CleanPowerSF Sfpuc Commission
February 11, 2025

Audited Financial Statements
Fiscal Year 2023-24
February 11, 2025
Vivian Chen
Deputy Chief Financial Officer
1 Fiscal Year 2023-24
Audited Financial Statements
2 Issued: Macias Gini & O’Connell LLP, November 12, 2024 Audited Financial Statements & Annual Comprehensive
Financial Reports | SFPUC (sfpuc.org)
Summary of Audit Results, (3) Reports
Water, Wastewater and Hetch Hetchy Water & Power &
CleanPowerSF
 Unmodified opinion
 No material misstatements in the financial statements  No internal control deficiencies observed

FY 2023-24 Annual Comprehensive Financial
Report and Popular Annual Financial Report
3 Annual Comprehensive Financial Report
Issued: Macias Gini & O’Connell LLP, December 20, 2024 Audited Financial Statements & Annual Comprehensive
Financial Reports | SFPUC (sfpuc.org)
• Recipient of the prestigious Government Finance Officers Association (GFOA) Certificate of Achievement for
Excellence in Financial Reporting annually since 2009
Popular Annual Financial Report
Issued: December 2024
Popular Annual Financial Reports| SFPUC (sfpuc.org)
• Recipient of the GFOA’s Award for Outstanding
Achievement in Popular Annual Financial Reporting
annually since 2010

THANK YOU
Next Presenter:

Annie Louie, Assurance Partner
Macias Gini & O’Connell LLP
4 San FranciscoPublic Utilities CommissionPresented by Macias Gini & O’Connell LLP FY 2023/24 AUDIT RESULTS
February 11, 2025
Scope of Audits1.Enterprise Financial Statements• Water• Wastewater• Hetch Hetchy Water and Power and CleanPowerSF2.Annual Comprehensive Financial Report

Auditor ResponsibilityOur responsibility under U.S. Generally Accepted Auditing Standards and Government Auditing Standards.

To express our opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. This does not relieve you or management of your responsibilities. To perform an audit in accordance with generally accepted auditing standards issued by the AICPA and Government Auditing Standards, and to design the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement.To obtain an understanding of the SFPUC and its environment, including internal controls over financial reporting and compliance, as a basis for designing our audit procedures, but not for the purpose of expressing an opinion on its effectiveness. To communicate findings that, in our judgment, are relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.AUDIT OPINIONAICPA STANDARDSINTERNALCONTROLSFINDINGS Management Responsibilities•Fairly presenting the financial statements, including disclosures in conformity with U.S. GAAP•Adjusting the financial statements to correct material misstatements and affirming in the representation letter that the effects of anyuncorrected misstatements aggregated by the auditor are immaterial, both individually and in the aggregate, to the financial statementstaken as a wholeManagement responsibilities – Financial statements•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 errorManagement responsibilities –ICFR•To provide the auditor with:1.access to all information of which management is aware is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters;2.additional information that the auditor may request from management for the purpose of the audit; and3.unrestricted access to persons within the entity from whom the auditor determines it necessary to obtain audit evidence•Identifying and ensuring that the entity complies with laws and regulations applicable to its activities, and for informing the auditor of any known material violations of such laws and regulations•Providing the auditor with a letter confirming certain representations made during the audit, that includes but is not limited to management’s:1.disclosure of all significant deficiencies, including material weaknesses, in the design or operation of internal controls that could adversely affect the entity’s financial reporting2.acknowledgement of their responsibility for the design, implementation, and maintenance of internal controls to prevent and detect fraud Management responsibilities – Other
•Oversight of the financial reporting process and internal control over financial reporting (ICFR)•Oversight of the establishment and maintenance by management of programs and controls designed to prevent, deter, and detect fraudAudit Committee responsibilities•Setting the proper tone and creating and maintaining a culture of honesty and high ethical standards•Ensuring that the entity’s operations are conducted in accordance with the provisions of laws and regulations, including compliance with the provisions of laws and regulations that determine the reported amounts and disclosures in the entity’s financial statements.Management and the Audit Committee responsibilities Audit Results and Required CommunicationsUnmodified opinionAuditor’s ReportNo matters to reportDeficiencies in internal controlsNote 2 to basic financial statements (ACFR)Implementation of New GASB Statements:•Statement No. 99, Omnibus 2022 – para. 4-10 related to financial guarantees and the classification and reporting of derivative instruments •Statement No. 100, Accounting Changes and Error CorrectionsNo exceptions noted.Significant accounting policies and practices Required Communications (continued)Significant accounting estimatesMoney market funds are carried at cost, which approximates fair value. All other investments arestated at fair value based on quoted market prices.Fair value of investmentsBad debt allowance for accounts receivable is based on historical experience.Allowance for doubtful accountsPollution remediation liabilities are measured according to the aggregate current values of the outlays expected to be incurred. Remediation projects with costs that exceed $100,000 and extends beyond the current fiscal year are recorded.Pollution remediation liabilitiesLease receivable/liability is recorded at the present value of future minimum lease payments to be received/made during the lease term.LeasesAssets with an initial individual cost of more than $5,000 and an estimated useful life in excess ofone year are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets.Depreciation of capital assetsSubscription liability is recorded at the present value of future minimum subscription payments as of the date of commencement.Subscription-based IT arrangementsEmployer and employee contribution requirements, the net pension/OPEB liabilities and related deferred outflows and inflows of resources are based on actuarial calculations performed by the City’s independent actuaries. SFPUC’s proportionate share is based on employer contributions.Pension and OPEB liabilitiesLiabilities are based on actuarial evaluations using historical loss and other data, as well as City Attorney’s judgment about the ultimate outcome of the claims.Workers’ compensation and general liability claims Required Communications (continued)Pension and OPEB benefitsImpact of the implementation of GASB 97 on subscription-based IT arrangementsSignificant financial statement disclosuresNo matters to reportFinancial presentation and disclosure omissionsNo material corrected misstatementsNo uncorrected misstatementsCorrected and uncorrected audit misstatementsNo matters to reportDifficulties encountered in performing the auditNo matters to reportDisagreements with managementNo matters to reportRepresentations Requested from ManagementNo matters to reportManagement consultations with other independent accountants Required Supplementary Information (RSI) – unauditedSupplementary Information – audited in relation to the basic financial statementsOther Information in Documents Containing Audited Financial Statements Accounting UpdatesEffective for fiscal year 2025Statement No. 101, Compensated AbsencesStatement No. 102, Certain Risk DisclosuresEffective for fiscal year 2026Statement No. 103, Financial Reporting Model ImprovementsStatement No. 104, Disclosure of Certain Capital Asset www.mgocpa.comQuestions?This presentation to the San Francisco Public Utilities Commission is intended solely for the information and use of the San Francisco Public Utilities Commission and management and is not intended to be and should not be used by anyone other than these specifiedparties. This presentation is not intended for general use, circulation, or publication, and should not be published, circulated, reproduced, or used for any purpose without our prior written permission in each specific instance.

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: February 11, 2025

To: Kate H. Stacy, President
Joshua Ace, Vice President
Avni Jamdar, Commissioner
Steve Leveroni, Commissioner

Through: Dennis J. Herrera, General Manager

From: Vivian Chen, Deputy Chief Financial Officer

RE: SFPUC Fiscal Year 2023-24 Annual Audited Financial Statements

Financial Services is pleased to present the FY 2023-24 Audited Financial Statements for the Water Enterprise, Wastewater Enterprise, and Hetch Hetchy Water & Power & CleanPowerSF, issued by Macias Gini & O’Connell LLP on November 12, 2024.

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

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

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

SFPUC continues to demonstrate strength in maintaining financial integrity and internal controls through effective fiscal oversight and ‘clean’ audits. If you have any questions, please contact me at (415) 487-5280.

cc: Ronald P. Flynn, Deputy General Manager
Nancy L. Hom, Assistant General Manager, Business Services & Chief Financial Officer Laura Busch, Deputy Chief Financial Officer

att: FY 2023-24 Annual Audited Financial Statements: Water, Wastewater, and Hetch Hetchy Water & Power & CleanPowerSF

Delivering High-Quality
Water Every Day.

Water Enterprise
Financial Statements June 30, 2024 and 2023
(With Independent Auditor’s Report Thereon)

SAN FRANCISCO WATER ENTERPRISE
Table of Contents
Page
Independent Auditor’s Report 1
Management’s Discussion and Analysis (Unaudited) 3
Financial Statements:

Statements of Net Position 17
Statements of Revenues, Expenses, and Changes in Net Position 19 Statements of Cash Flows 20
Notes to Financial Statements 22
Independent Auditor ’s Report on Internal Control O ver Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 84

w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
1 Independent Auditor’s Report
Honorable Mayor and the Board of Supervisors
City and County of San Francisco, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the San Francisco Water Enterprise (the Enterprise), an enterprise fund of the City and County of San Francisco (City), as of and for the years ended June 30, 2024 and 2023, and the related notes to the 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 Enterprise as of June 3 0, 2024 and 2023, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States ( 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 Enterprise, 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 opinion.

Emphasis of Matter
As discussed in Note 1, the financial statements present only the Enterprise and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2024 and 2023, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements The Enterprise’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally a ccepted 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 opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards 2 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 erro r, 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, individuall y 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 skept icism 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 inter nal control relevant to the audit in order to design audit procedures that are appropriate in the circumst ances, but not for the purpose o f expressing an opinion on the effectiveness of the Enterprise’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and t he reasonableness of significant accounting estimates made by management, as well as evaluate th e 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 o f America require that the management’s discussion and analysis, as list ed in the table of contents, be presented to supplement the financial statements. Such information is the responsibility of management and, although not a part of the financial statements, is required by the Go vernmental Accounting Standard s Board who considers it to be an essential part of financial reporting for placing the 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 financial statements, and other knowledge we obtained during our audits of the financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our report dated November 12, 2024 on our consideration of the Enterprise'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 Enterprise'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 Enterprise's internal control over financial reporting and compliance.

Walnut Creek, California
November 12, 2024

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

3 (Continued)
This section presents management’s analysis of the San Francisco Water Enterprise’s (the Enterprise) financial condition and activities as of and for fiscal years ended June 30, 2024 and 2023. Management’s Discussion and Analysis (MDA) is intended to serve as an introduction to the Enterprise’s financial statements. This information should be read in conjunction with the audited financial statements that follow this section. All dollar amounts, unless otherwise noted, are expressed in thousands of dollars.

The information in this MDA is presented under the following headings:
• Organization and Business
• Overview of the Financial Statements
• Financial Analysis
• Capital Assets
• Debt Administration
• Rates and Charges
• Request for Information
Organization and Business
The San Francisco Public Utilities Commission (SFPUC or the Commission) is a department of the City and County of San Francisco (the City) that is responsible for the maintenance, operation, and development of three utili ty enterprises: Water (the Enterprise), Hetch Hetchy Water and Power and CleanPowerSF , and Wastewater. The Enterprise collects, transmits, treats, and distributes high- quality drinking water to a total population of approximately 2.7 million people, includ ing retail customers in the City and wholesale customers located in San Mateo, Santa Clara, and Alameda Counties. The Enterprise sold approximately 174 million gallons of water per day in the year ended June 30, 20 24. Approximately 70 % of the water delivered by the Enterprise is to wholesale customers. Retail customers use the remaining 30% 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 pr ovided 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.

Overview of the Financial Statements
The Enterprise’s financial statements include the following:

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

While the Statements of Net Pos ition provide information about the nature and amount of resources and obligations as of year-end, the Statements of Revenues, Expenses, and Changes in Net Position present the results of the Enterprise’s operations over the course of the fiscal year and i nformation as to how the net position changed during the year. These statements can be used as an indicator of the extent to which the Enterprise has successfully recovered its costs through user fees and other charges. All changes in net position are repo rted 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.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

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

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

Financial Analysis
Financial Highlights for Fiscal Year 2024
• Total assets exceeded total liabilities by $641,038.
• Net position increased by $57,575 or 8.3% during the fiscal year. • Capital assets, net of accumulated depreciation and amortization increased by $125,515 or 2.2% to $5,778,467.
• Current and other assets increased by $174,613 or 2 5.3% mainly due to increases of reimbursements receivable relating to the Mountain Tunnel Improvement project for Clean Water State Revolving Funds (SRF) Loans and restricted cash from the issuance s of the 2023 Series AB and 2023 Series CD bonds.
• Operating revenues decreased by $14,201 or 2.1% to $676,890. • Operating expenses increased by $69,103 or 15.0% to $529,356.

Financial Highlights for Fiscal Year 20 23
• 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 $30,969 or 0.6% to $5,652,952.
• Current and other assets decreased by $99,872 or 12.6% 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.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

5 (Continued)
Financial Position
The following table summarizes the Enterprise’s net position.

2023 2022
Total assets:

Current and other assets $ 865,690 691,077 790,949 174,613 (99,872) Capital assets, net of accumulated depreciation and amortization 5,778,467 5,652,952 5,621,983 125,515 30,969 Total assets 6,644,157 6,344,029 6,412,932 300,128 (68,903) Deferred outflows of resources:

Unamortized loss on refunding of debt 89,186 124,635 139,481 (35,449) (14,846) Pensions 93,526 70,101 52,852 23,425 17,249
Other postemployment benefits 29,974 28,616 32,445 1,358 (3,829) Total deferred outflows of resources 212,686 223,352 224,778 (10,666) (1,426) Liabilities:

Current liabilities:

Revenue bonds 138,140 135,095 125,285 3,045 9,810
Certificates of participation 3,402 3,267 3,138 135 129 Commercial paper 190,000 — 206,297 190,000 (206,297) State revolving fund loans — — 3,283 — (3,283)
Other liabilities 148,337 148,547 182,349 (210) (33,802) Subtotal current liabilities 479,879 286,909 520,352 192,970 (233,443) Long-term liabilities:

Revenue bonds 4,826,497 4,575,751 4,735,650 250,746 (159,899) Certificates of participation 85,830 89,232 92,499 (3,402) (3,267) Commercial paper — 371,459 — (371,459) 371,459
State revolving fund loans 259,970 163,627 118,478 96,343 45,149 Arbitrage rebate payable 869 — — 869 —
Other liabilities 350,074 291,193 218,669 58,881 72,524 Subtotal long-term liabilities 5,523,240 5,491,262 5,165,296 31,978 325,966 Total liabilities:

Revenue bonds 4,964,637 4,710,846 4,860,935 253,791 (150,089) Certificates of participation 89,232 92,499 95,637 (3,267) (3,138) Commercial paper 190,000 371,459 206,297 (181,459) 165,162 State revolving fund loans 259,970 163,627 121,761 96,343 41,866 Arbitrage rebate payable 869 — — 869 —
Other liabilities 498,411 439,740 401,018 58,671 38,722 Total liabilities 6,003,119 5,778,171 5,685,648 224,948 92,523

Deferred inflows of resources:

Unamortized gain on refunding of debt 31,854 — — 31,854 — Pensions 13,305 28,504 248,704 (15,199) (220,200)
Leases 36,583 41,558 44,583 (4,975) (3,025)
Other postemployment benefits 22,334 27,075 25,348 (4,741) 1,727 Total deferred inflows of resources 104,076 97,137 318,635 6,939 (221,498) Net position:

Net investment in capital assets 350,430 460,213 512,313 (109,783) (52,100) Restricted for debt service 44,724 14,625 14,671 30,099 (46) Restricted for capital projects 200,632 56,822 17,085 143,810 39,737 Restricted for other purposes — — 100,407 — (100,407) Unrestricted 153,862 160,413 (11,049) (6,551) 171,462 Total net position $ 749,648 692,073 633,427 57,575 58,646 Table 1
Comparative Condensed Net Position
June 30, 2024, 2023, and 2022
2024
2024-2023
Change
2023-2022
Change

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

6 (Continued)
Net Position, Fiscal Year 2024
For the period ended June 30, 2024, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $749,648. Total net position increased from prior year by $57,575 or 8.3% (see Table 1). Increases of $289,462 in assets and deferred outflows of resources, and increases of $231,887 in liabilities and deferred inflows of resources are described below.

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 20 24, current and other assets increased by $174,613 or 25.3 %. The increases included $93,433 for reimbursements receivable from the State Water Resources Control Board (SWRCB) State Revolving Funds Loan relating to the SF Westside Recycled Water and the Mountain Tunnel Improvement projects, $53,237 in restricted and unre stricted cash and investments mainly due to the issuances of Series 2023 Series AB and 2023 Series CD bonds, $16,069 in Wholesale Balancing Account receivable (see Note 11 for details), $ 15,531 in charges for services receivable due to more billings than collections and adopted rate increases of 9.7% for wholesale customers and 5 .0% for retail customers , $1,264 in interest receivable mainly due to higher interest rates, $505 in notes receivable from the sale of the Balboa Reservoir due to interest accruals , $366 due from other governments for a Federal Emergency Management Agency disaster cost recovery relating to the 2020 Wildfires Santa Clara Fence project , and $275 in restricted interest and other receivables mainly due to increases in capacity fees. These increases were offset by decreases of $4,567 in leases receivable due to payments received , $1,121 in prepaid expenses of multiple software licensing and membership fees, $366 in inventory due to more issuances than purchases during the fiscal year, and $13 for custom work projects due from the Department of Public Works (DPW).

Capital assets, net of accumulated depreciation and amortization, increased by $125,515 or 2.2% mainly from the San Joaquin Pipeline Valve and Safe Entry Improvement and Mountain Tunnel Improvement projects. The l argest portion of the Enterprise’s net position of $ 350,430 or 46.7% represents net investment in capital assets (see Capital Assets section of the MDA for more information) , which decreased by $109,783 or 23.9% from prior year’s $ 460,213. The change was explained by an increase of $235,298 in liabilities mainly from the issuance s of 2023 Series AB and 2023 Series CD bonds, and additional State Revolving Funds Loans relating to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, offset by an increase of $125,515 in capital assets mainly from additional assets placed into service.

Deferred outflows of resources decreased by $ 10,666 due to a decrease of $35,449 in unamortized loss on refunding of debt mainly from defeasance of refunding loss by the 2023 Series CD revenue refunding bonds, offset by increases of $23,425 from pensions and $1,358 in OPEB benefits based on actuarial estimates.

Total liabiliti es increased by $224,948 which was due to increases of $253,791 in outstanding revenue bonds mainly from the issuances of 2023 Series AB revenue bonds and 2023 Series CD revenue refunding bonds, $96,343 in SRF Loans payable due to additional loans relating to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, $37,300 in pensions based on actuarial es timates, $9,700 in OPEB liabilities based on actuarial estimates, $6,442 in interest payable mainly from the issuance s of 2023 Series AB revenue bonds and 2023 Series CD revenue refunding bonds, $3,148 in damage claims based on actuarial reports, $2,055 in accrued payroll, vacation and sick leave based on unused leave and a 4.75% cost-of-living adjustment, $1,715 in restricted and unrestricted payables due to higher year end

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

7 (Continued)
expense accruals for operating activities as compared to prior year , $1,267 in accrued workers’ compensation based on actuarial estimates, $1,073 in unearned revenues mainly for the water utility California state arrearages relief grant received, and $869 in arbitrage rebate payable mainly for the 2023 Series A bonds. These increases were offset by decreases of $181,459 in commercial paper from refunding by the 2023 Series AB revenue bonds, $3,267 in certificates of participation from repayment and amortization of premium, $2,440 payment to San Francisco Municipal Transportation Agency (MTA) for a settlement payable relating to the Van Ness Corridor Transit Improvement project, $1,189 in leases liability due to payments in the current year, and $400 in subscription liability from payments in the current year.

Deferred inflows of resources increased by $6,939 due to an increase of $31,854 in unamortized gain on refunding of debt from the issuance of 2023 Series CD revenue refunding bonds , offset by decreases of $15,199 related to pensions based on actuarial estimates , $4,975 in leases due to fewer leases , and $4,741 in OPEB benefits based on actuarial estimates.

Net Position, Fiscal Year 2023
For the period ended June 30 , 2023, the 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 1). The increase 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 202 3, current and other assets decreased by $99,872 or 1 2.6%. 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 ser vices, $6,625 in prepaid expenses of multiple software licensing and membership fees, $2,535 in lease receivable due to lease payments received, $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 11 for details), $2,249 in inter est 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, 202 2, and $1,389 in inventory due to more purchases than issuances during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $ 30,969 or 0.6% mainly due to Mountain Tunnel Improvement and SF Westside Recycled Water projects . The largest portion of the Enterprise’s net position of $460,213 or 66.5% represents net investment in capital assets (see Capital Assets section of the MDA for more information), which decreased by $ 52,100 or 10.2% from prior year’s $512,313 The change was explained by an increase of $ 83,069 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 $30,969 increase in capital assets mainly from increased buildings, structures and improvements.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

8 (Continued)
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 SRF 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 le ave due to cost of living adjustments and unused leave, $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 $125,284 in bond repayment, $24,81 3 in bond premium amortization, offset by $8 in bond discount amortization, $79,150 in the Wholesale Balancing Account liability (see Note 11 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, $3,13 8 in certificates of participation from $3,124 in principal repayment and $14 in amortization of premium, $84 8 in subscription liabilities from the implementation of GASB Statement No. 96 – SBITAs, and $351 in interest payable from lower outstanding revenue bonds.

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 87 lease calculations, offset by an increase of $1,727 in OPEB obligations based on actuarial estimates.

Results of Operations
The following table summarizes the Enterprise’s revenues, expenses, and changes in net position.

2024 2023 2022
Revenues:

Charges for services $ 650,233 661,241 539,526 (11,008) 121,715 Rents and concessions 8,556 13,282 13,765 (4,726) (483) Other operating revenues 18,101 16,568 19,826 1,533 (3,258) Interest and investment income (loss) 25,097 11,156 (10,896) 13,941 22,052 Other non-operating revenues 42,071 40,679 41,871 1,392 (1,192) Total revenues 744,058 742,926 604,092 1,132 138,834 Expenses:

Operating expenses 529,356 460,253 401,764 69,103 58,489 Interest expenses 222,055 214,913 213,681 7,142 1,232 Amortization of premium, discount, refunding loss, and issuance costs (13,825) (9,971) (9,875) (3,854) (96) Non-operating expenses 1,760 1,775 828 (15) 947
Total expenses 739,346 666,970 606,398 72,376 60,572 Change in net position before capital contributions and transfers 4,712 75,956 (2,306) (71,244) 78,262 Capital contributions 53,599 2,717 — 50,882 2,717
Transfers from the City and County of San Francisco 505 5 15,035 500 (15,030) Transfers to the City and County of San Francisco (1,241) (20,032) (30,666) 18,791 10,634 Capital contributions and net transfers 52,863 (17,310) (15,631) 70,173 (1,679) Change in net position 57,575 58,646 (17,937) (1,071) 76,583 Net position at beginning of year 692,073 633,427 651,364 58,646 (17,937) Net position at end of year $ 749,648 692,073 633,427 57,575 58,646 Table 2
Comparative Condensed Revenues, Expenses, and Changes in Net Position June 30, 2024, 2023, and 2022
2024-2023
Change
2023-2022
Change

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

9 (Continued)
Results of Operations, Fiscal Year 2024
The Enterprise’s total revenues of $ 744,058 for the year represented an increase of $1,132 or 0.2% from prior year (see Table 2). Increases included $13,941 from interest and investment income, $1,533 in other operating revenues, and $1,392 in other non -operating revenues. These increases were offset by decreases of $11,008 in charges for services and $4,726 in rents and concessions.

Charges for services were $650,233 , a decrease of $11,008 or 1.7%, mainly due to a higher Wholesale Balancing Account adjustment to increase revenues in prior year, offset by adopted rate increases of 9.7% for wholesale customers and 5% for retail customers beginning July 1, 202 3. Rents and concessions were $8,556, a decrease of $ 4,726 or 35.6 %, mainly due to funding allocation for low -income customer assistance programs. Other operating revenues were $18,101 , an increase of $1,533 or 9.3%, mainly due to increased consumption by other City departments and an adopted rate increase of 5% beginning July 1, 2023. Interest and investment income were $25,097, an increase of $13,941 or 125.0%, mainly due to higher unrealized gains in the current year compared to prior year and higher interest rates . Other non- operating revenues were $42,071, an increase of $1, 392 or 3.4 %, mainly due to grants for COVID -19 pandemic related water utility arrearages relief and disaster cost recovery for the 2 020 Wildfires Santa Clara Fence project.

The Enterprise’s total expenses were $ 739,346, an increase of $72,376 or 10.9%. Operating expenses were $ 529,356, an increase of $69,103 or 15.0%, resulting from increases of $ 30,435 in general and administrative expenses mainly due to an increase in judgment and claims expenses based on actuarial estimates, $24,070 in personnel services mainly due to pension expenses based on actuarial estimates , $11,054 in other operating expenses mainly due SF Recycled Water and Mountain Tunnel Improvement projects spending, $3,209 in contractual services mainly for construction expenses , and $3,149 in materials and supplies mainly for water treatment supplies. These increases were offset by decreases of $2,272 for services provided by other departments mainly from lower water assessment fees paid to Hetch Hetchy Water, and $542 in depreciation. Interest expenses increased by $7,142 compared to prior year, mainly due to the issuance s of 2023 Series AB revenue bonds and 2023 Series CD revenue refunding bonds. Amortization of bond premium, discount, refunding loss/gain and issuance costs increased by $3,854 due to the issuance s of 2023 Series AB revenue bonds and 2023 Series CD revenue refunding bonds. Non-operating expenses decreased by $15 mainly due to higher rebates provided to customers in the prior year.

Capital contributions of $53,599 were received from developer s for assets relating mainly to the Treasure Island, Yerba Buena Island, and Pier 70 Development project. Transfer in of $505 from the General Fund included $500 for research on environmental impact s in Hunter's Point Shipyard and $5 for the Mayor’s Office’s minimum compensation ordinance. Transfer out of $ 1,241 included $1,167 to the Arts Commission for the arts enrichment fund , $42 to Hetch Hetchy Water to fund various Mountain Tunnel Improvement projects, and $32 to the Office of the City Administrator for the Enterprise’s contribution to the Surety Bond Program.

Results of Operations, Fiscal Year 2023
The Enterprise’s total revenues of $ 742,926 for the year represented a n increase of $138,834 or 23.0% from prior year (see Table 2). 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

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

10 (Continued)
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 unrealiz ed 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 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 mainl y for higher water assessments fees paid to Hetch Hetchy Water, $4,357 in contractual services mainly for custom work and professional and 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 judgment 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 youth 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 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.

Capital Assets
The following table summarizes changes in the Enterprise’s capital assets.

Capital Assets, Fiscal Year 2024
The Enterprise has net capital assets of $5 ,778,467 invested in a broad range of utility capital assets as of June 30, 2024 (see Table 3). The investment in capital assets includes land, facilities, improv ements, water treatment plants, aqueducts, water transmission, distribution mains, water storage facilities, pump stations, water reclamation facilities, machinery, and equipment. The Enterprise’s net revenue and long- term debt are used to finance capital investments. Capital assets, net of accumulated depreciation and amortization, increased by $125,515 from the prior year. Facilities, improvements, machinery, and equipment increased by $46,972 mainly due to additions relating to various Water Main Replacement projects. Intangible assets 2024 2023 2022
2024-2023
Change
2023-2022
Change
Facilities, improvements, machinery, and equipment $ 5,052,639 5,005,667 5,056,747 46,972 (51,080) Intangible assets 2,657 2,331 3,152 326 (821)
Land and rights-of-way 113,322 113,322 113,441 — (119) Construction work in progress 606,804 526,994 444,254 79,810 82,740 Right-to-use lease and subscription assets 3,045 4,638 4,389 (1,593) 249 Total $ 5,778,467 5,652,952 5,621,983 125,515 30,969 Table 3
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2024, 2023, and 2022

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

11 (Continued)
increased by $326 mainly due to Maximo improvements and Software as a Service Applications additions.

Land and rights-of-way was unchanged. Construction work in progress increased by $79,81 0 mainly from the San Joaquin Pipeline Valve and Safe Entry Improvement s and Mountain Tunnel Improvement p rojects.

Right-to-use lease and subscription assets decreased by $1,59 3 due to fewer lease s and subscription assets.

As of June 30, 2024 and 2023, the Enterprise had capital commitments of $225,678 and $ 187,936, respectively.

Major additions to construction work in progress during the year ended June 30, 2024 include the following:

Major land, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2024 include the following:

San Joaquin Pipeline Valve and Safe Entry Improvements $ 21,253 Mountain Tunnel Improvements 18,114
New City Distribution Division Headquarters 10,999 2023 March Winter Storm Joint Project 10,622
Lead Component Service Program 10,419
Water Main Replacement - WD-2847 Laidley/Castro to Harper/Bemis/Miguel/Various Side 8,038 College Hill Reservoir Outlet and Pipeline 7,960 New services for water installation 7,195
Water Main Replacement - WD-2859 Taraval Segment B 6,482 Regional Groundwater Storage and Recovery 6,426 Skyline Ridge Trail 6,336
Water Main Replacement - WD-2801 Mariposa to Cesar Chavez/York/Hampshire Streets 6,289 Water Main Replacement - WD-2843 Diamond/27th/28th/Duncan Streets 5,675 Westside Recycled Water Project 5,444
San Andreas Reservoir Road Improvements 5,358 Other project additions individually below $5,000 84,360 Total $ 220,970
Water Main Replacement - WD-2859 Taraval Segment B $ 15, 052 Water Main Replacement - WD-2843 Diamond/27th/28th/Duncan Streets 11,814 Water Main Replacement - WD-2847 Laidley/Castro to Harper/Bemis/Miguel/Various Side 10,882 Renewed Water Service Lines 10,419
Harry Tracy Water Treatment Plant Filters No. 1-6 Stainless Steel Underdrains 10,356 Water Main Replacement - WD-2806 Vicente Street/19th to 25th Avenue 9,315 Water Main Replacement - WD-2718 Prospect/Fair/Coso Avenues/Coleridge Street 9,173 Contributed Capital - Yerba Buena Island 1.34 mg Prestressed Concrete Water Storage 8,770 Contributed Capital - Pier 70 Phase 1 Auxiliary Water Supply System Pipe Network 8,648 New Water Service Facilities 7,195
Auxiliary Water Supply System - Pipeline at Clarendon Avenue 6,871 Contributed Capital - Pier 70 Phase 1 Low Pressure Water Pipe Network 6,789 2023 March Emergency Major Road Repair - Cherry Lake Road 6,679 Potable Emergency Firefighting Water System - Pipeline at 19th Avenue 6,489 Other items individually below $5,000 72,425
Total $ 200, 877
See Note 4 for additional information about Capital Assets.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

12 (Continued)
Water System Improvement Program (WSIP)
The WSIP delivers capital improvements that enhance the Enterprise’s ability to provide reliable, affordable, high-quality drinking water to its 27 wholesale customers and regional retail customers in Alameda, Santa Clara, and San Mateo Counties, as well as approximately 800,000 residential customers in San Francisco, in an environmentally sustainable manner. The program is structured to cost -effectively meet water quality requirements and long-term water supply objectives, as well as improve seismic and delivery reliability.

Overall, the $4.8 billion WSIP to upgrade the City of San Francisco’s regional and local drinking water systems is 99 % completed with $4. 8 billion of project appropriations expended through fiscal year ended June 30, 20 24. 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, 2024, 35 local projects were completed. For regional projects, 4 8 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 expected completion date is June 2032 . Additional details regarding the WSIP are available at https://sfpuc.gov/construction-contracts/water-infrastructure-improvements.

Capital Assets, Fiscal Year 2023
The Enterprise has net capital assets of $ 5,652,952 invested in a broad range of utility capital assets as of June 30, 2023 (see Table 3). The investment in capital assets includes land, facilities, improvements, water treatment plants, aqueducts, water transmission, distribution mains, water storage facilities, pump stations, water reclamation facilities, machinery, and equipment. The Enterprise’s net revenue and long- term debt are used to finance capital investments. Capit al assets, net of accumulated depreciation and amortization, increased by $30,969 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 . Right- to-use lease and subscription assets increased by $249 due to the implementation of GASB Statement No. 96 – SBITAs.

Major additions to construction work in progress during the year ended June 30, 2023 include the following:

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

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

13 (Continued)
Major land, depreciable facilities, improvements, intangible assets, machinery, and equipment placed in service, including transfers of completed projects from construction work in progress, during the year ended June 30, 2023 include the following:

Water System Improvement Program
The WSIP delivers capital improvements that enhance the Enterprise’s ability to provide reliable, affordable, high-quality drinking water to its 27 wholesale customers and regional retail customers in Alameda, Santa Clara, and San Mateo Counties, as well as approximately 800,000 residential customers in San Francisco, in an environmentally sustainable manner. The program is structured to cost -effectively meet water quality requirements and long-term water supply objectives, as well as improve seismic and delivery reliability.

Overall, the $4.8 billion WSIP to upgrade the City of San Francisco’s regional and local drinking water systems is 99% completed with $4.8 billion of project appropriations expended through fiscal year ended June 30, 202 3. The program consists of 35 local projec ts 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, 4 8 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 expected completion date is February 2027. Additional details regarding the WSIP are available at https://sfpuc.gov/construction-contracts/water-infrastructure- improvements.

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
See Note 4 for additional information about Capital Assets.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

14 (Continued)
Debt Administration
As of June 30, 2024, the Enterprise had $5,503,839 total debt outstanding, an increase of $165,408 over the prior year, as shown below in Table 4. More detailed information about the Enterprise’s debt activity is presented in Notes 6, 7, and 8 to the financial statements.

The increase of $ 253,791 in revenue bonds was due to increase s of $928,890 in bond principal and $136,522 in bond premium from the issuance s of 2023 Series AB revenue bonds and 2023 Series CD revenue refunding bonds, and $8 from the amortization of discount. These increases were offset by decreases of $619,115 in bond principal from refunding of various bonds by the 2023 Series CD revenue refund bonds, $135,075 in bond principal from repayment , $29,008 in premium from amortization , and $28,431 in bond premium from refunding . The Enterprise had $190,000 in tax-exempt commercial paper as of June 30, 2024, and $343,767 in tax-exempt and $27,692 in taxable commercial paper as of June 30, 2023. The $181,459 decrease of commercial paper resulted from a $372,609 decrease due to refunding by the 2023 Series AB revenue bonds , offset by a $190,995 increase in tax -exempt and $155 increase in taxable commercial paper from new issuances. The decrease of $3,267 in certificates of participat ion was from repayment. The $ 96,343 increase in SRF loans was from $97,477 in additional reimbursement requests submitted mainly for the Mountain Tunnel Improvement project offset by $1,134 in reversals of accrued interest capitalized to principal relating to the SF Westside Recycled Water project.

Credit Ratings and Bond Insurance – The Enterprise carried underlying ratings of “Aa2” and “AA -” from Moody’s and S&P Global Ratings (S&P) on June 30, 202 4, and “Aa2” and “AA-” from Moody’s and S&P on June 30, 2023, respectively.

Debt Service Coverage – Pursuant to the Amended and Restated Indenture, the Enterprise is required to collect sufficient net revenues each fiscal year, together with any Enterprise funds (except Bond Reserve Funds), which are available for payment of debt service and are not budgeted to be expended, at least equal to 1.25 times annual debt service for said fiscal year, and for the SFPUC’s debt service coverage policy, at least equal to 1.35 ti mes annual debt service for said fiscal year. During fiscal years 2024 and 2023, the Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rate covenant requirement s under the Enterprise’s Amended and Restated Indenture and the SFPUC’s debt service coverage policy (see Note 8).

Debt Authorization – Pursuant to the Charter Section 8B.124, the Enterprise can incur indebtedness upon two-thirds vote of the Board of Supervisors, as approved by voters in Proposition E in November 2002. As of June 30, 202 4, the Board of Supervisors has authorized the issuance of $ 6,157,510 in revenue bonds under Proposition E, with $4,317,653 issued against this authorization. The Enter prise can also incur indebtedness of up to $1,628,000 for improvements to the water system pursuant to Proposition A that 2024 2023 2022
2024-2023
Change
2023-2022
Change
Revenue bonds $ 4,964,637 4,710,846 4,860,935 253,791 (150,089) Commercial paper 190,000 371,459 206,297 (181,459) 165,162 Certificates of participation 89,232 92,499 95,637 (3,267) (3,138) State revolving fund loans 259,970 163,627 121,761 96,343 41,866 Total $ 5,503,839 5,338,431 5,284,630 165,408 53,801 Table 4
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2024, 2023, and 2022

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

15 (Continued)
was approved by the voters in November 2002. As of June 30, 202 4, $ 1,499,230 of the $1,628,000 Proposition A authorized bonds were issued. The Enterprise is also authorized to issue up to $500,000 in commercial paper.

Cost of Debt Capital – The Enterprise’s outstanding long -term debt has coupon interest rates ranging from

0.7% to 7.0% as of June 30, 2024, and 0.3% to 7.0% as of June 30, 2023. The Enterprise’s short-term debt has interest rates ranging from 2.2 % to 5.2% during fiscal year 202 4, and 1.2% to 5.3% during fiscal year 2023.

Rates and Charges
Rate Setting Process
Retail Customers
Proposition E, as approved by the voters in November 2002, amended the City Charter by adding the new Article VIIIB, entitled “Public Utilities,” which changed the Commission’s ability to issue new revenue bonds and set retail water rates. For the retail water rate setting, the Commission is required to:
• Establish rates, fees, and charges based on cost of service; • Retain an independent rate consultant to conduct cost of service studies at least every five years; • Consider establishing new connection fees;
• Consider conservation incentives and lifeline rates;
• Adopt a rolling five-year forecast annually; and
• Establish a Rate Fairness Board.

Pursuant to the City and County of San Francisco Charter Section 8B.125, an independent rate study is performed at least once every five years. In compliance with City Charter section 8B.125, a rate study was completed in spring 2023. In May 2023, t he Commission su bsequently 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 April 2024 to be effective July 1, 2024, 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.gov/accounts-services/water- power-and-sewer-rates.

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 i s 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 includes a reconciliation between prior year revenues and expenses. Refer to Note 1 1 of the notes to financial statements for further discussion on the balancing account of the wholesale customers.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

16 The following table is the Enterprise’s ten-year average percent rate adjustments:

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

Questions regarding any of the information provided in this report or requests for additional financial information should be addressed to San Francisco Public Utilities Commission, Chief Financial Officer, 525 Golden Gate Avenue, 13
th Floor, San Francisco, CA 94102. This report is available at https://sfpuc.gov/about-us/reports/audited-financial-statements-reports.

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     8.8
July 1, 2025 5.0 4     -
1 Four-year retail rate increases adopted and effective July 1, 2014. 2 3
No retail 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.

Retail Wholesale 5Effective Date:

Ten-year Average Rate Adjustments
Three-year rate increases adopted and effective July 1, 2023.

SAN FRANCISCO WATER ENTERPRISE
Statements of Net Position
June 30, 2024 and 2023
(In thousands)
17 (Continued)

2024 2023
Current assets:

Cash and investments with City Treasury $ 380,201 402,885 Cash and investments outside City Treasury 193 192
Receivables:

Charges for services, current portion (net of allowance for doubtful accounts of $10,777 as of June 30, 2024 and $8,615 as of June 30, 2023) 79,483 63,943 Wholesale balancing account receivable, current portion 26,121 5,571 Due from other City departments 102 115
Due from other governments 366 —
Interest 3,861 2,621
Interest - Leases 935 911
Restricted due from other governments 129,580 36,147
Leases receivable, current portion 3,246 3,521
Restricted interest and other receivable (net of allowance for doubtful accounts of $131 as of June 30, 2024 and $30 as of June 30, 2023) 3,789 3,510 Total current receivables 247,483 116,339
Prepaid charges, advances, and other receivables, current portion 4,958 5,909 Inventory 7,825 8,191
Restricted cash and investments outside City Treasury, current portion 40,065 10,863 Total current assets 680,725 544,379
Non-current assets:

Wholesale balancing account receivable, less current portion — 4,481 Restricted cash and investments with City Treasury 71,015 21,000 Restricted cash and investments outside City Treasury, less current portion 63,185 66,482 Leases receivable, less current portion 35,817 40,109
Restricted interest and other receivable (net of allowance for doubtful accounts of $0 as of June 30, 2024 and $8 as of June 30, 2023) — 4 Charges for services, less current portion (net of allowance for doubtful accounts of $664 as of June 30, 2024 and $656 as of June 30, 2023) 200 209 Note receivable - Balboa Reservoir 11,512 11,007
Right-to-use lease asset, net of accumulated amortization 2,734 3,943 Right-to-use subscription asset, net of accumulated amortization 311 695 Capital assets, not being depreciated and amortized 720,805 640,995 Capital assets, net of accumulated depreciation and amortization 5,054,617 5,007,319 Prepaid charges, advances, and other receivables, less current portion 3,236 3,406 Total non-current assets 5,963,432 5,799,650
Total assets 6,644,157 6,344,029
Deferred outflows of resources
Unamortized loss on refunding of debt 89,186 124,635
Pensions 93,526 70,101
Other postemployment benefits 29,974 28,616
Total deferred outflows of resources $ 212,686 223,352 Assets

SAN FRANCISCO WATER ENTERPRISE
Statements of Net Position
June 30, 2024 and 2023
(In thousands)
18 2024 2023
Current liabilities:

Accounts payable $ 25,353 22,671
Accrued payroll 13,444 11,807
Accrued vacation and sick leave, current portion 7,585 7,057 Accrued workers’ compensation, current portion 2,188 1,914 Due to other City departments — 2,440
Damage claims liability, current portion 5,716 11,125
Unearned revenues, refunds, and other 15,050 13,977
Bond, loan, lease, and subscription interest payable, current portion 37,924 35,104 Lease liability, current portion 1,028 1,189
Subscription liability, current portion 153 400
Revenue bonds, current portion 138,140 135,095
Certificates of participation, current portion 3,402 3,267 Commercial paper, current portion 190,000 —
Current liabilities payable from restricted assets 39,896 40,863 Total current liabilities 479,879 286,909
Long-term liabilities:

Arbitrage rebate payable 869 —
Net other postemployment benefits liability 158,301 148,601 Net pension liability 152,643 115,343
Lease liability, less current portion 1,793 2,821
Subscription liability, less current portion 155 308
Accrued vacation and sick leave, less current portion 6,418 6,528 Accrued workers’ compensation, less current portion 8,814 7,821 Damage claims liability, less current portion 17,057 8,500 Bond, loan, lease, and subscription interest payable, less current portion 3,622 — Revenue bonds, less current portion 4,826,497 4,575,751 Certificates of participation, less current portion 85,830 89,232 Commercial paper, less current portion — 371,459
State revolving fund loans 259,970 163,627
Pollution remediation obligation 1,271 1,271
Total long-term liabilities 5,523,240 5,491,262
Total liabilities 6,003,119 5,778,171
Deferred inflows of resources
Unamortized gain on refunding of debt 31,854 —
Pensions 13,305 28,504
Leases 36,583 41,558
Other postemployment benefits 22,334 27,075
Total deferred inflows of resources 104,076 97,137
Net position
Net investment in capital assets 350,430 460,213
Restricted for debt service 44,724 14,625
Restricted for capital projects 200,632 56,822
Unrestricted 153,862 160,413
Total net position $ 749,648 692,073
See accompanying notes to financial statements
Liabilities

SAN FRANCISCO WATER ENTERPRISE
Statements of Revenues, Expenses, and Changes in Net Position Years ended June 30, 2024 and 2023
(In thousands)
19 2024 2023
Charges for services $ 650,233 661,241
Rents and concessions 8,556 13,282
Capacity fees 863 1,256
Other revenues 17,238 15,312
Total operating revenues 676,890 691,091
Operating expenses:

Personnel services 159,779 135,709
Contractual services 20,128 16,919
Materials and supplies 23,195 20,046
Depreciation and amortization 155,172 155,714
Services provided by other departments 77,638 79,910
General and administrative and other 93,444 51,955
Total operating expenses 529,356 460,253
Operating income 147,534 230,838
Non-operating revenues (expenses):

Federal and state grants 12,414 —
Interest and investment income 25,097 11,156
Interest expenses (222,055) (214,913)
Amortization of premium, discount, refunding loss, and issuance costs 13,825 9,971 Net gain from sale of assets 2,060 12,660
Other non-operating revenues 27,597 28,019
Other non-operating expenses (1,760) (1,775)
Net non-operating expenses (142,822) (154,882)
Change in net position before capital contributions and transfers 4,712 75,956 Capital contributions 53,599 2,717
Transfers from the City and County of San Francisco 505 5 Transfers to the City and County of San Francisco (1,241) (20,032) Capital contributions and net transfers 52,863 (17,310) Change in net position 57,575 58,646
Net position at beginning of year 692,073 633,427
Net position at end of year $ 749,648 692,073
See accompanying notes to financial statements.

Operating revenues:

SAN FRANCISCO WATER ENTERPRISE
Statements of Cash Flows
Years ended June 30, 2024 and 2023
(In thousands)
20 (Continued)

2024 2023
Cash received from customers, including cash deposits $ 636,706 582,603 C
ash received from tenants for rent 8,343 13,098
Cash received from miscellaneous revenues 4,776 4,832
Cash paid to employees for services (151,655) (142,866) Cash paid to suppliers for goods and services (194,099) (174,938) Cash paid for judgments and claims (18,216) (6,927)
Net cash provided by operating activities 285,855 275,802 Cash flows from non-capital financing activities:

Cash received from grants 13,400 —
Cash received from settlements — 6,750
Cash paid for rebates and program incentives (1,760) (1,775) Transfers from the City and County of San Francisco 505 5 Transfers to the City and County of San Francisco (1,241) (20,032) Net cash provided by (used in) non-capital financing activities 10,904 (15,052) Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 1,569 1,370
Proceeds from bond issuance, net of premium 474,538 —
Proceeds from commercial paper borrowings 191,150 165,162 Proceeds from State revolving fund loan 4,044 12,371
Principal paid on commercial paper (372,609) —
Principal paid on long-term debt (138,342) (128,408)
Interest paid on long-term debt (214,366) (209,194)
Interest paid on commercial paper (1,511) (5,170)
Issuance cost paid on long-term debt (4,545) —
Lease payment (1,270) (1,050)
Subscription payment (408) (862)
Acquisition and construction of capital assets (228,113) (172,835) Federal interest income subsidy from Build America Bonds 22,909 23,260 Net cash (used in) capital and related financing activities (266,954) (315,356) Cash flows from investing activities:

Interest income received 17,141 9,141
Proceeds from sale of investments outside City Treasury 1,015,279 348,315 Purchase of investments outside City Treasury (1,081,634) (348,315) Net cash (used in) provided by investing activities (49,214) 9,141 Decrease in cash and cash equivalents (19,409) (45,465) Cash and cash equivalents:

Beginning of year 514,901 560,366
End of year 495,492 514, 901
Reconciliation of cash and cash equivalents to the statement of net position:

Cash and investments with City Treasury:

U
nrestricted 380,201 402,885
Restricted 71,015 21,000
Add: Unrealized loss on investments with City Treasury 7,188 13,479 Cash and investments outside City Treasury:

Unrestricted 193 192
Restricted 103,250 77,345
Less: Unrealized (gain) loss on investments outside City Treasury (540) — Less: Restricted (with maturity more than 90 days - see table in Note 3) (65,815) — Cash and cash equivalents at end of year on
statements of cash flows $ 495,492 514,901
Cash flows from operating activities:

SAN FRANCISCO WATER ENTERPRISE
Statements of Cash Flows
Years ended June 30, 2024 and 2023
(In thousands)
21 2024 2023
operating activities:

Operating income $ 147,534 230,838
Adjustments to reconcile operating income to
net cash provided by operating activities:

Depreciation and amortization 155,172 155,714
Miscellaneous revenue 4,776 4,832
Provision for uncollectible accounts 2,263 4,584
Write-off of capital assets and other non-cash items 58 4,628 Changes in operating assets and liabilities:

Receivables:

Charges for services (17,701) (13,655)
Prepaid charges, advances, and other 560 6,709
Due from other City departments 13 63
Inventory 366 (1,389)
Leases (327) 575
Subscriptions 8 895
Accounts payable 2,682 (181)
Accrued payroll 1,637 1,312
Net other postemployment benefits obligation* 3,601 10,042 Net pension obligations* (1,324) (21,699)
Accrued vacation and sick leave 418 (144)
Accrued workers’ compensation 1,267 762
Due to other City departments (2,440) 2,440
Wholesale balancing account (16,069) (89,202)
Damage claims liability 3,148 (16,444)
Unearned revenues, refunds, and other liabilities 213 (4,878) Total adjustments 138,321 44,964
Net cash provided by operating activities $ 285,855 275,802 Noncash transactions:

Accrued capital asset costs $ 39,896 40,863
Int
erfund payable — 2,440
Unrealized loss on investments with City Treasury 7,188 13,479 Unrealized (gain) on investments outside City Treasury (540) — Capital contribution 53,599 2,717
Sale of land with promissory note 11,512 11,007
Principal refunded 619,115 —
Bond proceeds paid to refunding escrow 590,874 —
* Net other postemployment benefits obligation include related deferred outflows/inflows See accompanying notes to financial statements.

Reconciliation of operating income to net cash provided by

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

22 (Continued)
(1) Description of Reporting Entity
The San Francisco Water Enterprise (the Enterprise) was established in 1930 under the provisions of the Charter of the City and County of San Francisco (the City) . The Enterprise acquired the fully developed, mature water works for San Francisco on March 3, 1930. Since then, the City has operated and maintained the water works as the San Francisco Water Enterprise. The Board of Supervisors of the City ha s adopted resolutions (the Water Resolutions) providing for the issuance of various water revenue and refunding bond series. The Water Resolutions require the City to keep separate books of records and accounts of the Enterprise. The Enterprise, which cons ists 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 2024 , the Enterprise sold approximately 63,854 million gallons, i.e. , about 174 million gallons per day of water, to approximately 2.7 million people within San Francisco and certain suburban areas.

The San Francisco Public Utilities Commission ( SFPUC or the Commission), established in 1932, is responsible for providing operational oversight of the public utility enterprises of the City, which include the Enterprise along with the City’s power and sewer utilities (i.e. , Hetch Hetchy Water and Power and CleanPowerSF , of which the Power Enterprise is a component, and the San Francisco Wastewater Enterprise). The Commission is responsible for determining such matters as the rates and charges for services, approval of contracts, and organizational policy.

The City Charter was amended in 2008 by Proposition E, a City and County of San Francisco Charter Section 4.112 amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the SFPUC, changed the process for appointing new members, and set qualifications for all members. Under the amended Charter, the Mayor continues to nominate candidates to the SFPUC, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four year terms for SFPUC members and requires them to meet the following qualifications:
• Seat 1 must have experience in environmental policy and an understanding of environmental justice issues.
• Seat 2 must have experience in ratepayer or consumer advocacy. • Seat 3 must have experience in project finance.
• Seat 4 must have experience in water systems, power systems, or public utility management. • Seat 5 is an at-large member.

The SFPUC is a department of the City, an d as such, the financial operations of the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF , and the Wastewater Enterprise s are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial statements are i ntended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financi al position of the City as of June 30, 2024 and 2023, the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

23 (Continued)
(2) Significant Accounting Policies
(a) Basis of Accounting and Measurement Focus
The accounts of the Enterprise are organized on the basis of a proprietary fund type and are included as an enterprise fund of the City. The activities of this Enterprise are accounted for with a separate set of self -balancing accounts that comprise the Enterprise’s assets, deferred outflows, liabilities, deferred inflows, net position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity’s costs of providing services, including capital cos ts (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

The financial activities of the Enterprise are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with U.S. GAAP. Under this method, all assets and li abilities associated with its operations are included on the statement of net position; revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operating revenues are defined as charges to customers, rental income, a nd capacity fees. Non-operating revenues include grants, investment income, and other income from non-operating activities.

The Enterprise applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
(b) Cash and Cash Equivalents
The E nterprise considers its pooled cash and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non -pooled cash and investments for the Enterprise. Non- pooled restricted deposits and investments held outside the City Treasury with original maturities of three months or less are also considered to be cash equivalents.
(c) Investments
Money market funds are carried at cost, which approximates fair value. All othe r 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 mater ials 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. Ca pital 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 at the time of donation and capital assets received

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

24 (Continued)
in a service concession arrangement, are valued at acquisition value. 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 depreci ation 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, tran sferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights -of-way easements, land use rights, water rights, licenses, permits, leases, and subscription–based information technology arrangements (SBITAs). The Enterprise capitalizes purchased or internally developed intangible assets with a useful life extending beyond one reporting period. It has established a capitalization threshold of $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 expense 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 is offset against the related debt and is also amortized using the effective interest method.
(i) Accrued Vacation and Sick Leave
Accrued vacation p ay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non-vesting and may be accumulated up to six months per employee.
(j) Workers’ Compensation
The Enterprise is self-insured for workers’ compensation claims and accrues the estimated cost of those claims, including the estimated cost of incurred but not reported claims (see Note 14(b)).
(k) General Liability
The Enterprise is self -insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover claims attributed to loss from earthquake, contamination, pollution reme diation efforts, and other specific naturally occurring contaminants such as mold. The liability represents an estimate of

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

25 (Continued)
the cost of all outstanding claims, including adverse loss development and estimated incurred but not reported claims (see Note 14(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 arbitrage rebate liability as of June 30, 2024 and 2023 were $869 and $0, respectively.
(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 Enterprise i s exempt from both federal income taxes and California state franchise taxes.
(o) Revenue Recognition
Water service charges are based on water usage as determined by the Enterprise. Effective July 2013, the majority of residential and non- residential customers are billed on a monthly basis except for building and contractor customers , which are billed on a bi- monthly basis. Revenues earned but unbilled are accrued as charges for services and reflected as a receivable on the statements of net position. The unbilled amounts as of June 30, 2024 and 2023 were $44,465 and $31,704, respectively.
(p) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that aff ect the reported amounts of assets , liabilities, deferred outflows and deferred inflows, 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) 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;

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

26 (Continued)
• A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cle aning 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 cl eanup or post -cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the design phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include, but are not limited to: asbestos or lead paint removal, leaking of sewage in underground pipes or neighboring areas, chemical spills, removal and disposal of known toxic waste, harmful biological and chemical pollution of water, or contamination of surrounding soils by underground storage tanks (see Note 15(d)).
(r) 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 Enterprise is a lessee and lessor for various noncancellable leases of land, building, equipment, vehicles, easement, etc.

Short-term Leases

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

Leases Other Than Short-term

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

Measurement of Lease Amounts (Lessee)

The Enterprise’s lease liability is recorded at the present value of future minimum lease payments as of the date of c ommencement. 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 lease term. If the Enterprise is reasonably certain of exercising a purchase option contained in a lease, the lease asset will be amortized over the useful life of the underlying asset.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

27 (Continued)
Measurement of Lease Amounts (Lessor)

The Enterprise’s lease receivable is measured at the present value of payments expected to be received during the lease term, reduced by any provision of estimated uncollectible amounts.

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

Key Estimates and Judgments

Key estimates and judgments include how the Enterprise determines (a) the discount rate it uses to calculate the present value of the expected lease payments, (b) lease terms, (c) lease payments, and (d) materiality threshold for equipment.
• The Enterprise generally uses its estimated incremental borrowing rate as the discount rate for leases unless the rate is implicit in the lease. The City’s incremental borrowing rate (IBR) is established using the average of Municipal Market Data (MMD) AAA b enchmark 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 an y additional periods covered by either lessee or lessor unilateral option to (1) extend for which it is reasonably certain to be exercised, or (2) terminate for which it is reasonably certain not to be exercised.

Periods in which both the lessee and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the lease term.
• Payments are evaluated by the Enterprise to determine if they should be included in the measurement of the lease receivables or lease liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments. • Equipment and other leases have a ca pitalization threshold of $100. 70% below market rent and/or ground leases are determined to be below market rent (BMR) and are excluded from lease capitalization.

Remeasurement of Lease

The Enterprise monitors changes in circumstances that may require re measurement 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.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

28 (Continued)
Presentation in Statement 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 capital-related assets and liabilities are reported under net investment in capital assets in the statement of net position (see Note 9). (s) Subscription-Based Information Technology Arrangements Subscription–Based Information Technology Arrangements (SBITAs) are defined as a contr act 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 Enterprise has noncancellable subscription arrangements (similar to a lease) for the right to use va rious information technology hardware and software SBITAs.

Short-term SBITAs
For SBITAs with a maximum possible term of 12 months or less at commencement, the Enterprise 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 Enterprise recognizes SBITAs liability and intangible right-to-use subscription asset for the Enterprise.

Measurement of Subscription Amounts (Subscriber)
The Enterprise’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 p ayments 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, subsc ription assets also include qualified 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 Judgments
Key estimates and judgments include how the Enterprise 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 Enterprise gene rally uses its estimated incremental borrowing rate as the discount rate for SBITAs unless the rate is implicit in the agreement. The Enterprise 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 Enterprise’s Aa/AA, COP, Tax-exempt to generate the yield curve and discount rate table. • The subscription term includes the noncancellable period of the subscri ption, plus any additional periods covered by either subscriber or lessor unilateral option to (1) extend for which

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

29 (Continued)
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 Enterprise to determine if they should be included in the measurement of the subscription l iabilities, 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 Lease or SBITAs
The Enterprise monitors changes in circumstances that may require remeasurement of SBITA s.

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 Statement of Net Position
Subscription assets are reported with current and non -current assets, subscription liabilities are reported with short-term and long-term liabilities, and both subscription assets and liabilities are reported under net investment in capital assets in the statement of net position (see Note 10). (t) Other Postemployment Benefits (OPEB)
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 12(b)). (u) New Accounting Standards Adopted in Fiscal Year 2024 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, ple dges 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 were adopted by the Enterprise for the year ended June 30, 2022. The requirem ents 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. The Enterprise adopted the provisions of Statement No. 99 in fiscal year 2024 which did not have a significant effect on its financial statements.

2) In June 2022, the GASB issued Statement No. 100, Accounting Changes and Error Corrections. This statement enhances accounting and financial reporting requirements fo r 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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

30 (Continued)
Enterprise adopted the provisions of Statement No. 100 in fiscal year 2024 which did not have a significant effect on its financial statements.
(v) GASB Statements Implemented in Fiscal Year 2023
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations . G ASB Statement No. 91 enhances the comparability 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. T he Enterprise 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 Availabili ty 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 and availability payment arrangements (PPPs).

The Enterprise 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 standard is effective for periods beginning after June 15, 2022. The Enterprise adopted the provisions of Statement No. 96 in fiscal year 2023 (see Note 10). (w) Future Implementation of New Accounting Standards
1) In June 2022, the GASB issued Statement No. 101, Compensated Abs ences. This statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. The new standard is effective for periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 101 in fiscal year 2025.

2) In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures . This statement establishes financial reporting requirements for risks related to vulnerabilities due to certain concentrations or constraints within governments. The new standard is effective for periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 102 in fiscal year 2025.

3) In April 2024, the GASB issued Statement No. 103, Financial Reporting Model Improvements. This statement is to improve key components of the financial reporting model to enhance its effective ness in providing information that is essential for decision making and assessing a government’s accountability. The new standard is effective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 103 in fiscal year 2026.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

31 (Continued)
4) In September 2024, the GASB issued Statement No. 104, Disclosure of Certain Capital Assets. This statement requires certain types of capital assets, such as l ease assets recognized in accordance with Statement No. 87, Leases , and intangible right-to-use assets recognized in accordance with Statement No. 94, Public-Private and Public -Public Partnerships and Availability Payment Arrangements to be disclosed separately by major classes of underlying assets in the capital assets note disclosures. Subscription assets recognized in accordance with Statement No. 96, Subscription -Based Information Technology Arrangements are also required to be disclosed separately. Furthermore, the statement requires intangible assets other than those three types to be disclosed separately by major class. Finally, the statement requires additional disclosures for capital assets held for sale. The new standard is ef fective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 104 in fiscal year 2026. (x) Reclassifications
The Enterprise has reclassified certain amounts relating to the prior period to conform to its current period presentation. Lease receivable, lease related interest receivable, lease related interest payable, and subscription related interest payable were reclassified from net investment in capital assets to unrestricted in the statement of net position for fiscal year 2023.

Restricted liabilities were reclassified from net position restricted for capital projects to net investment in capital assets for fiscal years 2024 and 2023. These reclassifications had no effect on previously reported changes in net position.
(3) Cash, Cash Equivalents, and Investments
The Enterprise’s cash, cash equivalents , and investments with the City Treasury are invested in an unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of priority, preservation of capital, liquidity, and yield.

The policy addresses soundness of financial institutions in which the City will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio that may be invested in certain in struments with longer terms to maturity. The City Treasurer allocates income from the investment of pooled cash at month -end in proportion to the Enterprise’s average daily cash balances. The primary objectives of the Enterprise’s investment policy are consistent with the City’s policy.

Some r estricted 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 expendit ures. The current balances as of June 30, 2024 and 2023 were $ 103,250 and $77,345, respectively. The Enterprise held all investments in treasury and government obligations, commercial paper, as well as money market mutual funds consisting of t reasury 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, 2024 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, 2023 were “Aaa-mf”

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

32 (Continued)
and “P- 1” by Moody’s, and “AAAm” and “A -1” by S&P. Investment agreements must be with a U.S. bank or trust company that have a rating by Moody’s and S&P of “A” or higher, or are guaranteed by any entity with a rating of “A” or higher, at the time the agreement is entered.

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

The following tables present the restricted and unrestricted cash and investments outside City Treasury, including commercial paper issuers, credit ratings and the fair value hierarchy as of June 30, 2024 and 2023:

Certain investments such as money market investments, and cash and cash equivalents are not subject to the fair value hierarchy.

The restricted cash and investments outside City Treasury as of June 30, 2024 and 2023 included an unrealized gain due to changes in fair value on commercial paper of $540 and $0, respectively.

Additional cash outside of the investment pool included revolving fund and cash in transit. The revolving fund has a balance of $ 28 and $28 as of June 30, 2024 and 2023, respectively, which is held in a commercial bank in non -interest bearing checking accounts covered by Federal Deposit Credit Ratings
(S&P/Moody's) Maturities Fair Value

U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 22,815 22,815 — — — Money Market Funds A-1/P-1 < 90 days 43 43 — — —
Commercial Paper-Toyota Motor Corp A-1+/P-1 October 11, 2024 45,422 — 45,422 — — Commercial Paper-Toronto-Dominion Bank A-1+/P-1 October 28, 2024 10,310 — 10,310 — — U.S. Agency Securities AA+/Aaa April 17, 2025 10,083 — 10,083 — — Cash and Cash Equivalents N/A 14,577 14,577 — — —
Total Restricted Cash and Investments outside City Treasury $ 103,250 37,435 65,815 — —

Cash and Cash Equivalents N/A $ 193 193 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 193 193 — — — Fair Value Measurements Using
Investments
June 30, 2024
Cash and Investments outside City Treasury
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Investments
exempt from
fair value
Credit Ratings
(S&P/Moody's) Maturities Fair Value

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 — — —

Cash and Cash Equivalents N/A $ 192 192 — — —
Total Unrestricted Cash and Investments outside City Treasury $ 192 192 — — — June 30, 2023
Investments
exempt from
fair value
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Cash and Investments outside City Treasury
Investments
Fair Value Measurements Using
Unobservable
Inputs
(Level 3)

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

33 (Continued)
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 $165 and $ 164 as of June 30, 2024 and 2023, respectively.

The Enterprise’s cash, cash equivalents, and investments are shown on the accompanying statements of net position as follows:

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

As of June 30, 2024, the Enterprise has the following commercial paper investments that represent

5.0% or more of the total investments outside City Treasury:

2024 2023
Cash and investments with City Treasury $ 380, 201 402,885 Cash and investments outside City Treasury 193 192
Restricted cash and investments outside City Treasury 40,065 10, 863 Non-current assets:

Restricted cash and investments with City Treasury 71,015 21, 000 Restricted cash and investments outside City Treasury 63,185 66, 482 Total cash, cash equivalents, and investments $ 554, 659 501,422 Current assets:

Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2024 22.2% 19.5% 16.3% 42.0%
2023 21.5% 18.0% 14.5% 46.0%
Investment maturities (in months)
Fair Value
% of
Investments
Toyota Motor Corp $ 45, 422 51.2 % Toronto-Dominion Bank 10,310 11.6

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

34 (Continued)
(4) Capital Assets
Capital assets as of June 30, 2024 and 2023 consist of the following:

2023 Increases Decreases 2024
Land and rights-of-way $ 113,322 — — 113,322
Intangible assets 679 — — 679
Construction work in progress 526,994 220,970 (141,160) * 606,804 Total capital assets not being depreciated and amortized 640,995 220,970 (141,160) 720,805 Capital assets being depreciated and amortized:

Facilities and improvements 6,755,307 191,146 — 6,946,453 Intangible assets 26,121 1,593 — 27,714
Machinery and equipment 337,799 8,138 (131) 345,806
Right-to-use lease assets 8,208 — (1,197) 7,011
Right-to-use subscription assets 2,450 — (1,590) 860
Total capital assets being depreciated and amortized 7,129,885 200,877 (2,918) 7,327,844 Less accumulated depreciation and amortization for:

Facilities and improvements (1,828,932) (141,039) — (1,969,971) Intangible assets (24,469) (1,267) — (25,736)
Machinery and equipment (258,507) (11,273) 131 (269,649) Right-to-use lease assets (4,265) (1,209) 1,197 (4,277) Right-to-use subscription assets (1,755) (384) 1,590 (549) Total accumulated depreciation and amortization (2,117,928) (155,172) 2,918 (2,270,182) Total capital assets being depreciated and amortized, net 5,011,957 45,705 — 5,057,662 Total capital assets, net $ 5,652,952 266,675 (141,160) 5,778,467 * Decrease in construction work in progress includes $58 in capital project write-offs, mainly related to Chlorine Trim Station Repairs project. The remaining difference of $59,775 is mainly due to direct additions to facilities and improvements, intangible assets and machinery and equipment.

Capital assets not being depreciated and amortized:
2022 Increases Decreases 2023
Land and rights-of-way $ 113,441 — (119) 113,322
I
ntangible 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
Right-to-use lease assets 5,646 2,562 — 8,208
Right-to-use subscription assets 2,450 — — 2,450
Total capital assets being depreciated and amortized 7,026,402 104,062 (579) 7,129,885 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) Right-to-use lease assets (2,834) (1,431) — (4,265)
Right-to-use subscription assets (873) (882) — (1,755) Total accumulated depreciation and amortization (1,962,793) (155,714) 579 (2,117,928) Total capital assets being depreciated and amortized, net 5,063,609 (51,652) — 5,011,957 Total capital assets, net $ 5,621,983 128,739 (97,770) 5,652,952 Capital assets not being depreciated and amortized:
* Decrease in construction wo rk in progress includes $4,628in capital project write-offs, mainly related to Stern Grove Emergency Restoration and Upper Alameda Creek Filter projects. The remaining difference of $10,920is mainly due to direct additions to facilities and improvements, intangible assets and machinery and equipment.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

35 (Continued)
(5) Restricted Assets
Pursuant to the Indentures, all revenues of the Enterprise (except amounts on deposit in the rebate fund) are irrevocably pledged to the punctual payment of debt service on the Water Revenue and Refunding Bonds. Accordingly, the revenues of the Enterprise shall not be used for any other purpose while any of its Water Revenue and Refunding Bonds are outstanding, except as expressly permitted by the Indentures. Further, all revenues shall be deposited by the City Treasurer, by instruction of the Enterprise, in special funds designated as the Water Enterprise Revenue Fund (the Water Revenue Fund), which must be maintained in the City Treasury. These funds, held at the City Treasury, are recorded in the statement of net position of the Enterprise as cash and investments. Deposits in the Water Revenue Fund, including earnings thereon, shall be appropriated, transferred, expended, or used for the f ollowing purposes pertaining to the financing, maintenance, and operation of the Enterprise in accordance with the following priority:

1. The payment of operation and maintenance expenses for such utility and related facilities;

2. The payment of pension charges and proportionate payments to such compensation and other insurance or outside reserve funds as the Enterprise may establish or the Board of Supervisors may require with respect to employees of the Enterprise;

3. The payment of principal, interest, reserve, sinking fund, and other mandatory funds created to secure Revenue Bonds and parity State revolving fund loans issued by the Enterprise for the acquisition, construction, or extension of facilities owned, operated, or controlled by the Enterprise;

4. The payment of principal and interest on General Obligation Bonds issued by the City for the Enterprise’s purposes;

5. Reconstruction and replacement as determined by the Enterprise or as required by any of the Enterprise’s Revenue Bond ordinances duly adopted and approved; and

6. The acquisition of land, real property, or interest in real property for, and the acquisition, construction, enlargement, and improvement of, new and existing buildings, structures, facilities, equipment, appliances, and other property necessary or convenient to the development or improvement of such utility owned, controlled, or operated by the Enterprise; and for any other lawful purpose of the Enterprise, including the transfer of surplus funds pursuant to the Charter.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

36 (Continued)
In accordance with the I ndenture, the bond financing program maintains that certain restricted cash and investment balances be held in trust. Restricted assets held in trust consisted of the following as of June 30, 2024 and 2023:

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.
2024 2023
Water revenue bond construction fund $ 71,015 21,000
Cash and investments outside City Treasury:
2010A Water revenue bond fund — 12
2010B Water revenue bond fund 22,813 21,861
2010D Water revenue bond fund — 12
2010E Water revenue bond fund 16,495 16,643
2010F Water revenue bond fund — 8
2010G Water revenue bond fund 18,994 18,178
2015A Water revenue refunding bond fund 7 4
2016A Water revenue refunding bond fund 13 8
2016B Water revenue refunding bond fund 1 1
2016C Water revenue bond fund 4 2
2017A Water revenue bond fund 1 —
2017B Water revenue bond fund 6 2
2017C Water revenue bond fund — 1
2017D Water revenue refunding bond fund 6 4
2017E Water revenue refunding bond fund 1 1
2019A Water revenue refunding bond fund 7 5
2019B Water revenue refunding bond fund 1 —
2019C Water revenue refunding bond fund 1 —
2020A Water revenue bond fund 4 2
2020B Water revenue bond fund 2 1
2020C Water revenue bond fund 2 1
2020D Water reveune bond fund 1 —
2020E Water revenue refunding bond fund 3 2
2020F Water revenue refunding bond fund 17 13
2020G Water reveune refunding bond fund 1 23
2020H Water revenue refunding bond fund 1 8
2023A Water revenue bond fund 19,235 —
2023B Water revenue bond fund 3,551 —
2023C Water revenue refunding bond fund 99 —
2023D Water revenue refunding bond fund 19 —
2009C Certificates of participation - 525 Golden Gate 965 1,696 2009D Certificates of participation - 525 Golden Gate 7,345 5,761 Commercial Paper - Tax Exempt 17 15
Commercial Paper - Taxable 28 28
Habitat reserve endowment fund 13,610 13,053
Total cash and investments outside City Treasury 103,250 77,345 Interest and other receivables:

Water bond construction fund including interest, prepaids, and other receivables 3,789 3,514 Due from other government for State Revolving Fund 129,580 36,147 Total restricted assets $ 307,634 138,006
Cash and investments with City Treasury:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

37 (Continued)
(6) Short-Term Debt
The Commission and the Board of Supervisors have authorized the overall Interim Funding Program issuance of up to $500,000, pursuant to the voter- approved 2002 Proposition E. The program is made up of two components: (1) three series totaling $400,000 (aggregate principal amount) that are for the issuance of either tax-exempt or taxable commercial paper and which are each supported by a high-grade bank credit facility in the form of a letter of credit or bank liquidity facility; and (2) one series that is for a $100,000 direct bank loan that can be used to make tax -exempt or taxable draws from a high- grade bank pursuant to a revolving credit agreement. As of June 30, 2024 and 2023, amounts outstanding under Proposition E were $190,000 and $371,59, respectively. Commercial paper interest rates ranged from 3.9% to 5.5%.

With maturities up to 270 days, the Enterprise intends to maintain the program by remarketing the commercial paper upon maturity over the near -to-medium term, at which time outstanding commercial paper will likely be refunded with revenue bonds. This is being done to take a dvantage of the continued low interest rate environment. If the commercial paper interest rates rise to a level that exceeds these benefits, the Enterprise will refinance the commercial paper with the long -term, fixed- rate debt.

As of June 30, 202 3, the 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.

The commercial paper notes can be issued in the aggregate principal amounts of up to $500,000 and may be marketed and re -marketed with maturities up to 270 days and are secured by three separate bank letters of credit and one revolving note, as set forth below. The commercial paper notes and the revolving notes are payable from revenues, and are secured on a parity lien basis with each other. The commercial paper notes and the revolving notes, collectively, are secured on a basis subordinate to the payment of debt service on outstanding bonds and SRF Loans.

As of June 30, 2024, the commercial paper notes are secured by the following series. Series A- 1/A-1- T, has a $100 million letter of credit from Sumitomo Mitsui Banking Corporation, acting through its New York Branch, which expires on May 16, 2025. The agreement for the Series A -1/A-1-T credit facility stipulates a quarterly commitment fee of .33%, on the maintenance of ratings of at least “AA -” by S&P and “Aa3” by Moody’s. Series A- 2/A-2-T, has a $200 million letter of credit from Sumitomo Mitsui Banking Corporation, acting through its New York Branch, which expires on June 14, 2027. The agreement for the Series A -2/A-2-T credit facility stipulates a quarterly commitment fee of .29%, on the maintenance of ratings of at least “AA -” by S&P an d “Aa3” by Moody’s. Series A -3/A-3-T, has a $100 million letter of credit from Barclays Bank PLC which expires on July 19, 2024. The agreement for the Series A -3/A-3-T credit facility stipulates a quarterly commitment fee of .29%, on the maintenance of ratings of at least “AA-” by S&P and “Aa3” by Moody’s.

BofA Securities, Inc., J.P. Morgan Securities LLC and Wells Fargo Bank, National Association, serve as dealers for the commercial paper notes. The annual fee paid to the dealer equals .05% of the average outstanding principal amount of the Notes managed by the Dealer.

The revolving notes were issued pursuant to a $100 million revolving credit agreement with U.S. Bank National Association which expires on July 18, 2024. The revolving credit agreement stipul ates an unutilized quarterly commitment fee of .21%, on the maintenance of ratings of at least “AA -” by S&P and “Aa3” by Moody’s. The revolving credit agreement had $0 outstanding as of June 30, 2024.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

38 (Continued)
The commercial paper reimbursement agreement and the commercial paper revolving credit and term loan agreements for the Enterprise, contain a provision that in the event advances (or drawings) remain unpaid, such advances (or drawings) will convert into term loans and will be subject to the repayment provisions relating thereto.

In accordance with GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements , the Enterprise had $ 310,000 and $128,541 in unused authorization as of June 30, 2024 and 2023, respectively. Significant e vents of default include 1) payment defaults 2) material breach of warranty, representation, or other non -remedied breach of covenants as specified in the respec tive 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, 2024, there were no such events describe herein.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

39 (Continued)
(7) Changes in Long-Term Liabilities
Long-term liability activities for the years ended June 30, 2024 and 2023 are as follows:

Maturity Due
Interest (Calendar within
rate Year) 2023 Additions Reductions 2024 one year
2010B revenue bonds (Build America) 4.00% – 6.00% 2040 $ 336,390 — (13,245) 323,145 13,725 2010E revenue bonds (Build America) 4.90 – 6.00 2040 331,455 — (13,165) 318,290 13,610 2010G revenue bonds (Build America) 6.95 2050 351,470 — — 351, 470 — 2015A revenue refunding bonds 2.00 – 5.00 2036 366,375 — (92,240) 274,135 29,485 2016A revenue refunding bonds 4.00 – 5.00 2039 686,945 — (113,445) 573,500 24,800 2016B revenue refunding bonds 1.50 – 5.00 2030 58,980 — (13,175) 45,805 13,720 2016C revenue bonds 0.87 – 4.19 2046 225,275 — (6,105) 219,170 6,275 2017A revenue bonds 5.00 2047 24,675 — (2,445) 22,230 2,570 2017B revenue bonds 5.00 2047 30,095 — (2,985) 27,110 3,135 2017C revenue bonds 5.00 2047 14,395 — (1,425) 12,970 1,500 2017D revenue refunding bonds 2.00 – 5.00 2035 345,340 — (88,045) 257,295 10,230 2017E revenue refunding bonds 4.00 – 5.00 2031 48,125 — (795) 47,330 835 2017F revenue refunding bonds 5.00 2031 8,005 — (735) 7,270 770 2017G revenue refunding bonds 2.03 – 2.91 2024 18,890 — (13,665) 5,225 5,225 2019A revenue refunding bonds 1.81 – 3.47 2043 587,825 — (194,745) 393,080 2,700 2019B revenue refunding bonds 3.15 – 3.52 2041 16,315 — (70) 16,245 75 2019C revenue refunding bonds 3.15 – 3.52 2041 17,775 — (80) 17,695 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 335,035 — (151,400) 183,635 915 2020F revenue refunding bonds 0.26 – 3.15 2047 135,455 — (1,430) 134,025 1,440 2020G revenue refunding bonds 0.26 – 3.10 2043 108,970 — (44,310) 64,660 6,360 2020H revenue refunding bonds 0.26 – 3.15 2047 64,815 — (685) 64,130 690 2023A revenue bonds 5.00-5.25 2052 — 349,495 — 349,495 — 2023B revenue bonds 5.00-5.25 2052 — 64,540 — 64,540 — 2023C revenue refunding bonds 4.00-5.00 2043 — 486,875 — 486,875 — 2023D revenue refunding bonds 5.00 2035 — 27,980 — 27,980 — Less issuance discount (115) — 8 (107) —
Add issuance premiums 251,596 136,522 (57,439) 330,679 — Total revenue bonds payable 4,710,846 1,065,412 (811,621) 4,964,637 138,140 2009D COPs (Build America) 6.36 – 6.49 2041 92,499 — (3,267) 89,232 3,402 Commercial paper * 2.20 – 5.15 2023 371,459 — (371,459) — — State Revolving Funds Loan 1.00 – 1.10 2057 163,627 97,477 (1,134) 259,970 — Accrued interest payable 35,104 221,095 (214,653) 41,546 37,924 Net other postemployment benefits liability 148,601 9,700 — 158,301 — Lease liability 4,010 — (1,189) 2,821 1,028
Subscription liability 708 — (400) 308 153
Net pension liability 115,343 37,300 — 152,643 —
Arbitrage rebate payable — 869 — 869 —
Accrued vacation and sick leave 13,585 13,724 (13,306) 14,003 7,585 Accrued workers’ compensation 9,735 4,336 (3,069) 11,002 2,188 Damage claims liability 19,625 18,823 (15,675) 22,773 5,716 Pollution remediation obligation 1,271 — — 1,271 —
Total $ 5,686,413 1,468,736 (1,435,773) 5,719,376 196,136 * Commercial paper recorded as short-term liability in FY24 Revenue Bonds:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

40 (Continued)

Maturity Due
Interest (Calendar within
rate Year) 2022 Additions Reductions 2023 one year
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 Commercial paper 1.20 – 5.30 2023 — 371,459 — 371,459 — State Revolving Funds Loan 1.00 – 1.10 2057 121,761 41,866 — 163,627 — Net other postemployment benefits liability 144,115 4,486 — 148,601 — Lease liability 2,863 2,562 (1,415) 4,010 1,189
Subscription liability 1,556 — (848) 708 400
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 Damage claims liability 36,069 1,898 (18,342) 19,625 11,125 Wholesale balancing account 79,150 — (79,150) — —
Pollution remediation obligation 1,271 — — 1,271 —
Total $ 5,366,059 554,025 (268,775) 5,651,309 160,047 Revenue Bonds:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

41 (Continued)
The payments of principal and interest amounts on various bonds are secured by net revenues of the 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 (BAB) (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, 2024 and 2023, the principal amount outstanding was $323,145 and $336,390, respectively. (b) Water Revenue Bonds 2010 Series E
In July 2010, 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, 2024 and 2023, the principal amount of 2010 Series E bonds outstanding was $318,290 and $331,455, respectively. (c) Water Revenue Bonds 2010 Series G
In December 2010, 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 p rojects. 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, 2024 and 2023, the principal amount of 2010 Series G bonds outstanding was $351,470. (d) Water Revenue Refunding Bonds 2015 Series A
In April 2015, the 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 maturi ng 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 bon ds 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.

A portion of the proceeds of the 2023 Series C bonds were used to pay at closing a portion of the 2015 Series A bonds which had been tendered for purchase on August 10, 2023. The proceeds of the 2023 Series C bonds were sufficient to pay the accrued interest a nd tender price of maturities of the 2015 Series A bonds starting on November 1, 2028 to November 1, 2033 and November 1, 2036. As of June 30, 2024 and 2023, the principal amount of 2015 Series A bonds outstanding was $274,135 and $366,375, respectively.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

42 (Continued)
(e) Water Revenue Refunding Bonds 2016 Series AB
In October 2016, the 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 2 009 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.

A portion of the proceeds of the 2023 Series C bonds were used to pay at closing a portion of the 2016 Series A bonds which had been tendered for purchase on August 10, 2023. The proceeds of the 2023 Series C bonds were sufficient to pay the accrued interest and tender price of maturities of the 2016 Series A bonds starting on November 1, 2031 to November 1, 2035. As of June 30, 2024 and 2023, the principal amount of 2016 Series AB bonds outstanding was $619,305 and $745,925, respectively.
(f) Water Revenue Bonds 2016 Series C
In December 2016, the 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, 2024 and 2023, the principal amo unt of 2016 Series C bonds outstanding was $219,170 and $225,275, respectively. (g) Water Revenue Bonds 2017 Series ABC
In December 2017, the Enterprise issued tax -exempt revenue bonds, 2017 ABC in the aggregate amount of $339,540. The purpose of the 2017 Seri es 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 te rm 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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

43 (Continued)
portion of the proceeds of the 2020 Series E refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable E scrow 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 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 2017 Series A bonds starting on November 1, 2030 and thereafter. The defeased principal amount outstanding for the 2017 Series A Revenue Bonds were $94,140 as June 30, 2024 . As of June 30, 2024 and 2023, the principal amount of 2017 Series A bonds outstanding was $22, 230 and $24,675, respectively.

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 20 47. 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 lega lly defease a portion of the outstanding 2017 Series B 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 2017 Series B bonds starting on November 1, 2030 and thereafter. The defeased principal amount outstanding for the 2017 Series B Revenue Bonds were $114,795 as of June 30 , 2024 . As of June 30, 2024 and 2023, the principal amount of 2017 Series B bonds outstanding was $27,110 and $30,095, respectively.

The $70,675 2017 Series C bonds were issued as tax -exempt bonds to refund approximately $60,266 of commercial paper notes a nd 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 porti on 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. The se 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 t he maturities of the 2017 Series C bonds starting on November 1, 2030 and thereafter. The defeased principal amount outstanding for the 2017 Series C Revenue Bonds were $54,925 as of June 30, 2024 . As of June 30, 2024 and 2023, the principal amount of 2017 Series C bonds outstanding was $12,970 and $14,395, respectively.
(h) Water Revenue Refunding Bonds 2017 Series DEFG
In December 2017, the 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. A portion of the proceeds of the 2023 Series C bonds were used to pay at closing a portion of the 2017 Series D bonds which had been tendered for purchase on August 10, 2023. The proceeds of the 2023

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

44 (Continued)
Series C bonds were sufficie nt to pay the accrued interest and tender price of maturities of the 2017 Series D bonds starting on November 1, 2031 to November 1, 2035.

The 2017 Series E bonds were issued for the purpose of refunding a portion of the outstanding 2011 Series C bonds maturing on or after November 1, 2022, a portion of the outstanding 2011 Series D bonds maturing on and after November 1, 2022, a portion of 2012 Series C1 bonds maturing on or after November 1, 2029.

The 2017 Series F bonds were issued for the purpose of ref unding 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 o f 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, 2024 and 2023, the principal amount of 2017 Series DEFG bonds outstanding was $317,120 and $420,360, respectively.
(i) Water Revenue Refunding Bonds 2019 Series ABC
In January 2020, the Enterprise issued taxable revenue bonds, 2019 Series ABC refunding bonds in the aggregate amount of $656,955. The 2019 S eries 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, 2 020, and a portion of the outstanding 2012 Series A (WSIP) bonds maturing on and after November 1, 2035. A portion of the proceeds of the 2023 Series C refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated August 1, 2023 to refund and legally defease a portion of the outstanding 2019 Series A 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 portions of the maturities of the 2019 Series A bonds starting on November 1, 2024 to November 1, 2026 and November 1, 2029 to November 1 2033. A portion of the proceeds of the 2023 Series C bonds were used to pay at closing a portion of the 2019 Series A bonds which had been tendered for purchase on August 10, 2023. The proceeds of the 2023 Series C bonds were sufficient to pay the accrued interest and tender price of portions of maturities of the 2019 Series A bonds starting on November 1, 2026 to November 1, 2032, November 1, 2034, November 1, 2039 and November 1, 2043. The defeased principal amount outstanding for 2019 Series A Revenue Bonds were $5,745 as of June 30, 2024.

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 p urpose of refunding a portion of the outstanding 2011 Series C bonds maturing on or after November 1, 2032.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

45 (Continued)
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 ga in of $92,556 or 14.0% of refunded principal. As of June 30, 2024 and 2023, the principal amount of 2019 Series ABC bonds outstanding was $427,020 and $621,915, respectively.
(j) Water Revenue Bonds 2020 Series ABCD
In September 2020, the 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 maturity in 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, 2024 and 2023, 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, 2024 and 2023, 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 b onds 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, 2024 and 2023, 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, 2024 and 2023, the principal amount of 2020 Series D bonds outstanding was $49,200.
(k) Water Revenue Refunding Bonds 2020 Series EFGH
In October 2020, the 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. A portion of the proceeds of the 2023 Series C bonds were used to pay at closing a portion of the 2020 S eries E bonds which had

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

46 (Continued)
been tendered for purchase on August 10, 2023. The proceeds of the 2023 Series C bonds were sufficient to pay the accrued interest and tender price of the 2020 Series E bonds maturing November 1, 2041.

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 outstandin g 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. A portion of the proceeds of the 2023 Series D refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated August 1, 2023 to refund and legally defease a portion of the o utstanding 2020 Series G 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 portions of the maturities of the 2020 Series G bonds maturing on November 1, 2024 and November 1, 2025. A portion of the proceeds of the 2023 Series D bonds were used to pay at closing a portion of the 2020 Series G bonds which had been tendered for purchase on August 10, 2023. The proceeds of the 2023 Series D bonds were sufficient to pay the accrued interest and tender price of portions of maturities of the 2020 Series G bonds starting on November 1, 2026 to November 1, 2032 and November 1, 2035. The defeased principal amount outstanding for the 2020 Series G Revenue Bonds was $1,495 as of June 30, 2024.

The 2020 Series H (Hetch Hetchy Water) bonds were issued for the purpose of refunding a portion of the outstanding 2017 Series C bonds maturing on or after November 1, 2030.

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, 2024 and 2023, the principal amount of 2020 Series EFGH bonds outstanding was $446,450 and $644,275, respectively.
(l) Water Revenue Bonds 2023 Series AB
In July 2023, the Enterprise issued tax -exempt revenue bonds, 2023 Series AB in the aggregate amount of $414,035. The purpose of the 2023 Series AB Bonds was to refund approximately $373,000 aggregate principal amount of commercial paper notes and to provide approximately $59,341 new money for various capital projects of t he Water Enterprise, and capital projects of Hetch Hetchy Water. The bonds carried “Aa2” and “AA -” ratings from Moody’s and S&P, respectively. The 2023 Series AB bonds include serial and term bonds with coupons of 5.0% to

5.3% and final maturities in 2052.

The $349,495 2023 Series A bonds were issued as tax -exempt bonds to refund approximately $305,625 of commercial paper notes for Water Enterprise capital projects and to provide approximately $59,299 new money for various capital projects for the Water Enterprise. The Series A bonds were issued as serial and term bonds with coupons of 5.0% to 5. 3% and a final

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

47 (Continued)
maturity of 2052. The Series A bonds have a true interest cost of 4.1%. As of June 30, 2024, the principal amount of 2023 Series A bonds outstanding was $349,495.

The $64,540 Series B bonds were issued as tax -exempt bonds to refund approximately $67,348 of commercial paper notes for Hetch Hetchy Water capital projects and approximately $42 in new money for Hetch Hetchy Water capital projects. The Series B bonds were issued as serial and term bonds with coupons of 5.0% to 5.3 % and have a final maturity of 2052. The Series B bonds have a true interest cost of 4.1%. As of June 30, 2024, the principal amount of 2023 Series B bonds outstanding was $64,540.
(m) Water Revenue Refunding Bonds 2023 Series CD
In August 2023, the Enterprise issued tax -exempt revenue bonds, 2023 Series CD refunding bonds in the aggregate amount of $514,855. The 2023 Series C (WSIP, Green) bonds were issued for the purpose of paying the purchase price of a portion of the 2015 Seri es A revenue bonds maturing on or after November 1, 2028, a portion of the 2016 Series A revenue bonds maturing on or after November 1, 2031, a portion of the 2017 Series D revenue bonds maturing on or after November 1, 2031, a portion of the 2019 Series A (WSIP, Green) revenue bonds maturing on or after November 1, 2026, and a portion of the 2020 Series E (WSIP, Green) revenue bonds maturing on November 1, 2041 that were tendered for cash and advance refund portions of 2019 Series A maturing on or after November 1, 2024.

The 2023 Series D (Local Water) bonds were issued for the purpose of paying the purchase price of a portion of the 2020 Series G bonds maturing on or after November 1, 2026 that were tendered for cash and advance refund portions of 2020 Se ries G bonds maturing on or after November 1, 2024.

The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2023 Series CD bonds include serial bonds with interest rates of 4.0% to 5.0% and have a final maturity in 2043. The Seri es CD bonds have a true interest cost of 3.2%. The refunding resulted in the recognition of a deferred accounting gain of $33,378, gross debt service savings of approximately $85,376, and an economic gain of $58,518 or 9.5% of refunded principal. As of June 30, 2024, the principal amount of 2023 Series CD bonds outstanding was $514,855. (n) 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 3 0, 2024. The federal interest subsidy amounts represent 35.0%, excluding sequestration, of the interest for the revenue bond 2010 Series B, E, and G.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

48 (Continued)

As defined in the Indentures, the principal and interest of the Enterprise’s revenue and refunding bonds are payable from its revenues, as well as monies deposited in certain funds and accounts pledged thereto (see Note 5).
(o) 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 Enterprise’s SF Westside Recycled Water Project. The CWSRF loan is in the amount of $191,094, 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 Enterprise’s outstanding revenue bonds. The principal outstanding as of June 30, 2024 and 2023 was $ 154,178 and $131,525 , respectively . In addition, there was $15,000 of principal forgiveness in fiscal year 2023.

Principal
Interest
before
s
ubsidy
Federal
interest
s
ubsidy*
Interest net
of subsidy
2025 $ 138, 140 214,379 (20,370) 194,009
2026 149,540 207, 947 (19,876) 188,071
2027 154,735 200, 835 (19,345) 181,490
2028 159,210 193, 311 (18,772) 174,539
2029 174,380 185, 123 (18,164) 166,959
2030-2034 989,480 790, 528 (79,528) 711,000
2035-2039 1,169,760 530, 841 (53,376) 477,465
2040-2044 858,385 286, 469 (25,530) 260,939
2045-2049 529,695 147, 127 (12,339) 134,788
2050-2053 310,740 21, 931 (1,184) 20,747
4,634,065 2,778,491 ( 268,484) 2,510,007
Less: Current portion (138,140)
Less: Unamortized bond discount (107)
Add: Unamortized bond premiums 330,679
Long-term portion as of June 30, 2024 $ 4, 826,497
* The S FPUC received an IRS notice dated April 17, 2024 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 $16,228, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.

Fiscal years ending June 30:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

49 (Continued)

(p) 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 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 construct ion. 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 with the Water Enterprise. The DWSRF loan is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. The principal outstanding as of June 30, 2024 and 2023 was $105,792 and $32,102, respectively.

California Clean Water State Revolving Fund Loan Principal Interest Total 2025 $ — — —
2026 4,432 1,542 5,974
2027 4,477 1,497 5,974
2028 4,521 1,453 5,974
2029 4,567 1,407 5,974
2030-2034 23,526 6,342 29,868
2035-2039 24,728 5,143 29,871
2040-2044 25,989 3,882 29,871
2045-2049 27,315 2,556 29,871
2050-2054 28,708 1,163 29,871
2055 5,915 60 5,975
154,178 25,045 179,223
Less: Current portion —
Long-term portion as of June 30, 2024 $ 154,178
Fiscal years ending June 30:

Drinking Water State Revolving Fund Loan Principal Interest Total 2025 $ — — —
2026 — — —
2027 — — —
2028 — — —
2029 3,041 1,058 4,099
2030-2034 15,669 4,827 20,496
2035-2039 16,468 4,028 20,496
2040-2044 17,308 3,188 20,496
2045-2049 18,191 2,305 20,496
2050-2054 19,119 1,377 20,496
2055-2058 15,996 402 16,398
105,792 17,185 122,977
Less: Current portion —
Long-term portion as of June 30, 2024 $ 105,792
Fiscal years ending June 30:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

50 (Continued)
(q) 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, and 2021 against Prop A. The total authori zation against Prop A was $1,499,230 as of June 30, 2024.
(r) 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, 2024, the Board of Supervisors authorized the issuance of $6,157,510 in revenue bonds with $4,317,653 issued against this authorization; in Septemb er 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 Enterprise’s SF Westside Recycled Water Project i n the amount of $191,094 (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, $190,000 and $371,459 in commercial paper were outstanding pursuant to this authorization as of June 30, 2024 and 2023, respectively. (s) Certificates of Participation Issued for the 525 Golden Ga te Avenue Headquarters Building In October 2009, the City issued $167,670 in certificates of participation to fund the headquarters building of the SFPUC at 525 Golden Gate Avenue. The 2009 Series C were issued for $38,120 and 2009 Series D for $129,550 as “Build America Bonds” 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 understandin g (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 proc eeds 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 durin g 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 MOU.

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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

51 (Continued)
ownership percentages less contributed equity. The percentage share of base rental payments for the Enterprises is as follows: Water (71.4%), Wastewater (18.9%), and Power (9.7%).

The future annual debt services relating to the certificates of participation 2009 Series D outstanding as of June 30, 2024 are as follows:

(t) Events of Default and Remedies
Significant Events of default as specified in the Water Enterprise Indenture (applicable to Water Revenue Bonds, and SRF 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 event s, 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, 2024 and 2023, there were no such events describe herein. (8) Revenue Pledge
The Enterprise has pledged future revenues to repay various revenue bonds and State Revolving Fund loans. Proceeds from the revenue bonds and State Revolving Fund loans provided financing for various capital construction projects, and to refund previously issued bonds. The bonds and State Revolving Fund loans are payable solely from revenues of the Enterprise through the fiscal year ending 2058.

The outstanding amount of revenue bonds and State Revolving Funds loan, total principal and interest remaining, principal and interest paid during fiscal years 2024 and 2023, applicable net revenues and funds available for debt service are as follows:

Principal
Interest before
subsidy
Federal interest
subsidy *
Interest net
of subsidy
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 4,013 4,710 (1,555) 3,155
2030-2034 22,762 19,369 (6,393) 12,976
2035-2039 28,071 11,157 (3,682) 7,475
2040-2042 19,892 1,972 (651) 1,321
Total 89,232 58,453 (19,291) 39,162
Less: Current portion (3,402)
Long-term portion as of June 30, 2024 $ 85,830
Certificates of Participation 2009 Series D (Taxable)
* The SFPUC received an IRS notice dated April 17, 2024 that the federal interest subsidy on the 2009 Series D bonds is reduced by 5.7%, or a total reduction of $1,166, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.

Fiscal years ending June 30:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

52 (Continued)

(9) Leases
Water Enterprise as Lessee
The Enterprise has entered into long -term leases for land, office space, and communication site. The terms and conditions for these leases vary, which range between 1 – 75 years.

A summary of intangible right -to-use leases during the year s ended June 30, 2024 and 2023 is as follows:

2024 2023
Bonds issued with revenue pledge $ 4,634,065 4,459,365 Principal and interest remaining due at the end of the year 7,714,756 7,193,317 Clean Water State Revolving Fund (CWSRF) loans with revenue pledge 259,970 163,627 Principal and interest paid net of capitalized interest and BAB subsidy during the year 306,369 307,062 Net revenues for the year ended June 30 337,985 372,689 Funds available for debt service* 555,585 566,764
* Includes other available funds budgetary balances that are non GAAP Balance Balance
J
uly 1, 2023 Increases Decreases Remeasurements June 30, 2024 Right-to-use assets:

Land $ 605 - (605) - - Building/Facility 7,603 - (592) - 7,011 Total lease assets 8,208 - (1,197) - 7,011 Less accumulated amortization:

Right-to-use assets:

Land (580) (55) 605 - (30) Building/Facility (3,685) (1,154) 592 - (4,247) Total accumulated
amortization (4,265) ( 1,209) 1,197 - (4,277) Total lease assets, net $ 3,943 (1,209) - - 2,734 Balance Balance
July 1, 2022 Increases Decreases Remeasurements June 30, 2023 Right-to-use assets:

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:

Right-to-use assets:

Land (383) (197) - - (580) Building/Facility (2,451) (1,234) - - (3,685) Total accumulated
amortization (2,834) (1,431) - - (4,265) Total lease assets, net $ 2,812 (1,282) - 2,413 3,943

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

53 (Continued)
A summary of changes in the related lease liabilities during the years ended June 30, 2024 and 2023 is as follows:

Future annual lease payments for fiscal years 2024 and 2023 are 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.

Balance Balance
July 1, 2023 Additions Remeasurements Deductions June 30, 2024 Water lease liabilities $ 4,010 - - (1,189) 2,821 1,028 Total $ 4,010 - - (1,189) 2,821 1,028 Amounts Due
Within One Year
Balance Balance
July 1, 2022 Additions R emeasurements Deductions June 30, 2023 Water lease liabilities $ 2, 863 149 2,413 (1,415) 4,010 1,189 Total $ 2,863 149 2,413 (1,415) 4,010 1,189 Amounts Due
Within One Year
Year ending June 30:

Principal
amount
Interest
amount Total
2025 $ 1, 028 55 1,083
2026 546 32 578
2027 135 26 161
2028 122 23 145
2029 85 21 106
2030-2034 418 77 495 2035-2039 436 29 465 2040-2044 51 1 52 2,821 264 3,085
Less: current portion (1,028)
Long-term portion as of June 30, 2024 $ 1,793
Year ending June 30:

Principal
amount
Interest
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 4,010 345 4,355
Less: current portion (1,189)
Long-term portion as of June 30, 2023 $ 2,821

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

54 (Continued)
Certain facility rental leases require the Enterprise to make variable lease payments that based on usage, related to the property taxes levied on the lessor, and insurance paym ents made by the lessor; these amounts are generally determined annually. The amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $79 and $263 during the year ended June 30, 2024 and 2023, respectively.

Water Enterprise as Lessor
The Enterprise 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.

Variable payments include percentage of sales, or payments depended on an index made by the lessee; these amounts are generally determined periodically. The Enterprise did not incur revenue related to residual value guarantees or lease termination penalties. The to tal amounts for lease revenue, interest revenue, and other lease -related revenues recognized during the year s ended June 30, 2024 and 2023 were $1,742 and $1,161, respectively.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

55 (Continued)
Principal and interest requirements to maturity for the lease receivable on June 30, 2024 and 2023 are as follows:

Year ended
June 30 Principal Interest Total
2025 3,246$ 807 4,053 2026 2,676 748 3,424 2027 2,409 695 3,104 2028 2,423 645 3,068 2029 2,215 595 2,810 2030-2034 10,897 2,348 13,245 2035-2039 8,246 1,280 9,526 2040-2044 363 921 1,284 2045-2049 - 1,056 1,056 2050-2054 - 1,224 1,224 2055-2059 240 1,179 1,419 2060-2064 898 748 1,646 2065-2069 1,291 617 1,908 2070-2074 1,778 433 2,211 2075+ 2,381 181 2,562 39,063$ 13,477 52,540 Year ended
June 30 P rincipal Interest 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 43,630$ 14,372 58,002

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

56 (Continued)
(10) Subscription-Based Information Technology Arrangements Water Enterprise as Subscriber
The Enterprise 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, 2024 and 2023 are as follows:

A summary of changes in the related subscription liabilities during the years ended June 30, 2024 and 2023 is as follows:

Future annual subscription payments as of June 30, 2024 and 2023 are as follows:

Balance Balance
July 1, 2023 Increases Decreases Remeasurements June 30, 2024 Subscription assets $ 2,450 - (1,590) - 860 Less accumulated amortization: (1,755) (384) 1,590 - (549) Total subscription assets, net $ 695 (384) - - 311 Balance Balance
July 1, 2022 Increases Decreases Remeasurements June 30, 2023 Subscription assets $ 2,450 - - - 2,450 Less accumulated amortization: (873) (882) - - (1,755) Total subscription assets, net $ 1,577 (882) - - 695 Balance Balance
July 1, 2023 Additions Remeasurements Deductions June 30, 2024 SBITA liabilities $ 708 - - (400) 308 153 Total $ 708 - - (400) 308 153 Amounts Due
Within One Year
Balance Balance
July 1, 2022 Additions Remeasurements Deductions June 30, 2023 SBITA liabilities $ 1,556 - - (848) 708 400 Total $ 1,556 - - (848) 708 400 Amounts Due
Within One Year
Year ending June 30:

Principal
amount
Interest
amount Total
2025 $ 153 4 157
2026 155 2 157
308 6 314
Less: current portion (153)
Long-term portion as of June 30, 2024 $ 155

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

57 (Continued)

(11) Wholesale Balancing Account
Water Supply Agreement
From 1984-2009, the 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.

Pursuant to the terms of the WSA, the Enterprise is required to establish water rates applicabl e 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 2024 and 2023, the WRR, net of adjustments, charged to such wholesale customers was $ 334,261 and $300,502, respectively. Such amounts are subject to final review by the Wholesale Customers, along with a trailing wholesale balancing account compliance audit of the WRR calculation.

Pursuant to Article VII, Section 7.02 of the WSA, the Enterprise is required to re- compute the WRR after the close of each fiscal year based on the actua l 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 Year ending June 30:

Principal
amount
Interest
amount Total
2024 $ 400 8 408
2025 153 4 157
2026 155 2 157
708 14 722
Less: current portion (400)
Long-term portion as of June 30, 2023 $ 308

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

58 (Continued)
Treasury and shall be taken into consideration in the determination of subsequent wholesale water rates. The Wholesale Customers owe d the Enterprise $26,121 as of June 30, 2024. The Wholesale Customers owed the Enterprise $10,052 as of June 30, 2023 . Refer to the compliance audit report for the final balancing account available at https://sfpuc.gov/about-us/reports/audited-financial- statements-annual-financial-reports.
(12) Employee Benefits
(a) Pension Plan
The Enterprise participates in a cost-sharing multiple -employer defined benefit pension Plan (SFERS Plan). For purposes of measuring the net pension liability, deferred outflows/inflows of resources related to pensions, pension expense, information about the fiduciary net position of the SFERS Plan, and additions to/deductions from the SFERS Plan’s fiduciary net position have been determined on the same basis as they are reported by the SFERS Plan. Contributions are recognized in the period in which they are due pursuant to legal requirements. Benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Replacement Benefits Plan – 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 SF ERS 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 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:

The City is an employer of the plan with a proportionate share of 94.85 % as of June 30, 202 3 (measurement date), and 94. 87% as of June 30, 202 2 (measurement date), 0. 02% decrease from prior year . The Enterprise’s allocation percentage was determined based on the Enterprise’s employer contributions divided by the City’s total employer contributions for fiscal years 2023 and 2022. The Enterprise’s net pension liability, deferred outflows/inflows of resources related to pensions, amortization of deferred outflows/inflows, and pension expense is based on the Enterprise’s allocated percentage. The Enterprise’s allocation of the City’s proportionate share was 4.34 % as of June 30, 20 23, and 4.2 7% as of J une 30, 202 2 (measurement dates).

Valuation Date (VD) July 1, 2022 updated to June 30, 2023 Measurement Date (MD) June 30, 2023
Measurement Period (MP) July 1, 2022 to June 30, 2023
Valuation Date (VD) July 1, 2021 updated to June 30, 2022 Measurement Date (MD) June 30, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022
Fiscal Year 2024
Fiscal Year 2023

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

59 (Continued)
Replacement Benefits Plan – The Enterprise’s allocation percentage was determined based on the Enterprise’s total pension liability divided by the City’s total headcount for fiscal year 202 3.

The 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 Enterprise’s allocated percentage. The Enterprise’s allocation of the City’s proportionate share was 1.95% as of June 30, 2023, and 2.31% as of June 30, 2022 (measurement dates).

SFERS Plan Description – The Plan provides basic service retirement, disability, and death benefits based on specified percentages of defined final average monthly salary and provide s annual cost-of-living adjustments after retirement. The Plan also provides pension continuation benefits to qualified survivors. The San Francisco City and County Charter and the Administrative Code are the authorities which establish and amend the benefit provisions and employer obligations of the Plan. The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the Plan.

That report may be obtained on the Retirement Sys tem’s website at https://mysfers.org or by writing to the San Francisco City and County Employees’ Retirement System, 1145 Market Street, 5th Floor, San Francisco, CA 94103 or by calling (415) 487-7000.

SFERS Benefits – The Retirement System provides servi ce retirement, disability and death benefits based on specified percentages of defined final average monthly salary and annual cost of living adjustments (COLA) after retirement. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. The Retirement System pays benefits according to the category of employment and the type of benefit coverage provided by the City and County. 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 pers onnel 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 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 CPI 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. Proposition A passed on November 8, 2022 making members who retired before November 6, 1996 (Pre96 Retirees) eligible for a Supplemental COLA, even if SFERS is not fully

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

60 (Continued)
funded based on the market value of assets. Also, Pre96 Retirees’ base retirement allowances were adjusted to account for Supplemental COLAs not received in 2013, 2014, 2017, 2018, and 2019 due to the full funding requirement. Effective with Proposition A, Pre96 Retirees receive the same Supplemental COLAs as the after November 6, 1996 and before January 7, 2012 members. 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 1 1.5% as a percentage of gross covered salary in fiscal year 2024, and

7.5% to 12.0% in fiscal year 2023 . Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The City is required to contribute at an actuarially determined rate. Based on the July 1, 2022 actuarial report, the required employer contribution rate s for fiscal year 2024 range from

15.24% to 18.24%. Based on th e July 1, 2021 actuarial report, the required employer contribution rates for fiscal year 2023 range from 17.85% to 21.35%.

Employer contributions and employee contributions made by the employer to the Plan are recognized when due and the employer has made a formal commitment to provide the contributions. The City’s proportionate share of employer contributions recognized by the Retirement System in fiscal year ended June 30, 20 23 and 2022 (measurement period) were $638,003 and $729,578, respectively. The Enterprise’s allocation of employer contributions for fiscal years 2023 and 2022 (measurement period) was $27,925 and $31,151, respectively.

Replacement Benefits Plan – The RBP is and will remain unfunded and the rights of any participant and beneficiary ar e 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 $4,614 replacement benefits in the year ended June 30, 2024.

Pension Liabilities/(Asset), Pension Expenses, and Deferred Outflows and Inflows of Resources Related to Pensions
Fiscal Year 2024
As of June 30, 202 4, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan and total pension liability of RBP of $ 3,588,819. The City’s NPL for each of its cost -sharing plans is measured as a proportionate share of the plans’ net pension liability. The net pension liability of the SFERS Plan is measured as of June 30, 2023 (measurement date), and the total pension liability for the SFERS Plan and RBP used to calculate the net pension liability was determined by an actuarial valuation as of July 1 , 2022 rolled forward to June 30, 202 3 using standard update procedures. The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the City’s long -term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined . The Enterprise’s allocation of the City’s proportionate share

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

61 (Continued)
of the net pension liability for the SFERS Plan as of June 30, 202 4 (reporting year) was $150,060. The Enterprise’s allocation of total pension liability for the RBP as of June 30, 202 4 was $2,583.

For the year ended June 30, 202 4, the City’s recognized pension expense was $ 667,276 including amortization of deferred outflow/inflow related pension items. The Enterprise’s allocation of pension expense including amortization of deferred outflow/inflow related pension items was $ 26,330. Pension expense increased from the prior year, largely due to the amortization of deferrals.

As of June 30, 202 4, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

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

On June 30, 2024, the Enterprise reported $27,653 as deferred outflows of resources related to contributions subsequent to the measurement date, which will be recognized as an adjustment to net pension liability in the reporting year ending June 30, 2025.

Fiscal Year 2023
As of June 30, 2023, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan and net pension liability of RBP of $2,708,927. The City’s NPL/net pension assets (NPA) for each of its cost -sharing plans is measured as a proportionate share of the plans’ net pension liability. The net pension liability of the SFERS Plan is measured as of June 30, 2022 (measurement date), and the total pension liability for the SFERS Plan and RBP used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2021 rolled forward to June 30, 2022 using standard update procedures.

The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the C ity’s long -term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The Enterprise’s allocation of the City’s proportionate share of the net pension liability for the SFERS Plan as of June 30, Deferred Outflows
of Resources
Deferred Inflows
of Resources
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contribution subsequent to measurement date $ 27,653 — — — Differences between expected and actual experience 16,124 — 222 657 Changes in assumptions 19,421 8,861 202 532
Net difference between projected and actual earnings on pension plan investments
28,399 — — —
Change in employer’s proportion 1,033 2,262 472 993
Total $ 92,630 11,123 896 2,182
SFERS Plan Replacement Benefits Plan
Fiscal Year 2024 Schedule of Deferred Outflows and Inflows of Resources Fiscal Years SFERS Plan
Replacement
Benefits Plan
2025 $ ( 340) (366)
2026 (9,299) (550)
2027 55,297 (384)
2028 8,196 14
Total $ 53,854 (1,286)

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

62 (Continued)
2023 (reporting year) was $111,743. The Enterprise’s allocation of total pension liability for the RBP as of June 30, 2023 was $3,600.

For the year ended June 30, 2023, the City’s recognized pension expense was $1,771 including amortization of deferred outflow/inflow related pension items. The Enterprise’s allocation of pension expense including amortization of deferred outflow/inflow related pension items was $6,225. Pension expense increased from the prior year, largely due to the amortization of deferrals.

As of June 30, 2023, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Amounts reported as deferred outflows, exclusive of contributions mad e after the measurement date, and deferred inflows of resources will be amortized annually and recognized in pension/(benefits) as follows:

Actuarial Assumptions
Fiscal Year 2024
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, 202 3 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2022 actuarial valuation. Refer to the July 1, 202 2 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org .

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contribution subsequent to measurement date $ 27,925 — — — Differences between expected and actual experience 10,200 — 475 455 Changes in assumptions 29,035 8,713 579 778
Net difference between projected and actual earnings on pension plan investments
— 13,890 — —
Change in employer’s proportion 1,869 3,138 18 1,530 Total $ 69,029 25,741 1,072 2,763
SFERS Plan Replacement Benefits Plan
Fiscal Year 2023 Schedule of Deferred Outflows and Inflows of Resources Fiscal Years SFERS Plan
Replacement
Benefits Plan
2024 $ (5,899) (283)
2025 (8,602) (374)
2026 (17,636) (589)
2027 47,500 (445)
Total $ 15,363 (1,691)

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

63 (Continued)

Changes of Assumptions SFERS plan – There were no changes in the discount rate for the measurement period ended June 30, 2023. The municipal bond yield increased from 3.54% to

3.65%.

Changes of Assumptions Replacement Benefits Plan – Both discount rate for the measurement period ended June 30, 2023 and the municipal bond yield increased from 3.54% to 3.65%.

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, 2023 measurement date were 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, 2022.

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 year) is provided below, including any assumptions that differ from those used in the July 1, 2021 actuarial valuation. Refer to the July 1, 2021 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org .

Key Actuarial Assumptions
Valuation Date July 1, 2022 updated to June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 3.65% as of June 30, 2023

3.54% as of June 30, 2022
Bond Buyer 20-Bond GO Index, June 30, 2022 and June 30, 2023 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 7. 20% as of June 30, 2023

7.20% as of June 30, 2022
Administrative Expenses 0.60% of payroll as of June 30, 2023

0.60% of payroll as of June 30, 2022
Basic COLA
Old Miscellaneous
and All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2023 2.00% 1.90% 2.50% 3.60%
June 30, 2022 2.00% 1.90% 2.50% 3.60%
SFERS Plan

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

64 (Continued)

Mortality rates for health Miscellaneous members were based upon adjusted PubG -2010 Employee and Retiree tables for non- annuitants and retirees, respectively. Mortal ity 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 were 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.

Discount Rate
Fiscal Year 2024
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 Key Actuarial Assumptions
Valuation Date July 1, 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 3.54% as of June 30, 2022

2.16% as of June 30, 2021
Bond Buyer 20-Bond GO Index, June 30, 2022
Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 7. 20% as of June 30, 2022

7.40% as of June 30, 2021
Administrative Expenses 0.60% of payroll as of June 30, 2022

0.60% of payroll as of June 30, 2021
Basic COLA
Old Miscellaneous
and All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2022 2.00% 1.90% 2.50% 3.60%
June 30, 2021 2.00% 1.90% 2.50% 3.60%
Key Actuarial Assumptions
Valuation Date July 1, 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%
Projected 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 Basic COLA
Old Miscellaneous
and All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2022 2.00% 1.90% 2.50% 3.60%
June 30, 2021 2.00% 1.90% 2.50% 3.60%
SFERS Plan
Replacement Benefits Plan

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

65 (Continued)
rate was 7.20% as of June 30, 202 3 (measurement date) and 7. 20% June 30, 202 2 (measurement date).

The discount rate used to measure the Total Pension Liability as of June 30, 202 3 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, 2022 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.

However, the change due to Proposition A was amortized over 10 years. In the July 1, 2016 valuation, the increase in the unfunded actuarial liability attributable to the Supplemental COLAs granted effective July 1, 2013 was amortized over 17 years. For the July 1, 2021 valuation, all amortization periods for actuarial gains and losses and prior assumption changes were reduced to 5 years . The assumption change effective July 1, 2021 is amortized over 20 years. Future experience gains and losses and assumption or method changes on or after July 1, 2021 are amortized over 20 years. If the plan becomes 100% funded based on the actuarial value of assets, any new net surpluses are amortized over a rolling 20 -year period. 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 were hired before Proposition C passed, 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 were hired after Proposit ion C passed, the market value of assets must also exceed the actuarial liability 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. Most members receive a 1.50% Supplemental COLA when a full Supplemental COLA is granted.

No Supplemental COLA was payable as of July 1, 2023 due to the unfavorable investment return for fiscal year 2023. 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
2025+ 0. 75 % 0.50 %
Assumed Supplemental COLA for Members with a 2.00% Basic COLA 96 - Prop C
Before 11/6/96 or
After Prop C

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

66 (Continued)
Based on these assumptions, the Retire ment System’s fiduciary net position was projected to be available to make projected future benefit payments for current members through 2104.

Projected benefit payments are discounted at the long -term expected return on assets of 7.20% to the extent the f iduciary net position is available to make the payments and at the municipal bond rate of 3.65% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2023 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.

Replacement Benefits Plan – The beginning and end of year measurements are based on different assumptions that result in different discount rates. The discount rate was 3.65% as of June 30, 2023. 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 30, 2022 and June 29, 2023. These are the rates used to determine the total pension liability as of June 30, 2023.

The inflation assumption of 2.50% compounded annually was used for projecting the annual IRC Section 415(b) limitations. The actual IRC Section 415(b) limitations published by the IRS of $265 was used for the 2023 measurement date.

The SFERS assumptions about Basic and Supplemental COLA previously discussed also apply to the Replacement Benefits Plan, including the impact of the State Appeals Court determination that the full funding requirement for payment of Supplemental COLA included in Proposition C was unconstitutional and the impact is accounted for as a change in benefits.

On June 30, 202 4, City’s membership in the RBP had a total of 227 active members and 149 retirees and beneficiaries currently receiving benefits. The Enterprise has 6 active members and 4 retirees and beneficiary currently receiving benefits.

Asset Class Target Allocations Long-Term Expected Real Rate of Return Global Equity 37.0 % 4.6 %
Private Equity 23.0 7.8
Private Credit 10.0 5.8
Real Assets 10.0 5.3
Absolute Return 10.0 4.4
Treasuries 8.0 1.7
Liquid Credit 5.0 3.5
Leverage -3.0 1.4
Total 100.0

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

67 (Continued)
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% June 30, 2021 (measurement date).

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 contri bution policy in effect for July 1, 2021 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 o ver 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 Retir ees), 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 member ship 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 Jun e 30, 2022 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 Suppl emental COLA for members with a

2.00% Basic COLA for sample years.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

68 (Continued)

The projection of benefit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.

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

Projected benefit payments are discounted at the long- term expected return on assets of 7.20% 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.

Replacement Benefits Plan – 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 30, 2022. This is the rate used to determi ne 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. The actual IRC Section 415(b) limitations published by the IRS of $245 was used for the 2022 measurement date.

Fiscal Years
2024 0.75 % 0.70 %
2025 0.75 0.60
2026 0.75 0.60
2027+ 0.75 0.50
Before 11/6/96 or
After Prop C96 - Prop C
Assumed Supplemental COLA for Members with a 2.00% Basic COLA Asset Class Target Allocation Long-Term Expected Real Rate of Return Global Equity 37.0 % 4.8 %
Private Equity 23.0 7.9
Private Credit 10.0 5.8
Real Assets 10.0 4.7
Hedge Funds/Absolute Return 10.0 3.4
Treasuries 8.0 0.6
Liquid Credit 5.0 3.5
Leverage -3.0 0.6
Total 100.0

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

69 (Continued)
The SFERS assumptions about Basic and Supplemental COLA previously discussed also apply to the Replacement Benefits Plan, including the impact of the State Appeals Court determination that the full funding requirement for payment of Supplemental COLA included in Proposition C was unconstitutional and the impact is accounted for as a change in benefits.

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 Enterprise has 7 active members and 6 retirees and beneficiary currently receiving benefits.

Sensitivity of Proportionate Share of the Net Pension Liability (NPL) to Changes in the Discount Rate – The following presents the Enterprise’ s allocation of the employer’s proportionate share of the net pension liability/(asset) for the SFERS Plan, calculated using the discount rate, as well as what the Enterprise’s allocation of the employer’s proportionate share of the net pension liability/(asset) would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.

Fiscal Year 2024

Fiscal Year 2023

The allocation of the employer’s proportionate share of the total pension liability for the Replacement Benefits Plan, calculated using the discount rate, as well as what the Enterprise’s allocation of the employer’s proportionate share of the total pension liability would be if it were calculated using a discount rate that is 1% lower or 1% higher than the current rate.

Fiscal Year 2024

Fiscal Year 2023

(b) Other Postemployment Benefits
The Enterprise participates in a single -employer defined benefit other postemployment benefits plan (the Plan). The Plan is maintained by the City and is administered through the City’s Health Service System. It provides postemployment medical, dental and vision insurance benefits to eligible employees, retired employees, surviving spouses, and domestic partners. Health benefit provisions are established and may be amended through negotiations between the City and the respective bargaining units. The City does not issue a separate report on its other postemployment benefit plan.

Employer
1% Decrease Share
of NPL @ 6.20%
Share of NPL
@ 7.20%
1% Increase Share
of (NPA) @ 8.20%
Water 351,972$ 150,060 (16,414) Employer
1% Decrease Share
of NPL @ 6.20%
Share of NPL
@ 7.20%
1% Increase Share
of (NPA) @ 8.20%
Water 305,993$ 111,743 (48,394) Employer 1% Decrease @ 2.65%
Measurment
Date @ 3.65% 1% Increase @ 4.65%
Water 3,060$ 2,583 2,207 Employer 1% Decrease @ 2.54%
Measurment
Date @ 3.54% 1% Increase @ 4.54%
Water 4,270$ 3,600 3,072

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

70 (Continued)
GASB Statement No. 75 requires that reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.

The Enterprise’s proportionate share percentage of the Plan was determined based on its percentage of citywide “pay -as-you-go” contributions for the year s ended June 30, 202 3 and June 30, 202 2. The Enterprise’s net Other Postemployment Benefits ( OPEB) liability, deferred outflows/inflows of resources related to OPEB, amortization of deferred outflows/inflows and OPEB expense to each department is based on the Enterprise’s allocated percentage . The Enterprise’s proportionate share of the City’s OPEB elements as of June 30, 202 3 and 2022 measurement dates was 4.03% and 3.97%, respectively.

Benefits
Permanent full-time and elected employees are eligible to retire and receive post employment health insurance benefits when they are eligible for retirement benefits from the City and County of San Francisco’s Retirement System. The eligibility requirements are as follows:

Normal Retirement Miscellaneous Age 50 with 20 years of credited service 1 Age 60 with 10 years of credited service
Safety Age 50 with 5 years of credited service
Disabled Retirement2 Any age with 10 years of credited service Terminated Vested 5 years of credited service at separation

1 Age 53 with 20 years of credited service, age 60 with 10 years of credited service, or age 65 for Miscellaneous members hired on or after January 7, 2012 under Charter Section 8.603. 2 No service requirement for Safety members retiring under the industrial disability benefit or for surviving spouses / domestic partners of those killed in the line of duty.

Retiree healthcare benefits are administered by the San Francisco Health Service System and include the following:

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 UnitedHealthcare Dental Vision: Vision benefits are provided under the medical insurance plans and are administered by Vision Service Plan.

Valuation Date (VD) June 30, 2022 updated to June 30, 2023 M
easurement Date (MD) June 30, 2023
Measurement Period (MP) July 1, 2022 to June 30, 2023
Valuation Date (VD) June 30, 2022
Measurement Date (MD) June 30, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022
San Francisco Health Service System Retiree Plan - Single-Employer Fiscal year 2024
Fiscal year 2023

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

71 (Continued)
Projections of the sharing of benefit related costs are based on an established pattern of practice.

Contributions
Benefits provided under the Plan are currently paid through “pay as you go” funding.

Additionally, under the City Charter, active officers and employees of the City who commenced employment on or after January 10, 2009, shall contribute to the Retiree Health Care Trust Fund (Trust Fund) a percentage of compensation not to exceed 2% of pre-tax compensation. The City shall contribute 1% of compensation for officers and employees who commenced employment on or after January 10, 2009 until the City’s GASB Actuary has determined that the City’s portion of the Tru st 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, sh all contribute an additional

0.25% of pre -tax compensation up to a maximum of 1%. Starting July 1, 2016, the City shall contribute 0.25% of compensation into the Trust Fund for each officer and employee who commenced employment on or before January 9, 2009. Beginning on July 1st of each subsequent year, the City shall contribute an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment on or before January 9, 2009. When the City’s actuary has determine d 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 esta blished or modified by amendment to the City’s Charter.

For the fiscal years ended June 30, 2024 and 2023, funding was based on “pay-as-you-go” plus a contribution of $ 48,779 and $45,241 to the Retiree Healthcare Trust Fund , respectively. The “pay-as-you-go” portion paid by the City was $ 229,922 for a total contribution of $ 278,701 for the fiscal year ended June 30, 2024, and $215,408 for a total contribution of $260,649 for the fiscal year ended June 30, 2023. The Enterprise’s proportionate share of the City’s contributions for fiscal year 2024 was $11,241, and for fiscal year 2023 was $10,339, and will be recognized as a reduction of the net OPEB liability in the subsequent fiscal period.

OPEB liabilities, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB Fiscal Year 2024
As of June 30, 20 24, the City reported net OPEB liability related to the Plan of $3 ,924,832. The Enterprise’s proportionate share of the City’s net OPEB liability as of June 30, 20 24 was $158,301.

For the year ended June 30, 20 24, the City’s recognized OPEB expense was $261,158 .

Amortization of the City’s deferred outflows and inflows is included as a component of OPEB expense. The Enterprise’s proportionate share of the City’s OPEB expense was $13,394.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

72 (Continued)
As of June 30, 20 24, the Enterprise reported its proportionate share of the City’s deferred outflows/inflows of resources related to OPEB from the following sources:

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

Fiscal Year 2023
As of June 30, 2023, the City reported net OPEB liability related to the Plan of $3,746,270. The Enterprise’s proportionate share of the City’s net OPEB liability as of June 30, 2023 was $148,601.

For the year ended June 30, 2023, the City’s recognized OPEB expense was $256,974.

Amortization of the City’s deferred outflows and inflows is included as a component of OPEB expense. The Enterprise’s proportionate share of the City’s OPEB expense was $20,381.

As of June 30, 2023, the Enterprise reported its proportionate share of the City’s deferred outflows/inflows of resources related to OPEB from the following sources:

Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date 11,241$ -$ Differences between expected and actual experience 6,801 18, 351 Changes in assumptions 4,602 -
Net difference between projected and actual earnings
on plan investments
1,212 -
Change in proportion 6,118 3, 983
Total 29,974$ 22,334$
Year ending June 30:
2025 (531)$
2026 (459)
2027 (877)
2028 (2,223)
2029 489
Total (3,601)$
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date 10,339$ -$ Differences between expected and actual experience 3,299 24,740 Changes in assumptions 6,344 -
Net difference between projected and actual earnings
on plan investments
2,392 -
Change in proportion 6,242 2,335
Total 28,616$ 27,075$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

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

Year ending June 30:
2024 (2,253)$
2025 (2,213)
2026 (720)
2027 (1,132)
2028 (2,480)
Total (8,798)$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

74 (Continued)
Actuarial Assumptions
Fiscal Year 2024
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2023 (measurement date) is provided below:

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

Valuation Date June 30, 2022 updated to June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method T he Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 7.24% trending down to ultimate rate of 3.94% in 2075 Medicare trend starts at 7.24% trending down to ultimate rate of 3.94% in 2075 10-County average trend starts at 5.00% trending down to ultimate rate of 3.94% in 2075 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety P ubS-2010 Employee 1.011 0.979
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety P ubS-2010 Employee 0.947 1.044
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety P ubS-2010 Employee 0.916 0.995
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety P ubG-2010 Employee 1.031 0.977
Adjustment Factor
Beneficiaries
Key Actuarial Assumptions
Base mortality tables are developed by m ultiplying a published table by an adjustment factor developed in SFERS experience study for the period ended June 30, 2019.

Non-Annuitants
Healthy Retirees
Disabled Retirees
Adjustment Factor
Adjustment Factor
Adjustment Factor

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

75 (Continued)
Fiscal Year 2023
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2022 (measurement date) is provided below:

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

Valuation Date June 30, 2022
Measurement Date June 30, 2022
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates P re-Medicare trend starts at 7.74% trending down to ultimate rate of 3.93% in 2076 Medicare trend starts at 7.74% trending down to ultimate rate of 3.94% in 2076 10-County average trend starts at 5.00% trending down to ultimate rate of 3.94% in 2076 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0. 979
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1. 044
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0. 995
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0. 977
Adjustment Factor
Beneficiaries
Key Actuarial Assumptions
Base mortality tables are developed by multiplying a p ublished table by an adjustment factor developed in SFERS experience study for the period ending June 30, 2019.

Non-Annuitants
Healthy Retirees
Disabled Retirees
Adjustment Factor
Adjustment Factor
Adjustment Factor

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

76 (Continued)
Sensitivity of Liabilities to Changes in the Healthcare Cost Trend Rate and Discount Rate The following presents the Enterprise’s proportionate share of the City’s net OPEB liability calculated using the healthcare cost trend rate, as well as what the Enterprise’s allocation of the City’s net OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1% lower or 1% higher than the current rate:

Discount Rate
Fiscal Year 2024
The discount rate used to measure the Total OPEB Liability as of June 30, 202 3 was 7.0%.

Based on the assumption that plan member contributions will continue to be made at the rates specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on plan investments was applied to all period s of projected benefit payments to determine the total OPEB liability.

The long-term expected rate of return on OPEB plan investments was 7.0% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation. Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

Fiscal Year 2024
Employer -1.00% Healthcare Cost
Trend Rate 1.00%
Water 134,621$ 158,301$ 187,684$ Fiscal Year 2023
Employer -1.00% Healthcare Cost
Trend Rate 1.00%
Water 127,125$ 148,601$ 175,238$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

77 (Continued)

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

Fiscal Year 2023
The discount rate used to measure the Total OPEB Liability as of June 30, 2022 was 7.0%.

Based on the assumption that plan member contributions will continue to be made at the rate s specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long-term expected rate of return on plan investments was ap plied to all periods of projected benefit payments to determine the total OPEB liability.

The long-term expected rate of return on OPEB plan investments was 7.0% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10-year and 20-year capital market assumptions for the Trust Fund’s asset allocation. Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

Target Allocation
Long-term
Expected Real
Rate of Return
Equities
U.S. Large Cap 25.0% 6.1%
U.S. Small Cap 2.0% 6.7%
Developed Market Equity (non-U.S.) 13.0% 7.2%
Emerging Market Equity 10.0% 7.4%
Credit
Bank Loans 3.0% 4.4%
High Yield Bonds 3.0% 4.7%
Rate Securities
Investment Grade Bonds 7.0% 2.8%
Short-term Treasury Inflation-Protected Securities (TIPS) 5.0% 1.0% Private Markets
Private Equity 10.0% 8.4%
Private Debt 5.0% 6.4%
Core Private Real Estate 5.0% 3.9%
Infrastructure (Core Private) 2.0% 5.2%
Risk Mitigating Strategies
Global Macro 10.0% 3.1%
Total 100.0%
Asset Class
1% Decrease

6.00%
Discount Rate

7.00%
1 % Increase

8.00%
185,275$ 158, 301$ 136,180$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

78 (Continued)

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

The City issues a publicly available financial report that includes the complete note disclosures and required supplementary information related to the City’s postemployment health care obligations. The report may be obtained at https://sfrhctf.org/financial-reports or by writing to the City and County of San Francisco, Office of the Controller, 1 Dr. Carlton B. Goodlett Place, Room 316, San Francisco, California 94102, or by calling (415) 554-7500. (13) Related Parties
Various common costs incurred by the Commission are allocated among the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF Enterprise, and the Wastewater Enterprise. The allocations are based on the Commission management’s best estimate and may change from year to year depending on the activities incurred by each Enterprise and the information available. The administrative costs of $59,952 or 48. 1% and $ 55,121 or 48.2% were allocated to the Enterprise for the years ended June 30, 2024 and 2023, respectively.

The City performs certain administrative services such as maintenance of accounting records and investment of cash for all fund groups within the City. The various funds are charged for these services based on the City’s indirect cost allocation plan.

Target Allocation
Long-term
Expected Real
Rate of Return
Equities
U.S. Large Cap 28.0% 6.8%
U.S. Small Cap 3.0% 7.4%
Developed Market Equity (non-U.S.) 15.0% 7.5%
Emerging Market Equity 13.0% 8.4%
Credit
Bank Loans 3.0% 4.0%
High Yield Bonds 3.0% 4.4%
Emerging Market Bonds 3.0% 4.2%
Rate Securities
Investment Grade Bonds 9.0% 2.4%
Long-term Government Bonds 4.0% 2.8%
Short-term Treasury Inflation-Protected Securities (TIPS) 4.0% 1.9% Private Markets
Private Equity 5.0% 10.0%
Core Private Real Estate 5.0% 6.1%
Risk Mitigating Strategies
Global Macro 5.0% 5.0%
Total 100.0%
Asset Class
1% Decrease

6.00%
Discount Rate

7.00%
1 % Increase

8.00%
173,000$ 148, 601$ 128,583$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

79 (Continued)
The Enterprise purchases water from Hetch Hetchy Water. The amounts, totaling $ 46,266 and $49,636 for the year s ended June 30, 2024 and 2023, respectively, have been included in the services provided by other departments in the accompanying financial statements.

The Enterprise purchases electricity from Hetch Hetchy Power at market rates. The amounts, totaling $10,256 and $11,398 for the years ended Ju ne 30, 2024 and 2023, respectively, have been included in services provided by other departments in the accompanying financial statements.

The Enterprise sold water to the Wastewater Enterprise at retail rates. This amount, totaling $ 1,736 and $1,552 for the years ended June 30, 2024 and 2023, respectively, has been included in charges for services in the accompanying financial statements.

Since fiscal year 2008, the Enterprise has charged City departments for water usage except for fire hydrants, whic h are used for general public safety. In fiscal years 2024 and 2023, the Enterprise delivered water for fire hydrant purposes totali ng $5 and $9, respectively, based on metered usage and applicable water rates, and the amount has been excluded from operati ng revenues in the accompanying financial statements.

A variety of City departments provide services such as engineering, purchasing, legal, data processing, telecommunications, and human resources to the Enterprise and charge amounts designed to recover those departments’ costs. These charges, totaling $20,925 and $18,690 for the years ended June 30, 2024 and 2023, respectively, have been included in services provided by other departments in the accompanying financial statements.

During the fiscal year ended June 30, 20 24, the Enterprise transferred $1,167 to the Arts Commission for the arts enrichment fund, $42 to Hetch Hetchy Water to fund various Mountain Tunnel Improvement projects, and $32 to the Office of the City Administrat or for the Enterprise’s contribution to the Surety Bond Program . During the fiscal year ended June 30, 2023, the Enterprise transferred $20,000 to Hetch Hetchy Water to fund various Mountain Tunnel Improvement projects, and $32 to the Office of the City Ad ministrator for the Enterprise’s contribution to the Surety Bond Program.

As of June 30, 2024, the Enterprise had interfund receivables of $102 from DPW relating to custom work projects . As of June 30, 2023 , the Enterprise had interfund receivables of $115 from DPW relating to custom work projects.

SFPUC’s 75-year lease agreement with the San Francisco Recreation and Park Department , for the use of parking spaces for its fleet of vehicles at the Civic Center Garage, commenced on February 1, 2011. The total payment under this agreement is $6,274 , which was fully made as of fiscal year 2015. The expenses and prepayments among the three SFPUC Enterprises are based on 525 Golden Gate occupancy. As of June 30, 2024, the Enterprise’s allocable s hares of expenses and prepayment were $4 6 and $3, 174, respectively; and as of June 30, 2023, the Enterprise’s allocable shares of expenses and prepayment were $45 and $3,220, respectively.

The Enterprise had a $0 and $2,440 payable to San Francisco Municipal Transportation Agency for a settlement payable relating to the Van Ness Corridor Transit Improvement project as of June 30, 2024 and 2023, respectively.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

80 (Continued)
(14) Risk Management
The Enterprise’s Risk Management program includes both self- insured (i.e., self- retention) and insured exposures at risk. Risk assessments and purchasing of insurance coverage are collaboratively coordinated by SFPUC Risk Management and the City’s Office of Risk Management. With certain exceptions, the City and the Enterp rise’s general approach is to first evaluate the exposure at risk for self-insurance. Based on this analysis, internal mitigation strategies and financing through a self - retention mechanism is generally more economical as the SFPUC in coordination with the City Attorney’s Office, administers, adjusts, settles, defends, and pays claims from budgeted resources (i.e., pay- as-you-go fund). When economically more viable or when required by debt financing covenants, the Enterprise obtains commercial insurance. At least annually, the City actuarially determines general liability and workers’ compensation risk exposures. The Enterprise does not maintain commercial earthquake coverage, with certain minor exceptions, such as a sub -limit for fire- sprinkler leakage due to earthquake under the SFPUC Property Insurance program . In the past three years, there were no settlements that exceeded insurance coverage.

(a) General Liability
Through coordination with the Controller’s Office and the City Attorney’s Office, the general liability risk exposure is actuarially determined and is addressed through pay- as-you-go funding as part of the budgetary process. Associated costs and estimates are recorded as expenses as required under GAAP fo r financial statement purposes for both the Enterprise and the City and County of San Francisco’s Annual Comprehensive Financial Report . The claim expense allocations are determined based on actuarially determined anticipated claim payments and the projected timing of disbursement.

The changes for the general liability (damage claims) for the years ended June 30, 2024 and 2023 are as follows:

(b) Workers’ Compensation
The City actuarially determines and allocates workers’ compensation costs to the Enterprise according to a formula based on the following: (i) the dollar amount of claims; (ii) yearly Coverage Approach
(a) General Liability Self-Insured
(b) Workers’ Compensation Self-Insured through Citywide Pool (c) Property Purchased Insurance and Self-Insured
(d) Public Officials Liability Purchased Insurance
(e) Employment Practices Liability Purchased Insurance
(f) Cyber Liability Purchased Insurance
(g) Crime Purchased Insurance
(h) Electronic Data Processing Purchased Insurance and Self-Insured (i) Surety Bonds Purchased and Contractual Risk Transfer (j) Errors and Omissions Purchased and Contractual Risk Transfer (k) Builders’ Risk Contractual Risk Transfer
Risk
Beginning Claims paid and changes End of
of year Claims changes in estimates year
$ 19,625 18,823 (15,675) 22,773 36,069 1,898 (18,342) 19,625 36,723 452 (1,106) 36,069 Fiscal years
2023
2024
2022

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

81 (Continued)
projections of payments based on historical experience; and (iii) the si ze of the Enterprise’s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent years. The City continues to develop and implement improved programs, such as return -to-work programs, to lower or mitigate the growth of workers’ compensation costs. Programs include accident prevention, investigation, and duty modifica tion for injured employees with medical restrictions so return to work can occur as soon as possible.

The changes in the liabilities for workers’ compensation for the years ended June 30, 2024 and 2023 are as follows:

(c) Property
The Enterprise’s property risk management approach varies depending on whether the facility is currently under construction, the property is part of revenue- generating operations, the property is of high value, or is mission -critical in nature. During the course of construction, the Enterprise requires each contractor to provide its own insurance, while ensuring the full scope of work be covered with satisfactory levels to limit the Enterprise’s risk exposure. Once construction is complete, the Enterprise performs an assessment to de termine whether liability/loss coverage will be obtained through the commercial property policy or self- insurance. The majority of property scheduled in the insurance program is for either: (1) revenue generating facilities, (2) debt-financed facilities, ( 3) mandated coverage to meet statutory requirements for bonding of various public officials, or (4) high-value, mission-critical property or equipment. (d) Public Officials Liability
All Enterprise public officials with financial oversight responsibilities are provided coverage through a commercial Public Officials Liability Policy. (e) Employment Practices Liability
A policy is retained to protect against employment-related claims and liabilities. (f) Cyber Liability
A policy is retained to protect against cyber-related claims and liabilities. (g) Crime
The Enterprise also retains a Commercial Crime Policy, in lieu of bonding its employees, to provide coverage against liabilities or losses due to third-party crime or employee fraud. (h) Electronic Data Processing
The Electronic Data Processing policy protects selected high- value electronic property in case of damage or loss.

Beginning Claims and changes C laims End of
of year in estimates p aid year
$ 9,735 4, 336 (3,069) 11,002
8,973 3,984 ( 3,222) 9,735
8,828 2,793 ( 2,648) 8,973
Fiscal years
2023
2024
2022

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

82 (Continued)
(i) Surety Bonds
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.
(j) Errors and Omissions
Errors and omissions, also known as Professional Liability, are commonly transferred through contract to the contra cted professional, or retained through self -insurance on a case -by-case basis depending on the size, complexity, or scope of construction or professional service contracts. Examples of such contracts are inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers. (k) Builders’ Risk
Builders’ risk policies of insurance are required to be provided by the contractor on all construction projects for the full value of construction. (15) Commitments and Litigation
(a) Commitments
As of June 30, 2024 and 2023, the Enterprise has outstanding commitments with third parties of $248,510 and $220,706 , respectively, for various capital projects and other purchase agreements for materials and services.
(b) Grants
Grants that the Enterprise receives are subject to audit and final acceptance by the granting agency. Current and prior year costs of such grants are subject to adjustment upon audit. (c) Litigation
The Enterprise is a defendant in various legal actions and claims that arise during the normal course of business. The final disposition of those legal actions and claims is not determinable.

However, in the opini on of management, the outcome of any litigation of these matters will not have a material effect on the financial position or changes in net position of the Enterprise. (d) Environmental Issue
As of June 30, 2024 and 2023, the pollution remediation liability of $1,271 is related to the Pacific Rod & Gun Club site construction projects for the full value of construction. (16) Subsequent Events
(a) Water Enterprise Interim Funding Program
On July 16, 2024 the SFPUC entered into an Amen ded and Restated Revolving Credit Agreement with U.S. Bank National Association to provide a revolving line of credit in the

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

83 principal amount of up to $100,000. The commitment expiration date under the Revolving Credit Agreement is July 16, 2027.
(b) Water Enterprise Interim Funding Program
On July 16, 2024 the SFPUC entered into a Second Amendment to Reimbursement Agreement, together with an Omnibus Amendment and Extension of Stated Expiration Date to the Irrevocable Letter of Credit with Barclays Bank PLC that, among other things, amends the Stated Expiration Date of the A-3 LOC to July 15, 2027.

w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
84 Independent Auditor’s 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
Honorable Mayor and the Board of Supervisors
City and County of San Francisco, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contai ned in Government Auditing Standards issued by the Comptroller General of the United States ( Government Auditing Standards ), the financial statements of the San Francisco Water Enterprise (the Enterpris e), an enterprise fund of the City and County of San Francisco (City), as of and for the year ended Ju ne 30, 2024, and the related notes to the financial statements, and have issued our report thereon dated November 12, 2024.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statement s, we considered the Enterprise’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectivene ss of the Enterprise’s internal control.

Accordingly, we do not express an opinion on the effectiveness of the Enterprise’s internal control.

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

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

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Ent erprise’s financial statements are free from material misstatement, we performed tests of its complianc e with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that a re required to be reported under Government Auditing Standards.
85 Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. A ccordingly, this communication is not suitable for any other purpose.

Walnut Creek, California
November 12, 2024

Cover photo: Calaveras Reservoir:

Outlet Tower
Back cover photo: Hetch Hetchy
Reservoir Waterfall
Photos by: Robin Scheswohl
Date of Publication:

November 2024

SFPUC Financial Services
525 Golden Gate Avenue, 4th Floor
San Francisco, CA 94102-3220
sfpuc.gov
Follow Us @MySFPUC
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.

San Francisco Public Utilities Commission
An Enterprise Department of the City and
County of San Francisco, California
Protecting Public Health
and the Environment.

Wastewater Enterprise
Financial Statements June 30, 2024 and 2023
(With Independent Auditor’s Report Thereon)

SAN FRANCISCO WASTEWATER ENTERPRISE
Table of Contents
Page
Independent Auditor’s Report 1
Management’s Discussion and Analysis (Unaudited) 3
Financial Statements:

Statements of Net Position 20
Statements of Revenues, Expenses, and Changes in Net Position 22 Statements of Cash Flows 23
Notes to Financial Statements 25
Independent Auditor’s 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 83

w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
1 Independent Auditor’s Report
Honorable Mayor and the Board of Supervisors
City and County of San Francisco, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the San Francisco Wastewater Enterprise (the Enterprise), an enterprise fund of the City and County of San Francisco (City), as of and for the years ended June 30, 2024 and 2023, and the related notes to the 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 Enterprise as of June 3 0, 2024 and 2023, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States ( 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 Enterprise, 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 opinion.

Emphasis of Matter
As discussed in Note 1, the financial statements present only the Enterprise and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2024 and 2023, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements The Enterprise’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally a ccepted 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 opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards 2 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 erro r, 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, individuall y 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 skept icism 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 inter nal control relevant to the audit in order to design audit procedures that are appropriate in the circumst ances, but not for the purpose o f expressing an opinion on the effectiveness of the Enterprise’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and t he reasonableness of significant accounting estimates made by management, as well as evaluate th e 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 o f America require that the management’s discussion and analysis, as list ed in the table of contents, be presented to supplement the financial statements. Such information is the responsibility of management and, although not a part of the financial statements, is required by the Go vernmental Accounting Standard s Board who considers it to be an essential part of financial reporting for placing the 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 financial statements, and other knowledge we obtained during our audits of the financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our report dated November 12, 2024 on our consideration of the Enterprise'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 Enterprise'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 Enterprise's internal control over financial reporting and compliance.

Walnut Creek, California
November 12, 2024

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

3 (Continued)

This section presents management’s analysis of the San Francisco Wastewater Enterprise’s (the Enterprise) financial condition and activities as of and for the fiscal years ended June 30, 20 24 and 20 23.

Management’s Discussion and Analysis (MDA) is intended to serve as an introduction to the Enterprise’s financial statements. This information should be read in conjunction with the audited financial statements that follow this section. All dollar amounts, unless otherwise noted, are expressed in thousands of dollars.

The information in this MDA is presented under the following headings:
• Organization and Business
• Overview of the Financial Statements
• Financial Analysis
• Capital Assets
• Debt Administration
• Rates and Charges
• Request for Information
Organization and Business

The San Francisco Public Utilities Commission (SFPUC or the Commission) is a department of the City and County of San Francisco (the City) that is responsible for the maintenance, operation, and development of three utility enterprises: Water, Hetch Hetchy Water and Powe r and CleanPowerSF, and Wastewater (the Enterprise). The primary responsibility of the Enterprise is to protect the public health and the surrounding bay and ocean receiving waters by collecting, transmitting, treating, and discharging storm and sanitary flows generated in the service area. This includes 1,139 miles of combined , sanitary, and storm collection system pipes including: gravity mains, force mains , culverts, transport storage boxes, and tunnels. San Francisco is the only coastal city in California with a combined sewer system that collects both wastewater and stormwater in the same network of pipes and provides treatment to remove harmful pollutants before discharging into the San Francisco Bay and Pacific Ocean. In addition, the Enterprise serves on a contractual basis certain municipal customers located outside of the City limits, including the North San Mateo County Sanitation District No. 3, Bayshore Sanitary District, and the City of Brisbane. The Enterprise recovers costs of service through user fees based on the volume and strength of sanitary flow . As of June 30, 2024, the Enterprise serves 149,455 residential accounts, which discharge about 15.3 million units of sanitary flow per year (measured in hundreds of cubic feet, or ccf) and 27,643 non-residential accounts, which discharge about 5.6 million ccf per year. These reflected an increase of 0.02 million discharge units for non-residential accounts due to an increase of 561 accounts and a decrease of 0.12 million discharge units for residential accounts compared to prior year.

Overview of the Financial Statements

The Enterprise’s financial statements include the following:

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

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

4 (Continued)

While the Statements of Net Position provide information about the nature and amount of resources and obligations at year -end, the Statements of Revenues, Expenses, and Changes in Net Position present the results of the Enterpris e’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which the Enterprise has successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in these 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 equivalent s resulting from operational, capital financing, non -capital financing, and investing activities. These statements summarize the annual flow of cash receipts and cash payments, without consideration of the timing of the event giving rise to the obligation or receipt and exclude non-cash accounting measures of depreciation or amortization of assets.

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

Financial Analysis

Financial Highlights for Fiscal Year 2024
• Total assets of the Enterprise exceeded total liabilities by $1,303,260. • Net position decreased by $61,395 or 4.4% during the year. • Capital assets, net of accumulated depreciation and amortization, increased by $802,064 or

17.1% to $5,488,410.
• Operating revenues increased by $31,105 or 8.5% to $395,041. • Operating expenses increased by $200,693 or 76.8% to $462,043.

Financial Highlights for Fiscal Year 2023
• Total assets of the Enterprise 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 $ 635,341 or

15.7% to $4,686,346.
• Operating revenues decreased by $4,946 or 1.3% to $363,936. • Operating expenses increased by $4,192 or 1.6% to $261,350.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

5 (Continued)

Financial Position
The following table summarizes the Enterprise’s net position.

Net Position, Fiscal Year 2024
As of June 30, 202 4, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,337,439. The Enterprise’s total net position decreased by $61,395 or

4.4% from prior year, comprised of decreases of $74,387 in unrestricted net position, $21,355 in restricted for capital projects, and $3,510 in restricted for debt service offset by an increase of $37,857 in net 2024 2023 2022
2024-2023
Change
2023-2022
Change
Total assets:

Current and other assets $ 577,997 574,446 624,771 3,551 (50,325) Capital assets, net of accumulated depreciation and amortization 5,488,410 4,686,346 4,051,005 802,064 635,341 Total assets 6,066,407 5,260,792 4,675,776 805,615 585,016 Deferred outflows of resources:

Unamortized loss on refunding of debt — 8 33 (8) (25) Pensions 42,685 32,592 25,369 10,093 7,223 Other postemployment benefits 12,816 11,493 12,898 1,323 (1,405) Total deferred outflows of resources 55,501 44,093 38,300 11,408 5,793 Liabilities:

Current liabilities:

Revenue bonds 35,370 28,070 34,345 7,300 (6,275) Certificates of participation 900 864 830 36 34 Commercial paper — — 379,157 — (379,157) State revolving fund loans 5,629 2,526 2,481 3,103 45 Other liabilities 239,840 200,992 165,662 38,848 35,330 Subtotal current liabilities 281,739 232,452 582,475 49,287 (350,023) Long-term liabilities:

Commercial paper 341,373 — — 341,373 — Revenue bonds 2,649,681 2,708,840 1,896,908 (59,159) 811,932 Revenue notes — 349,556 350,356 (349,556) (800) Certificates of participation 22,695 23,594 24,458 (899) (864) State revolving fund loans 312,033 316,163 300,178 (4,130) 15,985 Water Infrastructure Finance and Innovation Act (WIFIA) loans 922,431 122,357 — 800,074 122,357 Arbitrage rebate payable 8,521 188 — 8,333 188 Other liabilities 224,674 121,786 73,724 102,888 48,062 Subtotal long-term liabilities 4,481,408 3,642,484 2,645,624 838,924 996,860 Total liabilities:

Revenue bonds 2,685,051 2,736,910 1,931,253 (51,859) 805,657 Revenue notes — 349,556 350,356 (349,556) (800) Certificates of participation 23,595 24,458 25,288 (863) (830) Commercial paper 341,373 — 379,157 341,373 (379,157) State revolving fund loans 317,662 318,689 302,659 (1,027) 16,030 Water Infrastructure Finance and Innovation Act (WIFIA) loans 922,431 122,357 — 800,074 122,357 Arbitrage rebate payable 8,521 188 — 8,333 188 Other liabilities 464,514 322,778 239,386 141,736 83,392 Total liabilities 4,763,147 3,874,936 3,228,099 888,211 646,837 Deferred inflows of resources:

Unamortized gain on refunding of debt 10,255 11,353 — (1,098) 11,353 Leases 1,203 1,453 — (250) 1,453 Pensions 4,055 10,023 114,670 (5,968) (104,647) Other postemployment benefits 5,809 8,286 8,640 (2,477) (354) Total deferred inflows of resources 21,322 31,115 123,310 (9,793) (92,195) Net position:

Net investment in capital assets 1,148,814 1,110,957 1,002,813 37,857 108,144 Restricted for debt service — 3,510 5,391 (3,510) (1,881) Restricted for capital projects 31,782 53,137 204,562 (21,355) (151,425) Restricted for other purposes — — 48,770 — (48,770) Unrestricted 156,843 231,230 101,131 (74,387) 130,099 Total net position $ 1,337,439 1,398,834 1,362,667 (61,395) 36,167 Table 1
Comparative Condensed Net Position
June 30, 2024, 2023, and 2022

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

6 (Continued)

investment in capital assets. Increases in total assets and deferred outflows of resources of $817,023 and increases of $878,418 in total liabilities and deferred inflows of resources are described below (see Table 1).

During the fiscal year 202 4, current and other assets increased by $3,551 or 0.6%. The increase was due to an $8,245 rise in charges for services resulting from a $10,835 increase in sewer charges receivable, as there were more billings than collections . This was offset by a $2,590 increase in allowance for doubtful accounts related to sewer charges receivable that were over 120 days old . Other increases included $7,558 in other receivable due to revenue accrual for the upgrades fair share contribution from the Golden State Warriors and the University of California, San Francisco for th e Mariposa Project , $1,526 in unrestricted and restricted interest receivable due to higher average annualized interest rate, $458 in restricted and unrestricted cash and investments due to loan proceeds from Water Infrastructure Finance and Innovation Act (WIFIA) loans and commercial paper issuances offset by capital project spending and debt service principal and interest payments, $317 increase in inventory as there were more purchases than issuances during the year, $172 increase in capacity charges receivable, net of allowance for doubtful accounts, and $10 increase in custom work receivable. These increases were primarily offset by a $13,942 decrease in receivables from the State Water Resources Control Board (SWRCB) , as a result of receipts from reimbursement requests for the Southeast Water Pollution Control Plant New Headworks (Grit) Replacement Project. Other decreases included $ 440 in prior year prepaid expenses recognized in current year, $212 in lease receivable, $46 in receivable from the Department of Public Works (DPW) for the Mission Bay South Project, $38 prepayments amortizations for the Civic Center Garage lease and the Mariposa Pump Station & Force Project, $32 decrease in Federal interest subsidy receivable , $22 in property rent receivable, and $3 in miscellaneous receivable.

Capital assets, net of accumulated depreciation and amortization, increased by $802,064 or 1 7.1% reflecting an increase in construction and capital improvement activities . The largest portion of the Enterprise’s net position of $1,148,814 or 85.9%, represents net investment in capital assets (see Capital Assets section of the MDA for more information). Deferred outflows of resources increased by $11,408 mainly due to increases in pensions and other postemployment benefits of $10,093 and $1,323 , respectively, based on actuarial report, offset by $8 amortization of the 2013 Series A bond refunding loss.

Total liabilities increased by $888,211 or 22.9%. As of June 30, 202 4, total outstanding balance of $4,290,112 for revenue bonds, certificates of participation (COP), commercial paper, State Revolving Fund (SRF) loans, and WIFIA loans represented 90.1% of total liabilities, an increase of $ 738,142 or 20.8%. The increase was mainly due to $800,07 4 new WIFIA loans (included $7,50 6 of capitalized interest) for the Biosolids Digester Facilities Project and the Southeast Treatment Plant Improvement Project, $341,373 new issuance of commercial paper, and $1,498 SRF loan capitalized interest for the OSP Digester Gas Utilization Upgrade and SEP New Headworks (Grit) Replacement projects, offset by $347,465 defeasance of 2021 Series AB revenue notes by the WIFIA loans, principal repayments of $28,070 in bonds, $2,52 5 in SRF loans, and $863 in COP, and $ 25,880 in revenue bond s and notes premium amortization and defeasance. Other liabilities of $473,035, including arbitrage rebate payable, payables to vendors, contractors, and other government agencies for goods and services under contractual agreements, increased by $ 150,069 or 46.5% due to increases of $110,733 in damage claims liability based on actuarial report , $17,750 in net pension liability based on actuarial report, $8,549 in restricted and unrestricted payable to vendors and contractors mainly due to increased capit al project spending , $8,333 in arbitrage rebate payable due to actuarial calculation, $4,488 in bond, loan, lease, and subscription interest payable mainly due to higher outstanding debt principal resulting from the issuance of 2023 Series ABC revenue bonds and commercial paper, $3,166 in unearned revenue mainly due to $1,429 in unspent

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

7 (Continued)

Federal pass -through grant relating to California Water and Wastewater Arrearages Payment Program (CWWAPP), $1,169 in liens payable, and $652 in customer credit balances due to overpayments, offset by $84 decrease in deposits from Pacific Gas & Electric due to expenses incurred for the Cross Bore Project, $1,929 increase in employee related benefits including vacation, workers’ compensation , and accrued payroll mainly due to actuarial estimates, and 4.75% increase in cost of living adjustment (COLA), and $225 increase in other post employment benefits obligations based on actuarial report . The increase in other liabilities were offset by $2,102 in payment of prior year payable that was made in current year to Municipal Transportation Agency for its share of the Walsh Construction Settlement , $1,349 decrease in pollution remediation obligation due to payments made for the Yosemite Creek Remediation project, $1,297 in leases due to payments made, $243 decrease in subscription liability, and $113 payment to Hetch Hetchy Power related to the 525 Golden Gate Living Machine System. Deferred inflows of resources decreased by $9,793 due to decreases in pensions and other post employment benefits of $5,968 and $2,47 7, respectively, based on actuarial report s, $1,098 in unamortized gain on refunding of debt due to amortization and refunding gain, and $250 in leases.

Net Position, Fiscal Year 2023
For the year ended June 30, 2023, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $ 1,398,834. The Enterprise’s total net position increased by $36,167 or 2.7% as a result of increases of $108,144 in net investment in capital assets and $130,099 in unrestricted net position offset by decrease s of $151,425 in restricted for capital projects , $48,770 in restricted for other purposes, and $1,881 in restricted for debt service (see Table 1).

During the fiscal year 2023, current and other assets decreased by $50,325 or 8.1%. 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 Co ntrol Plant New Headworks (Grit) Replacement Project, and the Oceanside Plant (OSP) Digester Gas Ut ilization 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 , $1,014 due from the Treasure Island Development Authority (TIDA) for capacity fees, $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 receivable from the 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 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 in property rent receivable, and $5 in other receivable.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

8 (Continued)

Capital assets, net of accumulated depreciation and amortization , increased by $635,341 or 1 5.7% reflecting an increase in construction and capital improvement activities . The largest portion of the Enterprise’s net position of $1,110,957 or 79.4%, 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 postemployment benefits based on actuarial report , and $25 amortization of the 2013 Series A bonds refunding loss.

Total liabilities increased by $646,837 or 20.0%. As of June 30 , 202 3, total outstanding balance of $3,551,970 for revenue bonds, revenue notes, certificates of participation (COP), State Revolving Fund (SRF) loans, and W ater 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 Diges ter 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 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 $8 0 in deposits from P acific 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 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 postemployment benefits obligations based on actuarial report. Deferred inflows of resources decreased by $92,195 mainly due to decreases in pensions and other postemployment 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.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

9 (Continued)

Results of Operations
The following table summarizes the Enterprise’s revenues, expenses, and changes in net position.

Results of Operations, Fiscal Year 2024
The Enterprise’s total revenues were $444,866, a n increase of $ 68,464 or 18.2% from prior year (see Table 2). Charges for services increased by $30,360 or 8.6% mainly due to a 9% rate increase adopted on July 1, 2023, offset by a decrease in sanitary flow of 95,679 ccf, or 0.4% from both residential and non - residential customers. Interest and investment income increased by $22,97 2 or 898. 7% mainly due to $10,485 increase in unrealized gain in City Treasury pooled investments , attributed to improved fair value of investments and a $12,487 increase in interest earned mainly due to higher average cash balances from issuance of WIFIA loans and 2023 Series AB bonds and increase in interest rates . Other non -operating revenues increased by $14, 387, primarily due to a $12,104 rise in Federal and State grants received mainly for the CWWAPP and a revenue accrual of $7,558 for the upgrades fair share contribution from the Golden State Warriors and the University of California, San Francisco for the Mariposa Project. This increase was offset by the Monsanto settlement related to water pollution of $5,000 and the $196 Baker Beach grant received in the prior year, as well as decreases of $85 in Federal interest subsidy and $37 in gain s from the sale of assets. Other operating revenues increased by $ 828 or 9.6% mainly due to a $1,643 increase in revenues from other City departments , including Recreation & Park, Zuckerberg San Francisco General Hospital and Trauma Center, and the San Francisco Municipal Transporta tion Agency. This increase was offset by a n $815 decrease in capacity fees , driven by a $544 increase in the allowance for doubtful accounts and write -offs, along with a $271 decline in revenue due to lower permits prices and issuance .

Rents and concessions decreased by $ 83 or 10.1% mainly due to a decrease of $345 from three terminated leases offset by increases in rental income of $189 from tenants with 3.5% consumer price Table 2
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended ended June 30, 2024, 2023, and 2022
2024 2023 2022
2024-2023
Change
2023-2022
Change
Revenues:

Charges for services $ 384,851 354,491 356,041 30,360 (1,550) Rents and concessions 739 822 705 (83) 117 Other operating revenues 9,451 8,623 12,136 828 (3,513) Interest and investment income/(loss) 25,528 2,556 (7,087) 22,972 9,643 Other non-operating revenues 24,297 9,910 25,454 14,387 (15,544) Total revenues 444,866 376,402 387,249 68,464 (10,847) Expenses:

Operating expenses 462,043 261,350 257,158 200,693 4,192 Interest expenses 138,883 95,520 77,751 43,363 17,769 Amortization of premium, refunding loss, and issuance cost (47,299) (14,387) (8,422) (32,912) (5,965) Non-operating expenses 505 535 482 (30) 53 Total expenses 554,132 343,018 326,969 211,114 16,049 Change in net position before capital contributions and transfers (109,266) 33,384 60,280 (142,650) (26,896) Capital contributions 48,080 2,740 — 45,340 2,740 Transfers from the City and County of San Francisco — 75 — (75) 75 Transfers to the City and County of San Francisco (209) (32) (161) (177) 129 Capital contributions and net transfers 47,871 2,783 (161) 45,088 2,944 Change in net position (61,395) 36,167 60,119 (97,562) (23,952) Net position at beginning of year as restated 1,398,834 1,362,667 1,302,548 36,167 60,119 Net position at end of year $ 1,337,439 1,398,834 1,362,667 (61,395) 36,167

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

10 (Continued)

index average rate increase, $70 from short -term conference room rentals at Southeast Community Center and $3 related to leases.

Total expenses were $554,132, reflecting an increase of $211,114 or 61.5% compared to prior year. This was primarily due to increases of $200,693 in operating expenses, $43,363 in interest expenses mainly due to higher bond and WIFIA principal debt and arbitrage rebate liability, offset by an increase of $32,912 in amortization of premium, refunding loss, and issuance cost and $30 decrease in City grants program expenses due to $195 decrease in expenditures for community based organization services for the Youth Employment & Environment Project, offset by $165 increase in floodwater grant for the UC Wastewater Collection Project. The increase of $200,693 in operating expenses was primarily driven by several factors:
a $178,078 rise in general and administrative and other operating expenses largely attributed to judgments and claims expenses based on actuarial report, along with increased project costs associated with the WIFIA Headworks New Grit Removal/Influent Pump and Biosolids Digester projects; a $16,109 increase in personnel services, mainly due to a $15,239 rise related to the GASB 68 pension adjustment and a 4.75% cost-of-living adjustment (COLA) ; a $4,683 increase in depreciation and amortization expenses resulting from more assets being placed in service , a $3,108 rise in contractual services primarily due to higher maintenance costs for service equipment at the Southeast Treatment Plant and leas ing activities; and a $168 increase in materials and supplies for sewage treatment at the Southeast Treatment Plant, all offset by a $1,453 decrease in expenses for services of other departments mainly in electric services provided by Hetch Hetchy Power at the Southeast Treatment Plant.

Capital contributions of $48,080 were for the Developer Built Infrastructure transferred to capital assets, comprised of $25,923 for the Pier 70 Phase 1, $17,550 for the Treasure Island Stage 1, and $4,607 for the Yerba Buena Island Street Improvements projects . Transfer out of $209 included $177 transfers to Culture and Recreation Fund for art enrichment allocation and $32 to the Office of the City Administrator for the Surety Bond Program.

Results of Operations, Fiscal Year 2023
The Enterprise’s total revenues were $376,402, a decrease of $10,847 or 2.8% from prior year (see Table 2). 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 B iosolids 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 result ing from $3,985 decrease in permit s issued offset by $782 decrease in allowance for doubtful accounts , and $310 in other operating revenues to other City departments such as the Recreation & Park, the San Francisc o 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 C ommunity 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 87 implementation. Interest and investment income

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

11 (Continued)

increased by $9,643 or 136.1% mainly due to $4,436 decrease in unrealized loss in City Treasury pooled investments attributed to improved fair 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 $17,7 69 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 w ere mainly due to increases of $2 6,270 in personnel services due to $21,594 increase in expenses related to GASB 68 pension expense 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 u tility, $1,354 in services provided by other departments mainly for electricity from Hetch Hetchy Power, water from Water Enterprise, and for toxics waste and 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 capital assets and a decrease in judg ments and claims offset by increased capital project expenses primarily related to SSIP Biosolids Digester 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 were for the Sunnydale HopeSF Developer Project. Net transfers of $43 included transfer in of $75 from the General Fund for the Wastewater Add -backs Master Project offset transfer out of $32 to the Office of the City Administrator for the Surety Bond Program.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

12 (Continued)

Capital Assets
The following table summarizes changes in the Enterprise’s capital assets.

Capital Assets, Fiscal Year 2024
The Enterprise has capital assets of $ 5,488,410, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2024 (see Table 3). This amount represents an increase of $ 802,064 or 17.1% from prior fiscal year . As of June 30, 2024, the Enterprise h ad capital commitments of $667,703. 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 $ 645,826 or 28.9%.

Facilities, improvements, machinery, and equipment increased by $ 156,126 or 6.5%. Land improvements increased by $ 2,578 or 38.3% relating to improvements for the Ocean Beach Project. Right-to-use lease and subscription assets decreased by $1,506 or 88.9% due to termination of leases and subscriptions and amortization. Intangible assets decreased by $960 or 13.1% due to amortization.

Table 3
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2024, 2023, and 2022
2024 2023 2022
2024-2023
Change
2023-2022
Change
Facilities, improvements, machinery, and equipment $ 2,549,177 2,393,051 2,270,355 156,126 122,696 Intangible assets 6,373 7,333 7,107 (960) 226 Land and rights-of-way 44,572 44,572 44,572 — — Land Improvements 9,311 6,733 — 2,578 6,733 Construction work in progress 2,878,789 2,232,963 1,724,417 645,826 508,546 Right-to-use lease and subscription assets 188 1,694 4,554 (1,506) (2,860) Total $ 5,488,410 4,686,346 4,051,005 802,064 635,341

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

13 (Continued)

Major additions to construction work in progress during the year ended June 30, 2024 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, 2024 include the following:

See Note 4 for additional information about capital assets.

Southeast Plant Biosolids Digester Facilities Project $ 486,344 Southeast Plant New Headworks (Grit) Replacement 91,920 New Treasure Island Wastewater Treatment Plant Capital Improvements 57,168 Large Diameter Sewer Projects and Channel Force Main Intertie 27,993 WW-716 As-Needed Sewer Replacement Number 44 11,693
Taraval Sewer Improvements 10,455
Southeast Plant Power Feed and Primary Switchgear Upgrades 9,968 Westside Pump Station Reliability Improvements 9,691
Southeast Plant / Southeast Community Heating Ventilation Air Conditioning & Mechanical Upgrades 9,117 45th Avenue, 46th Avenue, 47th Avenue, Vicente Street, Wawona Street, and Sloat Boulevard Sewer Replacement 7,810 Oceanside Plant Condition Assessment Improvements - Part 2 7,666 Oceanside Plant Digester Gas Handling Utilization Upgrade 7,173 North Shore Pump Station Wet Weather Improvements 6,278 WW-715 As-Needed Sewer Replacement Number 43 6,272
Lower Alemany Area Stormwater Improvement Project 5,983 Southeast Plant Facility-Wide Distributed Control System Upgrades 5,583 Folsom Area Stormwater Improvement Project 5,578
Folsom Area Stormwater Phase 2 4,825
Green Infrastructure Grant Projects 4,716
Public Works Various Location Number 53 Infrastructure Improvements 4,377 Public Works Various Locations Number 55 Infrastructure Improvements 4,194 Other project additions individually below $4,000 94,639 $ 879,443
Wawona Area Stormwater Improvement Project $ 27,262
Contributed Capital: Pier 70 Phase 1 25,923
Contributed Capital: Treasure Island Stage 1 17,550
Public Works 19Th Avenue Infrastructure Improvements 14,755 WW-715 As-Needed Sewer Replacement Number 43 11,292
Large Diameter Sewer Projects And Channel Force Main Intertie 11,141 45th Avenue, 46th Avenue, 47th Avenue, Vicente Street, Wawona Street, and Sloat Boulevard Sewer Replacement 8,940 Public Works Various Locations Infrastructure Improvements Number 48 6,998 Public Works Number 56 Infrastructure Improvements 6,668 16th Street Sewer Replacement (Segment 2) 6,528
As-Needed Main Sewer Replacement Number 9 (WW-713) 6,416 Public Works Various Locations Pavement Improvements Number 38 6,240 Public Works Golden Gate Ave And Laguna Street Project 6,051 Public Works Various Locations Number 57 Infrastructure Improvements 5,711 WW-707 Various Locations Number 11 5,171
WW-704 Sewer Replacement Number 9 4,946
WW-708 Various Locations Number 12 4,772
Public Works Richmond Residential Streets Pavement Renovation 4,753 Contributed Capital: Yerba Buena Island Street Improvements 4,607 Public Works Various Locations Pavement Renovations Number 59 4,245 Public Works Various Locations Number 54 Infrastructure Improvements 4,136 Public Works Various Locations Number 52 Infrastructure Improvements 4,066 Other project additions individually below $4,000 40,791 $ 238,962

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

14 (Continued)

Sewer System Improvement Program
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 Phas e 1 projects totaling $2.9 billion. The revised program is referred to as the “2016 SSIP Baseline”.

As of June 30, 202 4, 49 projects or 70.0% totaling $ 525 million were completed, 1 project in multiple phases, 5 projects in pre -construction phase, 7 projects in construction phase, and 8 projects in close -out phase. The Central Bayside System Improvement Project (CBSIP) was completed on June 30, 2023 with reported project expenditures of $36 .7 million. The CBSIP provides collection system enhancement to the Channel and Islais Creek urban watersheds, including needed redundancy for the existing Channel Force Main, infrastructure improvements to sewers/pump stations, and stormwater management through elements of both green and grey infrastructure . Major components of the project consist of a tunnel to transport, via gravity, dry and wet -weather flows from the Channel and North Shore watersheds to the Southeast Water Pollution Control Plant (SEP), a large all-weather pump station to lift the flows into the SEP, improvements to Channel Pump Station, and green/gray infrastructure improvements within the watersheds. The New Headworks (Grit) Replacement Project is on-going construction. The project is reported at 86.8% complete and forecasted final completion is on May 30, 2025. As of June 30, 2024, total SSIP program expenditures totaled $3.2 billion . Additional details regarding the SSIP are available at https://sfpuc.gov/construction-contracts/sewer-system-improvement-program.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

15 (Continued)

Capital Assets, Fiscal Year 2023
The Enterprise has capital assets of $4,686,346, net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2023 (see Table 3). This amount represents an increase of $63 5,341 or 15.7% from prior fis cal year. As of June 30, 2023, the Enterprise had capital commitments of $ 750,138. 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 $122,69 6 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. Right-to-use lease and subscription assets decreased by $2,860 or 62.8% due to amortization.

Major additions to construction work in progress during the year ended June 30, 2023 include the following:

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 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 $ 709,485

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

16 (Continued)

Major depreciable facilities, improvements, intangible assets, machinery, and e quipment 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.

Sewer System Improvement Program
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 ma intain 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 Phas e 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 an d 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 $2.5 billion. Additional details regarding the SSIP are available at https://sfpuc.gov/construction- contracts/sewer-system-improvement-program.

Southeast Community Center at 1550 Evans $ 111,510
Mariposa 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 6,076
Castro, 19th, 26th Street Water and Sewer Improvements - WD-2739 3,773 Other project additions individually below $3,000 18,887 $ 204,853 *
* Does not include $1,573 equipment transfers from DPW.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

17 (Continued)

Debt Administration
As of June 30 , 202 4, 2023, and 2022, the Enterprise’s debt from revenue bonds, revenue notes, commercial paper, certificates of participation, SRF, and WIFIA loans were $4,290,112, $3,551,970, and $2,988,713, respectively, as shown in Table 4. More detailed information about the Enterprise’s debt activity is presented in Notes 6, 7, and 8 to the financial statements.

The increase of $738,142 was mainly due to $800,074 new WIFIA loans consisting of $792,568 aggregate draw down and $7,50 6 capitalized interest for the Biosolid s Digester Facilities and the Southeast Treatment Plant Improvements projects, $340,000 new issuance and $1,373 interest rolled to principal for commercial paper, and $1,498 capitalized interest for the SRF Headworks and OSP Digester projects, offset by $347,465 defeasance of revenue notes 2021 Series AB, $31,45 8 repayment of outstanding debt, and $25,880 of premium amortizations and defeasance.

Credit Ratings and Bond Insurance – As of June 30, 20 24 and 2023, the Enterprise carried underlying ratings of “Aa2” and “AA” from Moody’s and S&P Global Ratings (S&P), respectively.

Debt Service Coverage – Pursuant to the Amended and Restated Indenture, the Enterprise is required to collect sufficient net revenues each fiscal year, together with any Enterprise funds (except Bond Reserve Funds), which are available for payment of debt service and are not budgeted to be expended, at least equal to 1.25 times annual debt service for said fiscal year , and for the SFPUC’s debt servi ce coverage policy, at least equal to 1.35 times annual debt service for said fiscal year. During fiscal years 2024 and 2023, the Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were suf ficient to meet the rate covenant requirements under the Enterprise’s Amended and Restated Indenture and the SFPUC’s debt service coverage policy (see Note 8).

Debt Authorization – Pursuant to the Charter Section 8B.124, the Enterprise can incur indebtedne ss upon two-thirds vote of the Board of Supervisors. As of June 30, 20 24, the Enterprise had $ 8,052,607 in combined debt issuance authorization from the Board of Supervisors under Proposition E, with $4,482,180 issued against this authorization. The Enterprise has a $750,000 authorized commercial paper program, with $ 341,373 in tax -exempt commercial paper outstanding as of June 30, 20 24 and $ 0 in tax -exempt commercial paper outstanding as of June 30, 2023.

Cost of Debt Capital – The coupon interest rates on the Enterprise’s outstanding revenue bonds and revenue notes ranged from 1.0% to 5.8% after factoring in federal interest subsidy receipts on Build America Bonds at June 30, 20 24. The 2009 Series C certificates of participation carried coupon interest 2024-2023 2023-2022
2024 2023 2022 Change Change
Revenue bonds $ 2,685,051 2,736,910 1,931,253 (51,859) 805,657 Revenue notes — 349,556 350,356 (349,556) (800) Commercial paper 341,373 — 379,157 341,373 (379,157) Certificates of participation 23,595 24,458 25,288 (863) (830) State revolving fund loans 317,662 318,689 302,659 (1,027) 16,030 Water Infrastructure Finance and Innovation Act (WIFIA) loans 922,431 122,357 — 800,074 122,357 Total $ 4,290,112 3,551,970 2,988,713 738,142 563,257 Table 4
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2024, 2023, and 2022

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

18 (Continued)

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 20 24 and 20 23, respectively. The interest rates on short -term debt ranged from 3.6% to 3.8% during fiscal year 20 24 and from 0. 9% to 3.1% during fiscal year 202 3. The State revolving fund loans (CWSRF loans) carried original interest rates ranging from 0.8% to 1.8% during fiscal year 2024. 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 lo an carrie d interest rate of 1.5 % during fiscal year 2024 and capitalized interest added to the principal balance of the WIFIA loan on each Semi-Annual Payment Date occurring during the Capitalized Interest Period.

Rates and Charges
Rate Setting Process
Proposition E, as approved by the voters in November 2002, amended the City Charter by adding the new Article VIIIB, entitled “Public Utilities,” which established the Commission’s authority to issue new revenue bonds and set wastewater rates. The Commission is required to:
• Establish rates, fees, and charges based on cost of service; • Retain an independent rate consultant to conduct cost of service studies at least every five years; • Consider establishing new connection fees;
• Consider conservation incentives and lifeline rates;
• Adopt a rolling five-year forecast annually; and
• Establish a Rate Fairness Board.

Pursuant to the City and County of San Francisco Charter section 8B.125, an independent rate study is performed at least once every five years. In compliance with City Charter section 8B.125, a water and wastewater rate study were completed in May 2023. The Commission subsequently adopted three years of wastewater rate increases from July 1, 2023 through June 30, 20 26. Other miscellaneous fees for service and charges were last approved in April 2024 to be effective July 1, 2024 , and generally increase annually by the Consumer Price Index from the Controll er’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.gov/accounts-services/water-power-sewer- rates/rates.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

19 The following table is the Enterprise’s ten-year approved average rate adjustments:

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

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

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

Effective Date Adjustment
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
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.

Ten-year Average Rate Adjustments

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Net Position
June 30, 2024 and 2023
(In thousands)

20 (Continued)

2024 2023
Assets
Current assets:

Cash and investments with City Treasury $ 376,658 355,770 Cash and investments outside City Treasury 152 173 Receivables:
48,338 40,093
Due from other City departments 82 128 Interest 3,896 2,178
Leases receivable, current portion 226 212 Restricted due from other governments — 13,942 689 1,191
Total current receivables 53,231 57,744
Prepaid charges, advances, and other receivables, current portion 8,142 570 Inventory 3,657 3,340
Restricted cash and investments outside City Treasury 41,778 48,717 Total current assets 483,618 466,314
Non-current assets:

Restricted cash and investments with City Treasury 31,613 38,574 Restricted cash and investments outside City Treasury 59,930 66,439 388 417
342 342
Leases receivable, less current portion 1,019 1,245 Prepaid charges, advances, and other receivables, less current portion 1,087 1,115 Right-to-use lease assets, net of accumulated amortization — 1,272 Right-to-use subscription assets, net of accumulated amortization 188 422 Capital assets, not being depreciated and amortized 2,926,407 2,280,581 Capital assets, net of accumulated depreciation and amortization 2,561,815 2,404,071 Total non-current assets 5,582,789 4,794,478
Total assets 6,066,407 5,260,792
Deferred outflows of resources
Unamortized loss on refunding of debt — 8 Pensions 42,685 32,592
Other postemployment benefits 12,816 11,493
Total deferred outflows of resources $ 55,501 44,093 Charges for services, less current portion (net of allowance for doubtful accounts of $351 as of June 30, 2024 and $566 as of June 30, 2023)
Restricted interest, other receivable, and prepaid (net of allowance for doubtful accounts of $345 as of June 30, 2024 and $99 as of June 30, 2023)
Restricted interest, other receivable, and prepaid (net of allowance for doubtful accounts of $0 as of June 30, 2024 and $29 as of June 30, 2023)
Charges for services (net of allowance for doubtful accounts of $12,865 as of June 30, 2024 and $10,060 as of June 30, 2023)

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Net Position
June 30, 2024 and 2023
(In thousands)

21 2024 2023
Liabilities
Current liabilities:

Accounts payable $ 18,841 23,207
Accrued payroll 8,119 7,631
Accrued vacation and sick leave, current portion 6,583 6,040 Accrued workers’ compensation, current portion 1,685 1,509 Due to other City departments, current portion 114 2,215 Damage claims liability, current portion 28,742 1,650 Unearned revenues, refunds, and other 9,623 6,457 Bond, loan, lease, and subscription interest payable, current portion 30,300 27,918 Revenue bonds, current portion 35,370 28,070 Certificates of participation, current portion 900 864 State revolving fund loans payable, current portion 5,629 2,526 Lease liability, current portion — 1,297 Subscription liability, current portion 93 243 Current liabilities payable from restricted assets 135,740 122,825 Total current liabilities 281,739 232,452
Long-term liabilities:

Arbitrage rebate payable 8,521 188
Net other postemployment benefits liability 49,260 49,035 Net pension liability 67,299 49,549
Accrued vacation and sick leave, less current portion 5,506 5,622 Accrued workers’ compensation, less current portion 7,327 6,489 Due to other City departments, less current portion 291 405 Damage claims liability, less current portion 86,341 2,700 Bond, loan, lease, and subscription interest payable, less current portion 2,106 — Commercial paper 341,373 —
Revenue bonds, less current portion 2,649,681 2,708,840 Revenue notes — 349,556
Certificates of participation, less current portion 22,695 23,594 State revolving fund loans payable, less current portion 312,033 316,163 Water Infrastructure Finance and Innovation Act (WIFIA) loans 922,431 122,357 Subscription liability, less current portion 93 186 Pollution remediation obligation 6,451 7,800 Total long-term liabilities 4,481,408 3,642,484
Total liabilities 4,763,147 3,874,936
Deferred inflows of resources
Unamortized gain on refunding of debt 10,255 11,353 Leases 1,203 1,453
Pensions 4,055 10,023
Other postemployment benefits 5,809 8,286
Total deferred inflows of resources 21,322 31,115 Net position
Net investment in capital assets 1,148,814 1,110,957 Restricted for debt service — 3,510 Restricted for capital projects 31,782 53,137 Unrestricted 156,843 231,230
Total net position $ 1,337,439 1,398,834
See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2024 and 2023
(In thousands)

22 2024 2023
Operating revenues:

Charges for services $ 384,851 354,491
Rents and concessions 739 822
Capacity fees 2,262 3,077
Other revenues 7,189 5,546
Total operating revenues 395,041 363,936
Operating expenses:

Personnel services 105,835 89,726
Contractual services 23,885 20,777
Materials and supplies 14,474 14,306
Depreciation and amortization 82,722 78,039
Services provided by other departments 39,546 40,999 General and administrative and other 195,581 17,503 Total operating expenses 462,043 261,350
Operating (loss) income (67,002) 102,586
Non-operating revenues (expenses):

Federal and state grants 12,256 152
Interest and investment income 25,528 2,556
Interest expenses (138,883) (95,520)
Amortization of premium, refunding loss, and issuance costs 47,299 14,387 Net gain from sale of assets 77 114
Other non-operating revenues 11,964 9,644
Other non-operating expenses (505) (535)
Net non-operating expenses (42,264) (69,202)
Change in net position before capital contributions and transfers (109,266) 33,384 Capital contributions 48,080 2,740
Transfers from the City and County of San Francisco — 75 Transfers to the City and County of San Francisco (209) (32) Capital contributions and net transfers 47,871 2,783 Change in net position (61,395) 36,167
Net position at beginning of year 1,398,834 1,362,667 Net position at end of year $ 1,337,439 1,398,834

See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Cash Flows
Years Ended June 30, 2024 and 2023
(In thousands)

23 (continued)

2024 2023
Cash flows from operating activities:

Cash received from customers, including cash deposits $ 380,336 364,180 Cash received from tenants for rent 708 3,126 Cash received from miscellaneous revenues 6,648 686 Cash paid to employees for services (104,126) (95,895) Cash paid to suppliers for goods and services (116,262) (95,599) Cash paid for judgments and claims (6,851) (5,500) Net cash provided by operating activities 160,453 170,998 Cash flows from non-capital financing activities:

Cash received from grants 13,688 177
Cash received from settlements — 5,000 Cash paid for rebates and program incentives (505) (535) Transfers from the City and County of San Francisco — 75 Transfers to the City and County of San Francisco (209) (32) Net cash provided by non-capital financing activities 12,974 4,685 Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 79 127 Proceeds from bond issuance, net of premium — 1,287,593 Proceeds from commercial paper borrowings 341,373 177,564 Proceeds from State revolving fund loans 13,942 207,364 Proceeds from WIFIA loans, net of premium and interest 811,356 122,357 Principal paid on revenue notes (347,465) —
Principal paid on long-term debt (28,933) (454,676) Principal paid on commercial paper — (556,721) Principal paid on State revolving fund loans (2,525) (2,481) Lease payment (1,303) (2,371)
Subscription payment (247) (523)
Interest paid on long-term debt (112,460) (75,309) Interest paid on commercial paper (1,372) (8,674) Interest paid on State revolving fund loans (1,479) (1,523) Interest paid on revenue notes — (3,475) Interest paid on WIFIA loans — (74) Issuance cost paid on long-term debt (195) (3,124) Acquisition and construction of capital assets (871,699) (681,615) Federal interest income subsidy for Build America Bonds 3,911 3,991 Net cash (used in) provided by capital and related financing activities (197,017) 8,430 Cash flows from investing activities:

Interest income received 18,001 4,948
Proceeds from sale of investments outside City Treasury 1,860,653 514,288 Purchase of investments outside City Treasury (1,898,189) (514,288) Net cash (used in) provided by investing activities (19,535) 4,948 (Decrease) increase in cash and cash equivalents (43,125) 189,061 Cash and cash equivalents:

Beginning of year 522,224 333,163
End of year $ 479,099 522,224

Reconciliation of cash and cash equivalents to the statements of net position:

Cash and investments with City Treasury:

Unrestricted $ 376,658 355,770
Restricted 31,613 38,574
Add: Unrealized loss on investments with City Treasury 6,504 12,551 Cash and investments outside City Treasury:

Unrestricted 152 173
Restricted 101,708 115,156
Less: Restricted (with maturity more than 90 days - see table in Note 3) (37,269) — Less: Unrealized (gain) on investments outside City Treasury (267) — Cash and cash equivalents at the end of year on
statements of cash flows $ 479,099 522,224

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Cash Flows
Years Ended June 30, 2024 and 2023
(In thousands)

24 2024 2023
Reconciliation of operating (loss) income to net cash provided by operating activities:

Operating (loss) income $ (67,002) 102,586
Adjustment to reconcile operating (loss) income to net cash provided by operating activities:

Depreciation and amortization 82,722 78,039
Miscellaneous revenues 6,647 686
Provision for uncollectible accounts 2,807 5,500 Write-off of capital assets 47,795 911
Changes in operating assets and liabilities:

Receivables:

Charges for services (10,835) (5,558)
Prepaid charges, advances, and other (7,452) 1 Due from other City departments — 1,208 Inventory (317) (382)
Leases (38) 2,321
Subscription — 535
Accounts payable (4,366) 830
Accrued payroll 488 1,229
Net other postemployment benefits liability and related deferred outflows/inflows (3,575) 963 Net pension liabilities and related deferred outflows/inflows 1,689 (13,551) Accrued vacation and sick leave 427 761 Accrued workers’ compensation 1,014 452
Due to other City departments (2,101) 2,102
Pollution remediation obligation (1,349) (260) Damage claims liability 110,733 (7,695)
Unearned revenues, refunds, and other liabilities 3,166 320 Total adjustments 227,455 68,412
Net cash provided by operating activities $ 160,453 170,998

Noncash transactions:

Accrued capital asset costs $ 135,740 122,825
Interfund payable 405 2,620
Unrealized loss on investments with City Treasury 6,504 12,551 Unrealized (gain) on investments outside City Treasury (267) — Capital contribution 48,080 2,740
See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

25 (Continued)

(1) Description of Reporting Entity
The San Francisco Wastewater Enterprise (the Enterprise), formerly known as the San Francisco Clean Water Program (the Program), was established in 1977 follo wing the transfer of all sewage system-related assets and liabilities of the City and County of San Francisco (the City) to the Program.

In 1976, the electorate of the City appro ved 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 se parate books of records and accounts of the Enterprise.

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

The City Charter was amended in 2008 by Proposition E, a City and County of S an Francisco Charter Section 4.112 amendment approved by the voters in the June 3, 2008 election, terminated the terms of all five existing members of the SFPUC, changed the process for appointing new members, and set qualifications for all members. Under the amended Charter, the Mayor continues to nominate candidates to the SFPUC, but nominees do not take office until the Board of Supervisors votes to approve their appointments by a majority (at least six members). The amended Charter provides for staggered four -year terms for the SFPUC members and requires them to meet the following qualifications:
• Seat 1 must have experience in environmental policy and an understanding of environmental justice issues.
• Seat 2 must have experience in ratepayer or consumer advocacy. • Seat 3 must have experience in project finance.
• Seat 4 must have experience 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 op erations of the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF, and the Water Enterprise are included in the Annual Comprehensive Financial Report of the City as enterprise funds. These financial statements are intended to present only the finan cial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City as of Jun e 30, 202 4 and 202 3, the changes in its financial position, or, where applicable, the cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (GAAP).

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

26 (Continued)

(2) Significant Accounting Policies
(a) Basis of Accounting and Measurement Focus
The accounts of the Enterprise are organized on the basis of a proprietary fund type, specifically an enterprise fund of the City. The activities of this Enterprise are accounted for with a separate set of self-balancing accounts that comprise the Enterprise’s assets, deferred outflows, liabilities, deferred inflows, net position, revenues, and expenses. Enterprise funds account for activities (i) that are financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity; or (ii) that are required by laws or regulations that the activity’s costs of providing services, including capital costs (such as depreciation or debt service), be recovered with fees and charges, rather than with taxes or similar revenues; or (iii) that the pricing policies of the activity establish fees and charges designed to recover its costs, including capital costs (such as depreciation or debt service).

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

Non-operating revenues include grants, investment income, and other income from non -operating activities.

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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

27 (Continued)

concession arrangement, are valued at acquisition value. Depreciation and amortization are computed using the straight -line method over the estimated useful lives of the assets, which range from 1 to 100 years for equipment and 1 t o 200 years for building, structures, and improvements .

No depreciation or amortization is recorded in the year of acquisition, and depreciation or amortization is recorded in the year of disposal.
(f) Intangible Assets
Intangible assets are defined as identif iable, non-financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights -of-way easements, land use rights, water rights, licenses, permits , and right-to-use capital assets for leases and subscription-based information technology arrangements (SBITAs).

The Enterprise capitalize s purchased or internally developed intangible assets with a useful life extending beyond one reporting period. It has es tablished a capitalization threshold of $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 pr ovide a benefit that is not constrained by legal or contractual limitations or any other external factor, and therefore, are not amortized (see Note 4). (g) Construction Work in Progress
The cost of acquisition and construction of major plant and equipment is recorded as construction work in progress. Costs of construction projects that are discontinued are recorded as an expense in the year in which the decision is made to discontinue such projects. (h) Bond Discount, Premium, and Issuance Costs
Bond issuance co sts 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 amortiz ed using the effective interest method.
(i) Accrued Vacation and Sick Leave
Accrued vacation pay, which may be accumulated up to 10 weeks per employee, is charged to expense as earned. Sick leave earned subsequent to December 6, 1978 is non -vesting and may be accumulated up to six months per employee.
(j) Workers’ Compensation
The Enterprise is self -insured for workers’ compensation claims and accrues the estimated cost of those claims, including the estimated cost of incurred but not reported claims (see Note 13(b)). (k) General Liability
The Enterprise is self -insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial cover age 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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

28 (Continued)

claims, includ ing adverse loss development and estimated incurred but not reported claims (see Note 13(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 int erest costs on the bonds must be remitted to the federal government on every fifth anniversary of each bond issue. The arbitrage liability due as of June 30, 2024 and 2023 was $8,521 and $188, respectively (see Note 7).

(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 usin g 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 Enterprise is exempt from both feder al income taxes and California State franchise taxes.
(o) Revenue Recognition
Sewer service charges are based on water usage as determined by the San Francisco Water Enterprise. The majority of residential and non -residential customers are billed on a monthly basis except for building and contractor customers which are billed on a bi -monthly basis. Revenues earned but unbilled are accrued as charges for services and reflected as a receivable on the statements of net position. The unbilled amounts for the fiscal years ended June 30, 20 24 and 2023 were $23,256 and $14,919, respectively.
(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, deferred outflows and deferred inflows, 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) 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 pol lution remediation if it knows a site is polluted and any of the following recognition triggers occur:
• Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
• A government has violated a pollution prevention-related permit or license; • A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

29 (Continued)

• A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
• A government begins or legally obligates itself to begin cleanup or post -cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or o ther 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 th e implementation and construction of a major or minor capital project. Examples of pollution may include but are not limited to: asbestos or lead paint removal, leaking of sewage in underground pipes or neighboring areas, chemical spills, removal, and disposal of known toxic waste, harmful biological and chemical pollution of water, or contamination of surrounding soils by underground storage tanks (see Note 14(d)). (r) Leases
Leases are defined as a contract that conveys control of the right to use another en tity’s underlying asset for a specified period. The Enterprise is a lessee and a lessor for various noncancellable leases of land, building, equipment, vehicles, easements, etc.

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

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

Measurement of Lease Amounts (Lessee)
The Enterprise’s lease liability is recorded at the present value of future minimum lease payments as of the date of commencement. Subsequently, the lease liability is reduced by the principal portion of lease of payments made. The lease asset is initia lly 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 bef ore the lease commencement date. Subsequently, the lease asset is amortized into depreciation and amortization expense on a straight -line basis over the lease term. If the Enterprise is reasonably certain of exercising a purchase option contained in a leas e, the lease asset will be amortized over the useful life of the asset.

Measurement of Lease Amounts (Lessor)
The Enterprise’s lease receivable is measured at the present value of payments expected to be received during the lease term, redu ced by any provision of estimated uncollectible amounts.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

30 (Continued)

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

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

Key Estimates and Judgments
Key estimates and judgments include how the Enterprise determines (a) the discount rate it uses to calculate the present value of the expected lease payments, (b) lease terms, (c) lease payments, and (d) materiality threshold for equipment.
• The Enterprise generally uses its estimated incremental borrowing rate as the discount rate for leases unless the rate is 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 maturity date (year 1 to 30+), plus the average credit spread based on City’s Aa/AA, COP, Tax -exempt to generate t he 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) te rminate for which it is reasonably certain not to be exercised. Periods in which both the lessee and lessor have an option to terminate (or if both parties have to agree to extend) are excluded from the lease term. • Payments are evaluated by the Enterprise to determine if they should be included in the measurement of the lease receivables or lease liabilities, including those payments that require a determination of whether they are reasonably certain of being made, such as residual value guarantees, purchase options, payments for termination penalties, and other payments.
• Equipment and other leases have a capitalization threshold of $100. 70% below market rent and/or ground leases are determined to be below market rent (BMR ) and are excluded from lease capitalization.

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

When certain changes occur that are expected to significantly affect the amount of the lease receivable or lease liability, the receivable or liability is remeasured and a corresponding adjustment is made to the deferred inflow of resources or lease asset, respectively.

Presentation in Statement of Net Position
Lease assets are reported with current and non-current assets, lease liabilities are reported with current and long-term liabilities and both lease capital assets and liabilities are reported under net investment in capital assets in the statement of net position (see Note 9).

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

31 (Continued)

(s) Subscription-Based Information Technology Arrangements 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 specific period. The Enterprise has noncancellable subscription arran gements (similar to a lease) for the right to use various information technology hardware and software SBITAs.

Short-term SBITAs
For SBITAs with a maximum possible term of 12 months or less at commencement, the Enterprise 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 Enterprise recognizes SBITAs liability and intangible right-to-use subscription asset for the Enterprise.

Measurement of Subscription Amounts (Subscriber)
The Enterprise ’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 as set 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 i ncentives received at or before the subscription commencement date. For SBITAs, s ubscription assets also include qualified 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 Judgments
Key estimates and judgments include how the Enterprise 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 Enterprise generally uses its e stimated incremental borrowing rate as the discount rate for SBITAs unless the rate is implicit in the agreement. The Enterprise 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 Enterprise’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 l essor have an option to terminate (or if both parties have to agree to extend) are excluded from the subscription term.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

32 (Continued)

• Payments are evaluated by the Enterprise to determine if they should be included in the measurement of the subscription liabilities, inc luding 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 Enterprise monitors changes in circumstances that may require remeasurement of SBITA s.

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 Statement of Net Position
Subscription assets are reported wi th 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 statement of net position (see Note 10). (t) Other Postemployment Benefits (OPEB)
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 c urrent active and inactive employees attributed to those employees’ past service, less the amount of the Retiree Healthcare Trust Fund investments measured at fair value (see Note 11(b)).
(u) New Accounting Standards Adopted in Fiscal Year 2024 1) In April 202 2, the GASB issued Statement No. 99, Omnibus 2022 . GASB Statement No. 99 addresses a variety of topics. T he requirements related to extension of the use of the London Interbank Offered Rate, accounting for Supplemental Nutrition Assistance Program distribu tions, 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 were adopted by the Enterp rise for the year ended June 30, 2022. 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 . The Enterprise adopted the provisions of S tatement No. 99 in fiscal year 2024 which did not have a significant effect on its financial statements. 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 Enterprise adopted the provisions of Statement No. 100 in fiscal year 202 4, which did not have a significant effect on its financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

33 (Continued)

(v) GASB Statements Implemented in Fiscal Year 2023
1) In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. GASB Statement No. 91 enhances the comparability and consistency of conduit debt obligation reporting and reporting of related transactions by stat e and local government issuers. The new standard is effective for periods beginning after December 15, 2021. The Enterprise 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) and availability payment arrangements. The Enterprise 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 liab ilities for such arrangements and also requires additional disclosures related to such arrangements. The standard is effective for periods beginning after June 15, 2022. The Enterprise adopted the provisions of Statement No. 96 in fiscal year 2023 (see Note 10).

(w) Future Implementation of New Accounting Standards
1) 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 the periods beginning after December 15, 2023. The Enterprise will implement the provisions of Statement No. 101 in fiscal year 2025.
2) In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures. This statement establishes financial reporting requirements for risks related vulnerabilities due to certain concentrations or constraints within governments. The new standard is effective for periods beginning after June 15, 2024. The Enterprise will implement the provisions of Statement No. 102 in fiscal year 2025.
3) In April 2024, the GASB issued Statement No. 103, Financial Reporting Model Improvements. This statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. The new standard is effectiv e for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 103 in fiscal year 2026. 4) In September 2024, the GASB issued Statement No. 104, Disclosure of Certain Capital Assets .

This statement requires certain types of capital assets, such as lease assets recognized in accordance with Statement No. 87, Leases and intangible right-to-use assets recognized in accordance with Statement No. 94, Public-Private and Public -Public Partnerships and Ava ilability Payment Arrangements to be disclosed separately by major classes of underlying assets in the

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

34 (Continued)

capital assets note disclosures. Subscription assets recognized in accordance with Statement No. 96, Subscription-Based Information Technology Arrangemen ts are also required to be disclosed separately. Furthermore, the statement requires intangible assets other than those three types to be disclosed separately by major class. Finally, the statement requires additional disclosures for capital assets held fo r sale. The new standard is effective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 104 in fiscal year 2026. (x) Reclassifications
The Enterprise has reclassified certain amounts relating to the prior period to conform to its current period presentation. Lease receivable, lease related interest receivable, lease related interest payable and subscription related interest payable were reclassified from net investment in capital assets to unrestricted in the statement of net position for fiscal year 2023 . Furthermore, capital related liabilities were reclassified from restricted for capital projects and/or unrestricted to net investment in capital assets for fiscal year 2023. These reclassifications had no effect on previously reported changes in net position.
(3) Cash, Cash Equivalents, and Investments
The Enterprise’s cash, cash equivalents, and investments with the City Treasury are invested in an unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of priority, preservation of capital, liquidity, and yield. The policy addresses soundness of financial institutions in which the City will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio that may be invested in certain instruments with longer terms to maturity. The City Treasurer allocates income from the investment of pooled cash at month -end in proportion to the Enterprise’s average daily cash balances. The primary objectives of the Enterprise’s investment policy are consistent with the City’s policy.

The restricted cash and investments for bond reserves are held by an independent trustee outside the City investment pool. The balances as of June 30, 20 24 and 20 23 were $101,708 and $115,156, 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-mf,” “Aa1,” or “Aa2.” “Permitted Investments” also include commercial paper, and US treasury and agency securities.

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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

35 (Continued)

The following is a summary of the restricted and unrestricted cash and investments outside City Treasury, including commercial paper issuers, credit ratings, and the fair value hierarchy as of June 30, 2024 and 2023.

Certain investments such as money market investments, and cash and cash equivalents are not subject to the fair value hierarchy.

The restricted cash and investments outside City Treasury as of June 30, 202 4 and 2023 included an unrealized gain due to changes in fair values on Commercial Paper, U.S. Treasury Bonds & Notes, and U.S. Agency Securities of $267 and $0, respectively.

In vestmen ts
Credit Ratin gs
( S&P/Moody's) Matu rities Fair Valu e
U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 37,830 37,830 — — — Money Market Funds A-1/P-1 < 90 days 52 52 — — — Commercial Paper - Toyota Motor Corp A-1+/P-1 < 90 days 6,935 — 6,935 — — Commercial Paper - Toronto-Dominion Bank A-1+/P-1 < 90 days 19,342 — 19,342 — — Commercial Paper - Toyota Motor Corp A-1+/P-1 October 11, 2024 1,859 — 1,859 — — U.S. Agency Securities AA+/Aaa March 21, 2025 17,538 — 17,538 — — U.S. Treasury Bonds & Notes A-1+/P-1 September 15, 2025 17,872 — 17,872 — — Cash and Cash Equivalents N/A 280 280 — — — Total Restricted Cash and Investments outside City Treasury $ 101,708 38,162 63,546 — — Cash and Cash Equivalents N/A $ 152 152 — — — Total Unrestricted Cash and Investments outside City Treasury $ 152 152 — — — Cash and Investments outside City Treasury
Fair Value Measurements Using
In vestmen ts
exempt from
fair valu e
Qu oted prices
in active
markets for
iden tical
assets
( Level 1)
Sign ifican t
other
observable
in pu ts
( Level 2)
Un observable
In pu ts
( Level 3)
Ju n e 30, 2024
In vestmen ts
Credit Ratin gs
( S&P/Moody's) Matu rities Fair Valu e
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 Cash Equivalents N/A $ 173 173 — — — Total Unrestricted Cash and Investments outside City Treasury $ 173 173 — — — Cash and Investments outside City Treasury
Fair Value Measurements Using
In vestmen ts
exempt from
fair valu e
Qu oted prices
in active
markets for
iden tical
assets
( Level 1)
Sign ifican t
other
observable
in pu ts
( Level 2)
Un observable
In pu ts
( Level 3)
Ju n e 30, 2023

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

36 (Continued)

The Enterprise’s cash, cash equivalents, and investments are shown on the accompanying statements of net position as follows:

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

As of June 30, 2024, the Enterp rise has the following commercial paper investments that represent

5.0% or more of the total investments outside City Treasury:

2024 2023
Current assets:

Cash and investments with City Treasury $ 376,658 355,770 Cash and investments outside City Treasury 152 173 Restricted cash and investments outside City Treasury 41,778 48,717 Non-current assets:

Restricted cash and investments with City Treasury 31,613 38,574 Restricted cash and investments outside City Treasury 59,930 66,439 Total cash, cash equivalents, and investments $ 510,131 509,673

Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2024 22.2% 19.5% 16.3% 42.0%
2023 21.5% 18.0% 14.5% 46.0%
Investment maturities (in months)
Fair Value % of Investments
Toronto Domin Holding $ 19,342 19.1 %
Toyota Motor Corp 8,794 8.7

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

37 (Continued)

(4) Capital Assets
Capital assets as of June 30, 2024 and 2023 consisted of the following:

2023 Increases Decreases 2024
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 2,232,963 879,443 (233,617) * 2,878,789 Total capital assets not being depreciated and amortized 2,280,581 879,443 (233,617) 2,926,407 Capital assets being depreciated and amortized:

Facilities and improvements 3,923,910 229,886 — 4,153,796 Land improvements 6,965 3,747 — 10,712 Intangible assets 10,760 269 — 11,029 Machinery and equipment 105,661 5,060 (807) 109,914 Right-to-use lease assets 8,247 — (8,247) — Right-to-use subscription assets 1,487 — (965) 522 Total capital assets being depreciated and amortized 4,057,030 238,962 * (10,019) 4,285,973 Less accumulated depreciation and amortization for:

Facilities and improvements (1,551,767) (74,441) — (1,626,208) Land improvements (232) (1,169) — (1,401) Intangible assets (6,473) (1,229) — (7,702) Machinery and equipment (84,753) (4,379) 807 (88,325) Right-to-use lease assets (6,975) (1,272) 8,247 — Right-to-use subscription assets (1,065) (232) 963 (334) Total accumulated depreciation and amortization (1,651,265) (82,722) 10,017 (1,723,970) Total capital assets being depreciated and amortized, net 2,405,765 156,240 (2) 2,562,003 Total capital assets, net $ 4,686,346 1,035,683 (233,619) 5,488,410 * Decrease in construction work in progress is less than increase in capital assets being depreciated is due to direct additions to buildings structures and machinery and equipment by $48,080 and $5,060, respectively, offset by $47,795 in capital project write-offs, mainly related to the Channel Tunnel/Bayside Drainage Project. It was decided to shelve this project by management and expense the design costs due to higher than expected costs, reprioritization of other various projects and uncertain future regulatory requirements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

38 (Continued)

(5) Restricted Assets
The Bond indenture is a legally binding agreement between the SFPUC and U .S. Bank, N.A. (t rustee) regarding the issuance of bonds and requires all net revenues of the Enterprise (except amounts on deposit in the rebate fund) are irrevocably pledged to the punctual payment of debt service on the Wastewater revenue bonds. Accordingly, the net revenues of the Enterprise shall not be used for any other purpose while any of its revenue bonds are outstanding except as expressly permitted by the indenture. Further, all net revenues shall be deposited by the City Treasurer, by instruction of the Enterprise, in special funds designated as the Revenue Fund , which must be maintained in the City Treasury. These funds, held at the City Treasury, are recorded in the statements of net position of the Enterprise as cash and investments. Deposits in the Revenue Fund, including earnings thereon, shall be appropriated, transferred, expended, or used for the following purposes and only in accordance with the following priority:

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

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

3. Any other lawful purpose of the Enterprise.

2022 Increases Decreases 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 Right-to-use lease assets 8,247 — — 8,247 Right-to-use subscription assets 1,487 — — 1,487 Total capital assets being depreciated and amortized 3,851,876 206,426 * (1,272) 4,057,030 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) Right-to-use lease assets (4,650) (2,325) — (6,975) Right-to-use subscription assets (530) (535) — (1,065) Total accumulated depreciation and amortization (1,572,906) (79,611) 1,252 (1,651,265) Total capital assets being depreciated and amortized, net 2,278,970 126,815 (20) 2,405,765 Total capital assets, net $ 4,051,005 836,300 (200,959) 4,686,346 * 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.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

39 (Continued)

In accordance with the indenture, the Enterprise maintains certain restricted cash and investment balances in trust. Restricted assets held in trust consisted of the following as of June 30, 2024 and 2023:

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
2024 2023
Cash and investments with City Treasury:

Wastewater revenue bond construction fund $ 31,613 38,574 Cash and investments outside City Treasury:
2009 Series C Certificates of Participation - 525 Golden Gate 255 449 2009 Series D Certificates of Participation - 525 Golden Gate 1,942 1,523 2010 Series A Wastewater revenue bond fund 145 137 2010 Series B Wastewater revenue bond fund 9,027 7,153 2013 Series B Wastewater revenue bond fund 1 5 2016 Series A Wastewater revenue bond fund 3 6 2016 Series B Wastewater revenue bond fund 1 2 2018 Series A Wastewater revenue bond fund 3 6 2018 Series B Wastewater revenue bond fund 4 5 2018 Series C Wastewater revenue bond fund 2 2 2021 Series A Wastewater revenue bond fund 2,239 13,298 2021 Series B Wastewater revenue bond fund 397 2,163 2022 Series B Wastewater revenue bond fund 43 86 2023 Series A Wastewater revenue bond fund 43,212 65,673 2023 Series B Wastewater revenue bond fund 15,998 24,313 2023 Series C Wastewater revenue bond fund 8 19 2021 Series A Wastewater revenue note fund 218 152 2021 Series B Wastewater revenue note fund 1 89 Commercial Paper - Tax Exempt 76 75
2020 WIFIA Biosolids Digester 15,248 —
2020 WIFIA Southeast Treatment Plant 12,885 —
Total cash and investments outside City Treasury 101,708 115,156 Interest and other receivables:

Wastewater revenue bond construction fund including interest, prepaid, and other receivables 1,077 1,608 Due from other government for State Revolving Fund — 13,942 1,077 15,550
Total restricted assets $ 134,398 169,280

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

40 (Continued)

(6) Short-Term Debt
Under the voter approved 2002 Proposition E, the Commission and Board of Supervisors authorized the issuance of up to $750,000 in commercial paper for the purpose of r econstructing, expanding, repairing, or improving the Enterprise’s facilities. The program is made up of two components: (1) five series totaling $675,000 (aggregate principal amount) that are for the issuance of either tax -exempt or taxable commercial paper and which are each supported by a high -grade bank credit facility in the form of a letter of credit or bank liquidity facility; and (2) one series that is for a $75,000 direct bank loan that can be used to make tax -exempt or taxable draws from a high -grade bank pursuant to a revolving credit agreement. The Enterprise had $341,373 and $0 in commercial paper outstanding as of June 30, 2024 and 2023, respectively. The $341,373 was repaid by the 2024 Series CD Wastewater Revenue Bonds issued in July 2024 and has been reclassed to long -term liabilities on the financial statements as of June 30, 2024.

The commercial paper notes can be issued in the aggregate principal amounts of up to $750,000, and may be marketed and re-marketed with maturities up to 270 days and are secured by six separate bank credit facilities, as set forth below. The commercial paper notes are payable from revenues and are secured on a parity lien basis with each other, collectively the “Subordinate Obligations”. The Subordinate Obligations are secured on a subordinate basis to the payment of debt service on the Wastewater Revenue Bonds.

As of June 30, 2024, the Commercial Paper Notes are secured by the follo wing series: Series A -1 secured by a $150,000 letter of credit from Sumitomo Mitsui Bank expires on March 2, 2029. The agreement for the Series A -1 facility stipulates a commitment fee of 0.30%, on the maintenance of ratings of at least “Aa3” by Moody’s and “AA-” by S&P. Series A-2 secured by a $150,000 letter of credit facility stipulates a commitment fee of 0.27%, on the maintenance of ratings of at least “Aa3” by Moody’s and “AA -“ by S&P. Series A -4 secured by a $75,000 liquidity facility from TD Bank exp ires on July 3, 2028. The agreement for the Series A -4 facility stipulates a commitment fee of 0.21% on the maintenance of ratings of at least “Aa 2” by Moody’s and “AA “ by S&P. Series A -6 secured by a $200,000 State Street Bank expires on October 14, 2024. The agreement for the Series A -6 facility stipulates a commitment fee of 0.32%, on the maintenance of ratings of at least "Aa3” by Moody’s and “AA-“ by S&P. Series A -7 secured by a $100,000 letter of credit from Sumitomo Mitsui Bank expires on May 31, 2027. The agreement for the Series A -7 facility stipulates a commitment fee of 0.30%, on the maintenance of ratings of at least “Aa3” by Moody’s and “AA-“ by S&P.

Series R-1 secured by a $75,000 revolving credit agreement with U.S. Bank National Association expires on July 18, 2024. The revolving credit agreement stipulates an unutilized quarterly commitment fee of

0.19%, on the maintenance of ratings of at least “A a3” by Moody’s and “AA -“ by S&P. The revolving credit agreement had $0 outstanding as of June 30, 2024.

Morgan Stanley & Co. LLC, RBC Capital Markets, LLC, and U.S. Bancorp Investments, Inc. serve as dealers for the commercial paper notes. The annual fee is 0.05% paid to Morgan Stanley & Co. LL C, and U.S. Bancorp Investments, Inc. and 0.045% paid to RBC Capital Markets, LLC.

The commercial paper reimbursement agreements and the commercial paper revolving credit and term loan agreements for the Enterprise, contain a provision that in the event advances (or drawings) remain unpaid, such advances (or drawings) will convert into term loans and will be subject to the repayment provisions relating thereto.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

41 (Continued)

In accordance with GASB Statement No. 88, Certain Disc losures Related to Debt, Including Direct Borrowings and Direct Placements , the Enterprise had $408,627 and $750,000 in unused authorization as of June 30, 2024 and 2023, respectively . Significant events of default include 1) payment defaults 2) material breach of warranty, representation, or other non -remedied breach of covenants as specified in the respective agreemen ts (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, 2024 and 2023, there were no such events described herein.

(7) Changes in Long-Term Liabilities
Long-term liability activities for the years ended June 30, 2024 and 2023 are as follows:

Maturity Due
Interest (Calendar within
rate Year) 2023 Additions Reductions 2024 one year
Revenue Bonds:
2010 Series B (Build America) 4.65% - 5.82% 2040 $ 185,235 — (7,505) 177,730 7,745 2013 Series A 1.00 - 5.00 2025 575 — (575) — — 2013 Series B 4.00 - 5.00 2042 93,095 — — 93,095 — 2016 Series A 4.00 - 5.00 2046 240,580 — (5,475) 235,105 5,760 2016 Series B 4.00 - 5.00 2046 67,820 — (1,545) 66,275 1,625 2018 Series A 4.00 - 5.00 2043 221,335 — (7,160) 214,175 6,580 2018 Series B 5.00 2043 179,690 — (5,810) 173,880 5,335 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 8,325 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 339,240 — (23,789) 315,451 — 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 2,091 — (2,091) — — Total revenue bonds and notes payable 3,086,466 — (401,415) 2,685,051 35,370 Bond, loan, lease, and subscription interest payable — 32,406 — 32,406 30,300 Commercial Paper* 3.15 - 3.74 2024 — 341,373 — 341,373 — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 24,458 — (863) 23,595 900 State Revolving Fund Loans (CWSRF loans) 0.80 - 1.80 2056 318,689 1,498 (2,525) 317,662 5,629 Water Infrastructure Finance and Innovation Act (WIFIA) Loans 1.45 2062 122,357 800,074 — 922,431 — Arbitrage rebate payable 188 8,333 — 8,521 — Net other postemployment benefits liability 49,035 225 — 49,260 — Net pension liability 49,549 17,750 — 67,299 — Accrued vacation and sick leave 11,662 4,425 (3,998) 12,089 6,583 Accrued workers' compensation 7,998 2,680 (1,666) 9,012 1,685 Due to other City departments 2,620 — (2,215) 405 114 Lease liability 1,297 — (1,297) — — Subscription liability 429 — (243) 186 93 Damage claims liability 4,350 112,467 (1,734) 115,083 28,742 Pollution remediation obligation 7,800 — (1,349) 6,451 — Total $ 3,686,898 1,321,231 (417,305) 4,590,824 109,416 *As of June 30, 2024, the Enterprise had $341,373 in outstanding commercial paper which were repaid by 2024 Series CD Wastewater Revenue Bonds in July 2024. The $341,373 has been reclassified to long-term liabilities on the financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

42 (Continued)

The payments of principal and interest amounts on various bonds and notes are secured by net revenues of the Enterprise.

(a) Wastewater Revenue Bonds 2010 Series B
During fiscal year 2010, the Enterprise issued revenue bonds 2010 Series B (Federally Taxable – Build America Bonds – Direct Payment) in the amount of $192,515 with interest rates ranging from

4.7% to 5.8%. Proceeds from the bonds were used to red eem $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, 20 24 and 2023, the 2010 Series B bonds’ principal amount outstanding was $177,730 and $185,235, respectively. (b) Wastewater Revenue Bonds 2013 Series A
In January 2013, the Enterprise issued tax -exempt revenue bonds 2013 Series A in the amount of $193,400 for the purpose of refunding the remaining portion of the outstanding 2003 Series A bonds maturin g on and after October 1, 2013. The bonds carried “ Aa3” and “AA -” ratings from Maturity Due
Interest (Calendar Restated within
rate 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 loans) 0.80 - 1.80 2056 302,659 18,511 (2,481) 318,689 2,526 Water Infrastructure Finance and Innovation Act (WIFIA) Loans 1.45 2059 — 122,357 — 122,357 — Arbitrage rebate payable — 188 — 188 — Net other postemployment benefits liability 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 obligation 8,060 — (260) 7,800 — Total $ 2,702,442 1,493,062 (508,606) 3,686,898 44,414

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

43 (Continued)

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 mat urity in October 2025. The Series A bonds ha d a true interest cost of 1.2% at issuance. 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 accou nting 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. As of June 30, 2024 and 2023, the principal amount outstanding of the 2013 Series A bonds was $0 and $575, respectively.
(c) Wastewater Revenue Bonds 2013 Series B
In February 2013, the Enterprise issued revenue bonds 2013 Series B in the amount of $331,585 with interest rates ranging fr om 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 was 3.6% at issuance.

A portion of the proceeds of the 2022 Series B and 2023 Series B refunding bonds was deposited with the trustee, acting as escrow age nt 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 2013 Series B bonds were defeased by the 2022 Series B and 2023 Series B bonds for $147,920 and $90,570, respectively. The remaining bonds mature through October 1, 2042. As of June 30, 2024 and 2023, the principal amount outstanding of the 2013 Series B bonds was $93,095. (d) Wastewater Revenue Bonds 2016 Series A
In May 2016, the Enterprise issued tax -exempt revenue bonds 2016 Series A (Green Bonds) in the amount of $240,580 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects, to pay off $53,439 of outstanding commercial paper notes, to fund capitalized interest, and pay the costs of issuing the bonds. The bonds carried ratings of “AA” and “Aa 3” from S&P and Moody’s, respectiv ely, 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, 20 24 and 2023, the principal amount outstanding of the 2016 Series A bonds was $ 235,105 and $ 240,580, respectively.
(e) Wastewater Revenue Bonds 2016 Series B
In May 2016, the Enterprise issued tax -exempt revenue bonds 2016 Series B in the amount of $67,820 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds w ere used for Wastewater capital projects, to p ay 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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

44 (Continued)

“Aa3” from S&P and Moody’s, respectively , at the time of issuance . Bonds mature through Octobe r 1, 2046. The bonds h ave a true interest cost of 3.2%. As of June 30, 20 24 and 2023, the principal amount outstanding of the 2016 Series B bonds was $66,275 and $67,820, respectively. (f) Wastewater Revenue Bonds 2018 Series A
In August 2018, the Enterprise issued tax-exempt revenue bonds 2018 Series A (SSIP) (Green Bonds) in the amount of $229,050 with interest rates ranging from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects in fur therance of the SFPUC’s Sewer System Improvement Program (“SSIP”), to pay off $25 ,000 of outstanding commercial paper notes, to fund capitalized interest, and to pay the costs of issuing the bonds. The bonds carried ratings of “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, 2024 and 2023, the principal amount outstanding of the 2018 Series A bonds was $214,175 and $221,335, respectively. (g) Wastewater Revenue Bonds 2018 Series B
In August 2018, the Enterprise issued tax-exempt revenue bonds 2018 Series B ( Non-SSIP) in the amount of $185,950 with 5.0% interest rate. Proceeds from the bonds were used for Wastewater capital projects, to fund capitalized interest, and pay the costs of issuing the bonds. The bonds carried ratings of “AA” and “Aa 3” 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, 2024 and 2023, the principal amount outstanding of the 201 8 Series B bonds was $173,880 and $179,690, respectively.
(h) Wastewater Revenue Bonds 2021 Series AB
In November 2021 , the Enterprise issued tax -exempt revenue bonds , 2021 Series AB in the aggregate amount of $ 297,880. The purpose of the 2021 Series AB Bonds was to refund approximately $340,000 aggregate principal amount of commercial paper notes which funded various capital projects of the Wastewater Enterprise. The 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, 2024 and 2023, 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 approximat ely $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, 2024 and 2023, the principal amount of the 2021 Series B bonds outstanding was $37,045.
(i) Wastewater Revenue Notes 2021 Series AB
In November 2021, the Enterprise issued tax-exempt revenue (Green) notes, 2021 Sub-Series A and Sub-Series B together with an aggregate principal of $347,465 to finance a portion of the design, acquisition and construction of the Biosolids Digester Facilit y Project and Southeast Water Pollution Control Plant improvements. The SFPUC intends to pay principal of the 2021A Notes and 2021B

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

45 (Continued)

Notes from the proceeds of one or more draws under WIFIA Loan Agreements for the Biosolids Digester Facility Project and Sou theast 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 intere st cost of 0. 8%. As of June 30, 2024 and 2023, the principal amount of 2021 Series A Notes outstanding was $ 0 and $218,355, respectively.

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. 8%. As of June 30, 2024 and 2023, the principal amount of 2021 Series B Notes outstanding was $0 and $129,110, respectively.

In March 2024, the Enterprise deposited a portion of WIFIA disbursements with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated March 1, 2024 to refund and legally defease the outstanding 2021 Series A Notes and 2021 Series B Notes. 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 es crow agent were sufficient to redeem 2021 Series A Notes and 2021 Series B Notes with maturities October 1, 2025 and October 1, 2026, respectively . The defeased principal amount outstanding for 2021 Series A Notes and 2021 Series B Notes were $218,355 and $129,110, respectively, as of June 30, 2024. The refunding resulted in the recognition of a n accounting gain in an aggregate amount of $22,212.
(j) Wastewater Revenue Refunding Bonds 2022 Series B
In July 2022 , the Enterprise issued tax -exempt revenue bonds, 202 2 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 p ortion 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 2013 Series A bonds were defeased by 2022 Series B bonds for $1,870 in July 2022. 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, 2024 and 2023, the principal amount of the 2022 Series B bonds outstanding was $137,080.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

46 (Continued)

(k) Wastewater Revenue Refunding Bonds 2023 Series ABC
In April 2023, the 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, finance various capital projects of the 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 Enterprise. The Series A bonds were issued as seri al 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, 2024 and 2023, the principal amount of the 2023 Series A bonds outstanding was $530,565.

The $278,155 2023 Serie s B bonds were issued as tax -exempt bonds to refund a portion of the outstanding 2013 Series B b onds maturing on October 1 2035 through October 1, 20 39, refund approximately $156,900 of commercial paper notes for certain capital projects benefitting the Enterprise and finance certain capital projects benefitting the Enter prise. 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, gross debt service savings of $10,626, and an economic gain of $7,647 or 8.4% of refunded bonds. As of June 30, 2024 and 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 re funded bonds. As of June 30, 2024 and 2023, the principal amount of the 2023 Series C bonds outstanding was $165,660.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

47 (Continued)

(l) Future Annual Debt Service of Revenue Bonds and Refunding Bonds The following table presents the future annual debt service relating to the revenue and refunding bonds outstanding as of June 30, 2024. The interest before subsidy amounts includes the interest for 2010 Series B, 2013 Series B, 2016 Series A and B , 2018 Series A and B, 2021 Series A and B bonds, 2022 Series B , and 2023 Series A, B, and C bonds. The federal interest subsidy amounts represent 35.0% of the interest, excluding sequestration, for the 2010 Series B revenue bonds.

*The SFPUC received an IRS notice, dated April 17, 2024, 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 $ 1,910, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.

As defined in the Indenture, the principal and interest of the Enterprise’s refunding bonds are payable from its corresponding revenue as well as monies deposited in certain funds and accounts pledged thereto (see Note 5).

(m) Certificates of Participation Issued for the 525 Golden Gate Avenue Headquarters Building In October 2009, the City issued $167,670 in certificates of participation to fund the headquarters building of the SFPUC at 525 Golden Gate Avenue. The 2009 Series C were issued for $38,120 and 2009 Series D for $129,550 as “Build America Bonds” 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 d 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 i n March 2014 under a property lease in exchange for the proceeds of the sale of the certificates. The Trustee has leased the property back Interest Federal Interest
before interest net
Principal subsidy subsidy* of subsidy
Fiscal years ending June 30:
2025 $ 35,370 111,665 (3,235) 108,430
2026 38,460 109,860 (3,105) 106,755
2027 70,295 107,170 (2,968) 104,202
2028 77,225 103,460 (2,822) 100,638
2029 104,875 98,877 (2,668) 96,209
2030-2034 541,195 411,644 (10,719) 400,925
2035-2039 515,035 277,620 (5,557) 272,063 2040-2044 499,950 156,118 (527) 155,591 2045-2049 374,635 61,243 — 61,243 2050-2052 112,560 7,096 — 7,096 2,369,600 1,444,753 (31,601) 1,413,152
Less: Current portion (35,370)
Add: Unamortized bond premiums 315,451
Long-term portion as of June 30, 2024 $ 2,649,681

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

48 (Continued)

to the City for the City’s use under a project lease. The City is obligated under the project lease to pay base renta l payments and other payments to the Trustee each year during the 32 -year term of the project lease. The Commission makes annual base rental payments to the City for the building equal to annual debt service on the certificates. There are no events of default stated in this MOU.

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

The future annual debt service relating to the certificates of participation 2009 Series D outstanding as of June 30, 2024 is as follows:

*The SFPUC received an IRS notice dated April 17, 2024, 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 $ 308, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2024.

(n) Lake Merced Green Infrastructure Project CWSRF Loan In January 2016, then amended in May 2016, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (“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 CWS RF 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 Enterprise’s outstanding revenue bonds. The SFPUC has received loan disbursements to date totaling $ 6,116 and a construction period interest of $1 66 transferred to principal. As of June 30, 2024 and 2023, the principal amount outstanding of the loan was $5,775 and $5,945, respectively.

Interest Federal Interest
before interest net of
Principal subsidy subsidy* subsidy
Fiscal years ending June 30:
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 1,061 1,246 (411) 835 2030-2034 6,019 5,121 (1,690) 3,431 2035-2039 7,422 2,950 (974) 1,976 2040-2042 5,260 521 (172) 349 Total 23,595 15,455 (5,101) 10,354 Less: Current portion (900)
Long-term portion as of June 30, 2024 $ 22,695

Certificates of Participation 2009
Series D (Taxable)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

49 (Continued)

(o) Southeast Plant (SEP) 521/522 and Disinfection Upgrade Project CWSRF Loan In September 2017, then amended in December 2017 and May 2018, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP 521/522 and Disinfection Upgrade Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $40,00 7. 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 CWS RF loan will have a 30 -year term, with loan repayment beginning on e year after substantial completion of each project’s construction; substantial completion occurred in July 2019. The CWSRF loan is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $39,741. As of June 30, 2024 and 2023, the principal amount outstanding of the loan was $35,350 and $36,409, respectively. (p) North Point Facility Outfall Rehabilitation Project CWSRF Loan In September 2017, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the North Point Facility Outfall Rehabilitation Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $20,199. The loan bears an interest rate of 1.8% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was executed. The CWS RF 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 Enterprise’s outstanding reven ue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $17,706. As of June 30, 20 24 and 2023, the principal amount outstanding of the loan was $14,744 and $15,231, respectively.
(q) Southeast Plant (SEP) Primary/Secondary Clarifier Upgrade Project CWSRF Loan In September 2017 , the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP Primary/Secondary Clarifier Upgrade Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $34,446. The loan bears an interest rate of 0.8% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the ti me the agreement was executed. The CWS RF 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 Enterprise’s outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $29,197. As of June 30, 20 24 and 2023, the principal amount outstanding of the loan was $24,445 and $25,254, respectively.
(r) Oceanside Plant (OSP) Digester Gas Utilization Upgrade Project In May 2020, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the OSP Digester Gas Utilization Upgrade Project of the Sewer System Improvement Program. The CWSRF loan is in the amount of $ 54,388, which includes $4,000 of principal forgiveness, or a grant . The loan bears an interest rate of 1. 4% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was exec uted. The CWS RF loan will have a 30 -year term,

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

50 (Continued)

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 Enterprise’s outstanding revenue bonds.

The SFPUC h as received proceeds from loan disbursements to date totaling $ 33,230, which included a loan forgiveness grant of $4,000. As of June 30, 20 24 and 2023, the principal amount outstanding of the loan was $30,067 and $29,230, respectively. (s) Southeast Plant (SEP) Biosolids Digester Facilities Project In May 2020, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the S EP Biosolids Digester Facilities Project of the Sewer System Improvement Program. The CWSRF loan is in the amount of $ 132,000, which includes $4,000 of principal forgiveness, or a grant . The loan bears an interest rate of 1. 4% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was execut ed. The CWS RF 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 Enter prise’s outstanding revenue bonds . The SFPUC has received proceeds from loan disbursements to date totaling $ 132,000, which include s a $4,000 loan forgiveness grant . As of June 30, 2024 and 2023, the principal amount outstanding of the loan was $128,000. (t) Southeast Plant (SEP) New Headworks (Grit) Replacement Project In May 2021 , the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP New Headworks (Grit) Replacement Project of the Sewer System Improvement Program. The CWSRF loan is in the amount of $112,036.

The loan bears an interest rate of 1.1% which was equal to one -half of the State of California’s most recent 30-year General Obligation Bond true interest cost at the t ime the agreement was executed.

The CWSRF loan will have a 30 -year term, with loan repayment beginning one year after substantial completion of each project’s construction; substantial completion is expected in August 2027. The CWSRF loan is secured on a parity lien basis with the 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, 2024 and 2023, the principal amount outstanding of the loan was $79,281 and $78,620, respectively.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

51 (Continued)

(u) Future Annual Debt Service of State Revolving Fund Loans (CWSRF Loans) The future annual debt service relating to the SRF Loans to fund the Lake Merced Green Infrastructure Project , the North Point Facility Outfall Rehabilitation Project , t he SEP Primary/Secondary Clarifier Upgrade Project , the SEP 521/52 2 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, 2024 is as follows:

* Interest and Fees included debt administrative fees for the North Point Facility and SEP Clarifier Upgrade SRF loans.

(v) WIFIA Loan Agreement-Biosolids Digester Facility Project In July 2018, the SFPUC entered into a WIFIA Loan Agreement with the United States Environmental Protection Agency (EPA) 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 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 . In January of 2024, the SFPUC received a second disbursement of $439,995 in respect to eligible project costs. As of June 30, 202 4 and 2023, the principal amount outstanding of the loan including capitalized interest was $567,511 and $122,357, respectively.

California Clean Water State Revolving Fund Loans Principal Interest
and Fees* Total
Fiscal years ending June 30:
2025 $ 5,629 2,727 8,356
2026 5,711 2,645 8,356
2027 9,257 4,354 13,611
2028 9,390 4,221 13,611
2029 9,525 4,086 13,611
2030-2034 49,720 18,333 68,053
2035-2039 53,409 14,645 68,054
2040-2044 57,379 10,675 68,054
2045-2049 59,630 6,399 66,029
2050-2054 47,720 2,555 50,275
2055-2056 10,292 217 10,509
317,662 70,857 388,519
Less: Current portion (5,629)
Long-term portion as of June 30, 2024 $ 312,033

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

52 (Continued)

(w) WIFIA Loan Agreement-Southeast Treatment Plant Improvements In Ju ne 2020, another WIFIA Loan agreement with the United States Environmental Protection Agency in the amount of $ 513,862 was executed. 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 Cle an Water SRF Loans entered into with the California State Water Resources Control Board. The loan will bear a fixed interest rate of 1.45% for a 35 -year term, with loan repayment expected to begin in fiscal year 2025, after substantial completion of project construction.

In January of 2024, the SFPUC received disbursement of $352,573 in respect to eligible project costs. A s of June 30, 202 4 and 2023 , the principal amount outstanding of the loan including capitalized interest was $354,920 and $0, respectively. (x) WIFIA Master Loan Agreement and Project 1 Loan Agreement In April 2023, the SFPUC entered into a 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 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 Westsid e 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 SRF Loans entered into with the California State Water Resources Control Boar d.

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 EPA has approved $90,785 in project costs as of June 30, 2024. The SFPUC has not yet submitted any requests for disburse ment and there was no outstanding loan principal as of June 30, 2024 and 2023.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

53 (Continued)

(y) Future Annual Debt Service of WIFIA Loans
The future annual debt service relating to the WIFIA Loan to fund the Biosolids Digester Facility Project and the Southeast Treatment Plant Project outstanding as of June 30, 2024 is as follows:

(z) Events of Default and Remedies
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 applicab le 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 prov ider), declaring the principal and the interest accrued thereon, to be due and payable immediately . As of June 30, 2024 and 2023, there were no such events described herein. (8) Revenue Pledge
The Enterprise has pledged future revenues to repay various revenue bonds , 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, SRF, and WIFIA loans are payable through fiscal year s 2052, 2056, and 2062, respectively, and are solely from revenues of the Enterprise.

Water Infrastructure Finance and Innovation Act (WIFIA) Loans Principal Interest Total Fiscal years ending June 30:
2025 $ — — —
2026 — 4,115 4,115
2027 — 8,229 8,229
2028 — 8,229 8,229
2029 — 8,229 8,229
2030-2034 — 54,010 54,010
2035-2039 — 66,876 66,876
2040-2044 26,482 66,693 93,175
2045-2049 176,558 59,576 236,134
2050-2054 302,405 41,821 344,226
2055-2059 346,570 18,414 364,984
2060-2062 70,416 1,291 71,707
922,431 337,483 1,259,914
Less: Current portion —
Long-term portion as of June 30, 2024 $ 922,431

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

54 (Continued)

The outstanding amount of revenue bonds issued , revenue notes issued, SRF loans, and WIFIA loans, total principal and interest remaining, principal and interest paid during fiscal years 20 24 and 20 23, applicable net revenues, and funds available for debt service are as follows:

(9) Leases
The Enterprise as a lessee has entered into long -term leases for office space and communication site.

The terms and conditions for these leases vary, which range between 1-75 years.

A summary of intangible right-to-use lease s during the year s ended June 30, 202 4 and 202 3 is as follows:

2024 2023
Bonds issued with revenue pledge $ 2,369,600 2,397,670 Notes issued with revenue pledge — 347,465 Clean Water State Revolving Fund (CWSRF) loans with revenue pledge 317,662 328,776 WIFIA loans with revenue pledge 922,431 122,357 Principal and interest remaining due at the end of the year 5,462,786 4,872,238 Principal and interest paid during the year 91,601 98,811 Net revenues for the year ended June 30 188,709 178,850 Funds available for debt service 354,681 313,443 Balance Balance
July 1, 2023 Increases Decreases Remeasurements June 30, 2024 Right-to-use assets:

Building/Facility $ 8,247 — (8,247) — — Total lease assets 8,247 — (8,247) — — Less accumulated amortization:

Right-to-use assets:

Building/Facility (6,975) — 6,975 — — Total accumulated
amortization (6,975) — 6,975 — — Total lease assets, net $ 1,272 — (1,272) — — Balance Balance
July 1, 2022 Increases Decreases Remeasurements June 30, 2023 Right-to-use assets:

Building/Facility $ 8,247 — — — 8,247 Total lease assets 8,247 — — — 8,247 Less accumulated amortization:

Right-to-use assets:

Building/Facility (4,650) (2,325) — — (6,975) Total accumulated
amortization (4,650) (2,325) — — (6,975) Total lease assets, net $ 3,597 (2,325) — — 1,272

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

55 (Continued)

A summary of changes in the related lease liabilities during the years ended June 30, 2024 and 2023 is as follows:

Future annual lease payments as of June 30, 2024 and 2023:

There were no future lease payments or balances as of June 30, 2024.

Variable Lease Payments
Variable lease payments, other than those payments that depend on an index or rate or are fixed in substance, are excluded for the measurement of the lease liability. Such amounts are recognized as lease expenses in the period in which the obligation for those payments is incurred.

Certain facility rental leases require the Enterprise to make variable lease payments that based on usage, related to the property taxes levied on the lessor , and insurance payments made by the lessor, these amounts are generally determined annually. The amounts recognized as expense for variable lease payments not included in the measurement of the lease liability were $4 and $ 673 during the years ended June 30, 2024 and 2023, respectively.

Amounts
Balance Balance Due Within
July 1, 2023 Additions Remeasurements Deductions June 30, 2024 One Year Lease liabilities $ 1,297 — — (1,297) — — Total $ 1,297 — — (1,297) — — Amounts
Balance Balance Due Within
July 1, 2022 Additions Remeasurements Deductions June 30, 2023 One Year Lease liabilities $ 3,638 — — (2,341) 1,297 1,297 Total $ 3,638 — — (2,341) 1,297 1,297 Principal Interest
Year ending June 30: amount amount Total
2024 $ 1,297 6 1,303
1,297 6 1,303
Less: Current portion (1,297)
Long-term portion as of June 30, 2023 $ —

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

56 (Continued)

Wastewater Enterprise as Lessor
The Enterprise has leased facilities, easements, communication site and equipment to varies tenants.

The terms and conditions for these leases varies, which ranges between 1–65 years.

Variable payments include percentage of sales, or payments depended on an index made by the lessee; these amounts are generally determined periodically. The Enterprise did no t incur revenue related to residual value guarantees or lease termination p enalties. The total amounts for lease revenue, interest revenue, and other lease-related revenues recognized during the years ended June 30, 2024 and 2023 were $37 and $7, respectively.

Principal and interest requirements to maturity for the lease receivable on June 30, 2024 are as follows:

(10) Subscription-Based Information Technology Arrangements Wastewater Enterprise as Subscriber
The Enterprise has noncancellable subscription arrangements (similar to a lease) for the right to use various informa tion technology hardware and software (SBITAs). The terms and conditions for these subscriptions vary, which ranges between 1-5 years.

A summary of intangible right -to-use subscription IT assets during the y ears ended June 30, 202 4 and June 30, 2023 is as follows:

Year ending June 30: Principal Interest Total
2025 $ 226 32 258
2026 241 26 267
2027 257 19 276
2028 215 12 227
2029 105 7 112
2030-2033 201 6 207
$ 1,245 102 1,347
Balance Balance
July 1, 2023 Increases Decreases Remeasurements June 30, 2024 Subscription assets $ 1,487 — (965) — 522 Less accumulated amortization: (1,065) — 731 — (334) Total subscription IT assets, net $ 422 — (234) — 188 Balance Balance
July 1, 2022 Increases Decreases Remeasurements June 30, 2023 Subscription assets $ 1,487 — — — 1,487 Less accumulated amortization: (530) (535) — — (1,065) Total subscription IT assets, net $ 957 (535) — — 422

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

57 (Continued)

A summary of changes in the related subscription liabilities during the years ended June 30, 2024 and June 30, 2023 is as follows:

Future annual subscription payments as of June 30, 2024 and 2023 are as follows:

(11) Employee Benefits
(a) Pension Plan
The Enterprise participates in a cost -sharing multiple-employer defined benefit pension Plan (SFERS Plan). The SFERS Plan is administered by the San Francisco City and County Employees’ Retirement System (SFERS). Contributions are recognized in the period in which they are due pursuant to legal requirements. For purposes of measuring the net pension liability, defe rred 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. Benefit payments (including Amounts
Balance Balance Due Within
July 1, 2023 Additions Remeasurements Deductions June 30, 2024 One Year SBITA IT liabilities $ 429 — — (243) 186 93 Total $ 429 — — (243) 186 93 Amounts
Balance Balance Due Within
July 1, 2022 Additions Remeasurements Deductions June 30, 2023 One Year SBITA IT liabilities $ 944 — — (515) 429 243 Total $ 944 — — (515) 429 243 Principal Interest
Year ending June 30: amount amount Total
2025 $ 93 2 95
2026 93 1 94
186 3 189
Less: Current portion (93)
Long-term portion as of June 30, 2024 $ 93
Principal Interest
Year ending June 30: amount amount Total
2024 $ 243 4 247
2025 93 2 95
2026 93 1 94
429 7 436
Less: Current portion (243)
Long-term portion as of June 30, 2023 $ 186

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

58 (Continued)

refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

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

SFERS Plan – The City is an employer of the SFERS Plan with a proportionate share of 94.85% as of June 30, 2023 (measurement date) , and 94.87% as of June 30, 2022 (measurement date ), a

0.02% decrease from prior year . The Enterprise’s allocation percentage was determined based on the Enterprise’s employer contributions divided by the City’s total employer contributions for fiscal years 2023 and 2022. The Enterprise’s net pension liability, deferred outflows/inflows of resources related to pensions, amortizati on of deferred outflows/inflows, and pension expense is based on its allocated percentage. The Enterprise’s allocation of the City’s proportionate share was 1.95% as of June 30, 2023 and 1.99% as of June 30, 2022 (measurement dates).

Plan Description – The SFERS Plan provides basic service retirement, disability, and death benefits based on specified percentages of defined final average monthly salary and provides annual cost of living adjustments (COLA) after retirement. The SFERS Plan also provides pension conti nuation benefits to qualified survivors. The San Francisco City and County Charter and the Administrative Code are the authorities which establish and amend the benefit provisions and employer obligations of the SFERS Plan. The Retirement System issues a p ublicly available financial report that includes financial statements and required supplementary information for the SFERS Plan. That report may be obtained on the Retirement System’s website https://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.

Valuation Date (VD) July 1, 2022 updated to June 30, 2023 Measurement Date (MD) June 30, 2023
Measurement Period (MP) July 1, 2022 to June 30, 2023
Valuation Date (VD) July 1, 2021 updated to June 30, 2022 Measurement Date (MD) June 30, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022
Fiscal Year 2024
Fiscal Year 2023

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

59 (Continued)

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

Benefits and refunds are recognized when due and payable in accordance with the terms of the SFERS Plan. The Retirement System pays benefits according to the category of employment and the type of benefit coverage provided by the City and County. The four main categories of SFERS Plan members are:
a) Miscellaneous Non -Safety Members – staff, operational, supervisory, and all other eligib le 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 injur y 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 C onsumer Price Index with increases capped at 2%.

The SFERS Plan provides for a Supplemental COLA in years when there are sufficient “excess” investment earnings in the SFERS Plan. The maximum benefit adjustment each July 1 is 3.5% including the Basic COLA. Proposition A passed on November 8, 2022 making members wh o retired before November 6, 1996 (Pre96 Retirees) eligible for a Supplemental COLA, even if SFERS is not fully funded based on the market value of assets. Also, Pre96 Retirees’ base retirement allowances were adjusted to account for Supplemental COLAs not received in 2013, 2014, 2017, 2018, and 2019 due to the full funding requirement. Effective with Proposition A, Pre96 Retirees receive the same Supplemental COLAs as the after November 6, 1996 and before January 7, 2012 members.

For all members hired before January 7, 2012, all Supplemental COLAs paid to them in retirement benefits will continue into the future even where an additional Supplemental COLA is not payable in any given year. For members hired on and after January 7, 2012, a Supplemental COLA will only be paid to retirees when the SFERS Plan is fully funded on a market value of asset basis and in addition for these members, Supplemental COLAs will not be permanent adjustments to retirement benefits.

That is, in years when a Supplemental COLA is not paid, all previously paid Supplemental COLAs will expire.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

60 (Continued)

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

7.5% to 11.5% and 7.5% to 12.0% as a percentage of gross covered salary in fiscal years 2024 and 2023. Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contr ibutions on a pretax basis. The Enterprise is required to contribute at an actuarially determined rate. Based on the July 1, 2022 actuarial report, the required employer contribution rates for fiscal year 2024 ranged from 15.24% to 18.24%. Based on the July 1, 20 21 actuarial report, the required employer contribution rates for fiscal year 2023 ranged from 17.85% to 21.35%.

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, 20 23 and 2022 (measurement periods) was $638,003 and $729,578, respectively. The Enterprise’s allocation of employer contributions for fiscal years 2023 and 2022 was $12,383 and $14,543, respectively.

Pension Liabilities, Pension Expenses, Deferred Outflows , and Inflows of Resources Related to Pensions
Fiscal Year 2024
As of June 30, 2024, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $3,456,687. The City’s net pension liability for each of its cost-sharing plans is measured as a proportionate share of the plans’ net pension liability. The net pension liability of the SFERS Plan is measured as of June 30, 202 3 (measurement date), and the total pension liability for the SFERS Plan used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2022 rolled forward to June 30, 202 3 using standard update procedures. The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the City’s long -term share of contribution s to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The Enterprise’s allocation of the City’s proportionate share of the net pension liability for the SFERS Plan as of June 30, 2024 was $67,299.

For the year ended June 30, 2024, the City’s recognized pension expense was $667,276 , including amortization of deferred outflow s/inflows related pension items . The Enterprise’s allocation of pension expense including amortization of deferred outflows/infl ows related pension items was $14,091. Pension expense increased from the prior year, largely due to the amortization of deferrals.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

61 (Continued)

As of June 30, 202 4, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

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

Fiscal Year 2023
As of June 30, 2023, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $2,552,996. The City’s NPL for each of its cost -sharing plans is measured as a proportionate share of the plans’ NPL. The net pension liability of the SFERS Plan is measured as of June 30, 2022 (measurement date), and the total pension liability for the SFERS Plan used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2021 rolled forward to June 30, 2022 using standard update procedures. The City’s proportion of the net pension liability for the SFERS Plan was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The Enterprise’s allocation of the City’s proportionate share of the net pension liability for the SFERS Plan as of June 30, 2023 was $49,549.

For the year ended June 30, 2023, the City’s recognized pension expense was $1,771, including amortization of deferred outflows/inflows related pension items . The Enterprise’s allocation of pension expense including amortization of deferred outflows/inflow s related pension items was ($1,167).

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contributions subsequent to measurement date $ 12,402 — Differences between expected and actual experience 7,231 — Changes in assumptions 8,710 3,974 Net difference between projected and actual earnings on pension plan investments 12,736 —
Change in employer's proportion 1,606 81
Total $ 42,685 4,055
Fiscal Year 2024 Schedule of Deferred Outflows and Inflows of Resources Fiscal years
Deferred
Outflows/(Inflows)
of Resources
2025 $ 769
2026 (3,318)
2027 25,168
2028 3,609
Total $ 26,228

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

62 (Continued)

As of June 30, 2023, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

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

Actuarial Assumptions
Fiscal Year 2024
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability as of June 30, 2023 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2022 actuarial valuation. Refer to July 1, 2022 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website https://mysfers.org.

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contributions subsequent to measurement date $ 12,383 — Differences between expected and actual experience 4,523 — Changes in assumptions 12,874 3,864 Net difference between projected and actual earnings on pension plan investments — 6,159
Change in employer's proportion 2,812 —
Total $ 32,592 10,023
Fiscal Year 2023 Schedule of Deferred Outflows and Inflows of Resources Fiscal years
Deferred
Outflows/(Inflows)
of Resources
2024 $ (1,574)
2025 (2,830)
2026 (6,905)
2027 21,495
Total $ 10,186

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

63 (Continued)

Changes of Assumptions SFERS Plan – There were no changes in the discount rate for the measurement period ended June 30, 2023. The municipal bond yield increased from 3.54% to

3.65%.

Mortality rates for health Misce llaneous 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, 2023 measurement date were 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, 2022.

Fiscal Year 2023
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability as of June 30, 2022 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 2021 actuarial valuation. Refer to July 1, 2021 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website https://mysfers.org.

Key Actuarial Assumptions
Valuation Date July 1, 2022 updated to June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 3.65% as of June 30, 2023

3.54% as of June 30, 2022
Bond Buyer 20-Bond GO Index, June 30, 2022 and June 29, 2023 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based on employee classification and years of service Discount Rate 7.20% as of June 30, 2023

7.20% as of June 30, 2022
Administrative Expenses 0.60% of payroll as of June 30, 2023

0.60% of payroll as of June 30, 2022
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2023 2.00% 1.90% 2.50% 3.60%
June 30, 2022 2.00% 1.90% 2.50% 3.60%
SFERS Plan

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

64 (Continued)

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 a ctuarial assumptions used at the June 30, 2022 measurement date w ere based upon the result of a demographic experience study for the period July 1, 2014 through June 30, 2019 and an economic experience as of July 1, 2021.

Discount Rate
Fiscal Year 2024
SFERS Plan – The beginning and end of year measurements are based on differe nt assumptions and contribution methods that may result in different discount rates. The discount rate was 7.20% as of June 30, 2023 and 2022 (measurement date).

The discount rate used to measure the total pension liability as of June 30, 202 3 was 7.20%. T he projection of cash flows used to determine the discount rate assumed that SFERS plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 202 2 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 y ears and changes to inactive member benefits, including Supplemental COLAs, are amortized over 5 years. However, the change Key Actuarial Assumptions
Valuation Date July 1, 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 3.54% as of June 30, 2022

2.16% as of June 30, 2021
Bond Buyer 20-Bond GO Index and June 30, 2022
Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based on employee classification and years of service Discount Rate 7.20% as of June 30, 2022

7.40% as of June 30, 2021
Administrative Expenses 0.60% of payroll as of June 30, 2022

0.60% of payroll as of June 30, 2021
Basic COLA
Old Miscellaneous and
All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
and A8.596
Old Police & Fire
Charters A8.559
and A8.585
June 30, 2022 2.00% 1.90% 2.50% 3.60%
June 30, 2021 2.00% 1.90% 2.50% 3.60%
SFERS Plan

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

65 (Continued)

due to Proposition A was amortized over 10 years. In the July 1, 2016 valuation, the increase in the unfunded actuarial liability attributable to the Supplemental COLAs granted effective July 1, 2013 was amortized over 17 years. For the July 1, 2021 valuation, all amortization periods for actuarial gains and losses and prio r assumption changes were reduced to 5 years. The assumption change effective July 1, 2021 is amortized over 20 years. Future experience gains and losses and assumption or method changes on or after July 1, 2021 are amortized over 20 years. If the plan becomes 100% funded based on the actuarial value of assets, any new net surpluses are amortized over a rolling 20 -year period. All amortization schedules are established as a level percentage of payroll, so payments increase 3.25% each year. The unfunded actu arial 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 curr ent members when they are expected to be granted. For members who were hired before Proposition C passed, a Supplemental COLA is granted if the actual investment earnings during the year exceed the expected investment earnings on the actuarial value of ass ets. For members who were hired after Proposition C passed, the market value of assets must also exceed the actuarial liability 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. Most members receive a 1.50% Supplemental COLA when a full Supplemental COLA is granted.

No Supplemental COLA was payable as of July 1, 2023 due to the unfavorable investment return for fiscal year 2023. The table below shows the net assumed Supplemental COLA for members with a

2.00% Basic COLA for sample years.

The projection of benefit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.

Based on these assumptions, the Retirement System’s fiduciary net position was projected to be available to make projected future benefit payments for current members through 2104. 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

3.65% to the extent they are not available. The single equivalent rate used to determine the total pension liability as of June 30, 2023 was 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. Exp ected 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 retu rn by weighting the expected future real rates of return by the target asset Assumed Supplemental COLA for Members with a 2.00% Basic COLA Fiscal years
2025+ 0.75% 0.50%
96 - Prop C
Before 11/6/96
or After Prop C

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

66 (Continued)

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 e xpense and inflation) for each major asset class are summarized in the following table.

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 the June 30, 2022 (measurement date) and 7.40% as of June 30, 2021 (measurement date).

The discount rate used to measure the total pension liability as of June 30, 202 2 was 7.20%. The projection of cash flows used to determine the discount rate assumed that SFERS plan member contributions will continue to be made at the rates specified in the Charter. Employer contributions were assumed to be made in accordance with the contribution policy in effect for July 1, 202 1 actuarial valuation. That policy includes contributions equal to the employer portion of the Entry Age normal co sts 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 actu arial 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 Asset Class
Target
Allocation
Global Equity 37.0 % 4.6 %
Private Equity 23.0 7.8
Private Credit 10.0 5.8
Real Assets 10.0 5.3
Absolute Returns 10.0 4.4
Treasuries 8.0 1.7
Liquid Credit 5.0 3.5
Leverage -3.0 1.4
Total 100.0
Long-Term Expected Real
Rate of Return

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

67 (Continued)

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, 2022 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 ben efit payments to current members for determining the discount rate includes the payment of anticipated future Supplemental COLAs.

Based on these assumptions, the Retirement System’s fiduciary net position was projected to be available to make projected fut ure 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 bon d 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 was 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 i nflation. 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.

Assumed Supplemental COLA for Members with a 2.00% Basic COLA Fiscal years
2024 0.75 % 0.70 %
2025 0.75 0.60
2026 0.75 0.60
2027+ 0.75 0.50
96 - Prop C
Before 11/6/96
or After Prop C

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

68 (Continued)

Sensitivity of Proportionate Share of the Net Pension Liability (NPL) to Changes in the Discount Rate – The following presents the Enterprise’s allocation of the employer’s proportionate share of the net pension liability for the SFERS Plan, calculated using the discount rate, as well as what the 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.

Fiscal Year 2024

Fiscal Year 2023

(b) Other Postemployment Benefits (OPEB)
The Enterprise 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 . The plan 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 t hrough negotiations between the City and the respective bargaining units. The City does not issue a separate report on its other postemployment benefits plan.

Asset Class
Target
Allocation
Long-Term Expected
Real Rate of Return
Global Equity 37.0 % 4.8 %
Private Equity 23.0 7.9
Private Credit 10.0 5.8
Real Assets 10.0 4.7
Hedge Funds/Absolute Returns 10.0 3.4
Treasuries 8.0 0.6
Liquid Credit 5.0 3.5
Leverage -3.0 0.6
Total 100.0
Employer
1% Decrease Share
of NPL @ 6.20%
Share of NPL
@ 7.20%
1% Increase Share of
(NPA) @ 8.20%
Wastewater 157,852$ 67,299 (7,362) June 30, 2023 (measurement date)
Employer
1% Decrease Share
of NPL @ 6.20%
Share of NPL
@ 7.20%
1% Increase Share of
(NPA) @ 8.20%
Wastewater 135,684$ 49,549 (21,459) June 30, 2022 (measurement date)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

69 (Continued)

GASB Statement No. 75 requires that reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.

The Enterprise’s proportionate share percentage of the Plan was determined based on its percentage of citywide “pay -as-you-go” contributions for the years ended June 30, 20 23 and 2022.

The Enterprise’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 the Enterprise’s allocated percentage. The Enterprise’s proportionate share of the City’s OPEB elements as of June 30, 2023 and 2022 was 1.26% and 1.31%, respectively.

Benefits
Permanent full-time and elected employees are eligible to retire and receive postretirement health insurance benefits when they are eligible for retirement benefits from the City and County of San Francisco’s Retirement System. The eligibility requirements are as follows:

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 1 Age 53 with 20 years of credited service, age 60 with 10 years of credited service, or age 65 for Miscellaneous members hired on or after January 7, 2012, under charter Section 8.603. 2 No service requirement for Safety members retiring under the industrial disability benefit or for surviving spouses/domestic partners of those killed in the line of duty.

Retiree healthcare benefits are administered by the San Francisco Health Service System and include the following:

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 UnitedHealthcare Dental Vision: Vision benefits are provided under the medical insurance plans and are administered by Vision Service Plan.

Projections of the sharing of benefit related costs are based on an established pattern of practice.

Valuation Date (VD) June 30, 2022 updated to June 30, 2023 Measurement Date (MD) June 30, 2023
Measurement Period (MP) July 1, 2022 to June 30, 2023
Valuation Date (VD) June 30, 2022
Measurement Date (MD) June 30, 2022
Measurement Period (MP) July 1, 2021 to June 30, 2022
San Francisco Health Service System Retiree Plan - Single Employer Fiscal Year 2024
Fiscal Year 2023

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

70 (Continued)

Contributions
Benefits provided under the Plan are currently paid through “pay -as-you-go” funding. Additionally, under the City Charter, active officers and employees of the City who commenced employment on or after January 10, 2009, shall contribute to the Retiree Health Care Trust Fund (Trust Fund) a percentage of compensation not to exceed 2% of pre -tax compensation. The City shall contribute 1% of compensation for officers and employees who commenced employment on or after January 10, 2009 until the City’s GASB Actuary has determined that the City’s portion of the Trust Fund is fully funded. At that time, the City’ s 1% contribution shall cease, and officers and employees will each contribute 50% of the maximum 2% of pre-tax compensation.

Starting July 1, 2016, active officers and employees of the City who commenced employment on or before January 9, 2009, shall cont ribute 0.25% of pre -tax compensation into the Trust Fund.

Beginning on July 1 st of each subsequent year, the active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute an additional 0.25% of pre - tax compensation up to a maximum of 1%. Starting July 1, 2016, the City shall contribute 0.25% of compensation into the Trust Fund for each officer and employee who commenced employment on or before January 9, 2009. Beginning on July 1 st of each subsequent year, the City shall contribute an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment on or before January 9, 2009. When the City’s actuary has determined that the City’s portion of the Trust Fund is f ully 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.

For the fiscal year s ended June 30, 20 24 and 2023, the City’s funding was based on “pay -as-you- go” plus a contribution of $48,779 and $45,241 to the Retiree Healthcare Trust Fund , respectively.

The “pay-as-you-go” portion paid by the City was $ 229,922 for a total contribution of $ 278,701 for the fiscal year end ed June 30, 20 24, and $ 215,408 for a total contribution of $260,649 for the fiscal year ended June 30, 2023. The Enterprise’s proportionate share of the C ity’s contributions for fiscal year 2024 was $3,498, and for fiscal year 2023 was $3,412.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

71 (Continued)

OPEB Liability, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB Fiscal Year 2024
As of June 30, 202 4, the City reported net OPEB liability related to the Plan of $3,924,832. The Enterprise’s proportionate share of the City’s net OPEB liability as of June 30, 2024 was $49,260.

For the year ended June 30, 2024, the City’s recognized OPEB expense was $261,158. Amortization of the City’ s deferred outflows and inflows is included as a component of OPEB expense. The Enterprise’s proportionate share of the City’s OPEB expense(income) was ($647).

As of June 30, 202 4, the Enterprise reported its proportionate share of the City’s deferred outf lows and inflows of resources related to OPEB from the following sources:

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

Fiscal Year 2023
As of June 30, 2023, the City reported net OPEB liabilit y related to the Plan of $3,746,270. The Enterprise’s proportionate share of the City’s net OPEB liability as of June 30, 2023 was $49,035.

For the year ended June 30, 2023, the City’s recognized OPEB expense was $256,974. Amortization of the City’s deferred outflo ws and inflows is included as a component of OPEB expense. The Enterprise’s proportionate share of the City’s OPEB expense was $4,374.

Wastewater #REF!
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date 3,498$ -$ Differences between expected and actual experience 2,116 5,711 Changes in assumptions 1,432 -
Net difference between projected and actual earnings
on plan investments 377 -
Change in proportion 5,393 98
Total 12,816$ 5,809$
Year ending June 30:
2025 1,056$
2026 956
2027 829
2028 42
2029 626
Total 3,509$

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

72 (Continued)

As of June 30, 202 3, the Enterprise reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

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

Wastewater #REF!
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date 3,412$ -$ Differences between expected and actual experience 1,089 8,164 Changes in assumptions 2,093 -
Net difference between projected and actual earnings
on plan investments 789 -
Change in proportion 4,110 122
Total 11,493$ 8,286$
Year ending June 30:
2024 (137)$
2025 (124)
2026 369
2027 236
2028 (549)
Total (205)$

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

73 (Continued)

Actuarial Assumptions
Fiscal Year 2024
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2023 (measurement date) is provided below:

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

Key Actuarial Assumptions
Valuation Date June 30, 2022 updated to June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 7.24% trending down to ultimate rate of 3.94% in 2075 Medicare trend starts at 7.24% trending down to ultimate rate of 3.94% in 2075 10-County average trend starts at 5.00% trending down to ultimate rate of 3.94% in 2075 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc.: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Non-Annuitants
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0.979
Healthy Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1.044
Disabled Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0.995
Beneficiaries
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0.977
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ended June 30, 2019.

Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

74 (Continued)

Fiscal Year 2023
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2022 (measurement date) is provided below:

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

Key Actuarial Assumptions
Valuation Date June 30, 2022
Measurement Date June 30, 2022
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 7.74% trending down to ultimate rate of 3.93% in 2076 Medicare trend starts at 7.74% trending down to ultimate rate of 3.94% in 2076 10-County average trend starts at 5.00% trending down to ultimate rate of 3.94% in 2076 Vision and expenses trend remains a flat 3.0% for all years Expected Rate of Return on Plan Assets 7.00%
Salary Increase Rate Wage Inflation Component: 3.25%
Additional Merit Component (dependent on years of service):

Police: 0.50% - 7.50%
Fire: 0.50% - 14.00%
Muni Drivers: 0.00% - 16.00%
Craft: 0.50% - 3.75%
Misc.: 0.30% - 5.50%
Inflation Rate Wage Inflation: 3.25% compounded annually Consumer Price Inflation: 2.50% compounded annually
Mortality Tables
Non-Annuitants
Published Table Male Female
Miscellaneous PubG-2010 Employee 0.834 0.866
Safety PubS-2010 Employee 1.011 0.979
Healthy Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubS-2010 Employee 0.947 1.044
Disabled Retirees
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.045 1.003
Safety PubS-2010 Employee 0.916 0.995
Beneficiaries
Published Table Male Female
Miscellaneous PubG-2010 Employee 1.031 0.977
Safety PubG-2010 Employee 1.031 0.977
Base mortality tables are developed by multiplying a published table by an adjustment factor developed in SFERS experience study for the period ended June 30, 2019.

Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

75 (Continued)

Sensitivity of Liabilities to Changes in the Healthcare Cost Trend Rate and Discount Rate The following presents the Enterprise’s proportion ate share of the City’s net OPEB liability calculated using the healthcare cost trend rate, as well as what the Enterprise’s allocation of the City’s net OPEB liability would be if it were calculated using a healthcare cost trend rat e that is 1% lower or 1% higher than the current rate:

Discount Rate
Fiscal Year 2024
The discount rate used to measure the Total OPEB Liability as of June 30, 202 3 was 7.0%. Based on the assumption that plan member contributions will continue to be made at the rates specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long -term expected rate of return on plan i nvestments was applied to all periods of projected benefit payments to determine the total OPEB liability.

The long -term expected rate of return on OPEB plan investments was 7.0% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10 -year and 20 -year capital market assumptions f or the Trust Fund’s asset allocation. Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

Fiscal Year 2024 Healthcare Cost
Employer -1.00% Trend Rate 1.00%
Wastewater $ 41,892 $ 49,260 $ 58,404 Fiscal Year 2023 Healthcare Cost
Employer -1.00% Trend Rate 1.00%
Wastewater $ 41,948 $ 49,035 $ 57,824

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

76 (Continued)

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

Fiscal Year 2023
The discount rate used to measure the Total OPEB Liability as of June 30, 202 2 was 7.0%. Based on the assumption that plan member contributions will continue to be m ade at the rates specified in the Charter, it was determined that the Plan’s projected fiduciary net position will be greater than or equal to the benefit payments projected for each future period. As such, the long -term expected rate of return on plan inv estments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Asset Class
Equities
U.S. Large Cap 25.0% 6.1%
U.S. Small Cap 2.0% 6.7%
Developed Market Equity (non-U.S.) 13.0% 7.2%
Emerging Market Equity 10.0% 7.4%
Credit
Bank Loans 3.0% 4.4%
High Yield Bonds 3.0% 4.7%
Rate Securities
Investment Grade Corporate Bonds 7.0% 2.8%
Short-term Treasury Inflation-Protected Securities (TIPS) 5.0% 1.0% Private Markets
Private Equity 10.0% 8.4%
Private Debt 5.0% 6.4%
Core Private Real Estate 5.0% 3.9%
Infrastructure (Core Private) 2.0% 5.2%
Risk Mitigating Strategies
Global Macro 10.0% 3.1%
Total 100.0%
Long-term
Expected Real
Rate of Return
Target
Allocation
Employer
1% Decrease Share
of NOL @ 6.00%
Discount Rate @

7.00%
1% Increase Share
of NOL @ 8.00%
Wastewater 57,654$ 49,260$ 42,377$ June 30, 2023 (measurement period)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

77 (Continued)

The long -term expected rate of return on OPEB plan investments was 7.0% based on expected future returns and historical returns experienced by the Trust Fund. Expected future returns were determined based on 10 -year and 20 -year capital market assumptions f or the Trust Fund’s asset allocation. Target allocation for each major asset class and best estimates of geometric real rates of return are summarized in the following table:

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

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

Asset Class
Equities
U.S. Large Cap 28.0% 6.8%
U.S. Small Cap 3.0% 7.4%
Developed Market Equity (non-U.S.) 15.0% 7.5%
Emerging Market Equity 13.0% 8.4%
Credit
Bank Loans 3.0% 4.0%
High Yield Bonds 3.0% 4.4%
Emerging Market Bonds 3.0% 4.2%
Rate Securities
Investment Grade Bonds 9.0% 2.4%
Long-term Government Bonds 4.0% 2.8%
Short-term Treasury Inflation Protected Securities 4.0% 1.9% Private Markets
Private Equity 5.0% 10.0%
Core Private Real Estate 5.0% 6.1%
Risk Mitigating Strategies
Global Macro 5.0% 5.0%
Total 100.0%
Long-term
Expected Real
Rate of Return
Target
Allocation
Employer
1% Decrease Share
of NOL @ 6.00%
Discount Rate @

7.00%
1% Increase Share
of NOL @ 8.00%
Wastewater 57,086$ 49,035$ 42,429$ June 30, 2022 (measurement period)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

78 (Continued)

(12) Related Parties
Various common costs incurred by the Commission are allocated among the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF , and the Water Enterprise. The allocations are based on the Commission management’s best estimate and may change from year to year depending on the activities incurred by each Enterprise and the information available. The administrative costs of $35,943 or

28.8%, which included COVID -19 Project expenses , and $32,909 or 28.8% were allocated to the Enterprise for the years ended June 30, 2024 and 2023, respectively.

The City performs certain administrative services such as maintenance of accounting records and investment of cash for all fund groups within the City. The various funds are charged for these services based on the City’s indirect cost allocation plan.

The Enterprise purchases electricity from Hetch Hetchy Power at market rates. This amount, totaling $12,377 and $14,876 for the years ended June 30, 2024 and 2023, respectively, has been included in services provided by other departments in the accompanying financial statements.

The Enterprise purchases water from Water Enterprise at retail rates. This amount, totaling $1,701 and $1,552 for the years ended June 30, 2024 and 2023, respectively, has been included in services provided by other departments in the accompanying financial statements.

The Enterprise provides sewer services to other City departments at non -residential rates established by the Commission, and through the Customer Services Bureau, bills and collects sewer service charges on behalf of the Enterprise.

The City’s Department of Public Works provides certain engineering and other services to the Enterprise and charges amounts designed to recover its costs. These s ervices are primarily related to street cleaning, engineering, building repair, and sewer repair. These amounts totaling approximately $8,711 and $9,156 for the years ended June 30, 20 24 and 2023, respectively, have been included in services provided by other departments in the accompanying financial statements.

A variety of other City departments provide services such as purchasing, legal, data processing, telecommunications, and human resources to the Enterprise an d charge amounts designed to recover those departments’ costs. These charges totaling approximately $16,757 and $15,415 for the years ended June 30, 2024 and 20 23, respectively, have been included in services provided by other departments in the accompanying financial statements.

As of June 30, 2024 and 2023, the Enterprise has payables in the amount of $0 and $ 2,102 respectively, to MTA related to Walsh settlement and $405 and $518, respectively, which is associated with the SFPUC Headquarters Living Machine system.

As of June 30, 2024 and 2023, the Enterprise has interfund receivable from DPW for the Mission Bay South custom work project of $82 and $128, respectively.

SFPUC’s 75-year lease agreement with the San Francisco Recreation and Parks Department, for the use of parking spaces for its fleet of vehicles at the Civic Center Garage, commenced on February 1, 2011. Total payment under this agreement is $6,274, which w as fully made as of fiscal year 2015. The expenses and prepayments among the three SFPUC Enterprises are based on 525 Golden Gate occupancy. As of June 30, 20 24, the Enterprise’s allocable shares of expenses and prepayment were $21 and $1,103, respectively, and as of June 30, 2023 were $21 and $1,124, respectively.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

79 (Continued)

SFPUC’s 30-year lease agreement with the San Francisco Port Commission, for the use of approximately 4,833 square feet of land located within Seawall Lot 345 and within the public r ight-of-way on Terry A.

Francois Boulevard and on Illinois Street, commenced on September 1, 2018. SFPUC intends to use the premises for the reconstruction of the Mariposa Pump Station and Force Main Improvements. Total payment under this agreement is $ 502, which was fully made as of fiscal year 201 9. As of June 30, 2024, the Enterprise’s expenses and prepayment were $17 and $405, respectively, and as of June 30, 2023 were $17 and $421, respectively.
(13) Risk Management
The Enterprise’s Risk Management program includes both self -insured (i.e., self -retention) and insured exposures at risk. Risk assessments and purchasing of insurance coverage are collaboratively coordinated by SFPUC Risk Management and the City’s Office of Risk Management. With certain exceptions, the City and the Enterprise’s general approach is to first evaluate the exposure at risk for self-insurance. Based on this analysis, internal mitigation strategies and financing through a self - retention mechanism is generally more economical as the SFPUC in coordination with the City Attorney’s Office, administers, adjusts, settles, defends, and pays claims from budgeted resources (i.e., pay -as-you- go fund). When economically more viable or when required by debt fi nancing covenants, the Enterprise obtains commercial insurance. At least annually, the City actuarially determines general liability and workers’ compensation risk exposures. The Enterprise does not maintain commercial earthquake coverage, with certain minor exceptions, such as a sub -limit for fire-sprinkler leakage due to earthquake under the SFPUC Property Insurance program . In the past three years, there w ere no settlements that exceeded insurance coverage.

(a) General Liability
Through coordination with the Controller ’s Office and the City Attorney’s Office, the general liability risk exposure is actuarially determined and is addressed through pay -as-you-go funding as part of the budgetary process. Associated costs and estimates are recorded as expenses as required under GAAP for financial statement purposes for both the Enterprise and the City and County of San Francisco’s Annual Comprehensive Financial Report. The claim expense allocations are determined Risk Types Coverage Approach
(a) General Liability Self-Insured
(b) Workers’ Compensation Self-Insured through City-wide Pool (c) Property Purchased Insurance and Self-Insured
(d) Public Officials Liability Purchased Insurance
(e) Employment Practices Liability Purchased Insurance
(f) Cyber Liability Purchased Insurance
(g) Crime Purchased Insurance
(h) Electronic Data Processing Purchased Insurance and Self-Insured (i) Surety Bonds Purchased and Contractual Risk Transfer (j) Errors and Omissions Purchased and Contractual Risk Transfer (k) Builders’ Risk Contractual Risk Transfer
(l) Tenants' and Users' Liability Insurance Policy Purchased Insurance (m) Active Assailant Policy Purchased Insurance

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

80 (Continued)

based on actuarially determined anticipated claim payments and the projected timing of disbursement.

The changes for the general liability (damage claims) for the years ended June 30, 2024, 2023, and 2022 were as follows:

(b) Workers’ Compensation
The City actuarially determines and allocates workers’ compensation costs to the Enterprise according to a formula based on the following: (i) the dollar amount of claims; (ii) yearly projections of payments based on historical experience; and (iii) the si ze of the Enterprise’s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent years. The City continues to develop and implement improved programs, such as return -to-work programs, to lower or mitigate the growth of workers’ compensation costs. Programs include accident prevention, investigation, and duty modification for injured employees with medical restrictions so return to work can occur as soon as possible.

The changes in the liabilities for workers’ compensation for the years ended June 30, 20 24, 2023, and 2022 were as follows:

(c) Property
The Enterprise’s property risk management approach varies depending on whether the facility is currently under construction, the property is part of revenue-generating operations, the property is of high value, or is mission -critical in nature. During the course of constr uction, the Enterprise requires each contractor to provide its own insurance, while ensuring the full scope of work be covered with satisfactory levels to limit the Enterprise’s risk exposure. Once construction is complete, the Enterprise performs an asses sment to determine whether liability/loss coverage will be obtained through the commercial property policy or self -insurance. The majority of property scheduled in the insurance program is for either: (1) revenue generating facilities, (2) debt -financed facilities, (3) mandated coverage to meet statutory requirements for bonding of various public officials, or (4) high-value, mission-critical property or equipment.
(d) Public Officials Liability
All Enterprise public officials with financial oversight responsibilities are provided coverage through a commercial Public Officials Liability Policy.

Beginning of Claims and Claims paid and End of
Fiscal years year changes in estimates changes in estimates year 2024 4,350 $ 112,467 (1,734) 115,083 2023 12,045 2,716 (10,411) 4,350 2022 16,713 8,812 (13,480) 12,045 Beginning of Claims and Claims paid and End of
Fiscal years year changes in estimates changes in estimates year 2024 7,998$ 2,680 (1,666) 9,012 2023 7,546 2,976 (2,524) 7,998 2022 6,582 3,207 (2,243) 7,546

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

81 (Continued)

(e) Employment Practices Liability
A policy is retained to protect against employment-related claims and liabilities. (f) Cyber Liability
A policy is retained to protect against cyber-related claims and liabilities. (g) Crime
The Enterprise also retains a Commercial Crime Policy, in lieu of bonding its employees, to provide coverage against liabilities or losses due to third-party crime or employee fraud. (h) Electronic Data Processing
The Electronic Data Processing policy protects selected high -value electronic property in case of damage or loss.
(i) Surety Bonds
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.
(j) Errors and Omissions
Errors and omissions , also known as Professional Liability, are commonly transferred through contract to the contracted professional, or retained through self -insurance on a case -by-case basis depending on the size, complexity, or scope of construction or professional service contracts.

Examples of such contracts a re inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers. (k) Builders’ Risk
Builders’ risk policies of insurance are required to be provided by the contractor on all construction projects for the full value of construction.

(l) Tenants’ and Users’ Liability Insurance Policy
A policy is retained to provide coverage for injuries and property damage to third parties relating to injuries sustained on premises and scheduled ev ents, purchased for the Southeast Community Center.

(m) Active Assailant Policy
A policy is retained to protect against third party injuries, first party property damage, business interruption, and crises management for events occurring on premise, purchased for the Southeast Community Center.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

82 (14) Commitments and Litigation
(a) Commitments
As of June 30, 2024 and 2023, the Enterprise has outstanding commitments with third parties of $675,849 and $762,085, respectively, for various capital projects and other purchase agreements for materials and services.
(b) Grants
Grants that the Enterprise received are subject to audit and final acceptance by the granting agency.

Current and prior year costs of such grants are subject to adjustment upon audit. (c) Litigation
The Enterprise is a defendant in various legal actions and claims that arise during the normal course of business. The final disposition of these legal actions and claims is not determinable. However, in the opinion of management, the outcome of any litigation of these matters will not have a material effect on the financial position or changes in net position of the Enterprise. (d) Environmental Issue
As of June 30 , 202 4, and 20 23, the Enterprise recorded $6,451 and $7,800 in pollution remediation liability, respectively for the Yosemite Creek toxic sediments. The decrease of $1,349 in pollution remediation liability in fiscal year 2024 is due to payment related to the Yosemite Creek Remediation effort.
(15) Subsequent Event
2024 Series ABCD Revenue (Refunding) Bonds
On July 31, 2024, the SFPUC issued its San Francisco Wastewater Revenue Bonds, 2024 Series A (SSIP) ( Green Bonds) (Federally Taxable), 2024 Series B (Non -SSIP) (Federally Taxable), 2024 C (SSIP) (Green Bonds) and 2024 Series D (Non -SSIP) with a total princip al of $1,142,975 to finance or refinance Wastewater Enterprise projects through new money and the refunding and retirement of commercial paper issued as interim financing for such projects in furtherance of the Wastewater Capital Improvement Program.
w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
83 Independent Auditor’s 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
Honorable Mayor and the Board of Supervisors
City and County of San Francisco, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contai ned in Government Auditing Standards issued by the Comptroller General of the United States ( Government Auditing Standards ), the financial statements of the San Francisco Wastewater Enterprise (the Enterprise), an enterprise fund of the City and County of San Francisco (City), as of and for the year ended Ju ne 30, 2024, and the related notes to the financial statements, and have issued our report thereon dated November 12, 2024.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statement s, we considered the Enterprise’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectivene ss of the Enterprise’s internal control.

Accordingly, we do not express an opinion on the effectiveness of the Enterprise’s internal control.

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

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

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Ent erprise’s financial statements are free from material misstatement, we performed tests of its complianc e with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that a re required to be reported under Government Auditing Standards.
84 Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. A ccordingly, this communication is not suitable for any other purpose.

Walnut Creek, California
November 12, 2024

Cover photo: Southeast
Wastewater Treatment Plant:

Biosolids Digester Facilities Project
Back cover photo: Treasure Island
Wastewater Treatment Plant
Photos by: Robin Scheswohl
Date of Publication:

November 2024

SFPUC Financial Services
525 Golden Gate Avenue, 4th Floor
San Francisco, CA 94102-3220
sfpuc.gov
Follow Us @MySFPUC
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.

San Francisco Public Utilities Commission
An Enterprise Department of the City and
County of San Francisco, California
Generating Clean Energy
for Vital Services.

Hetch Hetchy Water and
Power and CleanPowerSF
Financial Statements June 30, 2024 and 2023
(With Independent Auditor’s Report Thereon)

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

Statements of Net Position 34
Statements of Revenues, Expenses, and Changes in Net Position 36 Statements of Cash Flows 37
Notes to Financial Statements 39
Independent Auditor’s 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 102

w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
1 Independent Auditor’s Report
Honorable Mayor and the Board of Supervisors
City and County of San Francisco, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of each major fund of Hetch Hetchy Water and Power and CleanPowerSF (Hetch Hetchy), an enterprise fund of the City and County of San Francisco (City), as of and for the years ended June 30, 2024 and 2023, and the related notes to the 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 respective financial position of each major fund of the Hetch Hetchy as of June 30, 2024 and 2023, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Re sponsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Hetch Hetchy, 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 Matter
As discussed in Note 1, the financial statements present only the Hetch Hetchy and do not purport to, and do not, present fairly the financi al position of the City, as o f June 30, 2024 and 2023, the changes in its financial position, or, where applicable, its cash flows for th e years 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.

Responsibilities of Management for the Financial Statements The Hetch Hetchy’s management is responsible for the preparatio n 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 con trol 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 2 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 erro r, 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, individuall y 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 circumst ances, but not for the purpose o f expressing an opinion on the effectiveness of the Hetch Hetchy’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and th e reasonableness of significant accounting estimates made by management, as well as evaluate th e 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 o f America require that the m anagement’s discussion and analysis , as listed in the table of contents, be presented to supplement the financial statements. Such information is the responsibility of management and, although not a part of the financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the financial statement s in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the r equired supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of pr eparing the information and comparing the information for consistency with management’s responses to our inquiries, the financial statements, and other knowledge we obtained during our audits of the financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our report dated November 12, 2024 on our consideration of the Hetch Hetchy'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 prov ide an opinion on the effectiveness of the Hetch Hetchy'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 Hetch Hetchy's internal control over financial reporting and compliance.

Walnut Creek, California
November 12, 2024

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

3 (Continued)

This section presents management’s analysis of San Francisco Hetch Hetchy Water and Power and CleanPowerSF Enterprise’s (Hetch Hetchy or the Enterprise) financial condition and activities as of and for fiscal years ended June 30, 20 24 and 2023. Management’s Discussion and Analysis (MDA) is intended to serve as an introduction to the Enterprise’s financial state ments. 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
• Financial Analysis
• Capital Assets
• Debt Administration
• Rates and Charges
• Request for Information

Organization and Business

SFPUC is a department of the City that is responsible for the maintenance, operation, and development of three utility enterprises: Water, Wastewater, and Hetch Hetchy. T he Enterprise was established as a result of the Raker Act of 1913, which granted water and power resource rights -of-way on the Tuolumne River in Yosemite National Park and the Stanislaus National Forest to the City. The Enterprise operates the Hetch Hetchy project, which provides both electricity generation and upcountry water service; and is engaged in the collection and conveyance of approximately 85% of the regional system’s water supply and in the generation and transmission of electricity.

In normal rain years, 85% of San Francisco’s drinking water starts out as snow falling on 459 sq uare miles of watershed land in Yosemite National Park and the City may supplement water supply from an additional 193 square miles of watershed in Yosemite National Park and the Stanislaus National Forest during extremely dry years. As the snow melts, it collects in the SFPUC’s storage reservoirs , then flows by gravity through over 150 miles of pipelines and tunnels, it turns the turbines in three hydroelectric powerhouses, generating approximately 1.4 billion kilowatt hours of electricity per year. The electricity travels over 160 miles of transmission and distribution lines from the upcountry powerhouses to the San Francisco Bay Area.

Approximately 55% of the electricity generated by Hetchy Power was used to provide electric service to the City’s municipal customers (including the San Francisco Municipal Transportation Agency (SFMTA), Recreation and Parks Department, the Port of San Francisco, San Francisco International Airport and its tenants, Zuckerberg San Francisco General Hospital and Trauma Center , City streetlights, Moscone Convention Center, and the Water and Wastewater Enterprises). The remaining 45 % of electricity generated was sold to CleanPowerSF and the wholesale electric market.

Hetch Hetchy

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

Hetch Hetchy, a stand -alone enterprise is comprised of three funds: 1) Hetch Hetchy Water (Hetchy Water) upcountry operations and water system; 2) Hetch Hetchy Power (Hetchy Power ), also referred to as the

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

4 (Continued)

Power Enterprise, which is wholly contained within the Hetch Hetchy fund; and 3) CleanPowerSF, which is a n enterprise fund to aggregate the buying power of customers within San Francisco to purchase renewable energy sources or clean power, is reported as a separate fund of Hetch Hetchy. A number of the facilities are joint assets and used for both water and power generation.

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 ma in 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 transm ission 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 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 presc ribed 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 rene wables, distributed generation, 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

CleanPowerSF is a community choice aggregation (CCA) program made possible by the 2002 passage of California Assembly Bill 117, enabling communities to purchase power on behalf of their residents and businesses and creating competition in power generation services. CleanPowerSF began serving customers with power generation in May 2016. CleanPowerSF’s core business is to provide greener electricity supply to residential and commercial consumers that are retail distribution customers of Pacific Gas and Electric Company (PG&E) in San Francisco. The SFPUC operates CleanPowerSF as a financially independent service, with the ability to set rates and charges with adequate revenues, and to issue debt to support its operations and future projects, as needed. CleanPowerSF is disc retely presented as a fund of the Enterprise starting fiscal year 2017.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

5 (Continued)

Through CleanPowerSF, SFPUC seeks to achieve several complementary goals, including offering affordable and competitive electricity generation rates, developing and maintaining a diverse electricity resource portfolio that is comprised of renewable and other clean sources of supply, and providing high-quality customer service. The program serves a pproximately 385,000 customer accounts and provides San Francisco with an electricity supply from its default “Green” product that is sourced from at least 50% California State Renewables Portfolio Standard (RPS)-eligible resources. 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.

Overview of the Financial Statements

Hetch Hetchy’s financial statements include the following:

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

While the Statements of Net Position provide information about the nature and amount of resources and obligations as of year-end, the Statements of Revenues, Expenses, and Changes in Net Position present the results of Hetch Hetchy’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which Hetch Hetchy has successfully recov ered 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 a re 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 ev ent 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.

Financial Analysis

Financial Highlights for Fiscal Year 202 4

Hetch Hetchy

• Total assets of Hetch Hetchy exceeded total liabilities by $1,008,835.

• Net position increased by $121,170 or 13.3% during the fiscal year.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

6 (Continued)

• Capital assets, net of accumulated depreciation and amortization, increased by $127,947 or 14.8% to $995,251.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $46,961 or 8.0% to $630,438.

• Operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $19,726 or 3.7% to $556,069.

Hetchy Water

• Total assets of Hetchy Water exceeded total liabilities by $272,975.

• Net position increased by $9,129 or 3.3% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $ 17,450 or 7.9% to $237,486.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, decreased by $3,205 or 6.1% to $49,492.

• Operating expenses, excluding other non- operating expenses, de creased by $6,061 or 12.1% to $43,950.

Hetchy Power

• Total assets of Hetchy Power exceeded total liabilities by $557,336.

• Net position increased by $51,552 or 9.9% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $ 110,514 or 17.1% to $757,752.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $10,349 or 5.1% to $214,352.

• Operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $9,049 or 4.7% to $200,601.

CleanPowerSF

• Total assets of CleanPowerSF exceeded total liabilities by $178,524.

• Net position increased by $60,489 or 51.3% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, decreased by $17 or 56.7% to $13.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

7 (Continued)

• Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $39,817 or 12.2% to $366,594.

• Operating expenses, excluding interest expenses increased by $16,738 or 5.7% to $311,518.

Financial Highlights for Fiscal Year 2023

Hetch Hetchy

• Total assets of Hetch Hetchy exceeded total liabilities by $901,552.

• Net position increased by $82,798 or 10.0% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $79,656 or 10.1% to $867,304.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $103,030 or 21.4% to $583,477.

• Operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $65,584 or 13.9% to $536,343.

Hetchy Water

• Total assets of Hetchy Water 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, 654 or 9.3% to $220,036.

• 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 oth er non -operating expenses, decreased by $2,288 or 4.4% to $50,011.

Hetchy Power

• Total assets of Hetchy Power 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 $61,273 or 10.5% to $647,238.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

8 (Continued)

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $30,761 or 17.8% to $204,003.

• 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 of CleanPowerSF exceeded total liabilities by $119,918.

• Net position increased by $33,681 or 39.9% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, decreased by $271 or 90.0% to $30.

• 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.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

9 (Continued)

Financial Position

The following tables summarize Hetch Hetchy’s net position:

2024-2023 2023-2022
2024 2023 2022 Change Change
Total assets:

Current and other assets $ 636,716   542,742   499,795   93,974   42,947 Capital assets, net of accumulated
depreciation and amortization 995,251   867,304   787,648   127,947   79,656 Total assets 1,631,967   1,410,046   1,287,443   221,921   122,603 Deferred outflows of resources:

Pensions 28,696   20,976   15,731   7,720   5,245
Other postemployment benefits 8,086   8,226   8,069   (140)  157 Total deferred outflows of resources 36,782   29,202   23,800   7,580   5,402 Liabilities:

Current liabilities:

Bonds 3,599   1,590   1,966   2,009   (376)
Certificates of participation 463   445   427   18   18 Commercial paper 90,654   —   40,019   90,654   (40,019) Other liabilities 102,253   104,704   94,902   (2,451)  9,802 Subtotal current liabilities 196,969   106,739   137,314   90,230   (30,575) Long-term liabilities:

Bonds 315,200   189,342   192,520   125,858   (3,178)
Certificates of participation 11,685   12,148   12,593   (463)  (445) Commercial paper —   116,352   —   (116,352)  116,352
Arbitrage rebate payable 184   —   —   184   —
Other liabilities 99,094   83,913   51,436   15,181   32,477 Subtotal long-term liabilities 426,163   401,755   256,549   24,408   145,206 Total liabilities:

Bonds 318,799   190,932   194,486   127,867   (3,554)
Certificates of participation 12,148   12,593   13,020   (445)  (427) Commercial paper 90,654   116,352   40,019   (25,698)  76,333 Arbitrage rebate payable 184   —   —   184   —
Other liabilities 201,347   188,617   146,338   12,730   42,279 Total liabilities 623,132   508,494   393,863   114,638   114,631 Deferred inflows of resources:

Pensions 5,238   10,500   82,029   (5,262)  (71,529)
Other postemployment benefits 8,730   9,775   7,670   (1,045)  2,105 Total deferred inflows of resources 13,968   20,275   89,699   (6,307)  (69,424) Net position:

Net investment in capital assets 576,573   527,185   527,794   49,388   (609) Restricted for debt service —   56   140   (56)  (84)
Restricted for capital projects 59,955   32,682   —   27,273   32,682 Restricted for other purposes —   —   32,749   —   (32,749) Unrestricted 395,121   350,556   266,998   44,565   83,558 Total net position $ 1,031,649   910,479   827,681   121,170   82,798 Table 1A - Consolidated Hetch Hetchy
Comparative Condensed Net Position
June 30, 2024, 2023, and 2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

10 (Continued)

2024-2023 2023-2022
2024 2023 2022 Change Change
Total assets:

Current and other assets $ 81,605   90,830   109,691   (9,225)  (18,861) Capital assets, net of accumulated
depreciation and amortization 237,486   220,036   201,382   17,450   18,654 Total assets 319,091   310,866   311,073   8,225   (207) Deferred outflows of resources:

Pensions 11,929   8,858   6,696   3,071   2,162
Other postemployment benefits 3,191   3,248   3,272   (57)  (24) Total deferred outflows of resources 15,120   12,106   9,968   3,014   2,138 Liabilities:

Current liabilities 8,198   9,888   17,553   (1,690)  (7,665) Long-term liabilities 37,918   31,730   17,095   6,188   14,635 Total liabilities 46,116   41,618   34,648   4,498   6,970 Deferred inflows of resources:

Pensions 1,941   4,142   34,477   (2,201)  (30,335)
Other postemployment benefits 2,897   3,084   2,734   (187)  350 Total deferred inflows of resources 4,838   7,226   37,211   (2,388)  (29,985) Net position:

Net investment in capital assets 233,276   214,014   194,688   19,262   19,326 Restricted for capital projects 31,330   10,980   —   20,350   10,980 Restricted for other purposes —   —   13,912   —   (13,912) Unrestricted 18,651   49,134   40,582   (30,483)  8,552 Total net position $ 283,257   274,128   249,182   9,129   24,946 Table 1B - Hetchy Water
Comparative Condensed Net Position
June 30, 2024, 2023, and 2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

11 (Continued)

2024-2023 2023-2022
2024 2023 2022 Change Change
Total assets:

Current and other assets $ 330,411   294,006   260,487   36,405   33,519 Capital assets, net of accumulated
depreciation and amortization 757,752   647,238   585,965   110,514   61,273 Total assets 1,088,163   941,244   846,452   146,919   94,792 Deferred outflows of resources:

Pensions 14,580   10,826   8,183   3,754   2,643
Other postemployment benefits 3,899   3,969   3,999   (70)  (30) Total deferred outflows of resources 18,479   14,795   12,182   3,684   2,613 Liabilities:

Current liabilities:

Bonds 3,599   1,590   1,966   2,009   (376)
Certificates of participation 463   445   427   18   18 Commercial paper 90,654   —   40,019   90,654   (40,019) Other liabilities 55,976   63,355   48,688   (7,379)  14,667 Subtotal current liabilities 150,692   65,390   91,100   85,302   (25,710) Long-term liabilities:

Bonds 315,200   189,342   192,520   125,858   (3,178)
Certificates of participation 11,685   12,148   12,593   (463)  (445) Commercial paper —   116,352   —   (116,352)  116,352
Arbitrage rebate payable 184   —   —   184   —
Other liabilities 53,066   45,626   22,762   7,440   22,864 Subtotal long-term liabilities 380,135   363,468   227,875   16,667   135,593 Total liabilities:

Bonds 318,799   190,932   194,486   127,867   (3,554)
Certificates of participation 12,148   12,593   13,020   (445)  (427) Commercial paper 90,654   116,352   40,019   (25,698)  76,333 Arbitrage rebate payable 184   —   —   184   —
Other liabilities 109,042   108,981   71,450   61   37,531 Total liabilities 530,827   428,858   318,975   101,969   109,883 Deferred inflows of resources:

Pensions 2,372   5,062   42,138   (2,690)  (37,076)
Other postemployment benefits 3,541   3,769   3,342   (228)  427 Total deferred inflows of resources 5,913   8,831   45,480   (2,918)  (36,649) Net position:

Net investment in capital assets 343,297   313,171   333,106   30,126   (19,935) Restricted for debt service —   56   140   (56)  (84)
Restricted for capital projects 28,625   21,702   —   6,923   21,702 Restricted for other purposes —   —   17,004   —   (17,004) Unrestricted 197,980   183,421   143,929   14,559   39,492 Total net position $ 569,902   518,350   494,179   51,552   24,171 Table 1C - Hetchy Power
Comparative Condensed Net Position
June 30, 2024, 2023, and 2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

12 (Continued)

Net Position, Fiscal Year 2024

Hetch Hetchy

Hetch Hetchy’s net position of $1,031,649 increased by $121,170 or 13.3% from prior year . Increases in total assets and deferred outflows of resources of $229,501 and increases of $108,331 in total liabilities and deferred inflows of resources are described below (see Table 1A). Current and other assets were $636,716, a $ 93,974 or 17.3% increase from prior year, mainly due to increased cash collections from charges for services for Hetchy Power and CleanPowerSF.

Capital assets, net of accumulated depreciation and amortization, increased by $ 127,947 or 14.8% to $995,251 primarily from construction and capital improvement activities for the Cluster 7 Mitigation and Transmission Line Clearance Mitigation Projects. Deferred outflows of resources increased by $7,580 due to an increase of $7,720 in pensions, offset by a decrease of $140 in other postemployment benefits (OPEB) based on actuarial reports.

Total liabilities increased by $114,638 or 22.5% to $ 623,132. Outstanding debt increased by $101,724 due to an increase of $ 127,867 in bonds mainly from 2023 Series A Revenue Bonds issuance, offset by decreases of $ 25,698 in commercial paper and $ 445 in Certificates of Participation. Arbitrage rebate payable increased by $184 related to 2021 Series AB and 2023 Series A R evenue Bonds. Other liabilities increased by $ 12,730 primarily due to increase in net pension liability based on actuarial estimates.

Deferred inflows of resources de creased by $6,307 due to decreases of $5,262 in pensions and $1,045 in OPEB based on actuarial reports.

2024-2023 2023-2022
2024 2023 2022 Change Change
Total assets:

Current and other assets $ 224,700   157,906   129,617   66,794   28,289 Capital assets, net of accumulated
depreciation and amortization 13   30   301   (17)  (271) Total assets 224,713   157,936   129,918   66,777   28,018 Deferred outflows of resources:

Pensions 2,187   1,292   852   895   440
Other postemployment benefits 996   1,009   798   (13)  211 Total deferred outflows of resources 3,183   2,301   1,650   882   651 Liabilities:

Current liabilities 38,079   31,461   28,661   6,618   2,800 Long-term liabilities 8,110   6,557   11,579   1,553   (5,022) Total liabilities 46,189   38,018   40,240   8,171   (2,222) Deferred inflows of resources:

Pensions 925   1,296   5,414   (371)  (4,118)
Other postemployment benefits 2,292   2,922   1,594   (630)  1,328 Total deferred inflows of resources 3,217   4,218   7,008   (1,001)  (2,790) Net position:

Restricted for other purposes —   —   1,833   —   (1,833) Unrestricted 178,490   118,001   82,487   60,489   35,514 Total net position $ 178,490   118,001   84,320   60,489   33,681 Table 1D - CleanPowerSF
Comparative Condensed Net Position
June 30, 2024, 2023, and 2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

13 (Continued)

Hetchy Water

Hetchy Water’s net position of $ 283,257 increased by $9,129 or 3.3% from prior year. Increases in total assets and deferred outflows of resources of $11,239 and increases of $2,110 in total liabilities and deferred inflows of resources are described below (see Table 1B) . The de crease of $9,225 in current and other assets was attributed to decreases of $10,152 in cash and investments with City Treasury mainly from higher cash paid to suppliers and contractors for goods and services , $59 in due from other governments related to State grant reimbursement for Rim Fire Project, and $22 in inventory due to more issuances than purchases during the fiscal year . The decreases were offset by increases of $659 in prepaid charges, advances, and other receivables mainly due to higher prepayments to San Joaquin Tributaries Authority and County of Tuolumne, $283 in interest receivables attributed to higher interest rates , and $66 in charges for services receivables due to higher consumption from Lawrence Livermore National Laboratory.

Capital assets, net of accu mulated depreciation and amortization, increased by $ 17,450 or 7.9% to $237,486 primarily from construction and capital improvement activities for the 2023 March Winter Storm and Mountain Tunnel Improvements Projects. Deferred outflows of resources increased by $3,014 due to an increase of $3,071 in pensions, offset by a decrease of $57 in OPEB based on actuarial reports.

Hetchy Water’s total liabilities in creased by $4,498 or 10.8% to $ 46,116, as explained by in creases of $4,985 in net pension liability based on actuarial estimates, $1,362 in OPEB obligations based on actuarial estimates, $468 in employee related benefits due to 4.75% increase in cost-of-living adjustment (COLA ).

These increases were offset by de creases of $1,720 in restricted payables due to lower project spending mainly for Mountain Tunnel Improvement Project, $432 in general liability based on actuarial estimates, $80 in subscription liability, $64 in unrestricted payables mainly due to decrease in management consulting services, $16 in lease liability, $4 in unearned revenue s, refund s, and other mainly due to decrease in prepaid rent received from tenants, and $1 in interest payable related to SBITAs.

Deferred inflows of resources de creased by $ 2,388 due to decrease s of $2,201 in pensions and $187 in OPEB based on actuarial reports.

Hetchy Power

Hetchy Power’s net position of $ 569,902 increased by $ 51,552 or 9.9% from prior year . Increases in total assets and deferred outflows of resources of $150,603 and increases of $99,051 in total liabilities and deferred inflows of resources are described below (see Table 1C). Increase of $36,405 in current and other assets was attributed to increases of $ 28,989 in cash and investments mainly due to higher collections from billings attributable to 14.0% average rate increase and cash proceeds from commercial paper, $6,065 in prepaid charges, advances, and other receivables mainly due to prepayments to vendors such as County of Tuolumne for municipal services and additional collateral paid to satisfy the CAISO’s financial security requirements, $4,079 in charges for services receivables mainly due to pending collections from wholesale customers, $1,320 in interest receivables attributed to higher interest rates , and $71 in inventory due to more purchases than issuances during the fiscal year.

These increases were offset by decreases of $3,982 in restricted interest and receivables due to refundable deposit received from PG&E, $72 in due from other governments related to State grant reimbursement for Rim Fire Project , and $65 in due from other City departments mainly due to repayment s for Moscone Renewable Energy Projects.

Capital assets, net of accumulated depreciation and amortization, increased by $ 110,514 or 17.1% to $757,752 primarily from construction and capital improvement activities for the Cluster 7 Mitigation and

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

14 (Continued)

Transmission Line Clearance Mitigation Projects. Deferred outflows of resources increased by $3,684 due to an increase of $3,754 in pensions, offset by a decrease of $70 in OPEB based on actuarial reports.

Hetchy Power’s total liabilities of $ 530,827 increased by $ 101,969 or 23.8%. As of June 30, 202 4, outstanding debt increased by $101,724 due to $131,230 from issuance of 2023 Series A Revenue Bonds and $91,635 from commercial paper issuance, offset by commercial paper repayment of $117,333, bonds and certificates of participation principal repayments of $2,035, and $1,773 in amortization of premium and discount. Other liabilities o f $109,042, such as payables to vendors, employees, contractors, and other government agencies for goods and services under contractual agreements, in creased by $ 61 or 0.1%, mainly due to increases of $6,093 in net pension liability based on actuarial estimates, $ 5,748 in restricted payables to vendors and contractors due to higher year -end expense accruals mainly for the Warnerville Substation Project, $1,663 in OPEB obligations based on actuarial estimates , $1,094 in interest payable mainly due to 2023 Series A R evenue Bonds issuance, $724 in unearned revenues, refunds, and other mainly due to utility user taxes payable to Alameda county, and $610 in employee related benefits due to

4.75% increase in COLA . These increases were offset by decreases of $11,465 in unrestricted payables mainly due to lower year -end expense accruals for power purchase s from APX, Inc. and distribution services from PG&E, $2,376 in general liability based on actuarial estimates, $1,946 in due to other City departments related to claim settlement reimbursement paid to SFMTA, $65 in subscription liability, and $19 in lease liability. Arbi trage rebate payable increased by $184 related to 2021 Series AB and 2023 Series A Revenue Bonds.

Deferred inflows of resources de creased by $ 2,918 due to decrease s of $2,690 in pensions and $228 in OPEB based on actuarial reports.

CleanPowerSF

CleanPowerSF’s net position of $178,490 increased by $60,489 or 51.3% from prior year. Increases in total assets and deferred outflows of resources of $67,659 and increases of $7,170 in total liabilities and deferred inflows of resources are described below (see Table 1D) . Increase in current and other assets of $66,794 was due to increases of $61,154 in cash and investments with City Treasury mainly attributed to higher collections from billings, $9,368 in charges for services receivables mainly due to 15.0% average rate increase, and $1,133 in interest receivable attributed to higher interest rates . These increases were offset by a decrease of $4,861 in prepaid charges and other receivables mainly related to $5,000 cash collateral returned from APX, Inc.

Capital assets, net of accumulated depreciation and amortization, decreased by $17 or 56.7% to $13 due to decrease in subscription assets. Deferred outflows of resources increased by $ 882 due to an increase of $895 in pensions, offset by a decrease of $13 in OPEB based on actuarial reports.

Total liabilities increased by $8,171 or 21.5% to $ 46,189, mainly explained by increases of $4,674 in payables due to higher power purchases, $1,840 in unearned revenues, refunds, and other , $1,439 in net pension liability based on actuarial estimates, $136 in OPEB obligations based on actuarial assumptions, and $113 in employee related benefits due to COLA increase. These increases were offset by decrease s of $18 in subscription liability and $13 in general liability based on actuarial estimates. Increase of $1,840 in unearned revenues, refunds, and other was mainly due to increases of $1, 241 for the Community Food Service Energy Efficiency Program and Disadvantaged Communities Programs from California Public Utilities Commission (CPUC), $651 in net energy metering credits to customers who generated excess energy, and $8 in energy tax payable, offset by a decrease of $60 in customer prepayments.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

15 (Continued)

Deferred inflows of resources de creased by $ 1,001 due to decrease s of $630 in OPEB and $ 371 in pensions based on actuarial reports.

Net Position, Fiscal Year 2023

Hetch Hetchy

Hetch Hetchy’s net position of $910,479 increased by $82,798 or 10.0% from prior year resulting from an increase of $128,005 in total assets and deferred outflows of resources, offset by a net increase of $45,207 in total liabilities and deferred inflows of resources (see Table 1A). Current and other assets were $542,742, a $42, 947 or 8. 6% increase from prior year, mainly due to increased cash collections from charges for services for Hetchy Power and CleanPowerSF. Hetch Hetchy adopted GASB Statement No. 96, SBITAs and recognized subscription assets net of accumulated amortization of $281 and liabilities of $286 as of June 30, 2023. See Note 10 for additional information about SBITAs.

Capital assets, net of accumulated depreciation and amortization, increased by $ 79,656 or 10. 1% to $867,304 primarily from construction and capital improveme nt activities for the Moccasin Powerhouse Rewind Project and the Mountain Tunnel Improvement Project. Deferred outflows of resources increased by $5,402 due to increases of $5,245 in pensions and $157 in other postemployment benefits (OPEB) based on actuarial reports.

Total liabilities increased by $114,631 or 29.1% to $508,494. Outstanding debt increased by $72,352 from additional $76,333 commercial paper issuances offset by $3,554 in bonds and $427 in Certificates of Participation. Other liabilities increased by $42,279 . Deferred inflows of resources decreased by $69,424 due to a decrease of $71,529 in pensions offset by an increase of $2,105 in OPEB based on actuarial reports.

Hetchy Water

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 1B). The decrease of $18, 861 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 s with City Treasury mainly from higher cash paid to suppliers and contractors for goods and services, $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 in fiscal year 2023, and $70 in charges for services receivables due to lower consumption f rom 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 fair value of investments and higher interest rates , and $22 in inventory due to more purchases than issuances during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $18,654 or 9.3% to $220,036 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 act uarial estimates, $667 in OPEB obligations based on actuarial

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

16 (Continued)

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 10).

Deferred inflows of resources decreased by $29,985 due to a decrease of $30,335 in pensions offset by an increase of $350 in OPEB based on actuarial reports.

Hetchy Power

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). Increase of $ 33,519 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 fair value of investments and higher interest rates, and $348 increase in State grants receivable mainly for the 2018 Moccasin Storm Project related to emergency repairs.

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 t o prepayments made in prior year to California Department of Water Resources for dam fees included in fiscal year 2023, $152 in restricted interest and other receivables mainly due to lower IRS bond interest subsidy accrual, and $59 in inventory due to more issuances than purchases during the fiscal year.

Capital assets, net of accumulated depreciation and amortization, increased by $61,273 or 10.5% to $647,238 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 $76,33 3 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, $8,30 2 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 interest payable related to 2021 Series AB revenue bond issued in prior year , and $94 in lease liability. These increases were offset by de creases of $267 in unearned revenues, refunds, and other , and $137 in subscription liability per implementation of GASB Statement No. 96, SBITAs (see Note 10). 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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

17 (Continued)

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 pensions offset by an increase of $427 in OPEB based on actuarial reports.

CleanPowerSF

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 1D). Increase in current and other assets of $ 28,289 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 fair 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 r eceivables decrease d by $5,721, of which $5,463 in lower prepaid for power purchase s 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.

Capital assets, net of accumulated depreciation and amortization, de creased by $271 or 90.0% to $30 due to $230 in lease right-to-use assets net of accumulated amortization from 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 de creased by $2,222 or 5.5% to $38,018, mainly explained by $9,000 cash collateral returned for power purchase agreement, $232 decrease i n 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 10 ). 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 in creases of $2,075 received from California Public Utilities Commission (CPUC) for the Community Food Service Energy Efficiency P rogram 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 de creased by $2,790 due to a decrease of $4,118 in pensions offset by an increase of $1,328 in OPEB based on actuarial reports.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

18 (Continued)

Results of Operations
The following tables summarize Hetch Hetchy’s revenues, expenses, and changes in net position:

2024-2023 2023-2022
2024 2023 2022 Change Change
Revenues:

Charges for services $ 630,078 583,194 480,198 46,884 102,996 Rents and concessions 360 283 249 77 34
Interest and investment income (loss) 22,903 4,603 (8,219) 18,300 12,822 Other non-operating revenues 9,252 16,964 19,001 (7,712) (2,037) Total revenues 662,593 605,044 491,229 57,549 113,815
Expenses:

Operating expenses 556,069 536,343 470,759 19,726 65,584 Interest expenses 14,475 9,491 5,636 4,984 3,855
Amortization of premium, discount, and issuance costs (1,008) (1,584) 192 576 (1,776) Non-operating expenses 1,021 499 628 522 (129)
Total expenses 570,557 544,749 477,215 25,808 67,534
Change in net position before transfers and contributions 92,036 60,295 14,014 31,741 46,281 Capital contributions 29,200 2,535 — 26,665 2,535
Transfers from the City and County of San Francisco 42 20,000 30,001 (19,958) (10,001) Transfers to the City and County of San Francisco (108) (32) (532) (76) 500 Capital contributions and net transfers 29,134 22,503 29,469 6,631 (6,966) Change in net position 121,170 82,798 43,483 38,372 39,315 Net position at beginning of year 910,479 827,681 784,198 82,798 43,483 Net position at end of year $ 1,031,649 910,479 827,681 121,170 82,798 Table 2A - Consolidated Hetch Hetchy
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2024, 2023 and 2022
2024-2023 2023-2022
2024 2023 2022 Change Change
Revenues:

Charges for services $ 49,330 52,570 49,200 (3,240) 3,370 Rents and concessions 162 127 112 35 15
Interest and investment income (loss) 3,255 457 (2,932) 2,798 3,389 Other non-operating revenues 338 1,861 479 (1,523) 1,382 Total revenues 53,085 55,015 46,859 (1,930) 8,156
Expenses:

Operating expenses 43,950 50,011 52,299 (6,061) (2,288) Interest expenses 3 4 3 (1) 1
Non-operating expenses 45 54 37 (9) 17
Total expenses 43,998 50,069 52,339 (6,071) (2,270)
Change in net position before transfers 9,087 4,946 (5,480) 4,141 10,426 Transfers from the City and County of San Francisco 42 20,000 30,001 (19,958) (10,001) Change in net position 9,129 24,946 24,521 (15,817) 425 Net position at beginning of year 274,128 249,182 224,661 24,946 24,521 Net position at end of year $ 283,257 274,128 249,182 9,129 24,946 Table 2B - Hetchy Water
Years Ended June 30, 2024, 2023 and 2022
Comparative Condensed Revenues, Expenses, and Changes in Net Position

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

19 (Continued)

Result of Operations, Fiscal Year 2024

Hetch Hetchy

Hetch Hetchy’s total revenues were $ 662,593, an increase of $ 57,549 or 9.5% over prior year (see Table 2A). Charges for services increased by $ 46,884 or 8.0% from prior year’s revenues mainly due to higher billings from CleanPowerSF and Hetchy Power. Total expen ses increased by $25,808 or 4.7% primarily from higher energy purchases for CleanPowerSF due to volatile and increased pricing in the power market. (See Table 2A).
2024-2023 2023-2022
2024 2023 2022 Change Change
Revenues:

Charges for services $ 214,154 203,847 173,105 10,307 30,742 Rents and concessions 198 156 137 42 19
Interest and investment income (loss) 13,744 3,741 (4,001) 10,003 7,742 Other non-operating revenues 8,528 13,605 15,763 (5,077) (2,158) Total revenues 236,624 221,349 185,004 15,275 36,345
Expenses:

Operating expenses 200,601 191,552 156,343 9,049 35,209 Interest expenses 14,472 9,486 5,627 4,986 3,859
Amortization of premium, discount, and issuance costs (1,008) (1,584) 192 576 (1,776) Non-operating expenses 99 227 591 (128) (364)
Total expenses 214,164 199,681 162,753 14,483 36,928
Change in net position before transfers and contributions 22,460 21,668 22,251 792 (583) Capital contributions 29,200 2,535 — 26,665 2,535
Transfers to the City and County of San Francisco (108) (32) (532) (76) 500 Capital contributions and net transfers 29,092 2,503 (532) 26,589 3,035 Change in net position 51,552 24,171 21,719 27,381 2,452 Net position at beginning of year 518,350 494,179 472,460 24,171 21,719 Net position at end of year $ 569,902 518,350 494,179 51,552 24,171 Years Ended June 30, 2024, 2023 and 2022
Table 2C - Hetchy Power
Comparative Condensed Revenues, Expenses, and Changes in Net Position 2024-2023 2023-2022
2024 2023 2022 Change Change
Revenues:

Charges for services $ 366,594 326,777 257,893 39,817 68,884 Interest and investment income (loss) 5,904 405 (1,286) 5,499 1,691 Other non-operating revenues 386 1,498 2,759 (1,112) (1,261) Total revenues 372,884 328,680 259,366 44,204 69,314
Expenses:

Operating expenses 311,518 294,780 262,117 16,738 32,663 Interest expenses — 1 6 (1) (5)
Non-operating expenses 877 218 — 659 218
Total expenses 312,395 294,999 262,123 17,396 32,876
Change in net position 60,489 33,681 (2,757) 26,808 36,438 Net position at beginning of year 118,001 84,320 87,077 33,681 (2,757) Net position at end of year $ 178,490 118,001 84,320 60,489 33,681 Table 2D - CleanPowerSF
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2024, 2023 and 2022

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

20 (Continued)

Hetchy Water

Hetchy Water’s total revenues were $ 53,085, a decrease of $1,930 or 3.5% from prior year’s revenues (see Table 2B). Decreases included $3,240 in charges for services and $1,523 in other non -operating revenues, offset by increases of $2,798 in interest and investment income and $35 in rents and concessions.

Charges for servi ces were $49,330 , a decrease of $ 3,240 or 6.2% mainly due to decreased water assessment fees from the Water Enterprise to fund upcountry water -related costs. Interest and investment income was $3,255 , an increase of $2,798 mainly due to unrealized gain in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates. Other non-operating revenues were $338, a decrease of $1,523 mainly due to decreases of $1,388 in State grants re venue for the Moccasin Storm Project and Rim Fire Project related to emergency repairs, $239 in Federal grants revenue for the Rim Fire Project, and $2 in net gain from sale of fixed assets, offset by increases of $100 settlement revenue mainly for San Joa quin Pipeline Project and $6 miscellaneous revenue. Rents were $162, an increase of $35 mainly due to higher collections from recreational rentals and new leases.

Total operating expenses, excluding interest expenses and other non- operating expenses, were $43,950, a decrease of $6,061 or 12.1%. Decreases included $13,074 in other operating expenses mainly due to lower project spending on the Mountain Tunnel Improvement Project , $ 807 in general and administrative expenses due to lower judgments and claims expenses , and $2 in depreciation and amortization mainly related to fewer subscription assets . These decreases were offset by increases of $6,484 in p ersonnel services due to higher pension expenses and 4.75% increase in COLA, $1,079 in contractual services from increased engineering services, $150 in material and supplies from treatment chemicals and hardware expenses, and $109 in services provided by other departments mainly due to higher risk management services.

Other non -operating expenses were $45 , a de crease of $ 9 due to lower payments to community- based organization programs. Interest expenses were $ 3, a decrease of $1 due to lower interest expenses related to leases and subscription assets. A transfer in of $ 42 was received from the Water Enterprise to fund various capital projects.

As a result of the above activities, net position for the year ende d June 30, 202 4 increased by $9,129 or

3.3% compared to prior year.

Hetchy Power

Hetchy Power’s total revenues were $ 236,624, an increase of $15, 275 or 6.9% from prior year’s revenues (see Table 2C). Increases included $10,307 from charges for services , $ 10,003 from interest and investment income, and $42 from rents and concessions, offset by a decrease of $ 5,077 from other non - operating revenues.

Charges for services were $ 214,154, an increase of $10,307 or 5.1%, mainly due to increases of $12,819 in revenue from City departments mainly due to average rate increase and lower allowance for uncollectible, $9,432 in resale of capacity to CleanPowerSF due to excess energy , $2,867 in sales to retail customers from incre ased consumption , and $1,055 from Treasure Island due to average rate increase, offset by a decrease of $15,866 mainly due to whole sale revenue from lower Congestion Revenue Right (CRR) credits from the California Independent System Operator (CAISO). Interest and investment income was $13,744, an increase of $10,003 mainly due to unrealized gain in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates . Rents increased by $42 or 26.9% to $ 198 mainly due to higher collections from recreational rentals and new leases.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2024 and 2023
(Dollars in thousands, unless otherwise stated)

21 (Continued)

Other non -operating revenues were $8, 528, a decrease of $ 5,077 or 37.3%, mainly due to decreases of $4,449 in revenue received in prior year for the Power System Mitigation Project , $567 in State grants revenue for the Moccasin Storm Project and Rim Fire Project related to emergency repairs , $344 in Federal grants revenue from the Rim Fire Project and California Arrearages Payment Program (CAPP) ended in prior year, $244 in settlement received in prior year due to labor litigation , and $78 in miscellaneous revenue.

These decreases were offset by an increase of $605 in Cap and Trade revenue due to increase of 12,157 allowances sold.

Total operating expenses, exclud ing interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $ 9,049 or 4.7% to $ 200,601. Increases included $14,217 in other operating expenses mainly due to higher project spending for the Winter Storm Projects , $8,875 in personnel services due to higher pension expenses and 4.75% increase in COLA, $2,804 in contractual services for construction contracts and engineering services , and $583 in depreciation and amortization related to additional facilities and improvements placed in service . These increases were offset by decreases of $ 14,715 in general and administrative expenses due to lower judgments and claims expenses, $1,846 in services provided by other departments mainly due to lower legal service charges from City Attorney’s Office , $708 in purchased electricity and transmission, distribution, and other power costs mainly related to transmission and related CAISO costs, and $161 in materials and supplies for electrical supplies.

Interest expenses increased by $ 4,986 or 52.6% due to higher outstanding bond s from issuance of 2023 Series A R evenue Bonds. Amortization of premium and discount decreased by $ 576 due to costs of issuance for 2023 Series A Revenue Bonds.