Item No. 7
Town of Atherton
CITY COUNCIL STAFF REPORT – CONSENT AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL
GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT BARRON III, FINANCE DIRECTOR
DATE: JULY 17, 2024
SUBJECT: ACCEPT THE FISCAL YEAR 2022-23 AUDITED BASIC FINANCIAL
STATEMENTS
RECOMMENDATION
Accept the FY 2022-23 Audited Basic Financial Statements.
BACKGROUND
The Town’s Basic Financial statements were completed by the Independent Auditor Maze & Associates. In the Auditor’s opinion, the Town’s financial statements “present fairly in all material respects, the respective financial position of the government activities, each major fund, and the aggregate remaining fund information of the Town as of June 30, 2023.” The Finance Committee reviewed and discussed the Town Basic Financial Statements at its May 2024 meeting. Maze and Associates audit engagement partner Grace Zhang was present at the Finance committee meeting to discuss the audited financial statements. The Committee recommends that the City Council accept the reports. The General Fund is the chief operating fund of the Town. The General Fund had a positive Net Change in Fund Balance of $159,636 during the fiscal year.
2017-18
Actual
2018-19
Actual
2019-20
Actual
2020-21
Actual
2021-22
Actual
2022-23 Actual
Revenues $17,019,068 $18,689,035 $18,319,800 $19,567,418 $22,457,646 $22,488,674 Expenses $12,065,022 $13,024,224 $13,680,869 $15,358,136 $21,616,937 $17,800,001 Proceeds/
Transfers
Out
$614,258 $237,929 $173,947 $14,889,656 $3,640,557 $4,529,037 Excess
(Deficient)
Revenues
over
Expenses
$4,339,788 $5,426,882 $4,464,984 ($10,680,374) ($2,799,848) $159,636 AUDITED FY 2022-23 BASIC FINANCIAL STATEMENTS
July 17, 2024
For FY 2022-23 there was a transfer out of $4,529,037. This included $1,189,037 transfer out to the Facility Construction Fund for the remainder of construction payment applications toward the Town Center project. There was also a transfer out of $3,340,000 to the Capital Improvement Fund for future and ongoing Town Master plan projects. The Town General Fund is providing the new funding capacity for the Town Capital Improvement programs.
At the end of the current fiscal year the unassigned fund balance of the General Fund was $11,055,528, with a total fund balance of $13,917,993. The unassigned fund balance represents 62% of the total General Fund expenditures of $17,800,001.
Some highlights of the General Fund over the previous Fiscal Year include:
➢ Total Property tax revenues increased by $1,102,290.
o In the previous year property taxes increased by $1,763,766. Secured property taxes increased $520,472. Property Tax in Lieu of VLF had an increase of $609,831 from the previous year. This was due to receiving FY 2020/21 VLF shortfall amount of $572,891. The VLF amount due for FY 2022/23 was $1,527,046, but the Town received $1,101,651. This is a shortfall of $425,395. There is hope that the State FY 2024/25 budget will address this shortfall. ERAF revenue had a decrease of $149,648 for a total of $2,339,065.
➢ Sales taxes decreased by $4,872 compared to the previous year for a total of $300,138. ➢ Other taxes (Franchise tax & Document Transfer Tax) decreased by $148,439. o A majority of the decrease was in Document Transfer tax of $242,426 over the previous year for a total amount of $506,554. This is an indication of a slowdown in the sale of properties. Franchise Cable fee increased $66,287 over the previous year for a total amount of $66,287. This was due to receiving an additional payment for cable franchise fee from the prior year.
➢ The Business License fee increased by $15,960 for a total of $269,739. ➢ Fines and Forfeitures increased by $121,153.
o Most of the increase is due to C&D time limit forfeiture of $874,200 realized in the year. The amount in the previous year was $655,900. Heritage Tree Damage Fee decreased $100,860 over previous year for an amount of $136,260. ➢ Service Charges decreased by $187,508.
o A majority of the decrease is attributed to building permit fees, which were $173,585 less than the previous year. Planning fees were $32,063 more than the previous year.
There is a continued decrease in building activity, potentially due to interest rate increases. Encroachment permits saw a decrease of $168,929. Administrative code enforcement citations decreased $102,800 for a total of $10,300. ➢ The Town saw a decrease in miscellaneous revenue of $1,709,959 over the previous year. This was due to the Town receiving America Rescue Plan funds of $1,707,322 in the prior year. ➢ Park revenue had an increase of $11,931 over the previous year to an amount of $176,323 as park rental activity had a slight increase.
➢ The General Fund Revenue increased $31,028 from the prior year and there was a $3,816,936 decrease in General Fund operating expenditures.
o The decrease in expenditure was due to a decrease in unfunded CalPERS liability additional discretionary payment of $5 million made toward public safety. In the prior AUDITED FY 2022-23 BASIC FINANCIAL STATEMENTS
July 17, 2024
year the town made this additional payment to CalPERS. There were slight increases in equipment purchases, liability, health insurance, increase in operational expenses within General government departments, Planning, and Public Works departments. o We are in the third-year payment of lease financing of Town Center as we paid $861,871. It is a 10-year financing with a 5-year call option. o There was an MOU salary increase for the Atherton Police Officers Association and Town employees. In Fiscal Year 2022-23 the CPI increase for Town employees was 4%. The Atherton Police Officer Association and remainder of Town employees’ salary increases began July 1, 2023.
o The CalPERS employer contribution rate had a slight decrease, as total expense was $7,627 less than the previous year. CalPERS continues to collect the unfunded liability as a dollar amount. The Town payment of the unfunded liability portion for the fiscal year decreased $132,576 to $1,268,243. The total CalPERS expense for the Town decreased $140,203.
GASB 68 and 71 were implemented for Accounting and Financial Reporting for Pensions. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. As of FY 2022-23 the Town of Atherton reports a net pension liability of $17,868,828, an increase of $5,629,295 and is as follows:
➢ Miscellaneous Employee Plan: $6,365,417
➢ Safety Employee Plan: $11,503,411
The Town reported a deferred outflow of resources of $10,478,291 and deferred inflow of $4,620,022 and a recognized pension expense reduction of $182,548. As a result of the implementation of the GASB statements, the Town made an adjustment of $12,193,107 to the Town Total Net Position.
GASB 68 & 71 Net Pension Liability Implementation 06/30/23 Miscellaneous Employees NPL $6,365,417
Safety Employees NPL $11,503,411
Deferred Outflow of Resources ($10,478,291)
Deferred Inflow of Resources $4,620,022
Adjustment to Beginning Governmental net
position
$12,010,559
In Fiscal Year 2017-18, GASB 74 and 75 were implemented for the Accounting and Financial Reporting for Postemployment Benefits Other than pensions. This establishes accounting and financial reporting requirements for governments whose employees are provided with OPEB benefits. It also includes requirements similar to pension reporting to address financial reporting for assets accumulated for the purpose of providing OPEB benefits.
As of FY 2022-23 the Town reported an ending net OPEB liability of $1,225,895. This reflects a net OPEB reduction adjustment of $1,398,519. With the implementation of GASB 75, there is an AUDITED FY 2022-23 BASIC FINANCIAL STATEMENTS
July 17, 2024
adjustment to the beginning net position of Governmental Activities in the amount of $1,225,895.
As of FY 2022-23, the Town of Atherton reports a net OPEB asset of $426,932.
The Town reported OPEB deferred inflows of resources of $2,505,557 and outflow of resources $852,730 and recognized OPEB expense adjustment of $1,398,519.
GASB 74 & 75 Net OPEB Liability Implementation 06/30/23 Net OPEB Liability (Asset) ($426,932)
Deferred Outflow of Resources ($852,730)
Deferred Inflow of Resources $2,505,557
Adjustment to Beginning Governmental net
position
$1,225,895
The Town had a positive net change in Net Position for the FY 2022-23 in the amount of $7,104,276, for an ending Net Position of $95,458,639. The previous FY had an ending net position of $88,354,363.
With implementation of GASB statements 68 and 71 fiscal year 14/15, which required the recognition of pension liabilities, deferred outflows, and deferred inflows of resources for pensions, resulted in the amount of $12,193,107. With the recognized FY 2022-23 pension expense reduction of $182,548, reflects a total adjustment of $12,010,559 to the Total Net Position. With the addition of the OPEB pension liability, deferred outflows, and deferred inflows of resources for OPEB, resulted in a total adjustment amount of $1,225,895. As mentioned above, the total FY Town Net Position is $95,458,639. Without the recognition of pension and OPEB liabilities the Town would have a total net position of $108,695,093 for FY 2022-23. Each fiscal year the Town will report the new net pension liability based on contributions and investment earnings on the plans.
The Town’s General Fund operating budget presents a plan for accomplishing the goals and objectives of the City Council within existing resources and core strategy of financial stability in mind. Paying down long-term liabilities and providing funding for capital projects will continue to be a priority as we consider the use of future unallocated fund balances. There is a renewed focus of capital infrastructure spending on Town Master Plans as we still have many long-term infrastructure needs in the Town. The General Fund continues to provide new funding capacity in the next several years for project priorities within the CIP Master Plans. Priority projects are derived from the Bicycle Pedestrian Master Plan, Drainage Master Plan, Green Infrastructure Plan, and Road Improvement Plan. The Town continues to implement current City Council priorities focused upon reducing long-term liabilities, addressing capital project needs, and ensuring that operational needs are met.
POLICY FOCUS
Each year the City Council accepts its Audited Financial Statements as part of the Town’s annual operating practice. The Audited Financial Statements represent the financial picture of the Town.
It is an examination of the Town’s financial statements and disclosures by an independent auditor and an assurance that the Town conducts its finances in accordance with generally accepted AUDITED FY 2022-23 BASIC FINANCIAL STATEMENTS
July 17, 2024
accounting principles. The result is a report from the auditor attesting to the fairness of the presentation of the financial statements and disclosures. The audit is not an opinion of the Town’s fiscal health and outlook.
The Management Discussion & Analysis (MD&A) is an important section of the Audit Report providing a picture of the Town’s finances from management’s perspective. The MD&A is factbased and provides readers with the management’s view of what is critical about the Town’s financial prospectus. The MD&A complements the Audited Financial Statements but is broader in scope. The MD&A can present an opinion of the Town’s fiscal health and outlook.
GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal A – Maintain Fiscal Transparency
• Goal F – Be Forward-Thinking, Well-Managed and Well-Planned
PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders – to include, but be not limited to, media outlets, school districts, Menlo Park Fire District, service provides (water, power, and sewer), and regional elected officials.
COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item _X___ has or ___ has not been before a Town Committee or Commission. _X__Audit/Finance Committee (meets every other month)
____ Bicycle/Pedestrian Committee (meets as needed)
____ Civic Center Advisory Committee (meets as needed)
____ Environmental Programs Committee (meets every other month) ____ Park and Recreation Committee (meets each month)
____ Planning Commission (meets each month)
____ Rail Committee (meets every other month)
____ Transportation Committee (meets every other month)
ATTACHMENTS
1. FY 2022-2023 Basic Financial Statements
2. FY 2022-2023 Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes & Transportation Development Act and Measure W Funds for Local Transportation Purposes in Accordance with San Mateo County Congestion Relief Plan