CleanPowerSF Sfpuc Commission
March 14, 2023

Audited Financial Statements
Fiscal Year 2021-22
March 14, 2023
Nancy L. Hom
Chief Financial Officer and
AGM, Business Services
1 FY 2021-22
Audited Financial Statements
2 Issued: KPMG LLP, January 27, 2023
Audited Financial Statements & Annual
Comprehensive Financial Reports | SFPUC
(sfpuc.org)
Summary of Audit Results, (3) Reports
Water, Wastewater and Hetch Hetchy
Water & Power & CleanPowerSF
 Unmodified opinion
 No material misstatements in the financial
statements
 No internal control deficiencies observed

THANK YOU
Next Presenter:

Lisa Avis, Managing Director

KPMG, LLP
3 San Francisco Public Utilities
Commission
Discussion with Those
Charged with Governance
Audit results for the year ending June 30, 2022
March 14, 2023
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Executive summary Audit results Independence Inquiries
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Required
communications to
Those Charged with
Governance
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Matters to communicate Response
Related parties
Going concern
Other information Page 10
Subsequent events
Noncompliance with laws and regulations
Significant difficulties encountered during the audit
Significant findings or issues discussed, or the subject of correspondence with management
Management’s consultation with other accountants
Difficult or contentious matters for which the auditor
consulted
Disagreements with management
Other significant matters
Summary: Audit results required communications
and other matters
Matters to communicate Response
Significant unusual transactions
Uncorrected audit misstatements
Corrected audit misstatements
Financial statement presentation and disclosure omissions Non-GAAP policies and practices
Auditors’ report Page 6
Significant accounting policies and practices Page 7
Significant accounting estimates Page 8
Significant financial statement disclosures Page 9
No matters to report
Executive summary Audit results Independence Inquiries
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Summary: Audit results required communications
and other matters
Illegal acts or fraud No actual or suspected fraud involving management, employees with significant roles in internal control, or where fraud results in a material misstatement in the financial statements were identified during the audit.

Written communications Engagement letter and management representation letters distributed under separate covers.

Independence We have complied with relevant ethical requirements regarding independence, as that term is defined by the professional standards.

Inquiries See slide 11
Matters to communicate
Executive summary Audit results Independence Inquiries
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Auditor’s report
Executive summary Audit results Independence Inquiries
Matters affecting the form and content of the auditors’ report • Emphasis of Matter paragraph
• Excerpt from the Auditors’ report for each enterprise:
- As discussed in Note 1, the financial statements of the Enterprise are intended to present the financial position, the changes i n financial position, and, where applicable, cash flows of only that portion of the business-type activities and each major fund of the City and county of San Francisco, California that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City and County of San Francisco, California, as of June 30, 2022 and 2021, the changes in its financial posi tion, or, where applicable, its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. Our opinion is not modified with respect to this matter.
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Significant accounting policies and practices
Executive summary Audit results Independence Inquiries
Description of significant accounting policies and practices Audit findings • Cash and investments Held by the City are reported as part of City and County of San Francisco’s internal pool of investments. • Each department’s proportionate share of the Pension and Postemployment Benefits Other than Pensions (OPEB) elements are based on employer contributions.
• Water, sewage, and power service revenue charges are based on consumption and usage by its customers.
• Capital Assets with initial individual costs greater than $5,000 and estimated useful life in excess of one year are capitalized. • Lease receivables, assets and payables are reported on the Statement of Net Position.
• Management follows GASB 72 Fair Value Measurement and application. Valuation and presentation of investments are reasonable.
• Vouched input of the liability to underlying records and support.

Engaged KPMG actuary to assess the methodology,
assumptions and inputs. Engaged KPMG specialist to review presentation and disclosures.
• Performed various analytics on accounts, noting no issues. • Performed test of details over capital assets and related accounts, including depreciation, noting no issues.
• Assessed implementation of GASB 87 and performed test of details over leases, noting no issues.
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Significant accounting estimates
Executive summary Audit results Independence Inquiries
Description of significant accounting estimates
• Management estimates fair value for its investments as described in the notes to the financial statements.

Audit findings
Management’s process used to develop the estimates
• Management’s investments are held in an internal pool in the City and County of San Francisco. The fair value is determined by the Controller’s Office Significant assumptions used that have a high degree of subjectivity • None at the department level.

Indicators of possible management bias
• None noted
Qualitative aspects
• This significant accounting policy follows GASB 72 Fair Value Measurement and Application, which is an acceptable framework under U.S. GAAP.

Conclusions
• We evaluated the key factors and assumptions used, including possible management bias in developing the fair value of investments, and determined it was reasonable in relation to the financial statements as a whole. 12 © 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Significant financial statement disclosures
Description of significant financial statement disclosures Audit findings • Under GASB 68 and 75 there are certain required disclosures reported under the enterprises. These disclosures include description of the plan, benefits, the liability, expenses, deferred outflows/inflows, contributions, actuarial assumptions, and discount rate. • Under GASB 87, there are certain required disclosures reported under the enterprises for leases including description of leasing arrangements, amount of leased assets, and principal and interest requirements to maturity.
• The disclosures are consistent with industry and conform with requirements under U.S. GAAP.

Executive summary Audit results Independence Inquiries
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Other information
Executive summary Audit results Independence Inquiries
Other information Procedures performed Results
Management’s Discussion and
Analysis

1. Verified the mathematical accuracy of the
amounts and calculations.

2. Obtained the underlying support and verify
consistency amongst the financial statements.

We performed the procedures with no exceptions
noted. No material inconsistencies were identified that require revision of the other information.
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Inquiries
Executive summary Audit results Independence Inquiries
Are those charged with governance aware of:
• Matters relevant to the audit, including, but not limited to, violations or possible violations of laws or regulations? • Any significant communications with regulators?
• Any developments in financial reporting, laws, accounting standards, corporate governance, and other related matters, and the effect of such developments on, for example, the overall presentation, structure, and content of the financial statements, including the following:
- The relevance, reliability, comparability, and understandability of the information presented in the financial statements - Whether all required information has been included in the financial statements, and whether such information has been appropriately classified, aggregated or disaggregated, and presented?
Do those charged with governance have knowledge of:
• Fraud, alleged fraud, or suspected fraud affecting the Commission? - If so, have the instances been appropriately addressed and how have they been addressed? Additional inquiries:
• What are those charged with governance’s views about fraud risks in the Commission? • Who is the appropriate person in the governance structure for communication of audit matters during the audit? • How are responsibilities allocated between management and those charged with governance? • What are the Commission’s objectives and strategies and related business risks that may result in material misstatements? • Are there any areas that warrant particular attention during the audit and additional procedures to be undertaken? • What are those charged with governance’s attitudes, awareness, and actions concerning (a) the Commission’s internal controls and their importance in the entity, including oversight of effectiveness of internal controls, and (b) detection of or possibility of fraud? • Have there been any actions taken based on previous communications with the auditor? • Has the Commission entered into any significant unusual transactions? • Whether the entity is in compliance with other laws and regulations that have a material effect on the financial statements? • What are the other document(s) that comprise the annual report, and what is the planned manner and timing of issuance of such documents? • Have any subsequent events occurred that might affect the financial statements? kpmg.com/socialmedia
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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.

Financial Services Bureau
525 Golden Gate Avenue, 4th Floor
San Francisco, CA 94102
T 415.554.3155
F 415.554.3161
TTY 415.554.3488
Date: March 14, 2023

To: Newsha K. Ajami, President
Sophie Maxwell, Vice President
Tim Paulson, Commissioner
Anthony Rivera, Commissioner
Kate H. Stacy, Commissioner

Through: Dennis J. Herrera, General Manager

From: Nancy L. Hom, Chief Financial Officer and AGM, Business Services

RE: SFPUC Fiscal Year 2021-22 Annual Audited Financial Statements

Financial Services is pleased to present the FY 2021-22 Audited Financial Statements for the Water Enterprise, Wastewater Enterprise, and Hetch Hetchy Water & Power & CleanPowerSF, issued by KPMG, LLP on January 27, 2023.

The reports can be found on our public-facing website:
https://sfpuc.org/about-us/reports/audited-financial-statements-reports

The main objective of the financial audit was to obtain reasonable assurance on whether the financial statements were free of material misstatement. The review also included consideration of internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of those internal controls.

KPMG, LLP issued an unqualified opinion for all three financial statements for each of Water, Wastewater, Hetch Hetchy Water & Power & CleanPowerSF. For all audited financial statements, no material misstatements were noted; nor were any internal control deficiencies observed.

SFPUC continues to demonstrate strength in maintaining financial integrity and internal controls through effective fiscal oversight and ‘clean’ audits. If you have any questions, please contact me at (415) 487-5229.

cc: Ronald P. Flynn, Deputy General Manager
Charles Perl, Deputy Chief Financial Officer

att: FY 2021-22 Annual Audited Financial Statements: Water, Wastewater, and Hetch Hetchy Water & Power & CleanPowerSF

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HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Table of Contents
Page
Independent Auditors’ Report 1
Management’s Discussion and Analysis (Unaudited) 3
Basic Financial Statements:

Statements of Net Position 33
Statements of Revenues, Expenses, and Changes in Net Position 34 Statements of Cash Flows 35
Notes to Financial Statements 37
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 96
Independent Auditors Report
The Honorable Mayor and Board of Supervisors
City and County of San Francisco:

Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the business-type activities and each major fund of Hetch Hetchy Water and Power and CleanPowerSF (Hetch Hetchy), as of and for the years ended June 30, 2022 and 2021, and the related notes to the financial statements, which collectively comprise Hetch Hetchy ial
statements for the years then ended as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of Hetch Hetchy, as of June 30, 2022 and 2021, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinions
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors
Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Hetch Hetchy and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter
As discussed in Note 1, the financial statements of Hetch Hetchy are intended to present the financial position, the changes in financial position, and, where applicable, cash flows of only that portion of the business-type activities and each major fund of the City and county of San Francisco, California that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City and County of San Francisco, California, as of June 30, 2022 and 2021, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. Our opinions are not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors
Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement
opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS andGovernment Auditing Standards will always

KPMG LLP
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San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 2 detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS andGovernment Auditing Standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Hetch Hetchy
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Required Supplementary Information
U.S. generally accepted accounting principles require that the management s discussion and analysis be
presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management
s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2023 on our consideration of Hetch Hetchy
with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Hetch Hetchy internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Hetch Hetchy reporting and compliance.

San Francisco, California
January 27, 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
3 (Continued)
This section presents management’s analysis of San Francisco Hetch Hetchy Water and Power and CleanPowerSF Enterprise’s (Hetch Hetchy or the Enterprise) financial condition and activities as of and for fiscal years ended June 30, 2022 and 2021. Management’s Discussion and Analysis (MDA) is intended to serve as an introduction to the Enterprise’s financial statements. This information should be read in conjunction with the audited financial statements th at follow this section. All dollar amounts, unless otherwise noted, are expressed in thousands of dollars.

In May 2016, San Francisco Public Utilities Commission (SFPUC or the Commission) launched CleanPowerSF, a Community Choice Aggregation (CCA) program into operation, pooling the electricity demands of their residents and businesses for the purpose of buying electricity on behalf of those customers. CleanPowerSF provides San Francisco with new clean energy alternatives, with its objectives to reduce greenhouse gas emissions, and to provide the City and County of San Francisco’s (the City) energy consumers with renewable electricity supplies at competitive rates. The SFPUC intends CleanPowerSF to be financially independent, with ability to set rates and charges with adequate revenues, and to issue debt to support its operations and future projects. CleanPowerSF is discretely presented as a fund of the Enterprise starting fiscal year 2017.

The information in this MDA is presented under the following headings:

Organization and Business
Overview of the Financial Statements
COVID-19
Financial Analysis
Capital Assets
Debt Administration
Rates and Charges
Request for Information
Organization and Business
SFPUC is a department of the City that is responsible for the maintenance, operation, and development of three utility enterprises: Water, Wastewater, and Hetch Hetchy. The Enterprise was established as a result of the Raker Act of 1913, which granted water and power resource rights-of-way on the Tuolumne River in Yosemite National Park and the Stanislaus National Forest to the City. The Enterprise operates the Hetch Hetchy project, which provides both electricity generation and upcountry water service; and is engaged in the collection and conveyance of approximately 85% of the regional system’s water supply and in the generation and transmission of electricity.

In normal rain years, 85% of San Francisco’s drinking water starts out as snow falling on 459 square miles of watershed land in Yosemite National Park and the City may supplement water supply from an additional 193 square miles of watershed in Yosemite National Park and the Stanislaus National Forest during extremely dry years. As the snow melts, it collects in the SFPUC's storage reservoirs, then flows by gravity through over 150 miles of pipelines and tunnels, it turns the turbines in three hydroelectric powerhouses, generating approximately 1.2 billion kilowatt hours of electricity per year. The electricity travels over 160 miles of transmission and distribution lines from the upcountry powerhouses to the San Francisco Bay Area.

Approximately 69% of the electricity generated by Hetchy Power was used to provide electric service to the City’s municipal customers (including the San Francisco Municipal Transportation Agency, Recreation and Parks Department, the Port of San Francisco, San Francisco International Airport and its tenants, Zuckerberg San Francisco General Hospital and Trauma Center, City streetlights, Moscone Convention Center, and the

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
4 (Continued)
Water and Wastewater Enterprises). The remaining 31% of electricity generated was sold to CleanPowerSF and the wholesale electric market.

Hetch Hetchy
Hetch Hetchy provides reliable, high-quality water an d electric energy to the City and other customers, protects watershed resources in cooperation with Federal agencies, operates and maintains facilities to a high standard of safety and reliability, and maximizes revenue opportunities within approved levels of risk.

Hetch Hetchy, a stand-alone enterprise is comprised of three funds: 1) Hetch Hetchy Water (Hetchy Water) upcountry operations and water system; 2) Hetch Hetchy Power (Hetchy Power), also referred to as the Power Enterprise, which is wholly contained within the Hetch Hetchy fund; and 3) CleanPowerSF, which is an enterprise fund to aggregate the buying power of customers within San Francisco to purchase renewable energy sources or clean power, is reported as a separate fund of Hetch Hetchy. A number of the facilities are joint assets and used for both water and power generation.

H
etchy Water
For efficiency and to streamline the coordination of upcountry water and power operations, Hetchy Water operates upcountry and joint asset facilities, managing resources in an environmentally responsible manner to a high standard of safety and reliability while meeting regulatory requirements. It is responsible for operating the Hetch Hetchy Reservoir, the main source of water for the Hetch Hetchy system. Hetchy Water operates, maintains, and improves water and power facilities, smaller dams and reservoirs, water transmission systems, power generation facilities, an d power transmission assets, including transmission lines to the Newark substation. Hetchy Water delivers high-quality water from upcountry downhill to the Bay Area while optimizing the resulting generation of clean hydropower as water is transported through the system. It maintains land and properties consistent with public health and neighborhood concerns.

H
etchy Power
The core business of Hetchy Power, as a municipal department, is to provide adequate and reliable supplies of electric power to meet the electricity needs of City and County of San Francisco’s customers, and to offer, when available, power for the municipal loads and agricultural pumping demands consistent with prescribed contractual obligations and federal law.

Hetchy Power’s portfolio consists of hydroelectric generation, onsite solar at SFPUC and other City facilities, generation using bio-methane produced at SFPUC wastewater treatment facilities, and third-party purchases. Consistent with its commitment to the development of cleaner and greener power, and to address environmental concerns and community objectives, Hetchy Power continues to evaluate and expand its existing resource base to include additional renewables, distributed generation, demand management, and energy efficiency programs. As part of its mission and core functions, Hetchy Power provides reliable energy services at reasonable cost to customers, with attention to environmental effects and community concerns.

H
etch Hetchy Joint
A portion of Hetch Hetchy’s operating budget, capital program, and assets, provides benefit to both Hetchy Power and Hetchy Water. This is commonly referred to as joint costs and joint assets. Both operating and capital costs that jointly benefit both funds are allocated 55% to Hetchy Power and 45% to Hetchy Water, as has historically been done by the SFPUC.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
5 (Continued)
CleanPowerSF
CleanPowerSF is a community choice aggregation (CCA) program made possible by the 2002 passage of California Assembly Bill 117, enabling communities to purchase power on behalf of their residents and businesses and creating competition in power generation since May 2016. The core business is to provide greener electricity generation to residential an d commercial consumers in San Francisco. Through CleanPowerSF, SFPUC seeks to achieve several complementary goals, including affordable and competitive electricity generation rates, a diverse electricity resource portfolio that is comprised of renewable and other clean sources of supply, and high-quality customer service. The program serves more than 380,000 customer accounts and provides San Francisco with an electricity supply from its default “Green” product that is at least 50% California State Renewables Portfolio Standard (RPS)-eligible. Additionally, CleanPowerSF offers “SuperGreen”, a 100% RPS-eligible electricity supply, that is available to customers for a small additional cost. On June 1, 2022, CleanPowerSF opened enrollment for its “SuperGreen Saver” product, which provides eligible lo w-income ratepayers residing in Disadvantaged Communities with 100% RPS electricity at a 20% bill discount.

O
verview of the Financial Statements
Hetch Hetchy’s financial statements include the following:

Statements of Net Position present information on Hetch Hetchy’s assets, deferred outflows, liabilities, and deferred inflows as of year-end, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Hetch Hetchy is improving or worsening.

While the Statements of Net Position provide information about the nature and amount of resources and obligations as of year-end, the Statements of Revenues, Expenses, and Changes in Net Position present the results of Hetch Hetchy’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which Hetch Hetchy has successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which th e underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in these statements from some items that will result in cash flows in future fiscal periods, such as delayed collection of operating revenues and the expenses of employee earned but unused vacation leave.

The Statements of Cash Flows present changes in cash and cash equivalents resulting from operational, capital financing, non-capital financing, and investing activities. These statements summarize the annual flow of cash receipts and cash pay ments, without consideration of the timing of the event giving rise to the obligation or receipt and exclude non-cash accounting measures of depreciation or amortization of assets.

The Notes to Financial Statements provide information that is essential to a full understanding of the financial statements that is not presented on the face of the financial statements.

C
OVID-19
On February 25, 2020, the City’s Mayor issued a proclamation declaring a local emergency to exist in connection with the imminent spread within the City of the novel coronavirus (“COVID-19”). On March 16, 2020, the City’s Health Officer issued a stay safe at home order, Health Officer Order No. C19-07 (the “Stay Safe At Home Order”), requiring most people and City employees to remain in their homes subject to certain exceptions including obtaining essential goods (such as food and necessary supplies), and requiring the

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
6 (Continued)
closure of nonessential businesses. In addition, Section 2 of the second supplement to the emergency proclamation authorizes the SFPUC to suspend (a) the discontinuation or shutoff of power service for residents and businesses in the City for non-payment of power bills and (b) the imposition of late payment penalties or fees for delinquent power bills through July 11, 2020. The suspension was extended on December 8, 2020 through June 30, 2021, again on April 27, 2021 through March 31, 2022 and then again on February 22, 2022 to July 31, 2022 for shut off of power service for residential customers and to June 30, 2023 for late payment penalties. The suspension of the return of delinquent CleanPowerSF customers to Pacific Gas & Electric Company (PG&E) generation service for failure to pay CleanPowerSF charges was extended to June 30, 2022. This proclamation did not have a material effect on the operations of the Hetch Hetchy Enterprise.

F
inancial Analysis
Hetch Hetchy
Total assets of Hetch Hetchy exceeded total liabilities by $893,577.

Net position increased by $43,480 or 5.5% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $117,106 or 17.5% to $786,643.

Operating revenues, excluding interest and invest ment income, and other non-operating revenues, increased by $89,276 or 22.8% to $480,447.

Operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, increased by $61,898 or 15.1% to $470,768.

Hetchy Water
Total assets of Hetchy Water exceeded total liabilities by $276,423.

Net position increased by $24,519 or 10.9% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $23,526 or 13.3% to $201,007.

Operating revenues, excluding interest and invest ment income, and other non-operating revenues, increased by $2,222 or 4.7% to $49,312.

Operating expenses, excluding other non-operating expenses, increased by $1,784 or 3.5% to $52,303.

H
etchy Power
Total assets of Hetchy Power exceeded total liabilities by $527,476.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
7 (Continued)
Net position increased by $21,718 or 4.6% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $93,580 or 19.0% to $585,636.

Operating revenues, excluding interest and invest ment income, and other non-operating revenues, increased by $36,859 or 27.0% to $173,242.

Operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, increased by $10,707 or 7.4% to $156,347.

C
leanPowerSF
Total assets of CleanPowerSF exceeded total liabilities by $89,678.

Net position decreased by $2,757 or 3.2% during the fiscal year.

CleanPowerSF had no capital assets, net of accumulated depreciation and amortization as of June 30, 2022.

Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $50,195 or 24.2% to $257,893.

Operating expenses, excluding interest expenses increased by $49,407 or 23.2% to $262,118.

Hetch Hetchy
Total assets of Hetch Hetchy exceeded total liabilities by $767,191.

Net position increased by $16,429 or 2.1% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $63,326 or 10.4% to $669,537.

Operating revenues, excluding interest and invest ment income, and other non-operating revenues, decreased by $30,113 or 7.1% to $391,171.

Operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, increased by $19,845 or 5.1% to $408,871.

H
etchy Water
Total assets of Hetchy Water exceeded total liabilities by $216,214.

Net position increased by $13,630 or 6.5% during the fiscal year.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
8 (Continued)
Capital assets, net of accumulated depreciation and amortization, increased by $16,699 or 10.4% to $177,481.

Operating revenues, excluding interest and invest ment income, and other non-operating revenues, increased by $12,137 or 34.7% to $47,090.

Operating expenses, excluding other non-operatin g expenses, increased by $5,644 or 12.6% to $50,517.

Hetchy Power
Total assets of Hetchy Power exceeded total liabilities by $462,136.

Net position increased by $6,857 or 1.5% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $46,627 or 10.5% to $492,056.

Operating revenues, excluding interest and invest ment income, and other non-operating revenues, decreased by $4,488 or 3.2% to $136,383.

Operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, decreased by $2,489 or 1.7% to $145,638.

C
leanPowerSF
Total assets of CleanPowerSF exceeded total liabilities by $88,841.

Net position decreased by $4,058 or 4.5% during the fiscal year.

CleanPowerSF had no capital assets, net of accumulated depreciation and amortization as of June 30, 2021.

Operating revenues, excluding interest and investment income, and other non-operating revenues, decreased by $37,762 or 15.4% to $207,698.

Operating expenses, excluding interest expense increased by $16,690 or 8.5% to $212,716.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
9 (Continued)
Financial Position
The following tables summarize Hetch Hetchy’s changes in net position:
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. **Eliminated interfund payable and receivable of $1,800 working capital loan between Hetchy Power and CleanPowerSF in fiscal year 2020.

Restated 2022-2021 2021-2020
2022 2021* 2020 Change Change
Total assets:

Current and other assets $ 500,159 469,507 441,635 30,652 27,872 Capital assets, net of accumulated
depreciation and amortization 786,643 669,537 606,211 117,106 63,326 Total assets 1,286,802 1,139,044 1,047,846 147,758 91,198 Deferred outflows of resources:

Pensions 15,731 18,133 18,238 (2,402) (105 ) Other post-employment benefits 8,069 8,719 5,452 (650) 3,267 Total deferred outflows of resources 23,800 26,852 23,690 (3,052) 3,162 Liabilities:

Current liabilities:

Bonds 1,966 1,928 2,115 38 (187 ) Certificates of participation 427 405 384 22 21 Commercial paper 40,019 114,671 63,535 (74,652) 51,136 Other liabilities 94,550 83,058 63,178 11,492 19,880 Subtotal current liabilities 136,962 200,062 129,212 (63,100) 70,850 Long-term liabilities:

Bonds 192,520 44,384 47,693 148,136 (3,309 ) Certificates of participation 12,593 13,026 13,444 (433) (418 ) Other liabilities 51,150 114,392 98,697 (63,242) 15,695 Subtotal long-term liabilities 256,263 171,802 159,834 84,461 11,968 Total liabilities:

Bonds 194,486 46,312 49,808 148,174 (3,496) Certificates of participation 13,020 13,431 13,828 (411) (397 ) Commercial paper 40,019 114,671 63,535 (74,652) 51,136 Other liabilities 145,700 197,450 161,875 (51,750) 35,575 Total liabilities 393,225 371,864 289,046 21,361 82,818 Deferred inflows of resources:

Related to pensions 82,029 3,288 10,843 78,741 (7,555 ) Other post-employment benefits 7,670 6,546 3,867 1,124 2,679 Total deferred inflows of resources 89,699 9,834 14,710 79,865 (4,876) Net position:

Net investment in capital assets 553,169 500,547 482,986 52,622 17,561 Restricted for debt service 140 99 142 41 (43) Restricted for capital projects — — 6,513 — (6,513 ) Unrestricted 274,369 283,552 278,139 (9,183) 5,413 Total net position $ 827,678 784,198 767,780 43,480 16,418 Table 1 A - C onsolidated H etch H etchy
Comparative Condensed Net Position
June 3 0, 2 022, 2 021, a nd 2 020
**

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
10 (Continued)
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

Restated 2022-2021 2021-2020
2022 2021* 2020 Change Change
Total assets:

Current and other assets $ 109,752 98,225 92,711 11,527 5,514 Capital assets, net of accumulated
depreciation and amortization 201,007 177,481 160,782 23,526 16,699 Total assets 310,759 275,706 253,493 35,053 22,213 Deferred outflows of resources:

Pensions 6,696 7,799 7,950 (1,103) (151) Other post-employment benefits 3,272 3,725 2,332 (453) 1,393 Total deferred outflows of resources 9,968 11,524 10,282 (1,556) 1,242 Liabilities:

Current liabilities 17,380 15,873 6,769 1,507 9,104
Long-term liabilities 16,956 43,623 40,441 (26,667) 3,182 Total liabilities 34,336 59,496 47,210 (25,160) 12,286 Deferred inflows of resources:

Related to pensions 34,477 988 4,335 33,489 (3,347) Other post-employment benefits 2,734 2,085 1,195 649 890 Total deferred inflows of resources 37,211 3,073 5,530 34,138 (2,457) Net position:

Net investment in capital assets 201,007 177,481 160,782 23,526 16,699 Restricted for capital projects — — 6,513 — (6,513)
Unrestricted 48,173 47,180 43,740 993 3,440
Total net position $ 249,180 224,661 211,035 24,519 13,626 Table 1 B - H etchy Water
C omparative C ondensed N et Position
June 3 0, 2 022, 2 021, a nd 2 020

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
11 (Continued)
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. **Included $1,800 working capital loan to CleanPowerSF in fiscal year 2020.

Restated 2022-2021 2021-2020
2022 2021* 2020 Change Change
Total assets:

Current and other assets $ 260,560 249,365 228,845 11,195 20,520 Capital assets, net of accumulated
depreciation and amortization 585,636 492,056 445,429 93,580 46,627 Total assets 846,196 741,421 674,274 104,775 67,147 Deferred outflows of resources:

Pensions 8,183 9,531 9,716 (1,348) (185)
Other post-employment benefits 3,999 4,552 2,850 (553) 1,702 Total deferred outflows of resources 12,182 14,083 12,566 (1,901) 1,517 Liabilities:

Current liabilities:

Bonds 1,966 1,928 2,115 38 (187)
Certificates of participation 427 405 384 22 21
Commercial paper 40,019 114,671 63,535 (74,652) 51,136 Other liabilities 48,549 49,450 33,218 (901) 16,232 Subtotal current liabilities 90,961 166,454 99,252 (75,493) 67,202 Long-term liabilities:

Bonds 192,520 44,384 47,693 148,136 (3,309)
Certificates of participation 12,593 13,026 13,444 (433) (418) Other liabilities 22,646 55,425 54,085 (32,779) 1,340 Subtotal long-term liabilities 227,759 112,835 115,222 114,924 (2,387 )
Total liabilities:

Bonds 194,486 46,312 49,808 148,174 (3,496)
Certificates of participation 13,020 13,431 13,828 (411) (397) Commercial paper 40,019 114,671 63,535 (74,652) 51,136 Other liabilities 71,195 104,875 87,303 (33,680) 17,572 Total liabilities 318,720 279,289 214,474 39,431 64,815 Deferred inflows of resources :

Related to pensions 42,138 1,207 5,298 40,931 (4,091) Other post-employment benefits 3,342 2,548 1,461 794 1,087 Total deferred inflows of resources 45,480 3,755 6,759 41,725 (3,004) Net position:

Net investment in capital assets 352,162 323,066 322,204 29,096 862 Restricted for debt service 140 99 142 41 (43 ) Unrestricted 141,876 149,295 143,261 (7,419) 6,034 Total net position $ 494,178 472,460 465,607 21,718 6,853 Table 1 C - H etchy Power
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
**

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
12 (Continued)
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. **Included $1,800 working capital loan from Hetchy Power in fiscal year 2020.

Hetch Hetchy
Hetch Hetchy’s net position of $827,678 increased by $43,480 or 5.5% from prior year resulting from a net increase of $144,706 in total assets and deferred outflows of resources, offset by an increase of $101,226 in total liabilities and deferred inflows of resources (see Table 1A). Current and other assets were $500,159, a $30,652 or 6.5% increase from prior year, mainly due to net pension assets recognized in current year based on actuarial reports. Hetch Hetchy adopted GASB Statement No. 87, Leases and recognized right-to- use assets net of accumulated amortization of $364 and $369 in lease liabilities as of June 30, 2022. See Note 9 for additional information about the leases.

Capital assets, net of accumulated depreciation and amortization, increased by $117,106 or 17.5% to $786,643 primarily from construction and capital improvement activities for the Bay Corridor Project and the Mountain Tunnel Improvement Project. Deferred outflows of resources decreased by $3,052 due to decreases of $2,402 in pensions and $650 in other post-employment benefits (OPEB) based on actuarial reports.

Total liabilities increased by $21,361 or 5.7% to $393, 225. The increases included $73,111 in outstanding d e b t m a i n l y f r o m P o w e r 2 0 2 1 S e r i e s A B r e v e n u e b o n d s a n d c o m m e r c i a l p a p e r i s s u a n c e s o f f s e t b y a decrease of $51,750 in other liabilities. Deferred inflows of resources increased by $79,865 due to increases of $78,741 in relation to pensions and $1,124 in OPEB based on actuarial reports.

H
etchy Water
Hetchy Water’s net position of $249,180 increased by $24,519 or 10.9% resulting from a net increase of $33,497 in total assets and deferred outflows of resources, offset by a net increase of $8,978 in total Restated 2022-2021 2021-2020
2022 2021* 2020 Change Change
Total assets:

Current and other assets $ 129,847 121,917 121,879 7,930 38 Total assets 129,847 121,917 121,879 7,930 38
Deferred outflows of resources:

Pensions 852 803 572 49 231
Other post-employment benefits 798 442 270 356 172
Total deferred outflows of resources 1,650 1,245 842 405 403 Liabilities:

Current liabilities 28,621 17 ,735 24,991 10,886 (7,256) Long-term liabilities 11,548 15,344 4,171 (3,796) 11,173 Total liabilities 40,169 33,079 29,162 7,090 3,917 Deferred inflows of resources:

Related to pensions 5,414 1,093 1,210 4,321 (117)
Other post-employment benefits 1,594 1,913 1,211 (319) 702 Total deferred inflows of resources 7,008 3,006 2,421 4,002 585 Net position:

Unrestricted 84,320 87,077 91 ,138 (2,757) (4,061)
Total net position $ 84,320 87,077 91,138 (2,757) (4,061) Table 1 D - C leanPowerSF
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
**

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
13 (Continued)
liabilities and deferred inflows of resources (see Table 1B). The increase of $11,527 in current and other assets was attributed to increases of $13,912 in net pension assets based on actuarial report, $33 in charges for services receivables due to higher consumption from Lawrence Livermore National Laboratory, $19 in interest receivables due to higher interest accr ual from City’s Treasury, and $8 in inventory due to more purchases than issuances during the fiscal year. The increases were offset by decreases of $2,173 in cash and investment with City Treasury mainly from higher project spending, $192 in prepaid charges, advances, and other receivables mainly due to prepayment to Turlock Irrigation District for relicensing studies, $67 decrease in due from other governments related to State grant reimbursement received for Lower Cherry Aqueduct project, and $13 decrease in lease right-to-use assets net of accumulated amortization per implementation of GASB Statement No. 87, Leases.

Capital assets, net of accumulated depreciation and amortization, increased by $23,526 or 13.3% to $201,007 primarily from construction and capital improvement activities for the Mountain Tunnel Improvement Project and San Joaquin Pipeline Valve and Safe Entry Improvement Project. Deferred outflows of resources decreased by $1,556 due to decreases of $1,103 in pensions and $453 in other post- employment benefits (OPEB) based on actuarial reports.

Hetchy Water’s total liabilities decreased by $25,160 or 42.3% to $34,336, as explained by decreases of $26,645 in net pension liability based on actuarial estimates, $2,733 in restricted payables to vendors and contractors mainly due to lower year-end expense accruals for capital projects, $204 in OPEB obligations based on actuarial assumptions, $16 in lease liability per implementation of GASB Statement No. 87, Leases, and $6 in grant advance due to recognition of prior year State grant for the Rim Fire project. These decreases were offset by increases of $4,192 in unrestricted payables mainly for license and permit fees to National Park Service, $148 in employee related benefits mainly due to increase in workers’ compensation, $102 in general liability based on actuarial estimates, and $2 increase in rental deposits and prepaid rent.

Deferred inflows of resources increased by $34,138 due to increases of $33,489 in relation to pensions and $649 in OPEB based on actuarial reports.

H
etchy Power
Hetchy Power’s net position of $494,178 increased by $21,718 or 4.6% resulting from a net increase of $102,874 in total assets and deferred outflows of resources, offset by an increase of $81,156 in total liabilities and deferred inflows of resources (see Table 1C). Increase of $11,195 in current and other assets was attributed to increases of $17,004 in net pension assets based on actuarial report, $7,882 in prepaid charges, advances, and other receivables mainly due to collateral paid to satisfy the CAISO's financial security requirements, $3,295 in cash and investments mainly due to higher collections from billings, $76 in interest receivables due to higher interest accrual from City’s Treasury, and $31 increase in Federal grants receivable mainly from the Rim Fire Project.

These increases were offset by decreases of $8,835 in charges for services receivables due to completion of billing system implementation in prior year resulting in more timely billings in current year, $7,497 in restricted interest and other receivables mainly due to decrease in vendor prepayment to PG&E for the Bay Corridor Project, $602 in due from other City departments mainly from repayment for Sustainable Energy Account, $142 in inventory due to more issuances than purchases during the fiscal year, and $17 decrease in lease right-to-use assets net of accumulated amortization per implementation of GASB Statement No. 87, Leases.

Capital assets, net of accumulated depreciation and amortization, increased by $93,580 or 19.0% to $585,636 primarily from construction and capital improvement activities for the Bay Corridor Project and

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
14 (Continued)
Mountain Tunnel Improvement Project. Deferred outflows of resources decreased by $1,901 due to decreases of $1,348 in pensions and $553 in OPEB based on actuarial reports.

Hetchy Power’s total liabilities of $318,720 increased by $39,431 or 14.1%. As of June 30, 2022, outstanding debt increased by $73,111 due to $124,000 from 2021 Series AB revenue bond issuances, $63,058 from commercial paper issuance for Hetchy Power facilities, and $27,022 in bond premium from 2 0 2 1 S e r i e s A B r e v e n u e b o n d s , o f f s e t b y $ 1 4 0 , 0 4 3 i n c o m m e r c i a l p a p e r , b o n d s , a n d c e r t i f i c a t e s o f participation principal repayments, and $926 in amortization of premium and discount. Other liabilities of $71,195, such as payables to vendors, employees, contractors, and other government agencies for goods and services under contractual agreements, decreased by $33,680 or 32.1%, mainly due to decreases of $32,566 in net pension liability based on actuarial estimates, $6,241 in unrestricted payables mainly from prior year wheeling charges to APX, Inc., $248 in OPEB obligations based on actuarial assumptions, $85 in general liability based on actuarial estimates, and $19 decrease in lease liability per implementation of GASB Statement No. 87, Leases. These decreases were offset by increases of $3,666 in restricted payables to vendors and contractors due to higher year-end expense accruals for capital projects, $868 increase in interest payable related to 2021 Series AB revenue bond issuances, $734 in unearned revenues, refunds, and other, $200 in employee related benefits mainly due to increase in workers’ compensation, and $11 in due to Department of Public Works for painting of light poles. Increase of $734 in unearned revenues, refunds, and other was mainly due to increases of $458 in deposits from custom work projects, $267 in prepayments from Distributed Antenna System (DAS) program, and $60 in overpayments received from customers, offset by decreases of $48 in grant advance due to recognition of Rim Fire State grant revenue and $3 in deposits received from retail customers.

Deferred inflows of resources increased by $41,725 due to increases of $40,931 in relation to pensions and $794 in OPEB based on actuarial reports.

C
leanPowerSF
C l e a n P o w e r S F ’ s n e t p o s i t i o n o f $ 8 4 , 3 2 0 d e c r e a s e d b y $ 2 , 7 5 7 o r 3 . 2 % , r e s u l t i n g f r o m a n i n c r e a s e o f $11,092 in total liabilities and deferred inflows of resources, offset by an increase of $8,335 in total assets and deferred outflows of resources (see Table 1D). Increase in total assets of $7,930 was due to increases of $20,602 in prepaid expenses included $12,236 in collateral paid to satisfy the CAISO's financial security r e q u i r e m e n t s , $ 5 , 9 1 4 f r o m p o w e r p u r c h a s e c r e d i t s , a n d $ 2 , 4 5 2 i n p r e p a y m e n t s t o P G & E f o r e l e c t r i c i t y purchases. Other increases included $20,438 in charge s for services receivables due to pre-approved rate increases, $1,833 in net pension assets based on ac tuarial report, and $6 in interest receivable due to higher interest accrual from City’s Treasury. These increases were offset by decreases of $34,604 in cash and investments with City Treasury mainly attributed to volatile and increased pricing in power market and $345 decrease in lease right-to-use assets net of ac cumulated amortization per implementation of GASB Statement No. 87, Leases.

Deferred outflows of resources increased by $405 due to increases of $356 in OPEB and $49 in pensions based on actuarial reports.

Total liabilities increased by $7,090 or 21.4% to $40,16 9, mainly explained by $7,667 increase in payables to suppliers for power purchases, $3,168 increase in unearned revenues, refunds, and other due to $2,676 g r a n t s r e c e i v e d i n a d v a n c e f r o m C a l i f o r n i a P u b l i c Utilities Commission (CPUC) for the new Disadvantaged Communities Programs (DAC) and the Community Food Service Energy Efficiency program, $503 from net energy metering credits to retail and commercial customers, offset by a decrease of $11 from customer prepayments. Other increases included $228 for employee related benefits including vacation sick leave and accrued payroll mainly due to an extra day in current year-end payroll accrual when compared to prior

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
15 (Continued)
year and $26 in general liability based on actuarial estimates. The increases were offset by decreases of $3,008 in net pension liability based on actuarial estimates, $645 in OPEB obligations based on actuarial assumptions, and $346 decrease in lease liability and interest payable per implementation of GASB Statement No. 87, Leases.

Def er r ed i n f lo w s o f r es o u r ces i ncr e as ed b y $4 , 0 0 2 du e t o an i ncrea se o f $ 4, 3 2 1 i n r el at io n t o p en s i on s , offset by a decrease of $319 in OPEB based on actuarial reports.

Hetch Hetchy
Hetch Hetchy’s net position of $784,209 increased by $16,429 or 2.1% from prior year resulting from an increase of $93,621 in total assets and deferred outflows of resources, offset by a net increase of $77,192 in total liabilities and deferred inflows of resources (see Table 1A). Current and other assets were $468,768, a $27,133 or 6.1% increase from prior year, driven by higher charges for services receivables from Hetchy Power. In April 2021, Hetchy Power implemented a new el ectric utility billing system causing billings from April to June to be delayed.

Capital assets, net of accumulated depreciation and amortization, increased by $63,326 or 10.4% to $669,537 primarily 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. Deferred outflows of resources increased by $3,162 due to an increase of $3,267 in other post-employment benefits (OPEB) based on actuarial reports offset by a decrease of $105 in pensions.

Total liabilities increased by $82,068 or 28.4% to $371,114. The increases included $47,243 in outstanding debt and $34,825 in other liabilities. Deferred inflows of resources decreased by $4,876 due to a decrease of $7,555 in relation to pensions offset by an increase of $2,679 in OPEB based on actuarial reports.

H
etchy Water
Hetchy Water’s net position of $224,665 increased by $13,630 or 6.5% resulting from an increase of $23,381 in total assets and deferred outflows of resources, offset by a net increase of $9,751 in total liabilities and deferred inflows of resources (see Tabl e 1B). The increase of $5,440 in current and other assets was attributed to increases of $7,423 in cash and investment with City Treasury mainly due to a $16,000 transfer from the Water Enterprise to fund up country projects, offset by higher project spending, $413 increase in charges for services receivables due to higher consumption from Lawrence Livermore National Laboratory, and $4 increase in inventory due to more purchases than issuances during the fiscal year. The increases were offset by decreases of $1,996 in due from other governments mainly due to prior year reimbursements received for disaster emergency recoveries related to the 2018 Moccasin Storm and $186 in interest receivables due to lower annualized interest rate. Prepaid charges, advances, and other receivables decreased by $114 due to $448 Rim Fire insurance recovery collections and $4 in amortization of the advance paid to the Recreation and Parks Department for the Civic Center Garage, offset by an increase of $338 in vendor prepayment to Turlock Irrigation District for Federal Energy Regulatory Commission (FERC) relicensing studies and California Department of Water Resources for annual dam fees.

Other decreases include $104 due from the City Attorney’s Office for legal services.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
16 (Continued)
Capital assets, net of accumulated depreciation and amortization, increased by $16,699 or 10.4% to $177,481 primarily from construction and capital improvement activities for the Mountain Tunnel Improvement Project and Repair & Replacement Life Extension Program, and additions of facilities, improvements, machinery, and equipment. Deferred outflows of resources increased by $1,242 due to an increase of $1,393 in OPEB based on actuarial reports offset by a decrease of $151 in pensions.

Hetchy Water’s total liabilities increased by $12,208 or 25.9% to $59,418, as explained by increases of $5,778 in restricted payables to vendors and contractors mainly due to higher year-end expense accruals for capital projects, $5,168 in net pension liability based on actuarial report, $3,304 in unrestricted payables m a i n l y f o r l i c e n s e a n d p e r m i t f e e s t o N a t i o n a l P a r k S e r v i c e , $ 6 2 6 i n e m p l o y e e r e l a t e d b e n e f i t s i n c l u d i n g workers’ compensation, vacation, sick leave and accrued payroll mainly due to an extra day in current year- end payroll accrual when compared to prior year and a 3% cost of living adjustment increase in December 2020, and $4 increase in rental deposits. The increa s e s w e r e o f f s e t b y d e c r e ases of $1,906 in OPEB obligations based on actuarial assumptions, $493 in grant advance due to recognition of Rim Fire grant revenue, $240 in payable due to the City Attorney’s Office for unbilled legal services, and $33 in general liability based on actuarial estimates.

Deferred inflows of resources decreased by $2,457 due to a decrease of $3,347 in relation to pensions offset by an increase of $890 in OPEB based on actuarial reports.

H
etchy Power
Hetchy Power’s net position of $472,464 increased by $6,857 or 1.5% resulting from an increase of $68,574 in total assets and deferred outflows of resources, offset by a net increase of $61,717 in total liabilities and deferred inflows of resources (see Table 1C). Increase of $20,430 in current and other assets w a s a t t r i b u t e d t o a n i n c r e a s e o f $ 1 6 , 0 5 7 i n c h a r g e s f o r s e r v i c e s r e c e i v a b l e s , o f w h i c h $ 1 5 , 6 7 3 w a s attributed to billing delays as a result of transition ing to new billing system implemented in April 2021. In addition, there was an increase of $1,051 in year-end accrual for California Independent System Operator (CAISO) Congestion Revenue Right (CRR) credits, offset by an increase of $667 in allowance for doubtful accounts due to increased past due balances as a result of the Mayor’s emergency proclamation that Hetchy Power temporarily suspend collection procedures and utility shutoffs for past due accounts to help customers with financial hardship due to COVID-19. Restricted interest and other receivables increased by $11,632 mainly due to vendor prepayment to PG&E for the Bay Corridor Project.

Prepaid charges, advances, and other receivables increased by $405 mainly due to $496 increase in vendor prepayments to PG&E for electric system reliability compliance product offset by decreases of $61 in receivables for the Distributed Antenna System (DAS) program due to more payments received, $16 in custom work receivables for Sunnydale Housing Projects, and $14 in amortization of the advance paid to the Recreation and Parks Department for the Civic Center Garage. Inventory increased by $211 due to more purchases than issuances during the fiscal year. The increases were offset by $3,280 decrease in cash and investment with/outside City Treasury due primarily to increase in capital spending. Due from other City departments decreased by $2,763, attributed to the final repayments of $1,800 from CleanPowerSF for working capital loan, $506 for the Sustainable Energy Account, $331 from City Attorney’s Office for legal services, $109 from Wastewater Enterprise for the Living Machine System, and $105 from the Recreation and Parks Department for Energy Efficiency Projects, offs et by increases of $46 in interest receivable from Treasure Island Development Authority (TIDA) in connection of an upgraded submarine power cable for the Treasure Island to increase service capacity and $42 from the Department of Public Works for Hunters Point Shipyard Development and Transbay Folsom Street Improvement custom work projects. Other decreases include $1,377 in grants receivable due to reimbursement received for disaster emergency recoveries

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
17 (Continued)
related to the Rim Fire and 2018 Moccasin Storm, and $455 in interest receivables due to lower annualized interest rate.

Capital assets, net of accumulated depreciation and amortization, increased by $46,627 or 10.5% to $492,056 primarily due to additions of facilities, improvements, machinery, and equipment for the Bay Corridor Project and Holm Powerhouse Rehabilitation & Kirkwood Powerhouse Oil Containment Upgrades.

Deferred outflows of resources increased by $1,517 due to an increase of $1,702 in OPEB based on actuarial reports offset by a decrease of $185 in pensions.

Hetchy Power’s total liabilities of $279,195 increased by $64,721 or 30.2%. As of June 30, 2021, outstanding debts increased by $47,243 and was attributable to $51,136 in commercial paper issuance for Hetchy Power facilities, offset by $2,402 in bonds an d certificates of participation principal repayments, $1,272 in return of unspent bond proceeds for 2015 NCREBs, and $219 in amortization of premium and discount. Other liabilities of $104,781, such as payables to vendors, employees, contractors, and other government agencies for goods and services under contractual agreements, increased by $17,478 or

20.0%, mainly due to increases of $8,724 in unrestricted payables mainly for wheeling charges to APX Inc., $6,934 restricted payables to vendors and contractors due to higher year-end expense accruals for capital projects, $6,317 in net pension liability based on ac tuarial report, and $876 in employee related benefits including workers’ compensation, vacation, sick leave and accrued payroll mainly due to an extra day in current year-end payroll accrual when compared to prior year and a 3% cost of living adjustment increase in December 2020. Offsetting decreases include $2,330 in OPEB obligations based on actuarial assumptions, $1,649 in unearned revenue, $1,114 in general liability based on actuarial estimates, $231 in due to City Attorney’s Office for unbilled legal services, and $49 in interest payable as a result of decreased outstanding debts and lower interest rates for commercial paper. Unearned revenue decreased by $1,649 due to $1,208 in remittance of utility tax collected, $1,193 in power revenue from commercial deposits, $681 in residential allowance refund for the Alice Griffith Housing Project, and $609 in recognition of Rim Fire grants revenue received in advance, offset by increases of $1,707 in deposits from custom work projects, $200 in prepayments from DAS program, $117 in overpayments received from customers, and $18 in deposits received from retail customers and security deposits for cottage rental.

Deferred inflows of resources decreased by $3,004 due to a decrease of $4,091 in relation to pensions offset by an increase of $1,087 in OPEB based on actuarial reports.

C
leanPowerSF
CleanPowerSF’s net position of $87,080 decreased by $4,058 or 4.5%, resulting from a net decrease of $134 in total assets and deferred outflows of resources and a net increase of $3,924 in total liabilities and deferred inflows of resources (see Table 1D). Total assets decreased by $537 due to a $6,447 decrease in charges for services receivables attributed to an increase of $3,675 in allowance for doubtful accounts due to higher past due balances in customer power utility accounts after the Mayor’s proclamation to extend the moratorium on utility shutoffs and bill collections to help customers experiencing financial hardship as a result of COVID-19. Other decreases include $2,772 in receivables mainly due to one-time customer assistance bill credits related to COVID-19 relief, $576 in prepaid charges, advances, and other receivables mainly due to lower vendor prepayments for purchased electricity and $160 in interest receivables due to lower annualized interest rate. The decreases were offset by an increase of $6,646 in cash and investment with City Treasury mainly from cash collateral received for power purchase agreement.

Deferred outflows of resources increased by $403 due to increases of $231 in pensions and $172 in OPEB based on actuarial reports.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
18 (Continued)
Total liabilities of $32,501 increased by $3,339 or 11.4%, which was mainly explained by $9,000 in cash collateral received for power purchase agreement (see Note 14(a)), $1,203 in net pension liability based on actuarial report, $712 in OPEB obligations based on actuarial assumptions, and an increase of $200 in employee related benefits including vacation, sick leave and accrued payroll mainly due to an extra day in current year-end payroll accrual when compared to prior year, and a 3% cost of living adjustment increase in December 2020. Other increases in unearned revenues, refunds, and other, include $90 from net energy metering credits to retail and commercial customers, $86 from customer prepayments, and $4 from utility and electric energy surcharge tax payable. These increases were offset by decreases of $6,047 in payables to vendors and contractors mainly from lower power purchases, $1,809 due to other City departments ($1,800 final working capital loan repayment to Hetchy Power and $9 to City Attorney’s Office for unbilled legal services), and $100 in general liability based on actuarial estimates.

Deferred inflows of resources increased by $585 due to an increase of $702 in OPEB based on actuarial reports offset by a decrease of $117 in relation to pensions.

R
esults of Operations
The following tables summarize Hetch Hetchy’s revenues, expenses, and changes in net position:
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
19 (Continued)
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. *Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
20 (Continued)
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

Hetch Hetchy
Hetch Hetchy’s total revenues were $491,229, an increase of $78,663 or 19.1% over prior year (see Table 2A). Charges for services increased by $89,274 or 22.8% from prior year’s revenues mainly due to higher billings from CleanPowerSF and Hetchy Power. Total expenses increased by $65,602 or 15.9% primarily from higher energy purchases due to volatile and increased pricing in power market. (See Table 2A).

H
etchy Water
Hetchy Water’s total revenues were $46,859, a decrease of $1,351 or 2.8% from prior year’s revenues (see T a b l e 2 B ) . D e c r e a s e w a s d u e t o $ 2 , 7 0 0 i n i n v e s t m e n t l o s s a n d a d e c r e a s e o f $ 8 7 3 f r o m o t h e r n o n - operating revenues, offset by increases of $2,221 from charges for services and $1 from rents and concessions.

C h a r g e s f o r s e r v i c e s w e r e $ 4 9 , 2 0 0 , a n i n c r e a s e o f $ 2 , 2 2 1 o r 4 . 7 % m a i n l y d u e t o i n c r e a s e d w a t e r assessment fees from the Water Enterprise to fund upcountry water-related costs and higher consumption from Lawrence Livermore National Laboratory. Rents were $112, an increase of $1 or 0.9% mainly due to consumer price index adjustment. Interest and investment loss was $2,932 mainly due to unrealized losses as a result of the decline in market value of investments related to rising interest rates. Other non-operating revenues were $479, a decrease of $873 or 64.6% mainly due to $899 lower Federal and State grants revenue from the Rim Fire Projects, offset by increases of $19 in overhead charges and $7 in net gain from sale of fixed assets.

Total operating expenses, excluding interest expenses and other non-operating expenses, were $52,303, an increase of $1,784 or 3.5%. The increase was primar ily due to increases of $4,275 in other operating expenses mainly due to higher capital spending, $612 in services provided by other departments mainly due to higher legal service charges from City Attorney’s Office, $456 in contractual services mainly from increased engineering and management consulting services, $309 in general and administrative expenses mainly due to higher fees, licenses, and permit expenses, $277 in depreciation and amortization mainly related to additional building, structure and equipment placed in service, and $90 in material and supplies Restated 2022-2021 2021-2020
2022 2021* 2020 Change Change
Revenues:

Charges for services $ 257,893 207,698 245,460 50,195 (37,762) Interest and investment income (loss) (1,286) 51 1,771 (1,337) (1,720) Other non-operating revenues 2,759 927 1 1,832 926 Total revenues 259,366 208,676 247,232 50,690 (38,556) Expenses:

Operating expenses 262,118 212,711 196,026 49,407 16,685 Interest expenses 5 26 69 (21) (43) Total expenses 262,123 212,737 196,095 49,386 16,642 Change in net position (2,757) (4,061) 51,137 1,304 (55,198) Net position at beginning of year 87,077 91,138 40,001 (4,061) 51,137 Net position at end of year $ 84,320 87,077 91,138 (2,757) (4,061 ) Table 2 D - C leanPowerSF
Comparative C ondensed R evenues, E xpenses, a nd C hanges in N et P osition Years Ended J une 3 0, 2 022, 2 021, a nd 2 020

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
21 (Continued)
mainly from fuel and water treatment supplies. These increases were offset by a decrease of $4,235 in personnel services due to lower pension obligations based on actuarial reports.

Other non-operating expenses were $37, a decrease of $26 due to lower payments to community-based organization programs. Interest expenses were $1, a decrease of $1 due to implementation of GASB Statement No. 87, Leases. A transfer in of $30,001 was received from the Water Enterprise to fund various Mountain Tunnel projects.

As a result of the above activities, net position for the year ended June 30, 2022 increased by $24,519 or

10.9% compared to prior year.

H
etchy Power
Hetchy Power’s total revenues were $185,004, an increase of $29,324 or 18.8% from prior year’s revenues (see Table 2C). Increases included $36,858 from charges for services and $1 from rents and concessions, offset by decreases of $4,025 from interest and investment income and $3,510 from other non-operating revenues.

Charges for services were $173,105, an increase of $36,858 or 27.1%, due to $22,537 in billings from City departments such as San Francisco International Airport, Municipal Transportation Agency, and Port of San Francisco as a result of increased operation due to easing of COVID-19 restrictions and $14,980 in Congestion Revenue Right (CRR) credits from California Independent System Operator (CAISO), offset by a decrease of $659 in resale of capacity to CleanPowerSF. Rents increased slightly by $1 or 0.7% to $137 mainly due to consumer price index adjustment. Interest and investment loss was $4,001, a decrease of $4,025, mainly due to unrealized losses as a result of the decline in market value of investments related to rising interest rates.

Other non-operating revenues were $15,763, a decrease of $3,510 or 18.2%, mainly due to lower collections of $3,254 from the Power System Mitigation Project, $1,371 in Cap and Trade revenue due to decrease of 97,000 allowances or 80% sold, $1,194 in revenue from Alice Griffith Housing Project due to prior year recognition of commercial deposits, $797 in settlement revenue from prior year litigation settlement, and $335 in overhead charges, offset by an increase of $3,441 in State and Federal grants revenue from Rim Fire Project and California Utility Arrearages Relief Payment Program for unpaid bills.

Total operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, increased by $10,707 or 7.4%, to $156,347. The increase was primarily due to increases of $15,559 in purchased electricity and transmission, distribution, and other power costs due to volatile and increased pricing in po wer market, $1,978 in depreciation and amortization mainly for buildings, facilities, machinery, and equipment related to higher capitalization of assets, $899 in contractual services mainly for management consulting and engineering services, $280 in materials and supplies mainly for electrical supplies and tools, and $116 in services provided by other departments mainly due to higher risk management costs. The increases were offset by decreases of $6,110 in personnel services due to lower pension obligations based on actuarial reports, $1,420 in general and administrative expenses mainly due to lower judgements and claims expenses, and $595 decrease in other operating expenses mainly due to higher capitalized project expenses.

Interest expenses increased by $3,652 or 185.2% mainly due to no bond interest capitalization recognized in current year resulting from the implementation of GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period . Amortization of premium and discount increased by $411 or 187.7% mainly due to costs of issuance for 2021 Series AB revenue bond.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
22 (Continued)
Other non-operating expenses were $591, a decrease of $311 or 34.5% mainly due to lower payments for G o S o l a r S F I n c e n t i v e P r o g r a m . T r a n s f e r o u t o f $ 5 3 2 i n c l u d e s $ 5 0 0 t o G e n e r a l F u n d f o r r e p a y m e n t o f Educational Revenue Augmentation Funds and $32 to the Office of the City’s Administrator for the Surety Bond Program.

As a result of the above activities, net position for the year ended June 30, 2022 increased by $21,718 or

4.6% compared to prior year.

C
leanPowerSF
CleanPowerSF’s total revenues were $259,366, a $50,69 0 or 24.3% increase over prior year (see Table 2D). Charges for services increased by $50,195 or 24.2% mainly due to increases of $44,215 in electricity sales to retail and commercial customers resulting from a 16% average rate increase, $2,831 reduction in allowance for doubtful accounts attributed to assistance received from California Utility Arrearages Relief Payment Program (CAPP) for eligible customer account arrearages, $2,817 in one-time customer assistance bill credit related to COVID-19 in prior year, and $332 from higher capacity sales to Hetchy Power. Other non- operating revenue increased by $1,832 mainly due to $2 ,424 Federal grants received from CAPP, offset by a decrease of $592 liquidated damage compensation received from supplier for delay of the Renewable Energy Project in prior year. Interest and investment loss was $1,286 as a result of the decline in market value of investments related to rising interest rates.

Total operating expenses, excluding interest expenses were $262,118, an increase of $49,407 or 23.2% from prior year. The increase was due to $48,749 in purchased electricity and transmission, distribution, and other power costs due to volatile and increased pr icing in power market, and higher resource adequacy capacity purchases related to compliance requirements from the California Public Utilities Commission.

Other operating expenses increased by $2,895 due to $2,424 grant expense recognized for CAPP when applied to customer account arrearages and $471 in operating expenses mainly for the Neighborhood Steward Program and the new Local Renewable Energy. Other increases included $1,394 in general and administrative expenses mainly due to higher judgements and claims expenses, $143 in professional and contractual services mainly from higher software licensing fee, and $7 in material and supplies mainly for data processing equipment. These increases were offset by decreases of $3,474 in personnel services due to lower pension obligations based on actuarial reports, $307 in services provided by other departments mainly due to lower labor support from Hetchy Power. Interest expenses decreased by $21 mainly due to repayment of working capital loan to Hetchy Power completed in prior year.

As a result of the above activities, net position for the year ended June 30, 2022 decreased by $2,757 or

3.2% compared to prior year.

Hetch Hetchy
Hetch Hetchy’s total revenues were $412,566, a decrease of $47,035 or 10.2% over prior year (see Table 2A). Charges for services decreased by $30,013 or 7.1% from prior year’s revenues mainly due to lower billings from CleanPowerSF and Hetchy Power. Total expenses increased by $18,927 or 4.8% primarily due to increase in California Independent System Operator (CAISO) charges for CleanPowerSF market energy purchases (See Table 2A).

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
23 (Continued)
Hetchy Water
Hetchy Water’s total revenues were $48,210, an increase of $7,464 or 18.3% from prior year’s revenues (see Table 2B). Increase was due to $12,182 from charge s for services, offset by decreases of $2,509 from other non-operating revenues, $2,164 in interest and investment income, and $45 from rents and concessions.

Charges for services were $46,979, an increase of $12,182 or 35.0% mainly due to increased water assessment fees from the Water Enterprise to fund upcountry water-related costs and higher consumption from Lawrence Livermore National Laboratory. Rents were $111, a decrease of $45 or 28.8% mainly from lower cottage rental revenue. Other non-operating revenues were $1,352, a decrease of $2,509 or 65.0% mainly due to decreases of $1,510 in Federal and State grants revenue resulting from lower collections from State grants related to 2018 Moccasin Storm, $995 from prior year Rim Fire recoveries, and $4 in net gain from sale of fixed assets. Interest and investment loss was $232 mainly due to unrealized loss attributed to decrease in market value in cash and investments with City Treasury and lower interest rates.

Total operating expenses, excluding other non-operating expenses, were $50,517, an increase of $5,644 or

12.6%. The increase was attributed to $3,567 in personnel services resulting from cost of living adjustments, higher retirement contribution rates, and increased personnel and fringe benefit costs. Other increases include $773 in contractual services mainly from increased engineering and management consulting services, $733 in depreciation and amortization related to additional building, structure and equipment placed in service, $664 in services provided by other departments mainly due to higher bureau support costs and legal service charges from City Attorney’s Office, and $162 in other operating expenses mainly due to higher capital spending. These increases were offset by decreases of $190 in general and administrative expenses mainly due to lower judgements and claims expenses and $65 decrease in materials and supplies mainly for water and sewage treatment supplies.

Other non-operating expenses were $63, an increase of $52 due to payments to community-based organization programs. A transfer in of $16,000 was received from the Water Enterprise to fund upcountry projects.

As a result of the above activities, net position for the year ended June 30, 2021 increased by $13,630 or

6.5% compared to prior year.

H
etchy Power
Hetchy Power’s total revenues were $155,680, a decrease of $15,943 or 9.3% from prior year’s revenues (see Table 2C). Decreases included $5,733 from other non-operating revenues, $5,722 from interest and investment income, $4,433 from charges for services, and $55 from rents and concessions.

Charges for services were $136,247, a decrease of $4,433 or 3.2% was attributed to a decrease of $8,362 in sa le s t o Ci t y dep ar tm e nt s, w h ol es al e, an d Tr e as ur e I s l an d cu st om e rs d ue t o C O V I D- 1 9 rel at e d i m p ac t s and $667 increase in allowance for doubtful accounts. Receivables aging over 120 days increased significantly due to the suspension of collection efforts and moratorium on utility shutoffs in response to the COVID-19 emergency proclamation issued by the Mayor. The decrease was offset by increases of $2,537 in sales to retail customers mainly due to new affordable redevelopment housing accounts and $2,059 in resale of capacity to CleanPowerSF due to excess capaci ty of electric system reliability compliance product.

Rents were $136, a decrease of $55 or 28.8% mainly due to lower cottage rental revenue. Interest and investment income were $24, a decrease of $5,722 or 99.6% mainly due to decreases of $4,691 in interest

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
24 (Continued)
earned from lower interest rates and cash balance, unrealized loss, and $1,031 from interest accrued for Treasure Island submarine power cable in prior year.

Other non-operating revenues were $19,273, a decrease of $5,733, or 22.9%, ma inly due to decreases of $ 5 , 7 3 9 f r o m L o w C a r b o n F u e l S t a n d a r d ( L C F S ) c r e d i t sales revenue, attributed to less carbon fuel credit generated by San Francisco Municipal Transportation Agency, $2,574 in license fee from Transbay Cable Project due to final payment received in prior year, $1,139 in Cap and Trade revenue due to decrease of 23,000 or 16% allowance sold, and $654 decrease in fees collected from DAS program. Other decreases include $402 in State and Federal grants revenue result ing from lower collections from State grants related to 2018 Moccasin Storm and Federal grants related to Hazard Mitigation grant, $70 in Federal interest subsidy due to lower debt outstanding, $37 in damage claims revenue, and $5 in net gain from sale of fixed assets. These decreases were offset by increases of $2,921 in collection for Power System Impact Mitigation Project, $797 in settlement revenue related to litigation, $736 in commercial deposits from Alice Griffith Housing Project recognized as revenue, $25 9 in overhead charges, and $174 in miscellaneous revenue mainly from generation interconnection study and refunds from vendor.

Total operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, decreased by $2,489 or 1.7%, to $145,638. The decrease was primarily due to $6,138 in purchased electricity and transmission, distribution, and other power costs due to lower electricity sales, $289 in services provided by other departments mainly due to lower bureau support costs, $270 in material and supplies due to lower equipment maintenance, and $96 decrease in depreciation and amortization for machinery and equipment. The decreases were offset by increases of $1,704 in general and administrative expenses mainly due to higher litigation expenses, $1,572 in other operating expenses mainly due to higher capital spending, $984 in contractual services mainly from new in- city inventory w are house rental at Pier 23 in S an Francisco, an d $44 in per sonnel services res ulting from cost of living adjustments, higher retirement cont ribution rates, higher pension obligations based on actuarial reports, and increased personnel and fringe benefit costs.

Interest expenses were $1,970, a decrease of $770 or 28.1% due to decrease in outstanding debt and lower interest rates for commercial paper. Amortization of premium and discount slightly decreased by $9 or

3.9% to $219.

Other non-operating expenses were $902, a decrease of $158 or 14.9% mainly due to decrease in payments for GoSolarSF Incentive Program. Transfer out of $532 includes $500 to General Fund for repayment of Educational Revenue Augmentation Funds and $32 to the Office of the City’s Administrator for the Surety Bond Program.

As a result of the above activities, net position for the year ended June 30, 2021 increased by $6,857 or

1.5% compared to prior year.

C
leanPowerSF
CleanPowerSF’s total revenues were $208,676, a $38,556 or 15.6% decrease over prior year (see Table 2D). Charges for services decreased by $37,762 or 15.4% mainly due to a decrease of $32,077 in electricity sales to retail and commercial customers resulting from consumption decrease of 92,503 MWh or 3%, a one-time customer assistance bill credit of $2,817 related to COVID-19 utility bill relief, an increase of $2,451 in allowance for doubtful accounts, and $417 lower capacity sales to other entities. Receivables aging over 120 days increased significantly due to th e suspension of collection efforts and moratorium on utility shutoffs in response to the COVID-19 emergency proclamation issued by the Mayor. Interest and investment income decreased by $1,720 or 97.1% due to unrealized loss and lower interest rates on pooled

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
25 (Continued)
cash and investments. Other non-operating revenue increased by $926 due to liquidated damage compensation from vendor for the delay of Renewable Energy Project.

Total operating expenses, excluding interest expenses were $212,716, an increase of $16,690 or 8.5% from prior year. The increase was due to $16,219 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 requiremen ts from the California Public Utilities Commission.

Other increases include $1,200 in services provided by other departments due to increased labor support from Hetchy Power and legal service charges from City Attorney’s Office, and $305 increase in other operating expenses mainly from the Neighborhood Steward Program and the new Local Renewable Energy Program. These increases were offset by decreases of $529 in professional and contractual services mainly from lower management consulting services, $279 in personnel services mainly due to lower pension obligations and OPEB based on actuarial reports, $195 in general and administrative expenses mainly due to lower judgements and claims based on actuarial es timates, and $31 in material and supplies due to reduced furnishings expenses. Interest expenses were $18, a decrease of $51 or 73.9% due to lower principal outstanding from Hetchy Power working capital loan.

As a result of the above activities, net position for the year ended June 30, 2021 decreased by $4,058 or

4.5% compared to prior year.

C
apital Assets
The following tables summarize Hetch Hetchy’s changes in capital assets.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
26 (Continued)
C
Hetch Hetchy
Hetch Hetchy has capital assets of $786,643, net of accumulated depreciation and amortization, invested in both water and power utility capital assets as of June 30, 2022 (see Table 3A). This amount represents an increase of $117,106 or 17.5%, resulting from increases of $110,022 in construction work in progress and $7,544 in facilities, improvements, machinery and equipm ent, offset by a decrease of $460 in amortization of intangible assets. The investment in capital assets includes land, buildings, improvements, hydropower facilities, dams, transmission lines, machinery, and equipment.

Major additions to construction work in progress, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2022 include the following:

H
etchy Water
Hetchy Water has capital assets of $201,007, net of accumulated depreciation and amortization, invested in a br oad r a n g e o f ut i l it y c ap i t al a sset s as o f J un e 30 , 2 02 2 ( s ee T ab l e 3 A) . Th i s amo un t r epr es e n t s an increase of $23,526 or 13.3%, primarily due to increases of $18,805 in construction work in progress and $4,928 in facilities, improvements, machinery, and equipment, offset by a decrease of $207 in amortization of intangible assets.

Hetchy Hetchy
Water Power 2022 T otal
Bay Corridor Project $ — 46,608 46,608 Mountain Tunnel Improvement Project 16,638 20,335 36,973 Moccasin Powerhouse Rewind — 12,368 12,368 O'Shaughnessy Dam Access & Drainage Improvements and
Outlet Works 1,733 2,118 3,851
San Joaquin Pipeline Valve & Safe Entry Improvement 2,952 — 2,952 Repair and Replacement Life Extension Program 2,776 — 2,776 Intervening Facilities — 2,758 2,758 Pier 70 — 2,739 2,739
Van Ness - Bus Rapid Transit — 2,423 2,423 Transmission Line Clearance Mitigation — 1,711 1,711 Other project additions individually below $1,500 5,555 19,799 25,354 Additions to Construction Work in Progress $ 29,654 110,859 140,513 San Joaquin Pipeline Tesla Valves and Installation $ 4,410 — 4,410 O'Shaughnessy Dam Access & Drainage Improvements - Stairs and Fall Protection 1,931 2,360 4,291
Pier 70 — 1,720 1,720
Transmission Line Clearance Mitigation — 1,508 1,508 Other project additions individually below $1,500 4,672 14,386 19,058 Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service $ 11,013 19,974 30,987 T
able 3 B - H etch H etchy
Major A dditions t o C onstruction Work in Progress a nd Facilities, I mprovements, I ntangible A ssets, M achinery, a nd E quipment Placed i n S ervice Year e nded J une 3 0, 2 022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
27 (Continued)
For the year ended June 30, 2022, Hetchy Water’s major additions to construction work in progress totaled $29,654. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $11,013 (see Table 3B).

H
etchy Power
Hetchy Power has capital assets of $585,636, net of accumulated depreciation and amortization, invested in utility capital assets as of June 30, 2022 (see Table 3A). This amount represents an increase of $93,580 or 19.0%, primarily due to increases of $91,217 in construction work in progress and $2,616 in facilities, improvements, machinery, and equipment, offset by a decrease of $253 in amortization of intangible assets.

For the year ended June 30, 2022, Hetchy Power’s major additions to construction work in progress totaled $110,859. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $19,974 (see Table 3B).

CleanPowerSF
CleanPowerSF had no capital assets as of June 30, 2022 and 2021.

See Note 4 for additional information about capital assets.

C
Hetch Hetchy
Hetch Hetchy has capital assets of $669,537, net of accumulated depreciation and amortization, invested in both water and power utility capital assets as of June 30, 2021 (see Table 3A). This amount represents an increase of $63,326 or 10.4%, resulting from increases of $46,356 in facilities, improvements, machinery and equipment and $17,431 in construction work in progress, offset by a decrease of $461 in amortization of intangible assets. The investment in capital assets includes land, buildings, improvements, hydropower facilities, dams, transmission lines, machinery, and equipment.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
28 (Continued)
Major additions to construction work in progress, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2021 include the following:

H
etchy Water
Hetchy Water has capital assets of $177,481, net of accumulated depreciation and amortization, invested in a br oad r a n g e o f ut i l it y c ap i t al a sset s as o f J un e 30 , 2 02 1 ( s ee T ab l e 3 A) . Th i s amo un t r epr es e n t s an increase of $16,699 or 10.4%, primarily due to increases of $11,005 in construction work in progress and $5,902 in facilities, improvements, machinery, and equipment, offset by a decrease of $208 in amortization of intangible assets.

For the year ended June 30, 2021, Hetchy Water’s major additions to construction work in progress totaled $22,586. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $11,703 (see Table 3C).

H
etchy Power
Hetchy Power has capital assets of $492,056, net of accumulated depreciation and amortization, invested in utility capital assets as of June 30, 2021 (see Table 3A). This amount represents an increase of $46,627 or 10.5%, primarily due to increases of $40,454 in facilities, improvements, machinery, and equipment and $6,426 in construction work in progress, offset by a decrease of $253 in amortization of intangible assets.

Hetchy Hetchy
Water Power 2021 T otal
Bay Corridor Project $ — 31,556 31,556 Mountain Tunnel Improvement Project 7,744 9,465 17,209 Transmission Line Clearance Mitigation & Upgrade — 6,176 6,176 Repair & Replacement Life Extension Program 5,188 — 5,188 Moccasin Penstock Rehabilitation and Powerhouse Rewind — 4,374 4,374 Van Ness - Bus Rapid Transit — 2,742 2,742 Moccasin Reservoir Security Fence 2,723 — 2,723 San Joaquin Pipeline Valve & Safe Entry Improvement 2,115 — 2,115 Treasure Island Capital Improvements — 2,025 2,025 Other project additions individually below $2,000 4,816 13,721 18,537 Additions to Construction Work in Progress $ 22,586 70,059 92,645 Holm Powerhouse Rehabilitation & Kirkwood Powerhouse Oil Containment Upgrades $— 21,920 21,920
Electrical Underground Duct Bank 23rd & Illinois South Street — 18,133 18,133 Moccasin Reservoir Security Fence 3,549 — 3,549 Switch Yard Asset — 3,533 3,533
San Joaquin Pipeline Rehabilitation 3,243 — 3,243 San Francisco Academy Solar Carport — 2,657 2,657 Other project additions individually below $2,000 4,911 9,585 14,496 Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Servic e $ 11,703 55,828 67,531 Table 3 C - H etch H etchy
Major A dditions t o C onstruction W ork in Progress a nd Facilities, I mprovements, I ntangible A ssets, M achinery, a nd E quipment Placed i n S ervice Year e nded J une 3 0, 2 021

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
29 (Continued)
For the year ended June 30, 2021, Hetchy Power’s major additions to construction work in progress totaled $70,059. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $55,828 (see Table 3C).

CleanPowerSF
CleanPowerSF had no capital assets as of June 30, 2021 and 2020.

See Note 4 for additional information about capital assets.

Debt Administration
Hetch Hetchy
As of June 30, 2022, Hetch Hetchy has outstanding Certificates of Participation, Clean Renewable Energy Bonds (CREBs), Qualified Energy Conservation Bonds (QECBs), New Clean Renewable Energy Bonds (NCREBs), 2015 Series AB revenue bonds, 2021 Series AB revenue bonds, and commercial paper. The aforementioned debts are obligations of the Power En terprise. See Hetchy Power section below for more details.

H
etchy Water
Hetchy Water did not have debt outstanding as of June 30, 2022 and 2021. Debt, including bond issuances, associated with the funding of water-related, upcountry infrastructure capital improvements is issued through the Water Enterprise, and is reflected in the Water Enterprise’s financial statements.

H
etchy Power
As of June 30, 2022 and 2021, Hetchy Power had outstanding debt of $247,525 and $174,414, respectively, as shown in Table 4. More detailed information about the Hetchy Power’s debt activity is presented in Notes 6, 7 and 8 to the financial statements.

CleanPowerSF
CleanPowerSF did not have any debt outstanding as of June 30, 2022 and 2021.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
30 (Continued)
The increase of $73,111 was mainly due to $124,000 in 2021 Series AB revenue bond issuances, $63,058 in commercial paper issuance for Hetchy Power facilities, and $27,022 in bond premium for 2021 Series AB revenue bonds, offset by $140,043 in commercial paper, bonds, and certificates of participation principal repayments, and $926 in amortization of premium and discount. – The Power Enterprise’s Power Revenue Bonds have been rated “AA-” by Fitch Inc and “AA” by Standard and Poor’s (S&P) as of June 30, 2022 and 2021, respectively.

In December 2020, Moody's Investors Service, ("Moody's") assigned a first-time A2 Issuer Rating to CleanPowerSF, with a stable outlook. Hetch Hetchy Water and Power contains the Power Enterprise as a separate enterprise fund, with CleanPowerSF a component unit of the Power Enterprise. CleanPowerSF is tracked and audited as a standalone fund, with financial statements, including revenues and expenses, separate and discrete from the Power Enterprise. As such, CleanPowerSF is deemed to be a separate credit from the Power Enterprise, with its own credit rating.
– Pursuant to the Indenture, the Power Enterprise is required to collect sufficient net revenues each fiscal year, together with any Available Funds (except Bond Reserve Funds) which include unappropriated fund balances and reserves, and cash and book value of investments held by the Treasurer for the Hetchy Power, that the SFPUC reasonably expects would be available, to pay principal and interest becoming due and payable on all outstanding bonds as provided in the Indenture, less any refundable credits, at least equal to 1.25 times annual debt service for said fiscal year. The Series 2015 AB power revenue bonds represent the first series of senior lien revenue bonds of Hetchy Power. Pursuant to Power’s Master Trust Indenture, senior lien debt service covera ge excludes debt service on subordinate obligations, s u c h a s H e t c h y P o w e r ’ s e x i s t i n g C R E B S , N C R E B s , a n d Q E C B s . D u r i n g f i s c a l y e a r 2 0 2 2 , t h e P o w e r Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rate covenant requirements under the Power Enterprise’s Indenture (see Note 8).
– Pursuant to Charter Section 9.107(6), the Power Enterprise can incur indebtedness upon three-fourths vote of the Board of Supervisors, for the purpose of the reconstruction or replacement of existing water facilities and electric power facilities, or combinations thereof, under the jurisdiction of the Public Utilities Commission. Pursuant to Charter Section 9.107(8), the Power Enterprise can issue revenue bonds, without voter approval, upon an affirmative vote of the Board of Supervisors, for the purpose of the acquisition, construction, installation, equipping, improvement, or rehabilitation of equipment or facilities for

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
31 (Continued)
renewable energy and energy conservation. Pursuant to Proposition A, approved by the San Francisco voters on June 5, 2018, City Charter Section 8B.124 is amended to authorize the Power Enterprise to enter into indebtedness, including revenue bonds, notes, commercial paper or other forms of indebtedness, when authorized by ordinance approved by a two-thirds vote of the Board of Supervisors to reconstruct, replace, expand, repair, improve or construct new power facilities under the jurisdiction of SFPUC or for any other purpose of the Power Enterprise, and in compliance with City Charter Section 8B.124. Proposition A expressly prohibits the SFPUC from issuing bonds to finance the construction of power plants that generate electricity using fossil fuels or nuclear energy. As of June 30, 2022 and 2021, $163,555 and $39,555 of Hetchy Power revenue bonds were issued against existing authorization of $555,043 and $535,699, respectively.

The Power Enterprise’s outstanding long-term senior lien debt consists of the 2015 Series AB and 2021 Series AB Power Revenue Bonds issued in May 2015 and December 2021, respectively, which are issued under the Master Indenture and are senior in lien to all the other Enterprise’s outstanding debt obligations. Coupon interest rates range from 3.0% to 5.0%. The Power Enterprise has previously issued and incurred debt service on Tax Credit Bonds and certificates of participation, which constitute subordinate obligations. Interest rates on the Tax Credit Bonds, which include QECBs and NCREBs, ranging from 1.2% to 1.5% (net of the federal tax subsidy). Certificates of participation carried interest rates ranging from 2.0% to 6.5%. The Powe r Enterprise’s short-term debt issued under its commercial paper program has interest rates ranging from 0.1% to 1.1% and 0.1% to 0.2% during fiscal years 2022 and 2021, respectively.

R
ates and Charges
Hetchy Water
Hetchy Water charges for services relates to the storage and delivery of water. Assessment fees from the Water Enterprise, which cover the water-related upcountry costs, were $45,815 and $44,149 for the years ended June 30, 2022 and 2021, respectively. In fiscal year 2023, the assessment fees will be $49,636, an increase of $3,821 or 8.3% as reflected in the fiscal year 2023 adopted budget.

H
etchy Power
Hetchy Power charges for services relates to power generation and electricity delivery to contractual and municipal customers. For municipal power services, customers are typically charged a General Use rate or Enterprise rate. Enterprise rates are charged based on projected PG&E equivalent rates by customer class.

General fund department customers are mostly charged a General Use rate, a rate that is currently below cost of service. These General Use rates, however, are moving closer towards cost of service and increasing by $0.01 per kWh on an annual basis beginning July 1, 2020. The General Use rates have been adopted every two years.

On May 10, 2020, the Commission adopted two years of General Use rates effective July 1, 2020 through June 30, 2022. The adopted General Use rate for fiscal years 2022 and 2021 are $0.09877/kWh and $0.08877/kWh, respectively. The Power Enterprise has developed rates under the cost of service analysis model and completed the 2022 Power Rates Study in spring of 2022, in which General Use rates have been modernized to standard customer classes and incrementally increased to cost of service over the next few years. New rates effective fiscal year 2023 have been adopted in May 2022. The SFPUC Rates Schedules and Fees is available at https://sfpuc.org/accounts-services/water-power-and-sewer-rates.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
32 The Commission approved a new schedule of retail electric rates, fees, and charges for residential, commercial, and industrial customers where Hetch Hetchy has been designated as the power provider for retail customers to be applied to meter readings on or after July 1, 2016. Total bundled service charges for residential service rates and low-income residential service rates are calculated using the total rates, monthly, based on monthly meter reading, plus any applicable taxes.

To date, Hetchy Power has prepared service standards, developed system plans and specifications, acquired materials and equipment, and initiated construction of primary distribution facilities.

Pursuant to City and County of San Francisco Charter Section 8B.125, an independent rate study is performed at least once every five years. The rate study is undertaken to examine future revenue requirement s and cost- of- service of the P ower Enterprise. In fall of 2020, SFP UC engag ed a cons ultant to perform a cost-of-service study. The informed rate setting from this study resulted in recommendation and approval by the Commission in the spring of 2022 for rates to be effective July 1, 2023. The SFPUC Rates Schedules and Fees is available at https://sfpuc.org/accounts-services/water-power-and-sewer-rates.

CleanPowerSF
CleanPowerSF began offering services in May 2016, giving residential and commercial electricity consumers in San Francisco a choice of having their electricity supplied from clean renewable sources, such as solar and wind, at competitive rates. CleanPowerSF offers two products: a “Green” product comprised of at least 50% renewable energy and a “SuperGreen” product comprised of 100% renewable energy. Most customers take service under the “Green” product rates and remaining customers have opted to upgrade to “SuperGreen” product rates. On May 25, 2021, the Commission approved a CleanPowerSF rate adjustment formula. Through Resolution 21-0085, CleanPowerSF rates formulaically adjusted, when PG&E rates changed to the lesser of no more than 5% higher than PG&E generation rates or rates that recover program costs. On September 28, 2021, the Commission approved a subsequent CleanPowerSF rate adjustment formula. Through Resolution 21-0152, CleanPowerSF rates formulaically adjusted when PG&E rates changed to the lesser of no more than 15% higher than PG&E generation rates or rates that recover program costs from November 1, 2021 to June 30, 2022.

CleanPowerSF revenues are adequate to support its own operations. CleanPowerSF is subject to Section 8B.125 of the City Charter, which requires an independent rate study to be performed at least once every five years, and the Commission sets rates and charges for the program. CleanPowerSF rates have been included in the 2022 Power Rates Study, which is completed in the spring of 2022 for rates to be effective July 1, 2023. The CleanPowerSF Rates Schedules are available at http://cleanpowersf.org/residential for residential customers and http://cleanpowersf.org/commercial for commercial customers.

Request for Information
This report is designed to provide our citizens, customers, investors, and creditors with an overview of Hetch Hetchy’s finances and to demonstrate Hetch Hetchy’s respective accountability for the money it receives.

Questions regarding any of the information provided in this report or requests for additional information should be addressed to San Francisco Public Utilities Commission, Chief Financial Officer, 525 Golden Gate Avenue, 13th Floor, San Francisco, CA 94102.

This report is available at https://sfpuc.org/about-us/reports/audited-financial-statements-reports. 33 *Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

See accompanying notes to financial statements.

Restated
Hetchy Hetchy 2022 Hetchy Hetchy 2021
Water Power Total Water Power Total*
Assets
Current assets:

Cash and investments with City Treasury $ 94,190 189,641 56,234 340,065 89,373 190,719 90,838 370,930 Cash and investments outside City Treasury 1 16 — 17 1 611 — 612 Receivables:

Charges for services (net of allowance for doubtful accounts from 475 10,189 48,703 59,367 442 19,024 28,265 47,731 Due from other City departments, current portion — 867 — 867 — 7,413 — 7,413 Due from other governments 512 298 — 810 579 267 — 846 Interest 40 201 61 302 21 125 55 201
Restricted interest and other receivables — 4,303 — 4,303 — 11,800 — 11,800 Total current receivables 1,027 15,858 48,764 65,649 1,042 38,629 28,320 67,991 Prepaid charges, advances, and other receivables, current portion 216 1,911 10,550 12,677 402 2,666 2,184 5,252 Inventory 199 1,678 — 1,877 191 1,820 — 2,011
Restricted cash and investments outside City Treasury, current portion — 5,228 — 5,228 — 153 — Total current assets 95,633 214,332 115,548 425,513 91,009 234,598 121,342 446,949 Non-current assets:

Net pension asset 13,912 17,004 1,833 32,749 — — — — Restricted cash and investments with City Treasury — — — — 6,990 5,241 — 12,231 Restricted cash and investments outside City Treasury, less current portion — 8,824 — 8,824 — 3,690 — 3,690 Capital assets, not being depreciated and amortized 57,376 265,772 — 323,148 38,571 174,555 — 213,126 Capital assets, net of accumulated depreciation and amortization 143,631 319,864 — 463,495 138,910 317,501 — 456,411 Lease right-to-use assets, net of accumulated amortization 61 73 230 364 74 90 575 739 Prepaid charges, advances, and other receivables, less current portion 146 9,390 12,236 21,772 152 753 — 905 Due from other City departments, less current portion — 10,937 — 10,937 — 4,993 — 4,993 Total non-current assets 215,126 631,864 14,299 861,289 184,697 506,823 575 692,095 Total assets 310,759 846,196 129,847 1,286,802 275,706 741,421 121,917 1,139,044 Deferred outflows of resources:

Pensions 6,696 8,183 15,731 7,799 9,531 18,133
Other post-employment benefits 3,272 3,999 798 8,069 3,725 4,552 442 8,719 Total deferred outflows of resources 9,968 12,182 1,650 23,800 11,524 14,083 1,245 Liabilities
Current liabilities:

Accounts payable
Accrued payroll
Accrued vacation and sick leave, current portion
Accrued workers’ compensation, current portion
Damage claims liability, current portion
Due to other City departments, current portion
Lease liability, current portion
Unearned revenues, refunds, and other, current portion
Bond, loan, and lease interest payable
Bonds, current portion
Certificates of participation, current portion
Commercial paper
Current liabilities payable from restricted assets
Total current liabilities 17,380 90,961 28,621 136,962 15,873 166,454 17,735 200,062 Long-term liabilities:

Other post-employment benefits obligations 14,444
Net pension liability 26,645
Accrued vacation and sick leave, less current portion 1,126 Accrued workers’ compensation, less current portion 923 Damage claims liability, less current portion 307
Bonds, less current portion
Lease liability, less current portion
Unearned revenues, refunds, and other, less current portion Certificates of participation, less current portion
Total long-term liabilities 16,956 227,759 11,548 256,263 43,623 112,835 15,344 171,802 Total liabilities 34,336 318,720 40,169 393,225 59,496 279,289 33,079 371,864 Deferred inflows of resources:

Related to pensions 34,477 42,138 82,029 988 1,207 3,288 Other post-employment benefits
Total deferred inflows of resources 37,211 45,480 7,008 89,699 3,073 3,755 3,006 9,834 Net position:

Net investment in capital assets 201,007 352,162 — 553,169 177,481 323,066 — 500,547 Restricted for debt service — 140 — 140 — 99 — 99 Unrestricted 48,173 141,876 84,320 274,369 47,180 149,295 87,077 283,552 Total net position $ 249,180 494,178 84,320 827,678 224,661 472,460 87,077 784,198 Hetchy Power of $1,297 and CleanPowerSF of $6,330 as of June 30, 2022; and Hetchy Power of $1,258 and CleanPowerSF of $5,485 as of June 30, 2021)

HETCH HETCHY W ATER AND P OWER AND CLEANPOWERSF
Statements of Net P osition
June 30, 2022 and 2021
(In thousands)
CleanPowerSF CleanPowerSF
34 *Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

See accompanying notes to financial statements.

Restated
Hetchy Hetchy 2022 Hetchy Hetchy 2021
Water Power Total Water Power Total*
Operating revenues:

Charges for services $ 49,200 173,105 257,893 480,198 46,979 136,247 207,698 390,924 Rents and concessions 112 137 — 249 111 136 — 247 Total operating revenues 49,312 173,242 257,893 480,447 47,090 136,383 207,698 391,171 Operating expenses:

Personnel services 15,636 34,646 4,167 54,449 19,871 40,756 7,641 68,268 Contractual services 2,854 9,604 6,821 19,279 2,398 8,705 6,678 17,781 Transmission/distribution and other power costs — 51,521 192 51,713 — 36,711 1,012 37,723 Purchased electricity — 6,731 239,546 246,277 — 5,982 189,977 195,959 Materials and supplies 1,362 2,270 33 3,665 1,272 1,990 26 3,288 Depreciation and amortization 6,305 17,628 345 24,278 6,028 15,650 345 22,023 Services provided by other departments 3,129 6,253 3,621 13,003 2,517 6,137 3,928 12,582 General and administrative and other 23,017 27,694 7,393 58,104 18,433 29,709 3,104 51,2 46 Total operating expenses 52,303 156,347 262,118 470,768 50,519 145,640 212,711 408,870 Operating income (loss) (2,991) 16,895 (4,225) 9,679 (3,429) (9,257) (5,013) (17,699) Non-operating revenues (expenses):

Federal and state grants 450 4,924 2,424 7,798 1,349 1,483 — 2,832 Interest and investment (loss) income (2,932) (4,001) (1,286) (8,219) (232) 24 51 (157) Interest expenses (1) (5,624) (5) (5,630) (2) (1,972) (26) (2,000) Amortization of premium, discount, and issuance costs — (192) — (192) — 219 — 219 Net gain from sale of assets 7 9 — 16 — — — —
Other non-operating revenues 22 10,830 335 11,187 3 17,790 927 18,720 Other non-operating expenses (37) (591) — (628) (63) (902) — (965) Net non-operating revenues (loss) (2,491) 5,355 1,468 4,332 1,055 16,642 952 18,649 Change in net position before transfers (5,482) 22,250 (2,757) 14,011 (2,374) 7,385 (4,061) 950 Transfers from the City and County of San Francisco 30,001 — — 30,001 16,000 — — 16,000 Transfers to the City and County of San Francisco — (532) — (532) — (532) — (532) Net transfers 30,001 (532) — 29,469 16,000 (532) — 15,468 Change in net position 24,519 21,718 (2,757) 43,480 13,626 6,853 (4,061) 16,418 Net position at beginning of year 224,661 472,460 87,077 784,198 211,035 465,607 91,138 767,780 Net position at end of year $ 249,180 494,178 84,320 827,678 224,661 472,460 87,077 784,198

HETCH HETCHY WATER AND P OWER AND CLEANPOWERSF
Statements of Revenues, Expenses, and Changes in Net P osition Years ended June 30, 2022 and 2021
(In thousands)
CleanPowerSF CleanPowerSF
35 (Continued)
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

Restated
Hetchy H etchy 2022 Hetchy Hetchy 2021
Water Power Total Water Power Total*
Cash flows from operating activities:

Cash received from customers, including cash deposits $ 49,161 46,176 120,981 223,325 390,482 Cash received from tenants for rent 114 116 142 258 Cash received from miscellaneous revenues 22 3 13,427 14,357 Cash paid to employees for services (20,430) (19,597) (40,236) (5,344) (65,177) Cash paid to suppliers for goods and services (25,726) (20,950) (81,722) (211,735) (314,407) Cash paid for judgments and claims (276) (563) (4,361) (153) (5,077) Net cash provided by (used in) operating activities 2,865 5,185 8,231 7,020 20,436 Cash flows from non-capital and related financing activities:

Cash received from grants
Cash received for license fees
Cash received from settlements
Cash paid for rebates, program incentives, and other
Cash paid for Hetchy Power loan interest — —
Transfers from the City and County of San Francisco
Transfers to the City and County of San Francisco
Net cash provided by non-capital financing activities 30,481 Cash flows from capital and related financing activities:

Acquisition and construction of capital assets (32,558) (16,981) (62,461) — (79,442) Proceeds from sale of capital assets 7 — — — —
Lease payments (17) (17) (21) (350) (388)
Proceeds from bond issuance, net of premium, discount, refunding loss, — — — — — and issuance costs
Principal paid on long-term debt — — (3,674) — (3,674) Proceeds from commercial paper borrowings — 51,136 — 51,136 Principal paid on commercial paper — — — — —
Interest paid on long-term debt — — (2,970) — (2,970) Interest paid on commercial paper borrowings — — (132) — (132) Issuance costs paid on long-term debt — — — — —
Federal interest income subsidy — — 511 — 511
Net cash used in capital and related financing activities (32,568) (16,998) Cash flows from investing activities:

Interest Income 329 1,003 739 1,986
Proceeds from sale of investments outside City Treasury — — Purchases of investments outside City Treasury — —
Net cash provided by investing activities
Increase (decrease) in cash and cash equivalents 1,107
Cash and cash equivalents:

Beginning of year 96,276
End of year $ 97,383
Reconciliation of cash and cash equivalents to the statements of net position:

Cash and investments with City Treasury:

Unrestricted $
Restricted
Add: Unrealized loss (gain) on investments with City Treasury 3,192 Cash and investments outside City Treasury:

Unrestricted 1
Restricted —
Cash and cash equivalents at end of year on statements of cash flows $ 97,383 208,857 57,887 364,127 96,276 200,265 90,764 387,305

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Statements of Cash F lows
Years ended June 30, 2022 and 2021
(In thousands)
CleanPowerSF CleanPowerSF
36 *Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

See accompanying notes to financial statements.

Restated
Hetchy Hetchy 2022 Hetchy Hetchy 2021
Water Power Total Water Power Total*
Reconciliation of operating income (loss) to net cash provided by (used in) operating activities:

Operating income (loss) $ (2,991) 16,895 (4,225) 9,679 (3,429) (9,257) (5,013) (17,699) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 6,305 17,628 345 24,278 6,028 15,650 345 22,023 Miscellaneous revenues 22 7,237 335 7,594 3 13,427 927 14,357 Provision for uncollectible accounts — 39 845 884 — 667 3,675 4,342 Write-off of capital assets 7 648 — 655 51 8,333 — 8,384 Changes in operating assets and liabilities:

Receivables:

Charges for services (33) 8,796 (21,283) (12,520) (413) (16,724) 2,772 (14,365) Prepaid charges, advances, and other 192 (344) (20,574) (20,726) 114 (12,172) 576 (11,482) Due from other City departments — 531 — 531 104 2,437 — 2,541 Inventory (8) 142 — 134 (4) (211) — (215)
Accounts payable 4,192 (6,241) 7,667 5,618 3,304 8,724 (6,047) 5,981 Accrued payroll 56 88 82 226 154 298 91 543
Other post-employment benefits obligations 898 1,099 (1,320) 677 (2,409) (2,945) 1,242 (4,112) Pension obligations (5,965) (7,291) (569) (13,825) 1,972 2,411 855 5,238 Accrued vacation and sick leave (16) (20) 146 110 539 660 109 1,308 Accrued workers’ compensation 108 132 — 240 (67) (82) — (149) Damage claims liability 102 (85) 26 43 (33) (1,114) (100) (1,247) Due to other City departments — 11 — 11 (240) (231) (1,592) (2,063) Unearned revenues, refunds, and other liabilities (4) 734 492 1,222 (489) (1,640) 9,180 7,051 Total adjustments 5,856 23,104 (33,808) (4,848) 8,614 17,488 12,033 38,135 Net cash provided by (used in) operating activities $ 2,865 39,999 (38,033) 4,831 5,185 8,231 7,020 20,436 Noncash transactions:

Accrued capital asset costs
$ 6,324 19,059 — 25,383 9,057 15,393 — 24,450
Receivables from Wastewater — 629 — 739
Unrealized loss (gain) on investments 3,192 5,148 1,653 9,993 (88) (149) (74) (311)

HETCH HETCHY WATER AND P OWER AND CLEANPOWERSF
Statements o f Cash F lows
Years ended June 30, 2022 and 2021
(In thousands)
CleanPowerSFCleanPowerSF

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
37 (Continued) (1) Description of Reporting Entity
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 and County of San Francisco (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), CleanPowerSF and Hetchy Water, the portion of the Water Enterprise ’s operations, specifically the upcountry water supply and transmission service.

Hetch Hetchy accounts for the activities of Hetch Hetchy Water and Power and is engaged in the collection and conveyance of approximately 85% of the regional system ’s water supply and in the generation and transmission of electricity from that resource, as well as the City Power services including energy efficiency and renewable.

Approximately 69% of the electricity generated by Hetchy Power is used to provide electric service to the City ’s municipal customers (including the San Francisco Municipal Transportation Agency, Recreation and Parks Department, the Port of San Francisco, the San Francisco International Airport and its tenants, Zuckerberg San Francisco General Hospital and Trauma Center, streetlights, Moscone Convention Center, and the Water and Wastewater Enterprises). The majority of the remaining 31% balance of electricity is sold to CleanPowerSF and the wholesale electric market. As a result of the 1913 Raker Act, energy produced above the City ’s municipal load is sold first to the 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 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 Regulatory Commission (FERC). Therefore, Hetch Hetchy serves as the City ’s representative at CPUC, CAISO, and FERC forums and continues to monitor regulatory proceedings.

Until August 1, 2008, the San Francisco Public Utilities Commission (SFPUC) consisted of five members, all appointed by the Mayor. Proposition E, a City and County of San Francisco Charter Section 4.112 amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the SFPUC, changed the process for appointing new members, and set qualifications for all members. Under the amended Charter, the Mayor continues to nominate candidates to the SFPUC, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four-year terms for SFPUC members and requires them to meet the following qualifications:

Seat 1 must have experience in environmental policy and an understanding of environmental justice issues.

Seat 2 must have experience in ratepayer or consumer advocacy.

Seat 3 must have experience in project finance.

Seat 4 must have expertise in water systems, power systems, or public utility management.

Seat 5 is an at-large member.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
38 (Continued) The SFPUC is a department of the City, and as such, the financial operations of Hetch Hetchy, Wastewater, and the Water Enterprises are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial statements are intended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of Hetch Hetchy. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2022 and 2021, and the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).
(
2) Significant Accounting Policies
(a)
The accounts of Hetch Hetchy are organized on the basis of proprietary fund types and are included as enterprise funds of the City. The activities of Hetch Hetchy and each fund are accounted for with a separate set of self-balancing accounts that comprise Hetch Hetchy’s and each fund’s assets, deferred outflows, liabilities, deferred inflows, net position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity’s costs of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

The financial activities of Hetch Hetchy are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with U.S. GAAP. Under this method, all assets and liabilities associated with operations are included on the Statements of Net Position, revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operating revenues are defined as charges to customers and rental income.

Hetch Hetchy applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
(
b)
Hetch Hetchy considers its pooled deposits and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non-pooled cash and investments for the Enterprise. Non-pooled restricted deposits and restricted deposits and investments held outside the City Treasury with original maturities of three months or less are considered to be cash equivalents. (
c)
Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based upon quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues. (
d)
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
39 (Continued) (e)
Capital assets are defined as assets with an initial individual cost of more than $5 and an estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an independent professional appraisal, or at cost, if known. All subsequent acquisitions have been recorded at cost. All donated capital assets are valued at estimated fair value at the time of donation. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, which range from 1 to 100 years for equipment and 1 to 200 years for buildings, structures, and impr ovements. No depreciation or amortization is recorded in the year of acquisition, and depreciation or amortization is recorded in the year of disposal.
(
f)
Under GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, intangible assets are defined as identifiable, non-financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights-of-way easements, land use rights, water rights, licenses, and permits. The accounting pronouncement also provides guidance on the capitalization of internally generated intangible assets, such as the development and installation of computer software by or on behalf of the reporting entity.

According to the standard, Hetch Hetchy is required to capitalize intangible assets with a useful life extending beyond one reporting period. Hetch Hetchy has established a capitalization threshold of $100. GASB Statement No. 51 also re quires amortization of intangible assets over the benefit period, except for certain assets having an indefinite useful life. Assets with an indefinite useful life generally provide a benefit that is not constrained by legal or contractual limitations or any other external factor and, therefore, are not amortized (see Note 4). (
g)
The cost of acquisition and construction of major plant and equipment is recorded as construction work in progress. Costs of construction projects that are discontinued are recorded as expenses in the year in which the decision is made to discontinue such projects. (h)
A portion of the interest cost incurred on capita l projects is capitalized on assets that require a period of time for construction or to otherwise prepare them for their intended use. Such amounts are amortized over the useful lives of the assets (see Note 4). Per the implementation of GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period, no interest was capitalized to capital assets in fiscal year 2022. (i)
Bond issuance costs related to prepaid insurance costs are capitalized and amortized using the effective interest method. Other bond issuance costs are expensed when incurred. Original issue bond discount or premium are offset ag ainst the related debt and are also amortized using the effective interest method.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
40 (Continued) (j)
Accrued vacation pay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non-vesting and may be accumulated up to six months per employee.
(k)
The Enterprise is self-insured for workers’ compensation claims and accrues the estimated cost of those claims, including the estimated cost of incurred but not reported claims (see Note 13(b)).
(l)
The Enterprise is self-insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover claims attributed to loss from earthquake, contamination, pollution remediation efforts, and other specific naturally occurring contaminants such as mold. The liability represents an estimate of the cost of all outstanding claims, including adverse loss development and estimated incurred but not reported claims (see Note 13(a)).
(
m)
Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements of the Clean Renewable Energy Bonds (CREBs), the Qualified Energy Conser vation Bonds (QECBs), and the New Clean Renewable Energy Bonds (NCREBs) stipulate that the first payment of excess investment earnings, if any, is required to be rebated to the federal government, no later than 60 days after the end of the fifth bond year of the agreement. Hetch Hetchy did not have any arbitrage liability as of June 30, 2022 and 2021.
(
n)
As a department of a government agency, the Enterprise is exempt from both federal income taxes and California State franchise taxes.
(
o)
Water and power revenues are based on water and power consumption and billing rates.

Generally, customers are billed monthly. Revenues earned but unbilled are accrued as charges for services receivables on the Statements of Net Position. The unbilled amounts for the fiscal years ending June 30, 2022 and 2021 are as follows:
(p)
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the Hetchy H etchy
Water Power C leanPowerSF Total
2022 $ 3,806 25,684
2021 13,823 26,423

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
41 (Continued) reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(q)
Eliminations for internal activities between the Hetchy Power and CleanPowerSF are made in the Statements of Net Position. There were no activities requiring eliminations for fiscal years ended June 30, 2022 and 2021.
(
r)
According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations , a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted and any of the following recognition triggers occur:

Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
A government has violated a pollution prevention-related permit or license; A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollut ion, or for paying all or some of the cost of the cleanup;
A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
A government begins or legally obligates itself to begin cleanup or post-cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the Design Phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include, but are not limited to, asbestos or lead paint removal; leaking of sewage in underground pipes or neighboring areas; chemical spills; removal and disposal of known toxic waste; harmful biological and chemical pollution of water; or contamination of surrounding soils by underground storage tanks (see Note 14(d)).
(
s)
Leases are defined as a contract that conveys control of the right to use another entity’s underlying asset for a specified period. Hetch Hetchy is a lessee for various noncancellable leases of building and radio tower.

Short-term Leases – For leases with a maximum possible term of 12 months or less at commencement, the Enterprise recognizes lease revenue if the Enterprise is the lessor of the lease or lease expense if the Enterprise is the lessee of the lease, based on the provisions of the lease contract. Liabilities are only recognized if payments are received in advance, and receivables are only recognized if payments are received subsequent to the reporting period.

Leases other than Short-term – For all other leases (i.e. those that are not short-term), Hetch Hetchy recognizes a lease liability and intangible right-to-use lease asset as lessee leases, or lease receivable and deferred inflow of resources as lessor leases.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
42 (Continued) Measurement of Lease Amounts (Lessee) – Hetch Hetchy’s lease liability is recorded at the present value of future minimum lease payments as of the date of inception. Subsequently, the lease liability is reduced by the principal port ion of lease payments made. The lease asset is initially measured as the initial amount of the le ase liability, less lease payments made at or before the lease commencement date, plus any initial direct costs ancillary to placing the underlying asset into service, less any lease incentives received at or before the lease commencement date. Subsequently, the lease asset is amortized into depreciation and amortization expense on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. If Hetch Hetchy is reas onably certain of exercising a purchase option contained in a lease, the lease asset will be amortized over the useful life of the underlying asset.

Measurement of Lease Amounts (Lessor) – Hetch Hetchy’s lease receivable is measured at the present value of payments expected to be re ceived during the lease term, reduced by any provision of estimated uncollectible amounts. Subsequently, the lease receivable is reduced by the principal portion of lease payments collected. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term, plus lease payments received from the lease at or before the commencement of the lease term that related to future periods. Subsequently, the deferred inflow of resources as lease revenue on a straight-line basis over the lease term.

Key Estimates and Judgements – Key estimates and judgements include how Hetch Hetchy determines (a) the discount rate it uses to calculate the present value of the expected lease payments, (b) lease terms, (c) lease payments, and (d) materiality threshold for equipment. • Hetch Hetchy generally uses its estimated incremental borrowing rate as the discount rate for leases unless the rate implicit in the lease. The City’s incremental borrowing rate (IBR) is established using the average of Municipal Market Data (MMD) AAA benchmark interest rate index by maturity date (year 1 to 30+), plus the average credit spread based on City’s Aa/AA, COP, Tax-exempt to generate the yield curve and discount rate table. The City’s incremental borrowing rate for leases is based on the rate of interest it would need to pay if it issued general obligation bonds to borrow an amount equal to the lease payments under similar terms at the commencement or remeasurement date. • The lease term includes the noncancellable period of the lease, plus any additional periods covered by either lessee or lessor unilateral option to (1) extend for which it is reasonably certain to be exercised, or (2) terminate for which it is reasonably certain not to be exercised. Periods in which both the lessee and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the lease term. • Payments are evaluated by Hetch Hetchy to determine if they should be included in the measurement of the lease receivables or lease liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments.
• Equipment and other leases have a capitalization threshold of $100. 70% below market rent and/or ground leases are determined to be below market rent (BMR), excluded from lease capitalization.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
43 (Continued) Remeasurement of Lease – Hetch Hetchy monitors changes in circumstances that may require remeasurement of a lease. When certain changes occur that are expected to significantly affect the amount of the lease receivable or lease liability, the receivable or liability is remeasured and a corresponding adjustment is made to the deferred inflow of resources or lease asset, respectively.

Presentation in Statements of Net Position – Lease assets are reported with non-current assets, lease liabilities are reported with current and long-term liabilities in the Statements of Net Position.
(t)
As prescribed under GASB Statement No. 75, Accounting and Financial Reporting for Post- employment Benefits Other than Pensions , net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB expense are actuarially determined on a citywide basis.

Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Trust Fund investments measured at fair value (see Note 11(b)).
(
u)
1) 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 liabilities that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 87 in fiscal year 2022 (see Note 9). As a result of adop tion, the cumulative effect of applying this Statement is recorded as beginning balances for the following accounts as of July 1, 2020:
2) 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 establishes accounting requirements for interest cost incurred before the end of construction period. The new Hetchy W ater H etchy P ower CleanPowerSF Total 2 021
Beginning balance:

Right-to-use Assets $ 93 113 920 1,126 Lease Liability - Current (29) (35) (371) (435) Lease Liability - Long Term (64) (78) (549) (691) Activities:

Accumulated Amortization (19) (23) (345) (387) Accrued Interest Payable - Current (1) (1)
Lease Liability - Current 13 16 26 55 Lease Liability - Long Term 2 3 317 322 Expenses 4 4 3 11 Total:

Right-to-use Assets 93 113 920 1,126 Accumulated Amortization (19) (23) (345) (387) Accrued Interest Payable - Current (1) (1)
Lease Liability - Current (16) (19) (345) (380) Lease Liability - Long Term (62) (75) (232) (369) Expenses 4 4 3 11 Change to net position $ 4 4 3 11

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
44 (Continued) standard is effective for periods beginning after December 15, 2020. The Enterprise adopted the provisions of Statement No. 89 in fiscal year 2022. 3) In January 2020, the GASB issued Statement No. 92, Omnibus 2020. GASB Statement No. 92 addresses practice issues that have been identified during implementation and application of certain GASB Statements. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 92 in fiscal year 2022, which did not have significant effect on its financial statements. 4) In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 93 in fiscal year 2022, which did not have a significant effect on its financial statements.
(
v)
1) In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. GASB Statement No. 84 establishes criteria for state and local governments to identify fiduciary activities and how those activities should be reported. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements. 2) In August 2018, the GASB issued Statement No. 90, Accounting and Financial Reporting for Majority Equity Interests. GASB Statement No. 90 provides clarification when a government should report a majority equity interest in a legally separate organization as either a component unit or an investment. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements. 3) 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 rules related to reporting of fiduciary activities under Statements No. 14 and No. 84 and enhances the accounting and financial reporting of IRS Code section 457 plans that meet the definition of a pension plan. The new standard is effective for periods beginning after June 15, 2021.

The Enterprise adopted early the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements. 4) 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. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.
(
w)
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the compatibility and consistency of conduit debt obligation

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
45 (Continued) reporting and reporting of related transactions by State and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The Enterprise will implement the provisions of Statement No. 91 in fiscal year 2023. 2) In March 2020, the GASB Issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements . The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). The new standard is effective for periods beginning after June 15, 2022. The En terprise will implement the provisions of Statement No. 94 in fiscal year 2023.
3) In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements . This Statement provides guidance on the accounting and financial reporting for subscription-based info rmation technology arrangements (SBITAs) by a government. The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 96 in fiscal year 2023. 4) In April 2022, the GASB issued Statement No. 99, Omnibus 2022. This Statement enhances comparability in accounting and financial re porting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 99 in fiscal year 2024.
5) In June 2022, the GASB issued Statement No. 100, Accounting Changes and Error Corrections. This Statement enhances accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 100 in fiscal year 2024. 6) In June 2022, the GASB issued Statement No. 101, Compensated Absences . This Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The new standard is effective for periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 101 in fiscal year 2025. (
x)
The Hetch Hetchy Enterprise has reclassified certain amounts relating to the prior period to conform to its current period presentation. These reclassifications had no effect on previously reported changes in net position.
(
3) Cash, Cash Equivalents, and Investments
Hetch Hetchy’s cash, cash equivalents, and investments with the City Treasury are invested in an unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of pr iority, preservation of capital, liquidity, and yield.

The policy addresses soundness of financial institutions in which the City will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
46 (Continued) portfolio, which may be invested in certain instruments with longer terms to maturity. The City Treasurer allocates income from the investment of pooled cash at month-end in proportion to Hetch Hetchy’s average daily cash balances. The primary objectives of Hetch Hetchy’s investment policy are consistent with the City’s policy.

Restricted assets are held by an independent trustee outside the City’s investment pool. The assets are held for the purpose of paying future interest and principal on the bonds and for eligible capital project expenditures. The balances as of June 30, 2022 and 2021 were $14,052 and $3,843, respectively. The Enterprise held all investments in guaranteed investment contracts, treasury and government obligations, commercial paper, corporate bonds, and notes, as well as money market mutual funds consisting of treasury and government obligations. The balance as of June 30, 2022 included 2021 Series AB bond proceeds of $10,346, 2015 Series A bond proceeds of $2,194, certificates of participation proceeds of $981, 2015 Series B bond proceeds of $516, $17 held at a commercial bank in a non-interest-bearing checking account that is covered by depository insurance, and commercial paper of $15. The balance as of June 30, 2021 included 2015 Series A bond proceeds of $2,193, certificates of participation proceeds of $1,115, $612 held at a commercial bank in a non-interest-bearing checking account that is covered by depository insurance, 2015 Series B bond proceeds of $516, and commercial paper of $19.

Hetch Hetchy did not have any unrealized gain and loss in the restricted cash and investments outside City Treasury as of June 30, 2022 and 2021.

Hetch Hetchy categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in active markets for id entical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities.

Commercial paper is valued using a variety of techniques such as matrix pricing; market corroborated pricing inputs such as yield curve, indices, and other market related data. Commercial paper, money market investments, and cash and cash equivalents are exempt from fair value treatment under GASB Statement No. 72.

The following is a summary of the Hetch Hetchy restricted and unrestricted cash and investments outside City Treasury and the fair value hierarchy as of June 30, 2022 and 2021.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
47 (Continued) For fiscal year 2022, proceeds from 2021 Series AB and 2015 Series AB bonds held as restricted cash and investments outside City Treasury in the amount of $13,056 were invested in U.S. Treasury Money Market with maturity date less than 90 days. For fiscal year 2021, proceeds from 2015 Series A and B bonds held as restricted cash and investments outside City Treasury in the amount of $2,709 were invested in U.S. Treasury Money Market with maturity date less than 90 days. The credit ratings of the U.S. Treasury Money Market as of June 30, 2022 and 2021 were “AAAm” by S&P and “Aaa-mf” by Moody’s.

Hetch Hetchy’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as of June 30, 2022 and 2021:

The following table shows the percentage distribution of the City’s pooled investment by maturity:

Hetchy Hetchy
Water Power CleanPowerSF Total 2 022
Current assets:

Cash and investments with City Treasury $ 94,190 189,641 56,234 340,065 Cash and investments outside City Treasury 1 16 17 Restricted cash and investments outside City Treasury 5,228 5,228 Non-current assets:

Restricted cash and investments outside City Treasury 8,824 8,824 Total cash, cash equivalents, and investments $ 94,191 203,709 56,234 354,134 Hetchy Hetchy
Water Power CleanPowerSF Total 2 021
Current assets:

Cash and investments with City Treasury $ 89,373 190,719 90,838 370,930 Cash and investments outside City Treasury 1 611 612 Restricted cash and investments outside City Treasury 153 153 Non-current assets:

Restricted cash and investments with City Treasury 6,990 5,241 12,231 Restricted cash and investments outside City Treasury 3,690 3,690 Total cash, cash equivalents, and investments $ 96,364 200,414 90,838 387,616

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
48 (Continued) (4) Capital Assets
Capital assets with a useful life of 50 years or greater include buildings and structures, reservoirs, dams, power stations, certain water mains and pipelines, transmission and distribution systems, tunnels, and bridges.
a) Hetch Hetchy capital assets as of June 30, 2022 and 2021 consist of the following:
* Decrease in construction in progress included $655 in capital project write-offs, mainly related to Hope San Francisco Projec t in Sunnydale and Potrero. The remaining difference of $1,151 was offset by direct additions to machinery and equipment. * Decrease in construction work in progress is greater than increase in capital assets being depreciated explained by $8,384 in capital project write-offs, mainly related to Bay Corridor Projec t, Transmission and Distribution System Project, and Treasure Island Capital Improvement Project. The remaining difference of $701 was offset by direct additions to machinery and equipment.
2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 5,181 5,181
Intangible assets 1,437 1,437
Construction work in progress 206,508 (30,491) * 316,530 Total capital assets not being depreciated and amortized 213,126 (30,491) 323,148 Capital assets being depreciated and amortized:

Facilities and improvements 782,963 809,945
Intangible assets 45,715 45,715
Machinery and equipment 144,323 148,241
Total capital assets being depreciated and amortized 973,001 * 1,003,901 Less accumulated depreciation and amortization for:

Facilities and improvements (405,446) (18,285) (423,731) Intangible assets (22,220) (460) (22,680)
Machinery and equipment (88,924) (5,158) (93,995)
Total accumulated depreciation and amortization (516,590) (23,903) (540,406) Total capital assets being depreciated and amortized, net 456,411 7,084 463,495 Total capital assets, net $ 669,537 147,597 (30,491) 786,643

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
49 (Continued) b) Hetchy Water capital assets as of June 30, 2022 and 2021 consist of the following:
* Decrease in construction in progress included $7 in capital project write-offs, mainly related to Hetchy Water’s share of roa d improvement projects. The remaining difference of $171 was offset by direct additions to machinery and equipment. * Decrease in construction in progress included $51 in capital project write-offs, mainly related to Hetchy Water’s share of ro ad improvement projects and 2018 Moccasin Strom project. The rema ining difference of $173 was offset by direct additions to machinery and equipment.
2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 3,232 3,232
Intangible assets 6 6
Construction work in progress 35,333 *5 4 , 1 3 8
Total capital assets not being depreciated and amortized 38,571 57,376 Capital assets being depreciated and amortized:

Facilities and improvements 295,968 306,116
Intangible assets 20,522 20,522
Machinery and equipment 27,518 28,383
Total capital assets being depreciated and amortized 344,008 * 355,021 Less accumulated depreciation and amortization for:

Facilities and improvements (174,695) (5,144) (179,839) Intangible assets (9,947) (207) (10,154)
Machinery and equipment (20,456) (941) (21,397)
Total accumulated depreciation and amortization (205,098) (6,292) (211,390) Total capital assets being depreciated and amortized, net 138,910 4,721 143,631 Total capital assets, net $1 7 7 , 4 8 1 34,375 201,007

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
50 (Continued) c) Hetchy Power capital assets as of June 30, 2022 and 2021 consist of the following:
* Decrease in construction in progress included $648 in capital project write-offs, mainly related to Hope San Francisco Projec t in Sunnydale and Potrero. The remaining difference of $980 was offset by direct additions to machinery and equipment. * Decrease in construction work in progress is greater than increase in capital assets being depreciated explained by $8,333 in capital project write-offs, mainly related to Bay Corridor Projec t, Transmission and Distribution System Project, and Treasure Island Capital Improvement Project. The remaining difference of $528 was offset by direct additions to machinery and equipment.

GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 Financial Accounting Standards Board (FASB) and American Institute of Certified Public Accountants (AICPA) Pronouncements, requires that interest expense incurred during construction of assets be capitalized. Per the implementation of GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period , no interest was capitalized to construction in progress beginning in fiscal year 2022. 2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:

Land and rights-of-way $ 1,949 1,949
Intangible assets 1,431 1,431
Construction work in progress 171,175 * 262,392
Total capital assets not being depreciated and amortized 174,555 265,772 Capital assets being depreciated and amortized:

Facilities and improvements 486,995 503,829
Intangible assets 25,193 25,193
Machinery and equipment 116,805 119,858
Total capital assets being depreciated and amortized 628,993 * 648,880 Less accumulated depreciation and amortization for:

Facilities and improvements (230,751) (13,141) (243,892) Intangible assets (12,273) (253) (12,526)
Machinery and equipment (68,468) (4,217) (72,598)
Total accumulated depreciation and amortization (311,492) (17,611) (329,016) Total capital assets being depreciated and amortized, net 317,501 2,363 319,864 Total capital assets, net $ 492,056 113,222 585,636

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
51 (Continued) Interest included in the construction work in progress and total interest expense incurred during the years ended June 30, 2022 and 2021 are as follows:
*Per the implementation of GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period.
**Restated per the implementation of GASB Statement No. 87, Leases. (5) Restricted Assets
Pursuant to the Hetchy Power Trust Indenture (the “Indenture”), established in fiscal year 2015, net revenues of the Hetchy Power are pledged first to the 2015 Series AB Bonds and 2021 Series AB Bonds, and have a priority lien on the pledge of net revenues to the outstanding CREBs, QECBs, and NCREBs (the “Subordinate Obligations”). The Lease/Purchase Agreements for the Subordinate Obligations pledge the net revenues of the Hetchy Power to these bonds, and such pledge is subordinate in lien to the net revenues pledge for the 2015 Series AB Bonds and 2021 Series AB Bonds (the “Bonds” or “Bond”).

In the Indenture, the SFPUC covenants and agrees that it will pay into the Revenue Fund as received all Revenues of Hetchy Power and shall be used and applied, as provided by the Indenture, solely for the purposes of operating and maintaining Hetchy Power and paying all costs, charges, and expenses in connection therewith and for the purpose of making repairs, renewals, and replacements to Hetchy Power and constructing additions, betterments, and extensions thereto.

The Indenture provides that Revenues deposited in the Revenue Fund shall be disbursed in the following order of priority:

1. The payment of operation and maintenance expenses;

2. Any priority reconstruction and replacement fund deposits;

3. Deposit in the interest account of each Bond Fund;

4. Deposit in the bond retirement account of each Bond Fund;

5. Deposit in the reserve fund;

6. (i) Payment of principal and premium, if any, and interest on any Subordinate Obligations; (ii) deposit into a reserve fund securing any Subordinate Obligations; (iii) Swap Agreement payments pursuant to Swap Agreements entered into by the SFPUC with respect to any Subordinate Obligations; and (iv) payment to any financial institution or insurance company providing any letter of credit, line of credit, or ot her credit or liquidity facility, including municipal bond insurance and guarantees, that secures the payment of principal or interest on any Subordinate Obligations; in each case in any order of priority within this paragraph which may be hereafter established by the SFPUC resolution;

7. Any additional reconstruction and replacement fund deposits into the reconstruction and replacement fund;

8. Any necessary or desirable capital additions or improvements to the Hetchy Power;

9. Any payment under a Take-or-Pay Power Purchase Agreement that does not constitute an operation and maintenance expense;

10. Any payment under a Swap Agreement that does not constitute a Swap Agreement payment; and

11. Any other lawful purpose of the SFPUC.

Restated
Hetchy P ower 2022 2021**
Interest expensed $ 5,624 1,972
Interest included in construction work in progress *1 , 0 8 3 Total interest incurred $ 5,624 3,055

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
52 (Continued) In the Indenture, the SFPUC covenants and agrees to transfer to the Trustee for deposit in the Interest Account of each applicable Bond Fund all Refundable Credits received by the SFPUC.

In accordance with the Agreements, Hetch Hetchy maintains certain restricted cash and investment balances in trust.
(a) Hetchy Water has the following restricted assets held in trust as of June 30, 2022 and 2021:
(b) Hetchy Power has the following restricted assets held in trust as of June 30, 2022 and 2021:

Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Hetch Hetchy Revenue Fund.
(
6) Short-Term Debt
Effective March 2019, under Charter Sections 9.107(6) and 9.107(8), and 2018 Proposition A, the Commission and Board of Supervisors authorized the issuance of up to $250,000 in commercial paper notes for the purpose of reconstructing, replacing, expanding, repairing or improving power facilities of Hetchy Power. Interest rates for the commercial paper ranged from 0.1% to 1.1% and

0.1% to 0.2% in fiscal years 2022 and 2021, respectively. The Enterprise had $40,019 and $114,671 commercial paper outstanding as of June 30, 2022 and 2021, respectively. The Enterprise had $209,981 and $135,329 in unused authorization as of June 30, 2022 and 2021, respectively.

In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , Significant Events of default as specified in the Reimbursement Agreements include 1) non-payment, 2) material breach of warranty, representation, or other non- remedied breach of covenants as specified in the respective agreements and 3) 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, 2022, there were no such events described herein.
2022 2021
Cash and investments with City Treasury:

Hetch Hetchy bond construction fund $
Total restricted assets $
2022 2021
Cash and investments with City Treasury:

Hetch Hetchy bond construction fund $
Cash and investments outside City Treasury:
2009 Series C Certificates of participation - 525 Golden Gate 2009 Series D Certificates of participation - 525 Golden Gate 2015 Series A Revenue Bonds
2015 Series B Revenue Bonds
2021 Series AB Revenue Bonds
Commercial Paper
Total restricted cash and investments outside City Treasury Interest and other receivables:

Hetch Hetchy bond construction fund
Total restricted assets $

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
53 (Continued) (7) Changes in Long-Term Liabilities
a) Hetch Hetchy’s long-term liability activities for the years ended June 30, 2022 and 2021 are as follows:
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases.

Interest Maturity Restated Due w ithin
rate (Calendar Y ear) 2021* Additions Reductions 2022 one y ear Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 843 (422) 421 421 Qualified Energy Conservation Bonds 4.74 2027 3,687 (549) 3,138 555 New Clean Renewable Energy Bonds 2015 4.62 2032 1,779 (142) 1,637 146 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 32,025 2015 Series B Revenue Bonds 3.00 - 4.00 2026 4,550 (815) 3,735 850 2021 Series A Revenue Bonds 4.00 - 5.00 2052 74,280
2021 Series B Revenue Bonds 4.00 - 5.00 2052 49,720
Less issuance discount (20) 14 (6) (6)
Add issuance premiums 3,448 (934) 29,536
Total bonds payable 46,312 (2,848) 194,486 1,966 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 830 (405) 425 425 2009 Series C COPs issuance premiums 8 (6) 2 2 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 12,593 Other post-employment benefits obligations 35,006 5,135 (6,232) 33,909 Net pension liability 62,219 (62,219)
Accrued vacation and sick leave 6,202 (2,759) 6,312 3,060 Accrued workers’ compensation 3,238 (315) 3,478 615 Damage claims liability 1,639 (3,797) 1,682 601 Due to other City departments 369 380 380
Lease liability 749 (380) 369 238
Unearned revenues, refunds, and other 16,159 (19,215) 20,057 10,143 Total $ 185,324 (98,176) 273,693 17,430
Interest Maturity Restated Due w ithin
rate (Calendar Y ear) 2020 Additions Reductions 2021* one y ear Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 1,265 (422) 843 422 Qualified Energy Conservation Bonds 4.74 2027 4,229 (542) 3,687 549 New Clean Renewable Energy Bonds 2012 4.74 2020 130 (130) New Clean Renewable Energy Bonds 2015 4.62 2032 3,190 (1,411) 1,779 142 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 32,025 2015 Series B Revenue Bonds 3.00 - 4.00 2026 5,335 (785) 4,550 815 Less issuance discount (34) 14 (20)
Add issuance premiums 3,668 (220) 3,448
Total bonds payable 49,808 (3,496) 46,312 1,928 2009 Series C Certificates of participation (COPs) 2.00 - 5.00 2022 1,214 (384) 830 405 2009 Series C COPs issuance premiums 21 (13) 8 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 12,593 Other post-employment benefits obligations 38,530 5,646 (9,170) 35,006 Net pension liability 49,531 28,918 (16,230) 62,219 Accrued vacation and sick leave 4,894 2,932 (1,624) 6,202 3,041 Accrued workers’ compensation 3,387 113 (262) 3,238 575 Damage claims liability 2,886 4,843 (6,090) 1,639 633 Due to other City departments 840 (471) 369 369 Lease liability 1,126 (377) 749 380 Unearned revenues, refunds, and other 9,117 28,750 (21,708) 16,159 6,191 Total $ 173,947 71,202 (59,825) 185,324 13,522

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
54 (Continued) b) Hetchy Water’s long-term liability activities for the years ended June 30, 2022 and 2021 are as follows:
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. c) Hetchy Power’s long-term liability activities for the years ended June 30, 2022 and 2021 are as follows:

Restated Due w ithin
2021* Additions Reductions 2022 one y ear
Other post-employment benefits obligations $ 14,444 1,921 (2,125) 14,240 Net pension liability 26,645 (26,645)
Accrued vacation and sick leave 2,185 (765) 2,169 1,034 Accrued workers’ compensation 1,120 (125) 1,228 215 Damage claims liability 525 (151) 627 228 Lease liability 78 (16) 62 3
Unearned revenues, refunds, and other 138 (18) 134 24 Total $ 45,135 (29,845) 18,460 1,504
Restated Due w ithin
2020 Additions Reductions 2021* one y ear
Other post-employment benefits obligations $ 16,350 1,818 (3,724) 14,444 Net pension liability 21,477 12,119 (6,951) 26,645 Accrued vacation and sick leave 1,646 1,034 (495) 2,185 1,059 Accrued workers’ compensation 1,187 18 (85) 1,120 197 Damage claims liability 558 478 (511) 525 218 Due to other City departments 240 (240)
Lease liability 93 (15) 78 16
Unearned revenues, refunds, and other 627 629 (1,118) 138 22 Total $ 42,178 16,096 (13,139) 45,135 1,512 Interest Maturity R estated Due w ithin
rate (Calendar Y ear) 2021* Additions Reductions 2022 one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 843 (422) 421 421 Qualified Energy Conservation Bonds 4.74 2027 3,687 (549) 3,138 555 New Clean Renewable Energy Bonds 2015 4.62 2032 1,779 (142) 1,637 146 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 32,025 2015 Series B Revenue Bonds 3.00 - 4.00 2026 4,550 (815) 3,735 850 2021 Series A Revenue Bonds 4.00 - 5.00 2052 74,280
2021 Series B Revenue Bonds 4.00 - 5.00 2052 49,720
Less issuance discount (20) 14 (6) (6 )
Add issuance premiums 3,448 (934) 29,536
Total bonds payable 46,312 (2,848) 194,486 1,966
2009 Series C Certificates of participation (COPs ) 2.00 - 5.00 2022 830 (405) 425 425 2009 Series C COPs issuance premiums 8 (6) 2 2 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 12,593 Other post-employment benefits obligations 17,653 2,347 (2,595) 17,405 Net pension liability 32,566 (32,566)
Accrued vacation and sick leave 3,617 1,856 (1,876) 3,597 Accrued workers’ compensation 2,118 322 (190) 2,250 Damage claims liability 1,108 2,005 (2,090) 1,023 Due to other City departments 369 380
Lease liability 94 (19) 75
Unearned revenues, refunds, and other 5,993 (7,676) 6,727 Total $ 123,261 (50,271) 238,963

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
55 (Continued) *Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. d) CleanPowerSF’s long-term liability activities fo r the years ended June 30, 2022 and 2021 are as follows:
*Restated per Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. (a)
In November 2008, Hetchy Power issued $6,325 of taxable CREBs to finance the installation of solar energy equipment on City-owned facilities, including Chinatown Branch Library, Maxine Hall Medical Center, City Distribution Division Warehouse, North Point Wastewater Plant, Chinatown Public Health Center, Municipal Transportation Agency Woods, and Municipal Transportation Agency Ways and Structures. Th e CREBs were non-rated and privately-placed with Banc of America Leasing. The net effective in terest rate on the CREBs, after the federal tax subsidy, is 0% through 2022. Hetchy Power began making principal payments in the amount of $422 on December 15, 2008 and will continue annual payments for 15 years until December 15, 2022. Funding for these payments will be guaranteed by net power revenues. Interest Interest Maturity R estated Due w ithin
rate (Calendar Y ear) 2020 Additions Reductions 2021* one year Bonds:

Clean Renewable Energy Bonds 0.00 % 2022 $ 1,265 (422) 843 422 Qualified Energy Conservation Bonds 4.74 2027 4,229 (542) 3,687 549 New Clean Renewable Energy Bonds 2012 4.74 2020 130 (130) New Clean Renewable Energy Bonds 2015 4.62 2032 3,190 (1,411) 1,779 142 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 32,025 2015 Series B Revenue Bonds 3.00 - 4.00 2026 5,335 (785) 4,550 Less issuance discount (34) 14 (20)
Add issuance premiums 3,668 (220) 3,448
Total bonds payable 49,808 (3,496) 46,312 1,928
2009 Series C Certificates of participation (COPs ) 2.00 - 5.00 2022 1,214 (384) 830 405 2009 Series C COPs issuance premiums 21 (13) 8 2009 Series D COPs (Build America) 6.36 - 6.49 2041 12,593 12,593 Other post-employment benefits obligations 19,983 2,223 (4,553) 17,653 Net pension liability 26,249 14,812 (8,495) 32,566 Accrued vacation and sick leave 2,957 1,763 (1,103) 3,617 1,777 Accrued workers’ compensation 2,200 95 (177) 2,118 378 Damage claims liability 2,222 4,212 (5,326) 1,108 409 Due to other City departments 600 (231) 369 369 Lease liability 113 (19) 94 19 Unearned revenues, refunds, and other 7,642 8,560 (10,209) 5,993 5,141 Total $ 125,602 31,665 (34,006) 123,261 10,426 Restated Due w ithin
2021* Additions Reductions 2022 one y ear
Other post-employment benefits obligations $ 2,909 867 (1,512) 2,264 Net pension liability 3,008 (3,008)
Accrued vacation and sick leave 400 264 (118) 546 279 Damage claims liability 6 1,582 (1,556) 32 15 Lease liability 577 (345) 232 232
Unearned revenues, refunds, and other 10,028 14,689 (11,521) 13,196 4,196 Total $ 16,928 17,402 (18,060) 16,270 4,722 Restated Due w ithin
2020 Additions Reductions 2021* one y ear
Other post-employment benefits obligations $ (893) 2,909 Net pension liability (784) 3,008
Accrued vacation and sick leave (26) 400
Damage claims liability (253) 6
Lease liability (343) 577
Unearned revenues, refunds, and other (10,381) 10,028 Total $ (12,680) 16,928

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
56 (Continued) payments are not required, since the effective equivalent of interest on the bonds is paid in the form of federal tax credits in lieu of interest paid by the issuer.

T h e f u t u r e a n n u a l d e b t s e r v i c e r e l a t i n g t o t h e C R E B s o u t s t a n d i n g a s o f J u n e 3 0 , 2 0 2 2 i s a s follows:
(b)
In December 2011, Hetchy Power issued $8,291 of taxable QECBs. The QECBs were issued to fund certain qualified green components for the SFPUC’s 525 Golden Gate Headquarters project. The QECBs were non-rated and privately placed with Banc of America Leasing. The net effective interest rate on the QECBs, after the federal tax subsidy, is 1.2% through 2028.

The future annual debt service relating to the QECBs outstanding as of June 30, 2022 is as follows:
* The SFPUC received an IRS notice dated June 2, 2022 that the federal interest subsidy is reduced by 5.7% or a total reduction of $19 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
(c)
In April 2012, Hetchy Power issued $6,600 of taxable NCREBs. The NCREBs were issued to fund certain qualified facilities that provide clean, renewable energy at Davies Symphony Hall, City Hall, and University Mound Reservoir. The NCREBs were non-rated and privately placed with Banc of America Leasing. The net effective interest rate on the NCREBs, after the federal tax subsidy, is 1.5% through 2021. $288 and $2,523 of principal were prepaid in fiscal years 2017 and 2016, respectively. There was no prepayment thereafter. 2012 NCREBs have been fully repaid as of June 30, 2021.
(
d)
In October 2015, Hetchy Power issued $4,100 of taxable 2015 NCREBs. The 2015 NCREBs were issued to fund certain qualified clean, renewable energy solar generation facilities at the Marina Middle School and the San Francisco Police Academy. The 2015 NCREBs were non- rated and privately placed with Banc of America Leasing. The net effective interest rate on the 2015 NCREBs, after the federal tax subsidy, is 1.4% through 2033. $0 and $1,272 of principal were prepaid in fiscal years 2022 and 2021, respectively.

Fiscal year ending June 30: Principal
2023 $ 421
Less: Current portion (421)
Less: Unamortized bond discount (6)
Less: Current portion 6
Long-term portion as of June 30, 2022 $ —
Interest Federal Interest
before interest net of
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2023 $ 555 142 (100) 42
2024 562 116 (82) 34
2025 569 89 (63) 26
2026 576 62 (44) 18
2027 582 35 (24) 11
2028 294 7 (4) 3
3,138 451 (317) 134
Less: Current portion (555)
Long-term portion as of June 30, 2022 $ 2,583

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
57 (Continued) The future annual debt service relating to the 2015 NCREBs outstanding as of June 30, 2022 is as follows:
* The SFPUC received an IRS notice dated June 2, 2022 that the federal interest subsidy is reduced by 5.7% or a total reduction of $17 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
(e)
In May 2015, Hetchy Power issued tax-exempt revenue bonds, 2015 Series A (Green) in the amount of $32,025 with interest rates ranging from 4.0% to 5.0% and 2015 Series B in the amount of $7,530 with interest rates ranging from 3.0% to 4.0%. Proceeds from the bonds were used to finance reconstruction or replacement of existing facilities of the SFPUC’s Hetch Hetchy project, to fund capitalized interest on the 2015 Series AB Bonds, to fund a debt service reserve a c c o u n t f o r t h e 2 0 1 5 S e r i e s A B B o n d s , a n d t o p a y c o s t s o f i s s u a n c e o f t h e 2 0 1 5 S e r i e s A B bonds. The bonds were rated “A+” and “AA-” by S&P and Fitch, respectively. Final maturity for 2015 Series AB are November 1, 2045 and November 1, 2026, respectively. The true interest cost is 3.95%. As of June 30, 2022 and 2021, the outstanding principal amounts were $35,760 and $36,575, respectively.

The future annual debt service relating to the 2015 Series AB Bonds outstanding as of June 30, 2022 are as follows:

Interest Federal Interest
before i nterest net o f
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2023 $ 146 74 (49) 25
2024 148 67 (44) 23
2025 150 60 (40) 20
2026 152 53 (35) 18
2027 154 47 (31) 16
2028-2032 803 122 (81) 41
2033 84 2 (1) 1
1,637 425 (281) 144
Less: Current portion (146)
Long-term portion as of June 30, 2022 $ 1,491
Fiscal years ending June 30: Principal Interest Total
2023 $ — 1,593 1,593
2024 — 1,593 1,593
2025 — 1,593 1,593
2026 — 1,593 1,593
2027 830 1,576 2,406
2028-2032 5,645 7,121 12,766
2033-2037 7,205 5,522 12,727
2038-2042 9,190 3,482 12,672
2043-2046 9,155 943 10,098
32,025 25,016 57,041
Add: Unamortized bond premium 3,119
Long-term portion as of June 30, 2022 $ 35,144
H etchy P ower - P ower R evenue B onds 2 015 S eries A (Green)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
58 (Continued) (f)
In December 2021, Hetchy Power issued tax-exem pt revenue bonds, 2021 Series A (Green) in the amount of $74,280 with interest rates ranging from 4.0% to 5.0% and 2021 Series B in the amount of $49,720 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used to refinance a portion of the costs of various capital projects benefiting the Power Enterprise, to fund capitalized interest on the 2021 Series AB Bonds, and to pay costs of issuance. The bonds were rated “AA” and “AA-” by S&P and Fitch, respectively. Final maturity for 2021 Series AB are November 1, 2051. The true interest cost is 2.64%. As of June 30, 2022 the outstanding principal amount was $124,000.

The future annual debt service relating to the 2021 Series AB Bonds outstanding as of June 30, 2022 are as follows:

Fiscal years ending June 30: Principal Interest Total
2023 $ 850 124 974
2024 880 93 973
2025 910 62 972
2026 945 25 970
2027 150 3 153
3,735 307 4,042
Less: Current portion (850)
Add: Unamortized bond premium 114
Long-term portion as of June 30, 2022 $ 2,999
H etchy P ower - Power R evenue B onds 2 015 S eries B Fiscal years ending June 30: Principal Interest Total
2023 $ — 3,085 3,085
2024 — 3,085 3,085
2025 1,385 3,050 4,435
2026 1,455 2,979 4,434
2027 1,530 2,905 4,435
2028-2032 8,875 13,294 22,169
2033-2037 11,025 11,140 22,165
2038-2042 13,470 8,698 22,168
2043-2047 16,450 5,716 22,166
2048-2052 20,090 2,073 22,163
74,280 56,025 130,305
Add: Unamortized bond premium 15,933
Long-term portion as of June 30, 2022 $ 90,213
H etchy Power - P ower R evenue B onds 2 021 S eries A ( Green)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
59 (Continued) (g)
In October 2009, the City issued $167,670 in certificates of participation to fund construction of the headquarters of the SFPUC at 525 Golden Gate Avenue. The 2009 Series C certificates were issued for $38,120 and 2009 Series D for $129 , 5 5 0 a s “ B u i l d A m e r i c a B o n d s ” ( B A B s ) o n a taxable basis under the 2009 American Recovery and Reinvestment Act. The 2009 Series C certificates carry interest rates ranging from 2.0% to 5.0% and mature on November 1, 2022.

The 2009 Series D certificates carry interest rates ranging from 6.4% to 6.5% and mature on November 1, 2041. After adjusting Series D for the federal interest subsidy, the true interest cost averages 3.4% and 4.3% for Series C and Series D certificates, respectively.

Under the terms of a Memorandum of Understanding between the City and the SFPUC dated October 1, 2009, the City conveyed the real property to the Trustee, the Bank of New York Mellon Trust Company, N.A., which was replaced by U.S. Bank in March 2014 under a property lease in exchange for the proceeds of the sale of the certificates. The Trustee has leased the property back to the City for the City’s use under a project lease. The City is obligated under the project lease to pay base rental payments and other payments to the Trustee each year during the 32-year term of the project lease. The Commission makes annual base rental payments to the City for the building equal to annual debt service on the certificates. It is anticipated these lease costs will be offset with reductions in cost s associated with current office rental expense.

Hetchy Power’s share is reflected on the Hetchy Power fund statements. There are no events of default stated in this memorandum of understanding.

The Power, Water, and Wastewater Enterprises have ownership interest in the building equal to their projected usage of space as follows: Water (73%), Wastewater (15%), and Power (12%).

Similarly, each Enterprise is responsible for a portion of the annual base rental payment based on their ownership percentages less contributed equity. The percentage share of base rental payments for the Enterprises is as follows: Water (71.4%), Wastewater (18.9%), and Power (9.7%). The future annual debt service relating to the certificates of participation 2009 Series C and D outstanding as of June 30, 2022 are as follow:

Fiscal years ending June 30: Principal Interest Total
2023 $ — 2,045 2,045
2024 — 2,045 2,045
2025 585 2,030 2,615
2026 620 2,000 2,620
2027 650 1,969 2,619
2028-2032 3,765 9,308 13,073
2033-2037 4,755 8,363 13,118
2038-2042 5,945 7,295 13,240
2043-2047 9,900 5,920 15,820
2048-2052 23,500 2,426 25,926
49,720 43,401 93,121
Add: Unamortized bond premium 10,370
Long-term portion as of June 30, 2022 $ 60,090
H etchy P ower - P ower R evenue B onds 2 021 S eries B Fiscal years ending June 30: Principal Interest Total
2023 $ 425 10 435
Less: Current portion (425)
Add: Unamortized bond premium 2
Less: Current portion (2)
Long-term portion as of June 30, 2022 $ —
H etchy Power - C ertificates o f P articipation 2 009 S eries C (Tax E xempt)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
60 (Continued) * The SFPUC received an IRS notice dated June 2, 2022 that the federal interest subsidy is reduced by 5.7% or a total reduction of $191 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
(h)
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, significant events of default as specified in the Power Enterprise Indenture (applicable to Power Revenue Bonds and energy bonds) and the Equipment Lease/Purchase Agreement include 1) non-payment, 2) material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods) and 3) 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, 2022 and 2021, there were no such events described herein.
(
8) Revenue Pledge
Hetchy Power has pledged future power revenues to repay the 2008 CREBs, the 2011 QECBs, the 2012 NCREBs, and the 2015 NCREBs. Additionally, Hetchy Power has pledged future power revenues for 2015 Series AB and 2021 Series AB power revenue bonds. Proceeds from the bonds provided financing for various capital construction and facility energy efficiency projects. 2015 Series AB and 2021 Series AB power revenue bonds are payable through fiscal year 2046 and 2052, respectively, and are solely payable from net revenues of Hetchy Power on a senior lien basis to the 2008 CREBs, the 2011 QECBs, the 2012 NCREBs, and the 2015 NCREBs.

The original amount of bonds issued, total principal and interest remaining, principal and interest paid during fiscal years 2022 and 2021, applicable net revenues, and funds available for debt service are as follows:
*Per Indenture, debt service for coverage is calculated using the amount of principal and interest paid during the year for the 2015 Series AB and 2021 Series AB power revenue bonds net of capitali zed interest if any, which have a senior lien on power enterpri se revenues; principal and interest paid during the year for the 2015 Series AB and 2021 Series AB power revenue bonds was $2,565, net of capitalized interest.

Interest Federal Interest
before i nterest net o f
Fiscal years ending June 30: Principal subsidy subsidy* subsidy 2023 $ — 812 (268) 544
2024 445 798 (263) 535
2025 463 769 (254) 515
2026 483 739 (244) 495
2027 503 709 (234) 475
2028-2032 2,852 3,020 (997) 2,023
2033-2037 3,514 1,995 (658) 1,337
2038-2042 4,333 727 (240) 487
9,569 (3,158) 6,411
Long-term portion as of June 30, 2022 $ 12,593
H etchy P ower - C ertificates o f P articipation 2 009 S eries D ( Taxable B ABs) Hetchy P ower 2022 2021
Bonds issued with revenue pledge $
Principal and interest remaining due at the end of the year Principal and interest paid during the year*
Net revenues for the year ended June 30
Funds available for debt service

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
61 (Continued) (9) Leases
Hetch Hetchy has entered into long-term leases for office space and other equipment. The terms and conditions for theses leases varies, which ranges between 1 to 75 years.

A summary of intangible right-to-use leases during the years ended June 30, 2022 and 2021 are as follows:
2021 Increases Decreases Remeasurements 2022
Hetch H etchy
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, net $
Hetch Water
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, net $
Hetch Power
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, net $
CleanPowerSF
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, net $

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
62 (Continued) A summary of changes in the related lease liabilities during the years ended June 30, 2022 and 2021 are as follows:
2020 Increases Decreases Remeasurements 2021
Hetch H etchy
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, ne t $
Hetch W ater
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, ne t $
Hetch P ower
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, ne t $
CleanPowerSF
Right-to-use assets: Building/facility equipment $
Total lease assets
Less accumulated amortization for:

Building/facility equipment
Total accumulated amortization
Total lease assets, ne t $
Beginning End o f D ue w ithin
Fiscal y ears of y ear Deductions year one y ear
Hetch H etchy
749$ (380) 369 238 1,126 (377) 749 380 Hetchy W ater
78$ (16) 62 3 93 (15) 78 16 Hetchy P ower
94$ (19) 75 3 113 (19) 94 19 CleanPowerSF
577$ (345) 232 232 920 (343) 577 345 2021
2022
2021
2022
2021
2022
2021
2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
63 (Continued) Future annual lease payments as of the years ended June 30, 2022 and 2021 are as follows:

Hetchy W ater
Fiscal years ending June 30: Principal Interest Total
2023 $ 3 1 4
2024 3 1 4
2025 3 1 4
2026 3 1 4
2027 3 1 4
2028-2032 17 4 21
2033-2037 18 3 21
2038-2042 12 1 13
62 13 75
Less: Current portion (3)
Long-term portion as of June 30, 2022 $ 59
Hetchy Power
Fiscal years ending June 30: Principal Interest Total
2023 $ 3 2 5
2024 4 2 6
2025 4 1 5
2026 4 1 5
2027 4 1 5
2028-2032 20 5 25
2033-2037 23 3 26
2038-2042 13 1 14
75 16 91
Less: Current portion (3)
Long-term portion as of June 30, 2022 $ 72
CleanPowerSF
Fiscal years ending June 30: Principal Interest Total
2023 $ 232 1 233
Less: Current portion (232)
Long-term portion as of June 30, 2022 $
Hetchy W ater
Fiscal years ending June 30: Principal Interest Total
2022 $ 16 2 18
2023 3 1 4
2024 3 1 4
2025 3 1 4
2026 3 1 4
2027-2031 16 5 21
2032-2036 18 3 21
2037-2041 16 1 17
78 15 93
Less: Current portion (16)
Long-term portion as of June 30, 2021 $ 62

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
64 (Continued) – Variable lease payments, other than those payments that depend on an index or rate or are fixed in substance, are excluded from the measurement of the lease liability. Such amounts are recognized as lease expenses in the period in which the obligation for those payments is incurred.

Certain equipment or facility rental leases require Hetch Hetchy to make variable lease payments that based on usage, related to the property taxes levied on the lessor, and insurance payments made by the lessor; these amounts are generally determined annually. As of June 30, 2022, the amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $45 for Hetch Hetchy, of which $1 for Hetchy Water, $1 for Hetchy Power and $43 for CleanPowerSF. As of June 30, 2021, the amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $24 for CleanPowerSF and $0 for Hetchy Water and Hetchy Power.
(
10) Other Non-Operating Revenues – Transbay Cable Construction and Licensing Fees In 2007, the Board of Supervisors adopted the resolution to enter into two non-exclusive licenses with the Transbay Cable LLC (the Licensee) for the Transbay Cable Project. The Licensee proposed to install, operate, and maintain approximately 53 miles of high-voltage direct current transmission cable running from the City of Pittsburg to the City. The first license was a Construction License to install a 400 MW high-voltage transmission line, with a four-year term. The Licensee paid Hetchy Power $3,500 in Renewable Energy, Transmission and Grid Reliability. The Construction licensing fees were fully spent as of 2020.

The second license is an operational license for operation of the transmission line with 25-year term and an option to renew for 10 years. The Licensee agrees to pay Hetchy Power in excess of $20,000 in 10 separate installments of $2,000 annually with adjustments for inflation, as the “San Francisco Electric Reliability Payment” to implement, advance, promote, or enhance policies and projects consistent with City Energy Policies. The project came on line November 29, 2010 and cumulative revenues of $22,708 were recorded, with final payment of $2,574 received in fiscal year 2020. Per Hetchy P ower
Fiscal years ending June 30: Principal Interest Total
2022 $ 19 2 21
2023 3 2 5
2024 4 2 6
2025 4 1 5
2026 4 1 5
2027-2031 20 6 26
2032-2036 22 3 25
2037-2041 18 1 19
94 18 112
Less: Current portion (19)
Long-term portion as of June 30, 2021 $ 75
CleanPowerSF
Fiscal years ending June 30: Principal Interest Total
2022 $ 345 5 350
2023 232 1 233
577 6 583
Less: Current portion (345)
Long-term portion as of June 30, 2021 $ 232

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
65 (Continued) agreement, the SFPUC shall consult with Departments of Environment and Public Health, as well as community members, including the Power Plant Task Force, in developing its proposals to the Board of Supervisors on how to spend the San Francisco Electricity Reliability Payment, and shall consider specifically renewable energy, conservation, and environmental health programs, which benefit low- income, at-risk, and environmentally disadvantaged communities. The San Francisco Electricity Reliability Payment shall also be partly used for green jobs training and placement programs, which benefit low-income, at-risk, and environmentally disadvantaged communities. As of June 30, 2022, cumulative expenses of $11,136 have been incurr ed, with $1,525 and $1,254 in fiscal years 2022 and 2021, respectively.
(
11) Employee Benefits
(a)
– Hetch Hetchy participates in a cost-sharing multiple-employer defined benefit pension Plan (SFERS Plan). The SFERS Plan is administered by the San Francisco City and County Employees’ Retirement System (SFERS). For purposes of measuring the net pension liability, deferred outflows/inflows of resources related to pensions, pension expense, information about the fiduciary net position of the SFERS Plan, and additions to/deductions from the SFERS Plan’s fiduciary net position have been determined on the same basis as they are reported by the SFERS Plan. Contributions are recognized in the period in which they are due pursuant to legal requirements. Benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

GASB Statement No. 68 requires that the SFERS Plan reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:
– The City is an employer of the plan with a proportionate share of 94.64% as of June 30, 2021 (measurement date), 0.25% increased from prior year, and 94.39% as of June 30, 2020 (measurement date). Hetch Hetchy’s allocation percentage was determined based on its employer contributions divided by the City’s total employer contributions for fiscal years 2021 and 2020. Hetch Hetchy’s net pension liability, deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/inflows, and pension expense is based on its allocated percentage. Hetch Hetchy’s allocation of the City’s proportionate share was 1.33%, of which 0.57% for Hetchy Water, 0.69% for Hetchy Power, and 0.07% for CleanPowerSF as of June 30, 2021 (measurement date). Hetch Hetchy’s allocation of the City’s proportionate share was 1.22%, of which 0.52% for Hetchy Water, 0.64% for Hetchy Power, and 0.06% for CleanPowerSF as of June 30, 2020 (measurement date).
– The Plan provides basic 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 Plan also provides pension continuation benefits to qualified survivors. The City Charter and the Administrative Code are the authorities which establish and amend the benefit provisions and employer obligations of the Plan. The Retirement System issues a publicly available financial report that includes financial Fiscal Y ear 2 022 Fiscal Y ear 2 021
Valuation Date (VD) June 30, 2020 updated to June 30, 2021 June 30, 2019 updated to June 30, 2020 Measurement Date (MD) June 30, 2021 June 30, 2020
Measurement Period (MP) July 1, 2020 to June 30, 2021 July 1, 2019 to June 30, 2020

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
66 (Continued) statements and required supplementary information for the Plan. That report may be obtained on the Retirement System’s website or by writing to the San Francisco Employees’ Retirement System, 1145 Market Street, 5
th Floor, San Francisco, CA 94103 or by calling (415) 487-7000. – The Retirement System provides service retirement, disability and death benefits based on specified percentages of defined final average monthly salary and annual COLA after retirement. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. 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 Plan members are:
a) Miscellaneous Non-Safety Members – staff, operational, supervisory, and all other eligible employees who are not in special membership categories. b) Sheriff’s Department and Miscellaneous Safety members – sheriffs assuming office on and after January 7, 2012, and undersheriffs, deputized personnel of the Sheriff’s department, and miscellaneous safety employees hired on and after January 7, 2012. c) 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.
d) 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 included in the Notes to the Basic Financial Statements of San Francisco Employees’ Retirement System.

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.

All retired members receive a benefit adjustment each July 1, which is the Basic COLA. The majority of adjustments are determined by changes in Consumer Price Index with increases capped at 2%. The Plan provides for a Supplemental COLA in years when there are sufficient “excess” investment earnings in 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, members who retired before November 6, 1996 will receive a Supplemental COLA only when the Plan is also fully funded on a market value of assets basis. However, the “full funding” requirement does not 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 where 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.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
67 (Continued) – Contributions are made by both the City and the participating employees.

Employee contributions are mandatory as required by the Charter. Employee contribution rates varied from 7.5% to 13.0% as a percentage of gross covered salary in fiscal years 2021 and 2020. 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, 2020 actuarial report, the required employer contribution rate for fiscal year 2022 range from 19.91% to 24.41%. Based on the July 1, 2019 actuarial report, the required employer contribution rate for fiscal year 2021 range from 22.40% to 26.90%.

Employer contributions and employee contributions made by the employer to the Plan are recognized when due and the employer has made a formal commitment to provide the contributions. The City’s proportionate share of employer contributions recognized by the Retirement System in fiscal years ended June 30, 2021 and 2020 (measurement years) were $791,736 and $701,307, respectively. Hetch Hetc hy’s allocation of employer contributions were $9,644, of which $4,130 for Hetchy Water, $5,048 for Hetchy Power, and $466 for CleanPowerSF for fiscal year 2021 (measurement period). Hetch Hetchy’s allocation of employer contributions were $8,243, of which $3,574 for Hetchy Water, $4,369 for Hetchy Power, and $300 for CleanPowerSF for fiscal year 2020 (measurement period).

For the year ended June 30, 2022, the City’s actuarial determined contribution was $729,578.

Hetch Hetchy’s share was $9,766, of which $4,149 for Hetchy Water, $5,071 for Hetchy Power, and $546 for CleanPowerSF for fiscal year 2022 and will be recognized as a reduction of the net pension liability in the subsequent fiscal period.

Fiscal Year 2022
As of June 30, 2022, the City reported net pension assets (NPA) for its proportionate share of the net pension asset of the SFERS Plan of $2,446,564. The City’s net pension asset for the Plan is measured as the proportionate share of the net pension asset. The net pension asset of the SFERS Plan is measured as of June 30, 2021 (measurement date), and the total pension (asset)/liability for the SFERS Plan used to calculate the net pension (asset)/liability was determined by an actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using standard update procedures. The City’s proportion of the net pension (asset)/liability for the SFERS Plan was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributi ons of all participating employers, actuarially determined. Hetch Hetchy’s allocation of the City’s proportionate share of the net pension (asset)/liability for the SFERS Plan as of June 30, 2022 was ($32,749), of which ($13,912) for Hetchy Water, ($17,004) for Hetchy Power, and ($1,833) for CleanPowerSF.

For the year ended June 30, 2022, the City’s recognized pension (benefit) was ($922,979), which includes Retirement Benefit Plan pension expense of $28,735. Hetch Hetchy’s allocation of pension (benefit) including amortization of deferred outflows/inflows related pension items were ($4,058), of which ($1,816) for Hetchy Water, ($2,220) for Hetchy Power, and ($22) for CleanPowerSF. Pension (benefit) increased from the prior year, largely due to the amortization of deferrals.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
68 (Continued) At June 30, 2022, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions from the following source:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be a m or t i zed ann u al l y a n d r e co g n iz ed i n p en s i on expense as follows:

Fiscal Year 2021
As of June 30, 2021, the City reported net pension liabilities (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $5,107,270. The City’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the SFERS Plan is measured as of June 30, 2020 (measurement date), and the total pension liability for the SFERS Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. Hetch Hetchy’s allocation of the City’s proportionate share of the net pension liability for the SFERS Plan as of June 30, 2021 was $62,219, of which $26,645 for Hetchy Water, $32,566 for Hetchy Power, and $3,008 for CleanPowerSF.

For the year ended June 30, 2021, the City’s recognized pension expense was $962,576 (which includes Retirement Benefit Plan pension expense of $25,243), including amortization of deferred outflows/inflows related pension items. Hetch Hetchy’s allocation of pension expense including amortization of deferred outflows/inflows related pension items were $14,883, of which $6,103 for Hetchy Water, $7,459 for Hetchy Power, and $1,321 for CleanPowerSF.

Pension expense increased from the prior year, largely due to the amortization of deferrals.

Fiscal H etchy H etchy
years Water Power CleanPowerSF Total
2023 $ (8,033) (9,817) (1,407) (19,257 )
2024 (7,470) (9,130) (1,278) (17,878)
2025 (7,679) (9,386) (1,194) (18,259)
2026 (8,748) (10,693) (1,229) (20,670 )
$ (31,930) (39,026) (5,108) (76,064)

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
69 (Continued) At June 30, 2021, Hetch Hetchy’s reported deferred outflows of resources and deferred inflows of resources related to pensions were the following:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be a m or t i zed ann u al l y a n d r e co g n iz ed i n p en s i on expense as follows:

Fiscal H etchy H etchy
years Water Power CleanPowerSF Total
2022 $ (115) (141) (472) (728)
2023 665 812 (195) 1,282 2024 1,160 1,418 (90) 2,488 2025 971 1,187 1 2,159 $2 , 6 8 1 3,276 (756) 5,201

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
70 (Continued) Fiscal Year 2022
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for SFERS Plan as of June 30, 2021 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2020 actuarial valuation. Refer to the July 1, 2020 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org.

Mortality rates for health Miscellaneous members were based upon adjusted PubG-2010 Employee and Retiree tables for non-annuitants and retirees, respectively. Mortality rates were then projected generationally from the base year using the MP-2019 projection scale.

The actuarial assumptions used at the June 30, 2021 measurement date was based upon the result of a demographic experience study for the period July 1, 2014 through June 30, 2019 and an economic experience study as of July 1, 2020.

Key Actuarial Assumptions
Valuation Date June 30, 2020 updated to June 30, 2021
Measurement Date June 30, 2021
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.40% net of investment expenses Municipal Bond Yield 2.21% as of June 30, 2020

2.16% as of June 30, 2021
Bond Buyer 20-Bond GO Index, June 25, 2020 and June 24, 2021 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based on employee classification and years of service Discount Rate 7.40% as of June 30, 2020

7.40% as of June 30, 2021
Administrative Expenses 0.60% of payroll as of June 30, 2020

0.60% of payroll as of June 30, 2021
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire,
Charters A8.595
and A8.596
Old Police & Fire,
Charters A8.559
and A8.585
June 30, 2020 2.00% 2.50% 3.10% 4.20%
June 30, 2021 2.00% 1.90% 2.50% 3.60%
SFERS Plan

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
71 (Continued) Fiscal Year 2021
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for SFERS Plan as of June 30, 2020 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2019 actuarial valuation. Refer to the July 1, 2019 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org. For healthy annuitants, the sex distinct 2009 CalPERS healthy annuitant mortality table, adjusted 1.014 for females and 0.909 for males. For active members, the sex distinct 2009 CalPERS employee mortality tables, adjusted 0.918 for females and 0.948 for males. Rates are projected generationally from the 2009 base year using a modified version of the MP-2015 projection scale.

The actuarial assumptions used at the June 30, 2020 measurement date was based upon the result of a demographic experience study for the period July 1, 2009 through June 30, 2014 and an economic experience study as of July 1, 2019.

Fiscal Year 2022
– The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of June 30, 2021 (measurement date) and June 30, 2020 (measurement date).

The discount rate used to measure the Total Pension Liability as of June 30, 2021 was 7.40%.

The projection of cash flows used to determine the discount rate assumed that plan member c o n t r i b u t i o n s w i l l c o n t i n u e t o b e m a d e a t t h e r a t e s s p e c i f i e d i n t h e C h a r t e r . E m p l o y e r contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 2020 actuarial valuation. That policy includes contributions equal to the employer portion

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
72 (Continued) of the entry age normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

The amortization payment is based on closed periods that vary in length depending on the s o u r c e . C h a r t e r a m e n d m e n t s p r i o r t o J u l y 1 , 2 0 1 4 a r e a m o r t i z e d o v e r 2 0 y e a r s . A f t e r J u l y 1 , 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member 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. The full amortization payment for the 2015 assumption changes is phased in over a period of 5 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 3.25% 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 actuarial liability in the funding 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 1997 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 for certain members, an assumption was developed as of June 30, 2021 for the probability and amount of Supplemental COLA for each future year. A full Supplemental COLA will be paid to all retired members, and their beneficiaries, who were retired effective July 1, 2021. The table below shows the net assumed Supplemental COLA 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.

Assumed S upplemental C OLA f or M embers w ith a 2 .00% B asic C OLA Fiscal y ears
2023 0.75 % 0.70 %
2025 0.75 0.70
2027 0.75 0.60
2029 0.75 0.60
2031 0.75 0.60
2033+ 0.75 0.50
96 - Prop C
Before 1 1/6/96
or A fter Prop C

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
73 (Continued) Based on these assumptions, the Retirement System’s fiduciary net position was projected to be available to make projected future benefit payments for current members for all future years.

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 2.16% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2021 is 7.40%.

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.

F
iscal Year 2021
– The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of June 30, 2020 (measurement date) and June 30, 2019 (measurement date).

The discount rate used to measure the Total Pension Liability as of the June 30, 2020 was

7.40%. The projection of cash flows used to determine the discount rate assumed that plan member 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. That policy includes contributions equal to the employer portion of the entry age, normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

The amortization payment is based on closed periods that vary in length depending on the s o u r c e . C h a r t e r a m e n d m e n t s p r i o r t o J u l y 1 , 2 0 1 4 a r e a m o r t i z e d o v e r 2 0 y e a r s . A f t e r J u l y 1 , 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member 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. The full amortization payment for the 2015 assumption changes is phased in over a period of 5 years.

Asset C lass
Target
Allocation
Long-Term Expected Real
Rate o f R eturn
Global Equity 37.0 % 4.2 % Private Equity 23.0 7.9
Private Credit 10.0 5.1
Real Assets 10.0 5.1
Hedge Funds/Absolute Returns 10.0 2.9
Treasuries 8.0 0.0
Liquid Credit 5.0 2.3
Leverage (3.0) 0.1
Total 100.0

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
74 (Continued) 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 actuarial liability in the funding 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 1997 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 for certain members, an assumption was developed as of June 30, 2020 for the probability and amount of Supplemental COLA for each future year. There were no excess earnings during the fiscal year ending June 30, 2020; consequently, no Supplemental COLA will be paid effective July 1, 2020.

The table below shows the net assumed Supplemental COLA 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.

Based on these assumptions, the Retirement System’s fiduciary net position was projected to be available to make projected future benefit payments for current members for all future years.

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%.

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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
75 (Continued) 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.

The following presents Hetch Hetchy’s allocation of the employer’s proportionate share of the net pension liability/asset for the SFERS Plan, calculated using the discount rate, as well as what Hetch Hetchy’s allocation of the employer’s proportionate share of the net pension (asset)/liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.
(
b)
Hetch Hetchy participates in a single-employer defined benefit other post-employment plan (the Plan). The Plan is maintained by the City and is administered through the City’s Health Service System. It provides post-employment 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. The City does not issue a separate report on its other post- employment benefit plan.

Hetchy H etchy
F iscal Y ear 2 0 22 Water Power CleanPowerSF Total
$9 , 2 7 2 11,333 1,221 21,826 (13,912) (17,004) (1,833) (32,749)
(33,053) (40,398) (4,354) (77,805)
Hetchy H etchy
F iscal Y ear 2 0 21 Water Power CleanPowerSF Total
$ 47,111 57,580 5,318 110,009
26,645 32,566 3,008 62,219
9,736 11,899 1,099 22,734
1% Decrease Share of NPL @ 6.40%
Share of NPA @ 7.40%
1% Increase Share of NPA @ 8.40%
1% Decrease Share of NPL @ 6.40%
Share of NPL @ 7.40%
1% Increase Share of NPL @ 8.40%

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
76 (Continued) 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.

Hetch Hetchy’s proportionate share percentage of the Plan was determined based on its percentage of citywide “pay-as-you-go” contributions for the years ended June 30, 2021 and June 30, 2020. Hetch Hetchy’s net OPEB liability, deferred outflows/inflows of resources related to OPEB, amortization of deferred outflows/inflows and OPEB expense to each department is based on its allocated percentage. Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.92%, of which 0.39% for Hetchy Water, 0.47% for Hetchy Power, and 0.06% for CleanPowerSF as of June 30, 2021 (measurement date). Hetch Hetchy’s proportionate share of the City’s OPEB elements was 0.92%, of which 0.38% for Hetchy Water, 0.46% for Hetchy Power, and 0.08% for CleanPowerSF as of June 30, 2020 (measurement date).

Permanent full-time and elected employees are eligible to retire and receive post-retirement health insurance benefits when they are eligible for retirement benefits from the City and County of San Francisco’s Retirement System. 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 Retirement2 Any age with 10 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.
2 No service requirement for Safety members retiring under the in dustrial disability benefit or for surviving spouses/domestic partners of those killed in the line of duty.

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 United Healthcare 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.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
77 (Continued) Benefits provided under the Plan are currently paid through “pay-as-you-go” funding.

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 Retiree Health Care Trust Fund (Trust Fund) a percentage of compensation not to exceed 2% of pre-tax compensation. The City shall contribute 1% of compensation for officers and employees who commenced employment on or after January 10, 2009 until the City’s GASB Actuary has determined that the City’s portion of the Trust Fund is fully funded. At that time, the City’s 1% contribution 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 Trust Fund.

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 shall contribute

0.25% of compensation into the Trust Fund for each officer and employee who commenced employment on or before January 9, 2009. Beginning on July 1 st of each subsequent year, the C i t y s h a l l c o n t r i b u t e a n a d d i t i o n a l 0 . 2 5 % o f c o m p e n s a t i o n , u p t o a m a x i m u m o f 1 % f o r e a c h officer and employee who commenced employment on or before January 9, 2009. When the City’s Actuary has determined that the City’s portion of the Trust Fund is fully funded, the City’s 1% contribution shall cease, and officers and employees will each contribute 50% of the maximum 1% of pre-tax compensation. Additional or existing contribution requirements may be established or modified by amendment to the City’s Charter.

F
iscal Year 2022
For the fiscal year ended June 30, 2022, the City’s funding was based on “pay as you go” plus a contribution of $41,841 to the Retiree Healthcare Trust Fund. The “pay as you go” portion paid by the City was $211,025 for a total contribution of $252,866 for the fiscal year ended June 30, 2022. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 2022 were $2,322: $975 for Hetchy Water, $1,192 for Hetchy Power, and $155 for CleanPowerSF for fiscal year 2022 and will be recognized as a reduction of the net OPEB liability in the subsequent fiscal period.

F
iscal Year 2021
For the fiscal year ended June 30, 2021, the City’s funding was based on “pay-as-you-go” plus a contribution of $39,555 to the Retiree Healthcare Trust Fund. The “pay-as-you-go” portion paid by the City was $206,439 for a total contribution of $245,994 for the fiscal year ended June 30, 2021. Hetch Hetchy’s proportionate share of the City’s contributions for fiscal year 2021 were $2,252: $929 for Hetchy Water, $1,136 for Hetchy Power, and $187 for CleanPowerSF.

Fiscal Year 2022
As of June 30, 2022, the City reported net OPEB liabilities related to the Plan of $3,691,122.

Hetch Hetchy’s proportionate share of the City’s net OPEB liability as of June 30, 2022 was $33,909: $14,240 for Hetchy Water, $17,405 for Hetchy Power, and $2,264 for CleanPowerSF.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
78 (Continued) For the year ended June 30, 2022, the City ’s recognized OPEB expense was $272,001.

Amortization of the City’s deferred outflows and inflows is included as a component of OPEB expense. Hetch Hetchy’s proportionate share of the City’s OPEB expense was $3,002: $1,874 for Hetchy Water and $2,291 for Hetchy Power, offset by a decrease of $1,163 expense for CleanPowerSF.

As of June 30, 2022, Hetch Hetchy reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in OPEB expense as follows:

F
iscal Year 2021
As of June 30, 2021, the City reported net OPEB liabilities related to the Plan of $3,823,334.

Hetch Hetchy’s proportionate share of the City’s net OPEB liability as of June 30, 2021 was $35,006: $14,444 for Hetchy Water, $17,653 for Hetchy Power, and $2,909 for CleanPowerSF.

For the year ended June 30, 2021, the City ’s recognized OPEB expense was $320,684.

Amortization of the City’s deferred outflows and inflows is included as a component of OPEB expense. Hetch Hetchy’s proportionate share of the City’s reduction of OPEB expense was $1,859: $1,480 for Hetchy Water and $1,809 for Hetchy Power, offset by an increase of $1,430 expense for CleanPowerSF.

Fiscal H etchy H etchy
years Water Power CleanPowerSF Total
2023 $ (105) (128) (264) (497) 2024 (106) (130) (264) (500) 2025 (103) (125) (264) (492) 2026 46 57 (167) (64) 2027 (43) (53) (59) (155) Thereafter (126) (156) 67 (215) Total $ (437) (535) (951) ( 1,923) Deferred Outflows/(Inflows) o f R esources

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
79 (Continued) As of June 30, 2021, Hetch Hetchy reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in OPEB expense as follows:

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
80 (Continued) Fiscal Year 2022
A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2021 (measurement date) is provided below:

The mortality rates in the base tables are projected generationally from the base year using the MP-2019 projection scale.

Key Actuarial Assumptions
Valuation Date June 30, 2020, updated to June 30, 2021
Measurement Date June 30, 2021
Actuarial 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 6.74% trending down to ultimate rate of 4.04% in 2075 Medicare trend starts at 7.24% trending down to ultimate rate of 4.04% in 2075 10-County average trend starts at 5.50% 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%
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 M ale Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0.979
Healthy Retirees
Published Table M ale Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1.044
Disabled Retirees
Published Table M ale Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0.995
Beneficiaries
Published Table M ale Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0.977
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 F actor
Adjustment F actor
Adjustment F actor
Adjustment F actor

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
81 (Continued) Fiscal Year 2021
A summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, 2020 (measurement year) is provided below:

The mortality rates in the base tables are projected generationally from the base year using the MP-2019 projection scale.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
82 (Continued) The following presents Hetch Hetchy’s proportionate share of the City’s net OPEB liability calculated using the healthcare cost trend rate, as well as what its allocation of the City’s net OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1% lower or 1% higher than the current rate as of June 30, 2022 and June 30, 2021:

Fiscal Year 2022
Th e di s co u nt rat e us ed t o me a sure th e T ot al O P E B Li a b i li t y as o f J u n e 3 0 , 2 0 21 w a s 7 . 0 0% .

Based on the assumption that plan member contributions will continue to be made at the rates specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on 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 7.00% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation.

Hetchy H etchy
Water Power CleanPowerSF 2022
1% Decrease $ 12,121 14,814 28,862
Healthcare Trend 14,240 17,405 33,909
1% Increase 16,882 20,634 40,201
Hetchy H etchy
Water Power CleanPowerSF 2021
1% Decrease $ 12,488 15,264 30,267
Healthcare Trend 14,444 17,653 35,006
1% Increase 16,992 20,767 41,181

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
83 (Continued) Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

The following presents Hetch Hetchy’s proportionate share of the City’s net OPEB liability calculated using the discount rate, as well as what Hetch Hetchy’s proportionate share of the City’s net OPEB liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate:

F
iscal Year 2021
The discount rate used to measure the total OPEB liability as of June 30, 2020 was 7.00%.

Based on the assumption that plan member contributions will continue to be made at the rates specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on 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 7.00% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation.

Hetchy H etchy
Water Power C leanPowerSF Total
1% Decrease 6.00% $ 16,652 20,352 39,652
Discount Rate 7.00% 14,240 17,405 33,909
1% Increase 8.00% 12,271 14,997 29,219

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
84 (Continued) Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

The asset allocation targets summarized above have a 20-year return estimate of 6.90%, which was weighted against a 10-year model estimating a 6.93% return, resulting in the ultimate long- term expected rate of return of 7.00%.

The following presents Hetch Hetchy’s proportionate share of the City’s net OPEB liability calculated using the discount rate, as well as what Hetch Hetchy’s proportionate share of the City’s net OPEB liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate:

The City issues a publicly available financial report that includes the complete note disclosures and required supplementary information related to the City’s post-employment health care obligations. The report may be obtained by writing to the City and County of San Francisco, Office of the Controller, 1 Dr. Carlton B. Goodlett Place, Room 316, San Francisco, California 94102, or by calling (415) 554-7500.

Hetchy H etchy
Water Power CleanPowerSF Total
1% Decrease 6.00% $ 16,761 20,486 40,623
Discount Rate 7.00% 14,444 17,653 35,006
1% Increase 8.00% 12,551 15,341 30,420

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
85 (Continued) (12) Related Parties
(a)
Various common costs incurred by the SFPUC are allocated among Hetch Hetchy, Water, and Wastewater Enterprises. The allocations are based on the SFPUC management’s best estimate and may change from year to year depending on the activities incurred by each Enterprise and the information available. For the years ended June 30, 2022 and 2021, the SFPUC allocated $22,221 or 20.7% and $20,099 or 20.5% respectively, in administrative costs including COVID- 19 Project expenses, which is presented in the financial statements under various expense categories. These costs are then allocated to Hetchy Water, Hetchy Power, and CleanPowerSF in the Hetch Hetchy financial statements, using the periodically reviewed department overhead allocation model.

The City performs certain administrative services such as maintenance of accounting records and investment of cash for all fund groups within the City. The various funds are charged for these services based on the City’s indirect cost allocation plan. Some City departments provide direct services such as engineering, purchasing, legal, data processing, telecommunication, and human resources to Hetch Hetchy and charge amounts designed to recover those departments’ costs. These charges totaling approximately $13,003 and $12,582 for the years ended June 30, 2022 and 2021, respectively, have been included in services provided by other departments in the accompanying financial statements.

SFPUC’s 75-year lease agreement with the San Francisco Recreation and Parks Department, for the use of parking spaces for its fleet of vehicles at the Civic Center Garage, commenced on February 1, 2011. Total payment under this agreement is $6,274, which was fully made as of fiscal year 2015. The expenses and prepayments among the three SFPUC Enterprises are based on 525 Golden Gate occupancy. As of June 30, 2022, Hetch Hetchy’s allocable shares of expenses and prepayment were $18 and $904, re spectively, and as of June 30, 2021 were $17 and $922, respectively.
(
b)
For the years ended June 30, 2022 and 2021, the SFPUC allocated $10,886 or 10.2%, and $4,585 or 4.7%, respectively, in administrative costs including COVID-19 Project expense to Hetchy Water.

The Water Enterprise purchases water from Hetchy Water. Included in the operating revenues are the water assessment fees of $45,815 and $44,149 for the years ended June 30, 2022 and 2021, respectively. The water assessment fees represent a recovery to fund upcountry, water-related costs that are not otherwise funded through Hetchy water-related revenue or Water revenue bonds.

Hetchy Water received $30,001 and $16,000 for the years ended June 30, 2022 and 2021, respectively, from the Water Enterprise to fund upcountry projects. (
c)
For the years ended June 30, 2022 and 2021, the SFPUC allocated $8,820 or 8.2%, and $13,202 or 13.5% respectively, in administrative costs including COVID-19 Project expense to Hetchy Power.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
86 (Continued) As of June 30, 2022, and 2021, operating revenues in sales of power to departments within the City were $116,334 and $82,129, respectively.

The Water Enterprise also purchases electricity and gas from Hetchy Power. This amount totaled $11,394 and $9,790 for the years ended June 30, 2022 and 2021, respectively.

The Wastewater Enterprise purchases electricity and gas from Hetchy Power. This amount totaled $11,887 and $10,122 for the years ended June 30, 2022 and 2021, respectively.

The Low Carbon Fuel Standard (LCFS) program is a regulatory program overseen by the California Air Resources Board (CARB). The LCFS program seeks to reduce the carbon intensity of California’s transportation fuel by 20% by 2030. Transportation fuel suppliers can achieve this goal by either reducing the carbon intensity of their fuels or purchasing LCFS credits from other fuel suppliers that have a lower carbon intensity. In 2017, the San Francisco Municipal Transportation Agency (SFMTA) joined the LCFS pr ogram, signing up its transit fleet of electric buses, cable cars, and light rail vehicles and generating LCFS credits. Through a Memorandum of Understanding (MOU) with SFMTA, approved by the SFPUC Commission in Resolution 17- 0199, net proceeds from the sale of LCFS credits would be shared 50/50 between SFMTA and Hetchy Power. Under the MOU, Hetchy Power would take responsibility for selling the LCFS credits. In Ordinance 0199-19, the Board of Supervisors authorized Hetchy Power to establish the Low Carbon Fuel Standard Fund to account for the revenue and expenditure from the sale of LCFS credits. The Ordinance also allowed Hetchy Power to sell LCFS credits on behalf of other City agencies. As of June 30, 2022 and 2021, Hetchy Power received total payments of $2,367 and $2,362, respectively, 50% ($1,184 in fiscal year 2022 and $1,181 in fiscal year 2021) was reallocated to SFMTA and the remaining portion was reported as other non-operating revenues on the Statements of Revenues, Expenses, and Change in Net Position.

Due from other City departments was $11,804 and $12,406 for the years ended June 30, 2022 and 2021, respectively. Hetchy Power serves as the City’s department for energy efficiency projects and maintains the Sustainable Energy Account (SEA) (formerly known as the Mayor’s Energy Conservation Account) fund to sponsor and financially support such projects at various City departments. In this role, Hetchy Power may secure low-interest financing to supplement funds available in the SEA fund. At June 30, 2022 and 2021, projects completed or under way throughout the City amounted to $4,050 and $4,556, respectively, and are recorded as due from other government agencies.

Hetch Hetchy funded a project for the Treasure Island Development Authority and recorded a r ec ei v abl e i n c o nn e ct i on w i t h an upg r a de d s u b ma ri ne p ower cabl e f or t he Tr ea sur e I sl a n d a s due from other government agencies. This amount totaled $6,666 and $6,627 for the years ended June 30, 2022 and 2021, respectively.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
87 (Continued) As of June 30, 2022 and 2021, Hetchy Power recorded receivables of $629 and $739, respectively, due from Wastewater Enterprise for its share of costs relating to SFPUC Headquarters Living Machine System. Details of due from other City departments are as follows:

As of June 30, 2022, Hetchy Power had payables in the amount of $380, of which $369 to the Port of San Francisco for Pier 70 Shoreside Power Project and $11 to the Department of Public Works for painting of light poles. As of June 30, 2021, Hetchy Power had payables of $369 to the Port of San Francisco for Pier 70 Shoreside Power Project. (
d)
For the years ended June 30, 2022 and 2021, the SFPUC allocated $2,515 or 2.4%, and $2,312 or 2.4%, respectively, in administrative costs to CleanPowerSF.

As of June 30, 2022, and 2021, operating revenue in sales of power to Hetchy Power were $2,332 and $1,072, respectively. Operating expenses in purchase of power from Hetchy Power were $1,589 and $2,456, respectively. Wholes ale sales of energy, capacity and/or other electric power related products may be made between the CleanPowerSF and Hetchy Power, when available. CleanPowerSF and Hetchy Power transact for such products at prevailing market prices.

CleanPowerSF received program support services from Hetchy Power. This amount totaled $1,861 and $2,224 for the years ended June 30, 2022 and 2021, respectively. (
13) Risk Management
The Enterprise’s Risk Management program includ es both self-insured (i.e., self-retention) and insured exposures at risk. Risk assessments and purchasing of insurance coverage are collaboratively coordinated by SFPUC Enterprise Risk Management and the City’s Office of Risk Management. With certain exceptions, the City and the Enterprise’s general approach is to first evaluate the exposure at risk for self-insurance. Based on this analysis, internal mitigation strategies and financing through a self-retention mechanism are generally more economical, as the SFPUC in coordination with the City Attorney’s Office administers, adjusts, settles, defends, and pays claims from budgeted resources (i.e., pay-as-you-go fund). When economically more viable or when required by debt financing covenants, the Enterprise obtains commercial insurance. At least annually, the City actuarially determines general liability and workers’ compensation risk exposures. The Enterprise does not maintain commercial earthquake coverage, with certain minor exceptions, such as a sub-limit for fire- sprinkler leakage due to earthquake under the SFPU C Property Insurance Program. In the past three years, there was no settlements that exceeded insurance coverage. 2022 2021
Treasure Island Development Authority $ 6,666 6,627
SEA-related project: Moscone Center 4,050 4,556
Wastewater - 525 Golden Gate Headquarters Project 629 739 San Francisco Recreation and Park 314 419
Department of Public Works 145 65
Total due from other City departments 11,804 12,406
Less: current portion (867) (7,413 )
Long-term portion as of June 30, net $ 10,937 4,993

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
88 (Continued) (a)
Through coordination with the Controller’s Office and City Attorney’s Office, the general liability risk exposure is actuarially determined and is addressed through pay-as-you-go funding as part of the budgetary process. Associated costs and estimates are recorded as expenses as required under GAAP for financial statement purposes for both the Enterprise and the City and County of San Francisco’s Annual Comprehensive Financial Report. The claim expense allocations are determined based on actuarially determined anticipated claim payments and the projected timing of disbursement.

The changes for the general liability (damage claims) for the years ended June 30, 2022 and 2021 are as follows:
(
b)
The City actuarially determines and allocates workers’ compensation costs to the Enterprise according to a formula based on the following: (i) the dollar amount of claims; (ii) yearly projections of payments based on historical experience; and (iii) the size of the Enterprise’s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent years. The City continues to develop and implement improved programs, such as return-to-work programs, to lower or mitigate the growth of workers’ compensation costs. Programs include accident prevention, investigation, and duty modification for injured employees with medical restrictions so return to work can occur as soon as possible.
(a) General Liability Self-Insured
(b) Workers' Compensation Self-Insured Through City-wide Pool (c) Property Purchased Insurance and Self-Insured
(d) Public Officials Liability Purchased Insurance
(e) Employment Practices Liability Purchased Insurance
(f) Cyber Liability Purchased Insurance
(g) Crime Purchased Insurance
(h) Electronic Data Processing Purchased Insurance and Self-Insured (i) Surety Bonds Purchased and Contractual Risk Transfer (j) Errors and Omissions Purchased and Contractual Risk Transfer (k) Builders' Risk Contractual Risk Transfer
Risk C overage A pproach
Beginning Claims a nd c hanges Claims End o f
Fiscal y ears of y ear i n e stimates paid year
Hetch H etchy
1,639$ (3,797) 1,682
2,886 (6,090) 1,639
Hetchy W ater
525$ (151) 627
558 (511) 525
Hetchy P ower
1,108$ (2,090) 1,023
2,222 (5,326) 1,108
CleanPowerSF
6$ (1,556) 32
106 (253) 62021
2022
2022
2022
2022
2021
2021
2021

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
89 (Continued) The changes for the workers’ compensation liabilities for the years ended June 30, 2022 and 2021 are as follows:
*CleanPowerSF had no workers’ compensation liabilities as of June 30, 2022 and 2021. (c)
The Enterprise’s property risk management approach varies depending on whether the facility is currently under construction, the property is part of revenue-generating operations, the property is of high value, or is mission-critical in nature . During the course of construction, the Enterprise requires each contractor to provide its own insurance, while ensuring the full scope of work is covered with satisfactory levels to limit the Enterprise’s risk exposure. Once construction is complete, the Enterprise performs an assessment to determine whether liability/loss coverage will be obtained through the commercial property policy or self-insurance. The majority of property scheduled in the insurance program is for (1) revenue generating facilities, (2) debt- financed facilities, (3) mandated coverage to meet statutory requirements for bonding of various public officials, or (4) high-value, mission-critical property or equipment. (
d)
All Enterprise public officials with financial oversight responsibilities are provided coverage through a commercial Public Officials Liability Policy. (
e)
An Employment Practices Liability Policy is retained to protect against employment-related claims and liabilities.
(
f)
A Cyber Liability Policy is retained to protect against cyber-related claims and liabilities. (g)
The Enterprise also retains a Commercial Crime Policy, in lieu of bonding its employees, to provide coverage against liabilities or losses due to third-party crime or employee fraud. (
h)
The Electronic Data Processing policy protects selected high-value electronic property in case of damage or loss.

Beginning Claims a nd c hanges Claims End o f
Fiscal y ears of y ear in e stimates paid year
Hetch H etchy
3,238$ (315) 3,478
3,387 (262) 3,238
Hetchy W ater
1,120$ (125) 1,228
1,187 (85) 1,120
Hetchy P ower
2,118$ (190) 2,250
2,200 (177) 2,1182021
2022
2021
2022
2021
2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
90 (Continued) (i)
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.
(
j)
Errors and omissions, also known as Profession al Liability, are commonly transferred through contract to the contracted professional, or retained through self insurance on a case-by-case basis depending on the size, complexity, or scope of construction or professional service contracts. Examples of such contracts are inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers. (
k)
Builders’ Risk policies of insurance are required to be provided by the contractor on all construction projects for the full value of construction. (
l)
Similar to other electric utilities with a heavy reliance on hydroelectric generation, Hetch Hetchy is exposed to risks that could impact its ability to generate net revenues to fund operating and capital investment activities. Hydroelectric generation facilities in the Sierra Nevada are the primary source of electricity for Hetch Hetchy. For this reason, the Hetch Hetchy revenues can vary with watershed hydrology, unexpected generator outages, and market prices for energy.

Given the inherent risk for all hydroelectric generation, several risk management interventions have been developed to mitigate exposure.
(
m)
The Power Enterprise adopted the ISO 31000 standard for Hetchy Power and the CleanPowerSF program as the framework for implementing Enterprise Risk Management (ERM). The Enterprise utilizes this framework to systematically and proactively identify and mitigate risks that threatens its business objectives. Since not all risks are insurable or transferable contractually, the ERM program provides an additional method to manage risks and protect the Enterprise’s current and expanding business allowing for increased operational resiliency and the ability to capitalize on opportunities.
(
14) Commitments and Litigation
(a)
As of June 30, 2022 and 2021, Hetch Hetchy has outstanding commitments with third parties of $199,283 and $143,404, respectively, for various capital projects and other purchase agreements for materials and services.

Hetchy Water
To meet certain requirements of the Don Pedro Reservoir operating license, the City entered into an agreement with the Modesto Irrigation District (MID) and Turlock Irrigation District (TID) in which the Districts would be responsible for an increase in water flow releases from the reservoir in exchange for annual payments from the City, which are included in Hetchy Water’s

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
91 (Continued) operating expenses. The payment amounts were $5,129 and $5,069 for fiscal years 2022 and 2021, respectively. The payments are to be made for the duration of the license, but may be terminated with one year’s prior written notice after 2001. The City and the Districts have also agreed to monitor the fisheries in the lower Tuolumne River for the duration of the license. A maximum monitoring expense of $1,400 is to be shared between the City and the Districts over the term of the license. The City’s share of the monitoring costs is 52%, while the Districts are responsible for 48% of the costs.

H
etchy Power
Upon expiration of the City’s previous Interconnection Agreement with PG&E, the City began taking 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 continues to negotiate with PG&E and, where necessary, file 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 “network” grid in the center of San Francisco; have new secondary interconnections; and/or serve any small, typically unmetered loads, such as streetlights, DAS, traffic signals, 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 years 2022 and 2021, Hetchy Power purchased distribution services for $22,404 and $8,868, respectively, 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 PG&E’s electric grid in San Francisco.

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 years 2022 and 2021, Hetchy Power purchased $4,152 and $0 of power and other related products, respectively. Sales of excess po wer, after meeting Hetch Hetchy’s obligations, were $0 for 2022 and $469 or 110,043 MWh for 2021, respectively.

Hetchy Power (Buyer) purchases energy, capacity, and environmental attributes from a local solar photovoltaic project located at Sunset Reservoir (the facility) pursuant to the 2009 25-year 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.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
92 (Continued) The PPA sets the starting purchase price of generated energy at $235/MWh, increasing by 3% 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 2022, the facility generated 6,460 MWh and the rate was at $334/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 e n e r g y b u t g e n e r a t i o n i n e x c e s s o f 1 2 0 % o f e x p e c t e d i s p u r c h a s e d a t n o c o s t . T h e P P A a l s o 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 years 2022 and 2021, purchases of energy under the Agreement were $2,225, or 6,460 MWh, and $2,127, or 6,598 MWh, respectively.

Hetchy Power and CleanPowerSF participate in the California Independent System Operator (CAISO) energy markets which requires the SFPUC to have a contract with a certified Scheduling Coordinator (SC). In June 2022, CleanPowerSF renewed a 5-year contract with APX, Inc with contract amount not to exceed $134,743 to fulfill this requirement. APX, Inc provides a number of services including but not limited to an interface with the CAISO’s energy scheduling portal, manage invoice payments to the CAISO and communications between the CAISO and the SFPUC, and dispatch of the Hetch Hetchy plant 24 hours a day, seven days a week. The contract a l so p rov i d es th at A P X, I n c w il l ac t a s t he S C f or r en ew ab le g e n er ati o n p l a nt s u n der so me o f CleanPowerSF’s Power Purchase Agreements. Hetchy Power’s share was $456 and $472 as of June 30, 2022 and 2021, respectively. CleanPowerSF’s share was $192 as of June 30, 2022 and 2021.

C
leanPowerSF
CleanPowerSF has added multiple additional short-term and medium-term contracts with multiple counterparties pursuant to master agreements, including the WSPP Master Agreement, to purchase renewable, carbon-free and conventional energy and resource adequacy capacity.

CleanPowerSF has also entered into long-term contracts for renewable energy and capacity with renewable energy developers including sPower, Terra-Gen, NextEra and EDF Renewables. These contracts have been entered to allow CleanPowerSF to meet its existing retail sales obligations, to support future retail sales from citywide enrollment into the CleanPowerSF program, and to comply with state law requiring that 65% of CleanPowerSF’s RPS compliance targets be fulfilled by RPS-eligible electricity from contracts of 1 0 o r m o r e y e a r s . C i t y w i d e e n r o l l m e n t w a s substantively completed with the enrollment of residential accounts in April 2019. Since it began serving customers in 2016, CleanPowerSF’s cumulative opt-out rate is 4.3% of all enrolled accounts. The total power purchase cost, net of wholesale sales, equaled $238,149 and $188,533 in fiscal years 2022 and 2021, respectively.

CleanPowerSF contracts with Calpine Energy Solutions to provide meter data management, billing and customer care support. Calpine is responsible for calculating and providing CleanPowerSF charges to Pacific Gas & Electric (PG&E), which in turn bills both CleanPowerSF and PG&E customers for electricity transmission, distribution, and CleanPowerSF generation services. PG&E remits payments received from customers for CleanPowerSF charges to the City.

During fiscal years 2022 and 2021, amounts paid were $4,730 and $6,664, respectively.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
93 (Continued) In November 2021, CleanPowerSF amended an existing Renewable Power Purchase Agreement with Blythe Solar IV, LLC (seller) to purcha se a storage product from the solar powered generation facility located in Blythe, California pursuant to the 20-year PPA. Under the revised agreement, the project in Blythe, California, will add batteries to the operating 62-MW solar photovoltaic power plant. The contract, including the new battery component, is for $196,399 over 20 years.

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, 2022 and 2021, CleanPowerSF received cash collateral of $9,000 for Development Assurance and Performance Assurance from the Seller.

In March 2018, CleanPowerSF entered into a five-year, $75,000 Credit Agreement with JPMorgan Chase Bank, National Association (“Bank”) to provide letters of credit or loans from the Bank to guarantee certain power purchase agreement payment obligations of CleanPowerSF and to meet working capital needs, if necessary. In November 2021 the Credit Agreement was decreased (at the request of CleanPowerSF) the available amount from $75,000 to $20,000, and the stated term of the agreement was extended to March 2024.

Additional changes to the agreement effected by the November 2021 Amendments include elimination of target reserve requirements, revisions to debt service coverage (allowing for a liquidity test two times in the aggregate for any consecutive four quarters) and rate-setting covenants, changes to ongoing reporting requirements to the Bank, and changes to events of default, including the addition of an event of default if CleanPowerSF’s long-term unenhanced credit rating is downgraded below investment grade or suspended, withdrawn or otherwise unavailable. In May 2022 CleanPowerSF executed another amendment to its Credit Agreement to eliminate and change certain financial covenants contained in the 2018 Credit Agreement.

Specifically, this Amendment eliminated the covenant of the Commission to maintain a specified debt service coverage ratio and changed such financial covenant to commit the Commission to maintain a specified level of Day Liquidity on Hand (as defined in the Credit Agreement). The Credit Agreement is secured by CleanPowerSF’s net revenues; there is no pledge of, or lien on net revenues that ranks senior to the obligations under the Credit Agreement. The Bank issued letters of credit in the face amounts totaling $5,847 and $13,810 for fiscal years ending June 30, 2022 and 2021, respectively. CleanPowerSF did not draw on the Credit Agreement during fiscal years 2022 and 2021. Accordingly, the uncommitted credit capacity under the Credit Agreement was $14,153 and $61,190 during fiscal years 2022 and 2021, respectively.

Original 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. CleanPowerSF was in compliance with other covenants and requirements of the

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
94 (Continued) Credit Agreement as of June 30, 2021. CleanPowerSF was in compliance with all covenants and requirements of the Credit Agreement as amended as of June 30, 2022.

GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, requires the disclosure of certain information related to debt, including unused letters of credit. Significant events of default under the Credit Agreement, include 1) non-payment, 2) material breach of warranty, representation, or other non-remedied breach of covenants as specified in the agreement and 3) bankruptcy and insolvency events, which could result in all outstanding loans under the Credit Agreement to be immediately due and payable; or the immediate termination of the Bank’s commitment to issue letters of credit or make loans under the Credit Agreement.

G
reen Tariff and Community Solar Green Tariff Programs for Disadvantaged Communities In June 2018. the California Public Utilities Commission (CPUC) established the Disadvantaged Communities-Green Tariff (DAC-GT) and Community Solar Green Tariff (CSGT) program to address barriers to solar adoption faced by low-income electric customers in neglected communities. The DAC-GT program provides a 20% rate discount on 100% Renewable Portfolio Standard (RPS) eligible electricity service to income-qualified customers residing in Disadvantaged Communities (DACs) as defined by the California Environmental Protection Agency’s (Cal EPA). Similar to DAC-GT, the CSGT program allows primarily for the DACs to benefit from the development of solar generation projects located in their own or nearby DACs. CSGT projects must also have a local community-based sponsor that supports site selection and customer enrollment.

The CPUC approved CleanPowerSF’s application to establish DAC-GT and CSGT programs in April 2021 and to receive funds to cover program administration and a portion of electricity supply costs. CleanPowerSF began enrolling customers in the DAC-GT program branded as “SuperGreen Saver” on June 1, 2022. The CSGT program is expected to start serving customers during fiscal year 2025, once CleanPowerSF is able to procure electricity from a CSGT-eligible solar project(s). As of June 30, 2022, CleanPowerSF received $1,150 from a combination of ratepayer funds and California Cap and Trade Auction proceeds. (
b)
Hetch Hetchy is a defendant in various legal ac tions and claims that arise during the normal course of business. The final disposition of these legal actions and claims is not determinable.

However, in the opinion of management, the outcome of any litigation of these matters will not have a material effect on the financial position or changes in net position of Hetch Hetchy. (
c)
Grants that the Enterprise received are subject to audit and final acceptance by the granting agency. Current and prior year costs of such grants are subject to adjustment upon audit. (
d)
As of June 30, 2022, and 2021, there was no pollution remediation liability recorded.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
95 (15) Subsequent Event
(a)
On September 13, 2022, the Commission approved to extend moratorium on shutoff of electric service for Hetchy Power residential retail customers in the City through June 30, 2023 and granted the General Manager discretion to restart severance and liens processes to multi-family residential accounts carrying balances greater than $25 which are 90 days or more past due. In addition, the temporary suspension of the return of delinquent residential CleanPowerSF customers to PG&E has also been extended through June 30, 2023.

Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
The Honorable Mayor and Board of Supervisors
City and County of San Francisco: We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business-type activities and each major fund of Hetch Hetchy Water and Power and Clean Power (Hetch Hetchy), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Hetch Hetchy basic financial statements, and have issued our
report thereon dated January 27, 2023.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Hetch Hetchy internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Hetch Hetchy internal control. Accordingly, we do not express an opinion on the effectiveness of Hetch Hetchy internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in inancial
statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether Hetch Hetchy financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

KPMG LLP
Suite 1400
55 Second Street
San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Hetch Hetchy internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

San Francisco, California
January 27, 2023
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SAN FRANCISCO WASTEWATER ENTERPRISE
Table of Contents
P age
1 3
Basic Financial Statements:

Statements of Net Position 19
Statements of Revenues, Expenses, and Changes in Net Position 20 Statements of Cash Flows 21
Notes to Financial Statements 23
Independent Auditors
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 75
Independent Auditors Report
The Honorable Mayor and Board of Supervisors
City and County of San Francisco:

Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the San Francisco Wastewater Enterprise (the Enterprise), as of and for the years ended June 30, 2022 and 2021, and the related notes to the financial statements, which collectively comprise the Enterprise
c financial statements for the years then ended as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Enterprise, as of June 30, 2022 and 2021, and the changes in its financial position and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors
Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Enterprise and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter
As discussed in Note 1, the financial statements of the Enterprise are intended to present the financial position, the changes in financial position, and, where applicable, cash flows of only that portion of the business-type activities and each major fund of the City and county of San Francisco, California that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City and County of San Francisco, California, as of June 30, 2022 and 2021, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors
Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement
opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS andGovernment Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from

KPMG LLP
Suite 1400
55 Second Street
San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 2 fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS andGovernment Auditing Standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Enterprise
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Required Supplementary Information
U.S. generally accepted accounting principles require that the management s discussion and analysis be
presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management
s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2023 on our consideration of the Enterprise
with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Enterprise internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Enterprise reporting and compliance.

San Francisco, California
January 27, 2023

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
3 (Continued)
This section
financial condition and activities as of and for the fiscal years ended June 30, 2022 and 2021. financial statements. This information should be read in conjunction with the audited financial statements that follow this section. All dollar amounts, unless otherwise noted, are expressed in thousands of dollars.

The information in this MDA is presented under the following headings:

Organization and Business
Overview of the Financial Statements
COVID-19
Financial Analysis
Capital Assets
Debt Administration
Rates and Charges
Request for Information
Organization and Business
The San Francisco Public Utilities Commission (SFPUC or the Commission) is a department of the City and County of San Francisco (the City) that is responsible for the maintenance, operation, and development of three utility enterprises: Water, Hetch Hetchy Water and Power and CleanPowerSF, and Wastewater (the Enterprise). The primary responsibility of the Enterprise is to protect the public health and the surrounding bay and ocean receiving waters by collecting, transmitting, treating, and discharging storm and sanitary flows generated in the service area. This includes 1,131 miles of combined, sanitary, and storm collection system pipes including: gravity mains, force mains, culverts, transport storage boxes, and tunnels. San Francisco is the only coastal city in California with a combined sewer system that collects both wastewater and stormwater in the same network of pipes and provides treatment to remove harmful pollutants before discharging into the San Francisco Bay and Pacific Ocean. In addition, the 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 Enterprise recovers costs of service through user fees based on the volume and strength of sanitary flow. As of June 30, 2022, the Enterprise serves 148,381 residential accounts, which discharge about 15.7 million units of sanitary flow per year (measured in hundreds of cubic feet, or ccf) and 26,790 non-residential accounts, which discharge about 5.3 million ccf per year. These reflected an increase of 0.7 million discharge units in non-residential accounts due to 360 increase in the number of accounts and a decrease of 0.9 million discharge units in residential accounts compared to prior year.

O
verview of the Financial Statements
lowing:

Statements of Net Position
deferred inflows as of year-end, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Enterprise is improving or worsening.

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
4 (Continued)
While the Statements of Net Position provide information about the nature and amount of resources and obligations at year-end, the Statements of Revenues, Expenses, and Changes in Net Position present the position changed during the year. These statements can be used as an indicator of the extent to which the Enterprise has successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in these statements from some items that will result in cash flows in future fiscal periods, such as delayed collection of operating revenues and the expenses of employee earned but unused vacation leave.

The Statements of Cash Flows present changes in cash and cash equivalents resulting from operational, capital financing, non-capital financing, and investing activities. These statements summarize the annual flow of cash receipts and cash payments, without consideration of the timing of the event giving rise to the obligation or receipt and exclude non-cash accounting measures of depreciation or amortization of assets.

The Notes to Financial Statements provide information that is essential to a full understanding of the financial statements that is not displayed on the face of the financial statements.

C
OVID-19
On February 25, 2020, the Mayor issued a proclamation declaring a local emergency to exist in connection with the i -
-
o remain in their homes subject to certain
exceptions including obtaining essential goods such as food and necessary supplies , and requiring the closure of nonessential businesses. In addition, Section 2 of the second supplement to the emergency proclamation authorized the SFPUC to suspend the (a) discontinuation or shut off of water service for residents and businesses in the City for non-payment of water and sewer bills and (b) the imposition of late payment penalties or fees for delinquent water and/or sewer bills through July 11, 2020. The proclamation was extended on December 8, 2020 through June 30, 2021 and then again on April 27, 2021, through to March 31, 2022. The suspension was extended again to July 31, 2022 for shut off of water service and to June 30, 2023 for late payment penalties. This proclamation did not have a material effect on the operations of the Wastewater enterprise.

Financial Analysis
Financial Highlights for Fiscal Year 2022
Total assets of the Enterprise exceeded total liabilities by $1,447,672.

Net position increased by $60,114 or 4.6% during the year.

Capital assets, net of accumulated depreciation and amortization, increased by $439,601 or

12.2% to $4,046,451.

Operating revenues increased by $41,217 or 12.6% to $368,882.

Operating expenses decreased by $35,002 or 12.0% to $257,171.

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
5 (Continued)
Financial Highlights for Fiscal Year 2021
Total assets of the Enterprise exceeded total liabilities by $1,266,577.

Net position increased by $9,647 or 0.7% during the year.

Capital assets, net of accumulated depreciation and amortization, increased by $544,562 or

17.8% to $3,606,850.

Operating revenues decreased by $16,463 or 4.8% to $327,665.

Operating expenses increased by $29,961 or 11.4% to $292,220.

Financial Position

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
6 (Continued)
Net Position, Fiscal Year 2022
For the year ended June 30, 2022
liabilities and deferred inflows of resources by $1,362,662. increased by $60,114 or 4.6% as a result of increases of $114,657 in restricted for capital projects, $104,142 in unrestricted net position, and $2,399 in restricted for debt service offset by a decrease of $161,084 in net investment in capital assets (see Table 1).

During the fiscal year 2022, current and other assets increased by $267,657 or 74.2%. The increase was mainly due to $182,040 in receivables from the State Water Resources Control Board (SWRCB) attributed to $202,795 aggregate new State Revolving Fund (SRF) reimbursement requests consisting of $132,000 for the Southeast Water Pollution Control Plant (SEP) Biosolids Digester Project, $64,678 for the SEP New Headworks (Grit) Replacement Project, and $6,117 for the Oceanside Plant (OSP) Digester Gas Utilization Upgrade Project, offset by $20,755 cash receipts from prior year receivables relating to the OSP Digester Gas Utilization Upgrade Project, an increase of $48,770 in net pension asset based on actuarial report and $32,650 increase in restricted and unrestricted cash and investments mainly from the issuance proceeds of tax-exempt 2021 Series AB (Green) revenue notes and 2021 Series AB revenue bonds. Other increases included $7,241 in receivables for charges for services mainly due to increased billings of $6,143, $1,098 decrease in allowance for doubtful accounts due to utility arrearage relief payment received from the State as Federal pass-through from the California Water and Wastewater Arrearages Payment Program (CWWAPP), $1,014 due from the Treasure Island Development Authority (TIDA) for capacity fees, $301 in inventory as there were more purchases than issuances during the year, $190 in capacity charges net of allowance for doubtful accounts, $118 in interest receivable, and $25 in State grant receivable for the Baker Beach reimbursement. These increases in current and other assets were offset by a decrease of $2,325 in lease assets, net of accumulated amortization, due to amortization, $1,763 in Federal interest subsidy receivable (attributed to $5,817 subsidy received offset by $4,054 subsidy accrual during the year), $324 decrease in rent receivable mainly due to $304 collection of prior year balance from the San Francisco Community College, $219 decrease in prepaid charges mainly due to $652 prior year prepaid expenses recognized in current year and $39 lease prepayments amortizations for the Civic Center Garage and the Mariposa Pump Station & Force, offset by $472 prepaid expenses in the current year, $56 decrease in interfund receivables and due from component unit consisting of $118 from the Department of Public Works (DPW) for the Mission Bay South and Hunters View Development Projects, $24 from the San Francisco Port Commission (Port), and $20 from component unit for the TIDA Replacement & Repair Project, offset by an increase of $106 in receivable from the Academy of Sciences and Office of Community Investment Infrastructure, and $5 decrease in custom work receivable.

Capital assets, net of accumulated depreciation and amortization, increased by $439,601 or 12.2% reflecting an increase in construction and capital improvement activities. The largest portion of the $1,092,705 or 80.2%, represents net investment in capital assets (see Capital Assets section of the MDA for more information). Deferred outflows of resources decreased by $7,119 mainly due to decreases in pensions and other post-employment benefits by $4,850 and $2,211, respectively based on actuarial report and $58 amortization of the 2013 Series A bonds loss on refunding.

Total liabilities increased by $526,128 or 19.5%. As of June 30, 2022, total debt outstanding balance of $2,988,713 for revenue bonds and notes payable, certificates of participation (COP), commercial paper, and State Revolving Fund (SRF) loans, represented 92.6% of total liabilities, an increase of $625,627 or

26.5%. The increase was mainly due to $373,700 issuance of 2021 Series AB revenue bonds, consisting of $297,880 par amounts and $75,820 premiums, $350,823 issuance of 2021 Series AB revenue notes

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
7 (Continued)
consisting of $347,465 par amounts and $3,358 premiums, $200,702 new SRF loans to finance the SEP Biosolids Digester Facilities, the SEP New Headworks Replacement, and the OSP Digester Gas Utilization Upgrade projects, and $80,639 issuance of commercial paper. These increases were offset by $340,000 retirement of commercial paper, $26,148 in debt principal repayments, $9,970 in premium amortization during the year, and $4,000 loan principal forgiveness for the SRF OSP Digester Gas Utilization Upgrade Project along with $119 unreimbursed loan claim. Other liabilities of $238,434 such as payables to vendors, contractors, and other government agencies for goods and services under contractual agreements and employees, decreased by $99,499 or 29.4%, mainly due to decreases of $103,746 in net pension liability based on actuarial report, $4,668 in general liability based on actuarial estimates, $2,314 in lease liability due to implementation of GASB 87 Leases, $1,588 in other post-employment benefits obligations based on actuarial report, and $110 in payable to Hetch Hetchy Power related to the 525 Golden Gate Living Machine System. These decreases were offset by increases of $7,229 in restricted and unrestricted payable due to increased vouchers, $4,184 in bond and loan interest payable due to higher outstanding debt principal, $792 in unearned revenues mainly due to $892 in customer credit balances mainly due to overpayments offset by decreases of $81 in deposits from Pacific Gas & Electric due to expenses incurred for the Cross Bore Project and $19 in liens payable, $462 in employee related benefits including vacation, , and 3.5% increase of cost of
living adjustment (COLA), and $260 in pollution remediation obligation. Deferred inflows of resources increased by $113,897 due to increases in pensions and other post-employment benefits by $112,522 and $1,375, respectively based on actuarial report.

N
et Position, Fiscal Year 2021
For the year ended June 30, 2021 resources exceeded
liabilities and deferred inflows of resources by $1,302,583. increased by $9,647 or 0.7% as a result of increases of $70,501 in net investment in capital assets and $1,765 in restricted for debt service offset by a decrease of $62,619 in unrestricted net position (see Table 1).

During the fiscal year 2021, current and other assets decreased by $118,831 or 25.1%. The decrease was mainly due to a decrease of $136,773 in restricted and unrestricted cash and investments largely attributed to increased spending for the Sewer System Improvement Program (SSIP) and debt principal and interest repayment. Other decreases included $666 in receivables for charges for services mainly due to $2,172 increase in allowance for doubtful accounts as there were more sewer charge receivables aging over 120 days attributable to the suspension of collection efforts in response to the COVID-19 emergency proclamation issued by the City Mayor. These decreases in current and other assets were offset by an increase of $17,490 in receivables from the State Water Resources Control Board (SWRCB) due to $20,755 in reimbursement receivable for disbursements claim relating to the Oceanside Plant (OSP) Digester Gas Utilization Upgrade Project offset by cash receipts of $3,265 in State Revolving Fund (SRF) reimbursement requests consisting of $2,041 for the Southeast Plant (SEP) 521/522 and Disinfection Upgrade and $1,224 for the Lake Merced Green Infrastructure projects. The other increases included $680 in prepaid charges, advances, and other receivable consisting of $546 prepayments to the San Francisco Estuary Institute, Bay Area Air Quality Management District, and Water Research Foundation, $290 in rent receivable mainly due a receivable from the San Francisco Community College, and $17 in custom work receivable offset by $173 prepaid expenses recognized to expense for the current year, $181 in inventory as there were more purchases than issuances during the year, $166 in restricted and unrestricted interest and other receivable mainly due to an increase in Federal interest subsidy receivable, and $91 increase in interfund receivables consisting of $47 from the Department of Public Works (DPW) for the Mission Bay

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
8 (Continued)
South and Hunters View Development Projects, $24 from the San Francisco Port Commission (Port), and $20 from the Treasure Island Development Authority (TIDA).

Capital assets, net of accumulated depreciation and amortization, increased by $544,562 or 17.8% reflecting an increase in construction and capital improvement activities. The largest portion of the of $1,253,789 or 96.3%, represents net investment in capital assets (see Capital Assets section of the MDA for more information). Deferred outflows of resources increased by $4,743 mainly due to $5,044 increase in other post-employment benefits based on actuarial report offset by $203 decrease in pensions based on actuarial report and $98 amortization of the 2013 Series A bonds loss on refunding.

Total liabilities increased by $432,491 or 19.1%. As of June 30, 2021, total outstanding balance of $2,363,086 for revenue bonds payable, commercial paper, certificates of participation, and SRF loans represented 87.7% of total liabilities, an increase of $418,006 or 21.5%. The increase was mainly due to $435,450 additional commercial paper issuance and $22,468 SRF loan to fund the OSP Digester Gas Utilization Upgrade, the SEP 521/522 and Disinfection Upgrade, and the Lake Merced Green Infrastructure projects offset by $31,316 in debt repayments and $8,596 in amortization of premium during the year.

Other liabilities of $331,976 such as payables to vendors, contractors, and other government agencies for goods and services under contractual agreements and employees, increased by $14,485 or 4.6%, due to increases of $17,511 in net pension liability based on actuarial report, $3,912 in employee related benefits including vacation, , and accrued payroll mainly due to actuarial estimates, 3% increase of cost of living adjustment (COLA), and more days in current year-end payroll accrual compared to prior year-end accrual, $822 in general liability based on actuarial estimates, $130 in customer credit balances mainly due to overpayments, and $26 in liens payable. These increases were offset by decreases of $7,472 in other post-employment benefits obligations based on actuarial report, $145 in bond and loan interest payable due to lower outstanding debt principal and lower interest rates , $135 in restricted and unrestricted payable due to higher voucher payments than vouchers generated, and $109 in payable to Hetch Hetchy Power due to payment for the 525 Golden Gate Living Machine System, $54 decrease in deposit from Pacific Gas & Electric due to expenses incurred for the Cross Bore Project, and $1 interfund . Deferred inflows of resources decreased by $11,664 due to $14,744 decrease in pensions based on actuarial report offset by $3,080 increase in other post-employment benefits based on actuarial report.

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
9 (Continued)
Results of Operations
Results of Operations, Fiscal Year 2022
$387,249, an increase of $55,860 or 16.9% from prior year (see Table 2). Charges for services increased by $37,805 or 11.9% mainly due to an average 8% adopted rate increase and a decrease in allowance for doubtful accounts by $1,098 as there were less sewer charge receivables aging over 120 days due to utility arrearage relief payments received from the State, offset by a sanitary flow decrease of 257,472 ccf or 1.2% from residential and non-residential customers. Other non- operating revenues increased by $20,543 mainly due to $9,302 utility arrearage relief payment received from the State as Federal pass-through from the CWWAPP, $8,000 SRF loan principal forgiveness component of the SEP Biosolids Digester Facilities Project and the OSP Digester Gas Handling Utilization Upgrade Project, $3,409 Baker Beach grant, and $4 gain from sale of assets offset by decreases of $164 in miscellaneous revenue due to less overhead recovery, redemption penalty and stormwater control plan review fees, and $8 in Federal interest subsidy. Other operating revenues increased by $3,349 or 38.1% mainly due to increases of $2,570 in capacity fees resulting from a 58.9% increase in average permit price and a 5.4% increase in permits issued
-
opening and eliminating local restrictions on business operations, and $779 in other operating revenues to other City departments such as the Recreation & Park, Academy of Sciences, and the San Francisco Table 2
Comparative C ondensed Revenues, Expenses, a nd C hanges in N et Position Years e nded J une 3 0, 2 022, 2 021, a nd 2 020
2 022
Restated
2021* 2020
2022-2021
Change
2021-2020
Change
Revenues:

Charges for services $ 356,041 318,236 331,721 37,805 (13,485) Rents and concessions 705 642 664 63 (22) Other operating revenues 12,136 8,787 11,743 3,349 (2,956) Interest and investment (loss) income (7,087) (1,187) 12,137 (5,900) (13,324) Other non-operating revenues 25,454 4,911 5,596 20,543 (685) Total revenues 387,249 331,389 361,861 55,860 (30,472) Expenses:

Operating expenses 257,171 292,173 262,259 (35,002) 29,914 Interest expenses 77,743 34,944 43,216 42,799 (8,272) Amortization of premium, refunding loss, and issuance cost (8,422) (8,497) (8,647) 75 150 Non-operating expenses 482 409 52 73 357 Total expenses 326,974 319,029 296,880 7,945 22,149 Change in net position before transfers 60,275 12,360 64,981 47,915 (52,621) Transfers from the City and County of San Francisco 1,440 280 (1,440) 1,160 Transfers to the City and County of San Francisco (161) (4,188) (1,468) 4,027 (2,720) Net transfers (161) (2,748) (1,188) 2,587 (1,560) Change in net position 60,114 9,612 63,793 50,502 (54,181) Net position at beginning of year as restated 1,302,548 1,292,936 1,229,143 9,612 63,793 Net position at end of year $ 1,362,662 1,302,548 1,292,936 60,114 9,612 *Restated due to the implementation of GASB 87 - Leases

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
10 (Continued)
General Hospital. Rents and concessions increased by $63 or 9.8% mainly due to increases in rental income of $34 from the Sheriff Department, $22 from tenants with 3.6% consumer price index average rate increase, and $7 from a short-term tenant, Young Community Developers. Interest and investment income decreased by $5,900 or 497.1% mainly due to $5,618 increase in unrealized loss in City Treasury pooled investments attributed to the decline in market value of investments and rising interest rates and $292 decrease in interest earned from pooled cash due to lower annualized interest rate offset by $10 increase in interest earned from fiscal agent account due to increase in fiscal agent cash balances.

Total expenses were $326,974, an increase of $7,945 or 2.5% due to increases of $42,799 in interest expenses mainly due to increased outstanding bond principal balance and the implementation of Governmental Accounting Standards Board (GASB) 89, Accounting for Interest Cost Incurred before the End of a Construction Period , which eliminated the capitalization of interest to capital assets beginning in fiscal year 2022, a decrease of $75 in amortization, refunding loss, and issuance cost, and $73 increase in City grants program expenses due to increased participation in the flood water management program for San Francisco properties offset by $35,002 decrease in operating expenses. The decrease of $35,002 in operating expenses was mainly due to decreases of $26,993 in personnel services due to $38,115 decrease in expenses related to GASB 68 pension adjustment offset by a 3.5% increase in cost of living adjustment (COLA) and $17,952 in general and administrative and other operating expenses mainly due to lower capital project expenses particularly for the Biosolids/Digester Project and Southeast Community Center Project, offset by increases of $3,232 in depreciation expense due to more capitalized assets put in service, $2,753 in materials and supplies mainly due to water sewage treatment supplies for Bayside Operations, $2,626 in contractual services mainly due to higher maintenance for building structures and professional and specialized services, and $1,332 in services provided by other departments mainly for electricity from Hetch Hetchy Power, water from Water Enterprise, and for facilities management services from the General Services Agency (GSA).

Net transfers of $161 included transfer out of $129 in art enrichment fund to the San Francisco Art Commission for the Westside Reliability Improvement and $32 to the Office of the City Administrator for the Surety Bond Program.

R
esults of Operations, Fiscal Year 2021
were $331,389 a decrease of $30,472 or 8.4% from prior year (see Table 2). Charges for services decreased by $13,485 or 4.1% mainly due to a sanitary flow decrease of 2,474,116 ccf or 10.2% from residential and non-residential customers and $2,172 increase in allowance for doubtful accounts as there were more sewer charge receivables aging over 120 days attributable to the suspension of collection efforts in response to the COVID-19 emergency proclamation issued by the City Mayor offset by an average 8% adopted rate increase. Interest and investment income decreased by $13,324 or 109.8% due to lower pooled and fiscal agent cash balances, and a lower annualized interest rate. Other operating revenues decreased by $2,956 or 25.2% mainly due to decreases of $2,186 in capacity fees resulting from a 25.2% decrease in average permit price and a 7.9% decrease in permits issued as only essential construction projects were allowed due to SF Health Order related to COVID-19 and $770 in other operating revenues to other City departments such as the Real Estate, Human Services Agency, and Academy of Sciences due to the COVID-19 shelter in place order. Other non-operating revenues decreased by $685 mainly due to decreases of $667 in miscellaneous revenue largely attributed to $642 receipts from California State Parks Foundation for a project at Yosemite Slough Site in prior year, $20 in gain from sale of assets, and $22 in Federal Emergency Management Agency (FEMA) grant relating to COVID-19 offset by $27 increase in federal interest subsidy. Rents and concessions decreased by $22 or

3.3% mainly due to the COVID-19 past due rent collection suspension as approved by the Commission.

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
11 (Continued)
Total expenses were $318,994, an increase of $22,114 or 7.4% due to increases of $29,961 in operating expenses, $357 in City grants program expenses as there were more expenses incurred for community- based organization services, and $150 decrease in amortization, refunding loss, and issuance cost due to $230 decrease in bond premium offset by decreases of $40 in issuance cost, and $40 in refunding loss amortization offset by a decrease of $8,354 in interest expenses due to lower interest rate compared to prior year and a decrease in outstanding bond principal balance. The increase of $29,961 in operating expenses was mainly due to increases of $20,866 in general and administrative and other operating expenses mainly due to higher capital project expenses related to the SSIP Biosolids Digester Project, $9,051 in depreciation expense due to more capitalized assets put in service, $1,004 in services provided by other departments mainly for Department of Public Works general administration and building repair services, General Services Agency (GSA) facilities management services, and City risk management services, and $100 in materials and supplies mainly due to water sewage treatment supplies for Bayside Operations. These increases were offset by a decrease of $564 in personnel services mainly due to $7,873 decrease in other post-employment benefits based on actuarial report offset by increases of $4,574 in expenses related to pension due to increase in retirement contribution rates, $2,051 in salaries and fringe benefits due to a 3% increase in cost of living adjustment (COLA claims. Other decrease included $496 in contractual services mainly due to lower professional and specialized services.

Net transfers of $2,748 included transfer out of $4,000 in art enrichment fund to the San Francisco Art Commission for the 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, offset by $1,440 transfer in from General Fund for the Sidewalk Garden Grants Project.

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
12 (Continued)
Capital Assets
Capital Assets, Fiscal Year 2022
The Enterprise has capital assets of $4,046,451, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2022 (see Table 3). This amount represents an increase of $439,601 or 12.2% from prior fiscal year. The investment in capital assets includes land, buildings, improvements, wastewater treatment plants, sewer pipes and mains, underground transport and storage boxes, pump stations, machinery, and equipment. Construction work in progress increased by $383,773 or 28.6%. Facilities, improvements, machinery, and equipment increased by $56,128 or 2.5%.

Intangible assets decreased by $300 or 4.1% due to $872 depreciation expense and $780 transfers out to non-capitalized repair and other expenses, offset by asset additions of $1,352 for the Customer Billing System Project.

Major additions to construction work in progress during the year ended June 30, 2022 include the following:

Table 3
Capital A ssets, N et o f Accumulated D epreciation a nd Amortization As o f J une 3 0, 2 022, 2 021, a nd 2 020
2022 2021 2020
2022-2021
Change
2021-2020
Change
Facilities, improvements, machinery, and equipment $ 2,270,355 2,214,227 2,104,332 56,128 109,895 Intangible assets 7,107 7,407 3,046 (300) 4,361 Land and rights-of-way 44,572 44,572 44,572 Construction work in progress 1,724,417 1,340,644 910,338 383,773 430,306 Total $ 4,046,451 3,606,850 3,062,288 439,601 544,562

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
13 (Continued)
Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2022 include the following:

See Note 4 for additional information about capital assets.

Sewer System Improvement Program
The Sewer System Improvement Program (SSIP) s wastewater capital improvement program which includes multiple projects to improve the existing wastewater system. The implementation of the SSIP projects and their associated expenditures will be phased over 20 years. In March 2016, the refined program scope and budget increased from $6.9 billion to $7.0 billion was endorsed by the Commission, , the Commission approved the 2020 SSIP
Baseline, increasing the budget for SSIP Phase 1 program to $3,655 million from $2,910.4 million in 2016.

The SFPUC is transitioning away from the original intent of three distinct SSIP phases and instead implementing capital improvement projects as part of a rolling Ten-Year capital plan.

As of June 30, 2022, 38 projects or 54.3% totaling $373 million were completed, 7 projects in pre- construction phase, 12 projects in construction phase, and 13 projects in close-out phase. The SEP 521/522 and Disinfection Upgrades Project was completed on June 30, 2021 with reported project expenditures of $44.8 million. The major components of the project are modifications to the existing SEP 521 building to include a new Effluent Sampling Station, new DCS Control Station, and upgrade to the existing bathroom for ADA compliance, new building (SEP 522) to house electrical and hydraulic controls, among others. The Southeast Water Pollution Control Plant New Headworks Facility is on-going construction. The project is reported at 47.0% completion and forecasted final completion is on February 29, 2024. Program expenditures as of June 30, 2022 totaled $1,943.8 million. Additional details regarding the SSIP are available at https://sfpuc.org/construction-contracts/sewer-system-improvement-program.

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
14 (Continued)
Capital Assets, Fiscal Year 2021
The Enterprise has capital assets of $3,606,850, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2021 (see Table 3). This amount represents an increase of $544,562 or 17.8% from prior fiscal year. The investment in capital assets includes land, buildings, improvements, wastewater treatment plants, sewer pipes and mains, underground transport and storage boxes, pump stations, machinery, and equipment. Construction work in progress increased by $430,306 or 47.3%. Facilities, improvements, machinery, and equipment increased by $109,895 or 5.2%, and intangible assets increased by $4,361 or 143.2% due to asset additions of $2,457 for the Operational Decision System Project and $1,904 for the Customer Billing System Project.

Major additions to construction work in progress during the year ended June 30, 2021 include the following:

Southeast Plant Biosolids and Digester Facilities Project $ 259,938 Southeast Plant New Headworks Grit Removal and Influent Pump Station 110,472 Southeast Community Cente r 47,373
Southeast Plant Power Feed and Primary Switchgear Upgrades 18,881 Mariposa Pump Station & Force Main 11,031
Oceanside Plant Digester Gas Handling Utilization 8,856 Seismic Reliability - Phase 1 7,647
Public Works Various Locations Number 35 Infrastructure Improvements 7,134 As-Needed Spot Sewer Replacement Number 40 7,101
Ocean Beach Project 6,727
Force Main Rehabilitation at Embarcadero and Jackson Streets 6,615 Facility-Wide Distributed Control System Upgrad
e 5,998
Van Ness Bus Rapid Transit Sewer Improvements 5,482
As-Needed Spot Sewer Replacement Number 38 4,972
Public Works Various Locations Number 40 Infrastructure Improvements 4,918 Southeast Plant 062 Archimedes Screw Pum p 4,697
Taraval Sewer Improvements 4,070
As-Needed Main Sewer Replacement Number 7 4,043
Other project additions individually below $4,000 93,864 $6 1 9 , 8 1 9

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
15 (Continued)
Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2021 include the following:

See Note 4 for additional information about capital assets.

Sewer System Improvement Program
The Sewer System Improvement Program (SSIP) includes three phases over 20 years to improve the existing wastewater system. In March 2016, the refined program scope and budget increased from $6.9 billion to $7.0 billion was endorsed by the Commission, which is now referred to as the 2016 SSIP Baseline program.

As of June 30, 2021, 37 projects or 52.9% totaling $367 million were completed, 8 projects in pre- construction phase, 18 projects in construction phase, and 7 projects in close-out phase. The OSP Condition Assessment Repairs was completed on January 29, 2021 with reported project expenditures of $11.6 million. The project includes planning, design, and environmental review of major improvements to the plant including rehabilitation of building structures, rehabilitation or replacement of mechanical and electrical equipment, and seismic retrofit of process tanks and buildings. Improvements 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 SEP Seismic Reliability and Condition Assessment Improvements Project is on-going construction. The project is reported at 86.0% completion and forecasted final completion is on March 8, 2022. Program expenditures as of June 30, 2021 totaled $1,546.1 million.

Additional details regarding the SSIP are available at https://sfpuc.org/construction-contracts/sewer- system-improvement-program.

Van Ness Bus Rapid Transit Sewer Improvements $2 0 , 6 6 5 Richmond Early Implementation Project 13,620
Geary Bus Rapid Transit Sewer Improvements 12,287
Public Works Lombard Street Infrastructure Improvement s 11,794 Southeast Plant 062 Archimedes Screw Pump 10,421
Taraval Sewer Improvements 10,397
Sunset Green Infrastructure 9,932
Public Works Various Locations Number 35 Infrastructure Improvements 8,722 As-Needed Spot Sewer Replacements Number 40 7,112
Public Works Various Locations Number 39 Infrastructure Improvements 6,493 Public Works Various Locations Number 36 Infrastructure Improvements 6,056 Public Works Various Locations Number 43 Infrastructure Improvements 6,023 As-Needed Spot Sewer Replacement Number 3 8 4,972
Public Works Alemany Blvd Infrastructure Improvements 4,956 Beach And Sansome Street Combined Sewer Distribution Rehabilitation 4,70 8 Public Works Second Street Infrastructure Improvement s 4,560 As-Needed Main Sewer Replacement Number 7 4,043
North Point Facility Dewatering Pump Replacement 3,725
Public Works Palou Avenue Infrastructure Improvements 3,514 Various Locations Sewer Replacements Number 7 3,429
Oceanside Plant Door Replacement 3,082
Other project additions individually below $3,000 25,763 $ 186,274

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
16 (Continued)
Debt Administration
As of June 30, 2022, 2021, and 2020 revenue notes,
commercial paper, certificates of participation, and State revolving fund loans were $2,988,713, $2,363,086, and $1,945,080, respectively, as shown in Table 4. More detailed information about the The increase of $625,627 was mainly due to $373,700 Revenue Bonds 2021 Series A (SSIP/Green) and 2021 Series B (Non-SSIP) net of premium, $350,823 Revenue (Green) Notes 2021 Series AB net of premium, $200,702 aggregate new State Revolving Fund loans for the Biosolids Digester, OSP Digester Gas Utilization Upgrade, and Headworks Replacement projects, and $80,639 issuance of commercial paper, offset by $340,000 retirement of commercial paper, $26,148 repayment of outstanding debt, $9,970 of premium amortizations, and $4,119 SRF OSP debt reduction for the $4,000 loan principal forgiveness component and $119 unreimbursed loan claim.

C
redit R atings a nd B ond I nsurance As of June 30, 2022 and 2021, the Enterprise carried underlying ratings of 2
Debt Service Coverage Pursuant to the Indenture for the Wastewater bonds, the Enterprise covenants to collect sufficient net revenues each fiscal year, together with any Enterprise funds (except Bond Reserve Funds) that are available for payment of debt service and are not budgeted to be expended, at least equal to 1.25 times annual debt service for said fiscal year. During fiscal years 2022 and 2021 net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rate covenant requirements under the Indenture (see Note 8).

Debt Authorization Pursuant to the Charter Section 8B.124, the Enterprise can incur indebtedness upon two-thirds vote of the Board of Supervisors. As of June 30, 2022, the Enterprise had $4,005,292 in combined debt issuance authorization from the Board of Supervisors under Proposition E, with $3,145,625 issued against this authorization. The Enterprise has a $750,000 authorized commercial paper program, with $379,157 in tax-exempt commercial paper outstanding as of June 30, 2022 and $638,518 in tax- exempt commercial paper outstanding as of June 30, 2021.

Cost o f D ebt C apital The coupon
from 1.0% to 5.8%, with a blended true interest cost of 2.9%, after factoring in federal interest subsidy receipts on Build America Bonds at June 30, 2022. The 2009 Series C certificates of participation carried coupon interest rates from 2.0% to 5.0% and 2009 Series D certificates of participation carried coupon interest rates from 6.4% to 6.5% in fiscal years 2022 and 2021, respectively. The interest rates on short-

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
17 (Continued)
term debt ranged from 0.1% to 1.4% during fiscal year 2022 and from 0.1% to 0.2% during fiscal year 2021. The State revolving fund loans (CWSRF loans) carried original interest rates ranging from 0.8% to

1.8% for a weighted average of 1.3% during fiscal year 2022. The State has elected to apply administrative service and grant charges to certain agreement repayment schedules in lieu of receiving interest payments; these charges will not affect the installment payments or increase the repayment amounts.

Rates and Charges
Rate Setting Process
Proposition E, as approved by the voters in November 2002, amended the City Charter by adding the new bonds and set wastewater rates. The Commission is required to:

Establish rates, fees, and charges based on cost of service; Retain an independent rate consultant to conduct cost of service studies at least every five years; Consider establishing new connection fees;
Consider conservation incentives and lifeline rates;
Adopt a rolling five-year forecast annually; and
Establish a Rate Fairness Board.

Pursuant to the City and County of San Francisco Charter section 8B.125, an independent rate study is performed at least once every five years. In compliance with City Charter section 8B.125, a water and wastewater rate study was completed in April 2018 and resulted in four-year wastewater rate increases from July 1, 2018 through June 30, 2022. The rates effective July 1, 2021 for fiscal year 2022 will remain unchanged for fiscal year 2023, which are effective July 1, 2022. These rates exclude those changed by the ncisco, as well as rates
adjusted by the 20-City Average Construction Index (CCI) published by Engineering News-Record (ENR) Magazine. The SFPUC Rates Schedules and Fees is available at https://sfpuc.org/accounts-services/water- power-and-sewer-rates.

The f -year approved average rate adjustments:

Effective D ate Adjustment
July 1, 2013 5.0 1
July 1, 2014 5.0 2
July 1, 2015 5.0 2
July 1, 2016 7.0 2
July 1, 2017 11.0 2
July 1, 2018 7.0 31 Four-year rate increases adopted and effective July 1, 2009.

July 1, 2019 7.0 32 Four-year rate increases adopted and effective July 1, 2014.

July 1, 2020 8.0 33 Four-year rate increases adopted and effective July 1, 2018.

July 1, 2021 8.0 34 No retail rate adjustment.

July 1, 2022 4
Ten-year A verage R ate A djustments

SAN FRANCISCO WASTEWATER ENTERPRISE
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
18 Request for Information
This report is designed to provide our citizens, customers, investors, and creditors with an overview of the Questions regarding any of the information provided in this report or requests for additional financial information should be addressed to San Francisco Public Utilities Commission, Chief Financial Officer, Financial Services, 525 Golden Gate Avenue, 13th Floor, San Francisco, CA 94102.

This report is available at https://sfpuc.org/about-us/reports/audited-financial-statements-reports.

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Net Position
June 30, 2022 and 2021
(In thousands)
19 SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Revenues, Expenses, and Changes in Net Position Years ended June 30, 2022 and 2021
(In thousands)
20 SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Cash Flows
Years ended June 30, 2022 and 2021
(In thousands)
21 (Continued)

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Cash Flows
Years ended June 30, 2022 and 2021
(In thousands)
22 Restated
2022 2021*
Reconciliation of operating income to net cash provided by operating activities:

Operating income $ 111,711 35,492
Adjustment to reconcile operating income to net cash
provided by operating activities:

Depreciation and amortization 77,575 74,343
Miscellaneous revenues 667 831
Provision for uncollectible accounts (781) 2,201 Write-off of capital assets 993 4,203
Receivables:

Charges for services (6,143) (1,506)
Prepaid charges, advances, and other 51 (716) Due from other City departments (901) 148
Inventory (301) (181)
Accounts payable 7,095 (4,762)
Accrued payroll 255 637
Other post-employment benefits obligations 1,998 (9,436) Pension obligations (35,144) 2,970
Accrued vacation and sick leave (757) 2,744 964 531
Pollution remediation obligation 260
Damage claims liability (4,668) 822
Unearned revenues, refunds, and other liabilities 792 102 Total adjustments 41,955 72,931
Net cash provided by operating activities $ 153,666 108,423 Noncash transactions:

Accrued capital asset costs $ 89,905 89,982
Interfund payable 629 739
Unrealized loss (gain) on investments 8,379 (228) * Restatement due to implementation of GASB 87 - Leases See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
23 (Continued)
(1) Description of Reporting Entity
The San Francisco Wastewater Enterprise (the Enterprise), formerly known as the San Francisco Clean Water Program (the Program), was established in 1977 following the transfer of all sewage system-related assets and liabilities of the City and County of San Francisco (the City) to the Program.

In 1976, the electorate of the City approved a proposition authorizing the City to issue $240,000 in revenue bonds pursuant to the Revenue Bond Law of 1941 of the State of California for the purpose of acquiring,
(Wastewater Resolutions) providing for the issuance of various sewer revenue and refunding bond series. The Wastewater Resolutions require the City to keep separate books of records and accounts of the Enterprise.

The Enterprise was placed under the jurisdiction of the San Francisco Public Utilities Commission (SFPUC or the Commission) in 1996. The Commission, established in 1932, is responsible for providing operational oversight of the public utility enterprises of the City, which includes the Enterprise along with and Power and CleanPowerSF, of which the
Power Enterprise is a component, and the San Francisco Water Enterprise). The Commission is responsible for determining such matters as the rates and charges for services, approval of contracts, and organizational policy.

Until August 1, 2008, the Commission consisted of five members, all appointed by the Mayor.

Proposition E, a City Charter SEC. 4.112 amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the Commission, changed the process for appointing new members, and set qualifications for all members. Under the amended Charter, the Mayor continues to nominate candidates to the Commission, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four-year terms for the Commission members and requires them to meet the following qualifications:

Seat 1 must have experience in environmental policy and an understanding of environmental justice issues.

Seat 2 must have experience in ratepayer or consumer advocacy.

Seat 3 must have experience in project finance.

Seat 4 must have expertise in water systems, power systems, or public utility management.

Seat 5 is an at-large member.

The SFPUC is a department of the City, and as such, the financial operations of the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF, and the Water Enterprises are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial statements are intended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2022 and 2021, the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
24 (Continued)
(2) Significant Accounting Policies
(a) Basis of Accounting and Measurement Focus
The accounts of the Enterprise are organized on the basis of a proprietary fund type, specifically an enterprise fund of the City. The activities of this Enterprise are accounted for with a separate set of self- ferred outflows, liabilities, deferred
inflows, net position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (
services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

The financial activities of the Enterprise are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with the U.S. GAAP. Under this method, all assets and liabilities associated with operations are included on the statements of net position; revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operating revenues are defined as charges to customers, rental income, and capacity fees.

The Enterprise applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
(
b) Cash and Cash Equivalents
The Enterprise considers its pooled deposits and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non-pooled cash and investments for the Enterprise. Non-pooled restricted deposits and restricted deposits and investments held outside the City Treasury with original maturities of three months or less are also considered to be cash equivalents. (c) Investments
Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based upon quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues. (
d) Inventory
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed.
(
e) Capital Assets
Capital assets are defined as assets with an initial individual cost of more than $5 and an estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an independent professional appraisal, or at cost, if known. All subsequent acquisitions have been recorded at cost.

All donated capital assets are valued at estimated fair value at the time of donation. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
25 (Continued)
assets, which range from 1 to 100 years for equipment and 1 to 200 years for building, structures, and improvements. No depreciation or amortization is recorded in the year of acquisition, and depreciation or amortization is recorded in the year of disposal. (f) Intangible Assets
Under GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets , intangible assets are defined as identifiable, non-financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights-of-way easements, land use rights, water rights, licenses, and permits. The accounting pronouncement also provides guidance on the capitalization of internally generated intangible assets, such as the development and installation of computer software by or on behalf of the reporting entity.

According to the standard, the Enterprise is required to capitalize intangible assets with a useful life extending beyond one reporting period. The Enterprise has established a capitalization threshold of $100. GASB Statement No. 51 also requires amortization of intangible assets over the benefit period, except for certain assets having an indefinite useful life. Assets with an indefinite useful life generally provide a benefit that is not constrained by legal or contractual limitations or any other external factor, and therefore, are not amortized (see Note 4). (g) Construction Work in Progress
The cost of acquisition and construction of major plant and equipment is recorded as construction work in progress. Costs of construction projects that are discontinued are recorded as an expense in the year in which the decision is made to discontinue such projects. (
h) Capitalization of Interest
A portion of the interest cost incurred on capital projects is capitalized on assets that require a period for construction or to otherwise prepare them for their intended use. Such amounts are amortized over the useful lives of the assets (see Note 4). Per the implementation of GASB No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period , no interest was capitalized to capital assets in fiscal year 2022.
(i) Bond Discount, Premium, and Issuance Costs
Bond issuance costs related to prepaid insurance costs are capitalized and amortized using the effective interest method. Other bond issuance costs are expensed when incurred. Original issue bond discount or premium are offset against the related debt and are also amortized using the effective interest method.
(j) Accrued Vacation and Sick Leave
Accrued vacation pay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non-vesting and may be accumulated up to six months per employee.
(
k)
The Enterprise is self-
those claims, including the estimated cost of incurred but not reported claims (see Note 12(b)).

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
26 (Continued)
(l) General Liability
The Enterprise is self-insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover claims attributed to loss from earthquake, contamination, pollution remediation efforts, and other specific naturally occurring contaminants such as mold. The liability represents an estimate of the cost of all outstanding claims, including adverse loss development and estimated incurred but not reported claims (see Note 12(a)).
(m) Arbitrage Rebate Payable
Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements generally stipulate that earnings from the investment of the tax-exempt bond proceeds that exceed related interest costs on the bonds must be remitted to the federal government on every fifth anniversary of each bond issue. No arbitrage liability is due as of June 30, 2022 or 2021.
(
n) Refunding of Debt
Gains or losses occurring from refunding of debt prior to maturity are reported as deferred outflows and deferred inflows of resources from refunding of debt. Deferred outflows and deferred inflows of resources are recognized as a component of interest expense using the effective interest method over the remaining life of the old debt or the life of the new debt, whichever is shorter. (o) Income Taxes
As a department of a government agency, the Enterprise is exempt from both federal income taxes and California State franchise taxes.
(
p) Revenue Recognition
Sewer service charges are based on water usage as determined by the San Francisco Water Enterprise. Effective July 1, 2013, the majority of residential and non-residential customers are billed on a monthly basis except for building and contractor customers which are billed on a bi- monthly basis. Revenues earned but unbilled are accrued as charges for services and reflected as a receivable on the statements of net position. The unbilled amount for the fiscal years ending June 30, 2022 and 2021 were $15,704 and $14,175, respectively. (
q) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(r) Accounting and Financial Reporting for Pollution Remediation Obligations According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted and any of the following recognition triggers occur:

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
27 (Continued)
Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
A government has violated a pollution prevention-related permit or license; A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
A government begins or legally obligates itself to begin cleanup or post-cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the design phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include, but are not limited to: asbestos or lead paint removal, leaking of sewage in underground pipes or neighboring areas, chemical spills, removal, and disposal of known toxic waste, harmful biological and chemical pollution of water, or contamination of surrounding soils by underground storage tanks (see Note 13(d)). (
s) Leases
Leases are defined as a contract that conveys co
asset for a specified period. The Enterprise is a lessee and a lessor for various noncancellable leases of land, building, equipment, vehicles, easements, etc.

Short-term Leases
For leases with a maximum possible term of 12 months or less at commencement, the Enterprise recognizes lease revenue if the Enterprise is the lessor of the lease or lease expense if the Enterprise is the lessee of the lease based on the provisions of the lease contract. Liabilities are only recognized if payments are received in advance, and receivables are only recognized if payments are received subsequent to the reporting period.

Leases Other Than Short-term
For all other leases (i.e., those that are not short-term) the Enterprise recognizes a lease liability and intangible right-to-use lease asset for the Enterprise as lessee leases, or lease receivable and deferred inflow of resources for the Enterprise as lessor leases.

Measurement of Lease Amounts (Lessee)
as of the date of inception. Subsequently, the lease liability is reduced by the principal portion of lease of payments made. The lease asset is initially measured as the initial amount of the lease liability, less lease payments made at or before the lease commencement date, plus any initial direct costs ancillary to placing the underlying asset into service, less any lease incentives received at or before the lease commencement date. Subsequently, the lease asset is amortized into depreciation and amortization expense on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. If the Enterprise is reasonably certain of exercising a

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
28 (Continued)
purchase option contained in a lease, the lease asset will be amortized over the useful life of the underlying asset.

Measurement of Lease Amounts (Lessor)
payments expected to be
received during the lease term, reduced by any provision of estimated uncollectible amounts.

Subsequently, the lease receivable is reduced by the principal portion of lease payments collected.

The deferred inflow or resources is initially measured as the initial amount of the lease receivable, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term, plus lease payments received from the lease at or before the commencement of the lease term that related to future periods. Subsequently, the deferred inflow of resources as lease revenue is on a straight-line basis over the lease term.

Key Estimates and Judgements
Key estimates and judgements include how the Enterprise determines (a) the discount rate it uses to calculate the present value of the expected lease payments, (b) lease terms, (c) lease payments, and (d) materiality threshold for equipment.

The Enterprise generally uses its estimated incremental borrowing rate as the discount rate is established using the average of Municipal Market Data (MMD) AAA benchmark interest rate index maturity date (year 1 to 30+), plus the
Aa/AA, COP, Tax-
incremental borrowing rate for leases is based on the rate of interest it would need to pay if it issued general obligation bonds to borrow an amount equal to the lease payments under similar terms at the commencement or remeasurement date.

The lease term includes the noncancellable period of the lease, plus any additional periods covered by either lessee or lessor unilateral option to (1) extend for which it is reasonably certain to be exercised, or (2) terminate for which it is reasonably certain not to be exercised. Periods in which both the lessee and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the lease term.

Payments are evaluated by the Enterprise to determine if they should be included in the measurement of the lease receivables or lease liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments.

Equipment and other leases have a capitalization threshold of $100. 70% below market rent and/or ground leases are determined to be below market rent (BMR), excluded from lease capitalization.

Remeasurement of Lease
The Enterprise monitors changes in circumstances that may require remeasurement of a lease.

When certain changes occur that are expected to significantly affect the amount of the lease

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
29 (Continued)
receivable or lease liability, the receivable or liability is remeasured and a corresponding adjustment is made to the deferred inflow of resources or lease asset, respectively.

Presentation in Statement of Net Position
Lease assets are reported with non-current assets, lease liabilities are reported with current and long-term liabilities in the statement of net position. (t) Other Post-Employment Benefits Other Than Pensions (OPEB) As prescribed under GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions , net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB expense are actuarially determined on a citywide basis. Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive
the amount of the Retiree Healthcare Trust Fund investments measured at fair value (see Note 10(b)).
(u) New Accounting Standard Adopted in Fiscal Year 2022 1) 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 liabilities that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 87 in fiscal year 2022 (see Note 9 for more details). As a result of adoption, the cumulative effect of applying this Statement is recorded as beginning balances for the following accounts as of July 1, 2020:
2) 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 establishes accounting requirements for interest cost incurred before the end of construction period. The new standard is effective for periods beginning after December 15, 2020. The Enterprise adopted the provisions of Statement No. 89 in fiscal year 2022.
3) In January 2020, the GASB issued Statement No. 92, Omnibus 2020 . GASB Statement No. 92 addresses practice issues that have been identified during implementation and application of certain GASB Statements. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 92 in fiscal year 2022, which did not have significant effect on its financial statements.

Right-to-use Assets $ 8,247 $ $8 , 2 4 7
Accumulated Amortization (2,325) (2,325) Accrued Interest Payable-Current (5) (5) Lease Liability - Current (2,487) 173 (2,314) Lease Liability - Long-Term (5,760) 2,122 (3,638) Expenses 35 35
Change to Net Position $ $3 5 $3 5
FY 2021
Beginning Balance FY 2021 Activities
FY 2021
Ending Balance

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
30 (Continued)
4) In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 93 in fiscal year 2022, which did not have a significant effect on its financial statements. (v) GASB Statement Implemented in Fiscal Year 2021
1) In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. GASB Statement No. 84 establishes criteria for state and local governments to identify fiduciary activities and how those activities should be reported. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements. 2) In August 2018, the GASB issued Statement No. 90, Accounting and Financial Reporting for Majority Equity Interests. GASB Statement No. 90 provides clarification when a government should report a majority equity interest in a legally separate organization as either a component unit or an investment. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.
3) 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 rules related to reporting of fiduciary activities under Statements No. 14 and No. 84 and enhances the accounting and financial reporting of IRS Code section 457 plans that meet the definition of a pension plan.

The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted early the provisions of Statement No. 97 in fiscal year 2021, which did not have a significant effect on its financial statements.
4) 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. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.
(
w) Future Implementation of New Accounting Standards
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the compatibility and consistency of conduit debt obligation reporting and reporting of related transactions by State and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The Enterprise will implement the provisions of Statement No. 91 in fiscal year 2023.
2) In March 2020, the GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements . The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
31 (Continued)
partnership arrangements (PPPs). The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 94 in fiscal year 2023. 3) In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) by a government. The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 96 in fiscal year 2023. 4) In April 2022, the GASB issued Statement No. 99, Omnibus 2022 . This Statement enhances comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 99 in fiscal year 2024. 5) In June 2022, the GASB issued Statement No. 100, Accounting Changes and Error Corrections .

This Statement enhances accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 100 in fiscal year 2024.
6) In June 2022, the GASB issued Statement No. 101, Compensated Absences . This Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The new standard is effective for periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 101 in fiscal year 2025.
(
x) Reclassifications
The Enterprise has reclassified certain amounts relating to the prior period to conform to its current period presentation. These reclassifications had no effect on previously reported changes in net position.
(
3) Cash, Cash Equivalents, and Investments
unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of priority, preservation of capital, liquidity, and yield. The policy addresses soundness of financial institutions in which the City will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio that may be invested in certain instruments with longer terms to maturity. The City Treasurer allocates income from the investment of pooled cash at month- average daily cash balances. The primary objectives of th The restricted cash for bond reserves is held by an independent trustee outside the City investment pool. The balances as of June 30, 2022 and 2021 were $39,358 and $10,196, respectively. Funds

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
32 (Continued)
Federal Investment Company Act of 1940 and whose shares are registered under the Federal Securities Act of 1933 and having a rating -G, ,
, , .

The Enterprise categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities.

The following is a summary of the restricted and unrestricted cash and investments outside City Treasury and the fair value hierarchy as of June 30, 2022 and 2021.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
33 (Continued)
Commercial paper is valued using a variety of techniques such as matrix pricing; market corroborated pricing inputs such as yield curve, indices, and other market related data. Commercial paper, money market investments, and cash and cash equivalents are exempt from fair value treatment under GASB Statement No. 72.

The restricted cash and investments outside City Treasury as of June 30, 2022 and 2021 included a $0 unrealized gain due to changes in fair values on Commercial Paper.

The
of net position as follows:

The
2022 2021
Current assets:

Cash and investments with City Treasury $ 285,029 281,572 Cash and investments outside City Treasury 397 366 Restricted cash and investments outside City Treasury 15,587 298 Non-current assets:

Restricted cash and investments outside City Treasury 23,771 9,898 Total cash, cash equivalents, and investments $ 324,784 292,134 Fiscal y ears
ended J une 3 0 Under 1 1 t o less t han 6 6 t o less t han 1 2 12 t o 6 0 2022 20.2% 14.0% 14.9% 50.9%
2021 14.5% 27.6% 29.7% 28.2%
Investment m aturities (in m onths)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
34 (Continued)
(4) Capital Assets
Capital assets with a useful life of 50 years or greater include buildings and structures, sewers, wastewater treatment plants, pump stations, and other pipelines.

Capital assets as of June 30, 2022 and 2021 consisted of the following:

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
35 (Continued)
GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 Financial Accounting Standards Board (FASB) and American Institute of Certified Public Accountants (AICPA) Pronouncements, requires that interest expense incurred during construction of assets be capitalized. Per the implementation of GASB No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, no interest was capitalized to construction in progress beginning in fiscal year 2022. Interest included in the construction work in progress and total interest expense incurred during the years ended June 30, 2022 and 2021 are as follows:
*Restated per implementation of GASB 87 Leases
(5) Restricted Assets
The Master Bond Resolution was discharged upon the issuance of the 2003 Series A Refunding Bonds.

Pursuant to the Indenture, which became effective with the issuance of the 2003 Series A Refunding Bonds, all net revenues of the Enterprise (except amounts on deposit in the rebate fund) are irrevocably pledged to the punctual payment of debt service on the Wastewater revenue bonds. Accordingly, the net revenues of the Enterprise shall not be used for any other purpose while any of its revenue bonds are outstanding except as expressly permitted by the Indenture. Further, all net revenues shall be deposited by the City Treasurer, by instruction of the Enterprise, in special funds designated as the Revenue Fund, which must be maintained in the City Treasury. These funds, held at the City Treasury, are recorded in the statements of net position of the Enterprise as cash and investments. Deposits in the Revenue Fund, including earnings thereon, shall be appropriated, transferred, expended, or used for the following purposes and only in accordance with the following priority:

1. The payment of operation and maintenance costs of the Enterprise;

2. The payment of State revolving fund loans;

3. The payment of bonds, parity State revolving fund loans, policy costs, and amounts due as reimbursement under any letter of credit agreement; and

4. Any other lawful purpose of the Enterprise.

Restated
2022 2021
Interest expensed $ 77,743 34,944 * Interest included in construction work in progress 33,420 Total interest incurred $ 77,743 68,364

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
36 (Continued)
In accordance with the Indenture, the Enterprise maintains certain restricted cash and investment balances in trust. Restricted assets held in trust consisted of the following as of June 30, 2022 and 2021:

Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Sewer Revenue Fund of the City Treasury.
2022 2021
Cash and investments outside City Treasury:
2009 Series C Certificates of Participation - 525 Golden Gate $ 433 433 2009 Series D Certificates of Participation - 525 Golden Gate 1,472 1,732 2010 Series A Wastewater revenue bond fund 3,592
2010 Series B Wastewater revenue bond fund 8,826 4,401
2021 Series A Wastewater revenue bond fund 24,396
2021 Series B Wastewater revenue bond fund 3,937
2021 Series A Wastewater revenue note fund 145
2021 Series B Wastewater revenue note fund 86
Commercial Paper - Tax Exempt 63 38
Total cash and investments outside City Treasury 39,358 10,196 Interest and other receivables:

Wastewater revenue bond construction fund including capacity fee receivables 2,735 3,291 Due from other government for State Revolving Fund 202,795 20,755 205,530 24,046
Total restricted assets $ 244,888 34,242

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
37 (Continued)
(6) Short-Term Debt
Under the voter approved 2002 Proposition E, the Commission and Board of Supervisors authorized the issuance of up to $750,000 in commercial paper for the purpose of reconstructing, expanding, The Enterprise had $379,157 and $638,518 in
commercial paper outstanding as of June 30, 2022 and 2021, respectively.

In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , the Enterprise had $370,843 and $111,482 in unused authorization as of June 30, 2022 and 2021, respectively. Significant Events of default as specified in the Reimbursement Agreements, Revolving Credit and Term Loan Agreements, or Revolving Credit Agreements include 1) payment defaults 2) 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 3) 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, 2022, there were no such events described herein.
(
7) Changes in Long-Term Liabilities
Long-term liability activities for the years ended June 30, 2022 and 2021 are as follows:

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
38 (Continued)
The payments of principal and interest amounts on various bonds and notes are secured by net revenues of the Enterprise.
(a) Wastewater Revenue Bonds 2010 Series A
During fiscal year 2010, the Enterprise issued revenue bonds 2010 Series A in the amount of $47,050 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used to redeem $50,000 in outstanding commercial paper notes, fund a cash debt service reserve fund, 3 -
respectively, at the time of issuance. Bonds mature through October 1, 2021. The true interest cost is 2.9%. As of June 30, 2022 and 2021
was $0 and $8,820, respectively.
(b) Wastewater Revenue Bonds 2010 Series B
During fiscal year 2010, the Enterprise issued revenue bonds 2010 Series B (Federally Taxable Build America Bonds Direct Payment) in the amount of $192,515 with interest rates ranging from

4.7% to 5.8%. Proceeds from the bonds were used to redeem $53,500 in outstanding commercial paper notes, provide funding for capital projects in the amount of $112,429, fund a cash debt service reserve fund, and pay financing costs for the bonds. The bonds were rated 3 -
, at the time of issuance. Bonds mature through October 1, 2040.

The true interest cost is 3.7%. As of June 30, 2022 and 2021 amount outstanding was $192,515.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
39 (Continued)
(c) Wastewater Revenue Bonds 2013 Series A
In January 2013, the Enterprise issued tax-exempt revenue bonds 2013 Series A in the amount of $193,400 for the purpose of refunding the rema ining portion of the outstanding 2003 Series A Aa3 - ratings from
, at the time of issuance. The 2013 Series A refunding bonds include serial bonds with interest rates varying from 1.0% to 5.0% and have a final maturity in October 2025. The Series A bonds have a true interest cost of 1.2%. The 2013 Series A bonds also refunded the remaining portion of the outstanding state revolving fund loans. The refunding resulted in the recognition of a deferred accounting loss of $2,986, gross debt service savings of $35,107 over the next 13 years, and an economic gain of $32,783 or 15.4% of the refunded principal. As of June 30, 2022 and 2021, the principal amount outstanding of the 2013 Series A bonds was $15,535 and $29,595, respectively.
(d) Wastewater Revenue Bonds 2013 Series B
In February 2013, the Enterprise issued revenue bonds 2013 Series B in the amount of $331,585 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects, pay off all outstanding Wastewater commercial paper notes, and pay the costs of issuing the bonds. The bonds were rated 3 - , at the
time of issuance. Bonds mature through October 1, 2042. The true interest cost is 3.6%. As of June 30, 2022 and 2021, the principal amount outstanding of the 2013 Series B bonds was $331,585. (e) Wastewater Revenue Bonds 2016 Series A
In May 2016, the Enterprise issued tax-exempt revenue bonds 2016 Series A (Green Bonds) in the amount of $240,580 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects, to pay off $53,439 of outstanding commercial paper notes, to 3 , at the time of issuance. Bonds mature through
October 1, 2046. The bonds have a true interest cost of 3.2%. As of June 30, 2022 and 2021, the principal amount outstanding of the 2016 Series A bonds was $240,580. (f) Wastewater Revenue Bonds 2016 Series B
In May 2016, the Enterprise issued tax-exempt revenue bonds 2016 Series B in the amount of $67,820 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects, to pay off $20,560 of outstanding commercial paper notes, to fund capitalized interest, and pay the costs of issuing the bonds. The bonds carried ratings 3 , at the time of issuance. Bonds mature through October 1, 2046. The bonds have a true interest cost of 3.2%. As of June 30, 2022 and 2021, the principal amount outstanding of the 2016 Series B bonds was $67,820. (g) Wastewater Revenue Bonds 2018 Series A
In August 2018, the Enterprise issued tax-exempt revenue bonds 2018 Series A (SSIP) (Green Bonds) in the amount of $229,050 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects in fur
, to pay off $25,000 of outstanding commercial paper notes, to fund capitalized interest, and to pay the costs of issuing the bonds. The bonds carried ratings of

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
40 (Continued)
3 , at the time of issuance. Bonds mature through October 1, 2043. The bonds have a true interest cost of 3.4%. As of June 30, 2022 and 2021, the principal amount outstanding of the 2018 Series A bonds was $229,050. (h) Wastewater Revenue Bonds 2018 Series B
In August 2018, the Enterprise issued tax-exempt revenue bonds 2018 Series B (Non-SSIP) in the amount of $185,950 with 5.0% interest rate. Proceeds from the bonds were used for Wastewater capital projects, to fund capitalized interest, an d pay the costs of issuing the bonds. The bonds carried ratings of
3 , at the time of issuance.

Bonds mature through October 1, 2043. The bonds have a true interest cost of 3.5%. As of June 30, 2022 and 2021, the principal amount outstanding of the 2018 Series B bonds was $185,950. (i) Wastewater Revenue Bonds 2018 Series C
In August 2018, the Enterprise issued tax-exempt revenue bonds 2018 Series C (SSIP) (Green Bonds) in the amount of $179,145 with 2.1% interest rate. Proceeds from the bonds were used for Wastewater capital projects, to fund capitalized interest, and pay the costs of issuing the bonds. The 3 , at the time of
issuance. Bonds mature through October 1, 2048. The Initial Mandatory Tender date of the 2018 Series C bonds is October 1, 2023. The bonds have a true interest cost of 3.5%. As of June 30, 2022 and 2021, the principal amount outstanding of the 2018 Series C bonds was $179,145. (
j) Wastewater Revenue Bonds 2021 Series AB
In November 2021, the Enterprise issued tax-exempt revenue bonds, 2021 Series AB in the aggregate amount of $297,880. The purpose of the 2021 Series AB Bonds was to refund approximately $340,000 aggregate principal amount of commercial paper notes which funded various capital projects of the Wastewater Enterprise.

The $260,835 2021 Series A Bonds were issued as tax-exempt Green Bonds to refund approximately $296,000 of commercial paper notes for SSIP capital projects. The Series A bonds were issued as serial bonds with coupons of 4.0% and 5.0% and a final maturity of 2051. The 2021 Series A bonds have a true interest cost of 3.0%. As of June 30, 2022, the principal amount of the 2021 Series A bonds outstanding was $260,835.

The $37,045 2021 Series B bonds were issued as tax-exempt bonds to refund approximately $44,000 of commercial paper notes for Wastewater capital projects. The Series B bonds were issued as serial bonds with coupons of 5.0% and have a final maturity of 2051. The Series B bonds have a true interest cost of 3.2%. As of June 30, 2022, the principal amount of the 2021 Series B bonds outstanding was $37,045.
(
k) Wastewater Revenue Notes 2021 Series AB
In November 2021, the Enterprise issued tax-exempt revenue (Green) notes, 2021 Sub-Series A and Sub-Series B together with an aggregate principal of $347,465 to finance a portion of the design, acquisition and construction of the Biosolids Digester Facility Project and Southeast Water Pollution Control Plant improvements. The SFPUC intends to pay principal of the 2021A Notes and 2021B Notes from the proceeds of one or more draws under WIFIA Loan Agreements for the Biosolids

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
41 (Continued)
Digester Facility Project and Southeast Treatment Plant Improvements, respectively, or from the proceeds of future obligations.

The $218,355 2021 Series A Notes were issued as tax-exempt Green Notes to fund a portion of the Biosolids Digester Facilities Project. The Series A Notes were issued with 1.0% coupons and a final maturity of 2025. The 2021 Series A Notes have a true interest cost of 0.75%. As of June 30, 2022, the principal amount of 2021 Series A Notes outstanding was $218,355.

The $129,110 2021 Series B Notes were issued as tax-exempt Green Notes to fund a portion of Southeast Water Pollution Control Plant improvements. The Series B Notes were issued with 1.0% coupons and a final maturity of 2026. The 2021 Series B Notes have a true interest cost of 0.81%.

As of June 30, 2022, the principal amount of 2021 Series B Notes outstanding was $129,110. (l) Future Annual Debt Services of Revenue Bonds and Notes and Refunding Bonds The following table presents the future annual debt service relating to the revenue and refunding bonds and revenue notes outstanding as of June 30, 2022. The interest before subsidy amounts includes the interest for 2010 Series A and B, 2013 Series A and B, 2016 Series A and B, 2018 Series A, B, and C, 2021 Series A and B bonds, and 2021 Series A and B notes. The federal interest subsidy amounts represent 35% of the interest, excluding sequestration, for the 2010 Series B revenue bonds.
*The SFPUC received an IRS notice, dated June 2, 2022, that the federal interest subsidy on the 2010 Series B bonds is reduced by 5.7% through fiscal year 2030, or a total reduction of $2,323, due to sequestration over the remaining life of the bonds assuming th e sequestration rate will remain the same after fiscal year 2023.

Interest F ederal Interest
b efore i nterest n et
Principal subsidy s ubsidy* o f s ubsidy
Fiscal years ending June 30:
2023 $ 34,345 79,288 (3,471) 75,817 2024 36,905 79,234 (3,356) 75,878 2025 36,935 79,083 (3,235) 75,848 2026 257,030 76,151 (3,105) 73,046 2027 169,625 72,469 (2,968) 69,501 2028-2032 233,765 325,416 (12,483) 312,933 2033-2037 295,065 259,098 (7,749) 251,349 2038-2042 367,020 181,095 (2,061) 179,034 2043-2047 404,575 96,342 96,342 2048-2052 252,260 22,115 22,115 2,087,525 1,270,291 (38,428) 1,231,863
Less: Current portion (34,345)
Add: Unamortized bond premiums 194,084
Long-term portion as of June 30, 2022 $ 2,247,264

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
42 (Continued)
payable from its corresponding revenue as well as monies deposited in certain funds and accounts pledged thereto (see Note 5).
(m) Certificates of Participation Issued for the 525 Golden Gate Avenue Headquarters Building In October 2009, the City issued $167,670 in certificates of participation to fund the headquarters building of the SFPUC at 525 Golden Gate Avenue. The 2009 Series C were issued for $38,120 and Recovery and Reinvestment Act. The 2009 Series C certificates carry interest rates ranging from

2.0% to 5.0% and mature on November 1, 2022. The 2009 Series D certificates carry interest rates ranging from 6.4% to 6.5% and mature on November 1, 2041. After adjusting for the federal interest subsidy, the true interest cost averages 3.4% and 4.3% for Series C and Series D, respectively.

Under the terms of a memorandum of understanding (MOU) between the City and the SFPUC dated October 1, 2009, the City conveyed the real property to the Trustee, the Bank of New York Mellon Trust Company, N.A., which was replaced by U.S. Bank in March 2014 under a property lease in exchange for the proceeds of the sale of the certificates. The Trustee has leased the property back project lease. The City is obligated under the project lease to pay base rental payments and other payments to the Trustee each year during the 32-year term of the project lease. The Commission makes annual base rental payments to the City for the building equal to annual debt service on the certificates. There are no events of default stated in this MOU.

Each of the three Enterprises has an ownership interest in the building equal to their projected usage of space as follows: Water (73%), Wastewater (15%), and Power (12%). Similarly, each Enterprise is responsible for a portion of the annual base rental payment based on their ownership percentages less contributed equity. The percentage share of base rental payments for the Enterprises is as follows: Water (71.4%), Wastewater (18.9%), and Power (9.7%).

The future annual debt services relating to the certificates of participation 2009 Series C outstanding as of June 30, 2022 are as follows:

Principal Interest Total
Fiscal years ending June 30:
2023 $ 826 21 847
826 21 847
Less: Current portion (826)
Add: Unamortized bond premiums 4
Less: Current portion (4)
Long-term portion as of June 30, 2022 $
Certificates o f Participation 2 009
Series C (Tax E xempt)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
43 (Continued)
The future annual debt services relating to the certificates of participation 2009 Series D outstanding as of June 30, 2022 are as follows:
*The SFPUC received an IRS notice dated June 2, 2022 that the federal interest subsidy on the 2009 Series D bonds is reduced by 5.7% through fiscal year 2030, or a total reduction of $371, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023. (n) 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 Improvement Program. The aggregate amount of the CWSRF loans is $7,435. The loan bears an interest rate of 1.6% which was equal to one- ecent 30-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 completion was in October 2020. The CWSRF loan is secured on a disbursements to date totaling $6,116 and a construction period interest of $166 transferred to principal. As of June 30, 2022 and 2021, the principal amount outstanding of the loan was $6,112 and $6,282, respectively.
(o) 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 $40,007. 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, substantial completion occurred in July 2019. The CWSRF loan is secured on a parity lien basis with nding revenue bonds. The SFPUC has received proceeds from loan Interest F ederal Interest
before interest net of
Principal subsidy s ubsidy* s ubsidy
Fiscal years ending June 30:
2023 $ 1,578 (521) 1,057 2024 864 1,551 (512) 1,039
2025 900 1,494 (493) 1,001
2026 937 1,436 (474) 962
2027 977 1,375 (454) 921
2028-2032 5,539 5,865 (1,936) 3,929 2033-2037 6,825 3,874 (1,279) 2,595 2038-2042 8,416 1,411 (466) 945 Total 18,584 (6,135) 12,449
Long-term portion as of June 30, 2022 $ 24,458
Certificates o f P articipation 2 009
Series D ( Taxable)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
44 (Continued)
disbursements to date totaling $39,741. As of June 30, 2022 and 2021, the principal amount outstanding of the loan was $37,450 and $38,512, respectively. (p) 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 $20,199. 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 occurred in February 2018. The CWSRF loans is secured on a parity lien basis wi outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $17,706. As of June 30, 2022 and 2021 the principal amount outstanding of the loan was $15,710 and $16,181, respectively.
(q) 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 $34,446. 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 outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $29,197. As of June 30, 2022 and 2021, the principal amount outstanding of the loan was $26,048 and $26,829, respectively.
(r) Oceanside Plant (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 $54,388, which includes $4,000 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, .

The CWSRF loan is secured on a parity lien basis with t The SFPUC has received proceeds from loan disbursements to date totaling $22,544 and a receivable for reimbursement of $6,117, which included a loan forgiveness grant of $4,000. As of June 30, 2022 and 2021, the principal amount outstanding of the loan was $24,661 and $20,755, respectively.
(s) Southeast Plant (SEP) Biosolids Digester Facilities 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 SEP Biosolids Digester Facilities Project of

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
45 (Continued)
the Sewer System Improvement Program. The CWSRF loan is in the amount of $132,000, which includes $4,000 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, substantial completion is expected in May 2026. The CWSRF loan is secured on a parity lien basis with the Enter
. The SFPUC has received proceeds from loan
disbursements to date totaling $0 and a receivable for reimbursement of $132,000, which includes a $4,000 loan forgiveness grant. As of June 30, 2022 and 2021, the principal amount outstanding of the loan was $128,000 and $0, respectively.
(t) Southeast Plant (SEP) New Headworks (Grit) Replacement Project In May 2021, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP New Headworks (Grit) Replacement Project of the Sewer System Improvement Program. The CWSRF loan is in the amount of $112,036.

The loan bears an interest rate of 1.1% which was equal to one- recent 30-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 The
SFPUC has received proceeds from loan disbursements to date totaling $0 and a receivable for reimbursement of $64,678. As of June 30, 2022 and 2021, the principal amount outstanding of the loan was $64,678 and $0, respectively.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
46 (Continued)
(u) Future Annual Debt Services of State Revolving Fund Loans (CWSRF Loans) The future annual debt services relating to the State Revolving Fund Loan to fund the Lake Merced Green Infrastructure Project, the North Point Facility Outfall Rehabilitation Project, the SEP Primary/Secondary Clarifier Upgrade Project, the SEP 521/522 and Disinfection Upgrade Project, the OSP Digester Gas Utilization Upgrade Project, the SEP Biosolids Digester Facilities Project, and the SEP New Headworks (Grit) Replacement Project outstanding as of June 30, 2022 are as follows:
* Interest and Fees included debt admin fees for the North Point Facility and SEP Clarifier Upgrade SRF loans. (v) WIFIA Loan Agreement-Biosolids Digester Facility Project In July 2018, the SFPUC entered into
amount of $699,242. The WIFIA Loan was entered into pursuant to the WIFIA statute authorized by Congres
Biosolids Digester Facility Project plus certain eligible expenses. Payment of the WIFIA Loan will be enues and is on a parity lien
The original 2018 loan bore a fixed interest rate of 3.09% for a 35-year term, with loan repayment expected to begin in fiscal year 2026, after substantial completion of project construction. In June 2020 the SFPUC re-executed the WIFIA Loan Agreement to have a fixed interest rate of 1.45% for a 35-year term. All other terms of WIFIA Loan Agreement are unchanged.

The SFPUC has not submitted any requests for loan disbursements to date and there is no outstanding loan principal as of June 30, 2022.

California C lean W ater S tate R evolving F und L oan Principal Interest
and F ees* Total
Fiscal years ending June 30:
2023 $ 2,481 1,524 4,005
2024 3,192 1,824 5,016
2025 5,079 2,481 7,560
2026 5,154 2,406 7,560
2027 8,693 4,121 12,814
2028-2032 45,402 18,672 64,074
2033-2037 48,807 15,267 64,074
2038-2042 52,476 11,598 64,074
2043-2047 56,429 7,645 64,074
2048-2052 48,642 3,637 52,279
2053-2056 26,304 812 27,116
302,659 69,987 372,646
Less: Current portion (2,481)
Long-term portion as of June 30, 2022 $ 300,178

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
47 (Continued)
(w) WIFIA Loan Agreement-Southeast Treatment Plant Improvements In June 2020,
States Environmental Protection Agency in the amount of $513,862. The WIFIA Loan was entered into pursuant to the WIFIA statute authorized by Congress in 2014. The WIFIA Loan will fund 49% of SEP New Headworks Replacement Project and additional
costs of the revised Biosolids Digester Facility Project plus certain eligible expenses. Payment of the WIFIA Loan will
ter Resources Control
Board. The loan will bear a fixed interest rate of 1.45% for a 35-year term, with loan repayment expected to begin in fiscal year 2025, after substantial completion of project construction. The SFPUC has not submitted any requests for loan disbursements to date and there is no outstanding loan principal as of June 30, 2022.
(x) Events of Default and Remedies
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , significant events of default as specified in the Wastewater Enterprise Indenture (applicable to Wastewater Revenue Bonds, SRF Loans, and WIFIA Loan include 1) Non-payment 2) material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods), and 3) 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, to be due and payable immediately. As of June 30, 2022, there were no such events described herein. (
8) Revenue Pledge
The Enterprise has pledged future revenues to repay various revenue bonds, notes, and State Revolving Fund loans. Proceeds from the revenue bonds, revenue notes, and State Revolving Fund provided financing for various capital construction projects, and to refund previously issued bonds. The bonds, notes, and State Revolving Fund loans are payable through fiscal years 2052, 2027, and 2056, respectively, and are solely from revenues of the Enterprise.

The original amount of revenue bonds issued, revenue notes issued, and State Revolving Fund loans, total principal and interest remaining, principal and interest paid during fiscal years 2022 and 2021, applicable net revenues, and funds available for debt service are as follows:
2022 2021
Bonds issued with revenue pledge $ 1,964,975 1,667,095
Notes issued with revenue pledge 347,465
Clean Water State Revolving Fund (CWSRF) loans with revenue pledge 310,265 113,681 Principal and interest remaining due at the end of the year 3,730,462 2,578,879 Principal and interest paid during the year 86,619 82,066 Net revenues for the year ended June 30 155,504 108,399 Funds available for debt service 310,835 306,177

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
48 (Continued)
(9) Leases
The Enterprise as a lessee has entered into long-ter m leases for land, office space, communication site, data processing, machinery, and other equipment. The terms and conditions for these leases vary, which range between 1-75 years.

A summary of intangible right-to-use leases during the year ended June 30, 2022 and 2021 is as follows:

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
49 (Continued)
A summary of changes in the related lease liabilities during the year ended June 30, 2022 and 2021 is as follows:

Future annual lease payments as of June 30, 2022 and 2021 are as follows:

Principal Interest
Year ending June 30: amount amount Total
2022 $ 2,314 57 2,371 2023 2,341 30 2,371 2024 1,297 6 1,303 2025
2026
2027-2031
2032-2036
2037-2041
5,952 93 6,045
Less: Current portion (2,314)
Long-term portion as of June 30, 2021 $ 3,638

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
50 (Continued)
Variable lease payments
Variable lease payments, other than those payments that depend on an index or rate or are fixed in substance, are excluded for the measurement of the lease liability. Such amounts are recognized as lease expenses in the period in which the obligation for those payments is incurred.

Certain equipment or facility rental leases require the Enterprise to make variable lease payments that based on usage, related to the property taxes levied on the lessor, and insurance payments made by the lessor, these amounts are generally determined annually. The amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $207 and $130 during the year ended June 30, 2022 and 2021, respectively. (
10) Employee Benefits
(a) Pension Plan
The Enterprise participates in a cost-sharing multiple-employer defined benefit pension Plan (SFERS Plan). The SFERS Plan is administered by the San Francisco City and System (SFERS). Contributions are recognized in the period in which they are due pursuant to legal requirements. For purposes of measuring the net pension liability, deferred outflows/inflows of resources related to pensions, pension expense, information about the fiduciary net position of the SFERS Plan, and additions to/deductions from the SFERS
determined on the same basis as they are reported by the SFERS Plan. Benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

GASB Statement No. 68 requires that the SFERS Plan reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

SFERS Plan
The City is an employer of the SFERS Plan with a proportionate share of 94.64% as of June 30, 2021 (measurement date), and 94.39% as of June 30, 2020 (measurement date). The s 2021 and 2020. The
/(asset), deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/inflows, and pension expense is based on its allocated nate share was 1.99% as of June 30,
2021 and 2.03% as of June 30, 2020 (measurement dates).

Valuation Date (VD) June 30, 2020 updated to June 30, 2021 Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
Valuation Date (VD) June 30, 2019 updated to June 30, 2020 Measurement Date (MD) June 30, 2020
Measurement Period (MP) July 1, 2019 to June 30, 2020
Fiscal year 2 022
Fiscal year 2 021

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
51 (Continued)
Plan Description The SFERS Plan provides basic 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 San Francisco City and County Charter and the Administrative Code are the authorities which establish and amend 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 http://mysfers.org or by writing to the San Francisco City and C
Francisco, CA 94103 or by calling (415) 487-7000.

Benefits The Retirement System provides service retirement, disability, and death benefits based on specified percentages of defined final average monthly salary and annual COLA after retirement.

Benefits and refunds are recognized when due and payable in accordance with the terms of the SFERS Plan. The Retirement System pays benefits according to the category of employment and the type of benefit coverage provided by the City and County. The four main categories of SFERS Plan members are:
a) Miscellaneous Non-Safety Members staff, operational, supervisory, and all other eligible employees who are not in special membership categories. b) Members Sheriffs assuming office on and
after January 7, 2012, and undersheriffs, deputized personnel of the S Department, and miscellaneous safety employees hired on and after January 7, 2012. c) 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.
d) 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 included in the Notes to the Basic Financial Statements of San Francisco Employees Retirement System.

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.

All retired members receive a benefit adjustment each July 1, which is the Basic COLA. The majority of adjustments are determined by changes in Consumer Price Index with increases capped at 2%.

The SFERS Plan provides
investment earnings in the SFERS 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 SFERS 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, members who retired before November 6,

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
52 (Continued)
1996 will receive a Supplemental COLA only when the SFERS Plan is also fully funded on a market value of assets
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 where 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 SFERS 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.

Funding & Contribution Policy
SFERS Plans
Contributions are made by both the City and the participating employees. Employee contributions are mandatory as required by the Charter. Employee contribution rates varied from

7.5% to 13.0% as a percentage of gross covered salary in fiscal years 2022 and 2021. Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The Enterprise is required to contribute at an actuarially determined rate. Based on the July 1, 2020 actuarial report, the required employer contribution rate for fiscal year 2022 was 19.91% to 24.41%. Based on the July 1, 2019 actuarial report, the required employer contribution rate for fiscal year 2021 was 22.40% to 26.90%.

Employer contributions and employee contributions made by the employer to the SFERS Plan are recognized when due and the employer has made a formal commitment to provide the System in fiscal years ended June 30, 2021 and 2020 (measurement periods) were $791,736 and $701,307, respectively.
2021
and 2020 were $16,083 and $14,352, respectively.

For the
$14,543 for fiscal year 2022 and will be recognized as a reduction of the net pension liability in the subsequent fiscal period.

Pension Liabilities/(Assets), Pension Expenses, Deferred Outflows, and Inflows of Resources Related to Pensions
F
iscal Year 2022
As of June 30, 2022, the City reported net pension assets (NPA) for its proportionate share of the net pension (asset) of the SFERS Plan of $2,446,564 asset for the SFERS Plan is measured as the proportionate share of the net pension asset. The net pension asset of the SFERS Plan is measured as of June 30, 2021 (measurement date), and the total pension (asset) for the SFERS Plan used to calculate the net pension (asset) was determined by an actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021
proportion of the net pension (asset) -
term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The
proportionate share of the net pension (asset) for the SFERS Plan as of June 30, 2022 was ($48,770).

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
53 (Continued)
For the year ended June 30, 2022 (benefit) was ($922,979), which includes Retirement Benefit Plan pension expense of $28,735. The pension (benefit) including amortization of deferred outflows/inflows related pension items was ($20,601).

As of June 30, 2022, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in pension expense as follows:

Fiscal Year 2021
The City reported net pension liabilities for its proportionate share of the pension liability of the SFERS Plan of $5,107,270 as of June 30, 2021 SFERS Plan is measured as the proportionate share of the net pension liability. The net pension liability of the SFERS Plan is measured as of June 30, 2020 (measurement date), and the total pension liability for the SFERS Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020
proportion of the net pension liability for the SFERS Plan long-term share of contributions to the pension plan relative to the projected contributions of all proportionate share of the net pension liability for the SFERS Plan as of June 30, 2021 was $103,746.

Deferred Outflows
of R esources
Deferred Inflows
of R esources
Pension contributions subsequent to measurement date $ 14,543 Differences between expected and actual experience 4,479 160 Changes in assumptions 3,300 8,562 Net difference between projected and actual earnings on pension plan investments 105,948
Change in employer's proportion 3,047
Total $ 25,369 114,670
Fiscal Year 2022 S chedule of Deferred Outflows and Inflows of Resources Fiscal y ears
Deferred
Outflows/(Inflows)
of R esources
2023 (26,134)
2024 (23,662)
2025 (24,937)
2026 (29,111)
Total $ (103,844)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
54 (Continued)
For the year ended June 30, 2021 962,576 including
amortization of deferred outflow/inflow related pension items. The expense including amortization of deferred outflow/inflow related pension items was $19,053.

Pension expense increased from the prior year, largely due to the amortization of deferrals.

As of June 30, 2021, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in pension expense as follows:

Fiscal y ears
Deferred
Outflows/(Inflows)
of R esources
2022 $ (787)
2023 3,009
2024 5,528
2025 4,238
Total $ 11,988

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
55 (Continued)
Actuarial Assumptions
Fiscal Year 2022
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability/(Asset) as of June 30, 2021 (measurement period) is provided below, including any assumptions that differ from those used in the July 1, 2020 actuarial valuation. Refer to the July 1, 2020 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System website http://mysfers.org.

Mortality rates for health Miscellaneous members were based upon adjusted PubG-2010 Employee and Retiree tables for non-annuitants and retirees, respectively. Mortality rates were then projected generationally from the base year using the MP-2019 projection scale.

The actuarial assumptions used at the June 30, 2021 measurement date was based upon the result of a demographic experience study for the period July 1, 2014 through June 30, 2019 and an economic experience as of July 1, 2020.

Key Actuarial Assumptions
Valuation Date June 30, 2020 updated to June 30, 2021
Measurement Date June 30, 2021
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.40% net of investment expenses Municipal Bond Yield 2.21% as of June 30, 2020

2.16% as of June 30, 2021
Bond Buyer 20-Bond GO Index, June 25, 2020 and June 24, 2021 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based on employee classification and years of service Discount Rate 7.40% as of June 30, 2020

7.40% as of June 30, 2021
Administrative Expenses 0.60% of payroll as of June 30, 2020

0.60% of payroll as of June 30, 2021
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2020 2.00% 2.50% 3.10% 4.20%
June 30, 2021 2.00% 1.90% 2.50% 3.60%
SFERS Plan

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
56 (Continued)
Fiscal Year 2021
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability as of June 30, 2020 (measurement period) is provided below, including any assumptions that differ from those used in the July 1, 2019 actuarial valuation. Refer to the July 1, 2019 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System website http://mysfers.org.

For healthy annuitants, the sex distinct 2009 CalPERS healthy annuitant mortality table, adjusted

1.014 for females and 0.909 for males. For active members, the sex distinct 2009 CalPERS employee mortality tables, adjusted 0.918 for females and 0.948 for males. Rates are projected generationally from the 2009 base year using a modified version of the MP-2015 projection scale.

The actuarial assumptions used at the June 30, 2020 measurement date was based upon the result of a demographic experience study for the period July 1, 2009 through June 30, 2014 and an economic experience as of July 1, 2019.

Discount Rate
Fiscal Year 2022
SFERS Plan The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of the June 30, 2021 (measurement date) and June 30, 2020 (measurement date).

The discount rate used to measure the total pension liability as of June 30, 2021 was 7.40%. The projection of cash flows used to determine the discount rate assumed that SFERS plan member 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, 2020 Key Actuarial Assumptions
Valuation Date June 30, 2019 updated to June 30, 2020
Measurement Date June 30, 2020
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.40% net of pension plan investment, including inflation Municipal Bond Yield 3.50% as of June 30, 2019

2.21% as of June 30, 2020
Bond Buyer 20-Bond GO Index, June 27, 2019 and June 25, 2020 Inflation 2.75%
Projected Salary Increases 3.50% plus merit component based on employee classification and years of service Discount Rate 7.40% as of June 30, 2019

7.40% as of June 30, 2020
Administrative Expenses 0.60% of payroll as of June 30, 2019

0.60% of payroll as of June 30, 2020
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2019 2.00% 2.50% 3.10% 4.20%
June 30, 2020 2.00% 2.50% 3.10% 4.20%
SFERS Plan

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
57 (Continued)
actuarial valuation. That policy includes contributions equal to the employer portion of the Entry Age normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

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 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. The full amortization payment for the 2015 assumption changes is phased in over a period of 5 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

3.25% 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 actuarial liability in the funding 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 for certain members, an assumption was developed as of June 30, 2021 for the probability and amount of Supplemental COLA for each future year. A full Supplemental COLA will be paid to all retired members, and their beneficiaries, who were retired effective July 1, 2021. The table below shows the net assumed Supplemental COLA for members with a 2.00% basic COLA for sample years.

Assumed S upplemental C OLA f or M embers w ith a 2 .00% B asic C OLA Fiscal years
2023 0.75 % 0.70 %
2025 0.75 0.70
2027 0.75 0.60
2029 0.75 0.60
2031 0.75 0.60
2033+ 0.75 0.50
96 - P rop C
Before 1 1/6/96
or A fter Prop C

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
58 (Continued)
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 for all future years.

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 2.16% to the extent they are not available. The single equivalent rate used to determine the total pension liability as of June 30, 2021 was 7.40%.

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.

F
iscal Year 2021
SFERS Plan The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of the June 30, 2020 (measurement date) and June 30, 2019 (measurement date).

The discount rate used to measure the total pension liability as of June 30, 2020 was 7.40%. The projection of cash flows used to determine the discount rate assumed that SFERS plan member 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. That policy includes contributions equal to the employer portion of the Entry Age normal costs for members as of the valuation date, a payment for the expected administrative expenses, and an amortization payment on the unfunded actuarial liability.

Asset C lass Target A llocation L ong-Term E xpected Real R ate o f R eturn Global Equity 37.0 % 4.2 %
Private Equity 23.0 7.9
Private Credit 10.0 5.1
Real Assets 10.0 5.1
Hedge Funds/Absolute Returns 10.0 2.9
Treasuries 8.0 0.0
Liquid Credit 5.0 2.3
Leverage -3.0 0.1
Total 100.0
Long-Term Expected R eal R ates o f R eturn

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
59 (Continued)
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 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. The full amortization payment for the 2015 assumption changes is phased in over a period of 5 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 actuarial liability in the funding valuation do not anticipate any future Supplemental COLAs, the projected contributions for the determination of the discount 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 for certain members, an assumption was developed as of June 30, 2020 for the probability and amount of Supplemental COLA for each future year. There were no excess earnings during the fiscal year ending June 30, 2020; consequently, no Supplemental COLA will be paid effective July 1, 2020. The table below shows the net assumed Supplemental COLA for members with a 2.00% basic COLA for sample years.

Assumed S upplemental C OLA f or M embers w ith a 2 .00% B asic C OLA Fiscal y ears
2022 0.75 % 0.19 %
2024 0.75 0.27
2026 0.75 0.30
2028 0.75 0.33
2030 0.75 0.35
2032 0.75 0.37
2034+ 0.75 0.38
96 - Prop C
Before 1 1/6/96
or A fter Prop C

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
60 (Continued)
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 for all future years.

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 was 7.40%.

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.

Sensitivity of Proportionate Share of the Net Pension Liability (NPL)/Net Pension Asset (NPA) to Changes in the Discount Rate
proportionate share of the net pension liability/(asset) for the SFERS Plan, calculated using the 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.

Fiscal Year 2022
Fiscal Year 2021
Employer
1% Decrease Share
of NPL @ 6.40%
Share of NPA
@ 7.40%
1% Increase Share of
NPA @ 8.40%
Wastewater 32,504$ (48,770) (115,868)
June 30, 2021 (measurement period)
Employer
1% Decrease Share
of NPL @ 6.40% Share of NPL @ 7.40%
1% Increase Share o f
NPL @ 8.40%
Wastewater 183,436$ 103,746 37,907

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
61 (Continued)
(b) Other Post-Employment Benefits
The Enterprise participates in employer defined benefit other postemployment benefits plan (the Plan). The Plan is maintained by the City and Health Service System. The 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. The City does not issue a separate report on its other post- employment benefit plan.

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. proportionate share percentage of the Plan was determined based on its -as-you- for the year ended June 30, 2021. The
proportionate sha as of June
30, 2021 and 2020 measurement dates was 1.33%.

Benefits
Permanent full-time and elected employees are eligible to retire and receive postretirement health insurance benefits when they are eligible for retirement benefits from the City and County of San 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 Retirement2 Any age with 10 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.

Valuation Date (VD) June 30, 2020, updated to June 30, 2021 Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
Valuation Date (VD) June 30, 2020
Measurement Date (MD) June 30, 2020
Measurement Period (MP) July 1, 2019 to June 30, 2020
San F rancisco Health Service System R etiree Plan - Single E mployer Fiscal year 2 022
Fiscal year 2 021

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
62 (Continued)
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.

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.

Contributions
Benefits provided under the Plan are -as-you-
under the City Charter, active officers and employees of the City who commenced employment on or after January 10, 2009, shall contribute to the Retiree Health Care Trust Fund (Trust Fund) a percentage of compensation not to exceed 2% of pre-tax compensation. The City shall contribute 1% of compensation for officers and employees who commenced employment on or after January tion of the Trust Fund is
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 Trust Fund.

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 shall contribute

0.25% of compensation into the Trust Fund 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 shall contribute an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment on or before January 9, 2009. When GASB Actuary
contribution shall cease, and officers and employees will each contribute 50% of the maximum 1% of pre-tax compensation.

Additional or existing contribution requirements may be established or modified by amendment to For the fiscal years ending June 30, 2022 and 2021, -as-you- plus a contribution of $41,841 and $39,555 to the Retiree Healthcare Trust Fund, respectively -as-you- 211,025 for a total contribution of $252,866 for the fiscal year ending June 30, 2022, and $206,439 for a total contribution of $245,994 for the fiscal year ending June 30, 2021. The Enterprise s proportionate share of the contributions for fiscal year 2022 was $3,365, and for fiscal year 2021 was $3,263 and will be recognized as a reduction of the net OPEB liability in the subsequent fiscal period.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
63 (Continued)
OPEB Liabilities, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB Fiscal Year 2022
As of June 30, 2022, the City reported net OPEB liabilities related to the Plan of $3,691,122. The 2 was $49,123.

For the year ended June 30, 2022 272,001.

Amortization of th
5,364.

As of June 30, 2022 ows
and inflows of resources related to OPEB from the following sources:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in OPEB expense as follows:

Wastewater #REF!
D eferred
Outflows o f
Resources
D eferred
Inflows o f
Resources
Contributions subsequent to measurement date 3,365$ -$ Differences between expected and actual experience 1,476 7,564 Changes in assumptions 2,076 -
Net difference between projected and actual earnings
on plan investments - 930
Change in proportion 5,981 146
Total 12,898$ 8,640$
Year e nded J une 3 0:
2023 291$
2024 288
2025 301
2026 231
2027 95
Thereafter (313)
Total 893 $

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
64 (Continued)
Fiscal Year 2021
As of June 30, 2021, the City reported net OPEB liabilities related to the Plan of $3,823,334. The 1 was $50,711.

For the year ended June 30, 2021 20,684.
was a credit of $6,174
to expense.

As of June 30, 2021
outflows/inflows of resources related to OPEB from the following sources:

Amounts reported as deferred outflows, exclusive of contributions made after the measurement date, and deferred inflows of resources will be amortized annually and recognized in OPEB expense as follows:

Wastewater #REF!
D eferred
Outflows o f
Resources
D eferred
Inflows o f
Resources
Contributions subsequent to measurement date 3,263$ -$ Differences between expected and actual experience 1,839 7,265 Changes in assumptions 2,567 -
Net difference between projected and actual earnings
on plan investments 33 -
Change in proportion 7,407 -
Total 15,109$ 7,265$
Year e nded J une 3 0:
2022 829$
2023 849
2024 846
2025 859
2026 788
Thereafter 410
Total 4,581$

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
65 (Continued)
Actuarial Assumptions
Fiscal Year 2022
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2021 (measurement date) is provided below:

The mortality rates in the base tables are projected generationally from the base year using the MP-2019 projection scale.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
66 (Continued)
Fiscal Year 2021
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2020 (measurement date) is provided below:

The mortality rates in the base tables are projected generationally from the base year using the MP-2019 projection scale.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
67 (Continued)
Sensitivity of Liabilities to Changes in the Healthcare Cost Trend Rate and Discount Rate ability
lower or 1% higher than the current rate:

Discount Rate
Fiscal Year 2022
The discount rate used to measure the Total OPEB Liability as of June 30, 2021 was 7.0%. Based on the assumption that plan member contributions will continue to be made at the rates specified in the Charter, it was determined
than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Fiscal Y ear 2 022
Employer -1.00% Healthcare Trend 1.00%
Wastewater $ 41,812 $ 49,123 $ 58,236 Fiscal Y ear 2 021
Employer -1.00% Healthcare Trend 1.00%
Wastewater $ 43,846 $ 50,711 $ 59,657

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
68 (Continued)
The long-term expected rate of return on OPEB plan investments was 7.0% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions f allocation. Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:
et OPEB liability
higher than the current rate:

Fiscal Year 2021
The discount rate used to measure the Total OPEB Liability as of June 30, 2020 was 7.0%. Based on the assumption that plan member contributions will continue to be made at the rates specified ected fiduciary net position will be greater
than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Asset C lass
Equities
U.S. Large Cap 28.0% 8.2%
U.S. Small Cap 3.0% 9.5%
Developed Market Equity (non-U.S.) 15.0% 8.9%
Emerging Market Equity 13.0% 11.0%
Credit
Bank Loans 3.0% 4.4%
High Yield Bonds 3.0% 4.4%
Emerging Market Bonds 3.0% 4.3%
Rate S ecurities
Investment Grade Bonds 9.0% 1.9%
Long-term Government Bonds 4.0% 3.2%
Short-term Treasury Inflation Protected Securities 4.0% 1.5% Private M arkets
Private Equity 5.0% 13.0%
Core Private Real Estate 5.0% 6.2%
Risk M itigating S trategies
Global Macro 5.0% 4.4%
Total 100.0%
Long-term
Expected Real
Rate o f R eturn
Target
Allocation
Employer
1% D ecrease S hare
of N OL @ 6 .00%
Discount R ate @

7.00%
1% I ncrease S hare
of N OL @ 8 .00%
Wastewater 57,442$ 49,123$ 42,328$ June 3 0, 2 021 (measurement p eriod)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
69 (Continued)
The long-term expected rate of return on OPEB plan investments was 7.0% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capi
allocation. Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

The asset allocation targets summarized above have a 20-year return estimate of 6.90%, which was weighted against a 10-year model estimating a 6.93% return, resulting in the ultimate long- term expected rate of return of 7.00%.

The following presents the En
or 1%
higher than the current rate:

The City issues a publicly available financial report that includes the complete note disclosures obligations. The report may be obtained by writing to the City and County of San Francisco, Office of the Controller, 1 Dr. Carlton B. Goodlett Place, Room 316, San Francisco, California 94102, or by calling (415) 554-7500.

Employer
1% D ecrease S hare
of N OL @ 6 .00%
Discount R ate @

7.00%
1% I ncrease S hare
of N OL @ 8 .00%
Wastewater 58,848$ 50,711$ 44,067$

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
70 (Continued)
(11) Related Parties
Various common costs incurred by the Commission are allocated among the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF, and the Water Enterprise. The allocations are based on the incurred by each Enterprise and the information available. The administrative costs of $32,212 or

30.0%, which included COVID-19 Project expenses, and $29,457 or 30.0% were allocated to the Enterprise for the years ended June 30, 2022 and 2021, respectively.

The City performs certain administrative services such as maintenance of accounting records and investment of cash for all fund groups within the City. The various funds are charged for these services The Enterprise purchases electricity from Hetch Hetchy Power at market rates. This amount, totaling $11,887 and $10,122 for the years ended June 30, 2022 and 2021, respectively, has been included in services provided by other departments in the accompanying financial statements.

The Enterprise purchases water from Water Enterprise at retail rates. This amount, totaling $1,819 and $1,308 for the years ended June 30, 2022 and 2021, respectively, has been included in services provided by other departments in the accompanying financial statements.

The Enterprise provides sewer services to other City departments at non-residential rates established by the Commission, and through the Customer Services Bureau, bills and collects sewer service charges on behalf of the Enterprise.
f Public Works provides certain engineering and other services to the Enterprise and charges amounts designed to recover its costs. These services are primarily related to street cleaning, engineering, building repair, and sewer repair. These amounts totaling approximately $13,099 and $15,088 for the years ended June 30, 2022 and 2021, respectively, have been included in services provided by other departments in the accompanying financial statements.

A variety of other City departments provide services such as purchasing, legal, data processing, telecommunications, and human resources to the Enterprise and charge amounts designed to recover $12,840 and $11,795 for the years
ended June 30, 2022 and 2021, respectively, have been included in services provided by other departments in the accompanying financial statements.

As of June 30, 2022 and 2021, the Enterprise has payables in the amount of $629 and $739, respectively, which is associated with the SFPUC Headquarters Living Machine system. As of June 30, 2022 and 2021, the Enterprise has payable of $0 to the
for legal services
provided.

As of June 30, 2022, the Enterprise has interfund receivable of $224, of which $118 from DPW for custom work projects and $106 from the Academy of Sciences for sewer charges. In fiscal year 2021, the Enterprise has interfund receivable of $261, of which $237 from the DPW and $24 from the San Francisco Port for the Islais Creek Project.

As of June 30, 2022, the Enterprise has receivables due of $1,015, consisting of $1,014 from the Treasure Island Development Authority for capacity charges and $1 from the Office of Community

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
71 (Continued)
Investment and Infrastructure (OCII) for the Candlestick Point Project. In fiscal year 2021, the Enterprise has receivable of $20 due from OCII.
-year lease agreement with the San Francisco Recreation and Parks Department, for the use of parking spaces for its fleet of vehicles at the Civic Center Garage, commenced on February 1, 2011. Total payment under this agreement is $6,274, which was fully made as of fiscal year 2015. The expenses and prepayments among the three SFPUC Enterprises are based on 525 Golden Gate occupancy. As of June 30, 2022
$22 and $1,145, respectively, and as of June 30, 2021 were $21 and $1,167, respectively. -year lease agreement with the San Francisco Port Commission, for the use of approximately 4,833 square feet of land located within Seawall Lot 345 and within the public right-of-way on Terry A.

Francois Boulevard and on Illinois Street, commenced on September 1, 2018. SFPUC intends to use the premises for the reconstruction of the Mariposa Pump Station and Force Main Improvements. Total payment under this agreement is $502, which was fully made as of fiscal year 2019. As of June 30, 2022, prepayment were $17 and $438, respectively, and as of June 30, 2021 were $17 and $455, respectively.
(12) Risk Management
T -insured (i.e., self-retention) and insured
exposures at risk. Risk assessments and purchasing of insurance coverage are collaboratively risk for
self-insurance. Based on this analysis, internal mitigation strategies and financing through a self- Office, administers, adjusts, settles, defends, and pays claims from budgeted resources (i.e., pay-as-you- go fund). When economically more viable or when required by debt financing covenants, the Enterprise obtains commercial insurance. At least annually, the City actuarially determines general liability and coverage, with certain minor exceptions, such as a sub-limit for fire-sprinkler leakage due to earthquake under the SFPUC Property Insurance program. In the past three years, there was no settlements that exceeded insurance coverage.

Risk Types
(a) General Liability Self-Insured
(b) Self-Insured Through City-wide Pool
(c) Property Purchased Insurance and Self-Insured
(d) Public Officials Liability Purchased Insurance
(e) Employment Practices Liability Purchased Insurance
(f) Cyber Liability Purchased Insurance
(g) Crime Purchased Insurance
(h) Electronic Data Processing Purchased Insurance and Self-Insured (i) Surety Bonds Purchased and Contractual Risk Transfer (j) Errors and Omissions Purchased and Contractual Risk Transfer (k)
Contractual Risk Transfer
Coverage Approach

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
72 (Continued)
(a) General Liability
Through coordination with the Controller
risk exposure is actuarially determined and is addressed through pay-as-you-go funding as part of the budgetary process. Associated costs and estimates are recorded as expenses as required under GAAP for financial statement purposes for both the Enterprise and the City and County of San Annual Comprehensive Financial Report. The claim expense allocations are determined based on actuarially determined anticipated claim payments and the projected timing of disbursement.

The changes for the general liability (damage claims) for the years ended June 30, 2022 and 2021 were as follows:
(b)
according to a formula based on the following: (i) the dollar amount of claims; (ii) yearly projections of payments based on historical experience; and (iii) the si compensation reforms have resulted in budgetary savings in recent years. The City continues to develop and implement improved programs, such as return-to-work programs, to lower or mitigate and duty modification for injured employees with medical restrictions so return to work can occur as soon as possible.
ended June 30, 2022 and
2021 were as follows:
(c) Property
currently under construction, the property is part of revenue-generating operations, the property is of high value, or is mission-critical in nature. During the course of construction, the Enterprise requires each contractor to provide its own insurance, while ensuring the full scope of work be covered with Enterprise performs an assessment to determine whether liability/loss coverage will be obtained through the commercial property policy or self-insurance. The majority of property scheduled in the insurance program is for either: (1) revenue generating facilities, (2) debt-financed facilities, (3) Beginning of Claims paid and End of
Fiscal years year Claims changes in estimates year
2022 16,713 $ 8,812 (13,480) 12,045
2021 15,891 6,428 (5,606) 16,713
Beginning o f Claims a nd c hanges Claims End o f
Fiscal years year in estimates paid year
2022 6,582$ 3,207 (2,243) 7,546 2021 6,051 2,616 (2,085) 6,582

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
73 (Continued)
mandated coverage to meet statutory requirements for bonding of various public officials, or (4) high-value, mission-critical property or equipment.
(d) Public Officials Liability
All Enterprise public officials with financial oversight responsibilities are provided coverage through a commercial Public Officials Liability Policy.
(e) Employment Practices Liability
A Policy is retained to protect against employment-related claims and liabilities. (f) Cyber Liability
A Policy is retained to protect against cyber-related claims and liabilities. (g) Crime
The Enterprise also retains a Commercial Crime Policy, in lieu of bonding its employees, to provide coverage against liabilities or losses due to third-party crime or employee fraud. (
h) Electronic Data Processing
The Electronic Data Processing policy protects selected high-value electronic property in case of damage or loss.
(i) Surety Bonds
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.
(
j) Errors and Omissions
Errors and omissions, also known as Professional Liability, are commonly transferred through contract to the contracted professional, or retained through self-insurance on a case-by-case basis depending on the size, complexity, or scope of construction or professional service contracts.

Examples of such contracts are inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers. (
k)
required to be provided by the contractor on all construction projects for the full value of construction.
(13) Commitments and Litigation
(a) Commitments
As of June 30, 2022 and 2021, the Enterprise has outstanding commitments with third parties of $1,037,607 and $633,255, respectively, for various capital projects and other purchase agreements for materials and services.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
74 (b) Grants
Grants that the Enterprise received are subject to audit and final acceptance by the granting agency.

Current and prior year costs of such grants are subject to adjustment upon audit. (c) Litigation
The Enterprise is a defendant in various legal actions and claims that arise during the normal course of business. The final disposition of these legal actions and claims is not determinable. However, in the opinion of management, the outcome of any litigation of these matters will not have a material effect on the financial position or changes in net position of the Enterprise. (
d) Environmental Issue
As of June 30, 2022, and 2021, the Enterprise recorded $8,060 and $7,800 in pollution remediation liability, respectively. The increase of $260 in pollution remediation liability in fiscal year 2022 is due to violation penalties of $240 at the Southeast Plant for the discharge of secondary treated and disinfected wastewater and $20 at the Oceanside Plant for failure to meet the District permit condition-imposed standards relating to gas released into the atmosphere from digesters. As of June 30, 2022, the pollution remediation liability of $8,060 consisted of $7,800 for the Yosemite Creek toxic sediments and $260 aggregate violation fines at the Southeast Plant and Oceanside Plant. In fiscal year 2021, the pollution liability of $7,800 was based on cleanup cost estimates for the toxic sediments at Yosemite Creek.
(
14) Subsequent Events
(a) Wastewater Revenue Bonds, Series 2022B Issuance
On July 6, 2022, the SFPUC issued its San Francisco Wastewater Revenue Bonds, 2022 Sub-Series B
outstanding 2013 Series A and 2013 Series B Wastewater Revenue Bonds. (b) Wastewater Interim Funding Program Credit Providers On July 7, 2022, the SFPUC entered into a $75 million Revolving Credit and Term Loan Agreement with TD Bank N.A. (TD Bank) (Series A-4) which expires July 6, 2027. The Series A-4 Revolving Credit and Term Loan Agreement replaced the $75 million Revolving Credit and Term Loan Agreement from the Toronto Dominion Bank which expired July 8, 2022. (
c) Fourth Extension of Shutoff, Liens, and Fines Moratorium for COVID-19 Relief On September 13, 2022, the Commission approved to extend moratorium on shutoff of sewer service for residents in the City through June 30, 2023 and granted the General Manager discretion to restart severance and liens processes to multifamily residential accounts carrying balances greater than $25 which are 90 days or more past due.

Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards
The Honorable Mayor and Board of Supervisors
City and County of San Francisco: We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of San Francisco Wastewater Enterprise (the Enterprise), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the basic
financial statements, and have issued our report thereon dated January 27, 2023.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Enterprise internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Enterprise internal control. Accordingly, we do not express an opinion on the effectiveness of the internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

KPMG LLP
Suite 1400
55 Second Street
San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

San Francisco, California
January 27, 2023
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SAN FRANCISCO WATER ENTERPRISE
Table of Contents
Page
Independent Auditors’ Report 1
Management’s Discussion and Analysis (Unaudited) 3
Basic Financial Statements:

Statements of Net Position 17
Statements of Revenues, Expenses, and Changes in Net Position 18 Statements of Cash Flows 19
Notes to Financial Statements 21
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 82
Independent Auditors Report
The Honorable Mayor and Board of Supervisors
City and County of San Francisco:

Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the San Francisco Water Enterprise (the Enterprise), as of and for the years ended June 30, 2022 and 2021, and the related notes to the financial statements, which collectively comprise the Enterprise
ancial statements for the years then ended as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Enterprise, as of June 30, 2022 and 2021, and the changes in its financial position and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Enterprise and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter
As discussed in Note 1, the financial statements of the Enterprise are intended to present the financial position, the changes in financial position, and, where applicable, cash flows of only that portion of the business-type activities and each major fund of the City and county of San Francisco, California that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City and County of San Francisco, California, as of June 30, 2022 and 2021, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors
Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement
opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS andGovernment Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from

KPMG LLP
Suite 1400
55 Second Street
San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 2 fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS andGovernment Auditing Standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Enterprise
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Required Supplementary Information
U.S. generally accepted accounting principles require that the management s discussion and analysis be
presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management
s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2023 on our consideration of the Enterprise
with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Enterprise internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Enterprise reporting and compliance.

San Francisco, California
January 27, 2023

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
3 (Continued)
This section presents management’s analysis of the San Francisco Water Enterprise’s (the Enterprise) financial condition and activities as of and for the fiscal years ended June 30, 2022 and 2021.

Management’s Discussion and Analysis (MDA) is intended to serve as an introduction to the Enterprise’s financial statements. This information should be read in conjunction with the audited financial statements that follow this section. All dollar amounts, unless otherwise noted, are expressed in thousands of dollars.

The information in this MDA is presented under the following headings:

Organization and Business
Overview of the Financial Statements
COVID-19
Financial Analysis
Capital Assets
Debt Administration
Rates and Charges
Request for Information
Organization and Business
The San Francisco Public Utilities Commission (SFPUC or the Commission) is a department of the City and County of San Francisco (the City) that is responsible for the maintenance, operation, and development of three utility enterprises: Water (the Enterprise), Hetch Hetchy Water and Power and CleanPowerSF, and Wastewater. The Enterprise collects, transmits, treats, and distributes high-quality drinking water to a total population of approximately 2.7 million people, including retail customers in the City and wholesale customers located in San Mateo, Santa Clara, and Alameda Counties. The Enterprise sold approximately 181 million gallons of water per day in the year ended June 30, 2022. Approximately three-quarter of the water delivered by the Enterprise is to wholesale customers. Retail customers use the remaining one- quarter and are primarily San Francisco consumers, including residential, commercial, industrial, and governmental users. Wholesale customers include cities, water districts, one private utility, and one non- profit university. Service to these customers is provided pursuant to the 25-year Amended and Restated Water Supply Agreement (WSA), commenced on July 1, 2009, which established the basis for determining the costs of wholesale service.

O
verview of the Financial Statements
The Enterprise’s financial statements include the following:

Statements of Net Position present information on the Enterprise’s assets, deferred outflows, liabilities, and deferred inflows as of year-end, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Enterprise is improving or worsening.

While the Statements of Net Position provide information about the nature and amount of resources and obligations as of year-end, the Statements of Revenues, Expenses, and Changes in Net Position present the results of the Enterprise’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which the Enterprise has successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in these

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
4 (Continued)
statements from some items that will result in cash flows in future fiscal periods, such as delayed collection of operating revenues and the expenses of employee earned but unused vacation leave.

The Statements of Cash Flows present changes in cash and cash equivalents resulting from operational, capital financing, non-capital financing, and investing activities. These statements summarize the annual flow of cash receipts and cash payments, without consideration of the timing of the event giving rise to the obligation or receipt and exclude non-cash accounting measures of depreciation or amortization of assets.

The Notes to Financial Statements provide information that is essential to a full understanding of the financial statements that is not displayed on the face of the financial statements.

COVID-19
On February 25, 2020, the City’s Mayor issued a proclamation declaring a local emergency to exist in connection with the imminent spread within the City of the novel coronavirus (“COVID-19”). On March 16, 2020, the City’s Health Officer issued a stay safe at home order, Health Officer Order No. C19-07 (the “Stay Safe At Home Order”), requiring most people and City employees to remain in their homes subject to certain exceptions including obtaining essential goods such as “food and necessary supplies”, and requiring the closure of nonessential businesses. In addition, Section 2 of the second supplement to the emergency proclamation authorized the SFPUC to suspend the (a) discontinuation or shut off of water service for residents and businesses in the City for non-payment of water and sewer bills and (b) the imposition of late payment penalties or fees for delinquent water and/or sewer bills through July 11, 2020. The proclamation was extended on December 8, 2020 through June 30, 2021 and then again on April 27, 2021, through March 31, 2022. The suspension was extended again to July 31, 2022 for shut off of water service and to June 30, 2023 for late payment penalties. This proclamation did not have a material effect on the operations of the Water enterprise.

F
inancial Analysis
Total assets exceeded total liabilities by $727,275.

Net position decreased by $17,946 or 2.8% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization increased by $29,795 or 0.5% to $5,617,594.

Current and other assets increased by $7,239 or 0.9% mainly due to net pension asset.

Operating revenues decreased by $9,319 or 1.6% to $573,117.

Operating expenses decreased by $46,996 or 10.5% to $401,786.

Total assets exceeded total liabilities by $418,167.

Net position increased by $8,502 or 1.3% during the fiscal year.

Capital assets, net of accumulated depreciation and amortization increased by $57,254 or 1.0% to $5,587,799.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
5 (Continued)
Current and other assets increased by $31,110 or 4.4% mainly due to bond proceeds from the issuance of 2020 Series ABCD bonds.

Operating revenues decreased by $1,739 or 0.3% to $581,612.

Operating expenses increased by $50,726 or 12.7% to $448,843.

The following table summarizes the Enterprise’s changes in net position.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
6 (Continued)
For the period ended June 30, 2022, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $633,418. Total net position decreased from prior year by $17,946 or 2.8% (see Table 1). The decrease in net position was the result of an increase of $22,208 in liabilities and deferred inflows of resources offset by an increase of $4,262 in assets and deferred outflows of resources.

Current and other assets are primarily comprised of restricted and unrestricted balances of cash, receivables for water deliveries and services, interfund receivables due from other governmental agencies, and inventory.

During the fiscal year 2022, current and other assets increased by $7,239 or 0.9%. The increases included $100,407 in net pension asset based on actuarial estimates, $6,276 in prepaid charges advances and other receivables mainly for a settlement from PG&E related to damages on Casitas Avenue in San Francisco, $6,267 in charges for services attributed to more billings, net of decrease in allowance for doubtful accounts due to utility arrearage relief payment received from the State as Federal pass-through from the California Water and Wastewater Arrearages Payment Program (CWWAPP), $865 in inventory due to more purchases than issuances during the fiscal year, $167 in interest, leases and other receivables due to higher interest rates, and $159 in restricted interest and other receivables. These increases were offset by decreases of $60,453 in restricted and unrestricted cash and investments mainly due to debt principal and interest payments, capital projects spending, payments for salaries and goods and services, $41,993 reimbursement from the State Water Resources Control Board (SWRCB) State Revolving Funds Loan relating to the SF Recycled Water project, $2,945 in leases receivable from the implementation of Governmental Accounting Standards Board (GASB) Statement No. 87 - Leases, $1,425 in lease asset from the implementation of GASB Statement No. 87 - Leases, $70 mainly for custom work projects due from the Department of Public Works, and $16 for a Federal grant of culvert repairs relating to the Santa Clara Unit Lightning Complex fires.

Capital assets, net of accumulated depreciation and amortization, increased by $29,795 or 0.5% mainly due to Water Main Replacement, Treasure Island Well, Serramonte Well and all other well construction, and capital improvement activities. The largest portion of the Enterprise’s net position of $537,644 or 84.9% represents net investment in capital assets (see Capital Assets section of the MDA for more information), which increased by $20,342 or 3.9% from prior year’s $517,302. The change was explained by an increase o f $ 2 9 , 7 9 4 i n c a p i t a l a s s e t s m a i n l y f r o m i n c r e a s e d b u i l d i n g s , s t r u c t u r e s a n d i m p r o v e m e n t s , o f f s e t b y a increase of $9,452 in liabilities related to capital assets mainly from bond principal repayment.

Deferred outflows of resources decreased by $32,772 due to decreases of $15,510 from amortization for unamortized loss on refunding, $11,945 relating to pensions based on actuarial reports, and $5,317 from OPEB obligations based on actuarial estimates.

Total liabilities decreased by $222,117 which was due to decreases of $216,417 in pensions based on actuarial report, $133,840 in outstanding revenue bonds from principal repayments, $4,656 from OPEB obligations due to actuarial report, $3,025 in certificates of participation mainly due to principal repayments, $1,381 in lease liability from the implementation of GASB Statement No. 87 - Leases, $757 in interest payable mainly due to lower bonds outstanding, and $654 in general liability based on actuarial report. These decreases were offset by increases of $100,435 in commercial paper from additional principal issuances, $14,354 in State Revolving Funds Loan payable due to additional loans related to the SF Westside Recycled Water project, $4,759 in restricted and unrestricted payables due to higher year end accruals as compared to prior year, $463 in accrued payroll, vacation and sick leave due to actuarial

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
7 (Continued)
entries, $171 in unearned revenues mainly for deposits on custom work, and $145 in workers’ compensation based on actuarial estimates. The Enterprise owed the wholesale customers $79,150, an increase of $18,286 which was mainly due to annual revenues from the wholesale customers exceeding their share of expenditures. This amount was recorded as a liability in accordance with the 2009 Water Supply agreement. See Note 10, Water Supply Agreement, for additional details.

Deferred inflows of resources increased by $244,325 due to an increase of $243,819 related to pensions and $4,033 from OPEB benefits based on actuarial reports, offset by a decrease of $3,527 from leases due to the implementation of GASB Statement No. 87 - Leases.

For the period ended June 30, 2021, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $649,517. Total net position increased from prior year by $8,502 or 1.3% (see Table 1). The increase in net position was the result of an increase of $107,058 in assets and deferred outflows, offset by a net increase of $98,556 in liabilities and deferred inflows of resources.

Current and other assets are primarily comprised of restricted and unrestricted balances of cash, receivables for water deliveries and services, interfund receivables due from other governmental agencies, and inventory. They also include receivables, which represent cumulative amounts due from the wholesale cu st o me rs to m at c h r ev e nu es w it h t he E n t er pr i se’ s c o sts of p r ov i di ng s erv i ce ( th e B al a nc i ng Ac co un t ), i n accordance with the provisions set forth in the WSA effective July 1, 2009. Balances are applied to future year rates. As of June 30, 2021, the Enterprise owed the wholesale customers $60,864, which was mainly due to higher water demand by the wholesale customers. This amount was recorded as a liability in accordance with the 2009 agreement. See Note 10, Water Supply Agreement, for additional details.

During the fiscal year 2021, current and other assets increased by $31,110 or 4.4%. The increases included $57,567 in restricted and unrestricted cash and investments mainly due to the issuance of the 2020 Series ABCD bonds, $2,372 in prepaid charges advances and others mainly for prepaid expenses of multiple software licensing and membership fees, $209 in restricted interest and other receivables, and $160 in inventory due to more purchases than issuances during the fiscal year. The increases were offset by decreases of $23,725 from the State Water Resources Control Board (SWRCB) State Revolving Funds Loan relating to the SF Recycled Water project mainly from reimbursements received for prior year receivable, $4,470 in charges for services due to more collections than billings and an increase in allowance for doubtful accounts (allowance for doubtful accounts increased by $2,934 primarily due to the Mayor’s COVID-19 proclamation suspending shutoff of water service and collection of past due accounts), $994 in interest receivable mainly due to lower interest rates and higher cash distributions than interest earnings, $7 due to cash received from other governments for grants relating to water efficiency, and $2 mainly due to collections from the Department of Public Works (DPW) for custom work projects.

Capital assets, net of accumulated depreciation and amortization, increased by $57,254 or 1.0% mainly due to San Andreas Pipeline No. 2 and San Francisco Groundwater Supply construction and capital improvement activities. The largest portion of the Enterprise’s net position of $517,302 or 79.6% represents net investment in capital assets (see Capital Assets section of the MDA for more information), which decreased by $10,554 or 2.0% from prior year’s $527,856. The change was explained by an increase of $67,808 in liabilities related to capital assets mainly from the issuance of 2020 Series ABCD and 2020 Series EFGH bonds, offset by an increase of $57,254 in capital assets in buildings, structures, and improvements and construction in progress from depreciation.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
8 (Continued)
Deferred outflows of resources increased by $18,694 due to increases of $10,802 for unamortized loss on refunding (the result of a $27,010 increase from the issuance of 2020 Series EFGH bonds, offset by a $15,156 decrease from amortization and $1,052 from refunding of the 2010 Series D, 2011 Series D and 2012 Series C bonds), and $10,179 from OPEB obligations based on actuarial reports. These increases were offset by a $2,287 decrease relating to pensions based on actuarial reports.

Total liabilities increased by $119,022 or 2.1% which is due to increases of $299,480 in outstanding revenue bonds mainly due to the issuance of 2020 Series ABCD and 2020 Series EFGH bonds, $38,284 in net pension liability based on actuarial report, $34,136 increase in State Revolving Funds Loan payable due to additional loans relating to the SF Westside Recycled Water project, $25,956 in general liability based on actuarial report, $3,650 in accrued payroll, vacation and sick leave mainly due to actuarial estimates, 3% increase of cost of living adjustment (COLA), and more days in current year-end payroll accrual compared to prior year-end accrual, $2,921 in restricted and unrestricted payables due to higher accruals as compared to prior year mainly for the Information Technology project and 19 th Ave.

Infrastructure Improvement project, and $792 in unearned revenues mainly due to additional customer credit balances from overpayments. These increases were offset by decreases of $256,492 in commercial p ap e r p r i ma r i l y d u e t o r e f un d i n g fr om t h e 2 0 2 0 S e r i e s A BC D b o n ds , $ 1 4 , 9 1 3 i n o t he r p o s t - e mp l o y me n t benefits obligations from actuarial estimates, $6,557 in interest payable mainly due to refunding from the 2020 Series EFGH Bonds, $3,993 in the Wholesale Balancing Account due to higher demand from the wholesale customers (see Note 9 for details), $2,916 in certificates of participation from repayments and amortization of premium, $674 in due to other City departments from payments made for legal services provided by the City Attorney and projects performed by the Department of Public Works for Sidewalk Inspection and Repair projects, $346 in workers’ compensation based on actuarial estimates, and $306 in pollution remediation liability as a result of additional expenditures incurred for the Lake Merced Pacific Rod and Gun Club and 17
th and Folsom sites (see Note 13(d) for details).

Deferred inflows of resources decreased by $20,466 from a $30,009 decrease related to pensions based on actuarial reports, offset by a $9,543 increase from OPEB obligations based on actuarial reports.

The following table summarizes the Enterprise’s revenues, expenses, and changes in net position.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
9 (Continued)
The Enterprise’s total revenues of $604,092 for the year represented a decrease of $25,592 or 4.1% from prior year (see Table 2). Decreases included $12,270 from interest and investment loss, $10,780 from charges for services, and $4,003 from other non-operating revenues. These decreases were offset by increases of $1,431 in other operating revenues, and $30 in rents and concessions.

Charges for services were $539,526, a decrease of $10,780 or 2.0% mainly due to 4.1% reduced consumption, offset by an adopted rate increase of 7.0% for retail customers beginning July 1, 2021. Rents and concessions were $13,765, an increase of $30 or 0.2% mainly due to a lease transfer fee and new tenants. Other operating revenues were $19,826, an increase of $1,431 or 7.8% mainly from increased capacity fee permits issued and a 7.0% adopted rate increase for retail customers. Interest and investment loss was $10,896, a decrease of $12,270 or 893.0% mainly due to unrealized losses as a result of the decline in market value of investments due to rising interest rates. Other non-operating revenues were $41,871, a decrease of $4,003 or 8.7% mainly due to $15,000 in State revolving fund (SRF) grant recognized in the prior year, $1,477 decrease in gain from sale of fixed assets, $292 in federal bond subsidies, offset by increases of $6,750 from a PG&E settlement and $5,929 from a water utility arrearages relief grant and $87 in other non-operating revenues.

The Enterprise’s total expenses were $606,407, a decrease of $21,479 or 3.4%. Operating expenses were $401,786, a decrease of $46,996 or 10.5%, the result of decreases of $49,143 in personnel services mainly due to decreases in pension obligations based on actuarial report, $5,357 in general and administrative and other expenses due to higher judgement and claims in prior year, and $572 in contractual services mainly from other current expenses and subscriptions. These decreases were offset by increases of $3,072 in services provided by other departments mainly for higher water assessment fees paid to Hetch Hetchy Water and higher gas and electric charges paid to Hetch Hetchy Power, $2,544 in materials and supplies mainly for water treatment supplies, and $2,460 in depreciation due to additional capital assets placed into service. Interest expenses increased by $28,990 due to reduced bond interest capitalization resulting from the implementation of GASB 89, Accounting for Interest Cost Incurred Before the End of a Construction Period, in fiscal year 2022. Amortization of bond premium, discount, refunding loss and issuance costs increased by $2,093 due to prior year bond issuance costs. Non-operating expenses decreased by $1,380 mainly due to prior year grant payments for water conservation.

Transfers in of $15,035 from the City included $15,030 for the Earthquake Safety and Emergency Response program, and $5 from the General Fund for low income assistance programs. Transfers out of $30,666 included $30,000 to Hetch Hetchy Water to fund various Mountain Tunnel projects, $500 to DPW for the UN Plaza Large Alternative Water Source project and purchase of capital assets, $134 for the Arts Commission for the arts enrichment fund for the new CDD Headquarters, and $32 to the Office of the City Administrator for the Enterprise’s contribution to the Surety Bond Program.

The Enterprise’s total revenues of $627,826 for the year represented a decrease of $60,776 or 8.8% from prior year (see Table 2). Decreases included $48,860 from other non-operating revenues, $10,177 from interest and investment income, $2,079 from other operating revenues, and $447 from charges for service. These decreases were offset by an increase of $787 from rents and concessions.

Charges for services were $550,306, a decrease of $447 or 0.1% mainly due to an 8.8% decrease in consumption for retail customers, and the COVID-19 emergency proclamation issued by the City’s Mayor suspending collection of past due accounts, mainly resulting in a $2,945 increase in the allowance for doubtful accounts which reduced charges for services. This was offset by an adopted rate increase of 7.0%

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
10 (Continued)
for retail customers beginning July 1, 2020. Rents and concessions were $12,911, an increase of $787 or

6.5% mainly due to rent increases and increased royalty revenues. Other operating revenues were $18,395, a decrease of $2,079 or 10.2% due to reduced capacity fees and sale of water to other City d e p a r t m e n t s a s a r e s u l t o f t h e S F H e a l t h O r d e r r e l a t i n g t o C O V I D - 1 9 , o f f s e t b y a 7 . 0 % a d o p t e d r a t e increase. Interest and investment income was $340, a decrease of $10,177 or 96.8% mainly due to unrealized losses resulting from decreases in value of fixed income securities from the City Treasury pool and lower interest earned on cash balances. Other non-operating revenues were $45,874, a decrease of $48,860 or 51.6% mainly due to a prior year one-time gain of $63,600 from the property transfer of 2000 Marin Street and 639 Bryant Street offset by a $15,000 grant from the State of California for the SF Westside Recycle Water project in current year.

The Enterprise’s total expenses were $627,875, an increase of $51,735 or 9.0%. Operating expenses were $448,843, an increase of $50,726 or 12.7%, the result of increases of $27,126 in general administrative and other mainly from judgement and claims based on actuarial estimates, $12,585 in personnel services mainly due to pension obligations based on actuarial report and a 3% cost of living adjustment, $9,107 in ser v ices p r ov id e d b y ot h e r d ep ar tm ent s m ai nl y f ro m hi g her wat er asse ss me n t fe e s p ai d t o H etc h H et chy Water, $1,805 in depreciation and amortization due to additional capital assets placed into service, and $978 in contractual services mainly from equipment maintenance. These increases were offset by a decrease of $875 in materials and supplies mainly for building and construction supplies. Interest expenses decreased by $6,640, as compared to prior year, mainly due to refunded bonds. Amortization of bond premium, discount, refunding loss and issuance costs decreased by $5,970 due to the issuance of the 2020 Series EFGH revenue bonds, which refunded 2010 Series D, 2011 Series D, 2012 Series ABC, and 2017 Series ABC revenue bonds. Non-operating expenses increased by $1,679 due to increased grants and rebates awarded for water conservation relating to the Onsite Water Reuse Grant Program and community-based services.

Transfers in of $21,025 from the City included $20,040 for the Emergency Firefighting Water System and $985 from the General Fund for Native Plant Garden project and low income assistance programs.

Transfers out of $16,654 included $16,000 to Hetch Hetchy Water to fund various upcountry water projects, $622 to the Arts Commission for arts enrichment fund 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 Enterprise’s contribution to the Surety Bond Program. Capital contribution of $4,180 was received for water pipeline assets from the Department of Public Works in the current year.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
11 (Continued)
Capital Assets
The following table summarizes changes in the Enterprise’s capital assets.

The Enterprise has net capital assets of $5,617,594 invested in a broad range of utility capital assets as of June 30, 2022 (see Table 3). The investment in capital assets includes land, facilities, improvements, water treatment plants, aqueducts, water transmission, distribution mains, water storage facilities, pump stations, water reclamation facilities, machinery, and equipment. The Enterprise’s net revenue and long-term debt are used to finance capital investments. Capital assets, net of accumulated depreciation and amortization, increased by $29,795 from the prior year. Facilities, improvements, machinery, and equipment increased by $108,561 mainly due to Water Main Replacement and Treasure Island Well projects. Land increased by $9,193 mainly from the acquisition of Oak Ridge Ranch Estates and Arroyo Hondo Estates. Construction work in progress decreased by $88,348 mainly due to Water Main Replacement and Treasure Island Well projects placed into service. Intangible assets increased by $389 mainly due to Java to Groovy Conversion software and Cross-Connection Assembly asset additions.

Major additions to construction work in progress during the year ended June 30, 2022 include the following:
2022 2021 2020
2022-2021
Chan ge
2021-2020
Chan ge
Facilities, improvements, machinery, and equipment $ 5,056,747 4,948,186 4,928,438 108,561 19,748 Intangible assets 3,152 2,763 4,089 389 (1,326)
Land and rights-of-way 113,441 104,248 105,336 9,193 (1,088) Construction work in progress 444,254 532,602 492,682 (88,348) 39,920 Total $ 5,617,594 5,587,799 5,530,545 29,795 57,254 Table 3
Capital A ssets, N et o f A ccumulated Depreciation a nd A mortization As o f J une 3 0, 2 022, 2 02 1, a nd 2 02 0
SF Recycled Water Project $ 18,684
Sunol Long Term Improvements 17,655
New Water Utility Service Facilities 8,843
Watershed Right of Way Land Acquisition 7,731 Upper Alameda Creek Filter Gallery 6,347
Regional Groundwater Storage & Recovery 5,769 Water Main Replacement - WD-2739 Castro/19th/26th Streets 5,504 Auxiliary Water Supply System - Pump Station No. 2 5,116 Other project additions individually below $5,000 99,542 Total $ 175,191

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
12 (Continued)
Major land, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2022 include the following:

The WSIP delivers capital improvements that enhance the Enterprise’s ability to provide reliable, affordable, high-quality drinking water to its 27 wholesale customers and regional retail customers in Alameda, Santa Clara, and San Mateo Counties, as well as approximately 800,000 residential customers in San Francisco, in an environmentally sustainable manner. The program is structured to cost-effectively meet water quality requirements and long-term water supply objectives, as well as improve seismic and delivery reliability.

Overall, the $4.8 billion WSIP to upgrade the City of San Francisco’s regional and local drinking water systems is 99% completed with $4.8 billion of project appropriations expended through fiscal year ended June 30, 2022. 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. As of June 30, 2022, 35 local projects were completed. For regional projects, 47 projects are completed, the Alameda Creek Recapture, Regional Groundwater Storage and Recovery Phase 2A, Regional Groundwater Storage and Recovery Phase 2B projects are under construction, the Bioregional Habitat Restoration project is in close-out, and Long-Term Mitigation Endowment project is not applicable as it does not include construction. The expected completion date is February 2027. Additional details regarding the WSIP are available at https://sfpuc.org/construction-contracts/water-infrastructure-improvements.

Water Main Replacement - WD-2739 Castro/19th/26th Streets $ 15,666 Treasure Island Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 11,656 Serramonte Well - Architectural/Structural/Well 10,977 Lake Merced Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 8,851 New Water Utility Service Facilities 8,843
Colma BART Well - Architectural/Structural/Well 8,739 Serramonte Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 8,351 Colma BART Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 7,826 Treasure Island Well - Architectural/Structural/Well 7,646 Hickey Well - Architectural/Structural/Well 7,137 Auxiliary Water Supply System - Pipelines on 19th Ave 6,990 Linear Park Well - Architectural/Structural/Well 6,576 Water Main Replacement - WD-2616 Baker/Sutter Streets 6,567 Hickey Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 6,465 Funeral Home Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 6,447 Millbrae Yard Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 6,086 Linear Park Well - Civil/Electrical/I&C/Mechanical/Pipeline/Plumbing 5,736 Water Main Replacement - WD-2842 Casitas/Lansdale Ave 5,423 Lake Merced Well - Architectural/Structural/Well 5,266 Other items individually below $5,000 113,430
Total $ 264,678
See Note 4 for additional information about Capital Assets.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
13 (Continued)
The Enterprise has net capital assets of $5,587,799 invested in a broad range of utility capital assets as of June 30, 2021 (see Table 3). The investment in capital assets includes land, facilities, improvements, water treatment plants, aqueducts, water transmission, distribution mains, water storage facilities, pump stations, water reclamation facilities, machinery, and equipment. The Enterprise’s net revenue and long-term debt are used to finance capital investments. Capital assets, net of accumulated depreciation and amortization, increased by $57,524 from the prior year. Construction work in progress increased by $39,920 primarily due to additions from the SF Recycled Water project, Sunol Long Term Improvements and Regional Groundwater Storage and Recovery projects. Facilities, improvements, machinery, and equipment increased by $19,748 mainly attributable to the San Andreas Pipeline No. 2 and Water Main Replacement projects.

Intangible assets decreased by $1,326 due to $1,601 in amortization, offset by $143 addition for information technology and $132 addition for automated meter reading system. Land decreased by $1,088 as the result of sale of the Wool Ranch property in the Alameda Creek Watershed and reimbursement of land costs for 2000 Marin Street, San Francisco, CA.

Major additions to construction work in progress during the year ended June 30, 2021 include the following:

Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2021 include the following:

SF Recycled Water Project $ 41,231
Sunol Long Term Improvements 15,516
Regional Groundwater Storage & Recovery 12,298
New Water Utility Services 7,992
San Andreas Pipeline No. 2 Replacement 7,961
Water Main Replacement - WD-2739 Castro/19th/26th Streets 7,953 Calaveras Dam Replacement 7,915
Water Main Replacement - WD-2766 Taraval Street 5,172 Auxiliary Water Supply System - Pump Station No. 2 5,135 Other project additions individually below $5,000 86,496 Total $ 197,669
San Andreas Pipeline No. 2 Replacement - 4 Segments in San Bruno $ 43,340 Water Main Replacement - WD-2692 Geary Blvd/36th/48th/Point Lobos Ave 9,329 Water Main Replacement - WD-2719 22nd/Valencia St/Potrero Ave 8,004 New Water Utility Services 7,992
Alameda Creek Watershed Fish Passage Facilities 7,465 Water Main Replacement - WD-2766 Taraval Street 7,328 Water Main Replacement - WD-2793 Geary Blvd/Cleary Ct/Market St 6,655 Other items individually below $5,000 72,342
Total $ 162,455
See Note 4 for additional information about Capital Assets.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
14 (Continued)
The WSIP delivers capital improvements that enhance the Enterprise’s ability to provide reliable, affordable, high-quality drinking water to its 27 wholesale customers and regional retail customers in Alameda, Santa Clara, and San Mateo Counties, as well as approximately 800,000 residential customers in San Francisco, in an environmentally sustainable manner. The program is structured to cost-effectively meet water quality requirements and long-term water supply objectives, as well as improve seismic and delivery reliability.

Overall, the $4.8 billion WSIP to upgrade the City of San Francisco’s regional and local drinking water systems is 99% completed with $4.8 billion of project appropriations expended through fiscal year ended June 30, 2021. 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. As of June 30, 2021, 35 local projects were completed, and the completion date was June 3, 2020. For regional projects, 44 are completed and the expected completion date is May 2023. Additional details regarding the WSIP are available at https://sfpuc.org/construction-contracts/water-infrastructure-improvements.

Debt Administration
As of June 30, 2022, the Enterprise had $5,284,630 total debt outstanding, a decrease of $22,076 over the prior year, as shown below in Table 4. More detailed information about the Enterprise’s debt activity is presented in Notes 6, 7, and 8 to the financial statements.

Th e decr e as e of $ 1 33 , 8 4 0 i n r ev enue b ond s w a s d ue t o dec r e ase s o f $ 10 8 , 50 0 fr o m b o n d r ep a y men t, $25,349 in bond premium from amortization, offset by a $9 increase in bond discount from amortization.

The $3,025 decrease of certificates of participation was due to a $2,970 decrease for principal repayment, and a $55 decrease for amortization of premium. The increase of $14,354 in State revolving funds loans was from additional reimbursement requests for the SF Westside Recycled Water project. The Enterprise had $179,600 in tax-exempt and $26,697 in taxable commercial paper as of June 30, 2022, and $79,251 in tax-exempt and $26,611 in taxable commercial paper as of June 30, 2021. The increase of $100,435 was due to additional issuances of $130,135 in tax-exempt and $86 in taxable commercial paper, offset by $29,786 from repayment of tax-exempt commercial paper.
– The Enterprise carried underlying ratings of “Aa2” and “AA-” from Moody’s and Standard & Poor’s (S&P) at June 30, 2022, and “Aa2” and “AA-” from Moody’s and Standard & Poor’s (S&P) at June 30, 2021, respectively.
– Pursuant to the Amended and Restated Indenture, the Enterprise is required to collect sufficient net revenues each fiscal year, together with any Enterprise funds (except Bond Reserve Funds), which are available for payment of debt service and are not budgeted to be expended, at least 2022 2021 2020
2022-2021
Change
2021-2020
C hange
Revenue bonds $ 4,860,935 4,994,775 4,695,295 (133,840) 299,480 Commercial paper 206,297 105,862 362,354 100,435 (256,492) Certificates of participation 95,637 98,662 101,578 (3,025) (2,916) State revolving fund loans 121,761 107,407 73,271 14,354 34,136 Total $ 5,284,630 5,306,706 5,232,498 (22,076) 74,208 Table 4
Outstanding Debt, N et o f U namortized C osts
As o f J une 3 0, 2 022, 2 021, a nd 2 020

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
15 (Continued)
equal to 1.25 times annual debt service for said fiscal year. During fiscal years 2022 and 2021, the Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rate covenant requirements under the Enterprise’s Amended and Restated Indenture (see Note 8).
– Pursuant to the Charter Section 8B.124, the Enterprise can incur indebtedness upon two-thirds vote of the Board of Supervisors, as approved by voters in Proposition E in November 2002. As of June 30, 2022, the Board of Supervisors has authorized the issuance of $4,617,099 in revenue bonds under Proposition E, with $3,898,744 issued against this authorization. The Enterprise can also incur indebtedness of up to $1,628,000 for improvements to the water system pursuant to Proposition A that was approved by the voters in November 2002. As of June 30, 2022, $1,499,230 of the $1,628,000 Proposition A authorized bonds were issued. The Enterprise is also authorized to issue up to $500,000 in commercial paper.
– The Enterprise’s outstanding long-term debt has coupon interest rates ranging from

0.3% to 7.0% as of June 30, 2022 and 2021. The Enterprise’s short-term debt has interest rates ranging from 0.1% to 2.0% during fiscal year 2022, and 0.1% to 0.3% during fiscal year 2021.

R
ates and Charges
Retail Customers
Proposition E, as approved by the voters in November 2002, amended the City Charter by adding the new Article VIIIB, entitled “Public Utilities,” which changed the Commission’s ability to issue new revenue bonds and set retail water rates. For the retail water rate setting, the Commission is required to:

Establish rates, fees, and charges based on cost of service; Retain an independent rate consultant to conduct cost of service studies at least every five years; Consider establishing new connection fees;
Consider conservation incentives and lifeline rates;
Adopt a rolling five-year forecast annually; and
Establish a Rate Fairness Board.

Pursuant to the City and County of San Francisco Charter Section 8B.125, an independent rate study is performed at least once every five years. In compliance with City Charter section 8B.125, a rate study was completed in April 2018 and resulted in an approved four-year retail rate increase. The Commission adopted retail rates effective for four fiscal years from July 1, 2018 through June 30, 2022. The rates effective July 1, 2021 for fiscal year 2022 will remain unchanged for fiscal year 2023, which are effective July 1, 2022. These rates exclude those changed by the Consumer Price Index from the Controller’s Office of the City and County of San Francisco, as well as rates adjusted by the 20-City Average Construction Index (CCI) published by Engineering News-Record (ENR) Magazine. SFPUC Rates Schedules and Fees is available at https://sfpuc.org/accounts-services/water-power-and-sewer-rates.

Wholesale Customers
The WSA prescribes the rate setting process for the wholesale water rates, and has a 25-year term, beginning on July 1, 2009, with two 5-year extension options. The WSA was amended and restated on December 11, 2018 by the SFPUC. The contract changed the rate basis by which the capital cost recovery

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
16 is determined from a “utility basis” to a “cash basis,” resulting in the repayment of the cost of capital over the life of the debt funding of those assets rather than the life of the asset. The WSA requires the rate be calculated and set annually and include a reconciliation between prior year revenues and expenses. Refer to Note 10 of the notes to financial statements for further discussion on the balancing account of the wholesale customers.

The following table is the Enterprise’s ten-year average percent rate adjustments:

R
equest for Information
This report is designed to provide our citizens, customers, investors, and creditors with an overview of the Enterprise’s finances and to demonstrate the Enterprise’s accountability for the money it receives.

Questions regarding any of the information provided in this report or requests for additional financial information should be addressed to San Francisco Public Utilities Commission, Chief Financial Officer, 525 Golden Gate Avenue, 13
th Floor, San Francisco, CA 94102. This report is available at https://sfpuc.org/about-us/reports/audited-financial-statements-reports.

July 1, 2013 6.5 (16.4)
July 1, 2014 12.0 19.6
July 1, 2015 12.0 28.0
July 1, 2016 10.0 9.3
July 1, 2017 7.0 -
July 1, 2018 9.0 -
July 1, 2019 8.0 -
July 1, 2020 7.0 -
July 1, 2021 7.0 -
July 1, 2022 - 15.9
Five-year retail rate increases adopted and effective July 1, 2009.

Four-year retail rate increases adopted and effective July 1, 2014.

No retail rate increase adopted and effective July 1, 2022 .

Wholesale rates adopted annually; no increase for wholesale rates effective July 1, 2017 to June 30, 2022.

Four-year retail rate increases adopted and effective July 1, 2018.

Retail Wholesale 5Effective Date:

Ten-year A verage R ate A djustments

SAN FRANCISCO WATER ENTERPRISE
Statements of Net Position
June 30, 2022 and 2021
(In thousands)
17 SAN FRANCISCO WATER ENTERPRISE
Statements of Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2022 and 2021
(In thousands)
18 SAN FRANCISCO WATER ENTERPRISE
Statements of Cash Flows
Years Ended June 30, 2022 and 2021
(In thousands)
19 (Continued)
Restated
2022 2021*
Cash received from customers, including cash deposits $ 563,433 570,041 Cash received from tenants for rent 15,032 12,542
Cash received from miscellaneous revenues 4,558 4,643
Cash paid to employees for services (137,080) (132,235) Cash paid to suppliers for goods and services (159,338) (136,653) Cash paid for judgments and claims (2,515) (3,969)
Net cash provided by operating activities 284,090 314,369 Cash flows from non-capital financing activities:

Cash received from grants 5,947 14,836
Cash received from settlements 6,750 —
Cash paid for rebates and program incentives (828) (2,208) Transfers from the City and County of San Francisco 15,035 21,025 Transfers to the City and County of San Francisco (30,666) (16,654) Net cash (used in) provided by non-capital financing activities (3,762) 16,999 Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 986 2,647
Proceeds from bond issuance, net of premium, discount, refunding loss, and issuance costs — 1,000,920
Proceeds from commercial paper borrowings 130,221 16,328 Proceeds from State revolving fund loan 56,113 57,861
Principal paid on commercial paper (29,786) (272,820)
Principal paid on long-term debt (111,470) (704,344)
Interest paid on long-term debt (213,922) (210,276)
Interest paid on commercial paper (212) (348)
Issuance cost paid on long-term debt (10) (3,032)
Lease payment (1,439) (1,472)
Acquisition and construction of capital assets (182,776) (184,144) Federal interest income subsidy from Build America Bonds 23,590 23,869 Net cash used in capital and related financing activities (328,705) (274,811) Cash flows from investing activities:

Interest income received 2,154 4,185
Proceeds from sale of investments outside City Treasury 398,825 323,586 Purchase of investments outside City Treasury (398,825) (323,586) Net cash provided by investing activities 2,154 4,185
(Decrease) increase in cash and cash equivalents (46,223) 60,742 Cash and cash equivalents:

Beginning of year 606,589 545,847
End of year 560,366 606,589
Reconciliation of cash and cash equivalents to the statement of net position:

Cash and investments with City Treasury:

Unrestricted 460,954 483,827
Restricted 9,299 —
Add: Unrealized loss (gain) on investments with City Treasury 13,838 (392) Cash and investments outside City Treasury:

Unrestricted 318 301
Restricted 75,957 122,853
Cash and cash equivalents at end of year on $ 560,366 606,589 statements of cash flows
* Restatement due to implementation of GASB 87 - Leases Cash flows from operating activities:

SAN FRANCISCO WATER ENTERPRISE
Statements of Cash Flows
Years Ended June 30, 2022 and 2021
(In thousands)
20 Restated
2022 2021*
operating activities:

Operating income $ 171,331 133,654
Adjustments to reconcile operating income to
net cash provided by operating activities:

Depreciation and amortization 147,904 145,444
Miscellaneous revenue 4,558 4,643
Provision for uncollectible accounts (1,410) 2,945
Write-off of capital assets and other non-cash items 4,592 3,810 Changes in operating assets and liabilities:

Receivables:

Charges for services (4,734) 1,537
Prepaid charges, advances, and other (6,543) (2,385)
Due from other City departments 70 93
Inventory (865) (160)
Leases 380 (824)
Accounts payable 6,669 5,609
Accrued payroll 650 1,354
Other post-employment benefits obligations 4,694 (15,549) Pension obligations (61,060) 10,562
Accrued vacation and sick leave (187) 2,296
Accrued workers’ compensation 145 (346)
Due to other City departments — (674)
Wholesale balancing account 18,286 (3,993)
Pollution remediation obligation — (306)
Damage claims liability (654) 25,956
Unearned revenues, refunds, and other liabilities 264 703 Total adjustments 112,759 180,715
Net cash provided by operating activities $ 284,090 314,369 Noncash transactions:

Accrued capital asset costs $ 25,353 27,263
Unrealized loss (gain) on investments 13,838 (392)
Capital contribution — 4,180
* Restatement due to implementation of GASB 87 - Leases See accompanying notes to financial statements.

Reconciliation of operating income to net cash provided by

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
21 (Continued)
(1) Description of Reporting Entity
The San Francisco Water Enterprise (the Enterprise) was established in 1930 under the provisions of the Charter of the City and County of San Francisco (the City). The Enterprise acquired the fully developed, mature water works for San Francisco on March 3, 1930. Since then, the City has operated and maintained the water works as the San Francisco Water Enterprise. The Board of Supervisors of the City has adopted resolutions (the Water Resolutions) providing for the issuance of various water revenue and refunding bond series. The Water Resolutions require the City to keep separate books of records and accounts of the Enterprise. The Enterprise, which consists of a system of reservoirs, storage tanks, water treatment plants, pump stations, and pipelines, is engaged in the distribution of water to San Francisco and certain suburban areas. In fiscal year 2022, the Enterprise sold approximately 66,005 million gallons, i.e., about 181 million gallons per day of water, to approximately 2.7 million people within San Francisco and certain suburban areas.

The San Francisco Public Utilities Commission (SFPUC or the Commission), established in 1932, is responsible for providing operational oversight of the public utility enterprises of the City, which include the Enterprise along with the City’s power and sewer utilities (i.e., Hetch Hetchy Water and Power and CleanPowerSF, of which the Power Enterprise is a component, and the San Francisco Wastewater Enterprise). The Commission is responsible for determining such matters as the rates and charges for services, approval of contracts, and organizational policy.

Until August 1, 2008, the Commission consisted of five members, all appointed by the Mayor.

Proposition E, a City Charter SEC. 4.112 amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the Commission, changed the process for appointing new members, and set qualifications for all members. Under the amended Charter, the Mayor continues to nominate candidates to the Commission, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four-year terms for the Commission members and requires them to meet the following qualifications:

Seat 1 must have experience in environmental policy and an understanding of environmental justice issues.

Seat 2 must have experience in ratepayer or consumer advocacy.

Seat 3 must have experience in project finance.

Seat 4 must have expertise in water systems, power systems, or public utility management.

Seat 5 is an at-large member.

The SFPUC is a department of the City, and as such, the financial operations of the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF, and the Wastewater Enterprises are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial statements are intended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2022 and 2021, the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
22 (Continued)
(2) Significant Accounting Policies
The accounts of the Enterprise are organized on the basis of a proprietary fund type and are included as an enterprise fund of the City. The activities of this Enterprise are accounted for with a separate set of self-balancing accounts that comprise the Enterprise’s assets, deferred outflows, liabilities, deferred inflows, net position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity’s costs of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

The financial activities of the Enterprise are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with U.S. GAAP. Under this method, all assets and liabilities associated with its operations are included on the statement of net position; revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operating revenues are defined as charges to customers, rental income, and capacity fees.

The Enterprise applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.

The Enterprise considers its pooled cash and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non-pooled cash and investments for the Enterprise. Non-pooled restricted deposits and investments held outside the City Treasury with original maturities of three months or less are also considered to be cash equivalents.

Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based on quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues.

Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed.

C a p i t a l a s s e t s a r e d e f i n e d a s a s s e t s w i t h a n i n i t i a l i n d i v i d u a l c o s t o f m o r e t h a n $ 5 a n d a n estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an independent professional appraisal, or at cost, if known. All subsequent acquisitions have been recorded at cost. All donated capital assets are valued at estimated fair value at the time of donation. Depreciation and amortization are computed using the straight-line method over the

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
23 (Continued)
estimated useful lives of the related assets, which range from 1 to 100 years for equipment and 1 to 200 years for buildings, structures, and improvements. No depreciation or amortization is recorded in the year of acquisition, and depreciation or amortization is recorded in the year of disposal.

Under GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets , intangible assets are defined as identifiable, non-financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights-of-way easements, land use rights, water rights, licenses, and permits. The accounting pronouncement also provides guidance on the capitalization of internally generated intangible assets, such as the development and installation of computer software by or on behalf of the reporting entity.

According to the standard, the Enterprise is required to capitalize intangible assets with a useful life extending beyond one reporting period. The Enterprise has established a capitalization threshold of $100. GASB Statement No. 51 also requires amortization of intangible assets over the benefit period, except for certain assets having an indefinite useful life. Assets with an indefinite useful lif e gener ally provide a benefit that is not const rained by le gal or cont ract ual limitations or any other external factor and, therefore, are not amortized (see Note 4).

The cost of acquisition and construction of major plant and equipment is recorded as construction work in progress. Costs of discontinued construction projects are recorded as an expense in the year in which the decision is made to discontinue such projects.

A portion of the interest cost incurred on capital projects is capitalized on assets that require a period of time for construction or to otherwise prepare them for their intended use. Such amounts are amortized over the useful lives of the assets (see Note 4). Per the implementation of GASB No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period , no interest was capitalized to capital assets in fiscal year 2022.

Bond issuance costs related to prepaid insurance costs are capitalized and amortized using the effective interest method. Other bond issuance costs are expensed when incurred. Original issue bond discount or premium is offset against the related debt and is also amortized using the effective interest method.

Accrued vacation pay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non-vesting and may be accumulated up to six months per employee.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
24 (Continued)
The Enterprise is self-insured for workers’ compensation claims and accrues the estimated cost of those claims, including the estimated cost of incurred but not reported claims (see Note 13(b)).

The Enterprise is self-insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover claims attributed to loss from earthquake, contamination, pollution remediation efforts, and other specific naturally occurring contaminants such as mold. The liability represents an estimate of the cost of all outstanding claims, including adverse loss development and estimated incurred but not reported claims (see Note 13(a)).

Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements generally stipulate that earnings from the investment of the tax-exempt bond proceeds that exceed related interest costs on the bonds must be remitted to the federal government on every fifth anniversary of each bond issue. The arbitrage rebate liability was $0 at June 30, 2022 and 2021.

Gains or losses occurring from refunding of debt prior to maturity are reported as deferred outflows and deferred inflows of resources from refunding of debt. Deferred outflows and deferred inflows of resources are recognized as a component of interest expense using the effective interest method over the remaining life of the old debt or the life of the new debt, whichever is shorter.

As a department of a government agency, the Enterprise is exempt from both federal income taxes and California state franchise taxes.

Water service charges are based on water usage as determined by the Enterprise. Effective July 2013, the majority of residential and non-residential customers are billed on a monthly basis except for building and contractor customers, which are billed on a bi-monthly basis. Revenues earned but unbilled are accrued as charges for services and reflected as a receivable on the statements of net position. The unbilled amounts for the fiscal years ending June 30, 2022 and 2021 were $29,774 and $30,277, respectively.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
25 (Continued)
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted, and any of the following recognition triggers occur:

Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
A government has violated a pollution prevention-related permit or license; A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
A government begins or legally obligates itself to begin cleanup or post-cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the design phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include, but are not limited to: asbestos or lead paint removal, leaking of sewage in underground pipes or neighboring areas, chemical spills, removal and disposal of known toxic waste, harmful biological and chemical pollution of water, or contamination of surrounding soils by underground storage tanks (see Note 14(d)).

Leases are defined as a contract that conveys control of the right to use another entity’s underlying asset for a specified period. The Enterprise is a lessee and lessor for various noncancellable leases of land, building, equipment, vehicles, easement, etc.

For leases with a maximum possible term of 12 months or less at commencement, the Enterprise recognizes lease revenue if the Enterprise executes a lessor lease or lease expense if the Enterprise executes a lessee lease based on the provisions of the lease contract. Liabilities are only recognized if payments are received in advance, and receivables are only recognized if payments are received subsequent to the reporting period.

For all other leases (i.e. those that are not short-term) the Enterprise recognizes a lease liability and intangible right-to-use lease asset for the Enterprise as lessee leases, or lease receivable and deferred inflow of resources for the Enterprise as lessor leases.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
26 (Continued)
Measurement of Lease Amounts (Lessee)
The Enterprise’s lease liability is recorded at the present value of future minimum lease payments as of the date of inception. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, less lease payments made at or before the lease commencement date, plus any initial direct costs ancillary to placing the underlying asset into service, less any lease incentives received at or before the lease commencement date. Subsequently, the lease asset is amortized into depreciation and amortization expense on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset. If the Enterprise is reasonably certain of exercising a purchase option contained in a lease, the lease asset will be amortized over the useful life of the underlying asset.

Measurement of Lease Amounts (Lessor)
The Enterprise’s lease receivable is measured at the present value of payments expected to be received during the lease term, reduced by any provision of estimated uncollectible amounts.

Subsequently, the lease receivable is reduced by the principal portion of lease payments collected. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term, plus lease payments received from the lease at or before the commencement of the lease term that related to future periods. Subsequently, the deferred inflow of resources as lease revenue is on a straight-line basis over the lease term.

Key Estimates and Judgements
Key estimates and judgements include how the Enterprise determines (a) the discount rate it uses to calculate the present value of the expected lease payments, (b) lease terms, (c) lease payments, and (d) materiality threshold for equipment.
• The Enterprise generally uses its estimated incremental borrowing rate as the discount rate for leases unless the rate implicit in the lease. The City’s incremental borrowing rate (IBR) is established using the average of Municipal Market Data (MMD) AAA benchmark interest rate index by maturity date (year 1 to 30+), plus the average credit spread based on City’s Aa/AA, COP, Tax-exempt to generate the yield curve and discount rate table. The City’s incremental borrowing rate for leases is based on the rate of interest it would need to pay if it issued general obligation bonds to borrow an amount equal to the lease payments under similar terms at the commencement or remeasurement date.
• The lease term includes the noncancellable period of the lease, plus any additional periods covered by either lessee or lessor unilateral option to (1) extend for which it is reasonably certain to be exercised, or (2) terminate for which it is reasonably certain not to be exercised.

Periods in which both the lessee and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the lease term.
• Payments are evaluated by the Enterprise to determine if they should be included in the measurement of the lease receivables or lease liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments. • Equipment and other leases have a capitalization threshold of $100. 70% below market rent and/or ground leases are determined to be below market rent (BMR), excluded from lease capitalization.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
27 (Continued)
Remeasurement of Lease
The Enterprise monitors changes in circumstances that may require remeasurement of a lease.

When certain changes occur that are expected to significantly affect the amount of the lease receivable or lease liability, the receivable or liability is remeasured and a corresponding adjustment is made to the deferred inflow of resources or lease asset, respectively.

Presentation in Statement of Net Position
Lease assets are reported with non-current assets, lease liabilities are reported with current and long-term liabilities in the statement of net position.

As prescribed under GASB 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, net OPEB liability, deferred outflows/inflows of resources related to OPEB, and OPEB expense are actuarially determined on a citywide basis. Net OPEB liability is measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Trust Fund investments measured at fair value (see Note 11(b)).
1) 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 liabilities that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 87 in fiscal year 2022. As a result of adoption, the cumulative effect of applying this Statement is recorded as beginning balances for the following accounts as of July 1, 2020:
2) 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 establishes accounting requirements for interest cost incurred before the end of construction period. The new FY2021
Beginning Balance
FY2021
Activities Total
Lease Receivable - Current 7,293$ (4,004) $ 3,289 $ Lease Receivable - Long Term 43,419 2,402 45,821 Interest Receivable - GASB 87 859 859 Right-to-use Assets 5,399 247 5,646 Accumulated Amortization - (1,409) (1,409) Deferred Inflows - Leases (50,712) 2,602 (48,110) Accrued Int Payable - Current - (5) (5) Lease Liability - Current (1,467) 86 (1,381) Lease Liability - Long Term (3,932) 1,069 (2,863) Revenues - (1,859) (1,859) Expenses - 12 12 Change to Net Position -$ (1,847)$ (1,847) $

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
28 (Continued)
standard is effective for periods beginning after December 15, 2020. The Enterprise adopted the provisions of Statement No. 89 in fiscal year 2022. 3) In January 2020, the GASB issued Statement No. 92, Omnibus 2020. GASB Statement No. 92 addresses practice issues that have been identified during implementation and application of certain GASB Statements. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 92 in fiscal year 2022, which did not have a significant effect on its financial statements. 4) In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The new standard is effective for periods beginning after June 15, 2021. The Enterprise adopted the provisions of Statement No. 93 in fiscal year 2022, which did not have a significant effect on its financial statements.
1) In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. GASB Statement No. 84 establishes criteria for state and local governments to identify fiduciary activities and how those activities should be reported. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements. 2) In August 2018, the GASB issued Statement No. 90, Accounting and Financial Reporting for Majority Equity Interests. GASB Statement No. 90 provides clarification when a government should report a majority equity interest in a legally separate organization as either a component unit or an investment. The new standard is effective for periods beginning after December 15, 2019. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements. 3) 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. The Enterprise adopted early the provision of Statement No. 97 in fiscal year 2021, which did not have a significant effect on its financial statements.
4) 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. The Enterprise adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
29 (Continued)
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the compatibility and consistency of conduit debt obligation reporting and reporting of related transactions by State and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The Enterprise will implement the provisions of Statement No. 91 in fiscal year 2023. 2) In March 2020, the GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements . The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 94 in fiscal year 2023.
3) In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements . This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) by a government. The new standard is effective for periods beginning after June 15, 2022. The Enterprise will implement the provisions of Statement No. 96 in fiscal year 2023. 4) In April 2022, the GASB issued Statement No. 99, Omnibus 2022. This Statement enhances comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 99 in fiscal year 2024.
5) In June 2022, the GASB issued Statement No. 100, Accounting Changes and Error Corrections. This Statement enhances accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. The new standard is effective for periods beginning after June 15, 2023. The Enterprise will implement the provisions of Statement No. 100 in fiscal year 2024. 6) In June 2022, the GASB issued Statement No. 101, Compensated Absences . This Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The new standard is effective for periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 101 in fiscal year 2025.

The Enterprise has reclassified certain amounts relating to the prior period to conform to its current period presentation. These reclassifications had no effect on previously reported changes in net position.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
30 (Continued)
(3) Cash, Cash Equivalents, and Investments
The Enterprise’s cash, cash equivalents, and investments with the City Treasury are invested in an unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of priority, preservation of capital, liquidity, and yield.

The policy addresses soundness of financial institutions in which the City will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio that may be invested in certain instruments with longer terms to maturity. The City Treasurer allocates income from the investment of pooled cash at month-end in proportion to the Enterprise’s average daily cash balances. The primary objectives of the Enterprise’s investment policy are consistent with the City’s policy.

Restricted assets are held by an independent trustee outside the City’s investment pool. The assets are held for the purpose of paying future interest and principal on the bonds and for eligible capital project expenditures. The current balances as of June 30, 2022 and 2021 were $75,957 and $122,853, respectively. The Enterprise held all investments in guaranteed investment contracts, t r e a s u r y a n d g o v e r n m e n t o b l i g a t i o n s , c o m m e r c i a l p a p e r , c o r p o r a t e b o n d s , a n d n o t e s , a s w e l l a s money market mutual funds consisting of Treasury and Government Obligations.

Funds held by the trustee established under the 2002 Amended and Restated Indentures agreements are invested in “Permitted Investments,” as defined in the agreement, which includes money market funds and investment agreements. The agreement permits investment in money market funds registered under the Federal Investment Company Act of 1940 whose shares are registered under the Federal Securities Act of 1933 and have a rating by S&P of “AAAm-G,” “AAAm,” or “ A A m , ” an d a r a t i n g b y M o o dy ’ s o f “A a a , ” “ A a 1 , ” o r “ A a2 ”. T he c r e di t r a t i n g s o f t h e m o ne y m a r k et funds invested in as of June 30, 2022 were “Aaa-mf” and “P-1” by Moody’s, and “AAAm” and “A-1+” by S&P. The credit ratings of the money market funds invested in as of June 30, 2021 were “Aaa-mf” and “P-1” by Moody’s, and “AAAm” and “A-1+” by S&P. Investment agreements must be with a U.S. bank or trust company that have a rating by Moody’s and S&P of “A” or higher, or are guaranteed by any entity with a rating of “A” or higher, at the time the agreement is entered.

The Enterprise categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
31 (Continued)
The following tables present the restricted and unrestricted cash and investments outside City Treasury as of June 30, 2022 and 2021:

Commercial paper is valued using a variety of techniques such as matrix pricing; market corroborated pricing inputs such as yield curve, indices, and other market related data. Commercial paper, money market investments, and cash and cash equivalents are exempt from fair value treatment under GASB Statement No. 72.

The restricted cash and investments outside City Treasury as of June 30, 2022 and 2021 included an unrealized gain due to changes in fair value on commercial paper of $0.

Additional cash outside of the investment pool included revolving fund and cash in transit. The revolving fund has a balance of $28 as of June 30, 2022 and 2021, respectively, which is held in a commercial bank in non-interest bearing checking accounts covered by Federal Deposit Insurance Corporation depository insurance. These accounts were established as provided by the City’s Administrative Code for revolving fund needs. The cash in transit was $290 and $273 as of June 30, 2022 and 2021, respectively.

Credit R atings
(S&P/Moo dy's) M aturities Fair Value
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days 62,854 62,854 — — — Money Market Funds A-1+/P-1 < 90 days 48 48 — — —
Cash and Cash Equivalents N/A 13,055 13,055 — — —
Total R estricted C ash a nd Investments o utside C ity Treasury $ 75,957 75,957 — — — Cash and Cash Equivalents N/A 318 318 — — —
Total C ash a nd I nvestments o utside C ity Tre asury $ 318 318 — — — Inve stme nts
exe mpt f rom
fair v alue
Fair V alue M easurements U sing
Investments
June 3 0, 2 022
Cash a nd I nvestments o utside C ity T reasury
Quoted price s
in a ctive
markets f or
identical
assets
(Level 1 )
Significant
o ther
observable
inputs
(Le vel 2 )
Unobservable
Inputs
(Level 3 )
Credit R atings
(S&P/Moody's) Maturitie s Fair V alue
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days 79,973 79,973 — — — Money Market Funds A-1+/P-1 < 90 days 55 55 — — —
Cash and Cash Equivalents N/A 42,825 42,825 — — —
Total R estricted C ash a nd Investm ents o utside C ity Tre asury $ 122,853 122,853 — — — Cash and Cash Equivalents N/A 301 301 — — —
Total C ash a nd I nvestments o utside C ity Treasury $ 301 301 — — — Investments
exem pt f rom
fair v alue
Fair V alue M easurem ents U sing
Investments
June 3 0, 2 021
Cash a nd I nvestments o utside C ity T reasury
Quoted p rices
in a ctive
markets f or
identical
assets
(Level 1 )
Significant
othe r
observable
inputs
(Level 2 )
Unobservable
Inputs
(Level 3 )

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
32 (Continued)
The Enterprise’s cash, cash equivalents, and investments are shown on the accompanying statements of net position as follows:

The following table shows the percentage distribution of the City’s pooled investments by maturity:
(4) Capital Assets
Capital assets with a useful life of 50 years or greater include buildings and structures, reservoirs, dams, treatment plants, pump stations, certain water mains and pipelines, sewer systems, tunnels, and bridges.

Capital assets as of June 30, 2022 and 2021 consist of the following:
2022 2021
Cash and investments with City Treasur y $ 460,954 483,827 Cash and investments outside City Treasur y 318 301
Restricted cash and investments outside City Treasur y 11,063 57,165 Non-current assets:

Restricted cash and investments with City Treasur y 9,299 — Restricted cash and investments outside City Treasur y 64,894 65,688 Total cash, cash equivalents, and investments $ 546,528 606,981 Current assets:

Fiscal y ears
ended J une 3 0 Under 1 1 t o l ess t han 6 6 t o less t han 1 2 12 t o 6 0 2022 20.2% 14.0% 14.9% 50.9%
2021 14.5% 27.6% 29.7% 28.2%
Investment m aturities ( in m onths)
2021 Increases Decreases 2 022
Land $ 104,248 9,193 — 113,441
Intangible assets 679 — — 679
Construction work in progress 532,602 175,191 (263,539) * 444,254 Total capital assets not being depreciated and amortized 637,529 184,384 (263,539) 558,374 Capital assets being depreciated and amortized:

Facilities and improvements 6,413,238 247,453 — 6,660,691 Intangible assets 23,772 1,370 — 25,142
Machinery and equipment 326,126 6,662 (315) 332,473
Total capital assets being depreciated and amortized 6,763,136 255,485 (315) 7,018,306 Less accumulated depreciation and amortization for:

Facilities and improvements (1,554,515) (134,202) — (1,688,717) Intangible assets (21,688) (981) — (22,669)
Machinery and equipment (236,663) (11,352) 315 (247,700) Total accumulated depreciation and amortization (1,812,866) (146,535) 315 (1,959,086) Total capital assets being depreciated and amortized, net 4,950,270 108,950 — 5,059,220 Total capital assets, net $ 5,587,799 293,334 (263,539) 5,617,594 * Decrease in construction work in progress of $8,054 includes $4,592 in capital project write offs, mainly related to Stern Grove Emergency Restorat ion and Lake Merced Water Level Restoration projects and $9,193 transferred to land. The remaining difference of $5,731 is mainly due to direct additions to facilities and improvements, intangible assets and machinery and equipment.

Capital assets not being depreciated and amortized:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
33 (Continued)
GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 Financial Accounting Standards Board (FASB) and American Institute of Certified Public Accountants (AICPA) Pronouncements, requires that interest expense incurred during construction of assets be capitalized. Per the implementation of GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period , no interest was capitalized to construction in progress beginning in fiscal year 2022.

Interest included in the construction work in progress and total interest expense incurred during the years ended June 30, 2022 and 2021 are as follows:
(5) Restricted Assets
Pursuant to the Indentures, all revenues of the Enterprise (except amounts on deposit in the rebate fund) are irrevocably pledged to the punctual payment of debt service on the Water Revenue and Refunding Bonds. Accordingly, the revenues of the Enterprise shall not be used for any other purpose while any of its Water Revenue and Refunding Bonds are outstanding, except as expressly permitted by the Indentures. Further, all revenues shall be deposited by the City Treasurer, by instruction of the Enterprise, in special funds designated as the Water Enterprise Revenue Fund (the Water Revenue Fund), which must be maintained in the City Treasury. These funds, held at the City Treasury, are recorded in the statement of net position of the Enterprise as cash and investments. Deposits in the 2020 Increases Decreases 2021
Land $ 105,336 — (1,088) 104,248
Intangible assets 679 — — 679
Construction work in progress 492,682 197,669 (157,749) * 532,602 Total capital assets not being depreciated and amortized 598,697 197,669 (158,837) 637,529 Capital assets being depreciated and amortized:

Facilities and improvements 6,258,333 154,905 — 6,413,238 Intangible assets 23,497 275 — 23,772
Machinery and equipment 319,000 7,275 (149) 326,126
Total capital assets being depreciated and amortized 6,600,830 162,455 (149) 6,763,136 Less accumulated depreciation and amortization for:

Facilities and improvements (1,423,722) (130,793) — (1,554,515) Intangible assets (20,087) (1,601) — (21,688)
Machinery and equipment (225,173) (11,639) 149 (236,663) Total accumulated depreciation and amortization (1,668,982) (144,033) 149 (1,812,866) Total capital assets being depreciated and amortized, net 4,931,848 18,422 — 4,950,270 Total capital assets, net $ 5,530,545 216,091 (158,837) 5,587,799 * Decrease in construction work in progress includes $3,810 in capital project write-offs, mainly related to Eastside Recycled Water and San Andrea s Spillway projects. The remaining difference of $8,516 is due to direct additions to facilities and improvements, intangible assets and machinery an d equipment.

Capital assets not being depreciated and amortized:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
34 (Continued)
Water Revenue Fund, including earnings thereon, shall be appropriated, transferred, expended, or used for the following purposes pertaining to the financing, maintenance, and operation of the Enterprise in accordance with the following priority:

1. The payment of operation and maintenance expenses for such utility and related facilities;

2. The payment of pension charges and proportionate payments to such compensation and other insurance or outside reserve funds as the Enterprise may establish or the Board of Supervisors may require with respect to employees of the Enterprise;

3. The payment of principal, interest, reserve, sinking fund, and other mandatory funds created to secure Revenue Bonds and parity State revolving fund loans issued by the Enterprise for the acquisition, construction, or extension of facilities owned, operated, or controlled by the Enterprise;

4. The payment of principal and interest on General Obligation Bonds issued by the City for the Enterprise’s purposes;

5. Reconstruction and replacement as determined by the Enterprise or as required by any of the Enterprise’s Revenue Bond ordinances duly adopted and approved; and

6. The acquisition of land, real property, or interest in real property for, and the acquisition, construction, enlargement, and improvement of, new and existing buildings, structures, facilities, equipment, appliances, and other property necessary or convenient to the development or improvement of such utility owned, controlled, or operated by the Enterprise; and for any other lawful purpose of the Enterprise, including the transfer of surplus funds pursuant to the Charter.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
35 (Continued)
In accordance with the Indenture, the bond financing program maintains that certain restricted cash and investment balances be held in trust. Restricted assets held in trust consisted of the following as of June 30, 2022 and 2021:

Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Water Revenue Fund of the City Treasury.
(6) Short-Term Debt
The Commission and the Board of Supervisors have authorized the issuance of up to $500,000 in commercial paper pursuant to the voter-approved 2002 Proposition E. As of June 30, 2022 and 2021, amounts outstanding under Proposition E were $206,297 and $105,862, respectively.

Commercial paper interest rates ranged from 0.1% to 2.0%.

With maturities up to 270 days, the Enterprise intends to maintain the program by remarketing the commercial paper upon maturity over the near-to-medium term, at which time outstanding commercial paper will likely be refunded with revenue bonds. This is being done to take advantage of the continued low interest rate environment. If the commercial paper interest rates rise to a level that exceeds these benefits, the Enterprise will refinance the commercial paper with the long-term, fixed- rate debt.
2022 2021
Water revenue bond construction fund $ 9,299 —
Cash and investments outside City Treasury:
2010B Water revenue bond fund 21,386 21,492
2010D Water revenue bond fund 1 —
2010E Water revenue bond fund 16,304 16,299
2010G Water revenue bond fund 17,703 17,698
2011B Water revenue bond fund — 670
2011C Water revenue bond fund — 140
2012A Water revenue bond fund 1 1
2020A Water revenue bond fund 86 7,370
2020B Water revenue bond fund 34 3,097
2020C Water revenue bond fund 54 3,463
2020D Water reveune bond fund 38 1,513
2020F Water revenue refunding bond fund 12 12
2020G Water reveune refunding bond fund 22 22
2020H Water revenue refunding bond fund 7 7
2009C Certificates of participation - 525 Golden Gate 1,638 1,638 2009D Certificates of participation - 525 Golden Gate 5,567 6,551 Commercial Paper - Tax Exempt 14 29,793
Commercial Paper - Taxable 37 34
Habitat reserve endowment fund 13,053 13,053
Total cash and investments outside City Treasury $ 75,957 122,853 Interest and other receivables:

Water bond construction fund including capacity fee receivables 4,146 3,987 Due from other government for State Revolving Fund 7,553 49,546 Total restricted assets $ 96,955 176,386
Cash and investments with City Treasury:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
36 (Continued)
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements , the Enterprise had $293,703 and $394,138 in unused authorization as of June 30, 2022 and 2021, respectively. Significant Events of default as specified in the Reimbursement Agreements, or Revolving Credit Agreement include 1) payment defaults 2) 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 3) 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, 2022, there were no such events describe herein.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
37 (Continued)
(7) Changes in Long-Term Liabilities
Long-term liability activities for the years ended June 30, 2022 and 2021 are as follows:

Maturity Due
Interest (Calendar Restated within
rate Year) 2021* Additions Reductions 2022 one y ear
2010B revenue bonds (Build America) 4.00% – 6.00% 2040 $ 361,500 — (12,330) 349,170 12,780 2010E revenue bonds (Build America) 4.90 – 6.00 2040 344,200 — — 344,200 12,745 2010G revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2011B revenue bonds 3.50 – 5.00 2041 755 — (755) — — 2011C revenue bonds 3.00 – 5.00 2041 825 — (825) — — 2015A revenue refunding bonds 2.00 – 5.00 2036 397,745 — (15,325) 382,420 16,045 2016A revenue refunding bonds 4.00 – 5.00 2039 743,050 — (23,315) 719,735 32,790 2016B revenue refunding bonds 1.50 – 5.00 2030 81,525 — (10,015) 71,510 12,530 2016C revenue bonds 0.87 – 4.19 2046 237,050 — (5,820) 231,230 5,955 2017A revenue bonds 5.00 2047 27,000 — — 27,000 2,325 2017B revenue bonds 5.00 2047 32,930 — — 32,930 2,835 2017C revenue bonds 5.00 2047 15,750 — — 15,750 1,355 2017D revenue refunding bonds 2.00 – 5.00 2035 347,720 — (925) 346,795 1,455 2017E revenue refunding bonds 4.00 – 5.00 2031 48,890 — — 48,890 765 2017F revenue refunding bonds 5.00 2031 8,705 — — 8,705 700 2017G revenue refunding bonds 2.03 – 2.91 2024 32,780 — (820) 31,960 13,070 2019A revenue refunding bonds 1.81 – 3.47 2043 615,725 — (24,405) 591,320 3,495 2019B revenue refunding bonds 3.15 – 3.52 2041 16,450 — (65) 16,385 70 2019C revenue refunding bonds 3.15 – 3.52 2041 17,925 — (75) 17,850 75 2020A revenue bonds 4.00 – 5.00 2050 150,895 — — 150,895 — 2020B revenue bonds 5.00 2050 61,330 — — 61,330 —
2020C revenue bonds 4.00 2050 85,335 — — 85,335 —
2020D revenue bonds 3.00 2050 49,200 — — 49,200 —
2020E revenue refunding bonds 2.83 – 2.95 2047 341,435 — (5,900) 335,535 500 2020F revenue refunding bonds 0.26 – 3.15 2047 136,880 — (1,425) 135,455 — 2020G revenue refunding bonds 0.26 – 3.10 2043 120,585 — (5,820) 114,765 5,795 2020H revenue refunding bonds 0.26 – 3.15 2047 65,495 — (680) 64,815 — Less issuance discount (133) — 9 (124) —
Add issuance premiums 301,758 — (25,349) 276,409 —
Total revenue bonds payable 4,994,775 — (133,840) 4,860,935 125,285 2009C certificates of participation (COPs) 2.00 – 5.00 2022 6,094 — (2,970) 3,124 3,124 2009C COPs issuance premiums 69 — (55) 14 14
2009D COPs (Build America) 6.36 – 6.49 2041 92,499 — — 92,499 — State Revolving Funds Loan 1.00 2051 107,407 14,354 — 121,761 3,283 Other post-employment benefits obligations 148,771 14,868 (19,524) 144,115 — Lease liability 4,244 — (1,381) 2,863 1,008
Net pension liability 216,417 — (216,417) — —
Accrued vacation and sick leave 13,916 8,177 (8,364) 13,729 6,888 Accrued workers’ compensation 8,828 2,793 (2,648) 8,973 1,700 Damage claims liability 36,723 452 (1,106) 36,069 10,191 Wholesale balancing account 60,864 18,633 (347) 79,150 48,422 Pollution remediation obligation 1,271 — — 1,271 —
Total $ 5,691,878 59,277 (386,652) 5,364,503 199,915 *Restated due to implementation of GASB 87 - Leases
Revenue Bonds: