 475,429,011 5 1.71% -- BMR 1000 Gateway LP* 455,894,074 6 1.64% -- Kilroy Realty 447,345,388 7 1.61% -- GNS South Tower LP* 435,506,434 8 1.57% -- Britannia Pointe Grand LP 332,388,936 9 1.20% 286,079,475 3 -- United Airlines Inc 292,552,819 10 1.05% 192,172,702 5 -- Myers Peninsula Venture LLC* -- 138,793,737 6 0.97% Gateway Center LLC -- 137,981,651 7 0.96% BMR 180 Oyster Point LLC* -- 129,633,840 8 0.91% ASN Solaire LLC -- 106,660,104 9 0.75% ARE San Francisco No 41 EXCH LLC -- 103,253,158 10 0.72% Subtotal 7,723,559,293$ 27.85% 4,166,260,056$ 29.13% Total Net Assessed Valuation: Fiscal Year 2022-23 27,730,440,659$ Fiscal Year 2013-14 14,304,352,770$ * Pending Appeals on Parcels HdL Coren & Cone, 2013/14 & 2022/23 Top Ten Property Taxpayers (Net Values). San Mateo County Assessor 2013/14 & 2022/23 Combined Tax Rolls and the SBE Non Unitary Tax Roll Source: 2022-23 2013-14 CITY OF SOUTH SAN FRANCISCO Principal Property Tax Payers Current Year and Nine Years Ago 164 Fiscal Percent of Year Allocations (5) Collections Delinquencies Delinquent taxes 2014 14,928,197$ (4) (4) 0.0% 2015 15,184,788 (4) (4) 0.0% 2016 15,994,773 (4) (4) 0.0% 2017 17,065,875 (4) (4) 0.0% 2018 17,894,855 (4) (4) 0.0% 2019 19,365,814 (4) (4) 0.0% 2020 20,651,650 (4) (4) 0.0% 2021 22,660,544 (4) (4) 0.0% 2022 23,680,782 (4) (4) 0.0% 2023 25,780,768 (4) (4) 0.0% Notes: (1) Excludes State Reimbursed Exemptions and deductions for County property tax administration. (2) County adopted full cash value method of valuation rather than assessed valuation. (3) Levies include real and personal property. (5) San Mateo County controller's Office. Adjusted estimated revenue for City of South San Francisco. Source: San Mateo County Auditor -- Controller's Office; Finance Department Revenue Reports (4) Information not applicable. All general purpose property taxes are levied by the County and allocated to other governmental entities. CITY OF SOUTH SAN FRANCISCO PROPERTY TAX LEVIES AND COLLECTIONS (1) LAST TEN FISCAL YEARS $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 $16 $17 $18 $19 $20 $21 $22 $23 $24 $25 $26 $27 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Mi l l i o n s 165 CITY OF SOUTH SAN FRANCISCO Ratio of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Loans from Lease Fiscal Successor Revenue Financing Year Agency Bonds Lease Total 2014 11,722,826$ -$ 3,316,836$ 15,039,662$ 2015 11,370,152 - 2,786,573 14,156,725 2016 10,714,152 - 2,238,998 12,953,150 2017 10,691,152 - 1,673,522 12,364,674 2018 8,309,152 - 1,135,102 9,444,254 2019 4,845,152 - 753,619 5,598,771 2020 3,635,152 43,905,000 489,781 48,029,933 2021 3,595,152 156,980,389 285,529 160,861,070 2022 2,150,152 224,792,690 144,637 227,087,479 2023 2,050,152 220,225,077 - 222,275,229 Business-Type Activities Sewer State Water Total Percentage Fiscal Revenue Resources Primary of Personal Per Year Bonds Loans Total Government Income (a) Capita (a) 2014 4,385,000$ 47,591,019$ 51,976,019$ 67,015,681$ 3.30% 1,019.27$ 2015 4,120,000 43,543,614 47,663,614 61,820,339 2.92% 957.19 2016 3,850,000 39,392,832 43,242,832 56,195,982 2.59% 858.60 2017 3,570,000 35,136,032 38,706,032 51,070,706 2.22% 761.32 2018 3,275,000 30,770,503 34,045,503 43,489,757 1.80% 648.35 2019 2,970,000 35,148,205 38,118,205 43,716,976 1.63% 644.04 2020 2,655,000 50,150,607 52,805,607 100,835,540 3.48% 1,501.98 2021 2,325,000 60,480,459 62,805,459 223,666,529 7.10% 3,468.13 2022 1,980,000 60,799,450 62,779,450 289,866,929 8.55% 4,506.43 2023 1,620,000 58,447,078 60,067,078 282,342,307 n/a n/a Note : Debt amounts exclude any premiums, discounts, or other amortization amounts. Sources: City of South San Francisco State of California, Department of Finance (population) U.S. Department of commerce, Bureau of the Census (income) (a) See Schedule of Demographic and Economic Statistics for personal income and population data. $- $50 $100 $150 $200 $250 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Mi l l i o n s Total Governmental Total Business 166 CITY OF SOUTH SAN FRANCISCO COMPUTATION OF DIRECT AND OVERLAPPING DEBT JUNE 30, 2023 2022-23 Assessed Valuation: 27,730,440,659$ Redevelopment Incremental Valuation: - Adjusted Assessed Valuation: 27,730,440,659$ Total Debt City's Share of OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/2023 % Applicable (1) Debt 6/30/23 San Mateo Community College District 708,837,622$ 9.614% 68,147,649$ Jefferson Union High School District 289,848,562 4.350 12,608,412 South San Francisco Unified School District 308,886,397 91.506 282,649,586 Brisbane School District 30,481,439 24.203 7,377,423 City of South San Francisco Community Facilities District No. 2021-1 19,685,000 100.000 19,685,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 390,468,070$ DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Mateo County General Fund Obligations 589,931,687$ 9.614% 56,716,032$ San Mateo County Board of Education Certificates of Participation 6,120,000 9.614 588,377 San Mateo County Flood Control and Sea LRR District General Fund Obligations 13,890,000 62.238 8,644,858 South San Francisco Unified School District General Fund Obligations 2,770,000 91.506 2,534,716 Jefferson Union High School District Certificates of Participation 47,490,000 4.350 2,065,815 City of South San Francisco Lease Revenue Bonds 220,225,077 100.000 220,225,077 City of South San Francisco Loans Payable 2,050,152 100.000 2,050,152 San Mateo County Mosquito and Vector Control District General Fund Obligations 3,617,831 9.614 347,818 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT: 293,172,845$ TOTAL DIRECT DEBT 222,275,229$ Total Overlapping Debt 461,365,686$ COMBINED TOTAL DEBT 683,640,915$ (2) (1) Percentage of overlapping debt applicable to the city is estimated uisng taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's asseessed value that is within the boundaries of the city divided by the destrict's total taxable asse Ratios to Adjusted Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.41% Total Direct Debt 0.80% Combined Total Debt 2.47% Source: California Municipal Statistics, Inc. and City of South San Francisco 510-658-2640 Austin Busch (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. 167 ASSESSED VALUATION: 27,730,440,659$ BONDED DEBT LIMIT (3.75% OF ASSESSED VALUE) (a) 1,039,891,525$ LESS AMOUNT OF DEBT SUBJECT TO LIMIT: - LEGAL BONDED DEBT MARGIN 1,039,891,525$ Total net debt Total Net Debt Legal applicable to the limit Fiscal Debt Applicable to Debt as a percentage Year Limit Limit Margin of debt limit 2014 536,413,229$ -$ 536,413,229$ 0.00% 2015 558,585,910 - 558,585,910 0.00% 2016 580,561,386 - 580,561,386 0.00% 2017 617,102,145 - 617,102,145 0.00% 2018 647,787,001 - 647,787,001 0.00% 2019 719,492,940 - 719,492,940 0.00% 2020 784,957,532 - 784,957,532 0.00% 2021 870,065,495 - 870,065,495 0.00% 2022 924,439,440 - 924,439,440 0.00% 2023 1,039,891,525 - 1,039,891,525 0.00% NOTE: (a) Source: HDL Coren & Cone, San Mateo County Assessor - Combined Tax Rolls CITY OF SOUTH SAN FRANCISCO COMPUTATION OF LEGAL BONDED DEBT MARGIN JUNE 30, 2023 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. 168 CITY OF SOUTH SAN FRANCISCO REVENUE BOND COVERAGE SEWER RENTAL ENTERPRISE FUND LAST TEN FISCAL YEARS Net Revenue Debt Service Requirements (4) Fiscal Gross Operating Available for Year Revenue (1)Expenses (2)Debt Service Principal Interest Total Coverage 2014 26,908,316$ 14,904,225$ 12,004,091$ 255,000$ 199,831$ 454,831$ 26.39 2015 26,147,550 18,630,672 7,516,878 265,000 190,533 455,533 16.50 2016 25,610,518 13,514,706 12,095,812 270,000 180,566 450,566 26.85 2017 25,684,966 17,357,273 8,327,693 280,000 169,976 449,976 18.51 2018 28,287,485 19,073,940 9,213,545 295,000 158,616 453,616 20.31 2019 30,393,993 20,398,157 9,995,836 305,000 146,616 451,616 22.13 2020 31,807,110 21,064,165 10,742,945 315,000 134,019 449,019 23.93 2021 33,885,393 21,401,332 12,484,061 330,000 120,593 450,593 27.71 2022 27,789,553 20,992,476 6,797,077 345,000 106,331 451,331 15.06 2023 30,343,556 22,399,721 7,943,835 360,000 90,000 450,000 17.65 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) Gross revenue includes operating revenue and non-operating revenue. (2) Direct operating expenses include operating expenses (except depreciation) and non-operating expenses (except interest expense). (3) Retirement of principal for 2005 Sewer Revenue Bonds begins in fiscal year 2008. (4) The requirement does not include loan payments on State Water Resources Board loans. See schedule of Sewer Debt service coverage for details. Source: City of South San Francisco, Department of Finance $5 $10 $15 $20 $25 $30 $35 $40 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Mi l l i o n s Revenue (1) Expenses (2) 169 CITY OF SOUTH SAN FRANCISCO SEWER DEBT SERVICE COVERAGE SEWER RENTAL ENTERPRISE FUND LAST EIGHT FISCAL YEARS Fiscal Year 2016 2017 2018 2019 2020 2021 2022 2023 Revenues Service Charges 19,515,093$ 19,750,636$ 22,188,154$ 23,556,871$ 24,150,139$ 24,526,952$ 22,567,226$ 23,180,130$ Connection and Other Fees 104,283 147,134 229,002 521,205 146,672 178,092 210,980 710,915 Interest Income 238,389 23,552 31,061 488,437 623,256 41,888 (652,348) 215,397 Developer Fees Other Cities' Participation (1)5,752,765 5,763,644 5,834,455 5,827,480 6,887,043 9,138,461 5,663,695 6,237,114 Total Revenues 25,610,530$ 25,684,966$ 28,282,672$ 30,393,993$ 31,807,110$ 33,885,393$ 27,789,553$ 30,343,556$ Operating Expenses (2)18,759,650$ 13,514,718$ 19,073,943$ 20,398,147$ 21,064,167$ 21,401,330$ 21,049,553$ 22,399,721$ Wastewater System Net Revenues 6,850,880$ 12,170,248$ 9,208,729$ 9,995,846$ 10,742,943$ 12,484,063$ 6,740,000$ 7,943,835$ Parity Debt Service (3) State Water Resources Control Board Loans 5,449,692$ 5,454,747$ 5,469,175$ 5,477,075$ 5,485,587$ 5,497,048$ 5,510,447$ 6,088,369$ CSCDA Series 2005D Revenue Bonds 178,036 167,284 155,706 143,608 130,815 117,175 102,716 85,562 Total Parity Debt 5,627,728$ 5,622,031$ 5,624,881$ 5,620,683$ 5,616,402$ 5,614,223$ 5,613,163$ 6,173,931$ Total Parity Debt Service Coverage 1.22 2.16 1.64 1.78 1.91 2.22 1.20 1.29 10,012,867 10,012,867 10,012,867 10,012,867 10,012,867 10,012,867 10,012,867 (2) Excludes depreciation, capital expenditures and debt service. (3) Includes Sewer Revenue Bonds and State Water Loan payments excluding construction interest (1) 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. (4) Reflects an adopted increase in rates for Fiscal Year 2004-05 of 25% per Resolution No. 68-2004, adopted by the City Council on July 14, 2004 and effective on and after July 1, 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. 170 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Funding Source: RDA tax increment revenues Fiscal Available Debt Service Requirements Fiscal Available Debt Service Requirements Year Revenue Principal Interest Total Coverage Year Revenue Principal Interest Total Coverage 2014 1,545,000$ 2,971,344$ 4,516,344$ 2014 220,000$ 69,780$ 28,780$ 2015 1,605,000 2,904,331 4,509,331 2015 230,000 58,750 288,750 2016 1,680,000 2,834,619 4,514,619 2016 245,000 46,875 291,875 2017 1,745,000 2,761,756 4,506,756 2017 255,000 34,375 289,375 2018 2018 275,000 21,125 296,125 2019 2019 285,000 7,125 292,125 2020 2020 2021 2021 2022 2022 2023 2023 Bond was paid off in fiscal year 2017 Funding Source: RDA tax increment revenues Fiscal Available Debt Service Requirements Year Revenue Principal Interest Total Coverage 2014 1,545,000$ 2,971,344$ 4,516,344$ 2015 1,605,000 2,904,331 4,509,331 2016 1,680,000 2,834,619 4,514,619 2017 1,745,000 2,761,756 4,506,756 2018 - - - 2019 - - - 2020 - - - 2021 - - - 2022 - - - 2023 - - - Note: Redevelopment Agencies abolished as of 1/31/2012. Numbers for 2012 include the first and second RPTTF distributions received. (A) Shows coverage of all non-housing bonds pledged to tax increment. Source: City of South San Francisco, Department of Finance RDA All Non-housing (A) 2006 RDA Revenue Bonds Funding Source: RDA Gateway and Low Moderate Income Housing tax increment revenues. Gateway bonds defeased in FY 05-06. 1999 RDA Revenue Bonds (Housing) 171 City City Estimated Personal Per Capita City San Mateo City City Income (2) Personal Unemployment County Population Year Population (1) (in thousands) Income (2) Rate (3) Population (4) % of County 2013 65,710 2,005,666$ 30,523$ 5.2% 747,373 8.79% 2014 65,749 2,033,156 30,923 4.5% 745,635 8.82% 2015 64,585 2,114,826 32,744 3.6% 765,135 8.44% 2016 65,451 2,167,750 33,120 3.2% 764,797 8.56% 2017 67,082 2,303,425 35,193 3.2% 771,410 8.70% 2018 67,078 2,421,033 36,092 2.3% 769,545 8.72% 2019 67,879 2,684,438 39,547 2.3% 766,573 8.85% 2020 67,135 2,895,980 43,136 8.9% 765,245 8.77% 2021 64,492 3,148,543 48,820 5.7% 737,888 8.74% 2022 64,323 3,391,203 52,721 2.6% 729,181 8.82% Notes: ** All data were updated to reflect the City of South San Francisco's current information available through HDL, Coren & Cone Data Sources: (1) City Population: HDL/California State Dept of Finance. (2) Personal and per capita income: HDL, Coren & Cone (3) Unemployment Data: HDL/California Employment Development Department (4) San Mateo County Population- https://www.census.gov/quickfacts/fact/table/sanmateocountycalifornia,CA/PST045219 CITY OF SOUTH SAN FRANCISCO DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 City Personal Income (in Thousands) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 City Unemployment Rate 8.20% 8.30% 8.40% 8.50% 8.60% 8.70% 8.80% 8.90%8.79%8.82% 8.44% 8.56% 8.70%8.72% 8.85% 8.77%8.74% 8.82% City Population % of County $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 City Per Capita Personal Income 172 Percentage Percentage Number of of Total City Number of of Total City Employer Employees Rank Employment Employees Rank Employment Genentech Inc. 8,637 1 13.4% 7,945 1 12.2% Verily Life Sciences LLC 2,220 2 3.5% ABBVIE 1,000 3 1.6% Costco Wholesale (4 stores) 834 4 1.3% 510 4 0.8% Life Technologies Corporation 622 5 1.0% 600 3 0.9% Amgen Inc 600 6 0.9% 406 5 0.6% Amazon.com Services 409 7 0.6% ZS Associates, Inc 390 8 0.6% Goodwill Industries of San Francisco 384 9 0.6% MRL San Francisco, LLC 317 10 0.5% Onyx Pharmaceuticals Inc 650 2 1.0% Successfactors, Inc 400 6 0.6% American Etc Inc/ Royal Laundry 284 7 0.4% The New French Bakery, Inc 281 8 0.4% Oroweat/ Entenmann's 264 9 0.4% Theravance Biopharma U.S. 258 10 0.4% Subtotal 15,413 24.0% 11,598 17.8% Total City Population 64,323 65,127 Data Sources: (1) SSF Business License Database- Business licenses expiring 12/31/23. (2) City of South San Francisco CAFR 2013-14 (3) Population: HDL/California State Dept of Finance 2022. 2013-142022-23 CITY OF SOUTH SAN FRANCISCO Principal Employers Current Year and Nine Years Ago 173 Function 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Government (1) 37.60 40.60 47.10 47.10 43.60 41.60 46.60 46.60 51.30 59.38 Fire Department (2) 82.98 83.48 92.68 92.68 92.68 91.93 91.68 91.68 93.49 93.49 Police Department 119.75 118.87 120.87 120.87 120.87 122.87 121.87 120.92 122.09 122.44 Park, Rec. & Maintenance Services 117.21 121.31 134.16 137.19 144.29 144.79 151.75 143.84 150.44 179.26 Library 37.66 37.71 38.71 39.26 40.49 41.49 41.49 38.56 38.15 44.06 Economic and Comm. Development 24.40 26.15 27.15 29.40 30.40 30.40 31.40 29.00 31.40 32.40 Public Works (2) 47.21 47.68 49.00 49.00 49.00 53.00 52.00 47.00 52.85 59.37 Water Quality Control Plant 39.63 39.06 41.74 41.50 41.50 41.50 41.50 41.50 41.50 41.50 Total 506.44 514.86 551.41 557.00 562.83 567.58 578.29 559.10 581.22 631.90 Notes: 1. City Council, City Treasurer, City Clerk, City Manager, HR, IT and Finance are under General Government. 2. Oversight of the Code Enforcement has been moved from Fire to Public Works Department. Source: City of South San Francisco's FY2014-2023 Adopted Operating budget. CITY OF SOUTH SAN FRANCISCO Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years (Adopted Operating Budget) 0.00 100.00 200.00 300.00 400.00 500.00 600.00 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General Government (1)Fire Department (2)Police Department Park, Rec. & Maintenance Services Library Economic and Comm. Development Public Works (2)Water Quality Control Plant 174 CITY OF SOUTH SAN FRANCISCO Operating Indicators by Function/Program Last Nine Fiscal Years 2015 2016 2017 2018 2019 2020 2021 2022 2023 Function/Program Public safety: Fire: Inspections conducted 1,817 2,563 3,426 2,292 2,511 2,375 3,888 3,060 2,421 Police: Police calls for service 31,532 32,477 33,313 34,811 38,299 38,541 40,503 60,333 59,580 Law violations: Part I crimes 1,874 2,126 2,103 2,276 2,007 2,070 3,481 1,955 1,892 Physical arrests (adult and juvenile)1,933 2,071 1,870 1,891 1,943 1,871 1,635 2,025 1,780 Traffic violations 3,828 4,211 3,785 3,359 3,620 4,172 2,119 1,985 1,799 Parking violations 13,378 12,006 15,291 18,339 26,228 12,269 13,276 17,667 16,995 Public works Street resurfacing (miles) (Eng Div) 0 2 8 3.3 7.0 7.9 19.57 9.60 6.55 Potholes repaired (square miles prior)/(square feet)0.11 2 0 (2) 3221 410 190 165 264 267 Asphalt used for street repairs (tons) 250 151 94 148 13 46 69 68 44.5 Culture and recreation: Recreation class participants* 26,879 23,399 23,939 25,688 23,394 17,333 (4) 5,282 8,631 10,021 Library: Total items borrowed 643,630 565,806 558,106 544,059 582,497 (3) 450,637 (3) 245,869 456,652 439,846 Items in collection 130,106 (1) 208,400 209,895 219,114 228,224 247,393 260,205 229,891 283,792 Wastewater Residential connections 16,470 16,491 16,488 12,556 12,559 12,549 12,571 12,672 12,673 Commercial connections 1,560 1,561 1,562 1,575 1,576 1,582 1,575 1,523 1,508 Other connections 128 131 140 140 140 140 140 140 140 Average daily sewage treatment (millions of gallons)8.89 7.92 8.41 8.62 8.62 7.12 6.76 7.35 7.45 Note: N/A denotes information not available. * Registration counts excludes all withdrawals from the classes for the year. (1) New items added for Grand Library and electronic books are also included. (2) Beginning 2018, pothole repairs will be measured by square feet instead of square miles. (3) Fewer items borrowed in FY2020 and FY2021 due to COVID-19 closures. (4) Summer camp and traditional sports programs included. Lower participant counts due to COVID-19 limitations and closures. 175 CITY OF SOUTH SAN FRANCISCO Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Function/Program Public safety: Fire stations 5555555555 Police stations 1111111111 Police Fleet 50 53 53 52 59 63 60 63 60 63 Public works Miles of streets 127 127 127 127 127 127 127 127 127 139.6 Street lights 4,505 4,505 4,505 4,505 4,531 4,531 4,531 4,581 4,581 4,581 Parking District lights (3) 20 20 20 16 16 16 16 16 16 16 Traffic Signals 74 74 76 76 76 76 76 80 80 80 Culture and recreation: Community services: City parks 28 28 28 28 28 28 28 28 28 30 City parks acreage 190 190 190 190 190 210 210 210 210 225 Playgrounds (4) 24 24 24 24 24 24 34 34 34 35 City trails 6666666666 Community gardens 1111111111 Community centers 4444444444 Senior centers (2) 1111111111 Skate Park 1111111111 Dog park 1111111111 Swimming pools 1111111111 Tennis courts 7777777777 Basketball Courts 12 12 12 12 12 12 12 12 12 12 Baseball/softball diamonds11111111111111111113 Soccer/football fields 5555555554 Library: City Libraries (1) 2222222222 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 1111111111 Source: ssf.net/depts/rcs; Director of Rec & Comm Services; Superintendent of parks & Maintenance (1) Community Learning Center not included on count as it is only a homework center not a library. (2) The only senior center is Magnolia Center but programming still continues at El Camino. (3) Year 2017- Lot 6 sold for Rotary Plaza development. (4) Year 2020 -Playgrounds in the Common Greens areas are now included. 176 2019 2020 2021 2022 2023 Transient Occupancy Tax Detail TOT Collected 15,535,213$ 12,591,459$ 6,215,172$ 11,268,807$ 15,188,739$ 1% Measure I Special Tax 1,556,009 1,114,911 495,099 866,831 1,168,365 Total TOT Collection 17,091,222$ 13,706,371$ 6,710,270$ 12,135,638$ 16,357,104$ 1% Measure I Special Tax Use Police 311,202$ 222,982$ 99,020$ 173,366$ 233,673$ Fire 311,202 222,982 99,020 173,366 233,673 Library 311,202 222,982 99,020 173,366 233,673 Parks 311,202 222,982 99,020 173,366 233,673 Recreation 311,202 222,982 99,020 173,366 233,673 Total 1% Measure I Special Tax 1,556,010$ 1,114,911$ 495,099$ 866,831$ 1,168,365$ * Note: The current TOT consists of three components - a 9% general excise tax (Measure FF) that generates General Fund revenues; a 1% special tax (Measure I- effective January 1, 2005) was earmarked for use to supplement funding parks, recreation, library, and public safety services (SSFMC 4.20.033) and a $2.50 tax devoted to the acquistion, renovation, maintenance and operation of the South San Francisco Conference Center. The City Council last increased the total TOT rate from 9% to 10% in 2009 with the incremental 1% increase being a general tax. City's TOT rate from 10% to 12% effective january 1, 2019. A subsequent 2% increase over the next two years would revise the TOT rate to 13% (effective January 1, 2020) and 14% (effective January 1, 2021). CITY OF SOUTH SAN FRANCISCO Collection and Use of 1% Special Transient Occupancy Tax (TOT) Approved by Voters as Measure I * Miscellaneous Information Last Five Fiscal Years 177 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, 2023 AND 2022 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, 2023 and 2022 Table of Contents Page Independent Auditor's Report ........................................................................................................................ 1 Fund Financial Statements: Comparative Balance Sheets ................................................................................................................... 3 Comparative Statements of Revenues and Expenditures ........................................................................ 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 City of South San Francisco South San Francisco, California Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the City of South San Francisco Transportation Development Act Article III Fund (TDA 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, 2023 and 2022, and related notes to the financial statements as listed in the Table of Contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the TDA Fund as of June 30, 2023 and 2022, and the respective changes in financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2023 and 2022 or the changes in its financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. 1 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the TDA Fund’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2023, on our consideration of the TDA Fund’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 solely 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 the effectiveness of the TDA Fund’s 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 TDA Fund’s internal control over financial reporting and compliance. Pleasant Hill, California December 21, 2023 2 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND COMPARATIVE BALANCE SHEETS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 2023 2022 ASSETS Due from Metropolitan Transportation Commission -$ 400,000$ Total Assets $400,000 LIABILITIES Due to the City -$ 400,000$ Total Liabilities - 400,000 FUND BALANCE - - Total Fund Balance - - Total Liabilities and Fund Balance -$ 400,000$ See accompanying notes to financial statements 3 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND COMPARATIVE STATEMENTS OF REVENUES AND EXPENDITURES FOR THE YEARS ENDED JUNE 30, 2023 AND 2022 2023 2022 REVENUES TDA Article 3.0 (Note 2) 400,000$ 400,000$ Total Revenues 400,000 400,000 EXPENDITURES Hillside Boulevard Road Diet Improvements 400,000 - East Grand Avenue - CalTrain Bicycle and Pedestrian Access - 400,000 Total Expenditures 400,000 400,000$ Net change in fund balance - - Fund balance at beginning of year - - Fund balance at end of year -$ -$ 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, 2023 and 2022 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of South San Francisco, California (City), Transportation Development Act Article III Fund (TDA Fund) includes the financial activities associated with the State of California Transportation Development Act. The State of California created a local transportation fund for each County funded by a portion of the State sales tax. The TDA Fund is distributed through the Metropolitan Transportation 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 Annual Comprehensive Financial Report 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 recognized. 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 current assets. TDA Article 3.0 revenues are recognized when qualifying project expenditures are incurred. Expenditures are generally recognized when they are incurred. C. Deferred Inflows of Resources In addition to liabilities, the balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has only one item, which arises only under a modified accrual basis of accounting, that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the balance sheet. The TDA Fund reports unavailable revenues from grants receivable, when applicable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. 5 CITY OF SOUTH SAN FRANCISCO TRANSPORTATION DEVELOPMENT ACT ARTICLE III FUND Notes to the Financial Statements For the Years Ended June 30, 2023 and 2022 NOTE 2 – TDA ARTICLE 3.0 REVENUE For the years ended June 30, 2023 and 2022 the City received allocation instructions from the Metropolitan Transportation Commission for the following projects: Instruction Number Project Name Grant Award Expended in June 30, 2023 Revenue in June 30, 2023 Expenditures to date through June 30, 2023 Revenue to date through June 30, 2023 20001106 East Grand Avenue - CalTrain Bicycle and Pedestrian Access 400,000$ 400,000$ 400,000$ 23001015 Hillside Boulevard Road Diet Improvements 400,000 400,000$ 400,000$ 400,000 400,000 800,000$ 400,000$ 400,000$ 800,000$ 800,000$ NOTE 3 – COMMITMENTS AND CONTINGENCIES The City participates 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 determined 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 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, the financial statements of the Transportation Development Act Article III Fund (the TDA Fund) of the City of South San Francisco (City), California, as of and for the year ended June 30, 2023, and the related notes to the financial statements, and have issued our report thereon dated December 21, 2023. Report on 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 reporting (internal control) as a basis for designing 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 important 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. 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. 7 Report on 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 TDA Fund’s 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 Transportation Development Act and the Allocation Instructions and Resolutions of the Metropolitan Transportation 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 reported under Government Auditing Standards. Purpose of this Report The purpose of this report 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 report 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 report 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 report, which is a matter of public record. Pleasant Hill, California December 21, 2023 8 CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes For the Year Ended June 30, 2023 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS For the Year Ended June 30, 2023 Table of Contents Page Independent Accountant’s Report on Management’s Assertion .................................................... 1 Financial Statements: Balance Sheet .................................................................................................................................. 2 Schedule of Revenues, Expenditures and Changes in Fund Balance ............................................. 3 Notes to Financial Statements ......................................................................................................... 5 Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes ................................................................. 7 This Page Left Intentionally Blank INDEPENDENT ACCOUNTANT'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 of the City of South San Francisco’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 (the Agreement) between the City of South San Francisco and the San Mateo County Transportation Authority dated March 5, 2009, that the City complied with the requirements of the Agreement during the year ended June 30, 2023. Management is responsible for that assertion. 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. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether management’s assertion that the City complied with the requirements of the Agreement is fairly stated, in all material respects. An examination involves performing procedures to obtain evidence about management’s assertion. The nature, timing and extent of procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement. In our opinion, management’s assertion that the City complied with the requirements of the Agreement for the year ended June 30, 2023 is fairly stated, in all material respects. This report is intended solely for the information and use of management, the City Council and the San Mateo County Transportation Authority and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record. Pleasant Hill, California December 21, 2023 1 CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS BALANCE SHEET JUNE 30, 2023 ASSETS: Cash and investments $5,486,805 Accounts receivable 166,956 Accrued interest receivable 25,212 TOTAL ASSETS $5,678,973 FUND BALANCE: Restricted for Measure A capital projects and maintenance $5,678,973 TOTAL FUND BALANCE $5,678,973 See accompanying notes to the financial statements. 2 CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2023 REVENUES Sales tax from the County of San Mateo $2,251,147 County grants 5,416 Interest and investment income 53,726 Total Revenues 2,310,289 TRANSFERS OUT Capital Improvements Projects: Street Rehabilitation Program FY 18-19 5,924 Grand Blvd Project - Chestnut to Arroyo 32,061 West Orange and Hillside Pedestrian Crossing Improvements 35,505 Oyster Point Peninsula Flood Improvements 31,618 Commercial and Spruce Signalized Intersection 1,476 South Linden Grade Separation 1,733 General Fund Projects: South City Shuttle 236,677 Total Transfers Out 344,994 Net Change in Fund Balance 1,965,295 Fund Balance, July 1 3,713,678 Fund Balance, June 30 $5,678,973 See accompanying notes to the financial statements. 3 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEASURE A FUNDS Notes to Financial Statements For the Year Ended June 30, 2023 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 Transportation 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 allocated to the cities of San Mateo County and to the County of San Mateo for the improvement of local transportation, including streets and roads in accordance with Measure A requirements. B. Basis of Accounting The Schedule of Measure A Funds (Transportation 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 applied to governmental units. The Governmental Accounting Standards Board is the accepted standard-setting body for establishing 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 fiscal period. Expenditures are recognized when the liability is incurred. 5 This Page Left Intentionally Blank December 21, 2023 San Mateo County Transportation Authority 120 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 for Local Transportation Purposes (the Agreement) between the City and the San Mateo County Transportation Authority entered into 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, 2023: 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 Schedule of Revenues, Expenditures and Changes in Fund Balance for the Year Ended June 30, 2023, are in compliance with the Agreement. __________________________ ________________________ City Manager Finance Director CITY COUNCIL 2023 FLOR NICOLAS, MAYOR (DIST. 3) MARK NAGALES, VICE MAYOR (DIST. 2) MARK ADDIEGO, MEMBER (DIST. 1) JAMES COLEMAN, MEMBER (DIST. 4) EDDIE FLORES, MEMBER (DIST. 5) SHARON RANALS, CITY MANAGER 7 This Page Left Intentionally Blank City of South San Francisco Measure W Funds Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in Accordance with the San Mateo County Congestion Relief Plan For the Year Ended June 30, 2023 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEASURE W FUNDS For the Year Ended June 30, 2023 Table of Contents Page Independent Accountant’s Report on Management’s Assertion ..................................................... 1 Financial Statements: Balance Sheet ................................................................................................................................... 2 Schedule of Revenues, Expenditures and Changes in Fund Balance .............................................. 3 Notes to Financial Statements .......................................................................................................... 5 Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in Accordance with the San Mateo County Congestion Relief Plan ................................................. 7 This Page Left Intentionally Blank INDEPENDENT ACCOUNTANT'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 of the City of South San Francisco’s assertion, included in accompanying Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in Accordance with the San Mateo County Congestion Relief Plan (the Agreement) between the City of South San Francisco and the San Mateo County Transportation Authority dated October 1, 2019, that the City complied with the requirements of the Agreement during the year ended June 30, 2023. Management is responsible for that assertion. 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. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether management’s assertion that the City complied with the requirements of the Agreement is fairly stated, in all material respects. An examination involves performing procedures to obtain evidence about management’s assertion. The nature, timing and extent of procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement. In our opinion, management’s assertion that the City complied with the requirements of the Agreement for the year ended June 30, 2023 is fairly stated, in all material respects. This report is intended solely for the information and use of management, the City Council and the San Mateo County Transportation Authority and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record. Pleasant Hill, California December 21, 2023 1 CITY OF SOUTH SAN FRANCISCO MEASURE W FUNDS BALANCE SHEET JUNE 30, 2023 ASSETS: Cash and investments $2,080,865 Accrued interest receivable 9,032 TOTAL ASSETS $2,089,897 FUND BALANCE: Restricted for Measure W capital projects and maintenance $2,089,897 TOTAL FUND BALANCE $2,089,897 See accompanying notes to the financial statements. 2 CITY OF SOUTH SAN FRANCISCO MEASURE W FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2023 REVENUES Sales tax from the County of San Mateo $912,453 Interest and investment income 19,243 Total Revenues 931,696 TRANSFERS OUT Capital Improvements Projects: Street Rehabilitation Program 206,476 Total Transfers Out 206,476 Net Change in Fund Balance 725,220 Fund Balance, July 1 1,364,677 Fund Balance, June 30 $2,089,897 See accompanying notes to the financial statements. 3 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEASURE W FUNDS Notes to Financial Statements For the Year Ended June 30, 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity At the General Election of November 6, 2018, the voters of City of San Mateo County approved Measure W, which is an ordinance providing for the San Mateo County Transportation Authority to impose a one-half of one percent sales transaction and use tax. The San Mateo County Congestion Relief Plan includes an annual allocation of 12.5% of the total revenue generated by the aforementioned tax for the Local Safety, Pothole and Congestion Relief Improvement Program Category, of which 10% is to be allocated to the cities of San Mateo County and to the County of San Mateo for transportation and public transit in accordance with the Congestion Relief Plan. B. Basis of Accounting The Schedule of Measure W Funds (Transportation 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 applied to governmental units. The Governmental Accounting Standards Board is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Measure W 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 fiscal period. Expenditures are recognized when the liability is incurred. 5 This Page Left Intentionally Blank December 21, 2023 San Mateo County Transportation Authority 120 San Carlos Avenue San Carlos, California 94070 Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in accordance with the San Mateo County Congestion Relief Plan The City of South San Francisco is responsible for complying with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in Accordance with the San Mateo County Congestion Relief Plan (the Agreement) between the City and the San Mateo County Transportation Authority entered into on October 1, 2019. 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 W – San Mateo County Transportation Expenditure Plan (the Measure), the City agrees that funds shall not be used to replace funds previously provided for public transportation investments, and that City will limit the use of funds provided pursuant to this Agreement to invest in major arterial and local roadway improvements in key congested areas throughout the County, focusing on improving safety, reducing congestion, and supporting all modes of travel on the County’s roadway system. With respect to compliance with the Agreement, management attests to the following for the year ended June 30, 2023: 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 Schedule of Revenues, Expenditures and Changes in Fund Balance for the Year Ended June 30, 2023, are in compliance with the Agreement. __________________________ ________________________ City Manager Finance Director CITY COUNCIL 2023 FLOR NICOLAS, MAYOR (DIST. 3) MARK NAGALES, VICE MAYOR (DIST. 2) MARK ADDIEGO, MEMBER (DIST. 1) JAMES COLEMAN, MEMBER (DIST. 4) EDDIE FLORES, MEMBER (DIST. 5) SHARON RANALS, CITY MANAGER 7 This Page Left Intentionally Blank INDEPENDENT ACCOUNTANT’S REPORT ON APPLYING AGREED UPON PROCEDURES FOR COMPLIANCE WITH THE PROPOSITION 111 2022-2023 APPROPRIATIONS LIMIT INCREMENT Honorable Mayor and Members of the City Council City of South San Francisco, California We have performed the procedures enumerated below on the Appropriations Limit Worksheet (Worksheet) of the City of South San Francisco, California, for the year ended June 30, 2023. The City’s management is responsible for the Worksheet. The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of these procedures, which were suggested by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, performed solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes. The procedures and associated findings were as follows: A. We obtained the Worksheet and determined that the 2022-2023 Appropriations Limit of $168,641,010 and annual adjustment factors were adopted by Resolution of the City Council. We also determined the population and inflation options were selected by a recorded vote of the City Council. B. We recomputed the 2022-2023 Appropriations Limit by multiplying the 2021-2022 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option. C. For the Worksheet, we agreed the Per Capita Income Factor and City Population Factor to California State Department of Finance Worksheets. The County Population Factor was not included in the City’s Worksheet. We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement. This report is intended solely for the information and use of management and the City Council and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record. Pleasant Hill, California December 27, 2023 CITY OF SOUTH SAN FRANCISCO REQUIRED COMMUNICATIONS FOR THE YEAR ENDED JUNE 30, 2023 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO REQUIRED COMMUNICATIONS For the Year Ended June 30, 2023 Table of Contents Page Required Communications ................................................................................................................................ 1 Significant Audit Matters: Qualitative Aspects of Accounting Practices ................................................................................... 1 Difficulties Encountered in Performing the Audit ........................................................................... 3 Corrected and Uncorrected Misstatements ...................................................................................... 3 Disagreements with Management .................................................................................................... 3 Management Representations ............................................................................................................ 3 Management Consultations with Other Independent Accountants ................................................. 3 Other Audit Findings or Issues .......................................................................................................... 3 Other Matters ............................................................................................................................................ 4 This Page Left Intentionally Blank 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, California, for the year ended June 30, 2023. We did not audit the financial statements of the South San Francisco Conference Center Authority, a discretely presented component unit of the City, as of and for the year ended June 30, 2023, which represents 0.61%, 0.7%, and 1.32%, of the assets, net position and revenues, respectively, of the primary government. The 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 auditors. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated October 18, 2023 and in our meeting with the City Manager on May 23, 2023. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Matters Qualitative Aspects of Accounting Practices Accounting Policies - Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City 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. The following pronouncements became effective, but did not have a material effect on the financial statements: GASB 91 – Conduit Debt Obligations GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements GASB 96 – Subscription-Based Information Technology Arrangements GASB 99 – Omnibus 2022, paragraphs 11-25 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. 1 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, 2023, the City held approximately $424.2 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, 2023. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2023. 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 1L 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 Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net pension liabilities and deferred outflows/inflows of resources are disclosed in Note 7 to the financial statements and are based on actuarial studies and accounting valuations determined by the California Public Employees Retirement System, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimates and determined that the estimates are reasonable in relation to the basic financial statements taken as a whole. Estimated Net OPEB Liability and OPEB-Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net OPEB liability and deferred outflows/inflows of resources are disclosed in Note 9 to the financial statements and are based on an actuarial study determined by a consultant, which is based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimates and determined that the estimates are reasonable in relation to the basic financial statements taken as a whole. Estimated Compensated Absences: Accrued compensated absences, which are comprised of accrued vacation and sick leave, is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year, and are disclosed in Note 1M to the financial statements. We evaluated the key factors and assumptions used to develop the accrued compensated absences and determined that it is reasonable in relation to the basic financial statements taken as a whole. \ Estimated Claims Liabilities: Management’s estimate of the claims liabilities payable is disclosed in Note 12 to the financial statements and the worker’s compensation claims payable is based on an actuarial study determined by a consultant and the general liability claims payable is based on estimates determined by the City’s third party claims administrator, which are both based on the claims 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. 2 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 27, 2023. 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. 3 Other Matters 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. Pleasant Hill, California December 27, 2023 4 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL FOR THE YEAR ENDED JUNE 30, 2023 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL For the Year Ended June 30, 2023 Table of Contents Page Memorandum on Internal Control ................................................................................................................... 1 Schedule of Other Matters ....................................................................................................................... 3 This Page Left Intentionally Blank 1 MEMORANDUM ON INTERNAL CONTROL 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, California, for the year ended June 30, 2023, and have issued our report thereon dated December 27, 2023. 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 as of and for the year ended June 30, 2023, 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 are opportunities for strengthening internal controls and operating efficiency or other informational items. Government Auditing Standards require the auditor to perform limited procedures on the City’s response to the findings identified in our audit and described in the accompanying Schedule of Significant Deficiencies and Schedule of Other Matters. The City’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. 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. Pleasant Hill, California December 27, 2023 1 This Page Left Intentionally Blank CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS 2023-01 Timely Escrow Retention Account Reconciliations Certain arrangements with construction contract vendors require that the City deposit the retentions payable into an escrow account. At the end of the project, the retention is then released to the vendor and withdrawn from the account. The balance in the escrow account should be recorded in the general ledger and agree to the balance of the retention payable. The City had five escrow accounts recorded in the general ledger when we started the audit. After we asked for the associated June 2023 bank statements and account reconciliations in October 2023, City staff determined that transactions in four of the accounts had not been recorded in the general ledger and the balances did not agree to the retentions payable. One account had been closed in December 2022 when the retention was released to the vendor, but the balance in the general ledger provided for audit was $244,715, and one account had been closed in June 2023, but the balance in the general ledger provided for audit was $434,324. In addition, two other accounts required adjustments to the cash and retentions payable in the amounts of $258 and $1,401. Although we understand that Finance staff attempted to obtain the retention account information from other departments well before the year-end closing, the final information was not provided to the Finance Department until October 2023 and the final reconciliation and adjustment was completed after the year- end audit began. We also understand that the Finance department performs these reconciliations on an annual basis and relies upon other departments to notify Finance when retentions are released and to provide the escrow account statements. When bank account activity is not reconciled to the general ledger and recorded in a timely manner, errors or unauthorized transactions could go undetected. And, when retention escrow account activity is not recorded in the general ledger, the cash and retentions payable balances could be over- or understated. The City should develop procedures to ensure that the escrow account statements are provided to the Finance Department throughout the fiscal year and when accounts are opened and closed, and the City should consider adjusting the balance in the general ledger on a more frequent basis, such as monthly or quarterly. Management’s Response: The City will work with Public Works department to establish process to ensure that Finance will be notified when retention to contractor is released. Finance will also request to receive a monthly statement from each trustee account. City agreed that the reconciliation should be done on a regular basis to avoid delay in recording the transactions in future. 3 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS 2023-02 Timely Journal Entry Posting Journal entries should be prepared and reviewed in a timely manner for the period in which the entry is to be posted, in order to keep accounts up to date with the current information. Generally, journal entries should be posted within 30-45 days of the transaction. In addition, to have a complete audit trail of the journal entry process, the dates of preparation and review should be documented for all journal entries. And, the post date of journal entries should normally be the date when the transactions occurred. We selected forty journal entries for testing of controls over the journal entry process and supporting documentation and noted 13 of the journal entries were prepared and posted to the general ledger more than a month after the activity of the transaction took place. Although once the journal entries were prepared, they were reviewed and approved in a timely manner, the posting dates of the journal entries ranged from two to four months after the transaction dates. Without the timely preparation, review and approval of journal entries, there is an increased risk of errors going undetected and inaccurate interim reporting. The City should develop procedures to ensure that all journal entries are prepared, reviewed, approved and posted to the general ledger in a timely manner (generally within 30-45 days of the date of activity). Management’s Response: The City agrees that the journal entries should be prepared and posted to General Ledger within reasonable time. Due to significant staff turnover in FY 2022-23, City is aware of posting delays and have implemented measures to have other staff to help with the review and approval. 2023-03 Unrecorded Loan Receivable Loans issued by the City to outside agencies should be recorded in the general ledger. During our review of the City Council minutes for fiscal year 2023, one action item mentioned a prior loan to a nonprofit agency and we noted that the loan was not recorded in the general ledger and was not included in the City’s loans inventory listing. City staff determined that the loan in the amount of $100,000 had been expensed when the loan was issued in fiscal year 2018. Although the loan has a forgiveness provision and the City historically offsets such loans with an allowance for collectability, which means the net impact on the general ledger is zero, the City should develop procedures to ensure that all loans are recorded in the general ledger as a receivable when issued. Management’s Response: The City agrees with this finding. The loan receivable happened in 2018 and our Economic and Community Development Department (ECD) had experienced a high staff turnover. Finance will review all the outstanding loans with ECD staff to ensure that all the loans receivable that have a forgivable clause will be reflected properly in the general ledger. 4 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS 2023-04 Develop Policy for Processing Terminated Employees The City should process terminated employees in a timely manner. This includes terminating the employee from both the payroll and general ledger systems upon issuance of their last check, or shortly thereafter. We selected twenty terminated employees for testing of proper and timely cutoff in the City’s computer system and noted seven were not terminated from the payroll system from four months to up to four years after their last check date, as follows: Termination Date Last Check Date 10/14/2022 11/21/2018 11/28/2022 7/28/2022 1/5/2023 3/18/2022 2/17/2023 8/26/2021 2/17/2023 10/7/2021 3/31/2023 7/16/2020 3/31/2023 9/9/2021 The majority of the employees were part-time seasonal employees, and the department did not determine they would be separated from employment until fiscal year 2023. And, although we understand the City’s departmental staff like the flexibility of being able to utilize the employees for special events, keeping inactive employees in the payroll and accounting system for extended periods of time could lead to unauthorized payroll payments or unintended access to the City’s accounting system. We also understand the City’s payroll system does not have an option for deactivating employees, so seasonal employees will remain active in the system until the department submits a Personnel Action Form (PAF) to the Human Resources department to terminate them. Therefore, the City should work to develop a policy to define a reasonable timeframe for which employees may be inactive in the system before they are terminated. Management’s Response: Finance has discussed the issue with the Human Resources Department during the audit. We will follow up with the Human Resources Department to develop a policy to define a reasonable timeframe for which employees may remain active in the system before they are terminated. We would discuss the process of reviewing inactive employee status by department annually to determine their employment status. 5 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking affect in the next few years. We have cited them here to keep you informed of developments: EFFECTIVE FISCAL YEARS 2021/22, 2022/23 and 2023/24: GASB 99 – Omnibus 2022 The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The practice issues addressed by this Statement are as follows: •Classification and reporting of derivative instruments within the scope of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, that do not meet the definition of either an investment derivative instrument or a hedging derivative instrument •Clarification of provisions in Statement No. 87, Leases, as amended, related to the determination of the lease term, classification of a lease as a short term lease, recognition and measurement of a lease liability and a lease asset, and identification of lease incentives •Clarification of provisions in Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, related to (a) the determination of the public-private and public-public partnership (PPP) term and (b) recognition and measurement of installment payments and the transfer of the underlying PPP asset •Clarification of provisions in Statement No. 96, Subscription-Based Information Technology Arrangements, related to the subscription-based information technology arrangement (SBITA) term, classification of a SBITA as a short term SBITA, and recognition and measurement of a subscription liability •Extension of the period during which the London Interbank Offered Rate (LIBOR) is considered an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap that hedges the interest rate risk of taxable debt •Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance Program (SNAP) •Disclosures related to nonmonetary transactions •Pledges of future revenues when resources are not received by the pledging government •Clarification of provisions in Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, related to the focus of the government-wide financial statements 6 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 99 – Omnibus 2022 (Continued) •Terminology updates related to certain provisions of Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position •Terminology used in Statement 53 to refer to resource flows statements. The Requirements of this Statement are Effective as Follows: The requirements in paragraphs 26–32 related to extension of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement 34, as amended, and terminology updates related to Statement 53 and Statement 63 are effective upon issuance. The requirements in paragraphs 11–25 related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. The requirements in paragraphs 4–10 related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter. Earlier application is encouraged and is permitted by individual topic. How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will enhance comparability in the application of accounting and financial reporting requirements and will improve the consistency of authoritative literature. Consistent authoritative literature enables governments and other stakeholders to more easily locate and apply the correct accounting and financial reporting provisions, which improves the consistency with which such provisions are applied. The comparability of financial statements also will improve as a result of this Statement. Better consistency and comparability improve the usefulness of information for users of state and local government financial statements. EFFECTIVE FISCAL YEAR 2023/24: GASB 100 – Accounting for Changes and Error Corrections The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting—understandability, reliability, relevance, timeliness, consistency, and comparability. This Statement also addresses corrections of errors in previously issued financial statements. 7 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 100 – Accounting for Changes and Error Corrections (Continued) This Statement prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections. This Statement requires that (a) changes in accounting principles and error corrections be reported retroactively by restating prior periods, (b) changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in accounting estimates be reported prospectively by recognizing the change in the current period. The requirements of this Statement for changes in accounting principles apply to the implementation of a new pronouncement in absence of specific transition provisions in the new pronouncement. This Statement also requires that the aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, be displayed by reporting unit in the financial statements. This Statement requires disclosure in notes to financial statements of descriptive information about accounting changes and error corrections, such as their nature. In addition, information about the quantitative effects on beginning balances of each accounting change and error correction should be disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to beginning balances as restated. Furthermore, this Statement addresses how information that is affected by a change in accounting principle or error correction should be presented in required supplementary information (RSI) and supplementary information (SI). For periods that are earlier than those included in the basic financial statements, information presented in RSI or SI should be restated for error corrections, if practicable, but not for changes in accounting principles. EFFECTIVE FISCAL YEAR 2024/25: GASB 101 – Compensated Absences The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. Recognition And Measurement This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences. 8 CITY OF SOUTH SAN FRANCISCO MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 101 – Compensated Absences (Continued) This Statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used. This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities. With respect to financial statements prepared using the current financial resources measurement focus, this Statement requires that expenditures be recognized for the amount that normally would be liquidated with expendable available financial resources. Notes To Financial Statements This Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. How the Changes in this Statement Will Improve Financial Reporting The unified recognition and measurement model in this Statement will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. In addition, the model can be applied consistently to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave. The model also will result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences. 9 This Page Left Intentionally Blank