Quarterly Audit and Performance
Review Report
FY 2021-22, Q4
August 23, 2022
Irella Blackwood, Audit Bureau Director
1 FY 2021-22 Audit Plan Portfolio Status
40 Audits and Assessments To Date
Status Count
Completed 18
In Progress 15
Upcoming 7
Total 40
2 Upcoming
17% Completed
45%
In Progress
38%
Audits Completed and Reports Issued
Audit / Assessment Oversight
Body Report Date
CleanPowerSF Privacy Audit CPUC 4/29/2022
FY 2021-22 Cybersecurity Maturity
Assessment CSA, Controller 5/27/2022
2021 Green-e Energy Verification Audit
Center for
Resource
Solutions
6/1/2022
FY 2020-21 Single Audit Controller 6/3/2022
3 Open CSA Audits and
Recommendations
4 # Audit Title
Report
Issued
Date
Open
Rec
Total
Rec
Months
Open
%
Complete
Target
Close
Date
External Affairs
1 Significant Changes Are Needed to the Design, Monitoring, and Control of the San Francisco Public Utilities Commission’s Social Impact Partnership Program
FY 2021-22 Q4 Update
• SFPUC submitted an update to CSA on 7/8/2022: 3 have been implemented and 4 are in progress
• CSA closed the 3 implemented recommendations on 8/9/2022 12/9/2021 7 7 8 0% 12/31/2022
Revenue Bond Oversight Committee
2 The San Francisco Public Utilities Commission Spent Revenue Bond Funds for Allowable Purposes but Should Improve Its Controls Over Reporting and Quality Assurance
FY 2021-22 Q4 Update
• SFPUC is implementing each recommendation and will
provide an update to the Revenue Bond Oversight Committee in its August 2022 and September 2022 meetings
2/9/2022 2 2 6 0% 12/31/2022
Total 99 0 %
5 FY 2022-23, Q1 Outlook
Completing
• FY 2021-22 Annual Physical Inventory Count
• FY 2020-21 Wholesale Revenue Requirement: Statement of Changes in Balancing Account
• 2021 Post Audit
• Public Integrity Assessment: SOLIS Procurement
• SSIP CS-165 Program Management Contract Audit
• IT / OT Network Audit
Upcoming
• 2020-22 CA Independent System Operator (CAISO), Scheduling Coordinators Self-Audit
• Reliability Standards Compliance Audit
THANK YOU
Feedback & Questions?
6 OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.
Audit Bureau
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.934.5707
F 415.554.1877
Date: August 23, 2022
To: Commissioner Anson Moran, President
Commissioner Newsha Ajami, Vice President
Commissioner Sophie Maxwell
Commissioner Tim Paulson
Through: Dennis J. Herrera, General Manager
From: Irella Blackwood, Audit Bureau Director
Subject: FY 2021-22 Q4 Audit and Performance Review Report
This memorandum provides the San Francisco Public Utilities Commission (SFPUC) Quarterly Audit and Performance Review (QAPR) report, as of FY 2021-22 Q4.
I. Completed Audits
There were four completed audits since the last quarterly report:
1. CleanPowerSF Pr ivacy Audit | April 29, 2022
Report is confidential.
Report Summary: Third-party auditor Turner, Warren, Hwang & Conrad AC (TWHC) reviewed and monitored CleanPowerSF’s compliance with data privacy and security commitments required by the California Public Utilities Commission Decision 12-08- 045 Rule 9(d) Attachment B (Rule).
Audit Findings Summary: TWHC concluded that CleanPowerSF complied with the Rule set for the 2021 reporting year with no outstanding issues.
2. FY 2021-22
Cybersecurity Maturity Assessment | May 27, 2022
Report is confidential.
Report Summary: The City Services Auditor (CSA) assessed SFPUC’s cybersecurity maturity level based on the National Institute of Standards and Technology (NIST) cybersecurity framework. The assessment is mandated by the Committee on Information Technology (COIT) cybersecurity policy.
Audit Findings Summary: SFPUC scored a “2.4” out of a possible “4.0” where a higher score indicates higher maturity. SFPUC continues to improve its cybersecurity program and bolster its cyber infrastructure.
3. 2021 Green-e Energy Verification Audit | June 1, 2022 Report is confidential.
Report Summary: Third-party auditor Larkin & Associates, PLLC performed the audit procedures agreed upon by CleanPowerSF and the Center for Resource
2 Resolutions (CRS) to verify compliance with annual reporting requirements of the CRS’s Green-e Energy program.
Audit Findings Summary: The confidential report found no exceptions regarding the compliance of the Green-e Energy verification reporting requirements.
4. FY 2020-21 Single Audit | June 3, 2022
Report Link: https://openbook.sfgov.org/webreports/details3.aspx?id=3105
Report Summary: Third-party auditor Macias Gini & O’Connell LLP (MGO) audited the City and County of San Francisco’s (City) compliance with the types of compliance requirements described in the OMB Compliance Supplement for FY 2020-21. SFPUC is included as a department of the City.
Audit Findings Summary: MGO concluded the City complied with the compliance requirements described in the OMB Compliance Supplement for FY 2020-21.
II. Audit Recommendation Status
9 audit recommendations remain open pertaining to the two audits: SFPUC Revenue Bond Programs Audit: Phase I and the Social Impact Partnership (SIP) Program Audit.
SFPUC submitted updates for the SIP Program Audit to the City Services Auditor and will be updating the Revenue Bond Oversight Committee in the upcoming months on the SFPUC Revenue Bond Programs Audit. All recommendations are on target to be implemented by the end of the calendar year.
If you have questions, please contact me at [email protected].
cc: Ronald P. Flynn, Deputy General Manager
Nancy L. Hom, Co-Acting Chief Financial Officer and Deputy CFO
att: FY 2021-22 Audit Plan, By Status
3 # Quarter
Status Audit Type Enterprise / Bureau Audit Name Oversight Body 1 Completed Financial Water
Annual Physical Inventory Count, FY 2020-21 SFPUC, Finance 2 Completed Financial Wastewater 3 Completed Financial Hetch Hetchy Water &
Power
4 Completed Financial Water
Audited Financial Statements, FY 2020-21 Controller 5 Completed Financial Wastewater 6 Completed Financial Hetch Hetchy Water &
Pow
er & CleanPowerSF
7 Completed Financial Power Gr een-e Verification Audit, 2020 Center for Resource Solutions
8 [Updated]
Completed Financial Power Gr een-e Verification Audit, 2021 Center for Resource Solutions
9 Completed Financial Business Services,
Finance
Wholesale Revenue Requirement: Statement of
Changes in Balancing Account, FY 2019-20 BAWSCA
10 Completed Financial Business Services,
Finance Post Audit, CY 2020 Controller
11 Completed Financial Business Services,
Fi
nance Sales and Use Tax Audit, 2018-20
CA Department of
Tax & Fee
Administration
12 Completed Financial Business Services,
Fi
nance
Annual Comprehensive Financial Report,
FY 2020-21 SFPUC
13 Completed Financial Business Services,
Finance Popular Annual Financial Report, FY 2020-21 SFPUC 14 [Updated]
Completed Financial Business Services,
Finance Single Audit (OMB Circular A-133), FY 2020-21 OMB 15 [Updated]
In Progress Financial Water
Annu
al Physical Inventory Count, FY 2021-22 SFPUC, Finance 16 [Updated] In Progress Financial Wastewater
17 [Updated]
In Progress Financial Hetch Hetchy Water &
Pow
er
18 [Updated]
In Progress Financial Water
Audi
ted Financial Statements, FY 2021-22 Controller 19 [Updated] In Progress Financial Wastewater
20 [Updated]
In Progress Financial Hetch Hetchy Water &
Power & CleanPowerSF
21 In Progress Financial Power Franchise Fee Audit: Pacific Gas & Electric Company Controller
22 In Progress Financial Power Fr anchise Fee Audit: Energy Center SF LLC Controller 23 In Progress Financial Business Services,
Finance
Wholesale Revenue Requirement: Statement of
Changes in Balancing Account, FY 2020-21 BAWSCA
24 In Progress Financial Business Services,
Finance Post Audit, CY 2021 Controller
Quarterly Audit & Performance Review Report
FY 2021-22 Audit Plan, By Status
As of June 30, 2022
Status
Completed: 18
In Progress: 15
Upcoming: 7
Total: 40
4 # Quarter
Status Audit Type Enterprise / Bureau Audit Name Oversight Body 25 [Updated]
Upcoming Financial Business Services,
Fi
nance
Annual Comprehensive Financial Report,
FY 2021-22 SFPUC
26 [Updated]
Upcoming Financial Business Services,
Finance Popular Annual Financial Report, FY 2021-22 SFPUC 27 [Updated]
Upcoming Financial Business Services,
Finance
Wholesale Revenue Requirement: Statement of
Changes in Balancing Account, FY 2021-22 BAWSCA
28 [Updated]
Completed Performance Business Services, ITS Cl eanPowerSF Privacy Audit CPUC 29 [Updated]
Completed Performance Business Services, ITS Cybersecurity Maturity Assessment, FY 2021-22 CSA, Controller
30 Completed Performance External Affairs Public Integrity Assessment: Social Impact Partnership Program Audit CSA, Controller
31 In Progress Performance Infrastructure Public Integrity Assessment: SOLIS Procurement CSA, Controller
32 In Progress Performance Infrastructure SSIP CS-165 Program Management Contract Audit CSA, Controller
33 [Updated]
In Progress Performance Business Services, ITS IT / OT Network Audit CSA, Controller 34 [Updated]
Upcoming Performance Hetch Hetchy Water &
Power Reliability Standards Compliance Audit WECC / NERC 35 [Updated]
Upcoming Performance Power CA Independent System Operator (CAISO), Scheduling Coordinators Self-Audit, 2020-22 CAISO
36 [Updated]
Upcoming Performance Business Services, ITS Int erconnection Security Agreement, FY 2022-23 CSA, Controller
37 [Updated]
Upcoming Performance Business Services, ITS Enterprise Risk Management: Cyber Risk Assessment SFPUC
38 [Updated]
In Progress
Concessions,
Lease
Revenue
Real Estate Services Revenue Lease Audit: Crystal Springs Golf Partners LP CSA, Controller
39 Completed
Revenue
Bond
Oversight
Committee
RBOC SFPUC Revenue Bond Programs Audit:
Phase I RBOC
40 In Progress
Revenue
Bond
Oversight
Committee
RBOC SFPUC Revenue Bond Programs Audit:
Phase II RBOC
Table of Contents
Government Auditing Standards
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www.mgocpa.co m
Macias Gini & O’Connell LLP
101 California Street, Suite 3910
San Francisco, CA 94111
Management’s Responsibility for the Financial Statements Auditor’s Responsibility
Government Auditing Standards
Opinions
Emphasis of a Matter
Fiduciary Activities
Other Matters
Prior-Year Comparative Information
Required Supplementary Information
Other Information
U.S. Code of Federal Regulations Uniform Administrative requirements, Cost Principles and Audit Requirements for Federal Awards
Government Auditing Standards
Government Auditing Standards
3 CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
presents a narrative
overview and analysis of the financial activities of the City for the year ended June 30, 2021. We encourage readers to consider the information presented here in conjunction with additional information in our transmittal letter. Certain amounts presented as fiscal year 2019-20 summarized comparative financial information in the basic financial statements have been reclassified to conform to the presentation in the fiscal year 2020-21 basic financial statements.
FINANCIAL HIGHLIGHTS
The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the end of the fiscal year by approximately $10.65 billion (net position). Of this balance, $10.56
position, and unrestricted ne
by $556.6 million, or 5.5 percent, from the previous fiscal year. Of this amount, total net investment in capital assets and restricted net position increased by $86.6 million or 0.8 percent and $851.6 million or 27.9 percent, respectively, and unrestricted net position decreased by $381.6 million or 11.1 percent.
17.7 percent increase from the prior year. Within this, revenues from property taxes, business taxes, real property transfer tax, fines, forfeitures, and penalties and intergovernmental sources grew by approximately $309.8 million, $1.06 billion, $10.1 million, $30.4 million and $432.6 million, respectively. Governmental funds expenditures totaled $7.27 billion for this period, a $239.8 million or 3.4 percent increase, reflecting increases in demand for governmental services of $352.2 million and increases in debt service of $66.1 million, offset by a decrease in capital outlay of $178.5 million. -term debt increased by $408.1 million in this fiscal year. The decrease of $89.4 million in the governmental activities was due to the retirement of Commercial Paper (CP) through the issuance of 2020 Certificates of Participation Animal Care and Control Project and Series 2021A Multiple Capital Improvement Projects. The short-term debt in the business-type activities increased by $497.5 million mainly due to the Airport, Hetch Hetchy Water and Power and the Wastewater Enterprise issuing a total of $987.8 million additional short-term debt to upgrade their facilities. The San Francisco General Hospital paid off $3.8 million of CP. The Airport and the Water Enterprise refinanced $230.0 million and $256.5 million of CP, respectively, through the issuance of long-term debt. -term debt increased by $469.4 million. A total of $736.2 million in general obligation bonds which included $35.6 million of bond premium were issued to provide funds to improve: facilities that deliver services to persons experiencing mental health challenges, substance abuse s parks, open spaces and
recreational facilities; low-and middle-income housing programs; certain fire, earthquake and emergency response; Muni service reliability, ease traffic congestion, reduce vehicle travel time, enhance pedestrian and bicycle safety and improve disabled access. The City issued $123.1 million certificates of participation with bond premium of $24.3 million to refinance the short-term debt issued for the Animal Care and Control Project and for acquisition of real properties for the Hall of Justice Relocation project. The City also issued $91.2 million in refunding general obligation bonds and $70.6 million refunding certificates of participation with bond premium of $21.6 million and $11.9 million, respectively, for debt service savings. The increase in debt was offset by $609.5 million due to refunded bonds and scheduled debt service payments of $567.3 million and amortization of bond premium of $42.2 million.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
4 The business-type activities long-term debt increased by $421.5 million. The Airport issued $980.5 million in revenue refunding bonds to refund certain outstanding revenue bonds and repay outstanding CP notes.
The Water Enterprise issued $420.3 million in revenue bonds to repay $229.8 million of CP and to finance capital projects of the Water and the Hetch Hetchy Water Enterprises. The Water Enterprise also issued $664.4 million in revenue refunding bonds for debt service savings and obtained a loan of $49.5 million from the State of California to fund its SF Westside Recycled Water Project. The Municipal Transportation Agency issued $124.6 million revenue bonds to finance the cost of various capital projects of MTA, issued revenue refunding bonds of $174.9 million for debt service savings and obtained additional bank loan of $369 for a garage renovation project. The Wastewater Enterprise drew down additional loans of $22.5 million from the State of California to fund various sewer system improvement projects. The increase in debt was partially offset by the $1.83 billion in refunded bonds and scheduled debt service payments and $182.2 million of bond premium and discount amortization.
The City adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 84 , Fiduciary Activities as of July 1, 2020. Statement No. 84 establishes criteria for identifying fiduciary activities of all state and local governments. The City restated the July 1, 2020 net position of governmental activities to include activities previously reported as agency funds. The net effect of this change was a $35.6 million The financial statements as of and for the year ended June 30, 2020 have not been restated for the effects of GASB Statement No. 84. 5 CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
OVERVIEW OF THE FINANCIAL STATEMENTS
Government-wide
financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.
These various elements of the are related as shown in the graphic below.
Organization of City and County of San Francisco
Introductory
Section INTRODUCTORY SECTION
+
Financial
Section
Management's Discussion and Analysis (MD&A)
Government -
wide Financial
Statements
Fund Financial Statements
Statement of
net position
Governmental
Funds
Proprietary
Funds
Fiduciary
Funds
Balance
sheet
Statement of
net position Statement of
fiduciary
net positionStatement of
revenues,
expenses, and
changes in
fund net positionStatement of
activities
Statement of
revenues,
expenditures, and
changes in fund
balances
Statement of
changes in
fiduciary
net positionStatement of
cash flows
Notes to the Financial Statements
Required Supplementary Information Other Than MD&A
Information on individual nonmajor funds and other
supplementary information that is not required
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
6 The following table summarizes the major features of the financial statements. The overview section below also describes the structure and contents of each of the statements in more detail.
Government -
wide
Statements
Fund Financial Statements
Governmental Proprietary Fiduciary
Scope Entire entity
(except
fiduciary funds)
The day-to-day
operating activities of
the City for basic
governmental
services
The day-to-day
operating activities
of the City for
business-type
enterprises
Instances in which
the City
administers
resources on
behalf of others,
such as employee
benefits
Accounting
basis and
measurement
focus
Accrual
accounting and
economic
resources focus
Modified accrual
accounting and
current financial
resources focus
Accrual accounting
and economic
resources focus
Accrual accounting
and economic
resources focus
Type of
balance
information
All assets,
deferred
outflows of
resources,
liabilities, and
deferred inflows
of resources,
both financial
and capital,
short-term and
long-term
Balances of
spendable resources
All assets, deferred
outflows of
resources,
liabilities, and
deferred inflows of
resources, both
financial and
capital, short-term
and long-term
All resources held
in a trustee or
custodial capacity
for others
Type of inflow
and outflow
information
All inflows and
outflows during
year, regardless
of when cash is
received or paid
Near-term inflows and
outflows of spendable
resources
All inflows and
outflows during
year, regardless of
when cash is
received or paid
All additions and
deductions during
the year,
regardless of when
cash is received or
paid
Government-wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the -sector business.
The statement of net position red outflows of
resources, liabilities, and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether or not the financial position of the City is improving or deteriorating.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
7 The statement of activities
most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave.
Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include public protection, public works, transportation and commerce, human welfare and neighborhood development, community health, culture and recreation, general administration and finance, and general City responsibilities. The business-type activities of the City include an airport, port, transportation system (including parking), water and power operations, an acute care hospital, a long-term care hospital, and sewer operations.
The government-wide financial statements include not only the City itself (known as the primary government), but also a legally separate development authority, the Treasure Island Development Authority (TIDA), for which the City is financially accountable. Financial information for this component unit is reported separately from the financial information presented for the primary government. Included within the governmental activities of the government-wide financial statements are the San Francisco County Transportation Authority (Transportation Authority) and San Francisco Finance Corporation. Included within the business-type activities of the government-wide financial statements is the operation of the San Francisco Parking Authority. Although legally separate from the City, these component units are blended with the primary government because of their governance or financial relationships to the City. The City also considers the Successor Agency to the Redevelopment Agency (Successor Agency) and various Community Facilities Districts as fiduciary component units of the City.
Fund Financial Statements
The fund financial statements are designed to report information about groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives.
The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into the following three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements services are reported in governmental funds. These statements, however, focus on (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are available and the constraints for spending. Such information may be useful in determining what financial Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-
-term financing decisions. Both the
governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
8 The City maintains several individual governmental funds organized according to their type (special revenue, debt service, capital projects and permanent funds). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, which is considered to be a major fund. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.
Proprietary funds. Proprietary funds are generally used to account for services for which the City charges customers
either outside customers, or internal units or departments of the City. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail.
The City maintains the following two types of proprietary funds:
Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the operations of the San Francisco International Airport (SFO or Airport), San Francisco Water Enterprise (Water), Hetch Hetchy Water and Power (Hetch Hetchy), San Francisco Municipal Transportation Agency (SFMTA), San Francisco General Hospital (SFGH), San Francisco Wastewater Enterprise (Wastewater), Port of San Francisco (Port), and the Laguna Honda Hospital (LHH), all of which are considered to be major funds of the City.
Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses internal service funds to account for its fleet of vehicles, management information and telecommunication services, printing and mail services, and for lease- purchases of equipment by the San Francisco Finance Corporation. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements.
Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report.
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside other custodial funds are reported under
the fiduciary funds. Since the resources of these funds are not available to they are not reflected in the government-wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds.
Notes to the Basic Financial Statements
The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.
Required Supplementary Information
In addition to the basic financial statements and accompanying notes, this report presents certain required liability, and OPEB contributions.
The City adopts a rolling two-year budget for its General Fund. A budgetary comparison schedule has been provided for the General Fund to demonstrate compliance with this budget.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
9 Combining Statements and Schedules
The combining statements and schedules referred to earlier in connection with nonmajor governmental funds, internal service funds, and fiduciary funds are presented immediately following the required supplementary information.
Condensed Statement of Net Position
(in thousands)
Analysis of Net Position
was $10.65 billion at the end of fiscal year 2020-
governmental activities account for $3.76 billion of this total and $6.89 billion stem from its business-type activities.
land, buildings, and equipment). This reflects a $86.6 million or 0.8 percent increase over the prior year which is due to the reclassification of $369.4 million from governmental activities to business-type activities ates of participation that fund various enterprise
decrease in the business-type activities, highlighted by decreases of $304.9 million at Airport and $8.1 million at SFGH offset by increases of $464.5 million at Water Enterprise and $231.6 million at SFMTA, respectively. Since the City uses capital assets to provide services, these assets are not available for future spending. Further, the resources required to pay the outstanding debt must come from other sources since the capital assets themselves cannot be liquidated to pay that liability. subject to external limitations regarding their use. The remaining portion of total net position is a deficit of $3.81 billion, which consists of a $3.13 billion deficit in governmental activities and $1.16 billion deficit in business-type activities. The governmental activities and business-type activities deficit is largely due to recording liabilities related to net pension and net other postemployment benefits (see Note 9). The governmental activities deficit also included $490.6 million in long-term bonds liabilities that fund the LHH Total
2021 2020 2021 2020 2021 2020
Assets:
Current and other assets.......................... 8,994,750$ 8,377,481 $ 6,327,864 $ 6,477,516 $ 15,322,614 $ 14,854,997 $ Capital assets............................................. 6,831,506 6,702,757 23,408,990 22,089,466 30,240,496 28,792,223 Total assets........................................... 15,826,256 15,080,238 29,736,854 28,566,982 45,563,110 43,647,220 Deferred outflows of resources: 1,252,731 1,161,466 1,191,964 1,103,005 2,444,695 2,264,471 Liabilities:
Current liabilities......................................... 2,609,243 3,214,799 2,918,746 2,395,258 5,527,989 5,610,057 Noncurrent liabilities.................................. 10,205,405 9,149,846 20,791,711 19,797,681 30,997,116 28,947,527 Total liabilities.......................................... 12,814,648 12,364,645 23,710,457 22,192,939 36,525,105 34,557,584 Deferred inflows of resources: 505,142 743,437 322,335 512,075 827,477 1,255,512 Net position:
Net investment in capital assets *........... 3,927,209 3,853,271 7,003,396 7,013,098 10,561,206 10,474,620 Restricted *.................................................. 2,965,770 2,118,598 1,055,138 956,701 3,899,691 3,048,043 Unrestricted (deficit) *................................ (3,133,782) (2,838,247) (1,162,508) (1,004,826) (3,805,674) (3,424,068) Total net position..................................... 3,759,197$ 3,133,622$ 6,896,026$ 6,964,973$ 10,655,223$ 10,098,595$ Business-type activities G overnmental activities
* See Note 10(d) to the basic financial statements.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
10 rebuild project, certain park facilities and Embarcadero seawall earthquake safety projects at the Port, improvement projects for reliable emergency water supply for the Water Enterprise, and road paving and street safety in SFMTA (see Note 10(d)). The business-type activities deficit also includes structural operating losses from SFGH and LHH subsidized by the General Fund.
Condensed Statement of Activities
(in thousands)
Analysis of Changes in Net Position
-21, a 5.0 percent increase from the
prior fiscal year after the cumulative effect of $35.6 million for the adoption of GASB Statement No. 84 effective July 1, 2020, as noted above. The increase in net position was due to a $590.0 million increase from governmental activities and offset by a decrease of $68.9 million from business-type activities. well as an increase in total expenses of $577.3 million or 8.9 percent this fiscal year. Business-type activities revenues decreased by $530.9 million or 10.4 percent, and total expenses also decreased by $15.2 million, G overnmental activities Business-type activities Total Revenues
Program revenues:
General revenues:
Expenses
Public works, transportation
Human welfare and
Increase/(decrease) in net position
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
11 or 0.3 percent. The net transfer to business-type activities increased by $182.5 million. The major components of increased revenue Citywide are increased operating grants and contributions of $661.9 million, property taxes of $238.7 million and business taxes of $1.06 billion, offset by decrease of charges for services of $819.8 million, capital grants and contribution of $144.8 million, hotel room tax of $243.3 million and interest and investment income of $285.9 million. Discussion of these and other changes is presented in the governmental activities and business-type activities sections that follow.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
12 Governmental Activities.
excluding the impact of a $35.6 million restatement. Key factors contributing to the changes are discussed below.
Overall, total revenues from governmental activities were $8.54 billion, a $1.12 billion or 15.1 percent increase over the prior year. For the same period, expense totaled $7.09 billion before transfers of $862.0 million.
Business tax revenues soared by $1.06 billion or 1.3 times predominately due to recognition of Proposition C Commercial Rent Tax and Proposition C Homelessness Gross Receipts Tax and Administrative Office which were in favor of the City in fiscal year 2021. The Commercial Rent Tax, passed in June 2018 and operative on January 1, 2019, imposes a new tax on gross receipts from leasing or subleasing of commercial space to fund early childhood education and increasing compensation of childcare professionals and staff. The Homelessness Gross Receipts Tax, which applies to business with gross payroll expenses in San Francisco, were passed in November 2018 and became operative on January 1, 2019. Both measures won with a simple majority but litigants sought to invalidate them, asserting they needed a two-thirds vote for approval due to the specific designation for the tax revenues. After the Supre
in fiscal year 2021, totaling $1.15 billion, were recognized in 2021. Business registration tax also had a modest increase of $40.9 million but was offset by a combined decrease of $133.5 million in payroll and Prop E gross receipt taxes, which were adversely impacted by the pandemic.
Property tax revenues increased by $238.7 million or 8.7 percent due in large part to the increased recognition of $130.8 million secured property tax which corresponded to the year-over-year growth of the secured assessment roll. Remaining increases were from Excess Educational Revenue Augmentation Fund (ERAF), redevelopment property tax increment and property tax in lieu of vehicle license fee.
The COVID pandemic continued to adversely impact other general revenue streams. Among these, hotel room tax plummeted by $243.3 million or 86.6 percent, due to travel restrictions, reductions both in international and domestic flights, and conference cancellations. Enplanements in fiscal year 2021 saw moderate growth through the latter half of the year, however, total enplanements for the year were 65.7 percent below fiscal year 2020 and 75.8 percent below fiscal year 2019. As a result of meetings taking place virtually, in other locales, or cancelled entirely, hotel room taxes were significantly impacted. Hotel tax revenues are highly correlated with revenue per available room (RevPAR) which is a function of changes in occupancy, average daily room rate (ADR) and room supply. In June 2020, RevPAR was $28.5, with a 12-month moving average of $159.32. RevPAR gradually increased and grew to a pandemic high of $70.5 in June 2021, with a 12-month moving average of $42.6. ADR increased from $109.7 in June 2020 to $161.7 in June 2021, or 47.4 percent. However, because the pandemic affected the entirety of the current year versus a portion of the prior year, annual average ADR saw a decline of 45.7 percent from $226.7 to $123.11. Similarly, although the hotel occupancy rate increased from 26.0 percent in June 2020 to a high of 43.6 percent a year later, the annual average occupancy rate for fiscal year 2021 was 34.0 percent, or
44.8 percent lower than the average in fiscal year 2020.
Interest and investment income dropped by $131.5 million or 92.5 percent primarily due to interest rate declines as the Federal Reserve maintained interest rates in the 0-2 basis point range for the entirety of this fiscal year to support the economy through the COVID crisis. The fair value portfolio ended the fiscal year with a significantly smaller unrealized gain compared to prior year and further impacted the total investment earnings.
The restrictions on retail and non-essential business and COVID related slowdowns and closures resulted in continued declines in sales and use tax revenues by $46.1 million or 16.5 percent. Although collections in the second half of the year were stronger than the same period in the prior year, total revenue was still far below pre-pandemic levels. Likewise, other local taxes, including parking tax, stadium admission tax,
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
13 and sugar sweetened beverage tax, decreased by $21 million. Utility users tax also fell by $12.9 million due to depressed utility consumption by businesses.
Total grants and contributions, however, increased by $392.0 million or 23.6 percent, of which $312.4 million was from the American Rescue Plan Act (ARPA) and $14.3 million from the Coronavirus Aid, Relief, and Economic Security (CARES) Act to support th
-19. The
remaining net increase of $65.3 million in federal, state and other operating grants and subventions was mostly for mental health, public protection, welfare services and aid. These increases were partly offset by a $15.5 million decrease in capital grants and contributions due to reduced capital project activities and spending in this fiscal year.
Total charges for services declined by $123.3 million or 14.4 percent owing to severely depressed business and economic activities for the entirety of this fiscal year. Despite a minor increase in receipts of development impact fees and settlements, revenues plunged in almost all service categories including rents and concessions, licenses and permits, fines, forfeitures and penalties, and other charges compared to prior fiscal year.
Net transfers from the governmental activities to business-type activities were $862.0 million, a $182.5 million or 26.9 percent increase over the prior year. Th is was primarily due to a $102.7 million increase in bond proceeds issued by Capital Project Funds and transferred to enterprise funds, composed of $134.7 million for SFMTA and $20.0 million for the San Francisco Water Enterprise this fiscal year versus $52 million for the Port last fiscal year. In addition, transfers from the General Fund to General Hospital also grew by $90.9 million mostly due to a one-time, unbudgeted transfer related to timing of revenue, and increased support for COVID related expenditures. Transfers from the San Francisco International Airport to the General Fund decreased by $19.0 million due to lower concession, parking and transportation revenues impacted by the pandemic. These net increases were partly offset by a decrease in General Fund transfer to SFMTA of $31.3 million driven by lower aggregate discretionary revenue for baseline transfer this fiscal year.
Total governmental expenses rose by $577.3 million, or 8.9 percent, primarily attributed to a surge of $460.9 million of spending on COVID response for shelter, feeding, testing, vaccination, supplies and materials including personal protection equipment, community grants, medical and related services. There was also a $94.5 million increase in other city grants and aid payments as demand increased. OPEB expenses also increased by $46.9 million because of proportionate share increases, assumption changes and contributions but were offset by a decrease of $107.1 million pension expenses driven by investment gains, actuarial gains and assumption changes. Increases in other expenses including judgments and claims, medical and health service payments, salaries and fringe and depreciation were mostly offset with less housing program expenses.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
14 CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
15 Business-type activities
this decrease are as follows:
The San Francisco International Airport had a decrease in net position at fiscal year end of $402.1 million, compared to a $216.9 million decrease in the prior year, a $185.2 million difference.
Operating revenues totaled $515.4 million for fiscal year 2020-21, a decrease of $428.5 million or 45.4 percent over the prior year and included a decrease of $276.3 million in aviation primarily due to changes in the unearned aviation revenue adjustment, $73.5 million in rents and concessions, $67.9 million in parking and transportation, and $10.8 million in other revenues, due to the impact of COVID- expenses decreased by $16.7 million, or 1.8 percent, for a net operating loss of $399.0 million for the period. Net nonoperating activities saw a deficit of $53.1 million versus $245.3 million deficit in the prior year, a $192.2 million decrease. The decrease of $16.7 million in operating expenses is primarily due to increases in personal services of $6.5 million due to higher other post-employment benefits, depreciation and amortization of $19.0 million due to the addition of capital assets, offset by decreases of $26.9 million due to lower professional services expenses, and $13.4 million due to higher estimated bad debt expense related to the Airport COVID-19 Emergency Rent Relief Program for concession tenants in fiscal year 2020. The decrease of $192.2 million in nonoperating activities is due to an increase in other nonoperating revenues of $248.0 million primarily due to the CARES Act grant funding, decrease of interest and investment income of $89.8 million primarily due to lower interest rates and investment fair values adjustments, and decrease in interest expense of $29.9 million primarily due to a decrease in fixed rate bond interest. Capital contributions increased by $15.4 million due to two fuel storage tanks transferred from SFO Fuel to the Airport in November 2020. est such entity in California, reported an increase in net position of $8.5 million at the end of fiscal year 2020-21, compared to an increase of $98.9 million at the end of the previous year, a $90.4 million difference. Operating revenues totaled $581.6 million, operating expenses totaled $448.8 million, nonoperating activities totaled a net expense of $132.8 million and the net increase from transfers was $4.4 million. Compared to the prior year, operating revenues decreased $1.7 million which was due to an 8.8% decrease in consumption by retail customers and the COVID-
collection of past due accounts, offset by an adopted rate increase of 7.0% for retail customers beginning July 1, 2020 coupled with rent increases and increased royalty revenues. The enterprise reported a total increase in operating expenses of $50.7 million in fiscal year 2020-21 mostly due to increases of $27.1 million in general administrative and other mainly from judgment and claims based on actuarial estimates and $12.6 million in personnel services mainly due to pension obligations based on actuarial report and a 3% cost of living adjustment. Net nonoperating activity decreased by $60.0 million of net expense primarily due to a prior year one-time gain of $63.6 million from the property transfer of 639 Bryant Street for 2000 Marin Street offset by a $15.0 million grant from the State of California for the SF Westside Recycle Water project in the current year.
Hetch Hetchy Water and Power and CleanPowerSF ended fiscal year 2020-21 with a net position increase of $16.4 million, compared to a $80.9 million increase the prior year, a difference of $64.5 million. This change consisted of a decrease in operating income of $50.0 million, a decrease in net nonoperating activities of $16.0 million, and an increase in net transfers from the City of $1.5 million.
This enterprise consists of three segments: Hetchy Water upcountry operations and water system, which reported a $13.6 million increase in change in net position, Hetchy Power (also known as the Power Enterprise), which reported a $6.9 million increase in change in net position, and CleanPowerSF, which reported a $4.1 million decrease in net position. Hetchy Water operating revenues increased by $12.1 million mainly due to an increase in water assessment fees from the Water Enterprise, while operating expenses increased by $5.6 million mainly due to personnel services resulting from cost of living adjustments, higher retirement expenses
operating revenues decreased by $4.5 million mostly due to a decrease in the sale of power. On the operating expenses side, Hetchy Power reported a decrease of $2.5 million mainly attributed to $6.1 million in lower electricity sales, offset by increases of $1.7 million in general and administrative expenses mainly due to higher litigation expenses and $1.6 million in higher capital project spending.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
16 million mostly due to a decrease in electricity
sales to retail and commercial customers. Operating expenses for CleanPowerSF increased by $16.7 million mainly due to $16.2 million in purchased electricity and transmission, distribution and other power costs as a result of higher prices in the CAISO market and increase in resource adequacy capacity purchases related to new compliance requirements from the California Public Utilities Commission.
9.6 million, compared to a $63.8 million
increase in the prior year, a $54.2 million change. Operating revenues decreased by $16.5 million primarily due to a $13.5 million decrease in charges for services from a sanitary flow decrease from residential and non-residential customers and $2.1 million increase in allowance for doubtful accounts attributable to suspension of collection efforts in response to the COVID-19 emergency proclamation issued by the City Mayor. Operating expenses increased by $30.0 million principally due to $20.9 million in general and administrative and other operating expenses mainly due to higher project expenses related to the SSIP Biosolids Digester Project, and $9.1 million in depreciation expense due to more capitalized assets put in service. Net nonoperating activities increased by $6.2 million due principally to $13.3 million decrease in interest and investment income from lower pooled and fiscal agent cash balances and a lower annualized interest rate, offset by a $8.2 million decrease in interest expense due to lower interest rate compared to prior year and a decrease in outstanding bond principal balance.
The Port ended fiscal year 2020-21 with a net position decrease of $27.4 million, $68.1 million lesser than the $40.7 million increase in the previous year. The Port is responsible for seven and one-half miles of waterfront property and its revenue is derived primarily from property rentals to commercial and industrial enterprises and a diverse mix of maritime operations. In fiscal year 2020-21, operating revenues decreased by $14.5 million principally due to decreases of $8.5 million in parking revenue as a result of reduced tourism and other activity on the waterfront and $4.9 million due to cancellation of all cruise calls and significantly fewer special events as a result of the COVID-19 pandemic. Operating expenses increased $11.1 million over the prior year. This was primarily due to increases of $8.4 million in personal services for increased pension and other post-employment benefits, $8.6 million mostly due to changes in remediation expense estimates, and $3.3 million of increased spending on contractual services, offset by prior years $9.8 million in contractual services mainly related to the Seawall project.
Also, net t
proceeds from City general obligation bonds to support the Seawall Earthquake Safety and disaster Prevention Program.
The SFMTA had an increase in net position of $306.0 million for fiscal year 2020-21, compared to an were $207.3 million, while total operating expenses reached $1.32 billion. Operating revenues decreased by $183.0 million compared to the prior year and is mainly due to decreases in fare collections by $135.2 million as well as parking by $20.9 million. Decrease in passenger fares was mainly due to significant decline in ridership caused by severe impacts of the COVID-19 pandemic.
Parking revenues were heavily impacted by the quarantine and shelter in place orders causing a major decrease in collections as a result of decline in parking activities. Operating expenses decreased by $113.5 million, primarily due to decreases in personal service by $37.1 million attributable to significant reduction in overtime costs and lower workers compensation and other post-employment benefit obligations, other operating expenses by $31.0 million with the reduction in paratransit costs and less noncapitalized expenditures, general and administrative costs by $26.3 million due to decrease in claim liability per actuarial study, and contractual services by $20.5 million was attributable to decreases in payments for garage operators and tow service contracts, and facilities and equipment maintenance services. Net nonoperating activities increased by $199.8 million, mainly from a $245.0 million increase in federal grants including CARES act grants, offset by decrease of $45.2 million in state and other operating grants, interest and investment income, and an increase in interest expense. Capital contributions decreased by $150.4 million due to decrease in capital expenditures incurred and billable to the grantors. Transfers in increased by $111.4 million mainly due to an increase of $134.7 million in
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
17 or revenue baseline subsidy, in lieu of parking tax and population-based allocation.
of fiscal year 2020-21, compared to an increase of $8.7 million at the end of the previous year, a $4.5 million for the prior year. This change of $16.8 million was mostly due to a $23.1 million increase in operating revenues, a $13.4 million increase in operating expenses, and a $7.1 million increase in net nonoperating activities. Net transfers decreased by approximately $12.3 million, due to a $14.9 million decrease in transfers in and a $2.6 million increase in transfers out. -21 with a net position increase of
$6.7 million, compared to a decrease of $26.5 million the prior year, a $33.2 million change. Operating revenues increased $264.6 million from prior year, mainly due to a $289.4 million increase in net patient service revenue. Operating expenses increased approximately $32.8 million, mainly due to a $22.8 million increase in personal services, and a $22.3 million increase in contractual services, offset by a $7.6 million decrease in services provided by other departments. Net nonoperating activities increased $12.7 million, mainly due to an increase in federal operating grants. Net transfers increased by approximately $98.6 million, due to a $82.1 million increase in transfers in and a $16.5 million decrease in transfers out.
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental Funds
-term inflows,
outflows, and balances of resources available for future spending. Such information is useful in assessing ements. In particular, unrestricted fund balance may serve as a useful measure funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds, Capital Project Funds, and the Permanent Fund.
At the end of fiscal year 2020-21, the City governmental funds reported combined fund balances of $6.28 billion, an increase of $1.24 billion or 24.6 percent over the prior year. Of the total fund balances, $1.79 billion is assigned and $668.3 million is unassigned. The total of $2.45 billion or 39.1 percent of the total balance classifications, the General Fund had an assigned fund balance of $1.56 billion. The remainder of the governmental fund balances includes $2.8 million nonspendable for items that are not expected to be converted to cash such as advances and long-term loans, $3.50 billion restricted for programs at various levels and $320.6 million committed for other reserves.
The General Fund is the chief operating fund of the City. As a measure of liquidity, both the sum of assigned and unassigned fund balances and total fund balance can be compared to total fund expenditures. As of the end of the fiscal year, assigned and unassigned fund balances totaled $2.23 billion while total fund balance was $2.67 billion. Combined assigned and unassigned fund balances represent 45.6 percent of total expenditures, while total fund balance represents 54.5 percent of total expenditures. For the year, the of $823.4 million, resulting in total fund balance decreasing by $51.2 million. Overall, federal grants increased by $326.7 million primarily driven by the American Rescue Plan Act for $312.4 million and CARES Act revenues by $14.3 million. Property taxes increased by $257.9 million due to increased ERAF for $131.6 million, year-over-year growth in the secured assessment roll contributed to about $87.7 million increased current year secured property tax revenues and $21.7 million additional property tax in-lieu of vehicle license fees. State grants and subventions also increased by $90.4 million primarily for mental
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
18 health and welfare programs. These increases are partly offset by a decline in other sources, particularly in hotel room tax, business taxes, interest and investment income, sales and use tax, parking tax, other revenues, licenses, permits and franchises, utility users tax, other local taxes and rents and concession which were severely impacted by the shelter-in-place order, travel restrictions, closure of non-essential business, cancellation of conferences and events and surging unemployment due to the pandemic. The net result of revenues over expenditures and transfers was a decrease in fund balance this fiscal year. The Fund has a beginning fund balances restatement of $35.4 million due to implementation of GASB 84.
Proprietary Funds
-type
activities section of the government-wide financial statements but with some additional detail.
At the end of fiscal year 2020-21, the unrestricted net position for the proprietary funds was as follows:
Water Enterprise: $64.3 million, Hetch Hetchy Water and Power: $283.6 million, Wastewater Enterprise:
$45.8 million, and Port: $84.5 million. In addition, the following funds had net deficits in unrestricted net position: Airport: $18.7 million, SFMTA: $703.9 million, San Francisco General Hospital: $632.4 million, and Laguna Honda Hospital: $285.7 million.
The following table shows actual revenues, expenses and the results of operations for the current fiscal decreased by approximately $68.9 million due to the current year financial activities. Reasons for this -type activities.
General Fund Budgetary Highlights
-forward appropriations for
various programs and projects, and supplemental appropriations approved during the fiscal year.
During the year, actual revenues and other resources were higher than the final budget by $108.5 million.
The City realized $182.0 million, $206.7 million, $72.2 million and $10.9 million revenues above budget in property tax, real property transfer tax, State subventions and interest and investment income which were partly offset by lower than budgeted revenues of $93.1 million, $77.2 million, $75.4 million, $36.8 million, $31.5 million, $15.0 million and $14.3 million in hotel room tax, federal grants and subventions, business taxes, sales and use tax, charges for services, other resources and other local taxes, respectively. Property tax was higher primarily due to recognition of ERAF following the guidance from the California State fiscal
year 2019-20 levels and outperformed budget by $206.7 million as the City budget assumed a much more severe slowdown than occurred, and because voters approved a November 2020 measure that increased tax rates on sales exceeding $10 million. State health and mental health subventions, health and welfare realignment, and other grants and subventions also have a combined $72.2 million favorable budget Ope rating
Re ve nue s
Ope rating
E xpenses
Ope rating
Income
(Loss)
Non-
Ope rating
Re ve nue s
(E xpense)
Capital
Contributions
and Others
Interfund
Transfers,
Ne t
Change In
Ne t
Position
Airport.............................................. 515,416$ 914,385 $ (398,969) $ (53,093) $ 64,735 $ (14,736) $ (402,063) $ Water............................................... 581,612 448,843 132,769 (132,818) 4,180 4,371 8,502 Hetch Hetchy................................... 391,171 408,871 (17,700) 18,661 - 15,468 16,429 Municipal Transportation Agency.... 207,288 1,317,073 (1,109,785) 609,859 160,956 644,982 306,012 General Hospital............................... 847,971 1,078,078 (230,107) 87,782 - 149,043 6,718 Wastew ater Enterprise.................... 327,665 292,220 35,445 (23,050) - (2,748) 9,647 Port................................................... 94,330 138,265 (43,935) 14,319 2,019 208 (27,389) Laguna Honda Hospital.................... 222,419
295,072 (72,653) 20,472 - 65,378 13,197
Total.............................................. 3,187,872$ 4,892,807$ (1,704,935)$ 542,132$ 231,890$ 861,966$ (68,947)$
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
19 variances. The cash position was better than projected and resulted in higher interest income than budgeted despite low interest rates.
These favorable budget variances were partially offset by unfavorable variances in the remaining taxes, particularly, hotel room tax, business taxes, sales and use tax, other local taxes and parking tax due to the continued shelter-in-place and closure of non-essential businesses attributed to the pandemic, which lasted longer than anticipated at the time of budget preparation. In addition, federal grants and subvention revenues were below budget as cost recoveries from FEMA were not entirely offset by unbudgeted ARPA funds. The remaining unfavorable variances in charges for services, rents and concessions and other resources, licenses, permits and franchises were largely due to cancelation of events, reduced service demand and restrictions imposed by pandemic restrictions, which eased in the fourth quarter.
Differences between the final budget and actual (budgetary basis) expenditures resulted in $185.6 million in expenditure savings. Highlights of the variances include:
$43.2 million savings for human welfare and neighborhood development largely due to reduced aid assistance and payments, community-based organization services and salaries and fringe benefits in $43.1 million savings for community health, of which $33.2 million was in non-personnel services and $9.3 million in salaries and fringe benefits.
$42.5 million savings for budgetary reserve and designations for self-insurance funds. $19.4 million savings for general administration and finance, of which $17.5 million was in salaries and fringe benefits and the remaining in programmatic expenditures and services from other City departments. City Planning realized savings of $7.2 million, due to reduced service demands during the pandemic, followed by Controller, City Attorney and General Services Agency- Administrative Services, which realized savings of $3.1 million, $2.7 million and $1.4 million, respectively. $13.3 million savings for public works, transportation and commerce, primarily in Office of Business and Economic Development with reduced aid assistance, loans and City grants issued primarily due to depressed economic activities during the pandemic.
$13.0 million savings for general City responsibilities mainly in non-personnel services and lower health service retiree subsidy costs.
Remaining savings for culture and recreation and public protection are mainly due to lower than budgeted non-personnel costs and services provided by other City departments. Departments with major savings include Superior Court, Juvenile Probation, Recreation and Park, Public Defender, Sheriff and Emergency Management.
The combined effect of revenue higher than budget and savings in expenditures was a budgetary fund balance available for subsequent year appropriation of $902.0 million at the end of fiscal year 2020-21. -22 and 2022-23 Adopted Budget assumed an available balance of $174.0 million fully appropriated in fiscal year 2021-22 and contingency and other reserves of $696.2 million, leaving $31.8 million available for future appropriations (see also Note to the Required Supplementary Information for additional budgetary fund balance details). The Adopted Budget spent $286.2 million of designated fund balance, including the entirety of the $113.5 million COVID Response and Economic Contingency Reserve, $18.7 million of the Federal and State Emergency Revenue Reserve, the entirety of the $149.0 million Business Tax Stabilization Reserve, and $5.0 million of the Hotel Tax Loss Contingency Reserve.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
20 Capital Assets
-type activities as of June 30, 2021, increased
by $1.45 billion, 5.0 percent, to $30.24 billion (net of accumulated depreciation). Capital assets include land, buildings and improvements, machinery and equipment, park facilities, roads, streets, bridges, and intangible assets. Governmental activities contributed $128.7 million or 8.9 percent to this total while $1.32 billion or 91.1 percent was from business-type activities. Details are shown in the table below.
Major capital asset events during the current fiscal year included the following:
Under governmental activities, net capital assets increased by $128.7 million or 1.9 percent. About $316.5 million worth of construction in progress work was substantially completed and capitalized as facilities and improvements and infrastructure. Of the completed projects, about $47.0 million in the Animal Care and Control Center, $41.0 million for Station 49 Ambulance Deployment Facility Project, $25.4 million for Margaret Hayward Playground, $21.8 million for Garfield Square Pool Bldg., $18.6 million for 1925 Evans Shelter, and $14.4 million for the Willie Woo Woo Wong Playground. The remaining completed projects are mainly public works.
increase in construction and capital improvement activities. Major additions to construction work in progress included Recycled Water project, Sunol Long Term Improvements and Regional Groundwater Storage and Recovery projects. Facilities, improvements, machinery, and equipment increased by $19.7 million mainly attributable to the San Andreas Pipeline No. 2 and Water Main Replacement System Improvement Program was 99.0 percent completed with $4.8 billion of project appropriations expended. The program consists of 35 local projects located within San Francisco and 52 regional projects spread over seven different counties from the Sierra Foothills to San Francisco. The 35 local projects in this program were completed. For regional projects, 44 are completed and 8 are expected to complete in May 2023.
Project construction in progress of $290.6 million and Muni Forward program of $61 million. The remaining $2.7 million was mainly from the procurement of new revenue vehicles. Construction in progress of the $592.4 million costs incurred were for the New Central Subway Project, Muni Forward program, facility upgrades, and light rail vehicle procurement. Facilities and Improvements of $4.7 million was incurred in fiscal year 2021 for facility upgrades, Islais Creek annex renovation projects, and Muni Forward program. Equipment cost of $48.4 million was incurred during the fiscal year mainly for light rail vehicles procurement, facility upgrades, Central Control System upgrades, and streetcar renovation. Infrastructure total of $184.3 million was incurred during the fiscal year mainly for rail replacement, Muni Forward program, street improvements, and traffic signals. to
higher depreciation expense and lower new construction in progress. LHH provides 780 resident beds -acre campus. The 500,000 square foot facility received
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
21 silver certification by the U.S. Green Building Counci (LEED) program, becoming the first green-certified hospital in California. depreciation expense and lower new construction in progress.
The Wastewater Enterprise net capital assets reported an increase of $544.6 million or 17.8 percent reflecting an increase in construction and capital improvement activities. The Sewer System Improvement Program (SSIP) includes three phases over 20 years to improve the existing wastewater system. As of June 30, 2021, 37 projects were completed, 8 projects in preconstruction phase, 18 projects in construction phase, and 7 projects in close-out phase. The Oceanside Plant (OSP) Condition Assessment Repairs was completed on January 29, 2021, with an improvement focus on maintaining operational reliability and extending the service life of buildings that are required to remain in operation for 30 years or more. The Southeast Plant (SEP) Seismic Reliability and Condition Assessment Improvements Project is on-going construction.
from construction and capital improvement activities, and additions of facilities, improvements, machinery, and equipment for the Bay Corridor Project and Holm Powerhouse Rehabilitation & Kirkwood Powerhouse Oil Containment Upgrades.
million or 4.9 percent primarily due to the capitalization of higher capital improvement project costs. The Airport maintains a Capital Improvement Plan to build new facilities, improve existing facilities, renovate buildings, repair or replace infrastructure, preserve assets, enhance safety and security, develop systems functionality, and perform needed maintenance.
The Terminal 1 (T1) Redevelopment Program is in various stages of construction as of June 30, 2021.
The first portion of the improvements consisted of nine gates which opened in July 2019, and the second phase opened in May 2020 adding an additional nine gates, for a total of 18 new operational gates. Construction of another seven gates was completed in May 2021, which now provides Harvey Milk Terminal 1 with a total of 25 operational gates. The next phase of construction will be focused on Terminal 1 North, and this work is forecasted to complete in fiscal year 2023. As a result of the COVID- 19 pandemic and the resulting economic uncertainty, the Airport has reprioritized its capital projects and has suspended some projects while moving forward with those that have been identified as essential to the operations and safety of the Airport.
The Port
depreciation of capital improvements in 2021, including 19th & Georgia Street Roadway project is located within the Crane Cove Park project site and adjacent to the Pier 70 Shipyard and Orton Historic Core along 20th Street. The scope of work included the construction of approximately 950 feet of new roadway and sidewalk, along with streetlights, fire hydrants, and a combined sewer. Crane Cove Park project is a new open space in the Union Iron Works National Historic District located at Pier 70. This site was part of an operating shipyard for more than 100 years and is being transformed into public open space, using multiple construction contracts. Mission Bay Ferry Landing Terminal provides berths for the San Francisco Police
upgrades the amenities at the EcoCenter.
-type activities had approximately $1.38 billion in commitments for various capital projects. Of this, Water Enterprise had an estimated $185.2 million, MTA had $303.5 million, Wastewater had $633.3 million, Airport had $93.4 million, Hetch Hetchy had $143.4 million, Port had $11.3 million, Laguna Honda Hospital had $1.8 million, and the General Hospital had $6.1 million.
For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Governmental fund financial statements record capital asset purchases as expenditures.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
22 Statements.
Debt Administration
At June 30, 2021, the City had total long-term and commercial paper debt outstanding of $22.09 billion. Of this amount, $2.75 billion represents general obligation bonds secured by ad valorem property taxes without limitation as to rate or amount upon all property subject to taxation by the City. The remaining $19.34 billion represents revenue bonds, commercial paper notes, certificates of participation and other debts of the City -term debt including
all bonds, loans, commercial paper notes and capital leases increased by $1.30 billion or 6.3 percent during the fiscal year.
For the year ended June 30, 2021, the net increase in the long-term debt in the governmental activities was $469.4 million and the net increase in business-type activities was $421.5 million as discussed in the highlights above.
s a limit on the amount of general obligation bonds the City can have outstanding at any given time. That limit is three percent of the assessed value of taxable property in the City estimated at $300.17 billion in value as of the close of the fiscal year. As of June 30, 2021, the City had $2.75 billion in authorized, outstanding general obligation bonds, which is equal to approximately 0.86 percent of gross (0.92 percent of net) taxable assessed value of property. As of June 30, 2021, there were an additional $1.96 billion in bonds that were authorized but unissued. If all these general obligation bonds were issued and outstanding in full, the total debt burden would be approximately 1.48 percent of gross (1.57 percent of net) taxable assessed value of property.
S&P Global Ratings AAA
Fitch Ratings AA+ During the fiscal year, S&P
stable rating outlook to negative negative rating
- -
gs on the outstanding
year. The Water -
respectively.
Additional information in the City's long-term debt can be found in Note 8 to the Basic Financial Statements.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
23 Economic factors and future budgets and rates
San Francisco experienced severe negative economic impacts from the pandemic and the necessary health response to it, which ended the longest period of expansion in U.S. history, beginning in the final quarter of FY 2019-20. The national, state, and local economies began to slowly stabilize and recover in FY 2020-21. Local public health conditions, interrupted by two surges of COVID-19 prevalence in Summer and Winter 2021, improved over the course of the fiscal year, permitting the targeted lifting of local public health control measures and the recovery of local economic activity. The San Francisco metro area recovered 44 percent of jobs lost in the first two months of the pandemic by the close of FY 2020-21.
Despite these improvements, though, impacts on the local hospitality, office industries, and the local economy were profound. Enplanements at San Francisco International Airport, which declined by 90 percent during the last quarter of the previous fiscal year, improved in FY 2020-21 but were still 50 percent below pre-pandemic levels at the end of the fiscal year. Citywide hotel occupancy rate, which fell to an historic low of 14 percent in April 2020, began a slow recovery in FY 2020-21 and ended the year at 44 percent, improved but well below average occupancy of 80 percent typical in pre-pandemic years. The -21, from just above 5 percent in
the first quarter of 2020.
While economic and health conditions began to improve, the annualization of associated tax revenues losses for a full 12 months in FY 2020-21 drove significant losses versus the prior year. Hotel, sales, and parking taxes for FY 2020-21 declined by 86.8 percent, 16.5 percent, and 31.5 percent, respectively, versus the previous year.
The Board of Supervisors approved a final two-year budget for fiscal years 2021-22 and 2022-23 in July 2021, which assumed an available balance of $174.0 million fully appropriated in fiscal year 2021-22 and contingency and other reserves of $696.2 million, leaving $31.8 million available for future appropriations.
CITY AND COUNTY OF SAN FRANCISCO
Year Ended June 30, 2021
24 REQUESTS FOR INFORMATION
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview
receives. Below are the contacts for questions about this report or requests for additional financial information.
City and County of San Francisco
Office of the Controller
1 Dr. Carlton B. Goodlett Place, Room 316
San Francisco, CA 94102-4694
Individual Department Financial Statements
San Francisco International Airport
Office of the Airport Deputy Director
Business and Finance Division
PO Box 8097
San Francisco, CA 94128
Port of San Francisco
Public Information Officer
Pier 1, The Embarcadero
San Francisco, CA 94111
San Francisco Water Enterprise
Hetch Hetchy Water and Power
San Francisco Wastewater Enterprise
Chief Financial Officer
525 Golden Gate Avenue, 13
th Floor
San Francisco, CA 94102
Laguna Honda Hospital
Chief Financial Officer
375 Laguna Honda Blvd.
San Francisco, CA 94116
Municipal Transportation Agency
SFMTA Chief Financial Officer
1 South Van Ness Avenue, 3
rd Floor
San Francisco, CA 94103
Health Service System
Chief Financial Officer
1145 Market Street, Suite 300
San Francisco, CA 94103
Zuckerberg San Francisco
General Hospital and Trauma Center
Chief Financial Officer
1001 Potrero Avenue, Suite 2A5
San Francisco, CA 94110
Successor Agency to the
San Francisco Redevelopment Agency
1 South Van Ness Avenue, 5
th Floor
San Francisco, CA 94103
San Francisco
Executive Director
1145 Market Street, 5th Floor
San Francisco, CA 94103
Retiree Health Care Trust
1145 Market Street, 5th Floor
San Francisco, CA 94103
Blended Component Units Financial Statements
San Francisco County Transportation Authority
Deputy Director for Administration and Finance
1455 Market Street, 22
nd Floor
San Francisco, CA 94103
San Francisco Finance Corporation
Office of Public Finance
City Hall, Room 338
1 Dr. Carlton B. Goodlett Place
San Francisco, CA 94102
WWW.SFGOV.ORG
CITY AND COUNTY OF SAN FRANCISCO
Statement of Net Position
June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 25 Primary Government Component Unit
Governmental
A ctivities
Business-Type
A ctivities Total
AS S ET S
Current assets:
Deposits and investments with City Treasury.................. 7,325,095$ 3,088,166 $ 10,413,261 $ - $ Deposits and investments outside City Treasury............. 344,163 23,301 367,464 - Receivables (net of allowance for uncollectible amounts of $409,579 for the primary government):
Property taxes and penalties........................................... 184,847 - 184,847 - Other local taxes............................................................. 380,617 - 380,617 - Federal and state grants and subventions...................... 347,874 186,828 534,702 - Charges for services....................................................... 123,891 295,629 419,520 6,113 Interest and other............................................................ 9,266 90,570 99,836 - Due from component units................................................ 14,180 713 14,893 - Inventories......................................................................... 37,954 114,793 152,747 - Other assets...................................................................... 57,935 10,798 68,733 - Restricted assets:
Deposits and investments with City Treasury................ - 577,046 577,046 - Deposits and investments outside City Treasury........... 6,272 177,224 183,496 - Grants and other receivables.......................................... - 182,653 182,653 - Total current assets.................................................... 8,832,094 4,747,721 13,579,815 6,113 Noncurrent assets:
Loan receivables (net of allowance for uncollectible
amounts of $1,972,980).................................................. 159,426 - 159,426 - Advance to component units............................................. 2,896 6,627 9,523 - Other assets...................................................................... 334 8,788 9,122 4,027 Restricted assets:
Deposits and investments with City Treasury................ - 845,201 845,201 - Deposits and investments outside City Treasury........... - 704,287 704,287 - Grants and other receivables.......................................... - 15,240 15,240 - Capital assets:
Land and other assets not being depreciated................. 1,459,714 6,108,752 7,568,466 34,846 Facilities, infrastructure and equipment, net of
depreciation................................................................... 5,371,792 17,300,238 22,672,030 4,441
Total capital assets..................................................... 6,831,506 23,408,990 30,240,496 39,287 Total noncurrent assets.............................................. 6,994,162 24,989,133 31,983,295 43,314 Total assets......................................................................... 15,826,256 29,736,854 45,563,110 49,427
DEFERRED OUTFLOWS OF RESOURCES
Unamortized loss on refunding of debt............................. 7,769 209,749 217,518 - Deferred outflows on derivative instruments..................... - 21,374 21,374 - Deferred outflows related to pensions.............................. 912,553 646,517 1,559,070 16 Deferred outflows related to OPEB................................... 332,409 314,324 646,733 - Total deferred outflows of resources................................... 1,252,731$ 1,191,964$ 2,444,695$ 16$
CITY AND COUNTY OF SAN FRANCISCO
Statement of Net Position (Continued)
June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 26 Primary Government Component Unit
Governmental
A ctivities
Business-Type
A ctivities Total
LIABILITIES
Current liabilities:
Accounts payable.............................................................. 503,199$ 239,739 $ 742,938 $ 956 $ Accrued payroll.................................................................. 162,318 120,557 282,875 118 Accrued vacation and sick leave pay................................ 121,663 86,495 208,158 - Accrued workers' compensation....................................... 56,729 40,621 97,350 - Estimated claims payable................................................. 83,426 84,110 167,536 - Bonds, loans, capital leases, and other payables............. 247,790 1,028,759 1,276,549 - Accrued interest payable................................................... 22,592 60,787 83,379 - Unearned grant and subvention revenues........................ 169,560 - 169,560 - Due to primary government............................................... - - - 11,618 Internal balances............................................................... 49,972 (49,972) - - Unearned revenues and other liabilities............................ 1,191,994 702,764 1,894,758 2,695 Liabilities payable from restricted assets:
Bonds, loans, capital leases, and other payables.......... - 280,317 280,317 - Accrued interest payable................................................. - 60,859 60,859 - Other............................................................................... - 263,710 263,710 -
Total current liabilities................................................. 2,609,243 2,918,746 5,527,989 15,387 Noncurrent liabilities:
Accrued vacation and sick leave pay................................ 128,741 84,268 213,009 - Accrued workers' compensation....................................... 249,093 190,496 439,589 - Estimated claims payable................................................. 121,427 101,392 222,819 - Bonds, loans, capital leases, and other payables............. 4,209,012 16,328,337 20,537,349 - Advance from primary government................................... - - - 6,627 Unearned revenues and other liabilities............................ 1,124 136,484 137,608 - Derivative instruments liabilities........................................ - 21,374 21,374 - Net pension liability............................................................ 3,385,806 2,228,215 5,614,021 21 Net other postemployment benefits (OPEB) liability......... 2,110,202 1,701,145 3,811,347 -
Total noncurrent liabilities........................................... 10,205,405 20,791,711 30,997,116 6,648 Total liabilities....................................................................... 12,814,648 23,710,457 36,525,105 22,035
DEFERRED INFLOWS OF RESOURCES
Unamortized gain on refunding of debt............................. 31,835 2,137 33,972 - Deferred inflows related to pensions................................. 111,431 67,477 178,908 6 Deferred inflows related to OPEB..................................... 361,876 252,721 614,597 - Total deferred inflows of resources..................................... 505,142 322,335 827,477 6
NET POSITION
Net investment in capital assets, Note 10(d)....................... 3,927,209 7,003,396 10,561,206 39,287 Restricted for:
Reserve for rainy day........................................................ 114,539 - 114,539 - Debt service...................................................................... 136,571 242,381 378,952 - Capital projects, Note 10(d)............................................... 256,804 510,813 646,400 - Community development.................................................. 1,267,587 - 1,267,587 - Transportation Authority activities..................................... 42,420 - 42,420 - Building inspection programs............................................ 130,927 - 130,927 - Children and families......................................................... 511,810 - 511,810 - Culture and recreation....................................................... 244,368 - 244,368 - Grants................................................................................ 150,374 - 150,374 - Other purposes................................................................. 110,370 301,944 412,314 -
Total restricted.............................................................. 2,965,770 1,055,138 3,899,691 - Unrestricted (deficit), Note 10(d)......................................... (3,133,782) (1,162,508) (3,805,674) (11,885) Total net position.................................................................. 3,759,197$ 6,896,026$ 10,655,223$ 27,402$
CITY AND COUNTY OF SAN FRANCISCO
Statement of Activities
Year Ended June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 27 CITY AND COUNTY OF SAN FRANCISCO
Balance Sheet
Governmental Funds
June 30, 2021
(With comparative financial information as of June 30, 2020) (In Thousands)
The notes to the financial statements are an integral part of this statement. 28 General Fund Other Governmental Funds Total Governmental Funds Assets:
Receivables (net of allowance for uncollectible
amounts of $337,375 in 2021; $309,138 in 2020):
Loans receivable (net of allowance for uncollectible
Liabilities:
Fund balances:
Total liabilities, deferred inflows of resources
CITY AND COUNTY OF SAN FRANCISCO
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position
June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 29 6,277,199$
Amounts reported for governmental activities in the statement of net position are different because:
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 6,818,309
Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds. (5,078,851) Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred inflows of resources and are recognized as revenues in the period the amounts become available in the governmental funds. 584,469
Interest on long-term debt is not accrued in the funds, but rather is recognized as an expenditure when due. (21,799)
Deferred outflows and inflows of resources in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. (24,575) Net pension liability and pension related deferred outflows and inflows of resources are not due in the current period and therefore are not reported in the governmental funds. (2,546,505) Net OPEB asset/liability and OPEB related deferred outflows and inflows of resources are not due in the current period and therefore are not reported in the governmental funds. (2,091,365) Internal service funds are used by management to charge the costs of capital lease financing, equipment maintenance services, printing and mailing services, and telecommunications and information systems to individual funds. The assets and liabilities of internal service funds are included in governmental activities in the statement of net position. (157,685) Net position of governmental activities 3,759,197$
CITY AND COUNTY OF SAN FRANCISCO
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
Year Ended June 30, 2021
(With comparative financial information year ended June 30, 2020) (In Thousands)
The notes to the financial statements are an integral part of this statement. 30 General Fund Other Governmental Funds Total Governmental Funds Revenues:
Intergovernmental:
Expenditures:
Current:
Debt service:
Excess (deficiency) of revenues over
Other financing sources (uses):
Issuance of bonds:
Fund balances at beginning of year,
CITY AND COUNTY OF SAN FRANCISCO
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 31 Net changes in fund balances - total governmental funds 1,201,772$ Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation, the loss on disposal of capital assets, and contributed capital assets. 129,788 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.
Certain long-term liabilities reported in the prior year statement of net position were paid during the current period resulting in expenditures in the governmental funds. This is the amount by which the increase in long-term liabilities exceeded expenditures in funds that do not require the use of current financial resources. (494,202)
Property taxes are recognized as revenues in the period the amounts become available. This is the current period amount by which the deferred inflows of resources increased in the governmental funds. 7,314
Other revenues that were unavailable are reported as deferred inflows of resources in the governmental funds. This is the current period amount by which deferred inflows of resources increased in the governmental funds. 15,455
Governmental funds report revenues and expenditures primarily pertaining to long-term loan activities, which are not reported in the statement of activities. These activities are reported at the government-wide level in the statement of net position. This is the net revenues reported in the governmental funds. (224)
Changes to net pension liability and pension related deferred outflows and inflows of resources do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. 95,951
Changes to net OPEB asset/liability and OPEB related deferred outflows and inflows of resources do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. 113,131
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt and capital leases consume the current financial resources of governmental funds. These transactions, however, have no effect on net position. This is the amount by which bond proceeds exceeded the principal retirement and payments to escrow for refunded debt in the current period. (430,689) Bond premiums are reported in the governmental funds when the bonds are issued, and are capitalized and amortized in the statement of net position. This is the amount of bond premiums capitalized during the current period. (93,427) Interest expense in the statement of activities differs from the amount reported in the governmental funds because of additional accrued and accreted interest; amortization of bond premiums and refunding losses and gains. 23,368
The activities of internal service funds are reported with governmental activities. 21,787 Change in net position of governmental activities 590,024$
CITY AND COUNTY OF SAN FRANCISCO
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 37 Pension,
Other
Employee and
Other Post-
Employment
Benefit Trust
Funds
Private-
Purpose Trust
Fund
External
Investment
Pool
Other
Custodial
Funds
Assets:
Deposits and investments with City Treasury.................................... 148,760$ 178,730 $ 862,826 $ 384,811 $ Deposits and investments outside City Treasury:
Cash and deposits............................................................................ 49,724 - - 128,269 Short-term investments.................................................................... 660,382 - - - Debt securities.................................................................................. 2,401,733 - - - Equity securities................................................................................ 13,124,615 - - - Real assets....................................................................................... 4,182,366 - - - Private equity and other alternative investments.............................. 15,800,488 - - - Foreign currency contracts, net........................................................ 69 - - - Invested securities lending collateral.................................................. 770,857 - - - Receivables:
Employer and employee contributions............................................. 51,360 - - - Brokers, general partners and others............................................... 248,940 - - - Federal and state grants and subventions....................................... - 404 - - Taxes................................................................................................ - - - 155,925 Interest and other.............................................................................. 12,949 4,086 498 44 Loans (net of allowance for uncollectible amounts)......................... - 1,471 - - Other assets....................................................................................... 2,869 1,685 - - Restricted assets:
Deposits and investments outside City Treasury............................. - 291,978 - 32,497 Capital assets:
Land and other assets not being depreciated.................................. - 4,152 - -
Total assets.................................................................................. 37,455,112 482,506 863,324 701,546 Deferred outflows of resources:
Unamortized loss on refunding of debt............................................... - 38,914 - - Deferred outflows related to pensions................................................ - 6,000 - - Deferred outflows related to OPEB.................................................... 2,255 2,569 - - Total deferred outflows of resources........................................... 2,255 47,483 - - Liabilities:
Accounts payable................................................................................ 52,047 50,682 1 18,083 Estimated claims payable................................................................... 28,108 - - - Due to the primary government.......................................................... - 3,275 - - Custodial obligations to State of California......................................... - - - 1,198 Taxes payable to other governments.................................................. - - - 387,249 Accrued interest payable..................................................................... - 12,921 - - Payable to brokers.............................................................................. 42,695 - - - Payable to borrowers of securities..................................................... 770,514 - - - Other liabilities..................................................................................... 3,199 1,027 - - Advance from primary government..................................................... - 2,896 - - Long-term obligations.......................................................................... - 872,524 - - Net pension liability.............................................................................. - 32,279 - - Net other postemployment benefits (OPEB) liability........................... 11,988 2,091 - -
Total liabilities............................................................................... 908,551 977,695 1 406,530 Deferred inflows of resources:
Deferred inflows related to pensions.................................................. - 2,520 - - Deferred inflows related to OPEB....................................................... 1,972 171 - - Total deferred inflows of resources.............................................. 1,972 2,691 - - Net position restricted for:
Pensions............................................................................................. 35,673,834 - - - Postemployment healthcare benefits................................................. 747,108 - - - External pool participants.................................................................... - - 863,323 - Individuals, organizations, and other governments............................. 125,902 (450,397) - 295,016
Total net position........................................................................ 36,546,844$ (450,397)$ 863,323$ 295,016$ Custodial Funds
CITY AND COUNTY OF SAN FRANCISCO
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
Year Ended June 30, 2021
(In Thousands)
The notes to the financial statements are an integral part of this statement. 38 Pension,
Other
Employee and
Other Post-
Employment
Benefit Trust
Funds
Private-
Purpose Trust
Fund
External
Investment
Pool
Other
Custodial
Funds
Additions:
Property taxes......................................................................... -$ 128,789$ - $ 5,760,595$ Charges for services.............................................................. - 11,150 - - Contributions:
Employee contributions........................................................ 643,499 - - - Employer contributions......................................................... 1, 946,706 - - - Contributions to pooled investments.................................... - - 4,081,448 - Total contributions............................................................ 2,590,205 139,939 4,081,448 5,760,595 Investment income (expenses):
Interest.................................................................................. 59,513 ( 216) 2,616 2,047 Dividends.............................................................................. 84,514 - - - Net appreciation in fair value of investments........................ 9,499,047 - - - Securities lending income.................................................... 4,059 - - - Total investment income.................................................. 9,647,133 (216) 2,616 2,047 Less investment expenses:
Other investment expenses............................................... (64,090) - - - Net investment income.................................................. 9,583,043 (216) 2,616 2,047 Custodial additions.................................................................. - - - 160,896 Other additions........................................................................ - 4,955 - - Total additions, net......................................................... 12,173,248 144,678 4,084,064 5,923,538 Deductions:
Neighborhood development.................................................... - 78,816 - - Depreciation............................................................................ - 4 - - Interest on debt....................................................................... - 41,482 - - Benefit payments.................................................................... 2, 840,188 - - - Refunds of contributions......................................................... 20,254 - - - Distribution from pooled investments..................................... - - 3,513,048 - Property taxes distributed to other governments.................... - - - 5,712,207 Custodial distributions to State............................................... - - - 7,568 Other custodial deductions..................................................... - - - 188,993 Administrative expenses......................................................... 20,514 13,635 - - Total deductions............................................................... 2,880,956 133,937 3,513,048 5,908,768 Change in net position...................................................... 9,292,292 10,741 571,016 14,770 Net position at beginning of year, as previously reported......... 27,254,552 (461,138) 292,307 - Cumulative effect of accounting change................................... - - - 280,246 Net position at beginning of year, as restated........................... 27,254,552 (461,138) 292,307 280,246 Net position at end of year......................................................... 36,546,844$ (450,397)$ 863,323$ 295,016$ Custodial Funds
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements
June 30, 2021
(Dollars in Thousands)
39 (1) T HE FINANCIAL REPORTING ENTITY
San Francisco is a city and county chartered by the State of California and as such can exercise the powers as both a city and a county under state law. As required by generally accepted accounting principles, the accompanying financial statements present the City and County of San Francisco (the City or primary government) and its component units. The component units discussed below are relationships with the City.
As a government agency, the City is exempt from both federal income taxes and California State franchise taxes.
Blended Component Units
Following is a description of those legally separate component units for which the City is financially accountable that are blended with the primary government because of their individual governance or financial relationships to the City.
San Francisco County Transportation Authority (Transportation Authority) The voters of the City
created the Transportation Authority in 1989 to impose voter-approved sales and use tax of one-half of one percent, for a period not to exceed 20 years, to fund essential traffic and transportation projects. In 2003, the voters approved Proposition K, extending the city-wide one-half of one percent sales tax with a new 30-year plan. A board consisting of the e
serving ex officio governs the Transportation Authority. The Transportation Authority is reported in a Transportation Authority can be obtained from their finance and administrative offices at 1455 Market Street, 22
nd Floor, San Francisco, CA 94103.
San Francisco City and County Finance Corporation (Finance Corporation) The Finance Corporation was created in 1990 by a vote of the electorate to allow the City to lease-purchase $20.0 million (plus
5.0 percent per year growth) of equipment using tax-exempt obligations. Although legally separate from the City, the Finance Corporation is reported as if it were part of the primary government because its sole purpose is to provide lease financing to the City. The Finance Corporation is governed by a three- member board of directors approved by the Mayor and the Board of Supervisors. The Finance Corporation is reported as an internal service fund. Financial statements for the Finance Corporation can be obtained from their administrative offices at City Hall, Room 338, 1 Dr. Carlton B. Goodlett Place, San Francisco, CA 94102.
San Francisco Parking Authority (Parking Authority)
The Parking Authority was created in October
1949 to provide services exclusively to the City. In accordance with Proposition D authorized by the Traffic
Commission (PTC). The PTC consists of five commissioners appointed by the Mayor. Upon creation -street parking operations was transferred from
the Parking Authority to the PTC. The staff and fiscal operations of the Parking Authority were also incorporated into the PTC. Beginning on July 1, 2002, the responsibility for overseeing the operations of the PTC became the responsibility of the Municipal Transportation Agency (SFMTA) pursuant to Proposition E, which was passed by the voters in November 1999. Separate financial statements are not prepared for the Parking Authority. Further information about the Parking Authority can be obtained from the SFMTA Chief Financial Officer at 1 South Van Ness Avenue, 3 rd Floor, San Francisco, CA
94103.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
40 Discretely Presented Component Unit
Treasure Island Development Authority (TIDA) The TIDA is a nonprofit public benefit corporation. The TIDA was authorized in accordance with the Treasure Island Conversion Act of 1997. Seven Supervisors, govern the TIDA. The specific purpose of the TIDA is to promote the planning, redevelopment, reconstruction, rehabilitation, reuse, and conversion of the property known as Naval Station Treasure Island for the public interest, convenience, welfare, and common benefit of the inhabitants of the City. The TIDA has adopted as its mission the creation of affordable housing and economic development opportunities on Treasure Island.
services entirely or almost entirely to the City. The TIDA is reported in a separate column to emphasize that it is legally separate from the City. The City is financially accountable for the TIDA through the related to the TIDA, where significant, are separately identified throughout these notes. Separate financial statements are not prepared for TIDA. Further information about TIDA can be obtained from their administrative offices at 1 Avenue of the Palms, Suite 241, Treasure Island, San Francisco, CA 94130.
Fiduciary Component Units
Successor Agency to the Redevelopment Agency of the City and County of San Francisco (Successor Agency)
The Successor Agency was created on February 1, 2012, to serve as a custodian for the assets and to wind down the affairs of the former San Francisco Redevelopment Agency pursuant to California Redevelopment Dissolution Law. The Successor Agency is governed by the Successor Agency Commission, commonly known as the Commission on Community Investment and Infrastructure, and is a separate public entity from the City. The Commission has five members, which The City is financially accountable for the Successor Agency through the appointment of the budget.
The financial statements present the Successor Agency and its component units, entities for which the Successor Agency is considered to be financially accountable. The City and County of San Francisco Redevelopment Financing Authority (Financing Authority) is a joint powers authority formed between the former Agency and the City to facilitate the long-term financing of the former Agency activities. The statements because the Financing Authority provides services entirely to the Successor Agency.
In order to facilitate construction and rehabilitation in the City, seven Community Facilities Districts (CFDs) were formed by the former Agency and Successor Agency. The Successor Agency can impose its will on the CFDs but does not have a financial benefit or burden from the CFDs. The CFDs are fiduciary component units of the Successor Agency and financial activities of the CFDs are included as custodial funds of the City.
Per the Redevelopment Dissolution Law, certain actions of the Successor Agency are also subject to the direction of an Oversight Board. The Oversight Board is comprised of seven-member representatives from local government bodies: four City representatives appointed by the Mayor of the City subject to confirmation by the Board of Supervisors of the City; the Vice Chancellor of the San Francisco Community College District; the Board member of the Bay Area Rapid Transit District; and the Executive Director of Policy and Operations of the San Francisco Unified School District. at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future fiscal years, the Successor Agency will only be
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
41 allocated revenues in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former Agency until all enforceable obligations of the former Agency have been paid in full and all assets have been liquidated. Based upon the nature of the Successor -purpose trust
at 1 South Van Ness Avenue, 5th Floor, San Francisco, CA 94103.
Community Facilities Districts and Special Tax Districts A Community Facilities District (CFD) is a -Roos law and with approval of
the Board of Supervisors. A Special Tax District (STD) is established pursuant to the San Francisco Special Tax Financing Law, which incorporates the Mello-Roos law. Several CFDs and STDs have been established for the sole purpose of financing facilities and services. Although there is no financial benefit or burden relation between the City and a CFD or STD, the Board of Supervisors acts as the legislative body as it does for the City and is able to impose its will to authorize the levy of special taxes and issuance of special tax debts, as well as to appoint, hire, reassign, or dismiss City employees who administrate the CFD or STD. CFDs and STDs are fiduciary component units of the City because assets are held by the City for the benefit of the CFD or STD. The combined activities of all CFDs and STDs are presented as a custodial fund. Separate financial statements are not prepared for CFDs and STDs.
Further information can be obtained from their administrative offices at City Hall, Room 338, 1 Dr.
Carlton B. Goodlett Place, San Francisco, CA 94102.
Non-Disclosed Organizations
There are other governmental agencies that provide services within the City. These entities have financial statements, except for certain cash held by the City as an agent, do not reflect operations of the San Francisco Airport Improvement Corporation, San Francisco Health Authority, San Francisco Housing Authority, San Francisco Unified School District and San Francisco Community College District. The City is represented in two regional agencies, the Bay Area Rapid Transit District and the entity.
(2) S UMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Government-wide and fund financial statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees and charges for support. Likewise, the primary government is reported separately from its legally separate component unit for which the primary government is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
42 The basic financial statements include certain prior year summarized comparative information. This information is presented only to facilitate financial analysis and is not at the level of detail required for a presentation in accordance with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the City's basic financial statements for the year ended June 30, 2020, from which the summarized information was derived. (b) Measurement focus, basis of accounting, and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers property tax revenues to be available if they are collected within 60 days of the end of the current fiscal period. All other revenues are considered to be available if they are generally collected claim requests for federal and state grant revenues within 30 days of the end of the program cycle and payment is generally received within the first or second quarter of the following fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to vacation, sick leave, claims and judgments, are recorded only when payment is due.
Property taxes, other local taxes, grants and subventions, licenses, charges for services, rents and concessions, and interest and investment income associated with the current fiscal period are all considered susceptible to accrual and so have been recognized as revenues of the current fiscal period.
All other revenue items are considered to be measurable and available only when the City receives cash.
The City reports the following major governmental fund:
The General Fund
City except those required to be accounted for in another fund.
The City reports the following major proprietary (enterprise) funds:
The San Francisco International Airport Fund accounts for the activities of the City-owned commercial service airport in the San Francisco Bay Area.
The San Francisco Water Enterprise Fund accounts for the activities of the San Francisco Water Enterprise (Water Enterprise). The Water Enterprise is engaged in the distribution of water to the City and certain suburban areas.
The Hetch Hetchy Water and Power Enterprise Fund accounts for the activities of Hetch Hetchy Water and Power (Hetch Hetchy) and CleanPowerSF. Hetch Hetchy is engaged in the collection transmission of electricity. CleanPowerSF aggregates the buying power of customers in San Francisco to purchase renewable energy.
The Municipal Transportation Agency Fund accounts for the activities of the Municipal Transportation Agency (SFMTA). The SFMTA was established by Proposition E, passed by the al Railway (Muni)
and the operations of Sustainable Streets, which includes the Parking Authority. Muni was
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
43 Sustainable Streets is responsible for proposing and implementing street and traffic changes and -street parking operations. Sustainable Streets is a separate department of the SFMTA. The parking garages fund accounts for the activities of various non-profit corporations formed by the Parking Authority to provide financial and other assistance to the City to acquire land, construct facilities, and manage various parking facilities.
The General Hospital Medical Center Fund accounts for the activities of the San Francisco General Hospital (SFGH), a City-owned acute care hospital.
The San Francisco Wastewater Enterprise Fund was created after the San Francisco voters approved a proposition in 1976, authorizing the City to issue $240.0 million in bonds for the purpose of acquiring, c
treatment and disposal system.
The Port of San Francisco Fund accounts for the operation, development, and maintenance of seven and one-half miles of waterfront property of the Port of San Francisco (Port). This was established in 1969 after the San Francisco voters approved a proposition to accept the transfer of the Harbor of San Francisco from the State of California.
The Laguna Honda Hospital Fund accounts for the activities of Laguna Honda Hospital (LHH), the City-owned skilled nursing facility, which specializes in serving elderly and disabled residents.
Additionally, the City reports the following fund types:
The Debt Service Funds account for the accumulation of property taxes and other revenues for periodic payment of interest and principal on general obligation and certain lease revenue bonds and related authorized costs.
The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service or capital projects.
The Capital Projects Funds are used to account for financial resources that are restricted, committed or assigned to expenditures for the acquisition of land or acquisition and construction of major facilities other than those financed in the proprietary fund types.
The Permanent Fund accounts for resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support specific programs.
The Internal Service Funds account for the financing of goods or services provided by one City department to another City department on a cost-reimbursement basis. Internal Service Funds account for the activities of the equipment maintenance services, centralized printing and mailing services, centralized telecommunications and information services, and lease financing through the Finance Corporation.
The Pension, Other Employee and Other Postemployment Benefit Trust Funds reflect the and the Retiree Health Care Trust Fund. The Retirement System accounts for employee contributions, City contributions, and the earnings and profits from investments. It also accounts for the disbursements made for employee retirement benefits, withdrawals, disability and death benefits as well as administrative expenses. The Health Service System accounts for contributions from active and retired employees and surviving spouses, City contributions, and the earnings and profits from investments. It also accounts for the disbursements to various health plans and health care providers for the medical expenses of beneficiaries. The Retiree Health Care Trust Fund currently accounts for other postemployment benefit contributions from the City and the San Francisco Community College District, together with the earnings and profits from investments.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
44 The Private-Purpose Trust Fund accounts for the custodial responsibilities that are assigned to the Successor Agency with the passage of the Redevelopment Dissolution Law.
The Custodial Funds
and resources held by the City in a custodial capacity on behalf of: the State of California and other governmental agencies; individuals; and human welfare, community health, and transportation the San Francisco Community College District, San Francisco Unified School District, and the Trial Courts of the State of California.
The City applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
In general, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this rule are charges to other City departments from the General Fund, Water Enterprise and Hetch Hetchy. These charges have not been eliminated because elimination would distort the direct costs and program revenues reported in the statement of activities.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating ce funds
are charges for customer services including: water, sewer and power charges, public transportation fees, airline fees and charges, parking fees, hospital patient service fees, commercial and industrial rents, printing services, vehicle maintenance fees, and telecommunication and information system support charges. Operating expenses for enterprise funds and internal service funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. restricted resources first, then unrestricted resources as they are needed. (c) Deposits and Investments
The Treasurer invests on behalf of most funds of the City and external participants in accordance with ho reports
to monitor compliance with the investment policy and reporting provisions of the law through an annual audit.
2) dedicated investment funds. The dedicated investment funds represent restricted funds and relate related to the issuance of bonds and certain loan programs of the City. The investments of the Retirement System and of the Retiree Health Care Trust Fund are held by trustees.
The San Francisco Unified School District (School District), San Francisco Community College District of June 30, 2021, involuntary participants accounted for approximately 97.7 percent of the pool.
Voluntary participants accounted for 2.3 percent of the pool. Further, the School District, Community pool. At June 30, 2021, $862.8 million was held on behalf of these external participants. The total Internal participants accounted for 93.6 percent of the pool.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
45 Investment Valuation
Investments are carried at fair value, except for certain non-negotiable investments that are reported at cost because they are not transferable and have terms that are not affected by changes in market interest rates, such as collateralized certificates of deposit and public time deposits. The fair value of position in the pool approximates the value of the pool shares. The method used to determine the value event that a certain fund overdraws its share of pooled cash, the overdraft is covered by the General Fund and a
Retirement System Investments are reported at fair value. Securities traded on national or international exchanges are valued at the last reported sales price at current exchange rates. Securities that do not have an established market are reported at estimated fair value derived from third-party pricing services. Purchases and sales of investments are recorded on a trade date basis.
The fair values of the partnership interests, which include private equity, real assets, private credit, and some public equity investments are based on net asset values (NAV) provided by the general partners and investment managers.
The Absolute Return Program invests in limited partnerships and other alternative investment vehicles.
The most common investment strategies include, but are not limited to equity, credit, macro, emerging markets, quantitative, multi-strategy, special situations/other, co-investments and commodities. These investments are valued using their respective NAV and are audited annually. The most significant input into the NAV of such an entity is the fair value of its investment holdings. These holdings are typically where no market exists, the General Partner may provide pricing input. The management assumptions are based upon the nature of the investment and the underlying business. Investments have the potential to become illiquid under stressed market conditions and, in certain circumstances, investors may be subject to redemption restrictions which can impede the timely return of capital. The valuation techniques vary based upon investment type but are predominantly derived from observed market prices.
San Francisco International Airport
The Airport has entered into certain derivative instruments, which it values at fair value, in accordance with GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, and GASB Statement No. 72, Fair Value Measurement and Application. The Airport applies hedge accounting for changes in the fair value of hedging derivative instruments, in accordance with GASB Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions, an amendment of GASB Statement No. 53 . Under hedge accounting, if the derivatives are determined to be effective hedges, the changes in the fair value of hedging derivative instruments are reported as either deferred inflows or deferred outflows in the statement of net position, otherwise changes in fair value are recorded within the investment revenue classification.
Other funds Non-pooled investments are also generally carried at fair value. However, money market investments (such as short-term, highly liquid debt instruments including commercial paper and nonparticipating interest-earning investment contracts (such as repurchase agreements and guaranteed or bank investment contracts) are carried at amortized cost. The fair value of non-pooled investments is determined annually and is based on current market prices. The fair value of investments in open-
Investment Income
Income from pooled investments is allocated at month end to the individual funds or external investments. City management has determined that the investment income related to certain funds should be allocated to the General Fund. On a budget basis, the interest income is recorded in the
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
46 General Fund. On a generally accepted accounting principles (GAAP) basis, the income is reported in the fund where the related investments reside. A transfer is then recorded to transfer an amount equal to the interest earnings to the General Fund. This is the case for certain other governmental and internal service funds.
to those funds that have a negative average daily
cash balance. In certain instances, City management has determined that the interest expense related to the fund should be allocated to the General Fund. On a budget basis, the interest expense is recorded in the General Fund. On a GAAP basis, the interest expense is recorded in the fund and then a transfer from the General Fund for an amount equal to the interest expense is made to the fund. This is the case for certain other funds, LHH, SFGH, and the internal service funds.
Interest income related to certain funds in fiduciary activities that are recorded in the General Fund on a budget basis is recorded as other income instead of as a transfer on the GAAP basis. (d) Loans Receivable
administer several housing and small business subsidy programs and issue loans to qualified applicants. In addition, the Department of Building Inspection manages other receivables from organizations. Management has determined through policy that many of these loans may be forgiven or renegotiated and extended long into the future if certain terms and conditions of the loans are met.
At June 30, 2021, it was determined that $1,973.0 million of the $2,132.4 million loan portfolio is not expected to be ultimately collected.
For the purposes of the fund financial statements, the governmental funds expenditures relating to long- term loans arising from loan subsidy programs are charged to operations upon funding and the loans are recorded, net of an estimated allowance for potentially uncollectible loans, with an offset to a deferred inflow of resources. For purposes of the government-wide financial statements, long-term loans are not offset by deferred inflows of resources.
(e) Inventories
Inventories recorded in the governmental funds consist of personal protective equipment and supplies related to the COVID-19 pandemic. Inventories recorded in the proprietary funds primarily consist of construction materials and maintenance supplies, as well as pharmaceutical supplies maintained by the hospitals. Generally, proprietary funds value inventory at cost or average cost and expense supply inventory as it is consumed. This is referred to as the consumption method of inventory accounting. (f) Property Held for Resale
Property held for resale includes both residential and commercial property and is recorded as other assets at the lower of estimated cost or estimated conveyance value. Estimated conveyance value is use. Property held for resale may, during the period it is held by the City, generate rental income, which is recognized as it becomes due and is considered collectible. (g) Capital Assets
Capital assets, which include land, facilities and improvements, machinery and equipment, infrastructure assets, and intangible assets, are reported in the applicable governmental or business- type activities columns in the government-wide financial statements and in the proprietary and private- purpose trust funds. Capital assets, except for intangible assets, are defined as assets with an initial individual cost of more than $5 and have an estimated life that extends beyond a single reporting period or more than a year. Intangible assets have a capitalization threshold of $100. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated acquisition value at the date of donation. Capital outlay is recorded as expenditures of the General Fund and other governmental funds and as assets in the government-wide threshold is met. Interest incurred during the
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
47 construction phase of the capital assets of business-type activities is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds of tax-exempt debt over the same period. Amortization of assets acquired under capital leases is included in depreciation and amortization.
Facilities and improvements, infrastructure, machinery and equipment, easements, and intangible assets of the primary government, as well as the component units, are depreciated using the straight- line method over the following estimated useful lives:
Assets Years
Facilities and improvements 15 to 175
Infrastructure 15 to 70
Machinery and equipment 2 to 75
Intangible assets Varies with type
Works of art, historical treasures and zoological animals held for public exhibition, education, or research in furtherance of public service, rather than financial gain, are not capitalized. These items are
proceeds from the sale of these items for the acquisition of other items for collection and display. (h) Accrued Vacation and Sick Leave Pay
Vacation pay, w
service, is payable upon termination. Sick leave may be accumulated up to six months. Unused amounts accumulated prior to December 6, 1978, are vested and payable upon termination of employment by retirement or disability caused by industrial accident or death.
The City accrues for all salary-related items in the government-wide and proprietary fund financial statements for which they are liable to make a payment directly and incrementally associated with payments made for compensated absences on termination. The City includes its share of social security and Medicare payments made on behalf of the employees in the accrual for vacation and sick leave pay.
(i) Bond Issuance Costs, Premiums, Discounts, and Interest Accretion In the government-wide financial statements, the proprietary fund type and fiduciary fund type financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, proprietary fund or fiduciary fund statement of net position. Bond issuance costs related to prepaid insurance costs, bond premiums and discounts for San Francisco International Airport, San Francisco Water Enterprise, Hetch Hetchy Water and Power, SFMTA, and San Francisco Wastewater Enterprise are amortized over the life of the bonds using the effective interest method. The remaining bond prepaid insurance costs, bond premiums and discounts are calculated using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount.
In the fund financial statements, governmental funds recognize bond premiums and discounts as other financing sources and uses, respectively. Issuance costs including bond insurance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
Interest accreted on capital appreciation bonds is reported as accrued interest payable in the government-wide, proprietary fund and fiduciary fund financial statements.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
48 (j) Fund Equity
Governmental Fund Balance
As prescribed by GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, governmental funds report fund balance in one of five classifications that comprise a hierarchy based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. The five fund balance classifications are as follows:
Nonspendable includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. The not in spendable form criterion includes items that are not expected to be converted to cash, such as prepaid amounts, as well as certain long-term receivables that would otherwise be classified as unassigned.
Restricted includes amounts that can only be used for specific purposes due to constraints n.
Restrictions may effectively be changed or lifted only with the consent of resource providers.
Committed includes amounts that can only be used for specific purposes pursuant to an ordinance passed by the Board of Supervisors and signed by the Mayor. Commitments may be changed or lifted only by the City taking the same formal action that imposed the constraint originally.
Assigned includes amounts that are not classified as nonspendable, restricted, or committed, but are intended to be used by the City for specific purposes. Intent is expressed by legislation or by action of the Board of Supervisors or the City Controller to which legislation has delegated the authority to assign amounts to be used for specific purposes.
Unassigned is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. Other governmental funds may only report a negative unassigned balance that was created after classification in one of the other four fund balance categories.
In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned.
Encumbrances
The City establishes encumbrances to record the amount of purchase orders, contracts, and other obligations, which have not yet been fulfilled, cancelled, or discharged. Encumbrances outstanding at year end are recorded as part of restricted or assigned fund balance.
Net Position
The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted.
Net Investment In Capital Assets This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt, including debt related deferred outflows and inflows of resources, that are attributable to the acquisition, construction, or improvement of these assets reduce the balance in this category.
Restricted Net Position This category represents net position that has external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.
Unrestricted Net Position This category represents net position of the City, not restricted for any project or other purpose.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
49 (k) Interfund Transfers
Interfund transfers are generally recorded as transfers in (out) except for certain types of transactions that are described below.
Charges for services are recorded as revenues of the performing fund and expenditures/expenses of the requesting fund. Unbilled costs are recognized as an asset of the performing fund and a liability of the requesting fund at the end of the fiscal year.
Reimbursements for expenditures, initially made by one fund, which are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as a reduction of expenditures in the fund that is reimbursed.
(l) Refunding of Debt
In governmental and business-type activities and proprietary and fiduciary funds, losses or gains from advance refundings are recorded as deferred outflows of resources and deferred inflows of resources, respectively, and amortized into expense.
(m) Pollution Remediation Obligations
Pollution remediation obligations are measured at their current value using a cost-accumulation approach, based on the pollution remediation outlays expected to be incurred to settle those obligations. Each obligation or obligating event is measured as the sum of probability-weighted amounts in a range of possible estimated amounts. Some estimates of ranges of possible cash flows may be limited to a few discrete scenarios or a single scenario, such as the amount specified in a contract for pollution remediation services.
(n) Cash Flows
Statements of cash flows are presented for proprietary fund types. Cash and cash equivalents include all unrestricted and restricted highly liquid investments with original purchase maturities of three months or less. Pooled cash and
pool and such accounts are similar in nature to demand deposits. (o) Pensions
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 SFERS and the ame basis as they are reported by the
plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Plan member contributions are recognized in the period in which the contributions are due. Investments are reported at fair value. (p) Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability and deferred outflows/inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Retiree Health Care as they are reported by the plans. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Plan member contributions are recognized in the period in which the contributions are due. Investments are reported at fair value.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
50 (q) Restricted Assets
well as certain resources set aside for their repayment, are classified as restricted assets on the statement of net position because the use of the proceeds is limited by applicable bond covenants and resolutions. Restricted assets account for the principal and interest amounts accumulated to pay debt service, unspent bond proceeds, and amounts restricted for future capital projects. (r) Deferred Outflows and Inflows of Resources
The City records deferred outflows or inflows of resources in its governmental, proprietary, fiduciary, and government-wide financial statements for consumption or acquisition of net position that is applicable to a future reporting period. These financial statement elements are distinct from assets and liabilities.
In governmental fund statements, deferred inflows of resources consist of revenues not collected within the availability period after fiscal year end. In government-wide financial statements, deferred outflows and inflows of resources are recorded for unamortized losses and gains on refunding of debt, deferred outflows and inflows of resources related to pensions and OPEB, and deferred outflows of resources on derivative instruments.
(s) Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
51 (3) R ECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (a) Explanation of certain differences between the governmental funds balance sheet and the government-wide statement of net position
governmental activities, $3,759,197 reported in the statement of net position. The difference primarily results from the long-term economic focus in the statement of net position versus the current financial resources focus in the governmental funds balance sheet.
Total
Governmental
Funds
Long-term
Assets,
Liabilities (1)
Internal
Service
Funds (2)
Reclassi-
fications and
Eliminations
Statement o f
Net Position
Totals
Assets
Deposits and inv estments with City Treasury........................... 7,281,724$ - $ 43,371$ - $ 7,325,095$ Deposits and inv estments outside City Treasury...................... 344,163 - 6,272 - 350,435 Receivables, net
Property taxes and penalties............................................... 184,847 - - - 184,847 Other local taxes................................................................ 380,617 - - - 380,617 Federal and state grants and subventions............................. 347,874 - - - 347,874 Charges for serv ices............................................................ 123,661 - 230 - 123,891 Interest and other................................................................ 8,914 - 352 - 9,266 Due from other funds............................................................. 16,606 - - (16,606) - Due from component units..................................................... 14,180 - - - 14,180 Adv ance to component unit.................................................... 2,896 - - - 2,896 Loans receiv able, net............................................................. 159,426 - - - 159,426 Inventories............................................................................ 37,954 - - - 37,954 Capital assets, net................................................................ - 6,818,309 13,197 - 6,831,506 Other assets........................................................................ 57,933 334 2 - 58,269
Total assets.............................................................. 8,960,795 6,818,643 63,424 (16,606) 15,826,256 Deferred outflows of resources
Unamortized loss on refunding of debt................................. . -6 ,982 787 - 7,769 Deferred outflows related to pensions................................... . - 893,681 18,87 2 -9 1 2 , 5 5 3 Deferred outflows related to OPEB...................................... . - 324,720 7,689 - 332,409 - 1,225,383 27,348 - 1,252,731
Liabilities
Accounts payable............................................................... 492,907 - 10,292 - 503,199 Accrued payroll.................................................................. 159,362 - 2,956 - 162,318 Accrued v acation and sick leav e pay.................................... - 245,087 5,317 - 250,404 Accrued workers' compensation........................................... - 304,373 1,449 - 305,822 Estimated claims payable................................................... - 204,853 - - 204,853 Accrued interest payable..................................................... - 21,799 793 - 22,592 Unearned grant and subvention rev enues............................... 169,560 - - - 169,560 Due to other funds.............................................................. 66,578 - - (16,606) 49,972 Unearned rev enues and other liabilities................................. 1,191,960 1,124 34 - 1,193,118 Bonds, loans, capital leases, and other payables.................. 18,760 4,323,414 114,628 - 4,456,802 Net pension liability............................................................. - 3,330,633 55,173 - 3,385,806 Net OPEB liability. ............. ........................... ............ .......... - 2,062,819 47,383 - 2,110,202 Total liabilities........................................................... 2,099,127 10,494,102 238,025 (16,606) 12,814,648 Deferred inflows of resources
Unav ailable rev enue............................................................. 584,469 (584,469) - - - Unamortized gain on refunding of debt.................................. - 31,557 278 - 31,835 Deferred inflows related to pensions...................................... - 109,553 1,878 - 111,431 Deferred inflows related to OPEB......................................... - 353,600 8,276 - 361,876 Total deferred inflows of resources............................... 584,469 (89,759) 10,432 - 505,142 Fund balances/ net position
Total fund balances/ net position................................. 6,277,199$ (2,360,317)$ (157,685)$ -$ 3,759,197$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
52 (1) When capital assets (land, infrastructure, buildings, equipment, and intangible assets) that are to be used in governmental activities are purchased or constructed, the costs of those assets are reported as expenditures in governmental funds.
However, the statement of net position includes those capital assets, net of accumulated depreciation, among the assets of the City as a whole.
Cost of capital assets ...............................................................................................$ 9,221,871 Accumulated depreciation ........................................................................................ (2,403,562) $ 6,818,309
Long-
payable in the current period, and accordingly, are not reported as fund liabilities.
All liabilities, both current and long-term, are reported in the statement of net position.
Accrued vacation and sick leave pay ....................................................................... $ (245,087) ............................................................................... (304,373) Estimated claims payable......................................................................................... (204,853) Unearned revenues and other liabilities ................................................................... (1,124) Bonds, loans, capital leases, and other payables .................................................... (4,323,414) $(5,078,851)
Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. $ (21,799)
Deferred outflows (inflows) of resources related to debt refundings in governmental activities are not financial resources, and therefore, are not reported in the governmental funds.
Unamortized loss on refunding of debt.....................................................................$ 6,982 Unamortized gain on refunding of debt .................................................................... (31,557) $( 2 4 , 5 7 5 )
Net pension liability is not due and payable in the current period, and accordingly is not reported as a fund liability. Deferred outflows (inflows) of resources related to pensions are not financial resources, and therefore, are not reported in the governmental funds.
Net pension liability...................................................................................................$(3,330,633) Deferred outflows of resources related to pensions ................................................. 893,681 Deferred inflows of resources related to pensions ................................................... (109,553) $(2,546,505)
Net OPEB liability is not due and payable in the current period, and accordingly is not reported as a fund liability. Deferred outflows (inflows) of resources related to OPEB are not financial resources, and therefore, are not reported in the governmental funds.
Net OPEB asset .......................................................................................................$ 334 Net OPEB liability ..................................................................................................... (2,062,819)
Deferred outflows of resources related to OPEB ..................................................... 324,720 Deferred inflows of resources related to OPEB........................................................ (353,600) $(2,091,365)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
53 Because the focus of governmental funds is on the availability of resources, some assets will not be available to pay for current period expenditures and thus are not included in fund balance.
Revenue not collected within 60 days of the end of the current fiscal period ..........$ 584,469 (2) Internal service funds are used by management to charge the costs of certain activities, such as capital lease financing, equipment maintenance services, printing and mailing services, and telecommunications and information systems, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position.
Net position before adjustments .....................................................................................$ (49,295) Adjustments for internal balances with the San Francisco Finance Corporation:
Capital lease receivables from other governmental and enterprise funds ............... (110,855) Unearned revenues and other liabilities ................................................................... 2,465 $ (157,685)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
54 (b) Explanation of certain differences between the governmental funds statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities
The net change in fund balances for governmental funds, $1,201,772, differs from the change in net position for governmental activities, $590,024, reported in the statement of activities. The differences arise primarily from the long-term economic focus in the statement of activities versus the current financial resources focus in the governmental funds. The effect of the differences is illustrated below.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
55 (3) Property taxes are recognized as revenues in the period the amount becomes available. This is the current period amount by which the deferred inflows of resources increased in the governmental funds. $ 7,314
Other revenues that were unavailable are reported as deferred inflows of resources in the governmental funds. This is the current period amount by which deferred inflows of resources increased in the governmental funds. 15,455 $ 22,769
Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Certain long-term liabilities reported in the prior year statement of net position were paid during the current period resulting in expenditures in the governmental funds. This is the amount by which the increase in long-term liabilities exceeded expenditures in funds that do not require the use of current financial resources. $ (494,202)
Changes to net pension liability and pension related deferred outflows and inflows of resources do not provide financial resources and, therefore, are not reported as a reduction in expenditures in governmental funds. 95,951 Changes to net OPEB asset/liability and OPEB related deferred outflows and inflows of resources do not provide financial resources and, therefore, are not reported as a reduction in expenditures in governmental funds. 113,131 Governmental funds report revenues and expenditures primarily pertaining to long- term loan activities, which are not reported in the statement of activities. These activities are reported at the government-wide level in the statement of net position.
This is the net revenues reported in the governmental funds. (224) $ (285,344)
(4) When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year and the loss on disposal of capital assets. In addition, contributions of capital assets are not financial resources in the governmental funds but are reported as revenues in the statement of activities.
Capital expenditures.................................................................................................$ 378,801 Depreciation expense............................................................................................... (230,614) Loss on disposal of capital assets............................................................................ (8,844) Capital contributions ................................................................................................. 61,650 Write off of construction in progress......................................................................... (71,205) Difference...........................................................................................................$ 129,788 (5) Internal service funds are used by management to charge the costs of certain activities, such as capital lease financing, equipment maintenance services, printing and mailing services, and telecommunications and information systems to charging additional amounts to participating governmental activities to completely $ 21,787
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
56 (6) Bond premiums are a source of funds in the governmental funds when the bonds are issued, but are capitalized in the statement of net position. This is the amount of premiums capitalized during the current period. $ (93,427) Repayment of bond principal and the payment to escrow for refunding of debt are reported as expenditures in governmental funds and, thus, have the effect of reducing fund balance because current financial resources have been used. For the City as a whole, however, the principal payments and payment to escrow for refunded debt reduce the liabilities in the statement of net position and do not result in expenses in the statement of activities. The City's bonded debt was reduced because principal payments were made to bond holders and payments were made to escrow for refunded debt.
Principal payments made .........................................................................................$ 356,986 Payments to escrow for refunded debt..................................................................... 197,860 554,846
Bond proceeds are reported as other financing sources in governmental funds and thus contribute to the change in fund balance. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net position and does not affect the statement of activities. Proceeds were received from:
General obligation bonds ..........................................................................................$ (700,570) Refunding general obligation bonds ......................................................................... (91,230) Certificates of participation........................................................................................ (123,095) Refunding certificates of participation ....................................................................... (70,640) (985,535)
$ (430,689)
Interest expense in the statement of activities differs from the amount reported in governmental funds because (1) additional accrued and accreted interest was calculated for bonds, notes payable and capital leases, and (2) amortization of bond premiums and refunding losses and gains are not expended within the fund statements.
Increase in accrued interest .....................................................................................$ (1,023) Gain on refundings ................................................................................................... (15,818) Amortization of bond premiums................................................................................ 41,552 Amortization of bond refunding losses and gains..................................................... (1,343) $ 23,368
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
57 (4) E FFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
During fiscal year 2021, the City implemented the following accounting standards:
In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. GASB Statement No. 84 establishes criteria for identifying fiduciary activities of all state and local governments. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. The City evaluated all funds and activities in accordance with the statement and determined that activities previously treated as agency funds should now be reported in the governmental funds or custodial funds. As a result, the City restated its fund balance and net position as of July 1, 2020 as follows:
In August 2018, the GASB issued Statement No. 90, Majority Equity Interests an amendment of GASB Statements No. 14 and No. 61 . GASB Statement No. 90 establishes standards for reporting a for periods beginning after December 15, 2019. Application of this statement did not have a significant impact on the City for the year ended June 30, 2021.
In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates . GASB Statement No. 93 addresses the accounting and financial reporting effects of replacement of interbank offering rates with other reference rates in agreem ents which reference an interbank offering rate.
Certain provisions of this new standard are effective for periods beginning after June 15, 2020.
Application of this statement did not have a significant impact on the City for the year ended June 30, 2021. Provisions of this statement that relate to the removal of the London Interbank Offered Rate (LIBOR) as an appropriate benchmark interest rate and to lease modifications under GASB Statement No. 87 are not effective for the year ended June 30, 2021. The City is currently analyzing its accounting practices to determine the impact of these provisions.
In June 2020, the GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans an
amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32 .
GASB Statement No. 97 clarifies the criteria used in determining whether a fiduciary component unit exists and clarifies financial reporting for Internal Revenue Code section 457 deferred compensation plans. The new standard is effective for periods beginning after June 15, 2021. Early application of this statement did not have a significant impact on the City for the year ended June 30, 2021.
As Previously
Reported
Change in
Accounting
Principle As Re sta te d
Primary Government:
Gov ermental Activ ities....................................... 3,133,622$ 35,551 $ 3,169,173 $ Total Business Type Activ ities........................... 6,964,973 - 6,964,973 Total Primary Gov ernment.................................... 10,098,595$ 35,551 $ 10,134,146 $ Governmental Funds:
General Fund................................................... 2,685,922$ 35,397 $ 2,721,319 $ Other Governmental Funds................................ 2,353,954 154 2, 354,108 Total Gov ernmental Funds................................... 5,039,876$ 35,551 $ 5,075,427 $ Custodial Funds.................................................. - $ 280,246 $ 280,246 $ Net Position/Fund Balance
at Beginning of Year
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
58 In October 2021, the GASB issued Statement No. 98, The Annual Comprehensive Financial Report .
GASB Statement No. 98 updates existing accounting standards by changing the name of the Comprehensive Annual Financial Report to the Annual Comprehensive Financial Report. The new standard is effective for periods ending after December 15, 2021. Early application of this statement did not have a significant impact on the City for the year ended June 30, 2021.
In addition, the City is currently analyzing its accounting practices to determine the potential impact of the following pronouncements:
In June 2017, the GASB issued Statement No. 87, Leases. GASB Statement No. 87 establishes a single model for lease accounting and requires reporting of certain lease assets, liabilities, and deferred inflows that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. Application of this statement is effectiv
In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. GASB Statement No. 89 requires that interest costs incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred and no longer included in the historical cost of capital assets. The new standard is effective for periods beginning after December 15, 2020. Application of this statem June 30, 2022.
In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. GASB Statement No. 91 clarifies the definition of conduit debt and establishes new recognition, measurement, and disclosure requirements. The new standard is effective for periods beginning after December 15, 2021. Application In January 2020, the GASB issued Statement No. 92, Omnibus 2020 . GASB Statement No. 92 addresses a variety of topics related to postemployment benefits and other issues. The new standard is effective for periods beginning after June 15, 2021. Application of this statement is effective for the
22. In March 2020, the GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements . GASB Statement No. 94 establishes standards for public-private and public-public partnerships (PPPs) and availability payment arrangements. A PPP is an arrangement in which a government contracts with an operator to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. An availability payment arrangement is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction. The new standard requires reporting of related assets and deferred inflows that currently are not reported and is effective for periods begi
ending June 30, 2023.
In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. GASB Statement No. 96 defines such arrangements as contracts that convey control capital assets, as specified in the contract for a period of time in an exchange or exchange-like transaction. The standard clarifies measurement and recognition of capitalizable costs, intangible assets, and subscription liabilities for such arrangements and also requires additional disclosures related to such arrangements. The new standard is effective for periods beginning after June 15, 2022.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
59 (5) D EPOSITS AND INVESTMENTS
(a) Cash, Deposits and Investments Presentation
Total City cash, deposits and investments, at fair value, are as follows:
(b) Investment Policies
financial institutions in which the City deposits funds, types of permitted investment instruments, and the percentage of the portfolio which may be invested in certain instruments with longer terms to maturity. The objectives of the policy, in order of priority, are safety, liquidity, and earning a market rate of return on public funds. The City has established a Treasury Oversight Committee (Oversight Committee) as defined in the City Administrative Code section 10.80-3, comprised of various City officials, representatives of agencies with large cash balances, and members of the public, to monitor and review the management of public funds maintained in the investment pool in accordance with Sections 27130 to 27137 of the California Government Code. The Treasurer prepares and submits an investment report to the Mayor, the Board of Supervisors, members of the Oversight Committee and the investment pool participants every month. The report covers the type of investments in the pool, maturity dates, par value, actual cost, and fair value.
The investment policy places maturity limits based on the type of security. Investments held by the Treasurer during the year did not include repurchase agreements or reverse repurchase agreements.
May 2021.
licy that address interest rate risk
and concentration of credit risk.
Gover nm e nta l
Activities
Business-type
Activities Fiduciary Funds Total
Deposits and investments with
7,325,095$ 3,088,166 $ 1,575,127 $ 11,988,388 $ Deposits and investments outside
344,163 23,301 37,118,503 37,485,967
Restricted assets:
Deposits and investments with
- 1,422,247 - 1,422,247
Deposits and investments outside
6,272 881,511 324,475 1,212,258
Total deposits & investments 7,675,530$ 5,415,225$ 39,018,105$ 52,108,860$ 1,219,240$
50,889,620
52,108,860$
Primary Government
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
60 The Treasurer also holds for safekeeping bequests, trust funds, and lease deposits for other City departments. The bequests and trust funds consist of stocks and debentures. Those instruments are valued at par, cost, or fair value at the time of donation.
Other Funds
Other funds consist primarily of deposits and investments with trustees related to the issuance of bonds and to certain loan programs operated by the City. These funds are invested either in accordance with bond covenants and are pledged for payment of principal, interest, and specified capital improvements or in accordance with grant agreements and may be restricted for the issuance of loans. established by the Retirement Board. The objective of the policy is to maximize the expected return of the fund at an acceptable level of risk. The Retirement Board has established percentage guidelines for types of investments to ensure the portfolio is diversified.
Investment managers are required to diversify by issue, maturity, sector, coupon, and geography.
Investment managers retained by the Retirement System follow specific investment guidelines and are evaluated against specific market benchmarks that represent their investment style. Any exemption from general guidelines requires approval from the Retirement Board. The Retirement System invests in securities with contractual cash flows, such as asset backed securities, commercial mortgage- backed securities and collateralized mortgage obligations. The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate values, issuers and changes in interest rates.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
61 The investment policy permits investments in domestic and international debt and equity securities, securities lending, foreign currency contracts, derivative instruments, private equity, real assets, private credit, and absolute return investments, which include investments in a variety of commingled partnership
2021, are as follows:
The Retirement System is not directly involved in repurchase or reverse repurchase agreements.
However, external investment managers retained by the Retirement System may employ repurchase Retirement System monitors the investment activity of its investment managers to ensure compliance with
managed account is authorized to use repurchase arrangements. The Retirement System maintains Retiree Health Care Trust Fund (RHCTF)
Treasury are invested pursuant to investment policy guidelines as established by the RHCTF Board.
The objective of the policy is to manage fund assets so as to achieve the highest, reasonably prudent real return possible. The RHCTF allocates its investments among numerous investment managers and in accordance with the investment policy approved by the RHCTF Board.
At its May 2021 Board
-Trust, the RHCTF Board
anticipated that illiquid investments will not be appropriate given the portfolio liquidity needs. Therefore, the RHCTF Board approved a new separate allocation that offers a higher liquidity, lower risk levels profile for the Community College.
Asset Class
Target Allocation
through October 2020
Target Allocation since
November 2020
Global Equity 31.0% 37.0%
Treasuries 6.0% 8.0%
Liquid Credit 3.0% 5.0%
Private Credit 10.0% 10.0%
Private Equity 18.0% 23.0%
Real Assets 17.0% 10.0%
Absolute Return 15.0% 10.0%
Leverage 0.0% -3.0%
100.0% 100.0%
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
62 The RHCTF Board has established percentage guidelines for types of investments to ensure the portfolio is diversified, as follows:
Asset Class
Target Allocation From
October 2019 to April 2021
Equities
U.S. Equity 31.0%
Developed Market Equity (Non-U.S.) 15.0%
Emerging Market Equity 13.0%
Credit
Bank Loans/ High Yield 6.0%
Emerging Market Bonds 3.0%
Rate Sensitive
Short-Term Treasury Inflation-Protected Securities (TIPS) 4.0% Investment Grade Bonds 9.0%
Long-Term Government Bonds 4.0%
Private Markets
Private Equity 5.0%
Private Core Real Estate 5.0%
Risk Mitigating Strategies
Global Macro 5.0%
100.0%
Asse t Class
City and County of San
Francisco Sub-Trust
Community College
District Sub-Trust
Equities
U.S. Equity Large Cap 28.0% 31.0%
U.S. Equity Small Cap 3.0% 3.0%
Developed Market Equity (Non-U.S.) 15.0% 18.0%
Emerging Market Equity 13.0% 16.0%
Credit
Bank Loans/ High Yield Bonds 6.0% 6.0%
Emerging Market Bonds 3.0% 3.0%
Rate Sensitive
Short-Term Treasury Inflation-Protected Securities (TIPS) 4.0% 3.0% Investment Grade Bonds 9.0% 15.0%
Long-Term Government Bonds 4.0% 5.0%
Private Markets
Private Equity 5.0% -
Private Core Real Estate 5.0% -
Risk Mitigating Strategies
Global Macro 5.0% -
100.0% 100.0%
Target Allocation Since May 2021
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
63 (c) Fair Value Hierarchy
The City 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 City does not value any of its investments using Level 3 inputs). The inputs or methodology used for valuing securities are not an indication of risk associated with investing in those securities.
Fair Value
Quoted Prices in
Activ e M ar ke ts
for Identical
Asse t s
Significant
Other
Observable
Inputs
Unobservable
Inputs
6/30/2021 (Level 1) (Level 2) (Level 3)
5,421,213$ 5,421,213 $ -$ - $ 489,606 - 489,606 -
3,225,513 - 3,225,513 -
1,905,907 - 1,905,907 -
Supranationals 467,070 - 467,070 -
40,000 * - - -
1,103,034 * - - -
Subtotal Investments in City Treasury 12,652,343 5,421,213 $ 6,088,096 $ - $ U.S. Treasury Notes 356,686 356,686$ - $ - $ 261,998 - 261,998 -
4,466 -4 , 4 6 6 -
550 -5 5 0 -
5,077 -5 , 0 7 7 -
2,017 - 2,017 -
1,349 * ---
664,351 * ---
273 * ---
Subtotal Investments Outside City Treasury 1,296,767 356,686 $ 274,108 $ - $ * Not subject to fair value hierarchy
U.S. Agencies - Discount
Money Market Mutual Funds
Fair Value Measurements Using
Investments Outside City Treasury:
(Governmental and Business-Type)
Primary Government:
Investments in City Treasury:
U.S. Treasuries
U.S. Agencies - Coupon (no call option)
Public Time Deposits
Negotiable Certificates of Deposits
Negotiable Certificates of Deposit
State and Local Agencies
Corporate Notes
Supranationals
U.S. Agencies
Commercial Paper
Money Market Mutual Funds
Certificates of Deposit
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
64 Investments Held in City Treasury
U.S. Treasury Notes are valued using quoted prices in active markets and classified in Level 1 of the fair value hierarchy.
U.S. Agencies, Negotiable Certificates of Deposit and Supranationals are valued using a variety of techniques such as matrix pricing, market corroborated pricing inputs such as yield curve, indices, and other market related data and classified in Level 2 of the fair value hierarchy.
Money Market Funds have maturities of one year or less from fiscal year end and are not subject to GASB Statement No. 72. Public Time Deposits are measured at cost.
Fair Value
Quoted Prices in
A ctive Markets
for Identical
Asse ts
Significant
Other
Observable
Inputs
Unobservable
Inputs
6/30/2021 (Level 1) (Level 2) (Level 3)
Short-Term Investments 644,979$ 606,433 $ - $ 38,546$ Debt Securities:
U.S. Government and Agency Securities 1,090,034 1,080,220 9,814 - Other Debt Securities 951,706 178,928 656,576 116,202
Equity Securities:
Domestic Equity 3,887,573 3,881,652 3,635 2,286
International Equity 2,905,789 2,905,142 647 -
Foreign Currency Contracts, net 69 - - 69
Invested Securities Lending Collateral 770,857 - 417,710 353,147 Subtotal 10,251,007 8,652,375 $ 1,088,382 $ 510,250 $ Investments m easured at the net asset value (NA V)
Short-Term Investments 6,525
Fixed Income invested in:
Other Debt Securities 142,340
Equity Funds invested in:
Domestic 5,239,176
International 624,792
Real Assets 4,182,366
Private Credit 1,818,240
Private Equity 10,280,363
Absolute Return 3,656,388
Total investments measured at the NAV 25,950,190
Subtotal Investments in Employees' Retirement System 36,201,197 Retiree Health Care Trust Investm ents m easured at the NA V Short-Term Investments 8,878
Fixed Income:
Debt Index Funds 217,653
Equities:
Domestic 243,911
International 223,374
Private Equity 9,825
Risk Mitigating Strategies 35,672
Subtotal Investments in Retiree Health Care Trust 739,313 Total Investm ents 50,889,620 $
Fair Value Measurements Using
Em ployees' Retirement Sy stem Investm ents
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
65 Investments Held Outside City Treasury
U.S. Treasury Notes are valued using quoted prices in active markets and classified in Level 1 of the fair value hierarchy. U.S. Agencies, State and Local Agencies, Corporate Notes, Supranationals, and Negotiable Certificates of Deposit are valued using a variety of techniques such as matrix pricing, market corroborated pricing inputs such as yield curve, indices, and other market related data and classified in Level 2. Commercial Paper, Money Market Funds, and Certificates of Deposit are not subject to the fair value hierarchy.
Investments at Fair Value
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. In some cases, a valuation technique may have multiple inputs used to measure fair value, and each input might fall into a different level of the fair value hierarchy. The level in the fair value hierarchy within which a fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the measurement. The prices used in determining the fair value hierarchy are obtained from various pricing Debt and equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets. Debt and equity securities classified in Level 2 of the fair value hierarchy are valued using prices determined by the use of matrix pricing techniques maintained by the various pricing vendors for these securities. Debt securities including short-term instruments are priced based on evaluated prices. Such evaluated prices may be determined by factors which include, but are not limited to, market quotations, yields, maturities, call features, ratings, institutional size trading in similar groups of securities and developments related to specific securities. For equity securities not traded on an active exchange, or if the closing price is not available, corroborated indicative quotes obtained from pricing vendors are generally used. Debt and equity securities classified in Level 3 of the fair value hierarchy are securities whose stated market prices are unobservable by the market place. Many of these securities are priced using uncorroborated indicative quotes, adjusted prices based on inputs from different sources, or evaluated prices using unobservable inputs, such as extrapolated data, proprietary models, and indicative quotes from pricing vendors.
Investments at Net Asset Value (NAV)
The equity and debt funds are commingled funds that are priced at net asset value by industry vendors and fund families. NAV is the fair value of all securities owned by a fund, minus its total liabilities, divided by the number of shares issued and outstanding. The NAV of an open-end fund is its price.
The fair value of the Retiremen
absolute return, and some public equity investments are based on NAV provided by the investment partnerships. The partnership financial statements are audited annually as of December 31 and the NAV is adjusted by additional contributions to and distributions from the partnership, the Retirement fair value, as determined by the General Partners.
The General Partners may use one or more valuation methodologies outlined in FASB ASC 820, Fair Value Measurement
determination of fair value is then based on the best information available in the circumstances and information that market participants would use in valuing the investments. The General Partners may take into consideration a combination of internal and external factors, including but not limited to,
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
66 appropriate risk adjustments for nonperformance and liquidity. Such fair value estimates involve subjective judgments of unrealized gains and losses.
The values provided by the General Partners may differ significantly from the values that would have been used had a ready market existed for these investments.
Private credit investment strategies include capital preservation, return maximization and opportunistic.
Investments in the asset class are achieved through commingled funds and separate account partnerships. Private credit investments are mostly illiquid and distributions are received over the life of the investments. These investments are not typically redeemed, nor do they have set redemption schedules. There are fourteen public equity investments held in commingled funds valued at NAV.
These investments may be subject to varying lock-up provisions and redemption schedules. The real asset holdings are illiquid. Distributions are received over the life of the investments, which could equal or exceed ten years. They are not redeemed, nor do they have set redemption schedules. Private equity investment strategies include buyout, venture capital, growth capital, and special situations.
Investments in the asset class are achieved primarily through commingled funds and separate account partnerships but may also include direct and co-investment opportunities. Private equity investments are illiquid and distributions are received over the life of the investments, which could equal or exceed ten years. These investments are not typically redeemed, nor do they have set redemption schedules.
Absolute return investment strategies include equity, credit, macro, emerging markets, quantitative, multi-strategy, special situations/other, co-investments, and commodities. Investments are achieved through limited partnerships. The table below provides a summary of the terms and conditions upon which the Retirement System may redeem its absolute return investments. Investments have the potential to become illiquid under stressed market conditions and, in certain circumstances, investors may be subject to redemption restrictions that differ from the standard terms and conditions summarized here, which can impede the return of capital according to those terms and conditions.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
67 Retiree Health Care Trust Fund
Investments at Net Asset Value (NAV)
At June 30, 2021, the RHCTF had cash and investments in the City Treasury pool, commingled funds, mutual funds, feeder funds, and money market funds. The funds are priced at net asset value (NAV) by industry vendors and fund families. NAV is the fair value of all securities owned by a fund, minus its total liabilities, divided by the number of shares issued and outstanding. As of June 30, 2021, one debt security investment valued at $51.8 million has quarter end redemptions with a 90 day advance written notice requirement. In addition, one international equity investment valued at $109.3 million has weekly redemptions with a three-day advance notification requirement. Both investments have 5% holdbacks on a weekly basis with four-day notice. There are no redemption restrictions for the remaining commingled funds.
eneral
limited partnerships. The partnership financial statements are audited annually as of December 31 and the NAV is adjusted by additional contribution
share of net earnings and losses, and unrealized gains and losses resulting from changes in fair value, as determined by the General Partners.
The General Partners may use one or more valuation methodologies outlined in FASB ASC 820, Fair Value Measurement
determination of fair value is then based on the best information available in the circumstances and may involve subj
information that market participants would use in valuing the investments. The General Partners may take into consideration a combination of internal and external factors, including but not limit to, appropriate risk adjustments for nonperformance and liquidity. Such fair value estimates involve subjective judgments of unrealized gains and losses.
The values provided by the General Partners may differ significantly from the values that would have been used had a ready market existed for these investments. (d) Investment Risks
Custodial Credit Risk - Deposits
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an
requirements that would limit the exposure to custodial credit risk for deposits, other than the following provision. The California Government Code requires that a financial institution secure deposits made by state or local governmental units not covered by Federal Deposit Insurance Corporation insurance by pledging government securities as collateral. The market value of pledged securities must equal at least 110.0% of the type of collateral authorized in California Government Code, Section 53651 (a) of the business-type activities bank balances were exposed to custodial credit risk by not being insured or collateralized.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
68 Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in interest rates. Inform
investments to interest rate fluctuations is provided by the following tables, which shows the distribution interest rate risk information is discussed in sections (f) and (g), respectively, of this note.
As of June 30, 2021, the investments in the City Treasury had a weighted average maturity of 407 days.
S&P Rating Fair Value
Less than
1 year
1 to 5
years
Primary Government:
Inv estments in City Treasury :
U.S. Treasury Notes AA+ 5,421,213$ 3,407,500$ 2,013,713$ U.S. Agencies AA+ 3,715,119 2,369,639 1,345,480
Negotiable Certificates of Deposit A-1,A-1+ 1,905,907 1,905,907 - Money Market Mutual Funds AAAm 1,103,034 1,103,034 -
Public Time Deposits NR 40,000 40,000 -
Supranationals AAA 467,070 262,214 204,856
Subtotal pooled investments 12,652,343 9,088,294$ 3,564,049$ Inv estments Outside City Treasury :
(Governmental and Business-Type)
U.S. Treasury Notes AA+ 356,686$ 26,795$ 329,891$ U.S. Agencies AA+ 261,998 29,508 232,490
State and Local Agencies NR,AA,AA+,AAA 4,466 - 4,466
Supranationals AAA 5,077 506 4,571
Corporate Notes AA+ 550 550 -
Money Market Mutual Funds A-1+,AAAm 570,395 570,395 -
U.S. Treasury Money Market Funds AAAm 93,956 93,956 -
Com m ercial Paper A-1+,AAAm 1,349 1,349 -
Negotiable Certificates of Deposit NR,A+,AA- 2,290 273 2,017 Subtotal investments outside City Treasury 1,296,767 723,332$ 573,435$ Retiree Health Care Trust Investments 739,313
Employees' Retirement System investments 36,201,197
Total Investments 50,889,620$
Investment Maturities
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
69 Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to pay the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The S&P Global Ratings (S&P) rating for each of the investment types are shown in the table above.
Custodial Credit Risk - Investments
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the City will not be able to recover the value of its investment or collateral securities that policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments; however, it is the practice of the City Treasurer that all investments are insured, business-type activities also have investments with trustees related to the issuance of bonds that are These amounts are included in the investments outside City Treasury shown in the table above.
Concentration of Credit Risk
issuer beyond that stipulated by the California Government Code and/or its investment policy. U.S.
Treasury and agency securities explicitly guaranteed by the U.S. government are not subject to single issuer limitation.
As of June 30, 2021, the City Treasurer has investments that represent 5.0% or more of the total Pool in the following:
Federal Farm Credit Bank.................................................................20.2% Federal Home Loan Bank ...................................................................5.4% Negotiable Certificates of Deposit
Toronto Dominion Bank ............5.3%
In addition, the following major fund holds investments with trustees that represent 5.0% or more of the Airport:
Federal Home Loan Mortgage Association ................................15.4% Federal National Mortgage Association .....................................11.2% Federal Home Loan Bank.............................................................5.4%
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
70 (e)
The following represents a condensed statement of net position and changes in net position for the of and for the year ended June 30, 2021:
June 30, 2021:
Statement of Net Position
$13,410,639
$12,547,813
862,826
$13,410,639
Statement of Changes in Net Position
$12,210,998
1,199,641
$13,410,639
Type of Investment Rates Maturities Par Value Carrying Value Pooled Investments:
U.S. Treasuries................................. 0.03% - 1.90% 07/08/21 - 04/30/26 5,398,860$ 5,421,213$ U.S. Agencies.................................... 0.05% - 3.09% 07/07/21 - 09/03/25 3,695,451 3,715,119 Public Time Deposits...................... 0.07% - 0.10% 09/20/21 - 12/20/21 40,000 40,000 Negotiable Certificates of Deposit 0.12% - 0.23% 07/02/21 - 05/25/22 1,905,000 1,905,907 Money Market Mutual Funds........... 0.01% - 0.03% 07/01/21 - 07/01/21 1,103,034 1,103,034 Supranationals................................. 0.02% - 2.97% 07/01/21 - 01/15/25 462,135 467,070 12,604,480$ 12,652,343
758,296
13,410,639$
Carrying amount of deposits with Treasurer..............................................................................................
Total cash and investments with Treasurer............................................................................................... .
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
71 (f)
2021, are summarized as follows:
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
72 Interest Rate Risk
The Retirement System does not have a specific policy to manage interest rate risk. Below is a table depicting the segmented time distribution for fixed income investments based upon the expected maturity (in years) as of June 30, 2021:
Credit Risk
Fixed income investment managers retained by the Retirement System follow specific investment guidelines and are evaluated against specific market benchmarks that represent their investment style.
Fixed income investment managers typically are limited within their portfolios to no more than 5.0% exposure in any single security, with the exception of United States Treasury and government agency embedded in the individual investment
manager agreements as prescribed and approved by the Retirement Board.
Investments are classified and rated using the lower of (1) S&P Global Ratings (S&P) rating or (2) esponding to the equivalent S&P rating. If only a
Maturities
Investment Type Fair Value
Less than 1
year 1-5 years 6-10 years 10+ years
Asset-Backed Securities 24,457 $ 20 $ 3,915 $ 4,108 $ 16,414 $ Bank Loans 112,605 3,151 57,243 52,211 -
City Investment Pool 9,184 6,597 2,587 - -
Collateralized Bonds 2,011 - - 533 1,478
Commercial Mortgage-Backed 87,798 - 621 1,927 85,250
Commingled and Other
Fixed Income Funds 321,260 2,009 - 87,236 232,015
Corporate Bonds 274,249 1,686 89,417 142,457 40,689
Corporate Convertible Bonds 197,414 1,917 141,231 49,560 4,706 Government Bonds 1,139,367 1,545 755,004 351,452 31,366 Government Mortgage-
Backed Securities 4,783 - - - 4,783
Municipal/Provincial Bonds 3,079 - 1,292 337 1,450
Non-Government Backed
Collateralized Mortgage Obligations 16,541 366 - - 16,175 Options 6 (6) 12 - -
Short-Term Investment Funds 651,504 651,504 - - -
Swaps 510 26 217 292 (25)
Total 2,844,768 $ 668,815 $ 1,051,539 $ 690,113 $ 434,301 $
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
73 Investments issued or explicitly guaranteed by the U.S. government of $1.10 billion as of June 30, 2021, are exempt from credit rating disclosures and are excluded from the table below. -term investment funds, government mortgage-backed
securities, and investments that invest primarily in rated securities, such as commingled funds and money market funds, but do not themselves have a specific credit rating. Excluding these investments, Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to th investment in a single issuer. Securities issued or guaranteed by the U.S. government or its agencies are exempt from this limit. As of June 30, 2021, the Retirement System had no investments of a single issuer that
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government may not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The Retirement System does not have a specific policy addressing custodial credit risk for investments, but investments are generally insured, registered, or they were not insured or registered in the name of the Retirement System and were held by the Foreign Currency Risk
y
denominated cash, equity, fixed income, private equity, real assets, and private credit. The Retirement which are limited to hedging currency exposure existing in the portfolio.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
74 Currency Cash Equities
Fixed
Income
Private
E quities R eal Assets
Private
Credit
Foreign
Currency
Contracts Total
Argentina peso - $ - $ 1 $ - $ - $ - $ - $ 1 $ Australian dollar - 20,693 121 12,820 - - 2,565 36,199
Brazil real - 10,282 1,995 - - - 1,764 14,041
Canadian dollar - 51,175 14 - - - 3,976 55,165
Chilean peso - 1,333 829 - - - 986 3,148
Chinese r yuan HK - - - - - - (5,497) (5,497)
Chinese yuan renminbi 38,546 483,245 4,622 - - - (17,531) 508,882 Colombian pes o - - 5,113 - - - (3,431) 1,682
Czech koruna - - (60) - - - 1,760 1,700
Danish krone - 54,690 - - - - - 54,690
Dominican rep peso - - 618 - - - (808) (190)
Egyptian pound - - 670 - - - - 670
Euro - 578,211 45,092 139,170 431,880 65,124 (108,522) 1,150,955 Hong Kong dollar - 120,819 - - - - 872 121,691
Hungarian forint - 3,342 828 - - - 882 5,052
Indonesian rupiah - 1,176 3,707 - - - 595 5,478
Israeli shekel - - - - - - (19) (19)
Japanese yen - 80,806 - - 56,587 - 20,759 158,152
Kazakhstan tenge - - 253 - - - - 253
Malay s ian r inggit - - 3,063 - - - 137 3,200
Mexican peso - 6,589 1,923 - - - 2,111 10,623
New Taiw an dollar - 46,346 - - - - - 46,346
Norw egian krone - 4,817 - - - - - 4,817
Per uv ian s ol - - 5,679 - - - (5,863) (184)
Philippines peso - 1,833 206 - - - (152) 1,887
Polish zloty - 9,086 2,024 - - - 847 11,957
Pound sterling - 210,529 8,079 53,304 50,326 - (11,917) 310,321 Romanian leu - - 851 - - - 501 1,352
New Russian ruble - 2,332 2,523 - - - 1,219 6,074
Singapore dollar - 1,495 - - - - - 1,495
South African rand - 11,021 8,676 - - - (6,419) 13,278
South Korean w on - 33,545 - - - - (459) 33,086
Sw edish krona - 45,299 - - - - - 45,299
Sw iss franc - 99,888 - - - - (645) 99,243
Thailand baht - 4,330 1,442 - - - 2,219 7,991
Turkish lira - 3,509 - - - - 86 3,595
Uruguayan peso - - - - - - 130 130
Total 38,546$ 1,886,391$ 98,269 $ 205,294 $ 538,793 $ 65,124 $ (119,854) $ 2,712,563 $
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
75 Money Weighted Rate of Return
For the year ended June 30, 2021, the annual money weighted rate of return on pension plan investments, net of investment expenses, adjusted for the changing amounts actually invested, was
35.5 percent.
Derivative Instruments
As of June 30, 2021, the derivative instruments held by the Retirement System are considered investments and not hedges for accounting purposes. The gains and losses arising from this activity are recognized as incurred in the statement of changes in fiduciary net position. All investment derivatives discussed below are included within the investment risk schedules, which precede this subsection. Investment derivative instruments are disclosed separately to provide a comprehensive and distinct view of this activity and its impact on the overall investment portfolio.
The fair value of the exchange traded derivative instruments, such as futures, options, rights and warrants are based on quoted market prices. The fair values of forward foreign currency contracts are determined using a pricing service, which uses published foreign exchange rates as the primary source.
The
quoted market prices of the underlying investment instruments or by an external pricing service using various proprietary methods.
The table below presents the notional amounts, the fair values, and the related net appreciation (depreciation) in the fair value of derivative instruments that were outstanding at June 30, 2021:
Derivative Type / Contracts
Notional
Amount
Fair
Value
Net
Appreciation
(Depreciation)
in Fair Value
Forwards
Foreign Exchange Contracts 263,225$ 69 $ 185$ Futures
Bond Futures Long 8,898 84 84
Equity Index Futures Long 76,766 1,073 (548)
Treasury Futures Long 400,741 1,474 1,070
Treasury Futures Short (8,215) (47) (47)
Options
Credit Contracts - (6) 12
Foreign Exchange Contracts 200 12 (133)
Swaps
Credit Contracts 5,375 324 (150)
Currency Contracts 440 247 (306)
Interest Rate Contracts 115,953 (61) (3,660)
Rights/Warrants
Equity Contracts 40,449 shares 101,656 (5,254)
Total 104,825$ (8,747) $
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
76 All investment derivatives are reported as investments at fair value in the statement of fiduciary net position. Rights, warrants, and equity index futures are reported in equity securities. Foreign exchange contracts are reported in foreign currency contracts, which also include spot contracts that are not derivatives. All other derivative contracts are reported in other debt securities. All changes in fair value are reported as net appreciation (depreciation) in fair value of investments in the statement of changes in fiduciary net position.
Counterparty Credit Risk
The Retirement System is exposed to credit risk on non-exchange traded derivative instruments that are in asset positions. The table below presents those investments being classified and rated using the to S&P is used for the purpose of this disclosure.
Custodial Credit Risk
The custodial credit risk disclosure for exchange traded derivative instruments is made in accordance with the custodial credit risk disclosure requirements of GASB Statement No. 40. At June 30, 2021, all name and are not exposed to custodial credit risk.
Interest Rate Risk
The table below describes the maturity periods of the derivative instruments exposed to interest rate risk at June 30, 2021.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
77 The following table details the reference rate, notional amount, and fair value of interest rate swaps that are highly sensitive to changes in interest rates as of June 30, 2021:
Investment Type Reference Rate Notional Value Fair Value Interest Rate Swap Receive Fixed 0.25%, Pay Variable 3-Month BBA 1,760$ (54)$ Interest Rate Swap Receive Fixed 0.48%, Pay Variable 6-Month PRIBOR 658 (7) Interest Rate Swap Receive Fixed 0.57%, Pay Variable 6-Month WIBOR 22,800 216 Interest Rate Swap Receive Fixed 1.48%, Pay Variable 6-Month PRIBOR 1,152 35 Interest Rate Swap Receive Fixed 2.00%, Pay Variable 6-Month BUBOR 379 82 Interest Rate Swap Receive Fixed 2.39%, Pay Variable 6-Month THB 5,158 (103) Interest Rate Swap Receive Fixed 2.42%, Pay Variable 6-Month THB 191 10 Interest Rate Swap Receive Fixed 2.81%, Pay Variable 6-Month THB 613 (21) Interest Rate Swap Receive Fixed 3.34%, Pay Variable 3-Month KLIBOR 5,201 96 Interest Rate Swap Receive Fixed 3.35%, Pay Variable 1-Day BIDOR 959 (25) Interest Rate Swap Receive Fixed 4.10%, Pay Variable 1-Day BIDOR 805 (10) Interest Rate Swap Receive Fixed 4.35%, Pay Variable 28-Day MXIBR 91 (4) Interest Rate Swap Receive Fixed 4.50%, Pay Variable 1-Day BIDOR 598 48 Interest Rate Swap Receive Fixed 4.87%, Pay Variable 1-Day BIDOR 790 (23) Interest Rate Swap Receive Fixed 5.25%, Pay Variable 1-Day BIDOR 241 7 Interest Rate Swap Receive Fixed 5.26%, Pay Variable 3-Month JIBAR 837 (21) Interest Rate Swap Receive Fixed 5.60%, Pay Variable 1-Day COOVIBR 359 17 Interest Rate Swap Receive Fixed 6.71%, Pay Variable 28-Day MXIBR 4,145 30 Interest Rate Swap Receive Fixed 7.13%, Pay Variable 28-Day MXIBR 11,340 (96) Interest Rate Swap Receive Fixed 7.48%, Pay Variable 1-Day BIDOR 574 46 Interest Rate Swap Receive Fixed 11.33%, Pay Variable 1-Day BIDOR 1,158 (3) Interest Rate Swap Receive Variable 1-Day BIDOR, Pay Fixed 6.25% 693 (37) Interest Rate Swap Receive Variable 1-Day BIDOR, Pay Fixed 7.17% 598 49 Interest Rate Swap Receive Variable 1-Day COOVIBR, Pay Fixed 1.20% 996 (8) Interest Rate Swap Receive Variable 1-Day COOVIBR, Pay Fixed 4.20% 1,774 (63) Interest Rate Swap Receive Variable 28-Day MXIBR, Pay Fixed 5.12% 1,696 (1) Interest Rate Swap Receive Variable 3-Month BBA, Pay Fixed 0.36% 998 68 Interest Rate Swap Receive Variable 3-Month JIBAR, Pay Fixed 7.46% 2,591 124 Interest Rate Swap Receive Variable 6-Month WIBOR, Pay Fixed 0.94% 46,798 (413) Total Interest Rate Swaps 115,953$ (61)$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
78 Foreign Currency Risk
At June 30, 2021, the Retirement System is exposed to foreign currency risk on its derivative investments denominated in foreign currencies. Below is the derivative instruments foreign currency risk analysis as of June 30, 2021:
Contingent Features
At June 30, 2021, the Retirement System held no positions in derivatives containing contingent features.
Currency For w a rds Options
Rights/
Warrants Swaps Future s Total
Argentina peso -$ -$ -$ (197)$ -$ (197)$ Australian dollar 2,565 - - - - 2,565
Brazil real 1,764 - - 161 - 1,925
Canadian dollar 3,976 - - - 14 3,990
Chilean peso 986 - - - - 986
Chinese r yuan HK (5,497) - - - - (5,497)
Chinese yuan renminbi (17,531) - - - - (17,531)
Colombian peso (3,431) - - 30 - (3,401)
Czech koruna 1,760 - - (60) - 1,700
Dominican rep peso (808) - - - - (808)
Euro (108,522) (4) 111 - 66 (108,349)
Hong Kong dollar 872 - - - - 872
Hungarian forint 882 - - (3) - 879
Indonesian rupiah 595 - - - - 595
Israeli shekel (19) - - - - (19)
Japanese yen 20,759 - - - - 20,759
Malaysian ringgit 137 - - 7 - 144
Mexican peso 2,111 - - (122) - 1,989
Peruvian sol (5,863) - - - - (5,863)
Philippines peso (152) - - - - (152)
Polish zloty 847 - - 14 - 861
Pound sterling (11,917) - - - 3 (11,914)
Romanian leu 501 - - - - 501
New Russian ruble 1,219 - - - - 1,219
South African rand (6,419) - - (36) - (6,455)
South Korean won (459) - - - - (459)
Swiss franc (645) - 5 - - (640)
Thailand baht 2,219 - - 143 - 2,362
Turkish lira 86 - - - - 86
Uruguayan peso 130 - - - - 130
Total (119,854)$ (4)$ 116$ (63)$ 83$ (119,722)$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
79 Securities Lending
The Retirement System lends U.S. government obligations, domestic and international bonds, and equities to various brokers with a simultaneous agreement to return collateral for the same securities plus a fee in the future. The securities lending agent manages the securities lending program and receives securities and cash as collateral. Cash and non-cash collateral is pledged at 102% to 110% depending on security type. There are no restrictions on the number of securities that can be lent at one time. The term to maturity of the loaned securities is generally not matched with the term to maturity of the investment of the corresponding collateral.
The Retirement System does not have the ability to pledge or sell collateral securities unless a borrower defaults. The securities collateral is not reported on the statement of fiduciary net position. As of June 30, 2021, the Retirement System has no credit risk exposure to borrowers because the amounts the Retirement System owes them exceed the amounts they owe the Retirement System. As with other extensions of credit, the Retirement System may bear the risk of delay in recovery or of rights in the collateral should the borrower of securities fail financially. However, the lending agent indemnifies the Retirement System against all borrower defaults.
As of June 30, 2021, the Retirement System has lent $2.06 billion in securities and received collateral of $770.5 million and $1.46 billion in cash and securities, respectively, from borrowers. The cash collateral is invested in a separate account managed by the lending agent using investment guidelines approved by the Retirement Board. Due to the increase in the fair value of assets held in the separately eral was valued at $770.9 million. The
net unrealized gain of $343 is presented as part of the net appreciation (depreciation) in fair value of investments in the statement of changes in fiduciary net position in the year in which the unrealized gains and losses occur. The Retirement System is exposed to investment risk including the possible loss of principal value in the separately managed cash collateral reinvestment account due to the fluctuation in the fair value of the assets held in the account.
The
following table.
Investment Type
Fair Value of
Loaned Securities
Cash
Collateral
Fair Value of Non-
Cas h Collateral
Securities on Loan for Cash Collateral
U.S. Corporate Fixed Income 86,347 $ 88,523 $ - $ U.S. Equities 445,420 477,334 -
U.S. Government Fixed Income 191,064 194,848 -
International Fixed Income 825 882 -
International Equities 8,418 8,927 -
Securities on Loan for Non-Cash Collateral
U.S. Corporate Fixed Income 3,118 - 3,192
U.S. Equities 538,114 - 586,380
U.S. Government Fixed Income 655,451 - 717,379
International Fixed Income 4,753 - 5,153
International Equities 126,529 - 146,309
2,060,039$ 770,514 $ 1,458,413 $
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
80 The following table presents the segmented time distribution for the reinvested cash collateral account based upon the expected maturity (in years) as of June 30, 2021.
June 30, 2021 is as follows:
* This figure includes $266.2 million in repurchase agreements.
Investments in Real Assets
and separate accounts. The changes in these investments during the year ended June 30, 2021, are summarized as follows:
Certificates of Deposit 20,728$ 20,728$ -$ Commercial Paper 98,781 98,781 -
Floating Rate Notes 349,033 345,999 3,034
Money Market Funds 36,095 36,095 -
Repurchase Agreements 266,178 266,178 -
Payable/Receivable 42 42 -
Total 770,857$ 767,823$ 3,034$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
81 (g) Retiree Health Care Trust Fund
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates may adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The RHCTF does not have a specific policy to manage interest rate risk but invests in a diversified portfolio of stocks and bonds with a goal of reducing sensitivity to any one interest rate regime.
investments were as follows:
Credit Risk
Credit risk is the risk that an issuer or other counterparty to an investment may not fulfill its obligations.
This is measured by the assignment of a rating by a nationally recognized statistical rating organization.
Protected Debt Index Fund, Emerging Markets Debt Fund, Multi-Sector Debt Fund, City investment pool and Treasury Money Market Fund are not rated. Although those funds may invest in rated securities, and securities issued or explicitly guaranteed by the U.S. Government that are exempt from the credit rating disclosures, the funds do not themselves have a specific credit rating.
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of investment in a single issuer.
Securities issued or explicitly guaranteed by the U.S. government are excluded from this disclosure.
As of June 30, 2021, the RHCTF had only commingled funds and a partnership investment that equaled partnership investment that has equal and greater than 5% at the issuer level and likely very little, if any, overlap.
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the RHCTF would not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The RHCTF does not have a specific policy addressing custodial credit risk for investments, but investments are generally insured, registered, or held by the were exposed to custodial credit risk because they were either insured or registered in the name of the Investment Type
Weighted Average
Maturity in Years
US Debt Index Fund 8.4
Government Bond Index Fund 24.5
Inflation Protected Debt Index Fund 2.7
Emerging Markets Debt Fund 12.4
Multi-Sector Debt Fund 6.9
City Investment Pool 1.1
Treasury Money Market fund 0.1
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
82 Foreign Currency Risk
funds are denominated in U.S. dollars, but may consist of underlying securities that are denominated currencies by converting them into U.S. dollars using the most appropriate exchange rates as identified by each manager. Also, the cost of purchases and proceeds from sales of investments, interest and dividend income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions.
Rate of Return
For the year ended June 30, 2021, the annual money-weighted rate of return on investments, net of investment expense, was 24.7 percent. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.
Unfunded Investments Commitments
The RHCTF has unfunded commitments to contribute capital for real estate in the amount of $32.0 million and private equity in the amount of $23.4 million, totaling $55.4 million as of June 30, 2021.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
83 (6) P ROPERTY TAXES
The City is responsible for assessing, collecting, and distributing property taxes in accordance with enabling state law. Property taxes are levied on both real and personal property. Liens for secured property taxes attach on January 1st preceding the fiscal year for which taxes are levied. Secured property taxes are levied on the first business day of September and are payable in two equal installments: the first is due on November 1st and delinquent with penalties after December 10th; the second is due February 1st and delinquent with penalties after April 10th. Secured property taxes that are delinquent and unpaid as of June 30th are subject to redemption penalties, costs, and interest when paid. If not paid at the end of five years, the secured property may be sold at public auction and the proceeds used to pay delinquent amounts due. Any excess is remitted, if claimed, to the taxpayer.
Unsecured personal property taxes do not represent a lien on real property. Those taxes are levied on January 1st and become delinquent with penalties after August 31st. Supplemental property tax assessments associated with changes in the assessed valuation due to transfer of ownership in property or upon completion of new construction are levied in two equal installments and have variable due dates based on the date the bill is mailed.
-1979, general property
taxes are based either on a flat 1% rate applied to the adjusted 1975-1976 value of the property and new construction value added after the 1975-1976 valuation or on a flat 1.0% rate of the sales price of the property for changes in ownership. Taxable values on properties (exclusive of increases related to sales and construction) can rise or be adjusted at the lesser of 2.0% per year or the inflation rate as The Proposition 13 limitations on general property taxes do not limit taxes levied to pay the interest and redemption charges on any indebtedness approved by the voters prior to June 6, 1978 (the date of passage of Proposition 13). Proposition 13 was amended in 1986 to allow property taxes in excess of the 1.0% tax rate limit to fund general obligation bond debt service when such bonds are approved by two-thirds of the local voters. In 2000, California voters approved Proposition 39, which set the approval threshold at 55.0% for school facilities-
amounted to approximately $367.5 million for the year ended June 30, 2021.
Taxable valuation for the year ended June 30, 2021, (net of non-reimbursable exemptions, reimbursable exemptions, and tax increment allocations to the Successor Agency) was approximately $277.9 billion, an increase of 8.71%. The secured tax rate was $1.1985 per $100 of assessed valuation.
After adjusting for a State mandated property tax shift to schools, the tax rate is comprised of: about $0.65 for general government, about $0.35 for other taxing entities including the San Francisco Unified School District, San Francisco County Office of Education, San Francisco Community College District, the Bay Area Air Quality Management District, and the San Francisco Bay Area Rapid Transit District, and $0.1985 for bond debt service. Delinquencies in the current year on secured taxes and unsecured taxes amounted to 1.00% and 0.96%, respectively, of the current year tax levy, for an average delinquency rate of 1.00% of the current year tax levy.
As established by the Teeter Plan, the Controller allocates to the City and other agencies 100.0% of the secured annual and escape property taxes billed but not yet collected by the City; in return, as the delinquent property taxes and associated penalties and interest are collected, the City retains such tax amounts in the custodial fund. To the extent the custodial fund balances are higher than required; loss reserve as of June 30, 2021, was $35.3 million, which is included in the custodial fund for reporting purposes. The City has funded payment of accrued and current delinquencies, together with the required reserve, from interfund borrowing.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
84 (7) C APITAL ASSETS
Primary Government
Capital asset activity of the primary government for the year ended June 30, 2021, was as follows:
(1) The increases and decreases include transfers of categories of capital assets from construction in progress to depreciable cate gories. (2) Includes reclassifications from MTA to match the presentation in the audited financial statements.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
85 Depreciation expense was charged to functions/programs of the primary government as follows:
Equipment is generally estimated to have useful lives of 2 to 40 years, except for certain equipment of the Water Enterprise that has an estimated useful life of up to 75 years. Facilities and improvements are generally estimated to have useful lives from 15 to 50 years, except for utility type assets of the Water Enterprise, Hetch Hetchy, the Wastewater Enterprise, the SFMTA, and the Port that have estimated useful lives from 51 to 175 years. These long-lived assets include reservoirs, aqueducts, pumping stations of Hetch Hetchy, Cable Car Barn facilities and structures of SFMTA, and pier substructures of the Port, which totaled $5.24 billion as of June 30, 2021. Hetch Hetchy Water had intangible assets of water rights having estimated useful lives from 51 to 100 years, which totaled $45.6 million as of June 30, 2021. The Airport had $6.9 million in intangible assets of permanent easements.
In addition, the Water Enterprise had utility type assets with useful lives over 100 years, which totaled $6.8 million as of June 30, 2021.
negative interest income of approximately $609.3 million and $(3.1) million, respectively. Of these amounts, net interest expense of approximately $101.2 million was capitalized. The Airport had write- offs and loss on disposal in the amount of $42.0 million primarily due to disposal. The Water Enterprise, Hetch Hetchy, and the Wastewater Enterprise expensed $3.8 million, $8.4 million, and $4.2 million, respectively, related to capitalized design and planning costs on certain projects that were discontinued.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
86 Component Unit
Capital asset activity of the component unit for the year ended June 30, 2021 was as follows:
July 1, June 30,
Treasure Island Development Authority: 2020 Increases Decreases 2021 Capital assets, not being depreciated:
Land.............................................................................. 34,344$ -$ -$ 34,344$ Construction in progress............................................... 502 - - 502 Total capital assets, not being depreciated................. 34,846 - - 34,846 Capital assets, being depreciated:
Facilities and improvements.......................................... 4,615 229 - 4,844 Machinery and equipment............................................. 36 - - 36 Total capital assets, being depreciated....................... 4,651 229 - 4,880 Less accumulated depreciation for:
Facilities and improvements.......................................... 315 92 - 407 Machinery and equipment............................................. 29 3 - 32 Total accumulated depreciation.................................. 344 95 - 439 Total capital assets, being depreciated, net.................. 4,307 134 - 4,441 Component unit capital asssets, net........................ 39,153$ 134$ -$ 39,287$ During the year ended June 30, 2021, TIDA recorded facility improvements for the YMCA gym improvements project. For the overall Treasure Island Development Project, construction began in late 2018, with the complete buildout of the project occurring over fifteen to twenty years. For additional information, refer to Note 15.
(8) B ONDS,L OANS,C APITAL LEASES AND OTHER PAYABLES
The changes in short-term obligations for governmental and business-type activities for the year ended June 30, 2021, are as follows:
City and County of San Francisco Commercial Paper Program The City launched its commercial paper (CP) program to pay for project costs in connection with the acquisition, improvement, renovation and construction of real property and the acquisition of capital equipment and vehicles (Resolution No. 85-09). Pursuant to Resolution No. 85-09 approved in March 2009, the Board of Supervisors established a $150.0 million commercial paper program. Pursuant to Resolution 247-13, the authorization of the commercial paper program was increased from $150.0 million to $250.0 million. The City currently has revolving credit agreements (RCA) and letters of credit (LOC) supporting the $250.0 million program.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
87 CP is an alternative form of short-term (or interim) financing for certain capital projects, vehicles and equipment, that permits the City to pay project costs as project expenditures are incurred. The CP has a fixed maturity date from one to 270 days between 30 to 90 days. On the maturity date of a CP note, the note may be rolled (or refinanced) with the re-issuance of CP notes for additional periods of up to 270 days until the CP is refunded with the issuance of long- term obligations.
The City issues CP in series based on the bank providing the applicable credit facility that are divided into subseries according to tax status. The
CP program has three credit facilities, two RCAs
issued by State Street Bank and Trust Company (State Street Bank) and U.S. Bank National Association, which supports the issuance of Commercial Paper Certificates of Participation Series 1&2 (Series 1&2), and a Letter of Credit Agreement (LOC) issued by State Street Bank, which supports the issuance of Commercial Paper Certificates of Participation Series 3 (Series 3). The Series 1&2 State Street and U.S. Bank National Association. RCAs have fees of 0.45% and 0.45% on the total commitment amounts, respectively, and are scheduled to expire in May 2023. In December 2018, the City closed the First Amendment to its Commercial Paper Letter of Credit Reimbursement Agreement with State Street Bank, supporting Series 3, in the maximum principal amount not to exceed $100.0 million. The amendment stipulates a quarterly fee of 0.38% for the credit facility agreement, corresponding to the maintenance of a rating at least Aa3/AA-/AA- respectively, and extended the terms of the agreement to February 2022.
In fiscal year 2021, the City issued $527.9 million and retired $617.3 million of CP, excluding CP issued for San Francisco General Hospital, to provide interim financing for various approved capital projects including the acquisition, construction and improvement of an animal care and control facility; the acquisition of and improvement to real property for the Hall of Justice relocation project, and the development, acquisition, construction or rehabilitation of affordable rental housing projects. As of June 30, 2021, the outstanding principal of taxable CP of governmental activities was $18.8 million, with an interest rate of 0.08%.
Events of default, under the Letter of Credit and Reimbursement Agreement, consist of failure by the City to pay any Reimbursement Obligation to the Bank; failure to perform certain covenants, including the failure to make rental payments under the Sublease, which is an agreement by which the City is obligated to make annual rental payments to a trustee by leasing back City-owned property from the trustee; failure to make payment on any other Material Debt; City files for bankruptcy; City is downgraded below investment grade; City sustains unsatisfied judgment of $25.0 million or more. Upon the occurrence of an event of default under the Letter of Credit and Reimbursement Agreement, the Credit Bank may terminate the Letter of Credit. Any outstanding Commercial Paper Certificates would be payable from proceeds of a Final Draw. If not repaid when due, drawings under the respective RCA supporting the CP notes are amortized up to a five-year period.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
88 San Francisco General Hospital
In July 2014, the Board of Supervisors authorized the execution and delivery of tax-exempt and/or taxable CP in an aggregate principal amount not to exceed $41.0 million to finance the costs of acquisition of furniture, fixtures, and equipment for the new San Francisco General Hospital. As of June 30, 2021, the outstanding principal amount of tax-exempt CP was $8.0 million with an interest rate of
0.08%. The Commercial Paper Certificates are secured by base rental payments made by the City General Fund resources.
Events of default, under the Letter of Credit and Reimbursement Agreement, consist of failure by the City to pay any Reimbursement Obligation to the Bank; failure to perform certain covenants, including the failure to make rental payments under the Sublease, which was an agreement by which the City is obligated to make annual rental payments to the trustee by leasing back City-owned property to the trustee; failure to make payment on any other Material Debt; City files for bankruptcy; City is downgraded below investment grade; City sustains unsatisfied judgment of $25.0 million or more. Upon the occurrence of an Event of Default under the Letter of Credit and Reimbursement Agreement, the Credit Bank may terminate the Letter of Credit. Any outstanding Commercial Paper Certificates would be payable from proceeds of a Final Draw. If not repaid when due, drawings under the respective LOC supporting the CP notes are amortized up to a five-year period.
San Francisco International Airport
In May 1997, the Airport adopted Resolution No. 97-0146, as amended and supplemented (the Note Resolution), authorizing the issuance of subordinate CP notes in an aggregate principal amount not to exceed the lesser of $500.0 million or the stated amount of the letter(s) of credit (LOC) securing the CP. In January 2021, the Airport adopted Resolution No. 21-0003 which amended the 1997 Note Resolution to increase the authorized maximum aggregate principal from $500.0 million to $600.0 million.
The Airport issues CP in series based on tax status that are divided into subseries according to the bank providing the applicable direct-pay LOC. In addition to the applicable LOC, the CP notes are further secured by a pledge of the Net Revenues of the Airport, subject to the prior payment of the Airport
s Second Series Revenue Bonds (the Senior Bonds) outstanding from time to time under Resolution No. 91-0210, adopted by the Airport on December 3, 1991, as amended and supplemented (the 1991 Master Bond Resolution).
Net Revenues are generally defined in the Note Resolution as all revenues earned by the Airport from or with respect to its construction, possession, management, supervision, maintenance, extension, operation, use and control of the Airport (not including certain amounts specified in the Note Resolution), less Operation and Maintenance Expenses (as defined in the Note Resolution).
The CP notes are special, limited obligations of the Airport, and the payment of the principal of and interest on the CP notes is secured by a pledge of, lien on and security interest in the Net Revenues and amounts in the funds and accounts as provided in the Note Resolution, subject to the prior payment of principal of and interest on the Senior Bonds. The CP notes are secured on a parity with any other bonds or other obligations from time to time outstanding under the Note Resolution.
In May 2021, the Airport closed a $100.0 million expansion of the CP program, increasing the aggregate principal amount of the CP notes that can be outstanding at any one time from $500.0 million to $600.0 million. A three-year irrevocable LOC issued by Barclays Bank PLC (Barclays) supports the additional -3, Series
B-3 and Series C-3 CP notes that had not been supported by a LOC since 2020. The Barclays LOC will expire May 24, 2024.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
89 As of June 30, 2021, the CP program was supported by six direct-pay letters of credit with a combined maximum stated principal amount of $600.0 million, from State Street Bank and Trust Company ($100.0 million, expires May 2, 2024), Sumitomo Mitsui Banking Corporation, acting through its New York Branch ($100.0 million, expires June 21, 2022), Barclays Bank PLC ($100.0 million, expires May 24, 2024), U.S. Bank National Association ($100.0 million, expires November 15, 2023), Barclays Bank PLC ($125.0 million, expires April 28, 2023), and Bank of America, N.A. ($75.0 million, expires May 26, 2023). Each of the LOC supports a separate subseries of Notes.
As of June 30, 2021, there were no obligations other than the CP notes outstanding under the 1997 Note Resolution.
During fiscal year 2021, the Airport issued new money CP notes in the aggregate principal amount of $80.7 million (AMT), $166.4 million (Non-AMT), and $259.0 million (Taxable) to fund capital improvement projects and costs of issuance related to the debt program, to reimburse the Airport for capitalized interest on Senior Bonds, and to defease outstanding Senior Bonds.
Events of default for the CP notes include nonpayment events, bankruptcy events, noncompliance with covenants, and default under the 1991 Master Bond Resolution. The CP notes are not subject to acceleration.
Events of default with respect to the LOC supporting the CP notes include nonpayment events (both on CP notes and Senior Bonds), bankruptcy events, noncompliance with covenants, default on debt in excess of a specified threshold amount, default under the 1997 Note Resolution, or a determination of taxability of interest on the tax-
supporting the CP notes. In addition, the State Street Bank and Trust LOC supporting $100.0 million of supports and to require a final drawing on the LOC. If not repaid when due, drawings under the respective LOC supporting the CP notes are amortized over a three-, four- or five-year period.
San Francisco Water Enterprise
The San Francisco Public Utilities Commission and the Board of Supervisors have authorized the issuance of up to $500.0 million in CP pursuant to the voter-approved 2002 Proposition E. As of June 30, 2021, the amount outstanding under Proposition E was $105.9 million. CP interest rates ranged from 0.1% to 2.2%. With maturities up to 270 days, the Water Enterprise intends to maintain the program by remarketing the CP upon maturity over the near-to-medium term, at which time outstanding CP will likely be refunded with revenue bonds. This is being done to take advantage of the continued low interest rate environment. If the CP interest rates rise to a level that exceeds these benefits, the Water Enterprise will refinance the CP with long-term, fixed rate debt. The Water Enterprise had $394.1 million in unused authorization as of June 30, 2021.
Events of default as specified in the Reimbursement Agreements, or Revolving Credit Agreement include payment defaults; material breach of warranty, representation, or other non-remedied breach of covenants as specified in the respective agreements (not cured within applicable grace periods); and bankruptcy and insolvency events, which may result in all outstanding obligations to be immediately due and payable (unless waived by the respective Bank, if applicable); or issuance of a No-Issuance Notice, reduction in credit to outstanding amounts plus interest coverage, and/or termination of the respective agreement. As of June 30, 2021, there were no such events described herein.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
90 Hetch Hetchy Water and Power
Effective March 2019, under Charter Sections 9.107(6) and 9.107(8), and 2018 Proposition A, the San Francisco Public Utilities Commission and Board of Supervisors authorized the issuance of up to $250.0 million in CP for the purpose of reconstructing, replacing, expanding, repairing or improving power facilities of Hetchy Power. Interest rates for the CP ranged from 0.1% to 0.2% in fiscal year 2021. Hetch Hetchy Water and Power had $114.7 million CP outstanding and $135.3 million in unused authorization as of June 30, 2021.
Events of default as specified in the Reimbursement Agreements include non-payment; material breach of warranty, representation, or other non-remedied breach of covenants as specified in the respective agreements; and bankruptcy, which may result in all outstanding obligations to be immediately due and payable (unless waived by the respective Bank, if applicable); or issuance of a No-Issuance Notice, reduction in credit to outstanding amount plus interest coverage, and/or termination of the respective agreement. As of June 30, 2021, there were no such events described herein.
San Francisco Wastewater Enterprise
Under the voter-approved 2002 Proposition E, the San Francisco Public Utilities Commission and Board of Supervisors authorized the issuance of up to $750.0 million in CP for the purpose of had $638.5 million CP outstanding and $111.5 million in unused authorization as of June 30, 2021.
Significant events of default as specified in the Reimbursement Agreements, Revolving Credit and Term Loan Agreements or Revolving Credit Agreements include payment defaults, material breach of warranty, representation, or other non-remedied breach of covenants as specified in the respective agreements (not cured within applicable grace periods), and bankruptcy and insolvency events, which may result in all outstanding obligations to be immediately due and payable (unless waived by the respective Bank, if applicable); or issuance of a No-Issuance Notice, reduction in credit to outstanding amount plus interest coverage, and/or termination of the respective agreement. As of June 30, 2021, there were no such events described herein.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
91 Long-Term Obligations
The following is a summary of long-term obligations of the City as of June 30, 2021:
GOVERNMENTAL ACTIVITIES
Debt service payments are made from the following sources:
(a) Property tax recorded in the Debt Service Fund.
(b) Lease revenues from participating departments in the General, Special Revenue and Enterprise Funds. (c) Revenues recorded in the Special Revenue Funds.
(d) Revenues recorded in the General Fund.
(e) Hotel taxes and other revenues recorded in the General and Special Revenue Funds. (f) User-charge reimbursements from the General, Special Revenue and Enterprise Funds. (g) Sales tax revenues by the San Francisco County Transportation Authority.
Internal Service Funds serve primarily the governmental funds. Accordingly, long-term liabilities for the Internal Service Funds are included in the above amounts.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
92 BUSINESS-TYPE ACTIVITIES
___________
* Includes Second Series Revenue Bonds Issue 2010A and 2018B/C, which were issued as variable rate bonds in a weekly mode. For the year ended June 30, 2021, the average interest rates on Issue 2010A1 and 2 were 0.10% and 0.09%, respectively. For Issue 2018B and 2018C, the average interest rates were 0.06% and 0.08%, respectively.
Sources of funds to meet debt service requirements are revenues derived from user fees and charges for services recorded in the respective enterprise funds.
Debt Compliance
various bond indentures.
Legal Debt Limit and Legal Debt Margin
was $9.00 billion. The total amount of debt applicable to the debt limit was $2.75 billion. The resulting legal debt margin was $6.25 billion.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
93 Arbitrage
Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after August 31, 1986 is subject to arbitrage rebate requirements. The requirements stipulate, in general, that the actual earnings from the investment of tax-exempt bond proceeds, which exceed related interest earnings if such investments were invested at a rate equal to the yield of the bonds, must be remitted to the federal government on every fifth anniversary of each bond issuance. The City has evaluated each series of tax-exempt general obligation bonds, lease revenue bonds, and certificates of participation, and other direct loans issued by the City and the Finance Corporation. The City and the Finance Corporation do not have rebatable arbitrage liability as of June 30, 2021. Each enterprise fund has performed similar analysis of its debt, which is subject to arbitrage rebate requirements and does not have rebatable arbitrage liability as of June 30, 2021.
Mortgage Revenue Bonds
Francisco Redevelopment Agency has issued various mortgage revenue bonds for the financing of multifamily rental housing and below-market rate mortgages for first-time homebuyers and to facilitate affordable housing construction and rehabilitation in the City. These obligations were issued on behalf of various property owners and developers who retain full responsibility for the payment of the debt.
These bonds are secured by the related mortgage indebtedness and special assessment taxes and are not considered obligations of the City. As of June 30, 2021, the total obligation outstanding was $2.15 billion.
Community Facilities District No. 2014-1 (Transbay Transit Center) The following is a summary of long-term obligations of the City and County of San Francisco Community Facilities District No. 2014-1 (CFD 2014-1) as of June 30, 2021:
The Special Tax Bonds of CFD 2014-1 are secured under the provisions of a Fiscal Agent Agreement and will be payable solely from Special Tax Revenues and funds pledged under that agreement. These bonds are not payable from any revenues or assets of the City. Neither the faith and credit nor the taxing power of the City, the State, or any political subdivision thereof are pledged for the payment of the principal or interest on the Special Tax Bonds of CFD 2014-1.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
94 Community Facilities District No. 2016-1 (Treasure Island) The following is a summary of long-term obligations of the City and County of San Francisco Community Facilities District No. 2016-1 (CFD 2016-1) as of June 30, 2021:
In October 2020, the City, on behalf of Improvement Area No. 1 of the City and County of San Francisco Community Facilities District No. 2016-1 (IA No. 1), issued Special Tax Bonds, Series 2020 (the 2020 Bonds) in the par amount of $17.1 million, in order to finance infrastructure and development costs for the Treasure Island/Yerba Buena Island Development Project. The 2020 Bonds bear interest rates ranging from 3.00% to 4.00% with principal amortizing from September 2021 through September 2050.
The Special Tax Bonds of CFD 2016-1 are secured under the provisions of a Fiscal Agent Agreement and will be payable solely from Special Tax Revenues and funds pledged under that agreement. These bonds are not payable from any revenues or assets of the City. Neither the faith and credit nor the taxing power of the City, the State, or any political subdivision thereof are pledged for the payment of the principal or interest on Special Tax Bonds of CFD 2016-1.
Special Tax District No. 2020-1 (Mission Rock Facilities and Services) The following is a summary of long-term obligations of the City and County of San Francisco Special Tax District No. 2020-1 as of June 30, 2021:
In May 2021, the City, on behalf of the City and County of San Francisco Special Tax District No. 2020- 1 (STD 2020-1), issued Development Special Tax Bonds, Series 2021A (the 2021A Bonds) in the par amount of $43.3 million, in order to finance infrastructure and development costs for the Mission Rock Development Project. The 2021A Bonds bear interest rates ranging from 3.00% to 4.00% with principal amortizing from September 2021 through September 2051.
The Development Special Tax Bonds of STD 2020-1 are secured under the provisions of a Fiscal Agent Agreement and will be payable solely from the Revenues and funds pledged under that agreement.
Infrastructure Financing District No. 2, Project Area I pledged to the bonds under a Pledge Agreement.
These bonds are not payable from any revenues or assets of the City. Neither the faith and credit nor the taxing power of the City, the State, or any political subdivision thereof are pledged for the payment of the principal or interest on Special Tax Bonds of STD 2020-1.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
95 Changes in Long-Term Obligations
The changes in long-term obligations for the year ended June 30, 2021, are as follows:
Internal Service Funds serve primarily the governmental funds, the long-term liabilities of which are included as part of the above totals for governmental activities. Also, for the governmental activities, claims and judgments, workers compensation and compensated absences are generally liquidated by the General Fund.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
96 Annual debt service requirements to maturity for all bonds and loans outstanding as of June 30, 2021 for governmental and business-type activities are as follows:
(1)
compensation is not practicable to determine.
(2) The interest is before the federal subsidy for the General Obligation Bonds Series 2010C and Series 2010D. The subsidy is approximately $15.7 million and $3.2 million, respectively, through the year ending 2030. The federal sequester reduction was
5.7% in fiscal year 2021. Future interest subsidy may be reduced as well. (3) Includes the Moscone Center Expansion Project Lease Revenue Refunding Bonds Series 2008-1 & 2 which bear interest at a weekly rate. An assumed rate of 0.02%, together with liquidity fee of 0.350% and remarketing fee of 0.0725% were used to project the interest rate payment in this table.
(4) anding
variable rate bonds had to be withdrawn upon to pay such bonds and the amount drawn had to be repaid by the Airport pursuant to the terms of the related agreement with banks providing such letters of credit, the total interest would be $250.9 million less. (5) The interest is before the federal subsidy for the San Francisco Water, San Francisco Wastewater and Hetch Hetchy Water and Power. Federal subsidies were reduced by 5.7% or a total reduction of $21.6 million, $2.9, million and $253, respectively, over the life of the bonds, assuming the sequestration rate will remain the same.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
97 Governmental Activities Long-term Liabilities
General Obligation Bonds
The City issues general obligation bonds to provide funds for the acquisition or improvement of real property and construction of affordable housing. General obligation bonds have been issued for both governmental and business-type activities. The net authorized and unissued governmental activities general obligation bonds for the year ended June 30, 2021 are as follows:
The increase in the authorized and unissued amount over the last year reflect the $487.5 million of 2020 Health and Recovery (Proposition A) General Obligation Bonds approved by at least two-thirds of voters at elections held on November 3, 2020. The proceeds of the Health and Recovery bonds will be used to stabilize, improve, and make permanent investments in supportive housing facilities, shelters and/or facilities that deliver services to persons experiencing mental health challenges, substance abuse disorder, and/or homelessness; improve the accessibility, safety and quality of parks, open spaces and recreation facilities; improve the accessibility, safety and condition of the City streets and other public right-of-way and related assets; and to pay related costs.
In September 2020, the City issued General Obligation Bonds Series 2020B (Transportation and Road Improvement) (the Series 2020B) in the amount of $135.8 million. The Series 2020B bonds bear an interest rate of 2.0% and with principal amortizing from June 2021 through June 2040. The Series 2020B bonds were issued to provide funds to construct, redesign, rebuild streets and sidewalks and to make infrastructure repairs and improvements that increase Muni service reliability, ease traffic congestion, reduce vehicle travel time, enhance pedestrian and bicycle safety, improve disabled access, and to pay certain cost related to the issuance of the Series 2020B bonds.
In November 2020, the City issued Tax-Exempt General Obligation Bonds (Public Health and Safety) Series 2020D-1 (the Series 2020D-1) and Taxable General Obligation Bonds (Public Health and Safety) Series 2020D-2 (the Series 2020D-2) in the amount of $111.9 million and $15.0 million, respectively. The Series 2020D-1 bonds bear interest rates of 4.0% and 5.0% and with maturity from June 2021 through June 2045 and the Series 2020D-2 bonds bear an interest rate of 0.3% and matured last December 2020. The proceeds of the Series 2020D-1 and the Series 2020D-2 bonds will be used finance certain public health and safety improvements and related costs, pay capitalized interest through June 2021 and to pay certain costs related to the issuance of the Series 2020D-1 and the Series 2020D-2 bonds.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
98 In December 2020, the City issued General Obligation Bonds (Affordable Housing-Preservation and Seismic Safety) Series 2020C (the Series 2020C) in the amount of $102.6 million with interest rates ranging from 0.219% to 3.084% and with maturity from June 2021 through June 2060. The Series 2020C bonds were issued to fund loans that finance the acquisition, improvement and rehabilitation of at-risk multi-unit residential buildings and to convert such structures to permanent affordable housing, and pay certain costs related to the issuance of the Series 2020C bonds.
In March 2021, the City issued General Obligation Bonds (Social Bonds-Affordable Housing) Series 2021A (the Series 2021A) in the amount of $254.6 million. The Series 2021A bonds bear interest rates ranging from 0.093% to 2.894% with principal amortizing from June 2021 through June 2046. The Series 2021A bonds were issued to finance or refinance affordable housing projects within the City, fund direct acquisition and rehabilitation of existing housing units and to pay certain cost related to the issuance of the Series 2021A bonds.
In March 2021, the City issued Tax-Exempt General Obligation Bonds (Earthquake Safety and Emergency Response) Series 2021B-1 (the Series 2021B-1) and Taxable General Obligation Bonds (Earthquake Safety and Emergency Response) Series 2021B-2 (the Series 2021B-2) in the amount of $69.2 million and $11.5 million, respectively. The Series 2021B-1 bonds bear interest rates of 4.0% and 5.0% and with maturity from June 2022 through June 2046 and the Series 2021B-2 bonds bear an interest rate of 0.2% and matured in June 2021. The proceeds of the Series 2021B-1 and the Series 2021B-2 bonds will be used to finance certain fire, earthquake, and emergency response improvements and related costs, and to pay certain costs related to the issuance of the Series 2021B-1 and the Series 2021B-2 bonds.
In May 2021, the City issued General Obligation Bonds Series 2021-R1 (the Series 2021-R1) in the amount of $91.2 million with interest rates of 4.0% and 5.0% and principal maturing from June 2022 through June 2033 to refund certain outstanding general obligation bonds described below and to pay certain costs related to the issuance of the Series 2021-R1 bonds.
Principal Maturities Redemption Redemption
Description of Bonds Refunded Refunded Price Date
Clean and Safe Neighborhood Parks S2013A 34,690 $ 2022-2033 100% 6/15/2021 Earthquake Safety and Emergency Response S2013B 14,955 2022-2033 100% 6/15/2021 Road Repaving and Street Safety S2013C 62,425 2022-2033 100% 6/15/2021 Total 112,070 $
General Obligation Bonds, Series 2021-R1
On the date of delivery of the Series 2021-R1 bonds, a portion of the proceeds of the bonds in the amount of $112.1 million plus funds transferred from the debt service fund related to the refunded bonds in the amount of $2.5 million were deposited with U.S. Bank National Association as escrow agent. The funds deposited and held with the escrow agent, together with investment earnings thereon, were enough to pay the principal and interest on the refunded bonds on the respective redemption dates specified on the table above and the cost of issuance on the Series 2021-R1 bonds.
The refunding resulted in the recognition of an accounting gain of $11.7 million for the year ended June 30, 2021. The City in effect reduced its aggregate debt service payments by $25.1 million and obtained a net present value savings of $23.1 million or 20.61% of the refunded bonds.
The General Obligation Bonds debt service payments are funded through ad valorem taxes on property.
The City is obligated to levy ad valorem taxes without limitation as to rate or amount on all real property subject to taxation (except in certain limited circumstances) for the payment of general obligation bonds.
No City property is pledged to the repayment of general obligation bonds nor is the City required to maintain a reserve fund for the payment of principal and interest.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
99 An event of default is the non-payment of interest or principal, when due. Remedies include mandamus action for payment. General Obligation Bonds are not subject to acceleration.
Certificates of Participation
In November 2020, the City issued $70.6 million Refunding Certificates of Participation Series 2020- R1 (Multiple Capital Improvement Projects) (the Certificates) to provide funds to prepay certain certificates of participation, the proceeds of which financed various capital projects of the City and pay the costs of execution and delivery of the Certificates. The Certificates bear interest rates ranging from
2.0% to 5.0% and will mature from October 2021 through October 2033. The refunding resulted in an accounting gain of $4.1 million and a net present value saving of $21.3 million or 24.8% of refunded bonds.
In November 2020, the City issued 2020 Certificates of Participation (Animal Care and Control Project) (the Certificates) in the amount of $47.1 million, the proceeds of which will be used to: finance or refinance the costs of the acquisition, construction and installation of improvements to the new San Francisco Animal Care and Control Facility; retire certain commercial paper certificates of participation of the City, the proceeds of which financed or refinanced a portion of the costs of the Project; fund the Reserve Fund established under the Trust Agreement for the Certificates; pay capitalized interest through April 2021 and pay costs of issuance of the Certificates. The Series 2020 Certificates bear interest rates of 4.0% and 5.0% with principal amortizing from April 2022 through April 2041.
In May 2021, the City issued Certificates of Participation (Multiple Capital Improvement Projects) Series 2021A (the Certificates) in the amount of $76.0 million, the proceeds of which will be used to finance or refinance the acquisition of certain real property within the City and the related site demolition and preparation, including through the retirement of certain taxable commercial paper notes of the City issued for such purpose; fund the debt service reserve for the Certificates and pay costs of issuance of the Certificates. The Series 2021A Certificates bear interest rates of 4.0% and 5.0% with principal amortizing from April 2023 through April 2041.
As of June 30, 2021, the City has a total of $1.17 billion of certificates of participation, excluding business-type activities, payable by pledged revenues from the base rental payments payable by the City. A Reserve Fund has been established for payment of certain COP issuances, equivalent to either 50% or 100% of the lesser of maximum annual debt service, 125% of average annual debt service, or 10% of the original principal amount of the COPs. The total debt service requirement on the certificates of participation is $1.79 billion payable through April 1, 2050. For the year ended June 30, 2021, principal and interest paid by the City totaled $34.3 million and $44.8 million, respectively.
An event of default on every outstanding series of Certificates of Participation, include: (i) the failure to make lease payments when due; or (ii) failure to observe covenants under the respective Project Lease.
In an event of default, the trustee may enforce all of its rights and remedies under the Project Lease, including reletting the leased property for the account of the City, or hold the Project Lease and sue each year for rent. Certificates of Participation are not subject to acceleration.
Lease Revenue Bonds
The changes in governmental activities - lease revenue bonds for the year ended June 30, 2021 were as follows:
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Finance Corporation
The purpose of the Finance Corporation is to provide a means to publicly finance, through lease financings, the acquisition, construction and installation of facilities, equipment and other tangible real The Finance Corporation uses lease revenue bonds to finance the purchase or construction of property and equipment, which are in turn leased to the City under the terms of an Indenture and Equipment Lease Agreement. These assets are then recorded in the basic financial statements of the City. Since the sole purpose of the bond proceeds is to provide lease financing to the City, any amount that is not applied towards the acquisition or construction of real and personal property such as unapplied acquisition fund, bond issuance costs, funds withheld pursuant to a reserve fund requirement, and amounts designated for capitalized interest are recorded as unearned revenues in the internal service fund until such time it is used for its intended purpose. The unearned amounts are eliminated in the governmental activities statement of net position.
The lease revenue bonds are payable by pledged revenues from the base rental payments payable by the City, pursuant to a Master Lease Agreement between the City and the Finance Corporation for the use of equipment and facilities acquired, constructed and improved by the Finance Corporation. The total debt service requirement remaining on the lease revenue bonds is $119.0 million payable through June 2030. For the year ended June 30, 2021, principal and interest paid by the Finance Corporation in the form of lease payments by the City totaled $12.1 million and $2.3 million, respectively.
Equipment Lease Program - In the June 5, 1990 election, the voters of the City approved Proposition C, which amended the City Charter to allow the City to lease-purchase up to $20.0 million of equipment through a non-profit corporation using tax-exempt obligations. Beginning July 1, 1991, the Finance Corporation was authorized to issue lease revenue bonds up to $20.0 million in aggregate principal amount outstanding plus 5% annual adjustment each July 1. As of June 30, 2021, all the previously issued equipment lease revenue bonds have been repaid. $86.4 million of unused authorization is still available for new issuance.
Events of Default and Remedies
Moscone Lease Revenue Refunding Bonds, Series 2008-1 and 2008-2 - Events of default as specified in the Indenture include: (i) failure to pay when due the amounts of any drawing, the principal or interest on any Liquidity Advance, or otherwise failure to pay the Credit Bank when due; (ii) failure to observe any covenant or warranty under Credit Agreement; (iii) default on any appropriation debt; (iv) filing for mandatory tender of bonds. Upon the occurrence of an event of default, th follows: (i) to require the City to post collateral up to the stated amount of the letter of credit (except the City has no such right upon bankruptcy event), (ii) declare by notice to the City all amounts due and payable (except such declaration is automatic upon bankruptcy event), (iii) by notice to Trustee declare event of default and cause a mandatory tender of bonds and termination of letter of credit in 15 days; (iv) pursue other rights under Indenture and otherwise available under equity and law.
Emergency Communications System Lease Revenue Refunding Bonds, Series 2010-R1 - Events of default as specified in the Master Trust Agreement include: (i) failure to make lease payments when due; or (ii) failure to observe covenants under the Master Lease. In an event of default, the trustee may enforce all of its rights and remedies under the Master Lease, including the right to terminate the Master Lease, enter the leased property, and remove all persons and property, reletting leased property for account of the City for public purpose, or hold the Master Lease and sue each year for rent. The bonds are not subject to acceleration.
Open Space Fund Lease Revenue Refunding Bonds, Series 2018A and Branch Library Improvement Program Lease Revenue Refunding Bonds, Series 2018B- Events of default as specified in the Project Lease include: (i) failure to make lease payments when due, (ii) or failure to observe covenants under
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the Project Lease. In an event of default, the trustee may enforce all of its rights and remedies under the Project Lease, including reletting property for account of the City, or enforce rights under lease and sue each year for rent. The bonds are not subject to acceleration.
San Francisco County Transportation Authority Long-Term Debt In November 2017, the San Francisco County Transportation Authority (SFCTA) issued Senior Sales Tax Revenue Bonds, Series 2017 (the Series 2017 Bonds) with a par value of $248.3 million to finance the cost of construction, acquisition and improvement of certain transit, street and traffic facilities and other transportation projects, repay a portion of the outstanding amount of a revolving credit agreement, pay capitalized interest on a portion of the Series 2017 Bonds and pay cost of issuance of the Series 2017 Bonds. The Series 2017 Bonds bear interest rates ranging from 3.0% to 4.0% and have final maturity date of February 1, 2034. Outstanding principal on June 30, 2021 is $222.0 million. The Series 2017 Bonds are payable from, and secured
service payments of $21.3 million as a ratio of pledged sales tax revenues of $86.5 million for the year ended June 30, 2021, was 4.06x or 405.59%. Events of default for the bonds include nonpayment events, bankruptcy events, and noncompliance with covenants. The Series 2017 Bonds are not subject to acceleration.
Events of Default under the Revolving Credit Agreement include nonpayment events, noncompliance with covenants, default on other specified debt, bankruptcy events, specified litigation events, or a acceleration (subject in some, but not all, circumstances to a 270-day notice period) and the termination of the right of the SFCTA to borrow under the Revolving Credit Agreement.
Events of Default and Remedies - Other Long-Term Obligations Marina West Harbor Loans - Events of default include the failure to make loan payments within 30 days of the due date, or failure to observe or comply with requirements under the Agreement within 180 days of receipt of written notice. Remedies by the Department of Boating and Waterways by the State of California are the repossession of the project area, declaring that the loan is due and payable, and the exercise of all other rights and remedies available by law. The Marina West Harbor Loan is subject to an acceleration provision.
IBM Credit LLC - Events of default include the failure to make lease payments when due, or failure to observe covenants under the Project Lease. Remedies of the lender are repossessing the leased equipment, entering premises to take possession, or enforce rights under Lease, and other remedies available by law. The IBM credit has no acceleration provision.
Public Safety Radio Lease Financing - Events of default include the failure to make lease payments when due, or failure to observe covenants under the Lease Purchase Financing Agreement. Remedies of the lender are repossessing the leased equipment, enforcing rights under the Lease, and other remedies available by law. The Public Safety Radio Lease Financing has no acceleration provision.
Business-Type Activities Long-Term Liabilities
The following provides a brief description of the current year additions to the long-term debt of the business-type activities.
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San Francisco International Airport
Second Series Revenue Bonds (Capital Plan Bonds)
Pursuant to resolutions adopted between fiscal years 2008 and 2021, the Airport has authorized the issuance of up to $10.8 billion of San Francisco International Airport Second Series Revenue Bonds (Capital Plan Bonds) to finance and refinance the construction, acquisition, equipping, and development of capital projects undertaken by the Airport, including retiring all or a portion of the service reserves, and for paying costs of issuance. As of June 30, 2021, $4.6 billion of the authorized capital plan bonds remained unissued. No capital plan bonds were issued during fiscal year 2021.
Second Series Revenue Refunding Bonds
Pursuant to resolutions adopted between fiscal years 2005 and 2020, as of June 30, 2021, the Airport has authorized the issuance of up to $11.1 billion of San Francisco International Airport Second Series Revenue Refunding Bonds for the purposes of refunding outstanding 1991 Master Bond Resolution Bonds and outstanding subordinate commercial paper notes, funding debt service reserves, and paying costs of issuance, including any related bond redemption premiums. As of June 30, 2021, $1.8 billion of the authorized refunding bonds remained authorized but unissued.
During fiscal year 2021, the Airport issued the following new refunding bonds under the 1991 Master Bond Resolution:
Second Series Revenue Refunding Bonds, Series 2020A, 2020B, and 2020C In August 2020, the Airport issued its fixed rate Second Series Revenue Refunding Bonds, Series 2020A (AMT), Series 2020B (Non-AMT/Governmental Purpose), and Series 2020C (Federally Taxable), in aggregate principal amount of $291.3 million to refund a combined $337.1 million of its Series 2010C, Series 2010D, Series 2010F, Series 2010G, Series 2011C, Series 2011F and Series 2011G Bonds, to finance deposits to the reserve account, and to pay costs of issuance.
The net proceeds of the Series 2020A, Series 2020B, and Series 2020C, together with $21.4 million accumulated in the debt service fund and reserve fund relating to the refunded bonds were used to deposit $346.6 million into redemption accounts and escrow funds with the Senior Trustee to refund $337.1 million in revenue bonds as described below, $3.9 million to deposit into the reserve account, and $1.0 million to pay costs of issuance.
The Series 2010C, 2010D, 2010F, and 2010G Bonds were redeemed on August 21, 2020, and the Series 2011C, 2011F, and 2011G Bonds were redeemed on May 1, 2021.
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In aggregate, the Series 2020A/B/C refundings resulted in the recognition of a deferred accounting loss of $7.7 million for the fiscal year ended June 30, 2021. Notably, the Series 2020A/B/C refundings million over
the first eleven years and obtained an economic gain (the difference between the present values of the debt service on the old debt and the new debt) of $29.1 million.
Second Series Revenue Refunding Bonds, Series 2021A, 2021B, and 2021C In April 2021, the Airport issued its fixed rate Second Series Revenue Refunding Bonds, Series 2021A (AMT), Series 2021B (Non-AMT/Governmental Purpose), and Series 2021C (Federally Taxable) in aggregate principal amount of $547.1 million to refund a combined $402.9 million of its Series 2011C, Series 2011D, Series 2011F, Series 2011G, Series 2011H, Series 2013A, Series 2016A, Series 2016D, Series 2017D, Series 2018A, Series 2019C, Series 2019G, and Series 2019H Bonds, to repay $230.0 million of CP Notes, to finance deposits to the reserve account, and to pay costs of issuance.
The net proceeds of the Series 2021A, Series 2021B, and Series 2021C, together with $9.7 million accumulated in the debt service fund relating to the refunded bonds were used to deposit $419.8 million into redemption accounts and escrow funds with the Senior Trustee to refund $402.9 million in revenue bonds as described below, $230.0 million to repay outstanding CP notes, $7.5 million to deposit into the reserve account, and $1.3 million to pay costs of issuance. The CP notes had been used to reimburse the Airport for capitalized interest on revenue bonds, to defease outstanding revenue bonds, and for other purposes.
The Series 2011C, 2011D, 2011F, and 2011G Bonds were redeemed on May 3, 2021, and the Series 2011H, 2013A, 2016A, 2016D, 2017D, 2018A, 2019C, 2019G, and 2019H Bonds will be paid at maturity on May 1, 2022.
In aggregate, the Series 2021A/B/C refundings resulted in the recognition of a deferred accounting loss of $11.9 million for the fiscal year ended June 30, 2021. In aggregate, the Series 2021A/B/C refundings ce payments by approximately $367.0 million over
the first eleven years and obtained an economic loss (the difference between the present values of the debt service of the old debt and the new debt) of $47.6 million.
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Variable Rate Demand Bonds
As of June 30, 2021, the Airport had outstanding an aggregate principal amount of $401.9 million, consisting of Second Series Variable Rate Revenue Refunding Bonds, Series 2010A, and Second Series Variable Rate Revenue Bonds, Series 2018B and Series 2018C, (collective 1, 2030 (Series 2010A), and May 1, 2058 (Series 2018B and 2018C). The Variable Rate Bonds are long-term, tax-exempt bonds that currently bear interest at a rate that is adjusted weekly, and that are subject to tender at par at the option of the holder thereof on seven in the secondary market to other investors. The interest rate on the Variable Rate Bonds can be converted to other interest rate modes, including a term rate or fixed rates to maturity, upon appropriate notice by the Airport.
The scheduled payment of the principal of and interest on, and payment of purchase price of, the Variable Rate Bonds is secured by separate irrevocable letters of credit issued to the Senior Trustee for the benefit of the applicable bondholders by the banks identified in the table below.
Amounts drawn under a letter of credit that are not reimbursed by the Airport bonds to the extent provided in the Resolution. The commitment fees for the letters of credit range between 0.28% and 0.39% per annum. As of June 30, 2021, there were no unreimbursed draws under these facilities.
The letters of credit securing the Variable Rate Bonds included in long-term debt as of June 30, 2021, are as follows:
Hotel Special Facility Bonds
Pursuant to resolutions adopted in fiscal years 2017, 2018 and 2019, the Airport authorized the issuance of $260.0 million of Special Facility Bonds to finance an on-Airport Hotel. These resolutions also designated the on-
hotel operating expenses and debt service on the Hotel Special Facility Bonds through the Hotel Special Facility Bond trustee. In June 2018, the Airport issued its fixed rate Special Facility Revenue Bonds (San Francisco International Airport Hotel), Series 2018 (Hotel Special Facility Bonds), in the aggregate principal amount of $260.0 million to finance the on-Airport Hotel and to fund a capitalized interest account.
The Hotel Special Facility Bonds are issued pursuant to a Trust Agreement (Hotel Trust Agreement).
In February 2021, the Hotel Special Facility Bonds and the trust agreement pursuant to which they were issued were amended and restated, including to delay the initial principal repayment until April 1, 2025 (instead of April 1, 2022) and temporarily reduce the interest rate on the Hotel Special Facility Bonds from 3.00% to 0.086% from April 1, 2020 through September 30, 2023. The interest rate will
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then increase incrementally until it is restored to 3.00% beginning on April 1, 2029. In addition, the amendments provided that October 1, 2020 is no longer an interest payment date, and there is no requirement to pay interest accrued on the Hotel Special Facility Bonds until October 1, 2023. The maximum principal amount of the Hotel Special Facility Bonds is not limited by the Hotel Trust Agreement, but the Airport must satisfy an additional bonds test prior to the issuance of any such bonds.
The Hotel Special Facility Bonds are limited obligations of the Airport. Under the Hotel Trust Agreement, the Airport has pledged the Revenues of the on-Airport Hotel, together with other assets, to the payment of the principal of and interest on the Hotel Special Facility Bonds. Revenues are generally defined in the Hotel Trust Agreement as all revenue and income of any kind derived directly or indirectly from operations at the on-Airport Hotel (not including certain amounts specified in the Hotel Trust Agreement). Operating expenses of the on-Airport Hotel are payable prior to payment of principal of and interest on the Hotel Special Facility Bonds. The Airport does not maintain a reserve account for the Hotel Special Facility Bonds. The Hotel Special Facility Bonds are subject to acceleration upon the occurrence of an event of default. Events of default include nonpayment events, bankruptcy events, noncompliance with covenants, condemnation of the hotel, or a failure by the Airport to maintain a third- party manager for the hotel. The Hotel Special Facility Bonds are not payable from or secured by the Airport is the owner of the on-Airport Hotel, the Air port is obligated to repay the Hotel Special Facility Bonds from the net revenues of the hotel. As of June 30, 2021, the Airport had $260.0 million of outstanding Hotel Special Facility Bonds.
Interest Rate Swaps
As of June 30, 2021,
Airport entered into to hedge the interest payments on its Second Series Variable Rate Revenue Refunding Bonds, Series 2010A. The Airport determined the hedging relationship between the variable rate bonds and the related interest rate swap continued to be effective as of June 30, 2021.
Fair Value
The fair value takes into consideration the prevailing interest rate environment and the specific terms and conditions of the swap. All values were estimated using the zero-coupon discounting method. This method calculates the future payments required by the swap, assuming that the current forward rates mate of future spot interest rates. These payments
are then discounted using the spot rates implied by the current yield curve for a hypothetical zero-coupon rate bond due on the date of each future net settlement payment on the swap to arrive at the so-ca
receive if the swap was terminated.
In addition, pursuant to GASB Statement No. 72, the settlement amounts are then adjusted for the nonperformance risk of each party to the swap to arrive at the fair value. The nonperformance risk was computed as the total cost of the transactions required to hedge the default exposure, i.e., a series of European swaptions, exercisable on each of the future payment exchange dates under the swap that are structured to reverse the remaining future cash flow obligations as of such dates, adjusted by probability of default on each future date. Default probabilities were derived from recovery rate adjusted credit default swap quotes or generic ratings based borrowing curves that fall into Level 2 of the GASB Statement No. 72 fair value hierarchy.
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As of June
fixed rate payable by the Airport is shown in the following table. Since the swap is guaranteed, the -Term Local Issuer Credit Rating,
- -Term Issuer Default Rating.
Fair Value Hierarchy
Change in Fair Value
The impact of the interest rate swaps on the financial statements for the year ended June 30, 2021 is as follows:
The fair value of the interest rate swap is recorded as a liability (since the Airport would owe a termination payment to the counterparty) in the statement of net position. Unless a swap was determined to be an off-market swap at the inception of its hedging relationship, the fair value of the swap is recorded as a deferred outflow asset (if a termination payment would be due to the counterparty) or inflow liability (if a termination payment would be due to the Airport). Any off-market issues. Unlike fair value and deferred inflow/outflow values, the balance of remaining off-market portions are valued on a present value, or fixed yield, to maturity basis. The difference between the deferred outflows and derivative instruments presented in the table above constitutes the unamortized off-market portions of the swaps as of June 30, 2021.
Basis Risk
During the year ended June 30, 2021, the Airport paid a total of $0.4 million less in interest on its variable rate bonds than the floating-rate payments it received from the swap counterparties, resulting in a decrease in the effective synthetic interest rates on the associated bonds.
Credit Risk As of June 30, 2021, the Airport is not exposed to credit risk because the swaps have a negative fair value to the Airport.
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Counterparty Risk As of June
(representing an amount payable by the Airport to each counterparty in the event the relevant swap was terminated).
Termination Risk The Airport has not secured municipal swap insurance for its outstanding swap.
As of June 30, 2021, the fair value of the swap was negative to the Airport as shown above.
Debt Service Reserves and Requirements
Issue 1 Reserve Account - As of June 30, 2021, the reserve requirement for the Issue 1 Reserve Account was $522.0 million, which was satisfied by $553.1 million of cash and investment securities, and reserve fund surety policies in the initial principal amount of $108.6 million. All of the providers of such reserve
In addition, $27.5 million of such surety policies have likely experienced a reduction in value in accordance with their terms.
2017 Reserve Account - As of June 30, 2021, the reserve requirement for the 2017 Reserve Account was $45.9 million, which was satisfied by $56.0 million in cash and investment securities.
Series Not Secured by Reserve Accounts - The Airport does not maintain reserve accounts for its Second Series Variable Rate Revenue Refunding Bonds, Series 2010A and Series 2018B/C, all of which are secured by letters of credit.
Events of default for the bonds include nonpayment events, bankruptcy events, and noncompliance with covenants, including the rate covenants described below. The bonds are not subject to acceleration.
Payment of principal, interest and purchase price of bonds that bear interest at variable interest rates are supported by letters of credit. Events of default with respect to the letters of credit supporting the bonds include nonpayment events, bankruptcy events, noncompliance with covenants, default on debt in excess of a specified threshold amount, default under the 1991 Master Bond Resolution, or a determination of taxability of interest on tax-exempt bonds supported by the letter of credit. A bond rating for credit-related reasons by any rating agency is an event of termination under the letters tender of the supported bonds or to accelerate amounts due and payable to the bank; provided that payments made on a parity with the bonds are capped based on provisions in the 1991 Master Bond Resolution. If there are no default events pending, drawings under the respective letters of credit supporting the bonds are amortized over a three- or five-year period; provided that payments made on a parity with the bonds are capped based on provisions in the 1991 Master Bond Resolution.
San Francisco Water Enterprise
Water Revenue Bonds 2020 Series ABCD
In September 2020, the Water Enterprise issued tax-exempt revenue bonds, 2020 Series ABCD in the aggregate amount of $346.8 million. The purpose of the 2020 Series ABCD Bonds was to refund approximately $229.8 million aggregate principal amount of CP notes and to provide $164.6 million new money for various capital projects of the Water Enterprise, and capital projects of Hetch Hetchy -
Series ABCD bonds include term bonds with coupons of 3.0% to 5.0% and final maturities from 2045 to 2050.
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The $150.9 million 2020 Series A bonds were issued as tax-exempt Green Bonds to refund approximately $180.0 million of CP notes for WSIP capital projects. The Series A bonds were issued as term bonds with coupons of 4.0% and 5.0% and a final maturity of 2050. As of June 30, 2021, the principal amount of 2020 Series A bonds outstanding was $150.9 million.
The $61.4 million Series B bonds were issued as tax-exempt bonds to provide $69.6 million in new money for Water Enterprise capital projects (non-WSIP, Regional). The Series B bonds were issued as term bonds with coupons of 5.0% and have a final maturity of 2050. As of June 30, 2021, the principal amount of 2020 Series B bonds outstanding was $61.3 million.
The $85.3 million Series C bonds were issued as tax-exempt bonds to provide $94.9 million in new money for Water Enterprise capital projects (non-WSIP, Local). The Series C bonds were issued as term bonds with coupons of 4.0% and have a final maturity of 2050. As of June 30, 2021, the principal amount of 2020 Series C bonds outstanding was $85.3 million.
The $49.2 million Series D bonds were issued as tax-exempt bonds to refund approximately $49.8 million of CP notes for Hetch Hetchy Water capital projects. The Series D bonds were issued as term bonds with coupons of 3.0% and a final maturity of 2050. As of June 30, 2021, the principal amount of 2020 Series D bonds outstanding was $49.2 million.
Water Revenue Refunding Bonds 2020 Series EFGH
In October 2020, the Water Enterprise issued taxable revenue bonds, 2020 Series EFGH refunding bonds in the aggregate amount of $664.4 million. The 2020 Series E (WSIP, Green) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series D (WSIP) bonds maturing on and after November 1, 2020, a portion of the outstanding 2012 Series A (WSIP) bonds maturing on and after November 1, 2038, and a portion of the outstanding 2017 Series A (WSIP) bonds maturing on and after November 1, 2030.
The 2020 Series F (non-WSIP, Regional) bonds were issued for the purpose of refunding a portion of the outstanding 2017 Series B bonds maturing on or after November 1, 2030.
The 2020 Series G (non-WSIP, Local) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series D bonds maturing on or after November 1, 2020, a portion of the 2011 Series D bonds maturing on or after November 1, 2022, a portion of 2012 Series B bonds maturing on or after November 1, 2031, and a portion of 2012 Series C bonds maturing on or after November 1, 2025.
The 2020 Series G (non-WSIP, Local) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series D bonds maturing on or after November 1, 2020, a portion of the 2011 Series D bonds maturing on or after November 1, 2022, a portion of 2012 Series B bonds maturing on or after November 1, 2031, and a portion of 2012 Series C bonds maturing on or after November 1, 2025.
The 2020 Series H (Hetch Hetchy Water) bonds were issued for the purpose of refunding a portion of the outstanding 2017 Series C bonds maturing on or after November 1, 2030. -
bonds include serial bonds and term bonds with interest rates varying from 0.3% to 3.1% and have a final maturity in 2047. The refunding resulted in the recognition of a deferred accounting loss of $27.0 million, gross debt service savings of $117.1 million and an economic gain of $75.2 million or 12.0% of refunded principal. As of June 30, 2021, the principal amount of 2020 Series EFGH bonds outstanding was $664.4 million.
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Clean Water State Revolving Fund (CWSRF) Loan and Grant In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (CWSRF) Loan and Grant to fund loan is in the amount of
$186.2 million, which includes $15.0 million of principal forgiveness, or a grant. It will bear an interest rate of 1.0% for a 30-year term, with loan repayment beginning one year after substantial completion of project constructio
outstanding revenue bonds. The principal outstanding as of June 30, 2021 was $107.4 million. In addition, there was $15.0 million of principal forgiveness.
Events of Default and Remedies
Revenue Bonds, Capital Appreciation Bonds and State Revolving Fund Loans - Events of default as specified in the Water Enterprise Indenture, include non-payment, material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods), and bankruptcy and insolvency events, which may result in the Trustee (upon written request by the majority of the owners, by aggregate amount of the bond obligations or of a credit provider), declaring the principal and the interest accrued thereon, and of all Capital Appreciation Bonds then outstanding, in the amount of the Accreted Value thereof, to be due and payable immediately. As of June 30, 2021, there were no such events described herein.
Hetch Hetchy Water and Power
Events of Default and Remedies
Clean Renewable Energy Bonds - Significant event of default as specified in the Equipment Lease/ Purchase Agreement, include payment defaults, material breach of warranty, representation, or covenants of the Equipment Lease/Purchase Agreement (not cured within applicable grace periods), and bankruptcy and insolvency events, which could cause acceleration of all Rental Payments. Assets constructed by the projects funded by the proceeds of this debt obligation are pledged as collateral. As of June 30, 2021, there were no such events described herein.
Qualified Energy Conservation Bonds -Significant event of default as specified in the Equipment Lease/ Purchase Agreement, include payment defaults, material breach of warranty, representation, or covenants of the Equipment Lease/Purchase Agreement (not cured within applicable grace periods), and bankruptcy and insolvency events, which could cause acceleration of all Rental Payments. Assets constructed by the projects funded by the proceeds of this debt obligation are pledged as collateral. As of June 30, 2021, there were no such events described herein.
Power Revenue Bonds - Significant event of default as specified in the Power Enterprise Indenture (applicable to Power Revenue Bonds) include non-payment, material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods), and bankruptcy and insolvency events, which may result in the Trustee (upon written request by the majority of the owners by aggregate amount of the bond obligations) declare the principal and the interest accrued thereon to be due and payable immediately. As of June 30, 2021, there were no such events described herein.
San Francisco Municipal Transportation Agency
Series 2021A and B Revenue Refunding Bonds
In February 2021, the SFMTA issued Revenue Refunding Bonds, Series 2021A and B in the total amount of $174.9 million to refund all outstanding Series 2012A and B, Series 2013, and Series 2014 revenue bonds. The Series 2021A bonds bear interest at fixed rates ranging from 0.249% and 2.804% and have a final maturity of March 2044. The Series 2021B bonds bear an interest rate of 4.0% and have a final maturity of March 2031.
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The net proceeds of $175.3 million was deposited into irrevocable escrow funds with the Trustee to defease and refund $156.2 million in revenue bonds described below:
The refunded bonds were defeased and redeemed in March 2021. Accordingly, the liabilities for these bonds have been removed from the accompanying statement of net position. Although the refunding resulted in the recognition of a deferred accounting loss of $0.9 million, the SFMTA obtained an economic gain (the difference between the present value of the old debt and the new debt) of $24.5 million or 15.7% of the refunded bonds.
Series 2021C Revenue Bonds
In March 2021, the SFMTA issued its Revenue Bonds, Series 2021C with a par value of $104.3 to fund various transit and parking capital projects for the SFMTA. The Series 2021C bonds bear interest at fixed rates between 4.0% to 5.0% and with final maturity of March 2051.
Portsmouth Plaza Parking Corporation and Japan Center Garage Corporation Loan In October 2016, the Portsmouth Plaza Parking Corporation entered into a loan agreement with First Republic Bank in a total principal amount of up to $12.5 million for the garage renovation project. The loan agreement was amended in February 2019 to reduce the maximum loan amount to $12.0 million.
The drawdowns are limited to once a month for a minimum of $0.25 million each disbursement. The business assets. The loan agreement requires the corporation to maintain a reserve account restricted for repayment of the loan. As of June 30, 2021, the reserve account held by the lender totaled $0.2 million.
In fiscal year 2021, the two remaining nonprofit parking garage corporations obtained Small Business of 1.0% per annum with no collateral requirement, with two-year maturity for loans issued prior to June 5, 2020 and five-year maturity for loans issued thereafter. The program allows borrowers to apply for loan forgiveness to cover eligible expenses incurred. Loan payments shall be deferred until SBA remits the loan forgiveness amount to the lender. For any amount of the loan that is not forgiven, the borrowers shall be responsible for the payment of principal and accrued interest within the term of the loan.
Portsmouth Plaza Parking Corporation obtained PPP loans through First Republic Bank of $0.2 million in April 2021. Japan Center Garage Corporation obtained PPP loans through California Bank & Trust of $0.1 million in February 2021.
The SFMTA is not responsible for loan repayments and any aspect of loan performance other than reporting on behalf of another government entity. The total loan balances of the two nonprofit parking garage corporations were $11.9 million as of June 30, 2021.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
111
Events of Default and Remedies
Revenue Bonds Events of default under the indenture of trust include failure to pay the principal amount and any installment of interest, failure to pay the purchase price of any bond tendered for optional or mandatory purchase, failure to comply with certain covenants, or either the SFMTA or the City files for bankruptcy. In an event of default, the trustee may declare the principal amount of all the bonds outstanding and interest accrued thereon to be due and payable immediately. In case any proceeding taken by the trustee on account of an event of default is discontinued, the SFMTA, trustee, and bondholders shall be restored to their former positions and rights as if no such proceeding had been taken.
Portsmouth Plaza Parking Corporation Loan
In an event of default under the loan agreement, any
outstanding amounts become immediately due if the garage is unable to make payment and fails to comply with the debt service coverage ratio of 1.25:1 for each fiscal year.
Wastewater Enterprise
Lake Merced Green Infrastructure Project CWSRF Loan
In January 2016, then amended in May 2016, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (CWSRF) Loan to fund the Lake Merced Green Infrastructure Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $7.4 million. The loan bears an interest rate of 1.6% which was equal to one-
-year General Obligation Bond true
interest cost at the time the agreement was executed. The CWSRF loan will have a 30-year term, with substantial completion occurred in October 2020. The CWSRF loan is secured on a parity lien basis totaling $6.1 million and a construction period interest of $0.17 million transferred to principal. As of June 30, 2021, the principal amount outstanding of the loan was $6.3 million.
Southeast Plant (SEP) 521/522 and Disinfection Upgrade Project CWSRF Loan In September 2017, then amended in December 2017 and May 2018, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP 521/522 and Disinfection Upgrade Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $40.0 million. The loan bears an interest rate of 1.8% which was equal to one-
-year General Obligation Bond true
interest cost at the time the agreement was executed. The CWSRF loan will have a 30-year term, with loan repayment beginning one year after substantial completion substantial completion occurred in July 2019. The CWSRF loan is secured on a parity lien basis with disbursements to date totaling $39.7 million. As of June 30, 2021, the principal amount outstanding of the loan was $38.5 million.
North Point Facility Outfall Rehabilitation Project CWSRF Loan In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the North Point Facility Outfall Rehabilitation Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $20.2 million. The loan bears an interest rate of 1.8% which was equal to one-half of the State of -year General Obligation Bond true interest cost at the time the agreement was executed. The CWSRF loan will have a 30-year term, with loan repayment beginning one year after substantial completion of e
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
112
bonds. The SFPUC has received proceeds from loan disbursements to date totaling $17.7million. As of June 30, 2021, the principal amount outstanding of the loan was $16.2 million.
Southeast Plant (SEP) Primary/Secondary Clarifier Upgrade Project CWSRF Loan In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP Primary/Secondary Clarifier Upgrade Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $34.4 million. The loan bears an interest rate of 0.8% which was equal to one-half of the State of -year General Obligation Bond true interest cost at the time the agreement was executed. The CWSRF loan will have a 30-year term, with loan repayment beginning one year ue
bonds. The SFPUC has received proceeds from loan disbursements to date totaling $29.2 million. As of June 30, 2021, the principal amount outstanding of the loan was $26.8 million.
Oceanside (OSP) Digester Gas Utilization Upgrade Project In May 2020, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the OSP Digester Gas Utilization Upgrade Project of the Sewer System Improvement Program. The CWSRF loan is in the amount of $54.4 million, which includes $4.0 million of principal forgiveness, or a grant. The loan bears an interest rate of 1.4% which was equal to one-
-year General Obligation Bond true
interest cost at the time the agreement was executed. The CWSRF loan will have a 30-year term, with substantial completion is expected in August 2021. The CWSRF loan is secured on a parity lien basis with
outstanding of the loan was $20.8 million.
Events of Default and Remedies
Wastewater Revenue Bonds, SRF Loans, and WIFIA Loan - Events of default as specified in the Wastewater Enterprise Indenture include non-payment, material breach of warranty, representation, or indenture covenants which are not cured within applicable grace periods, and bankruptcy and insolvency events. The trustee, upon written request, by majority of the owners (by aggregate amount of the bond obligations or of a credit provider), shall declare the principal and interest accrued thereon, to be due and payable immediately. As of June 30, 2021, there were no such events described herein.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
113
(9) E MPLOYEE BENEFIT PROGRAMS
(a) Retirement Plans
General Information About the Pension Plans
Retirement System (Retirement System) administers a cost-sharing multiple-employer defined benefit pension plan (SFERS Plan), which covers substantially all of the employees of the City and County of San Francisco, and certain classified and certificated employees of the San Francisco Community College and Unified School Districts, and San Francisco Trial Court employees other than judges. The San Francisco City and County Charter and the Administrative Code are the authority which establishes and amends the benefit provisions and employer obligations of the SFERS Plan. The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the SFERS Plan. That report may be obtained on the Retirement http://mysfers.org
Retirement System, 1145 Market Street, 5 th Floor, San Francisco, CA 94103 or by calling (415) 487- 7000.
Replacement Benefits Plan The Replacement Benefits Plan (RBP) is a qualified excess benefit plan established in October 1989. Internal Revenue Code Section 415(m) provides for excess benefit arrangements that legally permit benefit payments above the Section 415 limits, provided that the payments are not paid from the SFERS Trust. The RBP allows the City to pay SFERS retirees any portion of the Charter-mandated retirement allowance that exceeds the annual Section 415(b) limit.
The RBP plan does not meet the criteria of a qualified trust under GASB Statement No. 73 because the event of insolvency.
In addition, some City employees are eligible to participate in the Public Employe -
employer pension plan, or the CalPERS Miscellaneous Rate Plan, included in CalPERS public agency cost-sharing multiple-employer pension plan. Some employees of the Transportation Authority, a blended component unit, and the Successor Agency, a fiduciary component unit, are eligible to Act (PEPRA) Miscellaneous Rate Plan, both rate plans are included in CalPERS public agency cost- sharing multiple-employer pension plan. In addition, some employees of the Treasure Island Development Authority, a discretely presented component unit, are eligible to participate in the CalPERS Miscellaneous Rate Plan included in CalPERS public agency cost-sharing multiple-employer pension plan.
CalPERS acts as a common investment and administrative agent for various local and state governmental agencies within the State of California. Benefit provisions and other requirements are established by State statute, employer contract with CalPERS, by City resolution and resolution of component units. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website at www.calpers.ca.gov.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
114
Benefits
SFERS The SFERS Plan provides service retirement, disability, and death benefits based on specified percentages of defined final average monthly salary and provides annual cost-of-living adjustments (COLA) after retirement. The SFERS Plan also provides pension continuation benefits to qualified survivors. The Retirement System pays benefits according to the category of employment and the type of benefit coverage provided by the City. The four main categories of SFERS Plan members are:
Miscellaneous Non-Safety Members staff, operational, supervisory, and all other eligible employees who are not in special membership categories. sheriffs assuming office on and after
miscellaneous safety employees hired on and after January 7, 2012.
Firefighter Members firefighters and other employees whose principal duties are in fire prevention and suppression work or who occupy positions designated by law as firefighter member positions.
Police Members police officers and other employees whose principal duties are in active law enforcement or who occupy positions designated by law as police member positions.
The membership groups and the related service retirement benefits are summarized as follows:
Miscellaneous Non-Safety Members who became members prior to July 1, 2010 qualify for a service retirement benefit if they are at least 50 years old and have at least 20 years of credited service or if they are at least 60 years old and have at least 10 years of credited service. The service retirement benefit is calculated usi -year average monthly
Miscellaneous Non-Safety Members who became members on or after July 1, 2010 and prior to January 7, 2012 qualify for a service retirement benefit if they are at least 50 years old and have at least 20 years of credited service or if they are at least 60 years old and have at least 10 years of (highest two-
Miscellaneous Non-Safety Members who became members on or after January 7, 2012 qualify for a service retirement benefit if they are at least 53 years old and have at least 20 years of credited service or if they are at least 60 years old and have at least 10 years of credited service. The service retirement benefit is calculated usi
-year average monthly
and Miscellaneous Safety Members who were hired on or after January 7, 2012 qualify for a service retirement benefit if they are at least 50 years old and have at least 5 years of credited service. The service retirement benefit is calculated using the me compensation (highest three-
compensation.
Firefighter Members and Police Members who became members before November 2, 1976 qualify for a service retirement benefit if they are at least 50 years old and have at least 25 years of credited hly
salary earnable at the rank or position the member held for at least one year immediately prior to
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
115
Firefighter Members and Police Members who became members on or after November 2, 1976 and prior to July 1, 2010 qualify for a service retirement benefit if they are at least 50 years old and have at least 5 years of credited service. The service retiremen compensation (highest one-
compensation.
Firefighter Members and Police Members who became members on or after July 1, 2010 and prior to January 7, 2012 qualify for a service retirement benefit if they are at least 50 years old and have at least 5 years of credited service. The service retirement be compensation (highest two-
compensation.
Firefighter Members and Police Members who became members on or after January 7, 2012 qualify for a service retirement benefit if they are at least 50 years old and have at least 5 years of credited service. The service retirement benefit is calculated using the three-
All members are eligible to apply for a disability retirement benefit, regardless of age, when they have 10 or more years of credited service and they sustain an injury or illness that prevents them from performing their duties. Safety members are eligible to apply for an industrial disability retirement benefit from their first day on the job if their disability is caused by an illness or injury that they receive while performing their duties.
r death
Death benefit prior to retirementgenerally, upon death of the active member who is eligible for a service retirement, qualified surviving spouse and qualified domestic partner receives continuation benefits he or she retired on the date of death. The qualified surviving spouses and qualified domestic partners of Safety members who die prior to becoming eligible for service retirement and whose death is due to an injury received in or illness caused by the performance of duty, salary continuation is provided to the qualified survivor until such time as the member would have qualified for service retirement had he allowance is provided to the qualified survivor. A lump sum death payment equal to 6 ons is provided upon the death of an active employee
Death benefit after retirement generally, upon the death of a retired member, the retirement system provides continuation benefits to a qualified surviving spouse or qualified domestic partner equal to All retired members receive a benefit adjustment each July 1, which is the Basic COLA. The majority of adjustments are determined by changes in CPI with increases capped at 2%. The SFERS Plan the Plan. The maximum benefit adjustment each July 1 is 3.5% including the Basic COLA. Effective July 1, 2012, voters approved changes in the criteria for payment of the Supplemental COLA benefit, so that Supplemental COLAs would only be paid when the Plan is also fully funded on a market value of assets basis. Certain provisions of this voter-approved proposition were challenged in the Courts. A decision by the California Courts modified the interpretation of the proposition. Effective July 1, 2012,
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
116
members who retired before November 6, 1996 will receive a Supplemental COLA only when the Plan apply to members who retired on or after November 6, 1996 and were hired before January 7, 2012.
For all members hired before January 7, 2012, all Supplemental COLAs paid to them in retirement benefits will continue into the future even when an additional Supplemental COLA is not payable in any given year. For members hired on and after January 7, 2012, a Supplemental COLA will only be paid to retirees when the Plan is fully funded on a market value of asset basis and in addition for these members, Supplemental COLAs will not be permanent adjustments to retirement benefits. That is, in years when a Supplemental COLA is not paid, all previously paid Supplemental COLAs will expire.
CalPERS
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 a final compensation, which is the highest average pay rate and special compensation during any consecutive one-year or three-year period. The cost-of-living adjustments for the CalPERS plans are applied as specified by the Public Employees PEPRA, which took effect in January 2013, changes the way CalPERS retirement and health benefits are applied, and places compensation limits on members. As such, members who established CalPERS membership on or after January
Prior to On or after Prior to On or after
January 1, 2013 January 1, 2013* January 1, 2013 January 1, 2013 Benefit formula 2% @ 60 2% @ 50, 2% @
55, or 3% @ 55
2% @ 57 or
2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments Monthly for life Monthly for life Monthly for life Required employee contribution rates 5.00% 7.00% to 9.00% 10.75% to 13.75% Required employer contribution rates 11.93% 23.94% 23.94% City Miscellaneous Plan City Safety Plan
Hire date
* For the City Miscellaneous Plan there are no current active employees hired on or after January 1, 2013. For the Treasure Island Miscellaneous Plan there are no current active employees.
Prior to On or after Prior to On or after
January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 Benefit formula 2% @ 55 2% @ 62 2% @ 55 2% @ 62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service 5 years of service Benefit payments Monthly for life Monthly for life Monthly for life Monthly for life Required employee contribution rates 7.00% 6.75% 7.00% 7.25% Required employer contribution rates 11.03% 7.73% 11.82% 7.85% Hire date
Transportation Authority Successor Agency
Miscellaneous Plan Miscellaneous Plan
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
117
At June 30, 2021, the following current and former employees were covered by the benefit terms under each pension plan:
Contributions
SFERS Contributions are made to the basic SFERS Plan by both the City and the participating employees. Employee contributions are mandatory as required by the Charter. Employee contribution rates for fiscal year 2021 varied from 7.5% to 13.0% as a percentage of gross covered salary. For the year ended June 30, 2021, most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The City is required to contribute at an actuarially determined rate. Based on the July 1, 2019 actuarial report, the required employer contribution rates for fiscal year 2021 were 22.40% to 26.90%.
CalPERS
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 PERF 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 public employees during the year, with an additional amount to finance any unfunded accrued liability.
Replacement Benefits Plan
The RBP is and will remain unfunded and the rights of any participant and beneficiary are limited to those specified in the RBP. The RBP constitutes an unsecured promise by the City to make benefit payments in the future to the extent funded by the City. The City paid $3.0 million replacement benefits in the year ended June 30, 2021.
Pension liabilities are financed by governmental funds and enterprise funds that are responsible for the charges.
SFERS Plan
City CalPERS
Misce l la ne ous
Plan
City CalPERS
Safety Plan
Transportation
Authority CalPERS
Classic & PEPRA
Misce l la ne ous
Plans
Succe ssor Age ncy
CalPERS Classic &
PEPRA
Misce l la ne ous
Plans
Treas ure Is land
Development
Authority CalPERS
Misce l la ne ous
Plan
Inactive employees or beneficiaries
currently receiving benefits.............. 30,854 66 1,182 15 190 1 Inactive employees entitled to but not
yet receiv ing benefits...................... 11,126 - 290 61 152 - Activ e employees.............................. 33,644 2 756 37 46 - Total............................................. 75,624 68 2,228 113 388 1 SFERS Plan................................................................................................. $ 791,736 City CalPERS Miscellaneous Plan.................................................................. - City CalPERS Safety Plan............................................................................. 51,185 Transportation Authority CalPERS Classic & PEPRA Miscellaneous Plans........ 606 Successor Agency CalPERS Classic & PEPRA Miscellaneous Plans............... 2,299 Treasure Island Development Authority CalPERS Miscellaneous Plan................ 8 Total....................................................................................................... 845,834$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
118
Net Pension Liability
The table below shows how the net pension liability (NPL) as of June 30, 2021 is distributed. -
-sharing plans is measured as of June 30, 2020, and the total pension liability for each cost-sharing plan used to calculate the NPLs was determined by an actuarial valuation as of June 30, 2019, rolled forward to June 30, 2020, using standard update procedures. The -term share of
contributions to SFERS relative to the projected contributions of all participating employers, actuarially of the valuation date.
-sharing plans as of June 30, 2020 and 2019
were as follows:
Gov ernmental activ ities.................................................... 3,385,806$ Business-type activ ities................................................... 2,228,215 Fiduciary funds................................................................ 32,279 Component Unit - Treasure Island Development Authority.... 21 Total......................................................................... 5,646,321$ Proportionate
Share
Share of Net
Pension
Liability
(Asset)
SFERS Plan................................................................................................................ 94.3903% 5,107,273$ City CalPERS Miscellaneous Plan......................................................................... -0.1489% (16,206) City CalPERS Safety Plan........................................................................................ N/A 335,092 Transportation Authority CalPERS Classic & PEPRA Miscellaneous Plans. 0.0244% 2,659 Successor Agency CalPERS Classic & PEPRA Miscellaneous Plans.......... 0.2967% 32,279 Treasure Island Development Authority CalPERS Miscellaneous Plan......... 0.0002% 21 Replacement Benefits Plan..................................................................................... N/A 185,203 Total.............................................................................................................. 5,646,321 $ Proportionate Share
Share of Net
Pension
Liability
(Asset)
Proportionate
Share
Share of Net
Pension
Liability
(Asset)
SFERS Plan................................................................................................................ 94.3903% 5,107,273$ 94.1288% 4,213,809 $ City CalPERS Miscellaneous Plan......................................................................... -0.1489% (16,206) -0.1541 % (15,793) Transportation Authority CalPERS Classic & PEPRA Miscellaneous Plans. 0.0244% 2,659 0.0230% 2,352 Successor Agency CalPERS Classic & PEPRA Miscellaneous Plans.......... 0.2967% 32,279 0.2908% 29,803 Treasure Island Development Authority CalPERS Miscellaneous Plan ......... 0.0002% 21 0.0002% 25 Total.............................................................................................................. 5,126,026 $ 4,230,196 $ June 30, 2019
(Measurement Date)
June 30, 2020
(Measurement Date)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
119
less the CalPERS Safety Pl
Safety Plan is as follows:
as there are no assets in a plan. The change in the total pension liability for the City Replacement Benefits Plan is as follows:
Balance at June 30, 2019 (MD)............................
Change in year:
Service cost..........................................................
Interest..................................................................
Differences between expected and actual
experience........................................................
Assumption changes.........................................
Benefit payments................................................
Net changes during measurement period........
Balance at June 30, 2020 (MD)............................ 37,013
(3,634)
47,931
185,203$
Increase (Decrease)
Total Pension Liability
$ 137,272
1,976
4,776
7,800
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
120
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2021, the City recognized pension expense including amortization of deferred outflows/inflows related to pension items as follows:
resources
related to pensions from the following sources.
At June 30, 2021, the City reported $845.8 million as deferred outflows of resources related to contributions subsequent to the measurement date, which will be recognized as a reduction to net pension liability in the measurement year ending June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense in the measurement year as follows:
Component Unit
Gove r nm e nt a l
Activities
Business-type
Activities
Fiducia r y
Funds
Treasure
Island
Development
Authority Total
SFERS Plan.................................................................................................................. 521 ,714$ 415,618 $ - $ - $ 937,332$ City CalPERS Miscellaneous Plan........................................................................... 543 - - - 543 City CalPERS Safety Plan........................................................................................... 53,947 - - - 53,947 Transportation Authority CalPERS Classic & PEPRA Miscellaneous Plans... 854 - - - 854 Success or Agency CalPERS Classic & PEPRA Miscellaneous Plans............. - -3 ,574-3 ,574 Treas ure Island Development Authority CalPERS Miscellaneous Plan........... - - - 4 4 Replacement Benefits Plan....................................................................................... 16,298 8,945 - - 25,243 Total pension expense....................................................................................... 593,356$ 424,563$ 3,574$ 4$ 1,021,497$ Primary Government
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Pension contributions subsequent
to measurement date........................ 791,736$ - $ 2,913 $ - $ 51,185$ - $ - $ - $ 845,834$ -$ Change in assumptions....................... 280,393 88,456 116 249 80 - 49,565 2,058 330,154 90,763 Difference between expected and
actual experience............................... 173,459 16,002 1,801 836 223 2,917 17,683 - 193,166 19,755 Change in employer's proportion
and differences between the
employer's contributions and the
employer's proportionate share
of contributions................................... 66,431 56,604 2,613 4,440 - - 9,390 9,390 78,434 70,434 Net differences between projected
and actual earnings on plan
investments......................................... 106,947 - 1,039 482 9,512 - - - 117,498 482 Total.......................................................... 1,418,966$ 161,062$ 8,482$ 6,007$ 61,000$ 2,917$ 76,638$ 11,448$ 1,565,086$ 181,434 $ SFERS Plan
CalPERS
Miscellaneous Plans City CalPERS Safety Plan TotalReplacement Benefits Plan Year
Ending
June 30 SFERS Plan
CalPERS
Misce lla ne ous
Plans
CalPERS
Safety Plan
Replacement
Benefits Plan Total
2021....... (87,925)$ (374)$ (6,844)$ 19,821$ (75,322)$ 2022....... 106,362 (363) 2,958 18,814 127,771
2023....... 244,538 34 5,954 17,593 268,119
2024....... 203,193 265 4,830 8,962 217,250
Total 466,168$ (438)$ 6,898$ 65,190$ 537,818$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
121
Actuarial Assumptions
A summary of the actuarial assumptions and methods used to calculate the total pension liability as of June 30, 2020 is provided below, including any assumptions that differ from those used in the July 1, 2019 actuarial valuation.
For SFERS, mortality rates for active members and healthy annuitants were based upon adjusted Employee and Healthy Annuitant CalPERS mortality tables projected generationally from the 2009 base year using a modified version of the MP-2015 projection scale.
The actuarial assumptions used in the SFERS valuation at the June 30, 2020 measurement date were based upon the results of an experience study for the period July 1, 2009 through June 30, 2014 and an economic experience study as of July 1, 2019.
For Ca
includes 15 years of mortality improvements using Society of Actuaries Scale 90% of scale MP-2016.
All other actuarial assumptions used in the CalPERS June 30, 2019 valuation were based on the results of an actuarial experience study for the period 1997 to 2015, including updates to salary increase, GASB Statement No. 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The CalPERS discount was 7.15% as of the June 30, 2020 measurement date.
For the Replacement Benefits Plan beginning of the year measurement is also based on the census data used in the actuarial valuation as of July 1, 2019.
Discount Rates
SFERS
2020 was
7.40%. The projection of cash flows used to determine the discount rate assumed that plan members and employers contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2019 actuarial valuation.
The amortization payment is based on closed periods that vary in length depending on the source.
Charter amendments prior to July 1, 2014 are amortized over 20 years. After July 1, 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member CalPERS Miscellaneous and Safety Plans
Valuation date............................................. June 30, 2019 u pdated to June 30, 2020 June 30, 2019 Measurement date..................................... June 30, 2020 June 30, 2020 Actuarial cost method................................ Entry-age normal cost method Entry-age normal cost method Investment rate of return........................... 7.40%, net of pension plan investment expenses
7.15%, net of pension plan investment expenses, includes inflation
Municipal bond yield.................................. 2.21% as of June 30, 2020 Bond Buyer 20-Bond GO Index, June 25, 2020
Inflation......................................................... 2.75% 2.50% Projected salary increases....................... 3.50% plus merit comp onent based on employee classification and years of service
Varies by Entry Age and Service
Discount rate............................................... 7.40% as of June 30, 2020 7.15% as of June 30, 2020 Basic COLA................................................. Old Miscellaneous and All New Plans..................................................... 2.00% Old Police and Fire:
Pre 7/1/75 Retirements.................................... 2.50% Chapters A8.595 and A8.596.......................... 3.10% Chapters A8.559 and A8.585.......................... 4.20% Miscellaneous Contract COLA up to 2.50% until Purchasing Protection Allowance Floor on Purchasing Power applies.
Safety standard COLA 2.0%
SFERS Plan
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
122
benefits, including Supplemental COLAs, are amortized over 5 years. The remaining Unfunded Actuarial Liability not attributable to Charter amendments as of July 1, 2013 is amortized over a 19- year period commencing July 1, 2014. Experience gains and losses and assumption or method changes on or after July 1, 2014 are amortized over 20 years. For the July 1, 2016 valuation, the increase in the Unfunded Actuarial Liability attributable to the Supplemental COLAs granted on July 1, 2013 and July 1, 2014 are amortized over 17-years and 5-years, respectively. All amortization schedules are established as a level percentage of payroll so payments increase 3.50% each year.
The Unfunded Actuarial Liability is based on an Actuarial Value of Assets that smooths investment gains and losses over five years and a measurement of the Actuarial Liability that excludes the value of any future Supplemental COLAs.
While the contributions and measure of the Actuarial Liability in the valuation do not anticipate any future Supplemental COLAs, the projected contributions for the determination of the discount rate include the anticipated future amortization payments on future Supplemental COLAs for current members when they are expected to be granted. For members who worked after November 6, 1996 and before Proposition C passed (Post 97 Retirees), a Supplemental COLA is granted if the actual investment earnings during the year exceed the expected investment earnings on the Actuarial Value of Assets. For members who did not work after November 6, 1996 and before Proposition C passed, the Market Value of Assets must also exceed the Actuarial Liability at the beginning of the year for a Supplemental COLA to be granted. When a Supplemental COLA is granted, the amount depends on the amount of excess earnings and the basic COLA amount for each membership group. The large majority of members receive a 1.50% Supplemental COLA when granted.
Because the probability of a Supplemental COLA depends on the current funded level of the Retirement System, the Retirement System developed an assumption as of June 30, 2020, of the probability and amount of Supplemental COLA for each future year. There were no excess earnings during the year ending June 30, 2020; consequently, no Supplemental COLA will be paid effective July1, 2020.
The table below shows the net assumed Supplemental COLAs for members with a 2.00% basic COLA for sample years.
The projection of benefit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.
available to make projected future benefit payments for current members until fiscal year-end 2099 when only a portion of the projected benefit payments are expected to be made from the projected fiduciary net position. Projected benefit payments are discounted at the long-term expected return on assets of 7.40% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 2.21% to the extent they are not available. The single equivalent rate used to determine the total pension liability as of June 30, 2020 is 7.40%.
Year Ending
June 30 96 - Prop C
2022 0.75%
2024 0.75%
2026 0.75%
2028 0.75%
2030 0.75%
2032 0.75%
2034+ 0.75%
0.37%
0.38%
Before 11/6/96 or
After Prop C
As sumed Supplemental COLA
for Members with a 2.00% Basic COLA
0.33%
0.35%
0.19%
0.27%
0.30%
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
123
The long-term expected rate of return on pension plan investments was 7.40%. It was set by the Retirement Board after consideration of both expected future returns and historical returns experienced by the Retirement System. Expected future returns were determined by using a building-block method in which best-estimate ranges of expected future real rates of return were developed for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.
Target allocation and best estimates of geometric long-term expected real rates of return (net of pension plan investment expense and inflation) for each major asset class are summarized in the following table.
CalPERS - The discount rate used to measure each of the CalPERS Miscellaneous Rate Plans and the Safety Plan total pension liability was 7.15%. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate.
Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.15% rate is adequate, and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 7.15% is applied to all plans in the Public Employees Retirement Fund. The stress test The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.
Long-Term Expected
Asset Class Target Allocation Real Rate of Return
Global Equity 31.0% 4.9%
Treasuries 6.0% -0.5%
Liquid Credit 3.0% 2.7%
Private Credit 10.0% 4.8%
Private Equity 18.0% 7.9%
Real Assets 17.0% 5.7%
Hedge Funds/Absolute Return 15.0% 3.0%
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
124
The table below reflects long-term expected real rates of return by asset class. The rates of return were calculated using the capital market assumptions applied to determine the discount rate and asset allocation.
________
(1) In the CalPERS Basic Financial Statements, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-Term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities. (2) An expected inflation of 2.00% used for this period. (3) An expected inflation of 2.92% used for this period.
Replacement Benefits Plan The discount rate was 2.21% as of June 30, 2020. This reflects the yield for a 20-year, tax-exempt general obligation municipal bond with an average rating of AA/Aa or higher.
The Municipal Bond Yield is the Bond Buyer 20-Year GO Index as of June 25, 2020. This is the rate used to determine the total pension liability as of June 30, 2020.
The inflation assumption of 2.75% compounded annually was used for projecting the annual IRC Section 415(b) limitations. However, the actual IRC Section 415(b) limitations published by the IRS of $230 for 2020 was used for the 2020 measurement date.
The SFERS assumptions about Basic and Supplemental COLA previously discussed also apply to the Replacement Benefits Plan, including the impact of the State Appeals Court determination that the full funding requirement for payment of Supplemental COLA included in Proposition C was unconstitutional and the impact is accounted for as a change in benefits.
At June 30, 2021, the membership in the RBP had a total of 683 active members and 105 retirees and beneficiaries currently receiving benefits.
Sensitivity of Proportionate Share of the Net Pension Liability to Changes in the Discount Rate s cost-sharing
the net pension liability (asset) would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.
Asse t Cla ss(1)
Target
Allocation
Real Return
Years 1 - 10 (2)
Real Return
Years 11+ (3)
Global equity 50.00% 4.80% 5.98%
Global fixed income 28.00% 1.00% 2.62%
Inflation sensitive 0.00% 0.77% 1.81%
Private equity 8.00% 6.30% 7.23%
Real estate 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
Cost-Sharing Pension Plans
Proportionate Share of Net Pension Liability
1% Decrease
Share of NPL
@ 6.40%
Current Share
of NPL
@ 7.40%
1% Increase
Share of NPL
@ 8.40%
SFERS.................................................................................................... 9,030,293$ 5,107,273 $ 1,866,119 $ 1% Decrease
Share of NPL
@ 6.15%
Current Share
of NPL
@ 7.15%
1% Increase
Share of NPL
@ 8.15%
City CalPERS Miscellaneous Plan............................................................. (13,633)$ (16,206) $ (18,331 )$ Transportation Authority CalPERS Classic & PEPRA Miscellaneous Plans... 4,562 2,659 1,087 Successor Agency CalPERS Classic & PEPRA Miscellaneous Plans.......... 46,973 32,279 20,139 Treasure Island Development Authority CalPERS Miscellaneous Plan........... 32 21 12
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
125
-employer plan) and
in effect as of the measurement date, as well as what the net/total pension liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate. issued CalPERS financial report, copies may be obtained from the CalPERS website at www.calpers.ca.gov.
Deferred Compensation Plan
The City offers its employees a deferred compensation plan in accordance with Internal Revenue Code (IRC) Section 457. The plan, available to all employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees or other beneficiaries until termination, retirement, death, or unforeseeable emergency.
The City has no administrative involvement and does not perform the investing function. The City has no fiduciary accountability for the plan and, accordingly, the plan assets and related liabilities to plan participants are not included in the basic financial statements.
Health Service System
The Health Service System was established in 1937. Health care benefits of employees, retired employees and surviving spouses are financed by beneficiaries and by the City through the Health District, San Francisco Unified School District and the San Francisco Superior Court, amounted to determined by Charter provision based on similar contributions made by the ten most populous counties in California and the contribution models negotiated with the unions. Included in this amount is $249.5 million to provide postemployment health care benefits for 29,966 retired participants, of which $206.4 s
pay-as-you-go basis. The Health Service System issues a publicly available financial report that includes financial statements. That report may be obtained by writing to the San Francisco Health Agent Pension Plan
1% Decrease
@ 6.15%
Meas urement
Date @ 7.15%
1% Increase
@ 8.15%
City CalPERS Safety Plan......................................................................... 535,130$ 335,092 $ 169,416 $ 1% Decrease
@ 1.21%
Meas urement
Date @ 2.21%
1% Increase
@ 3.21%
Replacement Benefits Plan........................................................................ 223,249$ 185,203 $ 155,739 $
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
126
(b) Postemployment Health Care Benefits
City (excluding the Transportation Authority and the Successor Agency) The City maintains a defined benefit other postemployment benefits plan (OPEB Plan). The OPEB Plan provides postemployment medical, dental and vision insurance benefits to eligible employees, retired employees, surviving spouses, and domestic partners. Health benefit provisions are established and may be amended through negotiations between the City and the respective bargaining units.
GASB Statement No. 75 requires that reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.
San Francisco Health Service System OPEB Plan
Valuation Date (VD) June 30, 2020
Measurement Date (MD) June 30, 2020
Measurement Period (MP) July 1, 2019 to June 30, 2020
The City prefunds its OPEB obligations through the Retiree Health Care Trust Fund (RHCTF) that allows participating employers to prefund certain postemployment benefits other than pensions for their covered employees. The RHCTF is an agent multiple-employer trust fund and has two participating employers: (i) the City and County of San Francisco and (ii) the San Francisco Community College District. The RHCTF is administered by the City and is presented as an other postemployment benefit System (SFERS), issues a publicly available financial report consisting of financial statements and required supplementary information for the RHCTF in aggregate. The report may be obtained by writing to SFERS, 1145 Market Street, 5th Floor, San Francisco, CA 94103.
Former employees of the City and County of San Francisco who were members of the Health Service System and who retire under SFERS or CalPERS are eligible for postretirement health benefits from the City and County of San Francisco. Effective with Proposition B, passed June 3, 2008, employees hired on or after January 10, 2009 must retire within 180 days of separation in order to be eligible for retiree healthcare benefits from the City. The eligibility requirements are as follows:
Normal Retirement Miscellaneous Age 50 with 20 years of credited service 1 Age 60 with 10 years of credited service
Safety Age 50 with 5 years of credited service
Disabled Retirement 2 Any age with 10 years of credited service Terminated Vested 5 years of credited service at separation Normal Retirement Age 50 with 5 years of credited service Disabled Retirement 2 Any age with 5 years of credited service Terminated Vested 5 years of credited service at separation 1 Age 53 with 20 years of credited service, age 60 with 10 years of credited service, or age 65 for Miscellaneous members hired on or after January 7, 2012 under Charter Section 8.603. 2 No service requirement for Safety members retiring under the industrial disability benefit or for surviving spouses / domestic partners of those killed in the line of duty.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
127
Retiree healthcare benefits are administered by the San Francisco Health Service System and include the following:
Medical: PPO City Health Plan (self-insured) and UHC Medicare Advantage (fully-insured) HMO Kaiser (fully-insured) and Blue Shield (flex-funded) Dental: Delta Dental, DeltaCare USA and UnitedHealthcare Dental Vision: Vision benefits are provided under the medical insurance plans and are administered by Vision Service Plan.
Projections of the sharing of benefit related costs are based on an established pattern of practice.
As of the June 30, 2020 valuation date, the following current and former employees were covered by the benefit terms under the healthcare plan:
San Francisco County Transportation Authority and Successor Agency benefits to eligible employees and their surviving spouses. Employees become eligible to retire and receive healthcare benefits upon reaching the age of 50 and meeting program vesting requirements or being converted to disability status and retiring directly from the Transportation Authority. Dental and vision benefits are not available to retirees. The Transportation Authority is a contracting agency under for the provision of healthcare insurance programs for both active and retired employees.
Effective February 1, 2012, upon the operation of law to dissolve the former Agency, the Successor sponsors a defined benefit plan providing OPEB to employees who retire directly from the former Agency and/or the Successor Agency. The Successor Agency pays 100% of the premiums of CalPERS medical plan to eligible employees that satisfied the required services years and minimum age.
Benefit Trust Fund Program (CERBT), an agent multiple-employer postemployment health plan, to prefund other postemployment benefits through CalPERS. CalPERS issues publicly available financial reports for all plans it administers and a separate GASB Statement No. 75 report for CERBT that can be found on CalPERS website.
Projections of the sharing of benefit related costs are based on an established pattern of practice.
City Plan
32,879
2,211
22,728
Total............................................................................................. 57,818 Activ e plan members............................................................................
Inactive employees entitled to but not yet receiv ing benefit payments........
Inactive employees or beneficiaries currently receiving benefit payments...
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
128
As of the June 30, 2020 actuarial valuation, the following current and former employees were covered by the benefit terms under the healthcare plan:
Contributions
-as-you-
Additionally, under the City Charter, active officers and employees of the City who commenced employment on or after January 10, 2009, shall contribute to the RHCTF a percentage of compensation not to exceed 2% of pre-tax compensation. The City shall contribute 1% of compensation for officers determined that the
shall cease, and officers and employees will each contribute 50% of the maximum 2% of pre-tax compensation.
Starting July 1, 2016, active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute 0.25% of pre-tax compensation into the RHCTF. Beginning on July 1
st of each subsequent year, the active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute an additional 0.25% of pre-tax compensation up to a maximum of 1%. Starting July 1, 2016, the City contributes 0.25% of compensation into the RHCTF for each officer and employee who commenced employment on or before January 9, 2009.
Beginning on July 1
st of each subsequent year, the City contributes an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment contribute 50% of the maximum 1% of pre-tax compensation. Additional or existing contribution requirements may be establis
-as-you-
-as-you-
total contribution subsequent to the measurement date of $246.0 million for the year ended June 30, 2021.
Board. The Transportation Authority makes contributions on an actuarial basis, funding the full to contribute to the OPEB plan. For the year ended June 30, 2021, the Transportation Authority contributed
100% or more of the ADC annually by contributing to the CERBT. For the year ended June 30, 2021, the Successor Agency contributed $2.3 million to the plan. There are no employee contributions to the The ADC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
OPEB liabilities are financed by governmental funds, enterprise funds and fiduciary funds that are responsible for the charges.
Transportation
Authority
Successor
Agency
39 43
11 61 0 5
Total............................................................................................ 46 149 Activ e plan members..........................................................................
Inactive employees or beneficiaries currently receiving benefit payments..
Inactive employees entitled to but not yet receiving benefit payments......
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
129
Net OPEB Liability
The table below shows how the net OPEB liability (asset) as of June 30, 2021 is distributed. ollows:
Total OPEB
Liability
Plan
Fidicuary Net
Position
Net OPEB
Liability
Balance at June 30, 2019 (MD)....................................... $ 4,282,418 $ 366,603 $ 3,915,815 Changes during the measurement period.........................
Serv ice cost.............................................................. 141,642 - 141,642 Interest..................................................................... 314,907 - 314,907 Differences between expected and actual experience... (381,922) - (381,922) Changes of assumptions............................................ 151,725 - 151,725 Contributions - employer............................................ - 235,963 (235,963) Contributions - member.............................................. - 60,236 (60,236) Net inv estment income.............................................. - 22,746 (22,746) Benefit payments, including refunds of
member contributions.............................................. (196,445) (196,445) - Administrativ e expense.............................................. - (113) 113 Net changes during the measurement period.................... 29,907 122,387 (92,480) Balance at June 30, 2020 (MD)................................... $ 4,312,325 $ 488,990 $ 3,823,335 Increas e (Decreas e)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
130
The changes in net OPEB liability (asset) for the plans of the Transportation Authority and Successor Agency are as follows:
OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2021, the City recognized OPEB expense including amortization of deferred outflows/inflows related to OPEB items as follows:
Governmental
Activities
Business-type
Activities
Fiduc ia r y
Funds Tot a l
City defined benefit healthcare plan....................................... 250,062$ 70,597 $ 25 $ 320,684$ Transportation Authority defined benefit healthcare plan... 21 - - 21 Successor Agency defined benefit healthcare plan............ - - 1,149 1,149 Total OPEB expense........................................................... 250,083$ 70,597 $ 1,174 $ 321,854 $ Primary Government
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
131
As of June 30, 2021, the City reported deferred outflows/inflows of resources related to OPEB from the following sources:
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
132
Amounts reported as deferred outflows/inflows will be amortized annually and recognized in OPEB expense as follows:
Actuarial Assumptions
A summary of the actuarial assumptions and methods used to calculate the City liability as of June 30, 2020 (measurement date) is provided below:
Year ending
June 30: City
Transportation
Authority
Succe ssor
Agency Total
2022................ (44, 993)$ (32)$ 45$ (44,980)$ 2023................ (43, 494) (24) (17) (43,535)
2024................ (43, 786) (23) 46 (43,763)
2025................ (42, 791) (27) 65 (42,753)
2026................ (5,161) (42) - (5,203 )
Thereafter........ (32,887) (368) - (33,255)
Total (213,112)$ (516)$ 139$ (213,489)$ Key A ctuarial A ssumptions
Valuation Date June 30, 2020
Measurement Date June 30, 2020
A ctuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 4.00% in 2022, 7.00% in 2023, trending down to ultimate rate of 4.04% in 2075 Medicare trend starts at 1.00% in 2022, 7.50% in 2023, trending down to ultimate rate of 4.04% in 2075 10-County average trend starts at 4.5% in 2022, 5.50% in 2023, trending down to ultimate rate of 4.04% in 2075 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Discount Rate 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):
Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Non-Annuitants
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0.979
Healthy Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1.044
Disabled Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0.995
Beneficiaries
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0.977
A djustment Factor
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ending June 30, 2019.
A djustment Factor
A djustment Factor
A djustment Factor
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
133
The mortality rates in the base tables are projected generationally from the base year using the modified version of the MP-2019 projection scale.
The Transportation Authority net OPEB liability (asset) was measured as of June 30, 2020 and the total OPEB liability used to calculate the net OPEB liability (asset) was determined using an actuarial et OPEB liability was measured as of June
30, 2020, and the total pension liability used to calculation the net OPEB liability was determined by an actuarial valuation as of June 30, 2019. A summary of the actuarial assumptions and methods used to calculate the total OPEB liability are as follows:
Sensitivity of Net OPEB Liabilities (Asset) to Changes in the Healthcare Cost Trend Rate The following presents the net OPEB liability (asset) for each plan calculated using the healthcare cost trend rate, a
healthcare cost trend rate that is 1% lower or 1% higher than the current rate:
Discount Rate
City OPEB Plan - The discount rate used to measure the total OPEB liability as of June 30, 2020 was
7.0%. The projection of cash flows used to determine the discount rate assumed that plan member and employer contributions will continue to be made at the rates specified in the Charter, and disbursements from the RHCTF will continue to be limited by the Charter until it is fully funded. Based on those available to make all future benefit payments of current and inactive employees. 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.
The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The long-term -year capital market
Key Actuarial Assumptions Transportation Authority Successor Agency Actuarial Valuation Date June 30, 2019 June 30, 2019
Measurement Date June 30, 2020 June 30, 2020
Discount Rate 7.59% 6.75%
General Inflation 2.75% per annum 2.75%
Salary Increases 2.75% per annum, in aggregate 3.00%; Merit based on 2017 CalPERS Experience Study
Investment Rate of Return 7.59% 6.75%
Mortality, Turnover, Disability, and Retirement CalPERS Experience Study for the period from 1997 to 2015
CalPERS 2017 Experience Study for the
period from 1997 to 2015
Post-retirement mortality projected fully
generational with Scale MP-2018
Healthcare Cost Trend Rate Initial 6.5% for non-medicare eligibles,
11.0% for spouse/domestic partner
medicare eligibles and 4.5% medicare
eligibles, all grading down to 4.0%
Non-Medicare - 7.5% for 2020,
decreasing to an ultimate rate of 4.0% in
2076;
Medicare- 6.5% for 2020, decreasing to
an ultimate rate of 4.0% in 2076
June 30, 2020 Measurement Date
Plan 1% Decrease Healthcare Trend 1% Increase
City Defined Benefit Plan 3,305,789$ 3,823,335$ 4,497,900$ Transportation Authority (570) (334) (34)
Successor Agency 806 2,091 3,622
June 30, 2020 (measurement year)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
134
assump
real rates of return for each major asset class are summarized in the following table:
Transportation Authority and Successor Agency - The discount rates used to measure the total OPEB liability of the Transportation Authority and the Successor Agency were 7.59% and 6.75%, respectively. The projections of cash flows used to determine the discount rates assumed that Transportation Authority and Successor Agency contributions will be made at rates equal to the 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 the OPEB liability of each plan.
As s et Clas s Target Allocation
Long-term
Expected Real
Rate of Return
Equities
U.S. Large Cap 28.0% 8.4%
U.S. Small Cap 3.0% 9.8%
Developed Market Equity (non-U.S.) 15.0% 9.6%
Emerging Market Equity 13.0% 11.7%
Credit
Bank Loans 3.0% 4.9%
High Yield Bonds 3.0% 4.9%
Emerging Market Bonds 3.0% 4.8%
Rate Securities
Investment Grade Bonds 9.0% 2.2%
Long-term Government Bonds 4.0% 3.1%
Short-term Treasury Inflation-Protected Securities (TIPS) 4.0% 1.9% Private Markets
Private Equity 5.0% 12.5%
Core Private Real Estate 5.0% 6.4%
Risk Mitigating Strategies
Global Macro 5.0% 4.1%
Total 100.0%
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
135
The long-term expected rate of return on OPEB plan investments was determined using a building block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
The following presents the net OPEB liability (asset) calculated using the discount rate, as well as what the net OPEB liability (asset) would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate for each plan:
Asset Class
Target
Allocation
Transportation
Authority Successor Agency
Global Equity 59.00% 4.82% 4.82%
Fixed Income 25.00% 1.47% 1.47%
Treasury Inflation Protection Securities 5.00% 1.29% 1.29% Real Estate Investment Trusts 8.00% 0.84% 3.76%
Commodities 3.00% 3.76% 0.84%
Total 100.00%
Long-Term Expected Real Rate of Return
Plan
1% Decreas e
6.00%
Discount Rate
7.00 %
1% Increase
8.00%
City Defined Benefit Plan 4,436,900 $ 3,823,335 $ 3,322,453 $ 1% Decreas e
6.59%
Discount Rate
7.59%
1% Increase
8.59%
Transportation Authority (84) $ (334) $ (538) $ 1% Decreas e
5.75%
Discount Rate
6.75%
1% Increase
7.75%
Successor Agency 3,407 $ 2,091 $ 978 $ June 30, 2020 (measurement year)
June 30, 2020 (measurement year)
June 30, 2020 (measurement year)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
136
(10) FUND EQUITY
(a) Governmental Fund Balance
Fund balances for all the major and nonmajor governmental funds as of June 30, 2021, were distributed as follows:
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
137
(b) General Fund Stabilization and Other Reserves
Rainy Day Reserve
l
the upcoming budget year are going to be more than five percent higher than the General Fund revenues for the current year, the City automatically deposits one- Rainy Day Reserve. Seventy-five percent of the deposit is placed in the City Reserve and twenty-five percent is placed in the School Reserve. The total amount of money in the Rainy Day Reserve may not exceed
the City Reserve for any lawful governmental purpose, but only in years when the City projects that total General Fund revenues for the upcoming year will be less t Fund revenues, i.e., years when the City expects to take in less money than it had taken in for the current year. In those years, the City may spend up to half the money in the City Reserve, but no more than is necessary to bring the City's total available General Fund revenues up to the level of the current year. The School District may withdraw up to half the money in the School Reserve when it expects to collect less money per student than the previous fiscal year and would have to lay off a significant in the School Reserve by a two-thirds vote. The City does not expect to routinely spend money from the Rainy Day Reserve after evaluating its recent General Fund revenues trends and its most recent update to the Five-Year Financial Plan covering fiscal years 2022-23 through 2025-26.
Budget Stabilization Reserve
The City sets aside as an additional reserve 75 percent of (1) real estate transfer taxes in excess of the average collected over the previous five years, (2) proceeds from the sale of land and capital assets, and (3) ending unassigned General Fund balances. The City will be able to spend those funds in years in which revenues decline or grow by less than two percent, after using the amount legally available from the Rainy Day Reserve. The City, by a resolution of the Board of Supervisors adopted by a two- thirds vote, may temporarily suspend these provisions following a natural disaster that has caused the Mayor or the Governor to declare an emergency, or for any other purpose. The City does not expect to routinely spend money from the Budget Stabilization Reserve after evaluating its recent General Fund revenues trends and its most recent update to the Five-Year Financial Plan covering fiscal years 2022- 23 through 2025-26.
(c) Encumbrances
At June 30, 2021, encumbrances recorded in the General Fund and nonmajor governmental funds were $407.1 million and $523.2 million, respectively.
(d) Restricted Net Position
The City issued general obligation bonds and certificates of participation for the purpose of rebuilding and improving Laguna Honda Hospital. General obligation bonds were also issued for the purpose of reconstructing and improving waterfront parks and facilities on Port property and for the seismic strengthening and repair of the Embarcadero Seawall managed by the Port and for the retrofit and improvement work to ensure a reliable water supply (managed by the Water Enterprise) in an emergency or disaster and for certain street improvements managed by the SFMTA. These capital assets are repo
-type activities. However, the debt service will be paid with governmental revenues and as such these general obligation bonds and certificates of participation are al activities. In accordance with GASB
guidance, the City reclassified $490.6 million of unrestricted net position of governmental activities, of which $369.4 million reduced net investment in capital assets and $121.2 million reduced net position restricted for capital projects to reflect the total column of the primary government as a whole perspective.
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(e) Deficit Fund Balances and Net Position
The Senior Citizens Program Fund had a deficit of $1.3 million as of June 30, 2021. The deficit relates to unavailable revenue in various programs, which is expected to be collected beyond 60 days of the end of fiscal year 2021. The Environmental Protection Fund had a deficit of $0.6 million, mainly due to unearned and unavailable revenue which is expected to be collected in future years.
The Central Shops and Telecommunications and Information Internal Service Funds had deficits in total net position of $27.1 million and $24.6 million, respectively, as of June 30, 2021, mainly due to the accrual of the net pension and other postemployment benefits liabilities. The operating deficits are expected to be reduced in future years through anticipated rate increases or reductions in operating expenses. The rates are reviewed and updated annually.
Prior to February 1, 2012, the California Redevelopment Law provided tax increment financing as a source of revenue to redevelopment agencies to fund redevelopment activities. Due to the nature of the redevelopment financing, the former Agency liabilities exceeded assets. Therefore, the former Agency historically carried a deficit, which was expected to be reduced as future tax increment revenues were received and used to reduce its outstanding long-term debt. This deficit was transferred to the Successor Agency on February 1, 2012. The Successor Agency can only receive tax increment to the extent that it can show on an annual basis that it has incurred indebtedness that must be repaid with tax increment. At June 30, 2021, the Successor Agency has a deficit of $450.4 million, which will be eliminated with future redevelopment property tax revenues distributed from the Redevelopment .
(11) UNAVAILABLE RESOURCES IN GOVERNMENTAL FUNDS
The deferred inflows of resources balance in governmental funds as of June 30, 2021 consists of the following unavailable resources:
California Senate Bill 90 (SB90), was adopted in 1972 and added to the State Constitution in 1979.
When the Governor or Legislature mandates a new program or higher level of service upon local agencies and school districts, SB90 requires the State to reimburse local agencies and school districts for the cost of these new programs or higher levels of service. The balance in deferred inflows of resources is the value of reimbursement claims submitted to the State, which are subject to audit for unallowable costs.
As described in Note 6, under the Teeter Plan the City is allocated secured property tax revenue, which has been billed but not collected. Collections which have not occurred within the availability period are included in deferred inflows of resources in the General Fund.
Ge ne r a l Fund
Other
Gove r nm e nta l
Funds
Total
Gove r nm e nta l
Funds
Grant and subvention revenues............................... 120,569$ 83,186 $ 203,755 $ Property Tax.................................................................. 170,557 8,330 178,887 Teeter Plan................................................................... 31,745 - 31,745 SB 90............................................................................. 3,898 - 3,898 Advances to Successor Agency............................... - 2,896 2,896 PG&E franchise tax..................................................... 3,862 - 3,862 Loans............................................................................ - 159,426 159,426 Total............................................................................... 330,631$ 253,838$ 584,469$
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(12) SAN FRANCISCO COUNTY TRANSPORTATION AUTHORITY
The Transportation Authority was created in 1989 by a vote of the San Francisco electorate. The vote approved Proposition B, which imposed a sales tax of one-half of one percent (0.5%), for a period not to exceed 20 years, to fund essential transportation projects. The types of projects to be funded with the proceeds from the sales tax were set forth in the San Francisco County Transportation Expenditure Plan (Expenditure Plan), which was approved as part of Proposition B. The Transportation Authority was organized pursuant to Sections 131000 et seq. of the Public Utilities Code. Collection of the voter- approved sales tax began on April 1, 1990. The Transportation Authority administers the following programs:
Sales Tax Program. On November 4, 2003, the San Francisco voters approved Proposition K with a
74.7% affirmative vote, amending the City Business and Tax Code to extend the county-wide one-half of one percent sales tax, and to replace the 1989 Proposition B Plan with a new 30-year Expenditure Plan. The new Expenditure Plan includes investments in four major categories: 1) Transit; 2) Streets and Traffic Safety (including street resurfacing, and bicycle and pedestrian improvements); 3) Paratransit services for seniors and individuals with disabilities; and 4) Transportation System Management/Strategic Initiatives (including funds for neighborhood parking management, transportation/land use coordination, and travel demand management efforts). Major capital projects to be funded by the Proposition K Expenditure Plan include: A) development of the Bus Rapid Transit and Muni Metro Network; B) construction of the Muni Central Subway (Third Street Light Rail Project Phase
2); C) construction of the Caltrain Downtown Extension to a rebuilt Transbay Terminal; and D) South Approach to the Golden Gate Bridge: Doyle Drive Replacement Project (re-envisioned as the Presidio Parkway). Under Proposition K legislation, the Transportation Authority directs the use of the Sales Tax and may issue up to $1.88 billion in bonds secured by the Sales Tax.
Congestion Management Agency (CMA) Programs. On November 6, 1990, the Transportation Authority was designated under State law as the CMA for the City. Responsibilities resulting from this designation include developing a Congestion Management Program, which provides evidence of the integration of land use, transportation programming and air quality goals; preparing a long-range monitoring and measuring traffic congestion levels in the City; measuring the performance of all modes of transportation; and developing a computerized travel demand forecasting model and supporting for certain state and federal transportation funds and works with the Metropolitan Transportation Commission to program those funds to San Francisco projects.
Transportation Fund for Clean Air (TFCA) Program.On June 15, 2002, the Transportation Authority was designated to act as the overall program manager for the local guarantee (40%) share of transportation funds available through the TFCA program. Funds from this program, administered by the Bay Area Air Quality Management District come from a $4 vehicle registration fee on automobiles registered in the Bay Area. Through this program, the Transportation Authority recommends projects that benefit air quality by reducing motor vehicle emissions.
Vehicle Registration Fee for Transportation Improvements Program. On November 2, 2010, San Francisco voters approved Proposition AA with a 59.6% affirmative vote, authorizing the Transportation Authority to collect an additional $10 annual vehicle registration fee on motor vehicles registered in San Francisco and to use the proceeds to fund transportation projects identified in the 30-year Expenditure Plan. Revenue collection began in May 2011. Proposition AA revenues must be used to fund projects from the following three programmatic categories. The percentage allocation of revenues designated for each category over the 30-year Expenditure Plan period is shown in parenthesis for the following category name: 1) Street Repair and Reconstruction (50%); 2) Pedestrian Safety (25%); and 3) Transit Reliability & Mobility Improvements (25%).
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Treasure Island Mobility Management Authority (TIMMA) . The Treasure Island Transportation Management Act of 2008 (Assembly Bill 981, Leno) authorizes the creation or designation of a Treasure Island-specific transporta
approved a resolution designating the Transportation Authority as the TIMMA to implement the Treasure Island Transportation Implementation Plan in support of the Treasure Island/Yerba Buena Island Development Project. In September 2014, the Governor signed Assembly Bill 141, establishing TIMMA as a legal entity distinct from the Transportation Authority to help firewall the Transportation s of the Transportation Authority Board act as the Board of Commissioners for TIMMA. The Transportation Authority financial statements include TIMMA as a blended special revenue component unit.
Traffic Congestion Mitigation Tax. The Traffic Congestion Mitigation Tax was approved by San Francisco voters on November 5, 2019, through approval of Proposition D. The measure, also referred to as the Transportation Network Company (TNC) Tax, is a surcharge on commercial ride hailing trips
that originate in San Francisco, for the portion of the trip within the City. The intent of the TNC Tax to mitigate the effects of increased congestion due to TNC vehicles. Beginning January 1, 2020, a 1.5% tax is charged on shared rides or rides taken in a zero emission vehicle, and 3.25% is charged on rides
with a single occupant. The tax is in effect until November 2045. After a 2% set aside for administration by the City, 50% of the revenues are directed to the SFMTA for transit operations and improvements, and 50% to the Transportation Authority for bicycle and pedestrian safety improvements, traffic calming, traffic signals, and maintenance.
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(13) DETAILED INFORMATION FOR ENTERPRISE FUNDS
(a) San Francisco International Airport
San Francisco International Airport (the Airport or SFO), which is owned and operated by the City, is the principal commercial service airport for the San Francisco Bay Area. A five-member Commission is responsible for the operation, development and management of the Airport. The Airport is located 14 miles south of downtown San Francisco in an unincorporated area of San Mateo County, between the Bayshore Freeway (U.S. Highway 101) and the San Francisco Bay. The Airport is also a major origin Revenue Pledge The Airport has pledged all of the Net Revenues (as defined in bond resolutions adopted by the Airport Commission) to repay the following obligations, when due, in order of priority, (1) the San Francisco International Airport Second Series Revenue Bonds (Senior Bonds) and a portion of amounts due to reimburse drawings under the letters of credit securing the Senior Bonds, (2) the Subordinate Commercial Paper Notes and any other obligations (Subordinate Bonds) and amounts due to reimburse drawings under the letters of credit securing the Commercial Paper Notes, (3) remaining amounts due to reimburse drawings under the letters of credit securing the Senior Bonds, and (4) interest rate swap termination payments.
During fiscal year 2020-21, the original principal amount of the Senior Bonds and Commercial Paper Notes issued, principal and interest remaining due on outstanding Senior Bonds and Commercial Paper Notes, principal and interest paid on such obligations, and applicable Net Revenues are as set forth in the table below. There were no unreimbursed drawings under any letter of credit or interest rate swap termination payments due.
Bonds issued with revenue pledge .......................................................................... $ 838,380 Bond principal and interest remaining due at end of the fiscal year ........................ 15,125,941 Bond principal and interest paid in the fiscal year ................................................... 277,427 Commercial paper issued with subordinate revenue pledge ................................... 506,150 Commercial paper principal and interest remaining due at end of the fiscal year ... 279,408 Commercial paper principal, interest and fees paid in the fiscal year ..................... 3,751 Net revenues............................................................................................................ 311,233 In addition, pursuant to the Hotel Trust Agreement, the Airport has pledged all of the Revenues of the on-Airport Hotel and certain other assets pledged under the Amended and Restated Hotel Trust Agreement, to repay the Hotel Special Facility Bonds. This pledge is in force so long as the Hotel Special Facility Bonds are outstanding. The Hotel Special Facility Bonds mature in fiscal year 2058 and are subject to mandatory sinking fund redemption each year starting in 2025. The Hotel Special Facility Bonds are not payable from or secured by the Net Revenues of the Airport.
Reserves and Debt Service Requirement
Under the terms of the 1991 Master Bond Resolution,
the Airport may establish one or more reserve accounts with different reserve requirements to secure one or more series of Senior Bonds. Accordingly, the Airport has established three reserve accounts in the Reserve Fund: the Issue 1 Reserve Account, the 2009 Reserve Account, and the 2017 Reserve Account, all held by the trustee for the Senior Bonds. The reserve requirement for the Issue 1 Reserve Account is equal to the maximum annual debt service accruing in any year during the life of all participating series of bonds secured by the Issue 1 Reserve Account. The reserve requirement for each series of Senior Bonds secured by the 2009 Reserve Account (each a 2009 Reserve Series) is the lesser of: (i) maximum annual debt service for such series of 2009 Reserve Series Bonds, (ii) 125% of average annual debt service for such series of 2009 Reserve Series Bonds, and (iii) 10% of the outstanding principal amount of such series (or allocable issue price of such series if such series is sold with more than a de minimis (2%) amount of original issue discount), in each case as determined from
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time to time. With respect to all 2009 Reserve Series, the reserve requirement is the aggregate of such amounts for each individual series. On August 20, 2020, the last Series of Bonds supported by the 2009 Reserve Account, the Series 2010D Bonds, were defeased, and the 2009 Reserve Account was closed. The amounts remaining in the 2009 Reserve Account were transferred to the redemption account for the Series 2010D Bonds. The reserve requirement for the 2017 Reserve Account is equal to the lesser of: (i) the maximum amount of aggregate annual debt service for all 2017 Reserve Series Bonds in any fiscal year during the period from the date of calculation to the final scheduled maturity of the 2017 Reserve Series Bonds, (ii) 10% of the outstanding aggregate principal amount of all 2017 Reserve Series Bonds (provided that the issue price of a Series of 2017 Reserve Series Bonds will be used in this calculation if such Series was sold with an original issue discount that exceeded 2% of the principal of such Series on its original date of sale), and (iii) 125% of the average aggregate annual debt service for all 2017 Reserve Series Bonds. As of June 30, 2021, only the Series 2017D, 2018A, 2019B, and 2019D Bonds are secured by the 2017 Reserve Account. Alternatively, the Airport may establish a separate reserve account with a different reserve requirement to secure an individual series of Senior Bonds or may issue Senior Bonds without a reserve account.
While revenue bonds are outstanding, the Airport may not create liens on its property essential to operations, may not dispose of any property essential to maintaining revenues or operating the Airport, and must maintain specified levels of insurance or self-insurance.
Under the terms of the 1991 Master Bond Resolution, the Airport has covenanted that it will establish and at all times maintain rentals, rates, fees, and charges for the use of the Airport and for services rendered by the Airport so that:
(i) Net revenues in each fiscal year will be at least sufficient (i) to make all required debt service payments and deposits in such fiscal year with respect to the bonds, any subordinate bonds, and any general obligation bonds issued by the City for the benefit of the Airport and (ii) to make the annual service payment to the City, and
(ii) Net revenues, together with any transfer from the Contingency Account to the Revenue Account (both held by the City Treasurer), in each fiscal year will be at least equal to 125% of aggregate annual debt service with respect to the bonds for such fiscal year.
The methods required by the 1991 Master Bond Resolution for calculating debt service coverage differs statements.
Passenger Facility Charges The Airport, as authorized by the Federal Aviation Administration (FAA) pursuant to the Aviation Safety and Capacity Expansion Act of 1990 (the Act), as amended, imposes a Passenger Facility Charge (PFC) of $4.50 for each enplaned passenger at the Airport. Under the Act, air carriers are responsible for the collection of PFC and are required to remit PFC revenues to the Airport in the following month after they are recorded by the air carrier. As of June 30, 2021, the FAA has approved Airport applications (PFC #2 to PFC #9) for collection and use with a total cumulative collection amount of $2.3 billion. The final charge expiration date is estimated to be December 1, 2030.
On January 13, 2021, the FAA approved the Air
of $208.6 million. For the year ended June 30, 2021, the Airport reported approximately $29.5 million of PFC revenue, which is included in other nonoperating revenues in the accompanying basic financial statements.
Commitments and Contingencies On February 26, 2019, the Airport issued San Francisco International Airport Special Facilities Lease Revenue Bonds (SFO FUEL COMPANY LLC), Series amount of $125.0 million to refund all of the then-outstanding special facilities lease revenue bonds previously issued by the Commission for the benefit of SFO FUEL COMPANY LLC (SFO Fuel), finance
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June 30, 2021
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capital improvements to the jet fuel distribution and related facilities at San Francisco International Airport, pay capitalized interest on a portion of the Series 2019A Bonds, make a deposit to a reserve account for the Fuel Bonds, and pay costs of issuance. SFO Fuel, a special purpose limited liability company formed by certain airlines operating at the Airport, is required to pay facilities rent to the Airport pursuant to a lease agreement between the Commission and SFO Fuel with respect to the on-Airport jet fuel distribution facilities in an amount equal to debt service payments on the Fuel Bonds and any required bond reserve account deposits. The principal and interest on the Fuel Bonds are paid solely from the facilities rent payable by SFO Fuel to the Airport. The lease payments, and therefore the Fuel Bonds, are payable from charges imposed by SFO Fuel on air carriers pursuant to the Amended and Restated Fuel System Interline Agreement, dated as of September 1, 1997 (the Interline Agreement).
Pursuant to the Interline Agreement, the airlines that are members of SFO Fuel are collectively liable on a step-up basis for the sum of all costs, liabilities and expenses payable by SFO Fuel in relation to the administration and operation of SFO Fuel and the operation and maintenance of the premises and right-of-way leased from the Airport, including without limitation the facilities rent. The Fuel Bonds are not payable from or secured by the Net Revenues of the Airport. The Airport assigned its right to receive the facilities rent to the Fuel Bonds trustee to pay and secure the payment of the Fuel Bonds. Neither the Airport nor the City is obligated in any manner for the repayment of the Fuel Bonds other than from the facilities rent received from SFO Fuel. The Fuel Bonds are therefore not reported in the accompanying financial statements.
Purchase commitments for construction, material and services as of June 30, 2021 are as follows:
Construction ........................................... $ 93,431 Operating................................................ 44,947 Total........................................................ $ 138,378 Transactions with Other Funds Pursuant to the Lease and Use Agreement between the Airport and most of the airlines operating at the Airport, the Airport makes an annual service payment to the $5.0 million per fiscal year, in order to compensate the City for all indirect services provided to the Airport. The annual service payment for the year ended June 30, 2021 was $14.7 million and was recorded as a transfer. In addition, the Airport pays for the cost of certain direct services provided by City departments to the Airport, including those provided by the Police Department, Fire Department, City Attorney, City Treasurer, City Controller, City Purchasing Agent and other City departments. The cost of direct services paid for by the Airport for the year ended June 30, 2021, was $173.5 million.
Business Concentrations - In addition to the Lease and Use Agreements with the airlines, the Airport leases facilities to other businesses to operate concessions at the Airport. For the year ended June 30, operating revenues:
United Airlines ............................................... 32.0% (b) Port of San Francisco
A five-member Port Commission is responsible for the operation, development, and maintenance activities of the Port of San Francisco (Port). In February 1969, the Port was transferred in trust to the City under the terms and conditions of State legislation (Burton Act) ratified by the electorate of the City. Prior to 1969, the Port was operated by the State of California. The State retains the right to amend, modify or revoke the transfer of lands in trust provided that it assumes all lawful obligations related to such lands.
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Pledged Revenues
industrial enterprises and from maritime operations, which include cargo, ship repair, fishing, harbor services, cruise and other maritime activities, are held in a separate enterprise fund and appropriated for expenditure pursuant to the budget and fiscal provisions of the City Charter, consistent with trust requirements. Under public trust doctrine, the Burton Act, and the transfer agreement between the City and the State, Port revenues may be spent only for uses and purposes of the public trust.
The Port pledged future net revenues to repay its revenue bonds. As of June 30, 2021, the total principal and interest remaining to be paid on the bonds is $61.7 million. The principal and interest payments made in 2021 were $3.3 million and a net revenue deficit (total operating losses calculated in accordance with the bond indenture) for the year ended June 30, 2021, was $9.2 million.
The Port has entered into a loan agreement with the California Division of Boating and Waterways for $3.5 million to finance certain Hyde Street Harbor improvements. The loan is subordinate to all bonds payable by the Port and is secured by gross revenues as defined in the loan agreement. Total principal and interest remaining to be paid on this loan is $1.9 million. Annual principal and interest payments were $0.2 million in 2021 and pledged harbor revenues were $0.1 million for the year ended June 30, 2021.
Commitments and Contingencies
The Port is presently planning various development and capital purchase commitments for construction-related services, materials and supplies, and other services were $11.3 million for capital projects and $0.9 million for general operations.
Transactions with Other Funds The Port receives from, and provides services to, various City departments. In fiscal year 2020-21, the $22.2 million in services provided by other City departments (MOHCD) entered into a Memorandum of Understanding to implement the affordable housing development project at the Seawall Lot 322-
million from MOHCD, which included additional interest accrued since June 30, 2019. As part of the 88 Broadway project, the Port entered into a Ground Lease with a developer in March 2019. The Ground Lease has a term of fifty-seven years plus one eighteen extension option (a 75-year maximum term but with expiration no later than December 31, 2105). The lease revenues are being amortized over the 75-year maximum term of the lease. At June 30, 2021, the Port has a noncurrent unearned revenue balance in the amount of $14.1 million related to this Ground Lease. In addition to the payment by MOHCD, the Developer will be required to make lease payments representing a share of any cash flow generated by commercial activities.
In December 2017, the Port and the San Francisco Fire Department (SFFD) entered into a MOU for the use of water, apron, shed and office space at Pier 26 for berthing and servicing of fire boats for five years and on a month-to-month basis afterward. To facilitate these uses, SFFD repaired apron decking, replaced the fender system within the leasehold area and upgraded electrical services to Pier 26. In return, the Port allowed SFFD to apply hundred percent rent credits toward the lease payments until all required capital improvements, approximately $2.3 million, are fully offset. As of June 30, 2021, rent credits of $0.7 million have been provided to SFFD.
In November 2018, the Port and the Office of Community Investment and Infrastructure (OCII) entered into a grant agreement, to reimburse the Port from available excess bond proceeds for the Mission Bay Ferry Terminal Landing project construction costs in the amount not-to-exceed $9.0 million. In January imburse the remaining $0.6 million in
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2022. As of June 30, 2021, the Port recorded a due from other City funds and due to other City funds in the amount of $0.6 million.
South Beach Harbor Project Commitments On May 1, 2019, the Successor Agency transferred South Beach Harbor operations to the Port. Under San Francisco Bay Conservation and Development Commission (BCDC) Permit Amendment No. 17 for the South Beach Harbor Project, certain public access and other improvements were to be completed by December 31, 2017. Construction estimates prepared by a Port consultant in 2014 indicate that the required uncompleted work would cost approximately $7.9 million. The Port has worked with the water recreation community to develop an alternative public access improvement proposal for BCDC consideration. Port management believes that the alternative proposal will provide significant public access improvements that are relevant to the project area and at a lower cost. On December 18, 2020, BCDC issued Amendment No. 20 for the South Beach Harbor Permit (1984.002.20) requiring amended project work to be completed by December 31, 2024, including installation of a new guest dock, kayak launch, and hoists located at Pier
40. Pier 45 Fire
On May 23, 2020, a large fire broke out at a warehouse (Shed C) on Pier 45. The cause of the fire is undetermined. Nearly all of Shed C and its contents were lost due to the fire, including loss of private property stored at the pier. Other adjacent sheds were also damaged by smoke and soot. damaged property and lost profits, which the Port has denied. Tenant lease agreements generally contain language that protects the City from any form of property damage liability. Two lawsuits have ear
to be materially significant.
Pollution Remediation Obligations
and adjusted periodically, based on new information, in accordance with applicable GAAP, for the estimated costs of compliance with environmental laws and regulations and remediation of known contamination. As future development planning is undertaken, the Port evaluates its overall provisions for environmental liabilities in conjunction with the nature of future activities contemplated for each site and accrues a liability, if necessary. It is, therefore, reasonably possible that in future reporting periods current estimates of environmental liabilities could materially change.
Port lands are subject to environmental risk elements typical of sites with a mix of light industrial activities dominated by transportation, transportation-related and warehousing activities. Due to the historical placement of fill of varying quality, and widespread use of aboveground and underground tanks and pipelines containing and transporting fuel, elevated levels of petroleum hydrocarbons and lead are commonly found on Port properties. Consequently, any significant construction, excavation or other activity that disturbs soil or fill material or bay sediment may encounter hazardous materials and/or generate hazardous waste.
The Port has identified certain environmental issues related to Port property, including polychlorinated biphenyls, polycyclic aromatic hydrocarbons and other oil contamination. The Port may be required to perform certain clean-up work if it intends to develop or lease the property, or at such time as required by the City or State. There are sites where groundwater contamination may be later identified, where the Port has primary or secondary responsibility. The potential liability for all such risk cannot be reasonably made at this time.
A 69-
works, ship building and repair, and other heavy industrial operations. Much of the site was owned and/or occupied by the U.S. Navy or its contractors for at least 60 years. A long history of heavy an underutilized property area where reuse is
hindered by actual or suspected contamination. Fifteen acres remain occupied by an on-going ship
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repair facility. Environmental conditions exist that require investigation and remediation prior to any rehabilitation or development for adaptive reuse. The lack of adequate information about environmental conditions has hindered previous development proposals for Pier 70.
Investigation work completed in 2011 reduced the uncertainty regarding the nature and extent of contamination, potential need for remediation, and costs associated with implementation of a risk management plan. The Regional Water Quality Control Board approved the Risk Management Plan in January 2014. The Risk Management Plan provides institutional controls (e.g. use restrictions, health and safety plans) and engineering controls (e.g. capping contaminated soil) to protect current and future users and prevent adverse impact to the environment. The Risk Management Plan specifies how future development, operation, and maintenance will implement the remedy, by covering existing site soil with buildings, streets, plazas, hardscape or new landscaping, thereby minimizing or eliminating exposure to contaminants in soil.
Previous investigation of the northeast shoreline of Pier 70, in an area for development as the future -shore sediment is contaminated with metals, petroleum
hydrocarbons and polychlorinated biphenyls at concentrations that pose a potential risk to human health or the environment, and will likely require removal or capping of sediment before development of the area for public access and recreation. In 2018, the Port entered into a disposition and development agreement with a developer for the 28-acre Waterfront Site. The developer assumes substantial responsibility for capping contaminated soil in the project area according to a Risk Management Plan. The remaining accrued cost for pollution remediation at Pier 70, represents the estimated contract value for the soil cap between Crane Cove Park and the shipyard and a sediment cap underwater northwest of the shipyard, is estimated at $4.5 million at June 30, 2021.
Other environmental conditions on Port property include polycyclic aromatic hydrocarbons and oil contamination at various sites. The Port may be required to perform certain clean-up work if it intends to develop or lease such property, or at such time as may be required by the City or State. As of June A summary of environmental liabilities, included in noncurrent liabilities, at June 30, 2021, is as follows:
(c) San Francisco Water Enterprise
The San Francisco Water Enterprise (Water Enterprise) was established in 1930. The Water Enterprise, which consists of a system of reservoirs, storage tanks, water treatment plants, pump stations, and pipelines, is engaged in the collection, transmission and distribution of water to the City and certain suburban areas. In fiscal year 2020-21, the Water Enterprise sold water, approximately 68,812 million gallons annually, to a total population of approximately 2.7 million people who reside primarily in four Bay Area counties (San Francisco, San Mateo, Santa Clara and Alameda).
The San Francisco Public Utilities Commission, established in 1932, provides the operational oversight for the Water Enterprise, Hetch Hetchy Water and Power (Hetch Hetchy and CleanPowerSF), and the by the voters in June 2008, the Mayor nominates candidates subject to qualification requirements to the Commission and the Board of Supervisors votes to approve the nominees by a majority (at least six members).
Environmental
Remediation
Environmental liabilities at July 1, 2020 2,942 $
Current year claims and changes in estimates 7,388
Environmental liabilities at June 30, 2021 10,330 $
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Pledged Revenues The Water Enterprise has pledged future revenues to repay various bonds and State Revolving Fund loans. Proceeds from the revenue bonds and State Revolving Fund loans provided financing for various capital construction projects and to refund previously issued bonds.
These bonds and State Revolving Fund loans are payable solely from revenues of the Water Enterprise and are payable through fiscal year 2050-51.
The original amount of revenue bonds and State Revolving Fund loans issued, total principal and interest remaining, principal and interest paid during 2021 and applicable revenues for 2021 are as follows:
Bonds issued with revenue pledge .......................................................................... $ 4,891,480 Principal and interest remaining due at end of the fiscal year ................................. 7,771,993 Bond principal and interest paid in the fiscal year ................................................... 248,427 Net revenues............................................................................................................ 339,046 Funds available for revenue bond debt service ....................................................... 467,738 Water Balancing Account During fiscal year 2020-21, the wholesale revenue requirement, net of adjustments, charged to wholesale customers was $276.0 million. Such amounts are subject to final review by wholesale customers, along with a trailing wholesale balancing account compliance audit of the wholesale revenue requirement calculation. As of June 30, 2021, the Water Enterprise owed the Wholesale Customers $60.9 million under the Water Supply Agreement.
Commitments and Contingencies As of June 30, 2021, the Water Enterprise had outstanding commitments with third parties of $185.2 million for various capital projects and other purchase agreements.
Environmental Issue As of June 30, 2021, the total pollution remediation liability was $1.3 million, for the excavation of contaminated soil that contained polycyclic aromatic hydrocarbons from a gun club site in the Lake Merced area.
Transactions with Other Funds The Water Enterprise purchases water from Hetch Hetchy Water and electricity from Hetch Hetchy Power at market rates. These amounts, totaling approximately $44.1 million and $9.8 million, respectively, for the year ended June 30, 2021, are included in the operating A variety of other City departments provide services such as engineering, purchasing, legal, data processing, telecommunications, and human resources to the Water Enterprise and charge amounts year ended June 30, 2021 and have been included in services provided by other departments. (d) Hetch Hetchy Enterprise
San Francisco Hetch Hetchy Water and Power (Hetch Hetchy or the Enterprise) was established as a result of the Raker Act of 1913, which granted water and power resources rights-of-way on the Tuolumne River in Yosemite National Park and Stanislaus National Forest to the City. CleanPowerSF, launched in May 2016, provides green electricity from renewable sources to residential and commercial customers in San Francisco and was reported as part of Hetch Hetchy starting fiscal year 2016. Hetch Hetchy is a stand-alone enterprise comprised of three funds, Hetchy Power (the Power Enterprise), upcountry water supply and transmission service. Hetch Hetchy is engaged in the collection and of electricity from that resource, as well as the City Power services including energy efficiency and renewable.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
148
Approximately 81.0% of the electricity generated by Hetchy Power is used to provide electric service the Airport and its tenants, SFGH, streetlights, Moscone Convention Center, and the Water and Wastewater Enterprises). The majority of the remaining 19.0% balance of electricity is sold to CleanPowerSF and other publicly owned utilities districts. As a result of the 1913 Raker Act, energy old first to the other utility districts to cover their agricultural pumping and municipal load needs and any remaining energy is either sold to other municipalities and/or government agencies (not for resale) or sold into the California Independent System Operator (CAISO). Hetch Hetchy operation is an integrated system of reservoirs, hydroelectric power plants, aqueducts, pipelines, and transmission lines.
Hetch Hetchy also purchases wholesale electric power from various energy providers that are used in conjunction with owned hydro resources to meet the power requirements of its customers. Operations and business decisions can be greatly influenced by market conditions, state and federal power matters before the California Public Utilities Commission (CPUC), the CAISO, and the Federal Energy CAISO, and FERC forums and continues to monitor regulatory proceedings.
Segment Information Hetch Hetchy Power issued debt to finance its improvements. The Hetch Hetchy Water fund, the Hetch Hetchy Power fund, and CleanPowerSF fund are reported for in a single enterprise. However, investors in the debt rely solely on the revenue generated by the individual activities for repayment. Summary financial information for Hetch Hetchy is presented below:
Hetch Hetchy
Water
Hetch Hetchy
Power CleanPower SF Total
Assets*:
91,009$ 227,134 $ 121,342 $ 439,485 $ - 12,457 - 12,457
6,990 8,931 - 15,921
152 753 - 905
177,481 492,056 - 669,537
275,632 741,331 121,342 1,138,305
Deferred outflows of resources:
7,799 9,531 803 18,133
3,725 4,552 442 8,719
11,524 14,083 1,245 26,852
Liabilities:
15,857 166,435 17,389 199,681
43,561 112,760 15,112 171,433
59,418 279,195 32,501 371,114
Deferred inflows of resources:
988 1,207 1,093 3,288
2,085 2,548 1,913 6,546
3,073 3,755 3,006 9,834
Net position:
177,481 323,066 - 500,547
-9 9 -9 9
----
47,184 149,299 87,080 283,563
224,665$ 472,464 $ 87,080 $ 784,209 $ * Certain amounts presented herein have been reclassified from the Statement of Net Position Condens ed Statements of Net Pos ition
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
149
Pledged Revenues Hetch Hetchy Power has pledged future power revenues to repay the 2008 Clean Renewable Energy Bonds (CREBs), the 2011 Qualified Energy Conservation Bonds (QECBs), and the 2015 New Clean Renewable Energy Bonds (NCREBs). Additionally, Hetch Hetchy Power has pledged future power revenues for 2015 Series AB power revenue bonds. Proceeds from the bonds provided financing for various capital construction and facility energy efficiency projects. The Series 2015 AB power revenue bonds are payable through fiscal year 2045-46 and are solely payable from net revenues of Hetch Hetchy Power on a senior lien basis to the 2008 CREBs, the 2011 QECBs, and the 2015 NCREBs.
Hetch
Hetchy
Water
Hetch
Hetchy
Power
CleanPower
SF Total
47,090$ 136,383$ 207,698$ 391,171$
(6,009) (15,627) - (21,636)
(44,508) (130,011) (212,716) (387,235)
(3,427) (9,255) (5,018) (17,700)
Nonoperating revenues (expenses):
1,349 1,483 - 2,832
(232) 24 51 (157)
- (1,970) (18) (1,988)
(60) 17,107 927 17,974
16,000 (532) - 15,468
13,630 6,857 (4,058) 16,429
211,035 465,607 91,138 767,780
224,665$ 472,464 $ 87,080 $ 784,209 $
Condens ed Statements of Revenues , Expens es ,
and Changes in Fund Net Position
Condens ed Statements of Cas h Flows Hetch
Hetchy
Water
Hetch
Hetchy
Power
CleanPower
SF Total
Net cash provided by (used in):
5,165$ (5,217)$ 5,743$ 5,691$
19,285 18,801 692 38,778
(16,981) (17,590) - (34,571)
739 1,986 802 3,527
8,208 (2,020) 7,237 13,425
88,068 202,285 83,527 373,880
96,276$ 200,265 $ 90,764$ 387,305$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
150
The original amount of revenue bonds issued, total principal and interest remaining, principal and interest paid, and applicable revenues for fiscal year 2020-21 are as follows:
Hetch Hetchy Power
Bonds issued with revenue pledge .......................................................................... $ 64,871 Bond principal and interest remaining due at end of the fiscal year ........................ 71,082 Bond principal and interest paid in the fiscal year* .................................................. 5,368 Funds available for revenue bond debt service ....................................................... 34,178 * Per Indenture, debt service for coverage is calculated using the amount of principal and interest paid during the year for the 2015 series AB power revenue bonds, which has a senior lien on power enterprise revenues; principal and interest paid during the year for the 2015 Series AB power revenue bonds was $2,567.
Commitments and Contingencies As of June 30, 2021, Hetch Hetchy had outstanding commitments with third parties of $143.4 million for various capital projects and other purchase agreements for materials and services.
Hetch Hetchy Water
To meet certain requirements of the Don Pedro Reservoir operating license, the City entered into an agreement with the Modesto Irrigation District and Turlock Irrigation District (collectively the Districts) in which the Districts would be responsible for an increase in water flow releases from the reservoir in Total payments were $5.1 million in fiscal year 2020-21. The payments are to be made for the duration Districts have also agreed to monitor the fisheries, in the lower Tuolumne River, for the duration of the license. A maximum monitoring expense of $1.4 million is to be shared between the City and the are responsible for 48.0% of the costs.
Hetch Hetchy Power
service in 2015 under the Wholesale Distribution Tariff (WDT) for distribution service and under the CAISO Open-Access Transmission Tariff for transmission service. The FERC-regulated Wholesale Distribution Tariff is implemented by PG&E through the City specific Service Agreements and Interconnection Agreements. The terms of these agreements have been in contention since the effective date. The City is continuing to negotiate with PG&E and, where necessary, filing complaints and protests at FERC. In September 2020, PG&E filed a revised WDT. Under the terms of the new WDT, the City would pay substantially higher rates, at least twice to potentially four times the current charges, and be required to install costly and inefficient equipment not needed for technical, safety or reliability of operations. In addition, Hetchy Power would no longer be allowed to connect to the o; have new secondary interconnections; and/or serve any small, typically unmetered loads, such as streetlights, traffic signal and bus shelters.
Staff prepare regular reporting to the Board of Supervisors outlining on-going disputes with PG&E over project requirements, costs and delays. During fiscal year 2020-21, Hetch Hetchy Power purchased $8.9 million of distribution services and other support services from PG&E under the terms of the service agreements and Interconnection Agreements that implement the WDT. The City continues to litigate and dispute these terms at FERC and in the court systems; and pursue the purchase of the electric grid in San Francisco.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
151
Hetchy Power may purchase or sell energy and other related products (such as ancillary services, spinning reserves, resource adequacy products, and congestion revenue rights) with different market entities through the Western System Power Pool (WSPP) and the CAISO. During fiscal year 2020-21, Hetchy Power did not purchase power and other related products. There was $0.5 million of excess -21.
Hetchy Power (Buyer) purchases energy, capacity, and environmental attributes from a solar photovoltaic project located at Sunset Reservoir (the facility) pursuant to the 2009 25-year Power Purchase Agreement (PPA) with SFCity1, LP, owned by Duke Energy (Seller). In November 2010, the facility commenced commercial operation and began to provide Hetchy Power energy generated by the facility. The PPA sets the purchase price of generated energy at $235/MWh, increased by 3.0% each year throughout the term of the agreement, and it is expected that the facility will generate 6,560 MWh per year. In fiscal year 2020-21, the facility generated 6,598 MWh and rate was at $324/MWh.
In the event that the facility generates more energy than expected due to better than normal meteorological conditions, the PPA requires the Buyer to purchase all the excess energy but generation in excess of 120.0% of expected is purchased at no cost. The PPA also requires the Seller to generate a minimum amount of energy from the facility annually. If energy production falls below 50% of expected, the Seller must provide replacement power, and if energy falls below 90% of expected, the price for energy generated is lowered. In fiscal year 2020-21, purchases of energy under the PPA were $2.1 million or 6,598 MWh.
CleanPowerSF
CleanPowerSF launched in May 2016 and entered into contracts with Calpine Energy Services L.P. (Calpine) and Shiloh I Wind Project LLC (Shiloh) to purchase renewable and conventional energy and resource adequacy capacity to meet its retail sales obligations. Both contracts feature 10-year master agreements under which multiple transactions may be executed. Calpine did not have any reserve balance requirement in fiscal year 2020-21.
Since its launch, CleanPowerSF has added multiple short-term and medium-term contracts to purchase renewable, carbon-free and conventional energy and resource adequacy capacity, as well as long-term contracts for renewable energy and capacity with renewable energy sPower, Terra-Gen, NextEra and EDF Renewables. These contracts have been entered to allow CleanPowerSF to both meet its existing retail sales obligations and to support future retail sales from the citywide enrollment into the CleanPowerSF program. Citywide enrollment was substantively completed with the enrollment of residential accounts in April 2019. The total power purchase cost, net of wholesale sales in fiscal year 2020-21 equaled $188.5 million.
CleanPowerSF entered into contract with a third-party data management, billing administration, and customer care services provider in November 2015 for a three-year term, not to exceed $5.6 million.
On December 1, 2016, Noble Americas Energy Solutions was acquired by Calpine Corporation and Calpine Energy Solutions under its new name and ownership. In August 2018, CleanPowerSF exercised its option under the contract to extend the term for three years, through October 31, 2021, -to-exceed value to $18.8 million. During fiscal year 2020-21, amounts paid were $6.7 million.
In November 2020, CleanPowerSF executed a Power and Storage Purchase Agreement to purchase solar product and storage product from a solar powered generation facility and battery storage facility located at Livermore pursuant to the 25-year PPA with IP Aramis, LLC (Seller). As of June 30, 2021, CleanPowerSF received cash collateral of $9.0 million for Development Assurance and Performance Assurance from the Seller.
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Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
152
In March 2018, CleanPowerSF entered into a five-year, $75 million Credit Agreement with J.P. Morgan Chase in order for the program to secure letters of credit to guarantee certain payment obligations of CleanPowerSF and to meet working capital needs of CleanPowerSF, if necessary. The Credit Agreement is secured by CleanPowerSF net revenues; there is no pledge of or lien on CleanPowerSF net revenues that ranks senior to the obligations of the Credit Agreement. The letters of credit, issued by J.P. Morgan Chase, were in the amount of $13.8 million as of June 30, 2021. There was no draw against the Credit Agreement during fiscal year 2020-21.
Financial covenants include that CleanPowerSF maintain a Debt Service Coverage Ratio as defined in the Credit Agreement of not less than 1.05 for each fiscal quarter, as determined for the four consecutive fiscal quarter periods ended on the last day of such fiscal quarter. As of June 30, 2021, CleanPowerSF was not in compliance with this financial covenant as calculated for the four consecutive fiscal quarters ended on such date, resulting in a covenant event of default under the Credit Agreement.
In connection with subsequent amendments to the Credit Agreement, JPMorgan Chase granted a waiver of such event of default for the period ended June 30, 2021.
Transactions with Other Funds
The Water Enterprise purchases water from Hetch Hetchy Water and power from Hetch Hetchy Power. Included in the operating revenues are the water assessment fees totaling $44.1 million and purchased electricity for $9.8 million for the year ended June 30, 2021.
The water assessment fees represent a recovery to fund upcountry, water related costs that are not otherwise funded through water-related revenue. During fiscal year 2020-21, $44.1 million of the water assessment fees were received from the Water Enterprise. In addition, the Wastewater Enterprise purchases power from Hetch Hetchy Power totaling $10.1 million for the year ended June 30, 2021.
Included in 2021 operating revenues are sales of power to departments within the City of $82.1 million.
A variety of other City departments provide services such as engineering, purchasing, legal, data processing, telecommunications, and human resources to Hetch Hetchy and charge amounts designed June 30, 2021 and have been included in services provided by other departments.
For the year ended June 30, 2021, operating expenses include purchase of power from Hetchy Power to CleanPowerSF were $2.5 million.
CleanPowerSF received program support services from Hetchy Power. This amount totaled $2.2 million for the year ended June 30, 2021.
(e) San Francisco Municipal Transportation Agency
The San Francisco Municipal Transportation Agency (SFMTA) is governed by the SFMTA Board of ncompasses pedestrians,
bicycling, transit (Muni), traffic and on- and off-street parking, regulation of the taxi industry, and two nonprofit parking garage corporations operated by separate nonprofit corporations whose operations are interrelated.
The SFMTA was established by voter approval of the addition of Article VIIIA to the Charter of the City (the Charter) in 1999 (Proposition E). The purpose of the Charter amendment was to consolidate all surface transportation functions within a single City department, and to provide the Transportation System with the resources, independence, and focus necessary to improve transit service and the (Proposition A), which increased the autonomy of and revenue to the SFMTA; (2) in 2010 (Proposition G), which increased management flexibility related to labor contracts; (3) in 2014 (Proposition A), which provided $500 million in general obligation bonds for transportation and street infrastructure; (4) in 2014
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
153
increase and (5) in 2019 (Proposition D), which imposes tax on fares charged by commercial shared and private rides to fund transportation operations and infrastructure for traffic congestion mitigation in the City.
system in the United States. Operating historic streetcars, modern light rail vehicles, diesel buses, alternative fuel vehicles, electric trolley coaches, and the world- among the most diverse in the world.
bicycles, pedestrians, and parking infrastructure. It manages 21 City owned garages and 18 metered parking lots.
Nonprofit corporations provide operational oversight to two garages, namely Japan Center Garage Corporation and Portsmouth Plaza Parking Corporation (Portsmouth). Of these two garages, Portsmouth garage is owned by the Recreation and Park Department but managed by the SFMTA. The activities of these nonprofit garages are accounted for in the parking garages account.
Pledged Revenue
In 2007, San Francisco voters approved Proposition A, which authorized the SFMTA to issue revenue bonds and other forms of indebtedness without further voter approval but with approval by the SFMTA Board of Directors and concurrence by the Board of Supervisors. The SFMTA has pledged future revenues to repay various bonds. Proceeds from the revenue bonds provided financing for various capital construction projects and to refund previously issued bonds. These bonds are payable from all SFMTA operating revenues except for City General Fund allocations and restricted sources and are payable through the fiscal year 2050-51.
Annual principal and interest payments for fiscal year 2020-21 were 12.3% of funds available for revenue bond debt service. The original amount of revenue bonds issued, total principal and interest remaining, principal and interest paid during fiscal year 2020-21, applicable net revenues, and funds available for bond debt service are as follows:
Bonds issued with revenue pledge .......................................................................... $ 457,065 Bond principal and interest remaining due at end of the fiscal year ........................ 711,524 Net revenues............................................................................................................ 171,661 Bond principal and interest paid in the fiscal year ................................................... 23,326 Funds available for revenue bond debt service ....................................................... 194,987 Operating and Capital Grants and Subsidies
procedures and subject to the appropriation process. The amount of General Fund subsidy to the SFMTA was $442.7 million in fiscal year 2020-21. The General Fund subsidy includes a total revenue baseline transfer of $346.2 million, as required by the City Charter. In addition, SFMTA received $38 ax. Proposition B, approved by the voters in November
2014, provides additional City General Fund resources to address transportation needs tied to the City population growth. In fiscal year 2020-21, SFMTA received $55.6 million from this source. In fiscal year 2020-21, SFMTA also received additional City General Fund allocation of $2.9 million to fund various capital projects such as the Chase Event Center and mixed-use development project and Community Building Program for District 5.
The SFMTA also receives operating assistance from various federal, state, and local sources, including Transit Development Act funds, diesel fuel, and sales tax allocations. As of June 30, 2021, the SFMTA had various operating grants receivable of $77.0 million. In fiscal year 2020- state, and local grants of $6.7 million, to fund project expenses that are operating in nature.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
154
The operating assistance from federal sources include funds received from FTA in response to COVID- 19 pandemic. The SFMTA received $176.6 million in Coronavirus Aid, Relief, and Economic Security Act funding in fiscal year 2020-21. The SFMTA was awarded $340.9 million in the Coronavirus Response and Relief Supplemental Appropriations Act funding of which $273.6 million was received in fiscal year 2020-21 and $67.3 million remains to be accessed in fiscal year 2021-22.
Proposition 1B is a $20 billion transportation infrastructure bond that was approved by state voters in November 2006. The bond measure is composed of several funding programs including the Public Transportation Modernization, Improvement and Service Enhancement Account Program (PTMISEA) and the California Transit Security Grant Program (CTSGP). The original legislation required funds to be obligated within three years of the date awarded. The Budget Act of 2019 re-appropriated the remaining balances of PTMISEA appropriations, which are available for encumbrance and liquidation until June 30, 2023. PTMISEA funds may be used for transit rehabilitation, safety or modernization improvements, capital service enhancements or expansions, new capital projects, bus rapid transit improvements, bus and rail car procurement, rehabilitation, or replacement. CTSGP is administered by projects that protect critical transportation infrastructure and the traveling public from acts of terrorism, major disasters, and other emergencies. Per current Cal OES guidance, all funds allocated with outstanding balances shall be expended no later than March 31, 2022. The SFMTA did not receive cash in fiscal year 2020-21 from PTMISEA and CTSGP. During fiscal year 2020-21, $1.2 million and $1.1 million in drawdowns were made for various eligible projects from PTMISEA and CTSGP funds, respectively.
Commitments and Contingencies
The SFMTA has outstanding commitments of approximately
$303.5 million with third parties for various capital projects. Grant funding is available for the majority of this amount. The SFMTA also has outstanding commitments of approximately $68.9 million with third parties for noncapital expenditures. Various local funding sources are used to finance these expenditures.
(f) Laguna Honda Hospital
General Fund Subsidy - The Laguna Honda Hospital (LHH) is a skilled nursing facility which specializes in serving elderly and disabled residents. The operations of LHH are subsidized by the on a budgetary
basis; however, the amount of operating subsidy provided is limited to the amount budgeted by the City. Any amount not required for the purpose of meeting an enterprise fund deficit shall be transferred back to the General Fund at the end of each fiscal year, unless otherwise approved by the Board of Supervisors. For the year ended June 30, 2021, the subsidy for LHH was $60.3 million.
Net Patient Services Revenue - Net patient services revenues are recorded at the estimated net realizable amounts from patients, third-party payors and others for services rendered, including a provision for doubtful accounts and estimated retroactive adjustments under reimbursement agreements with federal and state government programs and other third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods, as final settlements are determined. Patient accounts receivable are recorded net of estimated allowances, which include allowances for contractuals and bad debt. These allowances are based on current payment rates, including per diems, Diagnosis-Related Group (DRG) reimbursement amounts and payment received as a percentage of gross charges.
Third-Party Payor Agreements - LHH has agreements with third-party payors that provide for reimbursement to LHH at amounts different from its established rates. Contractual adjustments under third-
lished rate
for services and amounts reimbursed by third-party payors. Medicare and Medi-Cal are the major third- party payors with whom such agreements have been established. Laws and regulations governing the
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
155
Medicare and Medi-Cal programs are complex and subject to interpretation. LHH believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties and exclusion from the Medicare and Medi-Cal programs.
During the fiscal
as follows:
Because Medi-
to receive supplemental federal funding. For the year ended June 30, 2021, LHH accrued and recognized $25.9 million of revenue as a result of matching federal funds to local funds.
Unearned Credits and Other Liabilities - As of June 30, 2021, LHH recorded approximately $59.1 million in other liabilities for third-party payor settlements payable.
Transactions with Other Funds A variety of other City departments provide services such as engineering, purchasing, legal, data processing, telecommunications, human resources, and public totaled $12.9 million for the year ended June 30, 2021 and have been included in services provided by other departments.
As of June 30, 2021, LHH has entered into various purchase contracts totaling $1.8 million that are related to the old building remodel phase of the Replacement Project. (g) San Francisco General Hospital
General Fund Subsidy - San Francisco General Hospital Medical Center (SFGH) is an acute care hospital. The operations of SFGH are subsidized by the City's General Fund. It is the City's policy to fully fund enterprise operations on a budgetary basis; however, the amount of operating subsidy provided is limited to the amount budgeted by the City. Any amount not required for the purpose of meeting an enterprise fund deficit shall be transferred back to the General Fund at the end of each fiscal year, unless otherwise approved by the Board of Supervisors. For the year ended June 30, 2021, the subsidy for SFGH was $142.5 million.
Medi-Cal Medicare Other Total
Gross Revenue 450,227$ 27,451 $ 3,023$ 480,701 $
Less:
Provision for Contractual Allowances (231,795) (23,853) (3,675) (259,323) Total, net 218,432$ 3,598$ (652)$ 221,378$
Net Patient Service Revenue
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
156
Net Patient Services Revenue - Net patient services revenues are recorded at the estimated net realizable amounts from patients, third-party payors and others for services rendered, including a provision for doubtful accounts and estimated retroactive adjustments under reimbursement agreements with federal and state government programs and other third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods, as final settlements are determined. Patient accounts receivable are recorded net of estimated allowances, which include allowances for contractuals, bad debt, and administrative write-offs. These allowances are based on current payment rates, including per diems, DRG amounts and payments received as a percentage of gross charges.
Third party Payor Agreements - SFGH has agreements with third-party payors that provide for reimbursement to SFGH at amounts different from its established rates. Contractual adjustments under third-party reimbursement programs represent the difference between SFGH's established rates and amounts reimbursed by third-party payors. Major third-party payors with whom such agreements have been established are Medicare, Medi-Cal, and the State of California through the Section 1115 Medicaid Waiver and Short-Doyle mental health programs. Laws and regulations governing the Medicare and Medi-Cal programs are complex and subject to interpretation. SFGH believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigation involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties and exclusion from the Medicare and Medi-Cal programs.
During the fiscal year ended June 30, 2021, SFGH's patient receivables and charges for services were as follows:
California's Section 1115 Medicaid Waiver (Waiver), titled "Medi-Cal 2020" began on December 30, 2015. As a result of the Public Health Emergency, parts of the Waiver were extended through December 31, 2021. The Waiver is intended to help sustain the state's Medicaid Program (known as Medi-Cal) by providing California public hospitals federal funding through programs that are designed to shift focus away from hospital-based and inpatient care, towards outpatient, primary and preventative care. California
to successfully implement the Affordable Care Act (ACA) beyond the primary step of coverage expansion. In addition to fee-for-service cost-based reimbursements for inpatient hospital services, Medi-Cal 2020 waiver features four main programs: (1) a pay-for-performance delivery system Medi-Cal Medicare Other Total
Gross Accounts Receivable............................ 225,165$ 210,740 $ 129,561$ 565,466$ Less:............................................................
Contractual Allowance............................. (202,846) (190,220) (81,075) (474,141) Prov ision for Bad Debts............................ - - (8,967) (8,967) Total, Net Accounts Receivable................ ....... 22,319$ 20,520$ 39,519$ 82,358$ Medi-Cal Medicare Other Total
Gross Patient Service Revenue....................... 1,858,186$ 1,032,641 $ 944,019 $ 3,834,846$ Less:............................................................
Contractual Allowance............................. (1,598,537) (853,491) (472,002) (2,924,030) Bad Debt Write Off.................................. - - (70,690) (70,690) Total, Net Patient Serv ice Rev enue.................. 259,649$ 179,150$ 401,327$ 840,126$ Patient Receivables, Net
Net Patient Service Revenue
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
157
transformation and alignment program known as PRIME (Public Hospital Redesign and Incentives in Medi-Cal); (2) Global Payment Program (GPP) for services to the uninsured in designated public hospital systems; (3) Whole Person Care Pilot Program is a county-based, voluntary program to target providing more integrated care for high-risk, vulnerable populations; and (4) Dental Transformation Incentive Program, an optional incentive program to increase the frequency and quality of dental care provided to children.
Payments received under Medi-Cal 2020 Waiver's GPP are utilization based and not dependent on Certified Public Expenditures (CPEs). However, GPP claims are subject to state and federal audit and final reconciliation. SFGH has established reserves for the uncertainty of future financial impact of potential audit and reconciliation adjustments. Revenues recognized under current and previous Medi- Cal Waivers are approximately $116.3 million for the year ended June 30, 2021.
In addition, SFGH is reimbursed by the State of California, under the Short-Doyle Program, for mental health services provided to qualifying residents based on an established rate per unit of service not to exceed an annual negotiated contract amount. During the year ended June 30, 2021, reimbursement under the Short-Doyle Program amounted to approximat ely $6.4 million and is included in net patient service revenue.
Unearned Credits and Other Liabilities - As of June 30, 2021, SFGH recorded approximately $340.2 million in unearned credits and other liabilities, which was comprised of $278.0 million in unearned credits mainly related to receipts under DSH/Safety Net Care Pool, The Medicare Accelerated payment program and AB915 programs, $61.6 million in Third Party Settlements payable.
Charity Care - SFGH provides care without charge or at amounts less than its established rates to patients who meet certain criteria under its charity care policy. Charges foregone based on established rates were $264.7 million and estimated costs and expenses to provide charity care were $74.4 million for the year ended June 30, 2021.
Other Revenues - SFGH recognized $59.9 million of realignment funding for the year ended June 30, 2021.
With California electing to implement a state-run Medicaid Expansion afforded by the Affordable Care or the
indigent population will decrease as much of the population becomes eligible for coverage through Medi-Cal or Covered California. Starting July 1, 2013, there was a mechanism that provided for the state to redirect health realignment funds to fund social service programs. The redirected amount will be determined according to a formula that takes into account a county's cost and revenue experience and redirects 80% of the savings realized by the county. A final reconciliation has been conducted for fiscal year 2018-19 showing no realignment to be redirected. A final reconciliation will be conducted prior to June 30, 2022 for the year ended June 30, 2020.
Contract with the University of California San Francisco - The City contracts on a year-to-year basis on behalf of SFGH with the University of California (UC). Under the contract, SFGH serves as a teaching facility for UC professional staff, medical students, residents, and interns who, in return, provide medical and surgical specialty services to SFGH's patients. The total amount for services rendered under the contract for the year ended June 30, 2021, was approximately $212.9 million.
Gift - From 2014 through 2016, SFGH received $62.4 million from San Francisco General Hospital Foundation for the acquisition of furniture, fixtures and equipment (FF&E) for the new hospital. As of June 30, 2021, SFGH has spent $47.5 million from the gift on acquisition of FF&E as stipulated by the donor and recorded the remaining $14.9 million as restricted net position.
Commitments and Contingencies - As of June 30, 2021, SFGH had outstanding commitments with third parties for capital projects totaling $6.1 million.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
158
(h) San Francisco Wastewater Enterprise
The San Francisco Wastewater Enterprise (Wastewater Enterprise) was established in 1977, following the transfer of all sewage-system-related assets and liabilities of the City to the Wastewater Enterprise pursuant to bon
The Wastewater Enterprise collects, transmits, treats, and discharges sanitary and stormwater flows, generated within the City, for the protection of public health and environmental safety. In addition, the Wastewater Enterprise serves, on a contractual basis, certain municipal customers located outside of the City limits, including the North San Mateo County Sanitation District No. 3, Bayshore Sanitary District, and the City of Brisbane. The Wastewater Enterprise recovers cost of service through user fees based on the volume and strength of sanitary flow. As of June 30, 2021, the Wastewater Enterprise serves approximately 147,926 residential accounts, which discharge about 16.6 million units of sanitary flow per year (measured in hundreds of cubic feet, or ccf) and approximately 26,430 non-residential accounts, which discharge about 4.6 million units of sanitary flow per year.
Pledged Revenues
venues, which consist mainly of sewer service
charges, are pledged for the payment of principal and interest on various revenue bonds and State Revolving Fund loans. Proceeds, from the bonds and State Revolving Fund, provided financing for various capital construction projects and to refund previously issued bonds. These bonds and State Revolving Fund loans are payable solely from net revenues of Wastewater Enterprise and are payable through fiscal years ending June 30, 2049 and 2052.
The original amount of revenue bonds issued and State Revolving Fund loans, total principal and interest remaining, principal and interest paid during fiscal year 2020-21, applicable net revenues, and funds available for bond debt service are as follows:
Bonds issued with revenue pledge ......................................................................... $ 1,667,095 Clean Water State Revolving Fund (CWSRF) loans with revenue pledge.............. 113,681 Principal and interest remaining due at end of the fiscal year ................................. 2,578,879 Principal and interest paid in the fiscal year ............................................................ 82,066 Net revenues............................................................................................................ 108,399 Funds available for revenue bond and loans debt service ...................................... 306,177 Commitments and Contingencies
As of June 30, 2021, the Wastewater Enterprise had outstanding commitments, with third parties, for capital projects and for materials and services totaling $633.3 million.
Pollution Remediation Obligations As of June 30, 2021, the Wastewater Enterprise recorded $7.8 million in pollution remediation liability, consisting of $7.8 million cleanup cost estimate at the Yosemite Creek site. The pollution remediation obligation reported in the accompanying statement of net position is based on estimated contractual costs.
Transactions with Other Funds The Wastewater Enterprise purchased power from Hetch Hetchy Power totaling $10.1 million for the year ended June 30, 2021. The Wastewater Enterprise purchased water from Water Enterprise totaling $1.3 million for the year ended June 30, 2021. The Department of Public Works provides certain engineering and other services to the Wastewater Enterprise and the total charge was $15.1 million for the year ended June 30, 2021. A variety of other City departments provide services such as engineering, purchasing, legal, data processing, telecommunications, and human resources to the Wastewater Enterprise and charge amounts designed to recover those 30, 2021
and have been included in services provided by other departments.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
159
(14) SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY OF THE CITY AND COUNTY OF SAN FRANCISCO As discussed in Note 1, the financial statements present the Successor Agency and its component unit, an entity for which the Successor Agency is considered to be financially accountable. The City and County of San Francisco Redevelopment Financing Authority (Financing Authority) is a joint powers authority formed between the former Agency and the City to facilitate the long-term financing of the mponent unit in the
the Successor Agency.
Pursuant to the Redevelopment Dissolution Law, funds that would have been distributed to the former Agency as tax increment, hereafter referred to as redevelopment property tax revenues, are deposited s enforceable obligations and the
taxing entities that receive pass-through payments. Any remaining funds in the Trust Fund, plus any unencumbered redevelopment cash and funds from asset sales are distributed by the City to the local agencies in the project area unless needed to pay enforceable obligations.
In September 2015, the State passed Senate Bill 107 (SB 107), which clarifies and updates existing law governing the dissolution of redevelopment agencies. SB 107 includes specific language that allows the Successor Agency to issue bonds or other indebtedness for the purposes of low and moderate income housing and infrastructure in the City by allowing the pledge of revenues available in the Trust Fund that are not otherwise pledged subject to the approval of the Oversight Board. SB 107 also declares that Mission Bay North, Mission Bay South, Hunters Point Shipyard Phase 1, Candlestick Point - Hunters Point Shipyard Phase 2, and Transbay projects are finally and conclusively approved as enforceable obligations.
(a) Capital Assets Held by the Successor Agency
For the year ended June 30, 2021, the summary of changes in capital assets is as follows:
Balance Balance
June 30, 2020 Additions Deletions Transfers June 30, 2021 Capital assets not being depreciated:
Land held for lease 4,152$ -$ -$ -$ 4,152$ Capital assets being depreciated:
Furniture and equipment - General 2,306 - - - 2,306
Less accumulated depreciation for:
Furniture and equipment (2,302) (4) - - (2,306)
Total capital assets being depreciated, net 4 (4) - - - Total capital assets, net 4,156$ (4)$ -$ -$ 4,152$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
160
(b) -Term Obligations
Debt service payments are made from the following sources:
(a) Hotel taxes from the occupancy of guest rooms in the hotels within the City. (b) Redevelopment property tax revenues from the Bayview Hunters Point, Western Addition, Rincon Point South Beach, Yerba Buena Center, India Basin, South of Market, Golden Gateway, Mission Bay South, Transbay, and Mission Bay North project areas.
Pledged Revenues for Bonds The Tax Allocation Bonds are equally and ratably secured by the pledge and lien of the redevelopment property tax revenues (i.e., the former tax increment). These revenues have been pledged until the year 2047, the final maturity date of the bonds. The total principal and interest remaining on these bonds is approximately $1.27 billion. The redevelopment property tax revenues recognized during the year ended June 30, 2021 were $128.8 million against the total debt service payment of $97.3 million.
The Hotel Tax Revenue Bonds are secured by the pledge and lien of the hotel tax revenue received by the Successor Agency from the City. These revenues have been pledged until the year 2025, the final maturity of the bonds. The total principal and interest remaining on the Hotel Tax Revenue Bonds is approximately $18.3 million. The hotel tax revenue recognized during the year ended June 30, 2021 was $4.5 million against the total debt service payment of $4.5 million.
Events of Default and Remedies
The Successor Agency shall be considered to be in default if it fails to make any principal, interest, or redemption payment when due. For Tax Allocation Bonds, in the event of default, the trustee may declare the principal and accrued interest to be due and payable immediately. For Hotel Tax Revenue Bonds, in the event of default, the Successor Agency must immediately transfer to the trustee all revenues held and thereafter received to be used for expenses necessary to protect the bondholders and payment of interest and principal.
Final
Maturity Remaining
Type of Obligation Date Interest Rate Amount
Hotel tax revenue bonds (a) 2025 16,230$
Tax allocation revenue bonds (b) 2047 2.13% - 8.41% 738,897 755,127$
5.00%
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
161
The changes in long-term obligations for the Successor Agency for the year ended June 30, 2021, are as follows:
(1) Amounts represent interest accretion on Capital Appreciation Bonds.
As of June 30, 2021, the debt service requirements to maturity for the Successor Agency, excluding accrued vacation and sick leave, are as follows:
During the year ended June 30, 2010, the former Agency borrowed $16.5 million from the Low and Moderate Income Housing Fund (LMIHF) to make payment of $28.7 million to the Supplemental ition 98 obligations to
schools. Upon dissolution of the former Agency, the City elected to become the Housing Successor obligations. The Successor Agency made payments in the amount of $1.8 million to the City during the year ended June 30, 2021, and the outstanding payable balance was $2.9 million.
June 30, Principal Interest * Principal Interest
2022 58,881$ 36,145$ 3,690$ 812$ 2023 50,188 42,255 3,865 627
2024 32,834 43,201 4,220 434
2025 33,071 42,900 4,455 222
2026 30,474 31,332 - -
2027-2031 154,841 141,193 - -
2032-2036 154,675 110,618 - -
2037-2041 134,779 58,078 - -
2042-2046 80,559 21,386 - -
2047 8,595 215 - -
Total 738,897$ 527,323$ 16,230$ 2,095$ * Including payment of accreted interest.
Tax Allocation Revenue Bonds Hotel Tax Revenue Bonds
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
162
(c) Commitments and Contingencies Related to the Successor Agency Encumbrances - At June 30, 2021, the Successor Agency had outstanding encumbrances totaling approximately $8.2 million.
Risk Management - The Successor Agency obtained coverage for personal injury, automobile liability, public official errors and omissions and employment practices liability with limits of $10.0 million per occurrence ($5.0 million for employment practices liability) and a $25 deductible per occurrence.
Operating Leases - The Successor Agency has cancelable operating leases for its office site. Total rent payments for operating leases totaled $1.1 million for the year ended June 30, 2021.
Notes and Mortgages Receivable During the process of selling land to developers and issuing mortgage revenue bonds, the Successor Agency may defer receipt of land sale proceeds and mortgage revenue bond financing fees from various private developers in exchange for notes receivable, which interest on the above-described arrangements when earned, net of any amounts deemed to be uncollectible. During the year ended June 30, 2021, the Successor Agency disbursed $18.2 million to the developers through this arrangement and recorded an allowance against these receivables. The Successor Agency also transferred $75.6 million of fully allowed receivables to the City. At June 30, 2021, the gross value of the notes and mortgage receivable was $200.6 million and the allowance for uncollectible amounts was $199.1 million.
Special Assessment Debt without Commitment - Various community facility district bonds have been issued by the former Agency on behalf of various property owners who retain full responsibility for the repayment of the debt. When these obligations are issued, they are secured by special assessment taxes, and, in the opinion of management, are not considered obligations of the Successor Agency or the City and are therefore not included in the financial statements. Debt service payments will be made by the property owners. At June 30, 2021, the Successor Agency had outstanding community facility district bonds totaling $154.4 million.
Transbay Transit Center Agreements - In July 2003, the City, the Transbay Joint Powers Authority (TJPA), and the State of California acting through its Department of Transportation (Caltrans) entered into the Transbay Transit Terminal Cooperative Agreement (Cooperative Agreement) in which Caltrans agreed to transfer approximately 10 acres of State-owned property in and around the then-existing Transbay Terminal to the City and the TJPA to help fund the development of the Transbay Transit Center (TTC). The Cooperative Agreement requires that the TJPA sell certain State-owned parcels and use the revenues from the sales and the net tax increments to finance the TTC.
In 2008, the City and the former Agency entered into a binding agreement with the TJPA that irrevocably pledges all sales proceeds and net tax increments from the State-owned parcels to the TJPA for a period of 45 years (Pledge Agreement). At the same time, the City, the TJPA and the former Agency entered into an Option Agreement which grants options to the former Agency to acquire the State- owned parcels, arrange for development of the parcels, and distribute the net tax increments to the TJPA to use for the TTC. During the year ended June 30, 2021, the Successor Agency distributed $24.4 million to the TJPA. The payment was recorded as a neighborhood development deduction on the statement of changes in fiduciary net position.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
163
(15) TREASURE ISLAND DEVELOPMENT AUTHORITY
The Treasure Island Development Authority (TIDA) is a nonprofit public benefit corporation. TIDA was authorized in accordance with the Treasure Island Conversion Act of 1997. TIDA is governed by the seven members of the TIDA Board of Directors who are appointed by the Mayor, subject to confirmation redevelopment, reconstruction, rehabilitation, reuse and conversion of the property known as Naval Station Treasure Island for the public interest, convenience, welfare and common benefit of the inhabitants of the City.
The services provided by TIDA include administering the acquisition of former Naval Station Treasure Island from the U.S. Navy and implementing the Treasure Island Development Project; renting existing Treasure Island facilities including commercial facilities and approximately 650 housing units to generate revenues to cover operating costs; maintaining Treasure Island utilities, facilities and other In early 2000, TIDA initiated a master developer selection process, culminating in the selection of Treasure Island Community Development, LLC (TICD) in March 2003. TIDA and TICD entered into an Exclusive Negotiating Agreement in 2003, and began work on the Development Plan and Term Sheet for the Redevelopment of Naval Station Treasure Island (Development Plan). The Development Plan was endorsed by the TIDA Board and the
Board of Supervisors in December 2006. In May 2010,
the TIDA Board and Board of Supervisors both unanimously endorsed a package of legislation that included an Update to the Development Plan and Term Sheet, terms of an Economic Development Conveyance Memorandum of Agreement (EDC MOA Term Sheet), and a Term Sheet between TIDA and the Treasure Island Homeless Development Initiative (TIHDI) now called One Treasure Island.
In April 2011, the TIDA Board and the Planning Commission certified the environmental impact report for the project and approved various project entitlements, including amendments to the Planning Code, Zoning Maps and General Plan, as well as a Development Agreement, Disposition and Development Agreement and Interagency Cooperation Agreement. These entitlements include detailed plans for land uses, phasing, infrastructure, transportation, sustainability, housing including affordable housing, jobs and equal opportunity programs, community facilities and project financing. In June 2011, the Board of approved the project entitlements. These project approvals established the framework and cleared the way for realization of a new environmentally sustainable community on Treasure Island and the thousands of construction and permanent jobs the construction will bring.
The development plan for the project anticipates a new San Francisco neighborhood consisting of up to 8,000 new residential housing units, new commercial and retail space, a hotel, and 290 acres of parks and public open space, including shoreline access and cultural uses. Transportation amenities being built for the project will enhance mobility on Yerba Buena Island and Treasure Island as well as link the islands to mainland San Francisco. Some amenities include a combined police/fire emergency services building; utility improvements including new water, sewer, storm, gas, electrical and communications infrastructure with new water storage reservoirs and a wastewater treatment plant; new and upgraded streets, public byways, bicycle, transit, and pedestrian facilities; and a new ferry terminal.
On May 29, 2015, the Navy made the first transfer of property to TIDA consisting of 275 acres on Yerba Buena and Treasure Islands and the offshore submerged lands. This has been followed by four smaller transfers with full conveyance of the former base expected to be completed in 2026.
Existing structures on Yerba Buena were demolished between February and August 2016, and structures in the first area of development on Treasure Island were demolished between July 2016 and February 2017. The first infrastructure construction projects on Yerba Buena Island, including the new water reservoirs and new roadways were completed in the third quarter of 2021, and utilities and street improvements were permitted and are underway. The first residential project on Yerba Buena Island,
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
164
a 124-unit condominium building, began construction in June 2019 and is expected to be ready for occupancy in early 2022. Geotechnical improvement of soil conditions in the first subphase area on Treasure Island were substantially completed in 2020, and the construction of new utility and roadway infrastructure is underway. The first residential project on Treasure Island a 105-unit, 100% affordable building developed by Chinatown Community Development Center in partnership with Swords to Plowshares broke ground in the fall of 2020 and is scheduled for completion in late 2022. was approved in the third quarter of 2021. The demolition of structures and isolation of utilities in this area have been completed, and the geotechnical ground improvement of this area is scheduled to begin in 2022.
The complete build-out of the project is anticipated to occur over fifteen to twenty years.
As of June 30, 2021, TIDA has the following payables to other City departments:
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
165
(16) INTERFUND RECEIVABLES,P AYABLES, AND TRANSFERS
pooled cash or when there are transactions between entities where one or both entities do not -term loans between funds. The composition
of interfund balances as of June 30, 2021 is as follows:
In addition to routine short-
projects and maintains the Sustainable Energy Account (SEA) to sponsor and financially support such projects at various City departments. In this role, Hetch Hetchy may secure low-interest financing to supplement funds available in the SEA fund. At June 30, 2021, Hetch Hetchy loaned $4.6 million to other City funds.
The SFMTA has a receivable from nonmajor governmental funds of $45.1 million for capital and operating grants.
Receivable Fund Payable Fund Amount
General Fund Nonmajor Governmental Funds 6,045 $
Port of San Francisco 642
6,687
Nonmajor Governmental Funds General Fund 71
Nonmajor Governmental Funds 9,723
Municipal Transportation Agency 125
9,919
General Hospital Medical Center Nonmajor Governmental Funds 104 San Francisco Water Enterprise Nonmajor Governmental Funds 248 Hetch Hetchy Water and Power Enterprise General Fund 452 Nonmajor Governmental Funds 4,588
San Francisco Wastewater Enterprise 739
5,779
Municipal Transportation Agency Nonmajor Governmental Funds 45,111 Port of San Francisco Hetch Hetchy Water and Power Enterprise 369 San Francisco Wastewater Enterprise Nonmajor Governmental Funds 236 Port of San Francisco 25
261
Total 68,478$
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
166
Due from component units:
Receivable Entity Payable Entity Amount
General Fund Component unit TIDA $ 8,283 (1)
Nonmajor Governmental Funds Component unit TIDA 3,264 (1) Hetch Hetchy Water and Power Enterprise Component unit TIDA 51 (1) San Francisco Wastewater Enterprise Component unit TIDA 20 (1) Nonmajor Governmental Funds Successor Agency 2,633 (2)
Port of San Francisco Successor Agency 642 (2)
Advance to component units:
Receivable Entity Payable Entity Amount
Hetch Hetchy Water and Power Enterprise Component unit TIDA $ 6,627 (1) Nonmajor Governmental Funds Successor Agency 2,896 (2)
(1) See discussion at Note 15.
(2) See discussion at Note 14(b) related to the Due to/Advances from the Primary Government.
General
Fund
Nonmajor
Govern-
mental
Funds
Internal
Service
Funds
Water
Enterprise
Hetch
Hetchy
Water and
Power
Enterprise
Municipal
Transporta-
tion Agency
San
Francisco
General
Hospital
Medical
Center
Wastewate r
Enterprise
Port of San
Francisco
Laguna
Honda
Hospital Total
-$ 503,101$ 73 $ 985 $ - $ 442,665$ 142,525 $ 1,440 $ - $ 76,066 $ 1,166,855$ Nonmajor
governmental funds....... 324,092 112,142 - 20,040 - 202,317 - - 240 - 658,831 San Francisco -
International Airport. ....... 14,736 - --- - - - -- 14,736 - 654 - - 16,000 - - - - - 16,654
Hetch Hetchy
Water and Power
Enterprise........................ 500 32 - - - - - - - - 532 San Francisco
General Hospital
Medical Center................ 2,170 - --- - - - -- 2,170 - 4,188 - - - - - - - - 4,188
- 3 2 - - - -- - - -3 2
2,000 - --- - 8,688 - - - 10,688
Total transfers out 343,498 $ 620,149 $ 73 $ 21,025 $ 16,000 $ 644,982 $ 151,213$ 1,440 $ 240 $ 76,066 $ 1,874,686$ Transfers In: Funds (in thousands)
Transfers Out:
Funds
General Fund...................
.
Water Enterprise...............
Wastewater Enterprise... .
Port of San Francisco......
Laguna Honda Hospital. .
The $1.17 billion General Fund transfer out includes a total of $645.5 million in operating subsidies to SFMTA, SFGH, and Laguna Honda Hospital (see Note 13). The transfer of $503.1 million from the General Fund to the nonmajor governmental funds is to provide support to various City programs such as the Public Library and Children and Families Fund, as well as to provide resources for the payment of debt service. The transfers between the nonmajor governmental funds are mainly to provide support for various City programs and to provide resources for the payment of debt service.
San Francisco International Airport transferred $14.7 million to the General Fund, representing a portion of concession revenues (see Note 13(a)). The General Fund received transfers in of $0.5 million from Hetch Hetchy Water and Power Enterprise for repayment of Educational Revenue Augmentation Funds. The General Fund received transfers in of $170 for interest earned by the SFGH but credited to the General Fund. The General Fund also received $2.0 million from SFGH and $2.0 million from Laguna Honda Hospital to fund the DPH project. SFGH also received $8.7 million from Laguna Honda Hospital for COVID-19 emergency response uses.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
167
SFMTA received $202.3 million transfers from nonmajor governmental funds, of which $49.5 million was for capital activities, $152.8 million was for operating activities.
The Water Enterprise transferred $16.0 million to Hetch Hetchy Water and Power Enterprise to fund various upcountry projects, $622 to the Art Commission for art enrichment for the SF Recycled Water, Sunol Valley Water Improvement and Mountain Tunnel Improvement projects and $32 to the Office of the City Administrator for the Surety Bond Program. In turn, the Water Enterprise received $20.0 million for the Emergency Firefighting Water System, $985 from the General Fund for low income assistance programs and Native Plant Garden project.
The Wastewater Enterprise transferred $4.0 million in art enrichment fund to the Art Commission for Southeast Plant Biosolids Digester Facilities, 1550 Southeast Community Center, and Treasure Island Capital Improvement Projects, $156 to Recreation & Park for Crocker Amazon Park, and $32 to the Office of the City Administrator for the Surety Bond Program. In turn, the Wastewater Enterprise received $1.4 million from the General Fund for the Sidewalk Garden Grants Project.
The Hetch Hetchy Water and Power Enterprise transferred $32 to the Office of the City Administrator for the Surety Bond Program.
s and transferred $32 to
the Office of the City Administrator for the Surety Bond Program.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
168
(17) COMMITMENTS AND CONTINGENT LIABILITIES
Operating Leases
The City has noncancelable operating leases for certain buildings and data processing equipment, which require the following minimum annual payments (in thousands):
64,281$
57,319
43,117
34,100
25,677
74,293
35,738
15,993
583
Total..................... 351,101$
Operating lease expense incurred for governmental activities for fiscal year 2020-21 was approximately $66.5 million.
Operating lease expense incurred for the Airport, Port, SFGH and SFMTA for fiscal year 2020-21 was $0.4 million, $2.8 million, $10.1 million, and $27.3 million, respectively.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
169
Several City departments lease land and various facilities to tenants and concessionaires who will provide the following minimum annual payments:
Gov ernmental Activ ities
F iscal Years
5,834$
5,034
4,590
4,540
4,456
20,102
17,960
17,960
17,145
243
97,864$
Business-type Activities
The Airport and Port have certain rental agreements with concessionaires, which specify that rental payments are to be based on a percentage of tenant sales, subject to a minimum amount. Concession percentage rents in excess of minimum guarantees for the Airport and Port were approximately $1.5 million and $4.8 million, respectively, in fiscal year 2020- that the MAG does not apply if the actual enplanements achieved during a one-month period is less than 80% of the actual enplanements of the same reference month in the reference year, and such shortfall continues for three consecutive months, and the reduced enplanement levels during the COVID-19 pandemic have resulted in inapplicability of the MAG pursuant to these provisions. The MAG
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
170
is reinstated once monthly enplanements equal or exceed 80% for the reference month enplanement for two consecutive months. Effective September 1, 2020, new five-year leases, with two (2) additional two-year extension options, exercisable at the sole discretion of the Airport, commenced with four rental car companies. The agreements provide for an aggregate MAG of $47.2 million. However, the MAG has been suspended since the effective date of the leases and will continue to be suspended until enplanements return to 80% of the levels se
(the calendar year before the leases were awarded), for a period of at least two months (compared to the same months in the Reference Year). While the MAG is suspended, only percentage rent equal to 10% of gross revenues will be due from the rental car operators.
Other Commitments
The Retirement System has unfunded commitments to contribute capital for real assets in the amount of $2.26 billion, private equity in the amount of $3.30 billion, private credit in the amount of $1.70 billion, and absolute return investments in the amount of $336.3 million, which totaled $7.59 billion at June 30, 2021.
In February 2011, the Asian Art Museum Foundation (Foundation) entered into an agreement with JP Morgan Chase Bank to refinance its obligations of $97.0 million. To facilitate the refinancing, the City entered into an assurance agreement which, in the event of nonpayment by the Foundation, requires the City to seek an appropriation to make debt payments as they become due. Since the City has not legally guaranteed the debt, and the City believes that the likelihood of nonpayment by the Foundation is remote, no amount is recorded in the City's financial statements related to this agreement. (18) R
ISK MANAGEMENT
Risk Retention Program Description
The City is exposed to various risks of losses related to torts, theft of, damage to, and destruction of assets; business interruption; errors and omissions; automobile liability and accident claims (primarily for SFMTA); medical malpractice; natural disasters; employee health benefit claim payments for direct provider care (collectively referred to herein as estimated claims payable); and injuries to employees ceptions, it is the policy of the City not to purchase commercial insurance for the risks of losses to which it is exposed. Instead, the City believes it is more economical to manage its risks internally and set aside funds as needed for estimated current claim settlements and unfavorable judgments through annual appropriations and supplemental appropriations.
The Airport carries aviation liability insurance coverage of $1.0 billion with $250.0 million in War Perils Liability, subject to a deductible of $10 per single occurrence and commercial property insurance coverage for full replacement value on all facilities at the Airport owned by the Airport, subject to a limit of $1.0 billion per single occurrence and a deductible of $500 per single occurrence. This policy includes flood coverage up to a $10.0 million sub-limit and business interruption coverage up to a $100.0 million pooled sub-limit.
of $5.0 million, subject to a deductible of $100 per single occurrence for each wrongful act other than violation. The Airport also carries insurance for public employee dishonesty, fine arts, electronic data processing equipment, cyber liability, and watercraft liability for Airport fire and rescue vessels, and target is not required to nor does it carry insurance or self-insure against any risks due to land movement or to terrorist acts.
The Port carries the following insurance (listed coverage limits and related deductible amounts are effective July 1, 2021): 1) marine general liability coverage of $100.0 million, subject to a deductible of $100 per occurrence; 2) hull and machinery liability coverage of $1.0 million, subject to a deductible of $100 per occurrence; 3) commercial property insurance for Port facilities, subject to a maximum of
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
171
$140.0 million and a deductible of $10.0 million per occurrence (increased from a maximum of $100.0 million and a deductible of $5.0 million per occurrence before July 1, 2021); and 4) public officials and employee liability coverage of $5.0 million, subject to a deductible of $50 per occurrence. The Port also carries insurance coverage for employee dishonesty, auto liability, property damage for certain high value Port vehicles, water pollution, and data processing equipment. In addition to the above, the Port requires most of its tenants, licensees, and contractors on all contracts to carry commercial general liability insurance in various amounts naming the Port Commission and the City as additional insured parties. Tenants whose operations pose a significant environment risk are also required to post an environmental oversight deposit and an environmental performance deposit.
The SFMTA risk treatment program encompasses both self-insured and insured methods. Insurance cases, directly by the agency. Self-insurance is when the City manages the risks internally and administers, adjusts, settles, defends, and pays claims from budgeted resources, i.e., pay-as-you-go. -insurance for the risks of loss to which it is exposed.
When economically more viable or when required by debt financing covenants, SFMTA purchases insurance as necessary or required.
The SFMTA is self-insured on general liability. Through coordination with the Controller and City A general liability payments are addressed through pay-as-you-go funding as part of the budgetary process as well as a reserve that is increased each year by approximately $3.0 million. The annual budget for claims was $8.6 million for fiscal year 2020-21. As of June 30, 2021, the reserve was $31.8 million. Claim liabilities are actuarially determined anticipated claims and projected timing of disbursement, considering recent claim settlement trends, inflation, and other economic social factors.
The SFMTA purchases property insurance on its facilities, Breda light rail cars, and personal property.
Also, insurance is purchased for scheduled City parking garages covering blanket property and business interruptions. Damages to facilities and property outside of the specified schedules are self- insured. For SFMTA contractors, SFMTA requires each contractor to provide its own insurance, the traditional insurance ensuring that the full scope of work be covered with satisfactory levels to limit the risk expos
Felonious Assault Coverage Insurance on transit operators per a Memorandum of Understanding with and omissions of its board
members and senior management.
Estimated Claims Payable
has been actuarially determined and includes an estimate of incurred but not reported losses and allocated loss adjustment expenses.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
172
Changes in the reported estimated claims payable since July 1, 2019, resulted from the following activity:
Breakdown of the estimated claims payable at June 30, 2021 is follows:
The City self-
been actuarially determined and includes an estimate of incurred but not reported losses. The total amount estimated to be payable for claims incurred as of June 30, 2021 was $536.9 million, which is activity:
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
173
Breakdown of the accrued workers' compensation liability at June 30, 2021 is as follows:
(19) SUBSEQUENT EVENTS
(a) Debt Issuance
In July 2021, the City issued $1.0 million of tax-exempt CP with an interest rate of 0.07% and maturity of August 2021 to provide new money for the construction of a homeless services center to be located within the City.
In August 2021, the City rolled over $9.0 million of tax-exempt CP issued for capital equipment for the San Francisco General Hospital and the costs of construction of a homeless services center with an interest rate of 0.06% and maturity of September 2021.
In August 2021, the City issued General Obligation Bonds Series 2021C (Transportation and Road Improvement, Tax Exempt Series 2021C-1 and Taxable Series 2021C-2) (Series 2021C Bonds) in the amount of $104.8 million and $18.0 million, respectively. The Series 2021C-1 Bonds bear interest rates of 4.0% and 5.0% and will mature through June 2046 and the Series 2021C-2 Bonds bear an interest rate of 0.08% and will finally mature in October 2021. The Series 2021C Bonds were issued to provide funds to construct, redesign and rebuild streets and sidewalks and to make infrastructure repairs and improvements that increase Muni service reliability, ease traffic congestion, reduce vehicle travel times, enhance pedestrian, and bicycle safety, and improve disabled access, and to pay certain costs related to the issuance of the Series 2021C Bonds.
In August 2021, the City issued General Obligation Bonds Series 2021D (Health and Recovery, Tax Exempt Series 2021D-1 and Taxable Series 2021D-2) (Series 2021D Bonds) in the amount of $194.3 million and $64.3 million, respectively. The Series 2021D-1 Bonds bear interest rates of 4.0% and 5.0% and will mature through June 2046 and the Series 2021D-2 Bonds bear interest rates of 0.08% and
0.25% and will finally mature in June 2022. The Series 2021D Bonds were issued to finance the acquisition or improvement of real property, including to stabilize, improve, and make permanent investments in supportive housing facilities, shelters, and/or facilities that deliver services to persons experiencing mental health challenges, substance use disorder and/or homelessness; improve the accessibility, safety and quality of parks, open spaces and recreation facilities; improve the -of-way and related assets;
and to pay certain cost related to the issuance of the Series 2021D Bonds.
In August 2021, the City issued General Obligation Bonds Series 2021E (Earthquake Safety and Emergency Response, Tax Exempt Series 2021E-1 and Taxable Series 2021E-2) (Series 2021E Bonds) in the amount of $74.1 million and $13.0 million, respectively. The Series 2021E-1 Bonds bear interest rates of 4.0% and 5.0% and will mature through June 2046 and the Series 2021E-2 Bonds bear an interest rate of 0.08% will finally mature in October 2021. The Series 2021E Bonds were issued to provide funds to improve fire, earthquake, and emergency response by improving, constructing, and/or replacing deteriorating cisterns, pipes, and tunnels, and related facilities to ensure firefighters a reliable
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
174
water supply for fires and disasters; neighborhood fire and police stations and supporting facilities; the related to the issuance of the Series 2021E Bonds.
In September 2021, the City issued $18.8 million of taxable CP with an interest rate of 0.09% and maturity of December 2021, and $9.0 million of tax-exempt CP with an interest rate of 0.07%, with maturity of October 2021. The taxable CP was issued to refund $18.8 million of maturing CP used to provide funds to assist in the development, acquisition, construction, or rehabilitation of affordable rental housing projects. The tax-exempt CP was issued to refund $9.0 million of maturing CP issued to finance the costs of the acquisition of furniture, fixtures and equipment for the San Francisco General Hospital and the costs of construction of a homeless services center to be located within the City.
In September 2021, the City issued General Obligation Bonds Series 2021-R2 (2021-R2 Bonds) in the amount of $86.9 million with an interest rate of 5.0% and principal maturing from June 2022 through June 2028 to refund certain outstanding general obligation bonds described below and to pay certain costs related to the issuance of the 2021-R2 Bonds.
On the date of delivery of the 2021-R2 Bonds, the proceeds of the bonds in the amount of $96.4 million were deposited with U.S. Bank National Association as escrow agent. The funds deposited and held with the escrow agent, together with investment earnings thereon were enough to pay the principal and interest on the refunded bonds on December 15, 2021 redemption date and to pay the cost of issuance of the 2021-R2 Bonds.
In October 2021, the City rolled over $9.0 million of tax-exempt CP issued for capital equipment for the San Francisco General Hospital and the costs of construction of a homeless services center with an interest rate of 0.08% and maturity of October 2021. The City subsequently issued $9.8 million of tax- exempt CP to refund the $9.0 million of maturing CP used to provide funds for capital equipment for the San Francisco General Hospital and the costs of construction of a homeless services center with an interest rate of 0.08% and maturity of November 2021.
In October 2021, the Transportation Authority entered into a new Revolving Credit Agreement (RCA) with U.S. Bank National Association (U.S. Bank) for $125.0 million. Amount borrowed under the RCA assumes a rate of interest equal to the sum of Securities Industry and Financial Markets Association rating changes) and unborrowed amounts under the RCA are subject to a commitment fee of 0.20%.
The Transportation Authorit
ity will use the
RCA to fund the capital projects and programs included in the Prop K Expenditure Plan.
In November 2021, the SFPUC issued its San Francisco Wastewater Revenue Bonds, 2021 Sub- Series A (SSIP) (Green Bonds), and Sub-Series B (non-SSIP) together with an aggregate principal of $297.9 million to refund approximately $340.0 million aggregate principal amount of CP notes issued acqui
Wastewater Capital Improvement Program.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
175
In November 2021, the SFPUC issued its San Francisco Wastewater Revenue Notes, 2021 Sub-Series A (SSIP-Biosolids) (Green Notes), and Sub-Series B (SSIP-SEP Improvements) (Green Notes) together with an aggregate principal of $347.5 million to finance a portion of the design, acquisition and construction of the Biosolids Digester Facility Project and Southeast Water Pollution Control Plant improvements.
In November 2021, the City issued $3.9 million of tax-exempt CP with an interest rate of 0.09% and a maturity of December 2021 to provide new money for improvements to Laguna Honda Hospital, provide new money for critical repair capital improvement projects, and to refund CP issued to finance the construction of a homeless services center; and paid down $8.7 million of tax-exempt CP issued for capital equipment for the San Francisco General Hospital.
In December 2021, the City issued $18.8 million of taxable CP with an interest rate of 0.10% and maturity of January 2022, and $4.5 million of tax-exempt CP with an interest rate of 0.09%, with maturity of January 2022. The taxable CP was issued to refund $18.8 million of maturing CP used to provide funds to assist in the development, acquisition, construction, or rehabilitation of affordable rental housing projects. The tax-exempt CP was issued to refund maturing CP and provide new money for the construction of a homeless services center, and to refund maturing CP issued to finance improvements to Laguna Honda Hospital and critical repair capital improvement projects.
In December 2021, the SFPUC issued its San Francisco Power Revenue Bonds, 2021 Sub-Series A (Green), and Sub-Series B together with an aggregate principal of $124.0 million to refund approximately $137.7 million aggregate principal amount of CP notes issued pursuant to the Power ign, acquisition, and construction
program.
In December 2021, the SFPUC issued $23.0 million in Power Enterprise CP notes to finance a portion of the design, ac
Power Enterprise capital improvement program. The CP notes were refinanced with proceeds of the Power Revenue Bonds Series 2021 AB issuance on December 22, 2021.
In January 2022, the City rolled over $18.8 million of taxable CP with an interest rate of 0.15% and maturity of March 2022, and $4.5 million of tax-exempt CP with an interest rate of 0.08%, with maturity of February 2022. The taxable CP was issued to refund $18.8 million of maturing CP used to provide funds to assist in the development, acquisition, construction, or rehabilitation of affordable rental housing projects. The tax-exempt CP was issued to refund maturing CP for the construction of a homeless services center, improvements to Laguna Honda Hospital and critical repair capital improvement projects.
(b) Others
CleanPowerSF Guarantee
In November 2021, CleanPowerSF and JPMorgan Chase Bank, National Association (JPMorgan) executed amendments to the March 2018 Credit Agreement. In connection with the amendments, JPMorgan waived the debt service coverage covenant event of default. Among other things, the amendments provided for a decrease in the Credit Agreement amount to $20.0 million from $75.0 million at the request of CleanPowerSF, and extended the agreement to March 2024. Additional changes to the agreement include elimination of target reserve requirements, revisions to debt service coverage and rate setting covenants, changes to ongoing reporting requirements to the bank, and rating is downgraded below investment grade or suspended, withdrawn or otherwise unavailable.
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued)
June 30, 2021
(Dollars in Thousands)
176
rearages Relief
The California State Water Board is administering funds to community water and wastewater systems for the California Water and Wastewater Arrearage Payment Program (Program) during fiscal year 2021-22, sourced by the American Rescue Plan Act. The Program was created to provide relief for unpaid bills related to the COVID-19 pandemic. Program guidelines for Wastewater arrearage relief are expected no later than February 2022, after all water arrearage relief has been distributed. The SFPUC has submitted surveys to the State Water Board with information on water arrearages accrued during the pandemic and is in the process of submitting an application. Funds of approximately $7.3 million for water arrearage relief are expected to reach the SFPUC sometime in early 2022.
The California Department of Community Services & Development is administering funds to energy utilities for the California Arrearage Payment Program (Program) during fiscal year 2021-22, sourced by the American Rescue Plan Act. The Program was created to provide relief for unpaid bills related to the COVID-19 pandemic. The SFPUC has submitted surveys to the Department of Community Services & Development. Hetch Hetchy received notice from California Department of Community Services & Development on October 28, 2021 stating that $1.2 million will be allocated to Hetchy Power and $2.4 million will be allocated to CleanPowerSF. Funds for energy arrearage relief are expected to reach the agency sometime in early 2022.
Declaration of Emergency
In August 2021, a water main ruptured at 22nd Avenue and Sloat Boulevard, causing flooding to adjacent areas. In accordance with Chapter 6, Article IV, Section 6.60(d) of the Administrative Code of the City, the SFPUC declared an emergency relating to this event. As of issuance date, the Water Enterprise has spent $387 towards restoration.
Federal Grants
In August 2021, the Airport executed a grant agreement with the FAA for approximately $169.0 million of federal American Rescue Plan Act (ARPA) grant funds for costs related to operations, personnel, cleaning, sanitization, janitorial services, combating the spread of pathogens at the airport, and debt service payments. In December 2021, the Airport executed a grant agreement with the FAA for approximately $23.8 million of ARPA grant funds for the purpose of providing rent relief to eligible concessionaires.
In September 2021, the SFMTA was awarded operating assistance of $288.2 million through FTA Section 5307 Urbanized Area Formula Program to prevent, prepare for, and respond to the COVID-19 pandemic. In December 2021, the total funding for this grant was amended and increased to $536.5 million. The SFMTA was also awarded grant funds through FTA Section 5309 Capital Investment Grant to help pay for increased capital project costs caused by the COVID-19 pandemic. In August and September 2021, the SFMTA was granted $21.9 million for Van Ness Bus Rapid Transit Project and $23.1 million for Central Subway Project, respectively. 6)59-6)(79440)1)28%6=
-2*361%8-32
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Liability
June 30, 2021
(Dollars in Thousands)
177
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
June 30, 2021
(Dollars in Thousands)
178
Notes to Schedule:
SFERS Plan
Benefit Changes There were no changes in benefits during the measurement period ended June 30, 2020, 2019 and 2018. The impact of benefit changes for the year ended June 30, 2017, which was $1.22 billion, was recognized immediately as pension expense
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Liability (Continued)
June 30, 2021*
(Dollars in Thousands)
179
Changes of Assumptions There were no changes in the discount rate for the measurement period ended June 30, 2020. For the measurement period ended June 30, 2019, the discount rate was decreased from
7.50% to 7.40% There were no changes in the discount rate for the measurement period ended June 30, 2018. For the measurement ended June 30, 2017, the discount rate was increased from 7.46% to 7.50%.
CalPERS Miscellaneous Plans
Benefit Changes There were no changes to benefit terms that applied to all members of the Public Agency Pool. However, individual employers in the Plan may have provided a benefit improvement to their employees by granting Two Years Additional Service Credit to members retiring during a specific time period (a.k.a. Golden Handshakes).
Changes of Assumptions
No changes for the year ended June 30, 2020.
* Fiscal year 2014-15 was the first year of implementation of GASB No. 68, therefore only seven years of information is shown
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Changes in Net Pension Liability and Related Ratios June 30, 2021*
(Dollars in Thousands)
180
Notes to Schedule:
Benefit Changes The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2018 valuation date. This applies for voluntary benefit changes as well as any offers of Two Year Additional Service Credit (a.k.a. Golden Handshakes).
Changes of Assumptions None in 2020 and 2019. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate for the measurement period ended June 30, 2020. The discount rate decreased from 7.65% to 7.15% for the measurement period ended June 30, 2017. * Fiscal year 2014-15 was the first year of implementation of GASB No. 68, therefore only seven years of information is shown
City CalPERS Safety Plan 2021 2020 2019 2018 2017 2016 2015 Total pension liability:
Service cost.......................................................................... 29,508$ 30,109$ 34,006$ 33,886$ 31,141$ 30,987$ 32,688$ Interest on the total pension liability................................ 102,990 98,555 94,305 88,729 85,094 80,057 76,177 Changes of assumptions.................................................. - - 2,492 75,057 - (19,949) - Differences between expected and actual experience (1,465) (7,134) 6,909 (14,353) 950 (14,218) - Benefit payments, including refunds of
employee contributions................................................... (66,815) (62,934) (56,625) (51, 579) (47,774) (44,699) (41,387) Net change in total pension liability ................................. 64,218 58,596 81,087 131,740 69,411 32,178 67,478 Total pension liability, beginning...................................... 1,460,539 1,401,943 1,320,856 1,189,116 1,119,705 1,087,527 1,020,049 Total pension liability, ending........................................... 1,524,757$ 1,460,539 $ 1,401,943 $ 1,320,856 $ 1,189,116 $ 1,119,705 $ 1,087,527$ Plan fiduciary net position:
Plan to plan resource movement..................................... - $ - $ (3)$ - $ - $ (4)$ - $ Contributions from the employer...................................... 49,455 43,789 31,189 30,575 23,640 20,718 20,613 Contributions from employees......................................... 8,947 9,141 9,359 10,307 14,310 15,061 15,216 Net investment income...................................................... 57,048 71,212 85,351 104,383 4,731 20,469 138,628 Benefit payments, including refunds of
employee contributions................................................... (66,815) (62,934) (56,625) (51, 579) (47,774) (44,699) (41,387) Administrative expenses.................................................... (1,611) (772) (1, 585) (1,366) (567) (1,048) - Other miscellaneous income/(expense).. ...................... - 2 (3,011) - - - - Net change in plan fiduciary net position........................ 47,024 60,438 64,675 92,320 (5,660) 10,497 133,070 Plan fiduciary net position, beginning............................. 1,142,641 1,082,203 1,017,528 925,208 930,868 920,371 787,301 Plan fiduciary net position, ending................................... 1,189,665$ 1,142,641 $ 1,082,203 $ 1,017,528 $ 925,208 $ 930,868$ 920,371$ 335,092$ 317,898$ 319,740$ 303,328$ 263,908$ 188,837$ 167,156$ Plan fiduciary net position as a percentage of the
total pension liability........................................................... 78.02% 78.23% 77.19% 77.04% 77.81% 83.14% 84.63% Covered payroll....................................................................... 92,968$ 94,522$ 106,765$ 107,812$ 110,139$ 109,462$ 111,311$ Plan net pension liability as a percentage of the
covered payroll..................................................................... 360.44% 336.32% 299.48% 281.35% 239.61% 172.51% 150.17% Plan net pension liability, ending...........................................
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Changes in Total Pension Liability and Related Ratios June 30, 2021*
(Dollars in Thousands)
181
Notes to Schedule:
No assets are accumulated in a trust that meet the criteria in GASB Statement No. 73 to pay related benefits.
Benefit Changes There were no changes to benefits terms for the measurement period ended June 30, 2020.
Changes of Assumptions The discount rate decreased from 3.50% to 2.21% in the measurement period ended June 30, 2020. The discount rate was changed from 3.87% in the measurement period ended June 30, 2018 to 3.50% in the measurement period ended June 30, 2019.
* Fiscal year 2016-17 was the first year of implementation of GASB Statement No. 73, therefore only five years of information is shown.
City Replacement Benefits Plan 2021 2020 2019 2018 2017 Plan total pension liability:
Service cost............................................................................... 1,976$ 1,286$ 1,298$ 1,605$ 956$ Interest....................................................................................... 4,776 3,538 2,998 2,218 2,112 Changes of benefits................................................................ - - - - 10,310 Differences between expected and actual experience..... 7,800 13,588 564 15,326 - Changes of assumptions...................................................... 37,013 29,565 5,540 (10,290) 11,516 Benefit payments..................................................................... (3,634) (2,958) (2,442) (3,164) (1,332) Net change in total pension liability.. .................................... 47,931 45,019 7,958 5,695 23,562 Total pension liability, beginning.......................................... 137,272 92,253 84,295 78,600 55,038 185,203$ 137,272$ 92,253$ 84,295$ 78,600$ Covered-employee payroll........................................................ 3,414,923$ 3,225,854$ 3,082,273$ 2,919,519$ 2,719,691$ Plan total pension liability as a percentage of the
covered-employee payroll...................................................... 5.42% 4.26% 2.99% 2.89% 2.89% Plan total pension liability, ending: ...............................................
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions Pension Plans
June 30, 2021
(Dollars in Thousands)
182
City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions 791,736 $ - $ 606 $ 2,299 $ 8 $ 51,185$ Contributions in relation to the
actuarially determined contributions (791,736) - (606) (2,299) (8) (51,185) Contribution deficiency (excess) - $ - $ - $ - $ - $ - $ Covered payroll 3,434,713$ -$ 4,826$ 7,430$ -$ 93,702$ Contributions as a percentage of
covered payroll 23.05% N/A 12.56% 30.94% N/A 54.63%
City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions 701,307$ 10 $ 539$ 2,012$ 7$ 40,778$ Contributions in relation to the
actuarially determined contributions (701,307) (10) (539) (2,012) (7) (40,778) Contribution deficiency (excess) -$ -$ -$ -$ - $ - $ Covered payroll 3,378,945$ 179$ 4,423$ 6,745$ -$ 92,968$ Contributions as a percentage of
covered payroll 20.76% 5.59% 12.19% 29.83% N/A 43.86%
City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions 607,408$ 28 $ 479$ 1,637$ 7$ 34,933$ Contributions in relation to the
actuarially determined contributions (607,408) (28) (479) (1,637) (7) (34,933) Contribution deficiency (excess) -$ -$ -$ -$ - $ - $ Covered payroll 3,186,405$ 359$ 4,396$ 6,384$ -$ 94,522$ Contributions as a percentage of
covered payroll 19.06% 7.80% 10.89% 25.65% N/A 36.96%
City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions 582,568$ 42$ 403$ 1,283$ 6 $ 30,743$ Contributions in relation to the
actuarially determined contributions (582,568) (42) (403) (1,283) (6) (30,743) Contribution deficiency (excess) -$ -$ -$ - $ - $ -$ Covered payroll 3,045,153$ 390$ 4,039$ 5,742$ -$ 106,765$ Contributions as a percentage of
covered payroll 19.13% 10.77% 9.99% 22.34% N/A 28.80%
For the year ended June 30, 2021
CalPERS Miscellaneous Plans
For the year ended June 30, 2019
CalPERS Miscellaneous Plans
For the year ended June 30, 2018
CalPERS Miscellaneous Plans
For the year ended June 30, 2020
CalPERS Miscellaneous Plans
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions Pension Plans (Continued) June 30, 2021*
(Dollars in Thousands)
183
* Fiscal year 2014-15 was the first year of implementation of GASB No. 68, therefore only seven years of information is shown.
** In fiscal year 2014-15, the actuarially determined contributions were based on an estimate. The City made a $0.1 million adjustment to align the estimated employer contribution amount with the actual employer contribution per the 2015 agent-multiple employer CalPERS report for the CalPERS Safety Plan. Due to the early implementation of GASB Statement No. 82, the City decreased the actuarially determined contributions for the City SFERS plan to deduct the employer pickup in the amount of $8.6 million.
City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions 519,073 $ 35 $ 293$ 970$ 2$ 27,190$ Contributions in relation to the
actuarially determined contributions (519,073) (35) (293) (970) (2) (27,190) Contribution deficiency (excess) -$ -$ -$ -$ - $ - $ Covered payroll 2,880,112$ 344$ 4,202$ 5,042$ -$ 107,812$ Contributions as a percentage of
covered payroll 18.02% 10.17% 6.97% 19.24% N/A 25.22%
City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions 496,343$ 33 $ 280$ 828$ 2$ 23,640$ Contributions in relation to the
actuarially determined contributions (496,343) (33) (280) (828) (2) (23,640) Contribution deficiency (excess) -$ -$ -$ -$ - $ -$ Covered payroll 2,681,695$ 329$ 3,644$ 3,769$ -$ 110,139$ Contributions as a percentage of
covered payroll 18.51% 10.03% 7.68% 21.97% 0.00% 21.46% City
SFERS Plan City
Transportation
Authority
Successor
Agency
Treasure
Island
CalPERS
Safety Plan
Actuarially determined contributions (1) ** 556,511$ 31 $ 400$ 598$ 2$ 20,718$ Contributions in relation to the
actuarially determined contributions (1) (556,511) (31) (400) (598) (2) (20,718) Contribution deficiency (excess) -$ -$ -$ -$ - $ -$ Covered payroll 2,529,879$ 319$ 3,684$ 3,427$ -$ 109,462$ Contributions as a percentage of
covered payroll 22.00% 9.72% 10.86% 17.45% 0.00% 18.93% (1) Contractually required contributions is an actuarially determined contribution for all cost-sharing plans.
CalPERS Miscellaneous Plans
For the year ended June 30, 2017
CalPERS Miscellaneous Plans
For the year ended June 30, 2016
CalPERS Miscellaneous Plans
For the year ended June 30, 2015
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions Pension Plans (Continued) June 30, 2021
(Dollars in Thousands)
184
Valuation date............................... July 1, 2019 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Closed 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.40% (net of inv estment expenses) Inflation......................................... 2.75% Projected salary increase............... Wage inflation component: 3.50% Valuation date............................... July 1, 2018 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Closed 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.40% (net of inv estment expenses) Inflation......................................... 3.00% compounded annually Projected salary increase............... Wage inflation component: 3.50% Valuation date............................... July 1, 2017 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Closed 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.50% (net of inv estment expenses) Inflation......................................... 3.00% compounded annually Projected salary increase............... Wage inflation component: 3.50% Valuation date............................... July 1, 2016 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Closed 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.50% (net of inv estment expenses) Inflation......................................... 3.25% compounded annually Projected salary increase............... Wage inflation component: 3.75% Methods and assumptions used to determine FY 2020-21 contribution rates to SFERS Plan Methods and assumptions used to determine FY 2019-20 contribution rates to SFERS Plan Methods and assumptions used to determine FY 2018-19 contribution rates to SFERS Plan Methods and assumptions used to determine FY 2017-18 contribution rates to SFERS Plan
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions Pension Plans (Continued) June 30, 2021
(Dollars in Thousands)
185
Valuation date............................... July 1, 2015 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Closed 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.50% (net of inv estment expenses) Inflation......................................... 3.25% compounded annually Projected salary increase............... Wage inflation component: 3.75% Valuation date............................... July 1, 2014 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Closed 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.50% (net of inv estment expenses) Inflation......................................... 3.25% compounded annually Projected salary increase............... Wage inflation component: 3.75% Valuation date............................... July 1, 2013 Actuarial cost method.................... Entry-age normal cost method Amortization method...................... Level annual percentage of payroll Remaining amortization period........ Rolling 15-year period Asset valuation method.................. 5 year smoothed market Investment rate of return................. 7.58% (net of inv estment expenses) Inflation......................................... 3.33% compounded annually Projected salary increase............... Wage inflation component: 3.83% Methods and assumptions used to determine FY 2014-15 contribution rates to SFERS Plan Methods and assumptions used to determine FY 2016-17 contribution rates to SFERS Plan Methods and assumptions used to determine FY 2015-16 contribution rates to SFERS Plan
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions Pension Plans (Continued) June 30, 2021
(Dollars in Thousands)
186
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions Pension Plans (Continued) June 30, 2021
(Dollars in Thousands)
187
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios Other Postemployment Healthcare Benefits Plan
June 30, 2021
(Dollars in Thousands)
188
City Plan
Successor
Agency
Transportation
Authority
Total OPEB Liability
Service cost (BOY) 141,642$ 344 $ 92 $ Interest (includes interest on serv ice cost) 314,907 830 114 Changes of benefit terms -- -
Differences between expected and actual
experience (381,922) - (1)
Changes of assumptions 151,725 (248) -
Benefit payments, including refunds of
member contributions (196,445) (902) (61)
Net change in total OPEB liability 29,907 24 144
Total OPEB liability - beginning 4,282,418 12,395 1,478 Total OPEB liability - ending 4,312,325$ 12,419 $ 1,622 $ Plan fiduciary net position
Contributions - employer 235,963$ 2,901 $ 61 $ Contributions - member 60,236 - -
Net inv estment income 22,746 285 67
Benefit payments, including refunds of
member contributions (196,445) (902) (61)
Administrativ e expense (113) (7) (1)
Net change in plan fiduciary net position 122,387 2,277 66 Plan fiduciary net position - beginning 366,603 8,051 1,890 Plan fiduciary net position - ending 488,990 10,328 1,956 Net OPEB liability/(asset) - ending 3,823,335$ 2,091$ (334)$
Plan fiduciary net position as a
percentage of the total OPEB liability 11.3% 83.2% 120.6% Covered payroll 3,951,792$ 6,745 $ 4,355 $ Net OPEB liabilit
y/(as s et) as a percentage
of covered payroll 96.7% 31.0% -7.7%
2021
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios Other Postemployment Healthcare Benefits Plan (Continued) June 30, 2021
(Dollars in Thousands)
189
City Plan
Successor
Agency
Transportation
Authority
Total OPEB Liability
Serv ice cost (BOY) 133,736$ 335 $ 118 $ Interest (includes interest on service cost) 283,520 812 143 Changes of benefit terms -- -
Differences between expected and actual
experience 194,068 - (596)
Changes of assumptions - - (63)
Benefit payments, including refunds of
member contributions (185,839) (906) (60)
Net change in total OPEB liability/(asset) 425,485 241
(458)
Total OPEB liability - beginning 3,856,933 12,154 1,936 Total OPEB liability - ending 4,282,418$ 12,395 $ 1,478 $ Plan fiduciary net position
Contributions - employer 218,625$ 2,967 $ 138 $ Contributions - member 51,024 - -
Net inv estment income 26,959 407 106
Benefit payments, including refunds of
member contributions (185,839) (906) (60)
Administrativ e expense (132) (3) (1)
Net change in plan fiduciary net position 110,637 2,465 183 Plan fiduciary net position - beginning 255,966 5,586 1,707 Plan fiduciary net position - ending 366,603 8,051 1,890 Net OPEB liability/(asset) - ending 3,915,815$ 4,344 $ (412)$ Plan fiduciary net position as a
percentage of the total OPEB liability 8.6% 65.0% 127.9% Covered payroll 3,763,446$ 6,384 $ 4,039 $ Net OPEB liabilit y/(as s et) as a percentage
of covered payroll 104.0% 68.1% -10.2%
2020
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios Other Postemployment Healthcare Benefits Plan (Continued) June 30, 2021
(Dollars in Thousands)
190
City Plan
Successor
Agency
Transportation
Authority
Total OPEB Liability
Serv ice cost (BOY) 127,850$ 164 $ 122 $ Interest (includes interest on service cost) 290,029 701 129 Changes of benefit terms -- ( 5 )
Differences between expected and actual
experience (385,732) 267 -
Changes of assumptions 111,119 1,572 -
Benefit payments, including refunds of
member contributions (178,019) (812) (58)
Net change in total OPEB liability (34,753) 1,892 188
Total OPEB liability - beginning 3,891,686 10,262 1,748 Total OPEB liability - ending 3,856,933$ 12,154 $ 1,936 $ Plan fiduciary net position
Contributions - employer 203,858$ 2,145 $ 144 $ Contributions - member 41,682 - -
Net inv estment income 14,105 339 119
Benefit payments, including refunds of
member contributions (178,019) (812) (58)
Administrativ e expense (137) (11) (1)
Net change in plan fiduciary net position 81,489 1,661 204 Plan fiduciary net position - beginning 174,477 3,925 1,503 Plan fiduciary net position - ending 255,966 5,586 1,707 Net OPEB liability - ending 3,600,967$ 6,568 $ 229 $ Plan fiduciary net position as a
percentage of the total OPEB liability 6.6% 46.0% 88.2% Covered payroll 3,583,448$ 5,742 $ 4,045 $ Net OPEB liability as a percentage of
covered payroll 100.5% 114.4% 5.7%
2019
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios Other Postemployment Healthcare Benefits Plan (Continued) June 30, 2021*
(Dollars in Thousands)
191
* Fiscal year 2017-18 was the first year of implementation of GASB No. 75, therefore only four years of information is shown.
City Plan
Successor
Agency
Transportation
Authority
Total OPEB Liability
Serv ice cost (BOY) 125,195$ 159 $ 122 $ Interest (includes interest on service cost) 272,942 692 117 Benefit payments, including refunds of
member contributions (165,470) (797) (64)
Net change in total OPEB liability 232,667 54 175
Total OPEB liability - beginning 3,659,019 10,208 1,573 Total OPEB liability - ending 3,891,686$ 10,262 $ 1,748 $ Plan fiduciary net position
Contributions - employer 183,898$ 1,097 $ 166 $ Contributions - member 31,686 - -
Net inv estment income 17,368 353 134
Benefit payments, including refunds of
member contributions (165,470) (797) (64)
Administrativ e expense (109) (3) (1)
Net change in plan fiduciary net position 67,373 650 235 Plan fiduciary net position - beginning 107,104 3,275 1,268 Plan fiduciary net position - ending 174,477 3,925 1,503 Net OPEB liability - ending 3,717,209$ 6,337 $ 245 $ Plan fiduciary net position as a
percentage of the total OPEB liability 4.5% 38.2% 86.0% Covered payroll 3,393,658$ 5,042 $ 3,946 $ Net OPEB liability as a percentage of
covered payroll 109.5% 125.7% 6.2%
2018
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions
Other Postemployment Healthcare Benefits Plans
Year Ended June 30, 2021*
(In Thousands)
192
* Fiscal year 2017-18 was the first year of implementation of GASB No. 75, and only five years of information is available for the Successor Agency plan and the Transportation Authority plan.
City Plan
Successor
Agency
Transportation
Authority
Charter required or actuarially determined contributions (ADC) 245,992 $ 813 $ 55 $ Contributions in relation to the charter required contribution or ADC (245,992) (2,259) (55 ) Contribution deficiency/(excess) -$ (1,446) $ - $ Covered payroll 4,022,105 $ 7,092 $ 4,420 $ Contributions as a percentage of covered payroll 6.12% 31.85% 1.24% City Plan
Successor
Agency
Transportation
Authority
Charter required or actuarially determined contributions (ADC) 235,962 $ 802 $ 51 $ Contributions in relation to the charter required contribution or ADC (235,962) (2,901) (61 ) Contribution deficiency/(excess) -$ (2,099) $ (10 )$ Covered payroll 3,951,792 $ 6,745 $ 4,355 $ Contributions as a percentage of covered payroll 5.97% 43.01% 1.40% City Plan
Successor
Agency
Transportation
Authority
Charter required or actuarially determined contributions (ADC) 218,625 $ 812 $ 138 $ Contributions in relation to the charter required contribution or ADC (218,625) (2,967) (138 ) Contribution deficiency/(excess) -$ (2,155) $ - $ Covered payroll 3,763,446 $ 6,384 $ 4,039 $ Contributions as a percentage of covered payroll 5.81% 46.48% 3.42% City Plan
Successor
Agency
Transportation
Authority
Charter required or actuarially determined contributions (ADC) 203,858 $ 813 $ 143 $ Contributions in relation to the charter required contribution or ADC (203,858) (2,145) (143 ) Contribution deficiency/(excess) -$ (1,332) $ - $ Covered payroll 3,583,448 $ 5,742 $ 4,045 $ Contributions as a percentage of covered payroll 5.69% 37.36% 3.54% City Plan
Successor
Agency
Transportation
Authority
Charter required or actuarially determined contributions (ADC) 183,898 $ 804 $ 165 $ Contributions in relation to the charter required contribution or ADC (183,898) (1,097) (165 ) Contribution deficiency/(excess) -$ (293) $ - $ Covered payroll 3,393,658 $ 5,042 $ 3,946 $ Contributions as a percentage of covered payroll 5.42% 21.76% 4.18% For the year ended June 30, 2020
For the year ended June 30, 2019
For the year ended June 30, 2018
For the year ended June 30, 2017
For the year ended June 30, 2021
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions
Other Postemployment Healthcare Benefits Plans (Continued) Year Ended June 30, 2021
(In Thousands)
193
Notes to Schedule:
The City Plan, Transportation Authority and Successor Agency calculate the annual required contributions on an actuarially determined basis. The methods and assumptions used to determine the fiscal year 2020-2021 contribution rates for the plans are as follows:
Actuarial As sumptions
Valuation Date June 30, 2020
Meas urement Date June 30, 2020
Actuarial Cos t Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 4.00% in 2022, 7.00% in 2023, trending down to ultimate rate of 4.04% in 2075 Medicare trend starts at 1.00% in 2022, 7.50% in 2023, trending down to ultimate rate of 4.04% in 2075 10-County average trend starts at 4.5% in 2022, 5.50% in 2023, trending down to ultimate rate of 4.04% in 2075 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Discount Rate 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):
Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Non-Annuitants
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0.979
Healthy Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1.044
Disabled Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0.995
Beneficiaries
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0.977
Adjustment Factor
Adjustment Factor
City Plan for the year ended June 30, 2021
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ending June 30, 2019.
Adjustment Factor
Adjustment Factor
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Schedules of Employer Contributions
Other Postemployment Healthcare Benefits Plans (Continued) Year Ended June 30, 2021
(In Thousands)
194
Actuarial Assumptions Successor Agency Transportation Authority Actuarial Valuation Date June 30, 2019 June 30, 2019
Actuarial Cost Method Entry age normal cost method Entry age normal cost method Asset Valuation Method Actuarial value of assets Actuarial value of assets General Inflation 2.75%, per annum 2.75% per annum
Salary Increases 3.00%, per annum 2.75% per annum, in aggregate Mortality, Turnover, Disability, and
Retirement
CalPERS 2017 Experience Study
for the period 1997 to 2015.
Post-retirement mortality projected
fully generational with Scale MP-
2018
CalPERS Experience Study for the
period from 1997 to 2015
Healthcare Cost Trend Rate Non-medicare - 7.5% for 2020, decreasing to an ultimate rate of
4.0% in 2076
Medicare - 6.5% for 2020,
decreasing to an ultimate rate of
4.0% in 2076
Initial 6.5% for non-medicare
eligibles, 11% for spouse/domestic
partner of medicare eligibles
Investment Rate of Return 6.75% 7.59%
For the year ended June 30, 2021
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule General Fund
Year Ended June 30, 2021
(In Thousands)
195
Original
Budget Final Budget
Actual
Budgetary
Basis
Variance
Positive
(Negative)
Budgetary Fund Balance, July 1, as previously reported 526,905$ 2,781,505 $ 2,781,505 $ - $ Cumulative effect of accounting change............................................... - 35,397 35,397 - Budgetary Fund Balance, July 1, as restated 526,905 2,816,902 2,816,902 - Resources (Inflows):
Property taxes........................................................................................ 2,019,600 2,161,945 2,343,9 54 182,009 Business taxes...................................................................................... 826,400 798,057 722,642 (75,41 5) Other local taxes:
Sales and use tax................................................................................ 183,670 183,670 146,863 (36,807 ) Hotel room tax...................................................................................... 126,230 126,230 33,177 (93,053 ) Utility users tax..................................................................................... 81,090 81,090 81,367 277 Parking tax........................................................................................... 59,350 59,350 47,555 (11,795 ) Real property transfer tax.................................................................... 138,000 138,000 344,683 206,683 Other local taxes.................................................................................. 69,650 69,650 55,395 (14,255 ) Licenses, permits and franchises:
Licenses and permits.......................................................................... 7,443 7,245 5,021 (2,224 ) Franchise tax....................................................................................... 15,732 15,732 15,027 (705) Fines, forfeitures, and penalties............................................................. 2,338 2,389 4,412 2,023 Interest and investment income............................................................. 23,490 20,732 31,657 10,925 Rents and concessions:
Garages - Recreation and Park........................................................... 5,588 5,588 1,947 (3,641 )
Rents and concessions - Recreation and Park.................................. 4,860 4,860 2,468 (2,392 ) Other rents and concessions.............................................................. 500 718 587 (131) Intergovernmental:
Federal grants and subventions.......................................................... 616,703 756,723 679,537 (77,186 ) State subventions:
Social service subventions................................................................ 134,817 134,774 121,818 (12,956) Health / mental health subventions................................................... 190,280 242,812 274,515 31,703 Health and welfare realignment......................................................... 263,786 263,786 292,562 28,776 Public safety sales tax....................................................................... 97,060 97,060 105,028 7,968 Other grants and subventions........................................................... 75,178 85,905 102,639 16,734 Other.................................................................................................... 2,870 10,696 9,143 (1,553) Charges for services:
General government service charges................................................. 87,234 86,543 75,121 (11,422 ) Public safety service charges............................................................. 41,961 41,661 35,845 (5,816 ) Recreation charges - Recreation and Park......................................... 13,951 13,943 7,865 (6,078 ) MediCal, MediCare and health service charges.................................. 114,149 112,843 104,644 (8,199 ) Other financing sources:
Transfers from other funds.................................................................. 447,095 417,009 417,009 - Other resources (inflows)...................................................................... 25,254 59,773 44,799 (14,974) Subtotal - Resources (Inflows) 5,674,279 5,998,784 6,107,280 108,496 Total amounts available for appropriation....................................... 6,201,184 8,815,686 8,924,182 108,496
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule - General Fund (Continued) Year Ended June 30, 2021
(In Thousands)
196
Original
Budget Final Budget
Actual
Budgetary
Basis
Variance
Positive
(Negative)
Charges to Appropriations (Outflows):
Public Protection
Adult Probation..................................................................................... 37,581$ 41,969 $ 41,969 $ - $ District Attorney................................................................................... 64,594 66,128 65,931 197 Emergency Management.................................................................... 72,696 75,676 74,985 691 Fire Department................................................................................... 374,414 410,267 410,263 4 Juvenile Probation................................................................................ 31,919 30,226 28,537 1,689 Police Accountability............................................................................ 10,208 10,319 9,948 371 Police Department............................................................................... 563,528 572,530 572,197 333 Public Defender................................................................................... 41,924 42,347 41,433 914 Sheriff................................................................................................... 212,586 222,840 222,069 771 Superior Court..................................................................................... 33,463 33,478 31,376 2,102 Subtotal - Public Protection 1,442,913 1,505,780 1,498,708 7,072 Public Works, Transportation and Commerce
Appeals Board..................................................................................... 1,177 1,151 1,008 143 Economic and Workforce Development............................................. 84,258 70,051 57,850 12,201 Municipal Transportation Agency......................................................... - 4,798 4,798 - Port...................................................................................................... - 7,628 7,628 - Public Utilities Commission................................................................. - 2,912 2,912 - Public Works....................................................................................... 101,294 132,446 131,462 984
Subtotal - Public Works, Transportation and Commerce 186,729 218,986 205,658 13,328 Human Welfare and Neighborhood Developm ent
Child Support Services........................................................................ - 152 151 1 Children, Youth and Their Families..................................................... 70,086 67,455 67,065 390 Environment......................................................................................... - 30 30 - Homelessness and Supportive Housing............................................. 417,956 288,004 277,469 10,535 Human Rights Commission................................................................ 11,105 6,830 6,237 593 Human Services.................................................................................. 968,208 1,132,923 1,104,442 28,481 Mayor's Office...................................................................................... 51,737 100,533 97,514 3,019 Status of Women................................................................................. 9,870 9,646 9,507 139
Subtotal - Human Welfare and Neighborhood Development 1,528,962 1,605,573 1,562,415 43,158 Community He alth
Public Health........................................................................................ 1,152,275 1,158,599 1,115,487 43,112 Culture and Recreation
Academy of Sciences.......................................................................... 5,588 5,957 5,551 406 Arts Commission................................................................................. 9,192 9,426 9,426 - Asian Art Museum................................................................................ 9,700 9,995 9,814 181 Fine Arts Museums.............................................................................. 17,167 18,148 18,145 3 Law Library.......................................................................................... 1,937 1,946 1,817 129 Library.................................................................................................. - 14 14 - Recreation and Park Commission...................................................... 105,673 101,848 100,744 1,104
Subtotal - Culture and Recreation 149,257 147,334 145,511 1,823
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule - General Fund (Continued) Year Ended June 30, 2021
(In Thousands)
197
Original
Budget Final Budget
Act ual
Budgetary
Basis
Variance
Positive
(Negative)
General Administration and Finance
Assessor/Recorder............................................................................. 33,666$ 31,716$ 31,392$ 324$ Board of Supervisors........................................................................... 18,426 18,413 17,713 700 City Attorney......................................................................................... 25,705 25,686 23,017 2,669 Civil Service......................................................................................... 925 927 682 245 Controller............................................................................................. 13,334 12,485 9,398 3,087 Elections.............................................................................................. 24,318 20,397 19,791 606 Ethics................................................................................................... 4,725 7,508 6,815 693 General Services Agency - Administrative Services........................... 68,940 78,469 77,071 1,398 Health Service System........................................................................ 634 881 300 581 Human Resources.............................................................................. 19,491 22,832 22,548 284 Mayor's Office...................................................................................... 6,964 6,886 6,474 412 Planning............................................................................................... 48,529 52,190 44,960 7,230 Retirement System.............................................................................. 1,558 1,094 1,094 - Telecommunications and Information Services.................................. 6,939 12,188 12,008 180 Treasurer/Tax Collector....................................................................... 34,013 41,325 40,354 971 Subtotal - General Administration and Finance 308,167 332,997 313,617 19,380 General City Responsibilities
General City Responsibilities............................................................... 185,565 126,993 113,986 13,007 Other financing uses:
Debt service......................................................................................... 18,091 2,600 338 2,262 Transfers to other funds...................................................................... 1,046,155 1,164,927 1,164,927 - Budgetary reserves and designations................................................. 183,070 42,454 - 42,454 Total charges to appropriations...................................................... 6,201,184 6,306,243 6,120,647 185,596 Total Sources less Current Year Uses........................................... -$ 2,509,443$ 2,803,535$ 294,092$ 2,803,535$
(1,649,631)
Reserve for Litigation and Contingencies and General Reserve (251,924) 901,980$
8,924,182$
(2,816,902)
(11,090)
(32,648)
(613)
2,248
20,820
167
(417,009)
5,669,155$
6,120,647$
(362)
15,287
(73,632)
(1,164,927)
4,897,013$
Transfers to other funds are outflows of budgetary resources but are not Total expenditures as reported on the statement of revenues, expenditures and changes in fund balance - General Fund...........................................................................................................
Recognition of expenditures for advances and imprest cash and capital asset acquisition for internal service fund.................................................................................................................. expenditures for financial reporting purposes................................................................................
Intergovernmental expense offset....................................................................................................
Purchase of inventories....................................................................................................................
Difference - budget to GAAP:
Total revenues as reported on the statement of revenues, expenditures and changes Difference - budget to GAAP:
The fund balance at the beginning of the year is a budgetary resource but is not a current year revenue for financial reporting purposes................................................................
Property tax revenue - Teeter Plan net change from prior year.......................................................
Change in unrealized gain/(loss) on investments............................................................................
Interest earnings / charges from other funds assigned to General Fund as interest adjustment...
Interest earnings from other funds assigned to General Fund as other revenues..........................
Grants, subventions and other receivables received after 60-day recognition period.....................
Prepaid lease revenue, Civic Center Garage...................................................................................
Transfers from other funds are inflows of budgetary resources, but are not revenues for financial reporting purposes...................................................................................... in fund balance - General Fund...........................................................................................................
Uses/outflows of resources
Actual amounts (budgetary basis) "total charges to appropriations"....................................................
Actual amounts (budgetary basis) "available for appropriation"...........................................................
Budgetary fund balance, June 30 before reserves and designations Reserves and designations made from budgetary fund balance not available for appropriation Net Available Budgetary Fund Balance, June 30
Sources/inflows of resources
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule - General Fund (Continued) Year Ended June 30, 2021
(In Thousands)
198
Notes to Budgetary Schedule:
(a) Budgetary Data
The City adopts two-year rolling budgets annually for all governmental funds on a substantially modified accrual basis of accounting except for capital project funds and certificates of participation and other debt service funds, which substantially adopt project length budgets.
The budget of the City is a detailed operating plan, which identifies estimated costs and results in relation to estimated revenues. The budget includes (1) the programs, projects, services, and activities to be provided during the fiscal year, (2) the estimated resources (inflows) available for appropriation, and (3) the estimated charges to appropriations. The budget represents a process through which policy decisions are deliberated, implemented, and controlled. The City Charter prohibits expending funds for which there is no legal appropriation.
detailing the budget timeline. A summary of the key budgetary steps is summarized as follows:
Original Budget
(1) Departments and Commissions conduct hearings to obtain public comment on their proposed annual than February 21.
(2)
e Board of Supervisors.
(3) By the first working day of May, the Mayor submits the Proposed Budget for selected departments to the Board of Supervisors. The selected departments are determined by the Controller in consultation with the Board President and the
budget submission in May for their revenue sources.
(4) By the first working day of June, the Mayor submits the complete Proposed Budget to the Board of Office.
(5) of Supervisors, the
provides an opinion as to their accuracy and reasonableness. The Controller also may make a recommendation regarding prudent reserves given th
(6) The designated Committee (usually the Budget Committee) of the Board of Supervisors conducts recommends an interim budget
Supervisors passes interim appropriation and salary ordinances. (7) Not later than the last working day of July, the Board of Supervisors adopts the budget through passage of the Annual Appropriation Ordinance, the legal authority for enactment of the budget.
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule - General Fund (Continued) Year Ended June 30, 2021
(In Thousands)
199
Final Budget
The final budgetary data presented in the basic financial statements reflects the following changes to the original budget:
(1) Certain annual appropriations are budgeted on a project or program basis. If such projects or programs are not completed at the end of the fiscal year, unexpended appropriations, including encumbered funds, are carried forward to the following year. In certain circumstances, other programs and regular annual appropriations may be carried forward after appropriate approval. Annually appropriated funds, not authorized to be carried forward, lapse at the end of the fiscal year. Appropriations carried forward from the prior year are included in the final budgetary data. (2) Appropriations may be adjusted during the year with the approval of the Mayor and the Board of Supervisors, e.g. supplemental appropriations. Additionally, the Controller is authorized to make certain transfers of surplus appropriations within a department. Such adjustments are reflected in the final budgetary data.
The Annual Appropriation Ordinance adopts the budget at the character level of expenditure within departments. As described above, the Controller is authorized to make certain transfers of appropriations within departments. Accordingly, the legal level of budgetary control by the Board of Supervisors is the department level.
Budgetary data, as revised, is presented as required supplementary information for the General Fund.
Final budgetary data excludes the amount reserved for encumbrances for appropriate comparison to actual expenditures.
(b) Budgetary Results Reconciled to Results in Accordance with Generally Accepted Accounting Principles
The budgetary process is based upon accounting for certain transactions on a basis other than GAAP. The results of operations are presented in the budget-to-actual comparison schedule in accordance with the budgetary process (Budget basis) to provide a meaningful comparison with the budget. differences represent transactions that are accounted for in different periods for Budget basis and GAAP basis reporting. Certain revenues accrued on a Budget basis have been deferred for GAAP reporting.
These primarily relate to the accounting for property tax revenues under the Teeter Plan (Note 6), revenues not meeting the 60-day availability period and other assets not available for budgetary appropriation.
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule - General Fund (Continued) Year Ended June 30, 2021
(In Thousands)
200
The fund balance of the General Fund as of June 30, 2021, on a Budget basis is reconciled to the fund balance on a GAAP basis as follows:
2,803,535$
3,978
(31,745)
Cumulative Excess Health, Human Services, Franchise and Other Revenues (120,569)
17,925
(5,734)
2,714
2,670,104$
Not available for appropriations:
Restricted Fund Balance:
114,539$
Committed Fund Balance:
320,637
407,137
753,776
42,454
6,000
Assigned for Subsequent Years' Budgets:
5,088
1,649,631$
Available for appropriations:
173,591
Assigned balance subsequently appropriated as part of
173,989
78,333
Unassigned - COVID-19 Response and
113,500
100,000
293,900
149,000
Unassigned - Gross Receipts Prepayment Reserv e................ 26,000 13,807
31,784
1,153,904
2,803,535$
General Fund budget basis fund balance as of June 30, 2021 is composed of the following:
Passed through State of California, Department of Aging:
Passed through State of California, Department of Aging:
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deficiency in internal control
material weakness
significant
deficiency
Government Auditing
Standards
Government
Auditing Standards
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OMB Compliance Supplement
U.S. Code of Federal
Regulations , Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
Management’s Responsibility
Auditor’s Responsibility
Government Auditing Standards
Unmodified Opinion on Each of the Major Federal Programs deficiency in internal control over compliance
material weakness in internal control over compliance
significant deficiency in internal control over
compliance
OFFICE OF THE CONTROLLER
CITY AND COUNTY OF SAN FRANCISCO
Significant Deficiency in Internal Controls over Financial Reporting
OFFICE OF THE CONTROLLER
CITY AND COUNTY OF SAN FRANCISCO
Material Noncompliance & Material Weakness in Internal Controls over Compliance