Item No. 4
Town of Atherton
CITY COUNCIL STAFF REPORT – CONSENT AGENDA
TO: HONORABLE MAYOR AND CITY COUNCIL
GEORGE RODERICKS, CITY MANAGER
FROM: ROBERT BARRON III, FINANCE DIRECTOR
DATE: MAY 21, 2025
SUBJECT: ACCEPT THE FISCAL YEAR 2023-24 AUDITED BASIC FINANCIAL
STATEMENTS
RECOMMENDATION
Accept the FY 2023-24 Audited Basic Financial Statements.
BACKGROUND
The Atherton Basic Financial statements were completed by the independent auditor Maze & Associates. In the auditor’s opinion the Town’s financial statements “present fairly in all material respects, the respective financial position of the government activities, each major fund, and the aggregate remaining fund information of the Town as of June 30, 2024.” The Finance Committee reviewed and discussed the Town Basic Financial Statements at its March 2025 meeting. Maze and Associates audit engagement partner Grace Zhang was present at the Finance committee meeting to discuss the audited financial statements. The Committee recommends that the City Council accept the reports. The General Fund is the chief operating fund of the Town. The General Fund had a negative Net Change in Fund Balance of $1,188,459 during the fiscal year.
2018-19
Actual
2019-20
Actual
2020-21
Actual
2021-22
Actual
2022-23
Actual
2023-24
Actual
Revenues $18,689,035 $18,319,800 $19,567,418 $22,457,646 $22,488,674 $24,468,680 Expenses $13,024,224 $13,680,869 $15,358,136 $21,616,937 $17,800,001 $19,767,139 Proceeds/
Transfers
Out
$237,929 $173,947 $14,889,656 $3,640,557 $4,529,037 $5,890,000 Excess
(Deficient)
Revenues
over
Expenses
$5,426,882 $4,464,984 ($10,680,374) ($2,799,848) $159,636 ($1,188,459) AUDITED FY 2023-24 BASIC FINANCIAL STATEMENTS
May 21, 2025
For FY 2023-24 there was a transfer out of $5,890,000 to the Capital Improvement Fund for future and ongoing Town Master plan projects. The Town General Fund is providing the new funding capacity for the Town Capital Improvement programs.
At the end of the current fiscal year the unassigned fund balance of the General Fund was $9,527,166 with a total fund balance of $12,729,534. The unassigned fund balance represents 48% of the total General Fund expenditures of $19,767,139.
Some highlights of the General Fund over the previous Fiscal Year include:
➢ Total Property tax revenues increased by $393,035.
o In the previous year property taxes increased by $1,102,290. Secured property taxes increased $1,023,654. Property Tax in Lieu of VLF had a decrease of $926,745 from the previous year. This was due to there being a shortfall in VLF revenue of $704,674.
The VLF amount due for FY 2023/24 was $1,651,448, but the Town received $947,113. There is hope that the State FY 2025/26 budget will address this shortfall.
ERAF revenue had an increase of $324,540 for a total of $2,663,605. ➢ Sales taxes increased by $133,968 compared to the previous year for a total of $434,106. ➢ Other taxes (Franchise tax & Document Transfer Tax) increased by $80,479. o A majority of the increase was in Document Transfer tax of $171,345 over the previous year for a total amount of $677,899, an indication of slight increase in the sale of properties. Cable fee decreased $35,553 over the previous year for a total amount of $133,468. This was a result of receiving standard four quarter payments for cable franchise fee. In the previous year an additional payment for cable franchise fee was received. There was an adjustment in refuse fees payments $60,085 decrease true up from an error in franchise fee overpayment to the Town on rate increases in first half of year.
➢ The Business License fee increased by $9,445 for a total of $279,184. ➢ Fines and Forfeitures increased by $178,954.
o A majority of the increase is due to the C&D time limit forfeiture of $1,022,800 realized in the year. The amount in the previous year was $874,200. Heritage Tree Damage Fee increased $25,500 over the previous year amount of $35,400. ➢ Service Charges decreased by $47,423.
o Most of the increase is attributed to building permit fees, which were $153,543 more than the previous year. Planning fees were $17,732 more than the previous year.
Building activity in the Town is at a somewhat slower pace than previous year.
Encroachment permits saw an increase of $45,290. Administrative code enforcement citations decreased $41,300 for a total of $71,800.
➢ The Town saw an increase in miscellaneous revenue of $304,104 over the previous year. This was due to the Town receiving donations of $236,000 for Police Department wellness and nutrition program and additional training toward perishable skills. The Town also received $100,000 in funding for a dedicated school resource officer at Menlo Atherton High School. year.
➢ Park revenue decreased by $114,862 over the previous year for an amount of $61,461 as park rental activity decreased significantly as the Town does not have a full-time park event management contractor.
AUDITED FY 2023-24 BASIC FINANCIAL STATEMENTS
May 21, 2025
➢ The General Fund Revenue increased $1,980,006 from the prior year and there was a $1,967,138 increase in General Fund operating expenditures. o The increase in expenditures was due to CalPERS normal cost increases. There were increases in equipment purchases for audio system upgrades, network security, Flock camera system, maintenance and rehab park pathways and playground, liability, health insurance, new wellness program, increase in operational expenses and facility maintenance within General government departments, Police, Planning, and Public Works departments.
o We are in the fourth-year payment of lease financing of Town Center as we paid $861,871. It is a 10-year financing with a 5-year call option. o There was a new four-year Memorandum of Understanding (MOU) that began on July 1, 2023 and included salary increase and equity adjustments for the Atherton Police Officers Association. There were also salary increases for Town employees. In the Fiscal Year 2023-24 the CPI increase for Town employees was 4%. The Atherton Police Officer Association in addition to CPI increases had one time equity adjustments to various positions in the MOU that ranged from 2.90% to 10%. o The CalPERS employer contribution rate increased, as total expense was $180,771 higher than the previous year. Public Safety had the highest employer contribution rate increase of 3.45% and the department was fully staffed. CalPERS continues to collect the unfunded liability as a dollar amount. The Town payment of the unfunded liability portion for the fiscal year decreased $45,242 to $1,223,001. The total CalPERS expense for the Town increased $135,529.
GASB 68 and 71 were implemented for Accounting and Financial Reporting for Pensions. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. As of FY 2023-24 the Town of Atherton reports a net pension liability of $19,018,949, an increase of $1,150,121 and is as follows:
➢ Miscellaneous Employee Plan: $6,793,214
➢ Safety Employee Plan: $12,225,735
The Town reported a deferred outflow of resources of $9,211,764 and deferred inflow of $3,389,109 and a recognized pension expense reduction of $1,185,735. As a result of the implementation of the GASB statements, the Town made an adjustment of $13,196,294 to the Town Total Net Position.
GASB 68 & 71 Net Pension Liability Implementation 06/30/24 Miscellaneous Employees NPL $6,793,214
Safety Employees NPL $12,225,735
Deferred Outflow of Resources ($9,211,764)
Deferred Inflow of Resources $3,389,109
Adjustment to Beginning Governmental net
position
$13,196,294
AUDITED FY 2023-24 BASIC FINANCIAL STATEMENTS
May 21, 2025
In Fiscal Year 2017-18, GASB 74 and 75 were implemented for the Accounting and Financial Reporting for Postemployment Benefits Other than pensions. This establishes accounting and financial reporting requirements for governments whose employees are provided with OPEB benefits. It also includes requirements similar to pension reporting to address financial reporting for assets accumulated for the purpose of providing OPEB benefits.
As of FY 2023-24 the Town reported an ending net OPEB liability of $330,004. This reflects a net OPEB reduction adjustment of $895,891. With the implementation of GASB 75, there is an adjustment to the beginning net position of Governmental Activities in the amount of $1,225,895.
As of FY 2023-24, the Town of Atherton reports a net OPEB asset of $510,276.
The Town reported OPEB deferred inflows of resources of $1,853,423 and outflow of resources $1,013,143 and recognized OPEB expense adjustment of $895,891.
GASB 74 & 75 Net OPEB Liability Implementation 06/30/23 Net OPEB Liability (Asset) ($510,276)
Deferred Outflow of Resources ($1,013,143)
Deferred Inflow of Resources $1,853,423
Adjustment to Beginning Governmental net
position
$330,004
The town had a positive net change in Net Position for the FY 2023-24 in the amount of $3,631,261, for an ending Net Position of $99,089,900. The previous FY had an ending net position of $95,458,639.
With implementation of GASB statements 68 and 71 fiscal year 14/15, which required the recognition of pension liabilities, deferred outflows, and deferred inflows of resources for pensions, resulted in the amount of $12,010,559. With the recognized FY 2023-24 pension expense increase of $1,185,735, reflects a total adjustment of $13,196,294 to the Total Net Position. With the addition of the OPEB pension liability, deferred outflows, and deferred inflows of resources for OPEB, resulted in a total adjustment amount of $300,004. As mentioned above, the total FY Town Net Position is $99,089,900. Without the recognition of pension and OPEB liabilities the Town would have a total net position of $112,616,198 for FY 2023-24. Each fiscal year the Town will report the new net pension liability based on contributions and investment earnings on the plans.
The Town’s General Fund operating budget presents a plan for accomplishing the priorities of the City Council within existing resources and core strategy of financial stability in mind. The FY 2024/25 Operating Budget reflects a positive outlook. With the completion of the Holbrook Palmer Park Access and Circulation plan, the new focus is shifting to park playground improvements and park playground restrooms replacement and other capital infrastructure needs from Town Master Plans. The Town continues to implement current City Council goals and priorities focused upon reducing long-term liabilities, addressing capital project needs, and ensuring that operational needs. The Town is heavily reliant on property taxes.
AUDITED FY 2023-24 BASIC FINANCIAL STATEMENTS
May 21, 2025
POLICY FOCUS
Each year the City Council accepts its Audited Financial Statements as part of the Town’s annual operating practice. The Audited Financial Statements represent the financial picture of the Town.
It is an examination of the Town’s financial statements and disclosures by an independent auditor and an assurance that the Town conducts its finances in accordance with generally accepted accounting principles. The result is a report from the auditor attesting to the fairness of the presentation of the financial statements and disclosures. The audit is not an opinion of the Town’s fiscal health and outlook.
The Management Discussion & Analysis (MD&A) is an important section of the Audit Report providing a picture of the Town’s finances from management’s perspective. The MD&A is factbased and provides readers with the management’s view of what is critical about the Town’s financial prospectus. The MD&A complements the Audited Financial Statements but is broader in scope. The MD&A can present an opinion of the Town’s fiscal health and outlook.
GOAL ALIGNMENT
This Report and its contents are in alignment with the following Council Policy Goals:
• Goal C – Maintain Conservative Fiscal Policies and Financial Transparency • Goal D – Be Forward Thinking
PUBLIC NOTICE
Public notification was achieved by posting the agenda, with this agenda item being listed, at least 72 hours prior to the meeting in print and electronically. Information about the project is also disseminated via the Town’s electronic News Flash and Atherton Online. There are approximately 1,200 subscribers to the Town’s electronic News Flash publications. Subscribers include residents as well as stakeholders – to include, but be not limited to, media outlets, school districts, Menlo Park Fire District, service provides (water, power, and sewer), and regional elected officials.
COMMISSION/COMMITTEE FEEDBACK/REFERRAL
This item _X___ has or ___ has not been before a Town Committee or Commission. _X__Audit/Finance Committee (meets every other month)
____ Bicycle/Pedestrian Committee (meets as needed)
____ Civic Center Advisory Committee (meets as needed)
____ Environmental Programs Committee (meets every other month) ____ Park and Recreation Committee (meets each month)
____ Planning Commission (meets each month)
____ Rail Committee (meets every other month)
____ Transportation Committee (meets every other month) AUDITED FY 2023-24 BASIC FINANCIAL STATEMENTS
May 21, 2025
ATTACHMENTS
1. FY 2023-2024 Basic Financial Statements
2. FY 2023-2024 Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes & Transportation Development Act and Measure W Funds for Local Transportation Purposes in Accordance with San Mateo County Congestion Relief Plan