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.
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.554.3155
F 415.554.3161
TTY 415.554.3488
Date: March 12, 2024
To: Tim Paulson, President
Anthony Rivera, Vice President
Newsha K. Ajami, Commissioner
Sophie Maxwell, Commissioner
Kate H. Stacy, Commissioner
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, Chief Financial Officer and AGM, Business Services
RE: SFPUC Fiscal Year 2022-23 Annual Comprehensive Financial Report and Popular Annual Financial Report
Financial Services is pleased to present the FY 2022-23 Annual Comprehensive Financial Report (ACFR) issued by MGO, LLP on January 26, 2024 and the FY 2022-23 Popular Annual Financial Report (PAFR) focusing on SFPUC’s “Delivering Reliability Around the Clock”.
The reports can be found on our public-facing website:
https://sfpuc.org/sites/default/files/about-us/policies-reports/ACFR-FY2023.pdf https://sfpuc.org/about-us/reports/popular-annual-financial-reports
The ACFR describes our financial activities, condition, and services as an organization, inclusive of the 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 of interest to the general public and investors. The Government Finance Officers Association (GFOA) has awarded the SFPUC the prestigious Certificate of Achievement in Financial Reporting annually since 2009.
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. This year’s report highlights our agency’s resiliency, reliability, and stewardship in the delivering of utility services to our customers. The SFPUC has received the GFOA Award for Outstanding Achievement in Popular Annual Financial Reporting annually since 2010. The award recognizes our commitment to transparency and increasing public awareness by providing an overview of our financial condition.
We are looking forward to another year of both prestigious awards for fiscal year 2023.
cc: Ronald P. Flynn, Deputy General Manager
Vivian Chen, Deputy Chief Financial Officer
Laura Busch, Deputy Chief Financial Officer
Att: FY 2022-23 Annual Comprehensive Financial Report
FY 2022-23 Popular Annual Financial
SUST AINING THE RESOURCES ENTRUSTED TO OUR CARE.
Annual Comprehensive
Financial Report
Fiscal Years Ended June 30, 20 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, 2023 and 2022
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) 1–15
General Manager’s Transmittal Letter 2–3
The Reporting Entity 4–5
Mission, Vision and Values and Commission Members 6–7
Structure and Organizational Chart 8
Agency Strategic Plan 9
Enterprise Risk Management Framework 9–10
San Francisco’s Budget Process 11
Operating and Capital Budgets 11–12
Ten-Year Financial Plan 13
Ten-Year Capital Plan 13
Financial Transparency, Reporting and Auditing Process 13 Financial Authority and Policies 14
Accounting Systems, Policies, and Internal Controls 14
Achievement Awards from Government Finance Officers Association 14-15 Financial Section
16–186
Independent Auditors’ Report 17–19
Management’s Discussion and Analysis (Unaudited) 20–65
Basic Financial Statements 66–174
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 71–174
Required Supplementary Information (Unaudited) 175–181
Schedules of the Proportionate Share of the Net Pension (Asset)/Liability
176
Schedules of Employer Contributions - Pension Plan 177–178 Schedules of Changes in Total Pension Liability and Related Ratios – Replacement Benefits Plan
179
Schedules of Changes in Other Post-employment Benefits Liability and Related Ratios - Other Post-employment Healthcare Benefits Plan
180
Page
Schedules of Employer Contributions -
Other Post-employment Healthcare Benefits Plan
181
Supplementary Information (Proprietary Funds)
182–186
Schedule of Changes in Net Position – Dollar and Percentage Change vs. Prior Year
182–183
Schedule of Changes in Revenues, Expenses, and Net Position – Dollar and Percentage Change vs. Prior Year
184
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
185–186
Statistical Section (Unaudited)
187–269
Financial Trends 188–217
Comparative Highlights of Revenues and Expenses 189–194 Changes in Net Position 195–206
Summary of Net Position by Component 207–212
Investments in Capital Assets 213–217
Revenue Capacity 218–225
Water, Wastewater, Hetchy Power, and CleanPowerSF Rates History
219–222
Net Revenue and Debt Service Coverage 223–225
Debt Capacity 226–244
Debt Ratings 227
Summary of Debt Outstanding 228–230
History of Outstanding Debt by Type 231
Future Principal and Interest Payments for Debt Issues 232–244 Demographic and Economic Information 245–262
City and County of San Francisco Economic and General
Information
246–250
Summary of Accounts by Type of Customer 251–252
Water Accounts and Billings 253
Historical Water Sales 254–256
Bay Area Water Supply and Conservation Agency Members 257 Water and Wastewater Accounts, and Billings by Type of Customer 258–259 Historical Hetchy Water Sales 260
Historical Hetchy Power Electric Sales 261
Historical CleanPowerSF Electric Sales 262
Page
Operating Information 263–269
Budgeted Full-Time Equivalent (FTEs) Employees by Division 264 Operating and Capacity Indicators 265–266
Major Water Wholesale, Retail, and Sewer Customer Accounts by Revenue
267
Major Electric Retail and Wholesale Customer Accounts by Revenue 268 Performance Measures 269
Project Team Acknowledgements
270
1 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 2 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
General Manager’s Transmittal Letter
January 26, 2024
Dear Customers and Interested Parties,
On behalf of the San Francisco Public Utilities Commission (SFPUC), I am pleased to share our Annual Comprehensive Financial Report for the fiscal years ending June 30, 2023 and 2022.
T
his report details the SFPUC’s work, accomplishments, and financial position from July 1, 202 1 to June 30, 2023. It offers insight into how public dollars are spent providing essential water, power, and sewer services 24 hours a day, sev en days a week. It also showcases some of the accomplishments our dedicated staff have achieved on behalf of our customers, our communities, and the environment.
As our city and region rebound from the COVID-19 pandemic, we face another longstanding challenge.
Climate change has been a driving factor in our work for some time, and we are addressing it head on. During the past year, California went from a historic drought to one of the wettest winters on record. Unprecedented storms deli
vered ha lf the average annual rainfall in just a matter of days in San Francisco.
Staff across our agency are committed to effectively managing the challenges that climate change
poses to our communities.
Every day, 2.7 million people in the San Francisco Bay Area depend on water we supply. Through a growing portfolio of power resources, including a new standalone battery-storage project in the Bay Area, we now serve about 75% of the electricity demand in San Francisco. We are making generational upgrades to our Southeast Treatment Plant, the workhorse of our combined sewer system, while also delivering other major improvements across that system to enhance seismic safety and climate resiliency.
We are proud to provide reliable services and value to our customers by optimizing the operations, maintenance, and improvement of all our assets. Our approach is strategic, long- term, and focused on cost effectiveness.
We have a robust asset management plan in place, while also continually testing innovative approaches to maximize effectiveness and public investments. Nowhere is the financial health of our agency more evident than when one looks at the improvements we make to our complex infrastructure to ensure the long-term reliability of those vital public assets.
We are also tackling affordability ch allenges h ead on. Working to make utility services more affordable for communities that have faced systemic bar riers is central to our work.
With a proven track record as a leader in customer affordability, this year we expanded our Customer Assistance Program to provide additional help to disadvantage communities and those struggling to pay their bills on time. Additionally, we successfully advocated for the extension of the State’s arrearage relief program for customer water and wastewater utility debts accrued during the COVID-19 pandemic. This fiscal year the SFPUC secured millions of
3 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
dollars for customers who accrued pandemic water, sewer and power utility debts. We are committed to helping those who need it the most. That’s part of what it means to be a utility of the future.
Finally, this year’s report highlights not just our financial health and fiscal responsibility, but underscores our commitment to environmental stewardship and the value of our diverse partnerships.
Even during times of adversity, the SFPUC team has continued to deliver. That will not change.
This Annual Comprehensive Financial Report has been prepared by the SFPUC’s Financ ial Service Bureau in accordance with the requirements set by the Governmental Accounting Standards Board (GASB). The information provided in this report is based on a comprehensive system of internal processes, and as required, our financial statements were audited by a firm of independent certified accountants. The SFPUC’s management is responsible for the data and information provided, and believes the report is accurate in all respects.
The SFPUC’s auditors MGO, LLC have issued an unmodified (clean) audit of our agency’s financial statements for the period July 1, 2022 through June 30, 2023. This audit provides accountability and transparency of the SFPUC’s financial activities, while reflecting the ethical manner in which our agency operates. A copy of this independent audit can be found in the financial section of this report.
We thank the Mayor, Board of Supervisors, and our Commissioners for their continued support of our efforts, achievements, and approach to innovation.
Respectfully submitted,
Dennis J. Herrera
General Manager
San Francisco Public Utilities Commission
4 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 E
nterprise 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 pump stations, discharge points, and the 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
5 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
C
leanPowerSF serves more than 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.
6 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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. • Teamwork: Support a cooperative work environment; the SFPUC team is strengthened by the diversity and contributions of its members.
• Trust: Act with honesty, integrity, and fairness.
Fiscal Y ear
Paulson Commissioner
Commissioner
(July 2021 to January
7 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
8 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Organizational Chart as of June 2023
Note: AGM is Assistant General Manager, the person who leads an Enterprise or Bureau.
9 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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/p
olicies-
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
We support a cooperative
strengthened by diversity.
We focus on customer integrity, and fairness.
satisfaction and innovation.
Inclusiveness
We provide access and
transparency to stakeholders
and community members.
We take the health and safety
of our employees, customers
and communities seriously.
We strive for personal excellence,
recognize exemplary performance,
and seek continuous improvement.
We responsibly manage the
resources entrusted to our
care in a sustainable manner.
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
Risk assessment
Risk treatment
Risk evaluation
Risk analysis
Risk identification
Communicate and consult
Monitor and review
10 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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
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
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 purpose.
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.
Stakeholders' interests
Public support/ Ratepayer fatigue
Competing expectations
Economic uncertainty
Long-term planning vs. budget limitations
Negative media coverage
Image and reputation
Bond rating
Debt obligations
Financial reporting
Cash flow/availability
Energy costs
Rate fatigue
HR and personnel risks
Operations disruption (e.g. construction,
utilities failure, procurement)
IT data / infrastructure compromise
Process / execution failure
Environmental
Aging infrastructure
Regulatory non-compliance with EPA,
WECC/NERC, GASB, OSHA,
government pol icy
Compliance with the WSA and WRR
Punitive damages, law suits
Construction
Worker injury/illness
Third-party liability
Physical structure damage
Public Officials' liability
Employment liability
11 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
T
he 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 2024 Operating Budgets
The SFPUC annual budgets, including debt service and cash-funded capital, as well as operating programs total $1.69 billion and $1.65 billion for fiscal years 2024 and 2023, 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 202 4 $1.69 billion operating budget, the Water Enterprise accounts for $675.1 million to fund the operations and maintenance of the SFPUC water system; Wastewater Enterprise’s operating budget of $431.7 million funds the operations and maintenance of the SFPUC’s sewer system. Hetch Hetchy Water and Power’s operating budget of $303.9 million funds the operations and maintenance of the upcountry water and power systems, including Power Enterprise activities within the City. CleanPowerSF’s operating budge t of $280.3 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 2024 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 i
ndebtedness is provided through rates and s ervice charge revenues of t he 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- Y ear Capital Fin ancial Plans. T he SFPUC develops st and- alone supplemental appropriations for our capital program which are coordinated with our operating budget review and approval cycle.
Total approved fiscal year 2024 capital budgets were $1.5 billion, including $389.7 million for the Water Enterprise, $953.1 million for the Wastewater Enterprise, $184.5 million for Hetch Hetchy Water and Power Enterprise and $2.2 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 tr ansmission 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 re quirements, and projects to i ncrease regional w ater 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. Local Buildings and Grounds Improvements includes the new City Di stributi on Division (CDD) headquarter at 2000 Marin.
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 th e 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. 12 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report F Y 2023 13 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 Financial Plan projections are based on current Mayor and Commission policies, goals, and objectives. For the Financial plan fiscal year 2024, these projections also include assumptions based on sales volumes rebound from the pandemic for fiscal year 2024 and impact of the drought by fiscal year 2026. 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 Financial 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 Capital 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 Plan 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 2024 through 2033 totals $8.8 billion, represents an 11% reduction in total from last fiscal year’s proposed expenditures of $9.9 billion. This significant reductions shows the many hard choices SFPUC made as an agency to constrain capital spendings, to keep the rath growth affordable in the long term. Water Enterprise is approximately $2.2 billion, including projects for the Local Water Conveyance, Regional and Local Buildings and Grounds Improvements, Regional Water Supply and Storage and Regional Water Treatment and Transmission Programs. Wastewater Enterprise is approximately $4.9 billion which mainly includes, Stormwater Management/Flood Resilience, and the Renewal and Replacement (R&R) program projects like Large and Small Diameter Sewer Improvements and Treatment Plant Improvements . Hetchy Water and Hetchy Power’s is approximately $1.6 billion is to fund up-county water/power projects like capital improvements on the San Joaquin Pipelines and Mountain Tunnel and power distribution services projects like SFO, Alice Griffith, Candlestick Park and Hunters Point. CleanPowerSF is approximately $7 3 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 MGO 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, 2023 and 2022 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, 2023 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.
14 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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. Each of the SFPUC’s enterprise funds is operated and managed as a separate financial entity and separate enterprise entity. 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, 2023, 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 Services Bureau is responsible for providing comprehensive financial services for the utility enterprises and bureaus, 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, 2022. This was the 14th 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.
15 Introductory Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, 2022
Executive Director/CEO
16 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
The San Francisco Public Utilities Commission
An Enterprise Department of the City and County of San Francisco, California www.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Blvd., Suite 750
Walnut Creek, CA 94596
17 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023 In
dependent Auditor’s Report
The San Francisco Public Utilities Commission, the
Honorable Mayor, and the Board of Supervisors of
City and County of San Francisco, California
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 year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the SFPUC’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities and each major fund of the SFPUC as of June 30, 2023, and the changes in financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit 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 ( Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the SFPUC, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matters
As discussed in Note 1, the financial statements of the 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 (City) that is attributable to the transactions of the SFPUC. They do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2023, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter.
As discussed in Note 2 to the financial statements, effective July 1, 2021, the SFPUC adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements. Our opinion is not modified with respect to this matter.
Other Matter
The financial statements of the SFPUC as of and for the year ended June 30, 2022, were audited by another auditor, who expressed an unmodified opinion on those statements on February 28, 2023. 18 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023 Responsibilities of Management for the Financial Statements The SFPUC’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, 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.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS 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 the SFPUC’S internal control. 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
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, 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, and Schedules of Employer Contributions – Other Post-employment Healthcare Benefit Plans, as listed in the 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 responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit 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. 19 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the SFPUC’s basic financial statements. The Schedule of Changes in Net Position – Dollar and Percentage Change vs. Prior Year and Schedule 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 audit 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, these schedules are 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 report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit 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 January 26, 2024 on our consideration of the SFPUC’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the SFPUC’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the SFPUC’s internal control over financial reporting and compliance.
Walnut Creek, California
January 26, 2024
20 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(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, 2023 and 2022.
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
● Financial Analysis
● Capital Assets
● Debt Administration
● Rates and Charges
● Request for Information
Organization and Business
The SFPUC is a department of the City and County of San Francisco (the City) that is responsible for the maintenance, operation, and development of three utility enterprises and five funds. The three utility enterprises include Water, Wastewater, and Hetch Hetchy (Hetchy Water, Hetchy Power and CleanPowerSF).
Water Enterprise
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 170 million gallons of water per day in the year ended June 30, 2023. Approximately 69% of the water delivered by the Water Enterprise is to wholesale customers. Retail customers use the remaining 31% 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 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, 2023 , the Wastewater Enterprise serves 148,598 residential accounts, which discharge about 15. 4 million units of sanitary flow per year (measured in hundreds of cubic feet, or ccf) and 27,082 non-residential accounts, which discharge about 5.6 million ccf per year.
These reflected an increase of 0.3 million discharge units in non-residential accounts due to an increase of 292 accounts and a decrease of 0.3 million discharge units in residential accounts compared to prior year. 21 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(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. The core business is to provide greener electricity generation to residential and commercial consumers that are retail distribution customers of Pacific Gas and Electric Company (PG&E) in San Francisco. The SFPUC intends CleanPowerSF to be financially independent, with ability to set rates and charges with adequate revenues, and to issue debt to support its operations and future projects. CleanPowerSF is discretely presented as a fund of the Enterprise starting fiscal year 2017.
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” pro duct 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 neighborhoods that meet the State of California’s criteria as Disadvantaged Communities with 100% RPS-eligible electricity at a 20% bill discount. 22 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(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.
Financial Analysis
Financial Highlights for Fiscal Year 2023
Department-wide Business Type Activities
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $3,001,386.
● Total assets exceeded total liabilities by $2,853,266. ● Net position increased by $177,611 or 6.3% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $748,978 or 7.2% to $11,199,666.
● Operating revenues increased by $216,058 or 15.2% to $1,638,504. ● Operating expenses increased by $128,265 or 11.4% to $1,257,946.
Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $692,073.
● Total assets exceeded total liabilities by $565,858.
● Net position increased by $58,646 or 9.3% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $30,720 or 0.5% to $5,648,314.
● Current and other assets decreased by $99,623 or 12.5% mainly due to bond principal and interest payments, capital project expenses, and payments for salaries.
● Operating revenues increased by $117,974 or 20.6% to $691,091. ● Operating expenses increased by $58,489 or 14.6% to $460,253. 23 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Wastewater
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $1,398,834.
● Total assets exceeded total liabilities by $1,385,856. ● Net position increased by $36,167 or 2.7% during the year. ● Capital assets, net of accumulated depreciation and amortization, increased by $638,201 or 15.8% to $4,684,652.
● Operating revenues decreased by $4,946 or 1.3% to $363,936. ● Operating expenses increased by $4,192 or 1.6% to $261,350.
Hetchy Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $274,128.
● Total assets exceeded total liabilities by $269,248.
● Net position increased by $24,946 or 10.0% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $18,747 or 9.3% to $219,754.
● Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $3,385 or 6.9% to $52,697.
● Operating expenses, excluding other non-operating expenses, decreased by $2,288 or 4.4% to $50,011.
Hetchy Power
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $518,350.
● Total assets exceeded total liabilities by $512,386.
● Net position increased by $24,171 or 4.9% during the fiscal year. ● Capital assets, net of accumulated depreciation and amortization, increased by $61,310 or 10.5% to $646,946.
● Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $30,761 or 17.8% to $203,003.
● Operating expenses, excluding interest expenses, other non-operating expenses, and amortization of premium, discount, and issuance costs, increased by $35,209 or 22.5% to $191,552.
CleanPowerSF
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $118,001.
● Total assets exceeded total liabilities by $119,918.
● Net position increased by $33,681 or 39.9% during the fiscal year. ● CleanPowerSF had no capital assets, net of accumulated depreciation and amortization as of June 30, 2023. ● Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $68,884 or 26.7% to $326,777.
● Operating expenses, excluding interest expenses increased by $32,663 or 12.5% to $294,780.
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 $2,823,775.
● Total assets exceeded total liabilities by $3,068,541. ● Net position increased by $85,665 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 $20,144 or 1.8% to $1,129,681.
24 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $633,427.
● Total assets exceeded total liabilities by $727,284.
● Net position decreased by $17,937 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 $8,816 or 1.1% mainly due to net pension asset. ● Operating revenues decreased by $9,319 or 1.6% to $573,117. ● Operating expenses decreased by $47,018 or 10.5% to $401,764.
Wastewater
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $1,362,667.
● Total assets exceeded total liabilities by $1,447,677. ● Net position increased by $60,119 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 $35,015 or 12.0% to $257,158.
Hetchy Water
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $249,182.
● Total assets exceeded total liabilities by $276,425.
● Net position increased by $24,521 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 $1,780 or 3.5% to $52,299.
Hetchy Power
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $494,179.
● Total assets exceeded total liabilities by $527,477.
● Net position increased by $21,719 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 $10,703 or 7.3% to $156,343.
CleanPowerSF
● Total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $84,320.
● 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 $49,406 or 23.2% to $262,117.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
25 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs). *Eliminated interfund payables and receivables of $518, $629 and $739 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction cost in fiscal years 2023, 2022 and 2021, respectively.
Restated 2023 - 2022 2022 - 2021
2023* 2022*# 2021* Change Change
Total assets:
Current and other assets $ 1,814,683 1,924,834 1,616,001 (110,151) 308,833 11,199,666 10, 450,688 9,864,186 748,978 586,502
Total assets 13,014,349 12,375,522 11,480,187 638,827 895,335 Deferred outflows of resources:
Unamortized loss on refunding of debt 124,643 139,514 155,082 (14,871) (15,568) Pensions 123,669 93,952 113,149 29,717 (19,197)
Other post-employment benefits 48,335 53,412 61,590 (5,077) (8,178) Total deferred outflows of resources 296,647 286,878 329,821 9,769 (42,943) Liabilities:
Current liabilities:
Bonds 164,755 161,596 133,308 3,159 28,288
Certificates of participation 4,576 4,395 4,160 181 235 Commercial paper — 625,473 859,051 (625,473) (233,578) State revolving fund loans 2,526 5,764 4,150 (3,238) 1,614 Other liabilities 454,130 442,802 386,562 11,328 56,240 Subtotal current liabilities 625,987 1,240,030 1,387,231 (614,043) (147,201) Long-term liabilities:
Arbitrage rebate payable 188 — — 188 —
Bonds 7,473,933 6,825,078 6,497,701 648,855 327,377 Revenue Notes 349,556 350,356 — (800) 350,356
Certificates of participation 124,974 129,550 134,020 (4,576) (4,470) State revolving fund loans 479,790 418,656 211,816 61,134 206,840 Commercial paper 487,811 — — 487,811 —
122,357 — — 122,357 —
Other liabilities 496,487 343,311 747,573 153,176 (404,262) Subtotal long-term liabilities 9,535,096 8,066,951 7,591,110 1,468,145 475,841 Total liabilities:
Arbitrage rebate payable 188 — — 188 —
Bonds 7,638,688 6,986,674 6,631,009 652,014 355,665 Revenue Notes 349,556 350,356 — (800) 350,356
Certificates of participation 129,550 133,945 138,180 (4,395) (4,235) Commercial paper 487,811 625,473 859,051 (137,662) (233,578) State revolving fund loans 482,316 424,420 215,966 57,896 208,454 122,357 — — 122,357 —
Other liabilities 950,617 786,113 1,134,135 164,504 (348,022) Total liabilities 10,161,083 9,306,981 8,978,341 854,102 328,640 Deferred inflows of resources:
Unamortized gain on refunding of debt 11,353 — — 11,353 — Leases 43,011 44,583 48,110 (1,572) (3,527)
Related to pensions 49,027 445,403 10,321 (396,376) 435,082 Other post-employment benefits 45,136 41,658 35,126 3,478 6,532 Total deferred inflows of resources 148,527 531,644 93,557 (383,117) 438,087 Net position:
Net investment in capital assets 2,336,792 2,230,525 2,271,638 106,267 (41,113) Restricted for debt service 18,191 20,202 48,677 (2,011) (28,475) Restricted for capital projects 21,192 114,657 22,319 (93,465) 92,338 Restricted for other purposes — 181,926 — (181,926) 181,926 Unrestricted 625,211 276,465 395,476 348,746 (119,011) Total net position $ 3,001,386 2,823,775 2,738,110 177,611 85,665
Capital assets, net of accumulated
depreciation and amortization
Table 1
Business Type Activities
Comparative Condensed Net Position
June 30, 2023, 2022, and 2021
Water Infrastructure Finance and
Innovation Act (WIFIA) loans
Water Infrastructure Finance and
Innovation Act (WIFIA) loans
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
26 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The following table summarizes Water’s changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Total assets:
Current and other assets $ 695,715 795,338 786,522 (99,623) 8,816 5,648,314 5,617,594 5,587,799 30,720 29,795
Total assets 6,344,029 6,412,932 6,374,321 (68,903) 38,611 Deferred outflows of resources:
Unamortized loss on refunding of debt 124,635 139,481 154,991 (14,846) (15,510) Pensions 70,101 52,852 64,797 17,249 (11,945)
Other post-employment benefits 28,616 32,445 37,762 (3,829) (5,317) Total deferred outflows of resources 223,352 224,778 257,550 (1,426) (32,772) Liabilities:
Current liabilities:
Revenue bonds 135,095 125,285 108,500 9,810 16,785
Certificates of participation 3,267 3,138 2,970 129 168 Commercial paper — 206,297 105,862 (206,297) 100,435 State revolving fund loans — 3,283 1,667 (3,283) 1,616 Other liabilities 148,547 182,349 154,257 (33,802) 28,092 Subtotal current liabilities 286,909 520,352 373,256 (233,443) 147,096 Long-term liabilities:
Revenue bonds 4,575,751 4,735,650 4,886,275 (159,899) (150,625) Certificates of participation 89,232 92,499 95,692 (3,267) (3,193) Commercial paper 371,459 — — 371,459 —
State revolving fund loans 163,627 118,478 105,740 45,149 12,738 Other liabilities 291,193 218,669 445,234 72,524 (226,565) Subtotal long-term liabilities 5,491,262 5,165,296 5,532,941 325,966 (367,645) Total liabilities:
Revenue bonds 4,710,846 4,860,935 4,994,775 (150,089) (133,840) Certificates of participation 92,499 95,637 98,662 (3,138) (3,025) Commercial paper 371,459 206,297 105,862 165,162 100,435 State revolving fund loans 163,627 121,761 107,407 41,866 14,354 Other liabilities 439,740 401,018 599,491 38,722 (198,473) Total liabilities 5,778,171 5,685,648 5,906,197 92,523 (220,549) Deferred inflows of resources:
Leases 41,558 44,583 48,110 (3,025) (3,527)
Related to pensions 28,504 248,704 4,885 (220,200) 243,819 Other post-employment benefits 27,075 25,348 21,315 1,727 4,033 Total deferred inflows of resources 97,137 318,635 74,310 (221,498) 244,325 Net position:
Net investment in capital assets 545,542 584,646 517,302 (39,104) 67,344 Restricted for debt service 14,625 14,671 45,586 (46) (30,915) Restricted for capital projects 15,959 — 22,319 15,959 (22,319) Restricted for other purposes — 100,407 — (100,407) 100,407 Unrestricted 115,947 (66,297) 66,157 182,244 (132,454) Total net position $ 692,073 633,427 651,364 58,646 (17,937) Capital assets, net of accumulated
depreciation and amortization
Table 1A
Proprietary Fund – Water
Comparative Condensed Net Position
June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
27 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Water Net Position, Fiscal Year 2023
For the period ended June 30, 2023, the Water Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $692,073. Total net position increased from prior year by $58,646 or
9.3% (see Table 1A). The inc rease in net position was the result of a decrease of $128,975 in liabilities and deferred inflows of resources offset by a decrease of $70,329 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, interest and lease receivables, interfund receivables due from other governmental agencies, prepaids, and inventory.
During the fiscal year 2023, current and other assets decreased by $99,623 or 12.5%. The decreases included $100,407 in restricted net pension asset based on actuarial estimates, $45,106 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, $6,625 in prepaid expenses of multiple software licensing and membership fees, $2,535 in lease receivable due to lease payments received, $882 in subscription asset from the implementation of Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements (SBITAs) , $632 in restricted interest and other receivables mainly due to capacity fees, and $63 mainly for custom work projects due from the Department of Public Works (DPW). These decreases were offset by increases of $28,594 for a reimbursement receivable from the State Water Resources Control Board (SWRCB) State Revolving Funds Loan relating to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, $11,007 in notes receivable from the sale of the Balboa Reservoir, $10,052 in Wholesale Balancing Account receivable (see Note 12 for details), $2,249 in interest receivable mainly due to higher interest rates, $2,205 in charges for services receivable mainly due to a 15.9% rate increase for wholesale customers beginning July 1, 2022, $1,389 in inventory due to more purchases than issuances during the fiscal year, and $1,131 in lease asset due to additional leases in the current year.
Capital assets, net of accumulated depreciation and amortization, increased by $30,720 or 0.5% mainly due to Mountain Tunnel Improvement and SF Westside Recycled Water projects. The largest portion of the Water Enterprise’s net position of $545,542 or 78.8% represents net investment in capital assets (see Capital Assets section of the MDA for more information), which decreased by $39,104 or 6.7% from prior year’s $584,646. The change was explained by an increase of $62,664 in liabilities related to capital assets mainly from State Revolving Funds Loan relating to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, offset by a $23,560 increase in capital assets mainly from increased buildings, structures and improvements .
Deferred outflows of resources decreased by $1,426 due to decreases of $14,846 from amortization for unamortized loss on refunding and $3,829 in OPEB obligations based on actuarial estimates, offset by an increase of $17,249 from pensions based on actuarial estimates.
Total liabilities increased by $92,523, which was due to increases of $165,162 in commercial paper from additional principal issuances, $115,343 in pensions based on actuarial reports, $41,866 in State Revolving Funds Loan payable due to additional loans related to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, $15,329 in restricted and unrestricted payables due to higher year end expense accruals for capital projects as compared to prior year, $4,486 in OPEB obligations based on actuarial estimates, $2,440 payable to San Francisco Municipal Transportation Agency for a settlement payable relating to the Van Ness Corridor Transit Improvement project, $1,168 in accrued payroll, vacation and sick leave due to cost of living adjustments and actuarial entries, $1,147 in lease liability from additional leases, and $762 in workers’ compensation based on actuarial estimates. These increases were offset by decreases of $150,089 in outstanding revenue bonds from $125,285 in bond repayment, $24,812 in bond premium amortization, offset by $8 in bond discount amortization, $79,150 in the Wholesale Balancing Account liability (see Note 12 for details), $16,444 in general liability based on actuarial report, $5,160 in unearned revenues mainly from lower custom work deposits and reduced Bay Area Water Supply and Conservation Agency (BAWSCA) Bond Surcharges, $3,138 in certificates of participation from $3,124 in principal repayment and $14 in amortization of premium, $848 in subscription liabilities from the implementation of GASB Statement No. 96 , SBITAs, and $351 in interest payable from lower outstanding revenue bonds.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
28 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Deferred inflows of resources decreased by $221,498 due to decreases of $220,200 related to pensions based on actuarial estimates and $3,025 in leases based on Controller’s Office GASB Statement No. 87, Leases, calculations, offset by an increase of $1,727 in OPEB obligations based on actuarial estimates.
Water Net Position, Fiscal Year 2022
For the period ended June 30, 2022, the Water Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $633,427. Total net position decreased from prior year by $17,937 or 2.8% (see Table 1 A). The decrease in net position was the result of an increase of $23,776 in liabilities and deferred inflows of resources offset by an increase of $5,839 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 $8,816 or 1.1%. The increases included $100,407 in restricted 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), $1,577 in subscription asset from the implementation of GASB Statement No. 96, $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 Westside 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 $584,646 or 92.3% represents net investment in capital assets (see Capital Assets section of the MDA for more information), which increased by $67,344 or 13.0% from prior year’s $517,302. The change was explained by an increase of $81,232 in capital assets mainly from increased buildings, structures and improvements, offset by a decrease of $13,888 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 $220,549 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, $745 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, $1,556 in subscription liability from the implementation of GASB Statement No. 96, $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 12, Water Supply Agreement, for additional details.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
29 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
The following table summarizes Wastewater’s changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Total assets:
Current and other assets $ 576,140 629,325 360,711 ( 53,185) 268,614 4,684,652 4,046,451 3,606,850 638,201 439,601
Total assets 5,260,792 4,675, 776 3,967,561 585,016 708,215 Deferred outflows of resources:
Unamortized loss on refunding of debt 8 33 91 (25) (58) Pensions 32,592 25,369 30,219 7,223 (4,850)
Other post-employment benefits 11,493 12,898 15,109 (1,405) (2,211) Total deferred outflows of resources 44,093 38,300 45,419 5,793 (7,119) Liabilities:
Current liabilities:
Revenue bonds 28,070 34,345 22,880 (6,275) 11,465
Certificates of participation 864 830 785 34 45
Commercial paper — 379,157 638,518 (379,157) (259,361) State revolving fund loans 2,526 2,481 2,483 45 (2) Other liabilities 200,992 165,662 149,357 35,330 16,305 Subtotal current liabilities 232,452 582,475 814,023 (350,023) (231,548) Long-term liabilities:
Arbitrage rebate payable 188 — — 188 —
Revenue bonds 2,708,840 1,896,908 1,567,042 811,932 329,866 Revenue notes 349,556 350,356 — (800) 350,356
Certificates of participation 23,594 24,458 25,302 (864) (844) State revolving fund loans 316,163 300,178 106,076 15,985 194,102 122,357 — — 122,357 —
Other liabilities 121,786 73,724 188,576 48,062 (114,852) Subtotal long-term liabilities 3,642,484 2,645,624 1,886,996 996,860 758,628 Total liabilities:
Arbitrage rebate payable 188 — — 188 —
Revenue bonds 2,736,910 1,931,253 1,589,922 805,657 341,331 Revenue notes 349,556 350,356 — (800) 350,356
Certificates of participation 24,458 25,288 26,087 (830) (799) Commercial paper — 379,157 638,518 (379,157) (259,361) State revolving fund loans 318,689 302,659 108,559 16,030 194,100 122,357 — — 122,357 —
Other liabilities 322,778 239,386 337,933 83,392 (98,547) Total liabilities 3,874,936 3,228,099 2,701,019 646,837 527,080 Deferred inflows of resources:
Unamortized gain on refunding of debt 11,353 — — 11,353 — Leases 1,453 — — 1,453 —
Related to pensions 10,023 114,670 2,148 (104,647) 112,522 Other post-employment benefits 8,286 8,640 7,265 (354) 1,375 Total deferred inflows of resources 31,115 123,310 9,413 (92,195) 113,897 Net position:
Net investment in capital assets 1,235,215 1,092,710 1,253,789 142,505 (161,079) Restricted for debt service 3,510 5,391 2,992 (1,881) 2,399 Restricted for capital projects — 114,657 — (114,657) 114,657 Restricted for other purposes — 48,770 — (48,770) 48,770 Unrestricted 160,109 101,139 45,767 58,970 55,372
Total net position $ 1,398,834 1,362,667 1,302,548 36,167 60,119 Water Infrastructure Finance and
Innovation Act (WIFIA) loans
Water Infrastructure Finance and
Innovation Act (WIFIA) loans
Capital assets, net of accumulated
depreciation and amortization
Table 1B
Proprietary Fund – Wastewater
Comparative Condensed Net Position
June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
30 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Wastewater Net Position, Fiscal Year 2023
For the year ended June 30, 2023, the Wastewater Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,398,834. The Wastewater Enterprise’s total net position increased by $36,167 or 2.7% as a result of increases of $142,505 in net investment in capital assets and $58,970 in unrestricted net position offset by decreases of $114,657 in restricted for capital projects, $48,770 in restricted for other purposes, and $1,881 in restricted for debt service (see Table 1B ).
During the fiscal year 2023, current and other assets decreased by $53,185 or 8.5%. The decrease was mainly due to $188,853 in receivables from the State Water Resources Control Board (SWRCB) attributed to $207,364 cash receipts from reimbursement requests relating to the Southeast Water Pollution Control Plant (SEP) Biosolids Digester Project, the Southeast Water Pollution Control Plant New Headworks (Grit) Replacement Project, and the Oceanside Plant (OSP) Digester Gas Utilization Upgrade Project, offset by $18,511 aggregate new reimbursement requests for the SEP New Headworks (Grit) Replacement and OSP Digester Gas Utilization Upgrade projects.
Other decreases included $48,770 in restricted net pension asset based on actuarial report, $2,325 in lease assets due to amortization, $1,014 due from the Treasure Island Development Authority (TIDA) for capacity fees, $535 in subscription asset due to implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs), $241 in capacity charges net of allowance for doubtful accounts as more collection than billings in current year, $228 in receivables for charges for services due to $5,787 increase in allowance for doubtful accounts attributed to increased sewer charges receivable aged over 120 days old offset by $5,559 increase in charges for services due to higher billings, $96 decrease in interfund receivable due to $105 collection of prior year balance from the Academy of Sciences, offset by $9 receivabl e from the Department of Public Works (DPW) for the Mission Bay South Project, $28 decrease in Federal interest subsidy receivable, $25 decrease in State grant receivable due to receipt of reimbursement for the Baker Beach project, and $7 decrease in custom work receivable. These decreases in current and other assets were offset by increases of $184,889 in restricted and unrestricted cash and investments largely from the issuance proceeds of 2023 Series ABC revenue bonds, $1,682 in interest receivable due to higher interest earnings, $1,457 in lease receivable due to additional GASB Statement No. 87, Leases, $495 increase in prepaid charges due to $1,004 prepaid expenses in the current year such as property rental, software license, and membership fees offset by $471 prior year prepaid expenses recognized in current year and $38 lease prepayments amortizations for the Civic Center Garage and the Mariposa Pump Station & Force, $382 in inventory as there were more purchases than issuances during the year, $27 i n property rent receivable, and $5 in other receivable.
Capital assets, net of accumulated depreciation and amortization, increased by $638,201 or 15.8% reflecting an increase in construction and capital improvement activities. The largest portion of the Wastewater Enterprise’s net position of $1,235,215 or 88.3%, represents net investment in capital assets (see Capital Assets section of the MDA for more information). Deferred outflows of resources increased by $5,793 mainly due to $7,223 increase in pensions based on actuarial report offset by $1,405 decrease in other post -employment benefits based on actuarial report, and $25 amortization of the 2013 Series A bonds loss on refunding.
Total liabilities increased by $646,837 or 20.0%. As of June 30, 2023, total outstanding balance of $3,551,970 for revenue bonds, revenue notes, certificates of participation (COP), State Revolving Fund (SRF) loans, and Water Infrastructure Finance and Innovation Act (WIFIA) loans represented 91.7% of total liabilities, an increase of $563,257 or 18.8%. The increase was mainly due to issuance of 2023 Series ABC and 2022 Series B revenue bonds with an aggregate par value of $974,380 and $137,080, an aggregate premiums of $161,622 and $16,852 from the 2023 Series ABC and 2022 Series B, respectively, to refund principal amount of and interest on commercial paper and portion of certain outstanding revenue bonds and to finance certain capital projects, $177,564 from issuance of commercial paper, $122,357 new WIFIA loan to fund for the Biosolids Digester Facilities Project, and $18,511 additional SRF loans to fund for the SEP New Headworks (Grit) Replacement and OSP Digester Gas Utilization Upgrade projects. These increases were offset by $556,721 refunding of commercial paper, $419,505 refunded principal for revenue bonds series 2013AB and 2018C, debt principal repayments of $34,345 in bonds, $2,481 in SRF, and $826 in COP, $15,494 refunded premium for revenue bonds series 2013AB, and $15,737 in premium amortization. Other liabilities of $322,966, including arbitrage rebate payable, such as payables to vendors, contractors, and other government agencies for goods and services under contractual agreements, increased by $83,580 or 34.9% due to increases of $49,549 in net pension liability based on actuarial report, $33,539 in restricted and unrestricted payable to vendors and contractors due to increased vouchers, $6,450 in bond, loan, lease, and subscription interest payable mainly due to higher outstanding debt principal
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
31 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
resulting from new debts relating to the issuance of revenue bonds 2023 Series ABC and 2022 Series B bonds, and new WIFIA loan, $2,442 in employee related benefits including vacation, workers’ compensation, and accrued payroll mainly due to actuarial estimates, and 5.25% increase cost of living adjustment (COLA), $2,102 in payable to Municipal Transportation Agency (MTA), and $320 in unearned revenues mainly due to $402 in customer credit balances due to overpayments offset by decreases of $80 in deposits from Pacific Gas & Electric due to expenses incurred for the Cross Bore Project and $2 in liens payable, and $188 in arbitrage rebate payable. The increase in other liabilities was offset by decreases of $7,695 in damage claims liability due to actuarial estimates, $2,341 in lease liability due to lease payment, $515 in subscription liability due to implementation of GASB Statement No. 96 , Subscription-Based Information Technology Arrangements (SBITAs) , $260 in pollution remediation obligation, $111 in payable to Hetch Hetchy Power related to the 525 Golden Gate Living Machine System, and $88 in other post-employment benefits obligations based on actuarial report.
Deferred inflows of resources decreased by $92,195 mainly due to decreases in pensions and other post - employment benefits by $104,647 and $354, respectively, based on actuarial report, offset by increases in unamortized gain on refunding of debt and leases by $11,353 and $1,453, respectively.
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 $1,362,667. The Wastewater Enterprise’s total net position increased by $60,119 or 4.6% as a result of increases of $114,657 in restricted for capital projects, $55,372 in unrestricted net position, $48,770 in restricted for other purposes, and $2,399 in restricted for debt service offset by a decrease of $161,079 in net investment in capital assets (see Table 1B)
During the fiscal year 2022, current and other assets increased by $268,614 or 74.5%. The increase was mainly due to $182,040 in receivables from the State Water Resources Control Board (SWRCB) attributed to $202,795 aggregate new 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 restricted 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, $957 in subscription asset due to implementation of GASB Statement No. 96, SBITAs, $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 decreases 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 $1,092,710 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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
32 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Total liabilities increased by $527,080 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 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 $239,386 such as payables to vendors, contractors, and other government agencies for goods and services under contractual agreements and employees, decreased by $98,547 or 29.2%, 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, $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, $4,192 in bond, loan, lease, and subscription interest payable due to higher outstanding debt principal, $944 in subscription liability due to implementation of GASB Statement No. 96, SBITAs, $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 4% 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.
The following table summarizes Hetchy Water’s changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Total assets:
Current and other assets $ 91,112 110,066 98,225 (18,954) 11,841 219,754 201,007 177,481 18,747 23,526
Total assets 310,866 311,073 275,706 (207) 35,367
Deferred outflows of resources:
Pensions 8,858 6,696 7,799 2,162 (1,103)
Other post-employment benefits 3,248 3,272 3,725 (24) (453) Total deferred outflows of resources 12,106 9,968 11,524 2,138 (1,556) Liabilities:
Current liabilities 9,888 17,553 15,873 (7,665) 1,680 Long-term liabilities 31,730 17,095 43,623 14,635 (26,528) Total liabilities 41,618 34,648 59,496 6,970 (24,848) Deferred inflows of resources:
Related to pensions 4,142 34,477 988 (30,335) 33,489 Other post-employment benefits 3,084 2,734 2,085 350 649 Total deferred inflows of resources 7,226 37,211 3,073 (29,985) 34,138 Net position:
Net investment in capital assets 219,754 201,007 177,481 18,747 23,526 Restricted for capital projects 5,233 — — 5,233 —
Restricted for other purposes — 13,912 — (13,912) 13,912 Unrestricted 49,141 34,263 47,180 14,878 (12,917)
Total net position $ 274,128 249,182 224,661 24,946 24,521 Proprietary Fund – Hetchy Water
Comparative Condensed Net Position
June 30, 2023, 2022, and 2021
Capital assets, net of accumulated
depreciation and amortization
Table 1C – A
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
33 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Water Net Position, Fiscal Year 2023
Hetchy Water’s net position of $274,128 increased by $24,946 or 10.0% resulting from a net decrease of $23,015 in total liabilities and deferred inflows of resources and a net increase of $1,931 in total assets and deferred outflows of resources (see Table 1C-A ). The decrease of $18,954 in current and other assets was attributed to decreases of $13,912 in restricted net pension assets based on actuarial report, $6,238 in cash and investment with City Treasury mainly from higher cash paid to suppliers and contractors for goods and services, $177 in subscription assets net of accumulated amortization per implementation of GASB Statement No. 96, SBITAs, $129 in prepaid charges, advances, and other receivables due to prepayments made in prior year to California Department of Water Resources for dam fees included fiscal year 2023, and $70 in charges for services receivables due to lower consumption from Lawrence Livermore National Laboratory. These decreases were offset by increases of $1,211 in State grants receivable for the 2018 Moccasin Storm Project related to emergency repairs, $255 in interest receivables attributed to improved market value of investments and higher interest rates, $84 in lease right-to-use assets net of accumulated amortization, and $22 in inventory due to more purchases than issuances during the fiscal year.
Capital assets, net of accumulated depreciation and amortization, increased by $18,747 or 9.3% to $219,754 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 increased by $2,138 due to an increase of $2,162 in pensions offset by a decrease of $24 in OPEB based on actuarial reports.
Hetchy Water’s total liabilities increased by $6,970 or 20.1% to $41,618, as explained by increases of $14,105 in net pension liability based on actuarial estimates, $667 in OPEB obligations based on actuarial assumptions, $242 in employee related benefits due to 5.25% increase in cost of living adjustment (COLA), $76 in lease liability and $73 in general liability based on actuarial estimates. These increases were offset by decreases of $7,421 in unrestricted payables mainly due to lower license and permit fees to the National Park Service, $577 in restricted payables due to lower project spending, $170 in subscription liability per implementation of GASB Statement No. 96, SBITAs, $24 in unearned revenues, refunds, and other mainly due to recognition of grant advance as revenue for the Rim Fire project, and $1 in interest payable related to SBITAs (see Note 1 1).
Deferred inflows of resources decreased by $29,985 due to a decrease of $30,335 in relation to pensions offset by an increase of $350 in OPEB based on actuarial reports.
Hetchy Water Net Position, Fiscal Year 2022
Hetchy Water’s net position of $249,182 increased by $24,521 or 10.9% resulting from a net increase of $33,811 in total assets and deferred outflows of resources, offset by a net increase of $9,290 in total liabilities and deferred inflows of resources (see Table 1C-A ). The increase of $11,841 in current and other assets was attributed to increases of $13,912 in restricted net pension assets based on actuarial report, $314 in subscription assets net of accumulated amortization per implementation of GASB Statement No. 96, SBITAs, $33 in charges for services receivables due to higher consumption from Lawrence Livermore National Laboratory, $19 in interest receivables due to higher interest accrual 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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
34 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Water’s total liabilities decreased by $24,848 or 41.8% to $34,648, 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, $309 in subscription liability per implementation of GASB Statement No. 96, SBITAs, $148 in employee related benefits mainly due to increase in workers’ compensation, $102 in general liability based on actuarial estimates, $3 in interest payable related to SBITs, 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.
The following table summarizes Hetchy Power’s changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Total assets:
Current and other assets $ 294,298 260,816 249,365 33,482 11,451 646,946 585,636 492,056 61,310 93,580
Total assets 941,244 846,452 741,421 94,792 105,031 Def
erred outflows of resources:
Pensions 10,826 8,183 9,531 2,643 (1,348)
Other post-employment benefits 3,969 3,999 4,552 (30) (553) Total deferred outflows of resources 14,795 12,182 14,083 2,613 (1,901) Liabilities:
Current liabilities:
Bonds 1,590 1,966 1,928 (376) 38
Certificates of participation 445 427 405 18 22
Commercial paper — 40,019 114,671 (40,019) (74,652)
Other liabilities 63,355 48,688 49,450 14,667 (762) Subtotal current liabilities 65,390 91,100 166,454 (25,710) (75,354) Long-term liabilities:
Bonds 189,342 192,520 44,384 (3,178) 148,136
Certificates of participation 12,148 12,593 13,026 (445) (433) Commercial paper 116,352 — — 116,352 —
Other liabilities 45,626 22,762 55,425 22,864 (32,663) Subtotal long-term liabilities 363,468 227,875 112,835 135,593 115,040 Total liabilities:
Bonds 190,932 194,486 46,312 (3,554) 148,174
Certificates of participation 12,593 13,020 13,431 (427) (411) Commercial paper 116,352 40,019 114,671 76,333 (74,652) Other liabilities 108,981 71,450 104,875 37,531 (33,425) Total liabilities 428,858 318,975 279,289 109,883 39,686 Deferred inflows of resources:
Related to pensions 5,062 42,138 1,207 (37,076) 40,931 Other post-employment benefits 3,769 3,342 2,548 427 794 Total deferred inflows of resources 8,831 45,480 3,755 (36,649) 41,725 Net position:
Net investment in capital assets 336,281 352,162 323,066 (15,881) 29,096 Restricted for debt service 56 140 99 (84) 41
Restricted for other purposes — 17,004 — (17,004) 17,004 Unrestricted 182,013 124,873 149,295 57,140 (24,422) Total net position $ 518,350 494,179 472,460 24,171 21,719 Table 1C – B
Proprietary Fund – Hetchy Power
Comparative Condensed Net Position
June 30, 2023, 2022, and 2021
Capital assets, net of accumulated
depreciation and amortization
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
35 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Power Net Position, Fiscal Year 2023
Hetchy Power’s net position of $518,350 increased by $24,171 or 4.9% resulting from an increase of $97,405 in total assets and deferred outflows of resources, offset by a net increase of $73,234 in total liabilities and deferred inflows of resources (see Table 1C -B). Increase of $33,482 in current and other assets was attributed to increases of $47,496 in cash and investments mainly due to higher collections from billings, $2,088 in charges for services receivables mainly due to pending collections from non -work order City departments, $1,302 in interest receivables attributed to improved market value of investments and higher interest rates, $348 increase in State grants receivable mainly for the 2018 Moccasin Storm Project related to emergency repairs, and $105 in lease right -to- use assets net of accumulated amortization.
These increases were offset by decreases of $17,004 in restricted net pension assets based on actuarial report, $318 in due from other City departments mainly due to repayments from Moscone Renewable Energy Projects, $182 in prepaid charges , advances, and other receivables mainly due to prepayments made in prior year to California Department of Water Resources for dam fees included fiscal year 2023, $152 in restricted interest and other receivables mainly due to lower IRS bond interest subsidy accrual, $142 in subscription assets net of accumulated amortization per implementation of GASB Statement No. 96, SBITAs, and $59 in inventory due to more issuances than purchases during the fiscal year.
Capital assets, net of accumulated depreciation and amortization, increased by $61,310 or 10.5% to $646,946 primarily from construction and capital improvement activities for the Moccasin Powerhouse Rewind Project and the Bay Corridor Project. Deferred outflows of resources increased by $2,613 due to an increase of $2,643 in pensions offset by a decrease of $30 in OPEB based on actuarial reports.
Hetchy Power’s total liabilities of $428,858 increased by $109,883 or 34.4%. As of June 30, 2023, outstanding debt increased by $72,352 due to $76,333 commercial paper issuance for Hetchy Power facilities, offset by $2,397 from bonds and certificates of participation principal repayments and $1,584 in amortization of premium and discount.
Other liabilities of $108,981, such as payables to vendors, employees, contractors, and other government agencies for goods and services under contractual agreements, increased by $37,531 or 52.5%, mainly due to increases of $17,239 in net pension liability based on actuarial estimates, $8,302 in unrestricted payables mainly due to higher power purchases, $5,127 in general liability based on actuarial estimates, $4,060 in restricted payables to vendors and contractors due to higher year -end expense accruals for capital projects mainly for the Winter Storm projects and Moccasin Powerhouse projects, $1,566 in due to other City departments mainly for claim settlement reimbursement to SFMTA, $815 in OPEB obligations based on actuarial assumptions, $464 in employee related benefits due to 5.25% increase in COLA, $268 increase in inter est payable related to 2021 Series AB revenue bond issued in prior year, and $94 in lease liability. These increases were offset by decreases of $267 in unearned revenues, refunds, and other, and $137 in subscription liability per implementation of GASB Statement No. 96, SBITAs (see Note 11). Decrease of $267 in unearned revenues, refunds, and other was mainly due to $436 deposit refund to developer for custom work project at 1064 Mission Street, $126 in refund for Hunter’s Point construction project, and $43 in grant advance due to recognition of Rim Fire State grant revenue, offset by increases of $170 in prepayments from Distributed Antenna System (DAS) program, and $168 in customer prepayments.
Deferred inflows of resources decreased by $36,649 due to a decrease of $37,076 in relation to pensions offset by an increase of $427 in OPEB based on actuarial reports.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
36 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Power Net Position, Fiscal Year 2022
Hetchy Power’s net position of $494,179 increased by $21,719 or 4.6% resulting from a net increase of $103,130 in total assets and deferred outflows of resources, offset by an increase of $81,411 in total liabilities and deferred inflows of resources (see Table 1C -B). Increase of $11,451 in current and other assets was attributed to increases of $17,004 in restricted 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, $256 in subscription assets net of accumulated amortization per implementation of GASB Statement No. 96, SBITAs , $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 $318,975 increased by $39,686 or 14.2%. 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 $71,450, such as payables to vendors, employees, contractors, and other government agencies for goods and services under contractual agreements, decreased by $33,425 or 31.9%, mainly due to decreases of $32,566 in net pension liability based on actuarial estimates, $6,241 in unrestricted payables mainly from prior year wheeling charges to APX, Inc., $248 in OPEB obligations based on actuarial assumptions, $85 in general liability based on actuarial estimates, and $19 decrease in lease liability per implementation of GASB Statement No. 87, Leases . These decreases were offset by increases of $3,666 in restricted payables to vendors and contractors due to higher year -end expense accruals for capital projects, $870 increase in interest payable mainly related to 2021 Series AB revenue bond issuances, $734 in unearned revenues, refunds, and other, $253 in subscription liability per implementation of GASB Statement No. 96, SBITAs, $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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
37 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The following table summarizes CleanPowerSF’s changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
CleanPowerSF Net Position, Fiscal Year 2023
CleanPowerSF’s net position of $118,001 increased by $33,681 or 39.9%, resulting from an increase of $28,669 in total assets and deferred outflows of resources and a decrease of $5,012 in total liabilities and deferred inflows of resources (see Table 1C-C) . Increase in total assets of $28,018 was due to increases of $42,423 in cash and investments with City Treasury mainly attributed to higher collections from billings and $498 in interest receivable attributed to improved market value of investments and higher interest rates. These increases were offset by decrease of $7,078 in charges for services receivables due to $5,485 lower unbilled accrual and $1,593 increase in allowance for uncollectible due to higher aged receivables greater than 120 days. Prepaid charges and other receivables decreased by $5,721, of which $5,463 in lower prepaid for power purchases and $4,258 in prepayments required by PG&E in prior year offset by $4,000 in collateral paid to the California Independent System Operator’s (CAISO) to satisfy financial security requirements. Restricted net pension assets decreased by $1,833 based on actuarial report, $230 in lease right -to-use assets net of accumulated amortization due to lease termination of 544 Golden Gate, and $41 in subscription assets net of accumulated amortization per implementation of GASB Statement No. 96, SBITAs.
Deferred outflows of resources increased by $651 due to increases of $440 in pensions and $211 in OPEB based on actuarial reports.
Total liabilities decreased by $2,222 or 5.5% to $38,018, mainly explained by $9,000 cash collateral returned for power purchase agreement, $232 decrease in lease liability related to the lease termination at 544 Golden Gate, $39 decrease in subscription liability per implementation of GASB Statement No. 96, SBITAs, and $1 decrease in interest payable related to SBITAs ( see Note 11 ). These decreases were offset by increases of $2,124 in net pension liability based on actuarial estimates, $1,950 in unearned revenues, refunds, and other, $1,789 in OPEB obligations based on actuarial assumptions, $818 in payables mainly due to higher power purchases, $367 in employee related benefits due to 5.25% increase in COLA, and $2 in general liability based on actuarial estimates.
Increases of $1,950 in unearned revenues, refunds, and other was mainly due to increases of $2,075 received from California Public Utilities Commission (CPUC) for the Community Food Service Energy Efficiency Program and Disadvantaged Communities Programs, $64 in customer prepayments, and $5 in energy tax payable, offset by a decrease of $194 in net energy metering credits to retail and commercial customers. Deferred inflows of resources decreased by $2,790 due to a decrease of $4,118 in relation to pensions offset by an increase of $1,328 Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Total assets:
Current and other assets $ 157,936 129,918 121,917 28,018 8,001 Total assets 157,936 129,918 121,917 28, 018 8,001
Deferred outflows of resources:
Pensions 1,292 852 803 440 49
Other post-employment benefits 1,009 798 442 211 356 Total deferred outflows of resources 2,301 1,650 1,245 651 405 Liabilities:
Current liabilities 31,461 28,661 17,735 2,800 10,926 Long-term liabilities 6,557 11,579 15,344 (5,022) (3,765) Total liabilities 38,018 40,240 33,079 (2,222) 7,161 Deferred inflows of resources:
Related to pensions 1,296 5,414 1,093 (4,118) 4,321
Other post-employment benefits 2,922 1,594 1,913 1,328 (319) Total deferred inflows of resources 4,218 7,008 3,006 (2,790) 4,002 Net position:
Restricted for other purposes 1,833 — (1,833) 1,833
Unrestricted 118,001 82,487 87,077 35,514 (4,590)
Total net position $ 118,001 84,320 87,077 33,681 (2,757) Proprietary Fund – CleanPowerSF
Comparative Condensed Net Position
June 30, 2023, 2022, and 2021
Table 1C – C
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
38 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
in OPEB based on actuarial reports.
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 $11,163 in total liabilities and deferred inflows of resources, offset by an increase of $8,406 in total assets and deferred outflows of resources (see Table 1C-C ). Increase in total assets of $8,001 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 restricted net pension assets based on actuarial report, $71 in subscription assets net of accumulated amortization per implementation of GASB Statement No. 96, SBITAs, 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 $7,161 or 21.6% to $40,240, 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 P ublic 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, $70 in subscription liability per im plementation of GASB Statement No. 96, SBITAs, $26 in general liability based on actuarial estimates, and $1 in interest payable related to SBITs. The increases were offset by decreases of $3,008 in net pension liability based on actuarial estimates, $645 in OPEB obligations based on actuarial assumptions, and $346 decrease in lease liability and interest payable per implementation of GASB Statement No. 87, Leases.
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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
39 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
The following table summarizes Water’s revenues, expenses, and changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Revenues:
Charges for services $ 1,598,926 1,375,765 1,259,466 223,161 116,299 Rents and concessions 14,387 14,719 14,624 (332) 95
Other operating revenues 25,191 31,962 27,182 (6,771) 4,780 Interest and investment income/(loss) 18,315 (26,202) 30 44,517 (26,232) Other non-operating revenues 67,553 86,326 72,337 (18,773) 13,989 Total revenues 1,724,372 1,482,570 1,373,639 241,802 108,931 Expenses:
Operating expenses 1,257,946 1,129,681 1,149,825 128,265 (20,144) Interest expenses 319,924 297,068 221,622 22,856 75,446 Amortization of premium, discount,
refunding loss, and issuance costs (25,942) (18,105) (16,498) (7,837) (1,607) Non-operating expenses 2,809 1,938 3,582 871 (1,644) Total expenses 1,554,737 1,410,582 1,358,531 144,155 52,051 169,635 71,988 15,108 97,647 56,880
Capital contributions 7,992 — 4,180 7,992 (4,180)
Transfers from the City and County of San Francisco 20,080 45,036 38,465 (24,956) 6,571 Transfers to the City and County of San Francisco (20,096) (31,359) (21,374) 11,263 (9,985) Net capital contributions and transfers 7,976 13,677 21,271 (5,701) (7,594) Change in net position 177,611 85,665 36,379 91,946 49,286 Net position at beginning of year 2,823,775 2,738,110 2,701,731 85,665 36,379 Net position at end of year $ 3,001,386 2,823,775 2,738,110 177,611 85,665 Table 2
Business Type Activities
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2023, 2022, and 2021
Change in net position before
transfers and capital contributions
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Revenues:
Charges for services $ 661,241 539,526 550,306 121,715 (10,780) Rents and concessions 13,282 13,765 13,735 (483) 30
Other operating revenues 16,568 19,826 18,395 (3,258) 1,431 Interest and investment income/(loss) 11,156 (10,896) 1,374 22,052 (12,270) Other non-operating revenues 40,679 41,871 45,874 (1,192) (4,003) Total revenues 742,926 604,092 629,684 138,834 (25,592) Expenses:
Operating expenses 460,253 401,764 448,782 58,489 (47,018) Interest expenses 214,913 213,681 184,678 1,232 29,003 Amortization of premium, discount,
refunding loss, and issuance costs (9,971) (9,875) (7,782) (96) (2,093) Non-operating expenses 1,775 828 2,208 947 (1,380)
Total expenses 666,970 606,398 627,886 60,572 (21,488) 75,956 (2,306) 1,798 78,262 (4,104)
Capital contributions 2,717 — 4,180 2,717 (4,180)
Transfers from the City and County of San Francisco 5 15,035 21,025 (15,030) (5,990) Transfers to the City and County of San Francisco (20,032) (30,666) (16,654) 10,634 (14,012) Net capital contributions and transfers (17,310) (15,631) 8,551 (1,679) (24,182) Change in net position 58,646 (17,937) 10,349 76,583 (28,286) Net position at beginning of year 633,427 651,364 641,015 (17,937) 10,349 Net position at end of year $ 692,073 633,427 651,364 58,646 (17,937) Table 2A
Proprietary Fund – Water
Years ended June 30, 2023, 2022, and 2021
Change in net position before
transfers and capital contributions
Comparative Condensed Revenues, Expenses, and Changes in Net Position
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
40 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Water Results of Operations, Fiscal Year 2023
The Water Enterprise’s total revenues of $742,926 for the year represented an increase of $138,834 or 23.0% from prior year (see Table 2A ). Increases included $121,715 from charges for services, and $22,052 in interest and investment income. These increases were offset by decreases of $3,258 in other operating revenues, $1,192 in other non-operating revenues, and $483 in rents and concessions.
Charges for services were $661,241, an increase of $121,715 or 22.6% mainly due to an adopted rate increase of
15.9% for wholesale customers and a 5% drought surcharge for retail customers beginning July 1, 2022. Rents and concessions were $13,282, a decrease of $483 or 3.5% mainly due to lease terminations. Other operating revenues were $16,568, a decrease of $3,258 or 16.4% mainly due to decreased consumption by other City departments and fewer capacity fee applications. Interest and investment income was $11,156, an increase of $22,052 or 202.4% due to prior year unrealized losses and higher interest earned on pooled cash. Other non- operating revenues were $40,679, a decrease of $1,192 or 2.8% due to an accrued settlement and water utility arrearages relief grant received in prior year.
The Water Enterprise’s total expenses were $666,970, an increase of $60,572 or 10.0%. Operating expenses were $460,253, an increase of $58,489 or 14.6%, as a result of increases of $52,324 in personnel services mainly due to pensions based on actuarial estimates, $6,937 in depreciation from additional capital assets placed into service, $6,603 in services provided by other departments mainly for higher water assessments fees paid to Hetch Hetchy Water, $4,357 in contractual services mainly for custom work and professional & specialized service charges, and increase of $4,327 in materials and supplies mainly for water treatment supplies. These increases were offset by a decrease of $16,059 in general administrative and other expenses mainly from judgement and claims. Interest expenses increased by $1,232, compared to prior year, mainly due to increased commercial paper interest.
Amortization of bond premium, discount, refunding loss and issuance costs increased by $96 mainly due to amortization of bond refunding loss. Non- operating expenses increased by $947 mainly for yout h employment and employment projects.
Transfer in of $5 from the General Fund was for the Mayor’s Office’s minimum compensation ordinance. Transfer out of $20,032 included $20,000 to Hetch Hetchy Water to fund various Mountain Tunnel Improvement projects, and $32 to the Office of the City Administrator for the Water Enterprise’s contribution to the Surety Bond Program.
Capital contribution of $2,717 was received from a developer for assets relating to the Potrero HOPE SF and Sunnydale HOPE SF projects.
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 fixe d 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 SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
41 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The Water Enterprise’s total expenses were $606,398, a decrease of $21,488 or 3.4%. Operating expenses were $401,764, a decrease of $47,018 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 $1,467 in contractual services mainly from other current expenses and subscriptions. These decreases were offset by increases of $3,333 in depreciation due to additional capital assets placed into service, $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, and $2,544 in materials and supplies mainly for water treatment supplies. Interest expenses increased by $29,003 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.
The following table summarizes Wastewater’s revenues, expenses, and changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Revenues:
Charges for services $ 354,491 356,041 318,236 (1,550) 37,805 Rents and concessions 822 705 642 117 63
Other operating revenues 8,623 12,136 8,787 (3,513) 3,349 Interest and investment income/(loss) 2,556 (7,087) (1,187) 9,643 (5,900) Other non-operating revenues 9,910 25,454 4,911 (15,544) 20,543 Total revenues 376,402 387,249 331,389 (10,847) 55,860 Expenses:
Operating expenses 261,350 257,158 292,173 4,192 (35,015) Interest expenses 95,520 77,751 34,944 17,769 42,807 Amortization of premium,
refunding loss, and issuance costs (14,387) (8,422) (8,497) (5,965) 75 Non-operating expenses 535 482 409 53 73
Total expenses 343,018 326,969 319,029 16,049 7,940 Change in net position before
transfers and capital contributions 33,384 60,280 12,360 (26,896) 47,920 Capital contributions 2,740 — — 2,740 —
Transfers from the City and County of San Francisco 75 — 1,440 75 (1,440) Transfers to the City and County of San Francisco (32) (161) (4,188) 129 4,027 Net capital contributions and transfers 2,783 (161) (2,748) 2,944 2,587 Change in net position 36,167 60,119 9,612 (23,952) 50,507 Net position at beginning of year 1,362,667 1,302,548 1,292,936 60,119 9,612 Net position at end of year $ 1,398,834 1,362,667 1,302,548 36,167 60,119 Table 2B
Proprietary Fund – Wastewater
Years ended June 30, 2023, 2022, and 2021
Comparative Condensed Revenues, Expenses, and Changes in Net Position
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
42 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Wastewater Results of Operations, Fiscal Year 2023
The Wastewater Enterprise’s total revenues were $376,402, a decrease of $10,847 or 2.8% from prior year (see Table 2B). Charges for services decreased by $1,550 or 0.4% mainly due to an increase in allowance for doubtful accounts by $6,885 as there were more sewer charge receivables aging over 120 days, offset by a 5% drought surcharge and a sanitary flow increase of 47,124 ccf or 0.2% from residential and non- residential customers. Other non-operating revenues decreased by $15,544 or 61.1% mainly due to Federal and State grants received in prior year consisting of $9,302 for the customer utility arrearage relief, $8,000 SRF loan principal forgiveness of the SEP Biosolids Digester Facilities and the OSP Digester Gas Handling Utilization Upgrade projects, and $3,409 Baker Beach grant, a decrease of $91 in Federal interest subsidy, and $44 refunded federal grant relating to customer utility arrearage relief program, offset by $5,000 Monsanto settlement related to water pollution, $196 Baker Beach grant in current year, and increases of $92 in gain from sale of assets and $14 in miscellaneous revenue. Other operating revenues decreased by $3,513 or 28.9% mainly due to decreases of $3,203 in capacity fees resulting from $3,985 decrease in permits issued offset by $782 decrease in allowance for doubtful accounts, and $310 i n other operating revenues to other City departments such as the Recreation & Park, the San Francisco Municipal Transportation Agency, and the Zuckerberg San Francisco General Hospital and Trauma Center. Rents and concessions increased by $117 or 16.6% mainly due to increases in rental income of $162 from short -term conference room rentals at Southeast Community Center beginning December 2022, $17 from tenants with 5.3% consumer price index average rate increase, offset by decreases of $59 from three terminated leases in the current year and $3 related to leases due to GASB Statement No. 87, Leases, implementation. Interest and investment income increased by $9,643 or 136.1% mainly due to $4,436 decrease in unrealized loss in City Treasury pooled investments attributed to improved market value of investments and higher interest rates, an increase of $3,697 in interest earned from pooled cash due to increase in cash balances and higher annualized interest rate, $1,500 increase in interest earned from fiscal agent account due to increase in fiscal agent cash balances and rising interest rates, and $10 interest earned from lease receivable.
Total expenses were $343,018, an increase of $16,049 or 4.9% due to increases of $17,769 in interest expenses mainly due to higher bond principal, $4,192 in operating expenses, and $53 increase in City grants program expenses due to increased expenditures for community based organization services such as for the Youth Employment & Environment Project and the UC Wastewater Treatment Project, offset by an increase of $5,965 in amortization of premium, refunding loss, and issuance cost. The increase of $4,192 in operating expenses were mainly due to increases of $26,270 in personnel services due to $21,594 increase in expenses related to GASB 68, Accounting and Financial Reporting for Pensions , pension adjustment and 5.25% increase in cost of living adjustment (COLA), $2,462 in materials and supplies due to water sewage treatment supplies for Bayside Operations, $2,205 in contractual services mainly due to higher building and equipment maintenance for sludge removal, vehicle rental, and power utility, $1,354 in services provided by other departments mainly for electricity from Hetch Hetchy Power, water from Water Enterprise, and for toxics waste & hazard materials services and cleanup charges related to the UC Wastewater Treatment Project, offset by decreases of $28,033 in general and administrative and other operating expenses mainly due to increased capitalized expenditures to fixed assets and a decrease in judgements and claims offset by I ncreased capital project expenses primarily related to SSIP Biosolids Dig ester Project, New Grit Removal/Influent Pump Project, and Westside Pump Station Reliability Improvement Project and $66 in depreciation and amortization expenses.
Capital contributions of $2,740 was for the Sunnydale H OPE SF Developer Project. Net transfers of $43 included transfer in of $75 from the General Fund for the Wastewater Add- backs Master Project offset by transfer out of $32 to the Office of the City Administrator for the Surety Bond Program.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
43 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 2 B). 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 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 $326,969, an increase of $7,940 or 2.5% due to increases of $42,807 in interest expenses mainly due to increased outstanding bond principal balance and the implementation of 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 $35,015 decrease in operating expenses. The decrease of $35,015 in operating expenses was mainly due to decreases of $26,993 in personnel services due to $38,115 decrease in expenses related to GASB Statement No. 68, Accounting and Financial Reporting for Pensions, pension adjustment offset by a 4% 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 $3,762 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, $2,083 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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
44 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The following table summarizes Hetchy Water’s revenues, expenses, and changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Hetchy Water Results of Operations, Fiscal Year 2023
Hetchy Water’s total revenues were $55,015, an increase of $8,156 or 17.4% from prior year’s revenues (see Table 2C-A). Increases included $3,370 in charges for services, $3,389 in interest and investment income, $1,382 in other non-operating revenues, and $15 in rents and concessions.
Charges for services were $52,570, an increase of $3,370 or 6.8% mainly due to increased water assessment fees from the Water Enterprise to fund upcountry water -related costs. Interest and investment income was $457, an increase of $3,389 mainly due to decrease in unrealized loss in City Treasury pooled investments attributed to improved market value of investments and higher interest rates. Other non- operating revenues were $1,861, an increase of $1,382 mainly due to increase of $1,177 in State grants revenue for the 2018 Moccasin Storm Project related to emergency repairs, $200 revenue related to labor settlements, and $9 in overhead charges, offset by decreases of $3 in net gain from sale of fixed assets and $1 in miscellaneous revenue. Rents were $127, an increase of $15 mainly due to higher collections from recreational rentals.
Total operating expenses, excluding interest expenses and other non- operating expenses, were $50,011, a decrease of $2,288 or 4.4%. Other operating expenses decreased by $7,358 mainly due to lower capital spending on the Mountain Tunnel Improvement Project, offset by increases of $2,788 in personnel services due to higher personnel and fringe benefit costs and 5.25% increase in COLA, $1,451 in general and administrative expenses due to higher fees, licenses, and permit expenses, $281 in contractual services from increased management consulting services, $263 in services provided by other departments mainly due to higher bureau allocations related to accounting services support from the Controller’s Office, $243 in material and supplies from fuel and minor data processing equipment, and $44 in depreciation and amortization mainly related to additional facilities and improvements placed in service.
Other non- operating expenses were $54, an increase of $17 due to higher payments to community -based organization programs. Interest expenses were $4, an increase of $1 mainly due to implementation of GASB Statement No. 96, SBITAs. A transfer in of $20,000 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, 2023 increased by $24,946 or 10.0% compared to prior year.
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Revenues:
Charges for services $ 52,570 49,200 46,979 3,370 2,221 Rents and concessions 127 112 111 15 1
Interest and investment income/(loss) 457 (2,932) (232) 3,389 (2,700) Other non-operating revenues 1,861 479 1,352 1,382 (873) Total revenues 55,015 46,859 48,210 8,156 (1,351)
Expenses:
Operating expenses 50,011 52,299 50,519 (2,288) 1,780 Interest expenses 4 3 2 1 1
Non-operating expenses 54 37 63 17 (26)
Total expenses 50,069 52,339 50,584 (2,270) 1,755
Change in net position before transfers 4,946 (5,480) (2,374) 10,426 (3,106) Transfers from the City and County of San Francisco 20,000 30,001 16,000 (10,001) 14,001 Change in net position 24,946 24,521 13,626 425 10,895 Net position at beginning of year 249,182 224,661 211,035 24,521 13,626 Net position at end of year $ 274,128 249,182 224,661 24,946 24,521 Table 2C – A
Proprietary Fund – Hetchy Water
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
45 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
Total operating expenses, excluding interest expenses and other non- operating expenses, were $52,299, an increase of $1,780 or 3.5%. The increase was primarily due to increases of $4,275 in other operating expenses mainly due to higher capital spending, $6 12 in services provided by other departments mainly due to higher legal service charges from City Attorney’s Office, $452 in depreciation and amortization mainly related to additional building, structure and equipment placed in service, $309 in general and administrative expenses mainly due to higher fees, licenses, and permit expenses, $277 in contractual services mainly from increased engineering and management consulting services, 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 $3, an increase of $1 mainly due to implementation of GASB Statements No. 87, Leases and GASB Statement No. 96, SBITAs. 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 $24,521 or 10.9% compared to prior year.
The following table summarizes Hetchy Power’s revenues, expenses, and changes in net position.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Revenues:
Charges for services $ 203,847 173,105 136,247 30,742 36,858 Rent
s and concessions 156 137 136 19 1
Interest and investment income/(loss) 3,741 (4,001) 24 7,742 (4,025) Other non-operating revenues 13,605 15,763 19,273 (2,158) (3,510) Total revenues 221,349 185,004 155,680 36,345 29,324 Expenses:
Operating expenses 191,552 156,343 145,640 35,209 10,703 Interest expenses 9,486 5,627 1,972 3,859 3,655
Amortization of premium, discount,
and issuance costs (1,584) 192 (219) (1,776) 411
Non-operating expenses 227 591 902 (364) (311)
Total expenses 199,681 162,753 148,295 36,928 14,458 Change in net position before transfers and contributions 21,668 22,251 7,385 (583) 14,866 Capital contribution 2,535 — — 2,535 —
Transfers to the City and County of San Francisco (32) (532) (532) 500 — Net capital contributions and transfers 2,503 (532) (532) 3,035 — Change in net position 24,171 21,719 6,853 2,452 14,866 Net position at beginning of year 494,179 472,460 465,607 21,719 6,853 Net position at end of year $ 518,350 494,179 472,460 24,171 21,719 Table 2C – B
Proprietary Fund – Hetchy Power
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
46 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Power Results of Operations, Fiscal Year 2023
Hetchy Power’s total revenues were $221,349, an increase of $36,345 or 19.6% from prior year’s revenues (see Table 2C-B). Increases included $30,742 from charges for services, $7,742 from interest and investment income, and $19 from rents and concessions, offset by a decrease of $2,158 from other non- operating revenues.
Charges for services were $203,847, an increase of $30,742 or 17.8%, mainly due to increases of $19,450 in wholesale revenue from Congestion Revenue Right (CRR) credits from California Independent System Operator (CAISO) and $12,159 in billings from non- work order City departments as a result of increased operation due to easing of COVID-19 restrictions, offset by a decrease of $867 in resale of capacity to CleanPowerSF. Interest and investment income was $3,741, an increase of $7,742 mainly due to decrease in unrealized loss in City Treasury pooled investments attributed to improved market value of investments and higher interest rates. Rents increased by $19 or 13.9% to $156 mainly due to higher collections from recreational rentals.
Other non-operating revenues were $13,605, a decrease of $2,158 or 13.7%, mainly due to decreases of $3,987 in State and Federal grants revenue from the Rim Fire Project and California Arrearages Payment Program (CAPP) to provide relief for customer unpaid bills, $590 in Low Carbon Fuel Standard credits, $306 Cap a nd Trade revenue due to decrease of 10,606 allowances sold, $22 in bond interest subsidies from IRS mainly due to lower subsidy for 2015 NCREBs, and $6 in net gain from sale of fixed assets, offset by increases of $2,084 from the Power System Mitigation Project, $244 in settlement revenue, $220 in Distributed Antenna System and miscellaneous revenue, and $205 in overhead charges.
Total operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $35,209 or 22.5% to $191,552. Increases included $20,406 in purchased electricity and transmission, distribution, and other power costs attributed to volatile and higher pricing in power market, $10,988 in general and administrative expenses due to higher judgements and claims expenses , $4,654 in personnel services due to higher personnel and fringe benefit costs and 5.25% increase in COLA, $2,421 in services provided by other departments mainly due to higher legal service charges from City Attorney’s Office, $1,360 in contractual services for construction contracts, $342 in materials and supplies for electrical supplies and fuel, and $108 in depreciation and amortization mainly related to additional facilities and improvements placed in service. These increases were offset by a decrease of $5,070 in other operating expenses mainly due to lower capital spending for Bay Corridor Project.
Interest expenses increased by $3,859 or 68.6% due to higher outstanding bonds and commercial paper.
Amortization of premium and discount decreased by $1,776 due to higher costs of issuance for 2021 Series AB revenue bonds in prior year.
Other non- operating expenses were $227, a decrease of $364 or 61.6% mainly due to lower payments for GoSolarSF Incentive Program. Capital contributions of $2,535 were from the Sunnydale and Potrero H OPE SF Projects. Transfer out of $32 to the Office of the City’s Administrator was for the Surety Bond Program.
As a result of the above activities, net position for the year ended June 30, 2023 increased by $24,171 or 4.9% compared to prior year.
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 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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
47 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 $10,703 or 7.3%, to $156,343. 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, $2,119 in depreciation and amortization mainly for buildings, facilities, machinery, and equipment related to higher capitalization of assets, $754 in contractual services mainly for management consulting and engineering services, $280 in materials and supplies mainly for electrical supplies and tools, and $116 in services provided by other departments mainly due to higher risk management costs. The increases were offset by decreases of $6,110 in personnel services due to lower pension obligations based on actuarial reports, $1,420 in general and administrative expenses mainly due to lower judgements and claims expenses, and $595 decrease in other operating expenses mainly due to higher capitalized project expenses.
Interest expenses increased by $3,655 or 185.3% 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 $21,719 or 4.6% 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. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Restated 2023 - 2022 2022 - 2021
2023 2022# 2021 Change Change
Revenues:
Charges for services $ 326,777 257,893 207,698 68,884 50,195 Interest and investment income/(loss) 405 (1,286) 51 1,691 (1,337) Other non-operating revenues 1,498 2,759 927 (1,261) 1,832 Total revenues 328,680 259,366 208,676 69,314 50,690 Expenses:
Operating expenses 294,780 262,117 212,711 32,663 49,406 Interest expenses 1 6 26 (5) (20)
Non-operating expenses 218 — — 218 —
Total expenses 294,999 262,123 212,737 32,876 49,386 Change in net position 33,681 (2,757) (4,061) 36,438 1,304 Net position at beginning of year 84,320 87,077 91,138 (2,757) (4,061) Net position at end of year $ 118,001 84,320 87,077 33,681 (2,757) Table 2C – C
Proprietary Fund – CleanPowerSF
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
48 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
CleanPowerSF Results of Operations, Fiscal Year 2023
CleanPowerSF’s total revenues were $328,680, a $69,314 or 26.7% increase over prior year (see Table 2C-C ).
Charges for services increased by $68,884 or 26.7% mainly due to $70,629 in electricity sales to retail and commercial customers from increased consumption of 1.1% or 30,441 MWh, offset by $997 in lower capacity sales to Hetchy Power and $748 increase in allowance for uncollectible attributed to lower assistance received from CAPP for eligible customer account arrearages. Interest and investment income was $405, an increase of $1,691 mainly due to decrease in unrealized loss in City Treasury pooled investments attributed to improved market value of investments and higher interest rates. Other non- operating revenue decreased by $1,261 mainly due to $1,251 decrease in Federal grants received from CAPP and $330 in liquidated damage compensation received from supplier for delay of the Renewable Energy Project in prior year, offset by an increase of $320 in revenue mainly from Disadvantaged Communities (DAC) Programs.
Total operating expenses, excluding interest expenses were $294,780, an increase of $32,663 or 12.5% from prior year. Purchased electricity and transmission, distribution, and other power costs increased by $25,640 due to volatile and increased pricing in power market, and higher resource adequacy capacity purchases related to compliance requirements from the CPUC. Other increases include $6,568 in personnel services due to higher personnel and fringe benefit costs and 5.25% increase in COLA, $681 in services provided by other departments mainly due to higher bureau allocations related to accounting services support from the Controller’s Office, $112 in other operating expenses mainly due to higher bureau allocations, and $24 in material and supplies mainly for minor data processing equipment. These increases were offset by decreases of $221 in professional and contractual services mainly from lower management consulting and financial services, $115 in depreciation and amortization due to lease termination for 544 Golden Gate, and $26 in general and administrative due to lower bank fees. Other non-o perating expenses increased by $218 in solar rebates for the Inverter Replacement Program. Interest expenses were $1, a decrease of $5 related to lease termination.
As a result of the above activities, net position for the year ended June 30, 2023 increased by $33,681 or 39.9% compared to prior year.
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 $262,117, an increase of $49,406 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 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, $102 in professional and contractual services mainly from higher software licensing fee, $40 in depreciation and amortization due to implementation of GASB Statement No. 96, SBITAs , 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 $20 mainly due to repayment of working capital loan to Hetchy Power completed in prior year.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
49 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
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.
Water Capital Assets, Fiscal Year 2023
The Water Enterprise has net capital assets of $5,648,314 invested in a broad range of utility capital assets as of June 30, 2023 (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 $30,720 from the prior year. Facilities, improvements, machinery, and equipment decreased by $51,080 mainly due to depreciation. Intangible assets decreased by $821 mainly due to amortization. Land decreased by $119 from the sale of Balboa Reservoir. Construction work in progress increased by $82,740 mainly from the Mountain Tunnel Improvement and SF Westside Recycled Water projects.
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Facilities, improvements, machinery, and equipment$ 7,865,615 7,767,562 7,595,329 98,053 172,233 Intangible assets 33,816 34,731 35,102 (915) (371)
Land and rights-of-way 163,075 163,194 154,001 (119) 9,193 Land Improvements 6,733 — — 6,733 —
Construction work in progress 3,130,427 2,485,201 2,079,754 645,226 405,447 Total $ 11,199,666 10,450,688 9,864,186 748,978 586,502 Table 3
Business Type Activities
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2023, 2022, and 2021
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Facilities, improvements, machinery, and equipment$ 5,005,667 5,056,747 4,948,186 (51,080) 108,561 Intangible assets 2,331 3,152 2,763 (821) 389
Land and rights-of-way 113,322 113,441 104,248 (119) 9,193 Construction work in progress 526,994 444,254 532,602 82,740 (88,348) Total $ 5,648,314 5,617,594 5,587,799 30,720 29,795 Table 3A
Proprietary Fund – Water
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
50 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Major additions to construction work in progress during the year ended June 30, 2023 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, 2023 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, 2023. 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, 2023, 35 local projects were completed. For regional projects, 48 projects were completed, the Alameda Creek Recapture and Regional Groundwater Storage 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 expec ted completion date is February 2027. Additional details regarding the WSIP are available at https://sfpuc.org/construction-contracts/water-infrastructure-improvements.
Mountain Tunnel Improvements $ 22,623
SF Westside Recycled Water Project 9,400
New Water Utility Service Facilities 7,594
Water Main Replacement and Auxiliary Water Supply System Pipeline - 19th Ave 7,183 College Hill Reservoir Outlet and Pipeline 7,087
Sunol Valley Water Treatment Plant Ozonation 6,987
Water Main Replacement - WD-2718 Prospect/Cortland/Fair Ave 5,987 Harry Tracy Water Treatment Plant - Filters No. 1 to 6 Underdrain Replacement 5,939 Water Main Replacement - WD-2859 Taraval Segment B 5,649 San Joaquin Pipeline Valve and Safe Entry Improvements 5,486 Water Main Replacement - WD-2843 Diamond/27th/28th Streets 5,372 Water Main Replacement - WD-2806 Vicente Street/19th to 25th Ave 5,189 Regional Groundwater Storage and Recovery 5,152
Other project additions individually below $5,000 80,743 Total $ 180,391
Auxiliary Water Supply System Pumping Station No. 2 Improvement - Structural System $ 14,683 Water Main Replacement - WD-2811 17th/Clayton/Ord Streets 11,240 New Water Utility Service Facilities 7,594
Water Main Replacement - 19th Ave 7,018
Auxiliary Water Supply System Pumping Station No. 2 Improvement - Diesel Engine Generator 6,235 Other items individually below $5,000 54,730
Total $ 101,500
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
51 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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:
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.
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
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
T
otal $ 264,678
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
52 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 at https://sfpuc.org/construction-c ontracts/water-
infrastructure-improvements.
The following table summarizes Wastewater’s changes in capital assets.
Wastewater Capital Assets, Fiscal Year 2023
The Wastewater Enterprise has capital assets of $4,684,652, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2023 (see Table 3B ). This amount represents an increase of $638,201 or 15.8% 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 $508,546 or 29.5%.
Facilities, improvements, machinery, and equipment increased by $122,696 or 5.4%. Land improvements increased by $6,733 or 100% relating to improvements for the Southeast Community Center Project. Intangible assets increased by $226 or 3.2% due to asset addition of $1,212 for the Customer Billing System Project, offset by $986 depreciation expense.
Major additions to construction work in progress during the year ended June 30, 2023 include the following:
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Facilities, improvements, machinery, and equipment $ 2,393,051 2,270,355 2,214,227 122,696 56,128 Intangible assets 7,333 7,107 7,407 226 (300)
Land and rights-of-way 44,572 44,572 44,572 — —
Land Improvements 6,733 — — 6,733 —
Construction work in progress 2,232,963 1,724,417 1,340,644 508,546 383,773 Total $ 4,684,652 4,046,451 3,606,850 638,201 439,601 Table 3B
Proprietary Fund – Wastewater
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2023, 2022, and 2021
Southeast Plant Biosolids and Digester Facilities Project $ 332,775 Southeast Plant New Headworks (Grit) Replacement 157,143 Westside Pump Station Reliability Improvements 14,226
Large Diameter Sewer Projects and Channel Force Main Intertie 13,125 As-Needed Spot Sewer Replacement Number 42 (WW-699) 11,231 Southeast Community Center at 1550 Evans 9,794
Southeast Plant Power Feed and Primary Switchgear Upgrades 9,711 Oceanside Plant Digester Gas Handling Utilization Upgrade 9,195
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
53 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, 2023 include the following:
*Does not include $1,573 equipment transfers from the Department of Public Works (DPW).
See Note 4 for additional information about capital assets.
Sewer System Improvement Program (SSIP)
The Sewer System Improvement Program (SSIP) is the SFPUC’s wastewater capital improvement program which includes multiple projects to improve the existing wastewater system. The implementation of the SSIP projects were originally phased over 20 years to maintain ratepayer affordability and minimize impacts to communities throughout the City. On March 22, 2016, the refined program scope and budget for $7.0 billion was endorsed by the Commission along with the baseline for scope, schedule, and budget for Phase 1 projects totaling $2.9 billion.
The revised program is referred to as the “2016 SSIP Baseline”.
As of June 30, 2023, 43 projects or 61.4% totaling $457 million were completed, 7 projects in pre- construction phase, 11 projects in construction phase, and 9 projects in close- out phase. The SEP Seismic Reliability and Condition Assessment Improvements Project was completed on March 31, 2023 with reported project expenditures of $33.6 million. This project represents immediate improvements to the existing facilities at Southeast Plant (SEP) identified as part of the condition assessment effort that are not specifically included as part of another near -term SSIP Phase 1 project. This project includes items for rehabilitation such as concrete spalling repair and seismic retrofit of priority process buildings. The Westside Pump Station Reliability Improvements is on-going construction.
The project is reported at 86.2% complete and forecasted final completion is on June 27, 2024. Program expenditures as of June 30, 2023 totaled $2,469.3 million. Additional details regarding the SSIP are available at https://sfpuc.org/construction-contracts/sewer-system-improvement-program.
North Shore Pump Station Wet Weather Improvements 8,853 New Treasure Island Wastewater Treatment Plant Capital Improvements 8,851 Southeast Plant Facility-Wide Distributed Control System Upgrades 7,581 Wawona Area Stormwater Improvement Project 5,879
As-Needed Main Sewer Replacement Number 9 (WW-713) 5,618 Folsom Area Stormwater Improvement Project 5,403
As-Needed Spot Sewer Replacement Number 43 (WW-715) 4,959 Public Works Golden Gate Avenue and Laguna Street Project 4,612 Ocean Beach Climate Change Adaptation Project 4,585
Taraval Sewer Improvements 4,519
Lower Alemany Area Stormwater Improvement Project 4,425 16Th Street Sewer Replacement (Segment 2) 4,262
Oceanside Plant Condition Assessment Improvements - Part 2 4,208 Other project additions individually below $4,000 78,530 Total $ 709,485
Southeast Community Center at 1550 Evans $ 111,510
Mar
iposa Pump Station & Force Main 35,852
As-Needed Spot Sewer Replacement Number 42 (WW-699) 12,531 Large Diameter Sewer Projects and Channel Force Main Intertie 9,182 Public Works 41st and 44th Avenue Infrastructure Improvements 7,042 Equipment Purchase, Repair & Replacement Project 6,076
Castro, 19th, 26th Street Water and Sewer Improvements - WD-2739 3,773 Other project additions individually below $3,000 18,887 Total $ 204,853 *
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
54 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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:
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.
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
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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
55 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 ht
tps://sfpuc.org/construction- contracts/sewer-system-improvement- program.
The following table summarizes Hetchy Water’s changes in capital assets.
Hetchy Water Capital Assets, Fiscal Year 2023
Hetchy Water has capital assets of $219,754, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2023 (see Table 3C- A). This amount represents an increase of $18,747 or 9.3%, primarily due to increases of $18,312 in construction work in progress and $642 in facilities, improvements, machinery, and equipment, offset by a decrease of $207 in amortization of intangible assets.
For the year ended June 30, 2023, Hetchy Water’s major additions to construction work in progress totaled $25,032. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $6,762 (see Table 3D).
See Note 4 for additional information about capital assets.
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 $207 in amortization of intangible assets.
2023 - 2022 2022 - 2021
2023 2022 2021 Cha nge Change
Facilities, improvements, machinery, and equipmen$ 133,905 133,263 128,335 642 4,928 Intangible assets 10,167 10,374 10,581 (207) (207)
Land and rights-of-way 3,232 3,232 3,232 — —
Construction work in progress 72,450 54,138 35,333 18,312 18,805 Total $ 219,754 201,007 177,481 18,747 23,526
Table 3C – A
Proprietary Fund – Hetchy Water
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
56 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 3E).
See Note 4 for additional information about capital assets.
The following table summarizes Hetchy Power’s changes in capital assets.
Hetchy Power Capital Assets, Fiscal Year 2023
Hetchy Power has capital assets of $646,946, net of accumulated depreciation and amortization, invested in utility capital assets as of June 30, 2023 (see Table 3 C-B). This amount represents an increase of $61,310 or 10.5%, primarily due to increases of $35,628 in construction work in progress and $25,795 in facilities, improvements, machinery, and equipment, offset by a decrease of $113 in amortization of intangible assets.
For the year ended June 30, 2023, Hetchy Power’s major additions to construction work in progress totaled $75,348. Major depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service totaled $43,392 (see Table 3D).
See Note 4 for additional information about 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 $19,974 (see Table 3E).
See Note 4 for additional information about capital assets.
CleanPowerSF Capital Assets
CleanPowerSF had no capital assets as of June 30, 2023 and 2022.
See N
ote 4 for additional information about capital assets.
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Facilities, improvements, machinery, and equipmen$ 332,992 307,197 304,581 25,795 2,616 Intangible assets 13,985 14,098 14,351 (113) (253)
Land and rights-of-way 1,949 1,949 1,949 — —
Construction work in progress 298,020 262,392 171,175 35,628 91,217 Total $ 646,946 585,636 492,056 61,310 93,580
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2023, 2022, and 2021
Table 3C – B
Proprietary Fund – Hetchy Power
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
57 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, 2023 and 2022 include the following:
He tchy He tchy 2023
Water Power Total
Moccasin Powerhouse Rewind $ — 16,920 16,920
Mountain Tunnel Improvement Project 6,835 8,353 15,188 Bay Corridor Project — 9,093 9,093
San Joaquin Pipeline Valve & Safe Entry Improvement 6,888 — 6,888 Transmission Line Clearance Mitigation Upgrade — 6,061 6,061 Cluster 7 Mitigation — 5,398 5,398
O'Shaughnessy Dam Outlet Works Phase 1 1,724 2,107 3,831 Treasure Island Capital Improvements — 3,471 3,471
Moccasin Dam Long Term Improvement and Facilities Upgrade 1,518 1,856 3,374 Repair & Replacement Life Extension Program 3,149 — 3,149 Intervening Facilities — 2,748 2,748
2023 March Winter Storm 874 1,068 1,942
Other project additions individually below $1,500 4,044 18,273 22,317 Additions to Construction Work in Progress $ 25,032 75,348 100,380 Van Ness Bus Rapid Transit $ — 13,916 13,916
Flow Control Facility Bypass Tunnel 3,291 4,022 7,313 Power Intervening Facilities — 4,953 4,953
Mission Rock Phase I — 2,075 2,075
Treasure Island Distribution Backbone — 1,792 1,792
Yerba Buena Island Underground Distribution System — 1,677 1,677 Marina Middle School Photovoltaic System — 1,587 1,587 Other project additions individually below $1,500 3,471 13,370 16,841 Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service $ 6,762 43,392 50,154 Table 3D
Proprietary Funds – Hetchy Water and Hetchy Power
Year ended June 30, 2023
Major Additions to Construction Work in Progress and Facilities, Improvements, Intangible Assets, Machinery, and Equipment Placed in Service He tchy He tchy 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, Intangible Assets, Machinery, and Equipment Placed in Service $ 11,013 19,974 30,987 Proprietary Funds – Hetchy Water and Hetchy Power
Intangible Assets, Machinery, and Equipment Placed in Service Year ended June 30, 2022
Table 3E
Major Additions to Construction Work in Progress and Facilities, Improvements,
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
58 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
Water Debt Administration
As of June 30, 2023, the Water Enterprise had $5,338,431 total debt outstanding, an increase of $53,801 over the prior year, as shown below in Table 4 A. More detailed information about the Water Enterprise’s debt activity is presented in Notes 6, 7, 8 and 9 to the financial statements.
The decrease of $150,089 in revenue bonds was due to decreases of $125,285 from bond repayment, $24,812 in bond premium from amortization, offset by a $8 increase in bond discount from amortization. The $3,138 decrease of certificates of participation was due to $3,124 from principal repayment, and $14 amortization of premium. The increase of $41,866 in State revolving funds loans was mainly from additional reimbursement requests of $32,102 for the Mountain Tunnel Improvement project and $9,764 for SF Westside Recycled Water project. The Water Enterprise had $343,767 in tax -exempt and $27,692 in taxable commercial paper as of June 30, 2023, and $179,600 in tax-exempt and $26,697 in taxable commercial paper as of June 30, 2022. The increase of $165,162 was due to additional issuances of $164,167 in tax-exempt and $995 in taxable 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, 2023, and “Aa2” and “AA-” from Moody’s and Standard & Poor’s (S&P) at June 30, 2022, respectively.
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Bonds $ 7,638,688 6,986,674 6,631,009 652,014 355,665 Revenue notes 349,556 350,356 — (800) 350,356
Commercial paper 487,811 625,473 859,051 (137,662) (233,578) Certificates of participation 129,550 133,945 138,180 (4,395) (4,235) State revolving fund loans 482,316 424,420 215,966 57,896 208,454 122,357 — — 122,357 —
Total $ 9,210,278 8,520,868 7,844,206 689,410 676,662 Water Infrastructure Finance and
Innovation Act (WIFIA) loans
Table 4
Business Type Activities
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2023, 2022, and 2021
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Revenue bonds $ 4,710,846 4,860,935 4,994,775 (150,089) (133,840) Commercial paper 371,459 206,297 105,862 165,162 100,435 Certificates of participation 92,499 95,637 98,662 (3,138) (3,025) State revolving fund loans 163,627 121,761 107,407 41,866 14,354 Total $ 5,338,431 5,284,630 5,306,706 53,801 (22,076) Table 4A
Proprietary Fund – Water
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
59 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 2023 and 2022, 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, 2023, the Board of Supervisors has authorized the issuance of $4,758,518 in revenue bonds under Proposition E, with $3,903,617 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, 2023, $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, 2023 and 2022. The Water Enterprise’s short -term debt has interest rates ranging from 1.2% to 5.3% during fiscal year 2023, and 0.1% to 2.0% during fiscal year 2022.
Wastewater Debt Administration
As of June 30, 2023, 2022, and 2021, the Wastewater Enterprise’s debt from revenue bonds, revenue notes, commercial paper, certificates of participation, SRF, and WIFIA loans were $3,551,970, $2,988,713, and $2,363,086, respectively, as shown in Table 4 B. More detailed information about the Wastewater Enterprise’s debt activity is presented in Notes 6, 7, 8 and 9 to the financial statements.
The increase of $563,257 was mainly due to $1,136,002 Revenue Bonds 2023 Series A (SSIP/Green), Series B (Non-SSIP), and Series C (Refunding – SSIP/Green) net of premium, $153,932 Revenue Bonds 2022 Series B (Refunding) net of premium, $177,564 issuance of commercial paper, $122,357 new WIFIA loan for Bi osolids Digester Facilities Project, and $18,511 aggregate new SRF loans for the SEP New Headworks Replacement and OSP Digester Gas Utilization Upgrade projects, offset by $556,721 refunding of commercial paper, $419,505 aggregate refunded principal of revenue bond Series 2013AB and 2018C, $37,652 repayment of outstanding debt, $15,737 of premium amortizations, and $15,494 refunded premium of revenue bond Series 2013AB.
Credit Ratings and Bond Insurance – As of June 30, 2023 and 2022 , the Wastewater Enterprise carried underlying ratings of “Aa2” and “AA” from Moody’s and Standard & Poor’s (S&P), respectively.
2023 - 2022 2022 - 2021
2023 2022 2021 Cha nge Change
Revenue bonds $ 2,736,910 1,931, 253 1,589,922 805,657 341,331 Revenue notes 349,556 350,356 — (800) 350,356
Commercial paper — 379,157 638,518 (379,157) (259,361) Certificates of participation 24,458 25,288 26,087 (830) (799) State revolving fund loans 318,689 302,659 108,559 16,030 194,100 122,357 — — 122,357 —
Total $ 3,551,970 2,988,713 2,363,086 563,257 625,627 Table 4B
Proprietary Fund – Wastewater
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2023, 2022, and 2021
Water Infrastructure Finance and
Innovation Act (WIFIA) loans
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
60 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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 2023 and 2022, 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, 2023, the Wastewater Enterprise had $4,709,491 in combined debt issuance authorization from the Board of Supervisors under Proposition E, with $4,242,615 issued against this authorization. The Wastewater Enterprise has a $750,000 authorized commercial paper program, with $0 in tax -exempt commercial paper outstanding as of June 30, 2023 and $379,157 in tax -exempt commercial paper outstanding as of June 30, 2022.
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 3.0%, after factoring in federal interest subsidy receipts on Build America Bonds at June 30, 2023. 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 2023 and 2022, respectively. The interest rates on short-term debt ranged from 0.9% to
3.1% during fiscal year 2023 and from 0.1% to 1.4% during fiscal year 2022. 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 2023. 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. The WIFIA loan carried interest rate of 1.5% during fiscal year 2023 and capitalized interest added to the principal balance of the WIFIA loan on each Semi- Annual Payment Date occurring during the Capitalized Interest Period.
Hetchy Water Debt Administration
Hetchy Water did not have debt outstanding as of June 30, 2023 and 2022. 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.
Hetchy Power Debt Administration
As of June 30, 30, 2023 and 2022, Hetchy Power had outstanding debt of $319,877 and $247,525, 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.
2023 - 2022 2022 - 2021
2023 2022 2021 Change Change
Clean Renewable Energy Bonds 2008 $ — 415 823 (415) (408) Certificates of Participation 2009 Series C — 427 838 (427) (411) Certificates of Participation 2009 Series D (BABs) 12,593 12,593 12,593 — — Qual
ified Energy Conservation Bonds 2011 2,583 3,138 3,687 (555) (549) New Clean Renewable Energy Bonds 2015 1,491 1,637 1,779 (146) (142) 2015 Series A Revenue Bonds 34,985 35,144 35,297 (159) (153) 2015 Series B Revenue Bonds 2,948 3,849 4,726 (901) (877) 2021 Series A Revenue Bonds 89,303 90,213 — (910) 90,213 2021 Series B Revenue Bonds 59,622 60,090 — (468) 60,090 Commercial Paper 116,352 40,019 114,671 76,333 (74,652) Total $ 319,877 247,525 174,414 72,352 73,111
Table 4C
Proprietary Fund – Hetchy Power
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2023, 2022, and 2021
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
61 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The increase of $72,352 was mainly due to $76,333 increase in commercial paper, offset by bonds and certificates of participation principal repayments of $2,397 and $1,584 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, 2023 and 2022, 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 Enterpri se. 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 2023, 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 reconstru ction or replacement of existing water facilities and electric power facilities, or combinations thereof, under the jurisdiction of the Public Utilities Commission. Pursuant to Charter Section 9.107(8), the Power Enterprise can issue revenue bonds, without voter approval, upon an affirmative vote of the Board of Supervisors, for the purpose of the acquisition, construction, installation, equipping, improvement, or rehabilitation of equipment or facilities for 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, 2023 and 2022, $163,555 of Hetchy Power revenue bonds were issued against existing authorization of $695,933 and $555,043, 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 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 1.1% to 3.2% and 0.1% to 1.1% during fiscal years 2023 and 2022, respectively.
CleanPowerSF Debt Administration
CleanPowerSF did not have debt outstanding as of June 30, 2023 and 2022.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
62 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Rates and Charges
Water Enterprise Retail Customers
Proposition E, as approved by the voters in November 2002, amended the City Charter by adding the new Article VIIIB, entitled “Public Utilities,” which changed the Commission’s ability to issue new revenue bonds and set retail water 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 spring 2023. In May 2023, the Commission subsequently adopted three years of retail rate increases from July 1, 2023 through June 30, 2026.
Other miscellaneous fees for service and charges were last approved in 2018, and generally increase annually by the Consumer Price Index from the Controller’s Office of the City and County of San Francisco, or the 20- City Average Construction Index (CCI) published by Engineering News-Record (ENR) Magazine.
All current SFPUC Rates Schedules and Fees are available at https://sfpuc.org/accounts-s ervices/water-power-
and-sewer-rates.
Water Enterprise Wholesale Customers
The Water Supply Agreement (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, and was most recently amended and restated in January 2023. Compared to the prior contract with the wholesale customers, the WSA 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 or at the time of budget appropriation and spending for revenue-funded capital projects, rather than the life of the asset. The WSA requires the rate be calculated and set annually and include a reconciliation between prior year revenues and expenses.
Refer to Note 12 of the notes to financial statements for further discussion on the balancing account of the wholesale customers.
Wastewater Enterprise
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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
63 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
1 2
3 No retal rate increase adopted and effective July 1, 2022. 4 5
Wholesale rates adopted annually.
Four-year retail rate increases adopted and effective July 1, 2018.
Three-year retail rate increases adopted and effective July 1, 2023.
Four-year retail rate increases adopted and effective July 1, 2014.
Effective Date Rate
July 1, 2016 7.0 1 %
July 1, 2017 11.0 1
July 1, 2018 7.0 2
July 1, 2019 7.0 2
July 1, 2020 8.0 2
July 1, 2021 8.0 2
July 1, 2022 — 3
July 1, 2023 9.0 4
July 1, 2024 9.0 4
July 1, 2025 9.0 4
Ten-y ear A verage Rate A djustm ents
1 Four-year rate increases adopted and effective July 1, 2014. 2 Four-year rate increases adopted and effective July 1, 2018. 3 No retail rate adjustment.
4 Three-year rate increases adopted and effective July 1, 2023.
July 1, 2016 10.0 1 9.3
July 1, 2017 7.0 1 —
July 1, 2018 9.0 2 —
July 1, 2019 8.0 2 —
July 1, 2020 7.0 2 —
July 1, 2021 7.0 2 —
July 1, 2022 — 3 15.9
July 1, 2023 5.0 4 9.7
July 1, 2024 5.0 4 —
July 1, 2025 5.0 4 —
Effective date Retail Wholesale5
Ten-y ear A verage Rate A djustm ents
Pursuant to the City and County of San Francisco Charter section 8B.125, an independent rate study is performed at least once every five years. In compliance with City Charter section 8B.125, a water and wastewater rate study were completed in May 2023. The Commission subsequently adopted three years of wastewater rate increases from July 1, 2023 through June 30, 2026. Other miscellaneous fees for service and charges were last approved in 2018, and generally increase annually by the Consumer Price Index from the Controller’s Office of the City and County of San Francisco, or the 20-City Average Construction Index (CCI) published by Engineering News- Record (ENR) Magazine. All current SFPUC Rates Schedules and Fees are available at https://sfpuc.org/accounts-services/water-power-sewer-rates/rates.
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:
Hetchy Water
Hetchy Water charges for services relates to the storage and delivery of water. The water -related portion of upcountry expenditures not covered by the small quantity of water sales to upcountry customers or other miscellaneous revenues are paid by an assessment to the Water Enterprise. Assessment fees were $49,636 and $45,815 for the years ended June 30, 2023 and 2022, respectively. In fiscal year 2024, the assessment fees will be $46,266, a decrease of $3,370 or 6.8% as reflected in the fiscal year 2024 adopted budget. The decrease is primarily due to higher projected water sales which offset a larger portion of the water-related expenditures.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
64 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Power
Hetchy Power charges for services relate to power generation and electricity delivery to contractual, municipal, and retail customers.
All current SFPUC Rates Schedules and Fees are available at https://sfpuc.org/accounts-s ervices/water-power- and-sewer-rates.
Hetchy Power Municipal Rates
Departments of the City & County of San Francisco, as well as certain other non- City government agencies, are eligible for municipal power rates. Historically, municipal customers paid either the General Use rate, which was a subsidized rate below the cost of service, or an Enterprise rate, which was set to exactly follow the equivalent PG&E rate.
Based on the results of the 2022 Power Cost of Service Study, beginning in fiscal year 2023, all municipal customers are being transitioned to standardized tariff schedules set to their cost of service. For General Use customers, this means that a) instead of a single flat rate per kWh, customers are assigned to a rate schedule based on their customer class (small commercial, industrial, etc.), and b) the subsidy is being gradually eliminated until the General Use rate reaches the equivalent retail rate, which is projected to take 3 to 8 years, depending on the customer class. For Enterprise customers, their rates will no longer follow PG&E. Instead, they are set to a rate for their standardized customer class and will be phased to cost of service over two years. Beginning in fiscal year 2024, all Enterprise customers will be on the same rate schedules as retail non- municipal customers.
Hetchy Power Retail Rates
Based on the results of the 2022 Power Cost of Service Study, the Commission approved a two- year schedule of retail electric rates for residential, commercial, and industrial customers where Hetch Hetchy has been designated as the power provider to be applied to meter readings on or after July 1, 2022. These rates apply to all existing retail customers and are the default rates for any new Hetchy Power customers.
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 geothermal, hydroelectric and wind, at competitive rates. CleanPowerSF offers two products: a “Green” product comprised of at least 50% RPS- eligible 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.
Previously, rates were set formulaically, at a percentage above or below the equivalent PG&E generation rate. In addition, the formula required rates to be set high enough to recover its costs. Whenever PG&E rates changed, rates would automatically adjust following the set formula.
Based on the results of the 2022 Power Cost of Service Study, CleanPowerSF customers have now transitioned to fixed rate schedules for the entire fiscal year. The rates for each customer class are set based on their unique cost of service, which means that the percentage difference from the equivalent PG&E rates may vary based on the rate schedule and throughout the year as PG&E’s rate change more frequently.
CleanPowerSF Rates Schedules are available at http://cleanpowersf.org/residential f or residential customers and
http://cleanpowersf.org/commercial f or commercial customers.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Management’s Discussion and Analysis (Unaudited)
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
65 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Net Position
Proprietary Funds
June 30, 2023 and 2022
(In thousands)
66 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
(continued)
A. Included interfund payables and interfund receivables for fiscal year 2023 of $518 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs.
B. Included interfund payables and interfund receivables for fiscal year 2022 of $629 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs. #Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
See accompanying notes to basic financial statements.
Assets 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023 2022 2023
Restated
2022#
Current assets:
Cash and investments with City Treasury..........................................................$ 402,885 460,954 355,770 285,029 76,973 94,190 224,234 189,641 98,657 56,234 — — 1,158,519 1,086,048 Cash and investments outside City Treasury.....................................................xx 192 318 173 397 — 1 154 16 — — — — 519 732 Receivables:
Charges for services (net of allowance for doubtful
accounts of $8,615, $10,060, $0, $3,923, and $7,923 in 2023 and $3,915, $4,273, $0, $1,297, and $6,330 in 2022)...........................................xx 63,943 61,740 40,093 40,321 405 475 12,277 10,189 41,625 48,703 — — 158,343 161,428 Wholesale balancing account, current portion.................................................... 5,571 — — — — — — — — — — — 5,571 — Due from other City departments, current portion..............................................xx 115 178 128 225 — — 1,134 867 — — (113) A ( 111) B 1,264 1,159 Due from other governments..............................................................................xx — — — 25 1,723 512 646 298 — — — — 2,369 835 Interest ................................................................................................................xx 2,621 399 2,178 314 295 40 1,503 201 559 61 — — 7,156 1,015 Interest-Leases ...................................................................................................xx 911 884 — — — — — — — — — — 911 884 Restricted due from other governments.............................................................xx 36,147 7,553 13,942 202,795 — — — — — — — — 50,089 210,348 Leases receivable, current portion…..................................................................xx 3,521 3,325 212 — — — — — — — — — 3,733 3,325 Restricted interest and other receivable (net of allowance for doubtful accounts of $30, $99, $0, $0 and $0 in 2023 and
$146, $385, $0, $0 and $0 in 2022)...............................................................xx 3,510 4,142 1,191 2,301 — — 4,151 4,303 — — — — 8,852 10,746 Total current receivables..............................................................................xx 116,339 78,221 57,744 245,981 2,423 1,027 19,711 15,858 42,184 48,764 (113) (111) 238,288 389,740 Prepaid charges, advances, and other receivables, current portion..................xx 5,909 12,180 570 346 92 216 1,579 1,911 5,641 10,550 — — 13,791 25,203 Inventory..............................................................................................................xx 8,191 6,802 3,340 2,958 221 199 1,619 1,678 — — — — 13,371 11,637 Restricted cash and investments outside City Treasury, current portion..........xx 10,863 11,063 48,717 15,587 — — 5,371 5,228 — — — — 64,951 31,878 Total current assets......................................................................................xx 544,379 569,538 466,314 550,298 79,709 95,633 252,668 214,332 146,482 115,548 (113) (111) 1,489,439 1,545,238 Non-current assets: xx
Restricted Net pension asset..............................................................................xx — 100,407 — 48,770 — 13,912 — 17,004 — 1,833 — — — 181,926 Restricted cash and investments with City Treasury.........................................xx 21,000 9,299 38,574 — 10,980 — 17,606 — — — — — 88,160 9,299 Restricted cash and investments outside City Treasury, less current portion...xx 66,482 64,894 66,439 23,771 — — 3,840 8,824 — — — — 136,761 97,489 Leases receivable, less current portion…..........................................................xx 40,109 42,840 1,245 — — — — — — — — — 41,354 42,840 Restricted interest and other receivable, and prepaid (net of allowance xx for doubtful accounts of $8, $29, $0, $0, and $0 in 2023 and xx $8, $29, $0, $0, and $0 in 2022)…………….....................................................xx 4 4 417 434 — — — — — — — — 421 438 Charges for services, less current portion (net of allowance for doubtful xx accounts of $656, $566, $0, $0, and $0 in 2023 and xx
$656, $567, $0, $0, and $0 in 2022)…………...................................................xx 209 207 342 342 — — — — — — — — 551 549 Wholesale balancing account, less current portion............................................xx 4,481 — — — — — — — — — — — 4,481 — Note receivable - Balboa Reservoir, less current portion…................................xx 11,007 — — — — — — — — — — — 11,007 — Prepaid charges, advances, and other receivables, less current portion..........xx 3,406 3,760 1,115 1,156 141 146 9,540 9,390 11,424 12,236 — — 25,626 26,688 Right-to-use Lease assets, net of accumulated amortization............................xx 3,943 2,812 1,272 3,597 145 61 178 73 — 230 — — 5,538 6,773 Right-to-use Subscription asset, net of accumulated amortization…................xx 695 1,577 422 957 137 314 114 256 30 71 — — 1,398 3,175 Capital assets, not being depreciated and amortized.........................................xx 640,995 558,374 2,280,581 1,772,035 75,688 57,376 301,400 265,772 — — — — 3,298, 664 2,653,557 Capital assets, net of accumulated depreciation and amortization....................xx 5,007,319 5,059,220 2,404,071 2,274,416 144,066 143,631 345,546 319,864 — — — — 7,901, 002 7,797,131 Due from other City departments, less current portion......................................xx — — — — — — 10,352 10,937 — — (405) A ( 518) B 9,947 10,419 Total non-current assets..............................................................................xx 5,799,650 5,843,394 4,794,478 4,125,478 231,157 215,440 688,576 632,120 11,454 14,370 (405) (518) 11,524,910 10,830,284 Total assets..................................................................................................xx 6,344,029 6,412,932 5,260,792 4,675,776 310,866 311,073 941,244 846,452 157,936 129,918 (518) (629) 13,014,349 12,375,522 Deferred outflows of resources xx
Unamortized loss on refunding of debt...............................................................xx 124,635 139,481 8 33 — — — — — — — — 124,643 139,514 Pensions..............................................................................................................xx 70,101 52,852 32,592 25,369 8,858 6,696 10,826 8,183 1,292 852 — — 123,669 93,952 Other post-employment benefits.........................................................................xx 28,616 32,445 11,493 12,898 3,248 3,272 3,969 3,999 1,009 798 — — 48,335 53,412 Total deferred outflows of resources............................................................$ 223,352 224,778 44,093 38,300 12,106 9,968 14,795 12,182 2,301 1, 650 — — 296,647 286,878
Business Type Activities – Proprietary Funds
Water SFPUC TotalWastewater Hetchy Water Hetchy Power EliminationsCleanPowerSF
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Statements of Net Position
Proprietary Funds
June 30, 2023 and 2022
(In thousands)
67 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
C. Included interfund payables and interfund receivables for fiscal year 2023 of $518 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs.
D. Included interfund payables and interfund receivables for fiscal year 2022 of $629 between Wastewater and Hetchy Power for the 525 Golden Gate Avenue Headquarters construction costs. #Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
See accompanying notes to basic financial statements.
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
2023 2022 2023
Restated
2022#
Liabilities
Current liabilities:
Accounts payable.........................................................................$ 22,671 22,852 23,207 22,588 1,033 8,454 24,970 16,668 24,344 23,526 — — 96,225 94,088 Accrued payroll.............................................................................xx 11,807 10,495 7,631 6,402 1,252 1,098 3,041 2,684 543 373 — — 24,274 21,052 Accrued vacation and sick leave, current portion........................xx 7,057 6,888 6,040 5,479 1,132 1,034 1,867 1,747 394 279 — — 16,490 15,427 Accrued workers’ compensation, current portion........................xx 1,914 1,700 1,509 1,393 216 215 401 400 — — — — 4,040 3,708 Due to other City departments, current portion...........................xx 2,440 — 2,215 111 — — 1,946 380 — — (113) C (111) D 6,488 380 Damage claims liability, current portion.......................................xx 11,125 10,191 1,650 9,323 300 228 450 358 16 15 — — 13,541 20,115 Unearned revenues, refunds, and other, current portion.............xx 13,977 19,137 6,457 6,137 110 24 5,880 5,923 6,146 4,196 — — 32,570 35,417 Bond, loan, lease and subscription interest payable...................xx 35,104 35,455 27,918 21,468 2 3 1,597 1,329 — 1 — — 64,621 58,256 Bonds, current portion..................................................................xx 135,095 125,285 28,070 34,345 — — 1,590 1,966 — — — — 164,755 161,596 Certificates of participation, current portion.................................xx 3,267 3,138 864 830 — — 445 427 — — — — 4,576 4,395 Commercial paper, current portion..............................................xx — 206,297 — 379,157 — — — 40,019 — — — — — 625,473 State revolving funds loans payable, current portion……………xx — 3,283 2,526 2,481 — — — — — — — — 2,526 5,764 Lease liability, current portion…...................................................xx 1,189 1,008 1,297 2,341 16 3 19 3 — 232 — — 2,521 3,587 Subscription liability, current portion…............................................ 400 848 243 515 80 170 65 137 18 39 — — 806 1,709 Wholesale balancing account, current portion............................xx — 48,422 — — — — — — — — — — — 48,422 Current liabilities payable from restricted assets.........................xx 40,863 25,353 122,825 89,905 5,747 6,324 23,119 19,059 — — — — 192,554 140,641 Total current liabilities................................................................xx 286,909 520,352 232,452 582,475 9,888 17,553 65,390 91,100 31,461 28,661 (113) (111) 625,987 1,240,030 Long-term liabilities: xx
Arbitrage rebate payable..............................................................xx — — 188 — — — — — — — — — 188 — Other post-employment benefits obligations...............................xx 148,601 144,115 49,035 49,123 14,907 14,240 18,220 17,405 4,053 2,264 — — 234,816 227,147 Net pension liability.......................................................................xx 115,343 — 49,549 — 14,105 — 17,239 — 2,124 — — — 198,360 — Accrued vacation and sick leave, less current portion................xx 6,528 6,841 5,622 5,422 1,134 1,135 1,849 1,850 349 267 — — 15,482 15,515 Accrued workers’ compensation, less current portion................xx 7,821 7,273 6,489 6,153 1,003 1,013 1,837 1,850 — — — — 17,150 16,289 Due to other City departments, less current portion....................xx — — 405 518 — — — — — — (405) C (518) D — — Damage claims liability, less current portion...............................xx 8,500 25,878 2,700 2,722 400 399 5,700 665 18 17 — — 17,318 29,681 Unearned revenues, refunds, and other, less current portion.....xx — — — — — 110 580 804 — 9,000 — — 580 9,914 Bonds, less current portion..........................................................xx 4,575,751 4,735,650 2,708,840 1,896,908 — — 189,342 192,520 — — — — 7,473,933 6,825,078 Revenue Notes, less current portion...........................................xx — — 349,556 350,356 — — — — — — — — 349,556 350,356 Certificates of participation, less current portion.........................xx 89,232 92,499 23,594 24,458 — — 12,148 12,593 — — — — 124,974 129,550 Commercial paper, less current portion......................................xx 371,459 — — — — — 116,352 — — — — — 487,811 — State revolving funds loans payable, less current portion………xx 163,627 118,478 316,163 300,178 — — — — — — — — 479,790 418,656 Water Infrastructure Finance and Innovation Act (WIFIA) loans…xx — — 122,357 — — — — — — — — — 122,357 — Lease liability, less current portion…...........................................xx 2,821 1,855 — 1,297 122 59 150 72 — — — — 3,093 3,283 Subscription liability, less current portion….................................xx 308 708 186 429 59 139 51 116 13 31 — — 617 1,423 Wholesale balancing account, less current portion.....................xx — 30,728 — — — — — — — — — — — 30,728 Pollution remediation obligations..................................................xx 1,271 1,271 7,800 8,060 — — — — — — — — 9,071 9,331 Total long-term liabilities............................................................xx 5,491,262 5,165,296 3,642,484 2,645,624 31,730 17,095 363,468 227,875 6,557 11,579 (405) (518) 9,535,096 8,066,951 Total liabilities.............................................................................xx 5,778,171 5,685,648 3,874,936 3,228,099 41,618 34,648 428,858 318,975 38,018 40,240 (518) (629) 10,161,083 9,306,981 Deferred inflows of resources xx
Unamortized gain on refunding of debt…....................................xx — — 11,353 — — — — — — — — — 11,353 — Related to pensions.....................................................................xx 28,504 248,704 10,023 114,670 4,142 34,477 5,062 42,138 1,296 5,414 — — 49,027 445,403 Leases…......................................................................................xx 41,558 44,583 1,453 — — — — — — — — — 43,011 44,583 Other post-employment benefits.................................................xx 27,075 25,348 8,286 8,640 3,084 2,734 3,769 3,342 2,922 1,594 — — 45,136 41,658 Total deferred inflows of resources...........................................xx 97,137 318,635 31,115 123,310 7,226 37,211 8,831 45,480 4,218 7,008 — — 148,527 531,644 Net position xx
Net investment in capital assets....................................................xx 545,542 584,646 1,235,215 1,092,710 219,754 201,007 336,281 352,162 — — — — 2,336,792 2,230,525 Restricted for debt service.............................................................xx 14,625 14,671 3,510 5,391 — — 56 140 — — — — 18,191 20,202 Restricted for capital projects........................................................xx 15,959 — — 114,657 5,233 — — — — — — — 21,192 114,657 Restricted for other purposes........................................................xx — 100,407 — 48,770 — 13,912 — 17,004 — 1,833 — — — 181,926 Unrestricted....................................................................................xx 115,947 (66,297) 160,109 101,139 49,141 34,263 182,013 124,873 118,001 82,487 — — 625,211 276,465 Total net position........................................................................$ 692,073 633,427 1,398,834 1,362,667 274,128 249,182 518,350 494,179 118,001 84,320 — — 3,001,386 2,823,775 EliminationsCleanPowerSF
SFPUC TotalWater Wastewater Hetchy Water Hetchy Power
Business Type Activities – Proprietary Funds
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
68 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Statements of Revenues, Expenses, and Changes in Net Position Proprietary Funds
June 30, 2023 and 2022
(In thousands)
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
See accompanying notes to basic financial statements.
2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022#
Operating revenues:
Charges for services...................................................................................$ 661,241 539,526 354,491 356,041 52,570 49,200 203, 847 173,105 326,777 257,893 1,598,926 1,375,765 Rents and concessions..............................................................................xx 13,282 13,765 822 705 127 112 156 137 — — 14,387 14,719 Capacity fees..............................................................................................xx 1,256 2,163 3,077 6,280 — — — — — — 4,333 8,443 Other revenues...........................................................................................xx 15,312 17,663 5,546 5,856 — — — — — — 20,858 23,519 Total operating revenues........................................................................xx 691,091 573,117 363,936 368,882 52,697 49,312 204,003 173,242 326,777 257,893 1,638,504 1,422,446 Operating expenses: xx
Personnel services.....................................................................................xx 135,709 83,385 89,726 63,456 18,424 15,636 39,300 34,646 10,735 4,167 293,894 201,290 Contractual services...................................................................................xx 16,919 12,562 20,777 18,572 2,956 2,675 10,819 9,459 6,559 6,780 58,030 50,048 Transmission/distribution and other power costs.......................................xx — — — — — — 70,580 51,521 226 192 70,806 51,713 Purchased electricity...................................................................................xx — — — — — — 8,078 6,731 265,152 239,546 273,230 246,277 Materials and supplies.................................................................................xx 20,046 15,719 14,306 11,844 1,605 1,362 2,612 2,270 57 33 38,626 31,228 Depreciation and amortization....................................................................xx 155,714 148,777 78,039 78,105 6,524 6,480 17,877 17,769 270 385 258,424 251,516 Services provided by other departments....................................................xx 79,910 73,307 40,999 39,645 3,392 3,129 8,674 6,253 4,302 3,621 137,277 125,955 General and administrative and other.........................................................xx 51,955 68,014 17,503 45,536 17,110 23,017 33,612 27,694 7,479 7,393 127,659 171,654 Total operating expenses.......................................................................xx 460,253 401,764 261,350 257,158 50,011 52,299 191,552 156,343 294,780 262,117 1,257,946 1,129,681 Operating income (loss).........................................................................xx 230,838 171,353 102,586 111,724 2,686 (2,987) 12,451 16,899 31,997 (4,224) 380,558 292,765 Non-operating revenues (expenses): xx
Federal and state grants.............................................................................xx — 5,931 152 20,711 1,627 450 937 4,924 1,173 2,424 3,889 34,440 Interest and investment income (loss)........................................................xx 11,156 (10,896) 2,556 (7,087) 457 (2,932) 3,741 (4, 001) 405 (1,286) 18,315 (26,202) Interest expenses........................................................................................xx (214,913) (213,681) (95,520) (77,751) (4) (3) (9,486) (5, 627) (1) (6) (319,924) (297,068) Amortization of premium, discount, refunding loss, and issuance costs...xx 9,971 9,875 14,387 8,422 — — 1,584 (192) — — 25,942 18,105 Net gain from sale of assets.......................................................................xx 12,660 1,079 114 22 4 7 3 9 — — 12,781 1,117 Other non-operating revenues....................................................................xx 28,019 34,861 9,644 4,721 230 22 12,665 10,830 325 335 50,883 50,769 Other Non-operating expenses...................................................................xx (1,775) (828) (535) (482) (54) (37) (227) (591) (218) — (2,809) (1,938) Net non-operating revenues (expenses)................................................xx (154,882) (173,659) (69,202) (51,444) 2,260 (2,493) 9,217 5,352 1,684 1,467 (210,923) (220,777) Change in net position before capital contributions and transfers.........xx 75,956 (2,306) 33,384 60,280 4,946 (5,480) 21,668 22,251 33,681 (2,757) 169,635 71,988 Capital contributions.......................................................................................xx 2,717 — 2,740 — — — 2,535 — — — 7,992 — Transfers from the City and County of San Francisco..................................xx 5 15,035 75 — 20,000 30,001 — — — — 20,080 45,036 Transfers to the City and County of San Francisco......................................xx (20,032) (30,666) (32) (161) — — (32) (532) — — (20,096) (31,359) Net capital contributions and transfers…...............................................xx (17,310) (15,631) 2,783 (161) 20,000 30,001 2,503 (532) — — 7,976 13,677 Change in net position............................................................................xx 58,646 (17,937) 36,167 60,119 24,946 24,521 24,171 21,719 33,681 (2,757) 177,611 85,665 Net position at beginning of year.................................................................... xx 633,427 651,364 1,362,667 1,302,548 249,182 224,661 494,179 472,460 84,320 87,077 2,823,775 2,738,110 Net position at end of year..............................................................................$ 692,073 633,427 1,398,834 1,362,667 274,128 249,182 518,350 494,179 118,001 84,320 3,001,386 2,823,775 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, 2023 and 2022
(In thousands)
69 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs). * Reclassification of fiscal year 2022 $6,750 settlement to conform with current year presentation.
See accompanying notes to basic financial statements.
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
2023
Restated
2022#
Cash flows from operating activities:
Cash received from customers, including cash deposits...................................$ 582,603 570,183 364,180 360,654 52,640 49,161 201,707 183,203 324,730 237,947 1,525,860 1,401,148 Cash received from tenants for rent....................................................................xx 13,098 15,032 3,126 1,035 129 114 158 139 — — 16,511 16,320 Cash received from miscellaneous revenues.....................................................xx 4,832 4,558 686 667 30 22 8,689 7,237 6 335 14,243 12,819 Cash paid to employees for services..................................................................xx (142,866) (137,080) (95, 895) (93,897) (21,537) (20,430) (42,804) (40,448) (8,063) (5,828) (311,165) (297,683) Cash paid to suppliers for goods and services...................................................xx (174,938) (158,443) (95, 599) (103,455) (31,864) (25,547) (113,682) (107,824) (275,322) (268,917) (691,405) (664,186) Cash paid for judgments and claims...................................................................xx (6,927) (2,515) (5, 500) (10,795) (331) (276) (5,548) (2,163) (1,725) (1,529) (20,031) (17,278) Net cash provided by (used in) operating activities......................................xx 275,802 291,735 170,998 154,209 (933) 3,044 48,520 40,144 39,626 (37,992) 534,013 451,140 Cash flows from non-capital financing activities: xx
Cash received from grants..................................................................................xx — 5,947 177 12,686 389 517 546 4,893 1,173 5,100 2,285 29,143 Cash received from settlements.........................................................................xx 6,750 — 5,000 — 200 — 244 — — — 12,194 — Cash received from license fees.........................................................................xx — — — — — — 3,713 3,333 — — 3,713 3,333 Cash received from Public Purpose Funds........................................................xx — — — — — — — — 2,394 — 2, 394 — Cash paid for rebates, program incentives, and other........................................xx (1,775) (828) (535) (482) (54) (37) (227) (591) (218) — (2,809) (1,938) Cash paid for Hetchy Power loan interest...........................................................xx — — — — — — — — — — — — Transfers from the City and County of San Francisco........................................xx 5 15,035 75 — 20,000 30,001 — — — — 20,080 45,036 Transfers to the City and County of San Francisco............................................xx (20,032) (30,666) (32) (161) — — (32) (532) — — (20,096) (31,359) Net cash provided by (used in) non-capital financing activities....................xx (15,052) (10,512) 4,685 12,043 20,535 30,481 4,244 7,103 3,349 5,100 17,761 44,215 Cash flows from capital and related financing activities: xx Proceeds from sale of capital assets..................................................................xx 1,370 986 127 22 4 7 3 9 — — 1,504 1,024 Proceeds from bond issuance, net of premium, discount, refunding loss, xx and issuance costs...........................................................................................xx — — 1,287,593 373,700 — — — 151,022 — — 1,287,593 524,722 Proceeds from revenue notes issuance, net of premium...................................xx — — — 350,823 — — — — — — — 350,823 Proceeds from commercial paper borrowings....................................................xx 165,162 130,221 177,564 80,639 — — 76,333 63,058 — — 419,059 273,918 Proceeds from State revolving fund loans...........................................................xx 12,371 56,113 207,364 22,544 — — — — — — 219,735 78,657 Proceeds from WIFIA loans…................................................................................. — — 122,357 — — — — — — — 122,357 — Principal paid on commercial paper....................................................................xx — (29,786) (556, 721) (340,000) — — — (137,710) — — (556,721) (507,496) Principal paid on long-term debt..........................................................................xx (128,408) (111,470) (454, 676) (23,665) — — (2,397) (2,333) — — (585,481) (137,468) Principal paid on state revolving fund loans.........................................................xx — — (2, 481) (2,483) — — — — — — (2,481) (2,483) Interest paid on commercial paper......................................................................xx (5,170) (212) (8, 674) (614) — — (1,327) (59) — — (15,171) (885) Interest paid on long-term debt............................................................................xx (209,194) (213,922) (75, 309) (69,988) — — (7,886) (4,695) — — (292,389) (288,605) Interest paid on state revolving fund loans...........................................................xx — — (1, 523) (1,522) — — — — — — (1,523) (1,522) Interest paid on WIFIA loans................................................................................xx — — (74) — — — — — — — (74) — Interest paid revenue notes..................................................................................xx — — (3, 475) (1,168) — — — — — — (3,475) (1,168) Issuance costs paid on long-term debt...............................................................xx — (10) (3, 124) (1,490) — — — (1,118) — — (3,124) (2,618) Acquisition and construction of capital assets....................................................xx (172,835) (183,671) (681, 615) (516,097) (25,856) (32,558) (72,541) (108,062) — — (952,847) (840,388) Lease payment....................................................................................................xx (1,050) (1,439) (2, 371) (2,371) (18) (17) (22) (22) (233) (351) (3,694) (4,200) Subscription payments…....................................................................................xx (862) — (523) (478) (172) (179) (139) (145) (39) (41) (1,735) (843) Federal interest income subsidy..........................................................................xx 23,260 23,590 3,991 5,818 — — 502 397 — — 27,753 29,805 Net cash provided by (used in) capital and related financing activities........xx (315,356) (329,600) 8,430 ( 126,330) (26,042) (32,747) (7,474) (39,658) (272) (392) (340,714) (528,727) Cash flows from investing activities: xx
Interest income received......................................................................................xx 9,141 2,154 4,948 1,335 914 329 3,663 1,003 1,207 407 19,873 5,228 Proceeds from sale of investment outside City Treasury...................................xx 348,315 398,825 514,288 101,115 — — 10,224 7,118 — — 872,827 507,058 Purchase of investments outside City Treasury.................................................xx (348,315) (398,825) (514, 288) (101,115) — — (10,224) (7,118) — — (872,827) (507,058) Net cash provided by investing activities ............................................... xx 9,141 2,154 4,948 1,335 914 329 3,663 1,003 1,207 407 19,873 5,228 Increase (decrease) in cash and cash equivalents......................................xx (45,465) (46,223) 189,061 41,257 (5,526) 1,107 48,953 8,592 43,910 (32,877) 230,933 (28,144) Cash and cash equivalents: xx
Beginning of year.................................................................................................xx 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 End of year...........................................................................................................$ 514,901 560,366 522,224 333,163 91,857 97,383 257,810 208,857 101,797 57,887 1,488,589 1,257,656 Reconciliation of cash and cash equivalents to the statements of net position:
Cash and investments with City Treasury:
Unrestricted......................................................................................................$ 402,885 460,954 355,770 285,029 76,973 94,190 224,234 189,641 98,657 56,234 1,158,519 1,086,048 Restricted......................................................................................................... 21,000 9,299 38,574 — 10,980 — 17,606 — — — 88,160 9,299 Add: Unrealized loss/(gain) on investments with City Treasury....................xx 13,479 13,838 12,551 8,379 3,904 3,192 6,605 5,148 3,140 1,653 39,679 32,210 Cash and investments outside City Treasury: xx
Unrestricted......................................................................................................xx 192 318 173 397 — 1 154 16 — — 519 732 Restricted.........................................................................................................xx 77,345 75,957 115,156 39,358 — — 9,211 14,052 — — 201,712 129,367 Cash and cash equivalents at end of year on statements of cash flows..$ 514,901 560,366 522,224 333,163 91,857 97,383 257,810 208,857 101,797 57,887 1,488,589 1,257,656 (Continued)
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, 2023 and 2022
(In thousands)
70 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
See accompanying notes to basic financial statements.
2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022# 2023
Restated
2022#
Reconciliation of operating income (loss) to net cash provided by (used in) operating activities:
Operating income (loss).................................................................$ 230,838 171,353 102,586 111,724 2,686 (2,987) 12,451 16,899 31,997 (4,224) 380,558 292,765 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization...................................................xx 155,714 148,777 78,039 78,105 6,524 6,480 17,877 17,769 270 385 258,424 251,516 Miscellaneous revenues............................................................xx 4,832 4,558 686 667 30 22 8,689 7,237 6 335 14,243 12,819 Provision for uncollectible accounts..........................................xx 4,584 (1,410) 5,500 (781) — — 2,626 39 1,593 845 14,303 (1,307) Write-off of capital assets and other non-cash items...............xx 4,628 4,592 911 993 192 7 211 648 — — 5,942 6,240 Changes in operating assets and liabilities: xx
Receivables: xx
Charges for services.............................................................xx (13,655) (4,734) (5,558) (6,143) 70 (33) (4,714) 8,796 5,485 (21,283) (18,372) (23,397) Due from other City departments..........................................xx 63 70 1,208 (901) — — 345 531 — — 1,616 (300) Prepaid charges, advances, and other.................................xx 6,709 207 1 51 129 192 115 (344) 5,908 (20,574) 12,862 (20,468) Inventory...................................................................................xx (1,389) (865) (382) (301) (22) (8) 59 142 — — (1,734) (1,032) Accounts payable....................................................................xx (181) 6,669 830 7,095 (7,421) 4,192 8,302 (6,241) 818 7,667 2,348 19,382 Accrued payroll........................................................................xx 1,312 650 1,229 255 154 56 357 88 170 82 3,222 1,131 Other post-employment benefits obligations...........................xx 10,042 4,694 963 1,998 1,041 898 1,272 1,099 2,906 (1,320) 16,224 7,369 Pension obligations..................................................................xx (21,699) (61,060) (13,551) (35,144) (4,480) (5,965) (5,476) (7,291) (601) (569) (45,807) (110,029) Leases.....................................................................................xx 575 380 2,321 — — — — — — — 2,896 380 Subscriptions...........................................................................xx 895 — 535 — — — — — — — 1,430 — Accrued vacation and sick leave.............................................xx (144) (187) 761 (757) 97 (16) 119 (20) 197 146 1,030 (834) Accrued workers' compensation.............................................xx 762 145 452 964 (9) 108 (12) 132 — — 1,193 1,349 Due to other City departments................................................xx 2,440 — 2,102 — — — 1,566 11 — — 6,108 11 Wholesale balancing account.................................................xx (89,202) 18,286 — — — — — — — — (89,202) 18,286 Damage claims liability............................................................xx (16,444) (654) (7,695) (4,668) 73 102 5,127 (85) 2 26 (18,937) (5,279) Unearned revenues, refunds, and other liabilities...................xx (4,878) 264 320 792 3 (4) (394) 734 (9,125) 492 (14,074) 2,278 Pollution remediation obligations.............................................xx — — (260) 260 — — — — — — (260) 260 Total adjustments...............................................................xx 44,964 120,382 68,412 42,485 (3,619) 6,031 36,069 23,245 7,629 (33,768) 153,455 158,375 Net cash provided by (used in) operating activities............$ 275,802 291,735 170,998 154,209 (933) 3,044 48,520 40,144 39,626 (37,992) 534,013 451,140 Noncash transactions:
Accrued capital asset costs.............................................................$ 40,863 25,353 122,825 89,905 5,747 6,324 23,119 19,059 — — 192,554 140,641 Interfund payables.............................................................................xx 2,440 — 2,620 629 — — — — — — 5,060 629 Interfund receivables.........................................................................xx — — — — — — 518 629 — — 518 629 Payable to MTA.................................................................................xx — — — — — — 1,946 — — — 1,946 — Unrealized loss/(gain) on investments.............................................xx 13,479 13,838 12,551 8,379 3,904 3,192 6,605 5,148 3,140 1,653 39,679 32,210 Capital contributions.........................................................................xx 2,717 — 2,740 — — — 2,535 — — — 7,992 — Sale of land promissory note............................................................xx 11,007 — — — — — — — — — 11,007 —
Business Type Activities – Proprietary Funds
Water Wastewater Hetchy Water Hetchy Power SFPUC TotalCleanPowerSF
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
71 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
(1) Description 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. P roposition 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, the Wastewater, and Hetchy Water and Hetchy Power and CleanPowerSF (Hetch Hetchy) enterprises are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial statements are intended to present only the financial position, and the changes in financial position and cash flows of only 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, 202 3 and 2022, 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 2023, the Water Enterprise sold approximately 62,227 million gallons, i.e., about 170 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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
72 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, 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 61% 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 39% 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 (Modesto Irrigation District and Turlock Irrigation District) to cover their agricultural pumping and municipal load needs and any remaining energy is either sold to other municipalities and/or government agencies (not for resale) or sold into the California Independent System Operator (CAISO). Hetch Hetchy operation is an integrated system of reservoirs, hydroelectric power plants, aqueducts, pipelines, and transmission lines.
Hetch Hetchy also purchases wholesale electric power from various energy providers that are used in conjunction with owned hydro resources to meet the power requirements of its customers. Operations and business decisions can be greatly influenced by market conditions, state and federal power matters before the California Public Utilities Commission (CPUC), the CAISO, and the Federal Energy 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) Significant Accounting Policies
(a) Basis 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 ser vice).
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
73 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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) Cash 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) Investments
Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based on quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues.
(d) Inventory
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed.
(e) Capital Assets
Capital assets are defined as assets with an initial individual cost of more than $5 and an estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an independent professional appraisal, or at cost, if known. All subsequent acquisitions have been recorded at cost. All donated capital assets and capital assets received in a service concession arrangement are valued at acquisition 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) 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 r ights, leases, SBITAs, licenses, and permits. The SFPUC capitalizes purchased or internally developed intangible assets with a useful life extending beyond one reporting period. It has established a capitalization threshold of
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
74 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
$100. Intangible assets are amortized over the benefit period or the contract term for leases and SBITAs, except for certain assets having an indefinite useful life. Assets with an indefinite useful life generally provide a benefit that is not constrained by legal or contractual limitations or any other external factor and, therefore, are not amortized (see Note 4).
(g) Construction Work in Progress
The cost of acquisition and construction of major plant and equipment is recorded as construction work in progress. Costs of discontinued construction projects are recorded as an expenses in the year in which the decision is made to discontinue such projects.
(h) Bond Discount, Premium, and Issuance Costs
Bond issuance costs related to prepaid insurance costs are capitalized and amortized using the effective interest method. Other bond issuance costs are expensed when incurred. Original issue bond discount or premium are offset against the related debt and are also amortized using the effective interest method.
(i) Accrued 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.
(j) Workers’ 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 16 (b)).
(k) General 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 16(a)).
(l) Arbitrage Rebate Payable
Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements generally stipulate that earnings from the investment of the tax exempt bond proceeds that exceed related interest costs on the bonds must be remitted to the federal government on every fifth anniversary of each bond issue. The Water Enterprise, Hetchy Water, Hetchy Power and CleanPowerSF did not have arbitrage rebate liability as of June 30, 2023 and 2022. The Wastewater Enterprise arbitrage liability as of June 30, 2023 and 2022 were $188 and $0, respectively (see Note 7).
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
75 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
(m) Refunding of Debt
Gains or losses occurring from refunding of debt prior to maturity are reported as deferred outflows and deferred inflows of resources from refunding of debt. Deferred outflows and deferred inflows of resources are recognized as a component of interest expense using the effective interest method over the remaining life of the old debt or the life of the new debt, whichever is shorter.
(n) Income Taxes
As a department of a government agency, the SFPUC is exempt from both federal income taxes and California State franchise taxes.
(o) Revenue 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, 2023 and 2022 are as follow:
(p) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(q) Eliminations
Eliminations for internal activities between Wastewater and Hetchy Power are made in the Statements of Net Position. There were activities requiring eliminations during the fiscal years ended June 30, 2023 and June 30, 2022 between Wastewater and Hetchy Power.
(r) Accounting and Financial Reporting for Pollution Remediation Obligations
According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted, and any of the following recognition triggers occur:
● 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;
Fiscal Years
Ending June 30 Water Wastewater
He tchy
Water
He tchy
Power CleanPowerSF
SFPUC
Total
2023 $ 31,704 14,919 — 3,470 19,694 69,787 2022 29,774 15,704 — 3,806 21,878 71,162
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
76 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
● A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
● A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
● A government begins or legally obligates itself to begin cleanup or post-cleanup activities limited to amounts the government is legally required to complete).
As a pa rt 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 17).
(s) 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 SFPUC recognizes lease revenue if the SFPUC is the lessor of the lease or lease expense if the SFPUC 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 date of commencement. 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 of resources is initially measured as the initial amount of the lease receivable, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term, plus lease payments received from the lease at or before the commencement of the lease term that related to future periods. Subsequently, the deferred inflow of resources is recognized as lease revenue on a straight-line basis over the lease term.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
77 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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.
● 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 current and non- current assets, lease liabilities are reported with current and long-term liabilities and both lease assets and liabilities are reported under net investment in capital assets in the Statements of Net Position (see Note 10).
(t) Subscription-Based Information Technology Arrangements (SBITAs)
SBITAs are defined as a contract that conveys control of the right to use another entity’s IT software, alone or in combination with tangible capital assets for a specified period. The SFPUC has noncancellable subscription arrangements (similar to a lease) for the right to use various SBITAs.
Short-term SBITAs - For SBITAs with a maximum possible term of 12 months at commencement, The SFPUC recognizes subscription expense based on the provisions of the SBITAs. Liabilities are only recognized if payments are received in advance, and receivables are only recognized if payments are received subsequent to the reporting period.
SBITAs other than Short- term - For all other SBITAs (i.e. those that are not short -term), The SFPUC recognizes SBITAs liability and intangible right-to-use subscription asset.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
78 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Measurement of Subscription Amounts (Subscriber) – The SFPUC’s subscription liability is recorded at the present value of future minimum subscription payments as of the date of commencement. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made. The subscription asset is initially measured as the initial amount of the subscription liability, less payments made at or before the subscription commencement date, plus any initial direct costs ancillary to placing the underlying asset into service, less any subscription incentives received at or before the subscription commencement date. For SBITAs, subscription assets also include qualify software implementation costs. Subsequently, the subscription asset is amortized into depreciation and amortization expense on a straight -line basis over the subscription 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 subscription payments, (b) subscription terms, (c) subscription payments, and (d) materiality threshold.
● The SFPUC generally uses its estimated incremental borrowing rate as the discount rate for SBITAs unless the rate is implicit in the agreement. 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 subscription term includes the noncancellable period of the subscription, plus any additional periods covered by either subscriber 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 subscriber and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the subscription term.
● Payments are evaluated by the SFPUC to determine if they should be included in the measurement of the subscription 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.
● SBITAs have a capitalization threshold of $100.
Remeasurement of SBITAs – The SFPUC monitors changes in circumstances that may require remeasurement of a SBITAs. When certain changes occur that are expected to significantly affect the amount of the subscription liability, the liability is remeasured and a corresponding adjustment is made to the subscription asset.
Presentation in Statements of Net Position - Subscription assets are reported with current and non-current assets, subscription liabilities are reported with current and long-term liabilities and both subscription assets and liabilities are reported under net investment in capital assets in the Statements of Net Position (see Note 11).
(u) Other 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 14(b)).
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
79 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
(v) New Accounting Standards Adopted in Fiscal Year 2023
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . GASB Statement No. 91 enhances the compatibility and consistency of conduit debt obligation reporting and reporting of related transactions by state and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The SFPUC adopted the provisions of Statement No. 91 in fiscal year 2023 which did not have a significant effect on its financial statements.
2) In March 2020, the GASB Issued Statement No. 94, Public-Private and Public -Public Partnerships and Availability Payment Arrangements. The primary objective of this Statement is to improve financial reporting by addressing issues related to public -private and public-public partnership arrangements (PPPs). The new standard is effective for periods beginning after June 15, 2022. The SFPUC adopted the provisions of Statement No. 94 in fiscal year 2023 which did not have a significant effect on its financial statements. 3) In May 2020, the GASB issued Statement No. 96, Subscription- Based Information Technology Arrangements (SBITAs). This Statement defines such arrangements as contracts that convey control of the right to use another party’s information technology software, alone or in combination with tangible capital assets, as specified in the contract for a period of time in an exchange or exchange- like transaction. The standard clarifies measurement and recognition of capitalizable costs, intangible assets, and subscription liabilities for such arrangements and also requires additional disclosures related to such arrangements. The new standard is effective for periods beginning after June 15, 2022. The SFPUC adopted the provisions of Statement No. 96 in fiscal year 2023 (see Note 11).
(w) GASB Statements Implemented in Fiscal Year 2022
1) In June 2017, the GASB issued Statement No. 87, Leases. GASB Statement No. 87 establishes a single model for lease accounting and requires reporting of certain lease liabilities that currently are not reported. The new standard is effective for periods beginning after June 15, 2021. Beginning balances as of July 1, 2020 were restated as the result of adoption of this standard (see Note 10).
Water Was tewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total
Beginning Balance FY2022:
Subscription Assets $ 2,344 1,422 468 380 106 4,720 Subscription Liability - Current (1,636) (993) (329) (264) (75) (3,297) Subscription Liability - Long Term (708) (429) (139) (116) (31) (1,423) Activities FY2022:
Subscription Assets 106 65 22 17 5 215
Accumulated Amortization (873) (530) (176) (141) (40) (1,760) Accrued Interest Payable - Current (12) (8) (3) (2) (1) (26) Subscription Liability - Current 788 478 159 127 36 1,588 Ending Balance FY2022:
Subscription Assets 2,450 1,487 490 397 111 4,935 Accumulated Amortization (873) (530) (176) (141) (40) (1,760) Accrued Interest Payable - Current (12) (8) (3) (2) (1) (26) Subscription Liability - Current (848) (515) (170) (137) (39) (1,709) Subscription Liability - Long Term (708) (429) (139) (116) (31) (1,423) Expenses (9) (5) (2) (1) — (17) Changes in Net Position FY2022: $ (9) (5) (2) (1) — (17)
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
80 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
2) In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. GASB Statement No. 89 establishes accounting requirements for interest cost incurred before the end of construction period. The new standard is effective for periods beginning after December 15, 2020. The SFPUC adopted the provisions of Statement No. 89 in fiscal year 2022. 3) In January 2020, the GASB issued Statement No. 92, Omnibus 2020. GASB Statement No. 92 addresses practice issues that have been identified during implementation and application of certain GASB Statements. The new standard is effective for periods beginning after June 15, 2021. The SFPUC adopted the provisions of Statement No. 92 in fiscal year 2022, which did not have significant effect on its financial statements.
4) In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The new standard is effective for periods beginning after June 15, 2021. The SFPUC adopted the provisions of Statement No. 93 in fiscal year 2022, which did not have a significant effect on its financial statements.
(x) Future Implementation of New Accounting Standards
1) In April 2022, the GASB issued Statement No. 99, Omnibus 2022. GASB Statement No. 99 addresses a variety of topics. The requirements related to extension of the use of the London Interbank Offered Rate, accounting for Supplemental Nutrition Assistance Program distributions, disclosures of nonmonetary transactions, pledges of future revenues by pledging governments, clarification of certain provisions in Statement No. 34, and terminology updates related to Statement No. 53 and Statement No. 63 are effective upon issuance and did not have a significant impact on the SFPUC for the year ended June 30, 2022. The requirements related to leases, public -public and public -private partnerships, and subscription- based information technology arrangements are effective for fiscal years beginning after June 15, 2022, and effective for the SFPUC’s year ending June 30, 2023. The requirements related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement No. 53 are effective for fiscal years beginning after June 15, 2023, and effective for the SFPUC’s year ending June 30, 2024. The SFPUC is currently analyzing its accounting practices to determine the potential impact of the provisions of Statement No. 99 applicable in future years.
2)
In June 2022, the GASB issued Statement No. 100, Accounting Changes and Error Corrections. This Statement enhances accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability.
The new standard is effective for periods beginning after June 15, 2023. The SFPUC will implement the provisions of Statement No. 100 in fiscal year 2024. 3) In
June 2022, the GASB issued Statement No. 101, Compensated Absences . This Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The new standard is effective for periods beginning after December 15, 2023. The 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.
For fiscal year 2022, Water Enterprise received cash from settlements in the amount of $6,750 was reclassified to cash received from customers including cash deposits to conf orm with the fiscal year 2023 presentation.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
81 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Restricted net pension assets in the amount of $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 was reclassified from unrestricted to restricted for other purposes in the Statements of Net Position as of June 30, 2022.
(3) Cash, 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.
Department-wide Business T ype Activities
Department-wide restricted and unrestricted cash and investments outside City Treasury as of June 30, 2023 and 2022 consist of the following:
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 $ 188,521 188,521 — — — Money Market Funds A-1/P-1 < 90 days 93 93 — — —
Cash and Cash Equivalents N/A 13,098 13,098 — — —
Total Restricted Cash and Investments outside City Treasury $ 201,712 201,712 — — — Cash and Cash Equivalents N/A 519 519 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 519 519 — — — SFPUC's Cash and Investments outside City Treasury
Fair Value Measurements Using
June 30, 2023
Investments
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 Unrestricted Cash and Investments outside City Treasury $ 732 732 — — — SFPUC's Cash and Investments outside City Treasury
Fair Value Measurements Using
June 30, 2022
Investments
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
82 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Department-wide cash, cash equivalents, and investments are shown on the accompanying statements of net position as follows:
The following table shows the percentage distribution of the City’s pooled investments by maturity:
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, 2023 and 2022 were $77, 345 and $75, 957, respectively. The Water Enterprise held all investments in guaranteed investment contracts, treasury and government obligations, commercial paper, corporate bonds, and notes, as well as money market mutual funds consisting of Treasury and Government Obligations.
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, 2023 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, 2022 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, 2023 and 2022:
2023 2022
Current assets:
Cash and investments with City Treasury $ 1,158,519 1,086,048 C
ash and investments outside City Treasury 519 732
Restricted cash and investments outside City Treasury 64,951 31,878 Non-current assets:
Restricted cash and investments with City Treasury 88,160 9,299 R
estricted cash and investments outside City Treasury 136,761 97,489 Total cash, cash equivalents, and investments $ 1,448,910 1,225,446 Fis cal Years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2023 21.5% 18.0% 14.5% 46.0%
2022 20.2% 14.0% 14.9% 50.9%
Investment maturities (in months)
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 fai r value (Level 1) (Level 2) (Level 3) U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 64,249 64, 249 — — — Money Market Funds A-1/P-1 < 90 days 43 43 — — —
Cash and Cash Equivalents N/A 13,053 13,053 — — —
Total Restricted Cash and Investments outside City Treasury $ 77,345 77,345 — — — C
ash and Cash Equivalents N/A 192 192 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 192 192 — — — Investments
Water's Cash and Investments outside City Treasury
Fair Value Measurements Using
June 30, 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
83 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The restricted cash and investments outside City Treasury as of June 30, 2023 and 2022 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, 2023 and 2022 , 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 $164 and $290 as of June 30, 2023 and 2022, respectively.
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, 2023 and 2022 were $115,156 and $39,358, 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, 2023 and 2022:
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-m f < 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 Unrestricted Cash and Investments outside City Treasury $ 318 318 — — — Fair Value Measurements Using
June 30, 2022
Investments
Water's Cash and Investments outside City Treasury
2023 2022
Current assets:
Cash and investments with City Treasury $ 402,885 460,954 Cash and investments outside City Treasury 192 318
Restricted cash and investments outside City Treasury 10,863 11,063 Non-current assets:
Restricted cash and investments with City Treasury 21,000 9,299 Restricted cash and investments outside City Treasury 66,482 64,894 Total cash, cash equivalents, and investments $ 501,422 546,528 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 $ 115,082 115,082 — — — Money Market Funds A-1/P-1 < 90 days 50 50 — — —
Cash and Cash Equivalents N/A 24 24 — — —
Total Restricted Cash and Investments outside City Treasury $ 115,156 115,156 — — — Cash and C
ash Equivalents N/A 173 173 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 173 173 — — — Wastewater's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2023
Investments
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
84 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The restricted cash and investments outside City Treasury as of June 30, 2023 and 2022 included a $ 0 unrealized gain due to changes in fair values on Commercial Paper.
The Wastewater Enterprise’s cash, cash equivalents, and investments are shown on the accompanying Statements of Net Position as follows:
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, 2023 and 2022 were $9,211 and $14,052, 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, 2023 included 2021 Series AB bond proceeds of $5,382, 2015 Series A bond proceeds of $2,261, certificates of participation proceeds of $1,015, 2015 Series B bond proceeds of $532, $154 held at a commercial bank in a non-interest-bearing checking account that is covered by depository insurance, and commercial paper of $21. The balance as of June 30, 202 2 included 2021 Series AB bond proceeds pf $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.
Hetch Hetchy did not have any unrealized gain and loss in the restricted cash and investments outside City Treasury as of June 30, 2023 and 2022.
For fiscal year 2023 , proceeds from 2021 Series AB and 2015 Series AB bonds held as restricted cash and investments outside City Treasury in the amount of $8,175 were invested in U.S. Treasury Money Market with maturity date less than 90 days. 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. . The credit ratings of the U.S. Treasury Money Market as of June 30, 2023 and 202 2 were “AAAm” by S&P and “Aaa-mf” by Moody’s.
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 Unrestricted Cash and Investments outside City Treasury $ 397 397 — — — Wastewater's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2022
Investments
2023 2022
Current assets:
Cash and investments with City Treasury $ 355,770 285,029 Cash and investments outside City Treasury 173 397 Restricted cash and investments outside City Treasury 48,717 15,587 Non-current assets:
Restricted cash and investments with City Treasury 38,574 — Restricted cash and investments outside City Treasury 66,439 23,771 Total cash, cash equivalents, and investments $ 509,673 324,784
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
85 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
The following tables present the Hetch Hetchy restricted and unrestricted cash and investments outside City Treasury as of June 30, 2023 and 2022:
Hetch Water and Hetchy Power and CleanPowerSF cash, cash equivalents, and investments as of June 30, 2023 and 2022 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) (Lev el 3) Hetchy Power
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 9,190 9,190 — — — Cash and Cash Equivalents N/A 21 21 — — —
Tot
al Restricted Cash and Investments outside City Treasury $ 9,211 9,211 — — — Cash and Cash Equivalents N/A 154 154 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 154 154 — — — Investments
Hetchy Power's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2023
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 — — —
Tot
al Unrestricted 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 — — —
Tot
al Restricted Cash and Investments outside City Treasury $ 14,052 14,052 — — — Cash and Cash Equivalents N/A 16 16 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 16 16 — — — Hetchy Water and Hetchy Power's Cash and Investments outside City Treasury Fair Value Measurements Using
June 30, 2022
Investments
Hetchy Hetchy
Water Power CleanPowerSF Total 2023
Current assets:
Cash and investments with City Treasury $ 76,973 224,234 98,657 399,864 Cash and investments outside City Treasury — 154 — 154 Restricted cash and investments outside City Treasury — 5,371 — 5,371 Non-current assets:
Restricted cash and investments with City Treasury 10,980 17,606 — 28,586 Restricted cash and investments outside City Treasury — 3,840 — 3,840 Total cash, cash equivalents, and investments $ 87,953 251,205 98,657 437,815 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 with City Treasury — — — — 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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
86 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
(4) Capital Assets
Department-wide Business T ype Activities
Department-wide capital assets as of June 30, 2023 and 2022 consist of the following:
*Decrease in construction work in progress is greater than increase in capital assets being depreciated is mainly explained by $5,942 in capital project writeoffs for Water, Wastewater Hetchy Water and Hetchy Power, offset by $18,992 mainly related to dire ct additions to facilities and improvements, intangible assets and machinery and equipment. ** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
*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, $6,2 40 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. ** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
2022 Increas es Dec reas es 2023
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 163,194 — (119) 163,075
Intangible assets** 5,162 — — 5,162
Construction work in progress 2,485,201 990,256 (345,030) * 3,130,427 Total capital assets not being depreciated and amortized 2,653,557 990,256 (345,149) 3,298,664 Capital assets being depreciated and amortized:
Facilities and improvements 11,199,956 335,051 — 11,535,007 Land Improvements — 6,965 — 6,965
Intangible assets** 80,405 2,331 — 82,736
Machinery and equipment 583,988 13,733 (2,036) 595,685 Total capital assets being depreciated and amortized 11,864,349 358,080 * (2,036) 12,220,393 Less accumulated depreciation and amortization for:
Facilities and improvements (3,594,436) (228,515) — (3,822,951) Land Improvements — (232) — (232)
Intangible assets** (50,836) (3,246) — (54,082)
Machinery and equipment (421,946) (22,194) 2,014 (442,126) Total accumulated depreciation and amortization (4,067,218) (254,187) 2,014 (4,319,391) Total capital assets being depreciated and amortized, net 7,797,131 103,893 (22) 7,901,002 Total capital assets, net $ 10,450,688 1,094,149 (345,171) 11,199,666 2021 Increas es Decreas es 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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
87 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Water Capital Assets – Water’s capital assets as of June 30, 2023 and 2022 consist of the following:
*Decrease in construction work in progress includes $4,628 in capital project writeoffs, mainly related to Stern Grove Emergency Restoration and Upper Alameda Creek Filter projects. The remaining difference of $8,477 is mainly due to direct additions to fa cilities and improvements, intangible assets and machinery and equipment.
** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
*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 $5,7 31 is mainly due to direct additions to facilities and improvements, intangible assets and machinery and equipment. ** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
2022 Increas es Decreas es 2023
Capital assets not being depreciated and amortized:
Land $ 113,441 — (119) 113,322
Intangible assets** 679 — — 679
Construction work in progress 444,254 180,391 (97,651) * 526,994 Total capital assets not being depreciated and amortized 558,374 180,391 (97,770) 640,995 Capital assets being depreciated and amortized:
Facilities and improvements 6,660,691 94,616 — 6,755,307 Intangible assets** 25,142 979 — 26,121
Machinery and equipment 332,473 5,905 (579) 337,799
Total capital assets being depreciated and amortized 7,018,306 101,500 (579) 7,119,227 Less accumulated depreciation and amortization for:
Facilities and improvements (1,688,717) (140,215) — (1,828,932) Intangible assets** (22,669) (1,800) — (24,469)
Machinery and equipment (247,700) (11,386) 579 (258,507) Total accumulated depreciation and amortization (1,959,086) (153,401) 579 (2,111,908) Total capital assets being depreciated and amortized, net 5,059,220 (51,901) — 5,007,319 Total capital assets, net $ 5,617,594 128,490 (97,770) 5,648,314 2021 Increas es Decreas es 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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
88 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Wastewater Capital Assets – Wastewater’s capital assets as of June 30, 2023 and 2022 consist of the following:
*Decrease in construction work in progress is less than increase in capital assets being depreciated is due to direct additions to machinery and equipment and buildings structures by $3,659 and $2,739, respectively offset by $911 in capital project write -offs, mainly related to the islais Creek Green Infrastructure Project.
** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
*Decrease in construction work in progress is greater th an increase in capital assets being depreciated is explained by $1,165 in direct additions to machinery and equipment offset by $993 in capital project write -offs, mainly related to Public Works various locations infrastructure improvement projects.
** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
2022 Increas es Decreas es 2023
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 1,724,417 709,485 (200,939) * 2,232,963 Total capital assets not being depreciated and amortized 1,772,035 709,485 (200,939) 2,280,581 Capital assets being depreciated and amortized:
Facilities and improvements 3,729,320 194,590 — 3,923,910 Land Improvements — 6,965 — 6,965
Intangible assets** 9,548 1,212 — 10,760
Machinery and equipment 103,274 3,659 (1,272) 105,661 Total capital assets being depreciated and amortized 3,842,142 206,426 * (1,272) 4,047,296 Less accumulated depreciation and amortization for:
Facilities and improvements (1,481,988) (69,779) — (1,551,767) Land Improvements — (232) — (232)
Intangible assets** (5,487) (986) — (6,473)
Machinery and equipment (80,251) (5,754) 1,252 (84,753) Total accumulated depreciation and amortization (1,567,726) (76,751) 1,252 (1,643,225) Total capital assets being depreciated and amortized, net 2,274,416 129,675 (20) 2,404,071 Total capital assets, net $ 4,046,451 839,160 (200,959) 4,684,652 2021 Increas es Decreas es 2022
Capital assets not being depreciated and amortized:
Land and ri
ghts-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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
89 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Water Capital Assets – Hetchy Water’s capital assets as of June 30, 2023 and 2022 consist of the following:
*Decrease in construction in progress included $192 in capital project write -offs, mainly related to Hetchy Water's share of 2018 Moccasin Storm Project. The remaining difference of $234 to capital asset additions was offset by direct additions to facilities, improvements, machinery, and equipment.
** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
*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 to capital asset additions was offset by direct add additions to machinery and equipment.
** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
2022 Increas es Decreas es 2023
Capital assets not being depreciated and amortized:
Land and rights-of-way $ 3,232 — — 3,232
Intangible assets** 6 — — 6
Construction work in progress 54,138 25,032 (6,720) * 72,450 Total capital assets not being depreciated and amortized 57,376 25,032 (6,720) 75,688 Capital assets being depreciated and amortized:
Facilities and improvements 306,116 5,196 — 311,312
Intangible assets** 20,522 — — 20,522
Machinery and equipment 28,383 1,566 (58) 29,891
Total capital assets being depreciated and amortized 355,021 6,762 * (58) 361,725 Less accumulated depreciation and amortization for:
Facilities and improvements (179,839) (5,227) — (185,066) Intangible assets** (10,154) (207) — (10,361)
Machinery and equipment (21,397) (893) 58 (22,232)
Total accumulated depreciation and amortization (211,390) (6,327) 58 (217,659) Total capital assets being depreciated and amortized, net 143,631 435 — 144,066 Total capital assets, net $ 201,007 25,467 (6,720) 219,754 2021 Increas es Decreas es 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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
90 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Hetchy Power Capital Assets – Hetchy Power’s capital assets as of June 30, 2023 and 2021 consist of the following:
*Decrease in construction in progress included $211 in capital project write -offs, mainly related to Hetchy Power’s share of 2018 Moccasin Storm Project. The remaining difference of $3,883 to capital assets was offset by direct additions to facilities, imp rovements, machinery, and equipment.
** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
*Decrease in construction in progress included $648 in capital project write-offs, mainly related to HOPE SF Project in Sunnydale and Potrero.
The remaining difference of $980 to capital asset additions was offset by direct additions to machinery and equipment. ** Right-to-use lease and subscription assets are reported separately from intangible assets in notes 10 and 11, respectively.
2022 Increas es Dec reas es 2023
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 262,392 75,348 (39,720) * 298,020 Total capital assets not being depreciated and amortized 265,772 75,348 (39,720) 301,400 Capital assets being depreciated and amortized:
Facilities and improvements 503,829 40,649 — 544,478 Intangible assets** 25,193 140 — 25,333
Machinery and equipment 119,858 2,603 (127) 122,334
Total capital assets being depreciated and amortized 648,880 43,392 * (127) 692,145 Less accumulated depreciation and amortization for:
Facilities and improvements (243,892) (13,294) — (257,186) Intangible assets** (12,526) (253) — (12,779)
Machinery and equipment (72,598) (4,161) 125 (76,634)
Total accumulated depreciation and amortization (329,016) (17,708) 125 (346,599) Total capital assets being depreciated and amortized, net 319,864 25,684 (2) 345,546 Total capital assets, net $ 585,636 101,032 (39,722) 646,946 2021 Increas es Decreas es 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
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
91 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
(5) Restricted Assets
Department-wide Business T ype Activities
The following table summarizes the department-wide restricted assets as of June 30, 2023 and 2022.
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 operat ion of the Water Enterprise in accordance with the following priority:
1. The payment of operation and maintenance expenses for such utility and related facilities;
2. The payment of pension charges and proportionate payments to such compensation and other insurance or outside reserve funds as the Water Enterprise may establish or the Board of Supervisors may require with respect to employees of the Water Enterprise;
3. The 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;
4. The payment of principal and interest on General Obligation Bonds issued by the City for the Water Enterprise’s purposes;
5. Reconstruction 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. The acquisition of land, real property, or interest in real property for, and the acquisition, construction, enlargement, and improvement of, new and existing buildings, structures, facilities, equipment, appliances, and other property necessary or convenient to the development or improvement of such utility owned, controlled, or operated by the Water Enterprise; and for any other lawful purpose of the Water Enterprise, including the transfer of surplus funds pursuant to the Charter.
2023 2022
Cash and investments with City Treasury $ 88,160 9,299 Cash and investments outside City Treasury 201,712 129,367 Interest and other receivables 59,362 221,532
Total restricted assets $ 349,234 360,198
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
92 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, 2023 and 2022:
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 earnings thereon, shall be appropriated,
2023 2022
Cash and investments with City Treasury:
Water revenue bond construction fund $ 21,000 9,299
Cash and investments outside City Treasury:
2010A Water revenue bond fund 12 —
2010B Water revenue bond fund 21,861 21,386
2010D Water revenue bond fund 12 1
2010E Water revenue bond fund 16,643 16,304
2010F Water revenue bond fund 8 —
2010G Water revenue bond fund 18,178 17,703
2012A Water revenue bond fund — 1
2015A Water revenue refunding bond fund 4 —
2016A Water revenue refunding bond fund 8 —
2016B Water revenue refunding bond fund 1 —
2016C Water revenue bond fund 2 —
2017B Water revenue bond fund 2 —
2017C Water revenue bond fund 1 —
2017D Water revenue refunding bond fund 4 —
2017E Water revenue refunding bond fund 1 —
2019A Water revenue refunding bond fund 5 —
2020A Water revenue bond fund 2 86
2020B Water revenue bond fund 1 34
2020C Water revenue bond fund 1 54
2020D Water revenue bond fund — 38
2020E Water revenue refunding bond fund 2 —
2020F Water revenue refunding bond fund 13 12
2020G Water revenue refunding bond fund 23 22
2020H Water revenue refunding bond fund 8 7
2009C Certificates of participation - 525 Golden Gate 1,696 1,638 2009D Certificates of participation - 525 Golden Gate 5,761 5,567 Commercial Paper - Tax Exempt 15 14
Commercial Paper - Taxable 28 37
Habitat reserve endowment fund 13,053 13,053
Total cash and investments outside City Treasury 77,345 75,957 Interest and other receivables:
Water bond construction, including interest, prepaids and other receivables 3,514 4,146 Due from other government for State Revolving Fund 36,147 7,553 Total restricted assets $ 138,006 96,955
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
93 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
transferred, expended, or used for the following purposes and only in accordance with the following priority:
1. The payment of operation and maintenance costs of the Wastewater Enterprise;
2. The payment of bonds, parity State revolving fund loans, policy costs, and amounts due as reimbursement under any letter of credit agreement; and
3. Any 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, 2023 and 2022:
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, 2023 and 2022:
Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Hetchy Water Revenue Fund.
2023 2022
Cash and investments with City Treasury:
Wastewater revenue bond construction fund $ 38,574 —
C
ash and investments outside City Treasury:
2009 Series C Certificates of Participation – 525 Golden Gate 449 433 2009 Series D Certificates of Participation – 525 Golden Gate 1,523 1,472 2010 Series A Wastewater revenue bond fund 137 —
2010 Series B Wastewater revenue bond fund 7,153 8,826 2013 Series B Wastewater revenue bond fund 5 —
2016 Series A Wastewater revenue bond fund 6 —
2016 Series B Wastewater revenue bond fund 2 —
2018 Series A Wastewater revenue bond fund 6 —
2018 Series B Wastewater revenue bond fund 5 —
2018 Series C Wastewater revenue bond fund 2 —
2021 Series A Wastewater revenue bond fund 13,298 24,396 2021 Series B Wastewater revenue bond fund 2,163 3,937 2022 Series B Wastewater revenue bond fund 86 —
2023 Series A Wastewater revenue bond fund 65,673 —
2023 Series B Wastewater revenue bond fund 24,313 —
2023 Series C Wastewater revenue bond fund 19 —
2021 Series A Wastewater revenue note fund 152 145
2021 Series B Wastewater revenue note fund 89 86
Commercial Paper - Tax Exempt 75 63
Total cash and investments outside City Treasury 115,156 39,358 Interest and other receivables:
Wastewater revenue bond construction fund including interest, prepaid, and other receivables 1,608 2,735 Due from other government for State Revolving Fund 13,942 202,795 Total restricted assets $ 169,280 244,888
2023 2022
Cas
h and investments with City Treasury:
Hetch Hetchy bond construction fund $ 10,980 —
Total restricted assets $ 10,980 —
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
94 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, QE CBs, and NCREBs (the “Subordinate Obligations”). The Lease/Purchase Agreements for the Subordinate Obligations pledge the net revenues of the Hetchy Power to these bonds, and such pledge is subordinate in lien to the net revenues pledge for the 2015 Series AB Bonds and 2021 Series AB Bonds (the “Bonds” or “Bond”).
In the Indenture, the SFPUC covenants and agrees that it will pay into the Revenue Fund as received all Revenues of Hetchy Power and shall be used and applied, as provided by the Indenture, solely for the purposes of operating and maintaining Hetchy Power and paying all costs, charges, and expenses in connection therewith and for the purpose of making repairs, renewals, and replacements to Hetchy Power and constructing additions, betterments, and extensions thereto.
The Indenture provides that Revenues deposited in the Revenue Fund shall be disbursed in the following order of priority:
1. The payment of operation and maintenance expenses;
2. Any priority reconstruction and replacement fund deposits;
3. Deposit in the interest account of each Bond Fund;
4. Deposit in the bond retirement account of each Bond Fund;
5. Deposit in the reserve fund;
6. (i) Payment of principal and premium, if any, and interest on any Subordinate Obligations; (ii) deposit into a reserve fund securing any Subordinate Obligations; (iii) Swap Agreement payments pursuant to Swap Agreements entered into by the SFPUC with respect to any Subordinate Obligations; and (iv) payment to any financial institution or insurance company providing any letter of credit, line of credit, or other credit or liquidity facility, including municipal bond insurance and guarantees, that secures the payment of principal or interest on any Subordinate Obligations; in each case in any order of priority within this paragraph which may be hereafter established by the SFPUC by resolution;
7. Any additional reconstruction and replacement fund deposits into the reconstruction and replacement
fund;
8. Any necessary or desirable capital additions or improvements to the Hetchy Power;
9. An y payment under a Take-or-Pay Power Purchase Agreement that does not constitute an operation and maintenance expense;
10. Any payment under a Swap Agreement that does not constitute a Swap Agreement payment; and
11. Any other lawful purpose of the SFPUC.
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.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
95 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
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, 2023 and 2022:
Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Hetchy Power Revenue Fund.
(6) Short-Term Debt
Department-wide Business T ype Activities
The following table summarizes the department-wide commercial paper debt.
*The SFPUC had $487,811 in outstanding commercial paper, which were repaid by the Water 2023 Series AB revenue bonds and Hetchy Power 2023 Series A revenue bonds issued in July 2023 and October 2023. The $487,811 has been reclassed to long- term liabilities on the financial statements (see Note 18).
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, 2023 and 2022, amounts outstanding under Proposition E were $371,459 and $206,297, respectively. Commercial paper interest rates ranged from 1.2% to 5.3%.
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.
As of June 30, 2023, the Water Enterprise had $371,459 in outstanding commercial paper, which were repaid by the 2023 Series AB Water Revenue Bonds issued in July 2023. The $371,459 has been reclassed to long-term liabilities on the financial statements (see Note 18).
2023 2022
Cash and investments with City Treasury:
Hetch Hetchy bond construction fund $ 17,606 —
Cash and investments outside City Treasury:
2009 Series C Certificates of Participation – 525 Golden Gate 231 223 2009 Series D Certificates of Participation – 525 Golden Gate 784 758 2015 Series A Revenue Bonds 2,261 2,194
2015 Series B Revenue Bonds 532 516
2021 Series AB Revenue Bonds 5,382 10,346
Commercial Paper 21 15
Total restricted cash and investments outside City Treasury 9,211 14,052 Interest receivable:
Hetch Hetchy bond construction fund 4,151 4,303
Total restricted assets $ 30,968 18,355
2022 Additions Re ductions 2023
Water* $ 206,297 165,162 — 371, 459
Wastewater 379,157 177,564 (556,721) —
Hetchy Power* 40,019 76,333 — 116,352
SFPUC Total $ 625,473 419,059 (556,721) 487,811
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
96 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements , the Water Enterprise had $128,541 and $293,703 in unused authorization as of June 30, 2023 and 2022, 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, 2023, 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 $0 and $379,157 in commercial paper outstanding as of June 30, 2023 and 2022, respectively.
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , the Wastewater Enterprise had $750,000 and $370,843 in unused authorization as of June 30, 2023 and 2022, 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, 2023, there were no such events described herein.
Hetchy Water Short-Term Debt
Hetchy Water had no commercial paper outstanding as of June 30, 2023 and 2022.
Hetchy Power Short-Term Debt
Effective Mar ch 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 1.1% to 3.2% and 0.1% to 1.1% in fiscal years 2023 and 2022, respectively. Hetchy Power had $116,352 and $40,019 commercial paper outstanding as of June 30, 2023 and 202 2, respectively. The Power Enterprise had $133,648 and $209,981 in unused authorization as of June 30, 2022 and 2021, respectively.
Hetchy Power had $116, 352 in outstanding commercial paper, which were repaid by the 2023 Series A bonds issued in October 2023. The $116,352 has been reclassed to lon g-term liabilities on the financial statements (see Note 18).
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, 2023 , there were no such events described herein.
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
97 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
CleanPowerSF Short-Term Debt
CleanPowerSF had no commercial paper outstanding as of June 30, 2023 and 2022.
(7) Changes in Long-Term Liabilities
Department-wide Long-Term Liability activities for the years ended June 30, 2023 and 2022 are as follows:
*Ending balance included elimination entries of $518 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. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Interes t Maturity Res tated Due within
rate (Calendar Year) 2022# Additions Reductions 2023 one year Revenue Bonds:
2010B water revenue bonds (Build America) 4.00 – 6.00 2040 $ 349,170 — ( 12,780) 336,390 13,245 2010B wastewater revenue bonds (Build America) 4.65 – 5.82 2040 192,515 — (7,280) 185,235 7,505 2010E water revenue bonds (Build America) 4.90 – 6.00 2040 344,200 — (12,745) 331,455 13,165 2010G water revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2013A wastewater revenue bonds 1.00 – 5.00 2025 15,535 — (14,960) 575 575 2013B wastewater revenue bonds 4.00 – 5.00 2042 331,585 — (238,490) 93,095 — 2015A water revenue refunding bonds 2.00 – 5.00 2036 382,420 — (16,045) 366,375 28,070 2015A hetchy power revenue bonds 4.00 – 5.00 2045 32,025 — — 32,025 — 2015B hetchy power revenue bonds 3.00 – 4.00 2026 3,735 — (850) 2,885 880 2016A water revenue refunding bonds 4.00 – 5.00 2039 719,735 — (32,790) 686,945 23,590 2016B water revenue refunding bonds 1.50 – 5.00 2030 71,510 — (12,530) 58,980 13,175 2016C water revenue bonds 0.87 – 4.19 2046 231,230 — (5,955) 225,275 6,105 2016A wastewater revenue bonds 4.00 – 5.00 2046 240,580 — — 240,580 5,475 2016B wastewater revenue bonds 4.00 – 5.00 2046 67,820 — — 67,820 1,545 2017A water revenue bonds 5.00 2047 27,000 — (2,325) 24,675 2,445 2017B water revenue bonds 5.00 2047 32,930 — (2,835) 30,095 2,985 2017C water revenue bonds 5.00 2047 15,750 — (1,355) 14,395 1,425 2017D water revenue refunding bonds 2.00 – 5.00 2035 346,795 — (1,455) 345,340 1,270 2017E water revenue refunding bonds 4.00 – 5.00 2031 48,890 — (765) 48,125 795 2017F water revenue refunding bonds 5.00 2031 8,705 — (700) 8,005 735 2017G water revenue refunding bonds 2.03 – 2.91 2024 31,960 — (13,070) 18,890 13,665 2018A wastewater revenue bonds 4.00 – 5.00 2043 229,050 — (7,715) 221,335 7,160 2018B wastewater revenue bonds 5.00 2043 185,950 — (6,260) 179,690 5,810 2018C wastewater revenue bonds 2.13 2048 179,145 — (179,145) — — 2019A water revenue refunding bonds 1.81 – 3.47 2043 591,320 — (3,495) 587,825 3,565 2019B water revenue refunding bonds 3.15 – 3.52 2041 16,385 — (70) 16,315 70 2019C water revenue refunding bonds 3.15 – 3.52 2041 17,850 — (75) 17,775 80 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 335,535 — (500) 335,035 1,530 2020F water revenue refunding bonds 0.26 – 3.15 2047 135,455 — — 135,455 1,430 2020G water revenue refunding bonds 0.26 – 3.10 2043 114,765 — (5,795) 108,970 7,065 2020H water revenue refunding bonds 0.26 – 3.15 2047 64,815 — — 64,815 685 2021A wastewater revenue bonds 4.00 – 5.00 2051 260,835 — — 260,835 — 2021B wastewater revenue bonds 5.00 2051 37,045 — — 37,045 — 2021A hetchy power revenue Bonds 4.00 – 5.00 2052 74,280 — — 74,280 — 2021B hetchy power revenue Bonds 4.00 – 5.00 2052 49,720 — — 49,720 — 2022B wastewater revenue bonds 5.00 2034 — 137,080 — 137,080 — 2023A wastewater revenue bonds 5.00 – 5.25 2042 — 530,565 — 530,565 — 2023B wastewater revenue bonds 4.00 – 5.00 2042 — 278,155 — 278,155 — 2023C wastewater revenue bonds 4.00 2048 — 165,660 — 165,660 — Clean Renewable Energy Bonds 0.00 2022 421 — (421) — — Qualified Energy Conservation Bonds 4.74 2027 3,138 — (555) 2,583 562 New Clean Renewable Energy Bonds 4.62 2032 1,637 — (146) 1,491 148 Less issuance discount (130) — 15 (115) —
Add issuance premiums 497,138 178,474 (56,828) 618,784 — Revenue Notes:
2021A wastewater - Biosolids 1.00 2025 218,355 — — 218,355 — 2021B wastewater - SEP Headworks 1.00 2026 129,110 — — 129,110 — Add issuance premiums 2,891 — (800) 2,091 —
Total revenue bonds & notes payable 7,337,030 1,289,934 (638,720) 7,988,244 164,755 2009C Certificates of Participation (COPs) 2.00 – 5.00 2022 4,375 — (4,375) — — 2009C COPs issuance premiums 20 — (20) — —
2009D COPs (Build America) 6.36 – 6.49 2041 129,550 — — 129,550 4,576 State Revolving Fund Loans (CWSRF Loans) Water 1.00 – 1.10 2057 121,761 41,866 — 163,627 — State Revolving Fund Loans (CWSRF Loans) Wastewater 0.80 – 1.80 2051 302,659 18,511 (2,481) 318,689 2,526 Water Infrastructure Finance and Innovation Act Loans (WIFIA) 1.45 2059 — 122,357 — 122,357 — Water Commercial Papers 1.20 – 5.30 2023 — 371,459 — 371,459 — Hetchy Power Commercial Papers 1.05 – 3.15 2023 — 116,352 — 116,352 — Arbitrage rebate payable — 188 — 188 —
Other post-employment benefits obligations 227,147 7,757 (88) 234,816 — Net Pension Liability — 198,360 — 198,360 —
Accrued vacation and sick leave 30,942 20,145 (19,115) 31,972 16,490 Accrued workers’ compensation 19,997 7,260 (6,067) 21,190 4,040 Due to Other City departments* 380 4,048 (380) 4,048 4,048 Lease liability 6,870 2,798 (4,054) 5,614 2,521
Subscription liability 3,132 — (1,709) 1,423 806
Damage claims liability 49,796 17,111 (36,048) 30,859 13,541 Wholesale balancing account water 79,150 — (79,150) — — Pollution remediation obligations 9,331 — (260) 9,071 — Unearned revenues, refunds, and other 20,057 33,434 (40,775) 12,716 12,136 $ 8,342,197 2,251,580 (833,242) 9,760,535 225,439
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
98 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
*Ending balance included elimination entries of $629 interfund payables and receivables between Wastewater and Hetchy Power f or the 525 Golden Gate Avenue Headquarters Living Machine.
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Interes t Maturity Res tated 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 — 2021A hetchy power revenue Bonds 4.00 – 5.00 2052 — 74,280 — 74,280 — 2021B hetchy power 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 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:
2021A wastewater - Biosolids 1.00 2025 — 218,355 — 218,355 — 2021B wastewater - 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
Subscription liability — 3,932 (800) 3,132 1,709
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 1,191,527 (654,262) 8,342,197 275,246
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
99 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
Water Long-Term Liability activities for the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Interes t Maturity Res tated Due within
rate (Calendar Year) 2022# Additions Reductions 2023 one year Revenue Bonds:
2010B revenue bonds (Build America) 4.00 – 6.00 % 2040 $ 349,170 — (12,780) 336,390 13,245 2010E revenue bonds (Build America) 4.90 – 6.00 2040 344,200 — (12,745) 331,455 13,165 2010G revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2015A revenue refunding bonds 2.00 – 5.00 2036 382,420 — (16,045) 366,375 28,070 2016A revenue refunding bonds 4.00 – 5.00 2039 719,735 — (32,790) 686,945 23,590 2016B revenue refunding bonds 1.50 – 5.00 2030 71,510 — (12,530) 58,980 13,175 2016C revenue bonds 0.87 – 4.19 2046 231,230 — (5,955) 225,275 6,105 2017A revenue bonds 5.00 2047 27,000 — (2,325) 24,675 2,445 2017B revenue bonds 5.00 2047 32,930 — (2,835) 30,095 2,985 2017C revenue bonds 5.00 2047 15,750 — (1,355) 14,395 1,425 2017D revenue refunding bonds 2.00 – 5.00 2035 346,795 — (1,455) 345,340 1,270 2017E revenue refunding bonds 4.00 – 5.00 2031 48,890 — (765) 48,125 795 2017F revenue refunding bonds 5.00 2031 8,705 — (700) 8,005 735 2017G revenue refunding bonds 2.03 – 2.91 2024 31,960 — (13,070) 18,890 13,665 2019A revenue refunding bonds 1.81 – 3.47 2043 591,320 — (3,495) 587,825 3,565 2019B revenue refunding bonds 3.15 – 3.52 2041 16,385 — (70) 16,315 70 2019C revenue refunding bonds 3.15 – 3.52 2041 17,850 — (75) 17,775 80 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 335,535 — (500) 335,035 1,530 2020F revenue refunding bonds 0.26 – 3.15 2047 135,455 — — 135,455 1,430 2020G revenue refunding bonds 0.26 – 3.10 2043 114,765 — (5,795) 108,970 7,065 2020H revenue refunding bonds 0.26 – 3.15 2047 64,815 — — 64,815 685 Less issuance discount (124) — 9 (115) —
Add issuance premiums 276,409 — (24,813) 251,596 —
Total revenue bonds payable 4,860,935 — (150,089) 4,710,846 135,095 2009C Certificates of Participation (COPs) 2.00 – 5.00 2022 3,124 — (3,124) — — 2009C COPs issuance premiums 14 — (14) — —
2009D COPs (Build America) 6.36 – 6.49 2041 92,499 — — 92,499 3,267 State Revolving Funds Loan 1.00 – 1.10 2057 121,761 41,866 — 163,627 — Commercial Papers 1.20 – 5.30 2023 — 371,459 — 371,459 — Other post-employment benefits obligations 144,115 4,486 — 148,601 — Net pension liability — 115,343 — 115,343 —
Accrued vacation and sick leave 13,729 12,427 (12,571) 13,585 7,057 Accrued workers’ compensation 8,973 3,984 (3,222) 9,735 1,914 Lease liability 2,863 2,562 (1,415) 4,010 1,189
Subscription liability 1,556 — (848) 708 400
Damage claims liability 36,069 1,898 (18,342) 19,625 11,125 Wholesale balancing account 79,150 — (79,150) — —
Pollution remediation obligations 1,271 — — 1,271 — Total $ 5,366,059 554,025 (268,775) 5,651,309 160,047
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
100 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
The payments of principal and interest amounts on various bonds are secured by net revenues of the Water Enterprise.
a) Water 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, 2023 and 2022, the principal amount outstanding was $336,390 and $349,170, respectively.
Interes t Maturity Res tated 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
Subscription liability — 1,556 — 1,556 848
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 60,833 (386,652) 5,366,059 200,763
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
101 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
b) Water 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, 2023 and 2022, 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, 2023 and 2022, the principal amount of 2010 Series E bonds outstanding was $331,455 and $344,200, respectively.
c) Water 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 $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, 2023 and 2022, the principal amount of 2010 Series G bonds outstanding was $351,470.
102 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
d) Water 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, 2023 and 2022, 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%.
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, 2023 and 2022, the principal amount of 2011 Series B bonds outstanding was $0.
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%.
103 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(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. $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, 2023 and 2022, the principal amount of 2011 Series C bonds outstanding was $0.
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 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 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 sufficient to redeem the maturities of the 2011 Series D bonds starting on November 1, 2022 and thereafter. As of June 30, 2023 and 2022, the principal amount of 2011 Series D bonds outstanding was $0.
e) Water 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, 2023 and 2022, the principal amount of 2015 Series A bonds outstanding was $366,375 and $382,420, respectively.
104 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
f) Water 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, 2023 and 2022, the principal amount of 2016 Series AB bonds outstanding was $745,925 and $791,245, respectively.
g) Water 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, 2023 and 2022, the principal amount of 2016 Series C bonds outstanding was $225,275 and $231,230, respectively.
h) Water 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.
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 were issued as serial and term bonds with coupons of
5.0% and a final maturity of 2047. 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, 2023 and 2022, the principal amount of 2017 Series A bonds outstanding was $24,675 and $27,000, respectively.
105 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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, 2023 and 2022, the principal amount of 2017 Series B bonds outstanding was $30,095 and $32,930, respectively.
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, 2023 and 2022 , the principal amount of 2017 Series C bonds outstanding was $14,395 and $15,750, respectively.
i) Water 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 201 1 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.
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, 2023 and 2022, the principal amount of 2017 Series DEFG bonds outstanding was $420,360 and $436,350, respectively.
106 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
j) Water 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, 2023 and 2022, the principal amount of 2019 Series ABC bonds outstanding was $621,915 and $625,555, respectively.
k) Water Revenue Bonds 2020 Series ABCD
In September 2020, the Water Enterprise issued tax -exempt revenue bonds, 2020 Series ABCD in the aggregate amount of $346,760. 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, 2023 and 2022, 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, 2023 and 2022, the principal amount of 2020 Series B bonds outstanding was $61,330.
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, 2023 and 2022, 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, 2023 and 2022, the principal amount of 2020 Series D bonds outstanding was $49,200.
107 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
l) Water 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, 2023 and 2022, the principal amount of 2020 Series EFGH bonds outstanding was $644,275 and $650,570, respectively.
m) Future 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, 2023 . The federal interest subsidy amounts represent 35.0%, excluding sequestration, of the interest for the revenue bond 2010 Series B, E, and G.
*The SFPUC received an IRS notice dated May 25, 2023 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 $17,488, 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 interes t Interest net
Principal subsidy subsidy* of subsidy
Fiscal years ending June 30:
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 163,125 170,410 (18,772) 151,638
2029-
2033 926,810 728,151 (83,650) 644,501
2034-2038 1,117,065 489,895 (59,144) 430,751
2039-2043 924,965 255,105 (29,912) 225,193
2044-2048 443,220 125,062 (14,788) 110,274
2049-2051 299,035 23,037 (2,629) 20,408
Total 4,459,365 2,543,745 (289,327) 2,254,418
Less: Current portion (135,095)
Less: Unamortized bond discount (115)
Add: Unamortized bond premiums 251,596
Long-term portion as of June 30, 2023 $ 4,575,751
108 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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).
n) SF 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, 2023 and 2022 were $131,525 and $121,761, respectively. In addition, there was $15,000 of principal forgiveness in fiscal year 2023.
o) Mountain Tunnel Improvement Project and Future Annual Debt Service for Drinking 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 Improvement Project by a Memorandum of Understanding that will be executed wi th the Water Enterprise. The DWSRF loan is secured on a parity lien basis with the Water Enterprise’s outstanding revenue bonds.
Principal Interes t To tal
Fiscal years ending June 30:
2024 $ — — —
2025 — — —
2026 3,781
1,315 5,096
2027 3,819 1,277 5,096
2028 3,857 1,239 5,096
2029-2033 19,872 5,610 25,482
2034-2038 20,885 4,596 25,481
2039-2043 21,951 3,531 25,482
2044-2048 23,070 2,411 25,481
2049-2053 24,247 1,234 25,481
2054-2057 10,043 152 10,195
Total 131,525 21,365 152,890
Less: Current portion —
Long-term portion as of June 30, 2023 $ 131,525
109 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The principal outstanding as of June 30, 2023 and 2022 was $32,102 and $0, respectively.
p) Proposition 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, 2023, 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 authoriz ation against Prop A was $1,499,230 as of June 30, 2023.
q) Proposition 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, 2023, the Board of Supervisors authorized the issuance of $4,758,518 in revenue bonds with $3,903,617 issued against this authorization; in September 2017 and amended in April 2023, 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, $371,459 and $206,297 in commercial paper was outstanding pursuant to this authorization as of June 30, 2023 and 2022, respectively.
r) Events 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, 2023, and 2022, there were no such events describe herein.
Principal Interes t Total
Fiscal years ending June 30:
2024 $ — — —
2025 — — —
2026 — — —
2027 — — —
2028 — — —
2029-2033 4,708 1,512 6,220
2034-2038 4,948 1,272 6,220
2039-2043 5,200 1,019 6,219
2044-2048 5,465 754 6,219
2049-2053 5,744 475 6,219
2054-2057 6,037 183 6,220
Total 32,102 5,215 37,317
Less: Current portion —
Long-term portion as of June 30, 2023 $ 32,102
110 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Wastewater Long-Term Liability activities for the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Interes t Maturity Res tated Due within
rate (Calendar Year) 2022# Additions Reductions 2023 one year Revenue bonds:
2010 Series B (Build America) 4.65 – 5.82 % 2040 $ 192,515 — (7,280) 185,235 7,505 2013 Series A 1.00 – 5.00 2025 15,535 — (14,960) 575 575 2013 Series B 4.00 – 5.00 2042 331,585 — (238,490) 93,095 — 2016 Series A 4.00 – 5.00 2046 240,580 — — 240,580 5,475 2016 Series B 4.00 – 5.00 2046 67,820 — — 67,820 1,545 2018 Series A 4.00 – 5.00 2043 229,050 — (7,715) 221,335 7,160 2018 Series B 5.00 2043 185,950 — (6,260) 179,690 5,810 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 —
2022 Series B 5.00 2034 — 137,080 — 137,080 —
2023 Series A 5.00 – 5.25 2042 — 530,565 — 530,565 — 2023 Series B 4.00 – 5.00 2042 — 278,155 — 278,155 — 2023 Series C 4.00 2048 — 165,660 — 165,660 —
For issuance premiums 191,193 178,474 (30,427) 339,240 — 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 2,891 — (800) 2,091 —
Total revenue bonds and notes payable 2,281,609 1,289,934 (485,077) 3,086,466 28,070 2009 Series C Certificates of Participation (COPs) 2.00 – 5.00 2022 826 — (826) — — 2009 Series C COPs issuance premiums 4 — (4) — —
2009 Series D COPs (Build America) 6.36 – 6.49 2041 24,458 — — 24,458 864 State Revolving Fund Loans (CWSRF) 0.80 – 1.80 2056 302,659 18,511 (2,481) 318,689 2,526 Water Infrastructure Finance and Innovation Act Loans (WIFIA) 1.45 2059 — 122,357 — 122,357 — Arbitrage rebate payable — 188 — 188 —
Other post-employment benefits obligations 49,123 — (88) 49,035 — Net pension liability — 49,549 — 49,549 —
Accrued vacation and sick leave 10,901 4,729 (3,968) 11,662 6,040 Accrued workers’ compensation 7,546 2,976 (2,524) 7,998 1,509 Due to Other City departments 629 2,102 (111) 2,620 2,215 Lease liability 3,638 — (2,341) 1,297 1,297
Subscription liability 944 — (515) 429 243
Damage claims liability 12,045 2,716 (10,411) 4,350 1,650 Pollution remediation obligations 8,060 — (260) 7,800 — Total $ 2,702,442 1,493,062 (508,606) 3,686,898 44,414
Interes t Maturity Res tated 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
Subscription liability — 1,422 (478) 944 515
Damage claims liability 16,713 8,812 (13,480) 12,045 9,323 Pollution remediation obligations 7,800 260 — 8,060 — Total $ 1,928,469 943,195 (169,222) 2,702,442 56,818 111 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The payments of principal and interest amounts on various bonds are secured by net revenues of the Wastewater Enterprise.
a) Wastewater 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, 202 3 and 2022, the 2010 Series A bonds’ principal amount outstanding was $0.
b) Wastewater 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, 2023 and 2022, the 2010 Series B bonds’ principal amount outstanding was $185,235 and $192,515, respectively.
c) Wastewater 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.
A
portion of the proceeds of the 2022 Series B refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated July 1, 2022 to refund and legally defease a portion of the outstanding 2013 Series A 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 2013 Series A bonds starting on October 1, 2024 and thereafter. As of June 30, 2023 and 2022, the principal amount outstanding of the 2013 Series A bonds was $575 and $15,535, respectively.
d) Wastewater 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%.
112 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
A portion of the proceeds of the 2022 Series B and 2023 Series B refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, date July 1, 2022 and April 1, 2023, respectively to refund and legally defease a portion of the outstanding 2013 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. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2013 Series A bonds starting on October 1, 2024 through October 1, 2039. The remaining bonds mature through October 1, 2042. As of June 30, 2023 and 2022, the principal amount outstanding of the 2013 Series B bonds was $93,095 and $331,585, respectively.
e) Wastewater 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, 202 3 and 2022, the principal amount outstanding of the 2016 Series A bonds was $240,580.
f) Wastewater 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, 2023 and 2022, the principal amount outstanding of the 2016 Series B bonds was $67,820.
g) Wastewater 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, 202 3 and 2022, the principal amount outstanding of the 2018 Series A bonds was $221,335 and $229,050, respectively.
h) Wastewater 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, 2023 and 2022, the principal amount outstanding of the 2018 Series B bonds was $179,690 and $185,950, respectively.
113 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
i) Wastewater 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. The 2018 Series C bonds was fully refunded by the 2023 Series C bonds. 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, 2023 and 2022, the principal amount outstanding of the 2018 Series C bonds was $0 and $179,145, respectively .
j) Wastewater 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, 2023 and 2022, the principal amount of the 2021 Series A bonds outstanding was $260,835.
The $37,045 2021 Series B bonds were issued as tax -exempt bonds to refund approximately $44,000 of commercial paper notes for Wastewater capital projects. The Series B bonds were issued as serial bonds with coupons of 5.0% and have a final maturity of 2051. The Series B bonds have a true interest cost of 3.2%. As of June 30, 2023 and 2022, the principal amount of the 2021 Series B bonds outstanding was $37,045.
k) Wastewater Revenue Notes 2021 Series AB
In November 2021, the 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, 2023 and 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, 202 3 and 2022, the principal amount of 2021 Series B Notes outstanding was $129,110.
114 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
l) Wastewater Revenue Refunding Bonds 2022 Series B
In July 2022, the Wastewater Enterprise issued tax -exempt revenue bonds, 2022 Series B in the aggregate principal amount of $137,080 on a forward delivery basis. The 2022 Series B bonds were issued for the purpose of refunding a portion of the outstanding 2013 Series A bonds maturing on October 1, 2024 and October 1, 2025 and a portion of the outstanding 2013 Series B bonds maturing on October 1, 2024 through October 1, 2034. The bonds carried “Aa2” and “AA” ratings from Moody’s and S&P, respectively.
The 2022 Series B bonds include serial bonds, each with an interest rate of 5% and have a final maturity in 2034. The Series B bonds have a true interest cost of 3.2%. The refunding resulted in the recognition of a deferred accounting gain of $6,868, gross debt service savings of $12,446, and an economic gain of $12,012 or 8.0% of refunded bonds. As of June 30, 2023, the principal amount of the 2022 Series B bonds outstanding was $137,080.
m) Wastewater Revenue Refunding Bonds 2023 Series ABC
In April 2023, the Wastewater Enterprise issued tax -exempt revenue bonds, 2023 Series ABC in the aggregate principal amount of $974,380. The purpose of the 2023 Series ABC bonds was to refund approximately $557,845 aggregate principal amount of commercial paper notes, financ e various capital projects of the Wastewater Enterprise, and refund certain outstanding revenue bonds. The bonds carried “Aa2” and “AA” ratings from Moody’s and S&P, respectively.
The $530,565 2023 Series A bonds were issued as tax -exempt Green Bonds to refund approximately $400,900 of commercial paper notes for SSIP capital projects and finance certain capital projects benefitting the Wastewater Enterprise. The Series A bonds were issued as serial bonds with coupons of 5.0% and 5.3% and a final maturity of 2042. The 2023 Series A bonds have a true interest cost of 2.9%. As of June 30, 2023, the principal amount of the 2023 Series A bonds outstanding was $530,565.
The $278,155 2023 Series B bonds were issued as tax -exempt bonds to refund a portion of the outstanding 2013 Series B bonds maturing on October 1, 2035 through October 1, 2039, refund approximately $156,900 of commercial paper notes for certain capital projects benefitting the Enterprise and finance certain capital projects benefitting the Wastewater Enterprise. The Series B bonds were issued as serial bonds with coupons of 4.0% and 5.0% and a final maturity of 2042.
The Series B bonds have a true interest cost of 3.0%. The refunding resulted in the recognition of a deferred accounting gain of $5,316 and gross debt service savings of $10,626. As of June 30, 2023, the principal amount of the 2023 Series B bonds outstanding was $278,155.
The $165,660 2023 Series C bonds were issued as tax -exempt Green Bonds to refund all of the outstanding 2018 Series C bonds. The Series C bonds were issued as serial bonds with a coupon of 4.0% and a final maturity of 2048. The 2023 Series C bonds have a true interest cost of 3.5%.
The refunding resulted in the recognition of a deferred accounting gain of $963, gross debt service savings of $24,606, and an economic gain of $15,785 or 8.8% of refunded bonds. As of June 30, 2023, the principal amount of the 2023 Series C bonds outstanding was $165 ,660.
115 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
n) Future 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, 2023 . The interest before subsidy amounts include the interest for 2010 Series B, 2013 Series A and B, 2016 Series A and B, and 2018 Series A, B, and C, 2021 Series A and B bonds, 2021 Series A and B notes, 2022 Series B and 2023 Series A, B, and C bonds. 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 May 25 2023, that the federal interest subsidy on the 2010 Series B bonds is reduced by 5.7% through fiscal year 2030, or a total reduction of $2,113, 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 Indenture, the principal and interest of the Wastewater Enterprise’s refun ding bonds are payable from its corresponding revenue as well as monies deposited in certain funds and accounts pledged thereto (see Note 5).
o) Lake Merced Green Infrastructure Project - CWSRF Loan
In January 2016, then amended in May 2016, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (“CWSRF”) Loan to fund the Lake Merced Green Infrastructure Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $7,435. 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; completion was in October 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, 2023 and 2022, the principal amount outstanding of the loan was $5,945 and $6,112, respectively.
p) Southeast Plant (SEP) 521/522 and Disinfection Upgrade Project - CWSRF Loan
In September 2017, then amended in December 2017 and May 2018, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP 521/522 and Disinfection Upgrade Project of the Sewer System I mprovement 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
Interest before Federal interes t Interest net
Principal subsidy subsidy* of subsidy
Fiscal years ending June 30:
2024 $ 28,070 114,379 (3,356) 111,023
2025 35,370 115,140 (3,235) 111,905
2026 256,815 112,242 (3,105) 109,137
2027 199,405 107,815 (2,968) 104,847
2028 77,225 103,460 (2,822) 100,638
2029-2033 540,075 438,987 (11,623) 427,364
2034-2038 520,935 303,416 (6,675) 296,741
2039-2043 526,905 179,593 (1,173) 178,420
2044-2048 378,985 77,465 — 77,465
2049-2052 181,350 13,138 — 13,138
Total 2,745,135 1,565,635 (34,957) 1,530,678
Less: Current portion (28,070)
Add: Unamortized bond premiums 341,331
Long-term portion as of June 30, 2023 $ 3,058,396
116 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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, 2023 and 2022, the principal amount outstanding of the loan was $36,409 and $37,450, respectively.
q) North Point Facility Outfall Rehabilitation Project - CWSRF Loan
In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the North Point Facility Outfall Rehabilitation Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $20,199. The loan bears an interest rate of 1.8% which was equal to one- half of the State of 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, 2023 and 2022, the principal amount outstanding of the loan was $15,231 and $15,710, respectively.
r) Southeast Plant (SEP) Primary/Secondary Clarifier Upgrade Project - CWSRF Loan
In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP Primary/Secondary Clarifier Upgrade Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $34,446. The loan bears an interest rate of 0.8% which was equal to one- half of the State of 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 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, 2023 and 2022, the principal amount outstanding of the loan was $25,254 and $26,048, respectively.
s) Oceanside Plant (OSP) Digester Gas Utilization Upgrade Project - CWSRF Loan
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. 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 $33,230, which included a loan forgiveness grant of $4,000.
As of June 30, 2023 and 2022, the principal amount outstanding of the loan was $29,230 and $24,661, respectively.
t) Southeast Plant (SEP) Biosolids Digester Facilities Project - CWSRF Loan and Grant
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,
117 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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 $132,000, which includes a $4,000 loan forgiveness grant. As of June 30, 2023 and 2022, the principal amount outstanding of the loan was $128,000.
u) Southeast Plant (SEP) New Headworks (Grit) Replacement Project - CWSRF Loan
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 $64,678 and a receivable for reimbursement of $13,942. As of June 30, 2023 and 2022, the principal amount outstanding of the loan was $78,620 and $64,678, respectively.
v) Future Annual Debt Services of State Revolving Fund Loans (CWSRF Loans)
The future annual debt services relating to the SRF 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, 2023 are as follows:
*Interest and Fees included debt admin fees for the North Point Facility and SEP Clarifier Upgrade SRF loans.
Principal Total
Fiscal years ending June 30:
2024 $ 2,526 1,479 4,005
2025 5,588 2,708 8,296
2026 5,669 2,627 8,296
2027 9,215 4,336 13,551
2028 9,347 4,204 13,551
2029-2033 48,792 18,960 67,752
2034-2038 52,411 15,341 67,752
2039-2043 56,308 11,444 67,752
2044-2048 60,505 7,247 67,752
2049-2053 48,755 3,197 51,952
2054-2056 19,573 481 20,054
Total 318,689 72,024 390,713
Less: Current portion (2,526)
Long-term portion as of June 30, 2023 $ 316,163
Interest
and Fees*
118 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
w) Biosolids Digester Facility Project Water Infrastructure Finance Innovation Act Loan Agreement (WIFIA)
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.
In March of 2023, the SFPUC received disbursement of $122,283 in respect to eligible project costs and a capitalized interest of $74 added to principal. As of June 30, 2023, the principal amount of the loan outstanding was $122,357
x) Southeast Treatment Plant Improvements Project - WIFIA Loan
In June 2020, the San Francisco Public Utilities Commission (“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 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 Resour ces 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, 2023.
y) Master Loan Agreement and Project 1 Loan Agreement - WIFIA Loan
In April 2023, the SFPUC entered into a “Water Infrastructure Finance and Innovation Act (WIFIA)” Master Agreement and Project 1 Loan Agreement with the United States Environmental Protection Agency. The WIFIA Master Agreement and Project 1 Loan was entered into pursuant to the “Water Infrastructure Finance and Innovation Act (WIFIA)” authorized by Congress in 2014.
The SFPUC entered the WIFIA Master Loan Agreement with the EPA in an amount not to exceed $791,337 to provide partial funding for projects in the Wastewater Enterprise Capital Plan. The Master Agreement defines the general terms for funding a series of WIFIA loans, the first of which is the “Project 1 Loan Agreement”. The incurrence of the Project 1 Loan Agreement, in an aggregate initial principal amount not to exceed $369,335, will provide partial funding for six Wastewater Enterprise capital improvement projects. Those projects are Westside Pump Station Reliability Improvements, North Shore Pump Station Wet Weather Improvements, Wawona Area Stormwater Improvement, New Treasure Island Wastewater Treatment Plant, Folsom Area Stormwater Improvement, and Yosemite Creek Daylighting. Proceeds of the loan will fund 49% of project costs plus eligible expenses. The Project 1 Loan is on a parity lien basis with the SFPUC’s outstanding Wastewater Revenue Bonds and Clean Water State Revolving Fund (“SRF”) Loans
119 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
entered into with the California State Water Resources Control Board. The loan will bear a fixed interest rate of 3.65% for a 32- year term, with loan repayment expected to begin in fiscal year 2033. The SFPUC has not yet submitted any requests for loan disbursements to date and there is no outstanding loan principal as of June 30, 2023.
z) Future Annual Debt Services of WIFIA Loans
The future annual debt services relating to the WIFIA Loan to fund the Biosolids Digester Facility Project outstanding as of June 30, 2023 are as follows:
aa) Events of Default and Remedies
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements, significant events of default as specified in the Wastewater Enterprise Indenture (applicable to Wastewater Revenue Bonds, SRF Loans, and WIFIA Loan include 1) Non -payment 2) material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods), and 3) bankruptcy and insolvency events, which may result in the Trustee (upon written request by the majority of the owners (by aggregate amount of the bond obligations or of a credit provider), declaring the principal and the interest accrued thereon, to be due and payable immediately. As of June 30, 2023 and 2022, there were no such events described herein.
Hetchy Water Long-Term Liability activities for the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Principal Interes t Total
Fiscal years ending June 30:
2024 $ — — —
2025 — — —
2026 — 886 886
2027 — 1,773
1,773
2028 — 1,773 1,773
2029-2033 — 8,866 8,866
2034-2038 — 8,866 8,866
2039-2043 — 8,866 8,866
2044-2048 20,166 8,328 28,494
2049-2053 41,698 6,108 47,806
2054-2058 49,610 2,813 52,423
2059 10,883 119 11,002
Total 122,357 48,398 170,755
Less: Current portion —
Long-term portion as of June 30, 2023 $ 122,357
Res tated Due within
2022# Additions Reductions 2023 one year
Other post-employment benefits obligations $ 14,240 667 — 14,907 — Net pension liability — 14,105 — 14,105 —
Accrued vacation and sick leave 2,169 700 (603) 2,266 1,132 Accrued workers’ compensation 1,228 76 (85) 1,219 216 Lease liability 62 105 (29) 138 16
Subscription liability 309 — (170) 139 80
Damage claims liability 627 320 (247) 700 300
Unearned revenues, refunds, and other 134 15 (39) 110 110 Total $ 18,769 15,988 (1,173) 33,584 1,854
120 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Hetchy Power Long-Term Liability activities for the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Res tated 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 Due to Other City departments — — — — —
Lease liability 78 — (16) 62 3
Subscription liability — 468 (159) 309 170
Damage claims liability 525 253 (151) 627 228
Unearned revenues, refunds, and other 138 14 (18) 134 24 Total $ 45,135 3,638 (30,004) 18,769 1,674
Interes t Maturity Res tated Due within
Rate (Calendar Year) 2022# Additions Reductions 2023 one year Bonds:
Clean Renewable Energy Bonds 0.00 % 2022 $ 421 — (421) — — Qual
ified Energy Conservation Bonds 4.74 2027 3,138 — (555) 2,583 562 New Clean Renewable Energy Bonds 2015 4.62 2032 1,637 — (146) 1,491 148 2015 Series A Revenue Bonds 4.00 - 5.00 2045 32,025 — — 32,025 — 2015 Series B Revenue Bonds 3.00 - 4.00 2026 3,735 — (850) 2,885 880 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 (6) — 6 — —
Add issuance premiums 29,536 — (1,588) 27,948 —
Total bonds payable 194,486 — (3,554) 190,932 1,590
2009 Series C Certificates of Participation (COPs) 2.00 – 5.00 2022 425 — (425) — — 2009 Series C COPs issuance premiums 2 — (2) — —
2009 Series D COPs (Build America) 6.36 – 6.49 2041 12,593 — — 12,593 445 Commercial Papers 1.05 – 3.15 2023 — 116,352 — 116,352 — Other post-employment benefits obligations 17,405 815 — 18,220 — Net pension liability — 17,239 — 17,239 —
Accrued vacation and sick leave 3,597 1,838 (1,719) 3,716 1,867 Accrued workers’ compensation 2,250 224 (236) 2,238 401 Due to Other City departments 380 1,946 (380) 1,946 1,946 Lease liability 75 131 (37) 169 19
Subscription liability 253 — (137) 116 65
Damage claims liability 1,023 10,439 (5,312) 6,150 450 Unearned revenues, refunds, and other 6,727 10,385 (10,652) 6,460 5,880 Total $ 239,216 159,369 (22,454) 376,131 12,663
Interes t Maturity Res tated 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
Subscription liability — 380 (127) 253 137
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 $ 123,261 166,353 (50,398) 239,216 11,341
121 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
CleanPowerSF Long-Term Liability activities for the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
a) Clean 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 matured with the last principal payment made on 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.
b) Qualified 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.
Res tated Due within
2022# Additions Reductions 2023 one year
Other post-employment benefits obligations $ 2,264 1,789 — 4,053 — Net pension liability — 2,124 — 2,124 —
Accrued vacation and sick leave 546 451 (254) 743 394 Lease liability 232 — (232) — —
Subscription liability 70 — (39) 31 18
Damage claims liability 32 1,738 (1,736) 34 16
Unearned revenues, refunds, and other 13,196 23,034 (30,084) 6,146 6,146 Total $ 16,340 29,136 (32,345) 13,131 6,574
Res tated 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
Subscription liability — 106 (36) 70 39
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 17,508 (18,096) 16,340 4,761
122 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The future annual debt service relating to the QECBs outstanding as of June 30, 2023 is as follows:
*The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy is reduced by
5.7% or a total reduction of $13 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
c) New 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 wer e 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. $1,272 of principal was prepaid in fiscal year 2021.
The future annual debt service relating to the 2015 NCREBs outstanding as of June 30, 2023 is as follows:
*The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy is reduced by 5.7% or a total reduction of $14 due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
d) Power 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 is suance 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, 2023 and 2022, the outstanding principal amounts were $34,910 and $35,760, respectively.
Interest
before
Federal
interes t
Interes t
net
Fiscal years ending June 30: Principal subsidy subsidy* of subsidy 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 2,583 309 (217) 92
Less: Current portion (562)
Long-term portion as of June 30, 2023 $ 2,021
Interes t
before
Federal
interes t
Interes t
net
Fiscal years ending June 30: Principal subsidy subsidy* of subsidy 2024 $ 148 67 (44) 23
2025 150 60 (40) 20
2026 152 53 (35) 18
2027 154 47 (31) 16
2028 156 39 (26) 13
2029-2033 731 85 (56) 29
Total 1,491 351 (232) 119
Less: Current portion (148)
Long-term portion as of June 30, 2023 $ 1,343
123 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The future annual debt service relating to the 2015 Series AB Bonds outstanding as of June 30, 2023 are as follows:
e) Power 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 wer e 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, 2023 and 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, 2023 are as follows:
Fiscal years ending June 30: Principal Interes t Total
2024 $ — 1,593 1,593
2025 — 1,593 1,593
2026 — 1,593 1,593
2027 830 1,576 2,406
2028 1,020 1,534 2,554
2029-2033 5,930 6,831 12,761
2034-2038 7,565 5,153 12,718
2039-2043 9,650 3,011 12,661
2044-2046 7,030 539 7,569
Total 32,025 23,423 55,448
Add: Unamortized bond premium 2,960
Long-term portion as of June 30, 2023 $ 34,985
Hetchy Power - Power Revenue Bonds 2015 Series A (Green) Fiscal years ending June 30: Principal Interes t Total
2024 $ 880 93 973
2025 910 62 972
2026 945 25 970
2027 150 3 153
Total 2,885 183 3,068
Less: Current portion (880)
Add: Unamortized bond premium 63
Long-term portion as of June 30, 2023 $ 2,068
Hetchy Power - Power Revenue Bonds 2015 Series B
Fiscal years ending June 30: Principal Interes t Total
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 1,605 2,826 4,431
2029-2033 9,305 12,868 22,173
2034-2038 11,470 10,690 22,160
2039-2043 14,020 8,149 22,169
2044-2048 17,125 5,045 22,170
2049-2052 16,385 1,343 17,728
Total 74,280 52,940 127,220
Add: Unamortized bond premium 15,023
Long-term portion as of June 30, 2023 $ 89,303
Hetchy Power - Power Revenue Bonds 2021 Series A (Green) 124 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
f) Events of Default and Remedies
In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements , significant events of default as specified in the 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, 202 3 and 2022, there were no such events described herein.
(8) Certificates of Participation Issued for the 525 Golden Gate Avenue Headquarters Building
Department-wide Business T ype 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 the 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
Fiscal years ending June 30: Principal Interes t Total
2024 $ — 2,045 2,045
2025 585 2,030 2,615
2026 620 2,000 2,620
2027 650 1,969 2,619
2028 685 1,935 2,620
2029-2033 3,940 9,120 13,060
2034-2038 4,985 8,168 13,153
2039-2043 6,200 7,052 13,252
2044-2048 12,885 5,464 18,349
2049-2052 19,170 1,573 20,743
Total 49,720 41,356 91,076
Add: Unamortized bond premium 9,902
Long-term portion as of June 30, 2023 $ 59,622
Hetchy Power - Power Revenue Bonds 2021 Series B
125 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
for the enterprises is as follows: Water (71.4%), Wastewater (18.9%), and Hetchy Power (9.7%).
Certificates of Participation 2009 Series C have been fully repaid as of June 30, 2023
The future annual debt services relating to the certificates of participation 2009 Series D outstanding as of June 30, 2023 are as follows:
Water Enterprise
*The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy on the 2009 Series D bonds is reduced by 5.7%, or a total reduction of $1,283, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
Wastewater Enterprise
*The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy on the 2009 Series D bonds is reduced by 5.7% through fiscal year 2030, or a total reduction of $339, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2023.
Hetchy Power
*The SFPUC received an IRS notice dated May 25, 2023 that the federal interest subsidy is reduced by 5.7% or a total reductio n of $174 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
interes t
subsidy*
Interest net
of subsidy
Fiscal years ending June 30:
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 3,852 4,961 (1,637) 3,324
2029-2033 21,834 20,808 (6,868) 13,940
2034-2038 26,918 12,940 (4,271) 8,669
2039-2042 25,986 3,460 (1,142) 2,318
Total 92,499 64,317 (21,226) 43,091
Less: Current portion (3,267)
Long-term portion as of June 30, 2023 $ 89,232
Principal
Interest
before
subsidy
Federal
interes t
subsidy*
Interest net
of subsidy
Fiscal years ending June 30:
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 1,019 1,312 (433) 879
2029-2033 5,773 5,502 (1,816) 3,686
2034-2038 7,117 3,421 (1,129) 2,292
2039-2042 6,871 915 (302) 613
Total 24,458 17,006 (5,613) 11,393
Less: Current portion (864)
Long-term portion as of June 30, 2023 $ 23,594
Principal
Interest
before
subsidy
Federal
interes t
subsidy*
Interest net
of subsidy
Fiscal years ending June 30:
2024 $ 445 798 (263) 535
2025 463 769 (254) 515
2026 483 739 (244) 495
2027 503 709 (234) 475
2028 524 675 (223) 452
2029-2033 2,972 2,833 (935) 1,898
2034-2038 3,665 1,762 (581) 1,181
2039-2042 3,538 471 (156) 315
Total 12,593 8,756 (2,890) 5,866
Less: Current portion (445)
Long-term portion as of June 30, 2023 $ 12,148
126 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
(9) Revenue Pledge
Department-wide Business T ype Activities
Department-wide revenue pledge for the years ended June 30, 2023 and 2022 are as follows:
Water Revenue Pledge
The Water Enterprise has pledged future revenues to repay various revenue bonds and SRF loans. Proceeds from the revenue bonds and SRF 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 2058.
The original amount of revenue bonds and SRF loans issued, total principal and interest remaining, principal and interest paid during fiscal years 2023 and 2022, applicable net revenues, and funds available for debt service are as follows:
Wastewater Revenue Pledge
The Wastewater Enterprise has pledged future revenues to repay various revenue bonds, revenue notes, SRF and WIFIA loans. Proceeds from the revenue bonds, revenue notes, SRF, and WIFIA loans provided financing for various capital construction projects, and to refund previously issued bonds. The bonds, notes, SRF and WIFIA loans payable through fiscal years 2052, 2027, 2056 and 2059, respectively, and are solely from revenues of the Wastewater Enterprise.
2023 2022
Bonds issued with revenue pledge $ 8,093,786 7,038,726 Notes issued with revenue pledge 347,465 347,465
Clean Water State Revolving Fund (CWSRF) loans with
revenue pledge 492,403 432,026
WIFIA loans with revenue pledge 122,357 —
Principal and interest remaining due at the end of the year 12,347,101 11,494,005 Principal and interest paid during the year 409,778 369,899 Net revenues for the year ended June 30 603,734 516,732 Funds available for debt service 1,042,606 819,884
2023 2022
Bonds issued with revenue pledge $ 4,882,130 4,891,480 Clean Water State Revolving Fund (CWSRF) loans with
revenue pledge 163,627 121,761
Principal and interest remaining due at the end of the year 7,193,317 7,472,962 Principal and interest paid during the year 307,062 279,352 Net revenues for the year ended June 30 372,689 306,918 Funds available for debt service 566,764 410,424
127 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The original amount of revenue bonds issued, revenue notes issued, SRF and WIFIA loans issued, total principal and interest remaining, principal and interest paid during fiscal years 2023 and 2022, applicable net revenues, and funds available for debt service are as follows:
Hetchy Power Revenue Pledge
Hetchy Power has pledged future power revenues to repay the 2008 CREBs, the 2011 QECBs, 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 2023 and 2022 , 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 $2,567, net of capitalized interest.
(10) Leases
Department-wide Business T ype 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 var y, which range between 1-75 years.
2023 2022
Bonds issued with revenue pledge $ 3,029,385 1,964,975 Notes issued with revenue pledge 347,465 347,465
Clean Water State Revolving Fund (CWSRF) loans with
revenue pledge 328,776 310,265
WIFIA loans with revenue pledge 122,357 —
Principal and interest remaining due at the end of the year 4,872,238 3,730,462 Principal and interest paid during the year 98,811 86,619 Net revenues for the year ended June 30 178,850 155,504 Funds available for debt service 313,443 310,835
2023 2022
Bonds issued with revenue pledge $ 182,271 182,271
Principal and interest remaining due at the end of the year 281,546 290,581 Principal and interest paid during the year* 3,905 3,928 Net revenues for the year ended June 30 52,195 54,310 Funds available for debt service 162,399 98,625
128 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
A summary of intangible right-to-use lease during the years ended June 30, 2023 and 2022 is as follows:
A summary of changes in the related lease liabilities during the years ended June 30, 2023 and 2022 is as follows:
Variable 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.
Right-to-use assets: 2022 Increas es Decreas es Remeas urements 2023 Land $ 605 — — — 605
Building/facility 14,356 149 (862) 2,649 16,292
Total lease assets 14,961 149 (862) 2,649 16,897
Less accumulated amortization for:
Land (383) (197) — — (580)
Building/facility (7,805) (3,836) 862 — (10,779)
Total accumulated amortization (8,188) (4,033) 862 — (11,359) Total leas e as s ets , net $ 6,773 (3,884) — 2,649 5,538 Right-to-use assets: 2021 Increas es Decreas es Remeas urements 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 leas e as s ets , net $ 10,898 (4,125) — — 6,773 Due within
2022 Additions Remeas urements Deductions 2023 one year Water $ 2,863 149 2,413 ( 1,415) 4,010 1,189 Wastewater 3,638 — — (2,341) 1,297 1,297 Hetchy Water 62 — 105 (29) 138 16 Hetchy Power 75 — 131 (37) 169 19 CleanPowerSF 232 — — (232) — —
SFPUC Total $ 6,870 149 2,649 (4,054) 5,614 2,521 Due within
2021 Additions Remeas urements 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 3,587 129 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The amounts recognized as expense for variable lease payments not included in the measurement of the lease liability for SFPUC during the year ended June 30, 2023 and 202 2 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.
The SFPUC 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, 2023 and 2022 were as follows:
Water Enterprise as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2023 and 2022 are as follows:
A summary of changes in the related leases liabilities during the years ended June 30, 2023 and 2022 is as follows:
Water Was tewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total
2023 $ 263 673 — — 160 1,096
2022 34 207 1 1 43 286
Water Wastewater
SFPUC
Total
2023 $ 1,161 7 1,168
2022 2,332 — 2,332
Right-to-use assets: 2022 Increas es Decreas es Remeas urements 2023 Land $ 605 — — — 605
Building/facility 5,041 149 — 2,413 7,603
Total lease assets 5,646 149 — 2,413 8,208
Less accumulated amortization for:
Land (383) (197) — — (580)
Building/facility (2,451) (1,234) — — (3,685)
Total accumulated amortization (2,834) (1,431) — — (4,265) Total leas e as s ets , net $ 2,812 (1,282) — 2,413 3,943 Right-to-use assets: 2021 Increas es Decreas es Remeas urements 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 leas e as s ets , net $ 4,237 (1,425) — — 2,812 Beginning End of Du e within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 2,863 149 2,413 (1,415) 4,010 1,189
2022 4,244 — — (1,381) 2,863 1,008
130 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Future annual lease payments as of June 30, 2023 and 2022 are as follows:
Water Enterprise as Lessor
Principal and interest requirements to maturity for the lease receivable at June 30, 2023 and 2022 are as follows:
Principal Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 1,189 81 1,270
2025 1,028 55 1,083
2026 546 32 578
2027 135 26 161
2028 122 23 145
2029-2033 416 86 502
2034-2038 445 39 484
2039-2043 129 3 132
Total 4,010 345 4,355
Less: Current portion (1,189)
Long-term portion as of June 30, 2023 $ 2,821
Principal Interes t 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 Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 3,521 869 4,390
2025 3,610 821 4,431
2026 3,046 756 3,802
2027 2,721 698 3,419
2028 2,423 645 3,068
2029-2033 10,951 2,571 13,522
2034-2038 9,941 1,477 11,418
2039-2043 828 914 1,742
2044-2048 — 1,027 1,027
2049-2053 — 1,191 1,191
2054-2058 117 1,263 1,380
2059-2063 832 768 1,600
2064-2068 1,208 647 1,855
2069-2073 1,676 475 2,151
2074+ 2,756 250 3,006
Total $ 43,630 14,372 58,002
131 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Wastewater Enterprise as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2023 and 2022 is as follows:
A summary of changes in the related leases liabilities during the years ended June 30, 2023 and 2022 is as follows:
Principal Interes t 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
Right-to-use assets: 2022 Increas es Decreas es Remeas urements 2023 Building/facility $ 8,247 — — — 8,247
Tot
al lease assets 8,247 — — — 8,247
Less accumulated amortization for:
Building/facility (4,650) (2,325) — — (6,975)
Total accumulated amortization (4,650) (2,325) — — (6,975) Total leas e as s ets , net $ 3,597 (2,325) — — 1,272 Right-to-use assets: 2021 Increas es Decreas es Remeas urements 2022 Building/facility $ 8,247 — — — 8,247
Tot
al 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 leas e as s ets , net $ 5,922 (2,325) — — 3,597 Beginning End of Due within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 3,638 — — (2,341) 1,297 1,297
2022 5,952 — — (2,314) 3,638 2,341
132 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Future annual lease payments as of June 30, 2023 and 2022 are as follows:
Wastewater Enterprise as Lessor
Principal and interest requirements to maturity for the lease receivable at June 30, 2023 is as follows:
Hetchy Water as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2023 and 2022 is as follows:
Principal Interes t FY 2023
Years ending June 30: amount amount Total
2024 1,297 6 1,303
Less: Current portion (1,297) 6 1,303
Long-term portion as of June 30, 2023 $ —
Principal Interes t 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 Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 212 38 250
2025 226 32 258
2026 241 26 267
2027 257 19 276
2028 215 12 227
2029-2031 306
13 319
Total $ 1,457 140 1,597
Right-to-use assets: 2022 In creas es Decreas es Remeas urements 2023 Bu
ilding/facility $ 67 — 26 105 198
Total lease assets 67 — 26 105 198
Less accumulated amortization for:
Building/facility (6) (21) (26) — (53)
Total accumulated amortization (6) (21) (26) — (53)
Total leas e as s ets , net $ 61 (21) — 105 145
Right-to-use assets: 2021 Increas es Decreas es Remeas urements 2022 Bu
ilding/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 leas e as s ets , net $ 74 (13) — — 61
133 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
A summary of changes in the related leases liabilities during the years ended June 30, 2023 and 2022 is as follows:
Future annual lease payments as of June 30, 2023 and 2022 are as follows:
*Excluded $28 payment from remeasurements due to lease renewal.
Hetchy Power as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2023 and 2022 is as follows:
Beginning End of Due within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 62 — 105 (29) 138 16
2022 78 — — (16) 62 3
Principal Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 16 2 18
2025 16 2 18
2026 16 2 18
2027 16 2 18
2028 17 1 18
2029-2033 30
4 34
2034-2038 19 2 21
2039-2042 8 — 8
Total 138 15 153
Less: Current portion (16)
Long-term portion as of June 30, 2023 $ 122
Principal Interes t 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
Right-to-use assets: 2022 Increas es Decreas es Remeas urements 2023 Building/facility $ 81 — 32 131 244
Total lease assets 81 — 32 131 244
Less accumulated amortization for:
Building/facility (8) (26) (32) — (66)
Total accumulated amortization (8) (26) (32) — (66)
Total leas e as s ets , net $ 73 (26) — 131 178
Right-to-use assets: 2021 Increas es Decreas es Remeas urements 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 leas e as s ets , net $ 90 (17) — — 73
134 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
A summary of changes in the related leases liabilities during the years ended June 30, 2023 and 2022 is as follows:
Future annual lease payments as of June 30, 2023 and 2022 are as follows:
*Excluded $34 payment from remeasurements due to lease renewal.
CleanPowerSF as Lessee
A summary of intangible right-to-use leases during the years ended June 30, 2023 and 2022 is as follows:
Beginning End of Due within
Fiscal years of year Additions Remeasurements Deductions year one year 2023 $ 75 — 131 (37) 169 19
2022 94 — — (19) 75 3
Principal Interes t FY 2023
Year
s ending June 30: amount amount Total
2024 $ 19 3 22
2025 19 3 22
2026 20 2 22
2027 20 2 22
2028 20 2 22
2029-2033 38 5 43
2034-2038 23 2 25
2039-2042 10 — 10
Total 169 19 188
Less: Current portion (19)
Long-term portion as of June 30, 2023 $ 150
Principal Interes t 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
Right-to-use assets: 2022 In creas es Decreas es Remeas urements 2023 Bu
ilding/facility $ 920 — (920) — —
Total lease assets 920 — (920) — —
Less accumulated amortization for:
Building/facility (690) (230) 920 — —
Total accumulated amortization (690) (230) 920 — —
Total leas e as s ets , net $ 230 (230) — — —
Right-to-use assets: 2021 Increas es Decreas es Remeas urements 2022 Bu
ilding/facility $ 920 — — — 920
Total lease assets 920 — — — 920
Less accumulated amortization for:
Building/facility (345) (345) — — (690)
Total accumulated amortization (345) (345) — — (690)
Total leas e as s ets , net $ 575 (345) — — 230
135 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
A summary of changes in the related leases liabilities during the years ended June 30, 2023 and 2022 is as follows:
Future annual lease payments as of June 30, 2022 is as follows:
(11) Subscription-Based Information Technology Arrangements (SBITAs)
Department-wide Business T ype Activities
The SFPUC has noncancellable subscription arrangements (similar to a lease) for the right to use various information technology hardware and software (SBITAs). The terms and conditions for these subscriptions varies, which ranges between 1 – 5 years.
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions -Based Information Technology Arrangements (SBITAs).
Beginning End of Due within
Fiscal years of year Additions Remeasurements Deductions year one year 2023 $ 232 — — (232) — —
2022 577 — — (345) 232 232
Principal Interes t 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 $ —
2022 Increas es Decreas es Remeas urements 2023
Subscription assets $ 4,935 — — — 4,935
Less accumulated amortization (1,760) (1,777) — — (3,537) Total Subscription assets, net $ 3,175 (1,777) — — 1,398 2021 Increas es Decreas es Remeas urements 2022#
Subscription assets $ 4,720 215 — — 4,935
Less accumulated amortization — (1,760) — — (1,760)
Total Subscription assets, net $ 4,720 (1,545) — — 3,175 Due within
2022 Additions Remeas urements Deductions 2023 one year Water $ 1,556 — — (848) 708 400 Wastewater 944 — — (515) 429 243 Hetchy Water 309 — — (170) 139 80 Hetchy Power 253 — — (137) 116 65 CleanPowerSF 70 — — (39) 31 18 SFPUC Total $ 3,132 — — (1,709) 1,423 806 Due within
2021 Additions Remeas urements Deductions 2022# one year Water $ 2,344 — — (788) 1,556 848 Wastewater 1,422 — — (478) 944 515 Hetchy Water 468 — — (159) 309 170 Hetchy Power 380 — — (127) 253 137 CleanPowerSF 106 — — (36) 70 39 SFPUC Total $ 4,720 — — (1,588) 3,132 1,709 136 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Water
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions -Based Information Technology Arrangements (SBITAs).
A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Future annual subscription payments as of June 30, 2023 and 2022 are as follows:
2022 Increas es Decreas es Remeas urements 2023
Subscription assets $ 2,450 — — — 2,450
Less accumulated amortization (873) (882) — — (1,755) Total Subscription assets, net $ 1,577 (882) — — 695 2021 Increas es Decreas es Remeas urements 2022#
Subscription assets $ 2,344 106 — — 2,450
Less accumulated amortization — (873) — — (873)
Total Subscription assets, net $ 2,344 (767) — — 1,577 Beginning End of Due within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 1,556 — — (848) 708 400
2022# 2,344 — — (788) 1,556 848
Principal Interes t FY 2023
Year
s ending June 30: amount amount Total
2024 $ 400 8 408
2025 153 4 157
2026 155 2 157
Total 708 14 722
Less: Current portion (400)
Long-term portion as of June 30, 2023 $ 308
Principal Interes t FY 2022
Years ending June 30: amount amount Total
2023 $ 848 14 862
2024 400 8 408
2025 153 4 157
2026 155 2 157
Total 1,556 28 1,584
Less: Current portion (848)
Long-term portion as of June 30, 2022 $ 708
137 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Wastewater
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Future annual subscription payments as of June 30, 2023 and 2022 are as follows:
2022 Increas es Decreas es Remeas urements 2023
Subscription assets $ 1,487 — — — 1,487
Less accumulated amortization (530) (535) — — (1,065) Total Subscription assets, net $ 957 (535) — — 422
2021 Increas es Decreas es Remeas urements 2022#
Subscription assets $ 1,422 65 — — 1,487
Less accumulated amortization — (530) — — (530)
Total Subscription assets, net $ 1,422 (465) — — 957 Beginning End of Due within
Fi
scal years of year Additions Remeas urements Deductions year one year 2023 $ 944 — — (515) 429 243
2022# 1,422 — — (478) 944 515
Principal Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 243 4 247
2025 93 2 95
2026 93 1 94
Total 429 7 436
Less: Current portion (243)
Long-term portion as of June 30, 2023 $ 186
Principal Interes t FY 2022
Years ending June 30: amount amount Total
2023 $ 515 8 523
2024 243 4 247
2025 93 2 95
2026 93 1 94
Total 944 15 959
Less: Current portion (515)
Long-term portion as of June 30, 2022 $ 429
138 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Hetchy Water
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Future annual subscription payments as of June 30, 2023 and 2022 are as follows:
Hetchy Power
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:
2022 Increas es Decreas es Remeas urements 2023
Subscription assets $ 490 — — — 490
Less
accumulated amortization (176) (177) — — (353)
Total Subscription assets, net $ 314 (177) — — 137
2021 Increas es Decreas es Remeas urements 2022#
Subscription assets $ 468 22 — — 490
Less
accumulated amortization — (176) — — (176)
Total Subscription assets, net $ 468 (154) — — 314
Beginning End of Du e within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 309 — — (170) 139 80
2022# 468 — — (159) 309 170
Principal Interes t FY 2023
Years ending June 30: amount a m ount Total
2024 $ 80 2 82
2025 30 2 32
2026 29 1 30
Total 139 5 144
Less: Current portion (80)
Long-term portion as of June 30, 2023 $ 59
Principal Interes t FY 2022
Years ending June 30: amount amount Total
2023 $ 170 3 173
2024 80 2 82
2025 30 1 31
2026 29 1 30
Total 309 7 316
Less: Current portion (170)
Long-term portion as of June 30, 2022 $ 139
2022 Increas es Decreas es Remeas urements 2023
Subscription assets $ 397 — — — 397
Less accumulated amortization (141) (142) — — (283)
Total Subscription assets, net $ 256 (142) — — 114
139 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Future annual subscription payments as of June 30, 2023 and 2022 are as follows:
CleanPowerSF
A summary of intangible right-to-use subscription IT assets during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
2021 Increas es Decreas es Remeas urements 2022#
Subscription assets $ 380 17 — — 397
Less accumulated amortization — (141) — — (141)
Total Subscription assets, net $ 380 (124) — — 256
Beginning End of Due within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 253 — — (137) 116 65
2022# 380 — — (127) 253 137
Principal Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 65 1 66
2025 25 1 26
2026 26 — 26
Total 116 2 118
Less: Current portion (65)
Long-term portion as of June 30, 2023 $ 51
Principal Interes t FY 2022
Years ending June 30: amount amount Total
2023 $ 137 2 139
2024 65 1 66
2025 25 1 26
2026 26 — 26
Total 253 4 257
Less: Current portion (137)
Long-term portion as of June 30, 2022 $ 116
2022 Increas es Decreas es Remeas urements 2023
Subscription assets $ 111 — — — 111
Less
accumulated amortization (40) (41) — — (81)
Total Subscription assets, net $ 71 (41) — — 30
2021 Increas es Decreas es Remeas urements 2022#
Subscription assets $ 106 5 — — 111
Less
accumulated amortization — (40) — — (40)
Total Subscription assets, net $ 106 (35) — — 71
140 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
A summary of changes in the related subscription liabilities during the years ended June 30, 2023 and 2022 are as follows:
#Restated due to the implementation of GASB Statement No. 96, Subscriptions-Based Information Technology Arrangements (SBITAs).
Future annual subscription payments as of June 30, 2023 and 2022 are as follows:
As of June 30, 2023 and 2022, no variable subscription payments were noted for SFPUC’s subscription IT arrangements.
(12) Water 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 most recently restated and amended in January 2023).
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 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 Enterprise of the outstanding balance of $356,139 as allowed by 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.
Beginning End of Due within
Fiscal years of year Additions Remeas urements Deductions year one year 2023 $ 70 — — (39) 31 18
2022# 106 — — (36) 70 39
Principal Interes t FY 2023
Years ending June 30: amount amount Total
2024 $ 18 — 18
2025 6 — 6
2026 7 — 7
Total 31 — 31
Less: Current portion (18)
Long-term portion as of June 30, 2023 $ 13
Principal Interes t FY 2022
Years ending June 30: amount amount Total
2023 $ 39 — 39
2024 18 — 18
2025 6 — 6
2026 7 — 7
Total 70 — 70
Less: Current portion (39)
Long-term portion as of June 30, 2022 $ 31
141 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Pur
suant 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)).
During fiscal years ending in 2023 and 2022, the WRR, net of adjustments, charged to such wholesale customers was $300,502 and $289,828, 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.
Pur
suant 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 Wholesale Customers owed the Water Enterprise $10,052 as of June 30, 2023. The Water Enterprise owed the Wholesale Customers $79,150 as of June 30, 2022. Refer to the compliance audit report for the final balancing account available at https://sfpuc.org/about-us/reports/audited-financial-statements-reports. (13) Other Non-Operating Revenues – Hetchy Power Transbay Cable Construction and Licensing Fees
In 2007, the Board of Supervisors adopted the resolution to enter into two non-e xclusive 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-v oltage direct current transmission cable running from the City of Pittsburg to the City. The first license was a Construction License to install a 400 MW high
-voltage transmission line, with a four-year term. The Licensee paid Hetchy Power $3,500 in Renewable Energy, Transmission and Grid Reliability. The Construction licensing fees were fully spent as of
2020.
The second license is an operational license for operation of the transmission line with 25-y ear term and an option to renew for 10 years. The project came on line November 29, 2010 and cumulative revenues of $22,708 were recorded. Per agreement, the SFPUC shall consider specifically renewable energy, conservation, and environmental health programs, which benefit low-i ncome, 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-i ncome, at-risk, and environmentally disadvantaged communities. As of June 30, 2023, cumulative expenses of $12,487 have been incurred, wit
h $1,351 and $1,525 in fiscal years 2023 and 2022, respectively. (14) Empl
oyee Benefits
a) Pension 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 142 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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 94.87% as of June 30, 2022 (measurement date) and 9 4.64% as of June 30, 2021 (measurement date) a
0.23% increase 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 2022 and 2021. The net pension liabi lity, 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 7.57%: 4.27% for Water, 1.99% for Wastewater, 0.55% for Hetchy Water, 0.68% for Hetchy Power and 0.08% for CleanPowerSF as of June 30, 2022 (measurement date). 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).
RBP – Th
e Water Enterprise’s allocation percentage was determined based on the Water Enterprise’s total pension liabilities divided by the City’s total pension liabilities for fiscal year 2022. 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 2.31% as of June 30, 2022 (measurement date) and 1.85% as of June 30, 2021 (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 City Charter and the Administrative Code are the authorities which establish and amend the benefit provisions and employer obligations of the Plan. The Retirement System issues a publicly available financial report that includes financial 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.
S
FERS 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.
Fiscal Year 2023 Fiscal Year 2022
Valuation Date (VD) June 30, 2021 updated to June 30, 2022 June 30, 2020 updated to June 30, 2021 Measurement Date (MD) June 30, 2022 June 30, 2021
Measurement Period (MP) July 1, 2021 to June 30, 2022 July 1, 2020 to June 30, 2021 143 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The four main categories of Plan members are:
a. Miscellaneous Non-Safety Members – staff, operational, supervisory, and all other eligible employees who are not in special membership categories. b. Sheriff’s Department and Miscellaneous Safety members – sheriffs assuming office on and after January 7, 2012, and undersheriffs, deputized personnel of the Sheriff’s department, and miscellaneous safety employees hired on and after January 7, 2012. c. Firefighter Members – firefighters and other employees whose principal duties are in fire prevention and suppression work or who occupy positions designated by law as firefighter member positions.
d. Police Members – police officers and other employees whose principal duties are in active law enforcement or who occupy positions designated by law as police member positions.
The membership groups and the related service retirement benefits are included in the Notes to the Basic Financial Statements of San Francisco Employees’ Retirement System.
All members are eligible to apply for a disability retirement benefit, regardless of age, when they have 10 or more years of credited service, and they sustain an injury or illness that prevents them from performing their duties. Safety members are eligible to apply for an industrial disability retirement benefit from their first day on the job if their disability is caused by an illness or injury that they receive while performing their duties.
All retired members receive a benefit adjustment each July 1, which is the Basic COLA. The majority of adjustments are determined by changes in Consumer Price Index with increases capped at 2%. The Plan provides for a Supplemental COLA in years when there are sufficient “excess” investment earnings in the Plan. The maximum benefit adjustment each July 1 is 3.5% including the Basic COLA. Effective July 1, 2012, voters approved changes in the criteria for payment of the Supplemental COLA benefit, so that Supplemental COLAs would only be paid when the Plan is also fully funded on a market value of assets basis. Certain 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, 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.
Funding 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 12.0% and 7.5% to 13.0% as a percentage of gross covered salary in fiscal years 2023 and 2022. 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 requ ired to contribute at an actuarially determined rate. Based on the July 1, 2021 actuarial report, the required employer contribution rate for fiscal year 2023 was 17.85% to 21.35%. Based on the July 1, 2020 actuarial report, the required employer contribution rate for fiscal year 2022 was 19.91% to 24.41%.
144 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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, 2022 and 2021 (measurement years) were $729,578 and $791,736, respectively. The SFPUC’s allocation of employer contributions for fiscal years 2022 and 202 1 (measurement periods) were $55,460 and $59,094, respectively. The Water Enterprise’s allocation of employer contributions for fiscal years 2022 and 2021 (measurement periods) were $31,151 and $33,367, respectively. The Wastewater Enterprise’s allocation of employer contributions for fiscal years 2022 and 2021 (measurement periods) were $14,543 and $16,083, respectively. Hetchy Water’s allocation of employer contributions for fiscal years 2022 and 2021 (measurement periods) were $4,149 and $4,130, respectively. Hetchy Power’s allocation of employer contributions for fiscal years 2022 and 202 1 (measurement periods) were $5,071 and $5,048, respectively. CleanPowerSF’s allocation of employer contributions for fiscal years 2022 and 2021 (measurement periods) were $546 and $466, respectively.
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 $4,472 and $4,097 replacement benefits in the years ended June 30, 2023 and June 30,2022, respectively.
Pension (A ssets)/Liabilities, P ension Ex penses, and Defe rred Outflows and Inflows of Resources Related to Pensions
Fiscal Year 2023
The City reported net pension liability (NPL) of $ 2,708,927 for its proportionate share of the SFERS Plan and RBP, which includes the net pension liability for SFERS Plan of $2,552,996 and the NPL of the RBP was $ 155,931, as of June 30, 2023. The City’s net pension (asset) (NPA)/NPL for the SFERS Plan is measured as the proportionate share of the (NPA)/NPL. The NPL of the SFERS Plan is measured as of June 30, 202 2 (measurement date), and the total pension liability for the SFERS Plan and RBP used to calculate the NPL was determined by an actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 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.
T
he SFPUC’s allocation of the City’s proportionate share of the net pension liability for the plan as of June 30 2023 was $194,760 of which $111,743 for Water Enterprise, $4 9,549 for Wastewater Enterprise, $14,105 for Hetchy Water, $17, 239 for Hetchy Power and $2, 124 for CleanPowerSF.
The Water Enterprise’s allocation of the total pension liability for the RBP as of June 30, 2023 was $3,600.
For the year ended June 30, 2023 , the City recognized net pension expense of $1,771, which includes pension (benefit) of ($13,196) for the SFERS Plan and pension expense of $14,967 for RBP, including amortization of deferred outflow/inflow related pension items. SFPUC’s allocation of pension expense/(benefit) for the SFERS Plan including amortization of deferred outflow/inflow related pension items were $ 2,866 of which $ 6,225, net of RBP of $ 1,363, was for the Water Enterprise, ($1,167) was for the Wastewater Enterprise, ($955) was for Hetchy Water, ($1,168) was for Hetchy Power, and ($69) was for CleanPowerSF.
145 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
As of J
une 30, 2023 , SFPUC reported deferred outflows of resources and deferred inflows of resources related to pensions were the following:
Amo
unts 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:
Fiscal Year 2022
The City reported net pension asset (NPA) of $2,226,990 for its proportionate share of the SFERS Plan and RBP, which includes the net pension asset for SFERS Plan of $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.
He tchy Hetchy SFPUC
Water Wastewater Water Power Total
Pension contribution subsequent $ 27,925 12,383 3,525 4,308 531 48,672 10,200 4,523 1,288 1,574 194 17,779
actual experience
29,035 12,874 3,665 4,479 552 50,605
1,869 2,812 380 465 15 5,541
$ 69,029 32,592 8,858 10,826 1,292 122,597
to the measurement date
Total
SFERS Plan - Schedule of Deferred Outflows of Resources Differences between expected and
Fiscal Year 2023
Changes in assumptions
Change in employer's proportion
CleanPowerSF
He tchy Hetchy SFPUC
Water Wastewater Water Power Total
$ — — — — — —
actual experience
8,713 3,864 1,100 1,344 166 15,187
Net difference between projected and actual 13,890 6,159 1,753 2,143 264 24,209 3,138 — 1,289
1,575 866 6,868
$ 25,741 10,023 4,142 5,062 1,296 46,264
Differences between expected and
Changes in assumptions
earnings on pension plan investments
Change in employer's proportion
Total
SFERS Plan - Schedule of Deferred Inflows of Resources
Fiscal Year 2023 CleanPowerSF
$ 475 455
actual experience
579 778
18 1,530
$ 1,072 2,763
Fiscal Year 2023
Differences between expected and
Changes in assumptions
Change in employer's proportion
Water Enterpris e - RBP
Total
Schedule of Deferred
Outflows of
Resources
Schedule of Deferred
Inflows of Resources
RBP
Fiscal
years Water Was tewater
Hetchy
Water
Hetchy
Power CleanPowerSF
SFPUC
Total Water
2024 $ (5,899) (1,574) (1,163) (1,422) (509) (10,567) (283) 2025 (8,602) (2,830) (1,366) (1,669) (426) (14,893) (374) 2026 (17,636) (6,905) (2,405) (2,939) (477) (30,362) (589) 2027 47,500 21,495 6,125 7,486 877 83,483 (445)
Total $ 15,363 10,186 1,191 1,456 (535) 27,661 (1,691) SFERS Plan
146 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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 f or 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.
As of June 30, 2022, 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:
Hetchy Hetchy SFPUC
Water Was tewater 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 Total
to the measurement date
Changes in assumptions
SFERS Plan - Schedule of Deferred Outflows of Resources Fiscal Year 2022
Differences between expected and
Change in employer's proportion
Hetchy Hetchy SFPUC
Fiscal Year 2022 Water Was tewater 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 Total Change in employer's proportion
Differences between expected and
earnings on pension plan investments
Changes in assumptions
SFERS Plan - Schedule of Deferred Inflows of Resources
$ 552 —
actual experience
757 —
200 1,381
$ 1,509 1,381
Differences between expected and
Changes in assumptions
Change in employer's proportion
Total
Water Enterpris e - RBP
Schedule of
Deferred
Outflows of
Resources
Schedule of
Deferred Inflows
of ResourcesFiscal Year 2022
RBP
Fiscal
years Water Was tewater
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
SFERS Plan
147 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Actuarial Assumptions
Fiscal Year 2023
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, 2022 (measurement date) is provided below, including any assumptions that differ from those used in the July 1, 2021 actuarial valuation. Refer to the July 1, 202 1 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org/.
Mortality rates for health Miscellaneous members were based upon adjusted PubG -2010 Employee and Retiree tables for non- annuitants and retirees, respectively. Mortality rates were then projected generationally from the base year using the MP-2019 projection scale.
The actuarial assumptions used at the June 30, 2022 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, 2021.
Key Actuarial Assumptions SFERS Plan
Valuation Date June 30, 2021 updated to June 30, 2022
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 2.16% as of June 30, 2021
3.54% as of June 30, 2022
Bond Buyer 20-Bond GO Index, June 24, 2021 and June 30, 2022 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, 2021
7.20% as of June 30, 2022
Administrative Expenses 0.60% of payroll as of June 30, 2021
0.60% of payroll as of June 30, 2022
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, 2021 2.00% 1.90% 2.50% 3. 60%
Basic COLA June 30, 2022 2.00% 1.90% 2.50% 3.60%
Key Actuarial Assumptions Replacement Benefits Plan
Valuation Date June 30, 2021 updated to June 30, 2022
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost
Municipal Bond Yield 3.54% as of June 30, 2022
Bond Buyer 20-Bond GO Index, June 24, 2021 and June 30, 2022 Inflation 2.50%
Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 3.54% as of June 30, 2022
Administrative Expenses 0.60% of payroll as of June 30, 2022 Old Police & Fire, Old Police & Fire,
Old Miscellaneous Old Police & Fire Charters Char ters
Basic COLA June 30, 2021 2.00% 1.90% 2.50% 3. 60%
Basic COLA June 30, 2022 2.00% 1.90% 2.50% 3.60%
148 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Fiscal 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/.
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.
Discount Rate
Fiscal Year 2023
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. 20% as of June 30, 2022 (measurement date) and 7.40% as of June 30, 2021 (measurement date).
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%
149 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
The discount rate used to measure the Total Pension Liability as of June 30, 2022 was 7.20%.
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, 202 1 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.
Bec
ause 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, 202 2 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, 2022.
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
2024 0.75 % 0.70 %
2025 0.75 0.60
2026 0.75 0.
60 2027 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
+
150 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(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 7.20% to the extent the fiduciary net position is available to make the payments and at the municipal bond rate of 3.54% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2022 is 7.20%.
The long-term expected rate of return on pension plan investments was 7. 20%. 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 3.54% as of June 30, 2022 . 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 24, 2021 and June 30 , 2022. These are the rates used to determine the total pension liability as of June 30, 2022.
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 $245 was used for the 2022 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, 2023 , City’s membership in the RBP had a total of 327 active members and 160 retirees and beneficiaries currently receiving benefits. The Water Enterprise has 7 active members and 6 retirees and beneficiaries currently receiving benefits.
Fiscal Year 2022
SFERS Plan – The beginning and end of year measurements are based on different assumptions and contribution methods that may result in different discount rates. The discount rate was 7.40% as of June 30, 2021 (measurement date) and June 30, 2020 (measurement date).
Target
Allocation
Long-term Expected Real
Rate of Return
37.0 % 4.8 %
23.0 7.9
Private Credit 10.0 5.8
10.0 4.7
10.0 3.4
8.0 0.6
5.0 3.5
(3.0) 0.6
100.0 %
Asset Class
Treasuries
Leverage
Private Equity
Hedge Funds/Absolute Returns
Global Equity
Total
Real Assets
Liquid Credit
151 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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 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
96 - Prop C
Before 11/6/96
or After Prop C
+
152 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(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 unconst itutional and the impact is accounted for as a change in benefits.
On J
une 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 retirees and beneficiaries currently receiving benefits.
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 %
Hedge Funds/Absolute Returns
Total
Liquid Credit
Leverage
Private Equity
Real Assets
Treasuries
Asset Class
Global Equity
153 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
Sensitivity of Proportionate Share of the Net Pension (Asset)/Liability to Changes 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) Other 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 Was tewater Water Power CleanPowerSF Total
$ 305,993 135,684 38,624 47,207 5,817 533,325 111,743 49,549 14,105 17,239 2,124 194,760 (48,394) (21,459) (6,108) (7,466) (920) (84,347) 1% Decrease Share of NPL @ 6.20%
1% Increase Share of (NPA) @ 8.20%
Share of (NPL) @ 7.20%
Fiscal Year 2023
SFERS Plan - Schedule of Employers’ Proportionate Share of the Net Pension (Asset)/Liability He tchy 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) 1% Increase Share of (NPA) @ 8.40% 1% Decrease Share of NPL @ 6.40%
Fiscal Year 2022
SFERS Plan - Schedule of Employers’ Proportionate Share of the Net Pension (Asset)/Liability Share of (NPA) @ 7.40%
Fiscal Year 2023 Water
1% Decrease Share of NPL @ 2.54% $ 4,270
Measurement Date @ 3.54% 3,600
1% Increase Share of NPL @ 4.54% 3,072
Fiscal Year 2022 Water
1% Decrease Share of NPL @ 1.16% $ 4,889
Measurement Date @ 2.16% 4,056
1% Increase Share of NPL @ 3.16% 3,411
Replacement Benefits Plan - Schedule of Employers’
Proportionate Share of the Net Pension Liability
154 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(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, 2022 and June 30, 2021. 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, 2022 (measurement date) was 6. 26%: 3.97% for the Water Enterprise, 1.31% for the Wastewater Enterprise, 0. 40% for Hetchy Water, 0.47% for Hetchy Power, and 0.11% for CleanPowerSF. 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.
Be
nefits – 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 se rvice, 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.
Ret
iree 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.
C
ontributions – 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- Fiscal Year 2023 Fiscal Year 2022
Valuation Date (VD) June 30, 2022 June 30, 2020 updated to June 30, 2021 Measurement Date (MD) June 30, 2022 June 30, 2021
Measurement Period (MP) July 1, 2021 to June 30, 2022 July 1, 2020 to June 30, 2021 San Francis co Health Service Sys tem Retiree Plan - Single-Employer 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 – Blue Shield (self-insured) and UHC Medicare Advantage (fully-insured) HMO – Kaiser (fully-insured) and Blue Shield (flex-funded) and Health Net (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. 155 Financial Section | San Francisco Public Utilities Commission Annual Comprehensive Financial Report FY 2023
THE SAN FRANCISCO PUBLIC UTILITIES COMMISSION
Notes to Basic Financial Statements
June 30, 2023 and 2022
(Dollars in thousands, unless otherwise stated)
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 contribute 50% of the maximum 1% of pre-tax compensation. Additional or existing contribution requirements may be established or modified by amendment to the City’s Charter.
Fiscal Year 2023
For the fiscal year ended June 30, 2023 , the City’s funding was based on “pay -as-you-go” plus a contribution of $45,241 to the Retiree Healthcare Trust Fund. The “pay-as-you-go” portion paid by the City was $215, 408 for a total contribution of $2 60,649 for the fiscal year ended June 30, 202 3. The SFPUC’s proportionate share of contributions for fiscal year 2023 was $16,339:
$10,339 for Water Enterprise, $3, 412 for the Wastewater Enterprise, $ 1,038 for Hetchy Water, $1,268 for Hetchy Power, and $282 for CleanPowerSF for fiscal year 2023 and will be recognized as a reduction of the net OPEB liability in the subsequent fiscal period.