Atherton City Council
May 21, 2025

The Town does not currently have any constraints on making its payments and is far better positioned than most agencies that are reliant on sales tax and transient occupancy tax revenues. Pension liabilities continue to be a focus as the Finance Committee is currently reviewing whether the Town should contribute an Additional Discretionary Payment (ADP) towards the Town’s Public Safety UAL. Optional ADP payments serve to reduce the Town’s UAL and future required contributions. This can result in significant long-term savings. There will be an anticipated recommendation from the Finance Committee on whether to contribute an additional ADP amount to CalPERS during the 2025/26 budget cycle.

Requests for Information
This financial report is designed to provide a general overview of the Town of Atherton’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, 91 Ashfield Road, Atherton, CA 94027 or www.ci.atherton.ca.us.
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TOWN OF ATHERTON

STATEMENT OF NET POSITION AND

STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize all of the Town’s financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all of the Town’s assets and liabilities, as well as all its revenues and expenses. This is known as the full accrual basis—the effect of all the Town’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between Town funds have been eliminated.

The Statement of Net Position reports the difference between the Town’s total assets and the Town’s total liabilities, including all the Town’s capital assets. The Statement of Net Position presents similar information to the old balance sheet format, but presents it in a way that focuses the reader on the composition of the Town’s net position, by subtracting total liabilities and deferred inflow of resources from total assets and deferred outflow of resources.

The Statement of Net Position summarizes the financial position of all of the Town’s Governmental Activities in a single column, and the financial position of all of the Town’s Business-Type Activities in a single column. These columns are followed by a Total column that presents the financial position of the entire Town.

The Town’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, and Capital Projects Funds.

The Statement of Activities reports increases and decreases in the Town’s net position. It is also prepared on the full accrual basis, which means it includes all the Town’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 Town’s expenses, listed by program. 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 governmental program. The Town’s general revenues are then listed in the Governmental Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position.

These financial statements, along with the fund financial statements and footnotes, are called Basic Financial Statements.
19

TOWN OF ATHERTON

STATEMENT OF NET POSITION
JUNE 30, 2024
Governmental
Activities
ASSETS
Cash and investments (Note 3) $40,148,464
Receivables:

Taxes 769,819
Grants 75,000
Interest 176,739
Other 23,379
Prepaid expenses 77,890
Net OPEB Asset, due in more than one year (Note 8) 510,276 Capital assets (Note 5):

Non-depreciable 4,487,549
Depreciable, net 80,408,777
Total Capital Assets 84,896,326
Total Assets 126,677,893

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 7) 9,211,764
Related to OPEB (Note 8) 1,013,143
Total Deferred Outflows of Resources 10,224,907

LIABILITIES
Accounts payable 2,349,249
Accrued liabilities 606,705
Deposits payable 3,827,583
Deferred revenue
Unearned revenue 9,900
Claims payable (Note 9)
Due in less than one year 51,019
Compensated absences (Note 1G)
Due in less than one year 585,323
Due in more than one year 488,676
Other Long term liabilities (Note 10)
Due in less than one year 1,073,830
Due in more than one year 4,559,134
Net pension liability, due in more than one year (Note 7) 19,018,949 Total Liabilities 32,570,368

DEFERRED INFLOWS OF RESOURCES
Related to pensions (Note 7) 3,389,109
Related to OPEB (Note 8) 1,853,423
Total Deferred Inflows of Resources 5,242,532
NET POSITION (Note 6):

Net investment in capital assets 80,079,093
Restricted for:

Streets and drainage maintenance and police services 1,261,839 Library operations 2,717,591
Public facilities constructions 591,855
Special revenue projects 3,035,476
Capital projects 8,659,256
Unrestricted 2,744,790
Total Net Position $99,089,900
See accompanying notes to financial statements
20

TOWN OF ATHERTON

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2024
Net (Expenses)
Revenue and
Changes in
Net Position
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities Primary Government:

General government $3,730,374 $62,287 $72,826 ($3,595,261) Public works 7,316,808 1,671,372 1,288,774 $330,331 (4,026,331) Police 9,558,939 168,479 261,027 (9,129,433)
Building 1,241,972 1,669,464 427,492
Planning 1,666,943 346,190 (1,320,753)
Total Governmental Activities $23,515,036 $3,917,792 $1,622,627 $330,331 (17,644,286) General revenues:

Taxes:

Property taxes 17,237,625
Sales taxes 434,106
Other taxes 1,929,626
Total Taxes 19,601,357
Investment earnings 1,400,485
Miscellaneous 273,705
Total General Revenues 21,275,547
Change in Net Position 3,631,261
Net Position-Beginning 95,458,639
Net Position-Ending $99,089,900
See accompanying notes to financial statements
Program Revenues
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MAJOR GOVERNMENTAL FUNDS
The funds described below were determined to be Major Funds by the Town in fiscal 2024. Individual non-major funds may be found in the Supplemental Section.

GENERAL FUND
The General Fund accounts for all the general revenues and financial resources of the Town not specifically levied or collected for the other Town funds, as well as the related expenditures.

SPECIAL TAX SPECIAL REVENUE FUND
Accounts for parcel tax assessments received from property owners to be used for maintenance of streets drainage and police services. The tax assessment is no longer collected. Fiscal year 2017-18 was the last year of collection. Residual funds remain.

LIBRARY SPECIAL REVENUE FUND
Accounts for the property tax funds dedicated to the Town’s library operations.

FACILITIES CONSTRUCTION CAPITAL PROJECTS FUND
Accounts for the funds dedicated to facilities construction.

CAPITAL IMPROVEMENT CAPITAL PROJECTS FUND
Accounts for capital improvement construction costs and financing sources. 23

TOWN OF ATHERTON

GOVERNMENTAL FUNDS

BALANCE SHEET
JUNE 30, 2024
Facilities Capital
Special Library Construction Improvement
Tax Special Special Capital Capital
General Fund Revenue Fund Revenue Fund Projects Fund Projects Fund ASSETS
Cash and investments (Note 3) $17,222,138 $494,064 $2,413,021 $591,855 $8,731,783 Receivables:

Taxes 418,385 336,902
Grants 75,000
Interest 176,739
Other 23,379
Prepaids 77,890
Total Assets $17,993,531 $494,064 $2,749,923 $591,855 $8,731,783

LIABILITIES
Accounts payable $819,809 $17,656 $32,332 $1,260,200
Accrued liabilities 606,705
Unearned revenue 9,900
Deposits payable 3,827,583
Total Liabilities 5,263,997 17,656 32,332 1,260,200

FUND BALANCES
Fund balance (Note 6):

Nonspendable 77,890
Restricted 476,408 2,717,591
Committed 2,965,071
Assigned 159,407 $591,855 7,471,583
Unassigned 9,527,166
Total Fund Balances 12,729,534 476,408 2,717,591 591,855 7,471,583 Total Liabilities and Fund Balances $17,993,531 $494,064 $2,749,923 $591,855 $8,731,783 See accompanying notes to financial statements
Major Funds
24

Other Total
Governmental Governmental
Funds Funds
$5,117,171 $34,570,032
14,532 769,819
75,000
176,739
23,379
77,890
$5,131,703 $35,692,859
$123,123 $2,253,120
606,705
9,900
3,827,583
123,123 6,697,308
77,890
4,975,290 8,169,289
2,965,071
33,290 8,256,135
9,527,166
5,008,580 28,995,551
$5,131,703 $35,692,859
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TOWN OF ATHERTON
Reconciliation of the

GOVERNMENTAL FUNDS -- BALANCE SHEET
with the

STATEMENT OF NET POSITION
JUNE 30, 2024
Total fund balances reported on the governmental funds balance sheet $28,995,551 Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds above because of the following:

CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. 84,429,358

ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are not governmental funds. However they are used by management to charge the costs of certain activities, such as insurance and central services and maintenance to individual governmental funds. The net current assets of the Internal Service Funds are therefore included in the Governmental Activities in the following line items in the Statement of Net Position.

Cash and investments 5,578,432
Capital assets, net 466,968
Accounts payable (96,129)
Compensated absences (1,073,999)
Claims payable (51,019)

DEFERRED INFLOWS AND OUTFLOWS OF RESOURCES
The balances below are not due and payable in the current period and therefore not reported in the funds:

Deferred outflows related to pensions 9,211,764
Deferred inflows related to pensions (3,389,109)
Deferred outflows related to OPEB 1,013,143
Deferred inflows related to OPEB (1,853,423)

LONG-TERM ASSETS (LIABILITIES)
The Assets( liabilities) below are not counted in the current period and therefore is not reported in the Funds:

Other long term liabilities (5,632,964)
Net OPEB asset (liabilities) 510,276
Net pension liability (19,018,949)
NET POSITION OF GOVERNMENTAL ACTIVITIES $99,089,900
See accompanying notes to financial statements
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TOWN OF ATHERTON

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2024
Special Facilities Capital
Tax Special Library Construction Improvement
Revenue Special Capital Capital
General Fund Fund Revenue Fund Projects Fund Projects Fund

REVENUES
Property taxes $16,509,528 $526,086
Special assessments
Sales taxes 434,106
Other taxes 1,650,442
Measure A grants
From other governmental agencies 125,027 $503,541
Permit and licenses 279,184 3,701
Fines and forfeitures 1,153,947
Service charges 2,755,147
Use of money and property 1,178,448 $8,421 4,275 $10,087 148,818 Miscellaneous 382,851 46,000
Total Revenues 24,468,680 8,421 530,361 56,087 656,060

EXPENDITURES
Current:

General government 3,280,597
Planning 1,666,943
Building 1,266,651
Police 9,412,928
Public works 2,499,546 78,695
Non-departmental 298,912
Capital outlay 779,803 3,437 3,389,679
Debt service:

Principal 743,566
Interest 117,105
Total Expenditures 19,767,139 82,132 298,912 3,389,679

EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 4,701,541 (73,711) 231,449 56,087 (2,733,619) Other Financing Sources (uses):

Proceeds from leases
Transfers in (Note 4) 250,000 5,890,000
Transfers (out) (Note 4) (5,890,000) (250,000)
Total Other Financing Sources (uses) (5,890,000) 250,000 5,640,000 Net change in fund balances (1,188,459) (73,711) 231,449 306,087 2,906,381 BEGINNING FUND BALANCES 13,917,993 550,119 2,486,142 285,768 4,565,202 ENDING FUND BALANCES $12,729,534 $476,408 $2,717,591 $591,855 $7,471,583 See accompanying notes to financial statements
Major Funds
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Other Total
Governmental Governmental
Funds Funds
$202,011 $17,237,625
434,106
1,650,442
497,086 497,086
545,304 1,173,872
282,885
1,153,947
2,755,147
87,212 1,437,261
428,851
1,331,613 27,051,222
3,280,597
1,666,943
1,266,651
9,412,928
28,803 2,607,044
298,912
353,389 4,526,308
743,566
117,105
382,192 23,920,054
949,421 3,131,168
6,140,000
(6,140,000)
949,421 3,131,168
4,059,159 25,864,383
$5,008,580 $28,995,551
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TOWN OF ATHERTON
Reconciliation of the

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2024
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets, current liabilities and current deferred outflows/inflows of resources on the modified accrual basis, with the Change in Net Position of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis.

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $3,131,168 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.

The capitalized expenditures are therefore added back to fund balance 2,525,694 Depreciation expense is deducted from the fund balance (3,039,105)

ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change):

Principal payments 1,057,178
Net OPEB liabilities and OPEB-related deferred outflows/inflows of resources 895,891 Net pension liabilities and pension-related deferred outflows/inflows of resources (1,185,735)

ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities such as equipment acquisition, maintenance, and insurance to individual funds.

The portion of the net revenue (expense) of these Internal Service Funds arising out of their transactions with governmental funds is reported with governmental activities, because they service those activities.

Change in Net Position - All Internal Service Funds 246,170 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $3,631,261 See accompanying notes to financial statements
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TOWN OF ATHERTON

GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2024
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Property taxes $16,761,296 $16,761,296 $16,509,528 ($251,768) Sales taxes 321,100 321,100 434,106 113,006
Other taxes 1,762,000 1,762,000 1,650,442 (111,558)
Permits and licenses 283,600 283,600 279,184 (4,416)
Fines and forfeitures 1,086,100 1,086,100 1,153,947 67,847 From other governmental agencies 47,300 47,300 125,027 77,727 Service charges 2,992,340 3,109,540 2,755,147 (354,393) Use of money and property 340,839 341,439 1,178,448 837,009 Other 113,000 113,000 382,851 269,851
Total Revenues 23,707,575 23,825,375 24,468,680 643,305 EXPENDITURES:

Current:

General government
City council 64,015 64,015 46,958 17,057
Administration 1,323,578 1,411,078 1,331,887 79,191
City attorney 310,000 310,000 300,358 9,642
Finance 864,052 864,052 834,289 29,763
Non-departmental 817,499 864,499 765,905 98,594
General government total 3,379,144 3,513,644 3,279,397 234,247 Planning 1,647,179 1,766,546 1,666,943 99,603
Building 1,359,830 1,602,830 1,266,651 336,179
Public works 3,315,679 3,529,584 2,499,546 1,030,038
Police 8,986,916 9,290,044 9,412,928 (122,884)
Capital outlay 711,394 943,931 779,803 164,128
Debt Service 861,871 861,871 861,871
Total Expenditures 20,262,013 21,508,450 19,767,139 1,741,311

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,445,562 2,316,925 4,701,541 2,384,616

OTHER FINANCING SOURCES USES
Proceeds from leases
Transfers (out) (Note 4) (5,890,000) (5,890,000)
NET CHANGE IN FUND BALANCE $3,445,562 ($3,573,075) (1,188,459) $2,384,616 BEGINNING FUND BALANCES 13,917,993
ENDING FUND BALANCES $12,729,534
See accompanying notes to financial statements
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TOWN OF ATHERTON

SPECIAL TAX SPECIAL REVENUE FUND

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2024
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Special assessments
Use of money and property $8,421 $8,421
Other revenue
Total Revenues 8,421 8,421
EXPENDITURES:

Current:

General government
Public works $355,000 $410,338 78,695 331,643
Capital outlay 230,000 249,900 3,437 246,463
Total Expenditures 585,000 660,238 82,132 578,106

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (585,000) (660,238) (73,711) 586,527
Net change in fund balance ($585,000) ($660,238) (73,711) $586,527 Fund Balance, beginning of year 550,119
Fund Balance, end of year $476,408
See accompanying notes to financial statements
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TOWN OF ATHERTON

LIBRARY SPECIAL REVENUE FUND

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2024
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Property taxes $637,102 $637,102 $526,086 ($111,016)
Use of money and property 16,000 16,000 4,275 (11,725)
Total Revenues 653,102 653,102 530,361 (122,741)
EXPENDITURES:

Current:

Library Maintenance 643,250 647,104 298,912 348,192
Total Expenditures 643,250 647,104 298,912 348,192

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 9,852 5,998 231,449 225,451

OTHER FINANCING SOURCES (USES)
Transfers in (Note 4)
Transfers (out) (Note 4)
Total Other Financing Sources (Uses)
NET CHANGES IN FUND BALANCE $9,852 $5,998 231,449 $225,451 BEGINNING FUND BALANCE 2,486,142
ENDING FUND BALANCE $2,717,591
See accompanying notes to financial statements
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PROPRIETARY FUNDS

INTERNAL SERVICE FUNDS
Internal Service Funds account for special activities and services performed by a designated Town department on a cost reimbursement basis.

The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities, the net revenue or expenses of the internal service fund is eliminated by netting them against the operations of the other Town departments which generated them.

The remaining balance sheet items are consolidated with these same funds in the Statement of Net Position. 35

TOWN OF ATHERTON

PROPRIETARY FUND

STATEMENT OF NET POSITION
JUNE 30, 2024
Governmental
Activities -
Internal Service
Funds
ASSETS
Current assets
Cash and investments (Note 3) $5,578,432
Total current assets 5,578,432
Noncurrent Assets:

Capital assets (Note 5):

Depreciable 2,121,507
Less accumulated depreciation (1,654,539)
Total capital assets 466,968
Total noncurrent assets 466,968
Total Assets 6,045,400

LIABILITIES
Current liabilities:

Accounts payable 96,129
Compensated absences (Note 1G) 585,323
Claims payable (Note 9) 51,019
Total current liabilities 732,471
Non-current liabilities:

Compensated absences (Note 1G) 488,676
Total noncurrent liabilities 488,676
Total Liabilities 1,221,147
NET POSITION (Note 6):

Net investment in capital assets 466,968
Unrestricted 4,357,285
Total Net Position $4,824,253
See accompanying notes to financial statements
36

TOWN OF ATHERTON

PROPRIETARY FUND

STATEMENT OF REVENUES, EXPENSES

AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2024
Governmental
ActivitiesInternal Service
Funds

OPERATING REVENUES
Charges for services $1,552,038
Total Operating Revenues 1,552,038

OPERATING EXPENSES
Insurance 704,036
OPEB expense 76,719
Employee benefits earned 337,577
Depreciation 151,150
Supplies and maintenance 131,461
Total Operating Expenses 1,400,943
Operating Income (Loss) 151,095

NONOPERATING REVENUES (EXPENSES)
Interest income 95,075
Total Nonoperating Revenues 95,075
Change in net position 246,170
BEGINNING NET POSITION 4,578,083
ENDING NET POSITION $4,824,253
See accompanying notes to financial statements
37

TOWN OF ATHERTON

PROPRIETARY FUND

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2024
Governmental
ActivitiesInternal Service
Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Interdepartmental charges $1,552,038
Payments to employees for benefits (436,670)
Payments to suppliers (758,365)
Cash Flows from Operating Activities 357,003

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition of capital assets, net (260,441)
Cash Flow from Capital and Related Financing Activities (260,441)

CASH FLOWS FORM INVESTING ACTIVITIES
Interest received 95,075
Cash Flow from Investing Activities 95,075
Net Cash Flows 191,637
Cash and investments at beginning of period 5,386,795
Cash and investment at end of period $5,578,432
Reconciliation of Operating Income to Cash Flows
from Operating Activities
Operating income $151,095
Adjustments to reconcile operating income to cash flows from operating activities:

Depreciation 151,150
Changes in assets and liabilities:

Accounts payable 88,703
Compensated absences (22,374)
Cash Flows from Operating Activities $357,003
See accompanying notes to financial statements
38

FIDUCIARY FUNDS

FIDUCIARY FUNDS
Town has only one type of Fiduciary Funds: Custodial Funds The Custodial Funds are used to account for monies held by the Town in a custodial capacity are as follows:

H-P PARK IMPROVEMENT FUND donated for Holbrook-Palmer Park Foundation TREE COMMITTEE Fund maintained for the Atherton Tree Committee 39

TOWN OF ATHERTON

FIDUCIARY FUNDS

STATEMENT OF NET POSITION
JUNE 30, 2024
Custodial Funds
H-P Park Tree
Improvement Fund Committee Total
ASSETS
Cash and investments (Note 3) $6,752 $27,229 $33,981
Total Assets 6,752 27,229 33,981

NET POSITION
Restricted for organizations 6,752 27,229 33,981
Total Net Position $6,752 $27,229 $33,981
See accompanying notes to financial statements
40

TOWN OF ATHERTON

FIDUCIARY FUND

STATEMENT OF CHANGES IN FIDUCIARY

NET POSITION
FOR THE YEAR ENDED JUNE 30, 2024
Custodial Funds
H-P Park Tree
Improvement Fund Committee Total

ADDITIONS
Interest income $115 $464 $579
Total additions 115 464 579

DEDUCTIONS
Distributions
Total deductions
Change in net position 115 464 579
BEGINNING NET POSITION 6,637 26,765 33,402
ENDING NET POSITION $6,752 $27,229 $33,981
See accompanying notes to financial statements
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TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Town of Atherton (the Town) was incorporated as a general law City in 1923 and is situated between the cities of Menlo Park and Redwood City on the Peninsula of the San Francisco Bay Area. The Town operates under the Mayor-Council-Manager form of government. There are five Council Members who serve overlapping terms of four years, and the Council, in turn, elects one of the Council Members to serve as Mayor for one year. The Town provides the following services: public safety (police), public works and streets, park, building and planning, and general administration services.

The financial statements and accounting policies of the Town conform with generally accepted accounting principles applicable to governments. The Government Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.

Significant accounting policies are summarized below:

A. Reporting Entity
The accompanying basic financial statements present the financial activity of the Town of Atherton, which is the primary government presented, along with the financial activities of its blended component unit Atherton Channel District, which is financially accountable, controlled by and dependent on the Town. Although it is separate legal entity, the blended component unit is in substance part of the Town’s operations and is therefore reported as an integral part of the Town’s financial statements.

The Atherton Channel District was established to assist in the maintenance and rehabilitation of the areas within the Town determined to be in the flood plain of the local stream. The District has all accounting and administrative functions performed by Town staff and the District receives property taxes to finance operations. The financial activities of the District have been included in the Atherton Channel District Capital Projects Fund in the accompanying basic financial statements.

B. Basis of Presentation
The Town’s Basic Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A.

These Standards require that the financial statements described below be presented.

Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government (the Town). These statements include the financial activities of the overall Town government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities, except where interfund services have been received or provided. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. 43

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basis of Presentation (Continued)
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town’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.

Fund Financial Statements: The fund financial statements provide information about the Town'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 investment earnings, result from nonexchange transactions or ancillary activities.

C. Major Funds
Major funds are defined as funds that have either assets and deferred outflows of resources, liabilities and deferred inflows of resources, 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 Town may also select other funds it believes should be presented as major funds.

The Town reported the following major governmental funds in the accompanying financial statements:

General Fund – Accounts for all the general revenues and financial resources of the Town not specifically levied or collected for the other Town funds, as well as the related expenditures.

Special Tax Special Revenue Fund – Accounts for parcel tax assessments received from property owners to be used for the maintenance of streets and drainage, and police services.

The tax assessment is no longer collected. Fiscal year 2017-18 was the last year of collection.

Residual funds remain.

Library Special Revenue Fund – Accounts for property tax funds dedicated to the Town’s library operations.

Facilities Construction Capital Projects Fund – Accounts for the funds dedicated to facilities construction.

Capital Improvement Capital Projects Fund – Accounts for capital improvement construction costs and financing sources.
44

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Major Funds (Continued)
The Town also reports the following fund types:

Internal Service Funds - Accounts for equipment replacement, workers’ compensation insurance, general liability and employee benefits provided to other departments on a cost reimbursement basis.

Fiduciary Funds – Custodial Funds account for assets held by the Town as an agent for Atherton Tree Committee and Holbrook-Palmer Park Foundation. The financial activities of these funds are excluded from the Entity-wide financial statements, but are presented in separate Fiduciary Fund financial statements.

D. Basis of Accounting
The government-wide, proprietary, and fiduciary fund 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 Town 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 general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources.

Those revenues susceptible to accrual are sales taxes, gas taxes, charges for services, and interest revenue. Fines, licenses and permits are not susceptible to accrual because they are not measurable until received in cash.

Non-exchange transactions, in which the Town 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.

The Town may fund programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The Town’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary.

Certain indirect costs are included in program expenses reported for individual functions and activities.
45

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position or balance sheet reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the statement of financial position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

F. Property Tax
Revenue is recognized in the period for which the tax and assessment is levied. The County of San Mateo levies, bills and collects property taxes and sewer charges for the Town; the County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and unsecured property taxes are levied on January 1.

Secured property tax is due in two installments, on November 1 and February 1, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on January 1 and becomes delinquent on August 31.

The term “unsecured” refers to taxes not secured by real property. These taxes are liens on the person or company named on the tax bill. Property tax revenues are recognized by the Town in the fiscal year they are assessed provided they become available as defined above.

San Mateo County distributes property taxes to jurisdictions according to the “alternate method of property tax distribution” known as the Teeter Plan. Under this plan, the County remits 100% of the levied taxes to the appropriate jurisdictions by June 30 each year, pursuing delinquencies and keeping related late penalties to cover their costs.
46

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Compensated Absences
Compensated absences comprise accrued compensated time-off, vacation and holiday pay for all regular employees; vacation and holiday pay for management employees. The Town’s liability for compensated absences is recorded in Governmental Activities. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be permanently liquidated (matured due to termination) are recorded as fund liabilities; the long-term portion is recorded in the Statement of Net Position.

The changes of the compensated absences during fiscal year 2024 were as follows:

Beginning Balance $1,096,373
Additions 829,283
Payments (851,657)
Ending Balance $1,073,999
Current Portion $585,323
The long-term portion of governmental activities compensated absences is liquidated primarily by the Employee Benefits Fund followed by the General Fund.

H. Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

I. 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 Town 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.
47

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. 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 Town’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 PARS Trust. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

K. Leases
As clarified by the Government Accounting Standards Board (GASB) Statement No. 87, 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 Town recognizes lease receivables or liabilities with an initial, individual value of $50,000 or more, based on the future lease payments remaining at the start of the lease.

L. Subscription-Based Information Technology Arrangements (SBITAs) Accounting As clarified by the Government Accounting Standards Board (GASB) Statement No. 96, a Subscription-Based Information Technology Arrangement (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 Town 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 straight‐line basis over the shorter of the subscription term or the useful life of the underlying IT assets. The Town recognizes SBITA liabilities with an initial, individual value of $50,000 or more, based on the future SBITA payments remaining at the start of the contract.

Key estimates and judgments related to SBITAs include how the Town 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 Town 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 Town uses its estimated incremental borrowing rate as the discount rate for subscription liabilities. • The subscription term includes the noncancellable period of the subscription. • Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that the Town is reasonably certain to exercise.
48

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L. Subscription-Based Information Technology Arrangements (SBITAs) Accounting (Continued) The Town 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 with liabilities on the statement of net position.

M. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements The following Governmental Accounting Standards Board (GASB) pronouncement was effective in fiscal year 2024:

GASB 96 – Subscription-Based Information Technology Arrangements (SBITAs) This Statement provides 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. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended.

The requirements of this Statement are effective for reporting periods beginning after June 15, 2022, and all reporting periods thereafter. The Town has no SBITAs subject to GASB#96 for the fiscal year 2024.

NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING
A. Budgets and Budgetary Accounting
The Town follows these procedures in establishing the budgetary data reflected in the financial statements:
• By June 30, the Town Manager submits to the Town Council a proposed operating and capital budget for the year commencing July 1. The operating and capital budget includes proposed expenditures and the means of financing them. Continuing appropriations are rebudgeted by the Town Council as part of the adoption of the subsequent year’s budget. • Public hearings are conducted to obtain taxpayer comments. • The budget is legally enacted through passage of resolution during a Town Council meeting in the month of June.

49

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING (Continued)
A. Budgets and Budgetary Accounting (Continued)
• The Town Manager is authorized to transfer budget appropriations within the same department in conformance with the adopted policies set by the Town Council. All other transfers must be approved by the Town Council. Any revisions that alter the total expenditures of any department must be approved by the Town Council. Expenditures are budgeted at, and may not legally exceed, the department level. Budgeted amounts shown are as originally adopted, or as amended by the Town Council during the year. • Formal budgeting is employed as a management control device during the year for the general and certain special revenue funds.
• Budgets for the general and certain special revenue are adopted on a basis consistent with generally accepted accounting principles (GAAP).
• Budgets for capital projects are adopted on a project-life basis. • The Town does not budget for the Storm Drainage Capital Project Fund.

B. Expenditures in Excess of Budget
The funds below incurred expenditures in excess of their budgets on the departmental level in the amounts below for the year ended June 30, 2024:

Amount
General Fund
Police ($122,884)
Nonmajor Special Revenue Funds:

County Measure A
Public Works (15,875)
Gas Tax
Public Works (6,946)
County Measure W
Public Works (2,000)
Fund Name
NOTE 3 – CASH AND INVESTMENTS
The Town’s dependence on property tax receipts requires it to maintain significant cash reserves to finance operations during the remainder of the year. The Town receives property tax in November (5%), December (45%), March (5%), April (35%), May (5%) and June (5%). The Town pools cash from all sources and all funds except Cash with Fiscal Agents so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time.

50

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
A. Policies
California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the Town’s cash on deposit or first trust deed mortgage notes with a value of 150% of the Town’s cash on deposit as collateral for these deposits. Under California Law, this collateral is held in an investment pool by an independent financial institution in the Town’s name and places the Town ahead of general creditors of the institution pledging the collateral.

The Town’s investments are carried at fair value, as required by generally accepted accounting principles. The Town 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. In the Town’s case, fair value equals fair market value, since all of the Town’s investments are readily marketable.

B. Classification
Cash and investments are classified in the financial statements as shown below.

Statement of Net Position
Cash and investments available for operations $40,148,464 Fiduciary Funds
Cash and investments available for operations 33,981
Total Cash and Investments $40,182,445
Cash and investments as of June 30, 2024 consist of the following:

Cash on hand $875
Cash in bank 2,988,595
Investments 37,192,975
Total Cash and Investment $40,182,445
Cash and investments are used in preparing the Proprietary Fund statement of cash flows since those funds participate in the Town-wide cash and investment pool. The fund equity in the pool is in substance a demand deposit which may be drawn down at any time.

51

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
C. Investments Authorized by the California Government Code and the Town’s Investment Policy The Town’s Investment Policy and the California Government Code allow the Town to invest in the following provided the credit ratings of the issuers are acceptable to the Town; and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code or the Town’s Investment Policy where it is more restrictive:

Authorized Investment Type
Maximum
Maturity
Minimum
Credit Quality
Maximum Percentage
of Portfolio
Maximum Investment
in One Issuer
U.S. Treasury Obligations 5 years N/A No Limit No Limit U.S. Agency Securities 5 years N/A No Limit 25%
Repurchase Agreements 30 days A / A-1 No Limit No Limit Medium-Term Corporate Notes 5 years A 30% 5%
Commercial Paper 270 days A / A-1 25% 5%
State Local Agency Investment Fund N/A N/A 50% $75M per account Money Market Mutual Funds N/A AAAm 20% No Limit
Negotiable and Non-Negotiable
Certificate of Deposits 5 years A-1+ 10% $250,000
D. 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 Town generally manages its interest rate risk by holding investments to maturity.

Information about the sensitivity of the fair values of the Town’s investments (including investments eld by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the Town’s investments by maturity or earliest call date:

Investment Type
12 Months
or less
25 to 60
Months Total
U.S. Treasuries $3,519,125 $3,608,542 $7,127,667
U.S. Agency Securities 3,038,808 1,355,715 4,394,523
Corporate Notes 2,579,493 2,213,655 4,793,148
California Local Agency Investment Fund 18,605,665 18,605,665 San Mateo County Investment Pool 2,162,099 2,162,099
Money Market Mutual Fund 109,873 109,873
Total Investments $30,015,063 $7,177,912 37,192,975
Cash in banks 2,988,595
Petty cash 875
Total Cash 2,989,470
Total Cash and Investments $40,182,445
52

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
E. 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 (NRSRO). The Standard and Poor’s investment ratings as of June 30, 2024 are as follows:

Investment Type AAAm AA+/AA/AA- A+/A/A- Not Rated Total U.S. Treasuries $7,127,667 $7,127,667
U.S. Agency Securities 4,394,523 4,394,523
Corporate Notes 607,015 $4,186,133 4,793,148
California Local Agency Investment Fund $18,605,665 18,605,665 San Mateo County Investment Pool 2,162,099 2,162,099
Money Market Mutual Fund $109,873 109,873
Total Investments $109,873 $12,129,205 $4,186,133 $20,767,764 $37,192,975 F. Concentration of Credit Risk

At June 30, 2024, the Town had four investments in the securities of any individual issuer, other than U. S. Treasury securities, mutual funds, and external investment funds, that represented 5% or more of total Entity-wide investments and General Fund investments. The four securities is from the Federal Home Loan Mortgage Association in the amount of $2,293,353.

G. Local Agency Investment Fund
The Town 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 Town 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 available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporation. At June 30, 2024, these investments matured in an average of 217 days.

H. San Mateo County Investment Pool
The Town’s investment held under San Mateo Library Donor Trust Fund was invested by the San Mateo Library (Library) in the San Mateo County Investment Fund (SMCIF) that is regulated by California Government Code Section 53600 under the oversight of the treasurer of the County of San Mateo. The Town reports its investment in SMCIF at the fair value amount provided by the Library.

The balance available for withdrawal is based on the accounting records maintained by SMCIF, which are recorded on an amortized cost basis. Included in SMCIF’s investment portfolio are U.S.

Treasury Notes, obligations issued by agencies of the U.S. Government, LAIF, corporate notes, commercial paper, collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, and floating rate securities issued by federal agencies, government-sponsored enterprises, and corporations. The Town reports its investments in SMCIF at the fair value amounts provided by SMCIF, which is the same as the value of the pool share. During fiscal year 2024, the library is holding on to these funds in Atherton trust fund account, $2,162,099 as of June 30, 2024. 53

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
I. Fair Value Hierarchy
The Town categorizes 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 the 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 Town as of June 30, 2024:

Level 1 Level 2 Total
Investments by Fair Value Level:

U.S. Treasuries $7,127,667 $7,127,667
U.S. Agency Securities $4,394,523 4,394,523
Corporate Notes 4,793,148 4,793,148
Subtotal $7,127,667 $9,187,671 16,315,338
Investments Measured at Amortized Cost:

Money Market Mutual Funds 109,873
Investments Exempt from Fair Value Hierarchy
California Local Agency Investment Fund 18,605,665
San Mateo County Investment Pool 2,162,099
Total Investments $37,192,975
Investment Type
U.S. Treasury Notes, classified in Level 1 of the fair value hierarchy, are valued using quoted prices in active markets. U.S. Agency Securities and Corporate Notes, classified in Level 2 of the fair value hierarchy, are valued using quoted prices for a non-active market portfolio at fiscal year-end.

These prices are obtained from various pricing sources by our custodian bank. Fair value is defined as the quoted market value on the last trading day of the period. Money market funds were reported at amortized cost.
54

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 4 – INTERFUND TRANSACTIONS
A. Transfers Between Funds
With Town Council approval, resources may be transferred from one Town fund to another. The purpose of the majority of transfers is to reimburse a fund, which has made an expenditure on behalf of another fund. Less often, a transfer may be made to open or close a fund.

Transfers between funds during the fiscal year ended June 30, 2024 were as follows:

Amount
Fund Receiving Transfer Fund Making Transfer Transferred Facilities Construction Capital Projects Fund Capital Improvement Capital Projects Fund $250,000 (A) Capital Improvement Capital Projects Fund General Fund 5,890,000 (A) $6,140,000
(A) Transfer used to fund capital projects
NOTE 5 – CAPITAL ASSETS
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 estimated acquisition value on the date contributed.

The Town has recorded all its public domain (infrastructure) capital assets, which include streets and roads, curbs and gutters, traffic control devices, drainage systems and street lighting systems.

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 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.

The Town has set the capitalization threshold at $5,000 for capital assets, except for infrastructure at $100,000, and a half year of depreciation is recorded in the year of acquisition. 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 Town has assigned the useful lives listed below to capital assets:

Buildings 40 years
Other improvements 20 years
Computer Equipment and Software 3 years
Furniture and fixtures 10 years
Vehicles 5 to 10 years
Machinery and Equipment 5 to 20 years
Infrastructure 20 to 50 years
Major outlays for capital assets and improvements are capitalized as projects are constructed. 55

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 5 – CAPITAL ASSETS (Continued)
A. Current Year Capital Asset Activities
Balance Balance
Governmental Funds June 30, 2023 Additions June 30, 2024 Capital assets not being depreciated:

Land $690,884 $690,884
Construction in progress 1,348,398 $2,448,267 3,796,665 Total non-depreciable capital assets 2,039,282 2,448,267 4,487,549 Capital assets being depreciated:

Buildings 65,668,477 65,668,477
Other improvements 1,125,668 1,125,668
Computer equipment and software 723,366 41,688 765,054
Furniture and fixtures 493,593 493,593
Vehicles 23,434 23,434
Machinery and equipment 569,123 35,739 604,862
Infrastructure 62,992,555 62,992,555
Total depreciable capital assets 131,596,216 77,427 131,673,643 Less accumulated depreciation for:

Buildings 1,513,860 1,642,052 3,155,912
Other improvements 986,033 27,487 1,013,520
Computer equipment and software 357,835 45,425 403,260
Furniture and fixture 57,738 45,879 103,617
Vehicles 23,434 23,434
Machinery and equipment 417,973 20,170 438,143
Infrastructure 45,335,856 1,258,092 46,593,948
Total accumulated depreciation 48,692,729 3,039,105 51,731,834 Depreciable capital assets, net 82,903,487 (2,961,678) 79,941,809 General capital assets, net 84,942,769 (513,411) 84,429,358 Internal Service Funds
Depreciable capital assets:

Vehicles 1,409,268 260,441 1,669,709
Computer equipment 327,621 327,621
Other equipment 124,177 124,177
Total depreciable capital assets 1,861,066 260,441 2,121,507 Less: accumulated depreciation for
Vehicles 1,051,593 151,150 1,202,743
Computer equipment 327,620 327,620
Other equipment 124,176 124,176
Total accumulated depreciation 1,503,389 151,150 1,654,539 Internal Service Funds capital assets, net 357,677 109,291 466,968 Total governmental activities capital assets, net $85,300,446 ($404,120) $84,896,326

56

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 5 – CAPITAL ASSETS (Continued)
B. Capital Asset Contributions
Some capital assets may be acquired using federal and State grant funds, or they may be contributed by developers or other governments. These contributions are 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 programs are as follows:

Public works $2,993,051
Police 39,106
General Government 6,948
Governmental activities subtotal 3,039,105
Internal Service Fund 151,150
Total $3,190,255
NOTE 6 – FUND BALANCES AND NET POSITION
A. Net Position
Net Position is the excess of all the Town’s assets and deferred outflows over all its liabilities and deferred inflows, 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 Town’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 Town cannot unilaterally alter. These principally include developer fees received for use on capital projects, debt service requirements, and Federal and State grant funds.

Unrestricted describes the portion of Net Position which is not restricted to use.

57

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 6 – FUND BALANCES AND NET POSITIONS (Continued)
B. Fund Balances
Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash and receivables, less its liabilities.

The Town’s fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the Town 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 require the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources.

Committed fund balances have constraints imposed by formal action of the Town Council, which may be altered only by formal action of the Town Council. Nonspendable amounts subject to Council commitments are included along with spendable resources.

Assigned fund balances are amounts constrained by the Town’s intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the Town Council or its designee and may be changed at the discretion of the Town Council or its designee. This category includes nonspendables, when it is the Town’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 that 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.

58

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 6 – FUND BALANCES AND NET POSITIONS (Continued)
B. Fund Balances (Continued)
Detailed classifications of the Town’s Fund Balances, as of June 30, 2024, are below:

Major Major
Special Revenue Funds Capital Projects Funds Other
General Facilities Capital Governmental
Fund Special Tax Library Construction Improvement Funds Total Nonspendable:

Prepaids $77,890 $77,890
Total Nonspendable 77,890 77,890
Restricted for:

Street drainage and police services $476,408 476,408
Library operations $2,717,591 2,717,591
Measure A $1,763,046 1,763,046
Gas tax 532,595 532,595
Measure W 785,431 785,431
Measure M 196,514 196,514
Refuse Services 543,133 543,133
Supplemental Law Enforcement Services 188 188
Channel Drainage District 1,154,383 1,154,383
Total Restricted 476,408 2,717,591 4,975,290 8,169,289
Committed to:

Emergency disaster 2,965,071 2,965,071
Total Committed 2,965,071 2,965,071
Assigned to:

Tennis program 132,178 132,178
Building department operations
Tree committee 27,229 27,229
Capital projects $591,855 $7,471,583 33,290 8,096,728
Total Assigned 159,407 591,855 7,471,583 33,290 8,256,135 Unassigned 9,527,166 9,527,166
Total Unassigned 9,527,166 9,527,166
Total Fund Balances $12,729,534 $476,408 $2,717,591 $591,855 $7,471,583 $5,008,580 $28,995,551 C. General Fund Committed Fund Balance for Emergency Disaster The Town Council has committed to set aside 15 percent of the actual annual General Fund operating expenditures specifically for emergency contingencies defined as a state of Federal and/or State emergency or declaration of a local emergency as defined in Atherton’s Municipal Code Section 2.44.010.

D. General Fund Unassigned Fund Balance Policy
The Town Council established the General Fund unassigned fund balance policy such that in no circumstances shall the total General Fund unassigned fund balance be less than 15% of the actual annual operating expenditures.
59

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN
A. General Information about the Pension Plan
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 Plan and additions to/deductions from the Plan’s 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 currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Plan Description – All qualified permanent and probationary employees are eligible to participate in the Town’s separate Safety and Miscellaneous (all other) Employee Pension Rate Plans. The Town’s Safety and Miscellaneous Plans are part of the public agency cost-sharing multiple-employer defined benefit pension plan (PERF C), which is administered by CalPERS. PERF C consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Individual employers may sponsor more than one miscellaneous and safety rate plan. The employer participates in one cost-sharing multiple-employer defined benefit pension plan regardless of the number of rate plans the employer sponsors. Benefit provisions under the Plan are established by State statute and Town resolution. CalPERS issues publicly available reports that include a full description of the pension plan 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
Town’s labor contracts (MOU) require the Town to pay the employees’ contributions as well as employer’s portion, except for the sworn officers, who are responsible for 2% of 9% after the Town makes a 7% contribution for them. However, as of July 1, 2013, Miscellaneous Plan employees started to pay their own portion of the required employee contribution rate of 7%. The Town and the Atherton Police Officers Association (APOA) adopted a new MOU on October 1, 2013. Effective on January 1, 2014, the Town’s payment of the employee share of the mandatory member contribution for the CalPERS retirement benefit shall be 5%. Effective January 1, 2015, the Town’s payment of the employee share of the mandatory member contribution shall be reduced to 2.5%. Effective January 1, 2016, the Town shall cease paying any portion of the employees’ share and the employees shall pay 100% of the employee share of the mandatory member contribution, presently 9% for sworn and 7% for civilian.

60

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN (Continued)
A. General Information about the Pension Plan (Continued) During the fiscal year 2018-2019, the Town adopted amendments with CalPERS that allows sharing of additional employer costs passed to the employees. The Town implemented a cost sharing within the pension plans among Public Safety and Local Miscellaneous employees. This included Public Safety sworn staff picking up the employers CalPERS share of 3% and 1% for Miscellaneous employees. These are the maximum under CalPERS law for the passing on of costs of the employer’s share. These were amendment changes to the contract between the Board of Administration California Public Employees’ Retirement System and The Town as proposed changes in Section 20516 (Employees Sharing Additional Costs). Increase in employee contribution rates results in a respective decrease in employer contribution rates. The Plan’s provisions and benefits in effect at June 30, 2024, are summarized as follows:

Miscellaneous
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50-67 or older 52-67 or older
Monthly benefits, as a % of eligible compensation 1.426% to 2.418% 1% to 2.5% Required employee contribution rates 7.00% 8.25%
Required employer contribution rates 12.63% 8.00%
Safety
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 3% @ 50 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50-55 or older 50-57 or older
Monthly benefits, as a % of eligible compensation 3% 2% to 2.7% Required employee contribution rates 9% 14.50%
Required employer contribution rates 29.09% 14.50%
Beginning in fiscal year 2016, CalPERS collects employer contributions for the cost-sharing 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 and side fund. The dollar amounts are billed on a monthly basis. The Town’s required contribution for the unfunded liability was $1,223,001 in fiscal year 2024.

61

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN (Continued)
A. General Information about the 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 the Plan 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 Town 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 employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions.

For the year ended June 30, 2024, the contributions to the Plan were as follows:

Miscellaneous
Miscellaneous
PEPRA Safety
Safety
PEPRA
Contributions - employer $581,444 $106,051 $1,137,718 $271,221 Contributions - employee 102,851 140,014 161,359 406,368 B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2024, the Town reported a net pension liability for its proportionate share of the net pension liability of the Plan as follows:

Proportionate Share
of Net Pension Liability
Miscellaneous - Classic & PEPRA $6,793,214
Safety - Classic & PEPRA 12,225,735
Total Net Pension Liability $19,018,949
The Town’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2023, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The Town’s proportionate shares of the net pension liability for the Plan as of June 30, 2022 and 2023 were as follows:

Miscellaneous Safety
Proportion - June 30, 2022 0.13604% 0.16741%
Proportion - June 30, 2023 0.13585% 0.16356%
Change - Increase (Decrease) -0.00019% -0.00385%
62

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
For the year ended June 30, 2024, the Town recognized pension expense of $3,282,169. At June 30, 2024, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Miscellaneous - Classic & PEPRA
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $687,495 Differences between actual and expected experience 347,034 ($53,833) Changes in assumptions 410,137
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions (41,780)
Change in employer proportion 10,302 (126,820)
Net differences between projected and actual earnings
on plan investments 1,099,883
Total $2,554,851 ($222,433)
Safety - Classic & PEPRA
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $1,408,939 Differences between actual and expected experience 897,594 ($76,844) Changes in assumptions 713,510
Change in employer's proportion and differences between the employer’s contributions and the employer’s
proportionate share of contributions 1,919,732 (450,829) Change in employer proportion 44,050 (2,639,003)
Net differences between projected and actual earnings
on plan investments 1,673,088
Total $6,656,913 ($3,166,676)
Grand total $9,211,764 ($3,389,109)

63

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
$2,096,434 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 Safety Total
Fiscal Year Ended Amortization Amortization Amortization June 30 Amount Amount Amount
2025 $467,841 $543,109 $1,010,950
2026 316,272 305,065 621,337
2027 829,248 1,186,426 2,015,674
2028 31,562 46,698 78,260
$1,644,923 $2,081,298 $3,726,221
Actuarial Assumptions – The total pension liabilities in the June 30, 2022 actuarial valuations were determined using the following actuarial assumptions:

Valuation Date June 30, 2022
Measurement Date June 30, 2023
Actuarial Cost Method Entry Age Actuarial Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase Varies by Entry Age, Service, and type of employment Investment Rate of Return 6.90% (1)
Mortality Derived using CalPERS Membership Data for all Funds (2) (1) Net of pension plan investment expenses, including inflation (2) The mortality table used was developed based on CalPERS' specific data. The table includes generational mortality improvements using Society of Actuaries Scale 80% of Scale MP 2020. For more details on this table, please refer to the November 2021 experience study report (based on CalPERS demographic data from 2001 to 2019) that can be found on the CalPERS website.

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2022 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.

64

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Discount Rate – The discount rate used to measure the total pension liability for the Plan was

6.90%. The projection of cash flows used to determine the discount rate for the 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, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. 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.

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 for all the funds’ 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 to account for assumed administrative expenses of 10 basis points.

The table below reflects the expected real rates of return by asset class.

For Miscellaneous and Safety Plan
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 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% 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. 65

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 7 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate – The following presents the Town’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what the Town’s proportionate share of the 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 $9,947,404 $20,082,454
Current Discount Rate 6.90% 6.90%
Net Pension Liability $6,793,214 $12,225,735
1% Increase 7.90% 7.90%
Net Pension Liability $4,197,045 $5,802,308
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS
A. General Information about the Town’s Other Post Employment Benefit (OPEB) Plan and the OPEB Trust Fund
OPEB Trust Plan Administrator – The City Manager is the Town’s appointed plan administrator to act on behalf of the Town. The Public Agency Retirement Services (PARS) administers the trust for the Town’s retiree healthcare benefit plan.

Plan Description – The Town’s Post Employment Benefit Plan is an agent multiple-employer defined benefit OPEB plan. By Town Council resolution, the Town provides certain medical benefits for employees and dependents who retire directly from the Town at fifty years or older and who are vested in the California Public Employees Retirement System (CalPERS).

Benefits Provided – The Town of Atherton participates in the CalPERS medical program. Retirees who qualify for a CalPERS pension are entitled to employer paid CalPERS medical benefits as described below. The Town does not pay for dental, vision or other health and welfare benefits for retirees.

Employees who retire from the Town, receive a PERS pension and continue their CalPERS medical coverage are eligible to receive the benefit described below. This benefit continues throughout the life of the retiree and surviving spouse.

Management Employees (non-represented), hired before adoption of Management Resolution on November 17, 2010 - The Town pays 100% of premiums for any medical coverage and any family status.
66

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) A. General Information about the Town’s Other Post Employment Benefit (OPEB) Plan and the OPEB Trust Fund (Continued)
Management Employees (non-represented), hired after adoption of November 17, 2010 and before June 30, 2013 - The Town pays up to a maximum of the single employee Kaiser premium regardless of family status. A spouse or dependent is only covered if the employee's premium is less than this maximum. After age 65, the Town pays up to a maximum of the reduced post age 65 single employee Kaiser premium.

Employees retiring from the Town and CalPERS concurrently with at least 5 years of service will receive the basic Public Employees Medical and Hospital Care Act (PEMHCA) minimum contribution by law.

Management Employees (non-represented), hired on or after July 1, 2013 - The Town pays the CalPERS minimum benefit.

APOA Police Officers, retired before October 1, 2013 - The Town pays a maximum monthly benefit of $1,247.06 which is assumed to not increase in the future. APOA employees retiring on disability from employment of the Town while in a job classification covered by this MOU and said disability arising from employment with the Town, shall be exempt from this cap.

Members of the APOA Police Officers, hired before October 1, 2013 but retired or will retire after October 1, 2013 – The Town pays up to a maximum of 90% of the Kaiser premium for any family status. This cap is assumed to increase at half the excess of the assumed rate of increase over 3% each year, with a minimum of 0%. This assumption is based on the language in Resolution 13-37, page 8, Paragraph C. a., and assumes that the same language will continue in years after 2016.

Employees retiring from the Town and CalPERS concurrently with at least 5 years of service will receive the basic Public Employees Medical and Hospital Care Act (PEMHCA) minimum contribution by law. If they have 10 or more years of service, they are subject to a vesting schedule.

APOA employees retiring on disability from employment of the Town while in a job classification covered by this MOU and said disability arising from employment with the Town, shall receive 90% of the Town contribution of Kaiser.

APOA Police Officers, hired on or after October 1, 2013 – The Town pays up to a maximum of the PEMHCA Minimum ($157 in 2024).

APOA Miscellaneous Employees – The Town pays the same benefit as for APOA Officers. It has been assumed that this benefit will continue after 2016.

Teamsters and Confidential employees – (non-management, miscellaneous) hired before January 19, 2011 - The Town pays up to a maximum benefit of 95% of Blue Shield Access Plus basic/supplemental Bay Area/Sacramento HMO premiums. This applies to any medical coverage and any family status. After age 65, the Town pays only 95% of the reduced post age 65 premiums.

67

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) A. General Information about the Town’s Other Post Employment Benefit (OPEB) Plan and the OPEB Trust Fund (Continued)
Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2024:

Active employees 41
Retirees receiving benefit payments 40
Total 81
To comply with Actuarial Standard of Practice No. 6 (ASOP 6), the actuarial valuation includes an implicit subsidy liability. When premiums for retirees are determined using a blend of active employee and retiree experience, it creates an implicit subsidy to the retirees, since retiree healthcare costs are generally higher than active employees. ASOP 6 effectively requires most public agencies to calculate an implicit subsidy liability whenever their retirees participate in the group medical plans, but only pay the same premiums as active employees.

As a result of the required ASOP 6, the Town’s Actuarial Accrued Liability at June 30, 2024 included an implicit subsidy liability of $1,583,334.

B. Net OPEB Liability (Asset)
Actuarial Methods and Assumptions – The Town’s net OPEB liability and total OPEB liability were determined by an actuarial valuation based on the following dates, actuarial methods and assumptions:

Actuarial Assumptions • June 30, 2024 Measurement Date
Valuation Date • June 30, 2024
Actuarial Cost Method • Entry Age Normal
Contribution Policy • The Town intends to contribute the full ADC to the PARS trust each year Inflation • 2.30% per annum
Payroll Increases • 2.80% annual increases
Medical Trend • Pre-65: 6.00% for 2024
• Post-65: 5.30% in 2024 decreasing to an ultimate rate of 3.94% by 2075 Mortality • CalPERS 2020 Scale MP-2020
Discount Rate and Long Term
Expected Rate of Return on
Investment
• 6.30%, based on PARS investment allocation Moderate
Change of Assumptions – Effective with the June 30, 2024 valuation date (2024 Measurement date) the inflation rate was reduced from 2.50% to 2.30%. In addition, the Discount Rate and Long Term Expected Rate of Return on Investment increased from 6.00% to 6.30%.

68

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) B. Net OPEB Liability (Asset) (Continued)
OPEB Trust Investment Policy - PARS offers different investment portfolios as part of the investment vehicle. The Town has elected to invest pre-funded contributions using a Moderate Index Plus portfolio. The investment objective of this strategy is to provide current income and moderate capital appreciation.

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class Moderate
Equity 48.20%
Fixed income 45.00%
REITS 1.80%
Cash 5.00%
Total 100.00%
The expected long-term real rate of return of the OPEB Trust is 6.30% as of June 30, 2024. This rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return net of investment expense are developed for each major asset class.

The above table shows the target asset allocation in the PARS Trust Moderate investment policy.

Discount Rate – The discount rate is based on a blend of (a) the long-term expected rate of return on assets for benefits covered by plan assets and a yield or index for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or better for benefits not covered by plan assets. The projection of cash flows used to determine the discount rate assumed that Town contributions will be made at rates equal to the 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.

OPEB Trust Annual Money-Weighted Rate of Return – For the year ended June 30, 2024, the annual money-weighted rate of return on investments, net of investment expense, was (10.18%). The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. 69

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) C. Changes in Net OPEB Liability (Asset)
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 $7,889,811 $8,316,743 ($426,932) Changes Recognized for the Measurement Period:

Service Cost 109,425 109,425
Interest on the total OPEB liability 464,265 464,265
Changes in benefit terms
Differences between expected and actual experience 754,624 754,624 Changes of assumptions (536,468) (536,468)
Net investment income 822,383 (822,383)
Contributions
Employer - Town's contribution
Employer - implicit subsidy 98,564 (98,564)
Benefit payments (424,444) (424,444)
Implicit subsidy credit (98,564) (98,564)
Administrative expenses (45,757) 45,757
Net changes 268,838 352,182 (83,344)
Balance at June 30, 2022 Measurement Date $8,158,649 $8,668,925 ($510,276) Plan fiduciary net position as a percentage of the total OPEB liability 106.3% The OPEB plan does not issue separate financial statements.

D. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates
The following presents the net OPEB liability of the Town, as well as what the Town's net OPEB 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 discount rate:

Net OPEB Liability (Asset)
Discount Rate -1% Current Discount Rate Discount Rate +1% (5.30%) (6.30%) (7.30%)
$339,263 ($510,276) ($1,227,551)
The following presents the net OPEB liability of the Town, as well as what the Town'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 above:

Net OPEB Liability (Asset)
Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
(5.80%) (6.80%) (7.80%)
($1,250,638) ($510,276) $349,681

70

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 8 – POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) E. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2024, the Town recognized negative OPEB expense of $895,891. At June 30, 2024, the Town reported deferred outflows and inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between actual and expected experience $943,258 ($589,027) Changes of assumptions (1,264,396)
Net differences between projected and actual earnings on plan investments 69,885 -
Total $1,013,143 ($1,853,423)
The deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in future fiscal years as part of OPEB expense as follows:

Year
Ended June 30 Amortization
2025 ($664,566)
2026 (221,615)
2027 (9,911)
2028 2,921
2029 33,053
Remaining 19,838
Total ($840,280)
NOTE 9 – RISK MANAGEMENT
A. Coverage
The Town is a member of Pooled Liability Assurance Network (PLAN), which provides general liability coverage of $5,000,000 above the Town’s deductible of $25,000 per occurrence, risk property insurance of $500,000 above the Town’s deductible of $5,000 for property damage and $5,000 for auto / vehicle damage. PLAN is governed by a board consisting of representatives from member municipalities. The board controls the operations of PLAN, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on the Board.

Audited financial statements may be obtained from PLAN Services, 1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833.

71

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 9 – RISK MANAGEMENT (Continued)
A. Coverage (Continued)
Alliant Insurance Services covers employment theft up to $2,000,000 for each claim and in the aggregate and the Town’s deductible is $10,000 per claim.

The Cities Group covers workers’ compensation claims up to $1,000,000 each for miscellaneous employees, up to $1,500,000 each for safety officers, and has coverage above that limit to a maximum of $10,000,000. The Town has no deductible for the claims.

Audited financial statements may be obtained from Cities Group, address, P.O. Box 111, Burlingame, CA 94011-0111.

B. Uninsured Claims
The Town’s liability for uninsured claims, including estimated claims incurred but not reported, was estimated by management based on prior years claims experience and was computed as follows as of June 30:
2024 2023
Beginning balance $62,590 $100,000
Net change in claims liabilities 35,743 (948)
Claims paid (47,314) (36,462)
Ending balance $51,019 $62,590
Claims liabilities due within a year $51,019 $62,590

For the years ended June 30, 2024, 2023, and 2022 the amount of settlements did not exceed insurance coverage.

NOTE 10 – LONG TERM LIABILITIES
The Town generally incurs long‐term debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt. This debt will be repaid only out of governmental funds but is not accounted for in these funds because this debt does not require an appropriation or expenditure in this accounting period.

The City’s debt issues and transactions are summarized below and discussed in detail thereafter.

A. Current Year Transactions and Balances
Balance at Balance at Due Within Due in More
June 30, 2023 Retirements June 30, 2024 One Year Than One Year Direct borrowings:

San Mateo County Bayfront Canal Loan $1,129,343 ($313,612) $815,731 $313,815 $501,916 Town Center Project Capital Lease 5,560,799 (743,566) 4,817,233 760,015 4,057,218 Total $6,690,142 ($1,057,178) $5,632,964 $1,073,830 $4,559,134 72

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 10 – LONG TERM LIABILITIES (Continued)
B. San Mateo County Bayfront Canal Loan (Direct Borrowing) The Town of Atherton entered into a $165,000 loan agreement for the Bayfront Canal and Atherton Channel Collaborative Memorandum of Understanding between the City of Redwood City, City of Menlo Park, Town of Atherton, and the County of San Mateo.

San Mateo County Resolution Number 075608 adopted on December 5, 2017, authorized the president of the Board of Supervisors to execute a loan agreement between the Town of Atherton and the County that provides a $165,000 loan to the Town of Atherton for the planning design, and environmental permitting for the Bayfront Canal and Atherton Channel Flood Management and Restoration Project. This amount is the proportionate share of the costs of planning, design, and environmental permitting services for the Bayfront Canal and Atherton Channel Flood Management and Restoration Project. The loan in the amount of $165,000 is to finance the Town's obligation pursuant to the MOU, with said loan being repaid over a ten (10) year period.

On December 9, 2022 the Town of Atherton entered into a sublease with the County of San Mateo for the construction of the Bayfront Canal Restoration Project related to the San Mateo County Intra-County Lease Agreement. The County loaned the Town of Atherton $1,350,000 for the Town’s portion of the construction costs of the Bayfront Canal Project. The loan is to be repaid over a five (5) year period through reduction of Atherton property taxes remittance from the County for a fix amount of $148,500 on April 15 and December 15 annually. As of June 30, 2024, the outstanding amount on the loan is $815,731.

C. Town Center Project Capital Lease Agreement (Direct Borrowing) On June 1, 2020, the Town entered into Lease Agreements with the Public Property Financing Corporation of California, which subsequently assigned the Agreement to Capital One Public Funding LLC (Assignee), under which the Town leased certain land and improvements initially consisting generally of the Holbrook-Palmer Park and the land on which the Town Center Project will be located, for which the Assignee made a one‐time up‐front lease payment to the Town in the amount of $7,680,000.

Simultaneously, the Town will lease back from the Assignee with annual lease payments over a lease term of 10 years, at a fixed interest rate of 2.20% per year. The Sublease is secured by the leased property. The Sublease is repayable in semi‐annual payments beginning December 1, 2020 through June 1, 2030. The pledge of repayment is from the General Fund.

73

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 10 – LONG TERM LIABILITIES (Continued)
D. Debt Services Requirements
Annual debt service requirements are shown below for all long‐term debt with specified repayment terms:

San Mateo County Town Center Project
Year ending June 30 Principal Interest Principal Interest Total 2025 $313,815 $683 $760,015 $101,856 $1,176,369
2026 314,016 482 776,828 85,044 1,176,370
2027 179,221 277 794,012 67,859 1,041,369
2028 8,679 71 811,577 50,294 870,621
2029 829,531 32,341 861,872
2030 845,270 13,990 859,260
Total $815,731 $1,513 $4,817,233 $351,384 $5,985,861
Bayfront Canal Loan Capital Lease
NOTE 11 – JOINT POWERS AUTHORITIES
The Town participates in joint ventures discussed below through 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 venture is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint venture, 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 these joint ventures are not the Town's responsibility and the Town does not have an equity interest in the assets of each joint venture except upon dissolution of the joint venture.

The Joint Powers Agreement is effective for the year ended June 30, 2018 and continues on a year to year basis until the parties agree to terminate the agreement or if a majority of the parties have withdrawn from the Joint Powers pursuant to Section 6 of the agreement.

A. Town/County Association of Governments of San Mateo County (C/CAG) Town/County Association of Governments of San Mateo County was formed in 1990 between the various cities in San Mateo County to prepare, adopt, monitor and enforce state mandated plans for the management of traffic congestion, integrated solid waste, airport land use and hazardous waste.

The Town’s contribution to C/CAG was $20,749 for the year ended June 30, 2024. Financial statements may be obtained by mailing a request to the City of San Carlos, 600 Elm Street, San Carlos, CA 94070.

B. Alcohol Violation Temporary Housing Authority (AVTHA) AVTHA was established between the County and most of the cities and towns in the County to provide temporary housing and counseling to persons accused of alcohol related law violations.

AVTHA contracts with an operator to provide such services. The costs of operating the temporary housing are allocated to each member based on alcohol related arrests occurring within each member’s jurisdiction. Financial statements for AVTHA may be obtained by mailing a request to Redwood City, 801 Marshall Street, Suite 600, Redwood City, California 94063. 74

TOWN OF ATHERTON

NOTES TO BASIC FINANCIAL STATEMENTS
For the Year Ended June 30, 2024
NOTE 11 – JOINT POWERS AUTHORITIES (Continued)
C. Library Joint Powers Agreement (JPA)
In 1999, the Town joined with the County and ten other municipalities in the County to coordinate and expand library services throughout the County, including those in the Town.

Property tax revenues in excess of the JPA’s costs of maintaining the library are remitted to the Town and are deposited into the Library Special Revenue Fund. Expenditures of this fund are subject to the approval of the Library JPA.

NOTE 12 – CONTINGENT LIABILITIES
The Town is subject to litigation arising in the normal course of business. In the opinion of the Town Attorney there is no pending litigation that is likely to have a material adverse effect on the financial position of the Town.

The Town participates in Federal and State grant programs. When required, these programs are audited in accordance with the provisions of the Federal Single Audit Act, as amended and applicable State requirements. These programs are also subjected to further examination by the grantors, and the amount, if any, of expenditures that may be disallowed by the granting agencies, cannot be determined at this time. The Town expects such amounts, if any, to be immaterial.
75

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REQUIRED SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION
COST-SHARING MULTIPLE-EMPLOYER DEFINED PENSION PLAN – LAST 10 YEARS SCHEDULE OF PLAN’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY Prepared for Town of Atherton, a Cost-Sharing Multiple-Employer Defined Pension Plan As of fiscal years ending June 30, 2015 through 2023
Last 10 Years

SCHEDULE OF THE PLAN'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY Miscellaneous
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 6/30/2023 Plan's proportion of the Net Pension
Liability (Asset) 0.04366% 0.10574% 0.11181% 0.11522% 0.11852% 0.12379% 0.12799% 0.17367% 0.13604% 0.13585% Plan's proportion share of the
Net Pension Liability (Asset) $2,716,530 $2,901,033 $3,884,053 $4,542,046 $4,466,539 $4,957,053 $5,398,568 $3,297,589 $6,365,417 $6,793,214 Plan's Covered Payroll $1,473,083 $1,595,884 $1,772,771 $1,912,587 $2,040,240 $2,127,834 $2,314,721 $2,320,927 $4,610,367 $2,537,827 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its
Covered Payroll 184.41% 181.78% 219.10% 237.48% 218.92% 232.96% 233.23% 142.08% 138.07% 267.68% Plan’s Fiduciary Net Position as a Percentage of the
Total Pension Liability 83.03% 78.28% 73.20% 75.39% 75.39% 75.17% 73.24% 82.62% 90.49% 77.97% Safety
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 6/30/2023 Plan's proportion of the Net Pension
Liability (Asset) 0.10505% 0.18865% 0.19496% 0.19379% 0.19992% 0.20325% 0.20805% 0.25479% 0.16741% 0.16356% Plan's proportion share of the
Net Pension Liability (Asset) $6,536,499 $7,773,056 $10,097,455 $11,579,520 $11,730,572 $12,687,811 $13,861,231 $8,941,944 $11,503,411 $12,225,735 Plan's Covered Payroll $2,030,918 $2,391,765 $2,488,471 $2,414,626 $2,608,708 $2,672,010 $2,668,668 $3,004,022 $4,610,367 $3,274,919 Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of its
Covered Payroll 321.85% 324.99% 405.77% 479.56% 449.67% 474.84% 519.41% 297.67% 249.51% 373.31% Plan’s Fiduciary Net Position as a Percentage of the
Total Pension Liability 81.46% 78.52% 73.96% 71.74% 71.74% 72.10% 70.82% 82.62% 86.61% 74.87%

78

REQUIRED SUPPLEMENTARY INFORMATION
COST-SHARING MULTIPLE-EMPLOYER DEFINED PENSION PLAN – LAST 10 YEARS

SCHEDULE OF CONTRIBUTIONS
Prepared for Town of Atherton, a Cost-Sharing Multiple-Employer Defined Pension Plan As of fiscal year ending June 30, 2024
Last 10 Years

SCHEDULE OF CONTRIBUTIONS
Miscellaneous
Fiscal Year Ended June 30 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Actuarially determined contribution $179,934 $150,616 $305,597 $349,365 $416,994 $480,181 $510,812 $211,663 $667,245 $687,495 Contributions in relation to the actuarially
determined contributions (179,934) (150,616) (305,597) (349,365) (416,994) (480,181) (510,812) (605,437) (667,245) (687,495) Contribution deficiency (excess) $0 $0 $0 $0 $0 $0 $0 ($393,774) $0 $0 Covered payroll $1,595,884 $1,772,771 $1,912,587 $2,040,240 $2,127,834 $2,314,721 $2,320,927 $4,610,367 $2,537,827 $2,696,555 Contributions as a percentage of
covered payroll 11.27% 8.50% 15.98% 17.12% 19.60% 20.74% 22.01% 13.13% 26.29% 25.50% Safety
Fiscal Year Ended June 30 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Actuarially determined contribution $646,174 $466,548 $849,073 $939,476 $1,042,632 $1,202,924 $1,359,480 $463,859 $1,330,515 $1,408,939 Contributions in relation to the actuarially
determined contributions (646,174) (466,548) (849,073) (939,476) (1,042,632) (1,202,924) (1,359,480) (6,470,904) (1,330,515) (1,408,939) Contribution deficiency (excess) $0 $0 $0 $0 $0 $0 $0 ($6,007,045) $0 $0 Covered payroll $2,391,765 $2,488,471 $2,414,626 $2,608,708 $2,672,010 $2,668,668 $3,004,022 $4,610,367 $3,274,919 $3,572,478 Contributions as a percentage of covered payroll 27.02% 18.75% 35.16% 36.01% 39.02% 45.08% 45.26% 140.36% 40.63% 39.44%

79

REQUIRED SUPPLEMENTARY INFORMATION

RETIREE HEALTHCARE OPEB PLAN- AGENT MULTIPLE EMPLOYER
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS – LAST 10 YEARS*

SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS Retiree Healthcare OPEB Plan - Agent Multiple Employer
Last 10 fiscal years*
Measurement Date 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 Total OPEB Liability
Service Cost $257,258 $167,493 $175,867 $215,662 $261,221 $105,341 $109,425 Interest 755,515 610,002 623,286 622,420 483,322 451,942 464,265 Changes in benefit terms
Differences between expected and actual experience (574,495) (11,091) 558,111 (18,835) (1,404,646) 224,199 754,624 Changes of assumptions (2,299,690) (849,626) (1,698,656) (7,409) (536,468) Benefit payments (401,170) (466,422) (419,991) (444,395) (628,249) (424,444) Implicit subsidy credit (85,496) (91,325) (137,858) (151,197) (98,564) Net change in total OPEB liability (1,861,412) 279,738 (50,109) (1,437,258) (1,263,104) 153,233 268,838 Total OPEB liability - beginning 10,269,746 12,532,328 10,487,049 10,436,940 8,999,682 7,736,578 7,889,811 Total OPEB liability - ending (a) $10,670,916 $10,549,484 $10,436,940 $8,999,682 $7,736,578 $7,889,811 $8,158,649 Plan fiduciary net position
Employer - Town's contributions $493,288 $747,885 $672,323 $566,672 $594,061 $626,765 Employer - implicit subsidy 85,496 91,325 137,858 98,564 Net investment income 380,626 417,827 322,036 1,432,366 (986,583) 532,619 822,383 Administrative expense (15,183) (33,395) (38,683) (44,195) (48,456) (44,314) (45,757) Benefit payments (401,170) (466,422) (419,991) (444,395) (628,249) (424,444) Implicit subsidy credit (85,496) (91,325) (137,858) (151,197) (98,564) Other miscellaneous income/(expense) (54,026) (85,496)
Net change in plan fiduciary net position 804,705 645,651 489,254 1,534,852 (1,036,570) 486,821 352,182 Plan fiduciary net position - beginning 5,855,635 6,842,386 7,331,640 8,866,492 7,829,922 8,316,743 Plan fiduciary net position - ending (b) $804,705 $6,501,286 $7,331,640 $8,866,492 $7,829,922 $8,316,743 $8,668,925 Net OPEB liability (Asset) - ending (a)-(b) $9,866,211 $4,048,198 $3,105,300 $133,190 ($93,344) ($426,932) ($510,276) Plan fiduciary net position as a percentage of
the total OPEB liability 7.5% 61.6% 70.2% 98.5% 101.2% 105.4% 106.3% Covered-employee payroll $4,648,758 $4,799,843 $4,983,389 $4,410,693 $5,142,900 $5,737,638 $6,262,322 Net OPEB liability as a percentage of
covered-employee payroll 212.23% 84.34% 62.31% 3.02% -1.82% -7.44% -8.15% * Fiscal year 2018 was the first year of implementation for GASB 75 80

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF CONTRIBUTIONS
Retiree Healthcare OPEB Plan - Agent Multiple Employer
Last 10 fiscal years*
Fiscal Year Ended June 30, 2018 2019 2020 2021 2022 2023 2024 Actuarially determined contribution $693,890 $419,511 $435,103 $465,571 $519,144 $142,708 $119,709 Contributions in relation to the
actuarially determined contribution 493,288 833,381 763,648 704,530 594,061 626,765 98,564 Contribution deficiency (excess) $200,602 ($413,870) ($328,545) ($238,959) ($74,917) ($484,057) $21,145 Covered-employee payroll $4,648,758 $4,799,843 $4,983,389 $4,410,693 $5,142,900 $5,737,638 $6,262,322 Contributions as a percentage of
covered-employee payroll 10.61% 17.36% 15.32% 15.97% 11.55% 10.92% 1.57% * Fiscal year 2018 was the first year of implementation for GASB 75 Actuarial Cost Method • Entry Age Normal
Contribution Policy • The Town intends to contribute the full ADC to the PARS trust each year Inflation • 2.30% per annum
Payroll Increases • 2.80% annual increases
Medical Trend • Pre-65: 6.00% for 2024
• Post-65: 5.30% in 2024 decreasing to an ultimate rate of 3.94% by 2075 Mortality • CalPERS 2020 Scale MP-2020
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
Investment
• 6.30%, based on PARS investment allocation Moderate
81

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SUPPLEMENTARY INFORMATION

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NON-MAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS
COUNTY MEASURE A FUND accounts for funds received from the County of San Mateo Measure A funds for local transportation purposes.

GAS TAX FUND accounts for funds received from the State of California for road improvement.

EVANS CREATIVE DESIGN FUND accounts for funds received from the Evans estate.

MEASURE M FUND accounts for funds received from the Congestion Management Agency for San Mateo County.

REFUSE RATE STABILIZATION FUND accounts for the surplus of refuse fees.

CAPITAL PROJECTS FUNDS
STORM DRAINAGE FUND accounts for the operation and maintenance costs of drainage systems in the Town.

CHANNEL DRAINAGE DISTRICT accounts for tax revenues collected and channel maintenance costs. 85

County Supplemental Law
Measure A Gas Tax Enforcement Services Measure M
ASSETS
Cash and investment $1,768,740 $525,995 $188 $198,321
Receivables:

Taxes 14,532
Other
Total Assets $1,768,740 $540,527 $188 $198,321

LIABILITIES
Accounts payable $5,694 $7,932 $1,807
Total Liabilities 5,694 7,932 1,807

FUND EQUITY
Fund balances
Restricted 1,763,046 532,595 $188 196,514
Assigned
Total Fund Balances 1,763,046 532,595 188 196,514
Total Liabilities and Fund Balances $1,768,740 $540,527 $188 $198,321

SPECIAL REVENUE FUNDS

TOWN OF ATHERTON

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
JUNE 30, 2024
86

CAPITAL PROJECT FUNDS
Refuse Channel Total Nonmajor
Rate County Storm Drainage Governmental
Stabilization Measure W Drainage District Funds
$548,507 $887,747 $33,290 $1,154,383 $5,117,171
14,532
$548,507 $887,747 $33,290 $1,154,383 $5,131,703
$5,374 $102,316 $123,123
5,374 102,316 123,123
$543,133 $785,431 $1,154,383 4,975,290
$33,290 33,290
543,133 785,431 33,290 1,154,383 5,008,580
$548,507 $887,747 $33,290 $1,154,383 $5,131,703

SPECIAL REVENUE FUNDS
87

County Supplemental Law
Measure A Gas Tax Enforcement Services Measure M

REVENUES
Property taxes
Measure Grants $497,086
From other agencies $373,395
Use of money and property 30,146 8,965 $3 $3,379
Miscellaneous
Total Revenues 527,232 382,360 3 3,379

EXPENDITURES
Current:

Public Works 15,875 6,946
Capital Outlay 37,718 193,633 20,914
Total Expenditures 53,593 200,579 20,914
NET CHANGE IN FUND BALANCES 473,639 181,781 3 (17,535)
BEGINNING FUND BALANCES 1,289,407 350,814 185 214,049
ENDING FUND BALANCES $1,763,046 $532,595 $188 $196,514

SPECIAL REVENUE FUNDS

TOWN OF ATHERTON

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2024
88

Total
Refuse Channel Nonmajor
Rate County Storm Drainage Governmental
Stabilization Measure W Drainage District Funds
$202,011 $202,011
497,086
$199,083 572,478
($17,826) 15,130 $567 19,674 60,038
(17,826) 214,213 567 221,685 1,331,613
2,000 3,982 28,803
97,444 3,680 353,389
99,444 7,662 382,192
(17,826) 114,769 567 214,023 949,421
560,959 670,662 32,723 940,360 4,059,159
$543,133 $785,431 $33,290 $1,154,383 $5,008,580

SPECIAL REVENUE FUNDS CAPITAL PROJECTS FUNDS
89

SPECIAL REVENUE FUNDS
County Measure A Gas Tax
Variance Variance
Positive Positive
Budget Actual (Negative) Budget Actual (Negative)

REVENUES
Property taxes
Measure A grants $430,000 $497,086 $67,086
From other agencies $375,000 $373,395 ($1,605)
Use of money and property 30,146 30,146 8,965 8,965
Miscellaneous
Total Revenues 430,000 527,232 97,232 375,000 382,360 7,360

EXPENDITURES
Current:

Public Works 15,875 (15,875) 6,946 (6,946)
Non-departmental
Capital Outlay 994,021 37,718 956,303 450,000 193,633 256,367 Total Expenditures 994,021 53,593 940,428 450,000 200,579 249,421

OTHER FINANCING SOURCES (USES)
NET CHANGE IN FUND BALANCES ($564,021) 473,639 $1,037,660 ($75,000) 181,781 $256,781 BEGINNING FUND BALANCES 1,289,407 350,814
ENDING FUND BALANCES $1,763,046 $532,595

TOWN OF ATHERTON

BUDGETED NON-MAJOR GOVERNMENTAL FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

AND CHANGES IN FUND BALANCES
90

SPECIAL REVENUE FUNDS
Measure M Refuse Rate Stabilization
Variance Variance Variance
Positive Positive Positive
Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $160,000 ($160,000) $75,000 ($75,000) ($27,174) ($27,174) 146 $3 (143) 3,379 $3,379 9,348 9,348
160,146 3 (160,143) 78,379 3,379 (75,000) (17,826) (17,826) 135,000 20,914 114,086
135,000 20,914 114,086
$160,146 3 ($160,143) ($56,621) (17,535) $39,086 (17,826) ($17,826) 185 214,049 560,959
$188 $196,514 $543,133
(Continued)
Supplemental Law Enforcement Services
91

TOWN OF ATHERTON

BUDGETED NON-MAJOR GOVERNMENTAL FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SPECIAL REVENUE FUNDS
County Measure W
Variance
Positive
Budget Actual (Negative)

REVENUES
Property taxes
Measure grants
From other agencies $145,000 $199,083 $54,083
Use of money and property 15,130 15,130
Miscellaneous
Total Revenues 145,000 214,213 69,213

EXPENDITURES
Current:

Public Works 2,000 (2,000)
Non-departmental
Capital Outlay 270,000 97,444 172,556
Total Expenditures 270,000 99,444 170,556

OTHER FINANCING SOURCES (USES)
NET CHANGE IN FUND BALANCES ($125,000) 114,769 $239,769 BEGINNING FUND BALANCES 670,662
ENDING FUND BALANCES $785,431
92

INTERNAL SERVICE FUNDS
Internal Service Funds are used to finance and account for special activities and services performed by a designated department for other departments in the Town on a cost reimbursement basis.

The concept of major funds does not extend to internal service funds because they do not do business with outside parties. For the Statement of Activities, the net revenues or expenses of each internal service fund is eliminated by netting them against operations of the other Town departments, which generated them. The remaining balance sheet items are consolidated with these same funds in the Statement of Net Position.

However, internal service funds are still presented separately in the Fund financial statements, including the funds below.

EQUIPMENT REPLACEMENT FUND accounts for the financing of replacement equipment within the Town such as vehicles and computer software.

WORKERS’ COMPENSATION INSURANCE FUND accounts for the financing of the Town’s outstanding worker’s compensation liability.

GENERAL LIABILITY FUND accounts for other liabilities including employment liabilities and hosts the insurance costs for liability claims and property losses. The activities for this fund provides for costs to general liability insurance, employment practice insurance, and self-insured retention claim expense.

EMPLOYEE BENEFITS FUND accounts for financing the liabilities for compensated absences and other post-employment benefits other than pension for Town General Fund departments. 93

TOWN OF ATHERTON

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF NET POSITION
JUNE 30, 2024
Workers'
Equipment Compensation General Employee
Replacement Insurance Liability Benefits Total
ASSETS
Current Assets:

Cash and investments $1,083,182 $1,990,463 $673,976 $1,830,811 $5,578,432 Receivables:

Other
Total Current Assets 1,083,182 1,990,463 673,976 1,830,811 5,578,432 Non-Current Assets:

Capital assets:

Depreciable 2,121,507 2,121,507
Less: accumulated depreciation (1,654,539) (1,654,539)
Net Capital Asset 466,968 466,968
Total noncurrent assets 466,968 466,968
Total Assets 1,550,150 1,990,463 673,976 1,830,811 6,045,400

LIABILITIES
Current liabilities
Accounts payable 58,809 36,825 495 96,129
Claims payable 51,019 51,019
Compensated absences 585,323 585,323
Total current liabilities 58,809 36,825 51,514 585,323 732,471 Noncurrent liabilities
Compensated absences 488,676 488,676
Total noncurrent liabilities 488,676 488,676
Total Liabilities 58,809 36,825 51,514 1,073,999 1,221,147 Net investment in capital assets 466,968 466,968
Unrestricted 1,024,373 1,953,638 622,462 756,812 4,357,285 Total Net Position $1,491,341 $1,953,638 $622,462 $756,812 $4,824,253 94

TOWN OF ATHERTON

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENSES

AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2024
Workers'
Equipment Compensation General Employee
Replacement Insurance Liability Benefits Total

OPERATING REVENUES
Charges for services $495,500 $102,275 $509,462 $444,801 $1,552,038 Total Operating Revenues 495,500 102,275 509,462 444,801 1,552,038

OPERATING EXPENSES
Insurance 147,300 556,736 704,036
OPEB expense 76,719 76,719
Employee benefits earned 337,577 337,577
Depreciation 151,150 151,150
Supplies and maintenance 131,461 131,461
Total Operating Expenses 282,611 147,300 556,736 414,296 1,400,943 Operating Income (Loss) 212,889 (45,025) (47,274) 30,505 151,095

NONOPERATING REVENUES (EXPENSES)
Interest income 18,461 33,925 11,486 31,203 95,075
Total Nonoperating Revenues (Expenses) 18,461 33,925 11,486 31,203 95,075

OTHER FINANCING SOURCES (USES)
Change in Net Position 231,350 (11,100) (35,788) 61,708 246,170 BEGINNING NET POSITION 1,259,991 1,964,738 658,250 695,104 4,578,083 ENDING NET POSITION $1,491,341 $1,953,638 $622,462 $756,812 $4,824,253 95

TOWN OF ATHERTON

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2024
Workers'
Equipment Compensation General Employee
Replacement Insurance Liability Benefits Total

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from other funds $495,500 $102,275 $509,462 $444,801 $1,552,038 Payments to employees for benefits (436,670) (436,670)
Payments to vendors (80,078) (110,475) (567,812) (758,365) Cash Flows from Operating Activities 415,422 (8,200) (58,350) 8,131 357,003

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition of capital assets, net (260,441) (260,441)
Cash Flows (used for) Capital and Related
Financing Activities (260,441) (260,441)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 18,461 33,925 11,486 31,203 95,075
Cash Flows from Investing Activities 18,461 33,925 11,486 31,203 95,075 Net Cash Flows 173,442 25,725 (46,864) 39,334 191,637
Cash and investments at beginning of period 909,740 1,964,738 720,840 1,791,477 5,386,795 Cash and investments at end of period $1,083,182 $1,990,463 $673,976 $1,830,811 $5,578,432 Reconciliation of operating income (loss) to
net cash flows from operating activities:

Operating income $212,889 ($45,025) ($47,274) $30,505 $151,095 Adjustments to reconcile operating income to
net cash flows from operating activities:

Depreciation 151,150 151,150
Compensated absences (22,374) (22,374)
Change in assets and liabilities:

Accounts payable 51,383 36,825 495 88,703
Claims payable (11,571) (11,571)
Cash Flows from Operating Activities $415,422 ($8,200) ($58,350) $8,131 $357,003 96

INDEPENDENT AUDITOR’S REPORT ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE

WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Members of the City Council
Town of Atherton, 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 basic financial statements of the Town of Atherton, California, as of and for the year ended June 30, 2024, and have issued our report thereon dated February 5, 2025.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal control over financial reporting (internal control) as a basis for 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 Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’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 Town’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. 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.
97

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statement. 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.

We have also issued a separate Memorandum on Internal Control dated February 5, 2025, which is an integral part of our audit and should be read in conjunction with this report.

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 result of that testing, and not to provide an opinion on the effectiveness of the Town’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 Town’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Pleasant Hill, California
February 5, 2025
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

FOR THE YEAR ENDED
JUNE 30, 2024

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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL
For the Year Ended June 30, 2024
Table of Contents
Page
Memorandum on Internal Controls .......................................................................................................... 1 Schedule of Other Matters .................................................................................................................... 3 Status of Prior Year Other Matters ..................................................................................................... 11

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MEMORANDUM ON INTERNAL CONTROL
To the City Council of
the Town of Atherton, California
In planning and performing our audit of the basic financial statements of the Town, as of and for the year ended June 30, 2024, in accordance with auditing standards generally accepted in the United States of America, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing 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 Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’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 Town’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.

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 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
February 5, 2025
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2024-01: TREASURER’S REPORT TIMELINESS
Criteria: The Treasurer’s Report (TR) is an important element of the Town’s internal control structure.

To maintain effective controls, the Town’s investment policy requires that the Treasurer’s Report be submitted to the City council after each quarter-end. Additionally, California Government Code 53646 requires that the quarterly report shall be submitted within 45 days following the end of the covered quarter.

Condition: We noticed the Town’s TR for December 2023 and March 2024 were submitted to the Council on 3/20/24 and 6/19/24 correspondingly, which were more than 2.5 months after the quarter ended.

Cause: Due to the timing of the availability of monthly statements and reports, combined with Council meeting dates not aligning for presentation, and the Staff Director's limited bandwidth for mid-year tasks, finalizing the previous audit, and the commencement of FY 24/25 budget preparations.

Potential Effect: The Town is not in compliance with its investment policy and California Government Code which suggests that the TR should be submitted within 45 days of quarter end.

Recommendation: We recommend that the Town should submit the TR as soon as possible after each quarter-end.

Management’s Responses:

We agree with the Auditor’s recommendation and the Town staff will work conscientiously to ensure the Treasurers’ report gets submitted timely to the City Council for review within 45 days following the end of the covered quarter. The City Council Meetings and when the investment reports are available after the quarter end sometimes may lead to the Treasurers report being submitted beyond the 45 days’ submission. We agree that we shall submit the Treasurers Report as soon as possible after each quarter end. 3

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2024-02: CASH RECEIPT – INCORRECT RATE CHARGE
Criteria: The Town should charge customers the rates authorized in the applicable Master Fee Schedule.

Condition: We noticed an error during our cash receipt testing. A day use permit was charged incorrectly due to manual calculations being used. The day-use permit rates differ between Atherton residents and non-Atherton residents and vary based on the number of people. In this case, the amount charged for a non-Atherton resident with 26-50 people for a day-use permit is $300. However, the town only charged the permit holder $150, the rate for non-Atherton residents with 13-25 people.

Cause: According to the Finance Director, the Town had turnover, the new staff did not understand how to properly account for some of the charges in the day use permit fee and performed a manual calculation and overrode the values in the System to compute day use permit fee. Did someone review it? Q for Town:

1. Was this an isolated incident? This was an isolated incident. We had temporary staff working doing our park event reservations and this was incorrectly charged.

2. Why would an override be allowed in the system? This was not an override in the system. The permit fee form was the correct amount, the credit card charge amount was incorrectly charged at the resident rate.

3. Anyone review the receipt billings? Yes, the receipt billings are reviewed. Why didn’t the review catch the error? The office specialist did not catch the error and there was an oversight on part of the reviewer.

Potential Effect: The Town is subjected to an increased risk that misstatements or unauthorized transactions will not be prevented, detected, and corrected on a timely basis. There is also increased risk that the Town might not have billed or received the proper revenue for the Day Use permit during the year. The maximum impact of the Day Use permit error, assuming 100% charges were incorrect, is approximately $5,000.

Recommendation: The Town should ensure that all permit fees are processed in a consistent manner in accordance with the Master Fee Schedule. The Town should also ensure that staff understands how to properly calculate permit fees to charge to customers. The Town should lock staff out of the ability to override the charges in the System so manual calculations cannot be completed without a supervisor’s approval.

Management’s Responses:

We agreed with the Auditor’s recommendation and will and/also have implemented reviews by staff entering the cash receipt to ensure the proper amount was charged. If not, then the correct amount is identified, and the customer is notified. The correct amount of the fee is then collected. 4

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2024-03: TIMELINESS OF INVOICE PAYMENTS
Criteria: The Town should pay vendor invoices in a timely manner within 30-45 days upon receiving invoices.

Condition: We noted during our disbursement testing that:

1. The Town made a payment on July 20, 2023, in the amount of $8,479.36, for an invoice dated June 1, 2023.

2. The Town made a payment on October 5, 2023, in the amount of $9,728, for an invoice dated June 20, 2023.

Cause: The town hired a new Accountant in the fall of 2023, who required time to be trained and became familiar with the invoice processing procedures.

Potential Effect: The Town is subjected to an increased risk that misstatements or unauthorized transactions will not be prevented, detected, and corrected on a timely basis. The expenditures might not be reflected in the correct fiscal years and/or paid in a timely manner.

Recommendation: The Town should train the staff or have a backup plan to ensure that invoices are processed in a timely manner.

Management’s Responses:

We agreed with the Auditor’s recommendation and are providing adequate training of staff. The Town does also have a net 30-day terms and for the most part does pay invoices prior to payment terms. During audit close the Finance Department notifies Town Departments to ensure vendors are contacted to ensure all invoices are remitted so they can be processed for year-end close. Of the disbursements above the Town tends to receive more invoices toward the end of the fiscal year to ensure payments are processed in the correct fiscal year. Item 1 was paid 50 days from the invoice date. Item 2 was an invoice that was received late and was processed in the correct fiscal year.
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS

CURRENT AND UPCOMING GASB PRONOUNCEMENTS
The following comment represents new pronouncements taking affect in the next few fiscal years. We cite them here to keep you informed of developments:

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.

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.
6

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 101 – Compensated Absences (Continued)
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.

GASB 102 – Certain Risk Disclosures
State and local governments face a variety of risks that could negatively affect the level of service they provide or their ability to meet obligations as they come due. Although governments are required to disclose information about their exposure to some of those risks, essential information about other risks that are prevalent among state and local governments is not routinely disclosed because it is not explicitly required. The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints.

This Statement defines a concentration as a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority. Concentrations and constraints may limit a government’s ability to acquire resources or control spending.

This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.

If a government determines that those criteria for disclosure have been met for a concentration or constraint, it should disclose information in notes to financial statements in sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the government’s vulnerability to the risk of a substantial impact. The disclosure should include descriptions of the following:
7

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 102 – Certain Risk Disclosures (Continued)
• The concentration or constraint.
• Each event associated with the concentration or constraint that could cause a substantial impact if the event had occurred or had begun to occur prior to the issuance of the financial statements. • Actions taken by the government prior to the issuance of the financial statements to mitigate the risk.

How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will improve financial reporting by providing users of financial statements with essential information that currently is not often provided. The disclosures will provide users with timely information regarding certain concentrations or constraints and related events that have occurred or have begun to occur that make a government vulnerable to a substantial impact. As a result, users will have better information with which to understand and anticipate certain risks to a government’s financial condition.

EFFECTIVE FISCAL YEAR 2025/26:

GASB 103 – Financial Reporting Model Improvements
The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This Statement also addresses certain application issues.

Management’s Discussion and Analysis – This Statement continues the requirement that the basic financial statements be preceded by management’s discussion and analysis (MD&A), which is presented as required supplementary information (RSI). MD&A provides an objective and easily readable analysis of the government’s financial activities based on currently known facts, decisions, or conditions and presents comparisons between the current year and the prior year. This Statement requires that the information presented in MD&A be limited to the related topics discussed in five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long-Term Financing Activity, and (5) Currently Known Facts, Decisions, or Conditions.

Furthermore, this Statement stresses that the detailed analyses should explain why balances and results of operations changed rather than simply presenting the amounts or percentages by which they changed.

This Statement emphasizes that the analysis provided in MD&A should avoid unnecessary duplication by not repeating explanations that may be relevant to multiple sections and that “boilerplate” discussions should be avoided by presenting only the most relevant information, focused on the primary government.

In addition, this Statement continues the requirement that information included in MD&A distinguish between that of the primary government and its discretely presented component units.

Unusual or Infrequent Items – This Statement describes unusual or infrequent items as transactions and other events that are either unusual in nature or infrequent in occurrence. Furthermore, governments are required to display the inflows and outflows related to each unusual or infrequent item separately as the last presented flow(s) of resources prior to the net change in resource flows in the government-wide, governmental fund, and proprietary fund statements of resource flows. 8

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 103 – Financial Reporting Model Improvements (Continued) Presentation of the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position – This Statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses.

Operating revenues and expenses are defined as revenues and expenses other than nonoperating revenues and expenses. Nonoperating revenues and expenses are defined as (1) subsidies received and provided, (2) contributions to permanent and term endowments, (3) revenues and expenses related to financing, (4) resources from the disposal of capital assets and inventory, and (5) investment income and expenses.

In addition to the subtotals currently required in a proprietary fund statement of revenues, expenses, and changes in fund net position, this Statement requires that a subtotal for operating income (loss) and noncapital subsidies be presented before reporting other nonoperating revenues and expenses. Subsidies are defined as (1) resources received from another party or fund (a) for which the proprietary fund does not provide goods and services to the other party or fund and (b) that directly or indirectly keep the proprietary fund’s current or future fees and charges lower than they would be otherwise, (2) resources provided to another party or fund (a) for which the other party or fund does not provide goods and services to the proprietary fund and (b) that are recoverable through the proprietary fund’s current or future pricing policies, and (3) all other transfers.

Major Component Unit Information – This Statement requires governments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. If the readability of those statements would be reduced, combining statements of major component units should be presented after the fund financial statements.

Budgetary Comparison Information – This Statement requires governments to present budgetary comparison information using a single method of communication—RSI. Governments also are required to present (1) variances between original and final budget amounts and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in notes to RSI.

How the Changes in This Statement Will Improve Financial Reporting The requirements for MD&A will improve the quality of the analysis of changes from the prior year, which will enhance the relevance of that information. They also will provide clarity regarding what information should be presented in MD&A.

The requirements for the separate presentation of unusual or infrequent items will provide clarity regarding which items should be reported separately from other inflows and outflows of resources.

The definitions of operating revenues and expenses and of nonoperating revenues and expenses will replace accounting policies that vary from government to government, thereby improving comparability.

The addition of a subtotal for operating income (loss) and noncapital subsidies will improve the relevance of information provided in the proprietary fund statement of revenues, expenses, and changes in fund net position.
9

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 103 – Financial Reporting Model Improvements (Continued) The requirement for presentation of major component unit information will improve comparability.

The requirement that budgetary comparison information be presented as RSI will improve comparability, and the inclusion of the specified variances and the explanations of significant variances will provide more useful information for making decisions and assessing accountability. 10

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2023-01 STALE OUTSTANDING CHECKS
Criteria: Items in the outstanding checklist should be kept current to reflect the Town’s cash balance accurately.

Condition: We noted the Town has over thirty outstanding checks, totaling approximately $195 thousand and more than one year old.

Cause: The Town does not have a formal/informal policy for handling outstanding checks.

Potential Effect: This practice does not promote proper control over disbursements.

Recommendation: We recommend that the Town to:
• Establish a formal policy and standard procedures for handling stale checks. • Take appropriate measures to follow up on the existing stale checks and designate staff to follow up regularly every six months.
• Consider publishing stale checks older than one year and writing them off with proper approval if they are not claimed after publication, or send them to the State as unclaimed property.

Management Responses:

The Town is aware that the outstanding checklist should be kept current to reflect the Town’s cash balance accurately. Of the thirty outstanding checks totaling approximately $195 thousand and more, there was one check for $100,000 for refund outstanding to a public utility company for public works deposit. This was voided and reissued to public utility.

The Town informal policy is that it attempts to contact the payee for any outstanding checks to determine if they want/need a check voided and reissued to them accordingly. If contacting the payee is unsuccessful, and the check remains outstanding for up to a year, it is moved to unclaimed property with the state. After 3 years, if still unclaimed, a notice is placed in the local newspaper identifying the unclaimed check. Finally, if this effort does not produce any results, the Town may escheat the checks to the State of California instead of reversing the asset to the Town’s balance sheet. The Town staff will work on publishing checks older than 1 year and those not claimed after publication will be escheated to the State of California. Staff will follow up regularly every six months with payee of outstanding checks.

Current Year Status:

Town Finance department is going to utilize Temporary help staff to contact the payee about their unclaimed property and attempt to reissue their outstanding check. We have a balance of $156,261 in payable unclaimed. If we are not successful in contacting payees we will send to the State as unclaimed property. We will follow the above recommendations regularly every six months. 11

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2023-02 TIMELINESS OF FINALIZING FINANCIAL REPORTS
Criteria: Effective organizations develops plans to ensure that adequate resources are available to analyze the general ledger to ensure that all accounts are accurate and the financial reports are reviewed timely for the reporting year.

Condition: Upon the audit completion, the financial report draft was subsequently provided to the finance for review in November 2023. However due to Town staff communication oversight the review was in progress, but was delayed till March of 2024.

Cause: Town Staff reviewed the financial report draft in December and January, noted updates to the financial statements and made notes on updated items. However, staff did not properly update the auditor of their report review and potential changes until March 2024. With the FY 2023/24 mid-year review and the start of the budget process following the new year, staff worked on completing the management discussion analysis. Management bandwidth was overextended on priorities.

Potential Effect: The above condition delayed the finalization of the audited financial reports, increasing the risk that unauthorized transactions, errors or misstatements may go undetected, and corrections may not be made in a timely manner.

Recommendation: The Town should analyze staff resources to ensure that the financial report is reviewed timely.

Management Responses:

Staff resources and priorities have been evaluated and are adequate for future financial reports review.

Financial Management dealt with extenuating circumstances that occurred during the Fiscal Year 2022/23 audit. These circumstances are being overcome and staff prioritizes continued adequate finalization of audit reports timely.

Current Year Status:

Staff resources and priorities are continually being evaluated for future financial reports review. During the fiscal year 2024/25 we experienced a staff member out on FMLA for six months. Identified resources for staff to assist Financial Management on financial review reports were put on hold as our departmentmaintained operations. There was mainly also an unmitigated issue in getting our GASB 75 OPEB Actuary report in time for FY23/24 audit. The OPEB Actuary was extremely delayed with all clients as the actuary moved to a new report program. The Town did not get its OPEB actuary report until late December 2024. This delayed our completion of our FY 2023/24 Basic Financial reports considerably.

With the FY 2024/25 mid-year review and the start of the budget process following the new year, staff worked on completing the management discussion analysis. Management bandwidth was overextended on multiple priorities. Financial report and audit review will be better timed as priorities are to have final audit and financial reports completed before the new calendar year. 12

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

FOR THE YEAR ENDED
JUNE 30, 2024

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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL
For the Year Ended June 30, 2024
Table of Contents
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MEMORANDUM ON INTERNAL CONTROL
To the City Council of
the Town of Atherton, California
In planning and performing our audit of the basic financial statements of the Town, as of and for the year ended June 30, 2024, in accordance with auditing standards generally accepted in the United States of America, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing 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 Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’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 Town’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.

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 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
February 5, 2025
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2024-01: TREASURER’S REPORT TIMELINESS
Criteria: The Treasurer’s Report (TR) is an important element of the Town’s internal control structure.

To maintain effective controls, the Town’s investment policy requires that the Treasurer’s Report be submitted to the City council after each quarter-end. Additionally, California Government Code 53646 requires that the quarterly report shall be submitted within 45 days following the end of the covered quarter.

Condition: We noticed the Town’s TR for December 2023 and March 2024 were submitted to the Council on 3/20/24 and 6/19/24 correspondingly, which were more than 2.5 months after the quarter ended.

Cause: Due to the timing of the availability of monthly statements and reports, combined with Council meeting dates not aligning for presentation, and the Staff Director's limited bandwidth for mid-year tasks, finalizing the previous audit, and the commencement of FY 24/25 budget preparations.

Potential Effect: The Town is not in compliance with its investment policy and California Government Code which suggests that the TR should be submitted within 45 days of quarter end.

Recommendation: We recommend that the Town should submit the TR as soon as possible after each quarter-end.

Management’s Responses:

We agree with the Auditor’s recommendation and the Town staff will work conscientiously to ensure the Treasurers’ report gets submitted timely to the City Council for review within 45 days following the end of the covered quarter. The City Council Meetings and when the investment reports are available after the quarter end sometimes may lead to the Treasurers report being submitted beyond the 45 days’ submission. We agree that we shall submit the Treasurers Report as soon as possible after each quarter end. 3

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2024-02: CASH RECEIPT – INCORRECT RATE CHARGE
Criteria: The Town should charge customers the rates authorized in the applicable Master Fee Schedule.

Condition: We noticed an error during our cash receipt testing. A day use permit was charged incorrectly due to manual calculations being used. The day-use permit rates differ between Atherton residents and non-Atherton residents and vary based on the number of people. In this case, the amount charged for a non-Atherton resident with 26-50 people for a day-use permit is $300. However, the town only charged the permit holder $150, the rate for non-Atherton residents with 13-25 people.

Cause: According to the Finance Director, the Town had turnover, the new staff did not understand how to properly account for some of the charges in the day use permit fee and performed a manual calculation and overrode the values in the System to compute day use permit fee. Did someone review it? Q for Town:

1. Was this an isolated incident? This was an isolated incident. We had temporary staff working doing our park event reservations and this was incorrectly charged.

2. Why would an override be allowed in the system? This was not an override in the system. The permit fee form was the correct amount, the credit card charge amount was incorrectly charged at the resident rate.

3. Anyone review the receipt billings? Yes, the receipt billings are reviewed. Why didn’t the review catch the error? The office specialist did not catch the error and there was an oversight on part of the reviewer.

Potential Effect: The Town is subjected to an increased risk that misstatements or unauthorized transactions will not be prevented, detected, and corrected on a timely basis. There is also increased risk that the Town might not have billed or received the proper revenue for the Day Use permit during the year. The maximum impact of the Day Use permit error, assuming 100% charges were incorrect, is approximately $5,000.

Recommendation: The Town should ensure that all permit fees are processed in a consistent manner in accordance with the Master Fee Schedule. The Town should also ensure that staff understands how to properly calculate permit fees to charge to customers. The Town should lock staff out of the ability to override the charges in the System so manual calculations cannot be completed without a supervisor’s approval.

Management’s Responses:

We agreed with the Auditor’s recommendation and will and/also have implemented reviews by staff entering the cash receipt to ensure the proper amount was charged. If not, then the correct amount is identified, and the customer is notified. The correct amount of the fee is then collected. 4

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2024-03: TIMELINESS OF INVOICE PAYMENTS
Criteria: The Town should pay vendor invoices in a timely manner within 30-45 days upon receiving invoices.

Condition: We noted during our disbursement testing that:

1. The Town made a payment on July 20, 2023, in the amount of $8,479.36, for an invoice dated June 1, 2023.

2. The Town made a payment on October 5, 2023, in the amount of $9,728, for an invoice dated June 20, 2023.

Cause: The town hired a new Accountant in the fall of 2023, who required time to be trained and became familiar with the invoice processing procedures.

Potential Effect: The Town is subjected to an increased risk that misstatements or unauthorized transactions will not be prevented, detected, and corrected on a timely basis. The expenditures might not be reflected in the correct fiscal years and/or paid in a timely manner.

Recommendation: The Town should train the staff or have a backup plan to ensure that invoices are processed in a timely manner.

Management’s Responses:

We agreed with the Auditor’s recommendation and are providing adequate training of staff. The Town does also have a net 30-day terms and for the most part does pay invoices prior to payment terms. During audit close the Finance Department notifies Town Departments to ensure vendors are contacted to ensure all invoices are remitted so they can be processed for year-end close. Of the disbursements above the Town tends to receive more invoices toward the end of the fiscal year to ensure payments are processed in the correct fiscal year. Item 1 was paid 50 days from the invoice date. Item 2 was an invoice that was received late and was processed in the correct fiscal year.
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS

CURRENT AND UPCOMING GASB PRONOUNCEMENTS
The following comment represents new pronouncements taking affect in the next few fiscal years. We cite them here to keep you informed of developments:

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.

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.
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 101 – Compensated Absences (Continued)
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.

GASB 102 – Certain Risk Disclosures
State and local governments face a variety of risks that could negatively affect the level of service they provide or their ability to meet obligations as they come due. Although governments are required to disclose information about their exposure to some of those risks, essential information about other risks that are prevalent among state and local governments is not routinely disclosed because it is not explicitly required. The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints.

This Statement defines a concentration as a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority. Concentrations and constraints may limit a government’s ability to acquire resources or control spending.

This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.

If a government determines that those criteria for disclosure have been met for a concentration or constraint, it should disclose information in notes to financial statements in sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the government’s vulnerability to the risk of a substantial impact. The disclosure should include descriptions of the following:
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 102 – Certain Risk Disclosures (Continued)
• The concentration or constraint.
• Each event associated with the concentration or constraint that could cause a substantial impact if the event had occurred or had begun to occur prior to the issuance of the financial statements. • Actions taken by the government prior to the issuance of the financial statements to mitigate the risk.

How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will improve financial reporting by providing users of financial statements with essential information that currently is not often provided. The disclosures will provide users with timely information regarding certain concentrations or constraints and related events that have occurred or have begun to occur that make a government vulnerable to a substantial impact. As a result, users will have better information with which to understand and anticipate certain risks to a government’s financial condition.

EFFECTIVE FISCAL YEAR 2025/26:

GASB 103 – Financial Reporting Model Improvements
The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This Statement also addresses certain application issues.

Management’s Discussion and Analysis – This Statement continues the requirement that the basic financial statements be preceded by management’s discussion and analysis (MD&A), which is presented as required supplementary information (RSI). MD&A provides an objective and easily readable analysis of the government’s financial activities based on currently known facts, decisions, or conditions and presents comparisons between the current year and the prior year. This Statement requires that the information presented in MD&A be limited to the related topics discussed in five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long-Term Financing Activity, and (5) Currently Known Facts, Decisions, or Conditions.

Furthermore, this Statement stresses that the detailed analyses should explain why balances and results of operations changed rather than simply presenting the amounts or percentages by which they changed.

This Statement emphasizes that the analysis provided in MD&A should avoid unnecessary duplication by not repeating explanations that may be relevant to multiple sections and that “boilerplate” discussions should be avoided by presenting only the most relevant information, focused on the primary government.

In addition, this Statement continues the requirement that information included in MD&A distinguish between that of the primary government and its discretely presented component units.

Unusual or Infrequent Items – This Statement describes unusual or infrequent items as transactions and other events that are either unusual in nature or infrequent in occurrence. Furthermore, governments are required to display the inflows and outflows related to each unusual or infrequent item separately as the last presented flow(s) of resources prior to the net change in resource flows in the government-wide, governmental fund, and proprietary fund statements of resource flows. 8

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 103 – Financial Reporting Model Improvements (Continued) Presentation of the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position – This Statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses.

Operating revenues and expenses are defined as revenues and expenses other than nonoperating revenues and expenses. Nonoperating revenues and expenses are defined as (1) subsidies received and provided, (2) contributions to permanent and term endowments, (3) revenues and expenses related to financing, (4) resources from the disposal of capital assets and inventory, and (5) investment income and expenses.

In addition to the subtotals currently required in a proprietary fund statement of revenues, expenses, and changes in fund net position, this Statement requires that a subtotal for operating income (loss) and noncapital subsidies be presented before reporting other nonoperating revenues and expenses. Subsidies are defined as (1) resources received from another party or fund (a) for which the proprietary fund does not provide goods and services to the other party or fund and (b) that directly or indirectly keep the proprietary fund’s current or future fees and charges lower than they would be otherwise, (2) resources provided to another party or fund (a) for which the other party or fund does not provide goods and services to the proprietary fund and (b) that are recoverable through the proprietary fund’s current or future pricing policies, and (3) all other transfers.

Major Component Unit Information – This Statement requires governments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. If the readability of those statements would be reduced, combining statements of major component units should be presented after the fund financial statements.

Budgetary Comparison Information – This Statement requires governments to present budgetary comparison information using a single method of communication—RSI. Governments also are required to present (1) variances between original and final budget amounts and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in notes to RSI.

How the Changes in This Statement Will Improve Financial Reporting The requirements for MD&A will improve the quality of the analysis of changes from the prior year, which will enhance the relevance of that information. They also will provide clarity regarding what information should be presented in MD&A.

The requirements for the separate presentation of unusual or infrequent items will provide clarity regarding which items should be reported separately from other inflows and outflows of resources.

The definitions of operating revenues and expenses and of nonoperating revenues and expenses will replace accounting policies that vary from government to government, thereby improving comparability.

The addition of a subtotal for operating income (loss) and noncapital subsidies will improve the relevance of information provided in the proprietary fund statement of revenues, expenses, and changes in fund net position.
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TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 103 – Financial Reporting Model Improvements (Continued) The requirement for presentation of major component unit information will improve comparability.

The requirement that budgetary comparison information be presented as RSI will improve comparability, and the inclusion of the specified variances and the explanations of significant variances will provide more useful information for making decisions and assessing accountability. 10

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2023-01 STALE OUTSTANDING CHECKS
Criteria: Items in the outstanding checklist should be kept current to reflect the Town’s cash balance accurately.

Condition: We noted the Town has over thirty outstanding checks, totaling approximately $195 thousand and more than one year old.

Cause: The Town does not have a formal/informal policy for handling outstanding checks.

Potential Effect: This practice does not promote proper control over disbursements.

Recommendation: We recommend that the Town to:
• Establish a formal policy and standard procedures for handling stale checks. • Take appropriate measures to follow up on the existing stale checks and designate staff to follow up regularly every six months.
• Consider publishing stale checks older than one year and writing them off with proper approval if they are not claimed after publication, or send them to the State as unclaimed property.

Management Responses:

The Town is aware that the outstanding checklist should be kept current to reflect the Town’s cash balance accurately. Of the thirty outstanding checks totaling approximately $195 thousand and more, there was one check for $100,000 for refund outstanding to a public utility company for public works deposit. This was voided and reissued to public utility.

The Town informal policy is that it attempts to contact the payee for any outstanding checks to determine if they want/need a check voided and reissued to them accordingly. If contacting the payee is unsuccessful, and the check remains outstanding for up to a year, it is moved to unclaimed property with the state. After 3 years, if still unclaimed, a notice is placed in the local newspaper identifying the unclaimed check. Finally, if this effort does not produce any results, the Town may escheat the checks to the State of California instead of reversing the asset to the Town’s balance sheet. The Town staff will work on publishing checks older than 1 year and those not claimed after publication will be escheated to the State of California. Staff will follow up regularly every six months with payee of outstanding checks.

Current Year Status:

Town Finance department is going to utilize Temporary help staff to contact the payee about their unclaimed property and attempt to reissue their outstanding check. We have a balance of $156,261 in payable unclaimed. If we are not successful in contacting payees we will send to the State as unclaimed property. We will follow the above recommendations regularly every six months. 11

TOWN OF ATHERTON

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2023-02 TIMELINESS OF FINALIZING FINANCIAL REPORTS
Criteria: Effective organizations develops plans to ensure that adequate resources are available to analyze the general ledger to ensure that all accounts are accurate and the financial reports are reviewed timely for the reporting year.

Condition: Upon the audit completion, the financial report draft was subsequently provided to the finance for review in November 2023. However due to Town staff communication oversight the review was in progress, but was delayed till March of 2024.

Cause: Town Staff reviewed the financial report draft in December and January, noted updates to the financial statements and made notes on updated items. However, staff did not properly update the auditor of their report review and potential changes until March 2024. With the FY 2023/24 mid-year review and the start of the budget process following the new year, staff worked on completing the management discussion analysis. Management bandwidth was overextended on priorities.

Potential Effect: The above condition delayed the finalization of the audited financial reports, increasing the risk that unauthorized transactions, errors or misstatements may go undetected, and corrections may not be made in a timely manner.

Recommendation: The Town should analyze staff resources to ensure that the financial report is reviewed timely.

Management Responses:

Staff resources and priorities have been evaluated and are adequate for future financial reports review.

Financial Management dealt with extenuating circumstances that occurred during the Fiscal Year 2022/23 audit. These circumstances are being overcome and staff prioritizes continued adequate finalization of audit reports timely.

Current Year Status:

Staff resources and priorities are continually being evaluated for future financial reports review. During the fiscal year 2024/25 we experienced a staff member out on FMLA for six months. Identified resources for staff to assist Financial Management on financial review reports were put on hold as our departmentmaintained operations. There was mainly also an unmitigated issue in getting our GASB 75 OPEB Actuary report in time for FY23/24 audit. The OPEB Actuary was extremely delayed with all clients as the actuary moved to a new report program. The Town did not get its OPEB actuary report until late December 2024. This delayed our completion of our FY 2023/24 Basic Financial reports considerably.

With the FY 2024/25 mid-year review and the start of the budget process following the new year, staff worked on completing the management discussion analysis. Management bandwidth was overextended on multiple priorities. Financial report and audit review will be better timed as priorities are to have final audit and financial reports completed before the new calendar year. 12

Item No. 5
Town of Atherton
CITY COUNCIL STAFF REPORT – PUBLIC HEARING
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: MONA EBRAHIMI, CITY ATTORNEY
DATE: MAY 21, 2025
SUBJECT: INTRODUCE AND WAIVE THE FIRST READING OF AN
ORDINANCE AMENDING SECTIONS 3.16.240 AND 3.16.280 OF

THE ATHERTON MUNICIPAL CODE RELATING TO
PURCHASING; CONSIDERATION AND APPROVAL OF A

RESOLUTION ESTABLISHING UPDATED AMOUNTS FOR

PROCUREMENT OF PUBLIC WORKS PROJECTS FOR FORCE

ACCOUNT/OPEN MARKET PROCEDURES, INFORMAL

BIDDING PROCEDURES, AND FORMAL BIDDING

PROCEDURES

RECOMMENDATION
It is recommended that the Council introduce and waive the first reading of the attached Ordinance amending two sections of Chapter 3.16 relating to Purchasing, including Section 3.16.240 relating to Requirements for contracting public works projects, and Section 3.16.280 relating to Public works project bids in excess of maximum authority. Adopt the attached Resolution that opts into the California Uniform Public Construction Cost Accounting Act ("Act") and establishes updated maximum amounts for procurement of public works projects for force account/open market procedures, informal bidding procedures, and formal bidding procedures,

BACKGROUND
The Act allows public agencies to utilize more relaxed bidding procedures for certain public works projects. The Act is codified in Public Contract Code sections 22000 et seq. Public agencies must elect to participate in the Act to be subject to it.

In 2012, the Town of Atherton adopted a resolution electing to participate in the Act.

Public Contract Code section 22034 requires a local agency who has opted into the Act to adopt an informal bidding ordinance to govern the selection of contractors to perform public works projects for works of a certain amount. In 2012, the Town of Atherton adopted an informal bidding

Bidding Process
May 21, 2025

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ordinance to comply with Public Contract code section 22034.

As part of the Act, every five years, the California Uniform Construction Cost Accounting Commission (the "Commission") is required to consider whether there have been material changes in public construction costs and make recommendations to the State Controller. These updates affect the amounts associated with force account, informal bidding procedures, and formal bidding procedures. Atherton Municipal Code section 3.16.240 requires these amounts to be established by resolution of the City Council on a periodic basis.

ANALYSIS
The attached Ordinance updates two sections of the Atherton Municipal Code to reflect recent changes in the law relating to the Act. The changes include modifying the definition of "public works projects" in section Atherton Municipal Code section 3.16.240 so it reflects the Public Contracts Code's definition and modifying the language of Atherton Municipal Code section

3.16.280 to reflect the updated amounts in the law. The modification to section 3.16.280 uses language to ensure the municipal code section accurately reflects the amounts as periodically amended in the Public Contracts Code.

The attached Resolution opts into the Act and establishes amounts for (1) force account, negotiated contract, or purchase order; (2) contract by informal procedures; and (3) contract by formal bidding procedure. This Ordinance reflects changes to dollar amounts made by Assembly Bill 2192, which became effective January 1, 2025, and follows the procedures laid out in Atherton Municipal Code section 3.16.240.

FISCAL IMPACT
Notices for Competitive Bidding occur at a cost to the Town. Being able to streamline certain projects by relying on the Act will likely save the Town money.

GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• By opting into the Act, the Town of Atherton is able to more efficiently complete public works projects under $75,000.

POLICY FOCUS
The attached Ordinance and Resolution align with the goal of Atherton to efficiently complete smaller public works projects.

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

Bidding Process
May 21, 2025

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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 Protection District, service provides (water, power, and sewer), and regional elected officials.

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item has not been before a Town Committee or Commission

ATTACHMENTS
ATTACHMENT 1 – Ordinance NO. 67X
ATTACHMENT 2 – Resolution NO. 2025 - X

ATTACHMENT 1
ORDINANCE NO. __

AN ORDINANCE OF THE CITY COUNCIL OF THE TOWN OF ATHERTON AMENDING SECTIONS 3.16.240 AND 3.16.280 OF CHAPTER 3.16 OF THE ATHERTON

MUNICIPAL CODE RELATING TO PURCHASING
WHEREAS, the California Uniform Public Construction Cost Accounting Act (the "Act"), located at Public Contract Code section 22000 et seq., allows public agencies to utilize more relaxed bidding procedures for certain public projects after the public agency has opted in; and WHEREAS, the California Uniform Construction Cost Accounting Commission, established under the Act, has developed uniform public construction cost accounting procedures for implementation by local agencies in the performance of or in the contracting for construction of public projects; and
WHEREAS, in 2012, the Town of Atherton adopted a resolution opting in and an ordinance meeting the requirements of the Act, specifically Public Contract Code section 22034; and WHEREAS, since the adoption of the ordinance, the Act has been amended, and the changes in the law are not reflected in Atherton's Municipal Code; and WHEREAS, to ensure the Atherton Municipal Code reflects the current state of the law relating to the Act, the City Council desires to updates its ordinances The City Council of the Town of Atherton does hereby ordain as follows:

SECTION 1: The following sections of Chapter 3.16 of the Atherton Municipal Code are amended to read as follows:

3.16.240 Requirements for contracting public works projects.

A public works project means any of the following: (1) construction, reconstruction, erection, alteration, renovation, improvement, demolition, installation, and repair work involving any publicly owned, leased, or operated facility; or (2) painting or repainting of any publicly owned, leased, or operated facility; or (3) in the case of a publicly owned electric utility system, "public project" shall include only the construction, erection, improvement, or repair of dams, reservoirs, powerplants, and electrical transmission lines of two hundred thirty thousand (230,000) volts and higher. A public works project does not include maintenance work, which includes the following: (1) routine, recurring, and usual work for the preservation or protection of any publicly owned or publicly operated facility for its intended purposes; or (2) minor repainting; or (3) resurfacing of streets and highways at less than one inch; or (4) landscape maintenance, including mowing, watering, trimming, pruning, planting, replacement of plants, and servicing of irrigation and sprinkler systems; or (5) work performed to keep, operate, and maintain publicly owned water, power, or waste disposal systems, including, but not limited to, dams, reservoirs, power plants, and electrical transmission lines of two hundred thirty thousand (230,000) volts and higher.

A. Procurement of Public Works Projects—Force Account/Open Market Procedures. Public works projects of up to an amount established by resolution of the city council on a periodic basis, appropriations for which have been approved by the city council, may be performed by the employees of the town or its agencies by force account, or by negotiated contract or purchase order approved by the city manager.

B. Procurement of Public Works Projects—Informal Bidding Procedures. Public works projects greater than the amount qualifying for a force account/open market procedure up to and including an amount established by resolution of the city council on a periodic basis may be let to contract by the informal bidding procedures (alternative procedure) set forth in this chapter as prescribed in Section 3.16.250.

C. Procurement of Public Works Projects—Formal Bidding Procedures. Public works projects greater than an amount established by resolution of the city council on a periodic basis shall be let to contract by the formal bidding procedure set forth in the Uniform Construction Cost Accounting Act.

3.16.280 Public works project bids in excess of maximum authority.

If all bids received are in excess of the current amount established in California Public Contract Code Section 22034, the city council may, by adoption of a resolution by a four-fifths vote, award the contract, at the current amount established in Public Contract Code Section 22034, or less, to the lowest responsible bidder, if the city council determines the cost estimate of the town was reasonable.

SECTION 2: Severability. The City Council hereby declares it would have passed this Ordinance sentence by sentence, paragraph by paragraph, and section by section, and does hereby declare that any provision in the Ordinance severable and, if for any reason any sentence, paragraph, or section of this Ordinance shall be held invalid, such decision shall not affect the validity of the remaining parts of this Ordinance.

SECTION 3: Effective Date. This Ordinance shall be posted in at least three public places according to law and shall take effect and be in force from and after 30 days after its passage and adoption.

Introduced on the ___ day of ___, 2025.

Passed and adopted as ordinance of the City Council of the Town of Atherton at a regular meeting thereof held on the ___ day of ___, 2025 by the following vote:

AYES COUNCILMEMBERS:

NOES COUNCILMEMBERS:

ABSENT COUNCILMEMBERS:

ABSTAIN COUNCILMEMBERS:

ATTEST: CITY CLERK
MAYOR

ATTACHMENT 2

TOWN OF ATHERTON
CITY COUNCIL RESOLUTION NO. __

A RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF ATHERTON,

CALIFORNIA, ELECTING TO BECOME SUBJECT TO THE UNIFORM PUBLIC

CONSTRUCTION COST ACCOUNTING ACT AND ADOPTING UPDATED CONTRACT

REQUIREMENT AMOUNTS FOR PROCUREMENT OF PUBLIC WORKS PROJECTS

FOR FORCE ACCOUNT/OPEN MARKET PROCEDURES, INFORMAL BIDDING

PROCEDURES, AND FORMAL BIDDING PROCEDURES
WHEREAS, prior to the passage of Assembly Bill No. 1666, Chapter 1054, Statutes of 1983, which added Chapter 2, commencing with Section 22000, to Part 3 of Division 2 of the Public Contract Code, existing law did not provide a uniform cost accounting standard for construction work performed or contracted by local public agencies; and WHEREAS, Public Contract Code section 22000 et seq., the Uniform Public Construction Cost Accounting Act (the "Act"), establishes such a uniform cost accounting standard; WHEREAS, the California Uniform Construction Cost Accounting Commission (the "Commission") established under the Act has developed uniform public construction cost accounting procedures for implementation by local public agencies in the performance of or in the contracting for construction of public projects; and
WHEREAS, the Act, located at Public Contract Code section 22000 et seq., establishes bidding thresholds for municipalities that have opted into the Act; and WHEREAS, the Act's bidding thresholds are updated every five years after review and recommendation by the Commission; and
WHEREAS, establishment of the dollar limits for the various procedures and processes listed in Atherton Municipal Code Chapter 3.16, relating to Purchasing, including Atherton's ordinances related to the Act located at Atherton Municipal Code section 3.16.240, are to be established by resolution of the City Council on a periodic basis; and WHEREAS, Assembly Bill 2192, effective January 1, 2025, increased the bidding thresholds for municipalities that have opted into the Act following review and recommendation by the Commission; and
WHEREAS, to ensure the Town of Atherton's policies reflect the recent changes in the law, the Town of Atherton desires to adopt this resolution reflecting the increased bidding thresholds established by Assembly Bill 2192.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the Town of Atherton, California, hereby elects under Public Contract Code section 22030 to become subject to the uniform public construction cost accounting procedures set forth in the Act and to the Commission's policies and procedures manual and cost accounting review procedures, as they may each from time

to time be amended, and directs that the City Clerk notify the State Controller forthwith of this election; and
NOW, THEREFORE, BE IT FURTHER RESOLVED THAT THE City Council of the Town of Atherton does hereby adopt the following amounts by resolution as described in Atherton Municipal Code section 3.16.240:

1. The dollar limit for contracting public works projects through the force account/open market procedure as set forth in Atherton Municipal Code section 3.16.240(A) is an amount up to seventy five thousand dollars ($75,000).

2. The dollar limit for contracting public works projects through the informal bidding procedure as set forth in Atherton Municipal Code section 3.16.240(B) is an amount greater than seventy five thousand dollars ($75,000) up to and including two hundred twenty thousand dollars ($220,000).

3. The dollar limit for contracting public works projects through the formal bidding procedure as set forth in Atherton Municipal Code section 3.16.240(C) is an amount greater than two hundred twenty thousand dollars ($220,000).

PASSED AND ADOPTED by the City Council of the Town of Atherton on this __ day of __ 2025, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:
____________________________
Elizabeth Lewis, Mayor
____________________________
Anthony W. Suber, City Clerk
____________________________
Mona Ebrahimi, City Attorney

Item No. 6
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT OVADIA, PUBLIC WORKS DIRECTOR
DATE: MAY 21, 2025
SUBJECT: ADOPTION OF SPEED LIMITS IN SCHOOL ZONES AND PROVIDING

FEEDBACK DIRECTION RERGARDING SPEED LIMITS ALONG

VALPARAISO AVENUE
RECOMMENDATION:

It is recommended that the City Council adopt a resolution setting the speed limit at 15 Miles per Hour in certain School Zones and provide feedback and direction regarding the potential reduction of the speed limit on Valparaiso Avenue to 25 Miles per Hour along Valparaiso Avenue, a designated Safety Corridor.

BACKGROUND
The California Vehicle Code outlines the requirements for setting speed limits on local roadways. If jurisdictions wish to enforce using radar, an Engineering and Traffic Survey (E&TS) must be conducted and updated regularly (see CVC § 627 and CVC § 40802). Most roadways in California require an E&TS to justify radar enforcement. If no valid E&TS exists and enforcement is pursued, this is considered a “speed trap” (which is not legal in California). However, some roadway types do not require an E&TS for radar enforcement - these roadways are therefore exempt from this requirement of the speed trap provisions.

Local roads and in certain prima facie zones (i.e., business districts, railroad crossings with an obstructed view, uncontrolled intersections with an obstructed view, and alleys), the prima facie speed limits apply even in the absence of actual speed limit signage. In other prima facie zones (i.e., business districts and school, senior, and playground zones), prima facie speed limits apply only when speed limit signage is present.

Recent legislation allows jurisdictions to consider reduction of speed limits set via an E&TS on certain streets. Specifically, jurisdictions can consider reductions of 5 miles per hour in dense (as defined) residential districts, Business and Business Activity Districts, Senior Zones, and along designated Safety Corridors. Legislation also allows for the Page 274 of 394 Speed Limits in School Zones and along Safety Corridors April 16, 2025

establishment of 15 mile per hour limits in School Zones (with 500 feet of a school, when children are present), and 25 miles per hour up to 1,000 of school grounds under certain conditions. The reduced speed limits in school zones may be adopted by resolution.

The City Council designated the following streets as Safety Corridors when they adopted the Town’s Local Roadway Safety Plan at their November 20, 2024 City Council Meeting.

Alameda de las Pulgas
Marsh Road
Middlefield Road
Oak Grove Avenue
Valparaiso Avenue
With the completion of the Valparaiso Slurry Seal project, and restriping the roadway with narrower lanes, Menlo Park has requested that the Town reduce the speed limit along the full length of Valparaiso Avenue from 30 miles per hour to 25 miles per hour.

Both the Town and Menlo Park have designated Valparaiso Avenue as a Safety Corridor which would allow for the speed limit reduction. The City of Menlo Park has adopted the lower speed limit and has waited for the Town to consider the speed limit reduction before resigning the street. The current speed limit along Valparaiso Avenue was set based on an Engineering & Traffic Survey conducted by the City of Menlo Park. Pursuant to CVC Section 22358.7, the reduction of speed limits along safety corridors must be adopted via ordinance.

The City Council also requested that the Transportation, Bicycle and Pedestrian Safety Committee review and recommend potential speed limit reductions along the Safety Corridors and in School Zones.

ANALYSIS
The San Mateo County City/County Association of Governments has developed a San Mateo County Safe Routes to School High Injury Network Report. The report indicates that speeding is a top barrier to students walking and biking to school, and identified routes where students traveling to or from school may face increased safety challenges.

The Transportation, Pedestrian, and Bicycle Safety Committee received a presentation regarding the potential reduction in speed limits along Safety Corridors and in School Zones and following public comments and deliberation recommended the following speed limits:

School Zones:

School Street Speed
Limit Page 275 of 394
Speed Limits in School Zones and along Safety Corridors April 16, 2025

Las Lomitas Elementary Camino al Lago* 15 mph
Laurel Elementary Edge Road 15 mph
Nativity Laurel Ave** 15 mph
Sacred Heart Schools Emilie Ave 15 mph
*Shared with County of San Mateo
**Shared with Menlo Park
It is noted that the southern half of Camino al Lago between Barney Avenue and Alameda de las Pulgas is withing the jurisdictional boundaries of the County of San Mateo, and that adoption of the reduced speed limit along this segment by the County of San Mateo is required to effect the change.

The City of Menlo Park has adopted, and posted, the 15mph speed limit along Laurel Avenue (and Oak Grove Avenue) associated with the Nativity School, within their boundaries.

Though considered, the Committee did not recommend reduced speed limits for the following School Zones:

School Street
Adelante-Selby Selby Lane
Encinal Elementary Encinal Avenue
Menlo-Atherton High School Oak Grove Avenue
Menlo-Atherton High School Ringwood Avenue
Menlo School/Cartan Field Alejandra Avenue
Sacred Heart Schools Elena Ave
Sacred Heart Schools Park Lane

The Committee did not recommend reductions in speed limits along any of the designated Safety Corridors at this time.

The attached draft resolution includes the reduction of speed limits in the following school zones:

School Street Speed
Limit
Las Lomitas Elementary Camino al Lago* 15 mph
Laurel Elementary Edge Road 15 mph
Nativity Laurel Ave** 15 mph
Sacred Heart Schools Emilie Ave 15 mph
*Shared with County of San Mateo
**Shared with Menlo Park
Though not recommended by the Committee, Staff is recommending discuss the desire to reduce the speed limit along Valparaiso Avenue, within the Town of Atherton, consistent with those adopted by the City of Menlo Park, as follows:

Limits Current Proposed CVC

Speed Limits in School Zones and along Safety Corridors April 16, 2025

Street Speed
Limit
Speed
Limit
Valparaiso Avenue City Limit to Cotton Street * 30 mph 30 mph 22358.7 Valparaiso Avenue Cotton Street to El Camino
Real*
30 mph 25 mph 22358.7
*Shared with Menlo Park
As noted above, the current speed limits along Valparaiso Avenue were set pursuant to an Engineering & Traffic Survey conducted by the City of Menlo Park, and the reduction in the speed limit, if desired, must be enacted by ordinance. Should the Council desire to reduce the speed limit, consistent with the City of Menlo Park, staff would return with an ordinance for the Council’s consideration.

FISCAL IMPACT
Fiscal impact is limited to the costs associated with the installation of the new signs.

GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal Area B – Preserve Small Town Character and Quality of Life Goal Area D – Manage Circulation and Improve Safety
• Goal Area F – Be Forward-Thinking, Well-Managed, and Well-Planned

POLICY FOCUS
Policy focus should be on the desire to reduce speed limits within School Zones and along designated Safety Corridors.

ATTACHMENTS

1. School Zone Map

2. C/CAG Youth Based High Injury Network – Atherton Top Corridors

3. Draft Resolution to reduce speed limits in certain school zones

© Latitude Geographics Group Ltd.

0.22 THIS MAP IS NOT TO BE USED FOR NAVIGATION
WGS_1984_Web_Mercator_Auxiliary_Sphere

0.22 Miles This map is a user generated static output from an Internet mapping site and is for reference only. Data layers that appear on this map may or may not be accurate, current, or otherwise reliable.
0 0.11
7,123
San Mateo map
1:

San Mateo County
ATTACHMENT 1

© Latitude Geographics Group Ltd.

0.45 THIS MAP IS NOT TO BE USED FOR NAVIGATION
WGS_1984_Web_Mercator_Auxiliary_Sphere

0.45 Miles This map is a user generated static output from an Internet mapping site and is for reference only. Data layers that appear on this map may or may not be accurate, current, or otherwise reliable.
0 0.22
14,245
San Mateo map
1:

San Mateo County
ATTACHMENT 1

© Latitude Geographics Group Ltd.

0.22 THIS MAP IS NOT TO BE USED FOR NAVIGATION
WGS_1984_Web_Mercator_Auxiliary_Sphere

0.22 Miles This map is a user generated static output from an Internet mapping site and is for reference only. Data layers that appear on this map may or may not be accurate, current, or otherwise reliable.
0 0.11
7,123
San Mateo map
1:

San Mateo County
ATTACHMENT 1

Map data ©2025 Google 100 ft
ATTACHMENT 1

Map data ©2025 100 ft
Adelante Selby Spanish Immersion School
ATTACHMENT 1

Map data ©2025 Google 200 ft
ATTACHMENT 1

Map data ©2025 Google 200 ft
ATTACHMENT 1

!
!
!
!
!
Atherton Avenue
Encinal Avenue
Middlefield Road
Watkins Avenue
Stockbridge Avenue
Alameda de las Pulgas
Fair Oaks
Lane
El Camino Real
West El Camino Real
Marsh Road
Junipero Serra Freeway

ATHERTON

MENLO PARK

REDWOOD CITY
Las Lomitas Elementary
Encinal Elementary
Laurel Elementary
Adelante Selby Spanish Immersion
Menlo-Atherton High

YOUTH-BASED HIGH INJURY NETWORK (HIN) - TOP CORRIDORS

COMBINED SAFETY

PRIORITY INDEX (MUNICIPAL)
Below 50th percentile
50th - 74th percentile
75th - 84th percentile
85th - 94th percentile
95th - 99th percentile
San Mateo County Youth-Based HIN
! School
! Priority School*
Equity Priority Community (MTC, 2020) 0 0.5 1 MILES

ATHERTON

COLLISION TYPES BY LOCATION
TOP 5 COLLISION FACTORS, ALL COLLISIONS
Prepared 6/10/2022 1:17 PM

ALL COLLISIONS BY TIME OF DAY

SCHOOL SAFETY ANALYSIS
Segments are sorted by their Combined Safety Priority Index scores. Columns may not add up because collisions may be counted in multiple columns.

Collision data from 2014 to 2020 was downloaded from the statewide Transportation Injury Mapping System (TIMS) which reports all collisions resulting in an injury. 2020 data was provisional at the time of download. *Priority schools are defined as those with 75% or greater eligibility for Free and Reduced Price Meal (FRPM) programs during the 2020-2021 school year.

TOP 5 SAFETY PRIORITY CORRIDORS
COLLISION STATISTICS FOR ATHERTON, 2014-2020
See the San Mateo County SRTS High Injury Network Report for additional context and guidance on countermeasures.

ATTACHMENT 2

ATTACHMENT 3
Resolution NO. 2025 – XX Page 1 of 2 May 21, 2025
RESOLUTION NO. 2025 - XX
A Resolution of the City Council of the Town of Atherton to Reduce the Posted Speed Limit in Certain School Zones Consistent with California State Law
WHEREAS, the California Vehicle Code (CVC) Section 22358.4(b) grants authority to local jurisdictions to reduce the posted speed limit to 15 mph within 500 feet of school grounds on roads meeting certain conditions; and WHEREAS, speeding traffic along school routes is a top barrier to walking and biking to school; and
WHEREAS, the reduced speed limits in school zones are consistent with City Council goals; and
WHEREAS, San Mateo County C/CAG has developed a San Mateo County Safe Routes to School High Injury Network Report, identifying routes where students traveling to or from school may face increased safety challenges WHEREAS, City Council reviewed the policy parameters and provided direction to staff to implement reduced speed limits in school zones per state law at all qualified roadway segments contiguous to K-12 schools within the City boundary; and
WHEREAS, the reduced speed limits will be in effect while children are going to or leaving the school, either during school hours or during the noon recess period.

NOW, THEREFORE, THE CITY COUNCIL OF THE TOWN OF ATHERON, CALIFORNIA, HEREBY RESOLVES that:

1. In accordance with CEQA Guidelines section 15061(b)(3) and 15301, the reduction of speed limits near school zones and along safety corridors is exempt from CEQA review under the “common sense” and “existing facility” exemptions, respectively, because it can be seen with certainty that there is no possibility reducing vehicle speed limits near schools may have a significant effect on the environment and it concerns only minor alterations of an existing street system involving no expansion of use.

ATTACHMENT 3
Resolution NO. 2025 – XX Page 2 of 2 May 21, 2025

2. Pursuant to CVC Section 22358.4(b), 15 miles per hour shall be the prima facie speed limit at a distance within 500 feet of a school boundary where applicable on the road segments identified below.

3. The road segments identified below meet the requirements of road segments eligible for a prima facie speed limit of 15 miles per hour pursuant to CVC Section 22358.4(b).

4. The speed limits near school zones shall be in effect while children are going to or leaving the school, either during school hours or during the noon recess period.

School Zones
School Street Prima Facie
Speed Limit
Las Lomitas Elementary Camino al Lago* 15 mph
Laurel Elementary Edge Road 15 mph
Nativity Laurel Ave** 15 mph
Sacred Heart Schools Emilie Ave 15 mph
*Shared with County of San Mateo
**Shared with Menlo Park
I hereby certify that the foregoing Resolution was duly and regularly passed and adopted by the City Council of the Town of Atherton at a regular meeting thereof held on the 21st day of May, 2025, by the following vote.

AYES: Council Members:

NOES: Council Members:

ABSENT: Council Members:

ABSTAIN: Council Members:
_________________________________
Elizabeth Lewis, MAYOR
Town of Atherton
ATTEST:
____________________________
Anthony Suber, City Clerk
APPROVED AS TO FORM:
___________________________
Mona G. Ebrahimi, City Attorney

Item No. 7
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT OVADIA, PUBLIC WORKS DIRECTOR
DATE: MAY 21, 2025
SUBJECT: PROVIDE FEEDBACK AND DIRECTION REGARDING UTILITY

SERVICES EXEMPTIONS PROCESS FOR DEVELOPMENT

PROJECTS AND APPROVAL OF OVERHEAD ELECTRICAL

UTILITY SERVICE CROSSING OF THE ATHERTON CHANNEL
FOR 39 BARYY LANE

RECOMMENDATION
It is recommended that the Council review and provide feedback and direction to staff regarding the proposed process for exemptions to the underground utility service connections required by the Town’s construction regulations associated with development and redevelopment construction projects; and approval of an overhead electrical utility service crossing of the Atherton Channel at 39 Barry Lane.

BACKGROUND
Atherton Municipal Code (AMC) Section 15.40 regulates various construction activities including but not limited to screening, parking, noise, signage, and utility services. AMC Section 15.40.010, adopted in 1966 states:
“All telephone, telegraph, electric wires and other such service facilities to newly constructed dwellings shall be placed underground from the point of the utility company pole. This section shall apply to all dwellings where building permits have not been issued prior to the date of the ordinance codified in this section. (Ord. 272, 1966)” This ordinance was likely enacted for multiple reasons including an effort to reduce the proliferation of overhead wires as the Town continued to develop, public safety and resiliency and aesthetics.

Staff interpretation of this ordinance requirement prohibits the installation of new overhead service lines or extension of service lines from existing infrastructure. The installation of new poles is limited to direct frontage along an existing pole line, unless agreement from other affected

Construction Regulations
Underground Electrical Services
MAY 21, 2025

properties is obtained. Pole replacement is permitted to allow for required services.

PG&E regulations limit the number and size of overhead transformers on utility poles and do not allow for primary power lines to be undergrounded on poles with transformers. PG&E is also limiting the approval/installation of new underground transformers related to availability, safety, and other concerns.

PG&E has indicated that they are generally able to provide a 400 Amps service for primary residences and an additional 200 Amp service for detached accessory dwelling units (ADU’s) with limited additional infrastructure. Many new full site development/redevelopment projects require services of 600 Amps or greater for the primary residence and accessory structures with additional service needs for an ADU if included. These large services typically require dedicated transformers from primary (high-voltage) power lines, or the extension of the primary lines to the private property with transformer located on site to accommodate the project’s power needs. Due to rightof-way constraints, aesthetics and impacts to neighboring properties, staff does not permit new above ground pad-mounted transformers within the public right-of-way.

With the increased power needs for projects and the number of utility poles with existing transformers, it is often difficult to locate a nearby utility pole that can easily accommodate the power needs for a large-scale development project. Developers, property owners and PG&E often seek the easiest/cheapest solution of installing a new pole and/or extending utility lines, most often affecting other’s property frontage as the most expedient way to provide power to their projects.

In consideration of heritage trees within and along the right-of-way and on property, installation of underground utility services often include directional boring or hand digging to minimize tree impacts. As outlined above, undergrounding of utility services and minimizing additional overhead utility infrastructure is increasingly important for public safety and resiliency, and minimizing impacts to residents and property values.

ANALYSIS
At the March 5, 2025, City Council Study Session, staff presented various development projects, issues related to the provision of underground utility service, outlined constraints and various solutions developed for various scenarios. In consideration of increasing climate risk, public safety concerns, aesthetics, and potential permanent impacts to current residents and their properties, the City Council confirmed the need to require undergrounding of service lines for development projects to the maximum extent possible. The City Council further directed staff to develop a procedural outline for instances where the provision of underground electrical utility services is not possible. The following is the proposed outline for granting an exception to the ordinance requirement for underground electrical utility service to a development/redevelopment project:

1. Applicant shall plan for and design underground electrical utility service connections for the proposed development project from the nearest underground transformer, or electrical utility pole capable to provide such service.

2. Applicant shall apply to PG&E for said underground service, including payment of all application and engineering design fees.

Construction Regulations
Underground Electrical Services
MAY 21, 2025

3. PG&E shall advise the Town if electrical underground service is unavailable, unconstructable or otherwise infeasible, regardless of cost.

4. PG&E shall analyze all options to serve the proposed development project, including but not limited to extended trenching to available infrastructure, setting of subsurface transformers, and any other means of providing underground service.

5. Developer shall submit a formal application (to be developed) along with a fee payment to the Town, outlining the scope and overall cost of the development, type of electrical service needed, an outline of the various service connection options considered, desired service connection, and a letter from PG&E that there is not other feasible option for an underground service connection.

6. Staff shall review the application and coordinate a field review and meeting with PG&E to review constraints associated with the project. Staff may require analysis and additional reviews of additional options, at applicant’s expense, to validate the feasibility of any options.

7. Should PG&E determine that there are no feasible options to overhead service, a letter outlining the various analyses completed and reviews conducted shall be provided to the Town along with options to provide service to the property with the least amount of above ground infrastructure possible. All nearby facilities shall be analyzed for potential connection to provide underground service.

8. Staff shall review the various design alternatives evaluated by PG&E and the potential service options that minimize overhead and above ground infrastructure associated with the provision of service and make a recommendation to the City Manager to process an exemption request.

9. Should the City Manager concur with staff’s recommendation, the application shall be forwarded to the City Council for review and approval.

10. Staff would also require noticing of the neighbors, within 500 feet of the subject property regarding the meeting.
39 Barry Lane
As noted above, staff presented various development project scenarios to the Council as part of the March 5, 2025, Study Session. Included in the presentation was the current development project at 39 Barry Lane.

The developer at 39 Barry Lane had been working with PG&E to obtain underground service through the front of the property via a transformer in the cul-de-sac, locatted in front of 53 Barry Lane. The transformer was installed with the development of 53 Barry Lane, also owned by the same property owner of 39 Barry Lane, and included the installation of an underground electrical line from the intersection of Atherton Avenue at Barry Lane. This installation included the use of PG&E Betterment Funds, as it was planned to serve more than the 53 Barry Lane property.

As the developer was working with PG&E, PG&E advised that they would not be able to bring underground service to the property via the front, and advised that the only viable power option

Construction Regulations
Underground Electrical Services
MAY 21, 2025

was through the rear of the property, where a pole line exists, on the other side of the Atherton Channel. PG&E proposed to install an overhead line, over the channel, from the existing pole line to a new pole, located in the rear yard of 39 Barry Lane. This was the original service point for the property, prior to demolition. The line would then come underground to a new transformer, to be located outside the required setbacks.

Staff contacted PG&E and asked them to review various options, including a new line from the existing transformer within the cul-de-sac, upgrade of the existing underground transformer, and other options for underground service from the front of the property. PG&E advised that they could not upgrade the underground transformer, nor was sufficient power available from the Atherton Avenue connection. Staff further asked if the crossing of the Atherton Channel could be bored under the channel and PG&E advised that they could not do so. The PG&E Government Liaison attended the March 5, 2025, Study Session and advised of certain limitations that PG&E had and stated that he would review the various options with their engineering teams regarding upgrading the transformer or other opportunities to provide underground service to the property. Following the meeting, the Government Liaison connected with PG&E teams to review the various options and advised that the only viable connection was through the rear, across the channel, via an overhead line connecting either to the original service pole in the rear of 70 Elena Avenue, where the original service connection was, or on the side of 59 Barry Lane, where the temporary power connection was provided for construction. The developer’s preferred and least difficult connection of those two is via the pole on the side of 59 Barry Lane.

Staff is recommending that the Council approve the proposed overhead electrical line, over the Atherton Channel easement, from the existing pole in the rear of 70 Elena Avenue, to a new pole to be located in the rear of 39 Barry Lane, close to the channel easement, where it would then be brought underground in to serve the property.

Staff is also recommending that the Council approve the proposed process, as outlined above. The fee, once developed, will be included in the June 2025 Fee Resolution for adoption.

FISCAL IMPACT
None at this time.

GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal A - Preserve Small Town Character & Quality of Life • Goal C - Maintain Conservative Fiscal Policies and Financial Transparency • Goal D - Be Forward Thinking

POLICY FOCUS

Construction Regulations
Underground Electrical Services
MAY 21, 2025

The policy focus for this item is regarding construction regulations associated with development and redevelopment projects – particularly utility underground requirements.

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 Protection District, service provides (water, power, and sewer), and regional elected officials.

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item has not been before a Town Committee or Commission

ATTACHMENTS

1. 39 Barry Lane – Layout and Proposed Electrical Service Location

39 Barry Lane
Location Map, Layout and Electrical Service Proposal

Item No. 8
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL

GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT OVADIA, PUBLIC WORKS DIRECTOR
DATE: MAY 21, 2025
SUBJECT: PROVIDE FEEDBACK AND DIRECTION REGARDING INTERIM

IMPROVEMENTS ALONG DESIGNATED BICYCLE AND

PEDESTRIAN ROUTES ASSOCIATED WITH DEVELOPMENT

PROJECTS

RECOMMENDATION
It is recommended that the Council review and provide feedback and direction to staff regarding interim improvements along designated bicycle and pedestrian routes to be required along the frontages of development projects.

BACKGROUND
The Town of Atherton adopted its first Bicycle and Pedestrian Master Plan in July 2014. Since that time, the Town has been responsible for implementing improvements. With the size and scale of development in Town, it is recommended that frontage improvements associated with certain developments include consideration and accommodation of the improvements along the designated routes.

The Town’s Encroachment Ordinance (12.04) generally limits the construction of impervious areas in the right-of-way, with the exception of those needed for ingress and egress to the property (pedestrian and vehicular). The Ordinance restricts the placement of obstructions (boulders, logs, curbs, etc.) such that they are not placed within 6 feet of the improved right-of-way. Similarly, mailboxes, keypads, and trees (when fully mature) shall also be placed at least 6-feet from the improved right-of-way. Landscaping height within the first 3 feet of the improved right-of-way is limited to 5-inches. Landscaping height between 3 and 6 feet from the improved right-of-way is limited to 36-inches.

Though the 2014 Bicycle and Pedestrian Master Plan designates bicycle routes, it did not define the specific improvements and associated impacts along each route, leaving the design of the improvements to a future date.

Interim Frontage Improvements along Designated Routes
MAY 21, 2025

Most full-site and substantial development projects include the relandscaping of the property frontage. Often, this includes landscaping and other improvements within the first 6-feet of the right-of-way that could be impacted by future implementation of the designated bicycle and pedestrian improvements.

Often, jurisdictions require implementation of frontage improvements as defined in various planning documents and standards as part of development projects. For Atherton, those frontage improvements would be triggered consistent with the 2014 Bicycle and Pedestrian Master Plan.

However, the Town is in the process of updating its Bicycle and Pedestrian Master Plan in its 2025 Active Transportation Plan. Certain corridors were designated as Class II bicycle routes and the Council has placed development of these Class II routes on hold pending the 2025 Update.

However, there are developments occurring along these corridors and clarity is desired regarding staff review of encroachment applications associated with frontage improvements for these fullsite and substantial development projects.

ANALYSIS
As noted above, full-site and substantial development projects typically include the complete relandscaping of the property frontage. Other than limiting placement of impervious surfaces and obstructions (curbs, logs, rocks, trees, mailboxes and keypads), landscaping is permitted as long as it is in compliance with the height limitations. Bio-treatment facilities, when required along the frontage, is typically located a minimum of 4-feet from the improved roadway.

These frontage improvements are often in scale with overall development of the property and pose a potential obstruction to future improvement of the right-of-way to accommodate future implementation of bicycle and pedestrian improvements. As the design of designated bikeways and pedestrian facilities are not fully developed, some accommodation is needed to allow for construction of these improvements, while reducing impacts to frontage improvements and green infrastructure installed with these development projects.

The general width of sidewalks/walkways is recommended at 5 feet, with a minimum width of 4- feet, and wider widths preferred. Class II (buffered) bikeways are recommended with a minimum width of 7-8 feet, with a minimum width of 5 feet without a buffer. If there is a gutter along the roadway, it is recommended to be relocated between the bike lane and the pedestrian facility. A Class I (mixed use) facility is recommended with a minimum width of 10 feet, with 2-foot shoulders and separation from the vehicular travel lanes. It is expected that street parking will not be available in areas where walkways are present, unless such walkways are sufficiently separated from the vehicular lanes to accommodate parking.

In consideration of the current efforts to update the Town’s Bicycle and Pedestrian Master Plan with the Active Transportation Plan, and the potential shift in priories for the street right-of-way, implementation of both bicycle and pedestrian facilities along project frontages is difficult without a general configuration and layout of the improvements. In the interim, it is recommended that full-site and substantial development be required to implement some minimum standard of improvement and set back any substantial obstruction, a minimum distance from the edge of the improved roadway. Though this would not eliminate the potential need for removal/reconstruction

Interim Frontage Improvements along Designated Routes
MAY 21, 2025

of frontage improvements to implement the final plan, it would limit substantial barriers, while providing interim facilities.

At this time, it is recommended that the setbacks for mailboxes, trees, call boxes and bio-treatment facilities along these designated routes (currently Atherton Avenue and Selby Lane) be located a minimum of 10 feet from the edge of the improved roadway (back of gutter). It is further recommended that there be construction of a stable pathway, 5-feet in width, along the property frontage. The pathway should be constructed of a firm and stable surface, complying with the Americans with Disabilities Act, and be either pervious or draining to a stormwater treatment area, complying with Municipal Regional Stormwater Permit C.3 guidelines, which treats the entire property frontage. The height of vegetation should be limited to 5-inches for a minimum of 5 feet behind the new walkway.

If the development wishes to have street parking along the frontage, the street parking surface shall be pervious, consistent with current code requirements. The walkway noted prior, should be located between the street parking and the property line; not between the parking and the edge of improved roadway. The location of the walkway may meander around heritage trees or other obstructions, such as utility poles.

Council feedback is needed regarding frontage improvements along the designated bicycle and pedestrian routes, as there is a subdivision project that was approved along Atherton Avenue that was required to implement frontage improvements along Atherton Avenue as a condition of their approval. Future projects on the street would be required to develop their frontage to the same standard until the Council approves an alternate configuration of the roadway with approval of the updated Bicycle and Pedestrian Master Plan.

FISCAL IMPACT
None at this time.

GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal A - Preserve Small Town Character & Quality of Life • Goal D - Be Forward Thinking
• Goal E - Maintain and Improve Public Infrastructure

POLICY FOCUS
The policy focus for this item is regarding construction regulations associated with development and redevelopment projects – particularly frontage improvement requirements on designated routes.

PUBLIC NOTICE

Interim Frontage Improvements along Designated Routes
MAY 21, 2025

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 Protection District, service provides (water, power, and sewer), and regional elected officials.

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item has not been before a Town Committee or Commission

ATTACHMENTS
None.

Item No. 9
Town of Atherton
CITY COUNCIL STAFF REPORT – REGULAR AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL
FROM: GEORGE RODERICKS, CITY MANAGER
DATE: MAY 21, 2025
SUBJECT: REVIEW AND APPROVAL OF LEGISLATIVE

CORRESPONDENCE

RECOMMENDATION
It is recommended that the Council review and approve the attached legislative correspondnence.

BACKGROUND
Over the past several years, the State has enacted a series of aggressive housing laws intended to address the state’s severe housing shortage, particularly in the area of affordability. These laws, such as SB 9 (2021), SB 35 (2017), SB 330 (2019), SB 423 (2023), and others increasingly limit the authority of local governments to regulate land use through traditional planning tools like general plans, zoning codes, and discretionary review processes.

While the Legislature’s goal has been to promote housing production near jobs and transit, especially in higher-density formats, the practical effect has been the erosion of local control, with jurisdictions struggling to balance these mandates against infrastructure constraints, environmental risks, and the expectations of residents. Local governments throughout California, including the Town, have consistently expressed concern that these sweeping laws prioritize production targets over community-based planning and that they do little to ensure truly affordable housing outcomes. In response, jurisdictions are advocating for a more collaborative and measured approach to state housing policy and one that respects the principles of local governance, promotes realistic implementation, and retains meaningful public engagement.

To that end, staff recommends that the Council consider approval of the attached letters of opposition to SB 79 and SB 677; as well as a general letter from the Town opposing laws that strip municipalities of local control.

ANALYSIS
Senate Bill 79
Senate Bill 79 (SB 79), introduced by Senator Scott Wiener, proposes the “Abundant & Affordable

Legislative Correspondence
MAY 21, 2025

Homes Near Transit Act,” aiming to address California’s housing shortage by facilitating higherdensity residential development near major public transit stops. The bill establishes tiered zoning standards permitting multi-family housing of up to seven stories within a half-mile radius of highcapacity transit stations, such as rail and bus rapid transit stops. It also authorizes transit agencies to develop residential and commercial projects on land they own or control, provided these developments meet or exceed local zoning standards. Additionally, SB 79 offers streamlined, ministerial approval processes for qualifying projects that adhere to specified environmental, labor, and affordability criteria. Proponents argue that the bill promotes sustainable, transit-oriented development and alleviates housing shortages, while opponents express concerns over potential impacts on local zoning autonomy, community character, and the adequacy of affordable housing provisions.

Staff recommends OPPOSITION.

Senate Bill 677
Senate Bill 677 (SB 677), introduced by Senator Scott Wiener, seeks to expand and streamline housing development by allowing up to four residential units on single-family zoned lots through ministerial approval, bypassing discretionary review and local zoning controls. The bill builds upon prior legislation (notably SB 9 and SB 423) by further limiting local governments’ ability to restrict small-scale infill housing, prohibiting subjective design standards, and capping or waiving certain development fees. It also curtails the authority of homeowner associations and imposes statewide standards that supersede local ordinances, with the aim of accelerating housing production in urban and suburban neighborhoods.

Staff recommends OPPOSITION.

General Correspondence to Governor
The Town strongly opposes the ongoing imposition of state housing laws that strip away local control and override carefully developed general plans, zoning ordinances, and community engagement processes. The attached letter advises that Atherton as a small, semi-rural town with a long tradition of responsible planning, argues that recent and proposed legislation—such as SB 9, SB 4, SB 423, and SB 79—undermines local authority, imposes unrealistic housing mandates through RHNA, and fails to deliver on promised affordability. The letter urges state lawmakers to reconsider this top-down approach and calls for a collaborative process that respects local discretion, ensures community input, and pursues sustainable housing solutions with measurable outcomes.

FISCAL IMPACT
None.

GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:

Legislative Correspondence
MAY 21, 2025

• Goal A - Preserve Small Town Character & Quality of Life • Goal D - Be Forward Thinking

POLICY FOCUS
The policy focus for this item is preservation of local control and intergovernmental collaboration.

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 Protection District, service provides (water, power, and sewer), and regional elected officials.

COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item has not been before a Town Committee or Commission

ATTACHMENTS

1. SB 79 – Letter of Opposition

2. SB 79 - Bill Text

3. SB 677 - Letter of Opposition

4. SB 677 - Bill Text

3. Letter to Governor

Town of Atherton
Office of the Mayor
80 Fair Oaks Lane
Atherton, California 94027
Phone (650) 752-0500
May 21, 2025
The Honorable Scott Wiener
California State Senate
1021 O Street, Suite 3330
Sacramento, CA 95814
RE: Opposition to Senate Bill 79 – Transit-Oriented Zoning Mandates Dear Senator Wiener,
On behalf of the Town of Atherton, I respectfully write to express our strong opposition to Senate Bill 79, which mandates by-right upzoning for residential developments within specified proximities to public transit, irrespective of existing local zoning standards or community input.

While we support efforts to address California’s housing crisis and promote sustainable land use, SB 79 represents a one-size-fits-all approach that severely undermines local land use authority, community character, and public engagement. The bill removes meaningful discretion from local governments, particularly small jurisdictions like Atherton that are already working to meet their Regional Housing Needs Allocations (RHNA) through locally developed and adopted Housing Elements.

Key concerns with SB 79 include:

1. Loss of Local Control: The bill imposes prescriptive zoning changes without regard to local planning processes, environmental constraints, or infrastructure capacity. It sidelines general plans, specific plans, and community-led visions that reflect years of careful planning.

2. Infrastructure and Safety Impacts: Many transit-adjacent areas in suburban communities were not designed to accommodate the density increases proposed in SB 79.

In Atherton, our limited road capacity, lack of commercial services, and infrastructure limitations present serious challenges to intensified development.

3. Environmental and Wildfire Risk: SB 79 fails to account for environmental hazards, such as wildfire zones or flood-prone areas, where increased density could endanger residents and strain emergency services.

4. Displacement and Equity Considerations: Ironically, while intending to promote equity, the bill may result in the displacement of vulnerable residents in lower-density areas without adequate affordability requirements or funding mechanisms for affordable housing.

SB 79 – Letter of Opposition
May 21, 2025

We respectfully urge the Legislature to reject SB 79 in its current form and instead continue to work collaboratively with local governments to craft nuanced, context-sensitive solutions that respect the diversity of California’s communities while addressing our shared housing challenges.

Thank you for your attention to this important matter.

Sincerely,
Sincerely,
Elizabeth Lewis
Mayor
Town of Atherton
cc: Senator Josh Becker
Assemblymember Diane Papan
League of California Cities
Atherton City Council

AMENDED IN SENATE APRIL 23, 2025
AMENDED IN SENATE APRIL 9, 2025
AMENDED IN SENATE MARCH 5, 2025
SENATE BILL No. 79
Introduced by Senator Wiener
January 15, 2025
An act to amend Section 54221 of, and to add Chapter 4.1.5 (commencing with Section 65912.155) to Division 1 of Title 7 of, the Government Code, and to add Section 21080.26.5 to the Public Resources Code, relating to land use.
legislative counsel’s digest
SB 79, as amended, Wiener. Local government land: public transit use: housing development: transit-oriented development. (1)  Existing law prescribes requirements for the disposal of surplus land by a local agency. Existing law defines “surplus land” for these purposes to mean land owned in fee simple by any local agency for which the local agency’s governing body takes formal action declaring that the land is surplus and is not necessary for the agency’s use. Existing law defines “agency’s use” for these purposes to include land that is being used for agency work or operations, as provided. Existing law exempts from this definition of “agency’s use” certain commercial or industrial uses, except that in the case of a local agency that is a district, except a local agency whose primary purpose or mission is to supply the public with a transportation system, “agency’s use” may include commercial or industrial uses or activities, as specified.

This bill would additionally include land leased to support public transit operations in the definition of “agency’s use,” as described above.

96

The bill would also revise the definition of “agency’s use” with respect to commercial or industrial uses to instead provide that a district or a public transit operator may use land for commercial or industrial uses or activities, as described above.
(2)  Existing law, the Planning and Zoning Law, requires each county and city to adopt a comprehensive, long-term general plan for the physical development of the county or city, and specified land outside its boundaries, that contains certain mandatory elements, including a housing element. Existing law requires that the housing element include, among other things, an assessment of housing needs and an inventory of resources and constraints that are relevant to the meeting of these needs, including an inventory of land suitable for residential development, as provided. Existing law, for the 4th and subsequent revisions of the housing element, requires the Department of Housing and Community Development to determine the existing and projected need for housing for each region, as specified, and requires the appropriate council of local governments, or the department for cities and counties without a council of governments, to adopt a final regional housing need plan that allocates a share of the regional housing need to each locality in the region.

Existing law, the Housing Accountability Act, among other things, requires a local agency that proposes to disapprove a housing development project, as defined, or to impose a condition that the project be developed at a lower density to base its decision on written findings supported by a preponderance of the evidence that specified conditions exist if that project complies with applicable, objective general plan, zoning, and subdivision standards and criteria in effect at the time that the application was deemed complete. The act authorizes the applicant, a person who would be eligible to apply for residency in the housing development project or emergency shelter, or a housing organization to bring an action to enforce the act’s provisions, as provided, and provides for penalties if the court finds that the local agency is in violation of specified provisions of the act.

This bill would require that a housing development project, as defined, proposed within a specified distance of a transit-oriented development (TOD) stop, as defined, be an allowed use on any site zoned for residential, mixed, commercial, or light industrial development, if the development complies with applicable requirements, as specified. The bill would establish requirements concerning height limits, density, and floor area ratio in accordance with a development’s proximity to 96 SB 79 — 2 —

specified tiers of TOD stops, as provided. The bill would provide that, for the purposes of the Housing Accountability Act, a proposed development consistent with the applicable standards of these provisions shall be deemed consistent, compliant, and in conformity with prescribed requirements. The bill would provide that a local government that denies a project meeting the requirements of these provisions located in a high-resource area, as defined, would be presumed in violation of the Housing Accountability Act, as specified, and immediately liable for penalties, as provided. The bill would specify that a development proposed pursuant to these provisions is eligible for streamlined, ministerial approval pursuant to specified law, except that the bill would exempt a project under these provisions from specified requirements, and would specify that the project is required to comply with certain affordability requirements, under that law.

This bill would require a proposed development to comply with specified requirements under existing law relating to the demolition of existing residential units. The bill would also authorize a transit agency to adopt objective standards for both residential and commercial development proposed pursuant to these provisions if the development would be constructed on land owned by the transit agency or on which the transit agency has a permanent operating easement, provided that the objective standards allow for the same or greater development intensity as allowed by local standards or applicable state law.

This bill would require the Department of Housing and Community Development to oversee compliance with the bill’s provisions, including, but not limited to, promulgating specified standards relating to the inventory of land included within a county’s or city’s housing element.

The bill would permit a local government to adopt an ordinance to implement these provisions, as provided. The bill would require the local government to submit a copy of this ordinance to the department within 60 days of adoption and require the department to review the ordinance for compliance, as specified. If the department finds an ordinance is out of compliance, and the local government does not take specified steps to address compliance, the bill would require the department to notify the local government in writing and authorize the department to notify the Attorney General, as provided.

This bill would define various terms for its purposes and make related findings and declarations.
96 — 3 — SB 79

This bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities. (3)  Existing law, the California Environmental Quality Act (CEQA), requires a lead agency, as defined, to prepare, or cause to be prepared, and certify the completion of an environmental impact report on a project that it proposes to carry out or approve that may have a significant effect on the environment or to adopt a negative declaration if it finds that the project will not have that effect. CEQA also requires a lead agency to prepare a mitigated negative declaration for a project that may have a significant effect on the environment if revisions in the project would avoid or mitigate that effect and there is no substantial evidence that the project, as revised, would have a significant effect on the environment. CEQA, until January 1, 2030, exempts from its requirements certain transportation-related projects if specified requirements are met, as provided. CEQA includes within these exempt transportation-related projects a public project for the institution or increase of bus rapid transit, bus, or light rail service, or other passenger rail service, that will be exclusively used by low-emission or zero-emission vehicles, on existing public rights-of-way or existing highway rights-of-way.

This bill would exempt from CEQA a public or private residential, commercial, or mixed-used project that, at the time the project application is filed, is located entirely or principally on land owned by a public transit agency, or fully or partially encumbered by an existing operating easement in favor of a public transit agency, and meets specified requirements. The bill would provide that, for a project that requires the construction of new passenger rail storage and maintenance facilities at a publicly or privately owned offsite location distinct from the principal project site, that project would be considered a wholly separate project from the project described in these provisions and shall not be exempt from CEQA.
(4)  By increasing the duties of local officials, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state.

Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.
96 SB 79 — 4 —

Vote: majority. Appropriation: no. Fiscal committee: yes.

State-mandated local program: yes.

The people of the State of California do enact as follows:
line 1 SECTION 1. Section 54221 of the Government Code is line 2 amended to read:
line 3 54221. As used in this article, the following definitions shall line 4 apply:
line 5 (a)  (1)  “Local agency” means every city, whether organized line 6 under general law or by charter, county, city and county, district, line 7 including school, sewer, water, utility, and local and regional park line 8 districts of any kind or class, joint powers authority, successor line 9 agency to a former redevelopment agency, housing authority, or line 10 other political subdivision of this state and any instrumentality line 11 thereof that is empowered to acquire and hold real property. line 12 (2)  The Legislature finds and declares that the term “district” line 13 as used in this article includes all districts within the state, line 14 including, but not limited to, all special districts, sewer, water, line 15 utility, and local and regional park districts, and any other political line 16 subdivision of this state that is a district, and therefore the changes line 17 in paragraph (1) made by the act adding this paragraph that specify line 18 that the provisions of this article apply to all districts, including line 19 school, sewer, water, utility, and local and regional park districts line 20 of any kind or class, are declaratory of, and not a change in, line 21 existing law.
line 22 (b)  (1)  “Surplus land” means land owned in fee simple by any line 23 local agency for which the local agency’s governing body takes line 24 formal action in a regular public meeting declaring that the land line 25 is surplus and is not necessary for the agency’s use. Land shall be line 26 declared either “surplus land” or “exempt surplus land,” as line 27 supported by written findings, before a local agency may take any line 28 action to dispose of it consistent with an agency’s policies or line 29 procedures. A local agency, on an annual basis, may declare line 30 multiple parcels as “surplus land” or “exempt surplus land.” line 31 (2)  “Surplus land” includes land held in the Community line 32 Redevelopment Property Trust Fund pursuant to Section 34191.4 line 33 of the Health and Safety Code and land that has been designated line 34 in the long-range property management plan approved by the line 35 Department of Finance pursuant to Section 34191.5 of the Health 96 — 5 — SB 79

line 1 and Safety Code, either for sale or for future development, but line 2 does not include any specific disposal of land to an identified entity line 3 described in the plan.
line 4 (3)  Nothing in this article prevents a local agency from obtaining line 5 fair market value for the disposition of surplus land consistent with line 6 Section 54226.
line 7 (4)  Notwithstanding paragraph (1), a local agency is not required line 8 to make a declaration at a public meeting for land that is “exempt line 9 surplus land” pursuant to subparagraph (A), (B), (E), (K), (L), or line 10 (Q) of paragraph (1) of subdivision (f) if the local agency identifies line 11 the land in a notice that is published and available for public line 12 comment, including notice to the entities identified in subdivision line 13 (a) of Section 54222, at least 30 days before the exemption takes line 14 effect.
line 15 (c)  (1)  Except as provided in paragraph (2), “agency’s use” line 16 shall include, but not be limited to, land that is being used, or is line 17 planned to be used pursuant to a written plan adopted by the local line 18 agency’s governing board, for agency work or operations, line 19 including, but not limited to, utility sites, property owned by a port line 20 that is used to support logistics uses, watershed property, land line 21 being used for conservation purposes, land for demonstration, line 22 exhibition, or educational purposes related to greenhouse gas line 23 emissions, sites for broadband equipment or wireless facilities, line 24 land leased to support public transit operations, and buffer sites line 25 near sensitive governmental uses, including, but not limited to, line 26 waste disposal sites, and wastewater treatment plants. “Agency’s line 27 use” by a local agency that is a district shall also include land line 28 disposed for uses described in subparagraph (B) of paragraph (2). line 29 (2)  (A)  “Agency’s use” shall not include commercial or line 30 industrial uses or activities, including nongovernmental retail, line 31 entertainment, or office development. Property disposed of for the line 32 sole purpose of investment or generation of revenue shall not be line 33 considered necessary for the agency’s use.
line 34 (B)  In the case of a local agency that is a district or a public line 35 transit operator, “agency’s use” may include commercial or line 36 industrial uses or activities, including nongovernmental retail, line 37 entertainment, or office development or be for the sole purpose of line 38 investment or generation of revenue if the agency’s governing line 39 body takes action in a public meeting declaring that the use of the line 40 site will do one of the following:
96 SB 79 — 6 —

line 1 (i)  Directly further the express purpose of agency work or line 2 operations.
line 3 (ii)  Be expressly authorized by a statute governing the local line 4 agency, provided the district complies with Section 54233.5 if line 5 applicable.
line 6 (d)  (1)  “Dispose” means either of the following:
line 7 (A)  The sale of the surplus land.
line 8 (B)  The entering of a lease for surplus land, which is for a term line 9 longer than 15 years, inclusive of any extension or renewal options line 10 included in the terms of the initial lease, entered into on or after line 11 January 1, 2024.
line 12 (2)  “Dispose” shall not mean either of the following:
line 13 (A)  The entering of a lease for surplus land, which is for a term line 14 of 15 years or less, inclusive of any extension or renewal options line 15 included in the terms of the initial lease.
line 16 (B)  The entering of a lease for surplus land on which no line 17 development or demolition will occur, regardless of the term of line 18 the lease.
line 19 (e)  “Open-space purposes” means the use of land for public line 20 recreation, enjoyment of scenic beauty, or conservation or use of line 21 natural resources.
line 22 (f)  (1)  Except as provided in paragraph (2), “exempt surplus line 23 land” means any of the following:
line 24 (A)  Surplus land that is transferred pursuant to Section 25539.4 line 25 or 37364.
line 26 (B)  Surplus land that is less than one-half acre in area and is line 27 not contiguous to land owned by a state or local agency that is line 28 used for open-space or low- and moderate-income housing line 29 purposes.
line 30 (C)  Surplus land that a local agency is exchanging for another line 31 property necessary for the agency’s use. “Property” may include line 32 easements necessary for the agency’s use.
line 33 (D)  Surplus land that a local agency is transferring to another line 34 local, state, or federal agency, or to a third-party intermediary for line 35 future dedication for the receiving agency’s use, or to a federally line 36 recognized California Indian tribe. If the surplus land is transferred line 37 to a third-party intermediary, the receiving agency’s use must be line 38 contained in a legally binding agreement at the time of transfer to line 39 the third-party intermediary.
96 — 7 — SB 79

line 1 (E)  Surplus land that is a former street, right-of-way, or line 2 easement, and is conveyed to an owner of an adjacent property. line 3 (F)  (i)  Surplus land that is to be developed for a housing line 4 development, which may have ancillary commercial ground floor line 5 uses, that restricts 100 percent of the residential units to persons line 6 and families of low or moderate income, with at least 75 percent line 7 of the residential units restricted to lower income households, as line 8 defined in Section 50079.5 of the Health and Safety Code, with line 9 an affordable sales price or an affordable rent, as defined in Section line 10 50052.5 or 50053 of the Health and Safety Code, for 55 years for line 11 rental housing, 45 years for ownership housing, and 50 years for line 12 rental or ownership housing located on tribal trust lands, unless a line 13 local ordinance or a federal, state, or local grant, tax credit, or other line 14 project financing requires a longer period of affordability, and in line 15 no event shall the maximum affordable sales price or rent level be line 16 higher than 20 percent below the median market rents or sales line 17 prices for the neighborhood in which the site is located. line 18 (ii)  The requirements of clause (i) shall be contained in a line 19 covenant or restriction recorded against the surplus land at the time line 20 of sale that shall run with the land and be enforceable against any line 21 owner who violates the covenant or restriction and each successor line 22 in interest who continues the violation.
line 23 (G)  (i)  Surplus land that is subject to a local agency’s open, line 24 competitive solicitation or that is put to open, competitive bid by line 25 a local agency, provided that all entities identified in subdivision line 26 (a) of Section 54222 will be invited to participate in the process, line 27 for a housing or a mixed-use development that is more than one line 28 acre and less than 10 acres in area, consisting of either a single line 29 parcel, or two or more adjacent or non-adjacent parcels combined, line 30 that includes not less than 300 residential units, and that restricts line 31 at least 25 percent of the residential units to lower income line 32 households, as defined in Section 50079.5 of the Health and Safety line 33 Code, with an affordable sales price or an affordable rent, as line 34 defined in Sections 50052.5 and 50053 of the Health and Safety line 35 Code, for 55 years for rental housing, 45 years for ownership line 36 housing, and 50 years for rental or ownership housing located on line 37 tribal trust lands, unless a local ordinance or a federal, state, or line 38 local grant, tax credit, or other project financing requires a longer line 39 period of affordability.
96 SB 79 — 8 —

line 1 (ii)  The requirements of clause (i) shall be contained in a line 2 covenant or restriction recorded against the surplus land at the time line 3 of sale that shall run with the land and be enforceable against any line 4 owner who violates the covenant or restriction and each successor line 5 in interest who continues the violation.
line 6 (H)  (i)  Surplus land totaling 10 or more acres, consisting of line 7 either a single parcel, or two or more adjacent or non-adjacent line 8 parcels combined for disposition to one or more buyers pursuant line 9 to a plan or ordinance adopted by the legislative body of the local line 10 agency, or a state statute. That surplus land shall be subject to a line 11 local agency’s open, competitive solicitation process or put out to line 12 open, competitive bid by a local agency, provided that all entities line 13 identified in subdivision (a) of Section 54222 will be invited to line 14 participate in the process for a housing or mixed-use development. line 15 (ii)  The aggregate development shall include the greater of the line 16 following:
line 17 (I)  Not less than 300 residential units.
line 18 (II)  A number of residential units equal to 10 times the number line 19 of acres of the surplus land or 10,000 residential units, whichever line 20 is less.
line 21 (iii)  At least 25 percent of the residential units shall be restricted line 22 to lower income households, as defined in Section 50079.5 of the line 23 Health and Safety Code, with an affordable sales price or an line 24 affordable rent pursuant to Sections 50052.5 and 50053 of the line 25 Health and Safety Code, for a minimum of 55 years for rental line 26 housing, 45 years for ownership housing, and 50 years for rental line 27 or ownership housing located on tribal trust lands, unless a local line 28 ordinance or a federal, state, or local grant, tax credit, or other line 29 project financing requires a longer period of affordability. line 30 (iv)  If nonresidential development is included in the line 31 development pursuant to this subparagraph, at least 25 percent of line 32 the total planned units affordable to lower income households shall line 33 be made available for lease or sale and permitted for use and line 34 occupancy before or at the same time with every 25 percent of line 35 nonresidential development made available for lease or sale and line 36 permitted for use and occupancy.
line 37 (v)  A violation of this subparagraph is subject to the penalties line 38 described in Section 54230.5. Those penalties are in addition to line 39 any remedy a court may order for violation of this subparagraph. line 40 A local agency shall only dispose of land pursuant to this 96 — 9 — SB 79

line 1 subparagraph through a disposition and development agreement line 2 that includes an indemnification clause that provides that if an line 3 action occurs after disposition violates this subparagraph, the line 4 person or entity that acquired the property shall be liable for the line 5 penalties.
line 6 (vi)  The requirements of clauses (i) to (v), inclusive, shall be line 7 contained in a covenant or restriction recorded against the surplus line 8 land at the time of sale that shall run with the land and be line 9 enforceable against any owner who violates the covenant or line 10 restriction and each successor in interest who continues the line 11 violation.
line 12 (I)  A mixed-use development, which may include more than line 13 one publicly owned parcel, that meets all of the following line 14 conditions:
line 15 (i)  The development restricts at least 25 percent of the residential line 16 units to lower income households, as defined in Section 50079.5 line 17 of the Health and Safety Code, with an affordable sales price or line 18 an affordable rent, as defined in Sections 50052.5 and 50053 of line 19 the Health and Safety Code, for 55 years for rental housing, 45 line 20 years for ownership housing, and 50 years for rental or ownership line 21 housing located on tribal trust lands, unless a local ordinance or a line 22 federal, state, or local grant, tax credit, or other project financing line 23 requires a longer period of affordability.
line 24 (ii)  At least 50 percent of the square footage of the new line 25 construction associated with the development is designated for line 26 residential use.
line 27 (iii)  The development is not located in an urbanized area, as line 28 defined in Section 21094.5 of the Public Resources Code. line 29 (J)  (i)  Surplus land that is subject to a valid legal restriction line 30 that is not imposed by the local agency and that makes housing line 31 prohibited, unless there is a feasible method to satisfactorily line 32 mitigate or avoid the prohibition on the site. A declaration of line 33 exemption pursuant to this subparagraph shall be supported by line 34 documentary evidence establishing the valid legal restriction. For line 35 the purposes of this section, “documentary evidence” includes, line 36 but is not limited to, a contract, agreement, deed restriction, statute, line 37 regulation, or other writing that documents the valid legal line 38 restriction.
line 39 (ii)  Valid legal restrictions include, but are not limited to, all of line 40 the following:
96 SB 79 — 10 —

line 1 (I)  Existing constraints under ownership rights or contractual line 2 rights or obligations that prevent the use of the property for line 3 housing, if the rights or obligations were agreed to prior to line 4 September 30, 2019.
line 5 (II)  Conservation or other easements or encumbrances that line 6 prevent housing development.
line 7 (III)  Existing leases, or other contractual obligations or line 8 restrictions, if the terms were agreed to prior to September 30, line 9 2019.
line 10 (IV)  Restrictions imposed by the source of funding that a local line 11 agency used to purchase a property, provided that both of the line 12 following requirements are met:
line 13 (ia)  The restrictions limit the use of those funds to purposes line 14 other than housing.
line 15 (ib)  The proposed disposal of surplus land meets a use consistent line 16 with that purpose.
line 17 (iii)  Valid legal restrictions that would make housing prohibited line 18 do not include either of the following:
line 19 (I)  An existing nonresidential land use designation on the surplus line 20 land.
line 21 (II)  Covenants, restrictions, or other conditions on the property line 22 rendered void and unenforceable by any other law, including, but line 23 not limited to, Section 714.6 of the Civil Code. line 24 (iv)  Feasible methods to mitigate or avoid a valid legal line 25 restriction on the site do not include a requirement that the local line 26 agency acquire additional property rights or property interests line 27 belonging to third parties.
line 28 (K)  Surplus land that was granted by the state in trust to a local line 29 agency or that was acquired by the local agency for trust purposes line 30 by purchase or exchange, and for which disposal of the land is line 31 authorized or required subject to conditions established by statute. line 32 (L)  Land that is subject to either of the following, unless line 33 compliance with this article is expressly required:
line 34 (i)  Section 17388, 17515, 17536, 81192, 81397, 81399, 81420, line 35 or 81422 of the Education Code.
line 36 (ii)  Part 14 (commencing with Section 53570) of Division 31 line 37 of the Health and Safety Code.
line 38 (M)  Surplus land that is a former military base that was line 39 conveyed by the federal government to a local agency, and is line 40 subject to Article 8 (commencing with Section 33492.125) of 96 — 11 — SB 79

line 1 Chapter 4.5 of Part 1 of Division 24 of the Health and Safety Code, line 2 provided that all of the following conditions are met:
line 3 (i)  The former military base has an aggregate area greater than line 4 five acres, is expected to include a mix of residential and line 5 nonresidential uses, and is expected to include no fewer than 1,400 line 6 residential units upon completion of development or redevelopment line 7 of the former military base.
line 8 (ii)  The affordability requirements for residential units shall be line 9 governed by a settlement agreement entered into prior to September line 10 1, 2020. Furthermore, at least 25 percent of the initial 1,400 line 11 residential units developed shall be restricted to lower income line 12 households, as defined in Section 50079.5 of the Health and Safety line 13 Code, with an affordable sales price or an affordable rent, as line 14 defined in Sections 50052.5 and 50053 of the Health and Safety line 15 Code, for 55 years for rental housing, 45 years for ownership line 16 housing, and 50 years for rental or ownership housing located on line 17 tribal trust lands, unless a local ordinance or a federal, state, or line 18 local grant, tax credit, or other project financing requires a longer line 19 period of affordability.
line 20 (iii)  Before disposition of the surplus land, the agency adopts line 21 written findings that the land is exempt surplus land pursuant to line 22 this subparagraph.
line 23 (iv)  Before disposition of the surplus land, the recipient has line 24 negotiated a project labor agreement consistent with the local line 25 agency’s project stabilization agreement resolution, as adopted on line 26 February 2, 2021, and any succeeding ordinance, resolution, or line 27 policy, regardless of the length of the agreement between the local line 28 agency and the recipient.
line 29 (v)  The agency includes in the annual report required by line 30 paragraph (2) of subdivision (a) of Section 65400 the status of line 31 development of residential units on the former military base, line 32 including the total number of residential units that have been line 33 permitted and what percentage of those residential units are line 34 restricted for persons and families of low or moderate income, or line 35 lower income households, as defined in Section 50079.5 of the line 36 Health and Safety Code.
line 37 A violation of this subparagraph is subject to the penalties line 38 described in Section 54230.5. Those penalties are in addition to line 39 any remedy a court may order for violation of this subparagraph line 40 or the settlement agreement.
96 SB 79 — 12 —

line 1 (N)  Real property that is used by a district for an agency’s use line 2 expressly authorized in subdivision (c).
line 3 (O)  Land that has been transferred before June 30, 2019, by the line 4 state to a local agency pursuant to Section 32667 of the Streets line 5 and Highways Code and has a minimum planned residential density line 6 of at least 100 dwelling units per acre, and includes 100 or more line 7 residential units that are restricted to persons and families of low line 8 or moderate income, with an affordable sales price or an affordable line 9 rent, as defined in Sections 50052.5 and 50053 of the Health and line 10 Safety Code, for 55 years for rental housing, 45 years for ownership line 11 housing, and 50 years for rental or ownership housing located on line 12 tribal trust lands, unless a local ordinance or a federal, state, or line 13 local grant, tax credit, or other project financing requires a longer line 14 period of affordability. For purposes of this subparagraph, not line 15 more than 20 percent of the affordable units may be restricted to line 16 persons and families of moderate income and at least 80 percent line 17 of the affordable units must be restricted to lower income line 18 households as defined in Section 50079.5 of the Health and Safety line 19 Code.
line 20 (P)  (i)  Land that meets the following conditions:
line 21 (I)  Land that is subject to a sectional planning area document line 22 that meets both of the following:
line 23 (ia)  The sectional planning area was adopted prior to January line 24 1, 2019.
line 25 (ib)  The sectional planning area document is consistent with line 26 county and city general plans applicable to the land. line 27 (II)  The land identified in the adopted sectional planning area line 28 document was dedicated prior to January 1, 2019. line 29 (III)  On January 1, 2019, the parcels on the land met at least line 30 one of the following conditions:
line 31 (ia)  The land was subject to an irrevocable offer of dedication line 32 of fee interest requiring the land to be used for a specified purpose. line 33 (ib)  The land was acquired through a land exchange subject to line 34 a land offer agreement that grants the land’s original owner the line 35 right to repurchase the land acquired by the local agency pursuant line 36 to the agreement if the land will not be developed in a manner line 37 consistent with the agreement.
line 38 (ic)  The land was subject to a grant deed specifying that the line 39 property shall be used for educational uses and limiting other types line 40 of uses allowed on the property.
96 — 13 — SB 79

line 1 (IV)  At least 25 percent of the units are dedicated to lower line 2 income households, as defined in Section 50079.5 of the Health line 3 and Safety Code, at an affordable rent, as defined by Section 50053 line 4 of the Health and Safety Code, or an affordable housing cost, as line 5 defined by Section 50052.5 of the Health and Safety Code, and line 6 subject to a recorded deed restriction for a period of 55 years for line 7 rental units and 45 years for owner-occupied units, unless a local line 8 ordinance or a federal, state, or local grant, tax credit, or other line 9 project financing requires a longer period of affordability. line 10 (V)  The land is developed at an average density of at least 10 line 11 units per acre, calculated with respect to the entire sectional line 12 planning area.
line 13 (VI)  No more than 25 percent of the nonresidential square line 14 footage identified in the sectional planning area document receives line 15 its first certificate of occupancy before at least 25 percent of the line 16 residential square footage identified in the sectional planning area line 17 document has received its first certificate of occupancy. line 18 (VII)  No more than 50 percent of the nonresidential square line 19 footage identified in the sectional planning area document receives line 20 its first certificate of occupancy before at least 50 percent of the line 21 residential square footage identified in the sectional planning area line 22 document has received its first certificate of occupancy. line 23 (VIII)  No more than 75 percent of the nonresidential square line 24 footage identified in the sectional planning area document shall line 25 receive its first certificate of occupancy before at least 75 percent line 26 of the residential square footage identified in the sectional planning line 27 area document has received its first certificate of occupancy. line 28 (ii)  The local agency includes in the annual report required by line 29 paragraph (2) of subdivision (a) of Section 65400 the status of line 30 development, including the total square footage of the residential line 31 and nonresidential development, the number of residential units line 32 that have been permitted, and what percentage of those residential line 33 units are restricted for persons and families of low or moderate line 34 income, or lower income households, as defined in Section 50079.5 line 35 of the Health and Safety Code.
line 36 (iii)  The Department of Housing and Community Development line 37 may request additional information from the agency regarding line 38 land disposed of pursuant to this subparagraph. line 39 (iv)  At least 30 days prior to disposing of land declared “exempt line 40 surplus land,” a local agency shall provide the Department of 96 SB 79 — 14 —

line 1 Housing and Community Development a written notification of line 2 its declaration and findings in a form prescribed by the Department line 3 of Housing and Community Development. Within 30 days of line 4 receipt of the written notification and findings, the department line 5 shall notify the local agency if the department has determined that line 6 the local agency is in violation of this article. A local agency that line 7 fails to submit the written notification and findings shall be liable line 8 for a civil penalty pursuant to this subparagraph. A local agency line 9 shall not be liable for the civil penalty if the Department of Housing line 10 and Community Development does not notify the agency that the line 11 agency is in violation of this article within 30 days of receiving line 12 the written notification and findings. Once the department line 13 determines that the declarations and findings comply with line 14 subclauses (I) to (IV), inclusive, of clause (i), the local agency line 15 may proceed with disposal of land pursuant to this subparagraph. line 16 This clause is declaratory of, and not a change in, existing law. line 17 (v)  If the local agency disposes of land in violation of this line 18 subparagraph, the local agency shall be liable for a civil penalty line 19 calculated as follows:
line 20 (I)  For a first violation, 30 percent of the greater of the final line 21 sale price or the fair market value of the land at the time of line 22 disposition.
line 23 (II)  For a second or subsequent violation, 50 percent of the line 24 greater of the final sale price or the fair market value of the land line 25 at the time of disposition.
line 26 (III)  For purposes of this subparagraph, fair market value shall line 27 be determined by an independent appraisal of the land. line 28 (IV)  An action to enforce this subparagraph may be brought by line 29 any of the following:
line 30 (ia)  An entity identified in subdivisions (a) to (e), inclusive, of line 31 Section 54222.
line 32 (ib)  A person who would have been eligible to apply for line 33 residency in affordable housing had the agency not violated this line 34 section.
line 35 (ic)  A housing organization, as that term is defined in Section line 36 65589.5.
line 37 (id)  A beneficially interested person or entity. line 38 (ie)  The Department of Housing and Community Development. line 39 (V)  A penalty assessed pursuant to this subparagraph shall, line 40 except as otherwise provided, be deposited into a local housing 96 — 15 — SB 79