SFPUC Fiscal Year 2024-25 Audited Financial Statements — CleanPowerSF Sfpuc Commission, February 10, 2026 (part 1 of 2)

Audited Financial Statements
Fiscal Year 2024-25
February 10, 2026
Vivian Chen
Deputy Chief Financial Officer
1 Fiscal Year 2024-25
Audited Financial Statements
2 Issued: Macias Gini & O’Connell LLP, November 5, 2025 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 2024-25 Annual Comprehensive Financial
Report and Popular Annual Financial Report
3 Annual Comprehensive Financial Report
Issued: Macias Gini & O’Connell LLP, December 10, 2025 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 2025
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 2024/25 AUDIT RESULTS
February 10, 2026
Audit ResultsScope1.Annual Comprehensive Financial Report2.Enterprise Financial Statements•Water•Wastewater•Hetch Hetchy Water and Power and CleanPowerSFAuditor ReportsReport of Independent Auditors•Unmodified opinionsReport on Internal Control Over Financial Reporting and on Compliance and Other Matters•No control or compliance findings

Auditor ResponsibilityTo 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.Audit opinionTo 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.Auditing standardsTo 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. Internal controlsTo 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.Findings Required CommunicationsNote 2 to basic financial statements (ACFR)Implementation of New GASB Statements:•Statement No. 101, Compensated Absences•Statement No. 102, Certain Risk DisclosuresImplementation of Statement No. 101 resulted in restatements of beginning balances as of July 1, 2024, as described in note 2(v) to the basic financial statements.Significant accounting policies and practices Pension and OPEB benefitsSignificant financial statement disclosuresNo matters to reportFinancial presentation and disclosure omissionsNo material corrected misstatements | No 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) – unaudited•Supplementary Information – audited in relation to the basic financial statementsOther Information in Documents Containing Audited Financial Statements Required Communications (continued)Significant accounting estimatesMoney market funds are carried at cost, which approximates fair value. All other investments are stated 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 liabilitiesAssets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one 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 assetsEmployer 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 Accounting UpdatesEffective for fiscal year 2026GASB Statement No. 103, Financial Reporting Model ImprovementsGASB Statement No. 104, Disclosure of Certain Capital Assets 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 10, 2026

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

Through: Dennis J. Herrera, General Manager

From: Vivian Chen, Deputy Chief Financial Officer

RE: SFPUC Fiscal Year 2024-25 Annual Audited Financial Statements

Financial Services is pleased to present the FY 2024-25 Audited Financial Statements for the Water Enterprise, Wastewater Enterprise, and Hetch Hetchy Water & Power & CleanPowerSF, issued by Macias Gini & O’Connell LLP on November 5, 2025.

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 2024-25 Annual Audited Financial Statements: Water, Wastewater, and Hetch Hetchy Water & Power & CleanPowerSF

Delivering High-Quality
Water Every Day.

Water Enterprise
Financial Statements June 30, 2025 and 2024
(With Independent Auditor’s Reports 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 18
Statements of Revenues, Expenses, and Changes in Net Position 20 Statements of Cash Flows 21
Notes to Financial Statements 23
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 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 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, 2025 and 2024, 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 30, 2025 and 2024, and the changes in its financial position and its cash flows for the years th en 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 applic able 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, 2025 and 2024, 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 accepted in the Un ited 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 will always detect a material misstatement when it exists. The risk of not detecting a material misstatement 2 resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, indi vidually 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 ma terial misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Enterprise’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policie s used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

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

Required Supplementary Information
Accounting principles generally accepted in the Unit ed States of America requ ire that the management’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 Acco unting Standards 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 5, 2025 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 te sting 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 5, 2025

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

3 (Continued)
This section presents management’s analysis of the San Francisco Water Enterprise’s (the Enterprise) financial condition and activities as of and for the fiscal years ended June 30, 202 5 and 2024.

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 (the Enterprise), Hetch Hetchy Water and Power and CleanPowerSF , and Wastewater. The Enterprise collects, transmits, treats, and distributes high -quality drinking water to a total population of approximately 2.7 million people, including retail customers in the City and wholesale customers located in San Mateo, Santa Clara, and Alameda Counties. The Enterprise sold approximately 182 million gallons of water per day in the year ended June 30, 20 25. Approximately 70% of the water delivered by the Enterprise is to wholesale customers. Retail customers use the remaining 3 0% 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 R estated 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 inflows as of year -end, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Enterprise is improving or worsening.

While the Statements of Net Position provide information about the nature and amount of resources and obligations as of year-end, the Statements of Revenues, Expenses, and Changes in Net Position present the results of the Enterprise’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which the Enterprise has successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in these 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, 2025 and 2024
(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 June 30, 2025
• Total assets exceeded total liabilities by $687,077.
• Net position increased by $49,632 or 6.8% during the fiscal year. • Capital assets, net of accumulated depreciation and amortization increased by $212, 832 or 3.7% to $5,991,299.
• Current and other assets increased by $1,003 or 0.1%. • Operating revenues increased by $1,747 or 0.3% to $678,637. • Operating expenses decreased by $35,191 or 6.6% to $495,463.

Financial Highlights for Fiscal Year 2024
• Total assets exceeded total liabilities by $624,496.
• Net position increased by $41,033 or 5.9% 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 SRF Loans and restricted cash from the issuances 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 $70,401 or 15.3% to $530,654.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

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

Restated*
2024 2023
Total assets:

Current and other assets $ 866,693 865,690 691,077 1,003 174,613 Capital assets, net of accumulated depreciation and amortization 5,991,299 5,778,467 5,652,952 212,832 125,515 Total assets 6,857,992 6,644,157 6,344,029 213,835 300,128 Deferred outflows of resources:

Unamortized loss on refunding of debt 82,711 89,186 124,635 (6,475) (35,449) Pensions 98,819 93,526 70,101 5,293 23,425
Other postemployment benefits 27,309 29,974 28,616 (2,665) 1,358 Total deferred outflows of resources 208,839 212,686 223,352 (3,847) (10,666) Liabilities:

Current liabilities:

Revenue bonds 139,250 138,140 135,095 1,110 3,045
Certificates of participation 3,545 3,402 3,267 143 135 Commercial paper 20,000 190,000 — (170,000) 190,000 Arbitrage rebate payable 536 — — 536 —
Other liabilities 190,100 157,052 148,547 33,048 8,505 Subtotal current liabilities 353,431 488,594 286,909 (135,163) 201,685 Long-term liabilities:

Revenue bonds 5,049,478 4,826,497 4,575,751 222,981 250,746 Certificates of participation 82,285 85,830 89,232 (3,545) (3,402) Commercial paper — — 371,459 — (371,459)
State revolving fund loans 300,035 259,970 163,627 40,065 96,343 Arbitrage rebate payable 1,285 869 — 416 869
Other liabilities 384,401 357,901 291,193 26,500 66,708 Subtotal long-term liabilities 5,817,484 5,531,067 5,491,262 286,417 39,805 Total liabilities:

Revenue bonds 5,188,728 4,964,637 4,710,846 224,091 253,791 Certificates of participation 85,830 89,232 92,499 (3,402) (3,267) Commercial paper 20,000 190,000 371,459 (170,000) (181,459) State revolving fund loans 300,035 259,970 163,627 40,065 96,343 Arbitrage rebate payable 1,821 869 — 952 869
Other liabilities 574,501 514,953 439,740 59,548 75,213 Total liabilities 6,170,915 6,019,661 5,778,171 151,254 241,490

Deferred inflows of resources:

Unamortized gain on refunding of debt 49,499 31,854 — 17,645 31,854 Pensions 7,050 13,305 28,504 (6,255) (15,199)
Leases 33,235 36,583 41,558 (3,348) (4,975)
Other postemployment benefits 23,394 22,334 27,075 1,060 (4,741) Total deferred inflows of resources 113,178 104,076 97,137 9,102 6,939 Net position:

Net investment in capital assets 450,019 350,430 460,213 99,589 (109,783) Restricted for debt service 5,353 44,724 14,625 (39,371) 30,099 Restricted for capital projects 145,442 200,632 56,822 (55,190) 143,810 Unrestricted 181,924 137,320 160,413 44,604 (23,093) Total net position $ 782,738 733,106 692,073 49,632 41,033 * Restated due to the implementation of GASB 101 - Compensated Absences.

Table 1
Comparative Condensed Net Position
June 30, 2025, 2024, and 2023
2025
2025-2024
Change
2024-2023
Change

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

6 (Continued)
Net Position, Fiscal Year 2025
For the period ended June 30, 2025, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $782,738. Total net position increased from prior year by $49,632 or 6.8% (see Table 1). Increases of $209,988 in assets and deferred outflows of resources, and increases of $160,356 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 2025, current and other assets increased by $1,003 or 0.1%. The increases included $105,164 in unrestricted and restricted cash and investments mainly due to the issuances of 2025 Series DEF water revenue refunding bonds and commercial paper, and $37,827 in interfund receivables mainly from Hetch Hetchy Power for the Mountain Tunnel Improvement project . Other increases of $3, 598 were mainly due to prepaids, advances and other receivables for software licensing, consulting, permits and subscription fees. These increases were offset by decreases of $105,774 from reimbursements received from the State Water Resources Control Board (SWRCB) State Revolving Fund s (SRF) Loan relating to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, $26,121 in Wholesale Balancing Account receivable (see Note 10 for details), $8,733 in charges for services receivable due to more receipts than billings, and $ 4,958 mainly in leases receivable, restricted and unrestricted interest and other receivables, and inventory.

Capital assets, net of accumulated depreciation and amortization, increased by $212,832 or 3.7% mainly from the Sunol Valley Water Treatment Plant Ozonation and New San Francisco Water Division Headquarters projects. The largest portion of the Enterprise’s net position of $ 450,019 or 57.5% represents net investment in capital assets (see the Capital Assets section of the MDA for more information), which increased by $ 99,589 or 28.4% from the prior year’s $ 350,430. The change was explained by an increase of $212,832 in capital assets, offset by a $ 113,243 increase in liabilities mainly from the issuances of 2025 Series ABC, 2025 Series DEF bonds and additional commercial paper.

Deferred outflows of resources decreased by $ 3,847 due to a $6,475 decrease in unamortized loss on refunding of debt mainly from defeasance of refunding loss by the 2025 Series ABC revenue bonds and amortization and $2,665 decrease in other postemployment benefits (OPEB) based on actuarial estimates, offset by an increase of $5,293 from pensions based on actuarial estimates.

Total liabilities increased by $151,254. Increases included $224,091 in revenue bonds, of which increases of $1,511,695 in bond principal and $129,352 in premium were from issuances of 2025 Series ABC and 2025 Series DEF bonds , and $10 in bond discount from amortization. These increases were offset by decreases of $1,206,240 in bond principal and $41,467 in premium from refunding, $138,140 in bond principal from repayment, $30,621 in bond premium from amortization, and $498 in bond discount from issuances. Additional increases include $40,065 in SRF Loans payable due to additional loans relating to the Mountain Tunnel Improvement and SF Westside Recycled Water projects, $29,276 in restricted and unrestricted payables due to higher year end expense accruals for capital projects and operating activities as compared to prior year , $14,335 in pensions based on actuarial estimates, $12,983 in Wholesale Balancing Account (see Note 1 0 for details) , $3,858 in accrued payroll mainly from cost of living adjustments for payroll and compensated absences mainly from the implementation of GASB Statement No. 101, Compensated Absences, and $3,674 in OPEB based on actuarial estimates . Other increases of $5,513 were mainly due to unearned revenues from customer deposits from more accounts . These increases were offset by decreases of $170,000 in commercial paper of which $312,400 was from

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

7 (Continued)
refunding by the 2025 Series DEF revenue refunding bonds offset by $142,400 from additional issuances.

Other decreases included $7,824 in damage claims based on the City Attorney and Controller’s Office s analysis, $3,402 in certificates of participation principal from repayment, and other decreases of $1,315 mainly from pollution remediation for the Lake Merced Pacific Rod and Gun Club (see Note 14(d) for more detail). Water Enterprise’s damage claim liability as of June 30, 2025 was estimated by using probable exposure information provided by the City Attorney’s Office and includes an estimate of incurred but not reported losses
Deferred inflows of resources increased by $9,102 due to increases of $17,645 in unamortized gain on refunding of debt mainly from the issuance of the 2025 Series ABC revenue refunding bonds and $1,060 in OPEB based on actuarial estim ates, offset by decreases of $6,255 in pensions based on actuarial estimates and $3,348 in leases due to fewer leases.

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 $733,106. Total net position increased from prior year by $41,033 or 5.9% (see Table 1). Increases of $289,462 in assets and deferred outflows of resources, and increases of $248,429 in liabilities and deferred inflows of resources are described below.

During the fiscal year 202 4, 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 p rojects, $53,237 in restricted and unrestricted 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 10 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 note s 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 issuances 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.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

8 (Continued)
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 liabilities increased by $241,490 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 estimates , $18,597 in accrued payroll, vacation and sick leave from the implementation of GASB Statement No. 101, $9,700 in OPEB liabilities based on actuarial estimates, $6,442 in interest payable mainly from the issuances of 2023 Series AB revenue bonds and 2023 Series CD revenue refunding bonds, $3,148 in damage claims based on actuarial reports, $1,715 in restricted and unrestricted payables due to higher year end 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 projec t, $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.
* The fiscal year 2024 net position narrative is updated to reflect the restatement in compensated absences.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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 2025
The Enterprise’s total revenues of $ 736,609 for the year represented a decrease of $7,449 or 1.0% from prior year (see Table 2). Decreases included $13,192 in other non-operating revenues and $1,202 in rents and concessions, offset by increases of $3, 996 in interest and investment income, $2, 823 in charges for services, and $126 in other operating revenues.

Charges for services were $ 665,552, an increase of $ 2,823 or 0.4%, mainly due to a 5% planned rate increase for retail customers and 8.8% rate increase for wholesale customers beginning July 1, 202 4 offset by a decrease in the WRR balancing account . Rents and concessions were $ 7,354, a decrease of $1,202 or 14.0%, mainly due to allocations for low -income customer assistance program s. Other operating revenues were $ 5,731, an increase of $126 or 2.2% mainly due to an increase in capacity fees permits issued. Interest and investment income were $29,093, an increase of $ 3,996 or 15.9%, mainly due to increased interest from higher cash balances. Other non-operating revenues were $28,879, a decrease of $13,192 or 31.4%, due to grants received in prior year for the COVID-19 pandemic related water utility arrearages relief and the SCU Lightning Complex fire.

The Enterprise’s total expenses were $698,513, a decrease of $42,131 or 5.7%. Operating expenses were $495,463, a decrease of $35,191 or 6.6%, resulting from decreases of $60,017 in general administrative and other expenses mainly due to due to a decrease in estimated judgment and claims expenses and higher capital project capitalizations in the current year, $ 2,566 in contractual services and materials and Restated**
2025 2024 2023
Revenues:

Charges for services $ 665,552 662,729 671,216 2,823 (8,487) Rents and concessions 7,354 8,556 13,282 (1,202) (4,726) Other operating revenues 5,731 5,605 6,593 126 (988) Interest and investment income 29,093 25,097 11,156 3,996 13,941 Other non-operating revenues 28,879 42,071 40,679 (13,192) 1,392 Total revenues 736,609 744,058 742,926 (7,449) 1,132 Expenses:

Operating expenses 495,463 530,654 460,253 (35,191) 70,401 Interest expenses* 201,152 208,230 204,942 (7,078) 3,288 Non-operating expenses 1,898 1,760 1,775 138 (15)
Total expenses 698,513 740,644 666,970 (42,131) 73,674 Change in net position before capital contributions and transfers 38,096 3,414 75,956 34,682 (72,542) Capital contributions 17,436 53,599 2,717 (36,163) 50,882 Transfers from the City and County of San Francisco 41,215 505 5 40,710 500 Transfers to the City and County of San Francisco (47,115) (1,241) (20,032) (45,874) 18,791 Capital contributions and net transfers 11,536 52,863 (17,310) (41,327) 70,173 Change in net position 49,632 56,277 58,646 (6,645) (2,369) Net position at beginning of year
Beginning of year, as previously reported 733,106 692,073 633,427 41,033 58,646 Cumulative effect of accounting change — (15,244) — 15,244 (15,244) Net position at beginning of year as restated 733,106 676,829 633,427 56,277 43,402 Net position at end of year $ 782,738 733,106 692,073 49,632 41,033 * Net of amortization of premium, refunding gain/loss, and issuance cost. ** Restated due to the implementation of GASB 101 - Compensated Absences.

Table 2
Comparative Condensed Revenues, Expenses, and Changes in Net Position June 30, 2025, 2024, and 2023
2025-2024
Change
2024-2023
Change

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

10 (Continued)
supplies mainly for construction expenses. These decreases were offset by increase s of $14,693 in personnel services mainly due to pension expenses based on actuarial estimates , $7,971 in services provided by other departments mainly due to increased electricity charges and water assessment fees paid to Hetch Hetchy Water, and $4,728 in depreciatio n from additional assets placed into service . Interest expenses decreased by $ 7,078 compared to prior year, mainly due the refunding of bonds through the issuance of the 2025 Series ABC and 2025 Series DEF water revenue refunding bonds . Non-operating expenses increased by $138 mainly due to higher rebates provided to customers.

Capital contributions of $ 17,436 were received from developers for assets related to the Mission Rock Phase 1A project. Transfer in of $41,215 included $41,211 from the City for the Earthquake Safety and Emergency Response program and $ 4 from the General Fund for the Mayor’s Office ’s minimum compensation ordinance . Transfer out of $ 47,115 included $ 47,084 to Hetch Hetchy Water for the Mountain Tunnel Improvement project and $31 to the Office of the City Administrator for the Enterprise’s contribution to the Surety Bond Program.

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 $ 662,729, a decrease of $ 2,823 or 0.4%, 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, 2023. 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 $5,605 , a decrease of $988 or 15.0%, mainly due to lower water installation charges. 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 2020 Wildfires Santa Clara Fence project.

The Enterprise’s total expenses were $ 740,644, an increase of $73,674 or 11.0%. Operating expenses were $530,654, an increase of $ 70,401 or 15. 3%, 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, $25,368 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 $3,288 compared to prior year, mainly due to the issuances 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 developers 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 impacts 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

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

11 (Continued)
Improvement projects, and $32 to the Office of the City Administrator for the Enterprise’s contribution to the Surety Bond Program.
* The fiscal year 2024 results of operations narrative is updated to reflect the restatement in compensated absences.

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

Capital Assets, Fiscal Year 2025
The Enterprise has net capital assets of $5,991,299 invested in a broad range of utility capital assets as of June 30, 2025 (see Table 3). The investment in capital assets includes land, facilities, improvements, water treatment plants, aqueducts, water transmission, distribution mains, water storage facilities, pump stations, water reclamation facilities, machinery, and equipment. The Enterprise’s net revenue and long -term debt are used to finance capital investments. Capital assets, net of accumulated depreciation and amortization, increased by $212,832 from the prior year. Facilities, improvements, machinery, and equipment decreased by $ 34,671 mainly due to depreciation . Intangible assets increased by $ 393 mainly due to Maximo improvements and Customer Care & Billing application additions. Land and rights -of-way were unchanged.

Construction work in progress increased by $246,463 mainly from the Sunol Valley Water Treatment Plant Ozonation and New CDD Headquarters p rojects. Right-to-use lease and subscription assets increased by $647 due to more leases and subscription assets.

As of June 30, 2025 and 2024 , the Enterprise had capital commitments of $ 447,672 and $ 225,678, respectively.

2025 2024 2023
2025-2024
Change
2024-2023
Change
Facilities, improvements, machinery, and equipment $ 5,017,968 5,052,639 5,005,667 (34,671) 46,972 Intangible assets 3,050 2,657 2,331 393 326
Land and rights-of-way 113,322 113,322 113,322 — —
Construction work in progress 853,267 606,804 526,994 246,463 79,810 Right-to-use lease and subscription assets 3,692 3,045 4,638 647 (1,593) Total $ 5,991,299 5,778,467 5,652,952 212,832 125,515 Table 3
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2025, 2024, and 2023

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

12 (Continued)
Major additions to construction work in progress during the year ended June 30, 2025 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, 2025 include the following:

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, 2025. 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, 2025, 35 local projects were completed . For regional projects, 4 8 projects were completed, the Alameda Creek Recapture is in planning phase, Regional Groundwater Storage is under construction, the Bioregional Sunol Valley Water Treatment Plant Ozonation $ 40, 786 New San Francisco Water Division Headquarters 40,244 San Joaquin Pipeline Valve and Safe Entry Improvements 26,705 Mountain Tunnel Improvements 20,580
Skyline Ridge Trail 17,978
Water Main Replacement - WD-2708 Geary Blvd from 32nd Avenue to Stanyan Street 11,498 Lead Component Service Program 9,098
New services for water installation 9,092
San Andreas Reservoir Road Improvements 7,152 Renewed Water Service Facilities 6,791
Water Main Replacement - WD-2848 Gold Mine Drive from Topaz Way to Diamond Heights 6,646 Water Main Replacement - WD-2801 Hampshire and York Streets from Mariposa to Cesar 6,183 Millbrae Campus Improvements 5,454
Water Main Replacement - WD-2765 Jersey Street from Douglass to Church Street 5,414 O'Shaughnessy Dam Outlet Works Phase 1 5,136
Other project additions individually below $5,000 121,781 Total $ 340, 538
Mission Rock Auxiliary Water Supply System $ 15, 467 San Andreas Reservoir Road Improvement - Soldier Pile Retaining Wall with Tiebacks 10,203 Renewed Water Service Lines 9,098
New Water Service Facilities 9,092
Water Main Replacement - WD-2848 Gold Mine Drive from Topaz Way to Diamond Heights 8,637 Water Main Replacement - WD-2874 Joost Avenue from Ridgewood Avenue to Congo Street 8,169 Renewed Water Service Facilities 6,791
Bay Division Pipeline No. 4 Slip Lining Pipe at Lafayette Street 5,098 Other items individually below $5,000 50,055
Total $ 122, 610
See Note 4 for additional information about Capital Assets.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

13 (Continued)
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 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, improvements, water treatment plants, aqueducts, water transmission, distribution mains, water storage facilities, pump stations, water reclamation facilities, machinery, and equipment. The Enterprise’s net revenue and long -term debt are used to finance capital investments. Capital assets, net of accumulated depreciation and amortization, increased by $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 increased by $326 mainly due to Maximo improvements and Software as a Service Applications additions .

Land and rights-of-way were unchanged. Construction work in progress increased by $79,810 mainly from the San Joaquin Pipeline Valve and Safe Entry Improvements and Mountain Tunnel Improvement projects.

Right-to-use lease and subscription assets decreased by $1,593 due to fewer leases 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:

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

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

14 (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, 2024 include the following:

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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

15 (Continued)
Debt Administration
As of June 30 , 2025, the Enterprise had $ 5,594,593 total debt outstanding, an increase of $90,754 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 $ 224,091 in revenue bonds was due to increases of $ 1,511,695 in bond principal and $129,352 in bond premium from the issuance s of the 2025 Series ABC and 2025 Series DEF water revenue refunding bonds and $10 in bond discount from amortization. These increases were offset by decreases of $1,206,240 in bond principal from refunding, $138,140 in bond principal from repayment, $41,467 in bond premium from bond refunding, $30,621 in bond premium from amortization, and $498 in bond discount from bond issuances. Commercial paper decreased by $170,000, explained by a $312,400 decrease from refunding by the 2025 Series DEF revenue refunding bonds offset by a $142,400 increase from additional issuances. The Enterprise had $ 20,000 in taxable commercial paper as of June 30, 2025, and $190,000 in tax-exempt commercial paper as of June 30, 2024. The decrease of $3,402 in certificates of participation was from repayment. The $40,065 increase in SRF loans was from additional loans for the Mountain Tunnel Improvement and SF Westside Recycled Water projects.

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, 2025, and “Aa2” and “AA -” from Moody’s and S&P on June 30, 2024, 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 times annual debt service for said fiscal year. During fiscal years 202 5 and 2024, the Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rate covenant requirements under the Enterprise’s Amended and Restated Indenture 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, 2025 , the Board of Supervisors has authorized the issuance of $6,157,510 in revenue bonds under Proposition E, with $ 5,305,913 issued against this authorization. The Enterprise can also incur indebtedness of up to $1,628,000 for improvements to the water system pursuant to Proposition A that was approved by the voters in November 2002. As of June 30, 2025, $ 1,499,230 of the $1,628,000 2025 2024 2023
2025-2024
Change
2024-2023
Change
Revenue bonds $ 5, 188,728 4,964,637 4,710,846 224,091 253,791 Commercial paper 20,000 190,000 371,459 (170,000) (181,459) Certificates of participation 85,830 89,232 92,499 (3,402) (3,267) State revolving fund loans 300,035 259,970 163,627 40,065 96,343 Total $ 5,594,593 5,503,839 5,338,431 90,754 165,408 Table 4
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2025, 2024, and 2023

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

16 (Continued)
Proposition A authorized bonds were issued. The Enterprise is also authorized to issue up to $ 750,000 in commercial paper.

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

0.8% to 7.0% as of June 30, 2025, and 0.7% to 7.0% as of June 30, 2024. The Enterprise’s short-term debt has interest rates ranging from 2.6% to 4.4% during fiscal year 202 5, and 2.2% to 5.2% during fiscal year 2024.

Rates and Charges
Rate Setting Process
Retail Customers
Proposition E, as approved by the voters in November 2002, amended the City Charter by adding Article VIIIB, entitled “Public Utilities,” which established the Commission’s authority to issue new revenue bonds and set retail water rates. For 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 water and wastewater rate study was completed in May 2023. The Commission subsequently adopted three years of retail water rate increases from July 1, 2023 through June 30, 2026.

Other miscellaneous fees 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 is determined. Rather than the “utility basis,” which sets rates using the cost of capital investments over the life of each asset, the WSA uses a “cash basis,” which sets rates using annual debt service costs for assets financed with debt or at the time of budget appropriation and spending for revenue -funded capital projects. The WSA requires the rate be calculated and set annually and includes a reconciliation between prior year revenues and expenses.

SAN FRANCISCO WATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

17 Refer to Note 10 of the notes to financial statements for further discussion on the balancing account of the wholesale customers.

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

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     2.3
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, 2025 and 2024
(In thousands)

18 (Continued)

Restated*
2025 2024
Current assets:

Cash and investments with City Treasury $ 436,413 380,201 Cash and investments outside City Treasury 76 193
Receivables:

Charges for services, current portion (net of allowance for doubtful accounts of $10,878 as of June 30, 2025 and $10,777 as of June 30, 2024) 70,751 79,483 Wholesale balancing account receivable — 26,121
Note receivable - Balboa Reservoir, current portion 3,116 — Due from other City departments, current portion 209 102 Due from other governments 1,038 366
Interest 3,466 3,861
Interest - Leases 945 935
Restricted due from other governments 23,806 129,580
Leases receivable, current portion 2,752 3,246
Restricted interest and other receivable (net of allowance for doubtful accounts of $145 as of June 30, 2025 and $131 as of June 30, 2024) 2,654 3,789 Total current receivables 108,737 247,483
Prepaid charges, advances, and other receivables, current portion 7,413 4,958 Inventory 7,567 7,825
Restricted cash and investments outside City Treasury, current portion 28,467 40,065 Total current assets 588,673 680,725
Non-current assets:

Restricted cash and investments with City Treasury 137,436 71,015 Restricted cash and investments outside City Treasury, less current portion 57,431 63,185 Leases receivable, less current portion 33,141 35,817
Charges for services, less current portion (net of allowance for doubtful accounts of $414 as of June 30, 2025 and $664 as of June 30, 2024) 199 200 Due from other City departments, less current portion 37,720 — Note receivable - Balboa Reservoir, less current portion 8,737 11,512 Capital assets, not being depreciated and amortized 967,268 720,805 Capital assets, net of accumulated depreciation and amortization 5,024,031 5,057,662 Prepaid charges, advances, and other receivables, less current portion 3,356 3,236 Total non-current assets 6,269,319 5,963,432
Total assets 6,857,992 6,644,157
Deferred outflows of resources
Unamortized loss on refunding of debt 82,711 89,186
Pensions 98,819 93,526
Other postemployment benefits 27,309 29,974
Total deferred outflows of resources $ 208,839 212,686 Assets

SAN FRANCISCO WATER ENTERPRISE
Statements of Net Position
June 30, 2025 and 2024
(In thousands)

19 Restated*
2025 2024
Current liabilities:

Accounts payable $ 21, 230 25,353
Accrued payroll 15,784 13,444
Accrued compensated absences, current portion 17,393 16,300 Accrued workers’ compensation, current portion 2,365 2,188 Damage claims liability, current portion 4,525 5,716
Unearned revenues, refunds, and other 16,666 15,050
Arbitrage rebate payable, current portion 536 —
Bond, loan, lease, and subscription interest payable, current portion 37,030 37,924 Lease liability, current portion 966 1,028
Subscription liability, current portion 846 153
Revenue bonds, current portion 139, 250 138,140
Certificates of participation, current portion 3,545 3,402 Commercial paper 20,000 190,000
Current liabilities payable from restricted assets 73,295 39,896 Total current liabilities 353,431 488,594
Long-term liabilities:

Arbitrage rebate payable less current portion 1,285 869 Net other postemployment benefits liability 161,975 158,301 Net pension liability 166,978 152,643
Lease liability, less current portion 1,811 1,793
Subscription liability, less current portion 159 155
Accrued compensated absences, less current portion 14,670 14,245 Accrued workers’ compensation, less current portion 9,936 8,814 Damage claims liability, less current portion 10,424 17,057 Bond, loan, lease, and subscription interest payable, less current portion 5,465 3,622 Revenue bonds, less current portion 5, 049,478 4,826,497 Certificates of participation, less current portion 82,285 85,830 State revolving fund loans 300,035 259,970
Wholesale balancing account 12, 983 —
Pollution remediation obligation — 1,271
Total long-term liabilities 5,817,484 5,531,067
Total liabilities 6,170,915 6,019,661
Deferred inflows of resources
Unamortized gain on refunding of debt 49,499 31,854
Pensions 7,050 13,305
Leases 33,235 36,583
Other postemployment benefits 23,394 22,334
Total deferred inflows of resources 113,178 104,076
Net position
Net investment in capital assets 450,019 350,430
Restricted for debt service 5,353 44,724
Restricted for capital projects 145,442 200,632
Unrestricted 181,924 137,320
Total net position $ 782,738 733,106
* Restatement due to implementation of GASB 101 - Compensated Absences.

See accompanying notes to financial statements.

Liabilities

SAN FRANCISCO WATER ENTERPRISE
Statements of Revenues, Expenses, and Changes in Net Position Years ended June 30, 2025 and 2024
(In thousands)
20 Restated**
2025 2024
Charges for services $ 665,552 662,729
Rents and concessions 7,354 8,556
Capacity fees 1,055 863
Other revenues 4,676 4,742
Total operating revenues 678,637 676,890
Operating expenses:

Personnel services 175,770 161,077
Contractual services 17,587 20,128
Materials and supplies 23,170 23,195
Depreciation and amortization 159,900 155,172
Services provided by other departments 85,609 77,638
General and administrative and other 33,427 93,444
Total operating expenses 495,463 530,654
Operating income 183,174 146,236
Non-operating revenues (expenses):

Federal and state grants 2,233 12,414
Interest and investment income 29,093 25,097
Interest expenses* (201,152) (208,230)
Net gain from sale of assets 1,701 2,060
Other non-operating revenues 24,945 27,597
Other non-operating expenses (1,898) (1,760)
Net non-operating expenses (145,078) (142,822)
Change in net position before capital contributions and transfers 38,096 3,414 Capital contributions 17,436 53,599
Transfers from the City and County of San Francisco 41,215 505 Transfers to the City and County of San Francisco (47,115) (1,241) Capital contributions and net transfers 11,536 52,863
Change in net position 49,632 56,277
Net position at beginning of year
Net position at beginning of year 733,106 692,073
Cumulative effect of accounting change — (15,244)
Beginning of year as restated 733,106 676,829
Net position at end of year $ 782,738 733,106
** Restatement due to implementation of GASB 101 - Compensated Absences.

See accompanying notes to financial statements.
* Net of amortization of premium, refunding gain/loss, and issuance cost.

Operating revenues:

SAN FRANCISCO WATER ENTERPRISE
Statements of Cash Flows
Years ended June 30, 2025 and 2024
(In thousands)

21 (Continued)

2025 2024
Cash received from customers, including cash deposits $ 721,479 636,706 Cash received from tenants for rent 3,240 5,429
Cash received from miscellaneous revenues 3,694 4,776
Cash paid to employees for services (156,968) (151,655) Cash paid to suppliers for goods and services (164,876) (194,188) Cash paid for judgments and claims (9,167) (18,216)
Cash received from settlements 1,078 —
Cash paid for rebates and program incentives (1,898) (1,760) Net cash provided by operating activities 396,582 281,092 Cash flows from non-capital financing activities:

Cash received for grants 1,595 13,400
Cash refunded for grants (1,386) —
Interfund loan receivable (37,822) —
Transfers from the City and County of San Francisco 41,215 505 Transfers to the City and County of San Francisco (47,115) (1,241) Net cash (used in) provided by non-capital financing activities (43,513) 12,664 Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 1,701 1,569
Proceeds from bond issuance, net of premium 95,520 474,538 Proceeds from commercial paper borrowings 142,400 191,150 Proceeds from State revolving fund loan 145,839 4,044
Principal paid on commercial paper — (372,609)
Principal paid on long-term debt (141,542) (138,342)
Interest paid on long-term debt (207,283) (214,279)
Interest paid on commercial paper (8,374) (1,511)
Issuance cost paid on long-term debt (5,035) (4,545)
Cash receipts from leases 4,624 3,745
Lease interest payments (90) (81)
Subscription interest payments (37) (6)
Acquisition and construction of capital assets (325,639) (229,702) Federal interest income subsidy from Build America Bonds 22,246 22,909 Net cash (used in) capital and related financing activities (275,670) (263,120) Cash flows from investing activities:

Interest income received 21,739 16,310
Proceeds from sale of investments outside City Treasury 1,626,714 1,015,279 Purchase of investments outside City Treasury (1,560,899) (1,081,634) Net cash provided by (used in) investing activities 87,554 (50,045) Increase (decrease) in cash and cash equivalents 164,953 (19,409) Cash and cash equivalents:

Beginning of year 495,492 514,901
End of year 660,445 495,492
Reconciliation of cash and cash equivalents to the statement of net position:

Cash and investments with City Treasury:

Unrestricted 436,413 380,201
Restricted 137,436 71,015
Add: Unrealized loss on investments with City Treasury 622 7,188 Cash and investments outside City Treasury:

Unrestricted 76 193
Restricted 85,898 103,250
Less: Unrealized loss (gain) 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 $ 660,445 495,492
Cash flows from operating activities:

SAN FRANCISCO WATER ENTERPRISE
Statements of Cash Flows
Years ended June 30, 2025 and 2024
(In thousands)

22 Restated*
2025 2024
operating activities:

Operating income $ 183,174 146,236
Adjustments to reconcile operating income to
net cash provided by operating activities:

Depreciation and amortization 159,900 155,172
Lease revenue amortization (3,987) (3,322)
Miscellaneous revenue 3,694 4,776
Provision for uncollectible accounts (135) 2,263
Write-off of capital assets and other non-cash items 4,394 58 Settlements 1,078 —
Rebates and program incentives (1,898) (1,760)
Changes in operating assets and liabilities:

Receivables:

Charges for services 8,881 (17,701)
Prepaid charges, advances, and other (2,970) 560
Due from other City departments (5) 13
Inventory 258 366
Accounts payable (4,123) 2,682
Accrued payroll 2,340 1,637
Net other postemployment benefits obligation** 7,399 3,601 Net pension obligations** 2,787 (1,324)
Accrued compensated absences 1,518 1,716
Accrued workers’ compensation 1,299 1,267
Due to other City departments — (2,440)
Wholesale balancing account 39,104 (16,069)
Pollution remediation obligation (1,271) —
Damage claims liability (7,824) 3,148
Unearned revenues, refunds, and other liabilities 2,969 213 Total adjustments 213,408 134,856
Net cash provided by operating activities $ 396,582 281,092 Noncash transactions:

Accrued capital asset costs $ 73,295 39,896
Unrealized loss on investments with City Treasury 622 7,188 Unrealized loss (gain) on investments outside City Treasury — (540) Capital contribution 17,436 53,599
Sale of land with promissory note 11,853 11,512
Bond principal refunded 1,206,240 619,115
Commercial paper refunded 313,384 373,103
Bond and commercial paper proceeds paid to refunding escrow 1,546,013 963,977 Interfund receivable from Hetchy Power 37,720 —
* Restatement due to implementation of GASB 101 - Compensated Absences. ** Net pension obligations and 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

23 (Continued)
(1) Description of Reporting Entity
The San Francisco Water Enterprise (the Enterprise) was established in 1930 under the provisions of the Charter of the City and County of San Francisco (the City) . The Enterprise acquired the fully developed, mature water works for San Francisco on March 3, 1930. Since then, the City has operated and maintained the water works as the San Francisco Water Enterprise. The Board of Supervisors of the City has adopted resolutions (the Water Resolutions) providing for the issuance of various water revenue and refunding bond series. The Water Resolutions require the City to keep separate books of records and accounts of the Enterprise. The Enterprise, which consists of a system of reservoirs, storage tanks, water treatment plants, pump stations, and pipelines, is engaged in the distribution of water to San Francisco and certain suburban areas. In fiscal year 2025 , the Enterprise sold approximately 66,444 million gallons, i.e. , about 182 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, and 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 intended to present only the financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2025 and 2024, 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

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

The financial activities of the Enterprise are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting in accordance with U.S. GAAP. Under this method, all assets and liabilities associated with its operations are included on the statement of net position; revenues are recognized when earned, and expenses are recognized when liabilities are incurred. Operating revenues are defined as charges to customers, rental income, and capacity fees. Non-operating revenues include grants, investment income, and other income from non-operating activities. When both restricted and unrestricted resources are available for use, it is the Enterprise’s policy to use restricted resources first, then unrestricted resources as they are needed.

The Enterprise applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
(b) Cash and Cash Equivalents
The Enterprise considers its pooled cash and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non-pooled cash and investments for the Enterprise. Non -pooled restricted deposits and investments held outside the City Treasury with original maturities of three months or less are also considered to be cash equivalents.
(c) Investments
Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based on quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues. (d) Inventory
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed. (e) Capital Assets
Capital assets are defined as assets with an initial individual cost of more than $ 10 and an estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

25 (Continued)
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 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 depreciation or amortization is recorded in the year of acquisition, and depreciation or amortization is recorded in the year of disposal. (f) Intangible Assets
Intangible assets are defined as identifiable, non- financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights-of-way easements, land use rights, water 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 Compensated Absences
City employees may accumulate earned, but unused leave benefits up to a specified maximum, as outlined in their applicable leave policies. In accordance with GASB Statement No. 101, Compensated Absences, the Enterprise recognizes liabilities for leaves that are attributable to services already rendered, will be paid upon separation or usage, and are more likely than not to be used or paid. Compensated absences that meet these criteria consist of vacation, sick, compensatory time, and other holidays and leaves. The Enterprise records the compensated absences liability, including employer payroll taxes and the employer's share of social security and Medicare taxes, as both current and noncurrent liabilities in the Statement of Net Position.

The Enterprise applies the current pay rates of active employees to leave balances in effect at fiscal year-end.
(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)).

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

26 (Continued)
(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 remediation efforts, and other specific naturally occurring contaminants such as mold . As of June 30, 2025, the Enterprise estimated its liability for pending and threatened lawsuits based on the Office of the City Attorney’s assessment of probable claims and historical trends for incurred but not reported losses. The recorded liability represents management’s best estimate of the Enterprise’s potential exposure based on currently available information.

During Fiscal Year 2025, the Enterprise changed its methodology for estimating claims liability.

The Enterprise’s claims liability had historically been actuarially determined. The revised measurement methodology aligns more closely with the Office of City Attorney’s judgment of the Enterprise’s potential exposure based on currently available information. This prospective change in accounting estimate is intended to enhance the understandability, relevance, and timeliness of the financial information.

Affected financial statement items include: current and noncurrent estimated claims payables; functional expenses in the statement of activities under governmental activities; and general and administrative expenses in the proprietary funds’ statement of revenues, expenses, and changes in fund net position (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 interest costs on the bonds must be remitted to the f ederal government on every fifth anniversary of each bond issue. The arbitrage rebate liability a s of June 30, 2025 and 2024 were $1,821 and $ 869, 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) Deferred Inflow of Resources and Deferred Outflow of Resources Deferred i nflows of resources represent an acquisition of net assets that applies to future periods. Deferred outflows of resources represent a consumption of net assets that applies to future periods.
(o) Income Taxes
As a department of a government agency, the Enterprise is exempt from both federal income taxes and California state franchise taxes.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

27 (Continued)
(p) 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, 2025 and 2024 were $38,703 and $44,465, respectively.
(q) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets , 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. (r) Accounting and Financial Reporting for Pollution Remediation Obligations According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations , as amended, a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted, and any of the following recognition triggers occur:
• Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
• A government has violated a pollution prevention-related permit or license; • A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
• A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
• A government begins or legally obligates itself to begin cleanup or post -cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the design phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include, but are not limited to: asbestos or lead paint removal, leaking of sewage in underground pipes or neighboring areas, chemical spills, removal and disposal of known toxic waste, harmful biological and chemical pollution of water, or contamination of surrounding soils by underground storage tanks (see Note 14(d)).
(s) Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability (asset) and deferred outflows/inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Retiree Health Care Trust Fund (RHCTF) and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

28 (Continued)
plans. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Plan member contributions are recognized in the period in which the contributions are due. Investments are reported at fair value. (t) Pensions
For purposes of measuring the net pension liability (asset) and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the San Francisco Employees’ Retirement System (SFERS) plan and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Plan member contributions are recognized in the period in which the contributions are due. Investments are reported at fair value.
(u) New Accounting Standards Adopted in Fiscal Year 2025 1) In June 2022, the GASB issued Statement No. 101, Compensated Absences. This statement requires that liabilities for compensated absences be recognized if the leave is attributable to services already rendered and the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means and establishes definitions, guidance, and disclosure requirements related to compensated absences. The new standard is effective for periods beginning after December 15, 2023. Application of this statement is effective for the Enterprise’s year ending June 30, 2025. In accordance with GASB Statement No. 100, Accounting Changes and Error Corrections , the Enterprise reported the implementation of GASB Statement No. 101 as a change in accounting principle. The cumulative effect of applying the new recognition and measurement guidance as of July 1, 2023 was recorded as a restatement of beginning balances for the following accounts. The impact is presented in the following table.

2) In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures . This statement establishes financial reporting requirements for risk related to vulnerabilities due to certain concentrations or constraints within governments. The new standard is effective for periods beginning after June 15, 2024. The Enterprise adopted the provisions of Statement No. 102 in fiscal year 2025 which did not have a significant effect on its financial statements.
(v) GASB Statements Implemented 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, 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 Enterprise for the year ended June 30, 2022. The requirements related to financial Net Position
7/1/2023 As
Previously
R
eported
Changes in
Accounting
P
rinciple
7/1/2023 As
Restated
692,073$ ( 15,244)$ 676,829$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

29 (Continued)
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 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 2024 which did not have a significant effect on its financial statements.
(w) Future Implementation of New Accounting Standards
1) 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 effective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 103 in fiscal year 2026.

2) 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 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 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. Certain other operating revenues, specifically charges to City municipal departments have been reclassified to charges for services for fiscal year 2024. In addition, the cash paid for rebates and program incentives in the direct cash flows statement has been reclassified under operating activities, lease receipts were reclassified from operating activities to capital and related financing activities in the direct cash flow, and lease and subscription payments were reclassified to acquisition and construction of capital assets under cash flows from capital and related financing activities for fiscal year 2024. These reclassifications had no effect on previously reported changes in net position.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

30 (Continued)
(3) Cash, Cash Equivalents, and Investments
The Enterprise’s cash, cash equivalents , and investments with the City Treasury are invested in an unrated City pool pursuant to investment policy guidelines established by the City Treasurer. The objectives of the policy guidelines are, in order of priority, preservation of capital, liquidity, and yield.

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

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 expenditures. The current balances as of June 30, 2025 and 2024 were $85,898 and $103,250, 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.

Custodial Credit Risk – Deposits
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the Enterprise will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits.

The California Government Code requires California banks and savings and loan associations to secure the Enterprise’s deposits not covered by Federal Deposit Insurance Corporation (FDIC) insurance by pledging government and/or local agency securities as collateral. The fair value of such pledged securities must equal at least 110% and be of the type authorized in California Government Code, Section 53651 (a) through (i). The collateral must be held at the pledging bank’s trust department or another bank, acting as the pledging bank’s agent, in the Enterprise’s name. At June 30, 2025, all banks with funds deposited by the Treasurer secured deposits with sufficient collateral or FDIC insurance
Interest Rate Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to pay the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The ratings for each of the investment types are provided by the tables below.

Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to pay the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The ratings for each of the investment types are provided by the tables below.

Custodial Credit Risk – Investments
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the Enterprise will not be able to recover the value of its investment or collateral securities that are in the possession of another party.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

31 (Continued)
The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments; however, it is the practice of the City Treasurer that all investments are insured, registered or held by the Treasurer’s custodial agent in the Enterprise’s name. The Enterprise also has investments with trustees related to the issuance of bonds that are uninsured, unregistered and held by the counterparty’s trust departments but not in the Enterprise’s name. These amounts are included in the investments outside City Treasury and are provided by the tables below.

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, 2025 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, 2024 were “Aaa-mf” and “P -1” by Moody’s, and “AAAm” and “A -1” by S&P . Investment agreements must be with a U.S. bank or trust company that have a rating by Moody’s and S&P of “A” or higher, or are guaranteed by any entity with a rating of “A” or higher, at the time the agreement is entered.

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

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, 2025 and 2024:

Fair Value
Measurements Using
Credit Ratings
(S&P/Moody's) Maturities Fair Value

U.S. Treasury Money Market Funds AAAm/Aaa-mf < 90 days $ 71,597 71,597 — Money Market Funds A-1/P-1 < 90 days 52 52 —
Cash and Cash Equivalents N/A 14,249 14,249 —
Total Restricted Cash and Investments outside City Treasury $ 85,898 85,898 —

Cash and Cash Equivalents N/A $ 76 76 —
Total Unrestricted Cash and Investments outside City Treasury $ 76 76 — Cash and Investments outside City Treasury
Investments
June 30, 2025
Quoted prices in
active markets for
identical assets
(Level 1)
Investments
exempt from
fair value

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

32 (Continued)

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, 2025 and 2024 included an unrealized gain due to changes in fair value on commercial paper of $0 and $540, 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, 2025 and 2024, respectively, which is held in a commercial bank in non -interest bearing checking accounts covered by Federal Deposit Insurance Corporation depository insurance. These accounts were established as provided by the City’s Administrative Code for revolving fund needs. The cash in transit was $ 48 and $165 as of June 30, 2025 and 2024, 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:

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 — Cash and Investments outside City Treasury
Fair Value
Measurements Using
Investments
June 30, 2024
Quoted prices in
active markets for
identical assets
(
Level 1)
Investments
exempt from
fair value
2025 2024
Cash and investments with City Treasury $ 436, 413 380,201 Cash and investments outside City Treasury 76 193
Restricted cash and investments outside City Treasury 28,467 40, 065 Non-current assets:

Restricted cash and investments with City Treasury 137,436 71, 015 Restricted cash and investments outside City Treasury 57,431 63, 185 Total cash, cash equivalents, and investments $ 659, 823 554,659 Current assets:

Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2025 20.8% 18.9% 17.5% 42.8%
2024 22.2% 19.5% 16.3% 42.0%
Investment maturities (in months)

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

33 (Continued)
As of June 30, 202 5, except for investments issued or explicitly guaranteed by the U.S. government and investments in mutual funds, external investment pools, and other pooled investments, the Enterprise did not have any investments in any one issuer that exceeded 5 percent of total investments. As of June 30, 202 4, the Enterprise has the following commercial paper investments that represent 5.0% or more of the total investments outside City Treasury.

(4) Capital Assets
Capital assets as of June 30, 2025 and 2024 consist of the following:

Toyota Motor Corp 45,422$ 51.2 %
Toronto-Dominion Bank 10,310 11.6
Fair Value
% of
Investments
2024 Increases Decreases 2025
Land and rights-of-way $ 113,322 — — 113, 322
Intangible assets 679 — — 679
Construction work in progress 606,804 340,538 (94,075) * 853,267 Total capital assets not being depreciated and amortized 720,805 340, 538 (94,075) 967,268 Capital assets being depreciated and amortized:

Facilities and improvements 6,946,453 111,341 — 7,057,794 Intangible assets 27,714 1,056 — 28,770
Machinery and equipment 345,806 10,213 (1,343) 354,676 Right-to-use land lease assets — 545 — 545
Right-to-use building lease assets 7,011 969 (618) 7,362 Right-to-use intangible subscription assets 860 2,145 (106) 2,899 Total capital assets being depreciated and amortized 7,327,844 126,269 (2,067) 7,452,046 Less accumulated depreciation and amortization for:

Facilities and improvements (1,969,971) (144,593) — (2,114,564) Intangible assets (25,736) (663) — (26,399)
Machinery and equipment (269,649) (11,632) 1,343 (279,938) Right-to-use land lease assets (30) (318) — (348)
Right-to-use building lease assets (4,247) (1,243) 618 (4,872) Right-to-use intangible subscription assets (549) (1,451) 106 (1,894) Total accumulated depreciation and amortization (2,270,182) (159,900) 2,067 (2,428,015) Total capital assets being depreciated and amortized, net 5,057,662 (33,631) — 5,024,031 Total capital assets, net $ 5,778,467 306,907 (94,075) 5, 991,299 * Decrease in c onstruction work in progress includes $4,394 in capital project write-offs, mainly related to University Mound East Pipeline project. The remaining difference of $36,588 is mainly due to direct additions to facilities and improvements, intangible assets and machinery and equipment.

Capital assets not being depreciated and amortized:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

34 (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 following purposes pertaining to the financing, maintenance, and operation of the Enterprise in accordance with the following priority:

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

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

3. The payment of principal, interest, reserve, sinking fund, and other mandatory funds created to secure Revenue Bonds and parity State r evolving fund loans issued by the Enterprise for the acquisition, construction, or extension of facilities owned, operated, or controlled by the Enterprise;
2023 Increases Decreases 2024
Capital assets not being depreciated and amortized:

Land $ 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 land lease assets 605 — (605) —
Right-to-use building lease assets 7,603 — (592) 7,011 Right-to-use intangible 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 land lease assets (580) (55) 605 (30)
Right-to-use building lease assets (3,685) (1,154) 592 (4,247) Right-to-use intangible 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.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

35 (Continued)

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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

36 (Continued)
In accordance with the Indenture, the bond financing program maintains that certain restricted cash and investment balances be held in trust. Restricted assets held in trust consisted of the following as of June 30, 2025 and 2024:

Restricted assets listed above as cash and investments with City Treasury are held in fund accounts within the Water Revenue Fund of the City Treasury.
(6) Short-Term Debt
The Commission and the Board of Supervisors have authorized the overall Interim Funding Program issuance of up to $500,000, pursuant to the voter -approved 2002 Proposition E. In December 2024, the Board of Supervisors approved an expansion of the Water Enterprise Interim Funding Program by $250,000 to a total Water Enterprise Interim Funding Program size of $750,000. The program is made up of two components: (1) four series totaling $550,000 (aggregate principal amount) that are 2025 2024
Water revenue bond construction fund $ 137,436 71,015
Cash and investments outside City Treasury:
2009C Certificates of participation - 525 Golden Gate 6 965 2009D Certificates of participation - 525 Golden Gate 8,574 7,345 2010B Water revenue bond fund 6 22,813
2010E Water revenue bond fund 6 16,495
2010G Water revenue bond fund 17,844 18,994
2015A Water revenue refunding bond fund — 7
2016A Water revenue refunding bond fund 177 13
2016B Water revenue refunding bond fund 1 1
2016C Water revenue bond fund 8 4
2017A Water revenue bond fund — 1
2017B Water revenue bond fund — 6
2017D Water revenue refunding bond fund 10 6
2017E Water revenue refunding bond fund 2 1
2017G Water revenue refunding bond fund 5 —
2019A Water revenue refunding bond fund 11 7
2019B Water revenue refunding bond fund 1 1
2019C Water revenue refunding bond fund 1 1
2020A Water revenue bond fund 7 4
2020B Water revenue bond fund 3 2
2020C Water revenue bond fund 3 2
2020D Water revenue bond fund — 1
2020E Water revenue refunding bond fund 4 3
2020F Water revenue refunding bond fund 17 17
2020G Water revenue refunding bond fund — 1
2020H Water revenue refunding bond fund 1 1
2023A Water revenue bond fund 1,948 19,235
2023B Water revenue bond fund 353 3,551
2023C Water revenue refunding bond fund 121 99
2023D Water revenue refunding bond fund 14 19
2025A Water revenue refunding bond fund 117 —
2025B Water revenue refunding bond fund 6 —
2025C Water revenue refunding bond fund 7 —
2025D Water revenue refunding bond fund 28,830 —
2025E Water revenue refunding bond fund 13,271 —
2025F Water revenue refunding bond fund 239 —
Commercial Paper - Tax Exempt 28 17
Commercial Paper - Taxable 29 28
Habitat reserve endowment fund 14,246 13,610
Total cash and investments outside City Treasury 85,896 103,250 Interest and other receivables:

Water bond construction fund including interest, prepaids, and other receivables 2,654 3,789 Due from other government for State Revolving Fund 23,806 129,580 Total restricted assets $ 249,792 307,634
Cash and investments with City Treasury:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

37 (Continued)
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) two series totaling $200,000 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, 2025 and 2024, amounts outstanding under Proposition E were $20,000 and $190,000, respectively. Commercial paper interest rates ranged from 2.6% to 4.4%.

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

As of June 30, 2025, the Enterprise has $20,000 in outstanding commercial paper. As of June 30, 2024, the Enterprise had $190,000 in outstanding commercial paper which were repaid by the 2025 Series DE Water revenue refunding bonds issued in June 2025.

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 four separate bank letters of credit and two revolving notes, 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, 2025, 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 February 15, 2030. The agreement for the Series A -1/A-1-T credit facility stipulates a quarterly commitment fee of 0.32%, 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 15, 2027. The agreement for the Series A-2/A -2-T credit facility stipulates a quarterly commitment fee of 0 .29%, on the maintenance of ratings of at least “AA- ” by S&P and “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 15, 2027. The agreement for the Series A-3/A -3-T credit facility stipulates a quarterly commitment fee of 0 .38%, on the maintenance of ratings of at least “AA-” by S&P and “Aa3” by Moody’s. Series A -4/A-4-T has a $150 million Letter of Credit from PNC Bank, National Association, which expires on February 17, 2028. The agreement for the Series A-4/A -4-T credit facility stipulates a quarterly commitment fee of 0 .30% 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 0 .05% of the average outstanding principal amount of the Notes managed by the Dealer.

The revolving notes were issued pursuant to the following series. Series R-1/R-1-T has a $100 million revolving credit agreement with U.S. Bank National Association which expires on July 16, 2027. The R- 1/R-1-T revolving credit agreement stipulates an unutilized quarterly commitment fee of 0 .23%, on the maintenance of ratings of at least “AA-” by S&P and “Aa3” by Moody’s. Series R -2/R-2-T has a $100 million revolving credit agreement with Wells Fargo Bank, National Association, which expires of March 3, 2028. The R -2/R-2-T revolving credit agreement stipulates an unutilized quarterly

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

38 (Continued)
commitment fee of 0 .25% 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, 2025.

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

The Enterprise had $730,000 and $310,000 in unused authorization as of June 30, 2025 and 2024, 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 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, 2025, there were no such events describe herein.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

39 (Continued)
(7) Changes in Long-Term Liabilities
Long-term liability activities for the years ended June 30, 2025 and 2024 are as follows:

Maturity Due
Interest (Calendar Restated* within
rate Y ear) 2024 Additions Reductions 2025 one year
Revenue Bonds:
2010B revenue bonds (Build America) 4.00% – 6.00% 2040 $ 323,145 — (323,145) — — 2010E revenue bonds (Build America) 4.90 – 6.00 2040 318, 290 — (318,290) — — 2010G revenue bonds (Build America) 6.95 2050 351,470 — — 351,470 — 2015A revenue refunding bonds 2.00 – 5.00 2036 274,135 — (274,135) — — 2016A revenue refunding bonds 4.00 – 5.00 2039 573,500 — (113,475) 460,025 26,050 2016B revenue refunding bonds 1.50 – 5.00 2030 45,805 — (13,720) 32,085 7,715 2016C revenue bonds 0.87 – 4.19 2046 219,170 — (6,275) 212,895 6,455 2017A revenue bonds 5.00 2047 22,230 — (22,230) — —
2017B revenue bonds 5.00 2047 27,110 — (27,110) — —
2017C revenue bonds 5.00 2047 12,970 — (12,970) — —
2017D revenue refunding bonds 2.00 – 5.00 2035 257,295 — (73,920) 183,375 20,515 2017E revenue refunding bonds 4.00 – 5.00 2031 47,330 — (835) 46,495 7,425 2017F revenue refunding bonds 5.00 2031 7,270 — (770) 6,500 875 2017G revenue refunding bonds 2.03 – 2.91 2024 5,225 — (5,225) — — 2019A revenue refunding bonds 1.81 – 3.47 2043 393,080 — (79,500) 313,580 2,050 2019B revenue refunding bonds 3.15 – 3.52 2041 16,245 — (75) 16,170 75 2019C revenue refunding bonds 3.15 – 3.52 2041 17,695 — (80) 17,615 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 183,635 — (34,915) 148,720 595 2020F revenue refunding bonds 0.26 – 3.15 2047 134,025 — (16,360) 117,665 1,210 2020G revenue refunding bonds 0.26 – 3.10 2043 64,660 — (10,835) 53,825 7,525 2020H revenue refunding bonds 0.26 – 3.15 2047 64,130 — (10,515) 53,615 565 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 — 2025A revenue refunding bonds 4.00-5.00 2047 — 467,960 — 467,960 33,260 2025B revenue refunding bonds 5.00 2047 — 37,400 — 37,400 3,005 2025C revenue refunding bonds 5.00 2047 — 18,075 — 18,075 1,435 2025D revenue refunding bonds 5.00 2055 — 304,505 — 304,505 — 2025E revenue refunding bonds 5.25 2055 — 133,480 — 133,480 — 2025F revenue refunding bonds 4.00-5.00 2040 — 550,275 — 550,275 20,415 Less issuance discount (107) (498) 10 (595) —
Add issuance premiums 330,679 129,352 (72,088) 387,943 — Total revenue bonds payable 4,964,637 1,640,549 (1,416,458) 5,188,728 139,250 2009D COPs (Build America) 6.36 – 6.49 2041 89,232 — (3,402) 85,830 3,545 State Revolving Funds Loan 1.00 – 1.10 2057 259,970 40,314 (249) 300,035 — Accrued interest payable 41,546 216,605 (215,656) 42,495 37,030 Net other postemployment benefits liability 158,301 3,674 — 161,975 — Lease liability 2,821 — (44) 2,777 966
Subscription liability 308 697 — 1,005 846
Net pension liability 152,643 14,335 — 166,978 —
Arbitrage rebate payable 869 952 — 1,821 536
Accrued compensated absences 30,545 1,518 — 32,063 17,393 Accrued workers’ compensation 11,002 5,083 (3,784) 12,301 2,365 Damage claims liability 22,773 4,502 (12,326) 14,949 4,525 Wholesale balancing account — 12,983 — 12,983 —
Pollution remediation obligation 1,271 — (1,271) — — Total $ 5,735,918 1,941,212 (1,653,190) 6,023,940 206,456 * Restatement due to implementation of GASB 101 - Compensated Absences. ** Compensated absences activities are shown as net.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

40 (Continued)

Maturity Due
Interest (Calendar Restated** within
rate Y ear) 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 compensated absences 13,585 16,960 — 30,545 16,300 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 1,471,972 (1,422,467) 5,735,918 204,851 * Commercial paper recorded as short-term liability in FY24. ** Restatement due to implementation of GASB 101 - Compensated Absences. ** Compensated absences activities are shown as net.

Revenue Bonds:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(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%. A portion of the proceeds from the 2025 Series F bonds were used to defease 2010 Series B Bonds in the par amount of $309,420. As of June 30, 2025 and 2024, the principal amount outstanding was $0 and $323,145, 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%. A portion of the proceeds from the 2025 Series F bonds were used to defease 2010 Series E Bonds in the par amount of $304,680. As of June 30, 2025 and 2024, the principal amount of 2010 Series E bonds outstanding was $0 and $318,290, 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 projects. The Series G bonds were issued as term bonds with a coupon of 7.0% and have a final maturity of 2050. The Series G bonds have a true interest cost (net of federal subsidy) of 4.5%. As of June 30, 2025 and 2024, 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 maturing on and after November 1, 2015 and portion of the outstanding 2009 Series A bonds maturing on and after November 1, 2023. The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively. The 2015 Series A bonds include serial bonds with interest rates varying from 2.0% to 5.0% and have a final maturity in 2036. The Series A bonds have a true interest cost of 3.3%.

Unamortized 2006 Series A bond issuance costs were $1,392, and there were no unamortized bond issuance costs for 2009 Series A bonds at the date of the refunding. The refunding resulted in the recognition of a deferred accounting loss of $25,365, gross debt service savings of $28,148 over the next 20 two -year terms, and an economic gain of $48,561 or 10.3% of refunded principal.

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 and tender price of maturities of the 2015 Series A bonds starting on November 1, 2028 to November 1,

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

42 (Continued)
2033 and November 1, 2036. On April 15, 2025, a portion of the proceeds from the 2025 Series A bonds together with other monies were used to current refund the 2015 Series A Bonds in the par amount of $244,650 with maturities starting on November 1, 2025, to November 1, 2036. As of June 30, 2025 and 2024, the principal amount of 2015 Series A bonds outstanding was $0 and $274,135, respectively.
(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 2009 Series A bonds maturing on and after November 1, 2020, a portion of the outstanding 2009 Series B bonds maturing on and after November 1, 2020, and a portion of the outstanding 2010 Series F bonds maturing on and after November 1, 2021. The 2016 Series B bonds were issued for the purpose of refunding, on a current basis, all the outstanding 2006 Series B and Series C bonds, and a portion of the outstanding 2010 Series A bonds maturing on and after November 1, 2020, the bonds carried “Aa3” and “AA -” ratings from Moody’s and S&P, respectively. The 2016 Series AB bonds include serial bonds with interest rates varying from 1.5% to 5.0% and have a final maturity in 2039. The Series AB bonds have a true interest cost of 2.9%. Unamortized bond issuance costs at the date of refunding were $145 for 2006 Series B bonds and $54 for 2006 Series C bonds. The refunding resulted in the recognition of a deferred accounting loss of $106,205, gross debt service savings of $135,966, and an economic gain of $107,152 or 11.5% of refunded principal.

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.

A portion of the proceeds from the 2025 Series A bonds together with other monies were used to pay at closing a portion of the 2016 Series A bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series A bonds were sufficient to pay accrued interest and tender price of maturities of the 2016 Series A bonds starting on November 1, 2024 to November 1, 2035.

As of June 30, 2025 and 2024, the principal amount of 2016 Series AB bonds outstanding was $492,110 and $619,305, 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, 2025 and 2024, the principal amount of 2016 Series C bonds outstanding was $212,895 and $219,170, respectively.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

43 (Continued)
(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 Series ABC Bonds was to refund approximately $120,500 aggregate principal amount of commercial paper notes and to provide $230,500 new money for WSIP capital projects, other various capital projects of the Water Enterprise, and capital projects of Hetch Hetchy Water. The bonds carried “Aa3” and “AA- ” ratings from Moody’s and S&P, respectively. The 2017 Series ABC bonds include serial bonds with coupon rates of 5.0% and have final maturity in 2045, and four term bonds with coupons of

5.0% and final maturities from 2045 to 2047.

The $121,140 2017 Series A bonds were issued as tax -exempt Green Bonds to refund approximately $60,265 of commercial paper notes and to provide $65,500 in new money for WSIP capital projects. The Series A bonds were issued as serial and term bonds with coupons of

5.0% and a final maturity of 2047. The Series A bonds have a true interest cost of 3.8%. A portion of the proceeds of the 2020 Series E refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1, 2020 to refund and legally defease a portion of the outstanding 2017 Series A bonds. These deposits, together with certain other available monies 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. On April 17, 2025, a portion of the proceeds from the 2025 Series A bonds together with other monies were used to current refund the 2017 Series A Bonds in the par amount of $19,660. As of June 30, 2025 and 2024, the principal amount of 2017 Series A bonds outstanding was $0 and $22,230, 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 2047. The Series B bonds have a true interest cost of 3.8%. A portion of the proceeds of the 2020 Series F refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1, 2020 to refund and legally defease a portion of the outstanding 2017 Series B bonds. These deposits, together with certain other available monies 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. On April 17, 2025, a portion of the proceeds from the 2025 Series B bonds together with other monies were used to current refund the 2017 Series B Bonds in the par amount of $23,975. As of June 30, 2025 and 2024, the principal amount of 2017 Series B bonds outstanding was $0 and $27,110, respectively.

The $70,675 2017 Series C bonds were issued as tax -exempt bonds to refund approximately $60,266 of commercial paper notes and to provide $15,000 in new money for Hetch Hetchy Water capital projects. The Series C bonds were issued as serial bonds and a term bond with coupons of 5.0% and have a final maturity of 2047. The Series C bonds have a true interest cost of 3.8%. A portion of the proceeds of the 2020 Series H refunding bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement dated October 1,

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

44 (Continued)
2020 to refund and legally defease a portion of the outstanding 2017 Series C bonds. These deposits, together with certain other available monies were held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 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. On April 17, 2025, a portion of the proceeds from the 2025 Series C bonds together with other monies were used to current refund the 2017 Series C Bonds in the par amount of $11,470. As of June 30, 2025 and 2024, the principal amount of 2017 Series C bonds outstanding was $0 and $12,970, 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 Series C bonds were sufficient 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 refunding a portion of the outstanding 2011 Series B bonds maturing on or after November 1, 2022.

The taxable 2017 Series G (WSIP, Green) bonds were issued to refund a portion of the outstanding 2011 Series A bonds maturing on and after November 1, 2022.

The bonds carried “Aa3” and “AA-” ratings from Moody’s and S&P, respectively. The 2017 Series DEFG bonds include serial bonds with interest rates varying from 2.0% to 5.0% and have a final maturity in 2035. The Series DEFG bonds have a true interest cost of 2.9%. The refunding resulted in the recognition of a deferred accounting loss of $34,275, gross debt service savings of $68,942, and an economic gain of $51,698 or 10.7% of refunded principal.

A portion of the proceeds from the 2025 Series A bonds were used to pay at closing a portion of the 2017 Series D bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series A bonds together with other monies were sufficient to pay accrued interest and tender price of maturities of a portion of the 2017 Series D bonds starting on November 1, 2030 to November 1, 2035. As of June 30, 2025 and 2024, the principal amount of 2017 Series DEFG bonds outstanding was $236,370 and $317,120, 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 Series A (WSIP, Green) bonds were

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

45 (Continued)
issued for the purpose of refunding a portion of the outstanding 2010 Series F (WSIP) bonds maturing on and after November 1, 2020, a portion of the outstanding 2011 Series A (WSIP) bonds maturing on and after November 1, 2020, and a portion of the outstanding 2012 Series A (WSIP) bonds maturing on and after November 1, 2035. 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 purpose of refunding a portion of the outstanding 2011 Series C bonds maturing on or after November 1, 2032.

The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2019 Series ABC bonds include serial bonds with interest rates varying from 1.8% to 3.5% and have a final maturity in 2043. The Series ABC bonds have a true interest cost of 3.3%. The refunding resulted in the recognition of a deferred accounting loss of $17,329, gross debt service savings of $119,827, and an economic gain of $92,556 or 14.0% of refunded principal.

A portion of the proceeds from the 2025 Series A bonds were used to pay at closing a portion of the 2019 Series A bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series A bonds together with other monies were sufficient to pay accrued interest and tender price of maturities of a portion of the 2019 Series A bonds starting on November 1, 2025 to November 1, 2043. As of June 30, 2025 and 2024, the principal amount of 2019 Series ABC bonds outstanding was $347,365 and $427,020, 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.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

46 (Continued)
The 2020 Series A bonds have a true interest cost of 3.3%. As of June 30, 2025 and 2024, 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, 2025 and 2024, the principal amount of 2020 Series B bonds outstanding was $61,330.

The $85,335 Series C bonds were issued as tax -exempt bonds to provide $94,948 in new money for Water Enterprise capital projects (non -WSIP, Local). The Series C bonds were issued as term bonds with coupons of 4.0% and have a final maturity of 2050. The Series C bonds have a true interest cost of 3.0%. As of June 30, 2025 and 2024, 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, 2025 and 2024, 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 Series E 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 the 2020 Series E bonds maturing November 1, 2041. A portion of the proceeds from the 2025 Series A bonds were used to pay at closing a portion of the 2020 Series E bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series A bonds together with other monies were sufficient to pay accrued interest and tender price of maturities of a portion of the 2020 Series E bonds starting on November 1, 2025 to November 1, 2047.

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. A portion of the proceeds from the 2025 Series B bonds were used to pay at closing a portion of the 2020 Series F bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series B bonds together with other monies were sufficient to pay accrued interest and tender price of maturities of a portion of the 2020 Series F bonds starting on November 1, 2025 to November 1, 2047.

The 2020 Series G (non- WSIP, Local) bonds were issued for the purpose of refunding a portion of the outstanding 2010 Series D bonds maturing on or after November 1, 2020, a portion of the 2011 Series D bonds maturing on or after November 1, 2022, a portion of 2012 Series B bonds maturing on or after November 1, 2031, and a portion of 2012 Series C bonds maturing on or after November 1, 2025. A portion of the proceeds of the 2023 Series D refunding bonds

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

47 (Continued)
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 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. A portion of the proceeds from the 2025 Series B bonds were used to pay at closing a portion of the 2020 Series G bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series B bonds together with other monies were sufficient to pay accrued interest and tender price of maturities of a portion of the 2020 Series G bonds starting on November 1, 2025 to November 1, 2032.

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. A portion of the proceeds from the 2025 Series C bonds were used to pay at closing a portion of the 2020 Series H bonds which had been tendered for purchase on April 17, 2025. The proceeds of the 2025 Series C bonds together with other monies were sufficient to pay accrued interest and tender price of maturities of a portion of the 2020 Series H bonds starting on November 1, 2025 to November 1, 2047.

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, 2025 and 2024, the principal amount of 2020 Series EFGH bonds outstanding was $373,825 and $446,450, 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 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 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 maturity of 2052. The Series A bonds have a true interest cost of 4.1%. As of June 30, 2025 and 2024, the principal amount of 2023 Series A bonds outstanding was $349,495.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

48 (Continued)
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, 2025 and 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 Series 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 Series 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 Series 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, 2025 and 2024, the principal amount of 2023 Series CD bonds outstanding was $514,855.
(n) Water Revenue Refunding Bonds 2025 Series ABC
In April 2025, the Enterprise issued tax -exempt revenue bonds, 2025 Series ABC refunding bonds in the aggregate amount of $523,435. The 2025 Series A (WSIP, Green) bonds were issued for the purpose of current refunding 2015 Series A revenue bonds maturing on or after November 1, 2029, 2017 Series A (WSIP , Green ) bonds maturing on or after November 1, 2025, and for the purpose of paying the purchase price of a portion of the 2016 Series A revenue bonds maturing on November 1, 2029, a portion of the 2017 Series D revenue bonds maturing on or after November 1, 2030, a portion of the 2019 Series A revenue bonds maturing on or after November 1, 2025, and a portion of the 2020 Series E bonds maturing on or after November 1, 2025.

The 2025 Series B (Regional and Local) bonds were issued for the purpose of current refunding 2017 Series B (Regional and Local Water) bonds maturing on or after November 1, 2025 and for the purpose of paying the purchase price of a portion of the 2020 Series F bonds maturing on or after November 1, 2025, and a portion of the 2020 Series G bonds maturing on or after November 1, 2025.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

49 (Continued)
The 2025 Series C (Hetch Hetchy Water) bonds were issued for the purpose of current refunding 2017 Series C (Hetch Hetchy Water) bonds maturing on or after November 1, 2025 and for the purpose of paying the purchase price of a portion of the 2020 Series H bonds maturing on or after November 1, 2025.

The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2025 Series ABC bonds include serial bonds with interest rates of 4.0% to 5.0% and have a final maturity in November 1, 2047. The Series ABC bonds have a true interest cost of 3.3%. The refunding resulted in a $19,815 accounting gain. As of June 30, 2025, the principal amount of 2025 Series ABC bonds outstanding was $523,435.
(o) Water Revenue Refunding Bonds 2025 Series DEF
In June 2025, the Enterprise issued tax -exempt revenue bonds and refunding bonds, 2025 Series DEF in the aggregate amount of $988,260. The purpose of the 2025 Series DE Bonds was to refund approximately $313,384 aggregate principal amount of commercial paper notes and to provide approximately $92,362 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 2025 Series DE bonds include serial and term bonds with coupons of 5.0% to 5.3% and final maturities in 2055.

The purpose of the 2025 Series F bonds was to refund 2010 Series B and 2010 Series E Water Revenue Bonds originally issued as Build America Bonds through an extraordinary redemption provision at a prepayment price maturing on or after November 1, 2025. The bonds carried “Aa2” and “AA-” ratings from Moody’s and S&P, respectively. The 2025 Series F bonds included serial bonds with coupons of 5. 0% and a final maturity of November 1, 2040. The Series F bonds have a true interest cost of 3.5%. As of June 30, 2025, the principal amount of 2025 Series DEF bonds outstanding was $988,260.
(p) Future Annual Debt Service of Revenue Bonds
The following table presents the future annual debt service relating to the revenue and refunding bonds outstanding as of June 30, 2025. The federal interest subsidy amounts represent 35.0%, excluding sequestration, of the interest for the 2010 Series G revenue bond.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

50 (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).
(q) 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, 2025 and 2024 was $164,252 and $154,178, respectively.

Principal
Interest
before
subsidy
Federal
interest
subsidy*
Interest net
of subsidy
2026 $ 139,250 217,241 (8,062) 209,179
2027 148,245 215,299 (8,062) 207,237
2028 152,775 208,298 (8,062) 200,236
2029 166,885 200,688 (8,062) 192,626
2030 175,080 192,497 (8,062) 184,435
2031-2035 983,215 830,967 (38,198) 792,769
2036-2040 1,152,855 578,523 (30,857) 547,666
2041-2045 701,490 364,183 (21,502) 342,681
2046-2050 557,000 231,760 (9,778) 221,982
2051-2055 510,010 91,668 (299) 91,369
2056-2058 114,575 2,909 — 2,909
4,801,380 3,134,033 (140,944) 2,993,089
Less: Current portion (139,250)
Less: Unamortized bond discount (595)
Add: Unamortized bond premiums 387,943
Long-term portion as of June 30, 2025 $ 5,049,478
* The SFPUC received an IRS notice dated April 8, 2025 that the federal interest subsidies on the 2010 Series G bonds are reduced by 5.7%, or a total reduction of $8,519, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2025.

Fiscal years ending June 30:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

51 (Continued)

(r) 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 construction. Power Enterprise is responsible for repayment for its share of SRF Loan debt service costs representing up to its allocable share of the cost of the Mountain Tunnel Improvement Project by a Memorandum of Understanding that will be executed 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, 2025 and 2024 was $135,783 and $105,792, respectively.

California Clean Water State Revolving Fund Loan Principal Interest Total 2026 $ — — —
2027 — — —
2028 4,722 1,643 6,365
2029 4,769 1,595 6,364
2030 4,817 1,548 6,365
2031-2035 24,816 7,005 31,821
2036-2040 26,082 5,740 31,822
2041-2045 27,413 4,409 31,822
2046-2050 28,811 3,011 31,822
2051-2055 30,281 1,542 31,823
2056-2057 12,541 188 12,729
164,252 26,681 190,933
Less: Current portion —
Long-term portion as of June 30, 2025 $ 164,252
Fiscal years ending June 30:

Drinking Water State Revolving Fund Loan Principal Interest Total 2026 $ — — —
2027 — — —
2028 — — —
2029 3,845 1,494 5,339
2030 3,887 1,451 5,338
2031-2035 20,087 6,606 26,693
2036-2040 21,216 5,476 26,692
2041-2045 22,409 4,284 26,693
2046-2050 23,669 3,024 26,693
2051-2055 25,000 1,693 26,693
2056-2058 15,670 345 16,015
135,783 24,373 160,156
Less: Current portion —
Long-term portion as of June 30, 2025 $ 135,783
Fiscal years ending June 30:

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

52 (Continued)
(s) 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, 2025 , 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 authorization against Prop A was $1,499,230 as of June 30, 2025.
(t) 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, 2025, the Board of Supervisors authorized the issuance of $6,157,510 in revenue bonds with $5,305,913 issued against this authorization; in September 2017 and amended in April 2023, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (CWSRF) Loan and Grant to fund the Enterprise’s SF Westside Recycled Water Project in 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, $20,000 and $190,000 in commercial paper were outstanding pursuant to this authorization as of June 30, 2025 and 2024, respectively. (u) 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 matured on November 1, 2022. The 2009 Series D certificates carry interest rates ranging from 6.4% to 6.5% and mature on November 1, 2041, after adjusting for the federal interest subsidy, the true interest cost averages 3.4% and

4.3% for Series C and Series D, respectively.

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

There are no events of default stated in the MOU.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

53 (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, 2025 are as follows:

(v) 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 events, which may result in the Trustee (upon written request by the majority of the owners (by aggregate amount of the bond obligations or of a credit provider), declaring the principal and the interest accrued thereon, to be due and payable immediately. As of June 30, 2025 and 2024, there were no such events describe herein. (w) Leases
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.

Future annual lease payments for fiscal years 2025 and 2024 are as follows:

Principal
Interest before
subsidy
Federal interest
subsidy *
Interest net
of subsidy
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 4,180 4,450 (1,469) 2,981
2031-2035 23,737 17,863 (5,897) 11,966
2036-2040 29,271 9,297 (3,068) 6,229
2041-2042 13,537 887 (293) 594
Total 85,830 52,800 (17,427) 35,373
Less: Current portion (3,545)
Long-term portion as of June 30, 2025 $ 82,285
Certificates of Participation
2009 Series D (Taxable)
* The SFPUC received an IRS notice dated April 8, 2025 that the federal interest subsidy on the 2009 Series D bonds is reduced by 5.7%, or a total reduction of $1,053, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2025.

Fiscal years ending June 30:

Year ending June 30:

Principal
amount
Interest
amount Total
2026 $ 966 55 1,021
2027 365 38 403
2028 249 31 280
2029 216 25 241
2030 158 20 178
2031-2035 426 68 494 2036-2040 397 20 417 2,777 257 3,034
Less: current portion (966)
Long-term portion as of June 30, 2025 $ 1,811

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

54 (Continued)

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

Certain 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 $90 and $79 during the year ended June 30, 2025 and 2024, respectively. (x) Subscription-Based Information Technology Arrangements (SBITAs) 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. (y) Future SBITAs Payments
Future annual subscription payments as of June 30, 2025 and 2024 are as follows:

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
2026 $ 846 22 868
2027 159 5 164
1,005 27 1,032
Less: current portion (846)
Long-term portion as of June 30, 2025 $ 159

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

55 (Continued)

(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 2025 and 2024, applicable net revenues and funds available for debt service are as follows:

(9) Leases
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 total amounts for lease revenue, interest revenue, and other lease-related revenues recognized during the year s ended June 30, 2025 and 2024 were $187 and $1,742, respectively.

Principal and interest requirements to maturity for the lease receivable on June 30, 2025 and 2024 are as follows:

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
2025 2024
Bonds issued with revenue pledge $ 4,801,380 4,634,065 Principal and interest remaining due at the end of the year 8,286,502 7,714,756 Clean Water State Revolving Fund (CWSRF) loans with revenue pledge 300,035 259,970 Principal and interest paid net of capitalized interest and BAB subsidy during the year 298,169 306,369 Net revenues for the year ended June 30 467,755 337,985 Funds available for debt service* 646,772 555,585
* Includes other available funds budgetary balances that are non-GAAP

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

56 (Continued)

Year ended
June 30 P rincipal Interest Total
2026 2,752$ 748 3,500 2027 2,409 695 3,104 2028 2,423 645 3,068 2029 2,215 595 2,810 2030 2,164 566 2,730 2031-2035 10,936 2,128 13,064 2036-2040 6,264 1,123 7,387 2041-2045 141 943 1,084 2046-2050 - 1,090 1,090 2051-2055 - 1,263 1,263 2056-2060 411 1,054 1,465 2061-2065 973 725 1,698 2066-2070 1,384 584 1,968 2071-2075 1,893 389 2,282 2076+ 1,928 122 2,050 35,893$ 12,670 48,563 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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

57 (Continued)
(10) Wholesale Balancing Account
Water Supply Agreement
Pursuant to the terms of the Water Supply Agreement (WSA), the Enterprise is required to establish water rates applicable to the Wholesale Customers annually. The wholesale water rates are based on an estimate of the level of revenues necessary to recoup the cost of distributing water to the Wholesale Customers in accordance with the methodology outlined in Article V of the WSA; this annual cost is referred to as the Wholesale Revenue Requirement (WRR). 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 actual costs incurred in the delivery of water to the Wholesale Customers. The WRR calculation is subject to a trailing compliance audit and final review by the Wholesale Customers. During fiscal years ending in 2025 (estimated) and 2024 (audited), the WRR, net of adjustments, charged to such wholesale customers was $333,210 and $321,433, respectively.

As part of the final re -calculation of the WRR required by Article VII, Section 7.02 of the WSA, the difference between the wholesale revenues earned during the year and the actual WRR is recorded in a separate account (the Balancing Account) and represents the cumulative amount that is either owed to the Wholesale Customers (if the wholesale revenues exceed the WRR) or owed to the City (if the WRR exceeds the wholesale revenues paid). In accordance with Article VI of the WSA, the amount recorded in the Balancing Account shall earn interest at a rate equal to the average rate received by the City during the year on the invested pooled funds of the City Treasury and the Balancing Account balance shall be taken into consideration in the determination of subsequent wholesale water rates.

The Enterprise is estimated to owe the Wholesale Customers $12,983 as of June 30, 2025. The Wholesale Customers owed the Enterprise $ 26,121 as of June 30, 2024. 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.
(11) 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 SFERS Plan. The RBP allows the City to pay SFERS retirees any portion of the Charter -mandated retirement allowance that exceeds the annual Section 415(b) limit. The RBP plan does not meet the criteria of a qualified trust under GASB Statement No. 73 because RBP assets are subject to the claims of the employer’s general creditors under federal and state law in the event of insolvency.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

58 (Continued)
GASB Statements No. 68 and 73 requires that the SFERS Plan and RBP reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

SFERS Plan - The City is an employer of the plan with a proportionate share of 94. 70% as of June 30, 202 4 (measurement date), and 94. 85% as of June 30, 2023 (measurement date),

0.15% 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 2024 and 2023. 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. 35% as of June 30, 2024 , and 4. 34% as of June 30, 2023 (measurement dates).

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 2024 .

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 1.91% as of June 30, 2024, and 1.95% as of June 30, 2023 (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 provides 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 System’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 service 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.

Valuation Date (VD) July 1, 2023 updated to June 30, 2024 Measurement Date (MD) June 30, 2024
Measurement Period (MP) July 1, 2023 to June 30, 2024
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
San Francisco Employees' Retirement System - Cost Sharing Fiscal Year 2025
Fiscal Year 2024

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

59 (Continued)
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 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 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. 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 1.0% as a percentage of gross covered salary in fiscal year 2025 , and

7.5% to 11.5% in fiscal year 2024. 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, 202 3 actuarial report, the required employer contribution rate s for fiscal year 2025 range from

14.91% to 1 6.91%. Based on the July 1, 2022 actuarial report, the required employer contribution rates for fiscal year 2024 range from 15.24% to 18.24%.

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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

60 (Continued)
Retirement System in fiscal year ended June 30, 2025 and 2024 (measurement period) were $636,991 and $638,003, respectively. The Enterprise’s allocation of employer contributions for fiscal years 2024 and 2023 (measurement period) was $27,653 and $27,925, respectively.

Replacement Benefits Plan – The RBP is and will remain unfunded and the rights of any participant and beneficiary are limited to those specified in the RBP. The RBP constitutes an unsecured promise by the City to make benefit payments in the future to the extent funded by the City. The City paid $3,142 replacement benefits in the year ended June 30, 2025.

Pension Liabilities/(Asset), Pension Expenses, and Deferred Outflows and Inflows of Resources Related to Pensions
Fiscal Year 2025
As of June 30, 2025, 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 $3,913,361. 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, 2024 (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, 202 3 rolled forward to June 30, 2024 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, 202 5 (reporting year) was $164,352. The Enterprise’s allocation of total pension liability for the RBP as of June 30, 202 5 was $2,626.

For the year ended June 30, 2025 , the City’s recognized pension expense was $ 734,418 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 $ 31,147. Pension expense increased from the prior year, largely due to the amortization of deferrals.

As of June 30, 2025 , 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:

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contribution subsequent to measurement date $ 28,362 — — — Differences between expected and actual experience 25,908 — 227 457 Changes in assumptions 12,962 3,953 28 446
Net difference between projected and actual earnings on pension plan investments
30,366 — — —
Change in employer’s proportion 554 1,629 412 565
Total $ 98,152 5,582 667 1,468
SFERS Plan Replacement Benefits Plan
Fiscal Year 2025 Schedule of Deferred Outflows and Inflows of Resources

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

61 (Continued)

On June 30, 2025 , the Enterprise reported $ 28,362 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, 2026.

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 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, 2023 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, 2024 (reporting year) was $150,060. The Enterprise’s allocation of total pension liability for the RBP as of June 30, 2024 was $2,583.

For the year ended June 30, 2024, 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, 2024, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Fiscal Years SFERS Plan
Replacement
Benefits Plan
2026 $ (6,821) (519)
2027 57,849 (350)
2028 10,693 43
2029 2,487 25
Total $ 64,208 (801)
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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

62 (Continued)

Actuarial Assumptions
Fiscal Year 2025
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, 2024 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 202 3 actuarial valuation. Refer to the July 1, 202 3 actuarial valuation report for a complete description of all other assumptions, which can be found on the Retirement System’s website http://mysfers.org.

Changes of Assumptions SFERS plan – There were no changes in the discount rate for the measurement period ended June 30, 2024 . The municipal bond yield increased from 3. 65% to

3.93%.

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)
Key Actuarial Assumptions
Valuation Date July 1, 2023 updated to June 30, 2024
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 3.93% as of June 30, 2024

3.65% as of June 30, 2023
Bond Buyer 20-Bond GO Index, June 29, 2023 and June 27, 2024 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, 2024

7.20% as of June 30, 2023
Administrative Expenses 0.60% of payroll as of June 30, 2024

0.60% of payroll as of June 30, 2023
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, 2024 2.00% 1.90% 2.50% 3.60%
June 30, 2023 2.00% 1.90% 2.50% 3.60%
SFERS Plan

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

63 (Continued)

Changes of Assumptions Replacement Benefits Plan – Both discount rate for the measurement period ended June 30, 2024 and the municipal bond yield increased from 3.65% to 3.93%.

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, 202 4 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 assumptions as of July 1, 2023.

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, 2023 (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, 2022 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 J uly 1, 2023 updated to June 30, 2024
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost
Municipal Bond Yield 3.93% as of June 30, 2024
Bond Buyer 20-Bond GO Index, June 29, 2023 and June 27, 2024 Inflation 2.50%
Projected Salary Increases 3.25% plus merit component based employee classification and years of service Discount Rate 3.93% as of June 30, 2024
Administrative Expenses 0.60% of payroll as of June 30, 2024 Basic COLA
Old Miscellaneous
and All New Plans
Old Police & Fire,
pre 7/1/75
Old Police & Fire
Charters A8.595
a
nd A8.596
Old Police & Fire
Charters A8.559
a
nd A8.585
June 30, 2024 2.00% 1. 90% 2.50% 3.60%
June 30, 2023 2.00% 1.90% 2.50% 3.60%
Replacement Benefits Plan

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

64 (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%.

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.

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
Key Actuarial Assumptions
Valuation Date June 30, 2022 updated to June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost
Municipal Bond Yield 3.65% as of June 30, 2023
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 employee classification and years of service Discount Rate 3.65% as of June 30, 2023
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, 2023 2.00% 1.90% 2.50% 3.60%
June 30, 2022 2.00% 1.90% 2.50% 3.60%
Replacement Benefits Plan

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

65 (Continued)
Discount Rate
Fiscal Year 2025
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, 2024 (measurement date) and 7. 20% June 30, 202 3 (measurement date).

The discount rate used to measure the Total Pension Liability as of June 30, 2024 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, 2023 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 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.

A 0.50% Supplement COLA is expected to be payable as of July 1, 2024 for most non -Prop C members due to the favorable investment returns for fiscal year ended 2024. The table below shows the net assumed Supplemental COLA for members with a 2.00% Basic COLA for sample year.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

66 (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 future benefit payments for current members through 2106. 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 3.93% to the extent they are not available. The single equivalent rate used to determine the Total Pension Liability as of June 30, 2024 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 best - estimate of expected future nominal rates of return for each major asset class over 10 and 30- year horizons. These estimates were combined to produce the long-term expected rate of return by weighting the expected future nominal rates of return by the target asset allocation percentage. The target allocation and best estimates of geometric long-term expected real rates of return (expected returns, 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 3.93% as of June 30, 2024. 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 29, 2023 and June 27, 2024. These are the rates used to determine the total pension liability as of June 30, 2024.

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 $275 was used for the 2024 measurement date.

Fiscal Years
2026+ 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
Asset Class
Target Allocation from
January 2021 - June 2024
Target Allocation
effective as of
July 2024
Long-Term
Expected Real
Rate of Return
Global Equity 37.0 % 32.0 % 4.2 %
Private Equity 23.0 20.0 7.2
Private Credit 10.0 10.0 5.9
Real Assets 10.0 10.0 5.5
Absolute Return 10.0 10.0 4.4
Treasuries 8.0 8.0 1.8
Liquid Credit 5.0 12.0 3.9
Cash 0.0 1.0 1.2
Leverage -3.0 -3.0 1.6
Total 100.0 100.0

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

67 (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, 2025 , City’s membership in the RBP had a total of 2 84 active members and 154 retirees and beneficiaries currently receiving benefits. The Enterprise has 6 active members and 4 retirees and beneficiaries currently receiving benefits.

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 rate was 7.20% as of June 30, 2023 (measurement date) and 7.20% June 30, 2022 (measurement date).

The discount rate used to measure the Total Pension Liability as of June 30, 2023 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.

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 Proposition C passed, the fair 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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

68 (Continued)
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 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.

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
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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

69 (Continued)
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, 2024, 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.

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 2025

Fiscal Year 2024

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 2025

Fiscal Year 2024

(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 Employer
1% Decrease Share
of NPL @ 6.20%
Share of NPL
@ 7.20%
1% Increase Share
of (NPA) @ 8.20%
Water 378,334$ 164,352 (11,966) 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 @ 2.93%
Measurement
Date @ 3.93% 1% Increase @ 4.93%
Water 3,100$ 2,626 2,251 Employer 1% Decrease @ 2.65%
Measurement
Date @ 3.65% 1% Increase @ 4.65%
Water 3,060$ 2,583 2, 207

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

70 (Continued)
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.

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 4 and June 30, 202 3. 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, 2025 and 2024 measurement dates was 4.13% and 4.03%, 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:

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)
Valuation Date (VD) June 30, 2024
M
easurement Date (MD) June 30, 2024
Measurement Period (MP) July 1, 2023 to June 30, 2024
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
San Francisco Health Service System Retiree Plan - Single-Employer Fiscal year 2025
Fiscal year 2024

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

71 (Continued)
Dental: Delta Dental, DeltaCare USA, and UnitedHealthcare Dental Vision: Vision benefits are provided under the medical insurance plans and are administered by Vision Service Plan.

Projections of the sharing of benefit related costs are based on an established pattern of practice.

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

Additionally, under the City Charter, active officers and employees of the City who commenced employment on or after January 10, 2009, shall contribute to the Retiree Health Care Trust Fund (Trust Fund) a percentage of compensation not to exceed 2% of pre-tax compensation. The City shall contribute 1% of compensation for officers and employees who commenced employment on or after January 10, 2009 until the City’s GASB Actuary has determined that the City’s portion of the Trust Fund is fully funded. At that time, the City’s 1% contribution shall cease, and officers and employees will each contribute 50% of the maximum 2% of pre-tax compensation.

Starting July 1, 2016, active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute 0.25% of pre-tax compensation into the Trust Fund.

Beginning on July 1st of each subsequent year, the active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute an additional

0.25% of pre-tax compensation up to a maximum of 1%. Starting July 1, 2016, the City shall contribute 0.25% of compensation into the Trust Fund for each officer and employee who commenced employment on or before January 9, 2009. Beginning on July 1st of each subsequent year, the City shall contribute an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment on or before January 9, 2009. When the City’s actuary has determined that the City’s portion of the Trust Fund is fully funded, the City’s 1% contribution shall cease, and officers and employees will each 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 years ended June 30, 2025 and 2024, funding was based on “pay-as-you-go” plus a contribution of $52,126 and $48,779 to the Retiree Healthcare Trust Fund , respectively. The “pay-as-you-go” portion paid by the City was $ 248,806 for a total contribution of $ 300,932 for the fiscal year ended June 30, 2025, and $229,922 for a total contribution of $278,701 for the fiscal year ended June 30, 2024. The Enterprise’s proportionate share of the City’s contributions for fiscal year 2025 was $12,429, and for fiscal year 2024 was $11,241, 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 2025
As of June 30, 2025, the City reported net OPEB liability related to the Plan of $3, 921,799. The Enterprise’s proportionate share of the City’s net OPEB liability as of June 30, 20 25 was $161,975.

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

72 (Continued)
For the year ended June 30, 20 25, the City’s recognized OPEB expense was $259,579 .

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 $19,829.

As of June 30, 2025 , the Enterprise reported its proportionate share of the City’s deferred outflows/inflows of resources related to OPEB from the following sources:

As June 30, 2025, the Enterprise reported $12,429 as deferred outflows of resources related to contributions subsequent to the measurement date, which will be recognized as an adjustment to net OPEB liability in the reporting year ending June 30, 2026

Fiscal Year 2024
As of June 30, 2024, 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 $158,301.

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 was $13,394.

As of June 30, 2024, 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
R
esources
Deferred
Inflows of
R
esources
Contributions subsequent to measurement date 12,429$ -$ Differences between expected and actual experience 4,884 15,175 Changes in assumptions 6,893 -
Net difference between projected and actual earnings
on plan investments
- 1, 814
Change in proportion 3,103 6,405
Total 27,309$ 23,394$
Year ending June 30:
2026 (1,529)$
2027 (1,956)
2028 (3,296)
2029 (925)
2030 (404)
Thereafter (404)
Total (8,514)$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

73 (Continued)

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)$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

74 (Continued)
Actuarial Assumptions
Fiscal Year 2025
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2024 (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, 2024
Measurement Date June 30, 2024
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 6.87% trending down to ultimate rate of 3.94% in 2075 Medicare trend starts at 6.87% trending down to ultimate rate of 3.93% 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 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 published 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

75 (Continued)
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, 2025 and 2024
(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 2025
The discount rate used to measure the Total OPEB Liability as of June 30, 2024 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 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:

Fiscal Year 2025
Employer -1.00% Healthcare Cost
Trend Rate 1.00%
Water 136,510$ 161,975$ 193,545$ Fiscal Year 2024
Employer -1.00% Healthcare Cost
Trend Rate 1.00%
Water 134,621$ 158,301$ 187,684$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(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 rate that is 1% lower or 1% higher than the current rate:

Fiscal Year 2024
The discount rate used to measure the Total OPEB Liability as of June 30, 2023 was 7.0%.

Target Allocation
Long-term
Expected Real
Rate of Return
Equities
U.S. Large Cap 25.0% 5.5%
U.S. Small Cap 2.0% 6.4%
Developed Market Equity (non-U.S.) 13.0% 5.9%
Emerging Market Equity 10.0% 5.9%
Credit
Bank Loans 3.0% 3.7%
High Yield Bonds 3.0% 3.9%
Rate Securities
Investment Grade Corporate Bonds 7.0% 1.9%
Short-term Treasury Inflation-Protected Securities (TIPS) 5.0% 0.9% Private Markets
Private Equity 10.0% 6.9%
Private Debt 5.0% 6.2%
Core Private Real Estate 5.0% 5.2%
Infrastructure (Core Private) 2.0% 6.0%
Risk Mitigating Strategies
Global Macro 10.0% 1.6%
Total 100.0%
Asset Class
1% Decrease

6.00%
Discount Rate

7.00%
1% Increase

8.00%
190,937$ 161,975$ 138,204$

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

78 (Continued)

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. (12) 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 $62,356 or 44.1% and $ 59,952 or 48. 1% were allocated to the Enterprise for the years ended June 30, 2025 and 2024, 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 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

79 (Continued)
The Enterprise purchases water from Hetch Hetchy Water. The amounts, totaling $ 49,240 and $46,266 for the year s ended June 30, 202 5 and 2024, 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. Th e amounts, totaling $13,477 and $10,256 for the years ended Ju ne 30, 2025 and 2024, respectively, ha ve 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 $ 3,669 and $1,736 for the years ended June 30, 2025 and 2024, 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, which are used for general public safety. In fiscal years 2025 and 2024, the Enterprise delivered water for fire hydrant purposes totaling $6 and $5, respectively, based on metered usage and applicable water rates, and the amount has been excluded from operating 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 $22,696 and $20,925 for the years ended June 30, 2025 and 2024, respectively, have been included in services provided by other departments in the accompanying financial statements.

During the fiscal year ended June 30, 20 25, the Enterprise transferred $47,084 to Hetch Hetchy Water for the Mountain Tunnel Improvement project and $31 to the Office of the City Administrator for the Enterprise’s contribution to the Surety Bond Program. During the fiscal year ended June 30, 2024, 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 Administrator for the Enterprise’s contribution to the Surety Bond Program.

As of June 30, 2025, the Enterprise had interfund receivables of $37,929 from Hetchy Power for the Mountain Tunnel Improvement project and DPW relating to c ustom work projects . As of June 30, 2024, the Enterprise had interfund receivables of $102 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 G arage, 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, 202 5, the Enterprise’s allocable shares of expenses and prepayment were $42 and $3,132, respectively; and as of June 30, 202 4, the Enterprise’s allocable shares of expenses and prepayment were $46 and $3,174, 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

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

80 (Continued)
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. 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
The Enterprise’s liability as of June 30, 2025, was estimated based on professional judgment regarding probable claims exposure provided by the City Attorney’s Office and includes an estimate of incurred but not reported losses. The recorded liability represents management’s best estimate of the City’s potential exposure based on currently available information.

The changes for the general liability (damage claims) for the years ended June 30, 2025, 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 projections of payments based on historical experience; and (iii) the size of the Enterprise’s payroll. The administration of workers’ compensation claims and payouts are handled by the Workers’ Compensation Division of the City’s Department of Human Resources. Statewide workers’ compensation reforms have resulted in budgetary savings in recent years. The City continues to develop and implement improved programs, such as return -to-work programs, to lower or mitigate the growth of workers’ compensation costs. Programs include accident prevention, investigation, and duty modification for injured employees with medical restrictions so return to work can occur as soon as possible.

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 Contractual Risk Transfer
(j) Errors and Omissions Contractual Risk Transfer
(k) Builders’ Risk Contractual Risk Transfer
Risk
Beginning Claims paid and changes End of
of year Claims changes in estimates year
$ 22,773 4,502 (12,326) 14,949 19,625 18,823 (15,675) 22,773 36,069 1,898 (18,342) 19,625 Fiscal years
2024
2025
2023

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

81 (Continued)
The changes in the liabilities for workers’ compensation for the years ended June 30, 202 5, 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 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. (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.

Beginning Claims and changes Claims End of
of year in estimates paid year
$ 11,002 5,083 (3,784) 12,301
9,735 4,336 (3,069) 11,002
8,973 3,984 (3,222) 9,735
Fiscal years
2024
2025
2023

SAN FRANCISCO WATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

82 (j) Errors and Omissions
Errors and omissions, also known as Professional Liability, are commonly transferred through contract to the contracted professional, or retained through self -insurance on a case -by-case basis depending on the size, complexity, or scope of construction or professional service contracts. Examples of such contracts are inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers. (k) 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. (14) Commitments and Litigation
(a) Commitments
As of June 30, 2025 and 2024, the Enterprise has outstanding commitments with third parties of $473,767 and $ 248,510, 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 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 5 and 2024, the pollution remediation liability was $0 and $1,271, respectively is related to the Pacific Rod & Gun Club site construction projects for the full value of construction.

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 contained 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 (t he Enterprise), an enterprise fund of the City and County of San Francisco (City), as of and for the year ended June 30, 2025, and the related notes to the financial statements, and have issued our report thereon dated November 5, 2025.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, 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 effe ctiveness 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 that a ma terial misstatement of the entity’s financial statements will not be prevented, or det ected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficienc ies in internal control that might be material weaknesses or significant deficiencies. Given thes e 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 whet her the Enterprise’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
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 integr al part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Walnut Creek, California
November 5, 2025

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
Cover photo: Lake Eleanor Dam
and Reservoir
Back cover photo: Calaveras Dam
and Reservoir
Photos by: Robin Scheswohl, Sabrina Wong
Date of Publication:

November 2025
Protecting Public Health
and the Environment.

Wastewater Enterprise
Financial Statements June 30, 2025 and 2024
(With Independent Auditor’s Reports 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 81

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, 2025 and 2024, and the related notes to the financial statements, as listed in the table of contents.

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.

The purpose of that report is solely to describe the sco pe 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 5, 2025

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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 25 and 20 24.

Management’s Discussion and Analysis (MD &A) 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 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, 2025, the Enterprise serves 149,672 residential accounts, which discharge approximately 15.9 million units of sanitary flow per year (measured in hundreds of cubic feet, or ccf) , and 32,010 non-residential accounts, which discharge approximately 5.8 million ccf per year. These figures reflect increases of 0.67 million discharge units for residential accounts and 0.15 million discharge units for non -residential accounts, resulting from account growth of 217 and 4,367, respectively, compared to prior year.

Overview of the Financial Statements

The Enterprise’s financial statements include the following:

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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 Enterprise’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which the Enterprise has successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in these statements from some items that will result in cash flows in future fiscal periods, such as delayed collection of operating revenues and the expenses of employee earned but unused vacation leave.

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

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

Financial Analysis

Financial Highlights for Fiscal Year 2025
• Total assets exceeded total liabilities by $1,323,663. • Net position increased by $31,303 or 2.4% during the year. • Capital assets, net of accumulated depreciation and amortization, increased by $796,443 or

14.5% to $6,284,853.
• Operating revenues increased by $36,150 or 9.2% to $431,191. • Operating expenses decreased by $170,610 or 36.8% to $292,481.

Financial Highlights for Fiscal Year 2024
• Total assets exceeded total liabilities by $1,289,457. • Net position decreased by $75,198 or 5.4% 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 $201,741 or 77.2% to $463,091.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

5 (Continued)

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

2025
Restated*
2024 2023
2025-2024
Change
2024-2023
Change
Total assets:

Current and other assets $ 1,013,574 577,997 574,446 435,577 3,551 Capital assets, net of accumulated depreciation and amortization 6,284,853 5,488,410 4,686,346 796,443 802,064 Total assets 7,298,427 6,066,407 5,260,792 1,232,020 805,615 Deferred outflows of resources:

Unamortized loss on refunding of debt — — 8 — (8) Pensions 44,997 42,685 32,592 2,312 10,093 Other postemployment benefits 11,099 12,816 11,493 (1,717) 1,323 Total deferred outflows of resources 56,096 55,501 44,093 595 11,408 Liabilities:

Current liabilities:

Revenue bonds 38,460 35,370 28,070 3,090 7,300 Certificates of participation 937 900 864 37 36 State revolving fund loans 6,419 5,629 2,526 790 3,103 Arbitrage rebate payable 290 — — 290 — Other liabilities 215,276 246,962 200,992 (31,686) 45,970 Subtotal current liabilities 261,382 288,861 232,452 (27,479) 56,409 Long-term liabilities:

Commercial paper — 341,373 — (341,373) 341,373 Revenue bonds 3,710,386 2,649,681 2,708,840 1,060,705 (59,159) Revenue notes — — 349,556 — (349,556) Certificates of participation 21,758 22,695 23,594 (937) (899) State revolving fund loans 360,187 312,033 316,163 48,154 (4,130) Water Infrastructure Finance and Innovation Act (WIFIA) loans 1,394,652 922,431 122,357 472,221 800,074 Arbitrage rebate payable 4,254 8,521 188 (4,267) 8,333 Other liabilities 222,145 231,355 121,786 (9,210) 109,569 Subtotal long-term liabilities 5,713,382 4,488,089 3,642,484 1,225,293 845,605 Total liabilities:

Revenue bonds 3,748,846 2,685,051 2,736,910 1,063,795 (51,859) Revenue notes — — 349,556 — (349,556) Certificates of participation 22,695 23,595 24,458 (900) (863) Commercial paper — 341,373 — (341,373) 341,373 State revolving fund loans 366,606 317,662 318,689 48,944 (1,027) Water Infrastructure Finance and Innovation Act (WIFIA) loans 1,394,652 922,431 122,357 472,221 800,074 Arbitrage rebate payable 4,544 8,521 188 (3,977) 8,333 Other liabilities 437,421 478,317 322,778 (40,896) 155,539 Total liabilities 5,974,764 4,776,950 3,874,936 1,197,814 902,014 Deferred inflows of resources:

Unamortized gain on refunding of debt 15,217 10,255 11,353 4,962 (1,098) Leases 954 1,203 1,453 (249) (250) Pensions 2,172 4,055 10,023 (1,883) (5,968) Other postemployment benefits 6,477 5,809 8,286 668 (2,477) Total deferred inflows of resources 24,820 21,322 31,115 3,498 (9,793) Net position:

Net investment in capital assets 1,039,359 1,148,814 1,110,957 (109,455) 37,857 Restricted for debt service 2,112 — 3,510 2,112 (3,510) Restricted for capital projects 140,768 31,782 53,137 108,986 (21,355) Unrestricted 172,700 143,040 231,230 29,660 (88,190) Total net position $ 1,354,939 1,323,636 1,398,834 31,303 (75,198) * Restated due to the implementation of GASB 101 - Compensated Absences.

Table 1
Comparative Condensed Net Position
June 30, 2025, 2024, and 2023

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

6 (Continued)

Net Position, Fiscal Year 2025
As of June 30, 202 5, the Enterprise’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,354,939. The Enterprise’s total net position increased by $31,303 or

2.4% from prior year. This change reflects increases of $108,986 in restricted for capital projects, $29,660 in unrestricted net position, and $2,112 in restricted for debt service, offset by a decrease of $109,455 in net investment in capital assets . The $1,232,615 increase in total assets and deferred outflows of resources, as well as the increase of $1,201,312 in total liabilities and deferred inflows of resources , are described below (see Table 1).

During fiscal year 2025, current and other assets increased by $435,577 or 75.4%. The increase was primarily driven by a $404,591 increase in restricted and unrestricted cash and investments, resulting from proceeds of the 2024 Series ABCD revenue bonds issuance and new loans under the Water Infrastructure Finance and Innovation Act (WIFIA) and State Revolving Fund (SRF). Additional increases include d a $30,301 rise in reimbursement receivables from the State Water Resources Control Board (SWRCB) for the Southeast Water Pollution Control Plant New Headworks (Grit) Replacement and OSP Digester Gas Utilization Upgrade projects ; a $4,560 increase in restricted and unrestricted receivables and inventory, primarily due to higher interest receivables driven by elevated average annualized interest rate s and cash balances; and a $2,097 increase in receivable s from charges for services and prepaid expenses, net of allowance for uncollectible receivables , largely attributed to higher sales. These increases were partially offset by a $5,972 decrease in other receivable s, mainly due to a $7,370 payment received from the University of California, San Francisco (UCSF) and the Golden State Warriors (GSW) for their fair share contribution to the Mariposa Sanitary Pump Station Upgrade Project.

Capital assets, net of accumulated depreciation and amortization , increased by $796,443 or 14.5% , primarily due to expanded capital improvement activities and the right-to-use lease and subscription assets.

The largest component of the Enterprise’s net position $1,039,359 or 76.7%, represents net investment in capital assets (see the Capital Assets section of the MD &A for further details ). Deferred outflows of resources increased by $595, resulting from a $2,312 rise in pension contributions, offset by a $1,717 reduction in other postemployment benefits.

Total liabilities increased by $1,197,814 or 25. 1%. As of June 30, 202 5, the outstanding balance of $5,532,799 for revenue bonds, certificate of participation (COP), SRF, and WIFIA loans represented 92.6% of total liabilities, an increase of $1,242,687 or 29.0%. This increase was driven by the issuances of 2024 Series ABCD revenue bonds totaling $1,217,971, which included an original issue premium of $74,996; $472,221 in new WIFIA loans , including $16,324 of capitalized interest ; $55,221 in new SRF loans ; and additions from commercial paper . These increases in outstanding debt w ere offset by $465,325 in defeasance and repayment of outstanding debt, a s well as $37,401 in amortization and defeasance of revenue bond premiums (see Table 4).

Other liabilities of $441,965, including arbitrage rebate payable, payables to vendors, contractors, and other government agencies for goods and services under contractual agreements, decreased by $44,873 or 9.2%. This is due to a $34,009 reduction in restricted and unrestricted payable s to vendors and contractors mainly due to decreased capital project spending; $3,977 decrease in arbitrage rebate payable; and a $ 1,391 decrease resulting from revenue recognition of rental deposits, payments to other City departments, and a refund to the State for unspent Federal COVID -19 recovery pass -through grant funds under the California Water and Wastewater Arrearages Payment Program (CWWAPP). Additionally, there was a decrease of $36,310 in damage claims liability based on the analyses performed by the City Attorney’s Office and Controller’s Office and in pollution remediation obligation due to payments made for the

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

7 (Continued)

Yosemite Creek Remediation Project. Wastewater’s damage claim s liability as of June 30, 2025 was estimated by using probable exposure information provided by the City Attorney’s Office and includes an estimate of incurred but not reported losses. These reductions were offset by an increase of $13,666 in interest payable primarily related to the newly issued 2024 Series ABCD revenue bonds ; an $8,816 increase in lease and subscription liabilities, and higher accrued payroll and workers’ compensation; and an increase of $ 8,332 in net pension and other postemployment benefits liability based on actua rial estimates.

Deferred inflows of resources increased by $3,498 due to an increase of $ 5,630 in the unamortized gain on refunding of debt by the 2024 ABCD revenue bonds and other postemployment benefits , offset by $2,132 decreases in pension and leases.

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 $1,3 23,636. The Enterprise’s total net position decreased by $ 75,198 or

5.4% from prior year, comprised of decreases of $88,190 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 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 the 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 17.1% 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.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

8 (Continued)

Total liabilities increased by $902,014 or 2 3.3%. As of June 30, 2024, 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 $800,074 new WIFIA loans (included $7,506 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, $2,525 in SRF loans, and $863 in COP, and $25,880 in revenue bonds and notes premium amortization and defeasance. Other liabilities of $486,838, including arbitrage rebate payable, payables to vendors, contractors, and other government agencies for goods and services under contractual agreements, increased by $163,872 or 50.7% due to increases of $110,733 in damage claims liability based on actuarial report, $17,750 in net pension liability based on actuarial report, $15,732 increase in employee related benefits including workers’ compensation , accrued payroll , vacation and sick leave from the implementation of GASB Statement No. 101 , and 4.75% increase in cost of living adjustment (COLA) , $8,549 in restricted and unrestricted payable to vendors and contractors mainly due to increased capital 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 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, and $225 increase in other postemployment 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 postemployment benefits of $5,968 and $2,477, 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.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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 2025
The Enterprise’s total revenues were $479,902, an increase of $35,036 or 7.9% from prior year (see Table 2). Charges for services increased by $35,453 or 9.0% mainly due to a 9.0% rate increase adopted on July 1, 2024, and an increase in sanitary flow of 797,494 ccf, or 3.7% from both residential and non-residential customers.

Interest and investment income increased by $18,537 or 72.6%, driven by a $19,939 increase in interest earned from City Treasury pooled investments . This was attributed to higher average cash balances resulting from issuances of the 2024 Series ABCD revenue bonds and WIFIA loans , as well as high er interest rates.

Other operating revenues increased by $561 or 24.8%, mainly due to increased capacity fees, driven by an 8% increase in the average permit price and a 3% increase in the number of permits issued . This was further supported by a reduction in the allowance for doubtful accounts and write -offs compared to prior year.

Rents and concessions increased by $136 or 18.4% mainly due to higher lease payments and the recognition of non-refundable deposits as revenue.

Table 2
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years ended June 30, 2025, 2024, and 2023
2025
Restated**
2024 2023
2025-2024
Change
2024-2023
Change
Revenues:

Charges for services $ 427,493 392,040 360,037 35,453 32,003 Rents and concessions 875 739 822 136 (83) Other operating revenues 2,823 2,262 3,077 561 (815) Interest and investment income 44,065 25,528 2,556 18,537 22,972 Other non-operating revenues 4,646 24,297 9,910 (19,651) 14,387 Total revenues 479,902 444,866 376,402 35,036 68,464 Expenses:

Operating expenses 292,481 463,091 261,350 (170,610) 201,741 Interest expenses* 154,566 91,584 81,133 62,982 10,451 Non-operating expenses 225 505 535 (280) (30) Total expenses 447,272 555,180 343,018 (107,908) 212,162 Change in net position before capital contributions and transfers 32,630 (110,314) 33,384 142,944 (143,698) Capital contributions 145 48,080 2,740 (47,935) 45,340 Transfers from the City and County of San Francisco — — 75 — (75) Transfers to the City and County of San Francisco (1,472) (209) (32) (1,263) (177) Capital contributions and net transfers (1,327) 47,871 2,783 (49,198) 45,088 Change in net position 31,303 (62,443) 36,167 93,746 (98,610) Net position at beginning of year:

Beginning of year, as previously reported 1,323,636 1,398,834 1,362,667 (75,198) 36,167 Cumulative effect of accounting change — (12,755) — 12,755 (12,755) Beginning of year as restated 1,323,636 1,386,079 1,362,667 (62,443) 23,412 Net position at end of year $ 1,354,939 1,323,636 1,398,834 31,303 (75,198) * Net of amortization of premium, refunding gain/loss, and issuance cost. ** Restated due to the implementation of GASB 101 - Compensated Absences.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

10 (Continued)

Other non -operating revenues decreased by $19,651 or 80.9 %, primarily due to prior year receipts of $12,104 in federal and state grants under the CWWAPP and revenue recognized fr om fair share contributions totaling $7,558 from the GSW and the UCSF for the Mariposa Project.

Total expenses were $447,272, reflecting a decrease of $107,908 or 19.4% compared to prior year. This reduction was primarily driven by a $170,610 decrease in operating expenses and a $280 decrease in City grants program expenses for community-based organization services and floodwater management program.

These decreases were offset by a $62,982 increase in interest expenses, mainly resulting from an increase of $75,292 in bonds and loans interest, amortization of premiums, refunding gain s, and issuance cost, primarily due to the issuance of the 2024 ABCD revenue bonds and the new WIFIA loans, offset by a $12,310 decrease in arbitrage rebate interest expense based on the computation from the BLX interim arbitrage rebate analysis report.

The $170,610 decrease in operating expenses was primarily due to a $202,206 decline in general and administrative and other operating expenses, largely due to reduced judgments and claims expenses based on analyses performed by the City Attorney’s Office and Controller’s Office, as well as lower project costs associated with the Westside Pump Station Reliability Improvement, Biosolids Digester, and Treasure Island Capital Improvement projects . The se reductions were partially offset by se veral increases, including a $21,334 increase in personnel services – driven by a 3% increase in cost-of-living adjustment (COLA), a 3% increase in full -time equivalents, and increased other postemployment benefit and pension expens es.

Additional increases included a $4,667 rise in electric utility services provided by Hetch Hetchy Power at the Southeast Treatment Plant ; a $3,754 increase in assets depreciation and amortization expenses; and a $1,841 increase in materials and supplies and contractual services for building and construction, equipment maintenance, and sewage treatment at the Southeast Treatment Plant reflecting higher maintenance costs.

Capital contributions totaled $145, representing a decrease of $47,935 compared to prior year . This is primarily due to the Developer Built Infrastructure transferred to capital assets, comprising $25,923 for Pier 70 Phase 1 , $17,550 for the Treasure Island Stage 1, and $4,607 for the Yerba Buena Island Street Improvements projects in prior year. Transfer out totaled $1,472, which included allocations to Culture and Recreation Fund for art enrichment , to Recreation and Park for the Green Infrastructure Grant Program at Buchanan Street Mall, and to the Office of the City Administrator for the Surety Bond Program.

Results of Operations, Fiscal Year 2024
The Enterprise’s total revenues were $444,866, an increase of $6 8,464 or 1 8.2% 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 gains 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

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

11 (Continued)

General Hospital and Trauma Center, and the San Francisco Municipal Transportation Agency. This increase was offset by an $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 index average rate increase, $70 from short -term conference room rentals at Southeast Community Center and $3 related to leases.

Total expenses were $555,180, reflecting an increase of $212,162 or 61.9% compared to prior year. This was primarily due to increases of $201,741 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 $201,741 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 $17,157 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 leasing 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.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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 2025
The Enterprise has capital assets of $6,284,853 net of accumulated depreciation and amortization, invested in a broad range of utility capital assets as of June 30, 2025 (see Table 3). This amount represents an increase of $796,443 or 14.5% from prior fiscal year. As of June 30, 202 5, the Enterprise had capital commitments of $547,063. 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. Facilities, improvements, machinery, and equipment increased by $816,458 or 32.0%. Right-to-use lease and subscription assets increased by $5,817 or 3,094.1% due to lease and subscriptions additions in current year , net of amortization. Construction work in progress decreased by $22,868 or 0.8%. Land improvements decreased by $1,681 or 18.1% due to depreciation.

Intangible assets decreased by $1,283 or 20.1% due to amortization.

Table 3
Capital Assets, Net of Accumulated Depreciation and Amortization As of June 30, 2025, 2024, and 2023
2025 2024 2023
2025-2024
Change
2024-2023
Change
Facilities, improvements, machinery, and equipment $ 3,365,635 2,549,177 2,393,051 816,458 156,126 Intangible assets 5,090 6,373 7,333 (1,283) (960) Land and rights-of-way 44,572 44,572 44,572 — — Land Improvements 7,630 9,311 6,733 (1,681) 2,578 Construction work in progress 2,855,921 2,878,789 2,232,963 (22,868) 645,826 Right-to-use lease and subscription assets 6,005 188 1,694 5,817 (1,506) Total $ 6,284,853 5,488,410 4,686,346 796,443 802,064

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

13 (Continued)

Major additions to construction work in progress during the year ended June 30, 2025 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, 2025 include the following:

See Note 4 for additional information about capital assets.

Southeast Plant Biosolids Digester Facilities Project $ 507,033 New Treasure Island Wastewater Treatment Plant Capital Improvements 85,564 Southeast Plant New Headworks (Grit) Replacement 43,824 Large Diameter Sewer Projects and Channel Force Main Intertie 25,430 Oceanside Plant Digester Gas Handling Utilization Upgrade 12,729 WW-753 Hayes Valley Sewer Improvements 12,386
WW-748 As Needed Spot Sewer Replacement Number 45 11,788 Southeast Plant Power Feed and Primary Switchgear Upgrades 9,962 Southeast Plant Facility-Wide Distributed Control System Upgrades 6,837 WW-726 Various Locations Sewer Replacement Number 15 6,549 Westside Pump Station Reliability Improvements 6,525
Lower Alemany Area Stormwater Improvement Project 6,223 Southeast Plant / Southeast Community Heating Ventilation Air Conditioning & Mechanical Upgrades 5,806 Folsom Area Stormwater Improvement Project 5,720
Folsom Area Stormwater Phase 2 5,568
New Trades and Maintenance Buildings 5,469
Primary Treatment Southeast Plant Buildings 040 and 041 5,357 WW-725 Various Locations Sewer Replacement Number 14 5,336 Oceanside Plant Condition Assessment Improvements - Part 2 4,611 Channel Pump Station Improvements 4,301
Other project additions individually below $4,000 94,001 $ 871,019
Southeast Plant New Headworks (Grit) Replacement $ 712,664 North Shore Pump Station Wet Weather Improvements 44,914 Large Diameter Sewer Projects and Channel Force Main Intertie 17,672 Taraval Sewer Improvements 17,481
WW-716 As-Needed Sewer Replacement Number 44 12,036
Folsom Area Stormwater Phase 2 10,454
Public Works Various Locations Number 55 Infrastructure Improvements 10,393 Public Works Various Location Number 53 Infrastructure Improvements 7,849 WW-705 Sewer Replacement Number 10 7,082
Oceanside Plant Condition Assessment Improvements - Part 2 6,229 Southeast Plant Facility-Wide Distributed Control System Upgrades 4,944 Other project additions individually below $4,000 45,340 $ 897,058

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

14 (Continued)

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 had 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.

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

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

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

15 (Continued)

See Note 4 for additional information about capital assets.

Sewer System Improvement Program
The Sewer System Improvement Program (SSIP) is a SFPUC’s wastewater capital improvement program which includes multiple projects to improve the existing wastewater system. The implementation of the SSIP projects were originally phased over 20 years to maintain ratepayer affordability and minimize impacts to communities throughout the City . On March 22, 2016, the refined program scope and budget for $ 7.0 billion was endorsed by the Commission along with the baseline for scope, schedule, and budget for Phase 1 projects totaling $2.9 billion. The revised program is referred to as the “2016 SSIP Baseline ”. The SSIP Phase 1 Baseline Budget and Schedule were revised starting in 2018 , resulting in an approved budget of $4.7 billion as of June 30, 2025.

SSIP, Fiscal Year 2025
As of June 30, 2025, SSIP Phase 1 includes 70 projects in various stages: 54 projects or 77.1% totaling $570 million were completed, 2 projects in multiple phases, 4 projects in pre-construction phase, 7 projects in construction phase, and 3 projects in close -out phase. The Mariposa Dry-Weather Pump Station & Force Main Improvements Project was completed on December 31, 2024 with reported project expenditures of $31.3 million. The project scope consists of demolishing the existing pump station building, underground structure, wet well, electrical system, and associated assets to make room for a new pump station. The 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

16 (Continued)

existing dry weather force main downstream of the pump station was also replaced to accommodate the increased flows. Additionally, construction at the Southeast Plant on the New Headworks (Grit) Replacement is progressing, with the New Headworks Facility reaching substantial completion and demolition of the old headworks facility underway. The project is currently over 90% complete, with project completion forecasted for Fall 2027. As of June 30, 202 5, total SSIP program expenditures totaled $3.9 billion. Additional details regarding the SSIP are available at https://sfpuc.gov/construction- contracts/sewer-system-improvement-program.

SSIP, Fiscal Year 2024
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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

17 (Continued)

Debt Administration
As of June 30 , 202 5, 2024, and 2023, the Enterprise’s outstanding debt comprising revenue bonds, revenue notes, commercial paper, certificates of participation, SRF, and WIFIA loans were $5,532,799, $4,290,112, and $3,551,970, respectively, as shown in Table 4. Additional information about the Enterprise’s debt activity is provided in Notes 6, 7, and 8 to the financial statements.

The increase of $1,242,687 was mainly due to $1,217,971 new issuances of 2024 Series ABCD revenue bonds, including $74,996 original issue premium, $ 472,221 in new WIFIA loans including $1 6,324 capitalized interest for the Biosolids Digester Facilities Project, the Southeast Treatment Plant Improvement Project, and the Wastewater Capital Plan Resilience Program – Project 1, $55,221 in new SRF loans for the OSP Digester Gas Utilization Upgrade and SEP New Headworks (Grit) Replacement projects, and commercial paper additions. The increase in outstanding debt was offset by $342,021 in defeasance of commercial paper by the 2024 Series C and D revenue bonds issuance, $81,405 in defeasance of 2023 Series B and 2018 Series B revenue bonds by the 2024 Series B revenue bonds issuance, principal repayments of $35,370 in bonds, $5,629 in SRF loans, $900 in COP, and $37,401 in revenue bonds premium amortization and defeasance.

Credit Ratings and Bond Insurance – As of June 30, 20 25 and 2024, 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 service coverage policy, at least equal to 1.35 times annual debt service for said fiscal year. During fiscal years 2025 and 2024, the Enterprise’s net revenues, together with fund balances available to pay debt service and not budgeted to be expended, were sufficient to meet the rate covenant requirements under the Enterprise’s Amended and Restated Indenture 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 of June 30, 20 25, the Enterprise had $ 8,052,607 in combined debt issuance authorization from the Board of Supervisors under Proposition E, with $5,625,155 issued against this authorization. The Enterprise has a $ 1,250,000 authorized interim funding program, with $0 in tax -exempt commercial paper outstanding as of June 30, 2025 and $341,373 in tax -exempt commercial paper outstanding as of June 30, 2024.
2025-2024 2024-2023
2025 2024 2023 Change Change
Revenue bonds $ 3,748,846 2,685,051 2,736,910 1,063,795 (51,859) Revenue notes — — 349,556 — (349,556) Commercial paper — 341,373 — (341,373) 341,373 Certificates of participation 22,695 23,595 24,458 (900) (863) State revolving fund loans 366,606 317,662 318,689 48,944 (1,027) Water Infrastructure Finance and Innovation Act (WIFIA) loans 1,394,652 922,431 122,357 472,221 800,074 Total $ 5,532,799 4,290,112 3,551,970 1,242,687 738,142 Table 4
Outstanding Debt, Net of Unamortized Costs
As of June 30, 2025, 2024, and 2023

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

18 (Continued)

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%, net of federal interest subsidy receipts on Build America Bonds at June 30, 20 25. The 2009 Series D certificates of participation carried coupon interest rates from 6.4% to

6.5% in fiscal years 2025 and 2024, respectively. Short-term debt instruments bore interest rates between

3.6% to 3.8% in both fiscal years 2025 and 2024. The State revolving fund loans (CWSRF loans) carried original interest rates ranging from 0.8% to 1.8% during fiscal year 2025. In certain agreements, the State opted to apply administrative service and grant charges in lieu of interest payments; these charges do not affect the installment payments or increase total repayment amounts. The WIFIA loan carrie d interest rate of 1.5% during fiscal year 2025 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 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-sewer- rates/rates.

SAN FRANCISCO WASTEWATER ENTERPRISE
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

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

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

This report is available at https://sfpuc.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, 2025 and 2024
(In thousands)

20 (Continued)

Restated*
2025 2024
Assets
Current assets:

Cash and investments with City Treasury $ 396,961 376,658 Cash and investments outside City Treasury 45 152 Receivables:
50,300 48,338
Due from other City departments, current portion 70 82 Interest 3,619 3,896
Leases receivable, current portion 241 226 Restricted due from other governments 30,301 — 6,889 689
Total current receivables 91,420 53,231
Prepaid charges, advances, and other receivables, current portion 729 8,142 Inventory 4,052 3,657
Restricted cash and investments outside City Treasury, current portion 83,614 41,778 Total current assets 576,821 483,618
Non-current assets:

Restricted cash and investments with City Treasury 398,588 31,613 Restricted cash and investments outside City Treasury, less current portion 35,514 59,930 371 388
343 342
Leases receivable, less current portion 777 1,019 Prepaid charges, advances, and other receivables, less current portion 1,160 1,087 Capital assets, not being depreciated and amortized 2,903,540 2,926,407 Capital assets, net of accumulated depreciation and amortization 3,381,313 2,562,003 Total non-current assets 6,721,606 5,582,789
Total assets 7,298,427 6,066,407
Deferred outflows of resources
Pensions 44,997 42,685
Other postemployment benefits 11,099 12,816
Total deferred outflows of resources $ 56,096 55,501 Charges for services, less current portion (net of allowance for doubtful accounts of $333 as of June 30, 2025 and $351 as of June 30, 2024)
Restricted interest, other receivable, and prepaid (net of allowance for doubtful accounts of $383 as of June 30, 2025 and $345 as of June 30, 2024)
Restricted interest, other receivable, and prepaid (net of allowance for doubtful accounts of $0 as of June 30, 2025 and as of June 30, 2024)
Charges for services (net of allowance for doubtful accounts of $12,045 as of June 30, 2025 and $12,865 as of June 30, 2024)

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Net Position
June 30, 2025 and 2024
(In thousands)

21 Restated*
2025 2024
Liabilities
Current liabilities:

Accounts payable $ 21,325 18,841
Accrued payroll 9,782 8,119
Accrued compensated absences, current portion 14,531 13,705 Accrued workers’ compensation, current portion 1,602 1,685 Due to other City departments, current portion 115 114 Damage claims liability, current portion 15,885 28,742 Unearned revenues, refunds, and other 8,346 9,623 Arbitrage rebate payable, current portion 290 — Bond, loan, lease, and subscription interest payable, current portion 42,174 30,300 Revenue bonds, current portion 38,460 35,370 Certificates of participation, current portion 937 900 State revolving fund loans payable, current portion 6,419 5,629 Lease liability, current portion 1,766 —
Subscription liability, current portion 503 93 Current liabilities payable from restricted assets 99,247 135,740 Total current liabilities 261,382 288,861
Long-term liabilities:

Net other postemployment benefits liability 50,552 49,260 Net pension liability 74,339 67,299
Accrued compensated absences, less current portion 12,726 12,187 Accrued workers’ compensation, less current portion 7,299 7,327 Due to other City departments, less current portion 176 291 Damage claims liability, less current portion 63,216 86,341 Bond, loan, lease, and subscription interest payable, less current portion 3,898 2,106 Arbitrage rebate payable, less current portion 4,254 8,521 Commercial paper — 341,373
Revenue bonds, less current portion 3,710,386 2,649,681 Certificates of participation, less current portion 21,758 22,695 State revolving fund loans payable, less current portion 360,187 312,033 Water Infrastructure Finance and Innovation Act (WIFIA) loans 1,394,652 922,431 Lease liability, less current portion 3,722 — Subscription liability, less current portion 94 93 Pollution remediation obligation 6,123 6,451 Total long-term liabilities 5,713,382 4,488,089
Total liabilities 5,974,764 4,776,950
Deferred inflows of resources
Unamortized gain on refunding of debt 15,217 10,255 Leases 954 1,203
Pensions 2,172 4,055
Other postemployment benefits 6,477 5,809
Total deferred inflows of resources 24,820 21,322 Net position
Net investment in capital assets 1,039,359 1,148,814 Restricted for debt service 2,112 —
Restricted for capital projects 140,768 31,782 Unrestricted 172,700 143,040
Total net position $ 1,354,939 1,323,636
* Restatement due to implementation of GASB 101- Compensated Absences.

See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2025 and 2024
(In thousands)

22 2025
Restated**
2024
Operating revenues:

Charges for services $ 427,493 392,040
Rents and concessions 875 739
Capacity fees 2,823 2,262
Total operating revenues 431,191 395,041
Operating expenses:

Personnel services 128,217 106,883
Contractual services 24,527 23,885
Materials and supplies 15,673 14,474
Depreciation and amortization 86,476 82,722
Services provided by other departments 44,213 39,546 General and administrative and other (6,625) 195,581 Total operating expenses 292,481 463,091
Operating (loss) income 138,710 (68,050)
Non-operating revenues (expenses):

Federal and state grants 562 12,256
Interest and investment income 44,065 25,528
Interest expenses* (154,566) (91,584)
Net gain from sale of assets 18 77
Other non-operating revenues 4,066 11,964
Other non-operating expenses (225) (505)
Net non-operating expenses (106,080) (42,264)
Change in net position before capital contributions and transfers 32,630 (110,314) Capital contributions 145 48,080
Transfers to the City and County of San Francisco (1,472) (209) Capital contributions and net transfers (1,327) 47,871 Change in net position 31,303 (62,443)
Net position at beginning of year:

Beginning of year, as previously reported 1,323,636 1,398,834 Cumulative effect of accounting change — (12,755) Beginning of year as restated 1,323,636 1,386,079 Net position at end of year $ 1,354,939 1,323,636

* Net of amortization of premium, refunding loss/gain, and issuance costs. ** Restatement due to implementation of GASB 101 - Compensated Absences.

See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Cash Flows
Years Ended June 30, 2025 and 2024
(In thousands)

23 (continued)

2025 2024
Cash flows from operating activities:

Cash received from customers, including cash deposits $ 428,084 380,336 Cash received from tenants for rent 829 496 Cash received from miscellaneous revenues 7,904 6,648 Cash paid to employees for services (116,892) (104,126) Cash paid to suppliers for goods and services (105,702) (116,262) Cash paid for judgments and claims (7,046) (6,851) Cash paid for rebates and program incentives (225) (505) Net cash provided by operating activities 206,952 159,736 Cash flows from non-capital financing activities:

Cash received from grants 591 13,688
Cash refund of grant (1,459) —
Transfers to the City and County of San Francisco (1,472) (209) Net cash (used in) provided by non-capital financing activities (2,340) 13,479 Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 14 79 Proceeds from bond issuance, net of premium 786,743 — Proceeds from commercial paper borrowings 648 341,373 Proceeds from State revolving fund loans 24,273 13,942 Proceeds from WIFIA loans, net of premium and interest 455,896 811,356 Receipts from leases 260 250
Principal paid on revenue notes — (347,465) Principal paid on long-term debt (36,270) (28,933) Principal paid on State revolving fund loans (5,629) (2,525) Lease interest payment (198) (6)
Subscription interest payment (22) (4) Interest paid on long-term debt (146,305) (112,460) Interest paid on commercial paper (647) (1,372) Interest paid on State revolving fund loans (2,727) (1,479) Issuance cost paid on long-term debt (3,291) (195) Acquisition and construction of capital assets (914,791) (873,239) Federal interest income subsidy for Build America Bonds 2,144 3,911 Net cash provided by (used in) capital and related financing activities 160,098 (196,767) Cash flows from investing activities:

Interest income received 33,389 17,963
Proceeds from sale of investments outside City Treasury 1,476,445 1,860,653 Purchase of investments outside City Treasury (1,463,839) (1,898,189) Net cash provided by (used in) investing activities 45,995 (19,573) Increase (decrease) in cash and cash equivalents 410,705 (43,125) Cash and cash equivalents:

Beginning of year 479,099 522,224
End of year $ 889,804 479,099

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

Cash and investments with City Treasury:

Unrestricted $ 396,961 376,658
Restricted 398,588 31,613
Add: Unrealized loss on investments with City Treasury 862 6,504 Cash and investments outside City Treasury:

Unrestricted 45 152
Restricted 119,128 101,708
Less: Restricted (with maturity more than 90 days - see table in Note 3) (24,663) (37,269) Less: Unrealized (gain) on investments outside City Treasury (1,117) (267) Cash and cash equivalents at the end of year on
statements of cash flows $ 889,804 479,099

SAN FRANCISCO WASTEWATER ENTERPRISE
Statements of Cash Flows
Years Ended June 30, 2025 and 2024
(In thousands)

24 Restated**
2025 2024
Reconciliation of operating (loss) income to net cash provided by operating activities:

Operating (loss) income $ 138,710 (68,050)
Adjustment to reconcile operating income (loss) to net cash provided by operating activities:

Depreciation and amortization 86,476 82,722
Lease revenue amortization (249) (250)
Miscellaneous revenues 7,904 6,647
Provision for uncollectible accounts (800) 2,807 Write-off of capital assets 1,309 47,795
Rebates and program incentives (225) (505) Changes in operating assets and liabilities:

Receivables:

Charges for services (1,125) (10,835)
Prepaid charges, advances, and other (418) (7,452) Inventory (395) (317)
Accounts payable 2,484 (4,366)
Accrued payroll 1,663 488
Net other postemployment benefits obligations liability* 3,677 (3,575) Net pension liability* 2,845 1,689
Accrued compensated absences 1,365 1,475
Accrued workers’ compensation (111) 1,014 Due to other City departments — (2,101) Pollution remediation obligation (328) (1,349) Damage claims liability (35,982) 110,733
Unearned revenues, refunds, and other liabilities 152 3,166 Total adjustments 68,242 227,786
Net cash provided by operating activities $ 206,952 159,736

Noncash transactions:

Accrued capital asset costs $ 99,247 135,740
Leases and subscription assets additions 11,630 — Interfund payable 291 405
Unrealized loss on investments with City Treasury 862 6,504 Unrealized (gain) on investments outside City Treasury (1,117) (267) Capital contribution 145 48,080
Commercial paper refunded 344,246 —
Bond proceeds paid to refunding escrow 86,982 — * Includes related deferred outflows/inflows.
** Restatement due to implementation of GASB 101 - Compensated Absences.

See accompanying notes to financial statements.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(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 approved a proposition authorizing the City to issue $240,000 in revenue bonds pursuant to the Revenue Bond Law of 1941 of the State of California for the purpose of acquiring, constructing, improving, and financing improvements to the City’s municipal sewage treatment and disposal system. Since then, the City’s Board of Supervisors has adopted resolutions (Wastewater Resolutions) providing for the issuance of various sewer revenue and refunding bond series. The Wastewater Resolutions require the City to keep separate books of records and accounts of the 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 San Francisco Water Enterprise). The Commission is responsible for determining such matters as the rates and charges for services, approval of contracts, and organizational policy.

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 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 operations 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 financial position, and the changes in financial position and cash flows of only that portion of the City that is attributable to the transactions of the Enterprise. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 202 5 and 202 4, 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, 2025 and 2024
(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).

Non-operating revenues include grants, investment income, and other income from non -operating activities. When both restricted and unrestricted resources are available for use, it is the Enterprise’s policy to use restricted resources first, then unrestricted resources as they are needed.

The Enterprise applies all applicable Governmental Accounting Standards Board (GASB) pronouncements.
(b) Cash and Cash Equivalents
The Enterprise considers its pooled deposits and investments held with the City Treasury to be demand deposits and, therefore, cash and cash equivalents for financial reporting. The City Treasury also holds non-pooled cash and investments for the Enterprise. Non -pooled restricted deposits and restricted deposits and investments held outside the City Treasury with original maturities of three months or less are also considered to be cash equivalents. (c) Investments
Money market funds are carried at cost, which approximates fair value. All other investments are stated at fair value based upon quoted market prices. Changes in fair value are recognized as investment gains or losses and are recorded as a component of non-operating revenues. (d) Inventory
Inventory consists primarily of construction materials and maintenance supplies and is valued at average cost. Inventory is expensed as it is consumed.
(e) Capital Assets
Capital assets are defined as assets with an initial individual cost of more than $ 10 and an estimated useful life in excess of one year. Capital assets with an original acquisition date prior to July 1, 1977 are recorded in the financial statements at estimated cost, as determined by an independent professional appraisal, or at cost, if known. All subsequent acquisitions have been

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

27 (Continued)

recorded at cost. All donated capital assets at the time of donation and capital assets received 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 assets, which range from 1 to 100 years for equipment and 1 to 200 years for building, structures, and improvements .

No depreciation or amortization is recorded in the year of acquisition, and depreciation or amortization is recorded in the year of disposal.
(f) Intangible Assets
Intangible assets are defined as identifiable, non -financial assets capable of being separated, sold, transferred, or licensed, and include contractual or legal rights. Examples of intangible assets include rights -of-way easements, land use rights, water rights, licenses, 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 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 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 costs related to prepaid insurance costs are capitalized and amortized using the effective interest method. Other bond issuance costs are expensed when incurred. Original issue bond discount or premium are offset against the related debt and are also amortized using the effective interest method.
(i) Deferred Inflow of Resources and Deferred Outflow of Resources Deferred inflows of resources represent an acquisition of net assets that applies to future periods.

Deferred outflows of resources represent a consumption of net assets that applies to future periods. (j) Accrued Compensated Absences
City employees may accumulate earned, but unused leave benefits up to a specified maximum, as outlined in their applicable leave policies . In accordance with GASB Statement No. 101, Compensated Absences , the Enterprise recognizes liabilities for leaves that are attributable to services already rendered, will be paid upon separation or usage, and are more likely than not to be used or paid. Compensated absences that meet these criteria consist of vacation, sick, compensatory time, and other holidays and leaves. The Enterprise records the compensated absences liability, including employer payroll taxes and the employer’s share of social security and Medicare taxes, as both current and noncurrent liabilities in the Statement of Net Position. The Enterprise applies the current pay rates of active employees to leave balances in effect at fiscal year-end.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

28 (Continued)

(k) 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 12(b)). (l) General Liability
The Enterprise is self -insured for general liability and uninsurable property damage claims.

Commercially uninsurable property includes assets that are underground or provide transmission and distribution. Maintained commercial coverage does not cover claims attributed to loss from earthquake, contamination, pollution remediation efforts, and other specific naturally occurring contaminants such as mold. As of June 30, 2025, the Enterprise estimated its liability for pending and threatened lawsuits based on the Office of the City Attorney’s assessment of probable claims and historical trends for incurred but not reported losses. The recorded liability represents management’s best estimate of the Enterprise’s potential exposure based on currently available information (see Note 12(a)).

During Fiscal Year 2025, the Enterprise changed its methodology for estimating claims liability. The Enterprise’s claims liability had historically been actuarially determined. The revised measurement methodology aligns more closely with the Office of City Attorney’s judgment of the Enterprise’s potential exposure based on currently available information. This prospective change in accounting estimate is intended to enhance the understandability, relevance, and timeliness of the financial information.

Affected financial statement items include: current and noncurrent estimated claims payables; and general and administrative expenses in the Enterprise’s statement of revenues, expenses, and changes in fund net position.
(m) Arbitrage Rebate Payable
Certain bonds are subject to arbitrage rebate requirements in accordance with regulations issued by the U.S. Treasury Department. The requirements generally stipulate that earnings from the investment of the tax -exempt bond proceeds that exceed related interest costs on the bonds must be remitted to the federal government on every fifth anniversary of each bond issue. The arbitrage liability due as of June 30, 2025 and 2024 was $4,544 and $8,521, respectively (see Note 7).

(n) Refunding of Debt
Gains or losses occurring from refunding of debt prior to maturity are reported as deferred outflows and deferred inflows of resources from refunding of debt. Deferred outflows and deferred inflows of resources are recognized as a component of interest expense using the effective interest method over the remaining life of the old debt or the life of the new debt, whichever is shorter. (o) Income Taxes
As a department of a government agency, the Enterprise is exempt from both feder al income taxes and California State franchise taxes.
(p) Revenue Recognition
Sewer service charges are based on water usage as determined by the San Francisco Water Enterprise. The majority of residential and non -residential customers are billed on a monthly basis

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

29 (Continued)

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 25 and 2024 were $19,103 and $23,256, respectively.
(q) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. (r) Accounting and Financial Reporting for Pollution Remediation Obligations According to GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, as amended, a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted and any of the following recognition triggers occur:
• Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem;
• A government has violated a pollution prevention-related permit or license; • A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup;
• A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution; or
• A government begins or legally obligates itself to begin cleanup or post -cleanup activities (limited to amounts the government is legally required to complete).

As a part of ongoing operations, situations may occur requiring the removal of pollution or other hazardous material. These situations typically arise in the process of acquiring an asset, preparing an asset for its intended use, or during the design phase of projects under review by the project managers. Other times, pollution may arise during the implementation and construction of a major or minor capital project. Examples of pollution may include but are not limited to: asbestos or lead paint removal, leaking of sewage in underground pipes or neighboring areas, chemical spills, removal, and disposal of known toxic waste, harmful biological and chemical pollution of water, or contamination of surrounding soils by underground storage tanks (see Note 13(d)). (s) Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability (asset) and deferred outflows/inflows of resources related to OPEB, and OPEB expense , information about the fiduciary net position of the Retiree Healthcare Trust Fund (RHCTF) and additions to/deductions from the plan ’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Plan member contributions are recognized in the period in which the con tributions are due. Investments are reported at fair value (see Note 10(b)).

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

30 (Continued)

(t) Pensions
For purposes of measuring the n et pension liability (asset) and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the San Francisco Employees’ Retirement System (SFERS) plan and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Plan member contributions are recognized in the period in which the contributions are due. Investments are reported at fair value (see Note 10(a)).
(u) New Accounting Standards Adopted in Fiscal Year 2025 1) In June 2022, the GASB issued Statement No. 101, Compensated Absences. GASB Statement No. 101 requires that liabilities for compensated absences be recognized if the leave is attributable to services rendered and the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means and establishes definitions, guidance, and disclosure requirements related to compensated absences. The new standard is effective for periods beginning after December 15, 2023. Application of this statement is effective for the Enterprise’s year ending June 30, 2025. In accordance with GASB Statement No. 100, Accounting Changes and Error Corrections , the Enterprise reported the implementation of GASB 101 as a change in accounting principle. The cumulative effect of applying the new recognition and measurement guidance as of July 1, 2023 was recorded as a restatement of beginning balances for the following accounts. The impact is presented in the following table.

2) In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures. This statement requires state and local governments to disclose significant risks related to concentrations or constraints that could lead to substantial impacts. The new standard is effective for periods beginning after June 15, 202 4. Application of this statement is effective for th e Enterprise’s year ending June 30, 2025. Application of this statement did not have a significant effect on its financial statements.
(v) GASB Statements Implemented 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, 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 Enterprise 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 Statement No. 99 in fiscal year 2024 which did not have a significant effect on its financial statements. 7/1/2023 Changes in
As Previously Accounting 7/1/2023
Reported Principle As Restated
Net Position 1,398,834$ (12,755) 1,386,079

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

31 (Continued)

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.
(w) Future Implementation of New Accounting Standards
1) 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 effective for periods beginning after June 15, 2025. The Enterprise will implement the provisions of Statement No. 103 in fiscal year 2026. 2) 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 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 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. Certain other operating revenues , specifically charges to City municipal departments have been reclassified to charges for services for fiscal year 2024 . In addition, the cash paid for rebates and program incentives in the direct cashflows statement has been reclassified under operating activities , lease receipts were reclassified from ope rating activities to capital and related financing activities in the direct cash flow , and lease and subscription payments were reclassified to acquisition and construction of capital assets under cash flows from capital and related financing activities for fiscal year 2024. 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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

32 (Continued)

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 25 and 20 24 were $119,128 and $101,708, 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 identical assets ; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities.

Custodial Credit Risk – Deposits
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the Enterprise will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the City’s investment policy do not contain lega l or policy requirements that would limit the exposure to custodial credit risk for deposits.

The California Government Code requires California banks and savings loan associations to secure the Enterprise’s deposits not covered by Federal Deposit Insurance Corporation (FDIC) insurance b y pledging government and/or local agency securities as colla teral. The fair value of such pledged securities must equal at least 110% and be of the type authorized in California Government Code, Section 53561 (a) through (i). The collateral must be held the pledging ban k’s trust department or another bank, acting as the pledging bank’s agent, in the Enterprise ’s name. At June 30, 2025, all banks with funds deposited by the Treasurer secured deposits with sufficient collateral or FDIC insurance.

Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in interest rates. Information about the sensitivity to the fair values of the Enterprise’s investments to interest rate fluctuation s is provided by the tables below, which show the distribution of the Enterprise’s investments by maturity.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

33 (Continued)

Credit Risk
Credit risk is the risk that an issue of an investment will not fulfill its obligation to pay the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The ratings for each of the investment types are provided by the table below.

Custodial Credit Risk – Investments
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the Enterprise will not be able to recover that value of its investment or collateral securities that are in the possession of another party.

The California Government Code and the City’s investment policy do not contain le gal or policy requirements that would limit the exposure to custodial credit risk for investments, however, it is the practice of the City Treasurer that all investments are insured, registered or held by the Treasurer’s custodial agent in the Enterprise’s name. The Enterprise also has inves tments with trustees related to the issuance of bonds that are uninsured, unregistered and held by the counterparty’s trust departments but not in the Enterprise’s name . These amounts are included in the investments outside City Treasury and are provided by the tables below.

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, 2025 and 2024.

Fair Value
Measurements Using
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 $ 51,443 51,443 — Money Market Funds A-1/P-1 < 90 days 53 53 — Commercial Paper - Royal Bank of Canada A-1+/P-1 < 90 days 24,765 — 24,765 U.S. Treasury Bonds & Notes A-1+/P-1 < 90 days 18,180 — 18,180 U.S. Treasury Bonds & Notes A-1+/P-1 March 31, 2026 24,663 — 24,663 Cash and Cash Equivalents N/A 24 24 — Total Restricted Cash and Investments outside City Treasury $ 119,128 51,520 67,608 Cash and Cash Equivalents N/A $ 45 45 — Total Unrestricted Cash and Investments outside City Treasury $ 45 45 — Ju n e 30, 2025
Cash and Investments outside City Treasury
In vestmen ts
exempt from
fair valu e
Qu oted prices in active
markets for iden tical
assets
( Level 1)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

34 (Continued)

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 5 and 2024 included an unrealized gain due to changes in fair values on Commercial Paper, U.S. Treasury Bonds & Notes, and U.S. Agency Securities of $1,117 and $267, respectively.

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

Fair Value
Measurements Using
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
In vestmen ts
exempt from
fair valu e
Qu oted prices in active
markets for iden tical
assets
( Level 1)
Ju n e 30, 2024
2025 2024
Current assets:

Cash and investments with City Treasury $ 396,961 376,658 Cash and investments outside City Treasury 45 152 Restricted cash and investments outside City Treasury 83,614 41,778 Non-current assets:

Restricted cash and investments with City Treasury 398,588 31,613 Restricted cash and investments outside City Treasury 35,514 59,930 Total cash, cash equivalents, and investments $ 914,722 510,131

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

35 (Continued)

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

As of June 30, 2025, the Enterprise has the following commercial paper investments that represent

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

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:

Fiscal years
ended June 30 Under 1 1 to less than 6 6 to less than 12 12 to 60 2025 20.8% 18.9% 17.5% 42.8%
2024 22.2% 19.5% 16.3% 42.0%
Investment maturities (in months)
Fair Value % of Investments
Royal Bank of Canada $ 24,765 20.8%
Fair Value % of Investments
Toronto Dominion Holding $ 19,342 19.1 %
Toyota Motor Corp 8,794 8.7

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

36 (Continued)

(4) Capital Assets
Capital assets as of June 30, 2025 and 2024 consisted of the following:

2024 Increases Decreases 2025
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 2,878,789 871,019 (893,887) * 2,855,921 Total capital assets not being depreciated and amortized 2,926,407 871,019 (893,887) 2,903,539 Capital assets being depreciated and amortized:

Facilities and improvements 4,153,796 892,722 — 5,046,518 Land improvements 10,712 — — 10,712 Intangible assets 11,029 — — 11,029 Machinery and equipment 109,914 4,336 (501) 113,749 Right-to-use lease assets — 10,362 (2,902) 7,460 Right-to-use subscription assets 522 1,269 (64) 1,727 Total capital assets being depreciated and amortized 4,285,973 908,689 * (3,467) 5,191,195 Less accumulated depreciation and amortization for:

Facilities and improvements (1,626,208) (75,629) — (1,701,837) Land improvements (1,401) (1,681) — (3,082) Intangible assets (7,702) (1,283) — (8,985) Machinery and equipment (88,325) (4,971) 501 (92,795) Right-to-use lease assets — (2,052) — (2,052) Right-to-use subscription assets (334) (860) 64 (1,130) Total accumulated depreciation and amortization (1,723,970) (86,476) 565 (1,809,881) Total capital assets being depreciated and amortized, net 2,562,003 822,213 (2,902) 3,381,314 Total capital assets, net $ 5,488,410 1,693,232 (896,789) 6,284,853 * Decrease in construction work in progress is less than increase in capital assets being depreciated is due to additions of $11,630 to right-to-use lease and subscription assets, direct additions of $4,336 to machinery and equipment, and contributed capital of $145 to buildings structures, offset by $1,309 in capital project write-offs, mainly related to the Interim Sidestream Nutrient Removal Project.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

37 (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.

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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

38 (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, 2025 and 2024:

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.
2025 2024
Cash and investments with City Treasury:

Wastewater revenue bond construction fund $ 398,588 31,613 Cash and investments outside City Treasury:
2009 Series C Certificates of Participation - 525 Golden Gate 2 255 2009 Series D Certificates of Participation - 525 Golden Gate 2,267 1,942 2010 Series A Wastewater revenue bond fund 151 145 2010 Series B Wastewater revenue bond fund 7,318 9,027 2013 Series B Wastewater revenue bond fund 2 1 2016 Series A Wastewater revenue bond fund 4 3 2016 Series B Wastewater revenue bond fund 2 1 2018 Series A Wastewater revenue bond fund 9 3 2018 Series B Wastewater revenue bond fund 15 4 2018 Series C Wastewater revenue bond fund 3 2 2021 Series A Wastewater revenue bond fund 8 2,239 2021 Series B Wastewater revenue bond fund 1 397 2022 Series B Wastewater revenue bond fund 46 43 2023 Series A Wastewater revenue bond fund 18,169 43,212 2023 Series B Wastewater revenue bond fund 6,936 15,998 2023 Series C Wastewater revenue bond fund 10 8 2021 Series A Wastewater revenue note fund 228 218 2021 Series B Wastewater revenue note fund 1 1 Commercial Paper - Tax Exempt 77 76
2020 WIFIA Biosolids Digester 15,981 15,248
2020 WIFIA Southeast Treatment Plant 13,509 12,885 2024 Series A Wastewater revenue bond 21,269 —
2024 Series B Wastewater revenue bond 7 — 2024 Series C Wastewater revenue bond 28,621 —
2024 Series D Wastewater revenue bond 4,492 — Total cash and investments outside City Treasury 119,128 101,708 Interest and other receivables:

Wastewater revenue bond construction fund including interest, prepaid, and other receivables 7,260 1,077 Due from other government for State Revolving Fund 30,301 — 37,561 1,077
Total restricted assets $ 555,277 134,398

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

39 (Continued)

(6) Short-Term Debt
The Commission and Board of Supervisors have authorized the overall Interim Funding Program issuance of up to $750,000, pursuant to the voter -approved 2002 Proposition E. In December 2024, the Board of Supervisors approved an expansion of the Wastewater Enterprise Interim Funding Program by $500,000 for a total Wastewater Enterprise Interim Funding Program size of $1,250,000. The program is made up of t hree 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 ; and (3) unused authority totaling $500,000 as of June 30, 2025. The Enterprise had $ 0 and $341,373 in commercial paper outstanding as of June 30, 2025 and 2024, respectively. The $341,373 was repaid by the 2024 Series CD Wastewater Revenue Bonds issued in July 2024 and was reclassed to long -term liabilities on the financial statements as of June 30, 2024.

The commercial paper notes can be issued or direct loan draws in the aggregate principal amounts of up to $750,000, and may be marketed and re -marketed with maturities up to 270 days (or if directly drawn, subject to repayment provisions per the respective agreements) 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, 202 5, the Commercial Paper Notes are secured by the following 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 $ 150,000 liquidity facility from TD Bank expires on July 3, 2028. The agreement for the Series A -4 facility stipulates a commitment fee of 0.2 5% on the maintenance of ratings of at least “Aa 2” by Moody’s and “AA“ by S&P. Series A -6 secured by a $125,000 liquidity facility from Bank of America expires on August 2, 202 7. The agreement for the Series A-6 facility stipulates a commitment fee of 0.42%, 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 31, 2027. The revolving credit agreement stipulates an unutilized quarterly commitment fee of

0.21%, on the maintenance of ratings of at least “Aa3” by Moody’s and “AA -“ by S&P. The revolving credit agreement had $0 outstanding as of June 30, 2025.

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. LLC, and U.S. Bancorp Investments, Inc. and 0.045% paid to RBC Capital Markets, LLC.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

40 (Continued)

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.

The Enterprise had $1,250,000 and $408,627 in unused authorization as of June 30, 202 5 and 2024, 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 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, 202 5 and 202 4, there were no such events described herein.

(7) Changes in Long-Term Liabilities
Long-term liability activities for the years ended June 30, 2025 and 2024 are as follows:

Maturity Due
Interest (Calendar Restated* within
rate Year) 2024 Additions Reductions 2025 one year
Revenue Bonds:
2010 Series B (Build America) 4.65% - 5.82% 2040 $ 177,730 — (7,745) 169,985 8,000 2013 Series B 4.00 - 5.00 2042 93,095 — — 93,095 — 2016 Series A 4.00 - 5.00 2046 235,105 — (5,760) 229,345 6,055 2016 Series B 4.00 - 5.00 2046 66,275 — (1,625) 64,650 1,705 2018 Series A 4.00 - 5.00 2043 214,175 — (6,580) 207,595 6,915 2018 Series B 5.00 2043 173,880 — (11,690) 162,190 5,610 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 — (8,325) 128,755 10,175 2023 Series A 5.00 - 5.25 2042 530,565 — — 530,565 — 2023 Series B 4.00 - 5.00 2042 278,155 — (75,050) 203,105 — 2023 Series C 4.00 2048 165,660 — — 165,660 — 2024 Series A 4.65 2027 — 431,110 — 431,110 — 2024 Series B 4.65 2037 — 87,250 — 87,250 — 2024 Series C 5.00 2054 — 539,720 — 539,720 — 2024 Series D 5.00 2054 — 84,895 — 84,895 — For issuance premiums 315,451 74,996 (37,401) 353,046 — Total revenue bonds and notes payable 2,685,051 1,217,971 (154,176) 3,748,846 38,460 Bond, loan, lease, and subscription interest payable 32,406 165,565 (151,899) 46,072 42,174 Commercial Paper 3.57 - 3.75 341,373 648 (342,021) — — 2009 Series D COPs (Build America) 6.36 - 6.49 2041 23,595 — (900) 22,695 937 State Revolving Fund Loans (CWSRF loans) 0.80 - 1.80 2056 317,662 54,573 (5,629) 366,606 6,419 Water Infrastructure Finance and Innovation Act (WIFIA) Loans 1.45 - 3.65 2062 922,431 472,221 — 1,394,652 — Arbitrage rebate payable 8,521 — (3,977) 4,544 290 Net other postemployment benefits liability 49,260 1,292 — 50,552 — Net pension liability 67,299 7,040 — 74,339 — Accrued compensated absences 25,892 1,365 — 27,257 14,531 Accrued workers' compensation 9,012 1,886 (1,997) 8,901 1,602 Due to other City departments 405 — (114) 291 115 Lease liability — 5,488 — 5,488 1,766 Subscription liability 186 411 — 597 503 Damage claims liability 115,083 4,968 (40,950) 79,101 15,885 Pollution remediation obligation 6,451 — (328) 6,123 — Total $ 4,604,627 1,933,428 (701,991) 5,836,064 122,682 * Restated due to the implementation of GASB 101- Compensated Absences. ** Compensated absences activities are shown as net.
**

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

41 (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 redeem $53,500 in outstanding commercial paper notes, provide funding for capital projects in the amount of $112,429, fund a cash debt service reserve fund, and pay financing costs for the bonds. The bonds were rated “Aa3” and “AA-” by Moody’s and S&P, respectively , at the time of issuance . Bonds mature through October 1, 2040.

The true interest cost is 3. 7%. As of June 30, 20 25 and 2024, the 2010 Series B bonds’ principal amount outstanding was $169,985 and $177,730, respectively.

Maturity Due
Interest (Calendar Restated** 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 compensated absences 11,662 14,230 — 25,892 13,705 Accrued workers' compensation 7,998 2,680 (1,666) 9,012 1,602 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 1,331,036 (413,307) 4,604,627 116,455 ** Restated due to the implementation of GASB 101- Compensated Absences. *** Compensated absences activities are shown as net.
* 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

42 (Continued)

(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 maturing on and after October 1, 2013. The bonds carried “ Aa3” and “AA -” ratings from Moody’s and S&P, respectively, at the time of issuance . The 2013 Series A refunding bonds include serial bonds with interest rates varying from 1.0% to 5.0% and have a final maturity in October 2025. The Series A bonds 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 accounting loss of $2,986 , gross debt service savings of $35,107 over the next 13 years, and an economic gain of $32,783 or 15.4% of the refunded principal.

A portion of the proceeds of the 2022 Series B refunding bonds was deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreements, dated July 1, 2022 to refund and legally defease a portion of the outstanding 2013 Series A bonds. This deposit, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non-callable Federal Securities. As of June 30, 2025 and 2024, the principal amount outstanding of the 2013 Series A bonds was $0.
(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 from 4.0% to 5.0%. Proceeds from the bonds were used for Wastewater capital projects, pay off all outstanding Wastewater commercial paper notes, and pay the costs of issuing the bonds. The bonds were rated “Aa3” and “AA-” by Moody’s and S&P, respectively , at the time of issuance . Bonds mature through October 1, 2042. The true interest cost 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 agent under the irrevocable Escrow Agreements, date July 1, 2022 and April 1, 2023, respectively to refund and legally defease a portion of the outstanding 2013 Series B bonds. This deposit, together with certain other available monies was held by the escrow agent under the Escrow Agreement and invested in non -callable Federal Securities . The 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, 2025 and 2024, 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 w ere 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, respectively, at the time of issuance . Bonds mature through October 1, 2046. The bonds have a true interest cost of 3.2%. As of June 30, 20 25 and 2024, the principal amount outstanding of the 2016 Series A bonds was $ 229,345 and $ 235,105, respectively.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

43 (Continued)

(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 pay off $20,560 of outstanding commercial paper notes, to fund capitalized interest, and pay the costs of issuing the bonds. The bonds carried ratings of “AA” and “Aa3” from S&P and Moody’s, respectively , at the time of issuance . Bonds mature through October 1, 2046. The bonds h ave a true interest cost of 3.2%. As of June 30, 20 25 and 2024, the principal amount outstanding of the 2016 Series B bonds was $64,650 and $66,275, 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, 2025 and 2024, the principal amount outstanding of the 2018 Series A bonds was $207,595 and $214,175, 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%. A portion of the proceeds of the 2024 Series B Bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement, dated July 1, 2024, to refund and legally defease a portion of the outstanding 2018 Series B bonds. This deposit was held by the escrow agent under the Escrow Agreement and invested in non -callable federal securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2018 Series B bonds starting on October 1, 2026 and thereafter. As of June 30, 2025 and 2024, the principal amount outstanding of the 2018 Series B bonds was $162,190 and $173,880, 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, 2025 and 2024, the principal amount of the 2021 Series A bonds outstanding was $260,835.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

44 (Continued)

The $37,045 2021 Series B bonds were issued as tax -exempt bonds to refund approximately $44,000 of commercial paper notes for Wastewater capital projects. The Series B bonds were issued as serial bonds with coupons of 5.0% and have a final maturity of 2051. The Series B bonds have a true interest cost of 3.2%. As of June 30, 2025 and 2024, 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 Facility Project and Southeast Water Pollution Control Plant improvements. The SFPUC intends to pay principal of the 2021A Notes and 2021B Notes from the proceeds of one or more draws under WIFIA Loan Agreements for the Biosolids Digester Facility Project and Southeast Treatment Plant Improvements , respectively, or from the proceeds of future obligations.

The $218,355 2021 Series A Notes were issued as tax-exempt Green Notes to fund a portion of the Biosolids Digester Facilities Project. The Series A Notes were issued with 1.0% coupons and a final maturity of 2025. The 2021 Series A Notes have a true interest cost of 0. 8%. As of June 30, 2025 and 2024, the principal amount of 2021 Series A Notes outstanding was $0.

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, 2025 and 2024, the principal amount of 2021 Series B Notes outstanding was $0.

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 escrow 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, 2025. The refunding resulted in the recognition of an 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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

45 (Continued)

an economic gain of $ 12,012 or 8 .0% of refunded bonds. As of June 30, 2025 and 2024, the principal amount of the 2022 Series B bonds outstanding was $128,755 and $137,080, respectively.
(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 serial bonds with coupons of 5.0% and 5. 3% and a final maturity of 2042. The 2023 Series A bonds have a true interest cost of 2.9%. As of June 30, 2025 and 2024, the principal amount of the 2023 Series A bonds outstanding was $530,565.

The $278,155 2023 Series B bonds were issued as tax -exempt bonds to refund a portion of the outstanding 2013 Series B bonds maturing on October 1 2035 through October 1, 20 39, refund approximately $156,900 of commercial paper notes for certain capital projects benefitting the Enterprise and finance certain capital projects benefitting the Enterprise. The Series B bonds were issued as serial bonds with coupons of 4.0% and 5.0% and a final maturity of 2042. The Series B bonds have a true interest cost of 3.0%. The refunding resulted in the recognition of a deferred accounting gain of $5,316, gross debt service savings of $10,626, and an economic gain of $7,647 or 8.4% of refunded bonds. A portion of the proceeds of the 2024 Series B Bonds were deposited with the trustee, acting as escrow agent under the irrevocable Escrow Agreement, dated July 1, 2024, to refund and legally defease a portion of the outstanding 2023 Series B bonds. This deposit was held by the escrow agent under the Escrow Agreement and invested in non -callable federal securities. The principal and interest on monies held by the escrow agent will be sufficient to redeem the maturities of the 2023 Series B bonds starting on October 1, 2026 and thereafter. As of June 30, 2025 and 2024, the principal amount of the 2023 Series B bonds outstanding was $203,105 and $278,155, respectively.

The $165,660 2023 Series C bonds were issued as tax -exempt Green Bonds to refund all of the outstanding 2018 Series C bonds. The Series C bonds were issued as serial bonds with a coupon of

4.0% and a final maturity of 2048. The 2023 Series C bonds have a true interest cost of 3.5%. The refunding resulted in the recognition of a deferred accounting gain of $963, gross debt service savings of $24,606, and an economic gain of $15,785 or 8.8% of refunded bonds. As of June 30, 2025 and 2024, the principal amount of the 2023 Series C bonds outstanding was $165,660. (l) Wastewater Revenue Refunding Bonds 2024 Series ABCD In July 2024, the Enterprise issued taxable and tax -exempt, 2024 Series ABCD, in the total aggregate principal amount of $1,142,975. The purpose of the 2024 Series ABCD bonds were issued to retire approximately $342,021 aggregate principal amount of commercial paper notes, finance various capital projects of the enterprise, and refund certain outstanding revenue bonds.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

46 (Continued)

The $431,110 2024 Series A Bonds were issued as taxable Green Bonds for the Sewer System Improvement Program (SSIP) to fund the Biosolids Digester Facility Project. The Series A were issued with a coupon rate of 4.7% and have a single maturity of 2027.The Series A have a true interest cost of 4.7%. The bonds carried a Aa2 rating from Moody’s. As of June 30, 2025, the principal amount of the 2024 Series A bonds outstanding was $431,100.

The $87,250 2024 Series B bonds were issued as taxable bonds for non -SSIP projects. The bonds were issued to defease a portion of the outstanding 2018 Series B bonds maturing on October 1, 2026 through October 1, 2043, and a portion of outstanding 2023 Series B bonds maturing October 1, 2026. The 2024 Series B bonds were issued as serial bonds with coupons of 4.6% to 5.1% and have a final maturity of 2037. The Series B bonds have a true interest cost of 5.0% The refunding resulted in the recognition of a deferred accounting gain/loss of $ 8,135 of refunded bonds. The Series B bonds carried of “AA” and “Aa2” ratings from S&P and Moody’s, respectively. As of June 30, 2025, the principal amount of the 2024 Series B bonds outstanding was $87,250.

The $539,720 2024 Series C bonds were issued as tax-exempt Green Bonds to retire approximately $270,189 of commercial paper notes for SSIP capital projects and finance certain capital projects benefitting the Enterprise. The Series C bonds were issued as serial bonds and term bonds with coupons of 5.0% and final maturity of 2054. The Series C bonds have a true interest cost of 4.2%.

The bonds carried of “AA” and “Aa2” ratings from S&P and Moody’s, respectively. As of June 30, 2025, the principal amount of the 2024 Series C bonds outstanding was $539,720.

The $84,895 2024 Series D bonds were issued as tax -exempt bonds to retire approximately $71,832 of commercial paper for non-SSIP projects and to finance certain capital project benefiting the Enterprise. The Series D were issued as serial bonds and term bonds with 5.0% coupons and a final maturity of 2054. The 2024 Series D bonds have a true interest cost of 4.2%. The bonds carried “Aa2” and “AA” ratings from Moody’s and S&P, respectively. As of June 30, 2025, the principal amount of the 2024 Series D bonds outstanding was $84,895.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

47 (Continued)

(m) 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, 2025. 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, 2023 Series A, B, and C bonds, and 2024 Series A, B, C, and D 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 8, 2025, 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 $ 1,715, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2025.

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).

(n) 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 in March 2014 under a property lease in Interest Federal Interest
before interest net
Principal subsidy subsidy* of subsidy
Fiscal years ending June 30:
2026 $ 38,460 161,374 (3,105) 158,269
2027 59,895 158,944 (2,968) 155,976
2028 528,685 144,966 (2,822) 142,144
2029 112,720 129,667 (2,668) 126,999
2030 118,370 123,857 (2,506) 121,351
2031-2035 592,025 529,328 (9,771) 519,557 2036-2040 565,485 384,154 (4,393) 379,761 2041-2045 560,520 248,782 (133) 248,649 2046-2050 456,425 135,701 — 135,701 2051-2055 363,215 41,859 — 41,859 3,395,800 2,058,632 (28,366) 2,030,266
Less: Current portion (38,460)
Add: Unamortized bond premiums 353,046
Long-term portion as of June 30, 2025 $ 3,710,386

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

48 (Continued)

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

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

The future annual debt service relating to the certificates of participation 2009 Series D outstanding as of June 30, 2025 is as follows:

* The SFPUC received an IRS notice dated April 8, 2025, 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 $ 278, due to sequestration over the remaining life of the bonds assuming the sequestration rate will remain the same after fiscal year 2025.

(o) Lake Merced Green Infrastructure Project CWSRF Loan In January 2016, then amended in May 2016, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a Clean Water State Revolving Fund (“CWSRF”) Loan to fund the Lake Merced Green Infrastructure Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $7,435. The loan bears an interest rate of 1.6% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was executed. The 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, 2025 and 2024, the principal amount outstanding of the loan was $5,602 and $5,775, respectively.

Interest Federal Interest
before interest net of
Principal subsidy subsidy* subsidy
Fiscal years ending June 30:
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 1,105 1,177 (388) 789
2031-2035 6,276 4,723 (1,559) 3,164 2036-2040 7,740 2,458 (811) 1,647 2041-2042 3,580 234 (78) 156 Total 22,695 13,961 (4,608) 9,353
Less: Current portion (937)
Long-term portion as of June 30, 2025 $ 21,758

Certificates of Participation 2009
Series D (Taxable)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

49 (Continued)

(p) Southeast Plant (SEP) 521/522 and Disinfection Upgrade Project CWSRF Loan In September 2017, then amended in December 2017 and May 2018, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP 521/522 and Disinfection Upgrade Project of the Sewer System 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 one year after substantial completion of each project’s construction; substantial completion occurred in July 2019. The CWSRF loan is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $39,741. As of June 30, 2025 and 2024, the principal amount outstanding of the loan was $34,272 and $35,350, respectively. (q) North Point Facility Outfall Rehabilitation Project CWSRF Loan In September 2017 , the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the North Point Facility Outfall Rehabilitation Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $20,199. The loan bears an interest rate of 1.8% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was executed. The CWSRF loan will have a 30 -year term, with loan repayment beginning one year after substantial completion of each project’s construction; substantial completion occurred in February 2018. The CWSRF loans is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $17,706. As of June 30, 2025 and 2024, the principal amount outstanding of the loan was $14,247 and $14,744, respectively.
(r) Southeast Plant (SEP) Primary/Secondary Clarifier Upgrade Project CWSRF Loan In September 2017 , the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the SEP Primary/Secondary Clarifier Upgrade Project of the Sewer System Improvement Program. The aggregate amount of the CWSRF loans is $34,446. The loan bears an interest rate of 0.8% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was executed. The CWSRF loan will have a 30 -year term, with loan repayment beginning one year after substantial completion of each project’s construction; substantial completion occurred in June 2018. The CWSRF loan is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. The SFPUC has received proceeds from loan disbursements to date totaling $29,197. As of June 30, 2025 and 2024, the principal amount outstanding of the loan was $23,622 and $24,445, respectively.
(s) 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 executed. The CWS RF loan will have a 30 -year term,

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(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 has received proceeds from loan disbursements to date totaling $ 45,103, which included a loan forgiveness grant of $4,000 and a receivable for reimbursement of $9,285 . As of June 30, 2025 and 2024, the principal amount outstanding of the loan including capitalized interest was $50,411 and $30,067, respectively.
(t) 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 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 is expected in May 2026. 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 $ 132,000, which include s a $4,000 loan forgiveness grant . As of June 30, 2025 and 2024, the principal amount outstanding of the loan was $128,000. (u) 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 time the agreement was executed.

The CWSRF loan will have a 30 -year term, with loan repayment beginning one year after substantial completion of each project’s construction; substantial completion is expected in August 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 $ 91,020 and a receivable for reimbursement of $21,016. As of June 30, 2025 and 2024, the principal amount outstanding of the loan including capitalized interest was $110,452 and $79,281, respectively. (v) New Treasure Island Wastewater Treatment Plant
In June 2025, the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the New Treasure Island Wastewater Treatment Plant. The CWSRF loan is in the amount of $110,000. The loan bears an interest rate of 1.7% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was executed . The CWSRF loan will have a 30 -year term, with loan repayment beginning one year after substantial completion of each project’s construction; substantial completion is expected in February 2027. The CWSRF loan is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. As of June 30, 2025 the Enterprise has not submitted any reimbursement requests to date and the principal amount outstanding of the loan was $0.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

51 (Continued)

(w) Folsom Area Stormwater Improvement Project
In June 2025 the SFPUC entered into an Installment Sale Agreement with the State Water Resources Control Board for a CWSRF Loan to fund the Folsom Area Stormwater Improvement Project. The CWSRF loan is in the amount of $50,000. The loan bears an interest rate of 1.8% which was equal to one -half of the State of California’s most recent 30 -year General Obligation Bond true interest cost at the time the agreement was executed . The CWSRF loan will have a 30 -year term, with loan repayment beginning one year after substantial completion of each project’s construction; substantial completion is expected in September 2028. The CWSRF loan is secured on a parity lien basis with the Enterprise’s outstanding revenue bonds. As of June 30, 2025 the Enterprise has not submitted any reimbursement requests to date and the principal amount outstanding of the loan was $0.
(x) 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, 2025 is as follows:

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

(y) 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 California Clean Water State Revolving Fund Loans Principal Interest
and Fees* Total
Fiscal years ending June 30:
2026 $ 6,419 3,172 9,591
2027 10,884 5,009 15,893
2028 11,036 4,856 15,892
2029 11,191 4,701 15,892
2030 11,348 4,544 15,892
2031-2035 59,182 20,281 79,463
2036-2040 63,469 15,994 79,463
2041-2045 68,077 11,385 79,462
2046-2050 68,944 6,467 75,411
2051-2055 50,874 2,195 53,069
2056 5,182 73 5,255
366,606 78,677 445,283
Less: Current portion (6,419)
Long-term portion as of June 30, 2025 $ 360,187

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

52 (Continued)

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. In February 2025, the SFPUC received a final disbursement of $136,964 . As of June 30, 202 5 and 2024, the principal amount outstanding of the loan including capitalized interest was $713,314 and $567,511, respectively. (z) 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 Clean 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. In February 2025, the SFPUC received a final disbursement of $161,289 . As of June 30, 2025 and 202 4, the principal amount outstanding of the loan including capitalized interest was $522,056 and $354,920, respectively.
(aa) 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 Westside Pump Station Reliability Improvements, North Shore Pump Station Wet Weather Improvements, Wawona Area Stormwater Improvement, New Treasure Island Wastewater Treatment Plant, Folsom Area Stormwater Improvement, and Yosemite Creek Daylighting. Proceeds of the loan will fund 49% of project costs plus eligible expenses. The Project 1 Loan is on a parity lien basis with the SFPUC’s outstanding Wastewater Revenue Bonds and Clean Water SRF Loans entered into with the California State Water Resources Control Board.

The loan will bear a fixed interest rate of 3.65% for a 32 -year term, with loan repayment expected to begin in fiscal year 2033. In February 2025, the SFPUC received disbursement of $157,643. As of

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

53 (Continued)

June 30, 2025 and 2024 the principal amount outstanding of the loan including capitalized interest was $159,282 and $0, respectively.

(ab) 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, 2025 is as follows:

(ac) Events of Default and Remedies
Significant e vents of default as specified in the Wastewater Enterprise Indenture (applicable to Wastewater Revenue Bonds, SRF Loans, and WIFIA Loan include 1) Non-payment 2) material breach of warranty, representation, or indenture covenants (not cured within applicable grace periods) , and 3) bankruptcy and insolvency events, which may result in the Trustee (upon written request by the majority of the owners (by aggregate amount of the bond obligations or of a credit prov ider), declaring the principal and the interest accrued thereon, to be due and payable immediately . As of June 30, 2025 and 2024, there were no such events described herein. (ad) 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.

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 Water Infrastructure Finance and Innovation Act (WIFIA) Loans Principal Interest Total Fiscal years ending June 30:
2026 $ — 5,190 5,190
2027 — 10,381 10,381
2028 — 10,381 10,381
2029 — 10,380 10,380
2030 — 10,380 10,380
2031-2035 — 101,652 101,652
2036-2040 — 118,820 118,820
2041-2045 111,009 116,086 227,095
2046-2050 332,557 96,741 429,298
2051-2055 441,799 64,130 505,929
2056-2060 436,539 25,487 462,026
2061-2062 72,748 1,423 74,171
1,394,652 571,051 1,965,703
Less: Current portion —
Long-term portion as of June 30, 2025 $ 1,394,652

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

54 (Continued)

variable lease payments not included in the measurement of the lease liability were $211 and $4 during the years ended June 30, 2025 and 2024, respectively.

Future annual lease payments as of June 30, 2025:

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

(ae) 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 information technology hardware and software (SBITAs). The terms and conditions for these subscriptions vary, which ranges between 1-5 years.

Future annual subscription payments as of June 30, 2025 and 2024 are as follows:

(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 Principal Interest
Year ending June 30: amount amount Total
2026 $ 1,766 135 1,901
2027 1,817 84 1,901
2028 1,209 37 1,246
2029 696 11 707
5,488 267 5,755
Less: Current portion (1,766)
Long-term portion as of June 30, 2025 $ 3,722
Principal Interest
Year ending June 30: amount amount Total
2026 $ 503 13 516
2027 94 3 97
597 16 613
Less: Current portion (503)
Long-term portion as of June 30, 2025 $ 94
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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

55 (Continued)

capital construction projects, and to refund previously issued bonds. The bonds, SRF, and WIFIA loans are payable through fiscal year s 2055, 2056, and 2062, respectively, and are solely from revenues of the Enterprise.

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 202 5 and 2024, applicable net revenues, and funds available for debt service are as follows:

(9) Leases
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 penalties. The total amounts for lease revenue, interest revenue, and other lease-related revenues recognized during the years ended June 30, 2025 and 2024 were $23 and $37, respectively.

Principal and interest requirements to maturity for the lease receivable on June 30, 2025 are as follows:

(10) Employee Benefits
(a) Pension Plan
The Enterprise participates in a cost-sharing multiple-employer defined benefit pension Plan (SFERS Plan). The SFERS Plan is administered by the San Francisco City and 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, deferred outflows/inflows of 2025 2024
Bonds issued with revenue pledge $ 3,395,800 2,369,600 Clean Water State Revolving Fund (CWSRF) loans with revenue pledge 366,606 317,662 WIFIA loans with revenue pledge 1,394,652 922,431 Principal and interest remaining due at the end of the year 7,865,418 5,462,786 Principal and interest paid during the year 114,350 91,601 Net revenues for the year ended June 30 239,391 188,709 Funds available for debt service 416,307 354,681 Year ending June 30: Principal Interest Total
2026 $ 241 26 267
2027 257 19 276
2028 214 12 226
2029 105 8 113
2030 112 4 116
2031-2035 89 1 90
$ 1,018 70 1,088

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

56 (Continued)

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 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 94.70% as of June 30, 2024 (measurement date) , and 94.85% as of June 30, 2023 (measurement date ), a

0.15% 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 2024 and 2023. 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 its allocated percentage. The Enterprise’s allocation of the City’s proportionate share was 1.97% as of June 30, 2024 and 1.95% as of June 30, 2023 (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 continuation benefits to qualified survivors. The San Francisco City and County Charter and the Administrative Code are the authorities which establish and amend the benefit provisions and employer obligations of the SFERS Plan. The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the SFERS Plan. That report may be obtained 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.

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:

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

57 (Continued)

a) Miscellaneous Non -Safety Members – staff, operational, supervisory, and all other eligible employees who are not in special membership categories. b) Sheriff’s Department and Miscellaneous Safety Members – Sheriffs assuming office on and after January 7, 2012, and undersheriffs, deputized personnel of the Sheriff’s Department, and miscellaneous safety employees hired on and after January 7, 2012. c) Firefighter Members – firefighters and other employees whose principal duties are in fire prevention and suppression work or who occupy positions designated by law as firefighter member positions.
d) Police Members – police officers and other employees whose principal duties are in active law enforcement or who occupy positions designated by law as police member positions.

The membership groups and the related service retirement benefits are included in the Notes to the Basic Financial Statements of San Francisco Employees’ Retirement System.

All members are eligible to apply for a disability retirement benefit, regardless of age, when they have 10 or more years of credited service, and they sustain an injury or illness that prevents them from performing their duties. Safety members are eligible to apply for an industrial disability retirement benefit from their first day on the job if their disability is caused by an illness or injury that they receive while performing their duties.

All retired members receive a benefit adjustment each July 1, which is the Basic COLA. The majority of adjustments are determined by changes in 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 who retired before November 6, 1996 (Pre96 Retirees) eligible for a Supplemental COLA, even if SFERS is not fully funded based on the fair 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 fair 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

58 (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 11.0% and 7.5% to 11.5%, as a percentage of gross covered salary in fiscal years 2025 and 2024. Most employee groups agreed through collective bargaining for employees to contribute the full amount of the employee contributions on a pretax basis. The Enterprise is required to contribute at an actuarially determined rate. Based on the July 1, 2023 actuarial report, the required employer contribution rates for fiscal year 20 25 ranged from 14.91% to 16.91%. Based on the July 1, 20 22 actuarial report, the required employer contribution rate s for fiscal year 20 24 ranged from 15.24% to 18.24%.

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 year s ended June 30, 20 24 and 2023 (measurement periods) was $636,991 and $638,003, respectively. The Enterprise’s allocation of employer contributions for fiscal year s 2024 and 2023 was $12,402 and $12,383, respectively.

Pension Liabilities, Pension Expenses, Deferred Outflows , and Inflows of Resources Related to Pensions
Fiscal Year 2025
As of June 30, 202 5, the City reported net pension liability (NPL) for its proportionate share of the net pension liability of the SFERS Plan of $3, 775,717. 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 4 (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, 202 3 rolled forward to June 30, 202 4 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, 202 5 was $74,339.

For the year ended June 30, 202 5, the City’s recognized pension expense was $ 734,019 including amortization of deferred outflows/inflows related pension items. The Enterprise’s allocation of pension expense including amortization of deferred outflows/inflows related pension items was $15,675. Pension expense increased from the prior year, largely due to the amortization of deferrals.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

59 (Continued)

As of June 30, 2025, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

At June 30, 2025 the Enterprise’s reported $ 12,829 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 ended June 30, 2026.

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 $3,456,68 7. 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, 2023 (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 Ju ly 1, 2022 rolled forward to June 30, 2023 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, 2024 was $67,299.

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contributions subsequent to measurement date $ 12,829 — Differences between expected and actual experience 11,719 — Changes in assumptions 5,863 1,788 Net difference between projected and actual earnings on pension plan investments 13,735 —
Change in employer's proportion 851 384
Total $ 44,997 2,172
Fiscal Year 2025 Schedule of Deferred Outflows and Inflows of Resources Fiscal years
Deferred
Outflows/(Inflows)
of Resources
2026 $ (2,281)
2027 26,486
2028 4,718
2029 1,073
Total $ 29,996

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

60 (Continued)

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/inflows related pension items was $14,091. Pension expense increased from the prior year, largely due to the amortization of deferrals.

As of June 30, 2024, the Enterprise reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Actuarial Assumptions
Fiscal Year 2025
A summary of the actuarial assumptions and methods used to calculate the Total Pension Liability as of June 30, 202 4 (measurement year) is provided below, including any assumptions that differ from those used in the July 1, 202 3 actuarial valuation. Refer to July 1, 202 3 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 $ 12,402 — 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

61 (Continued)

Changes of Assumptions SFERS Plan – There were no changes in the discount rate for the measurement period ended June 30, 202 4. The municipal bond yield increased from 3. 65% to

3.93%.

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.

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.

Key Actuarial Assumptions
Valuation Date July 1, 2023 updated to June 30, 2024
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost
Expected Rate of Return 7.20% net of investment expenses Municipal Bond Yield 3.93% as of June 30, 2024

3.65% as of June 30, 2023
Bond Buyer 20-Bond GO Index, June 29, 2023 and June 27, 2024 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, 2024

7.20% as of June 30, 2023
Administrative Expenses 0.60% of payroll as of June 30, 2024

0.60% of payroll as of June 30, 2023
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, 2024 2.00% 1.90% 2.50% 3.60%
June 30, 2023 2.00% 1.90% 2.50% 3.60%
SFERS Plan

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

62 (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 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.

Discount Rate
Fiscal Year 2025
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, 2024 and 2023 (measurement date).

The discount rate used to measure the total pension liability as of June 30, 202 4 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 3 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.

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

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

63 (Continued)

The amortization payment is based on closed periods that vary in length depending on the source.

Charter amendments prior to July 1, 2014 are amortized over 20 years. After July 1, 2014, any Charter changes to active member benefits are amortized over 15 years and changes to inactive member benefits, including Supplemental COLAs, are amortized over 5 years. 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 Proposition C passed, the fair 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.

A 0.50% Supplemental COLA is expected to be payable as of July 1, 202 4 for most non -Prop C members due to the favorable investment return s for fiscal year 202 4. 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 future benefit payments for current members through 210 6. 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. 93% to the extent they are not available. The single equivalent rate used to determine the total pension liability as of June 30, 2024 was 7.20%.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

64 (Continued)

experienced by the Retirement System. Expected future returns were determined by using best - estimate of expected future nominal rates of return for each major asset class over 10 and 30-year horizons. These estimates were combined to produce the long -term expected rate of return by weighting the expected future nominal rates of return by the target asset allocation percentage .

Target allocation and best estimates of geometric long -term expected real rates of return ( expected returns, net of pension plan investment expense and inflation) for each major asset class are summarized in the following table.

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 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 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 Asset Class
Target Allocation from
January 2021 - June 2024
Global Equity 37.0 % 32.0 % 4.2 %
Private Equity 23.0 20.0 7.2
Private Credit 10.0 10.0 5.9
Real Assets 10.0 10.0 5.5
Absolute Return 10.0 10.0 4.4
Treasuries 8.0 8.0 1.8
Liquid Credit 5.0 12.0 3.9
Cash 0.0 1.0 1.2
Leverage -3.0 -3.0 1.6
Total 100.0 100.0
Long-Term Expected
Real Rate of Return
Target Allocation
effective as of
July 2024

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

65 (Continued)

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.

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. 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.

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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

66 (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 2025

Fiscal Year 2024

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

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
Employer
1% Decrease Share
of NPL @ 6.20%
Share of NPL
@ 7.20%
1% Increase Share of
(NPA) @ 8.20%
Wastewater 171,127$ 74,339 (5,412) June 30, 2024 (measurement date)
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)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

67 (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 24 and 2023.

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, 2024 and 2023 was 1.29% and 1.26%, respectively, as of the measurement date.

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, 2024
Measurement Date (MD) June 30, 2024
Measurement Period (MP) July 1, 2023 to June 30, 2024
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
San Francisco Health Service System Retiree Plan - Single Employer Fiscal Year 2025
Fiscal Year 2024

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

68 (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 contribute 0.25% of pre -tax compensation into the Trust Fund.

Beginning on July 1 st of each subsequent year, the active officers and employees of the City who commenced employment on or before January 9, 2009, shall contribute an additional 0.25% of pre - tax compensation up to a maximum of 1%. Starting July 1, 2016, the City shall contribute 0.25% of compensation into the Trust Fund for each officer and employee who commenced employment on or before January 9, 2009. Beginning on July 1 st of each subsequent year, the City shall contribute an additional 0.25% of compensation, up to a maximum of 1% for each officer and employee who commenced employment on or before January 9, 2009. When the City’s actuary has determined that the City’s portion of the Trust Fund is fully funded, the City’s 1% contribution shall cease, and officers and employees will each contribute 50% of the maximum 1% of pre-tax compensation.

Additional or existing contribution requirements may be established or modified by amendment to the City’s Charter.

For the fiscal year s ended June 30, 20 25 and 2024, the City’s funding was based on “pay -as-you- go” plus a contribution of $52,126 and $48,779 to the Retiree Healthcare Trust Fund , respectively.

The “pay-as-you-go” portion paid by the City was $ 248,806 for a total contribution of $ 300,932 for the fiscal year end ed June 30, 20 25, and $ 229,922 for a total contribution of $278,701 for the fiscal year ended June 30, 2024. The Enterprise’s proportionate share of the City’s contributions for fiscal year 2025 was $3,879, and for fiscal year 2024 was $3,498.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

69 (Continued)

OPEB Liability, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB Fiscal Year 2025
As of June 30, 202 5, the City reported net OPEB liability related to the Plan of $3,921,799. The Enterprise’s proportionate share of the City’s net OPEB liability as of June 30, 2025 was $50,552.

For the year ended June 30, 2025, the City’s recognized OPEB expense was $259,579. 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 $7,556.

As of June 30, 202 5, the Enterprise reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

At June 30, 2025, the Enterprise reported $3,879 as deferred outflows of resources related to contributions subsequent to the measurement date, which will be recognized as an adjustment to net OPEB liability in the reporting year ending June 30, 2026.

Fiscal Year 2024
As of June 30, 202 4, the City reported net OPEB liabilit y 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).

Wastewater #REF!
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date 3,879$ -$ Differences between expected and actual experience 1,524 4,736 Changes in assumptions 2,151 -
Net difference between projected and actual earnings
on plan investments - 566
Change in proportion 3,545 1,175
Total 11,099$ 6,477$
Year ending June 30:
2026 565$
2027 434
2028 (352)
2029 390
2030 (147)
Thereafter (147)
Total 743$

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

70 (Continued)

As of June 30, 202 4, the Enterprise reported its proportionate share of the City’s deferred outflows and inflows of resources related to OPEB from the following sources:

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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

71 (Continued)

Fiscal Year 2025
A summary of the actuarial assumptions and methods used to calculate the Total OPEB Liability as of June 30, 2024 (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, 2024
Measurement Date June 30, 2024
Actuarial Cost Method The Entry Age Actuarial Cost Method is used to measure the Plan's Total OPEB Liability Healthcare Cost Trend Rates Pre-Medicare trend starts at 6.87% trending down to ultimate rate of 3.94% in 2075 Medicare trend starts at 6.87% trending down to ultimate rate of 3.93% 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

72 (Continued)

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):

Adjustment Factor
Adjustment Factor
Adjustment Factor
Adjustment Factor

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

73 (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 2025
The discount rate used to measure the Total OPEB Liability as of June 30, 202 4 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 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:

Fiscal Year 2025 Healthcare Cost
Employer -1.00% Trend Rate 1.00%
Wastewater $ 42,605 $ 50,552 $ 60,406 Fiscal Year 2024 Healthcare Cost
Employer -1.00% Trend Rate 1.00%
Wastewater $ 41,892 $ 49,260 $ 58,404

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

74 (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 using a discount rate that is 1% lower or 1% higher than the current 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 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:

Asset Class
Equities
U.S. Large Cap 25.0% 5.5%
U.S. Small Cap 2.0% 6.4%
Developed Market Equity (non-U.S.) 13.0% 5.9%
Emerging Market Equity 10.0% 5.9%
Credit
Bank Loans 3.0% 3.7%
High Yield Bonds 3.0% 3.9%
Rate Securities
Investment Grade Corporate Bonds 7.0% 1.9%
Short-term Treasury Inflation-Protected Securities (TIPS) 5.0% 0.9% Private Markets
Private Equity 10.0% 6.9%
Private Debt 5.0% 6.2%
Core Private Real Estate 5.0% 5.2%
Infrastructure (Core Private) 2.0% 6.0%
Risk Mitigating Strategies
Global Macro 10.0% 1.6%
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 59,592$ 50,552$ 43,134$ June 30, 2024 (measurement period)

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

75 (Continued)

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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

76 (Continued)

(11) Related Parties
Various common costs incurred by the Commission are allocated among the Enterprise, Hetch Hetchy Water and Power and CleanPowerSF , and the Water Enterprise. The allocations are based on the 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 $45,226 or

32.0%, which included COVID -19 Project expenses , and $35,943 or 28.8% were allocated to the Enterprise for the years ended June 30, 2025 and 2024, respectively.

The Enterprise purchases electricity from Hetch Hetchy Power at market rates. This amount, totaling $14,841 and $12,377 for the years ended June 30, 2025 and 2024, 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 $1,890 and $1,701 for the years ended June 30, 2025 and 2024, 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 services are primarily related to street cleaning, engineering, building repair, and sewer repair. These amounts totaling approximately $8,547 and $8,711 for the years ended June 30, 20 25 and 2024, respectively, have been included in services provided by other departments in the accompanying financial statements.

A variety of other City departments provide services such as purchasing, legal, data processing, telecommunications, and human resources to the Enterprise and charge amounts designed to recover those departments’ costs. These charges totaling approximately $18,935 and $16,757 for the years ended June 30, 2025 and 20 24, respectively, have been included in services provided by other departments in the accompanying financial statements.

As of June 30, 2025 and 2024, the Enterprise has payables in the amount of $291 and $405, respectively, which is associated with the SFPUC Headquarters Living Machine system.

As of June 30, 2025 and 2024, the Enterprise has interfund receivable from DPW for the Mission Bay South custom work project of $70 and $82, 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 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, 20 25, the Enterprise’s allocable shares of expenses and prepayment were $22 and $1,081, respectively, and as of June 30, 2024 were $21 and $1,103, respectively.

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

77 (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 right -of-way on Terry A.

Francois Boulevard and on Illinois Street, commenced on September 1, 2018. SFPUC intends to use the premises for the reconstruction of the Mariposa Pump Station and Force Main Improvements. Total payment under this agreement is $ 502, which was fully made as of fiscal year 201 9. As of June 30, 2025, the Enterprise’s expenses and prepayment were $17 and $388, respectively, and as of June 30, 2024 were $17 and $405, respectively.
(12) 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 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 w ere no settlements that exceeded insurance coverage.

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 Contractual Risk Transfer
(j) Errors and Omissions 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

78 (Continued)

(a) General Liability
The Enterprise’s liability as of June 30, 2025, was estimated based on professional judgement regarding probable claims exposure provided by the City Attorney’s Office and includes an estimate of incurred but not reported losses. The recorded liability represents management’s best estimate of the City’s potential exposure based on currently available information.

The changes for the general liability (damage claims) for the years ended June 30, 2025, 2024, and 2023 were as follows:

The changes in the liabilities for workers’ compensation for the years ended June 30, 20 25, 2024, and 2023 were as follows:

Beginning of Claims and Claims paid and End of
Fiscal years year changes in estimates changes in estimates year 2025 115,083 $ 4,968 (40,950) 79,101 2024 4,350 112,467 (1,734) 115,083 2023 12,045 2,716 (10,411) 4,350 Beginning of Claims and Claims paid and End of
Fiscal years year changes in estimates changes in estimates year 2025 9,012$ 1,886 (1,997) 8,901 2024 7,998 2,680 (1,666) 9,012 2023 7,546 2,976 (2,524) 7,998

SAN FRANCISCO WASTEWATER ENTERPRISE
Notes to Financial Statements
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

79 (Continued)

(d) Public Officials Liability
All Enterprise public officials with financial oversight responsibilities are provided coverage through a commercial Public Officials Liability Policy.
(e) Employment Practices Liability
A policy is retained to protect against employment-related claims and liabilities. (f) Cyber Liability
A policy is retained to protect against cyber-related claims and liabilities. (g) Crime
The Enterprise also retains a Commercial Crime Policy, in lieu of bonding its employees, to provide coverage against liabilities or losses due to third-party crime or employee fraud. (h) Electronic Data Processing
The Electronic Data Processing policy protects selected high -value electronic property in case of damage or loss.
(i) Surety Bonds
Bonds are required in most phases of the public utilities construction contracting process for such phases as bid, performance, and payment or maintenance. Additionally, bonds may be required in other contracts where goods or services are provided to ensure compliance with applicable terms and conditions such as warranty.
(j) Errors and Omissions
Errors and omissions , also known as Professional Liability, are commonly transferred through contract to the contracted professional, or retained through self -insurance on a case -by-case basis depending on the size, complexity, or scope of construction or professional service contracts.

Examples of such contracts are inclusive of services provided by engineers, architects, design professionals, and other licensed or certified professional service providers. (k) 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 events, 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, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

80 (13) Commitments and Litigation
(a) Commitments
As of June 30, 2025 and 2024, the Enterprise has outstanding commitments with third parties of $554,307 and $675,849, 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 5, and 20 24, the Enterprise recorded $6,123 and $6,451 in pollution remediation liability, respectively for the Yosemite Creek toxic sediments . The decrease of $ 328 in pollution remediation liability in fiscal year 2025 is due to payment made for the remediation costs related to Yosemite Creek.

w
ww.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
81 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 contained 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 June 30, 2025, and the related notes to the financial statements, and have issued our report thereon dated November 5, 2025.

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

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whet her the Enterprise’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
82 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 integr al part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Walnut Creek, California
November 5, 2025

San Francisco Public Utilities Commission
An Enterprise Department of the City and
County of San Francisco, California
Cover photo: Treasure Island Water
Resource Recovery Facility
Back cover photo: Southeast Wastewater
Treatment Plant, Biosolids Digester
Photos by: Robin Scheswohl, Sabrina Wong
Date of Publication:

November 2025
Generating Clean Energy
for Vital Services.

Hetch Hetchy Water and
Power and CleanPowerSF
Financial Statements June 30, 2025 and 2024
(With Independent Auditor’s Reports Thereon)

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

Statements of Net Position 33
Statements of Revenues, Expenses, and Changes in Net Position 35 Statements of Cash Flows 36
Notes to Financial Statements 38
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 95

www.mgocpa.com Macias Gini & O’Connell LLP
2121 N. California Blvd., 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, 2025 and 2024, 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, 2025 and 2024, 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 Responsibilities 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 financial position of the City, as of June 30, 2025 and 2024, 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 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 preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards 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 error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hetch Hetchy’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, 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 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 5, 2025 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 provide 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 5, 2025

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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 25 and 2024. 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.

Organization and Business

The San Francisco Public Utilities Commission ( 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 Water and Power. The Enterprise was established as a result of the Raker Act of 1913, which granted water and power resource rights -of-way on the Tuolumne River in Yosemite National Park and the Stanislaus National Forest to the City. The Enterprise operates the Hetch Hetchy project, which provides both electricity generation and upcountry water service; and is engaged in the collection and conveyance of approximately 85% of the regional system’s water supply and in the generation and transmission of electricity.

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

Approximately 70% 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 (SFO) and its tenants, Zuckerberg San Francisco General Hospital and Trauma Center , City streetlights, Moscone Convention Center, and the Water and Wastewater Enterprises). The remaining 30 % of electricity generated was provided to other commercial/residential developments and 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 WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

4 (Continued)

Hetch Hetchy, a stand -alone enterprise is comprised of three funds: 1) Hetch Hetchy Water (Hetchy Water) upcountry operations and water system; 2) Hetch Hetchy Power (Hetchy Power ), also referred to as the Power Enterprise, which is wholly contained within the Hetch Hetchy fund; and 3) CleanPowerSF, which is 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 main source of water for the Hetch Hetchy system. Hetchy Water operates, maintains, and improves water and power facilities, smaller dams and reservoirs, water transmission systems, power generation facilities, and power transmission assets, including transmission lines to the Newark substation. Hetchy Water delivers high -quality water from upcountry downhill to the Bay Area while optimizing the resulting generation of clean hydropower as water is transported through the system. It maintains land and properties consistent with public health and neighborhood concerns.

Hetchy Power

Hetchy Power is San Francisco’s publicly owned utility which provides 100% greenhouse gas- free electric power to serve the City and County of San Francisco’s municipal customers, other commercial and residential developments. It includes approximately 160 miles of transmission lines from Yosemite to the Bay Area and nearly 400 megawatts of generation capacity. Hetch Hetchy Power is a full -service retail electric program serving approximately 20% of the City’s load and over 6,000 customer accounts.

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 address environmental concerns and community objectives, Hetchy Power continues to expand its resource base to include distributed generation as well as energy efficiency and transportation and building decarbonization programs. As part of its mission and core functions, Hetchy Power provides reliable energy services at reasonable cost to customers.

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 San Francisco’s community choice aggregation (CCA) program operated by the SFPUC. CCA programs were made possible by the 2002 passage of California Assembly Bill 117, enabling communities to generate and purchase power on behalf of their residents and businesses and creating retail competition for power supply 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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

5 (Continued)

rates and charges with adequate revenues, and to issue debt to support its operations and future projects, as needed. CleanPowerSF is discretely presented as a fund of the Enterprise starting fiscal year 2017.

CleanPowerSF offers affordable and competitive electricity generation rates with a diverse electricity resource portfolio that is comprised of renewable and other clean sources of supply. The program serves more than 380,000 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 Position present information on Hetch Hetchy’s assets, deferred outflows, liabilities, and deferred inflows as of year-end, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Hetch Hetchy is improving or worsening.

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

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

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

Financial Analysis

Financial Highlights for Fiscal Year 202 5

Hetch Hetchy

• Total assets of Hetch Hetchy exceeded total liabilities by $1,127,105.

• Net position increased by $130,626 or 12.8% during the fiscal year.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

6 (Continued)

• Capital assets, net of accumulated depreciation and amortization, increased by $ 65,086 or 6.5% to $1,060,337.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $71,032 or 11.3% to $701,470.

• Operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium and issuance costs, increased by $78,605 or 14.1% to $635,730.

Hetchy Water

• Total assets of Hetchy Water exceeded total liabilities by $328,268.

• Net position increased by $60,014 or 21.4% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $ 12,844 or 5.4% to $250,330.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $3,719 or 7.5% to $53,211.

• Operating expenses, excluding interest expenses and other non -operating expenses, in creased by $1,062 or 2.4% to $45,471.

Hetchy Power

• Total assets of Hetchy Power exceeded total liabilities by $553,699.

• Net position increased by $2,135 or 0.4% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $ 52,169 or 6.9% to $809,921.

• Operating revenues, excluding interest and investment income, and other non- operating revenues, increased by $4,111 or 1.9% to $218,463.

• Operating expenses, excluding interest expenses, other non- operating expenses, and amortization of premium and issuance costs, increased by $16,918 or 8.4% to $218,081.

CleanPowerSF

• Total assets of CleanPowerSF exceeded total liabilities by $245,138.

• Net position increased by $68,477 or 38.4% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $73 or 561.5% to $86.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

7 (Continued)

• Operating revenues, excluding interest and investment income, and other non-operating revenues, increased by $63,202 or 17.2% to $429,796.

• Operating expenses, excluding interest expenses increased by $60,625 or 19.5% to $372,178.

Financial Highlights for Fiscal Year 202 4*

Hetch Hetchy

• Total assets of Hetch Hetchy exceeded total liabilities by $1,001,122.

• Net position increased by $113,457 or 12.5% during the fiscal year.

• 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 $20,782 or 3.9% to $557,125.

Hetchy Water

• Total assets of Hetchy Water exceeded total liabilities by $269,661.

• Net position increased by $5,815 or 2.1% 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 $5,602 or 11.2% to $44,409.

Hetchy Power

• Total assets of Hetchy Power exceeded total liabilities by $553,285.

• Net position increased by $47,501 or 9.2% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, increased by $ 110,514 or 17.1% to $757,752.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

8 (Continued)

• 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 $9,611 or 5.0% to $201,163.

CleanPowerSF

• Total assets of CleanPowerSF exceeded total liabilities by $178,176.

• Net position increased by $60,141 or 51.0% during the fiscal year.

• Capital assets, net of accumulated depreciation and amortization, decreased by $17 or 56.7% to $13.
• 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 $16,773 or 5.7% to $311,553.

* The financial highlights for fiscal year 2024 were updated to reflect the restatements from Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

9 (Continued)

Financial Position

The following tables summarize Hetch Hetchy’s net position:

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Total assets:

Current and other assets $ 806,559 636,716 542,742 169,843 93,974 Capital assets, net of accumulated
depreciation and amortization 1,060,337 995,251 867,304 65,086 127,947 Total assets 1,866,896 1,631,967 1,410,046 234,929 221,921 Deferred outflows of resources:

Pensions 30,386 28,696 20,976 1,690 7,720
Other postemployment benefits 7,760 8,086 8,226 (326) (140) Total deferred outflows of resources 38,146 36,782 29,202 1,364 7,580 Liabilities:

Current liabilities:

Bonds 3,748 3,599 1,590 149 2,009
Certificates of participation 483 463 445 20 18 Commercial paper 169,333 90,654 — 78,679 90,654 Other liabilities 101,458 106,243 104,704 (4,785) 1,539 Subtotal current liabilities 275,022 200,959 106,739 74,063 94,220 Long-term liabilities:

Bonds 309,631 315,200 189,342 (5,569) 125,858
Certificates of participation 11,202 11,685 12,148 (483) (463) Commercial paper — — 116,352 — (116,352)
Arbitrage rebate payable 207 184 — 23 184
Other liabilities 143,729 102,817 83,913 40,912 18,904 Subtotal long-term liabilities 464,769 429,886 401,755 34,883 28,131 Total liabilities:

Bonds 313,379 318,799 190,932 (5,420) 127,867
Certificates of participation 11,685 12,148 12,593 (463) (445) Commercial paper 169,333 90,654 116,352 78,679 (25,698) Arbitrage rebate payable 207 184 — 23 184
Other liabilities 245,187 209,060 188,617 36,127 20,443 Total liabilities 739,791 630,845 508,494 108,946 122,351 Deferred inflows of resources:

Pensions 2,659 5,238 10,500 (2,579) (5,262)
Other postemployment benefits 8,030 8,730 9,775 (700) (1,045) Total deferred inflows of resources 10,689 13,968 20,275 (3,279) (6,307) Net position:

Net investment in capital assets 590,401 576,573 527,185 13,828 49,388 Restricted for debt service — — 56 — (56)
Restricted for capital projects 53,460 59,955 32,682 (6,495) 27,273 Restricted for other purposes 5,772 — — 5,772 — Unrestricted 504,929 387,408 350,556 117,521 36,852 Total net position $ 1,154,562 1,023,936 910,479 130,626 113,457 Table 1A - Combined Hetch Hetchy
Comparative Condensed Net Position
June 30, 2025, 2024, and 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

10 (Continued)

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Total assets:

Current and other assets $ 127,978 81,605 90,830 46,373 (9,225) Capital assets, net of accumulated
depreciation and amortization 250,330 237,486 220,036 12,844 17,450 Total assets 378,308 319,091 310,866 59,217 8,225 Deferred outflows of resources:

Pensions 12,435 11,929 8,858 506 3,071
Other postemployment benefits 2,954 3,191 3,248 (237) (57) Total deferred outflows of resources 15,389 15,120 12,106 269 3,014 Liabilities:

Current liabilities 8,728 9,921 9,888 (1,193) 33 Long-term liabilities 41,312 39,509 31,730 1,803 7,779 Total liabilities 50,040 49,430 41,618 610 7,812 Deferred inflows of resources:

Pensions 868 1,941 4,142 (1,073) (2,201)
Other postemployment benefits 2,832 2,897 3,084 (65) (187) Total deferred inflows of resources 3,700 4,838 7,226 (1,138) (2,388) Net position:

Net investment in capital assets 248,610 233,276 214,014 15,334 19,262 Restricted for capital projects 20,815 31,330 10,980 (10,515) 20,350 Unrestricted 70,532 15,337 49,134 55,195 (33,797) Total net position $ 339,957 279,943 274,128 60,014 5,815 Table 1B - Hetchy Water
Comparative Condensed Net Position
June 30, 2025, 2024, and 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

11 (Continued)

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Total assets:

Current and other assets $ 386,239 330,411 294,006 55,828 36,405 Capital assets, net of accumulated
depreciation and amortization 809,921 757,752 647,238 52,169 110,514 Total assets 1,196,160 1,088,163 941,244 107,997 146,919 Deferred outflows of resources:

Pensions 15,198 14,580 10,826 618 3,754
O
ther postemployment benefits 3,611 3,899 3,969 (288) (70) Total deferred outflows of resources 18,809 18,479 14,795 330 3,684 Liabilities:

Current liabilities:

Bonds 3,748 3,599 1,590 149 2,009
Certificates of participation 483 463 445 20 18 Commercial paper 169,333 90,654 — 78,679 90,654 Other liabilities 54,523 58,082 63,355 (3,559) (5,273) Subtotal current liabilities 228,087 152,798 65,390 75,289 87,408 Long-term liabilities:

Bonds 309,631 315,200 189,342 ( 5,569) 125,858
Certificates of participation 11,202 11,685 12,148 (483) (463) Commercial paper — — 116,352 — (116,352)
Arbitrage rebate payable 207 184 — 23 184
Other liabilities 93,334 55,011 45,626 38,323 9,385 Subtotal long-term liabilities 414,374 382,080 363,468 32,294 18,612 Total liabilities:

Bonds 313,379 318,799 190,932 (5,420) 127,867
Certificates of participation 11,685 12,148 12,593 (463) (445) Commercial paper 169,333 90,654 116,352 78,679 (25,698) Arbitrage rebate payable 207 184 — 23 184
Other liabilities 147,857 113,093 108,981 34,764 4,112 Total liabilities 642,461 534,878 428,858 107,583 106,020 Deferred inflows of resources:

Pensions 1,061 2,372 5,062 (1,311) (2,690)
Other postemployment benefits 3,461 3,541 3,769 (80) (228) Total deferred inflows of resources 4,522 5,913 8,831 (1,391) (2,918) Net position:

Net investment in capital assets 341,791 343,297 313,171 (1,506) 30,126 Restricted for debt service — — 56 — (56)
Restricted for capital projects 32, 645 28,625 21,702 4,020 6,923 Restricted for other purposes 5,772 — — 5,772 — Unrestricted 187,778 193,929 183,421 (6,151) 10,508 Total net position $ 567,986 565,851 518,350 2,135 47,501 Table 1C - Hetchy Power
Comparative Condensed Net Position
June 30, 2025, 2024, and 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

12 (Continued)

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

Net Position, Fiscal Year 2025

Hetch Hetchy

Hetch Hetchy’s net position of $1,154,562 increased by $130,626 or 12.8% from prior year. Increases in total assets and deferred outflows of resources of $ 236,293 and increases of $ 105,667 in total liabilities and deferred inflows of resources are described below (see Table 1A). Current and other assets were $806,559, a $ 169,843 or 26.7% 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 $ 65,086 or 6.5% to $1,060,337 primarily from construction and capital improvement activities for the Mountain Tunnel Improvement and the Bay Corridor Transmission and Distribution Project s. Deferred outflows of resources increased by $1,364 due to an increase in p ensions offset by a decrease in other postemployment benefits (OPEB) based on actuarial reports.

Total liabilities increased by $108,946 or 17.3% to $739,791. Outstanding debt increased by $72,796 due to an increase of $78,679 from commercial paper issuance , offset by $4,062 in bonds and certificates of participation principal repayments and $1,821 in amortization of premium. Arbitrage rebate payable and other liabilities increased by $36, 150 primarily due to $37,822 in State Revolving Fund (SRF) loan payable to Water Enterprise for the Mountain Tunnel Project. Deferred inflows of resources decreased by $3,279 due to decreases in pensions and OPEB based on actuarial reports.

Restated 2025-2024 2024-2023
2025 2024* 2023 C hange Change
Total assets:

Current and other assets $ 292,342 224,700 157,906 67, 642 66,794 Capital assets, net of accumulated
depreciation and amortization 86 13 30 73 (17)
Total assets 292,428 224,713 157,936 67,715 66,777 Deferred outflows of resources:

Pensions 2,753 2,187 1, 292 566 895
Other postemployment benefits 1,195 996 1, 009 199 (13) Total deferred outflows of resources 3,948 3,183 2,301 765 882 Liabilities:

Current liabilities 38,207 38,240 31, 461 (33) 6,779 Long-term liabilities 9,083 8,297 6, 557 786 1,740 Total liabilities 47,290 46, 537 38,018 753 8,519 Deferred inflows of resources:

Pensions 730 925 1,296 (195) (371)
Other postemployment benefits 1,737 2,292 2,922 (555) (630) Total deferred inflows of resources 2,467 3,217 4,218 (750) (1,001) Net position:

Unrestricted 246,619 178,142 118,001 68, 477 60,141 Total net position $ 246,619 178,142 118,001 68, 477 60,141 Table 1D - CleanPowerSF
Comparative Condensed Net Position
June 30, 2025, 2024, and 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

13 (Continued)

Hetchy Water

Hetchy Water’s net position of $ 339,957 increased by $60,014 or 21.4% from prior year. Increases in total assets and deferred outflows of resources of $59,486 and decreases of $528 in total liabilities and deferred inflows of resources are described below (see Table 1B). The in crease of $46 ,373 in current and other assets was attributed to an increase of $ 46,258 in cash and investments with City Treasury mainly due to transfer of $47,084 from the Water Enterprise for the Mountain Tunnel Improvement Project . The remaining increase of $115 was mainly due to increase in interest receivables from higher interest rates.

Capital assets, net of accumulated depreciation and amortization, increased by $ 12,844 or 5.4% to $250,330 primarily from construction and capital improvement activities for the Mountain Tunnel Improvement and O’Shaughnessy Dam Outlet Works Projects. Deferred outflows of resources increased by $269 due to an increase in pensions offset by a decrease in OPEB based on actuarial reports.

Hetchy Water’s total liabilities increased by $610 or 1.2% to $50,040, as explained by increases of $ 1,320 in net pension liability based on actuarial estimates and $825 in emp loyee related benefits due to 3.0% increase in cost-of-living adjustment (COLA) and implementation of GASB Statement No. 101, Compensated Absences which required the recognition of additional leave benefits. Other increases of $1,374 were mostly related to unrestricted payables due to increase in management consulting services and equipment purchases. These increases were offset by a decrease of $2,909 in restricted payables due to lower project spending mainly for Repair and Replacement Projects.

Deferred inflows of resources decreased by $ 1,138 due to decreases in p ensions and OPEB based on actuarial reports.

Hetchy Power

Hetchy Power’s net position of $ 567,986 increased by $2,135 or 0.4% from prior year. Increases in total assets and deferred outflows of resources of $ 108,327 and increases of $ 106,192 in total liabilities and deferred inflows of resources are described below (see Table 1C). Increase of $ 55,828 in current and other assets was attributed to increases of $ 60,535 in cash and investments mainly due to cash proceeds from additional commercial paper issuances and $1,788 in prepaid charges, advances, and other receivables mainly due to new Inflation Reduction Act tax credits for solar projects . These increases were offset by decreases of $5,240 in charges for services receivables due to less excess energy sold to wholesale customers and $1,255 in due from other City departments from one-time utility users tax refund received from the General Fund.

Capital assets, net of accumulated depreciation and amortization, increased by $ 52,169 or 6.9% to $809,921 primarily from construction and capital improvement activities for the Bay Corridor Transmission and Distribution Projects. Deferred outflows of resources increased by $ 330 due to an increase in pensions offset by a decrease in OPEB based on actuarial reports.

Hetchy Power’s total liabilities of $ 642,461 increased by $ 107,583 or 20.1%. As of June 30, 202 5, outstanding debt increased by $ 72,796 due to $78,679 commercial paper issuance, offset by $4,062 in bonds and certificates of participation principal repayments and $ 1,821 in amortization of premium.

Arbitrage rebate payable and other liabilities increased by $34,787 mainly due to $37,822 in SRF loan payable to Water Enterprise for the Mountain Tunnel Project, $3,031 increase in unrestricted payable due to higher year-end expense accruals for power purchases , $1,613 in net pension liability based on actuarial estimates, and $1,093 in unearned revenue s, refunds, and other due to prepaid Distributed Antenna System (DAS) revenue . The remaining increase of $1 ,962 was mostly related to employee related benefits

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

14 (Continued)

due to 3.0% increase in COLA and implementation of GASB Statement No. 101, Compensated Absences which required the recognition of additional leave benefits. These increases were offset by decrease s of $7,608 in restricted payable mainly due to lower year -end expense accruals for the Warnerville Substation Rehabilitation and Bay Corridor Transmission and Distribution projects and $3,126 in damage claim liability.

Hetchy Power’s damage claim liability as of June 30, 2025 was estimated by using probable exposure information provided by the City Attorney’s Office and includes an estimate of incurred but not reported losses.

Deferred inflows of resources decreased by $1,391 due to decreases in pensions and OPEB based on actuarial reports.

CleanPowerSF

CleanPowerSF’s net position of $246,619 increased by $68,477 or 38.4% from prior year. Increases in total assets and deferred outflows of resources of $68,480 and increases of $3 in total liabilities and deferred inflows of resources are described below (see Table 1D). Increase in current and other assets of $ 67,642 was due to increases of $ 62,638 in cash and investments with City Treasury mainly attributed to higher collections from billings, $3,686 in charges for services receivables mainly due to 8.5% average rate increase, and $1,318 in prepaid charges , interest receivables, and other receivables mainly related to additional interest receivable on collateral and pending collections for resource adequacy capacity sales to counterparties.

Capital assets, net of accumulated depreciation and amortization, in creased by $73 or 561.5% to $ 86 due to increase in subscription assets . Deferred outflows of resources increased b y $765 due to increase s in pensions and OPEB based on actuarial reports.

Total liabilities increased by $753 or 1.6% to $47,290, mainly explained by increases of $3,109 in payables due to higher power purchases and $1,590 in net pension liability based on actuarial estimates and increase in employee related benefits due to 3.0 % COLA increase and implementation of GASB Statement No. 101, Compensated Absences which required the recognition of additional leave benefits . These increases were offset by a decrease of $3, 946 in unearned revenues, OPEB, damage claims, and other liabilities mainly due to return of funds for the Community Food Service Energy Efficiency Program to PG&E.

Deferred inflows of resources decreased by $ 750 due to decreases in pensions and OPEB based on actuarial reports.

Net Position, Fiscal Year 2024*

Hetch Hetchy

Hetch Hetchy’s net position of $1,023,936 increased by $113,457 or 12.5% from prior year . Increases in total assets and deferred outflows of resources of $229,501 and increases of $116,044 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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

15 (Continued)

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 $122,351 or 24.1% to $ 630,845. 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 $ 20,443 primarily due to increase s in net pension liability based on actuarial estimates and accrued compensated absences per implementation of GASB Statement No. 101, Compensated Absences .

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.

Hetchy Water

Hetchy Water’s net position of $ 279,943 increased by $5,815 or 2.1% from prior year. Increases in total assets and deferred outflows of resources of $11,239 and increases of $ 5,424 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 accumulated 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 $7,812 or 18.8% to $ 49,430, as explained by in creases of $4,985 in net pension liability based on actuarial estimates, $3,314 in accrued compensated absences per implementation of GASB Statement No. 101, Compensated Absences, $1,362 in OPEB obligations based on actuarial estimates, and $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 revenues, refunds, 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 $ 565,851 increased by $ 47,501 or 9.2% from prior year . Increases in total assets and deferred outflows of resources of $150,603 and increases of $ 103,102 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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

16 (Continued)

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 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 $ 534,878 increased by $ 106,020 or 24.7%. 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 $113,093, such as payables to vendors, employees, contractors, and other government agencies for goods and services under contractual agreements, in creased by $ 4,112 or 3.8%, 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, $4,051 in accrued compensated absences per implementation of GASB Statement No. 101, Compensated Absences, $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. Arbitrage 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 $178,142 increased by $60,141 or 51.0% from prior year. Increases in total assets and deferred outflows of resources of $67,659 and increases of $7,518 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.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

17 (Continued)

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 $8,519 or 22.4% to $ 46,537, 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, $348 in accrued compensated absences per implementation of GASB Statement No. 101, Compensated Absences , $136 in OPEB obligations based on actuarial assumptions, and $113 in employee related benefits due to COLA increase . These increases were offset by decreases 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.

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.

* The fiscal year 2024 net position narrative was updated to reflect the restatement s from Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(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:

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

** Interest expenses are net of amortization of premium, discount, and issuance costs.

Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Revenues:

Charges for services $ 701,141 630,078 583,194 71,063 46,884 Rents and concessions 329 360 283 (31) 77
Interest and investment income (loss) 30,186 22,903 4,603 7,283 18,300 Other non-operating revenues 4,031 9,252 16,964 (5,221) (7,712) Total revenues 735,687 662,593 605,044 73,094 57,549
Expenses:

Operating expenses 635,730 557,125 536,343 78,605 20,782 Interest expenses** 16,034 13,467 7,907 2,567 5,560
Non-operating expenses 881 1,021 499 (140) 522
Total expenses 652,645 571,613 544,749 81,032 26,864
Change in net position before transfers and contributions 83,042 90,980 60,295 (7,938) 30,685 Capital contributions 4,032 29,200 2,535 (25,168) 26,665 Transfers from the City and County of San Francisco 47,084 42 20,000 47,042 (19,958) Transfers to the City and County of San Francisco (3,532) (108) (32) (3,424) (76) Capital contributions and net transfers 47,584 29,134 22,503 18,450 6,631 Change in net position 130,626 120,114 82,798 10,512 37,316 Net position at beginning of year
Beginning of year, as previously reported 1,023,936 910,479 827,681 113,457 82,798 Cumulative effect of accounting change — (6,657) — 6,657 (6,657) Net position at beginning of year as restated 1,023,936 903,822 827,681 120,114 76,141 Net position at end of year $ 1,154,562 1,023,936 910,479 130,626 113,457 Table 2A - Combined Hetch Hetchy
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2025, 2024, and 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

19 (Continued)

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

** Interest expenses are net of amortization of premium, discount, and issuance costs.

Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Revenues:

Charges for services $ 53,071 49,330 52,570 3,741 (3,240) Rents and concessions 140 162 127 (22) 35
Interest and investment income (loss) 5,016 3,255 457 1,761 2,798 Other non-operating revenues 205 338 1,861 (133) (1,523) Total revenues 58,432 53,085 55,015 5,347 (1,930)
Expenses:

Operating expenses 45,471 44,409 50,011 1,062 (5,602)
Interest expenses 23 3 4 20 (1)
Non-operating expenses 8 45 54 (37) (9)
Total expenses 45,502 44,457 50,069 1,045 (5,612)
Change in net position before transfers 12,930 8,628 4,946 4,302 3,682 Transfers from the City and County of San Francisco 47,084 42 20,000 47,042 (19,958) Change in net position 60,014 8,670 24,946 51,344 (16,276) Net position at beginning of year
Beginning of year, as previously reported 279,943 274,128 249,182 5,815 24,946 Cumulative effect of accounting change — (2,855) — 2,855 (2,855) Net position at beginning of year as restated 279,943 271,273 249,182 8,670 22,091 Net position at end of year $ 339,957 279,943 274,128 60,014 5,815 Table 2B - Hetchy Water
Years Ended June 30, 2025, 2024, and 2023
Comparative Condensed Revenues, Expenses, and Changes in Net Position Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Revenues:

Charges for services $ 218,274 214,154 203,847 4,120 10,307 Rents and concessions 189 198 156 (9) 42
Interest and investment income (loss) 14,688 13,744 3,741 944 10,003 Other non-operating revenues 3,105 8,528 13,605 (5,423) (5,077) Total revenues 236,256 236,624 221,349 (368) 15,275
Expenses:

Operating expenses 218,081 201,163 191,552 16,918 9,611 Interest expenses** 16,006 13,464 7,902 2,542 5,562
Non-operating expenses 534 99 227 435 (128)
Total expenses 234,621 214,726 199,681 19,895 15,045
Change in net position before transfers and contributions 1,635 21,898 21,668 (20,263) 230 Capital contributions 4,032 29,200 2,535 (25,168) 26,665 Transfers to the City and County of San Francisco (3,532) (108) (32) (3,424) (76) Capital contributions and net transfers 500 29,092 2,503 (28,592) 26,589 Change in net position 2,135 50,990 24,171 (48,855) 26,819 Net position at beginning of year
Beginning of year, as previously reported 565,851 518,350 494,179 47,501 24,171 Cumulative effect of accounting change — (3,489) — 3,489 (3,489) Net position at beginning of year as restated 565,851 514,861 494,179 50,990 20,682 Net position at end of year $ 567,986 565,851 518,350 2,135 47,501 Years Ended June 30, 2025, 2024, and 2023
Table 2C - Hetchy Power
Comparative Condensed Revenues, Expenses, and Changes in Net Position

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

20 (Continued)

* Restated per Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences.

Result of Operations, Fiscal Year 2025

Hetch Hetchy

Hetch Hetchy’s total revenues were $ 735,687, an increase of $ 73,094 or 11.0% over prior year (see Table 2A). Charges for services increased by $ 71,063 or 11.3% from prior year’s revenues mainly due to higher billings from CleanPowerSF and Hetchy Power. Total expenses increased b y $ 81,032 or 14.2% primarily from higher energy purchases for CleanPowerSF due to volatile and increased pricing in the power market. (See Table 2A).

Hetchy Water

Hetchy Water’s total revenues were $ 58,432, an increase of $ 5,347 or 10.1% from prior year’s revenues (see Table 2B). Increases included $3, 741 in charges for services and $1, 761 in interest and investment income, offset by decreases of $133 in other non-operating revenues and $22 in rents and concessions.

Charges for services were $ 53,071, an in crease of $3, 741 or 7.6 % mainly due to in creased water assessment fees from the Water Enterprise to fund upcountry water -related costs. Interest and investment income was $5, 016, an increase of $1, 761 mainly due to higher interest rates. Rents and other non- operating revenues decreased by $155 mainly due to settlement revenue in prior year for the San Joaquin Pipeline Project.

Total operating expenses, excluding interest expenses and other non- operating expenses, were $45,471, an increase of $1,062 or 2.4%. Increases included $ 3,037 in other operating expenses mainly due to higher building structure and improvement expenses, $2,317 in general and administrative expenses due to higher payments to other governments related to law enforcement and emergency response services , and $751 in depreciation, amortization, materials and supplies expenses mainly related to additional facilities and improvements placed in service. These increases were offset by a decrease of $4,048 in personnel services Restated 2025-2024 2024-2023
2025 2024* 2023 Change Change
Revenues:

Charges for services $ 429,796 366,594 326,777 63,202 39, 817 Interest and investment income (loss) 10,482 5,904 405 4,578 5,499 Other non-operating revenues 721 386 1,498 335 (1,112)
Total revenues 440,999 372,884 328,680 68,115 44,204
Expenses:

Operating expenses 372,178 311,553 294,780 60,625 16,773 Interest expenses 5 — 1 5 (1)
Non-operating expenses 339 877 218 (538) 659
Total expenses 372,522 312,430 294,999 60,092 17,431
Change in net position 68,477 60,454 33,681 8,023 26,773 Net position at beginning of year
Beginning of year, as previously reported 178,142 118,001 84,320 60,141 33,681 Cumulative effect of accounting change — (313) — 313 (313) Net position at beginning of year as restated 178,142 117,688 84,320 60,454 33,368 Net position at end of year $ 246,619 178,142 118,001 68,477 60,141 Table 2D - CleanPowerSF
Comparative Condensed Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2025, 2024, and 2023

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

21 (Continued)

due to lower bureau support costs. The remaining decrease of $995 was mainly from lower share of bureau support costs.

Transfer in of $47,084 from the Water Enterprise was to fund the Hetchy Water's share of the Mountain Tunnel Project.

As a result of the above activities, net position for the year ended June 30, 2025 increased by $60,014 or

21.4% compared to prior year.

Hetchy Power

Hetchy Power’s total revenues were $236, 256, a decrease of $368 or 0.2% from prior year’s revenues (see Table 2C). Decreases included $ 5,423 from other non- operating revenues and $9 f rom rents and concessions, offset by increases of $4,120 from charges for services and $944 from interest and investment income.

Charges for services were $2 18,274, an increase of $4 ,120 or 1.9%, mainly due to average rate increase and higher consumption, of which $17,465 was from City departments such as SFO and SFMTA and $4,734 from sales to retail customers. These increases were offset by decreases of $15,967 in wholesale revenue due to higher hydrogen eration in prior year resulting in greater excess supply sold, and $2,112 in resale of capacity to CleanPowerSF due to less excess energy . Interest and investment income was $14 ,688, an increase of $944 mainly due to higher interest rates.

Other non-operating revenues were $ 3,105, a decrease of $ 5,423 or 63.6%, mainly due to $2,873 in loss from the decommissioned solar power plant and photovoltaic system at Pier 96 and SFO, $2,550 in revenue received in prior year for the power system mitigation projects and lower DAS revenue.

Total operating expenses, excluding interest expenses and other non -operating expenses, increased by $16,918 or 8.4% to $ 218,081. Increases included $9,548 in purchased electricity due to higher resource adequacy purchases related to compliance requirements, $7,941 in personnel services due to 3 .0% increase in COLA, $4,460 in other operating expenses mainly due t o higher spending for the Moccasin Powerhouse Rewind Project, $2,548 in depreciation and amortization related to additional facilities and improvements placed in service , $1,254 in services provided by other departments mainly due to higher bureau support costs, and $1,012 in general, administrative, materials and supplies expenses mainly due to higher payments to other governments related to law enforcement and emergency response services . These increases were offset by a decrease of $9, 845 from lower distribution charges from PG&E and contractual services.

Interest expenses increased by $2 ,542 or 18.9% due to higher outstanding commercial paper and higher bond interest expenses for the 2023 Series A Revenue Bonds.

Other non -operating expenses were $534 , an increase of $ 435 or 439.4% mainly due to new incentive program for energy-efficient improvements. Capital contributions of $ 4,032 were from developers for assets at Mission Rock and Warnerville Substation . Transfer out of $ 3,532 included $3,500 to General Fund related to acquisition of PG&E assets and $32 to the Office of the City’s Administrator for the Surety Bond Program.

As a result of the above activities, net position for the year ended June 30, 202 5 increased by $2,135 or

0.4% compared to prior year.

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

22 (Continued)

CleanPowerSF

CleanPowerSF’s total revenues were $440 ,999, a $ 68,115 or 18.3% increase over prior year (see Table 2D). Charges for serv ices increased by $63 ,202 or 17.2% mainly due to increases of $ 45,476 in electricity sales to retail and commercial customers from 8.5% average rate increase and 112,113 MWh or 3.9% consumption increase, $10,267 in higher capacity sales to counterparties, and $7 ,459 in wholesale sales due to excess energy . C apacity sales are based on availability. Interest and investment income was $10,482, an increase of $ 4,578 due to higher interest rates and higher cash balances. Other non-operating revenue increased by $ 335 mainly due to non-refundable dep osits for the interconnections process enhancement project.

Total operating expenses, excluding interest expenses and non -operating expenses we re $372,178, an increase of $60,625 or 19.5% from prior year. Purchased electricity and transmission, distribution, and other power costs increased by $ 58,038 due to increased pricing in power market and higher customer power consumption. Other increases included $2,894 in personnel services due to 3.0% COLA increase and increased labor charges from Hetchy Power , $ 1,444 in contractual services , depreciation, materials and supplies, and other operating expenses mainly due to increase in CleanPowerSF’s share of rent at 525 Golden Gate and higher management consulting fees and software licensing fees . These increases were offset by a decrease of $1,751 in services provided by other departments and general and administrative expenses mainly due to support services from Hetchy Power was posted directly to personnel services in current year and lower judgment and claims expenses. O ther non-operating expenses decreased by $538 mainly due to lower payments for the neighborhood steward program in current year.

As a result of the above activities, net position for the year ended June 30, 2025 increased by $68,477 or

38.4% compared to prior year.

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 expenses increased by $ 26,864 or 4.9% primarily from higher energy purchases for CleanPowerSF due to volatile and increased pricing in the power market. (See Table 2A).

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 services 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 revenue 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

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

23 (Continued)

settlement revenue mainly for San Joaquin 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 $44,409, a decrease of $5,602 or 11.2%. 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 $6,943 in p ersonnel services due to higher pension expenses, 4.75% increase in COLA, and implementation of GASB Statement No. 101, Compensated Absences , $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 ended June 30, 202 4 increased by $5,815 or

2.1% 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 increase d 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.

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, excluding interest expenses, other non- operating expenses, and amortization of premium, discount, and issuance costs, increased by $ 9,611 or 5.0% to $ 201,163. Increases included $14,217 in other operating expenses mainly due to higher project spending for the Winter Storm Projects , $9,437 in personnel services due to higher pension expenses , 4.75% increase in COLA, and implementation

HETCH HETCHY WATER AND POWER AND CLEANPOWERSF
Management’s Discussion and Analysis (Unaudited)
June 30, 2025 and 2024
(Dollars in thousands, unless otherwise stated)

24 (Continued)

of GASB Statement No. 101, Compensated Absences , $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.

Other non -operating expenses were $99 , a decrease of $ 128 or 56.4% mainly due to lower incentive payments for Electric Vehicle Charge Program . Capital contributions of $2 9,200 were for assets at Pier 70, Treasure Island, and Yerba Buena Island . Transfer out of $108 included $76 to General Fund for Public Power Expansion Project and $32 to the Office of the City’s Administrator for the Surety Bond Program.

As a result of the above activities, net position for the year ended June 30, 2024 increased by $47,501 or

9.2% compared to prior year.

CleanPowerSF

CleanPowerSF’s total revenues were $372,884 , a $ 44,204 or 13.4% increase over prior year (see Table 2D). Charges for services increased by $ 39,817 or 12.2% mainly due to increases of $38,403 in electricity sales to retail and commercial customers from 15.0% average rate increase and $3,606 in wholesale sales due to excess energy , offset by $2,192 in lower capacity sales to counter parties . Capacity sales are based on availability. Interest and investment income was $5,904 , an increase of $5,499 mainly due to unrealized gain in City Treasury pooled investments attributed to improved fair value of investments and higher interest rates. Other non-operating revenue de creased by $1, 112 mainly due to $ 1,173 decrease in Federal CAPP grants which ended in prior year , offset by an increase of $ 61 in revenue mainly from Disadvantaged Communities (DAC) Programs.

CleanPowerSF Sfpuc CommissionFebruary 10, 2026

CleanPowerSF Sfpuc Commission
February 10, 2026