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 & AGM, Business Services
RE: SFPUC Fiscal Year 2021-22 Annual Comprehensive Financial Report and Popular Annual Financial Report
Financial Services is pleased to present the FY 2021-22 Popular Annual Financial Report (PAFR) focusing on SFPUC’s Serving People and the Environment, and the FY 2021-22 Annual Comprehensive Financial Report (ACFR) issued by KPMG, LLP on February 28, 2023.
The reports can be found on our public-facing website:
https://sfpuc.org/about-us/reports/audited-financial-statements-reports https://sfpuc.org/about-us/reports/popular-annual-financial-reports
The ACFR describes our financial activities, condition, and services as an organization, inclusive or Water, Wastewater, and Hetch Hetchy Water & Power & CleanPowerSF audited financial statements. The report includes financial and statistical information, inclusive of ten years of financial and operating indicators and trends, social and economic data and other metrics that are of interest to the general public and financial investors. The SFPUC has received the Government Finance Officers Association (GFOA) Certificate of Achievement in Financial Reporting annually since 2009 for the ACFR.
The PAFR is specifically designed to be readily accessible and easily understandable to the general public and interested parties without a background in public finance. Like the ACFR, the SFPUC has received the GFOA PAFR award annually since 2010.
We are looking forward to another award for both reports for fiscal year 2022.
cc: Ronald P. Flynn, Deputy General Manager
Charles Perl, Deputy Chief Financial Officer
Att: FY 2021-22 Annual Comprehensive Financial Report
FY 2021-22 Popular Annual Financial Reports
SUSTAINING THE RESOURCES ENTRUSTED TO OUR CARE.
Annual Comprehensive
Financial Report
Fiscal Years Ended June 30, 2022 and 2021
The San Francisco Public Utilities Commission
An Enterprise Department of the City and County of
San Francisco, California
Annual Comprehensive Financial Report
For the Fiscal Years Ended
June 30, 2022 and 2021
Prepared by SFPUC Financial Services
Nancy L. Hom
Chief Financial Officer and Assistant General Manager, Business Services
The San Francisco Public Utilities Commission
TABLE OF CONTENTS
Page
Introductory Section (Unaudited) 1–14
General Manager’s Transmittal Letter 1–2
The Reporting Entity 3–4
Mission, Vision and Values and Commission Members 5–6
Structure and Organizational Chart 7
Agency Strategic Plan 8
Enterprise Risk Management Framework 8–9
San Francisco’s Budget Process 10
Operating and Capital Budgets 10–11
Ten-Year Financial Plan 11–12
Ten-Year Capital Plan 12
Financial Transparency, Reporting and Auditing Process 12 Financial Authority and Policies 12–13
Accounting Systems, Policies, and Internal Controls 13
Achievement Awards from Government Finance Officers Association 13–14 Financial Section 15–180
Independent Auditors’ Report 16–17
Management’s Discussion and Analysis (Unaudited) 18–65
Basic Financial Statements 66–168
Statements of Net Position – Proprietary Funds 66–67
Statements of Revenues, Expenses, and Changes in Net Position – Proprietary Funds
68 Statements of Cash Flows – Proprietary Funds 69–70
Notes to Basic Financial Statements 71–168
Required Supplementary Information (Unaudited) 169–175
Schedules of the Proportionate Share of the Net Pension (Asset)/Liability
170
Schedules of Employer Contributions - Pension Plan 171–172 Schedules of Changes in Total Pension Liability and Related Ratios – Replacement Benefits Plan
173
Schedules of Changes in Other Post-employment Benefits Liability and Related Ratios - Other Post-employment Healthcare Benefits Plan
174
Page
Schedules of Employer Contributions -
Other Post-employment Healthcare Benefits Plan
175
Supplementary Information (Proprietary Funds) 176–180
Schedule of Changes in Net Position – Dollar and Percentage Change vs. Prior Year
176–177
Schedule of Changes in Revenues, Expenses, and Net Position – Dollar and Percentage Change vs. Prior Year
178
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
179–180
Statistical Section (Unaudited) 181–264
Financial Trends 182–211
Comparative Highlights of Revenues and Expenses 183–188 Changes in Net Position 189–200
Summary of Net Position by Component 201–206
Investments in Capital Assets 207–211
Revenue Capacity 212–219
Water, Wastewater, Hetchy Power, and CleanPowerSF Rates History 213–216 Net Revenue and Debt Service Coverage 217–219
Debt Capacity 220–238
Debt Ratings 221
Summary of Debt Outstanding 222–224
History of Outstanding Debt by Type 225
Future Principal and Interest Payments for Debt Issues 226–238 Demographic and Economic Information 239–256
City and County of San Francisco Economic and General Information 240–244 Summary of Accounts by Type of Customer 245–246
Water Accounts and Billings 247
Historical Water Sales 248–250
Bay Area Water Supply and Conservation Agency Members 251 Water and Wastewater Accounts, and Billings by Type of Customer 252–253 Historical Hetchy Water Sales 254
Historical Hetchy Power Electric Sales 255
Historical CleanPowerSF Electric Sales 256
Page
Operating Information 257–264
Budgeted Full-Time Equivalent (FTEs) Employees by Division 258 Operating and Capacity Indicators 259–260
Capacity Charge Revenues and Expenses 261
Major Water Wholesale, Retail, and Sewer Customer Accounts by Revenue 262 Major Electric Retail and Wholesale Customer Accounts by Revenue 263 Performance Measures 264
Project Team Acknowledgements 265
Introductory Section (Unaudited)
General Manager’s Transmittal Letter
The Reporting Entity
Mission, Vision and Values and Commission Members
Structure and Organizational Chart
Agency Strategic Plan
Enterprise Risk Management Framework
San Francisco’s Budget Process
Operating and Capital Budgets
Ten-Year Financial Plan
Ten-Year Capital Plan
Financial Transparency, Reporting and Auditing Process
Financial Authority and Policies
Accounting Systems, Policies, and Internal Controls
Achievement Awards from Government Finance Officers Association The San Francisco Public Utilities Commission
An Enterprise Department of the City and County of San Francisco, California Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20221
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
General Manager’s Transmittal Letter
February 28, 2023
Dear Customers and Interested Parties,
At the SFPUC, protecting the environment and being responsible stewards of the resources entrusted to our care is vital to everything that we do. These resources include maintaining and upgrading the water, power, and wastewater systems that our customers depend on. It means supporting our communities through Customer Assistance Programs and the opening of the new Southeast Community Center in San Francisco’s Bayview-Hunters Point neighborhood. It also means adapting our water, power, and wastewater systems to withstand climate change. We continue to innovate to invest in our future.
Public Power
Our power portfolio is a combination of greenhouse-gas-free hydropower that we generate through our Hetch Hetchy Power system and sustainable energy that we procure through our CleanPowerSF community choice aggregation program. We are providing cleaner, less expensive power than our investor-owned competitor, PG&E, and we are actually lowering rates for many of our customers, while PG&E has raised theirs.
We are doing that while also growing rooftop solar generation by adding a seventh public school to our portfolio of solar installation sites. As a public power utility, the SFPUC owns and operates numerous solar installations in San Francisco that collectively generate 8.5 megawatts of solar energy.
Additionally, we have added to our clean energy storage capacity by entering into new contracts.
CleanPowerSF now has over 200 megawatts of battery storage under active contract and serves over 380,000 San Francisco customer accounts.
Water
Our responsible water management allows us to release water to the Tuolumne River every spring.
In particular, since 2006 we have worked to make special releases to support wildlife and wetland vegetation in the ecologically important Poopenaut Valley within Yosemite National Park. This supports numerous riparian bird species and up to 17 species of bats. These special releases have occurred in six of the last 11 years.
We are also working with the U.S. Fish and Wildlife Service and our partners on the Tuolumne River on pilot habitat restoration projects for approximately 9 acres of salmon spawning habitat and 2 acres of adjacent floodplain rearing habitat. The preliminary project timeline includes grant seeking in 2023 and construction in 2024.
Biodiversity is a key factor for a healthy watershed. A healthy watershed produces high-quality drinking water and is more resilient to drought and wildfire. We are protecting our watershed one seed at a time with our Sunol Native Plant Nursery, which grows plants free from damaging pathogens for habit restoration in our watershed.
In western San Francisco, we are nearing completion of our Westside Enhanced Recycled Water Treatment Facility, which is designed to save up to 2 million gallons per day on average of drinking water that is currently used for non-drinking purposes, like irrigation.
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20222 Wastewater
We have been implementing innovative ways to reduce the burden on our unique combined sewer system that protects our bay and ocean by continuing to expand green infrastructure for stormwater management across the city.
We now capture and manage 250 million gallons of stormwater per year through green infrastructure like rain gardens, permeable pavement, rainwater harvesting systems and green roofs. In September 2021, we completed the Sunset Boulevard Greenway Project, installing 30 new rain gardens along 14 city blocks. The project is collectively expected to keep around 6 million gallons of stormwater out of our sewer system each year and reduce the total volume of stormwater entering the sewer system from the project area by 95%. The new rain gardens feature drought tolerant plants and specially engineered soils to absorb runoff from the surrounding streets.
We are also making investments across our entire wastewater system, including upgrading our treatment plants into state-of-the-art facilities that will look better, smell better, and work better for all of San Francisco.
People
Two of our most important resources are our customers and our staff. As we continue to build the utility of the future, investments in people are just as important as investments in infrastructure.
We not only introduced and then extended a moratorium on shutoffs and late fees because of the pandemic, we also secured $20 million in state and federal funding to provide bill relief to our customers.
Additionally, we are working every day to grow our ability to be the employer of choice in the utility industry. That includes a resolute focus on racial equity to continue to attract and retain the best talent. We are committed to addressing long- time systemic barriers for communities of color. The SFPUC has expanded staffing and consultant resources to advance racial equity work, and we are implementing new strategies for diversity-based recruitment for SFPUC jobs. We are also investing in developing and retaining our existing staff by broadening employee and supervisor training.
Our racial equity work extends beyond our workforce. As this fiscal year drew to a close, we were putting the finishing touches on a historic investment in our southeast neighborhoods, which are home to communities of color that, over the years, have felt a disproportionate effect from our operations.
The new Southeast Community Center opened in early fiscal year 2022-23, a landmark destination for the local community to gather, learn, play, and grow. This partnership with San Francisco’s southeast communities is designed to promote residents’ health; wellbeing; and cultural, educational, and financial empowerment.
We would like to express appreciation to the Mayor, Board of Supervisors, and our Commission for their continued support of our approach and achievements.
On behalf of the SFPUC, I am pleased to present the Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022.
Respectfully submitted,
Dennis J. Herrera
General Manager
San Francisco Public Utilities Commission
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20223 The Reporting Entity - Profile of the San Francisco Public Utilities Commission The San Francisco Public Utilities Commission (SFPUC) , an enterprise department of the City and County of San Francisco (the City), is responsible for the operation, maintenance, and development of three utility enterprises: Water, Wastewater, and Hetch Hetchy Water and Power and CleanPowerSF. We provide wholesale and retail drinking water to the San Francisco Bay Area, wastewater collection and treatment within San Francisco and three neighboring municipalities, and power to residential and commercial customers and municipal facilities.
Our Business Services, External Affairs, and Infrastructure bureaus provide support and administrative services and are funded through utility rates and charges.
The Water Enterprise operates the Hetch Hetchy Regional Water System (System), a wholesale and retail drinking water supply system that serves 2.7 million customers in Alameda, Santa Clara, San Mateo, and San Francisco counties. The upcountry portion of the System begins with Hetch Hetchy Reservoir in Yosemite National Park. Impounded by O’Shaughnessy Dam, Hetch Hetchy Reservoir water passes through hydroelectric powerhouses before it enters the San Joaquin Pipelines, the Tesla Ultraviolet Treatment Facility, and the Coast Range Tunnel on its journey to the Bay Area.
The Bay Area portion of the System includes water collection, treatment, and transmission facilities from the Alameda East Portal to the wholesale service area and terminal reservoirs in San Francisco. Water storage facilities include watersheds, dams, and reservoirs such as our Calaveras, San Antonio, Crystal Springs, Pilarcitos, and San Andreas. The water treatment facilities are Tesla Ultraviolet Treatment Facility, disinfecting the Hetch Hetchy supply; Sunol Valley Water Treatment Plant, treating the water from the Calaveras and San Antonio supply as well as the stored Hetch Hetchy supply; and Harry Tracy Water Treatment Plant, treating the water from the Crystal Springs and San Andreas supply. The water transmission system in the Bay Area and Peninsula includes the Bay Division, San Andreas, Sunset Supply, and Crystal Springs pipelines. The Bay Area transmission system also includes Irvington Tunnel 1 and Tunnel 2, the Bay Tunnel, and the Crystal Springs Bypass Tunnel.
The Water Enterprise also manages water distribution in the City and the majority of the drinking water is supplied by our system, originates as snowmelt within the 459-square-mile Hetch Hetchy Watershed on the upper Tuolumne River within Yosemite National Park. This high-quality water is transported 167 miles across California solely by gravity. The Hetch Hetchy water supply is augmented with precipitation collected in the reservoirs of the Alameda Creek Watershed in Alameda County, and the Peninsula Watershed in San Mateo County. The Regional Groundwater Storage and Recovery Project, currently under construction, will provide additional dry year water supply to the System for drought management.
Water Enterprise revenue is based on retail and wholesale water rate payments from customers. Retail rates are set by the SFPUC, while wholesale rates are set by the Commission pursuant to our Water Supply Agreement with our wholesale customers.
The Wastewater Enterprise is responsible for the operation and maintenance of San Francisco’s combined sewer system that collects, treats, and discharges once treated, sanitary sewage (toilet flushing, bathroom and kitchen sinks, showers) and stormwater runoff (rainwater falling on our roofs, sidewalks and streets within San Francisco, parts of Daly City, the Bayshore Sanitary District, Brisbane, Treasure Island, and Yerba Buena Island. This work is crucial for the protection of public health, and for the environmental safety of the San Francisco Bay and Pacific Ocean. Our combined sewer system is unique to coastal California and offers significant environmental benefits because it captures and treats both stormwater (rain runoff) and sanitary sewage from homes and businesses, and these combined flows are referred to as wastewater.
San Francisco wastewater and stormwater flows are treated at three facilities: the Southeast Treatment Plant, the Oceanside Treatment Plant, and the North Point Wet Weather Facility, the last of which is operated only in wet weather.
The sewer system currently can handle up to an average of 70 million gallons per day (MGD) in dry weather and can treat up to 575 MGD in wet weather. The Wastewater Enterprise operates 27 pump stations, 36 discharge points, and massive underground transport/storage structures around the City that have storage capacity up to 200 million gallons.
Enterprises Funds
Water Water
Wastewater Wastewater
Hetch Hetchy
Hetchy Water
Hetchy Power
CleanPowerSF
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20224 We operate, clean, inspect, and maintain more than 1,000 miles of sewer pipes. We regularly monitor areas of the San Francisco shoreline for water quality where water recreation is common and provide water quality reports to the public using our 24-hour hotline, website, and e-newsletters.
The Wastewater Enterprise serves both residential and commercial accounts as well as some municipal customers. Our sewer facilities and resource recovery programs have received recognition from agencies at the state and national level, including the U.S. Environmental Protection Agency, National Association of Clean Water Agencies, and the California Water Environment Association.
In a combined sewer system, such as San Francisco’s, managing stormwater is an important priority for the SFPUC and the City. We take a comprehensive approach to managing stormwater and advancing flood resilience across the City. Although no sewer system can handle the heaviest rains, we are pursuing a variety of approaches to improve the City’s flood resilience in the face of increasingly intense rainstorms. The comprehensive RainReadySF Program, which is a combination of planned infrastructure improvements, coordinated City services and innovative programs, provides residents and businesses with the resources they need to reduce the risk of flooding during a major rainstorm.
The Hetch Hetchy Water and Power and CleanPowerSF Enterprise (Hetch Hetchy) comprises of three key components:
(1) Hetch Hetchy Water (Hetchy Water), which operates and maintains the upcountry water and power facilities; (2) Hetch Hetchy Power (Hetchy Power), responsible for all power utility wholesale and retail transactions and in-City power operations; and (3) CleanPowerSF, a Community Choice Aggregation (CCA) that provides San Francisco residents and businesses with electricity supply services sourced from new and existing clean energy sources.
Hetchy Water is responsible for operating the Hetch Hetchy Reservoir, the main source of water for the Hetch Hetchy Regional Water System (System) and plays a key role in water delivery in California. Several of the Hetch Hetchy Water facilities are joint assets and are used for both water transmission and power generation and transmission. Operating and capital costs of these facilities are allocated 45% to Hetchy Water and 55% to Hetchy Power. Refer to Water Enterprise for more information on the System.
Hetchy Power is the publicly owned utility for San Francisco. The Hetchy Power System is comprised of transmission lines and some local distribution facilities. It has a generation portfolio that includes three major hydroelectric powerhouses – Holm, Kirkwood, and Moccasin – in the Sierra Nevada mountain range and 23 solar arrays in San Francisco. Hetchy Power revenue is based on retail and wholesale power-rate payments and charges collected from customers. Retail rates are set by the Commission.
Hetchy Power customers include San Francisco International Airport (SFO), libraries, police stations, City Hall, San Francisco Municipal Transportation Agency (SFMTA), San Francisco Port Authority, Treasure Island, Hunter’s Point Shipyard, and the Transbay Transit Center. Hetchy Power also owns, operates, and maintains approximately 60% of the streetlights in the City. Finally, Hetchy Power provides electrical maintenance services, energy efficiency programs, and distributed generation services to our customers.
CleanPowerSF, San Francisco’s CCA program, provides clean electricity supply to residents and businesses in San Francisco. Under this program, CleanPowerSF supplies customers with electricity from renewable sources like solar wind, and hydro power. Pacific Gas & Electric Company (PG&E) delivers the energy via their electrical grid. CleanPowerSF’s Green product features at least 50% California Renewable Portfolio Standard (RPS) certified renewable energy, and its SuperGreen product offers 100% California RPS-certified renewable energy.
CleanPowerSF serves approximately 380,000 customer accounts in San Francisco. Collectively, Hetch Hetchy Power and CleanPowerSF meet more than 70% of the electricity demand in San Francisco with clean power.
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20225 Mission, Vision, and Values
The mission of the San Francisco Public Utilities Commission (SFPUC or the Commission) is to provide our customers with high-quality, efficient, and reliable water, power, and wastewater services in a manner that is inclusive of environmental and community interests, and sustains the resources entrusted to the SFPUC’s care.
SFPUC values sustainability as a fundamental business principle, exemplified through the adoption of an agency-wide strategic sustainability plan to ingrain the values of a sustainable future into our agency’s core processes. The SFPUC is a sustainable utility leader, recognized for superior levels in service, value, environmental stewardship and innovation.
Most importantly we value our workforce and community as reflected in the core values adopted by our organization. •
Communication: Listen and communicate honestly and openly. • Diversity: Valuing a workforce that reflects all manner of views, experiences, backgrounds, and talents, and recognize it is vital to the SFPUC success. • Equal Opportunity: Provide opportunities to all staff to contribute and reach their potential. To achieve this, the SFPUC must be a learning organization.
• Excellence: Strive for personal and professional excellence, and recognize exemplary performance by seeking continuous improvement.
• Inclusiveness: Provide access and transparency to stakeholders and community members. • Respect: Understand and appreciate the inherent value of the SFPUC’s staff, customers, and community. • Safety: Take the health and safety of the SFPUC’s employees, customers, and communities seriously. • Service: Focus on customer satisfaction, health, and safety. • Stewardship: Responsibly manage the resources entrusted to the SFPUC’s care. • Te amwork: Support a cooperative work environment; the SFPUC team is strengthened by the diversity and contributions of its members.
• T rust: Act with honesty, integrity, and fairness.
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20226 Fiscal Year 2022
San Francisco Mayor and Public Utilities Commission Members London N. Breed
Mayor
Anson Moran
President
Tim Paulson
Commissioner
Sophie Maxwell
Commissioner
Ed Harrington
Commissioner
(July 2021 to January 2022)
Newsha K. Ajami
Vice President
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20227 Organizational Chart as of June 2022
Note: AGM is Assistant General Manager, the person who leads an Enterprise or Bureau.
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20228 The Agency Strategic Plan is a high-level and future-oriented plan. The purpose is to better align the work of the Water, Wastewater and Hetch Hetchy Enterprises, set a strategic direction and identify key priorities.
The Agency Strategic Plan outlines the mission, vision and values and sets forth 6 priority goals and supporting objectives.
The goals are as follows:
• Reliable service and assets;
• Organizational excellence;
• Effective workforce;
• Financial sustainability;
• Stakeholder and community interest; and
• Environmental stewardship.
Each Goal has one or more Executive Champions who
have worked across the Enterprises, Infrastructure,
and the Bureaus to develop performance measures
including target and baseline metrics. There is a Lead
Strategist for each of the six goal area who will carry the vision of their respective goal area will report
biannually to the Goal Champions on progress of
achieving the performance measures consistent with
the target/baseline. At the end of the fiscal year, each Goal Champion is required to report performance
measured against the target/baseline. More details
of the 2020 SFPUC Strategic plan are available
at https://sfpuc.org/about-us/policies-plans/agency-strategic-plan and the Performance Measures in the Operating Information section of this report.
Enterprise Risk Management Framework
The SFPUC helps ensure successful implementation of our Mission, Vision, and Values by integrating the principles of Enterprise Risk Management (ERM) into organizational culture and strategic decision making. In planning for our future, the ERM framework promotes a culture where risks are identified, assessed, prioritized, and managed to minimize threats hindering us from achieving our goals; and to maximize opportunities benefiting the SFPUC. Accountability and transparency are promoted through assignment of identified risks to owners, and routine reporting of mitigation status to senior management. The ERM framework is a continuous process that strengthens organizational structure and culture through communication and awareness. The Risk Management division provides support to the SFPUC’s journey from a traditional risk management approach towards enterprise risk management – emphasizing effective management of the total cost of risk and management of risk for better outcomes.
In fiscal years 2015 and 2016 respectively, the Power Enterprise adopted and implemented the ISO 31000 standard for Enterprise Risk Management for the Hetchy Power and CleanPowerSF
program. The program enables systematic and proactive
identification and analysis of risks that threaten business Supporting Values
Core
Values
Teamwork
We support a cooperative
work environment that is
strengthened by diversity.
Respect
We understand and
appreciate the inherent
value of our staff,
customers, and
community.
Equal Opportunity
We provide opportunities
to all staff to contribute
and reach their potential.
Communication
We listen and
communicate honestly
and openly.
Service
We focus on customer
satisfaction and innovation.
Inclusiveness
We provide access and
transparency to stakeholders
and community members.
Safety
We take the health and safety
of our employees, customers
and communities seriously.
Stewardship
We responsibly manage the
resources entrusted to our
care in a sustainable manner.
Excellence
We strive for personal excellence,
recognize exemplary performance,
and seek continuous improvement.
Trust
We act with honesty,
integrity, and fairness.
OUR VALUES
Diversity
We value a diverse workforce
that reflects all manner of views,
experiences, backgrounds and
talents, and recognize it is vital
to our success.
Establish the context
Monitor and review
Communicate and consult
Risk treatment
Risk identification
Risk analysis
Risk evaluation
Risk assessment
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 20229 objectives before they occur. Proper identification of risks to business objectives ensures mitigation measures can be implemented to reduce the probability of certain risks occurring or reducing negative impact. Other prior applications of ERM at the SFPUC include supporting the Strategic Plan, the Business Services Bureau, Emergency Planning and Security, and other specific PUC programs.
The SFPUC also utilizes other risk tools as part of a comprehensive risk management approach. This includes the SFPUC Purchased Insurance Program, a portfolio of insurance policies acquired to mitigate various liability risks to mission critical assets, operational and financial. Other risk management activities include contractual risk review, project specific risk assessments and advisement for the Infrastructure Project Management Bureau and Contract Management Bureau for construction, professional and general service contracts. SFPUC Risk Management also collaborates with the Office of the Administrator’s City Risk Management for citywide risk management initiatives.
Risk Categories
• HR and personnel risks
• O perations disruption (e.g. construction,
utilities failure, procurement)
• IT data / infrastructure compromise
• Process / executi on failure
• Envir onmental
• Aging infrastructure
• C onstruction
• Worker injury/ illness
• Third- party liability
• Physical structure damage
• P ublic Officials' liability
• Employm ent liability
• B ond rating
• D ebt obligations
• Fi nancial reporting
• Cash flow/ava ilability
• E nergy costs
• Rate fatigue
• Stak eholders' interests
• P ublic support/ Ratepayer fatigue
• Com peting expectations
• Economic uncertainty
• Long-term planning vs. budget limitations
• Negative m edia coverage
• Image and reputation
• Regulatory non-compliance with EPA,
WECC/NERC, GASB, OSHA,
government policy
• Comp liance with the WSA and WRR
• P unitive damages, law suits
Our property insurance policy
covers select Mission Critical
Power Assets for all risks (e.g. fire,
flood up to $1M, terrorism, etc.)
excluding specific catastrophic
perils (e.g. earthquake, tsunami,
war, etc.).
We have not purchased Business
Interruption insurance as the
property insurance ‘extra expense’
clause serves a similar purpo se.
Strategic
Trends in Economy &
Society
Financial
Effect of Market Forces
on Financial Assets or
Liabilities
Operational
People, Processes &
Systems or Controls
Legal/ Regulatory
Effect of Change in Laws
and Regulations
Insurable Hazards
Loss Exposures:
Property, Liability or
Personnel
Overall, the SFPUC’s ERM initiatives are designed to reduce the chances of a negative outcome from occurring, lessen its impact, or transfer financial liabilities away from the organization. These initiatives can also increase opportunities and maximize the benefit from taking advantage of positive outcomes. A combination of these strategies will help lower the total cost of risk for the SFPUC and achieve both short and long-term benefits to our ratepayers.
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 202210 San Francisco’s Budget Process
The budget cycle for the biennial July 1 fiscal year budget begins in August and typically ends in July. The two-year fixed budget is prepared, reviewed, enacted by the Board of Supervisors, signed by the Mayor, and implemented by departments and adjusted as necessary during this period. The Board of Supervisors does not adopt a new budget for the second fiscal year of the cycle unless there are significant increases or decreases in revenues or expenditures which then reopen the budget to follow the usual budget process.
The SFPUC’s two-year budget is comprised of two, single-year spending plans, which supports the ongoing mission of the SFPUC to provide its customers with high-quality, efficient, and reliable water, wastewater, and power services in a manner that is inclusive of environmental and community interests, and that sustains the resources entrusted to our care. The budget is a detailed operating plan that identifies estimated costs and results in relation to estimated revenues and represents a process through which policy decisions are deliberated, implemented, and controlled. The budget aligns funding to accomplish our long-term strategic goals and objectives, ensures funding for our operating programs, and purposefully supports the Strategic Plan targeted outcomes to ensure the appropriate application of resources to reach our goals.
Budgeting Basis
The City adopts budgets for all government funds on a budget basis relying on a current financial resources measurement focus and a modified accrual basis of accounting. The modified accrual method is a basis of accounting used with a current financial resources measurement focus. It modifies the accrual basis of accounting in two significant ways: first, revenues are only recognized when they are measurable and available; second, expenditures are recognized in the period in which the SFPUC normally liquidates the related liability rather than when the liability is first incurred, if earlier. The City Charter prohibits expending funds for which there is no legal appropriation.
Accounting Basis
The accounts of the SFPUC Enterprises are organized by proprietary fund type, specifically an enterprise fund. The activities of the Enterprises are accounted for with a separate set of self-balancing accounts that comprise the Enterprises’ assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenues, and expenses. Enterprise funds account for activities that (1) are financed with debt secured solely by a pledge of the net revenues from fees and charges of the activity; or (2) 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 (3) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs.
The financial activities of each Enterprise and the year-end audited financial statements are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting. Under this method, all assets, deferred outflows of resources, liabilities, and deferred inflows of resources associated with its operations are included on the Statement of Net Position; revenues are recorded when earned, and expenses recorded when liabilities are incurred. The SFPUC Enterprises apply all applicable Governmental Accounting Standards Board (GASB) pronouncements.
Fiscal Year 2023 Operating Budgets
The SFPUC annual budgets, including debt service and cash-funded capital, as well as operation programs total $1.65 billion and $1.48 billion for fiscal years 2023 and 2022, respectively. The operating programs include regular operating costs, maintenance of utility facilities and lands, as well as support services, like management, business services, planning, regulatory compliance, communication, and planned debt service for each of the Enterprise. The budget includes a forecast of volumetric utility assumptions which incorporate the significant negative impact due to the COVID-19 pandemic and assumptions around drought impacts on revenues. The operating budget is financed by both wholesale and retail rates, service charges and non-operating revenues, including rental income and interest earnings.
Of the SFPUC fiscal year 2023 $1.65 billion operating budget, the Water Enterprise accounts for $663.7 million to fund the operations and maintenance of the SFPUC water system; Wastewater Enterprise’s operating budget of $406.1 million funds the operations and maintenance of the SFPUC’s sewer system. Hetch Hetchy Water and Power’s operating budget of $266.0 million funds the operations and maintenance of the upcountry water and power systems, including Power
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 202211 Enterprise activities within the City. CleanPowerSF’s operating budget of $315.7 million funds the operations and power purchases. Detailed budget information is available on our website https://sfpuc.org/about-us/reports/operating-and- capital-budgets.
Fiscal Year 2023 Capital Budgets
Our capital programs are intended to reconstruct, replace, expand, repair, or improve facilities that are under the SFPUC’s jurisdiction. The capital budgets are coordinated with the Ten-Year Capital Plan and the Ten-Year Financial Plan. The issuance of revenue bonds, other forms of indebtedness, and the execution of governmental loans are provided under the San Francisco City Charter to finance our capital programs. The repayment of this indebtedness is provided through rates and service charge revenues of the SFPUC that incurs the debt and benefits from the underlying capital improvements.
The budget appropriations for capital programs are coordinated with the SFPUC’s Ten-Year Capital Financial Plans.
The SFPUC develops stand-alone supplemental appropriations for our capital program which are coordinated with our operating budget review and approval cycle.
Total approved fiscal year 2023 capital budgets were $983.2 million, including $111.2 million for the Water Enterprise, $687.2 million for the Wastewater Enterprise, $181.1 million for Hetch Hetchy Water and Power Enterprise and $3.7 million for CleanPowerSF.
The major capital investment for the Water Enterprise includes the Water Treatment Program, which is to provide major improvements to the Sunol and Millbrae Yards such as the Sunol Valley Water Treatment Plant Ozone project. The Water Transmission Program is to provide upgrades to the transmission system including inspections and repairs, valve replacements and pump station and vault upgrades. The Regional Water Supply and Storage Program includes upgrades to structures to meet State Division of Safety of Dams requirements, and projects to increase regional water supply diversification and explore alternative methods for expanding water sources. The Water Conveyance/Distribution System Program includes funding to install, replace and renew distribution system pipelines and service connection for over 1,000 miles of drinking water mains in San Francisco.
The Wastewater Enterprise’s major capital investment from the Sewer System Improvement Program (SSIP) includes the Treatment Facilities Programs, including improvements to the combined sewer transport storage and near shore combined sewer discharge structures and liquid treatments at various treatment sites. Another major SSIP project is the Stormwater Management/Flood Control Program, includes work on drainage basins, flood resilience and green infrastructure storm management program. The Collection System from the Renewal and Replacement Program (R&R) includes cleaning and inspection of large diameter sewers, transport/storage boxes and collection system discharge/ overflow structures, planned and emergency repairs and replacement of structurally inadequate sewers.
The Hetch Hetchy Water and Power’s major capital investment includes the Distribution Services projects, Water infrastructure program and Joint projects. The Distribution Services projects include the San Francisco Airport (SFO) Substation Improvements to plan, design, and construct needed upgrades at the substations, the Alice Griffith/Candlestick Point for the second phase of development to install the conductors in the conduits, transformers, switches, and metering equipment required for the electric distribution system. Water Infrastructure program include concept, development, design, and upgrades for operating, managing, and maintaining the Hetchy Water Infrastructure. Joint Projects between Hetchy Water and Hetchy Power includes upgrade communication system within the Moccasin compound, upgrade the dams and reservoirs to meet the Water Levels of Service and Power Operational Objectives, inspection, and repair to the mountain tunnel to assure reliability of water delivery.
The CleanPowerSF major capital investment includes the development of new renewable energy (solar photovoltaic) and battery storage projects on select SFPUC sites as well as development and implementation of new customer programs project for programs supporting demand response, electric mobility, local renewable energy generation, and building decarbonization technologies.
Ten-Year Financial Plan
The SFPUC prepares an annual updated Ten-Year Financial Plan as required by the City and County of San Francisco Charter Section 8B.123. The Ten-Year Financial Plan is a summary of projected revenues, expenditures, fund balances, and financial ratios for each enterprise over a rolling 10-year period. The Plan projections are based on current Mayor
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 202212 and Commission policies, goals, and objectives. For the ten year plan fiscal year 2023, these projections also include assumptions based on the pandemic economic recovery and the 2021 drought declaration. A key objective is to promote SFPUC’s Strategic Plan goal of Financial Sustainability by estimating future revenue requirements and financial ratios while providing a view of resulting rates changes. Consolidating these key financial indicators into the Plan serves to inform the SFPUC’s long-term planning decisions, such as the biennial operating and capital budgets, long-range capital planning and capital financing strategies.
Ten-Year Capital Plan
The SFPUC prepares an annual updated Ten-Year Capital Plan as required by the City and County of San Francisco Charter Section 3.20. The Plan is to contain a list of projects to be executed during the 10-year planning horizon, including cost estimates and schedules. Both Ten-Year Financial and Capital Plan, serve as a basis and supporting documentation for the Commission’s capital budget and issuance of revenue bonds and other indebtedness to support the SFPUC capital program.
The SFPUC Ten-Year Capital Plan for fiscal years 2023 through 2032 totals $9.9 billion. Water Enterprise is approximately $2.1 billion, including projects for the Local Water Conveyance, Local Buildings and Grounds Improvements and Regional Water Supply and Storage. Wastewater Enterprise is approximately $6.1 billion which mainly includes the Treatment Facilities, Stormwater Management/Flood Control, and the Renewal and Replacement (R&R) program projects like Sewer Improvements. Hetchy Water and Hetchy Power’s is approximately $1.6 billion is to fund up-county water/power projects and power distribution services projects like SFO, Alice Griffith, Candlestick Park and Hunters Point. CleanPowerSF is approximately $74 million to fund the development of new renewable energy (solar photovoltaic) and battery storage projects.
Financial Transparency, Reporting and Auditing Process
This report was prepared by SFPUC Financial Services in conformance with the principles and standards for financial reporting set forth by the GASB and U.S. Generally Accepted Accounting Principles (GAAP). Recommended guidelines by the Government Finance Officers Association of the United States and Canada were also followed.
The SFPUC’s management is responsible for both the accuracy of the data presented and the completeness and fairness of its presentation, including all disclosures. The existing comprehensive structure on internal controls in the City and SFPUC ensures that the financial statements are free of any material misstatements. This report is accurate in all material respects, and it is presented in a manner designed to set forth fairly the financial position and the results of operations of the SFPUC. The included disclosures enable the reader to gain a thorough understanding of the SFPUC’s financial activities.
The SFPUC’s financial statements have been audited by KPMG LLP, an independent registered public accounting firm.
The goal of the independent audit was to provide reasonable assurance that the financial statements of the SFPUC for the fiscal years ended June 30, 2022 and 2021 are fairly presented in conformity with GAAP and are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statements presentation. The independent auditors rendered an unmodified “clean” opinion on the SFPUC’s financial statements for the fiscal year ended June 30, 2022 since 2008. The independent auditors’ report is presented as the first component of the financial section of this report. Management’s Discussion and Analysis (MDA) is presented after the independent auditors’ report, and provides a narrative introduction, overview, and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement MDA and should be read in conjunction with it.
Financial Authority and Policies
The City is a Charter City under the California Constitution, and as a result, the Charter is the guiding document for financial authority and policies for City departments. The SFPUC is the department responsible for the maintenance, operation, and development of three utility enterprises: the Water Enterprise, the Wastewater Enterprise, and Hetch Hetchy Water and Power and CleanPowerSF Enterprise. Each of the SFPUC’s enterprise funds is operated and managed as a separate financial entity and separate enterprise entity.
Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 202213 The SFPUC’s financial policies, adopted and updated such as fund balance reserve and debt service coverage requirements are available on our website https://sfpuc.org/about-us/policies-plans/financial-plans-and-policies. The purpose and source for each of the designated reserves within its major funds of operating, capital projects, debt service, and trust are included in these guidelines which enable restricting funds for future infrastructure needs, replacement of aging facilities, bond reserves, and various operating reserves to mitigate unexpected occurrences. These reserves are critical to the SFPUC’s financial strength and high bond ratings. Further, the City has a long-standing practice of recognizing and reserving for known and anticipated liabilities. The City also has established an irrevocable trust for other post- employment benefits (also known as retiree medical) and continues to make the annual requirement contribution to ensure this future obligation is funded.
Accounting Systems, Policies, and Internal Controls
In developing and maintaining the accounting systems, consideration is given by the administration as to the adequacy of internal controls. Internal controls are designed to provide reasonable, but not absolute, assurance. The SFPUC’s management is responsible for establishing and maintaining a system of internal controls designed to safeguard the enterprises’ assets from loss, theft, or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in accordance with GAAP. For the fiscal year ended June 30, 2022, the independent auditors noted no matters involving internal controls over financial reporting that would be considered a material weakness for Water, Wastewater and Hetch Hetchy Water and Power and CleanPowerSF.
The SFPUC’s Finance Department is responsible for providing the financial services for the utility enterprises, including support for financial accounting and reporting, accounts payable, billing and collection of water, wastewater, and power charges, and other revenues. The SFPUC’s financial statements and records are maintained on an enterprise basis using the accrual method of accounting to ensure the timely matching of revenues against the costs of providing services. Revenues and expenses are recorded in the period in which the revenues are earned, and the expenses are incurred.
Achievement Awards
The Government Finance Officers Association of the United States and Canada (GFOA) awarded the Certificate of Achievement for Excellence in Financial Reporting to the SFPUC for its Annual Comprehensive Financial Report for the fiscal year ended June 30, 2021. This was the 13th consecutive year that the SFPUC has achieved this prestigious award.
In order to be awarded the Certificate of Achievement, a government or reporting entity must publish an easily readable and efficiently organized Annual Comprehensive Financial Report. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Annual Comprehensive Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to GFOA to determine its eligibility for another certificate.
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City and County of San Francisco
Public Utilities Commission
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2021
Executive Director/CEO
15 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022 Financial Section
Independent Auditors’ Report
Management’s Discussion and Analysis (Unaudited)
Basic Financial Statements
Statements of Net Position – Proprietary Funds
Statements of Revenues, Expenses, and Changes in Net Position – Proprietary Funds
Statements of Cash Flows – Proprietary Funds
Notes to Basic Financial Statements
Required Supplementary Information (Unaudited)
Schedules of the Proportionate Share of the Net Pension (Asset)/Liability Schedules of Employer Contributions – Pension Plan
Schedules of Changes in Total Pension Liability and Related Ratios – Replacement Benefits Plan
Schedules of Changes in Other Post-employment Benefits Liability and related Ratios - Other Post-employment Healthcare Benefits Plan Schedules of Employer Contributions – Other Post-employment Healthcare Benefits Plan
Supplementary Information (Proprietary Funds)
Schedule of Changes in Net Position – Dollar and Percentage Change vs.
Prior Year
Schedule of Changes in Revenues, Expenses, and Net Position – Dollar and Percentage Change vs. Prior Year
Independent Auditors’ Report on Internal Control
The San Francisco Public Utilities Commission
An Enterprise Department of the City and County of San Francisco, California
KPMG LLP
Sui
te 1400
55 Second Street
San Francisco, CA 94105
KPMG LLP , a Delaware limited liability partnership and a membe r firm of
the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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 the San Francisco Public Utilities Commission (SFPUC), as of and for the years ended June 30, 2022 and 2021, and the related notes to the financial statements, which collectively comprise SFPUC for the years then ended as listed in the table of con
tents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and each major fund of SFPUC, 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 SFPUC 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 SFPUC 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 SFPUC. 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 Stateme nts Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement
. 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 and Government Auditing Standards will always 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 and Government 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 SFPUC Accordingly, no such opinion is expressed.
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 and required sup
plementary information as listed in the accompanying table of contents 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
res
ponses 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.
Supplementary Information
Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise SFPUC s
bas
ic financial statements. The schedule of changes in net position dollar and percentage change vs. prior year and schedul e of changes in revenues, expenses and net position dollar and percentage change vs. prior year are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audits of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Information
Management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditors report thereon. Our opinions on the basic financial sta tements do not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audits of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 28, 2023 on our consideration of SFPUC
laws, regulations, contracts, and grant agreements and o ther 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 SFPUC financial reporting or on compliance. That report is a n integral part of an audit performed in accordance with Government Auditing Standards in considering SFPUC reporting and compliance.
San
Francisco, California
February 28, 2023
18 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
This section presents management’s analysis of the San Francisco Public Utilities Commission’s (SFPUC or the Commission) 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 SFPUC’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
● Fund Financial Statements
● COVID-19
● Financial Analysis
● Capital Assets
● Debt Administration
● Rates and Charges
● Request for Information
Organization and Business
The SFPUC is a department of the City that is responsible for the maintenance, operation, and development of three utility enterprises and five funds. The three utility enterprises include Water, Wastewater, and Hetch Hetchy (Hetchy Water, Hetchy Power and CleanPowerSF).
Water Enterprise
As the third largest municipal water agency in California, the Water 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 Water 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 Water 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.
Wastewater Enterprise
The primary responsibility of the Wastewater 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 Wastewater Enterprise serves on a contractual basis to certain municipal customers located outside of the City limits, including the North San Mateo County Sanitation District No. 3, Bayshore Sanitary District, and the City of Brisbane. The Wastewater Enterprise recovers costs of service through user fees based on the volume and strength of sanitary flow. As of June 30, 2022, the Wastewater 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 and 360 increase in the number of accounts for non-residential and a decrease of 0.9 million discharge units and 455 increase in the number of accounts for residential, as compared to prior year.
19 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy 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, and 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.
Hetchy 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.
Hetch 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.
CleanPowerSF
In May 2016, SFPUC launched CleanPowerSF, 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. 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 Hetch Hetchy Water and Power and CleanPowerSF Enterprise starting fiscal year 2017.
The core business is to provide greener electricity generation to residential and 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 low-income ratepayers residing in Disadvantaged Communities with 100% RPS electricity at a 20% bill discount.
20 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Overview of the Financial Statements
The Department’s financial statements include the following:
Statements of Net Position present information on the Department’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 Department is improving or worsening.
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 results of the Department’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 Department 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 presented on the face of the financial statements.
Fund Financial Statements
The Department has five funds: Water, Wastewater, Hetchy Water, Hetchy Power, and CleanPowerSF.
COVID-19
On February 25, 2020, the 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 the temporary suspension of (a) discontinuation or shut-off of water, sewer, and power services for residents and businesses in the City for non-payment of water, sewer, and power bills, and (b) the imposition of late payment penalties or fees for delinquent water, sewer, and 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 and to June 30, 2023 for late payment penalties for Water Enterprise, Wastewater Enterprise, and Hetchy Power for residential accounts. The suspension of the return of delinquent CleanPowerSF customers to 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 SFPUC.
Financial Analysis
Financial Highlights for Fiscal Year 2022
Department-wide Business Type Activities
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $2,823,758.
● Total assets exceeded total liabilities by $3,068,524. 21 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
● Net position increased by $85,648 or 3.1% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $586,502 or 5.9% to $10,450,688.
● Operating revenues increased by $121,174 or 9.3% to $1,422,446. ● Operating expenses decreased by $20,100 or 1.7% to $1,129,725.
Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $633,418.
● 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.
Wastewater
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $1,362,662.
● Total assets 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.
Hetchy Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $249,180.
● Total assets 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 investment 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.
Hetchy Power
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $494,178.
● Total assets exceeded total liabilities by $527,476.
● 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 investment 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.
CleanPowerSF
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $84,320.
22 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
● Total assets 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.
Financial Highlights for Fiscal Year 2021
Department-wide Business Type Activities
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $2,736,309.
● Total assets exceeded total liabilities by $2,451,935. ● Net position increased by $34,578 or 1.3% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $665,142 or 7.2% to $9,864,186.
● Operating revenues decreased by $48,315 or 3.6% to $1,300,448. ● Operating expenses increased by $100,532 or 9.6% to $1,149,934.
Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $649,517.
● 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. ● 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 Wastewater
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $1,302,583.
● Total assets 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.
Hetchy Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $224,665.
● Total assets exceeded total liabilities by $216,214.
● Net position increased by $13,630 or 6.5% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $16,699 or 10.4% to $177,481. ● Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $12,137 or 34.7% to $47,090.
● Operating expenses, excluding other non-operating expenses, increased by $5,644 or 12.6% to $50,517. 23 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Power
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $472,464.
● Total assets 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 investment 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.
CleanPowerSF
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $87,080.
● Total assets 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. 24 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Financial Position
Department-wide Business Type Activities
The following table summarizes the department-wide changes in net position. Detailed discussion follows for each proprietary fund.
Restated 2022 - 2021 2021 - 2020
2022* 2021*^ 2020* Change Change
Total assets:
Current and other assets $ 1,921,659 1,616,001 1,615,614 305,658 387 10,450,688 9,864,186 9,199,044 586,502 665,142
Total assets 12,372,347 11,480,187 10,814,658 892,160 665,529 Deferred outflows of resources:
Unamortized loss on refunding of debt 139,514 155,082 144,378 (15,568) 10,704 Pensions 93,952 113,149 115,744 (19,197) (2,595)
Other post-employment benefits 53,412 61,590 43,100 (8,178) 18,490 Total deferred outflows of resources 286,878 329,821 303,222 (42,943) 26,599 Liabilities:
Current liabilities:
Bonds 161,596 133,308 119,435 28,288 13,873
Certificates of participation 4,395 4,160 3,955 235 205 Commercial paper 625,473 859,051 633,828 (233,578) 225,223 State revolving fund loans 5,764 4,150 2,458 1,614 1,692 Other liabilities 441,067 386,562 346,217 54,505 40,345 Subtotal current liabilities 1,238,295 1,387,231 1,105,893 (148,936) 281,338 Long-term liabilities:
Bonds 6,825,078 6,497,701 6,247,401 327,377 250,300 Revenue Notes 350,356 — — 350,356 —
Certificates of participation 129,550 134,020 138,310 (4,470) (4,290) State revolving fund loans 418,656 211,816 159,362 206,840 52,454 Other liabilities 341,888 747,573 682,730 (405,685) 64,843 Subtotal long-term liabilities 8,065,528 7,591,110 7,227,803 474,418 363,307 Total liabilities:
Bonds 6,986,674 6,631,009 6,366,836 355,665 264,173 Revenue Notes 350,356 — — 350,356 —
Certificates of participation 133,945 138,180 142,265 (4,235) (4,085) Commercial paper 625,473 859,051 633,828 (233,578) 225,223 State revolving fund loans 424,420 215,966 161,820 208,454 54,146 Other liabilities 782,955 1,134,135 1,028,947 (351,180) 105,188 Total liabilities 9,303,823 8,978,341 8,333,696 325,482 644,645 Deferred inflows of resources:
Related to pensions 445,403 10,321 62,629 435,082 (52,308) Leases 44,583 48,110 — (3,527) 48,110
Other post-employment benefits 41,658 35,126 19,824 6,532 15,302 Total deferred inflows of resources 531,644 93,557 82,453 438,087 11,104 Net position:
Net investment in capital assets 2,183,518 2,271,638 2,194,130 (88,120) 77,508 Restricted for debt service 20,202 48,677 17,285 (28,475) 31,392 Restricted for capital projects 114,657 22,319 49,635 92,338 (27,316) Unrestricted 505,381 395,476 440,681 109,905 (45,205) Total net position $ 2,823,758 2,738,110 2,701,731 85,648 36,379 Capital assets, net of accumulated
depreciation and amortization
Table 1
Business Type Activities
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
^Restated due to the implementation of GASB Statement No. 87, Leases . *Eliminated interfund payables and receivables of $0, $0, and $1,800 working capital loan between Hetchy Power and CleanPowerSF and $629, $739, and $847 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction cost in fiscal years 2022, 2021 and 2020, respectively.
25 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes Water’s changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases .
Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Total assets:
Current and other assets $ 793,761 786,522 701,206 7,239 85,316 5,617,594 5,587,799 5,530,545 29,795 57,254
Total assets 6,411,355 6,374,321 6,231,751 37,034 142,570 Deferred outflows of resources:
Unamortized loss on refunding of debt 139,481 154,991 144,189 (15,510) 10,802 Pensions 52,852 64,797 67,084 (11,945) (2,287)
Other post-employment benefits 32,445 37,762 27,583 (5,317) 10,179 Total deferred outflows of resources 224,778 257,550 238,856 (32,772) 18,694 Liabilities:
Current liabilities:
Revenue bonds 125,285 108,500 94,080 16,785 14,420
Certificates of participation 3,138 2,970 2,824 168 146 Commercial paper 206,297 105,862 362,354 100,435 (256,492) State revolving fund loans 3,283 1,667 — 1,616 1,667 Other liabilities 181,489 154,257 134,563 27,232 19,694 Subtotal current liabilities 519,492 373,256 593,821 146,236 (220,565) Long-term liabilities:
Revenue bonds 4,735,650 4,886,275 4,601,215 (150,625) 285,060 Certificates of participation 92,499 95,692 98,754 (3,193) (3,062) State revolving fund loans 118,478 105,740 73,271 12,738 32,469 Other liabilities 217,961 445,234 415,865 (227,273) 29,369 Subtotal long-term liabilities 5,164,588 5,532,941 5,189,105 (368,353) 343,836 Total liabilities:
Revenue bonds 4,860,935 4,994,775 4,695,295 (133,840) 299,480 Certificates of participation 95,637 98,662 101,578 (3,025) (2,916) Commercial paper 206,297 105,862 362,354 100,435 (256,492) State revolving fund loans 121,761 107,407 73,271 14,354 34,136 Other liabilities 399,450 599,491 550,428 (200,041) 49,063 Total liabilities 5,684,080 5,906,197 5,782,926 (222,117) 123,271 Deferred inflows of resources:
Related to pensions 248,704 4,885 34,894 243,819 (30,009) Leases 44,583 48,110 — (3,527) 48,110
Other post-employment benefits 25,348 21,315 11,772 4,033 9,543 Total deferred inflows of resources 318,635 74,310 46,666 244,325 27,644 Net position:
Net investment in capital assets 537,644 517,302 527,856 20,342 (10,554) Restricted for debt service 14,671 45,586 15,916 (30,915) 29,670 Restricted for capital projects — 22,319 43,122 (22,319) (20,803) Unrestricted 81,103 66,157 54,121 14,946 12,036
Total net position $ 633,418 651,364 641,015 (17,946) 10,349 Capital assets, net of accumulated
depreciation and amortization
Table 1A
Proprietary Fund – Water
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 2 26 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Water Net Position, Fiscal Year 2022
For the year ended June 30, 2022, the Water 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 1A). 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 Water 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 of $29,794 in capital assets mainly from increased buildings, structures, and improvements, offset by a decrease 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 entries, $171 in unearned revenues mainly for deposits on custom work, and $145 in workers’ compensation based on actuarial estimates. The Water 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 11, Water Supply Agreement, for additional details. 27 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Water Net Position, Fiscal Year 2021
For the year ended June 30, 2021, the Water 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 1A). 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 customers to match revenues with the Water Enterprise’s costs of providing service (the Balancing Account), in 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 Water 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 11, 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 Water 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.
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 19th 28 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 paper primarily due to refunding from the 2020 Series ABCD bonds, $14,913 in other post-employment 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 11 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 17th and Folsom sites (see Note 16(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.
29 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes Wastewater’s changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Total assets:
Current and other assets $ 628,368 360,711 473,620 267,657 (112,909) 4,046,451 3,606,850 3,062,288 439,601 544,562
Total assets 4,674,819 3,967,561 3,535,908 707,258 431,653 Deferred outflows of resources:
Unamortized loss on refunding of debt 33 91 189 (58) (98) Pensions 25,369 30,219 30,422 (4,850) (203)
Other post-employment benefits 12,898 15,109 10,065 (2,211) 5,044 Total deferred outflows of resources 38,300 45,419 40,676 (7,119) 4,743 Liabilities:
Current liabilities:
Revenue bonds 34,345 22,880 23,240 11,465 (360)
Certificates of participation 830 785 747 45 38
Commercial paper 379,157 638,518 207,939 (259,361) 430,579 State revolving fund loans 2,481 2,483 2,458 (2) 25
Other liabilities 165,139 149,357 148,585 15,782 772 Subtotal current liabilities 581,952 814,023 382,969 (232,071) 431,054 Long-term liabilities:
Revenue bonds 1,896,908 1,567,042 1,598,493 329,866 (31,451) Revenue notes 350,356 — — 350,356 —
Certificates of participation 24,458 25,302 26,112 (844) (810) State revolving fund loans 300,178 106,076 86,091 194,102 19,985 Other liabilities 73,295 188,576 168,906 (115,281) 19,670 Subtotal long-term liabilities 2,645,195 1,886,996 1,879,602 758,199 7,394 Total liabilities:
Revenue bonds 1,931,253 1,589,922 1,621,733 341,331 (31,811) Revenue notes 350,356 — — 350,356 —
Certificates of participation 25,288 26,087 26,859 (799) (772) Commercial paper 379,157 638,518 207,939 (259,361) 430,579 State revolving fund loans 302,659 108,559 88,549 194,100 20,010 Other liabilities 238,434 337,933 317,491 (99,499) 20,442 Total liabilities 3,227,147 2,701,019 2,262,571 526,128 438,448 Deferred inflows of resources:
Related to pensions 114,670 2,148 16,892 112,522 (14,744) Other post-employment benefits 8,640 7,265 4,185 1,375 3,080 Total deferred inflows of resources 123,310 9,413 21,077 113,897 (11,664) Net position:
Net investment in capital assets 1,092,705 1,253,789 1,183,288 (161,084) 70,501 Restricted for debt service 5,391 2,992 1,227 2,399 1,765 Restricted for capital projects 114,657 — — 114,657 — Unrestricted 149,909 45,767 108,421 104,142 (62,654) Total net position $ 1,362,662 1,302,548 1,292,936 60,114 9,612 Capital assets, net of accumulated
depreciation and amortization
Table 1B
Proprietary Fund – Wastewater
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 3 30 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Wastewater Net Position, Fiscal Year 2022
For the year ended June 30, 2022, the Wastewater Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,362,662. The Wastewater Enterprise’s total net position 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 1B).
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 Wastewater Enterprise’s net position of $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 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 Statement No. 87, Leases, 31 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
$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, workers’ compensation, accrued payroll mainly due to actuarial estimates, 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.
Wastewater Net Position, Fiscal Year 2021
For the year ended June 30, 2021, the Wastewater Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,302,583. The Wastewater Enterprise’s total net position 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 1B).
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 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 Wastewater Enterprise’s net position 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 32 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
of $17,511 in net pension liability based on actuarial report, $3,912 in employee related benefits including vacation, workers’ compensation, 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 PG&E due to expenses incurred for the Cross Bore Project, and $1 interfund payable to City Attorney’s Office. 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.
The following table summarizes Hetchy Water’s changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases.
Hetchy Water Net Position, Fiscal Year 2022
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 liabilities and deferred inflows of resources (see Table 1C-A). 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 accrual Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Total assets:
Current and other assets $ 109,752 98,225 92,711 11,527 5,514 201,007 177,481 160,782 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 Proprietary Fund – Hetchy Water
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
Capital assets, net of accumulated
depreciation and amortization
Table 1C – A
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 4 33 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Hetchy Water Net Position, Fiscal Year 2021
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 Table 1C-A). 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 upcountry 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.
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 mainly for license and permit fees to National Park Service, $626 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, and $4 increase in rental deposits. The increases were offset by 34 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
decreases 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.
The following table summarizes Hetchy Power’s changes in net position.
^Restated due to the implementation of 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 20,520 585,636 492,056 445,429 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 1C – B
Proprietary Fund – Hetchy Power
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
Capital assets, net of accumulated
depreciation and amortization
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 5 35 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Power Net Position, Fiscal Year 2022
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-B). 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 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 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. 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 and interest payable 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.
Hetchy Power Net Position, Fiscal Year 2021
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-B). Increase of $20,430 in current and other assets was attributed to an increase of $16,057 in charges for services receivables, of which $15,673 was attributed to billing delays as a result of transitioning 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 36 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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, offset 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 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 and 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 and 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 actuarial 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.
37 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes CleanPowerSF’s changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases . *Included $1,800 working capital loan from Hetchy Power in fiscal year 2020.
CleanPowerSF Net Position, Fiscal Year 2022
CleanPowerSF’s net position of $84,320 decreased by $2,757 or 3.2%, resulting from an increase of $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 1C-C). 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 requirements, $5,914 from power purchase credits, and $2,452 in prepayments to PG&E for electricity purchases. Other increases included $20,438 in charges for services receivables due to pre-approved rate increases, $1,833 in net pension assets based on actuarial 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 accumulated 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 $40,169, 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 grants received in advance from California Public 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 year and $26 in general liability based on actuarial estimates. The increases were 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) Proprietary Fund – CleanPowerSF
Comparative Condensed Net Position
June 30, 2022, 2021, and 2020
Table 1C – C
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 6 38 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Deferred inflows of resources increased by $4,002 due to an increase of $4,321 in relation to pensions, offset by a decrease of $319 in OPEB based on actuarial reports.
CleanPowerSF Net Position, Fiscal Year 2021
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 1C-C). 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.
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 16(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.
39 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Results of Operations
Department-wide Business Type Activities
The following table summarizes the department-wide revenues, expenses, and changes in net position. Detailed discussion follows for each proprietary fund.
^Restated due to the implementation of GASB Statement No. 87, Leases .
Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Revenues:
Charges for services $ 1,375,765 1,259,466 1,303,411 116,299 (43,945) Rents and concessions 14,719 14,624 13,135 95 1,489 Other operating revenues 31,962 27,182 32,217 4,780 (5,035) Interest and investment income/(loss) (26,202) 30 32,103 (26,232) (32,073) Net gain from transfer of assets — — — — —
Other non-operating revenues 86,326 72,337 129,198 13,989 (56,861) Total revenues 1,482,570 1,373,639 1,510,064 108,931 (136,425) Expenses:
Operating expenses 1,129,725 1,149,825 1,049,402 (20,100) 100,423 Interest expenses 297,041 221,622 237,271 75,419 (15,649) Amortization of premium, discount,
refunding loss, and issuance costs (18,105) (16,498) (22,627) (1,607) 6,129 Non-operating expenses 1,938 3,582 1,652 (1,644) 1,930 Total expenses 1,410,599 1,358,531 1,265,698 52,068 92,833 71,971 15,108 244,366 56,863 (229,258)
Capital contributions — 4,180 — (4,180) 4,180
Transfers from the City and County of San Francisco 45,036 38,465 15,500 6,571 22,965 Transfers to the City and County of San Francisco (31,359) (21,374) (16,305) (9,985) (5,069) Net capital contributions and transfers 13,677 21,271 (805) (7,594) 22,076 Change in net position 85,648 36,379 243,561 49,269 (207,182) Net position at beginning of year 2,738,110 2,701,731 2,458,170 36,379 243,561 Net position at end of year $ 2,823,758 2,738,110 2,701,731 85,648 36,379 Table 2
Business Type Activities
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2022, 2021, and 2020
Change in net position before
transfers and capital contributions
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 7 40 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes Water’s revenues, expenses, and changes in net position.
Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Revenues:
Charges for services $ 539,526 550,306 550,753 (10,780) (447) Rents and concessions 13,765 13,735 12,124 30 1,611 Other operating revenues 19,826 18,395 20,474 1,431 (2,079) Interest and investment income/(loss) (10,896) 1,374 10,517 (12,270) (9,143) Other non-operating revenues 41,871 45,874 94,734 (4,003) (48,860) Total revenues 604,092 629,684 688,602 (25,592) (58,918) Expenses:
Operating expenses 401,786 448,782 398,117 (46,996) 50,665 Interest expenses 213,668 184,678 191,246 28,990 (6,568) Amortization of premium, discount,
refunding loss, and issuance costs (9,875) (7,782) (13,752) (2,093) 5,970 Non-operating expenses 828 2,208 529 (1,380) 1,679
Total expenses 606,407 627,886 576,140 (21,479) 51,746 (2,315) 1,798 112,462 (4,113) (110,664)
Capital contributions — 4,180 — (4,180) 4,180
Transfers from the City and County of San Francisco 15,035 21,025 1,220 (5,990) 19,805 Transfers to the City and County of San Francisco (30,666) (16,654) (14,805) (14,012) (1,849) Net capital contributions and transfers (15,631) 8,551 (13,585) (24,182) 22,136 Change in net position (17,946) 10,349 98,877 (28,295) (88,528) Net position at beginning of year 651,364 641,015 542,138 10,349 98,877 Net position at end of year $ 633,418 651,364 641,015 (17,946) 10,349 Table 2A
Proprietary Fund – Water
Years ended June 30, 2022, 2021, and 2020
Change in net position before
transfers and capital contributions
Comparative Condensed Revenues, Expenses, and Changes in Net Position ^Restated due to the implementation of GASB Statement No. 87, Leases .
Water Results of Operations, Fiscal Year 2022
The Water Enterprise’s total revenues of $604,092 for the year represented a decrease of $25,592 or 4.1% from prior year (see Table 2A). 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 Water 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 41 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 Statement No. 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 Water Enterprise’s contribution to the Surety Bond Program.
Water Results of Operations, Fiscal Year 2021
The Water Enterprise’s total revenues of $627,826 for the year represented a decrease of $60,776 or 8.8% from prior year (see Table 2A). 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% 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 departments as a result of the SF Health Order relating to COVID-19, offset by a 7.0% adopted rate 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 Water 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 services provided by other departments mainly from higher water assessment fees paid to Hetch Hetchy 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, 42 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
and $32 to the Office of the City Administrator for the Water 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.
The following table summarizes Wastewater’s revenues, expenses, and changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases .
Wastewater Results of Operations, Fiscal Year 2022
The Wastewater Enterprise’s total revenues were $387,249, an increase of $55,860 or 16.9% from prior year (see Table 2B). 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 attributed to new developments on Treasure Island and the City’s re-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 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 Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change 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) InInterest and investment income/(loss) (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 costs (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 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 Table 2B
Proprietary Fund – Wastewater
Years ended June 30, 2022, 2021, and 2020
Comparative Condensed Revenues, Expenses, and Changes in Net Position 43 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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) Statement No. 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.
Wastewater Results of Operations, Fiscal Year 2021
The Wastewater Enterprise’s total revenues were $331,389 a decrease of $30,472 or 8.4% from prior year (see Table 2B).
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.
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 44 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
mainly due to water sewage treatment supplies for Bayside Operations. These increases were offset by a decrease of $564 in personnel services mainly due $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), and $684 in workers’ compensation 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 and 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.
The following table summarizes Hetchy Water’s revenues, expenses, and changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases .
Hetchy Water Results of Operations, Fiscal Year 2022
Hetchy Water’s total revenues were $46,859, a decrease of $1,351 or 2.8% from prior year’s revenues (see Table 2C-A).
Decrease was due to $2,700 in investment loss and a decrease of $873 from other non-operating revenues, offset by increases of $2,221 from charges for services and $1 from rents and concessions.
Charges for services were $49,200, an increase of $2,221 or 4.7% 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 $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.
Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Revenues:
Charges for services $ 49,200 46,979 34,797 2,221 12,182 Rents and concessions 112 111 156 1 (45)
Interest and investment income/(loss) (2,932) (232) 1,932 (2,700) (2,164) Other non-operating revenues 479 1,352 3,861 (873) (2,509) Total revenues 46,859 48,210 40,746 (1,351) 7,464
Expenses:
Operating expenses 52,303 50,519 44,873 1,784 5,646 Interest expenses 1 2 — (1) 2
Non-operating expenses 37 63 11 (26) 52
Total expenses 52,341 50,584 44,884 1,757 5,700
Change in net position before transfers (5,482) (2,374) (4,138) (3,108) 1,764 Transfers from the City and County of San Francisco 30,001 16,000 14,000 14,001 2,000 Change in net position 24,519 13,626 9,862 10,893 3,764 Net position at beginning of year 224,661 211,035 201,173 13,626 9,862 Net position at end of year $ 249,180 224,661 211,035 24,519 13,626 Table 2C – A
Proprietary Fund – Hetchy Water
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2022, 2021, and 2020
45 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 primarily 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 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.
Hetchy Water Results of Operations, Fiscal Year 2021
Hetchy Water’s total revenues were $48,210, an increase of $7,464 or 18.3% from prior year’s revenues (see Table 2C-A). Increase was due to $12,182 from charges 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.
46 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes Hetchy Power’s revenues, expenses, and changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases .
Hetchy Power Results of Operations, Fiscal Year 2022
Hetchy Power’s total revenues were $185,004, an increase of $29,324 or 18.8% from prior year’s revenues (see Table 2C-B). 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 power 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 Restated 2022 - 2021 2021 - 2020
2022 2021^ 2020 Change Change
Revenues:
Charges for services $ 173,105 136,247 140,680 36,858 (4,433) Rents and concessions 137 136 191 1 (55)
Interest and investment income/(loss) (4,001) 24 5,746 (4,025) (5,722) Other non-operating revenues 15,763 19,273 25,006 (3,510) (5,733) Total revenues 185,004 155,680 171,623 29,324 (15,943) Expenses:
Operating expenses 156,347 145,640 148,127 10,707 (2,487) Interest expenses 5,624 1,972 2,740 3,652 (768)
Amortization of premium, discount,
and issuance costs 192 (219) (228) 411 9
Non-operating expenses 591 902 1,060 (311) (158)
Total expenses 162,754 148,295 151,699 14,459 (3,404) Change in net position before transfers 22,250 7,385 19,924 14,865 (12,539) Transfers to the City and County of San Francisco (532) (532) (32) — (500) Change in net position 21,718 6,853 19,892 14,865 (13,039) Net position at beginning of year 472,460 465,607 445,715 6,853 19,892 Net position at end of year $ 494,178 472,460 465,607 21,718 6,853 Table 2C – B
Proprietary Fund – Hetchy Power
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 11 47 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Other non-operating expenses were $591, a decrease of $311 or 34.5% mainly due to lower 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, 2022 increased by $21,718 or 4.6% compared to prior year.
Hetchy Power Results of Operations, Fiscal Year 2021
Hetchy Power’s total revenues were $155,680, a decrease of $15,943 or 9.3% from prior year’s revenues (see Table 2C-B). 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 sales to City departments, wholesale, and Treasure Island customers due to COVID-19 related impacts 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 capacity 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 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%, mainly due to decreases of $5,739 from Low Carbon Fuel Standard (LCFS) credit 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 resulting 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, $259 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 48 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
expenses, $1,572 in other operating expenses mainly due to higher capital spending, $984 in contractual services mainly from new in-city inventory warehouse rental at Pier 23 in San Francisco, and $44 in personnel services resulting from cost of living adjustments, higher retirement contribution 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.
The following table summarizes CleanPowerSF’s revenues, expenses, and changes in net position.
^Restated due to the implementation of GASB Statement No. 87, Leases .
CleanPowerSF Results of Operations, Fiscal Year 2022
CleanPowerSF’s total revenues were $259,366, a $50,690 or 24.3% increase over prior year (see Table 2C-C). 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 pricing 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 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 2C – C
Proprietary Fund – CleanPowerSF
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2022, 2021, and 2020
49 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
CleanPowerSF Results of Operations, Fiscal Year 2021
CleanPowerSF’s total revenues were $208,676, a $38,556 or 15.6% decrease over prior year (see Table 2C-C). 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 the 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 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 requirements 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 estimates, 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.
50 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Capital Assets
Department-wide Business Type Activities
The following table summarizes the department-wide changes in capital assets. Detailed discussion follows for each proprietary fund.
The following table summarizes Water’s changes in capital assets.
2022 - 2021 2021 - 2020
2022 2021 2020 Change Change
Facilities, improvements, machinery, and equipment $ 7,767,562 7,595,329 7,419,330 172,233 175,999 Intangible assets 34,731 35,102 32,528 (371) 2,574
Land and rights-of-way 163,194 154,001 155,089 9,193 (1,088) Construction work in progress 2,485,201 2,079,754 1,592,097 405,447 487,657 Total $ 10,450,688 9,864,186 9,199,044 586,502 665,142 Table 3
Business Type Activities
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 13 Water Capital Assets, Fiscal Year 2022
The Water 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 3A). 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 Water 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 2021 - 2020
2022 2021 2020 Change Change
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 3A
Proprietary Fund – Water
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 14 SF Recycled Water Project $ 18,684
Sunol Long Term Improvements 17,655
New Water Utility Services 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 Number 2 5,116 Other project additions individually below $5,000 99,542 Total $ 175,191
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 15 51 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Water System Improvement Program (WSIP)
The WSIP delivers capital improvements that enhance the Water 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 https://sfpuc.org/ construction-contracts/water-infrastructure-improvements .
Water Capital Assets, Fiscal Year 2021
The Water 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 3A). 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 Water 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, 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
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 15 52 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
machinery, and equipment increased by $19,748 mainly attributable to the San Andreas Pipeline Number 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 Number 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 Number 2 5,135 Other project additions individually below $5,000 86,496 Total $ 197,669
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 16 San Andreas Pipeline Number 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
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 16 See Note 4 for additional information about capital assets.
Water System Improvement Program (WSIP)
The WSIP delivers capital improvements that enhance the Water 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. 53 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes Wastewater’s changes in capital assets.
Wastewater Capital Assets, Fiscal Year 2022
The Wastewater 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 3B). 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.
Major additions to construction work in progress during the year ended June 30, 2022 include the following:
2022 - 2021 2021 - 2020
2022 2021 2020 Chan ge Chan ge
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 Table 3B
Proprietary Fund – Wastewater
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 17 Southeast Plant Biosolids and Digester Facilities Project $ 133,997 Southeast Plant New Headworks Grit Replacement 131,458
Southeast Community Center 30,582
Southeast Plant Power Feed and Primary Switchgear Upgrades 26,911 Wawona Area Stormwater Improvement Project 15,644
Westside Pump Station Reliability Improvements 13,895
North Shore Pump Station Wet Weather Improvements 13,366 Large Sewer Condition Improvements 11,656
As-Needed Spot Sewer Replacement Number 41 (WW-698) 9,514 Public Works 19th Avenue Infrastructure Improvements 8,782 Oceanside Plant Digester Gas Handling Utilization Upgrade 8,175 As-Needed Spot Sewer Replacement Number 40 (WW-693) 5,007 Various Locations Sewer Replacement Number 8 (WW-679) 4,927 Folsom Area Stormwater Improvement Project 4,728
Public Works 41st and 44th Avenues Infrastructure Improvements 4,676 Mariposa Dry-Weather Pump Station & Force Main Improvements 4,527 Taraval Sewer Improvements 4,401
Ocean Beach Climate Change Adaptation Project 4,301
Southeast Plant Facility-Wide Distributed Control System Upgrades 4,275 Other project additions individually below $4,000 73,857 Total $ 514,679
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54 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 (SSIP)
The Sewer System Improvement Program (SSIP) is the Wastewater Enterprise’s 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, referred to as the “2016 SSIP Baseline”. In December 2020, 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.
Wastewater Capital Assets, Fiscal Year 2021
The Wastewater 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 3B). 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.
Southeast Plant Seismic Reliability and Condition Assessment Improvements $ 23,679 Force Main Rehabilitation at Embarcadero and Jackson Streets 11,480 As-Needed Spot Sewer Replacement Number 41 (WW-698) 9,571 Combined Sewer Discharge Backflow Prevention and Monitoring 9,029 Cargo Way Sewer Box Odor Reduction 8,615
Mission Street, 16th to Cesar Chavez Streets, Brick Sewer Rehabilitation 7,783 Public Works Various Locations Number 40 Infrastructure Improvements 6,575 Various Locations Sewer Replacement Number 8 (WW-679) 5,553 Various Locations Sewer Replacement Number 6 (WW-677) 5,347 As-Needed Spot Sewer Replacement Number 40 (WW-693) 5,006 Taraval Sewer Improvements 4,401
Public Works Sunset Parkside Pavement Renovations 4,360 Oceanside Plant Egg Shaped Digester Interior Lining Rehabilitation (WW-706) 3,499 Other project additions individually below $3,000 26,181 Total $ 131,079
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 1. FY22 ACFR Financial Section
55 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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:
Southeast Plant Biosolids and Digester Facilities Project $ 259,938 Southeast Plant New Headworks Grit Removal and Influent Pump Station 110,472 Southeast Community Center 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 Upgrade 5,998
Van Ness Bus Rapid Transit Sewer Improvements 5,482
As-Needed Spot Sewer Replacement No. 38 4,972
Public Works Various Locations Number 40 Infrastructure Improvements 4,918 Southeast Plant 062 Archimedes Screw Pump 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 Total $ 619,819
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 19 Van Ness Bus Rapid Transit Sewer Improvements $ 20,665
Richmond Early Implementation Project 13,620
Geary Bus Rapid Transit Sewer Improvements 12,287
Public Works Lombard Street Infrastructure Improvements 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 Replacement 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 38 4,972
Public Works Alemany Blvd Infrastructure Improvements 4,956 Beach and Sansome Street Combined Sewer Distribution Rehabilitation 4,708 Public Works Second Street Infrastructure Improvements 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 Replacement Number 7 3,429
Oceanside Plant Door Replacement 3,082
Other project additions individually below $3,000 25,763 Total $ 186,274
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 19 See Note 4 for additional information about capital assets. 56 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
The following table summarizes Hetchy Water’s changes in capital assets.
2022 - 2021 2021 - 2020
2022 2021 2020 Chan ge Chan ge
Facilities, improvements, machinery, and equipment $ 133,263 128,335 122,433 4,928 5,902 Intangible assets 10,374 10,581 10,789 (207) (208)
Land and rights-of-way 3,232 3,232 3,232 — —
Construction work in progress 54,138 35,333 24,328 18,805 11,005 Total $ 201,007 177,481 160,782 23,526 16,699
Table 3C – A
Proprietary Fund – Hetchy Water
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 20 Hetchy Water Capital Assets, Fiscal Year 2022
Hetchy Water has capital assets of $201,007, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2022 (see Table 3C-A). This amount represents 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.
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 3D).
See Note 4 for additional information about capital assets.
Hetchy Water Capital Assets, Fiscal Year 2021
Hetchy Water has capital assets of $177,481, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2021 (see Table 3C-A). This amount represents 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 3E).
See Note 4 for additional information about capital assets. 57 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The following table summarizes Hetchy Power’s changes in capital assets.
Hetchy Power Capital Assets, Fiscal Year 2022
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 3C-B). 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 3D).
See Note 4 for additional information about capital assets.
Hetchy Power Capital Assets, Fiscal Year 2021
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 3C-B). 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.
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 3E).
See Note 4 for additional information about capital assets.
CleanPowerSF Capital Assets
CleanPowerSF had no capital assets as of June 30, 2022 and 2021.
See Note 4 for additional information about capital assets. 2022 - 2021 2021 - 2020
2022 2021 2020 Chan ge Chan ge
Facilities, improvements, machinery, and equipment $ 307,197 304,581 264,127 2,616 40,454 Intangible assets 14,098 14,351 14,604 (253) (253)
Land and rights-of-way 1,949 1,949 1,949 — —
Construction work in progress 262,392 171,175 164,749 91,217 6,426 Total $ 585,636 492,056 445,429 93,580 46,627
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2022, 2021, and 2020
Table 3C – B
Proprietary Fund – Hetchy Power
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 20 58 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 years ended June 30, 2022 and 2021 include the following:
Hetchy Hetchy 2022
Water Power Total
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, Intan
gible Assets, Machinery,
and Equipment Placed in Service $ 11,013 19,974 30,987 qp Table 3D
Proprietary Funds – Hetchy Water and Hetchy Power
Year ended June 30, 2022
Major Additions to Construction Work in Progress and Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section 21 59 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Debt Administration
Department-wide Business Type Activities
The following table summarizes the department-wide outstanding debt, net of unamortized costs, discount, and premium.
Detailed discussion follows for each proprietary fund.
Hetchy Hetchy 2021
Water Power Total
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 Service $ 11,703 55,828 67,531 qp Proprietary Funds – Hetchy Water and Hetchy Power
Intangible Assets, Machinery, and Equipment Placed in Service Year ended June 30, 2021
Table 3E
Major Additions to Construction Work in Progress and Facilities, Improvements, W:\FINANCE\AFR\FY2022 ACFR\11. Final ACFR\To Communication\2.2.2023 P!Graphics P4 ACFR\2. 2.2.2023 FY22 ACFR Financial Section 22
2022 - 2021 2021 - 2020
2022 2021 2020 Change Change
Revenue bonds $ 6,986,674 6,631,009 6,366,836 355,665 264,173 Revenue notes 350,356 — — 350,356 —
Commercial paper 625,473 859,051 633,828 (233,578) 225,223 Certificates of participation 133,945 138,180 142,265 (4,235) (4,085) State revolving fund loans 424,420 215,966 161,820 208,454 54,146 Total $ 8,520,868 7,844,206 7,304,749 676,662 539,457 Table 4
Business Type Activities
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 23 Water Debt Administration
As of June 30, 2022, the Water Enterprise had $5,284,630 total debt outstanding, a decrease of $22,076 over the prior year, as shown below in Table 4A. More detailed information about the Water Enterprise’s debt activity is presented in Notes 6, 7, 8 and 9 to the financial statements.
60 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The decrease of $133,840 in revenue bonds was due to decreases of $108,500 from bond repayment, $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 Water 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.
Credit Ratings and Bond Insurance – The Water 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.
Debt Service Coverage – Pursuant to the Amended and Restated Indenture, the Water Enterprise is required to collect sufficient net revenues each fiscal year, together with any Water Enterprise funds (except Bond Reserve Funds), which 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, the Water 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 Water Enterprise’s Amended and Restated Indenture (see Note 9).
Debt Authorization – Pursuant to the Charter Section 8B.124, the Water 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 Water 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 Water Enterprise is also authorized to issue up to $500,000 in commercial paper.
Cost of Debt Capital – The Water 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 Water 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.
Wastewater Debt Administration
As of June 30, 2022, 2021, and 2020, the Wastewater Enterprise’s debt from revenue bonds, 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 4B. More detailed information about the Wastewater Enterprise’s debt activity is presented in Notes 6, 7, 8 and 9 to the financial statements.
2022 - 2021 2021 - 2020
2022 2021 2020 Change Change
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 4A
Proprietary Fund – Water
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 24 61 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Credit Ratings and Bond Insurance – As of June 30, 2022 and 2021, the Wastewater Enterprise carried underlying ratings of “Aa2” and “AA” from Moody’s and Standard & Poor’s (S&P), respectively.
Debt Service Coverage – Pursuant to the Indenture for the Wastewater bonds, the Wastewater Enterprise covenants to collect sufficient net revenues each fiscal year, together with any Wastewater 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, the Wastewater 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 Indenture (see Note 9).
Debt Authorization – Pursuant to the Charter Section 8B.124, the Wastewater Enterprise can incur indebtedness upon two-thirds vote of the Board of Supervisors. As of June 30, 2022, the Wastewater 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 Wastewater 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 of Debt Capital – The coupon interest rates on the Wastewater Enterprise’s outstanding revenue bonds ranged 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 on 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-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.
Hetchy Water Debt Administration
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. 2022 - 2021 2021 - 2020
2022 2021 2020 Change Change
Revenue bonds $ 1,931,253 1,589,922 1,621,733 341,331 (31,811) Revenue notes 350,356 — — 350,356 —
Commercial paper 379,157 638,518 207,939 (259,361) 430,579 Certificates of participation 25,288 26,087 26,859 (799) (772) State revolving fund loans 302,659 108,559 88,549 194,100 20,010 Total $ 2,988,713 2,363,086 1,945,080 625,627 418,006 Table 4B
Proprietary Fund – Wastewater
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 25 62 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Power Debt Administration
As of June 30, 30, 2022 and 2021, Hetchy Power had outstanding debt of $247,525 and $174,414, respectively, as shown in Table 4C. More detailed information about the Hetchy Power’s debt activity is presented in Notes 6, 7 8 and 9 to the financial statements.
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.
Credit Ratings and Bond Insurance – 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.
Debt Service Coverage – 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 coverage excludes debt service on subordinate obligations, such as Hetchy Power’s existing CREBS, NCREBs, and QECBs. During fiscal year 2022, the Power 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 9).
Debt Authorization – 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, 2022 - 2021 2021 - 2020
2022 2021 2020 Change Change
Clean Renewable Energy Bonds 2008 $ 415 823 1,231 (408) (408) Certificates of Participation 2009 Series C 427 838 1,235 (411) (397) Certificates of Participation 2009 Series D (BABs) 12,593 12,593 12,593 — — Qualified Energy Conservation Bonds 2011 3,138 3,687 4,229 (549) (542) New Clean Renewable Energy Bonds 2012 — — 130 — (130) New Clean Renewable Energy Bonds 2015 1,637 1,779 3,190 (142) (1,411) 2015 Series A Revenue Bonds 35,144 35,297 35,444 (153) (147) 2015 Series B Revenue Bonds 3,849 4,726 5,584 (877) (858) 2021 Series A Revenue Bonds 90,213 — — 90,213 —
2021 Series B Revenue Bonds 60,090 — — 60,090 —
Commercial Paper 40,019 114,671 63,535 (74,652) 51,136 Total $ 247,525 174,414 127,171 73,111 47,243
Table 4C
Proprietary Fund – Hetchy Power
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2022, 2021, and 2020
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 26 63 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
or rehabilitation of equipment or facilities for 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.
Cost of Debt Capital – 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 Power 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 Power 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.
CleanPowerSF Debt Administration
CleanPowerSF did not have debt outstanding as of June 30, 2022 and 2021.
Rates and Charges
Water and Wastewater Enterprises
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 and 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 rate study was completed in April 2018 and resulted in an approved four-year water and wastewater rate increase 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. The SFPUC Rates Schedules and Fees is available at https://sfpuc.org/accounts-services/ water-power-and-sewer-rates.
Water Enterprise Wholesale Customers
The WSA prescribes the rate setting process for the wholesale water rates. The WSA 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 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 64 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
prior year revenues and expenses. Refer to Note 11 of the notes to financial statements for further discussion on the balancing account of the wholesale customers.
The following table is the Water Enterprise’s ten-year average rate adjustments:
The following table is the Wastewater Enterprise’s ten-year approved average rate adjustments:
July 1, 2013 6.5 1 % (16.4) %
July 1, 2014 12.0 2 19.6
July 1, 2015 12.0 2 28.0
July 1, 2016 10.0 2 9.3
July 1, 2017 7.0 2 —
July 1, 2018 9.0 3 —
July 1, 2019 8.0 3 —
July 1, 2020 7.0 3 —
July 1, 2021 7.0 3 —
July 1, 2022 — 4 15.9
1 2
3 4
No retal rate increase adopted and effective July 1, 2022. 5 Effective date Retail Wholesale 5
Ten-year Average Rate Adjustments
Five-year retail rate increases adopted and effective July 1, 2009.
Four-year retail rate increases adopted and effective July 1, 2014.
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.
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 27 Effective Date Rate
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 3
July 1, 2019 7.0 3
July 1, 2020 8.0 3
July 1, 2021 8.0 3
July 1, 2022 — 4
1 Four-year rate increases adopted and effective July 1, 2009. 2 Four-year rate increases adopted and effective July 1, 2014. 3 Four-year rate increases adopted and effective July 1, 2018. 4 No retail rate adjustment.
Ten-year Average Rate Adjustments
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 28 July 1, 2013 6.5 1 % (16.4) %
July 1, 2014 12.0 2 19.6
July 1, 2015 12.0 2 28.0
July 1, 2016 10.0 2 9.3
July 1, 2017 7.0 2 —
July 1, 2018 9.0 3 —
July 1, 2019 8.0 3 —
July 1, 2020 7.0 3 —
July 1, 2021 7.0 3 —
July 1, 2022 — 4 15.9
1 2
3 4
No retal rate increase adopted and effective July 1, 2022. 5 Effective date Retail Wholesale 5
Ten-year Average Rate Adjustments
Five-year retail rate increases adopted and effective July 1, 2009.
Four-year retail rate increases adopted and effective July 1, 2014.
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.
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 27 Effective Date Rate
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 3
July 1, 2019 7.0 3
July 1, 2020 8.0 3
July 1, 2021 8.0 3
July 1, 2022 — 4
1 Four-year rate increases adopted and effective July 1, 2009. 2 Four-year rate increases adopted and effective July 1, 2014. 3 Four-year rate increases adopted and effective July 1, 2018. 4 No retail rate adjustment.
Ten-year Average Rate Adjustments
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 28 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.
Hetchy Power
Municipal Rates
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. 65 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
Retail Rates
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 requirements and cost-of-service of the Power Enterprise. In fall 2020, SFPUC engaged a consultant 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 48% 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, Commission approved a CleanPowerSF rate adjustment formula. Through Resolution 21-0085 CleanPowerSF rates will be formulaically adjusted, when PG&E rates change 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 the SFPUC’s finances and to demonstrate the Department’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, 13th Floor, San Francisco, CA 94102.
This report is available at https://sfpuc.org/about-us/reports/audited-financial-statements-reports.
66 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Net Position
Proprietary Funds
June 30, 2022 and 2021
(In thousands)
A. Included interfund payables and interfund receivables for fiscal year 2022 of $629 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs.
B. Included interfund payables and interfund receivables for fiscal year 2021 of $739 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs. ^Restated due to the implementation of GASB Statement No. 87, Leases .
See accompanying notes to basic financial statements.
Assets 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022 2021 2022
Restated
2021^
Current assets:
Cash and investments with City Treasury........................................................................................................................................................................................................................$ 460,954 483,827 285,029 281,572 94,190 89,373 189,641 190,719 56,234 90,838 — — 1,086,048 1,136,329 Cash and investments outside City Treasury.....................................................................................................................................................................................................................xx 318 301 397 366 1 1 16 611 — — — — 732 1,279 Receivables:
Charges for services (net of allowance for doubtful
accounts of $3,915, $4,273, $0, $1,297, and $6,330 in 2022 and $5,445, $5,369, $0, $1,258, and $5,485 in 2021).................................................................................................................................................................................................................xx 61,740 55,473 40,321 33,081 475 442 10,189 19,024 48,703 28,265 — — 161,428 136,285 Due from other City departments, current portion................................................................................................................................................................................................................................xx 178 248 225 281 — — 867 7,413 — — (111) A (110) B 1,159 7,832 Due from other governments..........................................................................................................................................................................................................xx — 16 25 — 512 579 298 267 — — — — 835 862 Interest ...........................................................................................................................................................................................................................................xx 399 257 314 189 40 21 201 125 61 55 — — 1,015 647 Interest-Leases ...........................................................................................................................................................................................................................................xx 884 859 — — — — — — — — — — 884 859 Restricted due from other governments................................................................................................................................................................................................................xx 7,553 49,546 202,795 20,755 — — — — — — — — 210,348 70,301 Leases receivable, current portion….........................................................................xx 3,325 3,289 — — — — — — — — — — 3,325 3,289 Restricted interest and other receivable (net of allowance for doubtful accounts of $146, $385, $0, $0 and $0 in 2022 and
$24, $68, $0, $0 and $0 in 2021)..................................................................................xx 4,142 3,983 2,301 2,841 — — 4,303 11,800 — — — — 10,746 18,624 Total current receivables..............................................................................................................................................................................................................................................xx 78,221 113,671 245,981 57,147 1,027 1,042 15,858 38,629 48,764 28,320 (111) (110) 389,740 238,699 Prepaid charges, advances, and other receivables, current portion..............................................................................................................................................................................................................................xx 12,180 6,147 346 877 216 402 1,911 2,666 10,550 2,184 — — 25,203 12,276 Inventory....................................................................................................................................................................................................................................................xx 6,802 5,937 2,958 2,657 199 191 1,678 1,820 — — — — 11,637 10,605 Restricted cash and investments outside City Treasury, current portion....................................................................................................................................................................................................................................................xx 11,063 57,165 15,587 298 — — 5,228 153 — — — — 31,878 57,616 Total current assets...........................................................................................................................................................................................................................................xx 569,538 667,048 550,298 342,917 95,633 91,009 214,332 234,598 115,548 121,342 (111) (110) 1,545,238 1,456,804 Non-current assets: xx
Net pension asset..............................................................................................................................................................................................................................xx 100,407 — 48,770 — 13,912 — 17,004 — 1,833 — — — 181,926 — Restricted cash and investments with City Treasury....................................................................................................................................................................................................xx 9,299 — — — — 6,990 — 5,241 — — — — 9,299 12,231 Restricted cash and investments outside City Treasury, less current portion.................................................................................................................................................................................................xx 64,894 65,688 23,771 9,898 — — 8,824 3,690 — — — — 97,489 79,276 Leases receivable, less current portion….........................................................................xx 42,840 45,821 — — — — — — — — — — 42,840 45,821 Restricted interest and other receivable, and prepaid (net of allowance xx for doubtful accounts of $8, $29, $0, $0, and $0 in 2022 and xx $8, $29, $0, $0, and $0 in 2021)……………...............................................................................xx 4 4 434 450 — — — — — — — — 438 454 Lease assets, net of accumulated amortization...............................................................................................................................................................................................................xx 2,812 4,237 3,597 5,922 61 74 73 90 230 575 — — 6,773 10,898 Charges for services, less current portion (net of allowance for doubtful xx accounts of $656, $567, $0, $0, and $0 in 2022 and xx
$658, $569 $0, $0, and $0 in 2021)…………....................................................................………….xx 207 207 342 341 — — — — — — — — 549 548 Prepaid charges, advances, and other receivables, less current portion.............................xx 3,760 3,517 1,156 1,183 146 152 9,390 753 12,236 — — — 26,688 5,605 Capital assets, not being depreciated and amortized............................................................................................................................................................................................................................xx 558,374 637,529 1,772,035 1,388,262 57,376 38,571 265,772 174,555 — — — — 2,653,557 2,238,917 Capital assets, net of accumulated depreciation and amortization...............................................................................................................................................................................................................xx 5,059,220 4,950,270 2,274,416 2,218,588 143,631 138,910 319,864 317,501 — — — — 7,797,131 7,625,269 Due from other City departments, less current portion.............................................................xx — — — — — — 10,937 4,993 — — (518) A (629) B 10,419 4,364 Total non-current assets........................................................................................................................................................................................................................................xx 5,841,817 5,707,273 4,124,521 3,624,644 215,126 184,697 631,864 506,823 14,299 575 (518) (629) 10,827,109 10,023,383 Total assets................................................................................................................................xx 6,411,355 6,374,321 4,674,819 3,967,561 310,759 275,706 846,196 741,421 129,847 121,917 (629) (739) 12,372,347 11,480,187 Deferred outflows of resources xx
Unamortized loss on refunding of debt.........................................................................................xx 139,481 154,991 33 91 — — — — — — — — 139,514 155,082 Pensions..................................................................................................................................................................xx 52,852 64,797 25,369 30,219 6,696 7,799 8,183 9,531 852 803 — — 93,952 113,149 Other post-employment benefits..................................................................................................................................................................xx 32,445 37,762 12,898 15,109 3,272 3,725 3,999 4,552 798 442 — — 53,412 61,590 Total deferred outflows of resources.......................................................................................................................$ 224,778 257,550 38,300 45,419 9,968 11,524 12,182 14,083 1,650 1,245 — — 286,878 329,821 (Continued)
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Net Position
Proprietary Funds
June 30, 2022 and 2021
(In thousands)
Business Type Activities – Proprietary Funds
Water SFPUC TotalWastewater Hetchy Water Hetchy Power EliminationsCleanPowerSF 67 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Net Position
Proprietary Funds
June 30, 2022 and 2021
(In thousands)
C. Included interfund payables and interfund receivables for fiscal year 2022 of $629 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs.
D. Included interfund payables and interfund receivables for fiscal year 2021 of $739 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs. ^Restated due to the implementation of GASB Statement No. 87, Leases .
See accompanying notes to basic financial statements.
2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022 2021 2022
Restated
2021^
Liabilities
Current liabilities:
Accounts payable...............................................................................................................................................................................................................................................$ 22,852 16,183 22,588 15,282 8,454 4,262 16,668 22,909 23,526 15,859 — — 94,088 74,495 Accrued payroll................................................................................................................................................................................................................................................xx 10,495 9,845 6,402 6,147 1,098 1,042 2,684 2,596 373 291 — — 21,052 19,921 Accrued vacation and sick leave, current portion...............................................................................................................................................................................................................xx 6,888 6,787 5,479 5,811 1,034 1,059 1,747 1,777 279 205 — — 15,427 15,639 Accrued workers’ compensation, current portion.................................................................................................................................................................................................................xx 1,700 1,694 1,393 1,198 215 197 400 378 — — — — 3,708 3,467 Due to other City departments, current portion......................................................................................................................................................................xx — — 111 110 — — 380 369 — — (111) C (110) D 380 369 Damage claims liability, current portion....................................................................................................................................................................................................................xx 10,191 14,400 9,323 5,892 228 218 358 409 15 6 — — 20,115 20,925 Unearned revenues, refunds, and other, current portion.......................................................................................................................................................................................................................................xx 19,137 18,966 6,137 5,345 24 22 5,923 5,141 4,196 1,028 — — 35,417 30,502 Bond, loan and lease interest payable.................................................................................................................................................................................................................................xx 35,443 36,200 21,460 17,276 — — 1,327 459 — 1 — — 58,230 53,936 Bonds, current portion.................................................................................................................................................................................................................................xx 125,285 108,500 34,345 22,880 — — 1,966 1,928 — — — — 161,596 133,308 Certificates of participation, current portion....................................................................................................................................................xx 3,138 2,970 830 785 — — 427 405 — — — — 4,395 4,160 Commercial paper...............................................................................................................................................................................................................................................xx 206,297 105,862 379,157 638,518 — — 40,019 114,671 — — — — 625,473 859,051 State revolving funds loans payable, current portion……………...…xx 3,283 1,667 2,481 2,483 — — — — — — — — 5,764 4,150 Lease liability, current portion….................................................... xx 1,008 1,381 2,341 2,314 3 16 3 19 232 345 — — 3,587 4,075 Wholesale balancing account, current portion....................................................................xx 48,422 21,538 — — — — — — — — — — 48,422 21,538 Current liabilities payable from restricted assets.............................................................................................................................................................................................................xx 25,353 27,263 89,905 89,982 6,324 9,057 19,059 15,393 — — — — 140,641 141,695 Total current liabilities......................................................................................................................................................................................................................................xx 519,492 373,256 581,952 814,023 17,380 15,873 90,961 166,454 28,621 17,735 (111) (110) 1,238,295 1,387,231 Long-term liabilities: xx
Other post-employment benefits obligations.......................................................................................................................................................................................................................xx 144,115 148,771 49,123 50,711 14,240 14,444 17,405 17,653 2,264 2,909 — — 227,147 234,488 Net pension liability....................................................................................xx — 216,417 — 103,746 — 26,645 — 32,566 — 3,008 — — — 382,382 Accrued vacation and sick leave, less current portion..........................................................................................................................................................................................................xx 6,841 7,129 5,422 5,847 1,135 1,126 1,850 1,840 267 195 — — 15,515 16,137 Accrued workers’ compensation, less current portion............................................................................................................................................................................................................xx 7,273 7,134 6,153 5,384 1,013 923 1,850 1,740 — — — — 16,289 15,181 Due to other City departments, less current portion........................xx — — 518 629 — — — — — — (518) C (629) D — — Damage claims liability, less current portion...............................................................................................................................................................................................................xx 25,878 22,323 2,722 10,821 399 307 665 699 17 — — — 29,681 34,150 Unearned revenues, refunds, and other, less current portion.......................................................................................................................................................................................................................................xx — — — — 110 116 804 852 9,000 9,000 — — 9,914 9,968 Bonds, less current portion............................................................................................................................................................................................................................xx 4,735,650 4,886,275 1,896,908 1,567,042 — — 192,520 44,384 — — — — 6,825,078 6,497,701 Revenue Notes, less current portion............................................................................................................................................................................................................................xx — — 350,356 — — — — — — — — — 350,356 — Certificates of participation, less current portion.......................................................................................................................................................................................................................................xx 92,499 95,692 24,458 25,302 — — 12,593 13,026 — — — — 129,550 134,020 State revolving funds loans payable, less current portion…………..xx 118,478 105,740 300,178 106,076 — — — — — — — — 418,656 211,816 Lease liability, less current portion…....................................................xx 1,855 2,863 1,297 3,638 59 62 72 75 — 232 — — 3,283 6,870 Wholesale balancing account, less current portion....................................................................xx 30,728 39,326 — — — — — — — — — — 30,728 39,326 Pollution remediation obligations.........................................................................................................................................................................................................xx 1,271 1,271 8,060 7,800 — — — — — — — — 9,331 9,071 Total long-term liabilities....................................................................................................................................................................................................................................xx 5,164,588 5,532,941 2,645,195 1,886,996 16,956 43,623 227,759 112,835 11,548 15,344 (518) (629) 8,065,528 7,591,110 Total liabilities..............................................................................................................................................................................................................................................xx 5,684,080 5,906,197 3,227,147 2,701,019 34,336 59,496 318,720 279,289 40,169 33,079 (629) (739) 9,303,823 8,978,341 Deferred inflows of resources xx
Related to pensions..............................................................................................................................................................................................................................................xx 248,704 4,885 114,670 2,148 34,477 988 42,138 1,207 5,414 1,093 — — 445,403 10,321 Leases…....................................................................................... xx 44,583 48,110 — — — — — — — — — — 44,583 48,110 Other post-employment benefits..................................................................................................................................................................xx 25,348 21,315 8,640 7,265 2,734 2,085 3,342 2,548 1,594 1,913 — — 41,658 35,126 Total deferred inflows of resources....................................................xx 318,635 74,310 123,310 9,413 37,211 3,073 45,480 3,755 7,008 3,006 — — 531,644 93,557 Net position xx
Net investment in capital assets................................................................................................................................................................................................................xx 537,644 517,302 1,092,705 1,253,789 201,007 177,481 352,162 323,066 — — — — 2,183,518 2,271,638 Restricted for debt service....................................................................................................................................................................................................................................xx 14,671 45,586 5,391 2,992 — — 140 99 — — — — 20,202 48,677 Restricted for capital projects................................................................................................................................................................................................................................xx — 22,319 114,657 — — — — — — — — — 114,657 22,319 Unrestricted...................................................................................................................................................................................................................................................xx 81,103 66,157 149,909 45,767 48,173 47,180 141,876 149,295 84,320 87,077 — — 505,381 395,476 Total net position...............................................................................................................................................................................................................................................$ 633,418 651,364 1,362,662 1,302,548 249,180 224,661 494,178 472,460 84,320 87,077 — — 2,823,758 2,738,110 EliminationsCleanPowerSF SFPUC TotalWater Wastewater Hetchy Water Hetchy Power Business Type Activities – Proprietary Funds
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Net Position
Proprietary Funds
June 30, 2022 and 2021
(In thousands)
68 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022 ^Restated due to the implementation of GASB Statement No. 87, Leases .
See accompanying notes to basic financial statements.
2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^
Operating revenues:
Charges for services..............................................................................................................$ 539,526 550,306 356,041 318,236 49,200 46,979 173,105 136,247 257,893 207,698 1,375,765 1,259,466 Rents and concessions........................................................................................................................xx 13,765 13,735 705 642 112 111 137 136 — — 14,719 14,624 Capacity fees........................................................................................................................xx 2,163 1,326 6,280 3,710 — — — — — — 8,443 5,036 Other revenues......................................................................................................................................................xx 17,663 17,069 5,856 5,077 — — — — — — 23,519 22,146 Total operating revenues.................................................................................................................................xx 573,117 582,436 368,882 327,665 49,312 47,090 173,242 136,383 257,893 207,698 1,422,446 1,301,272 Operating expenses: xx
Personnel services.....................................................................................................................xx 83,385 132,528 63,456 90,449 15,636 19,871 34,646 40,756 4,167 7,641 201,290 291,245 Contractual services......................................................................................................................xx 13,457 14,029 19,115 16,489 2,854 2,398 9,604 8,705 6,821 6,678 51,851 48,299 Transmission/distribution and other power costs......................................................................................................................xx — — — — — — 51,521 36,711 192 1,012 51,713 37,723 Purchased electricity.........................................................................................................................................................................xx — — — — — — 6,731 5,982 239,546 189,977 246,277 195,959 Materials and supplies......................................................................................................................xx 15,719 13,175 11,844 9,091 1,362 1,272 2,270 1,990 33 26 31,228 25,554 Depreciation and amortization.............................................................................................................................................................................................xx 147,904 145,444 77,575 74,343 6,305 6,028 17,628 15,650 345 345 249,757 241,810 Services provided by other departments..............................................................................................................................................................................xx 73,307 70,235 39,645 38,313 3,129 2,517 6,253 6,137 3,621 3,928 125,955 121,130 General and administrative and other.......................................................................................................................xx 68,014 73,371 45,536 63,488 23,017 18,433 27,694 29,709 7,393 3,104 171,654 188,105 Total operating expenses..................................................................................xx 401,786 448,782 257,171 292,173 52,303 50,519 156,347 145,640 262,118 212,711 1,129,725 1,149,825 Operating income (loss).....................................................................................................xx 171,331 133,654 111,711 35,492 (2,991) (3,429) 16,895 (9,257) (4,225) (5,013) 292,721 151,447 Non-operating revenues (expenses): xx
Federal and state grants.....................................................................................................xx 5,931 14,829 20,711 — 450 1,349 4,924 1,483 2,424 — 34,440 17,661 Interest and investment income (loss)...................................................................................xx (10,896) 1,374 (7,087) (1,187) (2,932) (232) (4,001) 24 (1,286) 51 (26,202) 30 Interest expenses...............................................................................................................xx (213,668) (184,678) (77,743) (34,944) (1) (2) (5,624) (1,972) (5) (26) (297,041) (221,622) Amortization of premium, discount, refunding loss, and issuance costs..............xx 9,875 7,782 8,422 8,497 — — (192) 219 — — 18,105 16,498 Net gain from sale of assets..............................................................................................xx 1,079 2,556 22 18 7 — 9 — — — 1,117 2,574 Other non-operating revenues.......................................................................................xx 34,861 28,489 4,721 4,893 22 3 10,830 17,790 335 927 50,769 52,102 Other Non-operating expenses.....................................................................................xx (828) (2,208) (482) (409) (37) (63) (591) (902) — — (1,938) (3,582) Net non-operating revenues (expenses)........................................................xx (173,646) (131,856) (51,436) (23,132) (2,491) 1,055 5,355 16,642 1,468 952 (220,750) (136,339) Change in net position before capital contributions and transfers.....................................................................xx (2,315) 1,798 60,275 12,360 (5,482) (2,374) 22,250 7,385 (2,757) (4,061) 71,971 15,108 Capital contributions.................................................................................................................xx — 4,180 — — — — — — — — — 4,180 Transfers from the City and County of San Francisco.................................................................................................................xx 15,035 21,025 — 1,440 30,001 16,000 — — — — 45,036 38,465 Transfers to the City and County of San Francisco..............................................................................................................xx (30,666) (16,654) (161) (4,188) — — (532) (532) — — (31,359) (21,374) Net capital contributions and transfers…....................................................xx (15,631) 8,551 (161) (2,748) 30,001 16,000 (532) (532) — — 13,677 21,271 Change in net position....................................................................................................................................xx (17,946) 10,349 60,114 9,612 24,519 13,626 21,718 6,853 (2,757) (4,061) 85,648 36,379 Net position at beginning of year....................................................................................................................................................................................................................................................................................................................................................................................................................................... year…………………………………………………………………………..…………………………………………………………..…………………………………………………………..xx 651,364 641,015 1,302,548 1,292,936 224,661 211,035 472,460 465,607 87,077 91,138 2,738,110 2,701,731 Net position at end of year.................................................................................................$ 633,418 651,364 1,362,662 1,302,548 249,180 224,661 494,178 472,460 84,320 87,077 2,823,758 2,738,110
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Revenues, Expenses, and Changes in Net Position Proprietary Funds
June 30, 2022 and 2021
(In thousands)
Business Type Activities – Proprietary Funds
Water Wastewater Hetchy Water Hetchy Power SFPUC TotalCleanPowerSF
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Revenues, Expenses, and Changes in Net Position Proprietary Funds
June 30, 2022 and 2021
(In thousands)
69 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022 ^Restated due to the implementation of GASB Statement No. 87, Leases .
See accompanying notes to basic financial statements
2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^
Cash flows from operating activities:
Cash received from customers, including cash deposits..........................................................................................................................................................................$ 563,433 570,041 360,654 327,879 49,161 46,176 183,203 120,981 237,947 223,325 1,394,398 1,288,402 Cash received from tenants for rent.....................................................................................................................................................................................................................................xx 15,032 12,542 1,035 362 114 116 139 142 — — 16,320 13,162 Cash received from miscellaneous revenues..........................................................................................xx 4,558 4,643 667 831 22 3 7,237 13,427 335 927 12,819 19,831 Cash paid to employees for services........................................................................................xx (137,080) (132,235) (93,897) (90,918) (20,430) (19,597) (40,448) (40,236) (5,828) (5,344) (297,683) (288,330) Cash paid to suppliers for goods and services......................................................................xx (159,338) (136,653) (103,998) (126,436) (25,726) (20,950) (107,969) (81,722) (268,958) (211,735) (665,989) (577,496) Cash paid for judgments and claims.......................................................................................xx (2,515) (3,969) (10,795) (3,295) (276) (563) (2,163) (4,361) (1,529) (153) (17,278) (12,341) Net cash provided by (used in) operating activities....................................................................xx 284,090 314,369 153,666 108,423 2,865 5,185 39,999 8,231 (38,033) 7,020 442,587 443,228 Cash flows from non-capital financing activities: xx
Cash received from grants..............................................................................................................................................................................xx 5,947 14,836 12,686 — 517 3,345 4,893 2,860 5,100 — 29,143 21,041 Cash received from settlements................................................................................................xx 6,750 — — — — — — 797 — — 6,750 797 Cash received from license fees................................................................................................xx — — — — — — 3,333 3,151 — — 3,333 3,151 Cash paid for rebates, program incentives, and other.....................................................................xx (828) (2,208) (482) (409) (37) (63) (591) (902) — — (1,938) (3,582) Cash paid for Hetchy Power loan interest..........................................................................................xx — — — — — — — — — (235) — (235) Transfers from the City and County of San Francisco.................................................................................................................................................................................................................xx 15,035 21,025 — 1,440 30,001 16,000 — — — — 45,036 38,465 Transfers to the City and County of San Francisco.................................................................................................................................................................................................................xx (30,666) (16,654) (161) (4,188) — — (532) (532) — — (31,359) (21,374) Net cash provided by (used in) non-capital financing activities..................................xx (3,762) 16,999 12,043 (3,157) 30,481 19,282 7,103 5,374 5,100 (235) 50,965 38,263 Cash flows from capital and related financing activities: xx Proceeds from sale of capital assets.........................................................................................xx 986 2,647 22 12 7 — 9 — — — 1,024 2,659 Proceeds from bond issuance, net of premium, discount, refunding loss, xx and issuance costs..................................................................................................................................xx — 1,000,920 373,700 — — — 151,022 — — — 524,722 1,000,920 Proceeds from revenue notes issuance, net of premium..........................................xx — — 350,823 — — — — — — — 350,823 — Proceeds from commercial paper borrowings.....................................................................xx 130,221 16,328 80,639 435,450 — — 63,058 51,136 — — 273,918 502,914 Proceeds from State revolving fund loans............................................................................xx 56,113 57,861 22,544 4,811 — — — — — — 78,657 62,672 Principal paid on commercial paper............................................................................................xx (29,786) (272,820) (340,000) (4,871) — — (137,710) — — — (507,496) (277,691) Principal paid on long-term debt................................................................................................xx (111,470) (704,344) (23,665) (23,987) — — (2,333) (3,674) — — (137,468) (732,005) Principal paid on state revolving fund loans............................................................................xx — — (2,483) (2,458) — — — — — — (2,483) (2,458) Interest paid on commercial paper..............................................................................................................................................................................................................................xx (212) (348) (614) (484) — — (59) (132) — — (885) (964) Interest paid on long-term debt.....................................................................................................................xx (213,922) (210,276) (69,988) (66,654) — — (4,695) (2,970) — — (288,605) (279,900) Interest paid on state revolving fund loans........................................................................................................................................................................................................................xx — — (1,522) (1,123) — — — — — — (1,522) (1,123) Interest paid revenue notes....................................................................................................................................................................................................................xx — — (1,168) — — — — — — — (1,168) — Issuance costs paid on long-term debt.....................................................................................................................xx (10) (3,032) (1,490) — — — (1,118) — — — (2,618) (3,032) Acquisition and construction of capital assets...........................................................................xx (182,776) (184,144) (516,032) (582,841) (32,558) (16,981) (108,062) (62,461) — — (839,428) (846,427) Lease payment...................................................................................................................xx (1,439) (1,472) (2,371) (2,371) (17) (17) (22) (21) (351) (350) (4,200) (4,231) Federal interest income subsidy..........................................................................................................xx 23,590 23,869 5,818 2,297 — — 397 511 — — 29,805 26,677 Net cash used in capital and related financing activities.......................................xx (328,705) (274,811) (125,787) (242,219) (32,568) (16,998) (39,513) (17,611) (351) (350) (526,924) (551,989) Cash flows from investing activities: xx
Interest income received...............................................................................................................xx 2,154 4,185 1,335 3,169 329 739 1,003 1,986 407 802 5,228 10,881 Proceeds from sale of investment outside City Treasury................................................................xx 398,825 323,586 101,115 134,955 — — 7,118 3,968 — — 507,058 462,509 Purchase of investments outside City Treasury.....................................................................xx (398,825) (323,586) (101,115) (134,955) — — (7,118) (3,968) — — (507,058) (462,509) Net cash provided by investing activities ............................................... xx 2,154 4,185 1,335 3,169 329 739 1,003 1,986 407 802 5,228 10,881 Increase (decrease) in cash and cash equivalents......................................................xx (46,223) 60,742 41,257 (133,784) 1,107 8,208 8,592 (2,020) (32,877) 7,237 (28,144) (59,617) Cash and cash equivalents: xx
Beginning of year.......................................................................................................................xx 606,589 545,847 291,906 425,690 96,276 88,068 200,265 202,285 90,764 83,527 1,285,800 1,345,417 End of year...................................................................................................................................$ 560,366 606,589 333,163 291,906 97,383 96,276 208,857 200,265 57,887 90,764 1,257,656 1,285,800 Reconciliation of cash and cash equivalents to the statements of net position:
Cash and investments with City Treasury:
Unrestricted...................................................................................................................................$ 460,954 483,827 285,029 281,572 94,190 89,373 189,641 190,719 56,234 90,838 1,086,048 1,136,329 Restricted............................................................................................................................................. 9,299 — — — — 6,990 — 5,241 — — 9,299 12,231 Add: Unrealized (loss)/gain on investments with City Treasury..............................................................................................................xx 13,838 (392) 8,379 (228) 3,192 (88) 5,148 (149) 1,653 (74) 32,210 (931) Cash and investments outside City Treasury: xx
Unrestricted.........................................................................................................................................xx 318 301 397 366 1 1 16 611 — — 732 1,279 Restricted..............................................................................................................................................................xx 75,957 122,853 39,358 10,196 — — 14,052 3,843 — — 129,367 136,892 Cash and cash equivalents at end of year on statements of cash flows........................................................................................$ 560,366 606,589 333,163 291,906 97,383 96,276 208,857 200,265 57,887 90,764 1,257,656 1,285,800 (Continued)
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Cash Flows
Proprietary Funds
Years ended June 30, 2022 and 2021
(In thousands)
Business Type Activities – Proprietary Funds
Water Wastewater Hetchy Water Hetchy Power SFPUC TotalCleanPowerSF
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Cash Flows
Proprietary Funds
Years ended June 30, 2022 and 2021
(In thousands)
70 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022 ^Restated due to the implementation of GASB Statement No. 87, Leases .
See accompanying notes to basic financial statements.
2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^ 2022
Restated
2021^
Reconciliation of operating income (loss) to net cash provided by (used in) operating activities:
Operating income (loss)................................................................................................................................................................................................$ 171,331 133,654 111,711 35,492 (2,991) (3,429) 16,895 (9,257) (4,225) (5,013) 292,721 151,447 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization...................................................................................................................................................................................................................................................xx 147,904 145,444 77,575 74,343 6,305 6,028 17,628 15,650 345 345 249,757 241,810 Miscellaneous revenues...........................................................................................................................................................................................................................xx 4,558 4,643 667 831 22 3 7,237 13,427 335 927 12,819 19,831 Provision for uncollectible accounts...........................................................................................................................................................................................................................xx (1,410) 2,945 (781) 2,201 — — 39 667 845 3,675 (1,307) 9,488 Write-off of capital assets and other non-cash items.....................................................................................................................................................................................................................................................................xx 4,592 3,810 993 4,203 7 51 648 8,333 — — 6,240 16,397 Changes in operating assets and liabilities: xx
Receivables: xx
Charges for services...........................................................................................................................................................................................................................................xx (4,734) 1,537 (6,143) (1,506) (33) (413) 8,796 (16,724) (21,283) 2,772 (23,397) (14,334) Due from other City departments...........................................................................................................................................................................................................................xx 70 93 (901) 148 — 104 531 2,437 — — (300) 2,782 Prepaid charges, advances, and other..............................................................................................................................................................................................................................xx (6,543) (2,385) 51 (716) 192 114 (344) (12,172) (20,574) 576 (27,218) (14,583) Inventory....................................................................................................................................................................................................................................................xx (865) (160) (301) (181) (8) (4) 142 (211) — — (1,032) (556) Accounts payable...............................................................................................................................................................................................................................................xx 6,669 5,609 7,095 (4,762) 4,192 3,304 (6,241) 8,724 7,667 (6,047) 19,382 6,828 Accrued payroll................................................................................................................................................................................................................................................xx 650 1,354 255 637 56 154 88 298 82 91 1,131 2,534 Other post-employment benefits obligations...............................................................................................................................................................................................................xx 4,694 (15,549) 1,998 (9,436) 898 (2,409) 1,099 (2,945) (1,320) 1,242 7,369 (29,097) Pension obligations.....................................................................................................................................................xx (61,060) 10,562 (35,144) 2,970 (5,965) 1,972 (7,291) 2,411 (569) 855 (110,029) 18,770 Leases.....................................................................................................................................................xx 380 (824) — — — — — — — — 380 (824) Accrued vacation and sick leave................................................................................................................................................................................................................................xx (187) 2,296 (757) 2,744 (16) 539 (20) 660 146 109 (834) 6,348 Accrued workers' compensation..................................................................................................................................................................................................................................xx 145 (346) 964 531 108 (67) 132 (82) — — 1,349 36 Due to other City departments............................................................................................................................................................................................xx — (674) — — — (240) 11 (231) — (1,592) 11 (2,737) Wholesale balancing account..................................................................................................................................................................................................................................xx 18,286 (3,993) — — — — — — — — 18,286 (3,993) Damage claims liability.....................................................................................................................................................................................................................................xx (654) 25,956 (4,668) 822 102 (33) (85) (1,114) 26 (100) (5,279) 25,531 Unearned revenues, refunds, and other liabilities..........................................................................................................................................................................................................................xx 264 703 792 102 (4) (489) 734 (1,640) 492 9,180 2,278 7,856 Pollution remediation obligations...............................................................................................................................................................................................................................xx — (306) 260 — — — — — — — 260 (306) Total adjustments..............................................................................................................................................................................................................................................xx 112,759 180,715 41,955 72,931 5,856 8,614 23,104 17,488 (33,808) 12,033 149,866 291,781 Net cash provided by (used in) operating activities......................................................................................................................................................................................................................$ 284,090 314,369 153,666 108,423 2,865 5,185 39,999 8,231 (38,033) 7,020 442,587 443,228 Noncash transactions:
Accrued capital asset costs....................................................................................................................................................................................................................................$ 25,353 27,263 89,905 89,982 6,324 9,057 19,059 15,393 — — 140,641 141,695 Interfund payables...................................................................................................xx — — 629 739 — — — — — — 629 739 Interfund receivables...................................................................................................xx — — — — — — 629 739 — — 629 739 Unrealized loss/(gain) on investments..........................................................................................xx 13,838 (392) 8,379 (228) 3,192 (88) 5,148 (149) 1,653 (74) 32,210 (931) Capital contributions..........................................................................................xx — 4,180 — — — — — — — — — 4,180
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Cash Flows
Proprietary Funds
Years ended June 30, 2022 and 2021
(In thousands)
Business Type Activities – Proprietary Funds
Water Wastewater Hetchy Water Hetchy Power SFPUC TotalCleanPowerSF
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Cash Flows
Proprietary Funds
Years ended June 30, 2022 and 2021
(In thousands)
71 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
(1) D escription of Reporting Entity
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 Water, Wastewater, Hetchy Water and Power and CleanPowerSF. 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 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 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 Water Enterprise, the Wastewater Enterprise, and Hetchy Water and Hetchy Power and CleanPowerSF (Hetch Hetchy) 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 the portion of the City that is attributable to the transactions of the enterprises. 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).
Water Enterprise
The San Francisco Water Enterprise was established in 1930 under the provisions of the Charter of the City and County of San Francisco (the City). The Water 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 Water Enterprise. The Water 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 Water 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.
Wastewater Enterprise
The San Francisco Wastewater 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 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, 72 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
constructing, improving, and financing improvements to the City’s municipal sewage treatment and disposal system. Since then, the City’s Board of Supervisors has adopted resolutions (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 Wastewater Enterprise.
Hetch Hetchy
San Francisco Hetch Hetchy Water and Power (Hetch Hetchy) 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 (aka 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.
(2) S ignificant Accounting Policies
(a) B asis of Accounting and Measurement Focus – Fund Financial Statements The accounts of Water, Wastewater, Hetchy Water, Hetchy Power and CleanPowerSF are organized on the basis of a proprietary fund type and are included as enterprise funds of the City. The activities are accounted for with a separate set of self balancing accounts that comprise the funds’ 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).
73 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The financial activities of Water, Wastewater, Hetchy Water, Hetchy Power and CleanPowerSF 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 statements of net position; revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Water and Wastewater Enterprises’ operating revenues are defined as charges to customers, rental income, capacity fees and other revenues while Hetchy Water, Hetchy Power and CleanPowerSF’s operating revenues are defined as charges to customers and rental incomes. Operating expenses include the costs of delivering services, administrative expenses, and depreciation and amortization on capital assets. Revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.
The SFPUC applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
(b) C ash and Cash Equivalents
The SFPUC 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 SFPUC. 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) I nvestments
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) In ventory
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed.
(e) C apital 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 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.
(f) I ntangible 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 SFPUC is required to capitalize intangible assets with a useful life extending beyond one reporting period. The SFPUC has established a capitalization threshold of $100. 74 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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) C onstruction Work in Progress
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 expenses in the year in which the decision is made to discontinue such projects. (h) C apitalization of Interest
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 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) B ond 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) A ccrued Vacation and Sick Leave
Accrued vacation pay, which may be accumulated up to ten 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) W orkers’ Compensation
The SFPUC 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 15(b)). (l) G eneral Liability
The SFPUC 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 15(a)). (m) Ar bitrage 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. The SFPUC did not have arbitrage rebate liability as of June 30, 2022 and 2021.
75 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
(n) R efunding 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) Inc ome Taxes
As a department of a government agency, the SFPUC is exempt from both federal income taxes and California State franchise taxes.
(p) R evenue Recognition
Charges for water, wastewater, and power services are based on usage. 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 by the Water and Wastewater Enterprises.
Hetchy Water, Hetchy Power and CleanPowerSF revenues are based on consumption and billing rates.
Generally, customers are billed monthly. 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 are as follow:
Fiscal Years
Ending June 30 Water Wastewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total
2022 $ 29,774 15,704 — 3,806 21,878 71,162 2021 30,277 14,175 — 13,823 12,600 70,875 (q) Us e 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) Eliminations
Eliminations for internal activities between Wastewater, Hetchy Power and CleanPowerSF are made in the Statements of Net Position. There were activities requiring eliminations during the fiscal years ended June 30, 2022 and June 30, 2021 between Wastewater and Hetchy Power. (s) A ccounting 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:
● 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;
76 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
● 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 16(d)).
(t) Leases
Leases are defined as a contract that conveys control of the right to use another entity’s underlying asset for a specified period. The SFPUC is a lessee and a lessor for various noncancellable leases of land, building, equipment, vehicles, easements, and 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), SFPUC 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.
Measurement of Lease Amounts (Lessee) - The SFPUC’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 SFPUC 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 SFPUC’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 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 on a straight-line basis over the lease term.
Key Estimates and Judgements - Key estimates and judgements include how the SFPUC 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. 77 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
● The SFPUC 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 SFPUC 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 SFPUC 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. (u) O ther Post-employment Benefits (OPEB)
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 13(b)). (v) N ew Accounting Standards Adopted in Fiscal Year 2022 1) I n 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 SFPUC adopted the provisions of Statement No. 87 in fiscal year 2022 (see Note 10). 78 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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) I n 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 SFPUC adopted the provisions of Statement No. 89 in fiscal year 2022.
3) I n 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 SFPUC adopted the provisions of Statement No. 92 in fiscal year 2022, which did not have a significant effect on its financial statements.
Water Wastewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total
Beginning Balance FY2021:
Lease Receivable - Current $ 7,293 — — — — 7,293 Lease Receivable - Non-Current 43,419 — — — — 43,419 Interest Receivable - GASB 87 — — — — — —
Deferred Inflows - Leases (50,712) — — — — (50,712) Right-to-use Assets 5,399 8,247 93 113 920 14,772 Accumulated Amortization — — — — — —
Accrued Interest Payable - Current — — — — — —
Lease Liability - Current (1,467) (2,487) (29) (35) (371) (4,389) Lease Liability - Long Term (3,932) (5,760) (64) (78) (549) (10,383) Changes to Net Position: — — — — — —
Activities FY2021:
Lease Receivable - Current (4,004) — — — — (4,004) Lease Receivable - Non-Current 2,402 — — — — 2,402 Interest Receivable - GASB 87 859 — — — — 859 Deferred Inflows - Leases 2,602 — — — — 2,602 Right-to-use Assets 247 — — — — 247
Accumulated Amortization (1,409) (2,325) (19) (23) (345) (4,121) Accrued Interest Payable - Current (5) (5) — — (1) (11) Lease Liability - Current 86 173 13 16 26 314 Lease Liability - Long Term 1,069 2,122 2 3 317 3,513 Changes to Net Position: 1,847 (35) (4) (4) (3) 1,801 Ending Balance FY2021:
Lease Receivable - Current 3,289 — — — — 3,289 Lease Receivable - Non-Current 45,821 — — — — 45,821 Interest Receivable - GASB 87 859 — — — — 859 Deferred Inflows - Leases (48,110) — — — — (48,110) Right-to-use Assets 5,646 8,247 93 113 920 15,019 Accumulated Amortization (1,409) (2,325) (19) (23) (345) (4,121) Accrued Interest Payable (5) (5) — — (1) (11) Lease Liability - Current (1,381) (2,314) (16) (19) (345) (4,075) Lease Liability - Long Term (2,863) (3,638) (62) (75) (232) (6,870) Revenues (1,859) — — — — (1,859)
Expenses 12 35 4 4 3 58 Changes in Net Position FY2021: $ (1,847) 35 4 4 3 (1,801) 79 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
4) I n 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 SFPUC adopted the provisions of Statement No. 93 in fiscal year 2022, which did not have a significant effect on its financial statements. (w) G ASB Statements Implemented in Fiscal Year 2021
1) I n 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 SFPUC adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.
2) I n 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 SFPUC adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.
3) I n 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 SFPUC adopted early the provision of Statement No. 97 in fiscal year 2021, which did not have a significant effect on its financial statements. 4) I n 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 SFPUC adopted the provisions of this Statement in fiscal year 2021, which did not have a significant effect on its financial statements.
(x) F uture Implementation of New Accounting Standards
1) I n 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 SFPUC will implement the provisions of Statement No. 91 in fiscal year 2023.
2) I n 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 SFPUC will implement the provisions of Statement No. 94 in fiscal year 2023. 3) I n May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for 80 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
subscription-based information technology arrangements (SBITAs) by a government. The new standard is effective for periods beginning after June 15, 2022. The SFPUC will implement the provisions of Statement No. 96 in fiscal year 2023.
4) I n 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 SFPUC will implement the provisions of Statement No. 99 in fiscal year 2024.
5) I n 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 SFPUC will implement the provisions of Statement No. 100 in fiscal year 2024.
6) I n 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 SFPUC will implement the provisions of Statement No. 101 in fiscal year 2025.
(y) Reclassifications
The SFPUC 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) C ash, Cash Equivalents, and Investments
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 SFPUC’s average daily cash balances. The primary objectives of SFPUC’s investment policy are consistent with the City’s policy.
The SFPUC 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.
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.
81 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Department-wide Business Type Activities
Department-wide restricted and unrestricted cash and investments outside City Treasury as of June 30, 2022 and 2021 consist of the following:
Department-wide cash, cash equivalents, and investments are shown on the accompanying statements of net position as follows:
Credit Ratings
Investments
exempt from
Quoted prices in
active markets for
identical assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 116,187 116,187 — — — Money Market Funds A-1+/P-1 < 90 days 92 92 — — —
Cash and Cash Equivalents N/A 13,088 13,088 — — —
Total Restricted Cash and Investments outside City Treasury $ 129,367 129,367 — — — Cash and Cash Equivalents N/A 732 732 — — —
Total Cash and Investments outside City Treasury $ 732 732 — — — Credit Ratings
Investments
exempt from
Quoted prices in
active markets for
identical assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 93,956 93,956 — — — Money Market Funds A-1+/P-1 < 90 days 81 81 — — —
Cash and Cash Equivalents N/A 42,855 42,855 — — —
Total Restricted Cash and Investments outside City Treasury $ 136,892 136,892 — — — Cash and Cash Equivalents N/A 1,279 1,279 — — —
Total Cash and Investments outside City Treasury $ 1,279 1,279 — — — SFPUC's Cash and Investments outside City Treasury
Fair Value Measurements Using
June 30, 2022
Investments
SFPUC's Cash and Investments outside City Treasury
Fair Value Measurements Using
June 30, 2021
Investments
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 34 The following table shows the percentage distribution of the City’s pooled investments by maturity:
2022 2021
Current assets:
Cash and investments with City Treasury $ 1,086,048 1,136,329 Cash and investments outside City Treasury 732 1,279
Restricted cash and investments outside City Treasury 31,878 57,616 Non-current assets:
Restricted cash and investments with City Treasury 9,299 12,231 Restricted cash and investments outside City Treasury 97,489 79,276 Total cash, cash equivalents, and investments $ 1,225,446 1,286,731 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 35 Fiscal Years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2022 20.2% 14.0% 14.9% 50.9%
2021 14.5% 27.6% 29.7% 28.2%
Investment maturities (in months)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 35 Water Enterprise
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 Water Enterprise held all investments in guaranteed investment contracts, treasury and government obligations, 82 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
commercial paper, corporate bonds, and notes, as well as 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 “AAm,” and a rating by Moody’s of “Aaa,” “Aa1,” or “Aa2”. The credit ratings of the money market 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 following tables present the Water Enterprise’s restricted and unrestricted cash and investments outside City Treasury as of June 30, 2022 and 2021:
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 Ratings
Investments
exempt from
Quoted prices in
active markets
for identical
assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) 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 Restricted Cash and Investments outside City Treasury $ 75,957 75,957 — — — Cash and Cash Equivalents N/A 318 318 — — —
Total Cash and Investments outside City Treasury $ 318 318 — — — Investments
Water's Cash and Investments outside City Treasury
Fair Value Measurements Using
June 30, 2022
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 36 Credit Ratings
Investments
exempt from
Quoted prices in
active markets
for identical
assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) 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 Restricted Cash and Investments outside City Treasury $ 122,853 122,853 — — — Cash and Cash Equivalents N/A 301 301 — — —
Total Cash and Investments outside City Treasury $ 301 301 — — — Fair Value Measurements Using
June 30, 2021
Investments
Water's Cash and Investments outside City Treasury
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 37 83 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The Water Enterprise’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as follows:
Wastewater Enterprise
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 held by the trustee established under the 2003 Indenture are invested in “Permitted Investments” as defined in the Indenture. “Permitted Investments” include money market funds registered under the Federal Investment Company Act of 1940 and whose shares are registered under the Federal Securities Act of 1933 and having a rating by S&P of “AAAm-G,” “AAAm,” or “AAm” and a rating by Moody’s of “Aaa,” “Aa1,” or “Aa2.” The following tables present the Wastewater Enterprise’s restricted and unrestricted cash and investments outside City Treasury as of June 30, 2022 and 2021:
2022 2021
Current assets:
Cash and investments with City Treasury $ 460,954 483,827 Cash and investments outside City Treasury 318 301
Restricted cash and investments outside City Treasury 11,063 57,165 Non-current assets:
Restricted cash and investments with City Treasury 9,299 — Restricted cash and investments outside City Treasury 64,894 65,688 Total cash, cash equivalents, and investments $ 546,528 606,981 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 38 Credit Ratings
Investments
exempt from
Quoted prices in
active markets
for identical
assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 39,296 39,296 — — — Money Market Funds A-1+/P-1 < 90 days 44 44 — — —
Cash and Cash Equivalents N/A 18 18 — — —
Total Restricted Cash and Investments outside City Treasury $ 39,358 39,358 — — — Cash and Cash Equivalents N/A 397 397 — — —
Total Cash and Investments outside City Treasury $ 397 397 — — — Wastewater's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2022
Investments
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 39 Credit Ratings
Investments
exempt from
Quoted prices in
active markets for
identical assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 10,159 10,159 — — — Money Market Funds A-1+/P-1 < 90 days 26 26 — — —
Cash and Cash Equivalents N/A 11 11 — — —
Total Restricted Cash and Investments outside City Treasury $ 10,196 10,196 — — — Cash and Cash Equivalents N/A 366 366 — — —
Total Cash and Investments outside City Treasury $ 366 366 — — — Wastewater's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2021
Investments
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 40 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. 84 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The Wastewater Enterprise’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as follows:
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 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 41 Hetch Hetchy (Hetchy Water, Hetchy Power and CleanPowerSF) 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. Hetch Hetchy 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.
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.
The following tables present the Hetch Hetchy restricted and unrestricted cash and investments outside City Treasury as of June 30, 2022 and 2021:
Credit Ratings
Investments
exempt from
Quoted prices in
active markets for
identical assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) Hetchy Water
Cash and Cash Equivalents N/A $ 1 1 — — —
Total Cash and Investments outside City Treasury $ 1 1 — — — Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 14,037 14,037 — — — Cash and Cash Equivalents N/A 15 15 — — —
Total Restricted Cash and Investments outside City Treasury $ 14,052 14,052 — — — Cash and Cash Equivalents N/A 16 16 — — —
Total Cash and Investments outside City Treasury $ 16 16 — — — Investments
Hetchy Water and Hetchy Power's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2022
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 42 85 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetch Water and Hetchy Power and CleanPowerSF cash, cash equivalents, and investments as of June 30, 2022 and 2021 are shown on the accompanying Statements of Net Position as follows:
Credit Ratings
Investments
exempt from
Quoted prices in
active markets
for identical
assets
Significant
other
observable
inputs
Unobservable
Inputs
(S&P/Moody's) Maturities Fair Value fair value (Level 1) (Level 2) (Level 3) Hetchy Water
Cash and Cash Equivalents N/A $ 1 1 — — —
Total Cash and Investments outside City Treasury $ 1 1 — — — Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 3,824 3,824 — — — Cash and Cash Equivalents N/A 19 19 — — —
Total Restricted Cash and Investments outside City Treasury $ 3,843 3,843 — — — Cash and Cash Equivalents N/A 611 611 — — —
Total Cash and Investments outside City Treasury $ 611 611 — — — Hetchy Water and Hetchy Power's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2021
Investments
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 43 Hetchy Hetchy
Water Power CleanPowerSF Total 2022
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 2021
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 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 44 86 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
(4) C apital Assets
Department-wide Business Type Activities
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, transmission and distributions systems, tunnels, and bridges.
Department-wide capital assets as of June 30, 2022 and 2021 consist of the following:
*Decrease in construction work in progress is greater than increase in capital assets being depreciated is mainly explained by $9,193 transferred to land for Water, $6,239 in capital project writeoffs for Water, Wastewater Hetchy Water and Hetchy Power, offset by $8,047 mainly related to direct additions to facilities and improvements, intangible assets and machinery and equipment.
*Decrease in construction work in progress is greater than increase in capital assets being depreciated is mainly explained by $16,397 in capital project writeoffs for Water, Wastewater Hetchy Water and Hetchy Power offset by $10,181 mainly related to direct additions to facilities and improvements, intangible assets and machinery and equipment. 2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 154,001 9,193 — 163,194
Intangible assets 5,162 — — 5,162
Construction work in progress 2,079,754 830,383 (424,936) * 2,485,201 Total capital assets not being depreciated and amortized 2,238,917 839,576 (424,936) 2,653,557 Capital assets being depreciated and amortized:
Facilities and improvements 10,796,179 403,777 — 11,199,956 Intangible assets 78,463 1,942 — 80,405
Machinery and equipment 572,846 11,832 (690) 583,988
Total capital assets being depreciated and amortized 11,447,488 417,551 * (690) 11,864,349 Less accumulated depreciation and amortization for:
Facilities and improvements (3,372,070) (222,366) — (3,594,436) Intangible assets (48,523) (2,313) — (50,836)
Machinery and equipment (401,626) (21,010) 690 (421,946) Total accumulated depreciation and amortization (3,822,219) (245,689) 690 (4,067,218) Total capital assets being depreciated and amortized, net 7,625,269 171,862 — 7,797,131 Total capital assets, net $ 9,864,186 1,011,438 (424,936) 10,450,688 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 45 2020 Increases Decreases 2021
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 155,089 — (1,088) 154,001
Intangible assets 5,162 — — 5,162
Construction work in progress 1,592,097 910,133 (422,476) * 2,079,754 Total capital assets not being depreciated and amortized 1,752,348 910,133 (423,564) 2,238,917 Capital assets being depreciated and amortized:
Facilities and improvements 10,400,544 395,635 — 10,796,179 Intangible assets 73,827 4,636 — 78,463
Machinery and equipment 557,168 15,989 (311) 572,846
Total capital assets being depreciated and amortized 11,031,539 416,260 * (311) 11,447,488 Less accumulated depreciation and amortization for:
Facilities and improvements (3,157,846) (214,224) — (3,372,070) Intangible assets (46,461) (2,062) — (48,523)
Machinery and equipment (380,536) (21,401) 311 (401,626) Total accumulated depreciation and amortization (3,584,843) (237,687) 311 (3,822,219) Total capital assets being depreciated and amortized, net 7,446,696 178,573 — 7,625,269 Total capital assets, net $ 9,199,044 1,088,706 (423,564) 9,864,186 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 46 87 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Water Capital Assets – Water’s capital assets as of June 30, 2022 and 2021 consist of the following:
*Decrease in construction work in progress of $8,054 includes $4,592 in capital project write offs, mainly related to Stern Grove Emergency Restoration 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. *Decrease in construction work in progress includes $3,810 in capital project write-offs, mainly related to Eastside Recycled Water and San Andreas Spillway projects. The remaining differences of $8,516 is due to direct additions to facilities and improvements, intangible assets and machinery and equipment.
2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:
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 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 48 1 of 1
2020 Increases Decreases 2021
Capital assets not being depreciated and amortized:
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 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 48 1 of 1
88 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Wastewater Capital Assets – Wastewater’s capital assets as of June 30, 2022 and 2021 consist of the following:
*Decrease in construction work in progress is greater than increase in capital assets being depreciated is explained by $1,165 in direct additions to machinery and equipment offset by $992 in capital project write-offs, mainly related to Public Works various locations infrastructure improvement projects.
*Decrease in construction work in progress is greater than increase in capital assets being depreciated is explained by $4,203 in capital project write-offs, mainly related to the Watershed Storm Management Project, Operational Decision System Ph 2 Project, and the Seacliff Ave Sewer Replacement-627 Project offset by $964 direct additions to machinery and equipment. 2021 Increases Decreases 2022
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 44,572 — — 44,572
Intangible assets 3,046 — — 3,046
Construction work in progress 1,340,644 514,679 (130,906) * 1,724,417 Total capital assets not being depreciated and amortized 1,388,262 514,679 (130,906) 1,772,035 Capital assets being depreciated and amortized:
Facilities and improvements 3,599,978 129,342 — 3,729,320 Intangible assets 8,976 572 — 9,548
Machinery and equipment 102,397 1,165 (288) 103,274
Total capital assets being depreciated and amortized 3,711,351 131,079 * (288) 3,842,142 Less accumulated depreciation and amortization for:
Facilities and improvements (1,412,109) (69,879) — (1,481,988) Intangible assets (4,615) (872) — (5,487)
Machinery and equipment (76,039) (4,500) 288 (80,251)
Total accumulated depreciation and amortization (1,492,763) (75,251) 288 (1,567,726) Total capital assets being depreciated and amortized, net 2,218,588 55,828 — 2,274,416 Total capital assets, net $ 3,606,850 570,507 (130,906) 4,046,451 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 49 2020 Increases Decreases 2021
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 44,572 — — 44,572
Intangible assets 3,046 — — 3,046
Construction work in progress 910,338 619,819 (189,513) * 1,340,644 Total capital assets not being depreciated and amortized 957,956 619,819 (189,513) 1,388,262 Capital assets being depreciated and amortized:
Facilities and improvements 3,419,029 180,949 — 3,599,978 Intangible assets 4,615 4,361 — 8,976
Machinery and equipment 101,595 964 (162) 102,397
Total capital assets being depreciated and amortized 3,525,239 186,274 * (162) 3,711,351 Less accumulated depreciation and amortization for:
Facilities and improvements (1,344,830) (67,279) — (1,412,109) Intangible assets (4,615) — — (4,615)
Machinery and equipment (71,462) (4,739) 162 (76,039)
Total accumulated depreciation and amortization (1,420,907) (72,018) 162 (1,492,763) Total capital assets being depreciated and amortized, net 2,104,332 114,256 — 2,218,588 Total capital assets, net $ 3,062,288 734,075 (189,513) 3,606,850 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 49 89 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Water Capital Assets – Hetchy Water’s capital assets as of June 30, 2022 and 2021 consist of the following:
*Decrease in construction work in progress included $7 in capital project write-offs, mainly related to Hetchy Water’s share of road improvement projects. The remaining difference of $171 is due to direct add additions to machinery and equipment.
*Decrease in construction work in progress included $51 in capital project write-offs, mainly related to Hetchy Water’s share of road improvement projects and 2018 Moccasin Storm Project. The remaining 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 29,654 (10,849) * 54,138 Total capital assets not being depreciated and amortized 38,571 29,654 (10,849) 57,376 Capital assets being depreciated and amortized:
Facilities and improvements 295,968 10,148 — 306,116 Intangible assets 20,522 — — 20,522
Machinery and equipment 27,518 865 — 28,383
Total capital assets being depreciated and amortized 344,008 11,013 * — 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 $ 177,481 34,375 (10,849) 201,007 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 50 2020 Increases Decreases 2021
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 3,232 — — 3,232
Intangible assets 6 — — 6
Construction work in progress 24,328 22,586 (11,581) * 35,333 Total capital assets not being depreciated and amortized 27,566 22,586 (11,581) 38,571 Capital assets being depreciated and amortized:
Facilities and improvements 284,480 11,488 — 295,968 Intangible assets 20,522 — — 20,522
Machinery and equipment 27,303 215 — 27,518
Total capital assets being depreciated and amortized 332,305 11,703 * — 344,008 Less accumulated depreciation and amortization for:
Facilities and improvements (169,874) (4,821) — (174,695) Intangible assets (9,739) (208) — (9,947)
Machinery and equipment (19,476) (980) — (20,456)
Total accumulated depreciation and amortization (199,089) (6,009) — (205,098) Total capital assets being depreciated and amortized, net 133,216 5,694 — 138,910 Total capital assets, net $ 160,782 28,280 (11,581) 177,481 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 50 90 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Power Capital Assets – Hetchy Power’s 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 Project 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 Project, Transmission and Distribution System Improvement 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 171,175 110,859 (19,642) * 262,392 Total capital assets not being depreciated and amortized 174,555 110,859 (19,642) 265,772 Capital assets being depreciated and amortized:
Facilities and improvements 486,995 16,834 — 503,829 Intangible assets 25,193 — — 25,193
Machinery and equipment 116,805 3,140 (87) 119,858
Total capital assets being depreciated and amortized 628,993 19,974 * (87) 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) 87 (72,598)
Total accumulated depreciation and amortization (311,492) (17,611) 87 (329,016) Total capital assets being depreciated and amortized, net 317,501 2,363 — 319,864 Total capital assets, net $ 492,056 113,222 (19,642) 585,636 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 51 2020 Increases Decreases 2021
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 164,749 70,059 (63,633) * 171,175 Total capital assets not being depreciated and amortized 168,129 70,059 (63,633) 174,555 Capital assets being depreciated and amortized:
Facilities and improvements 438,702 48,293 — 486,995 Intangible assets 25,193 — — 25,193
Machinery and equipment 109,270 7,535 — 116,805
Total capital assets being depreciated and amortized 573,165 55,828 * — 628,993 Less accumulated depreciation and amortization for:
Facilities and improvements (219,420) (11,331) — (230,751) Intangible assets (12,020) (253) — (12,273)
Machinery and equipment (64,425) (4,043) — (68,468)
Total accumulated depreciation and amortization (295,865) (15,627) — (311,492) Total capital assets being depreciated and amortized, net 277,300 40,201 — 317,501 Total capital assets, net $ 445,429 110,260 (63,633) 492,056 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 51 91 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 implementation of GASB Statement No. 87, Leases (5) R estricted Assets
Department-wide Business Type Activities
The following table summarizes the department-wide restricted assets as of June 30, 2022 and 2021.
Water Restricted Assets
Pursuant to the Indentures, all revenues of the Water 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 Water 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 Water 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 Water Enterprise as cash and investments. Deposits in the 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 Water Enterprise in accordance with the following priority:
1. T he payment of operation and maintenance expenses for such utility and related facilities;
2. T he payment of pension charges and proportionate payments to such compensation and other insurance or outside reserve funds as the Water Enterprise may establish or the Board of Supervisors may require with respect to employees of the Water Enterprise;
3. T he payment of principal, interest, reserve, sinking fund, and other mandatory funds created to secure Revenue Bonds issued by the Water Enterprise for the acquisition, construction, or extension of facilities owned, operated, or controlled by the Water Enterprise; 2022 2021
Cash and investments with City Treasury $ 9,299 12,231 Cash and investments outside City Treasury 129,367 136,892 Interest and other receivables 221,532 89,379
Total restricted assets $ 360,198 238,502
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 52 Hetchy SFPUC
Water Wastewater Power Total
Interest expensed $ 213,668 77,743 5,624 297,035
Interest included in construction work in progress* — — — — Total interest incurred $ 213,668 77,743 5,624 297,035 2022
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 47 Hetchy SFPUC
Water Wastewater Power Total
Interest expensed^ $ 184,678 34,944 1,972 221,594
Interest included in construction work in progress 19,461 33,420 1,083 53,964 Total interest incurred $ 204,139 68,364 3,055 275,558 Restated 2021^
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 47 92 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
4. T he payment of principal and interest on General Obligation Bonds issued by the City for the Water Enterprise’s purposes;
5. R econstruction and replacement as determined by the Water Enterprise or as required by any of the Water Enterprise’s Revenue Bond ordinances duly adopted and approved; and
6. T he 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 Water Enterprise; and for any other lawful purpose of the Water Enterprise, including the transfer of surplus funds pursuant to the Charter.
In accordance with the Indenture, the bond financing program 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 Water Revenue Fund of the City Treasury.
Wastewater 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 Wastewater 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 Wastewater 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 Wastewater 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 Wastewater Enterprise as cash and investments. Deposits in the Revenue Fund, including 2022 2021
Cash and investments with City Treasury:
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 revenue bond fund 38 1,513
2020F Water revenue refunding bond fund 12 12
2020G Water revenue 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
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 53 93 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
earnings thereon, shall be appropriated, transferred, expended, or used for the following purposes and only in accordance with the following priority:
1. T he payment of operation and maintenance costs of the Wastewater Enterprise;
2. T he payment of State revolving fund loans;
3. T he payment of bonds, parity State revolving fund loans, policy costs, and amounts due as reimbursement under any letter of credit agreement; and
4. A ny other lawful purpose of the Wastewater Enterprise.
In accordance with the Indenture, the Wastewater 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.
Hetchy Water Restricted Assets
Hetchy Water restricted assets held in trust consist of the following as of June 30, 2022 and 2021:
Restricted assets listed above as cash and investments with City Treasury are held in funds accounts within the Hetchy Water Revenue Fund.
Hetchy Power 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”). 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 Total restricted assets $ 244,888 34,242
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 54 2022 2021
Cash and investments with City Treasury:
Hetch Hetchy bond construction fund $ — 6,990
Total restricted assets $ — 6,990
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 55 94 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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. T he payment of operation and maintenance expenses;
2. A ny priority reconstruction and replacement fund deposits;
3. D eposit in the interest account of each Bond Fund;
4. D eposit in the bond retirement account of each Bond Fund;
5. D eposit 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 other credit or liquidity facility, including municipal bond insurance and guarantees, that secures the payment of principal of 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 by resolution;
7. A ny additional reconstruction and replacement fund deposits into the reconstruction and replacement fund;
8. A ny necessary or desirable capital additions or improvements to the Hetchy Power;
9. A ny payment under a Take-or-Pay Power Purchase Agreement that does not constitute an operation and maintenance expense;
10. A ny payment under a Swap Agreement that does not constitute a Swap Agreement payment; and
11. A ny other lawful purpose of the SFPUC.
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, Hetchy Power maintains certain restricted cash and investment balances in trust. Restricted assets held in trust consist of the following as of June 30, 2022 and 2021:
Restricted assets listed above as cash and investments with City Treasury are held in funds accounts within the Hetchy Power Revenue Fund.
2022 2021
Cash and investments with City Treasury:
Hetch Hetchy bond construction fund $ — 5,241
Cash and investments outside City Treasury:
2009 Series C Certificates of Participation – 525 Golden Gate 223 223 2009 Series D Certificates of Participation – 525 Golden Gate 758 892 2015 Series A Revenue Bonds 2,194 2,193
2015 Series B Revenue Bonds 516 516
2021 Series AB Revenue Bonds 10,346 —
Commercial Paper 15 19
Total restricted cash and investments outside City Treasury 14,052 3,843 Interest receivable:
Hetch Hetchy bond construction fund 4,303 11,800
Total restricted assets $ 18,355 20,884
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 55 95 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
(6) S hort-Term Debt
Department-wide Business Type Activities
The following table summarizes the department-wide short-term commercial paper debt.
Water 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 Water 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 Water Enterprise will refinance the commercial paper with the long-term, fixed-rate debt.
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements, the Water 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.
Wastewater Short-Term Debt
Under the voter approved 2002 Proposition E, the Commission and Board of Supervisors has authorized the issuance of up to $750,000 in commercial paper for the purpose of reconstructing, expanding, repairing, or improving the Wastewater Enterprise’s facilities. The Wastewater 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 Wastewater 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.
2021 Additions Reductions 2022
Water $ 105,862 130,221 (29,786) 206,297
Wastewater 638,518 80,639 (340,000) 379,157
Hetchy Power 114,671 63,058 (137,710) 40,019
SFPUC Total $ 859,051 273,918 (507,496) 625,473
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 56 96 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Water Short-Term Debt
Hetchy Water had no commercial paper outstanding as of June 30, 2022 and 2021.
Hetchy Power 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.
Hetchy Power had $40,019 and $114,671 commercial paper outstanding as of June 30, 2022 and 2021, respectively. The Power 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 Borrowing 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.
CleanPowerSF Short-Term Debt
CleanPowerSF had no commercial paper outstanding as of June 30, 2022 and 2021. 97 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
(7) C hanges in Long-Term Liabilities
D epartment-wide Long-Term Liability activities for the years ended June 30, 2022 and 2021 a re as follows:
*Ending balance included elimination entries of $629 interfund payables and receivables between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters Living Machine.
^Restated due to the implementation of GASB Statement No. 87, Leases .
Interest Maturity Restated Due within
rate (Calendar Year) 2021^ Additions Reductions 2022 one year Revenue Bonds:
2010A wastewater revenue bonds 4.00 – 5.00 % 2021 $ 8,820 — (8,820) — — 2010B water revenue bonds (Build America) 4.00 – 6.00 2040 361,500 — (12,330) 349,170 12,780 2010B wastewater revenue bonds (Build America) 4.65 – 5.82 2040 192,515 — — 192,515 7,280 2010E water revenue bonds (Build America) 4.90 – 6.00 2040 344,200 — — 344,200 12,745 2010G water revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2011B water revenue bonds 3.50 – 5.00 2041 755 — (755) — — 2011C water revenue bonds 3.00 – 5.00 2041 825 — (825) — — 2013A wastewater revenue bonds 1.00 – 5.00 2025 29,595 — (14,060) 15,535 13,090 2013B wastewater revenue bonds 4.00 – 5.00 2042 331,585 — — 331,585 — 2015A water revenue refunding bonds 2.00 – 5.00 2036 397,745 — (15,325) 382,420 16,045 2015A hetchy power revenue bonds 4.00 – 5.00 2045 32,025 — — 32,025 — 2015B hetchy power revenue bonds 3.00 – 4.00 2026 4,550 — (815) 3,735 850 2016A water revenue refunding bonds 4.00 – 5.00 2039 743,050 — (23,315) 719,735 32,790 2016B water revenue refunding bonds 1.50 – 5.00 2030 81,525 — (10,015) 71,510 12,530 2016C water revenue bonds 0.87 – 4.19 2046 237,050 — (5,820) 231,230 5,955 2016A wastewater revenue bonds 4.00 – 5.00 2046 240,580 — — 240,580 — 2016B wastewater revenue bonds 4.00 – 5.00 2046 67,820 — — 67,820 — 2017A water revenue bonds 5.00 2047 27,000 — — 27,000 2,325 2017B water revenue bonds 5.00 2047 32,930 — — 32,930 2,835 2017C water revenue bonds 5.00 2047 15,750 — — 15,750 1,355 2017D water revenue refunding bonds 2.00 – 5.00 2035 347,720 — (925) 346,795 1,455 2017E water revenue refunding bonds 4.00 – 5.00 2031 48,890 — — 48,890 765 2017F water revenue refunding bonds 5.00 2031 8,705 — — 8,705 700 2017G water revenue refunding bonds 2.03 – 2.91 2024 32,780 — (820) 31,960 13,070 2018A wastewater revenue bonds 4.00 – 5.00 2043 229,050 — — 229,050 7,715 2018B wastewater revenue bonds 5.00 2043 185,950 — — 185,950 6,260 2018C wastewater revenue bonds 2.13 2048 179,145 — — 179,145 — 2019A water revenue refunding bonds 1.81 – 3.47 2043 615,725 — (24,405) 591,320 3,495 2019B water revenue refunding bonds 3.15 – 3.52 2041 16,450 — (65) 16,385 70 2019C water revenue refunding bonds 3.15 – 3.52 2041 17,925 — (75) 17,850 75 2020A water revenue bonds 4.00 – 5.00 2050 150,895 — — 150,895 — 2020B water revenue bonds 5.00 2050 61,330 — — 61,330 — 2020C water revenue bonds 4.00 2050 85,335 — — 85,335 — 2020D water revenue bonds 3.00 2050 49,200 — — 49,200 — 2020E water revenue refunding bonds 2.83 – 2.95 2047 341,435 — (5,900) 335,535 500 2020F water revenue refunding bonds 0.26 – 3.15 2047 136,880 — (1,425) 135,455 — 2020G water revenue refunding bonds 0.26 – 3.10 2043 120,585 — (5,820) 114,765 5,795 2020H water revenue refunding bonds 0.26 – 3.15 2047 65,495 — (680) 64,815 — 2021A wastewater revenue bonds 4.00 – 5.00 2051 — 260,835 — 260,835 — 2021B wastewater revenue bonds 5.00 2051 — 37,045 — 37,045 — 2021 Series A Revenue Bonds 4.00 – 5.00 2052 — 74,280 — 74,280 — 2021 Series B Revenue Bonds 4.00 – 5.00 2052 — 49,720 — 49,720 — 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 Less issuance discount (153) — 23 (130) (6)
Add issuance premiums 430,068 102,842 (35,772) 497,138 — Revenue Notes:
2021 Series A - Biosolids 1.00 2025 — 218,355 — 218,355 — 2021 Series B - SEP Headworks 1.00 2026 — 129,110 — 129,110 — Add issuance premiums — 3,358 (467) 2,891 —
Total revenue bonds & notes payable 6,631,009 875,545 (169,524) 7,337,030 161,596 2009C Certificates of Participation (COPs) 2.00 – 5.00 2022 8,535 — (4,160) 4,375 4,375 2009C COPs issuance premiums 95 — (75) 20 20
2009D COPs (Build America) 6.36 – 6.49 2041 129,550 — — 129,550 — State Revolving Fund Loans (CWSRF Loans) Water 1.00 2051 107,407 14,354 — 121,761 3,283 State Revolving Fund Loans (CWSRF Loans) Wastewater 0.80 – 1.80 2051 108,559 196,583 (2,483) 302,659 2,481 Other post-employment benefits obligations 234,488 25,469 (32,810) 227,147 — Net Pension Liability 382,382 — (382,382) — —
Accrued vacation and sick leave 31,776 13,941 (14,775) 30,942 15,427 Accrued workers’ compensation 18,648 6,555 (5,206) 19,997 3,708 Due to Other City departments 369 11 — 380 380
Lease liability 10,945 27 (4,102) 6,870 3,587
Damage claims liability 55,075 13,104 (18,383) 49,796 20,115 Wholesale balancing account water 60,864 18,633 (347) 79,150 48,422 Pollution remediation obligations 9,071 260 — 9,331 — Unearned revenues, refunds, and other 16,159 23,113 (19,215) 20,057 10,143 $ 7,804,932 1,187,595 (653,462) 8,339,065 273,537
*
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 57 98 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
*Ending balance Included elimination entries $739 of interfund payables and receivables between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters Living Machine.
^Restated due to the implementation of GASB 87, Leases .
Interest Maturity Restated Due within
rate (Calendar Year) 2020 Additions Reductions 2021^ one year Revenue Bonds:
2010A wastewater revenue bonds 4.00 – 5.00 % 2021 $ 17,210 — (8,390) 8,820 8,820 2010B water revenue bonds (Build America) 4.00 – 6.00 2040 373,420 — (11,920) 361,500 12,330 2010B wastewater revenue bonds (Build America) 4.65 – 5.82 2040 192,515 — — 192,515 — 2010D water revenue refunding bonds 3.00 – 5.00 2021 30,990 — (30,990) — — 2010E water revenue bonds (Build America) 4.90 – 6.00 2040 344,200 — — 344,200 — 2010G water revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2011B water revenue bonds 3.50 – 5.00 2041 1,485 — (730) 755 755 2011C water revenue bonds 3.00 – 5.00 2041 1,620 — (795) 825 825 2011D water revenue refunding bonds 4.00 – 5.00 2028 19,135 — (19,135) — — 2012A water revenue bonds 4.00 – 5.00 2043 216,540 — (216,540) — — 2012B water revenue bonds 4.00 – 5.00 2043 16,520 — (16,520) — — 2012C1 water revenue refunding bonds 4.00 2031 8,465 — (8,465) — — 2012C2 water revenue refunding bonds 4.00 – 5.00 2032 69,570 — (69,570) — — 2013A wastewater revenue bonds 1.00 – 5.00 2025 44,445 — (14,850) 29,595 14,060 2013B wastewater revenue bonds 4.00 – 5.00 2042 331,585 — — 331,585 — 2015A water revenue refunding bonds 2.00 – 5.00 2036 412,380 — (14,635) 397,745 15,325 2015A hetchy power revenue bonds 4.00 – 5.00 2045 32,025 — — 32,025 — 2015B hetchy power revenue bonds 3.00 – 4.00 2026 5,335 — (785) 4,550 815 2016A water revenue refunding bonds 4.00 – 5.00 2039 763,005 — (19,955) 743,050 23,315 2016B water revenue refunding bonds 1.50 – 5.00 2030 95,980 — (14,455) 81,525 10,015 2016C water revenue bonds 0.87 – 4.19 2046 242,755 — (5,705) 237,050 5,820 2016A wastewater revenue bonds 4.00 – 5.00 2046 240,580 — — 240,580 — 2016B wastewater revenue bonds 4.00 – 5.00 2046 67,820 — — 67,820 — 2017A water revenue bonds 5.00 2047 121,140 — (94,140) 27,000 — 2017B water revenue bonds 5.00 2047 147,725 — (114,795) 32,930 — 2017C water revenue bonds 5.00 2047 70,675 — (54,925) 15,750 — 2017D water revenue refunding bonds 2.00 – 5.00 2035 348,610 — (890) 347,720 925 2017E water revenue refunding bonds 4.00 – 5.00 2031 48,890 — — 48,890 — 2017F water revenue refunding bonds 5.00 2031 8,705 — — 8,705 — 2017G water revenue refunding bonds 2.03 – 2.91 2024 33,280 — (500) 32,780 820 2018A wastewater revenue bonds 4.00 – 5.00 2043 229,050 — — 229,050 — 2018B wastewater revenue bonds 5.00 2043 185,950 — — 185,950 — 2018C wastewater revenue bonds 2.13 2048 179,145 — — 179,145 — 2019A water revenue refunding bonds 1.81 – 3.47 2043 622,580 — (6,855) 615,725 24,405 2019B water revenue refunding bonds 3.15 – 3.52 2041 16,450 — — 16,450 65 2019C water revenue refunding bonds 3.15 – 3.52 2041 17,925 — — 17,925 75 2020A water revenue bonds 4.00 – 5.00 2050 — 150,895 — 150,895 — 2020B water revenue bonds 5.00 2050 — 61,330 — 61,330 — 2020C water revenue bonds 4.00 2050 — 85,335 — 85,335 — 2020D water revenue bonds 3.00 2050 — 49,200 — 49,200 — 2020E water revenue refunding bonds 2.83 – 2.95 2047 — 341,435 — 341,435 5,900 2020F water revenue refunding bonds 0.26 – 3.15 2047 — 136,880 — 136,880 1,425 2020G water revenue refunding bonds 0.26 – 3.10 2043 — 120,585 — 120,585 5,820 2020H water revenue refunding bonds 0.26 – 3.15 2047 — 65,495 — 65,495 680 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 Less issuance discount (177) — 24 (153) —
Add issuance premiums 449,024 73,542 (92,498) 430,068 — Total revenue bonds payable 6,366,836 1,084,697 (820,524) 6,631,009 133,308 2009C Certificates of Participation (COPs) 2.00 – 5.00 2022 12,490 — (3,955) 8,535 4,160 2009C COPs issuance premiums 225 — (130) 95 —
2009D COPs (Build America) 6.36 – 6.49 2041 129,550 — — 129,550 — State Revolving Fund Loans (CWSRF Loans) Water 1.00 2051 73,271 49,546 (15,410) 107,407 1,667 State Revolving Fund Loans (CWSRF Loans) Wastewater 0.80 – 1.80 2051 88,549 22,468 (2,458) 108,559 2,483 Other post-employment benefits obligations 260,397 26,291 (52,200) 234,488 — Net Pension Liability 313,899 164,517 (96,034) 382,382 — Accrued vacation and sick leave 25,428 18,447 (12,099) 31,776 15,639 Accrued workers’ compensation 18,612 4,641 (4,605) 18,648 3,467 Due to Other City departments 851 — (482) 369 369
Lease liability 14,772 — (3,827) 10,945 4,075
Damage claims liability 29,544 38,914 (13,383) 55,075 20,925 Wholesale balancing account water 64,857 — (3,993) 60,864 21,538 Pollution remediation obligations 9,377 — (306) 9,071 — Unearned revenues, refunds, and other 9,117 28,750 (21,708) 16,159 6,191 $ 7,417,775 1,438,271 (1,051,114) 7,804,932 213,822
*
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 58 99 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
W ater Long-Term Liability activities for the years ended June 30, 2022 and 2021 are as follows:
^Restated due to the implementation of GASB 87, Leases .
Interest Maturity Restated Due within
rate (Calendar Year) 2021^ Additions Reductions 2022 one year Revenue Bonds:
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 — 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 Lease liability 4,244 — (1,381) 2,863 1,008
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 obligations 1,271 — — 1,271 — Total $ 5,691,878 59,277 (386,652) 5,364,503 199,915 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 59 100 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
^Restated due to the implementation of GASB 87, Leases .
The payments of principal and interest amounts on various bonds are secured by net revenues of the Water Enterprise.
a) W ater Revenue Bonds 2010 Series B
The 2010 Series B Bonds in the par amount of $417,720 were issued as taxable Build America Bonds (with Direct Pay Subsidy) to provide $364,757 in new money for WSIP capital projects and pay financing costs. The 2010 Series B bonds were issued as serial and term bonds with coupons ranging from 4.0% to 6.0% and have a final maturity of 2040. The Series B bonds have a true interest cost (net of federal subsidy) of 3.9%. As of June 30, 2022 and 2021, the principal amount outstanding was $349,170 and $361,500, respectively.
Interest Maturity Restated Due within
rate (Calendar Year) 2020 Additions Reductions 2021^ one year Revenue Bonds:
2010B revenue bonds (Build America) 4.00 – 6.00 % 2040 $ 373,420 — (11,920) 361,500 12,330 2010D revenue refunding bonds 3.00 – 5.00 2021 30,990 — (30,990) — — 2010E revenue bonds (Build America) 4.90 – 6.00 2040 344,200 — — 344,200 — 2010G revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2011B revenue bonds 3.50 – 5.00 2041 1,485 — (730) 755 755 2011C revenue bonds 3.00 – 5.00 2041 1,620 — (795) 825 825 2011D revenue refunding bonds 4.00 – 5.00 2028 19,135 — (19,135) — — 2012A revenue bonds 4.00 – 5.00 2043 216,540 — (216,540) — — 2012B revenue bonds 4.00 – 5.00 2043 16,520 — (16,520) — — 2012C1 revenue refunding bonds 4.00 2031 8,465 — (8,465) — — 2012C2 revenue refunding bonds 4.00 – 5.00 2032 69,570 — (69,570) — — 2015A revenue refunding bonds 2.00 – 5.00 2036 412,380 — (14,635) 397,745 15,325 2016A revenue refunding bonds 4.00 – 5.00 2039 763,005 — (19,955) 743,050 23,315 2016B revenue refunding bonds 1.50 – 5.00 2030 95,980 — (14,455) 81,525 10,015 2016C revenue bonds 0.87 – 4.19 2046 242,755 — (5,705) 237,050 5,820 2017A revenue bonds 5.00 2047 121,140 — (94,140) 27,000 — 2017B revenue bonds 5.00 2047 147,725 — (114,795) 32,930 — 2017C revenue bonds 5.00 2047 70,675 — (54,925) 15,750 — 2017D revenue refunding bonds 2.00 – 5.00 2035 348,610 — (890) 347,720 925 2017E revenue refunding bonds 4.00 – 5.00 2031 48,890 — — 48,890 — 2017F revenue refunding bonds 5.00 2031 8,705 — — 8,705 — 2017G revenue refunding bonds 2.03 – 2.91 2024 33,280 — (500) 32,780 820 2019A revenue refunding bonds 1.81 – 3.47 2043 622,580 — (6,855) 615,725 24,405 2019B revenue refunding bonds 3.15 – 3.52 2041 16,450 — — 16,450 65 2019C revenue refunding bonds 3.15 – 3.52 2041 17,925 — — 17,925 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 — 341,435 5,900 2020F revenue refunding bonds 0.26 – 3.15 2047 — 136,880 — 136,880 1,425 2020G revenue refunding bonds 0.26 – 3.10 2043 — 120,585 — 120,585 5,820 2020H revenue refunding bonds 0.26 – 3.15 2047 — 65,495 — 65,495 680 Less issuance discount (143) — 10 (133) —
Add issuance premiums 311,923 73,542 (83,707) 301,758 — Total revenue bonds payable 4,695,295 1,084,697 (785,217) 4,994,775 108,500 2009C Certificates of Participation (COPs) 2.00 – 5.00 2022 8,918 — (2,824) 6,094 2,970 2009C COPs issuance premiums 161 — (92) 69 —
2009D COPs (Build America) 6.36 – 6.49 2041 92,499 — — 92,499 — State Revolving Funds Loan 1.00 2051 73,271 49,546 (15,410) 107,407 1,667 Other post-employment benefits obligations 163,684 14,036 (28,949) 148,771 — Net pension liability 178,133 93,066 (54,782) 216,417 — Accrued vacation and sick leave 11,620 10,109 (7,813) 13,916 6,787 Accrued workers’ compensation 9,174 1,912 (2,258) 8,828 1,694 Lease liability 5,399 — (1,155) 4,244 1,381
Damage claims liability 10,767 27,643 (1,687) 36,723 14,400 Wholesale balancing account 64,857 — (3,993) 60,864 21,538 Pollution remediation obligations 1,577 — (306) 1,271 — Total $ 5,315,355 1,281,009 (904,486) 5,691,878 158,937 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 60 101 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
b) W ater Revenue Bonds 2010 Series DE
In July 2010, the Water Enterprise issued revenue bonds 2010 Series DE in the combined principal amount of $446,925. The purpose of the bonds is to advance refund $31,570 of outstanding 2002 Series A revenue bonds and to provide $372,689 in new money for WSIP capital projects, with the balance applied to financing costs and a cash-funded debt service reserve fund. The bonds were rated “AA-” and “Aa2” from S&P and Moody’s, respectively. The bonds included serial and term bonds with interest rates ranging from 3.0% to 6.0%.
The 2010 Series D Bonds in the par amount of $102,725 were issued as tax-exempt bonds to provide $72,243 in new money for WSIP capital projects and $35,080 to advance refund a portion of outstanding 2002 Series A revenue bonds. The Series D bonds were issued as serial bonds with coupons ranging from 3.0% to 5.0% and have a final maturity of 2021. The Series D bonds have a true interest cost of 2.5%.
On February 27, 2013, the Wholesale Water Customers BAWSCA made an early repayment of $356,139 to the Water Enterprise. $12,360 of the repayment proceeds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement, dated February 27, 2013, to refund and legally defease a portion of the outstanding 2010 Series D bonds. BAWSCA repayment funds were combined with $165 from the 2010 Series D Capitalized Interest Account. This deposit, together with certain other available monies, was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities consisting of United States Treasury Securities - SLGS. The principal and interest on monies held by the escrow agent will be sufficient to partially defease a portion of the 2010 Series D bonds maturing November 1, 2015 through 2017. A portion of the proceeds from 2020 Series E and 2020 Series G refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated October 1, 2020, to refund and legally defease the outstanding 2010 Series D bonds. These deposits, together with certain other available monies were held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities.
The principal and interest on monies held by the escrow agent will be sufficient to refund and legally defease all of the maturities of the 2010 Series D bonds starting on November 1, 2021. As of June 30, 2022 and 2021, the principal amount of 2010 Series D bonds outstanding was $0.
The 2010 Series E Bonds in the par amount of $344,200 were issued as taxable Build America Bonds (with Direct Pay Subsidy) to provide $300,446 in new money proceeds for WSIP capital projects. The Series E bonds were issued as serial and term bonds with coupons ranging from 4.9% to 6.0% and have a final maturity of 2040. The Series E bonds have a true interest cost (net of federal subsidy) of 3.8%. As of June 30, 2022 and 2021, the principal amount of 2010 Series E bonds outstanding was $344,200.
c) W ater Revenue Bonds 2010 Series FG
In December 2010, the Water Enterprise issued revenue bonds 2010 Series FG in the combined principal amount of $532,430. The purpose of the bonds is to provide $437,980 in new money for WSIP capital projects, with the balance applied to financing costs and a cash-funded debt service reserve.
The bonds were rated “AA-” and “Aa2” from S&P and Moody’s, respectively. The bonds included serial and term bonds with interest rates ranging from 3.0% to 7.0%.
The $180,960 Series F bonds were issued as tax-exempt bonds to provide $149,728 in new money for WSIP capital projects. The Series F bonds were issued as serial and term bonds with coupons ranging from 3.0% to 5.5% and have a final maturity of 2030. The Series F bonds have a true interest cost of 4.8%.
On February 27, 2013, the Wholesale Water Customers BAWSCA made an early repayment of $356,139 to the Water Enterprise. $3,646 of the repayment proceeds were deposited with the trustee, acting as 102 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
escrow agent under the irrevocable Escrow Agreement, dated February 27, 2013, to refund and legally defease a portion of the outstanding 2010 Series F bonds. BAWSCA repayment funds were combined with $131 from the 2010 Series F Capitalized Interest Account. This deposit, together with certain other available monies, was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities consisting of United States Treasury Securities - SLGS. The principal and interest on monies held by the escrow agent will be sufficient to partially defease a portion of the 2010 Series F bonds maturing November 1, 2017 and 2018.
A portion of the proceeds of the 2016 Series A refunding bonds and 2019 Series A refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated October 1, 2016 and December 1, 2019, respectively, to refund and legally defease a portion of the outstanding 2010 Series F bonds. These deposits, together with certain other available monies were held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities.
The principal and interest on monies held by the escrow agent will be sufficient to refund and legally defease all of the maturities of the 2010 Series F bonds starting on November 1, 2020 and thereafter.
As of June 30, 2022 and 2021, the principal amount of 2010 Series F bonds outstanding was $0.
The $351,470 Series G bonds were issued as taxable Build America Bonds (with Direct Pay Subsidy) to provide $288,252 in new money for WSIP capital projects. The Series G bonds were issued as term bonds with a coupon of 7.0% and have a final maturity of 2050. The Series G bonds have a true interest cost (net of federal subsidy) of 4.5%. As of June 30, 2022 and 2021, the principal amount of 2010 Series G bonds outstanding was $351,470.
d) W ater Revenue Bonds 2011 Series ABCD
In August 2011, the Water Enterprise issued revenue bonds, 2011 Series ABCD in the combined principal amount of $720,750. The purpose of the bonds is to provide new money for WSIP capital projects, to finance Hetch Hetchy Water Improvements, and to finance the Local Water Main Replacement Projects, as well as refund $56,670 of outstanding 2001 Series A and 2002 Series A revenue bonds, with the balance applied to financing costs and a cash-funded debt service reserve. The bonds were rated “AA-” and “Aa3” from S&P and Moody’s, respectively. The bonds included serial and term bonds with interest rates varying from 3.0% to 5.0%.
The $602,715 Series A bonds were issued as tax-exempt bonds to provide $525,000 in new money for WSIP capital projects. The Series A bonds were issued as serial and term bonds with coupons ranging from 4.3% to 5.0% and have a final maturity of 2041. The Series A bonds have a true interest cost of
4.6%.
A portion of the proceeds of the 2017 Series D and G and 2019 Series A refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated December 1, 2017 and December 1, 2019, respectively, to refund and legally defease a portion of the outstanding 2011 Series A bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2011 Series A bonds starting on November 1, 2020 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2011 Series A bonds outstanding was $0.
The $28,975 Series B bonds were issued as tax-exempt bonds to provide $27,710 to finance improvements to certain up-country water storage and transmission facilities under the jurisdiction of Hetch Hetchy Water and Power and CleanPowerSF. The Series B bonds were issued as serial and term bonds with coupons ranging from 3.5% to 5.0% and have a final maturity of 2041. The Series B bonds have a true interest cost of 4.5%.
103 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
On February 27, 2013, the Wholesale Water Customers BAWSCA made an early repayment of $356,139 to the Water Enterprise. $515 of the repayment proceeds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement, dated February 27, 2013, to refund and legally defease a portion of the outstanding 2011 Series B bonds. This deposit, together with certain other available monies, was held by the escrow agent under the Escrow Agreement and invested in non- callable Federal Securities consisting of United States Treasury Securities - SLGS. The principal and interest on monies held by the escrow agent will be sufficient to partially defease a portion of the 2011 Series B bonds maturing November 1, 2017 through 2018.
A portion of the proceeds from the 2017 Series F and 2019 Series B refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated December 1, 2017 and December 1, 2019, respectively, to refund and legally defease a portion of the outstanding 2011 Series B bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2011 Series B bonds starting on November 1, 2022 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2011 Series B bonds outstanding was $0 and $755, respectively.
The $33,595 Series C bonds were issued as tax-exempt bonds to provide $33,772 to finance certain water main replacement projects within the City. The Series C bonds were issued as serial and term bonds with coupons ranging from 3.0% to 5.0% and have a final maturity of 2041. The Series C bonds have a true interest cost of 4.4%.
On February 27, 2013, the Wholesale Water Customers BAWSCA made an early repayment of $356,139 to the Water Enterprise. $3,824 of the repayment proceeds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement, dated February 27, 2013, to refund and legally defease a portion of the outstanding 2011 Series C bonds. This deposit, together with certain other available monies, was held by the escrow agent under the Escrow Agreement and invested in non- callable Federal Securities consisting of United States Treasury Securities - SLGS. The principal and interest on monies held by the escrow agent will be sufficient to partially defease a portion of the 2011 Series C bonds maturing November 1, 2014 through 2018.
A portion of the proceeds of the 2017 Series E and 2019 Series C refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated December 1, 2017 and December 1, 2019, respectively, to refund and legally defease a portion of the outstanding 2011 Series C bonds. These deposits, together with certain other available monies were held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2011 Series C bonds starting on November 1, 2022 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2011 Series C bonds outstanding was $0 and $825, respectively.
The $55,465 Series D bonds were issued as tax-exempt bonds to provide $59,381 to refund, on a current basis, a portion of the 2001 Series A bonds as well as refund, on an advance basis, a portion of the 2002 Series A bonds. The Series D bonds were issued as serial bonds with coupons ranging from 4.0% to 5.0% and have a final maturity of 2028. The Series D bonds have a true interest cost of 3.8%.
A portion of the proceeds of the 2017 Series E refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement, dated December 1, 2017, to refund and legally defease a portion of the outstanding 2011 Series D bonds. This deposit, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be 104 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
sufficient to redeem the maturities of the 2011 Series D bonds starting on November 1, 2022 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2011 Series D bonds outstanding was $0.
e) W ater Revenue Bonds 2012 Series AB and C (C1 and C2) In June 2012, the Water Enterprise issued revenue bonds, 2012 Series ABC in the combined principal amount of $701,880. The purpose of the bonds was to provide $530,000 of new money for WSIP capital projects, $15,750 to reimburse the Water Enterprise for costs to settle litigation arising out of certain capital projects of benefit to the Water Enterprise, and to refund $99,180 of outstanding 2001 Series A and 2002 Series A revenue bonds, with the balance applied to financing costs and a cash-funded debt service reserve. The bonds were rated “AA-” and “Aa3” from S&P and Moody’s, respectively. The bonds included serial and term bonds with interest rates varying from 4.0% to 5.0%.
The $591,610 Series A bonds were issued as tax-exempt bonds to provide $530,000 in new money for WSIP capital projects. The Series A bonds were issued as serial and term bonds with coupons ranging from 4.0% to 5.0% and have a final maturity of 2043. The Series A bonds have a true interest cost of 4.3%. A portion of the proceeds of the 2017 Series D, 2019 Series A, and 2020 Series E refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated December 1, 2017, December 1, 2019, and October 1, 2020 respectively, to refund and legally defease a portion of the outstanding 2012 Series A bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2012 Series A bonds starting on November 1, 2031 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2012 Series A bonds outstanding was $0.
The $16,520 Series B bonds were issued as tax-exempt bonds to reimburse the Water Enterprise $15,750 for costs to settle litigation arising out of certain capital projects of benefit to the Water Enterprise. The Series B bonds were issued as serial and term bonds with coupons ranging from 4.0% to
5.0% and have a final maturity of 2043. The Series B bonds have a true interest cost of 4.1%. A portion of the proceeds of the 2020 Series G refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1, 2020 to refund and legally defease a portion of the outstanding 2012 Series B bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2012 Series B bonds starting on November 1, 2031 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2012 Series B bonds outstanding was $0.
The $93,750 Series C bonds were issued as tax-exempt bonds to provide $101,147 to refund, on a current basis, a portion of the 2001 Series A bonds as well as refund, on an advance basis, a portion of the 2002 Series A bonds. The Series C bonds were issued as serial bonds with coupons ranging from
4.0% to 5.0% and have a final maturity of 2032. The Series C bonds have a true interest cost of 3.7%.
A portion of the proceeds of the 2017 Series E and 2020 Series G refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements dated December 1, 2017 and October 1, 2020, respectively, to refund and legally defease a portion of the outstanding 2012 Series C bonds. This deposit, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2012 Series C bonds starting on November 1, 2025 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2012 Series C bonds outstanding was $0.
105 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
f) W ater Revenue Refunding Bonds 2015 Series A
In April 2015, the Water Enterprise issued tax-exempt revenue bonds, 2015 Series A in the amount of $429,600 for the purpose of refunding all the outstanding 2006 Series A bonds maturing on and after November 1, 2015 and portion of the outstanding 2009 Series A bonds maturing on and after November 1, 2023. The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively.
The 2015 Series A bonds include serial bonds with interest rates varying from 2.0% to 5.0% and have a final maturity in 2036. The Series A bonds have a true interest cost of 3.3%. Unamortized 2006 Series A bond issuance costs were $1,392, and there were no unamortized bond issuance costs for 2009 Series A bonds at the date of the refunding. The refunding resulted in the recognition of a deferred accounting loss of $25,365, gross debt service savings of $28,148 over the next 20 two-year terms, and an economic gain of $48,561 or 10.3% of refunded principal. As of June 30, 2022 and 2021, the principal amount of 2015 Series A bonds outstanding was $382,420 and $397,745, respectively. g) W ater Revenue Refunding Bonds 2016 Series AB
In October 2016, the Water Enterprise issued tax-exempt revenue bonds, 2016 Series AB in the aggregate amount of $893,820. The 2016 Series A bonds were issued for the purpose of refunding a portion of the outstanding 2009 Series A bonds maturing on and after November 1, 2020, a portion of the outstanding 2009 Series B bonds maturing on and after November 1, 2020, and a portion of the outstanding 2010 Series F bonds maturing on and after November 1, 2021. The 2016 Series B bonds were issued for the purpose of refunding, on a current basis, all the outstanding 2006 Series B and Series C bonds, and a portion of the outstanding 2010 Series A bonds maturing on and after November 1, 2020, the bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively. The 2016 Series AB bonds include serial bonds with interest rates varying from 1.5% to 5.0% and have a final maturity in 2039. The Series AB bonds have a true interest cost of 2.9%. Unamortized bond issuance costs at the date of refunding were $145 for 2006 Series B bonds and $54 for 2006 Series C bonds.
The refunding resulted in the recognition of a deferred accounting loss of $106,205, gross debt service savings of $135,966, and an economic gain of $107,152 or 11.5% of refunded principal. As of June 30, 2022 and 2021, the principal amount of 2016 Series AB bonds outstanding was $791,245 and $824,575, respectively.
h) W ater Revenue Bonds 2016 Series C
In December 2016, the Water Enterprise issued taxable bonds, 2016 Series C in the amount of $259,350. The bonds were issued as Green Bonds. The purpose of the bonds was to refund all of the outstanding taxable commercial paper notes in the approximate amount of $237,000, and to provide $19,975 of new money for WSIP capital projects. The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively. The 2016 Series C bonds include serial bonds with interest rates varying from 0.9% to 4.0% and have a final maturity in 2046, and two term bonds with 4.0% and 4.2% interest rates and final maturities of 2041 and 2046. The Series C bonds have a true interest cost of 3.9%. As of June 30, 2022 and 2021, the principal amount of 2016 Series C bonds outstanding was $231,230 and $237,050, respectively.
i) W ater Revenue Bonds 2017 Series ABC
In December 2017, the Water Enterprise issued tax-exempt revenue bonds, 2017 ABC in the aggregate amount of $339,540. The purpose of the 2017 Series ABC Bonds was to refund approximately $120,500 aggregate principal amount of commercial paper notes and to provide $230,500 new money for WSIP capital projects, other various capital projects of the Water Enterprise, and capital projects of Hetch Hetchy Water. The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively. The 2017 Series ABC bonds include serial bonds with coupon rates of 5.0% and have final maturity in 2045, and four term bonds with coupons of 5.0% and final maturities from 2045 to 2047. 106 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The $121,140 2017 Series A bonds were issued as tax-exempt Green Bonds to refund approximately $60,265 of commercial paper notes and to provide $65,500 in new money for WSIP capital projects.
The Series A bonds have a true interest cost of 3.8%. A portion of the proceeds of the 2020 Series E refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1, 2020 to refund and legally defease a portion of the outstanding 2017 Series A bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2017 Series A bonds starting on November 1, 2030 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2017 Series A bonds outstanding was $27,000.
The $147,725 2017 Series B bonds were issued as tax-exempt bonds to provide $150,000 in new money for Water Enterprise capital projects (non-WSIP). The Series B bonds were issued as serial and term bonds with coupons of 5.0% and have a final maturity of 2047. The Series B bonds have a true interest cost of 3.8%. A portion of the proceeds of the 2020 Series F refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1, 2020 to refund and legally defease a portion of the outstanding 2017 Series B bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2017 Series B bonds starting on November 1, 2030 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2017 Series B bonds outstanding was $32,930.
The $70,675 2017 Series C bonds were issued as tax-exempt bonds to refund approximately $60,266 of commercial paper notes and to provide $15,000 in new money for Hetch Hetchy Water capital projects.
The Series C bonds were issued as serial bonds and a term bond with coupons of 5.0% and have a final maturity of 2047. The Series C bonds have a true interest cost of 3.8%. A portion of the proceeds of the 2020 Series H refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1, 2020 to refund and legally defease a portion of the outstanding 2017 Series C bonds. These deposits, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities.
The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2017 Series C bonds starting on November 1, 2030 and thereafter. As of June 30, 2022 and 2021, the principal amount of 2017 Series C bonds outstanding was $15,750. j) W ater Revenue Refunding Bonds 2017 Series DEFG
In December 2017, the Water Enterprise issued tax-exempt revenue bonds, 2017 Series DEF, and taxable 2017 Series G refunding bonds in the aggregate amount of $442,180. The 2017 Series D (WSIP, Green) bonds were issued for the purpose of refunding a portion of the outstanding 2011 Series A (WSIP) bonds maturing on and after November 1, 2022, a portion of the outstanding 2012 Series A bonds maturing on and after November 1, 2031.
The 2017 Series E bonds were issued for the purpose of refunding a portion of the outstanding 2011 Series C bonds maturing on or after November 1, 2022, a portion of the outstanding 2011 Series D bonds maturing on and after November 1, 2022, a portion of 2012 Series C1 bonds maturing on or after November 1, 2029.
The 2017 Series F bonds were issued for the purpose of refunding a portion of the outstanding 2011 Series B bonds maturing on or after November 1, 2022.
The taxable 2017 Series G (WSIP, Green) bonds were issued to refund a portion of the outstanding 2011 Series A bonds maturing on and after November 1, 2022. 107 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively. The 2017 Series DEFG bonds include serial bonds with interest rates varying from 2.0% to 5.0% and have a final maturity in 2035. The Series DEFG bonds have a true interest cost of 2.9%. The refunding resulted in the recognition of a deferred accounting loss of $34,275, gross debt service savings of $68,942, and an economic gain of $51,698 or 10.7% of refunded principal. As of June 30, 2022 and 2021, the principal amount of 2017 Series DEFG bonds outstanding was $436,350 and $438,095 respectively. k) W ater Revenue Refunding Bonds 2019 Series ABC
In January 2020, the Water Enterprise issued taxable revenue bonds, 2019 Series ABC refunding bonds in the aggregate amount of $656,955. The 2019 Series A (WSIP, Green) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series F (WSIP) bonds maturing on and after November 1, 2020, a portion of the outstanding 2011 Series A (WSIP) bonds maturing on and after November 1, 2020, and a portion of the outstanding 2012 Series A (WSIP) bonds maturing on and after November 1, 2035.
The 2019 Series B (Hetch Hetchy Water) bonds were issued for the purpose of refunding a portion of the outstanding 2011 Series B bonds maturing on or after November 1, 2032.
The 2019 Series C (Local) bonds were issued for the purpose of refunding a portion of the outstanding 2011 Series C bonds maturing on or after November 1, 2032.
The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2019 Series ABC bonds include serial bonds with interest rates varying from 1.8% to 3.5% and have a final maturity in 2043. The Series ABC bonds have a true interest cost of 3.3%. The refunding resulted in the recognition of a deferred accounting loss of $17,329, gross debt service savings of $119,827, and an economic gain of $92,556 or 14.0% of refunded principal. As of June 30, 2022 and 2021, the principal amount of 2019 Series ABC bonds outstanding was $625,555 and $650,100, respectively. l) W ater Revenue Bonds 2020 Series ABCD
In September 2020, the Water Enterprise issued tax-exempt revenue bonds, 2020 Series ABCD in the aggregate amount of $346,760. The purpose of the 2020 Series ABCD Bonds was to refund approximately $229,770 aggregate principal amount of commercial paper notes and to provide $164,632 new money for various capital projects of the Water Enterprise, and capital projects of Hetch Hetchy Water. The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2020 Series ABCD bonds include term bonds with coupons of 3.0% to 5.0% and final maturities from 2045 to 2050.
The $150,895 2020 Series A bonds were issued as tax-exempt Green Bonds to refund approximately $180,000 of commercial paper notes for WSIP capital projects. The Series A bonds were issued as term bonds with coupons of 4.0% and 5.0% and a final maturity of 2050. The 2020 Series A bonds have a true interest cost of 3.3%. As of June 30, 2022 and 2021, the principal amount of 2020 Series A bonds outstanding was $150,895.
The $61,330 Series B bonds were issued as tax-exempt bonds to provide $69,644 in new money for Water Enterprise capital projects (non-WSIP, Regional). The Series B bonds were issued as term bonds with coupons of 5.0% and have a final maturity of 2050. The Series B bonds have a true interest cost of 3.7%. As of June 30, 2022 and 2021, the principal amount of 2020 Series B bonds outstanding was $61,330.
108 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The $85,335 Series C bonds were issued as tax-exempt bonds to provide $94,948 in new money for Water Enterprise capital projects (non-WSIP, Local). The Series C bonds were issued as term bonds with coupons of 4.0% and have a final maturity of 2050. The Series C bonds have a true interest cost of 3.0%. As of June 30, 2022 and 2021, the principal amount of 2020 Series C bonds outstanding was $85,335.
The $49,200 Series D bonds were issued as tax-exempt bonds to refund approximately $49,761 of commercial paper notes for Hetch Hetchy Water capital projects. The Series D bonds were issued as term bonds with coupons of 3.0% and a final maturity of 2050. The 2020 Series D bonds have a true interest cost of 2.7%. As of June 30, 2022 and 2021, the principal amount of 2020 Series D bonds outstanding was $49,200.
m) W ater Revenue Bonds 2020 Series EFGH
In October 2020, the Water Enterprise issued taxable revenue bonds, 2020 Series EFGH refunding bonds in the aggregate amount of $664,395. The 2020 Series E (WSIP, Green) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series D (WSIP) bonds maturing on and after November 1, 2020, a portion of the outstanding 2012 Series A (WSIP) bonds maturing on and after November 1, 2038, and a portion of the outstanding 2017 Series A (WSIP) bonds maturing on and after November 1, 2030.
The 2020 Series F (non-WSIP, Regional) bonds were issued for the purpose of refunding a portion of the outstanding 2017 Series B bonds maturing on or after November 1, 2030.
The 2020 Series G (non-WSIP, Local) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series D bonds maturing on or after November 1, 2020, a portion of the 2011 Series D bonds maturing on or after November 1, 2022, a portion of 2012 Series B bonds maturing on or after November 1, 2031, and a portion of 2012 Series C bonds maturing on or after November 1, 2025.
The 2020 Series H (Hetch Hetchy Water) bonds issued for the purpose of refunding a portion of the outstanding 2017 Series C bonds maturing on or after November 1, 2030.
The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2020 Series EFGH bonds include serial bonds and term bonds with interest rates varying from 0.3% to 3.1% and have a final maturity in 2047. The Series EFGH bonds have a true interest cost of 2.7%. The refunding resulted in the recognition of a deferred accounting loss of $27,010, gross debt service savings of $117,114, and an economic gain of $75,212 or 12.0% of refunded principal. As of June 30, 2022 and 2021, the principal amount of 2020 Series EFGH bonds outstanding was $650,570 and $664,395, respectively. n) F uture Annual Debt Service of Revenue Bonds
The following table presents the future annual debt service relating to the revenue and refunding bonds outstanding as of June 30, 2022. The federal interest subsidy amounts represent 35.0%, excluding sequestration, of the interest for the revenue bond 2010 Series B, E, and G.
109 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
*The SFPUC received an IRS notice, dated June 2, 2022, that the federal interest subsidies on the 2010 Series B bonds, 2010 Series E bonds, and 2010 Series G bonds are reduced by 5.7%, or a total reduction of $18,776, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
As defined in the Indentures, the principal and interest of the Water Enterprise’s revenue and refunding bonds are payable from its revenues, as well as monies deposited in certain funds and accounts pledged thereto (See Note 5).
o) S F Westside Recycled Water Project and Future Annual Debt Service for Clean Water State Revolving Fund (CWSRF) Loan and Grant In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (CWSRF) Loan and Grant to fund the Water Enterprise’s SF Westside Recycled Water Project. The CWSRF loan is in the amount of $186,220, which includes $15,000 of principal forgiveness, or a grant. It will bear an interest rate of 1.0% for a 30- year term, with loan repayment beginning one year after substantial completion of project construction.
The CWSRF loan is secured on a parity lien basis with the Water Enterprise’s outstanding revenue bonds.
The principal outstanding as of June 30, 2022 and 2021 were $121,761 and $107,407, respectively. In addition, there was $15,000 of principal forgiveness.
Interest before Federal interest Interest net
Principal subsidy subsidy* of subsidy
Fiscal years ending June 30:
2023 $ 125,285 203,067 (21,290) 181,777
2024 135,095 197,481 (20,841) 176,640
2025 140,485 191,563 (20,370) 171,193
2026 151,930 185,085 (19,876) 165,209
2027 157,635 177,956 (19,345) 158,611
2028-2032 892,755 770,116 (87,360) 682,756
2033-2037 1,092,025 540,947 (64,682) 476,265
2038-2042 1,037,900 295,084 (35,116) 259,968
2043-2047 464,125 145,355 (17,128) 128,227
2048-2051 387,415 40,159 (4,608) 35,551
Total 4,584,650 2,746,813 (310,616) 2,436,197
Less: Current portion (125,285)
Less: Unamortized bond discount (124)
Add: Unamortized bond premiums 276,409
Long-term portion as of June 30, 2022 $ 4,735,650
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 61 Principal Interest Total
Fiscal years ending June 30:
2023 $ 3,283 1,142 4,425
2024 3,542 1,185 4,727
2025 3,577 1,149 4,726
2026 3,613 1,114 4,727
2027 3,649 1,077 4,726
2028-2032 18,801 4,833 23,634
2033-2037 19,760 3,874 23,634
2038-2042 20,768 2,866 23,634
2043-2047 21,827 1,806 23,633
2048-2052 22,941 692 23,633
Total 121,761 19,738 141,499
Less: Current portion (3,283)
Long-term portion as of June 30, 2022 $ 118,478
110 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
p) D rinking Water State Revolving Fund (DWSRF) Loan
In April 2022, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Drinking Water State Revolving Fund (DWSRF) Loan to fund the Water Enterprise’s Mountain Tunnel Improvement Project. The DWSRF loan is in the amount of $238,219. It will bear an interest rate of 1.1% for a 30-year term, with interest payments beginning annually after the initial loan proceed draw occurs and loan principal repayment beginning one year after substantial completion of project construction. Power Enterprise is responsible for repayment for its share of SRF Loan debt service costs representing up to its allocable share of the cost of the Mountain Tunnel Project by a Memorandum of Understanding that will be executed with the Water Enterprise. The DWSRF loan is secured on a parity lien basis with the Water Enterprise’s outstanding revenue bonds. The principal outstanding as of June 30, 2022 was $0.
q) P roposition A
On November 5, 2002, the San Francisco voters passed Proposition A, which provides for the issuance of revenue bonds and/or other forms of indebtedness by the Commission in a principal amount not to exceed $1,628,000 to finance the acquisition and construction of improvements to the City’s Water System. As of June 30, 2022, there was no commercial paper outstanding pursuant to this authorization and $1,499,230 of bonds had been issued in fiscal years 2006, 2010, 2012, 2021 against Prop A. The total authorization against Prop A was $1,499,230 as of June 30, 2022. r) P roposition E
On November 5, 2002, the San Francisco voters passed Proposition E, which authorizes the Board of Supervisors’ approval of the issuance of revenue bonds and/or other forms of indebtedness by the Commission to finance costs for the Commission’s capital programs, including WSIP. As of June 30, 2022, the Board of Supervisors has authorized the issuance of $4,617,099 in revenue bonds with $3,898,744 issued against this authorization; and in September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (CWSRF) Loan and Grant to fund the Water Enterprise’s SF Westside Recycled Water Project in the amount of $186,220 (which includes a $15,000 grant) and in April 2022, the SFPUC entered in to an Installment Sale Agreement with the State Water Resources Control Board for a Drinking Water State Revolving Fund (DWSRF) Loan to fund the Mountain Tunnel Improvement Project in the amount of $238,219. Additionally, $206,297 and $105,862 in commercial paper was outstanding pursuant to this authorization as of June 30, 2022 and 2021, respectively. s) E vents of Default and Remedies
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements , significant events of default as specified in the Water Enterprise Indenture (applicable to Water Revenue Bonds, and CWSRF 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 describe herein.
111 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Wastewater Long-Term Liability activities for the years ended June 30, 2022 and 2021 are as follows:
^Restated due to the implementation of GASB Statement No. 87, Leases .
^ Restated due to the implementation of GASB Statement No. 87, Leases .
The payments of principal and interest amounts on various bonds are secured by net revenues of the Wastewater Enterprise.
Interest Maturity Restated Due within
rate (Calendar Year) 2021^ Additions Reductions 2022 one year Revenue bonds:
2010 Series A 4.00 – 5.00 % 2021 $ 8,820 — (8,820) — — 2010 Series B (Build America) 4.65 – 5.82 2040 192,515 — — 192,515 7,280 2013 Series A 1.00 – 5.00 2025 29,595 — (14,060) 15,535 13,090 2013 Series B 4.00 – 5.00 2042 331,585 — — 331,585 — 2016 Series A 4.00 – 5.00 2046 240,580 — — 240,580 — 2016 Series B 4.00 – 5.00 2046 67,820 — — 67,820 —
2018 Series A 4.00 – 5.00 2043 229,050 — — 229,050 7,715 2018 Series B 5.00 2043 185,950 — — 185,950 6,260
2018 Series C 2.13 2048 179,145 — — 179,145 —
2021 Series A 4.00 – 5.00 2051 — 260,835 — 260,835 — 2021 Series B 5.00 2051 — 37,045 — 37,045 —
For issuance premiums 124,862 75,820 (9,489) 191,193 — Revenue Notes:
2021 Series A - Biosolids 1.00 2025 — 218,355 — 218,355 — 2021 Series B - SEP Headworks 1.00 2026 — 129,110 — 129,110 — For issuance premiums — 3,358 (467) 2,891 —
Total revenue bonds and notes payable 1,589,922 724,523 (32,836) 2,281,609 34,345 2009 Series C Certificates of Participation (COPs) 2.00 – 5.00 2022 1,611 — (785) 826 826 2009 Series C COPs issuance premiums 18 — (14) 4 4
2009 Series D COPs (Build America) 6.36 – 6.49 2041 24,458 — — 24,458 — State Revolving Fund Loans (CWSRF Loans) 0.80 – 1.80 2056 108,559 196,583 (2,483) 302,659 2,481 Other post-employment benefits obligations 50,711 5,466 (7,054) 49,123 — Net pension liability 103,746 — (103,746) — —
Accrued vacation and sick leave 11,658 2,895 (3,652) 10,901 5,479 Accrued workers’ compensation 6,582 3,207 (2,243) 7,546 1,393 Due to Other City departments 739 — (110) 629 111
Lease liability 5,952 27 (2,341) 3,638 2,341
Damage claims liability 16,713 8,812 (13,480) 12,045 9,323 Pollution remediation obligations 7,800 260 — 8,060 — Total $ 1,928,469 941,773 (168,744) 2,701,498 56,303 W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 63 Interest Maturity Restated Due within
rate (Calendar Year) 2020 Additions Reductions 2021^ one year Revenue bonds:
2010 Series A 4.00 – 5.00 % 2021 $ 17,210 — (8,390) 8,820 8,820 2010 Series B (Build America) 4.65 – 5.82 2040 192,515 — — 192,515 — 2013 Series A 1.00 – 5.00 2025 44,445 — (14,850) 29,595 14,060 2013 Series B 4.00 – 5.00 2042 331,585 — — 331,585 — 2016 Series A 4.00 – 5.00 2046 240,580 — — 240,580 — 2016 Series B 4.00 – 5.00 2046 67,820 — — 67,820 —
2018 Series A 4.00 – 5.00 2043 229,050 — — 229,050 — 2018 Series B 5.00 2043 185,950 — — 185,950 —
2018 Series C 2.13 2048 179,145 — — 179,145 —
For issuance premiums 133,433 — (8,571) 124,862 —
Total revenue bonds payable 1,621,733 — (31,811) 1,589,922 22,880 2009 Series C Certificates of Participation (COPs) 2.00 – 5.00 2022 2,358 — (747) 1,611 785 2009 Series C COPs issuance premiums 43 — (25) 18 —
2009 Series D COPs (Build America) 6.36 – 6.49 2041 24,458 — — 24,458 — State Revolving Fund Loans (CWSRF Loans) 0.80 – 1.80 2051 88,549 22,468 (2,458) 108,559 2,483 Other post-employment benefits obligations 58,183 6,609 (14,081) 50,711 — Net pension liability 86,235 42,533 (25,022) 103,746 — Accrued vacation and sick leave 8,914 5,406 (2,662) 11,658 5,811 Accrued workers’ compensation 6,051 2,616 (2,085) 6,582 1,198 Due to Other City departments 849 — (110) 739 110
Lease liability 8,247 — (2,295) 5,952 2,314
Damage claims liability 15,891 6,428 (5,606) 16,713 5,892 Pollution remediation obligations 7,800 — — 7,800 — Total $ 1,929,311 86,060 (86,902) 1,928,469 41,473
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 64 112 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
a) W astewater Revenue Bonds 2010 Series A
During fiscal year 2010, the Wastewater 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, and pay the costs of issuing the bonds. The bonds were rated “Aa3” and “AA-” by Moody’s and S&P, 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, the 2010 Series A bonds’ principal amount outstanding was $0 and $8,820, respectively.
b) W astewater Revenue Bonds 2010 Series B
During fiscal year 2010, the Wastewater 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 “Aa3” and “AA-” by Moody’s and S&P, respectively 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, the 2010 Series B bonds’ principal amount outstanding was $192,515.
c) W astewater Revenue Bonds 2013 Series A
In January 2013, the Wastewater Enterprise issued tax-exempt revenue bonds 2013 Series A in the amount of $193,400 for the purpose of refunding the remaining portion of the outstanding 2003 Series A bonds maturing on and after October 1, 2013. The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively 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) W astewater Revenue Bonds 2013 Series B
In February 2013, the Wastewater 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 “Aa3” and “AA-” by Moody’s and S&P, respectively 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) W astewater Revenue Bonds 2016 Series A
In May 2016, the Wastewater 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 fund capitalized interest, and pay the costs of issuing the bonds. The bonds carried ratings of “AA” and “Aa3” from S&P and Moody’s, respectively 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. 113 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
f) W astewater Revenue Bonds 2016 Series B
In May 2016, the Wastewater 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 of “AA” and “Aa3” from S&P and Moody’s, respectively 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) W astewater Revenue Bonds 2018 Series A
In August 2018, the Wastewater 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 furtherance of the SFPUC’s Sewer System Improvement Program (SSIP), to pay off $25,000 of outstanding commercial paper notes, to fund capitalized interest, and pay the costs of issuing the bonds. The bonds carried ratings of “AA” and “Aa3” from S&P and Moody’s, respectively 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) W astewater Revenue Bonds 2018 Series B
In August 2018, the Wastewater 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, and pay the costs of issuing the bonds. The bonds carried ratings of “AA” and “Aa3” from S&P and Moody’s, respectively 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) W astewater Revenue Bonds 2018 Series C
In August 2018, the Wastewater 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 bonds carried ratings of “AA” and “Aa3” from S&P and Moody’s, respectively 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) W astewater Revenue Bonds 2021 Series AB
In November 2021, the Wastewater 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 bonds carried “Aa2” and “AA” ratings from Moody’s and S&P, respectively.
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.
114 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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) W astewater Revenue Notes 2021 Series AB
In November 2021, the Wastewater 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 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) F uture Annual Debt Service of Revenue and Refunding Bonds The following table presents the future annual debt service relating to the revenue and refunding bonds outstanding as of June 30, 2022. The interest before subsidy amounts include the interest for 2010 Series A and B, 2013 Series A and B, 2016 Series A and B, and 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%, or a total reduction of $2,323, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
Interest before Federal interest Interest net
Principal subsidy subsidy* of subsidy
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
Total 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
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 65 115 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
As defined in the Indenture, the principal and interest of the Wastewater Enterprise’s refunding bonds are payable from its corresponding revenue as well as monies deposited in certain funds and accounts pledged thereto (see Note 5).
m) L ake Merced Green Infrastructure Project CWSRF Loan In January 2016, then amended in May 2016, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (“CWSRF”) Loan to fund the Lake Merced Green Infrastructure Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $7,435. The loan bears an interest rate of 1.6% which was equal to one-half of the State of California’s most 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 completion of each project’s construction; substantial completion is expected by July 2020. The CWSRF loan is secured on a parity lien basis with the Wastewater Enterprise’s outstanding revenue bonds. The SFPUC has received loan 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. n) S outheast Plant (SEP) 521/522 and Disinfection Upgrade Project C WSRF 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-half of the State of California’s most 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 completion of each project’s construction; substantial completion occurred in July 2019. The CWSRF loan is secured on a parity lien basis with the Wastewater Enterprise’s outstanding revenue bonds. The SFPUC has received proceeds from loan 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.
o) N orth 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 California’s most 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 completion of each project’s construction, substantial completion occurred in February 2018. The CWSRF loans is secured on a parity lien basis with the Wastewater Enterprise’s 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. p) S outheast Plant (SEP) Primary/Secondary Clarifier Upgrade Project C WSRF 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 California’s most 116 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 completion of each project’s construction; substantial completion occurred in June 2018. The CWSRF loan is secured on a parity lien basis with the Wastewater Enterprise’s 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. q) O ceanside 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- half of the State of California’s most 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 completion of each project’s construction; substantial completion is expected in August 2021. The CWSRF loan is secured on a parity lien basis with the Wastewater Enterprise’s outstanding revenue bonds. 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.
r) S outheast 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 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- half of the State of California’s most 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 completion of each project’s construction; substantial completion is expected in May 2026. The CWSRF loan is secured on a parity lien basis with the Wastewater Enterprise’s outstanding revenue bonds. 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.
s) S outheast 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-half of the State of California’s most 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 completion of each project’s construction; substantial completion is expected in March 2024. The CWSRF loan is secured on a parity lien basis with the Wastewater Enterprise’s outstanding revenue bonds. 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.
117 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
t) F uture Annual Debt Services of State Revolving Fund Loans (CWSRF Loans W astewater Revenue Notes 2021 Series AB)
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. u) W IFIA Loan Agreement-Biosolids Digester Facility Project In July 2018 the SFPUC entered into a “Water Infrastructure Finance and Innovation Act (WIFIA)” Loan Agreement (“WIFIA Loan”) with the United States Environmental Protection Agency in the amount of $699,242. The WIFIA Loan was entered into pursuant to the WIFIA statute authorized by Congress in 2014. The WIFIA Loan will fund 49% of the costs of the Wastewater Enterprise’s Biosolids Digester Facility Project plus certain eligible expenses. Payment of the WIFIA Loan will be secured by a senior lien pledge of the Wastewater Enterprise’s net revenues and is on a parity lien basis with the SFPUC’s outstanding Wastewater Revenue Bonds and Clean Water State Revolving Fund (“SRF”) Loans entered into with the California State Water Resources Control Board.
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.
v) W IFIA Loan Agreement-Southeast Treatment Plant Improvements Project In June 2020 the SFPUC entered into a “Water Infrastructure Finance and Innovation Act (WIFIA) Loan Agreement (WIFIA Loan) with the United 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 the costs of the Wastewater Enterprise’s 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 be secured by a senior lien pledge of the Wastewater Principal 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
Total 302,659 69,987 372,646
Less: Current portion (2,481)
Long-term portion as of June 30, 2022 $ 300,178
Interest
and Fees*
118 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Enterprise’s net revenues and is on a parity lien basis with the SFPUC’s outstanding Wastewater Revenue Bonds and Clean Water State Revolving Fund (“SRF”) Loans entered into with the California State Water 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.
w) E vents 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.
Hetchy Water Long-Term Liability activities for the years ended June 30, 2022 and 2021 are as follows:
^Restated due to the implementation of GASB Statement No. 87, Leases . ^Restated due to the implementation of GASB Statement No. 87, Leases .
Restated Due within
2021^ Additions Reductions 2022 one year
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 2,185 749 (765) 2,169 1,034 Accrued workers’ compensation 1,120 233 (125) 1,228 215 Lease liability 78 — (16) 62 3
Damage claims liability 525 253 (151) 627 228
Unearned revenues, refunds, and other 138 14 (18) 134 24 Total $ 45,135 3,170 (29,845) 18,460 1,504
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 67A Restated Due within
2020 Additions Reductions 2021^ one year
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 Due to Other City departments 240 — (240) — —
Lease liability 93 — (15) 78 16
Damage claims liability 558 478 (511) 525 218
Unearned revenues, refunds, and other 627 629 (1,118) 138 22 Total $ 42,178 16,096 (13,139) 45,135 1,512
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 67B 119 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
Hetchy Power Long-Term Liability activities for the years ended June 30, 2022 and 2021 are as follows:
^Restated due to the implementation of GASB Statement 87, Leases .
^Restated due to the implementation of GASB Statement 87, Leases .
Interest Maturity Restated Due within
Rate (Calendar Year) 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 — 74,280 — 2021 Series B Revenue Bonds 4.00 - 5.00 2052 — 49,720 — 49,720 — Less issuance discount (20) — 14 (6) (6)
Add issuance premiums 3,448 27,022 (934) 29,536 —
Total bonds payable 46,312 151,022 (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 1,747 Accrued workers’ compensation 2,118 322 (190) 2,250 400 Due to Other City departments 369 11 — 380 380
Lease liability 94 — (19) 75 3
Damage claims liability 1,108 2,005 (2,090) 1,023 358 Unearned revenues, refunds, and other 5,993 8,410 (7,676) 6,727 5,923 Total $ 123,261 165,973 (50,271) 238,963 11,204
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 68 Interest Maturity Restated Due within
Rate (Calendar Year) 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) 4,550 815 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 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 Due to Other City departments 600 — (231) 369 369
Lease liability 113 — (19) 94 19
Damage claims liability 2,222 4,212 (5,326) 1,108 409 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
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 69 120 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
CleanPowerSF Long-Term Liability activities for the years ended June 30, 2022 and 2021 are as follows:
^Restated due to the implementation of GASB Statement No. 87, Leases . ^Restated due to the implementation of GASB Statement No. 87, Leases . a) C lean Renewable Energy Bonds
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. The CREBs were non-rated and privately-placed with Banc of America Leasing. The net effective interest 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 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.
The future annual debt service relating to the CREBs outstanding as of June 30, 2022 is as follows:
Restated Due within
2021^ Additions Reductions 2022 one year
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 Lease liability 577 — (345) 232 232
Damage claims liability 6 1,582 (1,556) 32 15
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 within
2020 Additions Reductions 2021^ one year
Other post-employment benefits obligations $ 2,197 1,605 (893) 2,909 — Net pension liability 1,805 1,987 (784) 3,008 —
Accrued vacation and sick leave 291 135 (26) 400 205 Lease liability 920 — (343) 577 345
Damage claims liability 106 153 (253) 6 6
Unearned revenues, refunds, and other 848 19,561 (10,381) 10,028 1,028 Total $ 6,167 23,441 (12,680) 16,928 1,584
Fiscal years 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 $ —
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 71 121 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
b) Q ualified Energy Conservation Bonds
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) N ew Clean Renewable Energy Bonds 2012
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 was prepaid in fiscal year 2017 and 2016, respectively. There was no prepayment thereafter. 2012 NCREBs have been fully repaid as of June 30, 2021. d) N ew Clean Renewable Energy Bonds 2015
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.
Interest
before
Federal
interest
Interest
net
Fiscal years ending June 30: Principal subsidy subsidy* of 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
Total 3,138 451 (317) 134
Less: Current portion (555)
Long-term portion as of June 30, 2022 $ 2,583
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 72 122 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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) P ower Revenue Bonds 2015 Series A (Green) and Series B 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 account for the 2015 Series AB Bonds, and to pay costs of issuance of the 2015 Series AB 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
before
Federal
interest
Interest
net
Fiscal years ending June 30: Principal subsidy subsidy* of 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
Total 1,637 425 (281) 144
Less: Current portion (146)
Long-term portion as of June 30, 2022 $ 1,491
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 72 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
Total 32,025 25,016 57,041
Add: Unamortized bond premium 3,119
Long-term portion as of June 30, 2022 $ 35,144
Hetchy Power - Power Revenue Bonds 2015 Series A (Green) W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 73 123 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
f) P ower Revenue Bonds 2021 Series A (Green) and Series B In December 2021, Hetchy Power issued tax-exempt 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
Total 3,735 307 4,042
Less: Current portion (850)
Add: Unamortized bond premium 114
Long-term portion as of June 30, 2022 $ 2,999
Hetchy Power - Power Revenue Bonds 2015 Series B
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 73 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
Total 74,280 56,025 130,305
Add: Unamortized bond premium 15,933
Long-term portion as of June 30, 2022 $ 90,213
Hetchy Power - Power Revenue Bonds 2021 Series A (Green) W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 73 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
Total 49,720 43,401 93,121
Add: Unamortized bond premium 10,370
Long-term portion as of June 30, 2022 $ 60,090
Hetchy Power - Power Revenue Bonds 2021 Series B
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 73 124 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
g) E vents 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 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) C ertificates of Participation Issued for the 525 Golden Gate Avenue H eadquarters Building
D epartment-wide Business Type Activities
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 2009 Series D for $129,550 as “Build America Bonds” (BABs) on 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 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 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 costs associated with current office rental expense. There are no events of default stated in this memorandum of understanding.
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 Hetchy 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 Hetchy Power (9.7%).
The future annual debt services relating to the certificates of participation 2009 Series C and D outstanding as of June 30, 2022 are as follows:
W ater Enterprise
Principal Interest Total
Fiscal years ending June 30:
2023 $ 3,124 78 3,202
Less: Current portion (3,124)
Add: Unamortized bond premium 14
Less: Current portion (14)
Long-term portion as of June 30, 2022 $ —
Certificates of Participation 2009 Series C
(Tax-Exempt)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 74 125 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
*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%, or a total reduction of $1,402, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
W astewater Enterprise
*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%, 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.
Principal
Interest
before
subsidy
Federal
interest
subsidy*
Interest net
of subsidy
Fiscal years ending June 30:
2023 $ — 5,968 (1,970) 3,998
2024 3,267 5,864 (1,935) 3,929
2025 3,402 5,652 (1,865) 3,787
2026 3,545 5,431 (1,792) 3,639
2027 3,695 5,201 (1,716) 3,485
2028-2032 20,949 22,183 (7,321) 14,862
2033-2037 25,811 14,651 (4,835) 9,816
2038-2042 31,830 5,335 (1,761) 3,574
Total 70,285 (23,195) 47,090
Long-term portion as of June 30, 2022 $ 92,499
Certificates of Participation 2009 Series D
(Taxable BABs)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 74 Principal Interest Total
Fiscal years ending June 30:
2023 $ 826 21 847
Less: Current portion (826)
Add: Unamortized bond premium 4
Less: Current portion (4)
Long-term portion as of June 30, 2015Long-term portion as of June 30, 2022 $ — Certificates of Participation 2009 Series C
(Tax-Exempt)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 75 Principal
Interest
before
subsidy
Federal
interest
subsidy*
Interest net
of subsidy
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 of Participation 2009 Series D
(Taxable BABs)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 75 126 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
H etchy Power
*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.
(9) R evenue Pledge
D epartment-wide Business Type Activities
Department-wide revenue pledge for the years ended June 30, 2022 and 2021 are as follows:
W ater Revenue Pledge
The Water Enterprise has pledged future revenues to repay various revenue bonds and State Revolving Fund loans. Proceeds from the revenue bonds and State Revolving Fund loans provided financing for various capital construction projects, and to refund previously issued bonds. The bonds and State Revolving Fund loans are payable solely from revenues of the Water Enterprise through the fiscal year ending 2051.
Principal Interest Total
Fiscal years ending June 30:
2023 $ 425 10 435
Less: Current portion (425)
Add: Unamortized bond premium 2
Less: Current portion (2)
Long-term portion as of June 30, 2015Long-term portion as of June 30, 2022 $ — Certificates of Participation 2009 Series C
(Tax-Exempt)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 76 Principal
Interest
before
subsidy
Federal
interest
subsidy*
Interest net
of subsidy
Fiscal years ending June 30:
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
Total 9,569 (3,158) 6,411
Long-term portion as of June 30, 2022 $ 12,593
Certificates of Participation 2009 Series D
(Taxable BABs)
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 76 2022 2021
Bonds issued with revenue pledge $ 7,038,726 6,623,446 Notes issued with revenue pledge 347,465 —
Clean Water State Revolving Fund (CWSRF) loans with
revenue pledge 432,026 221,088
Principal and interest remaining due at the end of the year 11,494,005 10,421,954 Principal and interest paid during the year 369,899 335,861 Net revenues for the year ended June 30 516,732 458,054 Funds available for debt service 819,884 808,093
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 77 127 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The original amount of revenue bonds and State Revolving Fund loans 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: W astewater Revenue Pledge The Wastewater Enterprise has pledged future revenues to repay various revenue bonds, revenue notes, and State Revolving Fund loans. Proceeds from the revenue bonds, revenue notes, and State Revolving Fund loans provided financing for various capital construction projects, and to refund previously issued bonds. The bonds, notes, and State Revolving Fund loans payable through fiscal years 2052, 2027 and 2056, respectively, and are solely from revenues of the Wastewater Enterprise.
The original amount of revenue bonds issued, revenue notes issued, and State Revolving Fund loans 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:
H etchy Power 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. The Series 2015 AB power and 2021 Series AB revenue bonds are payable through fiscal year 2046 and 2052, respectively, are solely payable from net revenues of Hetchy Power on a senior lien basis to the 2008 CREBs, the 2011 QECBs, 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 capitalized interest if any, which have a senior lien on power enterprise 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.
2022 2021
Bonds issued with revenue pledge $ 4,891,480 4,891,480 Clean Water State Revolving Fund (CWSRF) loans with
revenue pledge 121,761 107,407
Principal and interest remaining due at the end of the year 7,472,962 7,771,993 Principal and interest paid during the year 279,352 248,427 Net revenues for the year ended June 30 306,918 339,046 Funds available for debt service 410,424 467,738
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 77 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
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 77 2022 2021
Bonds issued with revenue pledge $ 182,271 64,871
Principal and interest remaining due at the end of the year 290,581 71,082 Principal and interest paid during the year* 3,928 5,368 Net revenues for the year ended June 30 54,310 10,609 Funds available for debt service 98,625 34,178
W:\FINANCE\AFR\FY2022 ACFR\02. Financial Section\1. FY22 ACFR Financial Section.xlsx 77 128 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
(10) Leases
D epartment-wide Business Type Activities
Lessee
The SFPUC has entered into long-term leases for land, office space, communication site, data processing, machinery, and other equipment. The terms and conditions for these leases varies, which ranges between 1-75 years. A summary of intangible right-to-use lease during the years ended June 30, 2022 and 2021 is as follows:
A summary of changes in the related leases liabilities during the years ended June 30, 2022 and 2021 is as follows:
V ariable Lease Payments
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 SFPUC 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 Right-to-use assets: 2021 Increases Decreases Remeasurements 2022 Land $ 605 — — — 605
Building/facility 14,414 — (58) — 14,356
Total lease assets 15,019 — (58) — 14,961
Less accumulated amortization for:
Land (187) (196) — — (383)
Building/facility (3,934) (3,929) 58 — (7,805)
Total accumulated amortization (4,121) (4,125) 58 — (8,188) Total lease assets, net $ 10,898 (4,125) — — 6,773
Right-to-use assets: 2020 Increases Decreases Remeasurements 2021 Land $ 605 — — — 605
Building/facility 14,167 250 (3) — 14,414
Total lease assets 14,772 250 (3) — 15,019
Less accumulated amortization for:
Land — (187) — — (187)
Building/facility — (3,937) 3 — (3,934)
Total accumulated amortization — (4,124) 3 — (4,121) Total lease assets, net $ 14,772 (3,874) — — 10,898
Due within
2021 Deductions 2022 one year
Water $ 4,244 (1,381) 2,863 1,008
Wastewater 5,952 (2,314) 3,638 2,341
Hetchy Water 78 (16) 62 3
Hetchy Power 94 (19) 75 3
CleanPowerSF 577 (345) 232 232
SFPUC Total $ 10,945 (4,075) 6,870 3,587
Due within
2020 Deductions 2021 one year
Water $ 5,399 (1,155) 4,244 1,381
Wastewater 8,247 (2,295) 5,952 2,314
Hetchy Water 93 (15) 78 16
Hetchy Power 113 (19) 94 19
CleanPowerSF 920 (343) 577 345
SFPUC Total $ 14,772 (3,827) 10,945 4,075
129 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
variable lease payments not included in the measurement of the lease liability for SFPUC during the year ended June 30, 2022 and 2021 were as follows:
Lessor
The SFPUC has leased facilities, easements, communication site and equipment to various tenants.
The terms and conditions for these leases vary, which range between 1-65 years.
Water Enterprise variable payments include percentage of sales, utility payments or payments depended on an index made by the lessee; these amounts are generally determined periodically. The Water Enterprise did not incur revenue related to residual value guarantees or lease termination penalties.
The total amounts for lease revenue, interest revenue, and other lease-related revenues recognized during the year ended June 30, 2022 and 2021 were $2,332 and $2,976, respectively.
W ater Enterprise as Lessor
Principal and interest requirements to maturity for the leases receivable at June 30, 2022 and 2021 are as follows:
Principal Interest FY 2022
Years ending June 30: amount amount Total
2023 $ 3,325 907 4,232
2024 3,389 848 4,237
2025 3,470 804 4,274
2026 2,951 743 3,694
2027 2,619 687 3,306
2028-2032 10,827 2,777 13,604
2033-2037 10,736 1,691 12,427
2038-2042 2,258 940 3,198
2043-2047 — 998 998
2048-2052 — 1,157 1,157
2053-2057 — 1,341 1,341
2058-2062 765 789 1,554
2063-2067 1,128 675 1,803
2068-2072 1,577 513 2,090
2073+ 3,120 327 3,447
Total $ 46,165 15,197 61,362
Principal Interest FY 2021
Years ending June 30: amount amount Total
2022 $ 3,289 957 4,246
2023 3,285 901 4,186
2024 3,348 843 4,191
2025 3,427 800 4,227
2026 2,905 739 3,644
2027-2031 11,102 2,988 14,090
2032-2036 10,862 1,908 12,770
2037-2041 4,302 1,010 5,312
2042-2046 — 969 969
2047-2051 — 1,123 1,123
2052-2056 — 1,302 1,302
2057-2061 586 924 1,510
2062-2066 1,049 701 1,750
2067-2071 1,479 550 2,029
2072+ 3,476 414 3,890
Total $ 49,110 16,129 65,239
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2022 $ 34 207 1 1 43 286
2021 — 130 — — 24 154
130 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
W ater Enterprise as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2022 and 2021 is as follows:
Future annual lease payments as of June 30, 2022 and 2021 are as follows:
Right-to-use assets: 2021 Increases Decreases Remeasurements 2022 Land $ 605 — — — 605
Building/facility 5,041 — — — 5,041
Total lease assets 5,646 — — — 5,646
Less accumulated amortization for:
Land (187) (196) — — (383)
Building/facility (1,222) (1,229) — — (2,451)
Total accumulated amortization (1,409) (1,425) — — (2,834) Total lease assets, net $ 4,237 (1,425) — — 2,812
Right-to-use assets: 2020 Increases Decreases Remeasurements 2021 Land $ 605 — — — 605
Building/facility 4,794 250 (3) — 5,041
Total lease assets 5,399 250 (3) — 5,646
Less accumulated amortization for:
Land — (187) — — (187)
Building/facility — (1,225) 3 — (1,222)
Total accumulated amortization — (1,412) 3 — (1,409) Total lease assets, net $ 5,399 (1,162) — — 4,237
Principal Interest FY 2022
Years ending June 30: amount amount Total
2023 $ 1,008 42 1,050
2024 370 33 403
2025 186 29 215
2026 101 27 128
2027 103 25 128
2028-2032 436 96 532
2033-2037 446 49 495
2038-2042 213 6 219
Total 2,863 307 3,170
Less: Current portion (1,008)
Long-term portion as of June 30, 2022 $ 1,855
Principal Interest FY 2021
Years ending June 30: amount amount Total
2022 $ 1,381 58 1,439
2023 1,008 42 1,050
2024 370 33 403
2025 186 29 215
2026 101 27 128
2027-2031 455 105 560
2032-2036 436 58 494
2037-2041 307 12 319
Total 4,244 364 4,608
Less: Current portion (1,381)
Long-term portion as of June 30, 2021 $ 2,863
131 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
W astewater Enterprise as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2022 and 2021 is as follows:
Future annual lease payments as of June 30, 2022 and 2021 are as follows:
Right-to-use assets: 2021 Increases Decreases Remeasurements 2022 Building/facility $ 8,247 — — — 8,247
Total lease assets 8,247 — — — 8,247
Less accumulated amortization for:
Building/facility (2,325) (2,325) — — (4,650)
Total accumulated amortization (2,325) (2,325) — — (4,650) Total lease assets, net $ 5,922 (2,325) — — 3,597
Right-to-use assets: 2020 Increases Decreases Remeasurements 2021 Building/facility $ 8,247 — — — 8,247
Total lease assets 8,247 — — — 8,247
Less accumulated amortization for:
Building/facility — (2,325) — — (2,325)
Total accumulated amortization — (2,325) — — (2,325) Total lease assets, net $ 8,247 (2,325) — — 5,922
Principal Interest FY 2022
Years ending June 30: amount amount Total
2023 $ 2,341 30 2,371
2024 1,297 6 1,303
Total 3,638 36 3,674
Less: Current portion (2,341)
Long-term portion as of June 30, 2022 $ 1,297
Principal Interest FY 2021
Years ending June 30: amount amount Total
2022 $ 2,314 57 2,371
2023 2,341 30 2,371
2024 1,297 6 1,303
Total 5,952 93 6,045
Less: Current portion (2,314)
Long-term portion as of June 30, 2021 $ 3,638
132 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
H etchy Water as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2022 and 2021 is as follows:
Future annual lease payments as of June 30, 2022 and 2021 are as follows:
Right-to-use assets: 2021 Increases Decreases Remeasurements 2022 Building/facility $ 93 — (26) — 67
Total lease assets 93 — (26) — 67
Less accumulated amortization for:
Building/facility (19) (13) 26 — (6)
Total accumulated amortization (19) (13) 26 — (6)
Total lease assets, net $ 74 (13) — — 61
Right-to-use assets: 2020 Increases Decreases Remeasurements 2021 Building/facility $ 93 — — — 93
Total lease assets 93 — — — 93
Less accumulated amortization for:
Building/facility — (19) — — (19)
Total accumulated amortization — (19) — — (19)
Total lease assets, net $ 93 (19) — — 74
Principal Interest FY 2022
Years ending June 30: amount amount 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
Total 62 13 75
Less: Current portion (3)
Long-term portion as of June 30, 2022 $ 59
Principal Interest FY 2021
Years ending June 30: amount amount 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
Total 78 15 93
Less: Current portion (16)
Long-term portion as of June 30, 2021 $ 62
133 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
H etchy Power as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2022 and 2021 is as follows:
Future annual lease payments as of June 30, 2022 and 2021 are as follows:
Right-to-use assets: 2021 Increases Decreases Remeasurements 2022 Building/facility $ 113 — (32) — 81
Total lease assets 113 — (32) — 81
Less accumulated amortization for:
Building/facility (23) (17) 32 — (8)
Total accumulated amortization (23) (17) 32 — (8)
Total lease assets, net $ 90 (17) — — 73
Right-to-use assets: 2020 Increases Decreases Remeasurements 2021 Building/facility $ 113 — — — 113
Total lease assets 113 — — — 113
Less accumulated amortization for:
Building/facility — (23) — — (23)
Total accumulated amortization — (23) — — (23)
Total lease assets, net $ 113 (23) — — 90
Principal Interest FY 2022
Years ending June 30: amount amount 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
Total 75 16 91
Less: Current portion (3)
Long-term portion as of June 30, 2022 $ 72
Principal Interest FY 2021
Years ending June 30: amount amount 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
Total 94 18 112
Less: Current portion (19)
Long-term portion as of June 30, 2021 $ 75
134 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
C leanPowerSF as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2022 and 2021 is as follows:
Future annual lease payments as of June 30, 2022 and 2021 are as follows:
(11) W ater Wholesale Balancing Account
Water Supply Agreement
From 1984-2009, the Water Enterprise provided water service pursuant to the terms of the 1984 Water Settlement Agreement and Master Water Sales Contract, which established the basis for water rates to be charged to those customers (Wholesale Customers). The Master Water Sales Contract expired on June 30, 2009. The Commission and the Wholesale Customers approved a Water Supply Agreement (WSA) effective July 1, 2009 (the contract was restated and amended by the SFPUC on December 11, 2018). The WSA has a 25-year term from July 1, 2009 with two options for five-year extensions. The existing 184 million gallons per day (mgd) Supply Assurance continues under the WSA and no increase in the Supply Assurance will be considered before December 31, 2028. During the period from 2009 to 2028, the WSA limits the quantity of water delivered to Retail Customers and Wholesale Customers from the watersheds to 265 mgd. Under the WSA, annual operating expenses, including debt service on bonds sold to finance regional system improvements and regional capital projects funded from revenues, will be allocated between Retail Customers and Wholesale Customers on the basis of proportionate annual water use. The original WSA stated the Wholesale Customers’ share of net book value of existing regional assets as of June 30, 2009 would be Right-to-use assets: 2021 Increases Decreases Remeasurements 2022 Building/facility $ 920 — — — 920
Total lease assets 920 — — — 920
Less accumulated amortization for:
Building/facility (345) (345) — — (690)
Total accumulated amortization (345) (345) — — (690)
Total lease assets, net $ 575 (345) — — 230
Right-to-use assets: 2020 Increases Decreases Remeasurements 2021 Building/facility $ 920 — — — 920
Total lease assets 920 — — — 920
Less accumulated amortization for:
Building/facility — (345) — — (345)
Total accumulated amortization — (345) — — (345)
Total lease assets, net $ 920 (345) — — 575
Principal Interest FY 2022
Years ending June 30: amount amount Total
2023 $ 232 1 233
Less: Current portion (232)
Long-term portion as of June 30, 2022 $ —
Principal Interest FY 2021
Years ending June 30: amount amount Total
2022 $ 345 5 350
2023 232 1 233
Total 577 6 583
Less: Current portion (345)
Long-term portion as of June 30, 2021 $ 232
135 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
recovered on level annual payment over the 25-year term of the WSA at an interest rate of 5.13%. The 25-year term repayment obligation was settled in February 2013. The Wholesale Customers made an early repayment to the Water Enterprise of the outstanding balance of $356,139 as discussed further in the “BAWSCA Early Repayment” Section 5.03 of the WSA. The WSA continues much of the rate setting, accounting, and dispute resolution provisions contained in the expired contract, and has emergency and drought-pricing adjustment provisions.
Pursuant to the terms of the WSA, the Water Enterprise is required to establish water rates applicable to the Wholesale Customers annually. The wholesale water rates are based on an estimate of the level of revenues necessary to recoup the cost of distributing water to the Wholesale Customers in accordance with the methodology outlined in Article V of the WSA (the Wholesale Revenue Requirement (WRR), previously known as the Suburban Revenue Requirement. During fiscal years ending in 2022 and 2021, the WRR, net of adjustments, charged to such wholesale customers was $289,828 and $245,743 respectively. Such amounts are subject to final review by the Wholesale Customers, along with a trailing wholesale balancing account compliance audit of the WRR calculation.
Pursuant to Article VII, Section 7.02 of the WSA, the Water Enterprise is required to re-compute the WRR after the close of each fiscal year based on the actual costs incurred in the delivery of water to the Wholesale Customers. The difference between the wholesale revenues earned during the year and the “actual” WRR is recorded in a separate account (the Balancing Account) and represents the cumulative amount that is either owed to the Wholesale Customers (if the wholesale revenues exceed the WRR) or owed to the City (if the WRR exceeds the wholesale revenues paid). In accordance with Article VI of the WSA, the amount recorded in the Balancing Account shall earn interest at a rate equal to the average rate received by the City during the year on the invested pooled funds of the City Treasury, and shall be taken into consideration in the determination of subsequent wholesale water rates. The Water Enterprise owed the Wholesale Customers $79,150 and $60,864 for the years ended June 30, 2022 and 2021, respectively, an increase of $18,286. Refer to the compliance audit report for the final balancing account available at https://sfpuc.org/about-us/reports/audited-financial- statements-reports .
In addition to advancing funds to acquire the pre-2009 assets as discussed previously, the Water Enterprise has also previously appropriated funds, advanced through rates charged to Retail Customers, for construction of capital projects that were not yet placed into service as of June 30, 2009. Wholesale Customers’ share of these construction work in progress costs is calculated in accordance with the provisions in the WSA, including a 10-year repayment term and payment of annual principal and interest rate calculated at 4.0% annually. The total obligation of the Wholesale Customers to the Water Enterprise is estimated at $9,532, and the level annual payment including principal and interest is approximately $1,159. The Wholesale Customers made the first annual payment as of June 30, 2015 and will end on June 30, 2024. (12) O ther Non-Operating Revenues – Hetchy Power Transbay Cable Construction a nd 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 is a Construction License to install a 400 MW high-voltage transmission line, with a four-year term. The Licensee has paid Hetchy Power $3,500 in Renewable Energy, Transmission and Grid Reliability. The entire 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 136 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
of $2,574 received in fiscal year 2020. Per 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 incurred, with $1,525 and $1,254 in fiscal years 2022 and 2021, respectively. (13) E mployee Benefits
a) Pe nsion Plan
San Francisco City and County Employees’ Retirement System – The SFPUC 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.
Replacement Benefits Plan – The Replacement Benefits Plan (RBP) is a qualified excess benefit plan established in October 1989. Internal Revenue Code Section 415(m) provides for excess benefit arrangements that legally permit benefit payments above the Section 415 limits, provided that the payments are not paid from the SFERS Plan. The RBP allows the City to pay SFERS retirees any portion of the Charter-mandated retirement allowance that exceeds the annual Section 415(b) limit. The RBP plan does not meet the criteria of a qualified trust under GASB Statement No. 73 because RBP assets are subject to the claims of the employer’s general creditors under federal and state law in the event of insolvency.
GASB Statements No. 68 and No. 73 require that the SFERS Plan and RBP 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) a 0.25% increased from prior year. SFPUC’s allocation percentage was determined based on its employer contributions divided by the City’s total employer contributions for fiscal years 2021 and 2020. The net pension liability, deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/ inflows, and pension expense are based on each department’s allocated percentage. SFPUC’s allocation of the City’s proportionate share was 7.59%: 4.27% for Water, 1.99% for Wastewater, 0.57% for Hetchy Water, 0.69% for Hetchy Power and 0.07% for CleanPowerSF as of June 30, 2021 (measurement date).
SFPUC’s allocation of the City’s proportionate share was 7.46%: 4.21% for Water, 2.03% for Wastewater,
0.52% for Hetchy Water, 0.64% for Hetchy Power and 0.06% for CleanPowerSF as of June 30, 2020 (measurement date).
Fiscal Year 2022 Fiscal Year 2021
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 137 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
RBP – The Water Enterprise’s allocation percentage was determined based on the Water Enterprise’s headcount (both active members and retirees) divided by the City’s total headcount for fiscal year 2021.
The Water Enterprise’s total pension liability, deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/inflows and pension expense is based on the Water Enterprise’s allocated percentage. The Water Enterprise’s allocation of the City’s proportionate share was 1.85% as of June 30, 2021 (measurement date) and 0.64% as of June30, 2020 (measurement date).
SFERS Plan Description – 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 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 Plan.
The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report may be obtained on the Retirement System’s website http://mysfers.org or by writing to the San Francisco City and County Employees’ Retirement System, 1145 Market Street, 5th Floor, San Francisco, CA 94103 or by calling (415) 487-7000.
SFERS 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 Plan members are:
a. M iscellaneous Non-Safety Members – staff, operational, supervisory, and all other eligible employees who are not in special membership categories.
b. S heriff’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. F irefighter 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. Po lice 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 provision 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, 138 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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.
F unding and Contribution Policy
SFERS Plan – 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 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 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.
The SFPUC’s allocation of employer contributions for fiscal years 2021 and 2020 (measurement periods) were $59,094 and $52,242, respectively. The Water Enterprise’s allocation of employer contributions for fiscal years 2021 and 2020 (measurement periods) were $33,367 and $29,647, respectively. The Wastewater Enterprise’s allocation of employer contributions for fiscal years 2021 and 2020 (measurement periods) were $16,083 and $14,352, respectively. Hetchy Water’s allocation of employer contributions for fiscal years 2021 and 2020 (measurement periods) were $4,130 and $3,574, respectively. Hetchy Power’s allocation of employer contributions for fiscal years 2021 and 2020 (measurement periods) were $5,048 and $4,369, respectively. CleanPowerSF’s allocation of employer contributions for fiscal years 2021 and 2020 (measurement periods) were $466 and $300, respectively.
For the year ended June 30, 2022, the City’s actuarial determined contribution was $729,578. SFPUC’s share was $55,460: $31,151 for Water, $14,543 for Wastewater, $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.
Replacement Benefits Plan – The RBP is and will remain unfunded and the rights of any participant and beneficiary are limited to those specified in the RBP. The RBP constitutes an unsecured promise by the City to make benefit payments in the future to the extent funded by the City. The City paid $4,097 and $3,600 replacement benefits in the years ended June 30, 2022 and June 30,2021, respectively. 139 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
P ension (Assets)/Liabilities, Pension Expenses, and Deferred Outflows and I nflows of Resources Related to Pensions
F iscal Year 2022
The City reported net pension asset (NPA) of $2,226,990 for its proportionate share of the SFERS Plan and RBP, which the net pension asset for SFERS Plan was $2,446,564 and the net pension liability of the RBP was $219,574, as of June 30, 2022. The City’s net pension asset for the SFERS Plan is measured as the proportionate share of the net pension asset. The net pension (asset)/ liability of the SFERS Plan is measured as of June 30, 2021 (measurement date), and the total pension (asset)/liability for the SFERS Plan and RBP 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 contributions of all participating employers, actuarially determined.
The SFPUC’s allocation of the City’s proportionate share of the net pension (asset) for the plan as of June 30 2022 was ($181,926) of which ($100,407) for Water Enterprise, ($48,770) for Wastewater Enterprise, ($13,912) for Hetchy Water, ($17,004) for Hetchy Power and ($1,833) for CleanPowerSF.
The Water Enterprise’s allocation of the total pension liability for the RBP as of June 30, 2022 was $4,056.
For the year ended June 30, 2022, the City recognized net pension (benefit) of ($922,979), which includes pension (benefit) of ($951,714) for the SFERS Plan and pension expense of $28,735 for RBP, including amortization of deferred outflow/inflow related pension items. SFPUC’s allocation of pension (benefit) for the SFERS Plan including amortization of deferred outflow/inflow related pension items were ($54,567) of which ($29,908), net of RBP of $3,131, was for the Water Enterprise, ($20,601) was for the Wastewater Enterprise, ($1,816) was for Hetchy Water, ($2,220) was for Hetchy Power, and ($22) was for CleanPowerSF.
At June 30, 2022, SFPUC reported deferred outflows of resources and deferred inflows of resources related to pensions were the following:
Hetchy Hetchy SFPUC
Water Wastewater Water Power CleanPowerSF Total
Pension contribution subsequent $ 31,151 14,543 4,149 5,071 546 55,460 9,593 4,479 1,278 1,561 168 17,079
actual experience
7,068 3,300 941 1,151 124 12,584
3,531 3,047 328 400 14 7,320
$ 51,343 25,369 6,696 8,183 852 92,443
Hetchy Hetchy SFPUC
Fiscal Year 2022 Water Wastewater Water Power CleanPowerSF Total $ 343 160 45 56 6 610
actual experience
18,339 8,562 2,443 2,985 322 32,651
Net difference between projected and actual 226,935 105,948 30,223 36,939 3,982 404,027 1,706 — 1,766 2,158 1,104 6,734
$ 247,323 114,670 34,477 42,138 5,414 444,022
to the measurement date
SFERS Plan - Schedule of Deferred Inflows of Resources
Total
SFERS Plan - Schedule of Deferred Outflows of Resources Differences between expected and
Fiscal Year 2022
Changes in assumptions
Change in employer's proportion
Differences between expected and
Changes in assumptions
earnings on pension plan investments
Change in employer's proportion
Total
140 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 (benefit)/ expense as follows:
F iscal Year 2021
The City reported net pension liabilities for its proportionate share of the pension liability of the Plan and RBP of $5,292,473 (which includes RBP pension liability of $185,203) as of June 30, 2021. The City’s net pension liability for the 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 and RBP 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. The SFPUC’s allocation of the City’s proportionate share of the net pension liability for the plan as of June 30 2021 was $381,205, of which $215,240 for Water Enterprise, $103,746 for Wastewater Enterprise, $26,645 for Hetchy Water, $32,566 for Hetchy Power and $3,008 for CleanPowerSF. The Water Enterprise’s allocation of the total pension liability for the RBP as of June 30, 2021 was $1,177.
For the year ended June 30, 2021, the City’s recognized pension expense was $962,576 (which includes RBP pension expense of $25,243) including amortization of deferred outflow/inflow related pension items. SFPUC’s allocation of pension expense including amortization of deferred outflow/inflow related pension items were $77,865 of which $43,929 for the Water Enterprise, $19,053 for the Wastewater Enterprise, $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. $ 552 —
actual experience
757 —
200 1,381
$ 1,509 1,381
Water Enterprise - RBP
Total
Schedule of
Deferred Outflows of
Resources
Schedule of
Deferred Inflows of
ResourcesFiscal Year 2022
Differences between expected and
Changes in assumptions
Change in employer's proportion
RBP
Fiscal
years Water Wastewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total Water
2023 $ (57,166) (26,134) (8,033) (9,817) (1,407) (102,557) 247 2024 (51,954) (23,662) (7,470) (9,130) (1,278) (93,494) 52 2025 (54,608) (24,937) (7,679) (9,386) (1,194) (97,804) 1 2026 (63,403) (29,111) (8,748) (10,693) (1,229) (113,184) (172) Total $ (227,131) (103,844) (31,930) (39,026) (5,108) (407,039) 128 Deferred Outflows/(Inflows) of Resources
SFERS Plan
141 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
At June 30, 2021, SFPUC 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 amortized annually and recognized in pension expense as follows:
A ctuarial Assumptions
F iscal Year 2022
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for both SFERS Plan and RBP 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’s website http://mysfers.org.
Hetchy Hetchy SFPUC
Water Wastewater Water Power CleanPowerSF Total
Pension contribution subsequent $ 33,367 16,083 4,130 5,048 466 59,094 7,310 3,524 905 1,106 102 12,947
actual experience
11,817 5,696 1,463 1,788 165 20,929
6,987 2,744 743 907 7 11,388
$ 63,988 30,219 7,799 9,531 803 112,340
Hetchy Hetchy SFPUC
Fiscal Year 2021 Water Wastewater Water Power CleanPowerSF Total $ 674 325 83 102 9 1,193
actual experience
Net difference between projected and actual — — — — — — 54 26 443 541 1,032 2,096
$ 4,456 2,148 988 1,207 1,093 9,892
earnings on pension plan investments
to the measurement date
Changes in assumptions
SFERS Plan - Schedule of Deferred Outflows of Resources Fiscal Year 2021
Differences between expected and
Change in employer's proportion
Total
SFERS Plan - Schedule of Deferred Inflows of Resources
Total
Change in employer's proportion
Differences between expected and
$ 112 —
actual experience
315 13
382 416
$ 809 429
Water Enterprise - RBP
Schedule of
Deferred Outflows
of Resources
Schedule of
Deferred Inflows of
ResourcesFiscal Year 2021
Differences between expected and
Changes in assumptions
Change in employer's proportion
Total
RBP
Fiscal
years Water Wastewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total Water
2022 $ 54 (787) (115) (141) (472) (1,461) 109
2023 6,166 3,009 665 812 (195) 10,457 193
2024 11,286 5,528 1,160 1,418 (90) 19,302 12 2025 8,659 4,238 971 1,187 1 15,056 66 Total $ 26,165 11,988 2,681 3,276 (756) 43,354 380 Deferred Outflows/(Inflows) of Resources
SFERS Plan
142 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 SFERS Plan
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%
Salary Increases 3.25% plus merit component based 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
Old Miscellaneous Old Police & Fire
Old Police & Fire,
Charters A8.595
Old Police & Fire,
Charters A8.559
and all New Plans pre 7/1/75 and A8.596 and A8.585
Basic COLA June 30, 2020 2.00% 2.50% 3.10% 4.20%
Basic COLA June 30, 2021 2.00% 1.90% 2.50% 3.60%
Key Actuarial Assumptions Replacement Benefits Plan
Valuation Date June 30, 2020 updated to June 30, 2021
Measurement Date June 30, 2021
Actuarial Cost Method Entry-Age Normal Cost
Municipal Bond Yield 2.16% as of June 30, 2021
Bond Buyer 20-Bond GO Index, June 25, 2020 and June 24, 2021 Inflation 2.50%
Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 2.16% as of June 30, 2021
Administrative Expenses 0.60% of payroll as of June 30, 2021 Old Police & Fire, Old Police & Fire,
Old Miscellaneous Old Police & Fire Charters Charters
Basic COLA June 30, 2020 2.00% 2.50% 3.10% 4.20%
Basic COLA June 30, 2021 2.00% 1.90% 2.50% 3.60%
143 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
F iscal Year 2021
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability for both SFERS Plan and RBP 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’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.
D iscount Rate
F iscal 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 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 contributions Key Actuarial Assumptions SFERS Plan
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%
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
Old Miscellaneous Old Police & Fire
Old Police & Fire,
Charters A8.595
Old Police & Fire,
Charters A8.559
and all New Plans pre 7/1/75 and A8.596 and A8.585
Basic COLA June 30, 2019 2.00% 2.50% 3.10% 4.20%
Basic COLA June 30, 2020 2.00% 2.50% 3.10% 4.20%
Key Actuarial Assumptions Replacement Benefits Plan
Valuation Date June 30, 2019 updated to June 30, 2020
Measurement Date June 30, 2020
Actuarial Cost Method Entry-Age Normal Cost
Municipal Bond Yield 2.21% as of June 30, 2020
Bond Buyer 20-Bond GO Index, June 27, 2019 and June 25, 2020 Inflation 2.75%
Salary Increases 3.50% plus merit component based on employee classification and years of service Discount Rate 2.21% as of June 30, 2020
Administrative Expenses 0.60% of payroll as of June 30, 2020 Old Police & Fire, Old Police & Fire,
Old Miscellaneous Old Police & Fire Charters Charters
Basic COLA June 30, 2020 2.00% 2.50% 3.10% 4.20%
144 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 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.
The projection of benefit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.
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
Assumed Supplemental COLA for Members with a
2.00% Basic COLA
Before 11/6/96
or After Prop C96 - Prop C
+
145 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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:
RBP – The beginning and end of year measurements are based on different assumptions that result in different discount rates. The discount rate was 2.16% as of June 30, 2021. This reflects the yield for a 20-year, tax-exempt general obligation municipal bond with an average rating of AA/Aa or higher. The Municipal Bond Yields are the Bond Buyer 20-Year GO Index as of June 25, 2020 and June 24, 2021.
These are the rates used to determine the total pension liability as of June 30, 2021.
The inflation assumption of 2.50% compounded annually was used for projecting the annual IRC Section 415(b) limitations. However, the actual IRC Section 415(b) limitations published by the IRS of $230 for 2021 was used for the 2021 measurement date.
The SFERS assumptions about Basic and Supplemental COLA previously discussed also apply to the RBP, including the impact of the State Appeals Court determination that the full funding requirement for payment of Supplemental COLA included in Proposition C was unconstitutional and the impact is accounted for as a change in benefits.
On June 30, 2022, City’s membership in the RBP had a total of 350 active members and 135 retirees and beneficiaries currently receiving benefits. The Water Enterprise has 9 active members and 3 retiree and beneficiary currently receiving benefits.
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 June 30, 2020 (measurement date) and June 30, 2019 (measurement date).
Target
Allocation
Long-term Expected
Real Rate of Return
37.0 % 4.2 %
23.0 7.9
Private Credit 10.0 5.1
10.0 5.1
10.0 2.9
8.0 0.0
5.0 2.3
(3.0) 0.1
100.0 %
Liquid Credit
Asset Class
Treasuries
Leverage
Private Equity
Hedge Funds/Absolute Returns
Global Equity
Total
Real Assets
146 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 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 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 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, 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.
Fiscal years
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 11/6/96
or After Prop C
Assumed Supplemental COLA for Members with a
2.00% Basic COLA
+
147 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
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 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:
RBP – The beginning and end of year measurements are based on different assumptions that result in different discount rates. The discount rate was 2.21% as of June 30, 2020. This reflects the yield for a 20-year, tax-exempt general obligation municipal bond with an average rating of AA/Aa or higher. The Municipal Bond Yields are the Bond Buyer 20-Year GO Index as of June 27, 2019 and June 25, 2020.
These are the rates used to determine the total pension liability as of June 30, 2020.
The inflation assumption of 2.75% compounded annually was used for projecting the annual IRC Section 415(b) limitations. However, the actual IRC Section 415(b) limitations published by the IRS of $230 for 2020 was used for the 2020 measurement date.
The SFERS assumptions about Basic and Supplemental COLA previously discussed also apply to the RBP, including the impact of the State Appeals Court determination that the full funding requirement for payment of Supplemental COLA included in Proposition C was unconstitutional and the impact is accounted for as a change in benefits.
On June 30, 2021, City’s membership in the RBP had a total of 683 active members and 105 retirees and beneficiaries currently receiving benefits. The Water Enterprise has 4 active members and 1 retiree and beneficiary currently receiving benefits.
Target
Allocation
Long-term Expected
Real Rate of Return
31.0 % 4.9 %
18.0 7.9
17.0 5.7
15.0 3.0
Private Credit 10.0 4.8
6.0 (0.5)
3.0 2.7
100.0 %
Treasuries
Asset Class
Global Equity
Liquid Credit
Total
Private Equity
Real Assets
Hedge Funds/Absolute Returns
148 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
S ensitivity of Proportionate Share of the Net Pension (Asset)/Liability to C hanges in the Discount Rate
The following presents the SFPUC’s allocation of the employer’s proportionate share of the net pension (asset)/liability (NPA/NPL) for the SFERS Plan, calculated using the discount rate, as well as what the SFPUC’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.
The following presents the Water Enterprise’s allocation of the employer’s proportionate share of the total pension liability for the RBP, calculated using the discount rate, as well as what the Water Enterprise’s allocation of the employer’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.
b) O ther Post-Employment Benefits
The SFPUC participates in the City’s single-employer defined benefit other post-employment benefits 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.
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.
Hetchy Hetchy SFPUC
Water Wastewater Water Power CleanPowerSF Total
$ 69,621 32,504 9,272 11,333 1,221 123,951 (104,463) (48,770) (13,912) (17,004) (1,833) (185,982) (248,184) (115,868) (33,053) (40,398) (4,354) (441,857) Hetchy Hetchy SFPUC
Water Wastewater Water Power CleanPowerSF Total
$ 380,571 183,436 47,111 57,580 5,318 674,016 215,240 103,746 26,645 32,566 3,008 381,205 78,645 37,907 9,736 11,899 1,099 139,286 Fiscal Year 2022
SFERS Plan - Schedule of Employers’ Proportionate Share of the Net Pension (Asset)/Liability 1% Increase Share of NPL @ 8.40%
1% Decrease Share of NPL @ 6.40%
1% Increase Share of (NPA) @ 8.40%
Share of (NPA) @ 7.40%
1% Decrease Share of NPL @ 6.40%
Fiscal Year 2021
Schedule of Employers’ Proportionate Share of the Net Pension Liability Share of NPL @ 7.40%
Fiscal Year 2022 Water
1% Decrease Share of NPL @ 1.16% $ 4,889
Share of NPL @ 2.16% 4,056
1% Increase Share of NPL @ 3.16% 3,411
Fiscal Year 2021 Water
1% Decrease Share of NPL @ 1.21% $ 1,418
Share of NPL @ 2.21% 1,177
1% Increase Share of NPL @ 3.21% 989
Replacement Benefits Plan - Schedule of Employers’
Proportionate Share of the Net Pension Liability
Fiscal Year 2022 Fiscal Year 2021
Valuation Date (VD) June 30, 2020 updated to June 30, 2021 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 San Francisco Health Service System Retiree Plan - Single-Employer 149 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2022 and 2021
(Dollars in thousands, unless otherwise stated)
The SFPUC’s allocation 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. The SFPUC’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 SFPUC’s allocated percentage.
The SFPUC’s proportionate share of the City’s OPEB elements as of June 30, 2021 (measurement date) was 6.15%: 3.90% for the Water Enterprise, 1.33% for the Wastewater Enterprise, 0.39% for Hetchy Water, 0.47% for Hetchy Power, and 0.06% for CleanPowerSF. The SFPUC’s proportionate share of the City’s OPEB elements as of June 30, 2020 (measurement date) was 6.14%: 3.89% for the Water Enterprise, 1.33% for the Wastewater Enterprise, 0.38% for Hetchy Water, 0.46% for Hetchy Power, and
0.08% for CleanPowerSF.
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 Francisco’s Retirement System. The eligibility requirements are as follows:
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 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:
Projections of the sharing of benefit related costs are based on an established pattern of practice.
Contributions – 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 1st 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 1st 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 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 Normal Retirement Miscellaneous Age 50 with 20 years of credited service1 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 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. 150 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2022