EAST PALO ALTO CITY
COUNCIL SPECIAL MEETING
AMENDED AGENDA
Tuesday, January 9, 2024, 6:30 PM
EPA Government Center
2415 University Avenue, First Floor
East Palo Alto, CA 94303
NOTICE
This meeting will be held virtually and in-person at the Council Chambers located on 2415 University Ave, First Floor East Palo Alto, CA 94303. The virtual portion of this City Council meeting will be conducted in accordance with City of East Palo Alto Resolution adopted pursuant to Assembly Bill 361.
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International numbers available: https://zoom.us/u/aMWYF4KT East Palo Alto City Council January 9, 2024 Agenda
1 1. CALL TO ORDER AND ROLL CALL
2. APPROVAL OF THE AGENDA
3. APPROVAL OF CONSENT CALENDAR
3.1 3.2
3.4 Minutes of the December 5, 2023 Meeting
3.5 Proclamation of the City of East Palo Alto Commemorating the Contributions of the Reverend Dr. Martin Luther King, Jr., in the Fight for Equality.
Recommendation: Accept the proclamation.
Proclamation of the City of East Palo Alto Honoring Larry C. Tripplett’s Legacy of Service to the East Palo Alto Community
Recommendation: Accept the proclamation.
3.3 Outside Counsel Services Agreement Second Amendment Recommendation:
Adopt a resolution authorizing the City Attorney to:
1. Execute a second amendment to the agreement with the Law Office of Clare M. Gibson.
Recommendation: Adopt the minutes of the December 5, 2023 Meeting.
Proclamation of the City of East Palo Alto in Loving Memory of Christian Sbragia
Recommendation: Accept the proclamation.
East Palo Alto City Council January 9, 2024 Agenda
2 4. CLOSED SESSION
4.1 PUBLIC EMPLOYEE PERFORMANCE EVALUATION (Government Code Section 54957(b)(1).
Title: City Attorney
4.2 PUBLIC EMPLOYEE PERFORMANCE EVALUATION (Government Code Section 54957(b)(1).
Title: City Manager
5. PUBLIC COMMENT
6. INFORMATIONAL REPORTS
7. SPECIAL PRESENTATIONS
8. PUBLIC HEARINGS
9. POLICY AND ACTION
9.1 Annual Financial Reports for FY2022-23
10. COUNCIL REPORTS
11. ADJOURNMENT
Recommendation:
Adopt a resolution accepting and directing staff to file the Annual Financial Reports for Fiscal Year 2022-23, including:
1. Annual Comprehensive Financial Report (ACFR),
2. Single Audit Report,
3. Measure A Fund Report,
4. Measure C Fund Report,
5. Measure HH Fund Report,
6. Measure W Fund Report, and
7. Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule (Fiscal Year 2023-24).
Upcoming meetings:
Meeting Date Time
Special Meeting January 23, 2024 6:30 PM
Special Retreat Meeting February 3, 2024 9:00 AM
Regular Meeting February 6, 2024 6:30 PM
East Palo Alto City Council January 9, 2024 Agenda
3 This AGENDA is posted in accordance with Government Code Section 54954.2(a) This Notice of Availability of Public Records: All public records relating to an open session item which are not exempt from disclosure pursuant to the Public Records Act, that are distributed to the majority of the City Council will be available for public inspection at the City Clerk’s Office, 2415 University Avenue, East Palo Alto, CA at the same time that the public records are distributed or made available to the City Council. Such documents may also be available on the East Palo Alto website www.cityofepa.org subject to staff’s ability to post the documents prior to the meeting. Information may be obtained by calling (650) 853-3100.
The City Council meeting packet may be reviewed by the public in the Library or the City Clerk's Office. Any writings or documents pertaining to an open session item provided to a majority of the City Council less than 72 hours prior to the meeting, shall be made available for public inspection at the front counter at the City Clerk's Office, 2ND Floor, City Hall, 2415 University Avenue, East Palo Alto, California 94303 during normal business hours. Information distributed to the Council at the Council meeting becomes part of the public record. A copy of written material, pictures, etc. should be provided for this purpose.
East Palo Alto City Council Chambers is ADA compliant. Requests for disability related modifications or accommodations, aids or services may be made by a person with a disability to the City Clerk's office at (650) 853-3127 no less than 72 hours prior to the meeting as required by Section 202 of the Americans with Disabilities Act of 1990 and the federal rules and regulations adopted in implementation thereof.
DECLARATION OF POSTING
This Notice is posted in accordance with Government Code §54954.2(a) or §54956. Members of the public can view electronic agendas and staff reports by accessing the City website. Under penalty of perjury, this Agenda was posted to the public at least 72 hours prior to the meeting.
POSTED: January 3, 2023
AMENDED: January 8, 2023
ATTEST:
James Colin
City Clerk
East Palo Alto City Council January 9, 2024 Agenda
4 CONSENT ITEM 3.1
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: January 9, 2024
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Proclamation of the City of East Palo Alto Commemorating the Contributions of the Reverend Dr. Martin Luther King, Jr., in the Fight for Equality.
Recommendation
Attachments
1. Proclamation
5 Proclamation of the City of East Palo Alto
Commemorating the Contributions of the
Reverend Dr. Martin Luther King, Jr.,
in the Fight for Equality
WHEREAS Dr. Martin L. King, Jr was born into a Christian Family residing in the State of Georgia and his heritage was from a line of Gospel Preachers and Educators. Early in his life Dr. King was exposed to the inequalities of public domainsthat he did not understand. He knew that this was not what the Preamble to the Constitution meant when it states, “All men are created equal”; and WHEREAS amid his educational pursuits, Dr. King, studied at Cozer Theological Seminary in Pennsylvania. he also studied at Morehouse College where he was inspired by Henry David Thoreau’s essays on Civil disobedience. In 1955, Dr. King received his Bachelor of Arts Degree from Boston University. He was further inspired by the writings of Mahatma Ghandi on Civil disobedience; and WHEREAS at the age of seventeen, Dr. King made his first public speech on equality at Ebenezer Baptist Church in Atlanta, where his father, Rev. Martin Luther King, Sr., was pastor. Dr. King was catapulted to national prominence in December 1955, after becoming pastor of Dexter Street Baptist Church in Montgomery, Alabama. He was pressed into service during the infamous “Bus Boycott” that began on December 1, 1955, when Mrs. Rosa Parks refused to give up her seat to a White male on a City bus in Montgomery and was arrested. These events set the stage for the organizing of the Southern Christian Leadership Conference. Dr. King and his Lieutenants trained young men and women carry out civil resistance during marches, arrests and even after the murder of several civil rights activists; and
WHEREAS on August 20, 1965, the world was mesmerized when Dr. King delivered his, “I Have A Dream” speech at the Washington Memorial Pavilion. Dr. King was awarded both the Nobel Peace Prize and the Presidential Medal of Freedom; and
WHEREAS Dr. King was dedicated to eradicating racial inequality in America. So, while in Memphis, Tennessee, in support of the Garbage Workers strike for higher wages and better working conditions, Dr. King was gunned down as he stood on the balcony of the Lorraine Hotel, his life was ended in a hail of bullets. The date, April 4, 1968; and
WHEREASon January 9, 2024, the City Council of East Palo Alto designatesthis day as “Dr. Martin Luther King, Jr.” Day.
Dated: January 9, 2024
Antonio Lopez, Mayor
6 CONSENT ITEM 3.2
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: January 9, 2024
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Proclamation of the City of East Palo Alto Honoring Larry C. Tripplett’s Legacy of Service to the East Palo Alto Community
Recommendation
Attachments
1. Proclamation
7 Proclamation of the City of East Palo
Alto Honoring Larry C. Tripplett’s
Legacy of Service to the
East Palo Alto Community
WHEREAS Mr. Larry C. Tripplett has left an indelible mark on the City of East Palo Alto through his unwavering dedication to community service; and
WHEREAS Mr. Tripplett played a pivotal role as a founding Board Member for The Center for a New Generation, contributing to the development and success of this organization; and
WHEREAS Mr. Tripplett served as a longtime leader and advocate for the well-being of Boys & Girls Clubs of the Peninsula (BGCP) students and their families, demonstrating a profound commitment to the betterment of our community; and WHEREAS Mr. Tripplett, in his capacity as President of the Board of Directors at BGCP, played an instrumental role in the establishment of the East Palo Alto Clubhouse, providing a safe and supportive space for the youth of our city; and WHEREAS Mr. Tripplett, as the owner of the first McDonald's restaurant in East Palo Alto, generously contributed to numerous nonprofit organizations in our community that served children, exemplifying a spirit of philanthropy and community support; and WHEREAS Mr. Tripplet 's philanthropic efforts extended to providing Happy Meals to the Community on Fridays, bringing joy and nourishment to the children of East Palo Alto, WHEREAS The Boys & Girls Clubs of the Peninsula (BGCP) has recognized Mr. Larry C.
Tripplett's significant contributions by naming the East Palo Alto Clubhouse basketball court in his honor, forever known as "The Larry C. Tripplett Court.” NOW, THEREFORE, BE IT PROCLAIMED, that the City Council of the City of East Palo Alto hereby honors and recognizes Larry C. Tripplett for his outstanding legacy of service to the East Palo Alto community.
Dated: January 9, 2024
Antonio Lopez, Mayor
8 CONSENT ITEM 3.3
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: January 9, 2024
TO: Honorable Mayor and Members of the City Council
VIA: John D. Lê
SUBJECT: Outside Counsel Services Agreement Second Amendment Recommendation
Adopt a resolution authorizing the City Attorney to:
1. Execute a second amendment to the agreement with the Law Office of Clare M. Gibson.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 3: Promote Health & Public Safety
Background
The Law Office of Clare M. Gibson has provided litigation advice services needed to support the City since July 2022. The City contracted the Law Firm of Clare M. Gibson (CMG) to provide legal advisory specialized services regarding public contract, procurement, and construction law issues for an amount not to exceed $10,000. On October 18, 2023, the City executed a first amendment to the Outside Counsel Agreement to increase the not to exceed amount to $20,000.
Analysis
The sum originally authorized for payment was insufficient to cover the services rendered. The City desires to enter into a second amendment to increase the not-to-exceed amount to 9 CONSENT ITEM 3.3
$50,000 with CMG to cover the work already completed and to continue providing legal specialized support services for the Public Works Department as well other legal issues.
Fiscal Impact
There are sufficient funds in the City Attorney budget to cover this contract due to a vacancy in the staff attorney position.
Public Notice
The public was provided notice by making the agenda and report available on the City’s website and on a bulletin board located at City Hall: 2415 University Avenue, East Palo Alto.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because it is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.
Awarding this contract is not a project under The California Environmental Quality Act (Section 21000, et. seq. of the California Public Resources Code, hereafter CEQA) because the action has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
Attachments
1. Resolution
10 RESOLUTION NO. XX-2024
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF EAST PALO ALTO
AUTHORIZING THE CITY ATTORNEY TO EXECUTE A SECOND AMENDMENT TO THE OUTSIDE COUNSEL AGREEMENT WITH THE LAW OFFICE OF CLARE M. GIBSON IN AN AMOUNT NOT-TO-EXCEED $50,000
WHEREAS, the Law Office of Clare M. Gibson (CMG) has provided litigation advice services needed to support the City during FY 2022-2023; and
WHEREAS, the sum originally authorized for payment was insufficient to cover the services rendered and the initial work has been completed with CMG; and WHEREAS, the City desires to amend the agreement and increase the not-to-exceed amount to $50,000 with CMG to provide legal specialized support services for the Public Works Department and other legal issues.
NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO authorizes the City Attorney to:
1. Execute a second amendment to the outside counsel services agreement with CMG for a total not-to exceed amount of $50,000; and
2. Waive the formal bid procedures under section 2.84.070(D) of the Municipal Code due to the special circumstances that the City has with CMG, and it would be neither practical nor productive to change firms.
PASSED AND ADOPTED this 9th day of January 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Antonio D. Lopez, Mayor
ATTEST: APPROVED AS TO FORM:
James Colin, City Clerk John D. Lê, City Attorney
11 CONSENT ITEM 3.4
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: January 9, 2024
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Minutes of the December 5, 2023 City Council Meeting Recommendation
The City Council will consider adopting the minutes of the December 5, 2023, Meeting.
Attachments
1. December 5, 2023 Minutes
12 East Palo Alto City Council December 5, 2023 Minutes Page 1 of 5
EAST PALO ALTO CITY COUNCIL
REGULAR MEETING MINUTES
DECEMBER 5, 2023
EPA Government Center
2415 University Ave, First Floor – City Council Chamber East Palo Alto, CA 94303
1. CALL TO ORDER AND ROLL CALL
The meeting was called to order by Mayor Lisa Gauthier at 6:31 p.m.
Attendee Name Title Status Arrived
Carlos Romero Councilmember Present
Ruben Abrica Councilmember Present
Lisa Gauthier Mayor Present
Antonio Lopez Vice Mayor Present
Martha Barragan Councilmember Present Left after Closed Session 2) APPROVAL OF THE AGENDA
Mayor Gauthier made an amendment to the agenda moving special presentation item 7.1 to be discussed before closed session item 4.1.
The approval of the agenda with the above amendment was motioned by Councilmember Abrica and Seconded by Mayor Gauthier and passed via unanimous vote.
3) APPROVAL OF CONSENT CALENDAR
Mayor Gauthier pulled item 3.3 for discussion and Councilmember Romero pulled item 3.1. The approval of the consent calendar except for item 3.1 and
3.4 was motioned by Councilmember Romero, seconded by Mayor Gauthier, and passed via unanimous vote.
3.1 Authorize the Purchase of Vehicles for the Building Services Division The approval of the consent calendar item 3.1 was motioned by Councilmember Carlos Romero seconded by Mayor Gauthier and passed via unanimous vote.
3.2 2023 Peninsula Volunteers Inc. Contract Renewal
3.3Adoption of East Palo Alto Opportunity to Purchase Act (EPA OPA) Public Comment:
13 East Palo Alto City Council December 5, 2023 Minutes Page 2 of 5 - Uhila Makoni
- Elena Savva
- Gail Wilkerson
- Grace
- Mark Dinan
- Betty Lu
- Court Skinner
- Anna Romanovskaia
- Neeraj Miglani
- Werner Rogmans
- Allan Johnson
- Rashit Nabieu
- Dixie Specht-Schulz
- Jim W
- Carel Hee
- Simon Weng
- Lucy Wu
- Carol Cunningham
- Jeannie Llevsellyn
- Diomis Papavramidis
- Tiombe Jama
- Elizabeth Jackson
- Francois Michael
- Tom Wedlick
- Kimberly Carlton
- Yana
14 East Palo Alto City Council December 5, 2023 Minutes Page 3 of 5 - George Wu
- Yong Zheng
- Timothy He
- Jessica
- Chris Schidt
- Jennifer L
- Matthew Runyan
- Linlin Zhang
- Kelly Batson
- Iris Li
- Ken Chan
- Yugang
- Sherman M.
- Chris Moore
- Adrienne Bryant
Benjamin Toney Fuse Fellow, Karen Camacho Housing and Economic Development Manager presented on the Opportunity to Purchase Act.
Vice Mayor Lopez presented a comment on the record regarding the Opportunity to Purchase Act.
Councilmember Romero motioned the approval of item 8.1 and Councilmember Abrica Seconded Roll call vote was taken for this item:
Votes in favor: Romero, Abrica
Votes against: Gauthier, Lopez, Barragan
Motion did not carry due to a lack of votes in favor.
3.4 Proclamation for Nuestra Casa
3.5 Proclamation for 2023 Kiwanis Angel Award Recipient Carol Thomsen
15 East Palo Alto City Council December 5, 2023 Minutes Page 4 of 5 4) CLOSED SESSION
4.1 PUBLIC EMPLOYEE PERFORMANCE EVALUATION (Government Code Section 54957(b)(1). Title: City Manager
4.2 PUBLIC EMPLOYEE PERFORMANCE EVALUATION (Government Code Section 54957(b)(1). Title: City Attorney
The City Attorney confirmed that there was no reportable action and direction was given to the City Council.
5) PUBLIC COMMENT
- Michael Mashack
- Gail Wilkerson
- Mohana
- Ofelia Bello
- Samantha Gonzales
- Julissa Manriques
- Xenia Hernandez
- Joseph Thornton
- Laura
- Adrienne Bryant
- JT Faraji
- Dixie Lee Specht Shulz
- Daniela Montes
- Kenia Najar
- Darrell Ford
- Carlos
- Edwin Magana Lopez
6. INFORMATIONAL REPORTS
6.1 RV Safe Parking Program Closure Final Report (Staff report updated)
Karen Camacho, Housing and Economic Development Manager, provided a presentation regarding the RV Safe Parking Program Closure.
7. SPECIAL PRESENTATIONS
7.1 JobTrain EPA Career Center Update
Esmeralda Serrato Regional Director for South San Mateo County Career Centers, Barry Hathaway CEO, Terry Crenshaw Employment Liaison, Ruben Avelar Regional Director of Career Centers, Larry Moody Government Affairs Community Liaison presented on the EPA JobTrain Center.
Public Comments:
- Adrienne Bryant
- Matt
16 East Palo Alto City Council December 5, 2023 Minutes Page 5 of 5 - Q Smith
- Jeffrey Austin
8. PUBLIC HEARINGS
8.1 Development Code Text Amendment (ZTA23-001) to amend various Chapters and Sections of Title 18 (Development Code) of the East Palo Alto Municipal Code
Elena Lee Planning Manager and Salifu Yakubu Senior Planner, Samantha Dolgoff Community Planning Collaborative, Gabrielle Jansen from Goldfarb and Lipman.
Councilmember Romero motioned the approval of recommendation 1, Vice Mayor Lopez seconded, and the council approved via unanimous vote.
Recommendations 2 and 3 were continued for discussion to the next regular city council meeting on December 12.
9. POLICY AND ACTION
9.1 City Council’s Proposed Schedule for 2024
Item 9.1 was continued to the December 12 City Council Meeting.
9.2 Updated Tobacco Retailer Ordinance
Item 9.2 was continued to the December 12 City Council Meeting.
9.3 Commission Appointments
The following appointments were made at this Council Meeting after being interviewed:
Senior Advisory Committee:
- Donna Rutherford
Rent Stabilization Board
- Karl Magnus Larsson
10. COUNCIL REPORTS
Councilmember Ruben Abrica announced that the Creek Cleaning Event was a success and that the Senior Center Breakfast was well attended. 11) ADJOURNMENT
Meeting adjourned at 12:17 AM
17 CONSENT ITEM 3.5
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: January 9, 2024
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Proclamation of the City of East Palo Alto in Loving Memory of Christian Sbragia Recommendation
Attachments
1. Proclamation
18 Proclamation of the City of East Palo
Alto in Loving Memory of
Christian Sbragia
WHEREAS, the City of East Palo Alto mourns the loss of a remarkable individual, Christian Sbragia, who dedicated his life to generosity and service, leaving an indelible mark on our community; and
WHEREAS, Christian's unwavering commitment to empowering communities of color, especially the youth, through his organization CoolineKids, reflects his dedication to creating positive change and fostering a more just society; and WHEREAS, his daily question, "How can I be of service?" epitomizes Christian's tireless efforts, advocacy for change, and leadership in embodying love and compassion; and WHEREAS, Christian's positive spirit, contagious laughter, and uplifting presence turned CoolineKids into a welcoming home for everyone, impacting the lives of countless individuals; and
WHEREAS, Christian's commitment to well-being, personal growth, and community development set him apart as a role model, leader, son, brother, grandson, nephew, and friend; and
WHEREAS, his legacy of selfless love and service will continue to inspire us all to be kinder, more loving, patient, and generous.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of East Palo Alto hereby proclaims its deepest condolences on the passing of Christian Sbragia and honors his memory as a brilliant light, a true leader, and a source of inspiration for our community; and
BE IT FURTHER RESOLVED that the City Council extends its heartfelt sympathy to Christian's family, friends, and the East Palo Alto Community, acknowledging the profound impact of his life and the legacy he leaves behind.
Dated: January 9, 2024
Antonio Lopez, Mayor
19 POLICY AND ACTION ITEM 9.1
EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: January 9, 2024
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Tomohito Oku, Finance Director
SUBJECT: Accept Annual Financial Reports for Fiscal Year 2022-23 Recommendation
Adopt a resolution accepting and directing staff to file the State Controller’s Office the Annual Financial Reports for Fiscal Year 2022-23, including:
1. Annual Comprehensive Financial Report (ACFR),
2. Single Audit Report,
3. Measure A Fund Report,
4. Measure C Fund Report,
5. Measure HH Fund Report,
6. Measure W Fund Report, and
7. Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule (Fiscal Year 2023-24).
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority: Ensure Our Financial and Organizational Health 20 POLICY AND ACTION ITEM 9.1
Background
State law requires that every general law municipality issue annual financial reports prepared in accordance with generally accepted accounting principles (GAAP), so that the financial position and results of operations of each government entity is publicly available to citizens, legislators, financial institutions, and other interested parties.
Over the last nine years, the City has contracted Badawi & Associates for audit services. The engagement concluded with the completion of the annual financial audit for the fiscal year ending June 30, 2022. Per the City’s financial policy and the best practice recommended by Government Finance Officers Association (GFOA), the City is required to solicit a competitive request for proposal for audit services no less frequently than every five years. However, due to the outbreak of the Covid-19 pandemic and remote work environment, staff sought Council approval to extend the agreement with Badawi & Associates for a total of two additional years, and the City Council granted such extensions.
On February 22, 2023, the City initiated a competitive Request for Proposal (RFP) to solicit bids/proposals for a new contract for audit services with a contract term of three years and an option to extend for two additional years. Based on the above evaluation process, staff has concluded that Eide Bailly LLP is the lowest responsible bidder for providing audit services to the City of East Palo Alto. The City Council has authorized the City Manager to enter into an agreement with Eide Bailly LLP to provide annual auditing services through the fiscal year ending 2025 with an option to extend for additional two years.
Eide Bailly LLP, Certified Public Accountants, have completed the annual audit and issued the City’s annual financial statements and other required special reports. An auditor representative will be presenting an overview of the audit results and will be available to answer any additional questions regarding the reports. The City received an “unmodified” (clean) audit opinion on the Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2023. In addition, the special financial reports issued by the City (e.g., Measure A, Single Audit, Measure C, Measure HH, Measure W and Appropriations Limit) met applicable standards and no material exceptions were identified by the auditors.
Fiscal year 2021-22 marks the fourteenth year the City has produced an Annual Comprehensive Financial Report (ACFR). The City has been awarded the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association (GFOA) in each of the preceding years and will submit the Fiscal Year 2022-23 ACFR to the award program. To receive the award, the ACFR must be presented in accordance with Generally Accepted Accounting Principles (GAAP) and meet a higher set of reporting and disclosure standards determined by the GFOA.
Analysis
Below is a summary description of each report published:
21 POLICY AND ACTION ITEM 9.1
1. Annual Comprehensive Financial Report (ACFR):
The ACFR includes three basic sections, as follows:
Introductory Section
Introduces the City’s organization structure and formally transmits and presents the ACFR to the City Council and citizens. The transmittal letter provides information and insights related to the City reporting entity, economic condition and fiscal outlook, and the long-term financial planning process.
Financial Section
The financial section contains the auditors “unmodified” (clean) audit opinion for Fiscal Year 2022-23, Management’s Discussion and Analysis (MD&A), and a complete set of the basic financial statements. In addition, the financial section also includes:
• Notes to the financial statements;
• Required Supplementary Information; and
• Supplementary Information.
Management’s Discussion and Analysis (MD&A) provides a high level, summary discussion of major operating activity for both the Government-Wide Financial Statements (prepared on an accrual basis of accounting), the Governmental Fund Financial Statements (prepared on a modified accrual basis which is typically the basis for Council’s adoption of the annual budget), and the Proprietary and Fiduciary Fund Financial Statements (prepared on the accrual basis of accounting).
Information regarding the City’s CalPERS pension plans and funding status is disclosed in Note 9 to the financial statements, as well as, in the required supplementary information.
Statistical Section
This section includes 17 additional information reports, many of which present ten years of historical data. This information helps the reader understand the financial statements in a broader context with the use of historical statistical information.
A summary of the net change in fund balance and position reported in the FY 2022-23 ACFR is as follows:
General CIP Restricted
Fund Fund Funds
Net change in fund balance $ 5,314,520 $ 2,703,097 $ 6,501,688 Beginning fund balance 48,472,160 15,874,735 44,004,259 Ending fund balance $ 53,786,680 $ 18,577,832 $ 50,505,947 22 POLICY AND ACTION ITEM 9.1
Governmental
Water Garbage Total
Net change in net position $ 6,964,279 $ 139,035 $ 19,080,781 Beginning net position 16,008,467 1,362,473 175,769,073 Ending net position $22,972,746 $1,501,508 $ 194,849,854 Government-wide
Business-type
As mentioned above, high level discussion and analyses of the basic financial statements are available in the MD&A section (page 7) of the ACFR (attachment 2).
2. Measure A Fund Report
This financial statement reports the auditor’s examination of management’s assertion of compliance with the terms of use of the City’s share of Measure A Funds administered by San Mateo County Transportation Authority. Measure A is a half-cent sales tax dedicated towards transportation facilities, services, and programs. It was opined that the City complied with the terms.
3. Single Audit Report
This financial statement reports the audit results on mandated testing of the City’s federal grant expenditures in compliance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). An unmodified auditor’s report was issued for the single audit report.
4. Measure C Fund Report
This report is a separately issued financial statement of the City’s Measure C Special Revenue Fund, as required by the November 2006 local voter-approved Measure C parcel tax. An unmodified auditor’s report was issued for the Measure C report.
5. Measure HH Fund Report
This financial statement reports the audit results on the City’s Measure HH Special Revenue Fund, as required by the November 2018 local voter-approved Measure HH parcel tax. An unmodified auditor’s report was issued for the Measure HH report.
6. Measure W Fund Report
This financial statement reports the auditor’s examination of management’s assertion of compliance with the terms of use of the City’s share of Measure W revenues administered by San Mateo County Transportation Authority. Measure W is a half-cent sales tax to support countywide transportation projects and programs. It was opined that the City complied with the terms.
7. Report on Agreed-upon Procedures Applied to Appropriations Limit Schedule 23 POLICY AND ACTION ITEM 9.1
This report presents findings of the agreed upon procedures to assist the City in meeting requirements of Section 1.5 of Article XIIIB of the California Constitution, also known as the Gann Appropriations Limit for FY 2023-24. No exceptions were noted as a result of the auditor’s procedures.
Fiscal Impact
There is no fiscal impact for this item.
Public Notice
The public was provided notice by making the agenda and report available on the City’s website and on a bulletin board located at City Hall: 2415 University Avenue, East Palo Alto.
Environmental
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Resolution.
2. Annual Comprehensive Financial Report (ACFR)
3. Single Audit Report
4. Measure A Report
5. Measure C Financial Report
6. Measure HH Financial Report
7. Measure W Report
8. Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule (FY 2023-24)
9. Communication letter to Council
24 RESOLUTION NO. ______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO ACCEPTING AND DIRECTING STAFF TO FILE THE ANNUAL FINANCIAL REPORTS:
ANNUAL COMPREHENSIVE FINANCIAL REPORT (“ACFR”); AND THE SINGLE
AUDIT, MEASURE A, MEASURE C, MEASURE HH, AND MEASURE W FUND REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2023; AND THE REPORT ON
AGREED-UPON PROCEDURES APPLIED TO THE APPROPRIATIONS LIMIT SCHEDULE FOR FISCAL YEAR ENDING JUNE 30, 2024
WHEREAS, local government agencies are required by law to undertake an independent audit of the annual financial statements, and California Government Code Section 53891 requires each local agency to provide an annual report of financial transactions to the State Controller’s Office containing data from audited financial statements prepared in accordance with generally accepted accounting principles; and WHEREAS, the City of East Palo Alto (“City”) engaged the firm of Eide Bailly LLP as the City’s independent auditor; and
WHEREAS, the annual financial audit for fiscal year ended June 30, 2023 was conducted in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards issued by the Controller of the United States and/or other procedures were conducted in accordance with applicable attestation standards established by the American Institute of Certified Public Accountants and/or agreed-upon procedures, as applicable; and
WHEREAS, the City received auditor opinions as applicable on related auditor financial reports indicating such reports are fairly stated, in material respects, in conformance with the applicable standards for the ACFR, Single Audit, Measure A, Measure C, Measure HH, and Measure W reports; and that no opinion is required or issued for the Report on Agreed-upon Procedures Applied to the Appropriations Limit Schedule as such report is solely for Council and management information and use.
NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO hereby:
1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action;
2. Accepts the Annual Financial Reports, including the Annual Comprehensive Financial Report (“ACFR”), the Single Audit, Measure A, Measure C, Measure HH, and Measure W Fund Reports for the Fiscal Year ended June 30, 2023, and the Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule for Fiscal Year Ending June 30, 2024; and
3. Directs staff to file the annual financial reports with the State’s Financial Controller, as required by law.
25 PASSED AND ADOPTED this 9th day of January 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Antonio Lopez, Mayor
ATTEST: APPROVED AS TO FORM:
James Colin, City Clerk John D. Lê, City Attorney
26 27
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28 East Palo Alto, California
Annual Comprehensive Financial Report
For the year ended June 30, 2023
Prepared by:
Finance Department
29 City of East Palo Alto
Annual Comprehensive Financial Report
For the year ended June 30, 2023
Table of Contents
Page
INTRODUCTORY SECTION
Transmittal Letter................................................................................................................................................. i Directory of City Officials .................................................................................................................................vii Map of City’s Location .....................................................................................................................................viii Organization Chart............................................................................................................................................. ix GFOA Certificate of Excellence in Financial Reporting..................................................................................... x
FINANCIAL SECTION
Independent Auditors’ Report...........................................................................................................................1 Management’s Discussion and Analysis...........................................................................................................5 Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position ........................................................................................................................ 19 Statement of Activities ............................................................................................................................. 20 Fund Financial Statements:
Governmental Fund Financial Statements
Balance Sheet......................................................................................................................................... 22 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ........................................................................23 Statement of Revenues, Expenditures and Changes in Fund Balances ............................................. 24 Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances to the GovernmentWide Statement of Activities............................................................................................................. 25 Proprietary Fund Financial Statements:
Statement of Net Position..................................................................................................................... 27 Statement of Revenues, Expenses and Changes in Net Position........................................................ 28 Statement of Cash Flows....................................................................................................................... 29 Fiduciary Fund Financial Statements:
Statement of Fiduciary Net Position.................................................................................................... 31 Statement of Changes in Fiduciary Net Position................................................................................. 32 Notes to Basic Financial Statements .............................................................................................................. 33 30 City of East Palo Alto
Annual Comprehensive Financial Report
For the year ended June 30, 2023
Table of Contents, Continued
Page
FINANCIAL SECTION, Continued
Required Supplementary Information (Unaudited):
Budgets and Budgetary Accounting ............................................................................................................. 74 Budgetary Comparison Schedules:
General Fund................................................................................................................................................75 Housing in Lieu Special Revenue Fund .....................................................................................................76 Defined Benefit Pension Plan:
Schedule of the City's proportionate share of the Net Pension Liability ................................................. 77 Schedule of Contributions........................................................................................................................... 78 Supplementary Information:
Non-Major Governmental Funds:
Combining Balance Sheet ........................................................................................................................... 81 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................ 85 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:
NPDES Fees Special Revenue Fund........................................................................................................ 88 Gas Tax Special Revenue Fund ............................................................................................................... 89 Federal and State Law Enforcement Special Revenue Fund ................................................................. 90 Park in Lieu Special Revenue Fund ........................................................................................................ 91 Rent Stabilization Special Revenue Fund ............................................................................................... 92 Federal and State Grant Special Revenue Fund ..................................................................................... 93 Housing Assistance Special Revenue Fund............................................................................................ 94 Measure A Special Revenue Fund........................................................................................................... 95 CYSFF TOT Special Revenue Fund......................................................................................................... 96 Lighting District Special Revenue Fund................................................................................................. 97 Drainage District Special Revenue Fund................................................................................................ 98 Measure C Special Revenue Fund........................................................................................................... 99 Local Grants Special Revenue Fund.......................................................................................................100 Silicon Valley Community Foundation Special Revenue Fund............................................................101 Low- and Moderate-Income Housing Special Revenue Fund.................................................................102 Housing TOT Special Revenue Fund.....................................................................................................103 Measure HH Special Revenue Fund......................................................................................................104 Measure W Special Revenue Fund.........................................................................................................105 ARPA Special Revenue Fund .................................................................................................................106 31 City of East Palo Alto
Annual Comprehensive Financial Report
For the year ended June 30, 2023
Table of Contents, Continued
Page
STATISTICAL SECTION (Unaudited)
Net Position by Component – Last Ten Fiscal Years...................................................................................110 Changes in Net Position – Last Ten Fiscal Years .........................................................................................112 Fund Balances of Governmental Funds – Last Ten Fiscal Years ................................................................112 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years.............................................113 Assessed Value of Taxable Property – Last Ten Fiscal Years .....................................................................114 Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years .........................................................115 Principal Property Tax Payers – Current Year and Nine Years Ago..........................................................116 Property Tax Levies and Collections – Last Ten Fiscal Years.....................................................................117 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years .....................................................................118 Computation of Direct and Overlapping Debt............................................................................................119 Computation of Legal Bonded Debt Margin - Last Ten Fiscal Years .........................................................120 Bonded Debt Pledged-Revenue Coverage – Last Ten Fiscal Years ............................................................121 Demographic and Economic Statistics – Last Ten Fiscal Years ..................................................................122 Principal Employers – Last Fiscal Year and Six Years Ago.........................................................................123 Number of Positions – City Government by Function – Last Ten Fiscal Years.........................................124 Operating Indicators by Function – Last Ten Fiscal Years..........................................................................125 Capital Asset by Function – Last Ten Fiscal Years. .....................................................................................126 32 INTRODUCTORY SECTION
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34 i
December 22, 2023
CITY OF EAST PALO ALTO
DEPARTMENT OF FINANCE
Letter of Transmittal
Honorable Mayor Lisa Gauthier
Honorable Members of the City Council Residents
of the City of East Palo Alto, California
THE ANNUAL COMPREHENSIVE FINANCIAL REPORT
OF THE CITY OF EAST PALO ALTO
We are pleased to present the Annual Comprehensive Financial Report (ACFR) of the City of East Palo Alto for the fiscal year ended June 30, 2023. It is the policy of the City of East Palo Alto to annually publish financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by an independent firm of certified public accountants. This ACFR report is published to fulfill that requirement.
Management assumes full responsibility for the accuracy of the information contained in this report. We believe this ACFR to be complete and reliable in all material respects. In order to provide a reasonable basis for making this representation, we have established a comprehensive framework of internal controls designed to protect the City’s assets from loss, theft, or misuse and to record and compile the information necessary to produce financial statements in conformity with generally accepted accounting principles. Since the cost of internal controls should not exceed the anticipated benefits, the objective is to provide reasonable rather than absolute assurance that the financial statements are free of any material misstatements.
The City’s financial statements have been audited by an independent firm of Certified Public Accountants, Eide Bailly LLP, licensed to practice in the State of California. The auditors expressed an opinion that the City’s financial statements for the year ended June 30, 2023 are fairly stated in conformity with accounting principles generally accepted in the United States. This is the most favorable conclusion and is commonly known as an “unmodified” opinion. The auditor’s report is in the Financial Section of this report.
Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management’s Discussion & Analysis (MD&A). The MD&A is designed to complement this letter of transmittal and should be read in conjunction with it. The MD&A can be found immediately following the report of the independent auditors.
35 ii
REPORTING ENTITY
The City of East Palo Alto was incorporated in 1983 and is in San Mateo County in the Greater San Francisco Bay Area. It is in a desirable setting and is situated among three major metropolitan cities: San Jose, Oakland, and San Francisco. East Palo Alto currently occupies 2.5 square miles and has a population of 28,586.
East Palo Alto operates under a Council-Manager form of government. Policy-making and legislative authority are vested in the governing body (City Council) consisting of the Mayor, the Vice-mayor and three other members. The City Council appoints the government’s Chief Executive Officer (known as City Manager), who in turn appoints the Directors of City departments; except for the City Attorney who is also appointed by the City Council. City Council members are elected by voters to serve overlapping four-year terms. The Mayor and Vice-Mayor are appointed by majority vote of the City Council on an annual basis to serve a one-year term. There are currently four Advisory Boards and Commissions that are appointed by the City Council: Rent Stabilization Board, Planning Commission, Public Works and Transportation Commission, and Senior Advisory Board.
The City of East Palo Alto provides a range of basic municipal services. These services include public safety police services, public works and maintenance, limited parks and recreation activities, building, planning and zoning, housing and rent stabilization services, community development, streetlighting, drainage, refuse collection, infrastructure construction, and general administrative services. The City also provides community grant programs to support community and social- services organizations.
The ACFR includes all funds of the City, as well as all governmental organizations and activities for which the City Council has financial and/or fiduciary accountability. The Council serves in separate session as the governing body of the East Palo Alto Public Financing Authority; and, the Successor Agency to the former Redevelopment Agency of the City of East Palo Alto, for which it has fiduciary responsibility. 36 iii
ECONOMIC CONDITION AND FISCAL OUTLOOK
The U.S. economy, as measured by real GDP, has expanded at an estimated 2.0 to 2.4% annualized pace through the first half of the calendar year 2023. While business sentiment was downbeat and business investment (inventory and equipment) was slow to start the year, there are indications this is turning the corner. Consumer spending– which drives 65% of GDP - has been resilient throughout. If consumer spending moderates as we expect in the second half, growth could slow to low levels by early next year. We project real GDP to expand at a 2% pace in the second half of 2023 and 0.5% for the first half of 2024. Monetary policy has been restrictive for several months now, and it’s expected the hiking cycle is nearing the end. The Fed has raised rates a sharp 525bp since March 2022 to a 5.25-5.5% target range, marking one of the steepest hiking cycles in four decades. It’s expected the Fed to be on hold through the middle of next year, provided inflation continues on its downward glide path. Inflation is moving in the right direction, lower, but has proven to be more persistent than expected through the first half of the year. It’s speculated gradual improvement in inflation over the coming months, though a return to the Fed’s targeted 2% level could take until late 2024.
The City’s resident population has remained stable but has been in a slight downward trend over the past five years, with an average of approximately 29,838. Labor markets remain tight. However, the City’s unemployment rate slightly rose from 2.3% to 2.9% as of June 30, 2022 and June 30, 2023, respectively.
Overall, Bay Area housing market is seeing fewer transactions, with the number of Bay Area sales dropping by
3.9% as of October 2023 comparing year by year. Bay Area home prices peaked in the spring of calendar year 2022 and had been trending downwards as of June 30, 2023. However, inventory remains tight, which is keeping prices elevated and prices ticked up slightly in most Bay Area counties from September to October 2023. San Mateo County median sold price is approximately $2.1 million and year-over-year change in housing price rose about 10.5%with in the County.
Property taxes, which are based on assessed values, are one of the City’s largest sources of revenue, accounting for approximately 51% of the City’s General Fund revenues. Assessed property values in fiscal year 2022-23 total $4.1 billion. The year-over-year increase is 9.8% compared to a 3.4% increase in the prior year. Property tax revenues were $19.9 million – an increase of 25.6% compared to the prior fiscal year due primarily to a significant increase in property tax in lieu of VLF for $2.6 million and an increase from the tax increments of the former RDAs for $1.2 million. Proposition 13, which governs property taxation in California, ties the annual inflation factor to the California Consumer Price Index (CCPI) issued by the California Industrial Relations Board and limits annual inflation increases of assessed value to no more than 2%. This year an annual inflation factor of 2.0% was applied to the 2022-23 assessed value of all real property that did not have a change in ownership or any new construction during 2022. Long- term growth potential remains highly positive due to undeveloped land in the Ravenswood Business District, unprecedented development planning activity, consolidation of industrial properties in the Ravenswood Business District, strategies to develop affordable housing, and incentives to intensify housing densities. The City is engaged in addressing the infrastructure, transit, environmental, and community impact challenges and opportunities attendant with the sustained interest in development. Solving these challenges increases the potential gap of time between project proposal and completion. 37 iv
Sales tax revenues have completely recovered from the revenue loss due to the pandemic in the fiscal year 2022-23 with an increase of 11.4% compared to the prior year, exceeding $0.5 million from the highest point of the pre-pandemic figure in the fiscal year 2018-19.
Compared to the pre-pandemic level of $3.0 million from the fiscal year 2018-19, Transient Occupancy Tax (TOT) revenues were $2.2 million in the fiscal year 2021-22; approximately 73% recovery from the prepandemic figure. Although we expect some recovery in the TOT revenues in the future years, the trend in the business meeting culture appears to be suppressing the recovery.
The City is focused on socially progressive milestones to support a vibrant, diverse community and workforce. The 2018 Measure HH special parcel tax generated approximately $1.7 million in additional annual taxes for affordable and supportive housing and for programs that facilitate resident access to job opportunities.
LONG TERM FINANCIAL PLANNING
As part of the strategic resource and budget planning process, management presents a multi-year financial projection to the City Council. The projection provides Council with the opportunity to plan for the management of financial resources and to address forecasted financial challenges. Maintaining a sustainable budget and prudent fiscal planning is a key strategic priority of the Council supported by citizen survey.
The financial plan also calls for the City to exercise financial “best practices,” including achieving a targeted General Fund contingency reserve of 30% of the adopted General Fund expenditure budget. The purpose of the reserve is to provide the City with fiscal capacity for responding to emergencies and economic uncertainties and vulnerabilities, thereby minimizing the impact on service levels to the community during such challenging times. Current reserve and unassigned reserve levels exceed the established minimum reserve level.
We also note that California cities are subject to limits on the proceeds of taxes that may be appropriated for spending in a given fiscal year (i.e. the GANN Limit). While voters may approve an override of such limits, it is anotherimportant long-term planning factor to considerin long-term strategic resource planning.
FINANCIAL POLICIES AND INFORMATION
Budgetary Controls
The City Council is required to adopt a budget on an annual basis which is passed by June 30th of each year.
In compliance with the City’s municipal ordinance, the Council adopted the Fiscal Year 2022-23 budget through a public hearing process conducted during June 2022. The budget serves as the foundation for the City of East Palo Alto’s financial planning and control. The budget is prepared by fund and division. Unless mandated by regulation, transfers between funds are approved by City Council.
The City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the Adopted Budget and approved by the City Council. The level of control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the fund level. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control.
38 v
Financial Policies
The City has financial policies related to revenue and expenditure administration, reserve management, grants and debt management, cash and investments, and other financial policies.
Major Initiatives
The City developed majorinitiatives forthe yearthrough the budget planning process and with the guidance of the City Council as articulated through its Strategic Priorities process, as follows:
Promote Housing, Economic and Workforce Development: includes goals to implement Measure HH employment and First Source Hiring Programs and affordable housing strategy, to provide assistance to small local businesses, to investigate potential ballot measure to support affordable housing, and to create an Economic Development Strategy with focus on small/micro businesses.
Implement the Comprehensive Transportation and Mobility Plan: includes goals to develop a Comprehensive Transportation and Mobility Plan, to expand pedestrian/bicycle facilities and interconnectivity, to begin construction of the University Overpass Project, to investigate University Avenue Improvements/Changes, and to analyze funding strategies for public infrastructure including streets, parks and utilities.
Promote Health and Public Safety: includes goals to effectively respond to the COVID-19 pandemic, to enhance flood protection for residents, businesses, and property owners, and to resolve Sanitation District incorporation matter.
Ensure Our Financial and Organizational Health: includes goals to address structural deficit through fiscal resiliency measures, to develop 10-year financial projections, to plan and implement an Enterprising Resource Planning (ERP) System, to focus on staff morale, retention, recruitment and succession planning, and to analyze funding strategies for and community perspectives on public infrastructure improvements.
Improve the City's Water Infrastructure: includes goals to improve operations and infrastructure of water system, to advance key water infrastructure projects, and to finalize Veolia lease negotiations.
Develop and Implement a Comprehensive Facilities Master Plan: includes goals to complete the City’s Comprehensive Facilities Master Plan, to investigate potential options for developing County vacant property located on Beech Street, to coordinate with the County Library District regarding the potential new library in East Palo Alto, to develop a detailed strategy for the location of the future police department, and to complete the City Hall tenant improvement project.
Enhance Community Services and Parks for Residents: includes goals to foster community cultural events and activities, to complete a Parks Master Plan, to complete a Information Technology Strategic Plan, and to engage with community and partner agencies to improve educational resources and outcomes. 39 vi
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded the Certificate of Achievement for Excellence in Financial Reporting to the City for its Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2022. This is the fourteenth consecutive year the City has achieved this prestigious award. To qualify for the Certificate of Achievement, the governmental entity must publish an easily readable and efficiently organized ACFR, in conformance with program standards. The report also must satisfy generally accepted accounting principles as well as all applicable legal requirements.
The Certificate of Achievement is valid for one year only. The City believes the ACFR conforms to the GFOA Certificate of Achievement Program and will submit the report to the GFOA for consideration of the annual award.
The preparation of the ACFR was made possible by the dedicated staff of the Finance Department. Sincere appreciation is extended to those staff - each of whom demonstrated exemplary personal dedication and professionalism during this process.
The Finance Department wishes to express our sincere appreciation to the City Council for providing policy direction and support for the pursuit of excellence in attaining the City’s goals.
Sincerely,
Tomohito Oku
Finance Director
40 vii
CITY OF EAST PALO ALTO
DIRECTORY OF OFFICIALS
City Council
Lisa Gauthier Mayor
Antonio López Vice Mayor
Carlos Romero Council Member
Ruben Abrica Council Member
Regina Wallace-Jones Council Member
Administration
Melvin Gaines City Manager
Vacant Assistant City Manager
John Le City Attorney
Marie McKenzie Administrative Services Director
Tomohito Oku Finance Director
Jeff Liu Police Chief
Humza Javed Public Works Director
Amy Chen Community & Economic Development Director
41 viii 42
ix 43
x
44 FINANCIAL SECTION
45 What inspires you, inspires us. | eidebailly.com
4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 Independent Auditor’s Report
To the honorable members of the City Council
of the City of East Palo Alto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of East Palo alto (City) as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2023, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City 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.
Responsibilities of Management for the Financial Statements 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.
46 2
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’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.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.
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.
47 3
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management Discussion and Analysis, the Budgetary Comparison Schedules for the General Fund and each Major Special Revenue Fund, the Schedule of the City's Proportionate Share of the Net Pension Liability and the Schedule of Contributions be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Non-Major Governmental Funds Combining Balance Sheet, Combining Statement of Revenues, Expenditures and Changes in Fund Balances, the nonmajor funds’ Schedules of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual and the Schedule of Revenues and Expenditures – Local Retail Transactions and Use tax are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Non-Major Governmental Funds Combining Balance Sheet, Combining Statement of Revenues, Expenditures and Changes in Fund Balances, the nonmajor funds’ Schedules of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual and the Schedule of Revenues and Expenditures – Local Retail Transactions and Use tax are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. 48 4
In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2023 on our consideration of the City’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 City’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 City’s internal control over financial reporting and compliance.
Menlo Park, California
December 22, 2023
49 MANAGEMENT'S DISCUSSION AND ANALYSIS
5 This section of the City’s Annual Comprehensive Financial Report presents a narrative overview and analysis of the City’s financial activities for the fiscal year ended June 30, 2023. We advise readers to consider the information presented here in conjunction with the accompanying transmittal letter and basic financial statements.
FISCAL YEAR 2022-23 FINANCIAL HIGHLIGHTS
Government-wide Statements
• Total net position equals $219.3 million, an increase of $26.2 million over the prior year balance of $193.1 million. The increase is comprised of $19.1 million in governmental activities and $7.1 million in business-type activities.
• Total revenues equal $65.7 million compared to $48.5 million in the prior year; an increase of $17.2 million. Of the total $65.7 million revenues reported, $61.1 million was generated by governmental activities, and$4.6million was generatedby business-type activities. The net increase of $17.2 million is primarily due to increased operating grants and contributions ($10.1M), investment earnings ($5.0M), and property tax revenues ($4.1M) offset by a decrease in capital grant and contributions ($3.6M).
• Total expenses equal $39.5 million compared to $32.9 million in the prior year; an increase of $6.7 million. Of the total $39.5 million expenses reported, $35.8 million is reported in governmental activities and $3.8 million is reported in business-type activities. The significant increases were noted for $2.2 million in the community development, $1.9 million in the public safety, and $1.5 million in the general government.
Governmental Fund Statements
• Total governmental fund balances equal $122.9 million, an increase of $14.5 million over the prior year balance of $108.4 million. Of the total $122.9 million balance, $90.3 million is comprised of nonspendable, restricted, committed, and assigned balances; and $32.6 million is unassigned balances. • General Fund total fund balance equals $53.8 million, an increase of $5.3 million over the prior year fund balance of $48.5 million. The net change is comprised of $38.7 million revenues offset by $30.7 million expenditures and $2.7 million net other financing uses. Net other financing uses are primarily for major capital projects and subsidies provided to special revenue funds. 50 MANAGEMENT'S DISCUSSION AND ANALYSIS
6 OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT Government-wide Financial Statements
The government-wide financial statements are designed toprovide the readers with a broadview of the City’s finances on a similar reporting basis as a private-sector business.
Statement of Net Position: Presents information on all the City’s assets, liabilities and deferred inflows/outflows with the difference reported as net position. Over time, the change in net position may serve as a useful indicator of whether the financial position of the City is improving or declining.
Statement of Activities: Presents information reflecting how the City’s net position changed during the most recent fiscal year. All changes in net position are reported in the period the event giving rise to the change occurs, regardless of timing ofrelated cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flow in future fiscal periods. Non-financial factors, such as changes in the City's property tax base and the condition of the City's infrastructure must be considered to properly assess the overall financial health of the City.
In the Statement of Net Position and the Statement of Activities, activities are divided into two types:
• Governmental activities - Most of the City's basic services are reported here, including police, public works, community development, and general administration. Taxes, user fees, and state and federal grants finance most of these activities.
• Business-type activities - The City charges a fee to cover all or most of the cost of certain services it provides. The City's water system and residential garbage collection services are reported in this activity.
Fund Financial Statements
A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other State and local governments, uses fund accounting to ensure and demonstrate financial compliance with legal requirements. Fund financial statements also report the City's operations in more detail than the government- wide statements by providing information about the City's most significant funds.
The fund financial statements provide detailed information about the most significant funds, called major funds. Some funds are required to be established by State law and by bond covenants. However, the City establishes many other funds to help control and manage funds for particular purposes (such as the Capital Improvements Fund) or to show that it is meeting legal responsibilities for using certain taxes, grants, and other monies (such as grants received from the Federal government). The City reports the following major funds: General Fund and Capital Improvements Fund. The remaining non-major funds of the City are summarized and presented in a single column. The City's different types of funds – governmental, proprietary, and fiduciary - use different accounting approaches. 51 MANAGEMENT'S DISCUSSION AND ANALYSIS
7 • Governmental funds - Most of the City's basic services are reported in the governmental funds, where the focus is on howmoney flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near-term to finance the City's programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is described in detail in a reconciliation located after each of the fund financial statements. • Proprietary funds - the City maintains only one type of proprietary funds, enterprise funds, which are used to report the same functions presented as business-type activities in the government-wide financial statements but provide more detail and additional information, such as a statement of cash flows. The City uses enterprise funds to account for activities related to water system and garbage collection services.
• Fiduciary funds – the City maintains a Private Purpose Trust Fund to account for the activity of the former Redevelopment Agency of the City of East Palo Alto. The City’s fiduciary activities such as the Successor Agency are reported in a separate Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position. The accounting basis used for fiduciary funds is comparable to the proprietary funds. These activities are excluded from the City’s other financial statements because the City cannot use the assets to finance its own operations.
Notes to the Financial Statements
The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
The City provides two-year comparative financial information for the Government-wide financial statements.
Net position serves as a useful indicator of a government’s financial position. 52 MANAGEMENT'S DISCUSSION AND ANALYSIS
8 Analysis of Net Position
Government-wide assets ($238.9M) and deferred outflows ($7.7M) exceed liabilities ($26.8M) and deferred inflows ($0.5M) by $219.3 million on June 30, 2023. A significant portion of assets ($88.4M) are comprised of capital assets and are not available to pay current and future liabilities of the City. The following table is a summary of the government-wide net position for both governmental and business-type activities:
2023 2022 2023 2022 2023 2022 Assets Current and other assets $ 133,891 $ 123,956 $ 16,605 $ 9,353 $ 150,496 $ 133,309 Capital assets 76,367 69,862 12,072 12,081 88,439 81,943 Total assets 210,258 193,818 28,677 21,434 238,935 215,252 Deferred Outflows of Resources Deferred pension outflows 7,670 3,963 68 - 7,738 3,963 Total deferred outflows 7,670 3,963 68 - 7,738 3,963
Liabilities Current and other liabilities 4,901 7,568 967 841 5,868 8,409 Noncurrent liabilities 17,644 9,959 3,299 3,222 20,943 13,181 Total liabilities 22,545 17,527 4,266 4,063 26,811 21,590 Deferred Inflows of Resources Deferred inflows - pension 534 4,485 5 - 539 4,485 Total deferred inflows 534 4,485 5 - 539 4,485
Net Position Net investment in capital assets 74,583 67,982 11,212 11,348 85,795 79,331 Restricted 58,078 52,681 5,589 1,944 63,667 54,625 Unrestricted 62,189 55,106 7,673 4,079 69,862 59,185 Total net position $ 194,850 $ 175,769 $ 24,474 $ 17,371 $ 219,324 $ 193,141
STATEMENT OF NET POSITION
(Dollars in thousands)
Governmental Activities Business-Type Activities Total
53 MANAGEMENT'S DISCUSSION AND ANALYSIS
9 Net Position – Governmental Activities
Total governmental activities assets of $210.3 million consist of current and other assets of $133.9 million and capital assets of $76.4 million. Total governmental activities assets increased $16.4 million and is comprised of increases in current and other assets ($9.9M) and capital assets ($6.5M).
Deferred outflows of $7.7 million consists of $2.4 million deferred employer pension contributions paid after the pension liability measurement date and $5.2 million of other pension valuation factors.
Total liabilities of $22.5 million consist of $4.9 million current liabilities and $17.6 million non- current liabilities. Of the non-current liabilities, the most significant portion ($14.6M) relates to net pension liability.
Total governmental activities liabilities increased $5.0 million primarily due to an increase in in net pension liability ($8.1M) offset by a decrease in accounts payable ($2.9M).
Deferred inflows of $0.5 million also relate to GASB 68 due primarily to net differences between projected and actual contributions.
Of the $194.9 million governmental activities net position, $74.6 million (38.3%) represents capital assets net of related debt. The City uses capital assets, such as roadways, storm drains, lighting, parks, and other infrastructure to provide services to residents; therefore, the assets do not provide cash liquidity to pay liabilities. Historically, the City has not issued a significant amount of debt to finance capital assets primarily due to a former focus on redevelopment contracts, grant-funded projects, and a lack of significant capital assets available for leveraged leaseback activity.
Total restricted net position equals $58.1 million (29.8%). Such amounts relate to resources subject to external restrictions on how they may be spent by the City. The restricted balance relates to local and county special taxes, tax districts, capital and grant agreements, housing funds, and other restricted uses. Total unrestricted net position equals $62.2 million (31.9%); however, a significant portion of the unrestricted balances are not liquid or are committed for capital projects and other intended uses.
Net Position - Business-type Activities
Business-type activities assets of $28.7 million consist of current and other assets of $16.6 million and capital assets of $12.1 million. Of the $16.6 million in current and other assets, approximately $2.2 million relates to garbage collection, and $14.4 million relates to water services, a significant portion of which is committed for capital infrastructure replacement. All capital assets are comprised of water-services infrastructure.
Business-type liabilities of $4.3 million primarily consist of garbage collection accounts payable ($0.7M) and amounts advanced from developers in connection with certain water service implementation agreements ($2.5M).
54 MANAGEMENT'S DISCUSSION AND ANALYSIS
10 Net position of $24.5 million includes $11.2 million of capital assets net of related debt, $5.6 million in restricted for capital projects, and $7.7 million in unrestricted net position. Unrestricted net position increased $3.6 million over the prior year due primarily to transfers from various funds to support a specific water infrastructure project.
Analysis of Statement of Activities
The statement of activities reports the change in government-wide net position during the fiscal year. The following table indicates the changes in net position for governmental and business-type activities compared to the previous year. The City’s government-wide net position increased $26.2 million as further described on the following pages.
55 MANAGEMENT'S DISCUSSION AND ANALYSIS
11 2023 2022 2023 2022 2023 2022 Revenues
Program revenues: Charges for services $ 2,904 $ 3,609 $ 4,221 $ 4,162 $ 7,125 $ 7,771 Operating grants & contributions 15,917 5,611 - 187 15,917 5,798 3,414 6,783 45 291 3,459 7,074 General revenues:
Property taxes 20,958 16,882 - - 20,958 16,882
Sales taxes 6,395 5,738 - - 6,395 5,738 Utility user tax 1,936 1,631 - - 1,936 1,631 2,224 1,448 - - 2,224 1,448
1,769 1,270 - - 1,769 1,270 Other taxes 1,783 2,125 - - 1,783 2,125 Investment Earnings 2,297 (2,010) 351 (298) 2,648 (2,309) Miscellaneous 1,487 1,238 - (141) 1,487 1,098 Total revenues 61,084 44,325 4,617 4,201 65,701 48,526
Expenses
Program expenses: General government 7,264 5,780 - - 7,264 5,780 Public safety 13,159 11,242 - - 13,159 11,242
Public works 5,996 5,275 - - 5,996 5,275 Culture and recreation 2,170 1,823 - - 2,170 1,823 Community development 7,099 4,943 - - 7,099 4,943 Water services - - 814 1,055 814 1,055 Garbage collection - - 2,940 2,789 2,940 2,788 Interest on long-term debt 74 7 - - 74 7
Total expenses 35,762 29,070 3,754 3,844 39,516 32,913 Excess before transfers or special items 25,322 15,255 862 357 26,183 15,613
Transfers (6,241) - 6,241 - - -
Change in Net Position 19,081 15,255 7,104 357 26,183 15,613 Net Position - Beginning 175,769 160,514 17,371 17,014 193,141 177,528 Net Position - Ending $ 194,850 $ 175,769 $ 24,475 $ 17,371 $ 219,324 $ 193,141
STATEMENT OF ACTIVITIES
(Dollars in thousands)
Governmental Activities Business-Type Activities Total
Capital grants & contribution
Transient Occupancy tax
Business taxes
56 MANAGEMENT'S DISCUSSION AND ANALYSIS
12 Statement of Activities – Governmental
Governmental activities change in net position equals $19.1 million compared to prior year net change of $15.3 million; an increase of $3.8 million. A depiction of sources and types of governmental activities revenues and expenses are illustrated in the following charts:
Charges for
services, 5%
Grants &
Contributions, 32%
Property taxes, 34%
Sales taxes, 10%
Utility user tax, 3%
Transient
Occupancy tax, 4%
Business License
tax, 3%
Other Taxes, 3%
Other revenues, 6%
Governmental Activities
Revenues by Source
General government
20%
Public safety
37%
Public works
17%
Culture and
recreation
6%
Community
development
20%
Interest on long-term debt
0%
Governmental Activities
Expenses by Type
57 MANAGEMENT'S DISCUSSION AND ANALYSIS
13 Statement of Activities - Governmental, continued
• Total revenues before transfers equal $61.1 million; an increase of $16.8 million (37.8%) over the prior year revenues of $44.3 million. The increase in revenues is primarily comprised of increases in operating grants and contributions ($10.3M), property tax revenues ($4.1M) and investment earnings ($4.3M) offset by a decrease in capital grants and contributions ($3.4M). The increase in operating grants and contributions are primarily attributable to a one-time award of the HCD affordable housing grant ($8M). The increase in property tax revenues is due mainly from an increase in property tax in lieu of VLF ($2.6M) and an increase from the tax increments of the former RDAs ($1.2M). The increase in investment earnings is primarily due to higher interest earnings as a result of the feds interest rate hike. The decrease in capital grants and contributions are directly related to a decrease in reimbursement requests submitted to the granting agencies related to major capital project.
• Total expenses equal $35.8 million, an increase of $6.7 million (23%) over the prior year expenses of $29.1 million. The increase in expenses is primarily come from community development ($2.2), public safety ($1.9M), and general government ($1.5M). Of the $2.2 million increase in community development, $1.7 million is related to local match funding contributions to the Housing Endowment and Regional Trust of San Mateo County (HEART) to support an affordable housing project. The increases in public safety and general government are primarily due to increases in personnel costs including pension expenses.
Statement of Activities - Business-type
• Business-type activities change in net position totaled $7.1 million compared to previous fiscal year of $0.4 million. The difference in change in net position is primarily comprised of water services ($6.7M).
• Total revenues before transfers equal $4.6 million, an increase of $0.4 million from prior year revenues of $4.2 million. The change mainly consists of an increase in investment earnings ($0.7M), offset by decreases in operating grants and contributions ($0.2M) and capital grants and contributions ($0.2M).
• Total expenses before transfers equal $3.8 million which has barely changed from the prior year as there was no significant change in the enterprise operations.
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
58 MANAGEMENT'S DISCUSSION AND ANALYSIS
14 Governmental Funds
The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of resources that are available for spending. Such information is useful in assessing the City’s financing requirements. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, and Capital Project Funds.
At June 30, 2023, the City’s governmental funds reported combined fund balances of $122.9 million, an increase of $14.6 million in comparison with the prior year. Of this amount, $32.6 million, or 26.5%, constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance is either nonspendable, restricted, committed, or assigned to indicate that it is (1) not in spendable form or not spendable because it is legally required to be maintained intact, $2.9 million; (2), restricted for particular purposes, $52.0 million; (3) committed for particular purposes, $22.3 million; or (4) assigned for particular purposes, $13.1 million.
Analysis of Individual Funds
The general fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the general fund was $32.8 million, while total fund balance increased to $53.8 million. The remaining fund balance consists of nonspendable ($2.9M), restricted ($0.04M), committed ($11.8M), or assigned ($6.2M). As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures. Unassigned fund balance represents 107% of total general fund expenditures, while total fund balance represents 176% of that same amount.
The fund balance of the City’s general fund increased by $5.3 million during the current fiscal year. The increase was due primarily to a combination of the increases in various revenue categories including property tax revenues ($4.0M), investment earnings ($2.2M), grants and intergovernmental ($1.8M), sales tax ($0.7M) and TOT revenues ($0.6M) offset by a notable increase in public safety personnel costs ($3.4M) in the general fund. It’s because significant amount of police department personnel costs were partially funded by and accounted in ARPA fund in the prior year whereas the current year allocation to ARPA fund of such costs was reduced to $0.9 million. The current year revenues over the expenditures before transfers was reported at $8.0 million, no notable change from the prior year.
The capital projects fund, a major fund, had a $2.7 million increase in fund balance during the current fiscal year which put the overall fund balance to $18.6 million. The fund reports an assigned fund balance, $6.9 million comprised of encumbrances, restricted by funding sources for $1.3 million, and committed, $10.4 million for flood preventative projects and other capital projects. The increase in fund balance was caused mainly by a timing difference between the revenues and expenditures related to reimbursement basis capital grants; the City received approximately $4.0 million from such grant reimbursements in the current year compared to the previous year receipt of $0.6 million. Depending on the timing, however, those grant reimbursements are typically for the capital expenditures incurred in the previous year. 59 MANAGEMENT'S DISCUSSION AND ANALYSIS
15 The housing in-lieu fund, a major special revenue fund, had a $6.7 million increase in fund balance during the current fiscal year which increased the ending fund balance to $13.3 million. The entire fund balance is classified as restricted fund balance. The primary reason for the increase is directly related to a one-time contribution from the State HCD to support an affordable housing project for $8.0 million offset by a related transfer of $1.5 million. The remaining funds, $6.5 million, are scheduled to be expended in the next fiscal year.
Proprietary Funds
The City’s proprietary funds provide the same type of information found in the business‐type activities portion of the government‐wide financial statements, but in more detail. Unrestricted net position of the water service fund at the end of the year was $6.2 million and for the garbage collection was $1.5 million.
The total growth in net position for each of the funds was $7.0 million and $0.1 million, respectively. As noted earlier in the discussion of business‐type activities, the difference in change in net position in the water service fund is due primarily to transfers from various funds to support an upcoming water infrastructure project.
GENERAL FUND BUDGETARY HIGHLIGHTS
Total adopted revenues (before transfers) of $29.4 million increased $9.3 million to final amended revenues of $38.7 million. Major revenue amendments include increases in property tax revenues ($3.2M), grants and intergovernmental ($2.7M), miscellaneous revenues ($2.3M), TOT revenue ($0.5M), and investment incomes ($0.4M). The change in property tax revenue was mainly reflected on a new positive finding related to a projected shortfall and the state backfill of property tax in lieu of VLF revenues. The change of miscellaneous revenue projection was due to expected changes in developer reimbursements. The TOT revenue projection was amended due to a more than expected recovery from the pandemic. The change of investment income projection was directly related to the positive fixed income market trends as a result of the series of federal interest rate hikes. The amendments also include an increase in grants and intergovernmental related to a one-time contribution received from the County for the library project ($1.8M).
Total adopted expenditures (before transfers) of $28.5 million increased $9.7 million to final amended expenditures of $38.2 million. The amendment is due mainly to a combination of the encumbrances carried forward from the previous year ($2.2M) and the purchase of a parcel for the future library location ($3.3M). 60 MANAGEMENT'S DISCUSSION AND ANALYSIS
16 Following are the main components of the differences between final amended budget and actual results:
• Actual revenues total $38.7 million, approximately equal to the amended budget of $38.7 million.
On an individual revenue category basis, however, there are some differences between the actual results and the amended budget throughout several revenue categories; all actual tax revenue categories exceeded the respective amended budget totaling $2.0 million. The excess of actual tax revenues is primarily due to conservative approach in projection due to the lingering impact from pandemic and the potential recession concerns. Additionally, the overperforming revenues are offset by unexpected shortages in some revenue categories such as charges for services ($0.4M), miscellaneous revenues ($1.4M), grants and intergovernmental ($0.8M). • Actual expenditures total $30.7 million, approximately $7.5 million less than the amended budget of $38.2 million. Of this amount, approximately $3.7 million is due to staff vacancy savings; $1.7 million is due to planned but incomplete professional and technical services across departments.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The capital assets for governmental and business-type activities balance as of June 30, 2023, total $88.4million (net of accumulated depreciation/amortization), a net increase of $6.5 million (7.9%) over the prior year.
Almost all of the increase is attributable from governmental activities. Total capital assets include land, construction in progress, buildings and improvements, machinery and equipment, and infrastructure.
Capital assets, net of accumulated depreciation and amortization, for the governmental and business-type activities are as follows:
2023 2022 2023 2022 2023 2022
Land $ 7,319 $ 4,059 $ 5,264 $ 5,264 $ 12,582 $ 9,323
Buildings and Improvements 20,267 20,252 11,212 11,212 31,479 31,464 Right-to-use Buildings 2,307 2,307 127 127 2,434 2,434 Construction in Progress 6,601 2,035 1,144 842 7,745 2,877 Furnishings & Equipment 2,269 2,183 - - 2,269 2,183 Vehicles 3,062 2,984 - - 3,062 2,984 Street and Roadways 80,594 78,985 - - 80,594 78,985
Storm Drain System 6,738 6,738 - - 6,738 6,738
Less: Accumulated Depreciation (52,790) (49,680) (5,675) (5,364) (58,464) (55,044) Total $ 76,367 $ 69,863 $ 12,072 $ 12,081 $ 88,439 $ 81,944 June 30, 2023
(Dollars in thousands)
Governmental Activities Business-Type Activities Total
61 MANAGEMENT'S DISCUSSION AND ANALYSIS
17 Major capital assets events during the current fiscal year included the following:
Governmental Activities
Capital assets increased $6.5 million and is primarily comprised of $4.6 million construction in progress related to street and roadways, $1.5 million additions to newly completed street and roadways, and $3.3 million acquisition of the future library parcel offset by $3.1 million depreciation expenses.
Business-Type Activities
Capital assets has barely changed from the prior year in the business-type activities. There were small additions to construction in progress related to water infrastructure and water meter projects ($0.3M) offset by depreciation expenses ($0.3M).
For government-wide financial statements presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year utilizing a half-year convention. Fund financial statements record capital assets purchases as expenditures. The City’s infrastructure assets are recorded at historical cost in the government-wide financial statements as required by GASB Statement No. 34.
Additional information about capital assets can be found in Note 5 to the financial statements.
Debt Administration
Historically, the City has engaged in limited debt-financing activity due to reliance on outside grant and former redevelopment funding for major infrastructure improvements. This is due to several factors, including that the City owns minimal property assets that are easily debt-leveraged, and has not engaged in ad valorem or assessment district funding or other parcel tax-related capital funding since Redevelopment dissolution. Additionally, with the dissolution of the former RDA, the Successor Agency fiduciary fund assumed the long-term term debt of the former RDA.
Business-type debt consists of a $0.6M note payable related to funding the Gloria Way Well project. 62 MANAGEMENT'S DISCUSSION AND ANALYSIS
18 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
While California's COVID-19 State of Emergency ended on February 28, 2023, new economic challenges have emerged. On a macro-economic level, the City faces significant economic challenges, including supply chain disruption, wars in Ukraine and the Middle East, high inflation and interest rates, and contractions in the local labor force, especially in the tech industry. Current economic concerns revolve around the Federal Reserve’s approach to the implementation of monetary policy to lower high inflation and how higher interest rates will impact the national and local economy over the next two years. The following economic factors were considered in the preparation of the City’s budget for fiscal year 2023-24:
Near-term general revenue growth trajectory is stagnant as the known major drivers such as taxable development and significant property portfolio turnover are not expected in the near future for property tax revenues and as other tax revenues such as sales taxes and TOT are at risk of low-growth due to expected economic slowdown or recession accompanied by high inflation. • Property tax projection is unusually uncertain primarily due to evolving property tax in lieu issues caused by the County’s negative ERAF condition and unknown recovery by the State’s backfill. • Transient occupancy tax has recognized significant recovery in FY2022-23 yet has only reached 73% of the pre-pandemic figures. Due to the changes in business meeting culture and office working environment, uncertainty exists in the projection and recovery is expected to continue in slower pace.
• City will experience long-term cost pressures across various activity due to historical underinvestment in aged infrastructure; staff resource challenges, rising personnel costs; operational costs of new infrastructure and facilities; and increases in professional and outside services due to high inflation.
• The City has reserves available to maintain stable service delivery during FY 2023-24 and enable implementation of a strategic and prioritized budget plan. Additionally, temporary suspension of certain capital and operating transfers; delay of non- essential project initiation, and strategic utilization of general fund unassigned reserves will provide near-term stability required to plan for more durable service delivery decisions in order to address resource constraints and uncertainty over an extended period.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to ensure transparency relative to city fiscal operations. If you have questions about this report or need additional financial information, contact the City’s Finance Department, East Palo Alto Government Center, 2415 University Avenue, East Palo Alto, CA 94303. 63 City of East Palo Alto
Statement of Net Position
June 30, 2023
19 Governmental Business-Type Activities Activities Total ASSETS Current assets: Cash and investments $ 110,238,322 $ 18,414,842 $ 128,653,164 Restricted cash and investments with fiscal agents 307,861 193,760 501,621 Receivables:
Accounts receivable 2,751,971 263,510 3,015,481
Interest receivable 998,347 138,788 1,137,135
Taxes receivable 1,609,926 - 1,609,926
Intergovermental receivables 6,077,487 - 6,077,487 Deposits and prepayments 63,457 - 63,457 Internal balances 2,406,005 (2,406,005) - Total current assets 124,453,376 16,604,895 141,058,271 Noncurrent assets: Loans to Successor Agency 2,354,766 - 2,354,766 Loans and notes receivable 7,082,505 - 7,082,505 Capital assets: Capital assets not being depreciated 13,919,845 6,408,018 20,327,863 Capital assets, net of accumulated depreciation/amortization 62,447,364 5,664,435 68,111,799 Total capital assets 76,367,209 12,072,453 88,439,662 Total noncurrent assets 85,804,480 12,072,453 97,876,933 Total assets 210,257,856 28,677,348 238,935,204 DEFERRED OUTFLOWS OF RESOURCES Deferred employer pension contributions 2,444,429 21,660 2,466,089 Deferred outflows of resources - pension 5,226,048 46,308 5,272,356 Total deferred outflows of resources 7,670,477 67,968 7,738,445 LIABILITIES Current liabilities: Accounts payable 1,906,848 905,740 2,812,588 Accrued liabilities 933,721 10,772 944,493 Retentions payable 218,719 - 218,719 Unearned revenue 1,006,786 - 1,006,786 Compensated absences 235,149 - 235,149 Claims payable 114,127 - 114,127 Notes payable - 23,333 23,333 Leases payable 485,352 27,402 512,754 Total current liabilities 4,900,702 967,247 5,867,949 Noncurrent liabilities: Deposits payable 1,156,976 26,360 1,183,336 Advances from developers 100,891 2,510,046 2,610,937 Compensated absences 690,817 - 690,817 Claims payable 152,022 - 152,022 Notes payable - 583,335 583,335 Leases payable 942,495 49,970 992,465 Net pension liablity 14,600,800 129,375 14,730,175 Total noncurrent liabilities 17,644,001 3,299,086 20,943,087 Total liabilities 22,544,703 4,266,333 26,811,036 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - pension 533,776 4,729 538,505 Total deferred inflows of resources 533,776 4,729 538,505 NET POSITION Net investment in capital assets 74,583,002 11,212,431 85,795,433 Restricted for: Streets and Infrastructure 16,118,821 - 16,118,821 Parks and Recreation 343,811 - 343,811 Measure C Program 138,450 - 138,450 Housing Programs 31,773,804 - 31,773,804 Special Programs 2,529,780 - 2,529,780 Capital Projects 7,172,849 5,589,148 12,761,997 Total restricted 58,077,515 5,589,148 63,666,663 Unrestricted 62,189,337 7,672,675 69,862,012 $ 194,849,854 $ 24,474,254 $ 219,324,108
Primary Government
Total net position
See accompanying Notes to Basic Financial Statements.
64 City of East Palo Alto
Statement of Activities
June 30, 2023
20 Operating Capital Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Total Activities Activities Total Primary Government: Governmental activities: General government $ 7,264,421 $ 12,786 $ 132,087 $ - $ 144,873 $ (7,119,548) $ - $ (7,119,548) Public safety 13,158,656 323,391 3,943,980 - 4,267,371 (8,891,285) - (8,891,285) Public works 5,995,606 172,677 1,801,993 3,414,258 5,388,928 (606,678) - (606,678) Culture and recreation 2,170,071 27,294 197,522 - 224,816 (1,945,255) - (1,945,255) Community Development 7,099,055 2,367,939 9,841,360 - 12,209,299 5,110,244 - 5,110,244 Interest on long-term debt 73,997 - - - - (73,997) - (73,997) Total governmental activities 35,761,806 2,904,087 15,916,942 3,414,258 22,235,287 (13,526,519) - (13,526,519) Business-type activities: Garbage Collections 2,940,594 3,030,827 - - 3,030,827 - 90,233 90,233 Water Services 813,827 1,189,481 - 44,963 1,234,444 - 420,617 420,617 Total business-type activities 3,754,421 4,220,308 - 44,963 4,265,271 - 510,850 510,850 Total primary government $ 39,516,227 $ 7,124,395 $ 15,916,942 $ 3,459,221 $ 26,500,558 (13,526,519) 510,850 (13,015,669) General Revenues: Taxes: Property taxes 20,957,659 - 20,957,659 Sales taxes 6,394,903 - 6,394,903 Utility users tax 1,936,239 - 1,936,239 Transient occupancy tax 2,223,732 - 2,223,732 Business license tax 1,768,500 - 1,768,500 Other taxes 1,782,881 - 1,782,881 Total taxes 35,063,914 - 35,063,914
Investment earnings 2,296,615 351,464 2,648,079 Miscellaneous 1,487,771 - 1,487,771 Transfers (6,241,000) 6,241,000 - Total general revenues and transfers 32,607,300 6,592,464 39,199,764 Change in net position 19,080,781 7,103,314 26,184,095 Net position - beginning of year 175,769,073 17,370,940 193,140,013 Net position - end of year $194,849,854 $ 24,474,254 $219,324,108 Net (Expense) Revenue Program Revenues and Changes in Net Position See accompanying Notes to Basic Financial Statements.
65 21
GOVERNMENTAL FUND FINANCIAL STATEMENTS
General Fund is the primary operating fund of the City and accounts for the revenues and expenditures to carry out basic governmental activities of the City such as general government, public safety, highway and street, culture and recreation, and community development. This fund accounts for all financial transactions not accounted for in other governmental funds.
Housing in Lieu Special Revenue Fund accounts for developer fees in lieu of providing affordable housing and the expenditures related to affordable housing development activities.
Capital Improvements Capital Projects Fund accounts for capital project improvement revenues and expenditures financed by various sources primarily Federal and State grants, General Fund transfers, and community benefit payments for related capital projects.
Non-Major Governmental Funds is the aggregate of all the non-major governmental funds. 66 City of East Palo Alto
Balance Sheet
June 30, 2023
22 Capital
Improvements Non-Major Total Housing In-lieu Capital Governmental Governmental General Fund Projects Fund Funds Funds ASSETS
Cash and investments $ 49,487,943 $ 13,214,527 $ 19,148,159 $ 28,387,693 $110,238,322 Restricted cash and investments - 100 307,761 - 307,861 Receivables:
Accrued interest 370,407 99,055 129,822 399,063 998,347 Taxes 1,475,354 - - 134,572 1,609,926
Intergovernmental 140,071 - 5,391,607 545,809 6,077,487 Accounts receivable 2,582,606 - - 169,365 2,751,971 Deposits and prepayments 63,457 - - - 63,457 Due from other funds 105,387 - - - 105,387 Advances to other funds 457,645 - - 1,948,360 2,406,005 Loans to Successor Agency 2,354,766 - - - 2,354,766
Loans and notes receivable - - - 7,082,505 7,082,505
Total assets $ 57,037,636 $ 13,313,682 $ 24,977,349 $ 38,667,367 $133,996,034
LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ 1,218,256 $ - $ 429,244 $ 259,348 $ 1,906,848 Retentions payable - - 102,661 116,058 218,719 Deposits payable 1,151,976 - 5,000 - 1,156,976 Other accrued liabilities 655,265 - - 278,456 933,721 Unearned revenue 128,630 - 862,761 15,395 1,006,786 Due to other funds - - - 105,387 105,387 Advances from developers - - 100,891 - 100,891 Total liabilities 3,154,127 - 1,500,557 774,644 5,429,328 Deferred inflows of resources: Unavailable revenues 96,829 - 4,898,960 700,458 5,696,247 Fund Balances: (Note 9) Nonspendable 2,875,868 - - - 2,875,868 Restricted 38,659 13,313,682 1,273,906 37,398,661 52,024,908 Committed 11,844,496 - 10,414,734 - 22,259,230 Assigned 6,218,971 - 6,889,192 - 13,108,163 Unassigned 32,808,686 - - (206,396) 32,602,290 Total fund balances 53,786,680 13,313,682 18,577,832 37,192,265 122,870,459 Total liabilities, deferred inflows of
resources, and fund balances $ 57,037,636 $ 13,313,682 $ 24,977,349 $ 38,667,367 $133,996,034 See accompanying Notes to Basic Financial Statements.
67 City of East Palo Alto
Reconciliation of the Governmental Funds Balance Sheet
To the Government-Wide Statement of Net Position
June 30, 2023
23 Total Fund Balances - Governmental Funds $ 122,870,459
Capital assets not being depreciated 13,919,845
Capital assets, net of accumulated depreciation/amortization 62,447,364 Total capital assets 76,367,209
Employer pension contributions are recorded as expenditures in the Governmental funds when paid based upon recommended actuarial contributions. In the Government-wide financial statements, these employer pension contributions are reported as deferred outflows of resources, to be applied against the net pension liability in the following fiscal year. 2,444,429
In the Government-Wide Financial Statements certain differences between actuarial estimates and actual results for pension, changes in assumptions, differences between actual and projected investment earnings, and differences resulting from changes in allocation percentages are deferred and amortized over a period of time, however in the governmental funds no transactions are recorded.
Deferred outflows of resources - pension 5,226,048 Deferred inflows of resources - pension (533,776) Unavailable revenue recorded in the fund financial statements resulting from activities in which revenues were earned but funds were not available are reclassified as revenues in the Government- Wide Financial Statements. 5,696,247 Long-term liabilities are not due and payable in the current period; therefore, they are not reported in the Governmental Funds Balance Sheet.
Compensated absences (925,966) Claims payable (266,149) Lease payable (1,427,847) Net pension liability (14,600,800) Total long-term liabilities (17,220,762)
Net Position of Governmental Activities $ 194,849,854
Governmental funds report capital outlays as expenditures. In the Government-wide financial statements, the cost of assets are capitalized and depreciated over the estimated useful lives of the assets and reported as depreciation expense. The capital assets, net of depreciation, are adjusted as follows:
Amounts reported for governmental activities in the Statement of Net Position are different from those reported in the Total Fund Balances - Governmental Funds above due to the following:
See accompanying Notes to Basic Financial Statements.
68 City of East Palo Alto
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the year ended June 30, 2023
24 Capital
Improvements Non-Major Total General Housing In-lieu Capital Governmental Governmental Fund Fund Projects Fund Funds Funds
REVENUES:
Property taxes $ 19,892,870 $ - $ - $ 1,064,789 $ 20,957,659 Sales taxes 6,394,903 - - 1,146,689 7,541,592
Transient occupancy tax 1,778,986 - - 444,746 2,223,732 Utility users tax 1,936,239 - - - 1,936,239 Other taxes 1,785,985 - - 3,114,401 4,900,386 Licenses, fees and permits 1,711,468 - - 23,016 1,734,484 Charges for services 654,775 - - 733,128 1,387,903 Fines and forfeitures 379,861 - - - 379,861 Use of money and property 1,197,455 200,338 534,875 870,325 2,802,993 Grants and intergovernmental 1,976,920 8,000,000 3,956,194 4,190,696 18,123,810 Miscellaneous 975,524 - - - 975,524 Total revenues 38,684,986 8,200,338 4,491,069 11,587,790 62,964,183 EXPENDITURES:
Current: General government 5,629,764 30,160 81,862 904,297 6,646,083 Public safety 11,499,595 - - 1,172,364 12,671,959
Public works 3,480,723 - 5,652 703,294 4,189,669 Culture and recreation 1,146,466 - 281,387 126,064 1,553,917 Community development 4,008,802 471 - 2,991,923 7,001,196 Capital outlay 4,419,476 - 2,833,805 2,361,099 9,614,380 Debt service:
Principal 439,791 - - 12,886 452,677
Interest 71,891 - - 2,106 73,997
Total expenditures 30,696,508 30,631 3,202,706 8,274,033 42,203,878 REVENUES OVER (UNDER) EXPENDITURES 7,988,478 8,169,707 1,288,363 3,313,757 20,760,305 OTHER FINANCING SOURCES (USES):
Transfers in 2,600,140 - 1,414,734 1,118,364 5,133,238
Transfers out (5,274,098) (1,500,000) - (4,600,140) (11,374,238) Total other financing sources (uses) (2,673,958) (1,500,000) 1,414,734 (3,481,776) (6,241,000) Net change in fund balances 5,314,520 6,669,707 2,703,097 (168,019) 14,519,305 FUND BALANCES:
Beginning of year 48,472,160 6,643,975 15,874,735 37,360,284 108,351,154 End of year $ 53,786,680 $ 13,313,682 $ 18,577,832 $ 37,192,265 $ 122,870,459 Major Funds
See accompanying Notes to Basic Financial Statements.
69 City of East Palo Alto
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities For the year ended June 30, 2023
25 Net Change in Fund Balances - Total Governmental Funds $ 14,519,305 Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of Activities, the cost of those assets was allocated over the estimated useful lives as depreciation expense. This was the amount of capital assets recorded in the current period. 9,614,380 Depreciation and amortization expense on capital assets is reported in the Government-Wide Statement of Activities, but does not require the use of current financial resources. Therefore, depreciation and amortization expense is not reported as expenditures in the governmental funds. (3,109,353) Accrued compensated absences is reported as an expenditure in the Governmental funds when paid, but the accrued payable increased compensated leave liabilities in the Government-Wide Statement of Net Position. (12,924)
Payments on existing claims against the City are recorded as expenditures in governmental funds, but the payment reduced long-term liabilities in the Government-Wide Statement of Net Position.
Expenses related to new claims and changes in claim estimates do not require the use of current financial resources and therefore are not reported as an expenditure in Governmental funds. (86,149) Principal payments on lease liabilities are current expenditures in the fund financials, but reduce the lease liability in the Government-Wide Statement of Net Position 452,677 Current year employer pension contributions are recorded as expenditures in the Governmental funds, however these amounts are reported as a deferred outflow of resources in the Government- Wide Statement of Net Position. 78,358 Pension expense is recorded as incurred in the Government-Wide Statement of Activities, however pension expense is not recognized in the governmental funds. (494,917) Grant and tax revenues that do not meet the revenue recognition criteria in the governmental funds but are recognized as revenue in the Government-Wide Financial Statements. (1,880,596) Change in Net Position of Governmental Activities $ 19,080,781 Amounts reported as Change in Net Position of governmental activities in the Statement of Activities are different from those reported as Net Change in Fund Balances - Total Governmental Funds above due to the following:
See accompanying Notes to Basic Financial Statements.
70 26
PROPRIETARY FUND FINANCIAL STATEMENTS
Garbage Collection Fund accounts for the certain activities associated with garbage collection services.
Water Service Fund accounts for activities related to water lease and capital improvement surcharge revenues utilized to improve and expand the City's water system infrastructure. 71 City of East Palo Alto
Statement of Net Position
Proprietary Funds
June 30, 2023
27 Total Water Garbage Enterprise Service Collection Funds ASSETS Current assets: Cash and investments $ 16,249,140 $ 2,165,702 $ 18,414,842 Cash with fiscal agents 193,760 - 193,760 Accrued interest 123,151 15,637 138,788 Accounts receivable, net 209,419 54,091 263,510 Total current assets 16,775,470 2,235,430 19,010,900 Noncurrent assets: Capital assets: Non-depreciable 6,408,018 - 6,408,018 Depreciable, net 5,664,435 - 5,664,435 Total capital assets 12,072,453 - 12,072,453
Total noncurrent assets 12,072,453 - 12,072,453 Total assets 28,847,923 2,235,430 31,083,353 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - pension 32,026 35,942 67,968 Total deferred outflows of resources 32,026 35,942 67,968 LIABILITIES Current liabilities: Accounts payable 206,793 698,947 905,740 Other accrued liabilities 10,772 - 10,772 Note payable 23,333 - 23,333 Lease payable 27,402 - 27,402 Total current liabilities 268,300 698,947 967,247 Noncurrent liabilities: Deposits payable 26,360 - 26,360 Advances from developers 2,510,046 - 2,510,046 Advances from other funds 2,406,005 - 2,406,005 Note payable 583,335 - 583,335 Lease payable 49,970 - 49,970 Net pension liability 60,959 68,416 129,375 Total noncurrent liabilities 5,636,675 68,416 5,705,091 Total liabilities 5,904,975 767,363 6,672,338 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - pension 2,228 2,501 4,729 Total deferred inflows of resources 2,228 2,501 4,729
NET POSITION
Net investment in capital assets 11,212,431 - 11,212,431 Restricted for: Capital projects 5,589,148 - 5,589,148 Unrestricted 6,171,167 1,501,508 7,672,675 Total net position $ 22,972,746 $ 1,501,508 $ 24,474,254 Business-type Activities
See accompanying Notes to Basic Financial Statements.
72 City of East Palo Alto
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the Year Ended on June 30, 2023
28 Total Water Garbage Enterprise Service Collection Funds OPERATING REVENUES:
Charges for services and other fees $ 815,277 $ 2,733,991 $ 3,549,268 Other 374,204 296,836 671,040 Total operating revenues 1,189,481 3,030,827 4,220,308
OPERATING EXPENSES: Outside services 315,716 2,803,453 3,119,169 Administration 187,459 137,141 324,600 Depreciation 310,652 - 310,652 Total operating expenses 813,827 2,940,594 3,754,421 OPERATING INCOME 375,654 90,233 465,887 NONOPERATING REVENUES (EXPENSES):
Interest income 302,662 48,802 351,464
- Total nonoperating revenues (expenses) 302,662 48,802 351,464 INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 678,316 139,035 817,351 Capital contributions 44,963 - 44,963 Transfers in 6,241,000 - 6,241,000 Change in net position 6,964,279 139,035 7,103,314 NET POSITION Beginning of year 16,008,467 1,362,473 17,370,940
End of year $ 22,972,746 $ 1,501,508 $ 24,474,254
Business-type Activities
See accompanying Notes to Basic Financial Statements.
73 City of East Palo Alto
Statement of Cash Flows
Proprietary Funds
For the Year Ended on June 30, 2023
29 Total Water Garbage Enterprise Service Collection Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from others $ 374,204 $ 296,836 $ 671,040 Cash received from customers 704,251 2,703,233 3,407,484 Cash payments to suppliers for goods and services (188,601) (2,774,823) (2,963,424) Cash paid to employees and city administration (145,865) (102,166) (248,031) Net cash provided by operating activities 743,989 123,080 867,069 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital contributions 6,351,919 - 6,351,919 Acquisition of capital assets (343,365) - (343,365) Payment of leases (25,547) (25,547) Repayments on advances from other funds (4,388) - (4,388) Repayments on advances from developers (1,776) - (1,776) Net cash (used in) capital and related financing activities 5,976,843 - 5,976,843 CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income received 203,582 38,090 241,672 Net cash provided by investing activities 203,582 38,090 241,672 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,924,414 161,170 7,085,584 CASH AND CASH EQUIVALENTS - Beginning of year 9,518,486 2,004,532 11,523,018 CASH AND CASH EQUIVALENTS - End of year $ 16,442,900 $ 2,165,702 $ 18,608,602 FINANCIAL STATEMENT PRESENTATION: Cash and investments $ 16,249,140 $ 2,165,702 $ 18,414,842 Cash with fiscal agents 193,760 - 193,760 Total $ 16,442,900 $ 2,165,702 $ 18,608,602 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income $ 375,654 $ 90,233 $ 465,887 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 310,652 - 310,652 Changes in assets and liabilities: Accounts receivable (111,026) (30,758) (141,784) Pension related deferred outflows of resources (32,026) (35,942) (67,968) Accounts payable 137,548 28,630 166,178 Net pension liabilities 60,959 68,416 129,375 Pension related deferred inflows of resources 2,228 2,501 4,729 Total adjustments 368,335 32,847 401,182 Net cash provided by operating activities $ 743,989 $ 123,080 $ 867,069 NON-CASH INVESTMENT AND FINANCING ACTIVITY:
Forgiveness of long term debt $ 23,333 $ - $ 23,333
Business-type Activities
See accompanying Notes to Basic Financial Statements.
74 30
FIDUCIARY FUND FINANCIAL STATEMENTS
Private Purpose Trust Funds
Successor Agency Trust to the Redevelopment Agency Private-Purpose Trust Fund accounts for the accumulation of resources held and administered under trust for the benefit of others. In January 2012, all California Redevelopment Agencies were dissolved pursuant to the Dissolution Act. As such, the City elected to serve as the Successor Agency (SA) of the former Redevelopment Agency. The SA is responsible for winding down the affairs of the former agency. This fund accounts for receipts and payments related to an Enforceable Obligation Schedule and the disposition of assets and property of the former Redevelopment Agency for the benefit of taxing agencies. The financial activities of the fund are excluded from the Government-wide financial statements but are presented in the separate Fiduciary Fund financial statements.
75 City of East Palo Alto
Statement of Net Position
Fiduciary Funds
June 30, 2023
31 Successor Agency
Trust Fund
ASSETS
Current assets Cash and investments $ 1,757,743
Receivables:
Interest receivable 28,513
Total current assets 1,786,256
Total assets 1,786,256
LIABILITIES
Liabilities: Current liabilities Other accrued liabilities 123,638 Loans payable to City 1,987,048
Bonds payable 1,085,000
Total current liabilities 3,195,686 Noncurrent liabilities Loans payable to City 367,718
Bonds payable 11,980,000
Total noncurrent liabilities 12,347,718
Total liabilities 15,543,404
DEFERRED INFLOWS OF RESOURCES
Deferred gain on refunding 123,013
NET POSITION
Held in trust for dissolution of RDA (13,880,161)
Total net position $ (13,880,161)
See accompanying Notes to Basic Financial Statements.
76 City of East Palo Alto
Statement of Changes in Net Position
Fiduciary Funds
June 30, 2023
32 Successor Agency
Trust Fund
ADDITIONS:
RDA property tax trust fund distribution $ 3,336,401 Use of money and property 79,136 Total additions 3,415,537
DEDUCTIONS:
General government 42,879
Interest and fiscal charges 490,751
Total Deductions 533,630
Change in net position 2,881,907
NET POSITION:
Beginning of year (16,762,068)
End of year $ (13,880,161)
See accompanying Notes to Basic Financial Statements.
77 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
33 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of East Palo Alto, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies.
The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below.
A. Financial Reporting Entity
The City of East Palo Alto (City) was incorporated in 1983, under the General Laws of the State of California and enjoys all the rights and privileges pertaining to "General Law" cities. The City uses the City Council/Manager form of government. The local government is comprised of five Council members who are elected every four years and act under powers granted under State law. The City provides a variety of services including general administration; police public safety; street/highway, storm drain, streetlight, and park maintenance; community development, and community services, including rent control services.
The basic financial statements present the City and its component units, entities for which the City is financially accountable. Blended component units, although legally separate entities are, in substance, part of the City’s operations and data from these units are combined with data of the City. The City has no discretely presented component units. The blended component unit has a June 30 year-end. The following entity is reported as a blended component unit:
The East Palo Alto Public Financing Authority - The East Palo Alto Public Financing Authority (Authority) was organized in October 1999 under a joint exercise of power agreement to provide financing for public improvements forthe City and the former East Palo Alto Redevelopment Agency (former Agency). The Authority and the City have a financial and operational relationship, which requires that the Authority’s financial statements be blended into the City’s financial statements. The Authority’s Board consists exclusively of all members of the City Council. Separate financial statements of the Authority are not prepared. There are currently no reportable financial transactions of the Authority.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on a fund basis, each of which is considered a separate accounting entity with its own self-balancing set of accounts that comprise its assets, liabilities, fund equity,revenues, and expenditures or expenses. These funds are established for the purpose of carrying out activities or certain objectives in accordance with specific regulations, restrictions, or limitation. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and how spending activities are controlled.
Government-Wide Financial Statements
The City’s Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of Governmental and Business-Type Activities for the City accompanied by a total column.
78 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
34 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Government-Wide Financial Statements, Continued
The financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting,revenues are recognizedin theperiodin which they are earnedwhile expenses are recognized in the period in which the liabilities are incurred.
Certain types of transactions reported as program revenues for the City are reported in three categories:
• Charges for services.
• Operating grants and contributions.
• Capital grants and contributions.
Certain eliminations have been made related to inter-fund activities, payables, and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:
• Due to/from otherfunds.
• Transfers in/out.
The City applies all applicable GASB pronouncements including all NCGA Statements and Interpretations currently in effect.
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these statements to the net position presented in the government-wide financial statements. The City has presented all major funds that meet specific qualifications.
All governmental funds are accounted for on a spending or “current financial resources” measurement focus andthemodifiedaccrual basis of accounting. Revenues are recognized when they have been earned and they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. 79 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
35 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued
The City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The primary revenue sources that have been treated as susceptible to accrual by the City are property taxes, taxpayer-assessed tax revenues (sales taxes, transient occupancy taxes, franchise taxes, etc.), grant revenues and earnings on investments. Expenditures are generally recorded when a liability is incurred, as under accrual accounting.
The City reports the following funds as major governmental funds of the City:
General Fund accounts for resources traditionally associated with governmental activities that are not required legally or by sound financial management to be accounted for in another fund.
Housing in Lieu Special Revenue Fund accounts for developer fees in lieu of providing affordable housing and the expenditures related to affordable housing development activities.
Capital Improvements Capital Projects Fund accounts for capital project improvement revenues and expenditures financed by various sources, primarily Federal and State grants, General Fund transfers, and capital-related community benefit receipts.
The City reports the following governmental funds as non-major governmental funds of the City:
NPDES Fees Special Revenue Fund accounts for the revenues and expenditures from assessments levied on property in the City in compliance with the provisions of the National Pollutant Discharge Elimination System for prevention of storm water and flood related damage.
Gas Tax Special Revenue Fund accounts forfunds received from the State of California to use for street and highway related projects.
Federal and State Law Enforcement Special Revenue Fund accounts for the receipt and use of State and Federal law enforcement related grant money.
Park in Lieu Special Revenue Fund accounts for park in lieu fees collected from developers.
Rent Stabilization Special Revenue Fund accounts for revenues and expenditures to support rent stabilization activities.
Federal and State Grants Special Revenue Fund accounts for grant money received and expended from various Federal and State government grants.
Housing Assistance Special Revenue Fund accounts for first time home buyer assistance program activities.
Measure A Special Revenue Fund accounts for the City's share of Measure A revenues and expenditures. Measure A is a half-cent sales tax to support countywide (San Mateo County) transportation projects and programs.
80 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
36 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued
CYSFF TOT Special Revenue Fund accounts for 10% of transient occupancy taxes collected as approved by voters and the City Council approved funding for various non-profit organizations related to Children/Youth/Seniors/Family programs.
Lighting District Special Revenue Fund accounts for revenues (property taxes) and expenditures for the Ravenswood Highway Lighting District.
Drainage District Special Revenue Fund accounts forrevenues (property taxes) and expenditures forthe East Palo Alto Maintenance Drainage District.
Measure C Special Revenue Fund accounts for activities related to the Measure C Parcel tax. Measure C was an annual tax approved by the voters in November 2006 for a period of ten years. The remaining funds are to be used to support violence prevention and public safety intervention.
Local Grants Special Revenue Fund accounts for revenues and expenditures from local public and private grants including the C/CAG Shuttle and the CA Endowment grants.
Silicon Valley Community Foundation (SVCF) Special Revenue Fund accounts for gift monies from the Silicon Valley Community Foundation to be used for the purpose of incentivizing the development of affordable housing within the City. Up to $2,000,000 was authorized for an inter-fund Advance to provide monies to purchase certain water rights. Remaining funds are restricted to pay a minimum amount of $500,000 for an affordable housing manager over a minimum period of five years.
Low- and Moderate-Income Housing Successor Special Revenue Fund accounts for the activities related to the housing assets assumed by the City as Housing Successor to the former Redevelopment Agency.
The activities are governed by California redevelopment law and must be used to provide housing for people with low and moderate incomes.
Housing TOT Special Revenue Fund accounts for 10% set-aside of transient occupancy taxes collected as approved by voters, and the expenditures related to affordable housing development activities.
Measure HH Special Revenue Fund accounts for the revenues and expenditures of Measure HH-Parcel tax. Measure HH was approved by the voters in November 2018. The tax is annual parcel tax and the funds are to be used for affordable and supportive housing programs, programs that facilitate access to job opportunities in the S.T.E.M. sectors, building trades, and strengthen First Source Hiring.
Measure W Special Revenue Fund accounts for the City’s share of San Mateo County Measure W revenues and expenditures. Measure W is a half-cent sales tax to support countywide transportation projects and programs.
ARPA Fund accounts for the federal payments to the City from the American Rescue Plan Act passed in March 2021.
CIP Impact Fees Capital Project Fund accounts for various development impact fees collected by the City for capital related activities.
81 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
37 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Proprietary Fund Financial Statements
Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Change in Net Position, and a Statement of Cash Flows for all proprietary funds.
Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement ofRevenues, Expenses and Changes in Fund Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which a liability is incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.
The City reports the Garbage Collection and Water Service enterprise funds as proprietary funds of the City.
Water Service Fund accounts for the certain activities related to water lease and capital surcharge revenues utilized to improve and expand the City’s water system infrastructure.
Garbage Collection Fund accounts for the activities associated with garbage collection services.
Fiduciary Fund Financial Statements
Fiduciary fund financial statements consist of a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. Private-purpose trust funds account for resources of all other trust arrangements in which principal and income benefit individuals, private organizations, or other governments (i.e. unclaimed property/escheat property). Fiduciary funds are accounted for using the accrual basis of accounting. The City reports the following fiduciary funds:
Successor Agency Private Purpose Trust Fund – accounts for assets and liabilities held by the City pursuant to California Redevelopment Dissolution Law whereby the City elected to serve as the Successor Agency of the former Agency effective February 1, 2012. The Successor Agency serves as custodian for the assets of, and winding down affairs related to, the former Agency. The Successor Agency is allocated revenues necessary to pay enforceable obligations of the former Agency. The activities of the fund are excluded from the Government-wide financial statements but are presented in the separate Fiduciary fund financial statements. 82 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
38 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Cash, Cash Equivalents, and Investments
The City pools cash resources from all funds to facilitate the management of cash. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures (Amendment of GASB No. 31), certain disclosure requirements forDeposits and InvestmentRisks were made in the following areas:
• Interest Rate Risk
• Credit Risk
o Overall
o Custodial Credit Risk
o Concentrations of Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end, and other disclosures.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City does not have any investments that are measured using Level 3 inputs.
The City participates in an investment pool managed by the State of California entitled Local Agency Investment Fund (LAIF) which has invested a portion of the pooled funds in structured notes and assetbacked securities. LAIF investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these structured notes and asset-backed securities are subject to market risk as to the change in interest rates.
Cash equivalents are considered amounts in demand deposits and short-term investments with a maturity date within three months of the date acquired by the City and are presented as “Cash and Investments” in the accompanying Basic Financial Statements.
The City considers all pooled cash and investments (consisting of cash and investments and restricted cash and investments) held by the City as cash and cash equivalents because the pool is used essentially as a demand deposit account from the standpoint of the funds. The City also considers all non-pooled cash and investments (consisting of cash with fiscal agent and restricted cash and investments held by fiscal agent) as cash and cash equivalents because investments meet the criteria for cash equivalents defined above.
83 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
39 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Restricted Cash and Investments
Certain restricted cash and investments are held by fiscal agents under the provisions of bond indentures or trust arrangements. The City’s Investment Policy does not apply to trust accounts held by the fiscal agents, which are invested as directed by separate trust arrangements.
D. Prepayments
Payments made for services that will benefit periods beyond fiscal year end are recorded as prepaid items.
In the governmental fund types, there is a portion of non-spendable fund balance equal to the total prepaid items since these are not available for appropriation.
E. Capital Assets
Capital assets used in governmental fund operations, including infrastructure assets (i.e. roads, curbs, gutters, bridges, sidewalks, drainage systems, lighting systems, and other assets) are reflected in the government-wide financial statements, along with related depreciation. Capital assets are defined by the City as assets with an initial individual cost of more than $5,000 and an estimated life more than one year.
Purchased capital assets are valued at historical cost or estimated historical cost. Donated capital assets are valued at their acquisition value on the date donated. Capital assets acquired under lease or purchase agreements are capitalized when the City accumulates an ownership equity in the assets acquired.
The purpose of depreciation is to allocate the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets.
Depreciation is provided using the straight-line method whereby the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The City has assigned the useful lives listed below to capital assets:
Infrastructure 7-55 years
Buildings and Improvements 30 years
Furniture, Fixture, and Equipment 5-10 years
Automobiles and Trucks 10 years
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period.
Right to use leased assets are recognized at the lease commencement date and represent the City's right to use an underlying asset for the lease term. Right to use leased assets are measured at the initial value of the lease liability plus any payments made to the lessor before commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term, plus any initial direct costs necessary to place the lease asset into service. Right to use leased assets are amortized over the shorter of the lease term or useful life of the underlying asset using the straight-line method. The amortization period varies from 3 to 5 years.
84 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
40 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued F. Unearned revenue
Unearned revenue is recognized for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues in the Government-wide Financial Statements are prepaid fees and charges for services.
G. Long-Term Debt
Government-wide Financial Statements – Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities.
Bond premiums and discounts, if any, are amortized overthe life of the bonds using straight line method.
Bonds payable are reported net of the applicable bond premium or discount.
Fund Financial Statements – The governmental fund financial statements do not report long-term debt.
As such, long-term debt is shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position.
Premiums and discounts related to debt issuance are recognized during the current period as other financing sources or uses. Proceeds from debt issuance are reported as other financing sources.
Lease Liabilities represent the City's obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments expected to be made during the lease term. The present value of lease payments are discounted based on a borrowing rate determined by the City.
H. Property Taxes
State Constitution Article XIIIA provides for a maximum general property tax rate statewide of $1.00 per $100, or one percent (1%) of assessed value unless an additional override tax rate is levied to pay voterapproved indebtedness. At the time of transfer of ownership, assessed value is calculated at 100% of market value as defined by Article XIIIA; otherwise assessed value is applied to the adjusted 1975-76 value of the property plus new construction value added after the 1975-76 valuation. Taxable values on properties can rise or be adjusted at the lesser 2% per year orthe inflation rate as determined by the Board of Equalization California Consumer Price Index.
85 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
41 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued J. Property Taxes, Continued
The State Legislature has determined the method of distribution of receipts from a $1.00 tax levy among the counties, cities, school districts and other districts. Counties, cities, school districts and other special districts, may levy such additional tax rate as is necessary to provide for voter-approved debt.
The County of San Mateo assesses properties and bills for and collects property taxes as follows:
K. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position (balance sheet) may report a separate section for deferred outflows ofresources. This separate financial statement element, deferred outflows ofresources, represents a consumption of net assets that applies to a future period(s) and will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time.
L. Net Position
Government-Wide Financial Statements
In the Government-wide Financial Statements, net position is classified in the following categories:
Net Investment in Capital Assets – This amount consists of capital assets, net of accumulated depreciation and reduced by outstanding debt, that is attributed to the acquisition, construction, or improvement of the assets.
Restricted – This amount is restricted by external creditors, grantors, contributors, or laws orregulations of governments.
Unrestricted – This amount is the net position balance that does not meet the definition of “net investment in capital assets” or “restricted net position” as defined above.
When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City’s policy is to apply restricted net position first. 86 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
42 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Fund Balance
Nonspendable Fund Balances
Non-spendable balances consist of amounts that do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for resale are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed, or assigned, then non-spendable amounts are required to be presented as a component of the applicable category.
Restricted Fund Balances
Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for specific purpose.
Encumbrances and nonspendable amounts subject to restrictions are included with spendable resources.
Committed Fund Balances
Committed fund balances have constraints imposed by resolution of the City Council which may be altered only by resolution of the City Council. Encumbrances and nonspendable amounts subject to Council commitments are included with spendable resources.
Assigned Fund Balances
Assigned fund balances are amounts constrained by the City’s intent to be used for a specific purpose but are neither restricted nor committed. Intent is expressed by the City Council or its designee and may be changed at the discretion of the City Council or its designee. This category includes encumbrances and non-spendable balance when it is the City’s intent to use proceeds or collections for a specific purpose.
The City Council is the only entity that has authority to make assignments of fund balance. The City Council has not delegated the authority to make assignments of fund balance.
Unassigned Fund Balance
Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual general fund balance and residual fund deficits, if any, of other governmental funds.
Hierarchy of Expenditures to Classify Fund Balance Amounts For expenditures made in any governmental fund, the restricted amounts will be reduced first, followed by committed amounts, assigned amounts, and then unassigned amounts.
Minimum Fund Balance Policies
The City's Reserve Management Policy requires that the City maintain a contingency reserve balance targeting 30% of adopted general fund expenditures including recurring transfers in the unassigned general fund balance.
87 City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2023
43 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Fund Balances, Continued
On June 30, 2023, the General Fund reported $32,808,686 in reserve which meets the City’s minimum 30% requirement level of $10,378,581. After the minimum fund balance requirement, the General Fund reserve fund balance is $22,430,105.
M. Compensated Leave Payable
Compensated absences are primarily comprised of unpaid vacation leave which is accrued as earned. All full-time, regular employees are entitled to earn a minimum of 80-hours of vacation per year. The accrual rate increases as length of related service exceeds five years. Maximum accrual of vacation ranges from 288 hours to 320 hours depending on length of related service. For governmental funds, compensated leave payable is recorded as current and noncurrent liabilities and as expenses only on the Governmentwide Financial Statements. Compensated absences are reported in governmental funds only if they have matured.
N. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s California Public Employees’ Retirement System (CalPERS) plan (Plan) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The liability for pension‐related debt is primarily liquidated by the General Fund.
O. Use of Estimates
The preparation of the Basic Financial Statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts and the disclosure. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions.
88 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
44 1. CASH AND INVESTMENTS
The City maintains a cash and investment pool for all funds. Certain restricted funds that are held and invested by independent outside custodians through contractual agreements are not pooled. These restricted funds include cash and investment held by trustees.
A. Summary of Cash and Investments
The following is a summary of cash and investments at June 30, 2023:
Governmental ActivitiesBusiness-Type ActivitiesFiduciary Funds Total
Cash Investments $ 110,238,322 $ 18,414,842 $ 1,757,743 $ 130,410,907 Reistricted cash and investments 307,861 193,760 - 501,621 Total cash and investments $ 110,546,183 $ 18,608,602 $ 1,757,743 $ 130,912,528 Government-Wide Statement
of Net Position
Cash and investments as of June 30, 2023, consist of the following:
Deposits:
Cash on hand $ 10,800 Deposits with Financial Institution 3,998,970 Total Deposits $ 4,009,770
Investments:
Local Agency Investment funds 64,087,918
San Mateo Investment Pool 62,313,219
Total investments 126,401,137
Total City Treasury 130,410,907
Restricted cash and investments:
Cash with fiscal agent 501,621
Total restricted Cash and Investments 501,621
Total cash and investments $ 130,912,528
89 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
45 2. CASH AND INVESTMENTS, Continued
B. Deposits
The carrying amount of the City’s cash deposits was $3,998,970 at June 30, 2023. Bank balances before reconciling items were a positive amount of $4,609,134 at June 30, 2023. The City has waived the collateral requirements for cash deposits up to the fully insured up to $250,000 by the Federal Deposit Insurance Corporation. The remaining amount was collateralized with securities held by the pledging financial institutions in the City’s name.
The California Government Code (Code) requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. The Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is held in the City's name. The fair value of pledged securities must equal at least 110% of the City’s cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits.
The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures or trust arrangements. Interest income earned on pooled cash and investments is allocated to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.
90 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
46 2. CASH AND INVESTMENTS, Continued
C. Authorized Investments by the City
The City's Investment Policy and the California Government Code allow the City to invest in the following, provided the credit ratings of the issuers are acceptable to the City. The following also identifies certain provisions of the City and California Government Code that address interest rate risk, credit risk, and concentration of credit risk. This does not address the City's investments of debt proceeds held by fiscal agents that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code orthe Entity's investment policy. Under the provisions of the City’s investment policy, and in accordance with the Code, the following investments are authorized:
Authorized Investment Type ****
Maximum Maturity Maximum % Holdings* Maximum % per
Issuer Maximum Rating**
Municipal Bonds 5 years 100% 5% N/A
U.S. Treasures and General Obligations 5 years 100% 100% N/A Federal Agency or U.S. Government
sponsored Enterprise (GSE) 5 years 100% 50% N/A
Bankers' Acceptance 180 days 40% 5% N/A
Commercial Paper*** 270 days 25% 5%
A-1/ P-1
plus A Long
Term
Negotiable Certificates of Deposit 5 years 30% 5% N/A Medium Term (Corporate) Notes 5 years 30% 5% NA Mutual and Money Market Funds 2(A) 7 Eligible 20% 10% AAA/AAA Shares of Beneficial Interest by a JPA 5 years 100% 50% N/A Supranationals (IBRD, IFC, and IDB) 5 years 30% 5% AA
Collateralized Bank Deposits 5 years 100% 20% N/A
Country Investment Pool N/A
Max permitted
by County
Treasurer
Max permitted
by County
Treasurer N/A
Local Agency Investment Fund (LAIF) N/A
Max permitted
by State
Treasuerer
Max permitted
by State
Treasuerer N/A
**** Excluding amounts held by bond trustee that are not subject to California Government Code restrictions. *Percentages are in compliance if within limits at time of purchase. Recomennded maximum % is more restrictive than allowed by code. Combine issuer types to determine maximum counterparty risk. **Rating category are inclusive of rating modifiers such as "+/-" or numbers from one NRSRO unless two ratings are noted
*** A-1 or equivalent plus A long term; total assets in excess of $500MM; no more than 10% outstanding from a simgle issuer.
91 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
47 2. CASH AND INVESTMENTS, Continued
D. Investments
Investments are stated at fair value using the aggregate method in all funds, resulting in the following investment income in all funds:
Interest Income $ 2,662,312
Unrealized gain/ (Loss) in changes in fair value of investments 546,048 Total Investment Income (Loss) $ 3,208,360
The City’s portfolio value fluctuates in an inverse relationship to any change in interest rate.
Accordingly, if interest rates rise, the portfolio value will decline. If interestrates fall, the portfolio value will rise. The portfolio for year-end reporting purposes is treated as if it were all sold. Therefore, fund balance must reflect the portfolio’s change in value. These portfolio value changes are unrealized unless sold.
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City’s investments with LAIF at June 30, 2023, include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following:
Structured Notes – are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or have embedded forwards or options.
Asset-Backed Securities – the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.
As of June 30, 2023, the City had $64,087,918 invested in LAIF. The LAIF fair value factor of 0.984828499 was used to calculate the fair value of the investments in LAIF.
The City is also a voluntary participant in the San Mateo County Investment Fund (County Pool) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the County. The City reports its investment in the County Pool at the fair value amount provided by the County. Included in the County Pool’s investment portfolio are US Treasury Notes, Obligations issued by agencies of the United States Government, LAIF, Corporate Notes, Commercial Paper, collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, and floating rate securities issued by federal agencies, government-sponsored enterprises, and corporations. The fair value factor of 0.9715 was used to calculate the fair value of the investments in the County Pool. 92 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
48 2. CASH AND INVESTMENTS, Continued
E. Risk Disclosures
Interest Risk: Interest rate risk is the fair value fluctuation due to overall changes in the interest rates. It is mitigated by limiting the average maturity of the City’s portfolio not to exceed three years.
Investments held in the City Treasury grouped by maturity date at June 30, 2023, are shown below:
Investment Type Fair Value 1 Year or Less 1-2 Years 2-3 Years 3+ Years City Local Agency Investment Fund $ 64,087,918 $ 64,087,918 - - - San Mateo County Pool 62,313,219 62,313,219 - - -
Total 126,401,137 126,401,137 - - -
Investment Maturities (in years)
Credit Risk: Creditrisk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2023 for each investment type:
Moody's S&P Fair Value
Not Rated Not Rated $ 64,087,918
Not Rated Not Rated $ 62,313,219
Credit Quality Ratings
Custodial Credit Risk: For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s Investment Policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City, be conducted on a delivery- versus-payment basis.
F. Investment Valuation
Investments (except for money market accounts, time deposits, and commercial paper) are measured at fair value on a recurring basis. Recurring fair value measurements are those that Governmental Accounting Standards Board (GASB) Statements require or permit in the statement of net position at the end of each reporting period. Fair value measurements are categorized based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.
Investments in LAIF and San Mateo County Pool and restricted cash and investments included money market accounts and guaranteed investment contracts are not subject to levelling disclosure requirements.
93 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
49 3. INTERFUND TRANSACTIONS
A. Transfers
At June 30, 2023, the City had the following transfers in/out which arose in the normal course of operations:
Enterprise
Fund
Transfers Out
General
Fund
Capital
Improvements
Non-Major Governmental
Funds
Water
Service Total
General Fund $ - $ 1,414,734 $ 1,118,364 $ 2,741,000 $ 5,274,098 Housing In-lieu Fund - - - 1,500,000 1,500,000 Nonmajor Governmental Funds 2,600,140 - - 2,000,000 4,600,140 Total $ 2,600,140 $ 1,414,734 $ 1,118,364 $ 6,241,000 $ 11,374,238 Transfers In
Transfers from the General Fund were made to 1) the Capital Improvements Fund to fund various capital projects including water infrastructure improvements, 2) to non-major funds for gas tax, storm drain and street sweeping operations, and for housing successor share of loan reimbursements, and 3) to the Water Fund to support a water infrastructure improvement project which was also funded through the transfers from Housing In-Lieu Fund and Nonmajor Funds for $1.5 million and $2.0 million, respectively. The transfer out from Nonmajor Funds to the General Fund ($2.6 million) was made through the ARPA Fund to support the general government services due to the revenue loss related to the COVID-19 pandemic.
B. Due to/from Other Funds
At June 30, 2023, the City had the following due to/from other funds:
Fund
Due from Other
Funds
Due to Other
Funds
General Fund $ 105,387 $ - Non-Major Governmental Funds - 105,387 Total $ 105,387 $ 105,387
The amounts due to the General Fund from other non-major funds represent reclassified temporary negative cash balances pending grant reimbursements or other receivables. Current interfund balances arise in the normal course of operations and are expected to be repaid shortly after the end of the fiscal year.
94 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
50 3. INTERFUND TRANSACTIONS, CONTINUED
C. Advances to/from Other Funds
Advances from the General Fund and Non-Major Governmental Funds (the SVCF Fund) were made to the Water Services Enterprise Fund to provide liquidity for the purchase of water assurance rights.
The advances are repaid upon collection of development impact fees related to the cost of the water assurance rights acquired to increase development capacity within the City. No advances were repaid during the year.
At June 30, 2023, the City had the following advances to/from other funds:
Advances To
Advances From
Water Services
Fund
Major Funds:
General Fund $ 457,645
Non-Major Governmental Funds 1,948,360
Total $ 2,406,005
4. LOANS AND NOTES RECEIVABLE
Loans receivable as of June 30, 2023, composed of the following, were held by the City:
Balances as of
June 30, 2023 Nairobi Housing Associates Loan $ 4,569,851 Nugent Square Partners Loan 1,245,906 Bay Road Housing Loan 462,500
First Time Home Buyers Assistance Loans 140,712 University Senior Apts 663,536 Subtotal 7,082,505
Loans to Successor Agency 2,354,766
Total $ 9,437,271
95 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
51 4. LOANS AND NOTES RECEIVABLE, CONTINUED
A. Nairobi Housing Associates Loan
On June 1, 1999, the former Agency entered into a loan agreement with Nairobi Housing Associates (Nairobi), a California Limited Partnership. The $5,500,000 loan was used by Nairobi used to develop 129 affordable multi-family rental housing units, ancillary landscaping, and other improvements known as Peninsula Park Apartments (the Project). In February 2019, the City agreed to a $714,000 loan repayment and approved certain regulatory and loan agreement amendments in connection with developer- refinancing of the Project, including extending the loan maturity. The loan accrues simple interest at the rate of 1% per annum, commencing February 1, 2001. The amended loan matures on July 31, 2056 and is secured by a subordinated note and deed of trust on the property.
B. Nugent Square Partners Loan
On August 1, 2003, the former Agency entered into a loan agreement in the amount of $1,100,000 with Nugent Square Partners, L.P. (Nugent), a California Limited Partnership to develop 32 affordable multi- family rental housing units, ancillary landscaping, and other improvements known as Nugent Square Apartments. In March 2020, the City agreed to a $50,000 loan prepayment and approved certain regulatory and loan subordination amendments in connection with developer-refinancing of the Project. On December 1, 2022, the City entered into an amended and restated loan agreement with Nugent. As of the date of the Amended Agreement, the Loan had accrued interest at the rate of 1% simple interest with a total accrued interest of $121,466, which is capitalized into the outstanding balance of the Loan for a total loan balance of $1,221,466. In accordance with the terms and conditions set forth in the Amended Agreement, the City is agreeing to restructure the Loan with interest accrues on the outstanding principal balance of the Loan at a rate of 3.43% compounding annually commencing on the effective date of the Amended Agreement. The loan matures in February 2045 and is secured by a deed of trust on the property.
C. Bay Road Housing Loan
In December 2004, the former Agency entered into a loan agreement with Bay Road Housing, L.P., a California Limited Partnership to provide annual maximum operating gap subsidies related to the development and subsequent operation of 77 affordable multi-family rental housing units known as Courtyard at Bay Road Apartments. The loan provides a maximum annual operating subsidy of $60,000 over a period of twenty years, or a maximum loan of $1.2 million. The loan accrues simple interest at the rate of 2% per annum. The loan matures in January 2027 and is secured by a deed of trust on the property.
D. First Time Home Buyer Assistance Loans
On December 21, 2004, the City approved a program for a down payment assistance loans to qualified homebuyers who met the criterion to purchase a below-market rate (BMR) home in East Palo Alto.
Generally, the assistance consists of 30-year loans at a fixed rate of 3% interest with payments deferred for the first five years.
96 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
52 4. LOANS AND NOTES RECEIVABLE, CONTINUED
E. University Senior Apartments Loan
On November 25, 2015, the City entered into a loan agreement in the amount of $700,000 with University Senior Apartments, L.P., a California limited partnership to develop 41 affordable multi-family senior housing units known as Serenity Senior Apartments. The loan bears an interest rate of 3% simple interest per annum, commencing on September 5, 2017. The loan is due on November 25, 2072, and is secured by a deed of trust on the property.
F. Loans to Successor Agency
At June 30, 2023, the outstanding balance of $2,354,766 is comprised of an advance to the former Agency which was assumed by the Successor Agency on February 1, 2012. The related agreement provided for the sale of the Ravenswood High School Site to the former Redevelopment Agency. This property was developed into a retail shopping center in the Gateway 101 Project Area. Repayment terms are subject to a formula outlined in the California Health and Safety Code and approved on an annual recognized obligation schedule (ROPS) under Dissolution Law. There is no interest provision.
5. CAPITAL ASSETS
Changes in capital assets during the year ended June 30, 2023, are comprised of the following:
Balance at July
1, 2022 Additions
Deletions/ ReclassificationBalance at June
30, 2023 Government activities Capital assets not being depreciated Land $ 4,058,724 $ 3,260,000 $ - $ 7,318,724 Construction in progress 2,035,355 4,689,666 (123,900) 6,601,121 Total capital assets not being depreciated 6,094,079 7,949,666 (123,900) 13,919,845 Capital assets being depreciated/amortized
Infrastructure: Streets and roadways 78,984,655 1,485,735 123,900 80,594,290 Storm drain system 6,738,214 - - 6,738,214 Building and improvements 20,252,333 14,629 - 20,266,962 Right-to-use leased buildings 2,306,523 - - 2,306,523 Furniture, fixtures, and equpment 2,183,012 85,668 - 2,268,680 Vehicles 2,983,803 78,684 - 3,062,487 Total capital assets being depreciated/amortized 113,448,541 1,664,716 123,900 115,237,156 Less accumulated depreciation/amortization for:
Infrastructure: Streets and roadways (34,521,026) (1,530,034) - (36,051,060) Storm drain system (2,824,366) (96,499) - (2,920,865) Building and improvements (8,121,640) (737,928) - (8,859,568) Right-to-use leased buildings (482,285) (482,285) - (964,570) Furniture, fixtures, and equpment (2,063,228) (44,340) - (2,107,568) Vehicles (1,667,893) (218,268) - (1,886,161) Total accumulated depreciation/amortization (49,680,438) (3,109,354) - (52,789,792) Total capital assets being depreciated or amortized, net 63,768,103 (1,444,638) 123,900 62,447,364 Governmental activities capital assets $ 69,862,182 $ 6,505,028 $ - $ 76,367,209 97 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
53 4. CAPITAL ASSETS, CONTINUED
Balance at July
1, 2022 Additions
Deletions/ ReclassificationBalance at June
30, 2023 Business - Type activities Capital assets not being depreciated Land $ 5,263,674 $ - $ - $ 5,263,674 Construction in progress 842,122 302,222 - 1,144,344 Total capital assets not being dep 6,105,796 302,222 - 6,408,018 Capital assets being depreciated/amortized
Building and improvements 11,212,061 - - 11,212,061 Right-to-use leased buildings 127,066 - - 127,066 Total capital assets being depreciated/amortized 11,339,127 - - 11,339,127 Less accumulated depreciation/amortization for: Building and improvements (5,336,810) (283,424) - (5,620,234) Right-to-use leased buildings (27,229) (27,229) - (54,458) Total accumulated depreciation (5,364,039) (310,653) - (5,674,692) Total capital assets being depreciated/amortized 5,975,088 (310,653) - 5,664,435 Business-type activities capital assets $ 12,080,884 $ (8,431) $ - $ 12,072,453 A. Capital Asset Contributions
Some capital assets may be acquired using federal and State grant funds, or they may be contributed by developers or other governments. GASB Statement 34 requires that these contributions be accounted for as revenues at the time the capital assets are contributed.
B. Depreciation and amortization Allocation
Depreciation and amortization expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or programs are as follows:
Governmental Activities General Government $ 30,022
Public Safety 429,328 Culture Recreation 608,007
Public Works 1,991,409 Community Development 50,588
Total Government Activities $ 3,109,354
Business-Type Activirties Water Service $ 310,653 Total Business-Type Activities $ 310,653 98 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
54 5. CAPITAL ASSETS, CONTINUED
C. Capital Project Commitments
The City has commitments underthe following significant capital infrastructure projects and programs:
Project
Project AuthorizationExpended through
June 30, 2023 Commitments Addison Avenue Steet Improvements $ 2,337,420 $ 354,437 $ 1,982,983 Joel Davis Restroom 424,695 - 424,695
Safer Bay - Flood Control 8,500,000 - 8,500,000
University Avenue Interchange 1,502,132 - 1,502,132
Water Main Project 1,104,450 239,227 865,223
Water Meter Replacement 998,000 488,927 509,073
Total $ 14,866,697 $ 1,082,591 $ 13,784,106
6. LONG-TERM DEBT
The City’s debt issues and transactions are summarized below and discussed in detail thereafter:
Balance June
30, 2022 Additions Retirements
Balance June
30, 2023
Current
Portion Government Activities
Leases $ 1,880,524 $ - $ (452,677) $ 1,427,847 $ 485,352 Total 1,880,524 - (452,677) 1,427,847 485,352 Business-Type Activities
San Mateo County Housing
Promissory Note 630,000 - (23,332) 606,668 23,333
Leases 102,919 - (25,547) 77,372 27,402
Total $ 732,919 $ - $ (48,879) $ 684,040 $ 50,735
99 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
55 6. LONG-TERM DEBT, CONTINUED
A. San Mateo County Housing Promissory Note
In March 2018, the City entered into an agreement with the County of San Mateo Department of Housing (the County) whereby the County awarded a Community Development Block Grant (CDBG) Program assistance loan in the amount of $700,000 for the Gloria Way Well Rehabilitation project (the Project).
Annual principal of $23,333 is forgiven upon each full year of operation, or each July 3rd, provided the Project remains in compliance with CDBG Program requirements and the use is as originally intended.
The Note bears zero interest if the intended use requirements are met throughout the Note term and matures on July 3rd, 2048. If the Gloria Way Well property is sold or discontinued as a City water treatment well before the end of the Note term (unless to a non-profit for the same use); then the entire Note amount plus three percent (3%) accrued simple interest is due and payable to the County.
7. Leases
The City leases three major building facility sites under non-cancellable leases. The sites leased include two police facilities, and the maintenance corporation yard. Below is a summary of these leases and the corresponding principal and interest schedules.
Assets Interest Rate Lease End Special Terms
Balance June
30, 2023
Police Department 4.05% 10/31/2025 n/a $ 421,185
Police Substation 4.05% 10/31/2027 n/a 310,313
Corp Yard 4.05% 2/28/2026
Rent increases evrery February
by the prior changes in CPI for
the San Francisco Bay Area. 773,721
Fiscal Year
Ending June 30
Principal Interest Principal Interest
2024 $ 172,803 $ 11,727 $ 65,931 $ 9,803
2025 184,709 5,338 69,242 7,363
2026 63,673 294 72,549 4,847
2027 - - 76,386 2,198
2028 and after - - 26,205 121
Total $ 421,185 $ 17,359 $ 310,313 $ 24,332
Police Substation Government ActivitiesPolice Department Government Activities 100
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
56 6. LONG-TERM DEBT, CONTINUED
B. Leases, Continued
Principal Interest Principal Interest
2024 $ 246,618 $ 20,130 $ 27,402 $ 2,237
2025 264,298 10,989 29,367 1,221
2026 185,433 1,965 20,603 219
Total $ 696,349 $ 33,084 $ 77,372 $ 3,677
Fiscal Year
Ending June 30 Government Activities Business-Type Activities Corp Yard
C. Legal Debt Margin
The City is subject to a statutory legal debt limit whereby the City may not incur indebtedness for public improvements which exceeds in the aggregate 3.75 percent of the taxable assessed value of all real and personal property of the City. This limit applies only to bonded indebtedness payable from the proceeds of taxes levied on taxable property. For the year ended June 30, 2023, the City’s maximum legal debt margin was $157,368,394 and the City had no outstanding debt subject to the margin.
7. COMPENSATED ABSENCES
Compensated absences are primarily comprised of unpaid vacation which is accrued as earned. The City’s liability for compensated absences is determined annually. Compensated absences are reported in governmental funds only if they have matured. The matured portion of governmental activities compensated absences is liquidated primarily by the General Fund.
Balance
June 1, 2022 Additions Deletions
Balance
June 30, 2023
Due Within
One Year
Due in More
Than One Year
Government Activities
Compensated Leave Payable $ 913,042 $ 599,231 $ (586,307) $ 925,966 $ 235,149 $ 690,817 101 City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
57 8. FUND BALANCE
Detailed classifications of the City's Fund Balances, as of June 30, 2023, are below:
General Fund Housing In- Lieu Funds
Capital
Improvement
s Capital Projects Fund
Other Government Funds Total Nonspendable Fund Balance Loans to Successor Agency $ 2,354,766 $ - $ - $ - $ 2,354,766 Advance to other funds 457,645 - - - 457,645 Deposits and prepayments 63,457 - - - 63,457 2,875,868 - - - 2,875,868 Restricted Fund Balance for: NPDES Fees - - - 323,478 323,478 Gas Tax - - - 3,799,487 3,799,487 Park in Lieu - - - 343,811 343,811 Rent Stabilization - - - 655,205 655,205 Housing Assistance - - - 474,742 474,742 Measure A/W - - - 5,836,490 5,836,490 CYSFF TOT Fund - - - 1,200,484 1,200,484 Lighting District - - - 5,158,855 5,158,855 Drainage District - - - 1,000,511 1,000,511 Measure C - - - 138,450 138,450 Silicon Valley Community Fd - - - 1,842,973 1,842,973 Low and Moderate Income Housing - - - 7,763,195 7,763,195 Housing in Lieu - 13,313,682 - - 13,313,682 Housing TOT - - - 2,369,951 2,369,951 Measure HH - - - 4,970,320 4,970,320 Capital projects - - - 643,623 643,623 Other Purposes 38,659 - 1,273,906 877,086 2,189,651 38,659 13,313,682 1,273,906 37,398,661 52,024,908 Committed fund balance for: CalPERS prefunding 3,000,000 - - - 3,000,000 Community benefits reserve 299,770 - - - 299,770 Information Technology Reserve 3,738,438 - - - 3,738,438 Vehicles Equipment Reserve 1,290,128 - - - 1,290,128 Self Insurance Reserve 2,035,160 - - - 2,035,160 Capital projects - - 10,414,734 - 10,414,734 Saving from ARPA contributions 1,481,000 - - - 1,481,000 11,844,496 - 10,414,734 - 22,259,230 Assigned fund balance for: Capital projects - - 6,889,192 - 6,889,192 Subsequent yearʹs budget: appropriation of fund balance 6,218,971 - - - 6,218,971
6,218,971 - 6,889,192 - 13,108,163 Unassigned fund balance Contigency reserve 10,378,581 - - 10,378,581 Other Purposes 22,430,105 - - (206,396) 22,223,709 32,808,686 - - (206,396) 32,602,290
Total Fund Balances $ 53,786,680 $ 13,313,682 $ 18,577,832 $ 37,192,265 $ 122,870,459 102
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
58 9. RETIREMENT BENEFITS
A. City Employees; Retirement Plan (Defined Benefit Pension Plan) Plan Description
All qualified permanent and probationary employees are eligible to participate in the Public Agency CostSharing Multiple-Employer Defined Benefit Pension Plan (Plan) administered by the California Public Employees’ Retirement System (CalPERS). The Plan consists of individualrate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other). Plan assets may be used to pay benefits for any employerrate plan of the safety and miscellaneous risk pools. Accordingly,rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors four rate plans (two miscellaneous and two safety).
Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions, and membership information that can be found on the CalPERS website.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: Basic Death Benefit, 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The City contracted for 2% cost of living adjustments.
103
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
59 9. RETIREMENT BENEFITS, CONTINUED
A. City Employees; Retirement Plan (Defined Benefit Pension Plan), Continued The rate plan provisions and benefits in effect at June 30, 2023 are summarized as follows:
Safety Miscellaneous Hire Date Prior to January 1, 2013 Prior to January 1, 2013 Benefit vesting schedule 5 years service 5 years service Benefit Formula 3.0% @ 55 2.5% @ 55
Benefit payment Monthly for life Monthly for life Retirement age 50 50 Monthly benefits, as a % of annual salary 2.4 - 3% 2 - 2.5% Required employee contribution rates 8.99% 7.96%
Required employer contribution rates 20.64% 11.59%
Required unfunded accrued liability payment (UAL) $ 738,385 $ 465,824 Safety Miscellaneous Hire Date On or after January 1, 2013 On or after January 1, 2013 Benefit vesting schedule 5 years service 5 years service Benefit Formula 3.0% @ 55 2.5% @ 55
Benefit payment Monthly for life Monthly for life Retirement age 57 62 Monthly benefits, as a % of annual salary 2.70% 2.00% Required employee contribution rates 13.00% 6.75%
Required employer contribution rates 12.78% 7.47%
Required unfunded accrued liability payment (UAL) $ 24,191 $ 27,624 Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for allpublic employers be determinedon an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions forthe Plan is determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
For the fiscal year ended on June 30, 2023, the contribution to the plan was $2,466,089, consisting of $1,397,580 for Safety and $1,068,509 for Miscellaneous. 104
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
60 9. RETIREMENT BENEFITS, CONTINUED
A. City Employees; Retirement Plan (Defined Benefit Pension Plan), Continued Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2023, the City reported a net pension liability for its proportionate share of the net pension liability of the Plan of $14,730,175. The City’s net pension liability for the Plan is measured as the proportionate share of the total net pension liability of the Plan. The net pension liability of the Plans is measured as of June 30, 2022, and the total pension liability for the Plan used to calculate the net pension liability was determined by actuarial valuations as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The City’s proportionate share of the net pension liability was based on the City’s plan liability and asset-related information where available, and proportional allocations of individual plan amounts as of the valuation date where not available.
The City’s proportionate share of the net pension liability for the Plan as of measurement date June 30, 2021 and 2022 were as follows:
Proportion - June 30, 2021 0.12067%
Proportion - June 30, 2022 0.12753%
Change - Increase (Decrease) 0.00686%
For the year ended June 30, 2023, the City recognized pension expense of $768,031. On June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows
of Resources
Deferred Inflows of
Resources
Pension Contributions subsequent to measurement date $ 2,466,089 $ - Changes of assumptions 1,494,926 - Differences between expected and actual
experience 483,943 175,243 Changes in employer's proportion 798,383 - Differences between the employer's contribution 19,984 363,262 Net differences between projected and actual earnings on plan investments 2,475,120 -
Total $ 7,738,445 $ 538,505
105
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
61 9. RETIREMENT BENEFITS, CONTINUED
A. City Employees; Retirement Plan (Defined Benefit Pension Plan), Continued Pension contributions subsequent to the measurement date in the amount of $2,466,089 and reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Fiscal Year Ending
June 30
Deferred
Outflows/
(Inflows) of
Resources
2024 $ 1,491,040
2025 1,147,037
2026 584,167
2027 1,511,607
Actuarial Assumptions – The total pension liabilities in the June 30, 2021 actuarial valuations were determined using the following actuarial assumptions:
Valuation Date June 30, 2021 Measurement Date June 30, 2022 Actuarial Cost Method Entry-Age Normal Cost Method Actuarial Assumptions: Discount Rate 6.90% Inflation 2.30%
Projected Salary Increase Varies by entry age and service Investment Rate of Retum 6.90% Mortality rate table(1) Derived using CalPERS' Membership Data for all Funds Post Retirement Benefit Increase Contract COLA up to 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies (1)The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.
106
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
62 9. RETIREMENT BENEFITS, CONTINUED
A. City Employees; Retirement Plan (Defined Benefit Pension Plan), Continued Discount Rate – The discount rate used to measure the total pension liability for the Plan was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. A detailed report testing these projections can be obtained from the CalPERS website.
The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS considered both short-term and longterm market return expectations as well as the expected pension fund cash flows. Using historical and forecasted information for all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.
The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.
Asset Class
Assumed Asset Allocation
Real Return Years
1 - 101,2
Global equity - cap-weighted 30.00% 4.45%
Global equity non-cap-weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27% Mortgage-backed Securities 5.00% 0.50% Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
100.00%
1 An expected inflation of 2.30% used for this period.
2 Figures are based on the 2021-22 Asset Liability Management study. 107
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
63 9. RETIREMENT BENEFITS, CONTINUED
A. City Employees; Retirement Plan (Defined Benefit Pension Plan), Continued Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate – The following presents the City’s proportionate share of the net pension liability forthe Plan, calculated using the discount rate for the Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
1% Decrease 5.90%
Net Pension Liability $ 23,296,684
Current Discount Rate 6.90%
Net Pension Liability $ 14,730,175
1% Increase 7.90%
Net Pension Liability $ 7,707,831
Pension Plan Fiduciary Net Position – Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
Payable to the Pension Plan
At June 30, 2023 the City reported a payable of $173,995 for outstanding amount of contributions to the pension plan required for the year ended June 30, 2023. All amounts were paid in July 2023 in a timely manner.
B. Deferred Compensation Plan
City employees may defer a portion of their compensation under optional City-sponsored deferred compensation plans created in accordance with Internal Revenue Code Section 457. Under the plan, participants are not taxed on the deferred portion of their compensation until it is distributed to them; distributions may be made only at termination, retirement, death, or in an emergency defined by governing documents of the plan. The City does not make contributions to the plan on behalf of the employees.
The laws governing deferred compensation plan assets require plan assets to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. The City has contracts with an outside thirdparty administrator to manage and invest the assets of the plan.
In the year 2021, the City evaluated the requirements of GASB Statement No. 84, Fiduciary Activities and GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensations Plans and determined that the plan didn’t meet the criteria to be reported as a fiduciary activity as required by the above mentioned GASB Statements since the assets held under this plan are not the City's property and are not subject to City control. Moreover, the plan is classified as other employee benefits for financial reporting purposes. 108
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
64 10. RISK MANAGEMENT
A. Insurance Coverage
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters.
The City participates in the Pooled Liability Assurance Network (PLAN), a joint powers authority established to provide liability insurance coverage, claims and risk management, and legal defense to its participating members. PLAN self-insures and purchases general and auto liability coverage for claims in an amount up to $30 million (subject to policy exclusions and sub-limits), and first-party property liability claims up to $1 billion (subject to policy exclusions and sub-limits). The City has a deductible or uninsured liability of up to $100,000 per liability claim and $5,000 per property claim.
Once the City's deductible is met, PLAN becomes responsible for payment of all claims up to the limit.
The State Compensation Insurance Fund provides workers' compensation insurance with a $1 million per occurrence coverage. The City has no deductible for the worker's compensation insurance.
Liabilities are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. Claim liabilities are actuarially determined considering recent claim settlement trends including the frequency and costs of payouts and other economic and social factors.
B. Liability for Uninsured Claims
The City provides for the uninsured portion of claims and judgments in the Workers' Compensation and General Liability. Claims and judgments, including a provision for claims incurred but not reported, are recorded when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims.
The City's liability for uninsured claims including a provision for claims incurred but not reported was computed as follows based on claims experience for the years ended June 30, 2021, 20202, and 2023:
2021 2022 2023
Beginning balance of claims payable $ 222,000 $ 133,000 $ 180,000 Increase in estimated claims liability (40,524) 123,526 152,152 Claims period (48,476) (76,526) (66,003)
Ending balance of claims payable 133,000 180,000 266,149 Current portion $ 61,000 $ 96,656 $ 114,127
During the past three fiscal years none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage from the prior year. 109
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
65 11. JOINT VENTURES
The City participates in the joint ventures discussed below through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these entities exercise full powers and authorities within the scope of the related Joint Powers Agreements; including, the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Each joint venture is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint venture, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on that Board.
Obligations and liabilities of these joint ventures are not the City's responsibility, and the City does not have an equity interest in the assets of each joint venture except upon dissolution of the joint venture.
A. City/County Association of Governments of San Mateo County (C/CAG) The City/County Association of Governments of San Mateo County is a joint powers agency formed in 1990 between the various cities and transportation agencies in San Mateo County to prepare, adopt, monitor and enforce state mandated plans related to transportation, airport land use, storm water pollution prevention, and climate protection. For the year ended June 30, 2023, the City contributed $85,219 for annual operations. An annual report may be obtained at 555 County Center 5th Floor, Redwood City, CA 94063.
B. Housing Endowment and Regional Trust of San Mateo County (HEART) The Housing Endowment and Regional Trust of San Mateo County (HEART) is a joint powers agency formed in 2003 as a public/private partnership comprised of the County of San Mateo, all twenty cities/towns within San Mateo County, and private sector members from business, nonprofit, and labor organizations. HEART is governed by a Board of Directors consisting of eleven elected officials from government member agencies and ten private sector members. HEART was established for the purpose of creating more affordable housing opportunities in the County. For the year ended June 30, 2023, the City contributed $9,267 for annual administrative operations. An annual report may be obtained at 2905 S. El Camino Real, San Mateo, CA 94403.
C. Peninsula Clean Energy
Peninsula Clean Energy (PCE) is a joint powers authority formed in 2016 and is comprised of the County of San Mateo and all twenty cities/towns in San Mateo County. The PCE is governed by a Board of Directors consisting of an elected representative from each member jurisdiction. PCE was established to provide electric power at competitive costs, as well as provide other benefits such as greenhouse gas emission reduction, development of local renewable resources, and promotion of long-term electric rate stability and energy reliability. PCE operates as a Community Choice Aggregation Program and derives no financial support from member agencies. Information may be obtained at 2075 Woodside Road, Redwood City, CA 94061.
110
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
66 11. JOINT VENTURES, CONTINUED
D. Peninsula Traffic Congestion Relief Alliance
The Peninsula Traffic Congestion Relief Alliance (Alliance) is a joint powers authority formed in 2000 and is comprised of the County of San Mateo and seventeen cities/towns in San Mateo County. Alliance is governed by an eighteen-member Board of Directors consisting of an elected representative from each member jurisdiction. Alliance was established to perform transit systems management efforts to mitigate traffic congestion in member communities. The operations are funded by countywide Measure A transportation funds, grants, and contributions from members of a shuttle consortium. Forthe year ended June 30, 2023, the City did not make any member contribution to Alliance. An annual report may be obtained at 400 Oyster Point Blvd. Suite 409, South San Francisco, CA 94080.
E. San Francisquito Creek Joint Powers Authority
The City is one of five members of the San Francisquito Creek Joint Powers Authority (SFCJPA) formed in 1999 to manage and provide policy direction related to flood control measures, emergency response, stabilization and maintenance, and other environmental issues regarding the San Francisquito Creek. The City has no equity interest in the SFCJPA. Forthe year ended June 30, 2023, the City contributed $395,926 for annual SFCJPA administrative operations. Financial statements may be obtained by mailing a request to 2100 Geng Road Suite 210, Palo Alto, CA 94303.
F. South Bayside Waste Management Authority
The City is one of twelve members of the South Bayside Waste Management Authority (SBWMA), which is a joint powers authority that the City commenced on March 1, 2000. The SBWMA was formed in 1982 to provide cost-effective waste reduction, recycling, and solid waste programs to member agencies to meet and sustain a minimum 50% diversion of waste from landfill as mandated by California State Law, AB939. SBWMA owns the Shoreway Environmental Center which serves as a regional solid waste and recycling facility and is operated by South Bay Recycling (SBR) on behalf of the SBWMA. The City has no equity interest in SBWMA. Through the operation of franchise agreements with each member, RECOLOGY collects fees charged for the use of the facilities and remits them to the SBWMA. Pursuant to an Operations Agreement with the SBWMA, RECOLOGY is compensated based on costs, a provision for profit and incentives for cost savings and performance. For the year ended June 30, 2023, the City made payments to Recology in the amount of $2,732,813. Financial statements may be obtained by mailing a request to 610 Elm Street, Suite 202, San Carlos, CA 94070. 111
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
67 12. SERVICE CONCESSION ARRANGEMENT FOR WATER SERVICES A. Lease Agreement and Assignment from American Water Service, Inc. to Veolia Water North America Services, LLC.
In April 2001, the City entered into a twenty-five (25) yearlease agreement with American Water Services, Inc. (American Water) whereby the City agreed to lease the water system to American Water for the purpose of furnishing potable water service and water service fire protection to all customers within the City’s water service area.
In November 2018, at American Water’s request, the City authorized the assignment of all terms and conditions of the lease agreement from American Water to Veolia Water North America Operating Services LLC (Veolia) subject to certain conditions of approval, including State of California approval and issuance of a water permit to Veolia to operate the City’s water system. On June 1, 2020, the City entered into a consent to assignment of the lease agreement with American Water whereby Veolia assumed all the terms and conditions of lease agreement from American Water.
During the term of the lease, the lessee is responsible for operating, maintaining and managing the water system, as well as fulfilling customer services, emergency services, water quality testing, and other service operations related to the water system.
If total annual system maintenance and repair costs exceed $110,000, the excess costs are considered system improvements and paid through additional capital charges. The lessee bills and collects water services charges, capital surcharges, and utility tax from the City's water customers. Utility users’ taxes and capital-related surcharges billed and collected by the lessee are passed-through to the City.
The lessee may request water rate relief from the City to recover necessary and reasonable costs related to performing the water system services, including earning an operational rate of return of eight percent (8%) after-tax on defined, contractual gross revenues. The City agrees to enact water rates based upon such requirements and in accordance with applicable State Law regarding water rate increases. No water rate relief request was submitted to the City during the year ended June 30, 2023. Any fees ortaxes billed and passed through to the City are not considered contractual gross revenues of the water system operation. Contractual gross revenues, as defined, for the year ended June 30, 2023, total approximately $6.2 million.
The City has retained title of the Water System and related capital assets underthe terms of the lease. Title for system improvements performed immediately vests with the City. The lessee may not retire, sell, transfer; convey, or encumber any real property or personal property of the Water System without the prior written consent of City. The City is not obligated to pay any costs or expense in connection with or related to the management, operation, improvement, repair, or maintenance of the water system during the lease term, except for costs related to environmental liabilities. The City currently has undertaken certain system improvements which are funded from grants, system impact fees, and water capital surcharges; of the system improvements authorized, approximately $448,000 is authorized to be performed by the lessee for distribution system improvements, and $550,000 is authorized to be performed for meter replacement labor costs. Forthe fiscal year ended June 30, 2023, water system assets total $12,072,453 net of depreciation.
112
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
68 12. SERVICE CONCESSION ARRANGEMENT FOR WATER SERVICES, CONTINUED A. Lease Agreement and Assignment from American Water Service, Inc. to Veolia Water North America Services, LLC.
In consideration for the lease of the water system assets, the lessee agrees to pay the City a monthly lease payment equal to 6% and a monthly franchise fee equal to 5% of the annual gross revenues generated by the water system. For the year ended June 30, 2023, Veolia paid lease payments and franchise fees to the City in amount of $370,891 and $309,076, respectively. Further, for the year ended June 30, 2023, the City reported passed-through utility taxes and capital-related surcharges of $325,083 and $538,327, respectively.
13. CONTINGENT LIABILITIES AND COMMITMENTS
A. Contingent Liabilities
The City is subject to litigation arising in the normal course of operations. In the opinion of the City Attorney there is no pending litigation which is likely to have a material adverse effect on the financial position of the City.
B. Federal and State Grants
The City has received federal and state grants for specific purposes that are subject to reviews by the grantor agencies. Such reviews could lead to requests for reimbursements to the grantor agency for expenditures disallowed under the terms of the grant. The amount, if any, of expenditures that may be disallowed by the granting agencies cannot be determined at this time, although City expects such amounts, if any, to be immaterial.
C. California State Water Resources Control Board Corrective Action Plan On April 21, 2015 the City, along with several other regional water system (RWS) customers of the San Francisco Public Utilities Commission (SFPUC), was cited by the State Water Resources Control Board (SWRCB) for not providing multi-barrier treatment to raw surface water. This citation was due to an incident occurring in March of 2015, whereby untreated water was inadvertently allowed to flow into the RWS. The incident did not result in any adverse effects; however, the SWRCB citation directed that the City prepare a Corrective Action Plan. The CAP includes several corrective actions developed to prevent another similar incident.
On August 15, 2015 the SWRCB acknowledged the City’s Corrective Action Plan (CAP) whereby the City will take steps to ensure the water supply and/or storage of water is safe and sustainable in the event SFPUC water becomes unavailable. The critical elements of the CAP are the new groundwater wells, the construction of water system interties, and the construction of storage tanks over an estimated period of seven (7) years. However, the CAP recognizes that the timing for the construction of the storage tanks is less certain due to the prioritization of the groundwater wells, staffing limitations and complexities securing site control. The highest priority water system improvements have estimated costs of roughly $15.5 million. The City enacted a capital improvement surcharge, contributed general and community benefit funds to the water system, secured grant funding and completed refurbishment of the Gloria Way Water Well, and has funding forthe water system interties. As of June 30, 2023, the City has capital water reserves of approximately $11.5 million.
113
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
69 13. CONTINGENT LIABILITIES AND COMMITMENTS, CONTINUED D. Water Rights Acquisition and Related Agreement
Water Rights Acquisition Agreements
In August 2018, the City entered into an agreement with the City of Mountain View to transfer all right, title, and interest to 1,000,000 gallons per day (1 MGD) of its guaranteed water supply (ISG) under the City and County of San Francisco Water Supply Agreement. The acquisition price of $5,000,000 was funded from the following sources:
Silicon Valley Community Foundation (SVCF) Gift Agreement/Advance $2.0 Million– In June 2017, the City entered into a gift agreement with the SVCF for $2.5 million whereby the gift is restricted for the purpose of incentivizing the development of affordable housing within the City. Up to $2,000,000 was authorized and utilized for an inter-fund advance from SVCF special revenue fund to acquire permanent water rights. The advance is repaid upon the receipt ofrelated water capacity charge orrelated impact, or charge imposed by the City. The remaining funds are restricted to fund not less than $500,000 for an affordable housing manager over a minimum period of five years. As of June 30, 2023, the inter-fund advance amount totaled $1,948,360.
General Fund Advance $0.47 Million - The City approved a long-term inter-fund advance to the Water Service Enterprise Fund for purpose of facilitating the permanent water rights transfer. Reimbursement of the funds advanced will be made solely from capacity charges established by the City, as allowed, to cover the entire cost the water rights transfer and charged for new or expanded water connections to its water system. As of June 30, 2023, the inter-fund advance amount totaled $457,645.
Amendment to Water Supply Implementation Agreement $1.53 Million – In June 2017, the City approved an amendment to the Water Supply Implementation Agreement (Amended WSIA) in order establish terms for payment of the attributed share of the costs of the permanent water rights transfer. Under the terms of the amendment, 2020 Bay Road LLC, the Primary School LLC, and the Sobrato Organization LLC (collectively “developers”) agreed to advance a collective total of $1.53 million as the developers’ attributed share of the cost of the water rights transfer. For a period of eight (8) years after the effective date of the water rights transfer, if entitlement for a developer site is approved in accordance with the City’s laws and policies, any payments made under the Amended WSIA will be credited against a water capacity charge or related impact or buy-in charge imposed by the City typically upon issuance of building permits. As of June 30, 2023, the Primary School and Sobrato development projects were entitled; however, no building permits have been issued. 114
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
70 13. CONTINGENT LIABILITIES AND COMMITMENTS, CONTINUED D. Water Rights Acquisition and Related Agreement, Continued Water Rights Acquisition Agreements, Continued
Sobrato Organization LLC Reimbursement Agreement $1.0 Million – The City approved a reimbursement agreement (Agreement) with the Sobrato Organization LLC (Sobrato) to provide funds in the amount of $1,000,000 forthe purpose of facilitating the permanent waterrights transfer. Reimbursement of the funds advanced will be made solely from capacity charges established by the City, as allowed, to coverthe entire cost the water rights transfer and charged for new or expanded water connections to its water system.
The Agreement expires upon the earlier of the date of full reimbursement of the advance or August 4, 2037 (twenty years from Agreement effective date). Upon expiration, the City’s commitments under the agreement terminate.In December 2019, in accordance with approved project entitlements and conditions of approval, Sobrato agreed to forego all outstanding amounts advanced under the Agreement upon the issuance of a building certificate of occupancy, which did not occur as of year-end. As of June 30, 2023, the balance of the advance totaled $974,181.
As of June 30, 2023, the advance from the Developers was outstanding for a collective total of $2,505,957.
E. Affordable Housing and Sustainable Communities Grant Commitments In June 2019, the City received a jointly submitted grant award of $20 million in partnership with Eden Housing, EPA CAN DO, and the San Mateo County Transit District (SamTrans). The grant funding consists of $13.5 million in loans for affordable housing development, and $6.5 million for transit and infrastructure improvements. Under the terms of the grant award, applicants are held jointly and severally liable to provide accountability and ensure the full scope of the project application is implemented. The City entered into cooperation and indemnification agreements with the grant coapplicants to mitigate risks among the parties. Of the $20 million, the City is responsible for completing $3.75 million in sustainable transportation infrastructure, and transit-related amenities in a timely manner. As of June 30, 2023, no projects have been completed.
F. CalOES Grant Commitment for SAFER Bay Project
In September 2018, the City authorized the San Francisquito Creek Joint Powers Authority (SFCJPA) to submit an application on behalf of the City to the California Office of Emergency Services (CalOES), Hazard Mitigation Grant Program for $22 million for the East Palo Alto Safer Bay Project, Phase I, protecting East Palo Alto with a levee from San Francisquito Creek through Bay Road and constructing related and necessary environmental mitigations. The grantrequired the City to reserve the required local funding match (25%) which was equal to $5.5 million, and the City of East Palo Alto has committed $5.5M in capital funding to construct the portion of the project in East Palo Alto. The engineering and design phase of the project was approved and awarded for $3.5 million by FEMA in September 2022. 115
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
71 13. CONTINGENT LIABILITIES AND COMMITMENTS, CONTINUED G. Flood and Sea Level Resiliency Agency
In March 2019, in conjunction with the County of San Mateo, C/CAG and other cities and towns in San Mateo County, the City agreed to fund the startup costs to modify the existing San Mateo County Flood Control District including expanding the scope and modifying the governance structure. The estimated startup costs approved total $1.1 million, of which the City agreed to fund $40,000 per year for a threeyear period. For the year ended June 30, 2022, the City paid its final $40,000 commitment.
14. REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES A. Redevelopment Dissolution
On June 28, 2011 the State of California adopted ABx1 26 (AB 26) which, in Late December 2011, was upheld by the California Supreme Court to be largely constitutional. This action, together with AB 1484 enacted on June 27, 2012, are referred to as “Dissolution Law” as related to former redevelopment agencies. Under the existing Dissolution Laws, California redevelopment agencies were dissolved as of February 1, 2012 and cannot engage in new projects, obligations, or commitments. Beginning in February 2012, Successor Agencies, together with other designated entities, initiated the process under AB 26 to unwind the affairs of the dissolved agencies. This action impacted the reporting entity of the City of East Palo Alto in that the City had previously reported a redevelopment agency (former Agency) as a blended component unit of the City.
On January 10, 2012, the City Council elected to serve as the Successor Agency to the former Agency whereby the Successor Agency holds assets, reports obligations, and otherwise oversees the winddown of the affairs of the former Agency as dictated by the Dissolution Laws and subject to control and approval of an established Oversight Board and the California Department of Finance.
Furthermore, on January 10, 2012, the City also elected to serve as the former Agency’s Housing Successor and retain the housing assets of the former Agency. On February 1, 2012, certain housing assets were transferred to the City's Housing Successor Special Revenue Fund.
Since February 1, 2012, the Successor Agency has complied with existing Dissolution Laws, including completing a due diligence review, obtaining a finding of completion, obtaining approval of the longrange property management plan, completing timely reporting of recognized obligation schedules. The Successor Agency continues to conduct the fiduciary activities of the Dissolution Laws until such time the affairs and obligations of the former Agency are complete.
Cash and investments of the Successor Agency as of June 30, 2023, are discussed in Note 2. Information presented in the following footnotes represents other assets and liabilities of the Successor Agency as of June 30, 2023.
116
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
72 14. REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES B. Long-Term Debt
The Successor Agency’s debt issues and transactions are summarized below and discussed in detail thereafter.
Issue
Amount
Balance at
June 30, 2022 Retirements
Discount/
Premium
Balance at
June 30, 2023
Due within
One Year
Successor Agency
2015 Tax Allocation
Refunding Bonds Series A
3.625%-4% due 10/1/2032 $ 16,950,000 $ 14,140,318 $ (1,030,000) $ (45,318) $ 13,065,000 $ 1,085,000 Total Successor Agency $ 16,950,000 $ 14,140,318 $ (1,030,000) $ (45,318) $ 13,065,000 $ 1,085,000 2015 Tax Allocation Refunding Bonds
On September 1, 2015, the Successor Agency issued $16,950,000 Tax Allocation Refunding Bonds, Series 2015A and $2,500,000 Taxable Tax Allocation Refunding Bonds, Series 2015B. The bonds were issued to refund the 1999 Tax Allocation Bonds, the 2003 Series A Bonds, and the 2003 Series B Bonds. Certain proceeds of the refunding bonds were subsequently used to call the East Palo Alto Public Financing Authority 2005 Revenue Bonds on October 1, 2015. The economic gain on refunding of these bonds was $2,560,798. The Series 2015B Refunding Bonds had been paid off in the fiscal year ending June 30, 2019.
Series 2015A Refunding Bonds
The 2015A Refunding Bonds mature annually starting October 1, 2018, through 2032, with semi-annual installments ranging from $45,000 to $1,515,000. The interest on the 2015A Refunding Bonds is payable semi-annually on each April 1 and October 1, with coupon rates ranging from 3.00% to 5.00%. The Series 2015A Bonds maturing on or after Octobers 1, 2026, are subject to redemption, at the option of the Successor Agency on any date on or after October 1, 2025, in whole or in part, by such maturities as are determined by the Successor Agency and by lot within a maturity, from any available source of funds, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium.
The annual debt service requirements of the Series 2015 A bonds are as follows:
Year Ending
June 30, Principal Interest Total
2024 $ 1,085,000 $ 467,425 $ 1,552,425
2025 1,140,000 411,800 1,551,800
2026 1,195,000 353,425 1,548,425
2027 1,250,000 304,800 1,554,800
2028-2032 6,880,000 887,747 7,767,747
2033 1,515,000 27,459 1,542,459
Total $ 13,065,000 $ 2,452,656 $ 15,517,656
117
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
73 14. REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES,
CONTINUED
B. Long-Term Debt, Continued
Pledged Revenues
The 2015 Tax Allocation Refunding Bonds of the Successor Agency are payable solely from and secured by tax revenues deposited into Redevelopment Property Tax Trust Fund. Principal and interest on the Series 2015A bonds are guaranteed under an insurance policy.
C. Deferred Inflows of Resources
The Successor Agency recorded the following item as deferred inflows of resources as of June 30, 2023.
Balance June
30, 2022 Additions Retirements
Balance June
30, 2023
2015 Tax Allocation Refunding
Bonds - Gain on refunding $ 153,892 $ - $ (30,879) $ 123,013 118
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2023
74 1. BUDGETS AND BUDGETARY ACCOUNTING
A. Budgetary Procedures
The City adopts a budget annually for all governmental fund types, except for capital projects. This budget is effective July 1 for the ensuing fiscal year. From the effective date of the budget, which is adopted at the fund level, the amounts stated therein as proposed expenditures become appropriations to the various City departments. The legal level of budgetary control is the fund level.
The City Council may amend the budget by resolution during the fiscal year. The City Manager has the authority to make adjustments to the operating budget between departments within the same fund. Transfers of operating budgets between funds, use of unappropriated fund balances, and significant changes in capital improvement project budgets require the approval of the City Council.
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States except for the Housing Assistance Fund and the Capital Improvements Capital Projects Fund which are adopted on a project length basis.
B. Encumbrances
The City uses an encumbrance accounting system under which purchase orders, contracts and other commitments for the expenditure of moneys are recorded in order to set aside that portion of the applicable appropriation. Encumbrance accounting is employed as an extension of formal budgetary integration in all budgeted funds. Encumbrances outstanding at year end are reappropriated in the following year. Unexpended appropriations lapse at year end and must be reappropriated in the following year.
119
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2023
75 1. BUDGETS AND BUDGETARY ACCOUNTING
C. Budgetary Comparison Schedules
Budgetary Comparison Schedule, General Fund
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Property taxes $ 15,765,421 $ 18,925,421 $ 19,892,870 $ 967,449 Sales taxes 5,845,000 5,845,000 6,394,903 549,903
Transient occupancy tax 1,100,000 1,600,000 1,778,986 178,986 Utility users tax 1,702,684 1,702,684 1,936,239 233,555 Other taxes 1,425,250 1,725,250 1,785,985 60,735
Licenses, fees and permits 1,606,200 1,606,200 1,711,468 105,268 Charges for services 1,282,217 1,083,822 654,775 (429,047) Fines and forfeitures 207,500 257,500 379,861 122,361
Use of money and property 336,500 766,564 1,197,455 430,891 Grants and intergovernmental 103,000 2,796,463 1,976,920 (819,543) Miscellaneous 75,000 2,391,142 975,524 (1,415,618) Total revenues 29,448,772 38,700,046 38,684,986 (15,060) EXPENDITURES:
Current: General government 6,273,305 7,891,979 5,629,764 2,262,215 Public safety 13,383,966 14,338,475 11,499,595 2,838,880 Public works 4,368,249 5,229,246 3,480,723 1,748,523 Culture and recreation 956,632 1,147,428 1,146,466 962 Community development 3,119,396 5,193,030 4,008,802 1,184,228 Capital outlay 350,000 4,374,078 4,419,476 (45,398) Debt service:
Principal - - 439,791 (439,791)
Interest - - 71,891 (71,891)
Total expenditures 28,451,548 38,174,236 30,696,508 7,477,728 REVENUES OVER (UNDER) EXPENDITURES 997,224 525,810 7,988,478 7,462,668 OTHER FINANCING SOURCES (USES):
Transfer in 821,140 2,600,140 2,600,140 -
Transfer out (1,818,364) (5,274,098) (5,274,098) -
Total other financing sources (uses) (997,224) (2,673,958) (2,673,958) - Net change in fund balance $ - $ (2,148,148) 5,314,520 $ 7,462,668 FUND BALANCE:
Beginning of year 48,472,160
End of year $ 53,786,680
Budget Amounts
120
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2023
76 1. BUDGETS AND BUDGETARY ACCOUNTING, CONTINUED
C. Budgetary Comparison Schedules, Continued
Budgetary Comparison Schedule, Housing in-Lieu Fund
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ 42,000 $ 105,257 $ 200,338 $ 95,081 Grants and intergovernmental 1,000,000 9,000,000 8,000,000 (1,000,000) Total revenues 1,042,000 9,105,257 8,200,338 (904,919)
EXPENDITURES:
Current: General government 30,160 30,160 30,160 - Community development 4,000,000 9,391,000 471 9,390,529 Total expenditures 4,030,160 9,421,160 30,631 9,390,529 REVENUES OVER (UNDER) EXPENDITURES (2,988,160) (315,903) 8,169,707 8,485,610 OTHER FINANCING SOURCES (USES):
Transfer out - (1,500,000) (1,500,000) -
Total other financing sources (uses) - (1,500,000) (1,500,000) - Net change in fund balance $ (2,988,160) $ (1,815,903) 6,669,707 $ 8,485,610 FUND BALANCE:
Beginning of year 6,643,975
End of year $ 13,313,682
Budget Amounts
121
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2023
77 2. DEFINED BENEFIT PENSION PLAN
A. Schedule of the City’s Proportionate share of the Net Pension Liability – Last 10 years* 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 Measurement date 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 Proportion of the net pension liability 0.127530% 0.120670% 0.115570% 0.112300% 0.110450% 0.109441% 0.109310% 0.118190% 0.126260% Proportionate share of the net pension
liability $ 14,730,175 $ 6,526,289 $ 12,574,721 $ 11,507,754 $ 10,642,902 $ 10,853,587 $ 9,458,584 $ 8,112,375 $ 7,856,469 Covered payroll $ 10,120,545 $ 10,344,561 $ 9,673,702 $ 9,577,025 $ 9,257,855 $ 8,464,356 $ 8,078,420 $ 7,962,595 $ 7,773,690 Proportionate share of the net liability
as a percentage of covered payroll 145.55% 63.09% 129.99% 120.16% 114.96% 128.23% 117.08% 101.88% 101.06% Plan fiduciary net position as a
percentage of the total pension liability 76.68% 88.29% 75.10% 75.26% 75.26% 73.31% 74.06% 78.40% 79.82% Notes to Schedule:
*Fiscal year 2015 was the first year of implementation, therefore only nine years are shown. The CalPERS discount rate was increased from 7.5% to 7.65% in fiscal year 2016, decreased from 7.65% to 7.15% in fiscal year 2018, and then decreased from 7.15% to 6.90% in fiscal year 2023. The CalPERS mortality assumptions were adjusted in fiscal year 2019. 122
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2023
78 2. DEFINED BENEFIT PENSION PLAN
B. Schedule of Contributions – Last 10 years*
2023 2022 2021 2020 2019 2018 2017 2016 2015 Fiscal Year Contractually required contribution (actuarially determined) $ 2,466,089 $ 2,366,071 $ 2,261,018 $ 1,976,048 $ 1,812,899 $ 1,642,560.0 $ 1,493,218.0 $ 1,371,578.0 $ 1,477,383.0 Contribution in relation to the actuarially determined contributions $ (2,466,089) $ (2,366,071) $ (2,261,018) $ (1,976,048) $ (1,812,899) $ (1,642,560.0) $ (1,493,218.0) $ (1,371,578.0) $ (1,477,383.0) Contribution deficiency (excess) - - - - - - - - - Covered payroll $ 10,323,474 $ 10,120,545 $ 10,344,561 $ 9,673,702 $ 9,577,025 $ 9,257,855 $ 8,464,356 $ 8,078,420 $ 7,962,595 Contributions as a percentage of covered payroll 23.89% 23.38% 21.86% 20.43% 18.93% 17.74% 17.64% 16.98% 18.55% Notes to schedule:
*Fiscal year 2015 was the first year of implementation, threfore only nine years are shown Variation Date (for contractually required contribution) 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 6/30/2013 6/30/2012 Actuarial cost method Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Amortization method (1) (1) (1) (1) (1) (1) (1) (1) (1) Assets valuation method Market Value Market Value Market Value Market Value Market Value Market Value Market Value Market Value 15 Year Smoothed Market Method
Inflation 2.50% 2.50% 2.50% 2.63% 2.75% 2.75% 2.75% 2.75% 2.75% Salary increases (2) (2) (2) (2) (2) (2) (2) (2) (2)
Investment rate of return 7.00% 7.00% 7.00% 7.25% 7.375% 7.50% 7.50% 7.50% 7.50% Retirement age (3) (3) (3) (3) (3) (3) (3) (3) (3) Mortality (4) (4) (4) (4) (4) (4) (4) (4) (4) (1) Level percentage Level percentage of payroll, closed (3) 2% @62
(2) Depending on age, service, and type of employment 50 for all plans, with the exception of 52 for Miscellaneous PEPRA (4) Mortality assumptions ar ebased on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS board.
123
79 NON-MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
NPDES Fees Fund accounts for the revenues and expenditures from assessments levied on property in the City in compliance with the provisions of the National Pollutant Discharge Elimination System for prevention of storm water and flood related damage.
Gas Tax Fund accounts for funds received from the State of California to use for street and highway related projects.
Federal and State Law Enforcement Fund accounts for the receipt and use of State and Federal law enforcement related grant money.
Park in Lieu Fund accounts for park in lieu fees collected from developers.
Rent Stabilization Fund accounts for revenues and expenditures to support rent stabilization activities.
Federal and State Grants Fund accounts for grant money received and expended from various Federal and State government grants.
Housing Assistance Fund accounts for first time home buyer assistance program activities.
Measure A Fund accounts for the City's Measure A revenues and expenditures. Measure A is a halfcent sales tax to support countywide (San Mateo County) transportation projects and programs.
CYSFF TOT Fund accounts for 10% of TOT taxes collected as approved by voters and the City Council approved funding for various non-profit organizations related to Children/Youth/Seniors/Family programs.
Lighting District Fund accounts for revenues (property taxes) and expenditures for the Ravenswood Highway Lighting District.
Drainage District Fund accounts for revenues (property taxes) and expenditures for the East Palo Alto Maintenance Drainage District.
Measure C Fund accounts for activities related to the Measure C Parcel tax. Measure C was an annual tax approved by the voters in November 2006 for a period of ten years. The remaining funds are to be used to support violence prevention and public safety intervention.
Local Grants Fund accounts for revenues and expenditures from local public and private grants.
Silicon Valley Community Foundation (SVCF) Special Revenue Fund accounts for gift monies from the Silicon Valley Community Foundation to be used for the purpose of incentivizing the development of affordable housing within the City. Up to $2,000,000 was authorized for an interfund advance to provide monies to purchase certain water rights. Remaining funds are restricted to pay a minimum amount of $500,000 for an affordable housing manager position over a minimum period of five years.
124
80 SPECIAL REVENUE FUNDS (CONTINUED)
Low and Moderate Income Housing Successor Fund accounts for the activities related to the housing assets assumed by the City as Housing Successor to the former Redevelopment Agency. The activities are governed by California redevelopment law and must be used to provide housing for those with low and moderate incomes.
Housing TOT Special Revenue Fund accounts for 10% set-aside of transient occupancy taxes collected as approved by voters, and the expenditures related to affordable housing development activities.
Measure HH Special Revenue Fund accounts for the revenues and expenditures of Measure HH Parcel tax. Measure HH was approved by the voters in November 2018. The tax is an annual parcel tax and the funds are to be used for affordable and supportive housing programs, programs that facilitate access to job opportunities in the S.T.E.M. sectors, building trades, and strengthen First Source Hiring.
Measure W Special Revenue Fund accounts for the City’s share of San Mateo County Measure W revenues and expenditures. Measure W is a half-cent sales tax to support countywide transportation projects and programs.
American Rescue Plan Act Fund accounts for the funds received from the Department of the Treasury relating to the American Rescue Plan Act passed in March 2021.
CAPITAL PROJECT FUND
CIP Impact Fees Capital Project Fund accounts for various development impact fees collected by the City for capital related activities.
125
City of East Palo Alto
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2023
81 Federal and Rent NPDES State Law Park in Stabilization Fees Gas Tax Enforcement Lieu Fund
ASSETS
Cash and investments $ 334,030 $ 3,682,597 $ 282,413 $ 341,235 $ 686,347 Receivables:
Accrued interest 2,780 27,217 1,857 2,576 6,248
Taxes - - - - -
Intergovernmental 25,939 184,454 - - -
Accounts receivable - - - - 3,458
Advances to other funds - - - - -
Loans and notes receivable - - - - -
Total assets $ 362,749 $ 3,894,268 $ 284,270 $ 343,811 $ 696,053
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES, AND FUND BALANCES
Liabilities:
Accounts payable $ 39,271 $ 39,781 $ 2,210 $ - $ 40,848 Retentions payable - 55,000 - - -
Other accrued liabilities - - - - -
Unearned revenue - - - - -
Due to other funds - - - - -
Total liabilities 39,271 94,781 2,210 - 40,848
Deferred inflows of resources:
Unavailable revenue - - - - -
Fund Balances:
Restricted 323,478 3,799,487 282,060 343,811 655,205
Unassigned - - - - -
Total fund balances 323,478 3,799,487 282,060 343,811 655,205 Total liabilities, deferred inflows
of resources, and fund balances $ 362,749 $ 3,894,268 $ 284,270 $ 343,811 $ 696,053 Special Revenue
126
City of East Palo Alto
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2023
82 Federal
and State Housing CYSFF Lighting Drainage Local
Grants Assistance Measure A TOT District District Measure C Grants $ 34,738 $ 356,879 $ 5,004,115 $ 1,168,712 $ 5,006,601 $ 987,956 $ 137,312 $ 611,330 239 2,785 37,751 8,676 37,294 7,684 1,138 4,823
- - - - 126,355 8,217 - -
335,416 - - - - - - -
- 1,650 58,997 23,096 - - - -
- - - - - - - -
- 113,549 - - - - - -
$ 370,393 $ 474,863 $ 5,100,863 $ 1,200,484 $ 5,170,250 $ 1,003,857 $ 138,450 $ 616,153 $ 2,445 $ 121 $ 41,409 $ - $ 3,493 $ 3,346 $ - $ 5,732
- - 32,000 - 7,902 - - -
257,622 - - - - - - -
- - - - - - - 15,395
- - - - - - - -
260,067 121 73,409 - 11,395 3,346 - 21,127
316,722 - - - - - - -
- 474,742 5,027,454 1,200,484 5,158,855 1,000,511 138,450 595,026 (206,396) - - - - - - -
(206,396) 474,742 5,027,454 1,200,484 5,158,855 1,000,511 138,450 595,026 $ 370,393 $ 474,863 $ 5,100,863 $ 1,200,484 $ 5,170,250 $ 1,003,857 $ 138,450 $ 616,153 Special Revenue
127
City of East Palo Alto
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2023
83 Capital
Special Revenue Project Low and Moderate Total
Income Non-Major Housing Housing Measure Measure CIP Governmental SVCF Successor TOT HH W ARPA Impact Fees Funds
ASSETS
Cash and investments $ - $ 1,689,444 $ 1,670,524 $ 4,978,379 $ 776,280 $ - $ 638,801 $ 28,387,693 Receivables:
Accrued interest - 174,748 36,027 37,213 5,185 - 4,822 399,063 Taxes - - - - - - - 134,572
Intergovernmental - - - - - - - 545,809
Accounts receivable - - 23,096 - 59,068 - - 169,365 Advances to other funds 1,948,360 - - - - - - 1,948,360 Loans and notes receivable - 6,305,420 663,536 - - - - 7,082,505 Total assets $ 1,948,360 $ 8,169,612 $ 2,393,183 $ 5,015,592 $ 840,533 $ - $ 643,623 $ 38,667,367
LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ - $ 25,079 $ - $ 45,272 $ 10,341 $ - $ - $ 259,348 Retentions payable - - - - 21,156 - - 116,058 Other accrued liabilities - 20,834 - - - - - 278,456 Unearned revenue - - - - - - - 15,395 Due to other funds 105,387 - - - - - - 105,387 Total liabilities 105,387 45,913 - 45,272 31,497 - - 774,644 Deferred inflows of resources: Unavailable revenue - 360,504 23,232 - - - - 700,458 Fund Balances: Restricted 1,842,973 7,763,195 2,369,951 4,970,320 809,036 - 643,623 37,398,661 Unassigned - - - - - - - (206,396) Total fund balances 1,842,973 7,763,195 2,369,951 4,970,320 809,036 - 643,623 37,192,265 Total liabilities, deferred inflows
of resources, and fund balances $ 1,948,360 $ 8,169,612 $ 2,393,183 $ 5,015,592 $ 840,533 $ - $ 643,623 $ 38,667,367 Special Revenue
128
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129
City of East Palo Alto
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds
For the Year Ended June 30, 2023
85 Federal and Rent NPDES State Law Park in Stabilization Fees Gas Tax Enforcement Lieu Fund
REVENUES:
Property taxes $ - $ - $ - $ - $ -
Sales taxes - - - - -
Transient occupancy tax - - - - - Other taxes - 1,437,136 - - - Licenses, fees and permits - - - - - Charges for services 125,648 - - - 607,278 Use of money and property 15,634 93,496 6,551 9,729 21,400 Grants and intergovernmental 124,140 - 197,497 - - Total revenues 265,422 1,530,632 204,048 9,729 628,678
EXPENDITURES:
Current: General government 160,008 203,310 - - 256,790 Public safety - - 178,400 - -
Public works 221,148 272,265 - - - Culture and recreation - - - - - Community development - - - - 409,605 Capital outlay 224,699 1,044,859 - - - Debt service:
Principal 12,886 - - - -
Interest 2,106 - - - -
Total expenditures 620,847 1,520,434 178,400 - 666,395
REVENUES OVER
(UNDER) EXPENDITURES (355,425) 10,198 25,648 9,729 (37,717) OTHER FINANCING SOURCES (USES):
Transfers in 303,868 64,500 - - -
Transfers out - - - - -
Total other financing sources (uses) 303,868 64,500 - - - Net change in fund balances (51,557) 74,698 25,648 9,729 (37,717) FUND BALANCES:
Beginning of the year 375,035 3,724,789 256,412 334,082 692,922 End of year $ 323,478 $ 3,799,487 $ 282,060 $ 343,811 $ 655,205 Special Revenue
130
City of East Palo Alto
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds
For the Year Ended June 30, 2023
City of East Palo A23
86 Federal
and State Housing CYSFF Lighting Drainage Local Grants Assistance Measure A TOT District District Measure C Grants $ - $ - $ - $ - $ 889,025 $ 175,764 $ - $ -
- - 799,061 - - - - -
- - - 222,373 - - - -
- - - - - - - -
- - - - - - - -
- 202 - - - - - -
239 13,435 127,151 27,087 118,709 19,760 7,349 19,182
187,793 - - - - - - 175,000
188,032 13,637 926,212 249,460 1,007,734 195,524 7,349 194,182 - 1,595 3,210 45,280 47,375 90,785 800 -
- - - - - - - 121,835
21,500 - - - 69,719 118,662 - -
35,078 - - 5,228 - - 85,758 -
271,136 1,517 - - - - - -
- - 622,118 - 46,310 - - -
- - - - - - - -
- - - - - - - -
327,714 3,112 625,328 50,508 163,404 209,447 86,558 121,835 (139,682) 10,525 300,884 198,952 844,330 (13,923) (79,209) 72,347 - - - - - 287,272 - -
- - - - - - - -
- - - - - 287,272 - -
(139,682) 10,525 300,884 198,952 844,330 273,349 (79,209) 72,347 (66,714) 464,217 4,726,570 1,001,532 4,314,525 727,162 217,659 522,679 $ (206,396) $ 474,742 $ 5,027,454 $ 1,200,484 $ 5,158,855 $ 1,000,511 $ 138,450 $ 595,026 Special Revenue
131
City of East Palo Alto
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds
For the Year Ended June 30, 2023
87 Capital
Special Revenue Project Low and Moderate Total
Income Non-Major Housing Housing Measure Measure CIP Governmental SVCF Successor TOT HH W ARPA Impact Fees Funds REVENUES:
Property taxes $ - $ - $ - $ - $ - $ - $ - $ 1,064,789 Sales taxes - - - - 347,628 - - 1,146,689 Transient occupancy tax - - 222,373 - - - - 444,746 Other taxes - - - 1,677,265 - - - 3,114,401 Licenses, fees and permits - - - - - - 23,016 23,016 Charges for services - - - - - - - 733,128 Use of money and property 4,270 123,968 72,257 111,162 17,213 44,657 17,076 870,325 Grants and intergovernmental - - - - - 3,506,266 - 4,190,696 Total revenues 4,270 123,968 294,630 1,788,427 364,841 3,550,923 40,092 11,587,790 EXPENDITURES:
Current: General government - 30,867 27,280 1,500 1,500 33,997 - 904,297 Public safety - - - - - 872,129 - 1,172,364 Public works - - - - - - - 703,294 Culture and recreation - - - - - - - 126,064 Community development 175,882 345,887 1,228,571 559,325 - - - 2,991,923 Capital outlay - - - - 423,113 - - 2,361,099 Debt service: Principal - - - - - - - 12,886 Interest - - - - - - - 2,106
Total expenditures 175,882 376,754 1,255,851 560,825 424,613 906,126 - 8,274,033
REVENUES OVER
(UNDER) EXPENDITURES (171,612) (252,786) (961,221) 1,227,602 (59,772) 2,644,797 40,092 3,313,757 OTHER FINANCING SOURCES (USES):
Transfers in - 462,724 - - - - - 1,118,364 Transfers out - (1,000,000) - (1,000,000) - (2,600,140) - (4,600,140) Total other financing sources (uses) - (537,276) - (1,000,000) - (2,600,140) - (3,481,776) Net change in fund balances (171,612) (790,062) (961,221) 227,602 (59,772) 44,657 40,092 (168,019) FUND BALANCES:
Beginning of the year 2,014,585 8,553,257 3,331,172 4,742,718 868,808 (44,657) 603,531 37,360,284 End of year $ 1,842,973 $ 7,763,195 $ 2,369,951 $ 4,970,320 $ 809,036 $ - $ 643,623 $37,192,265 Special Revenue
132
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual NPDES Special Revenue Fund
For the Year Ended June 30, 2023
88 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Charges for services $ 151,500 $ 151,500 $ 125,648 $ (25,852) Use of money and property 4,000 7,200 15,634 8,434 Grants and intergovernmental revenue 92,000 708,359 124,140 (584,219) Total revenues 247,500 867,059 265,422 (601,637)
EXPENDITURES:
Current: General government 265,645 334,093 160,008 174,085 Public works 285,723 306,785 221,148 85,637
Capital outlay - 708,359 224,699 483,660 Debt service:
Principal - - 12,886 (12,886)
Interest - - 2,106 (2,106)
Total expenditures 551,368 1,349,237 620,847 728,390
REVENUES OVER (UNDER) EXPENDITURES (303,868) (482,178) (355,425) 126,753 OTHER FINANCING SOURCES (USES):
Transfer in 303,868 303,868 303,868 -
Total other financing sources (uses) 303,868 303,868 303,868 - Net change in fund balance $ - $ (178,310) (51,557) $ 126,753 FUND BALANCE:
Beginning of year 375,035
End of year $ 323,478
Budget Amounts
133
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Gas Tax Special Revenue Fund
For the Year Ended June 30, 2023
89 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Other taxes $ 1,530,000 $ 1,530,000 $ 1,437,136 $ (92,864) Use of money and property 11,000 39,470 93,496 54,026 Total revenues 1,541,000 1,569,470 1,530,632 (38,838)
EXPENDITURES:
Current: General government 206,378 206,379 203,310 3,069 Public works 565,827 610,592 272,265 338,327
Capital outlay 550,000 1,100,000 1,044,859 55,141
Total expenditures 1,322,205 1,916,971 1,520,434 396,537 REVENUES OVER (UNDER) EXPENDITURES 218,795 (347,501) 10,198 357,699 OTHER FINANCING SOURCES (USES):
Transfer in 64,500 64,500 64,500 -
Total other financing sources (uses) 64,500 64,500 64,500 - Net change in fund balance $ 283,295 $ (283,001) 74,698 $ 357,699 FUND BALANCE:
Beginning of year 3,724,789
End of year $ 3,799,487
Budget Amounts
134
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Federal and State Law Enforcement Special Revenue Fund
For the Year Ended June 30, 2023
90 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ 2,000 $ 2,000 $ 6,551 $ 4,551 Grants and intergovernmental 160,000 160,000 197,497 37,497 Total revenues 162,000 162,000 204,048 42,048
EXPENDITURES:
Current:
Public safety 191,417 227,548 178,400 49,148
Total expenditures 191,417 227,548 178,400 49,148
Net change in fund balance $ (29,417) $ (65,548) 25,648 $ 91,196 FUND BALANCE:
Beginning of year 256,412
End of year $ 282,060
Budget Amounts
135
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Park in Lieu Special Revenue Fund
For the Year Ended June 30, 2023
91 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ - $ 3,187 $ 9,729 $ 6,542
Total revenues - 3,187 9,729 6,542
Net change in fund balance $ - $ 3,187 9,729 $ 6,542
FUND BALANCE:
Beginning of year 334,082
End of year $ 343,811
Budget Amounts
136
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Rent Stabilization Special Revenue Fund
For the Year Ended June 30, 2023
92 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Charges for services $ 536,360 $ 536,360 $ 607,278 $ 70,918 Fines and forfeitures 2,500 2,500 - (2,500) Use of money and property 6,000 10,836 21,400 10,564 Total revenues 544,860 549,696 628,678 78,982
EXPENDITURES:
Current: General government 256,790 256,790 256,790 -
Community development 401,069 704,108 409,605 294,503
Total expenditures 657,859 960,898 666,395 294,503
Net change in fund balance $ (112,999) $ (411,202) (37,717) $ 373,485 FUND BALANCE:
Beginning of year 692,922
End of year $ 655,205
Budget Amounts
137
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Federal and State Grants Special Revenue Fund
For the Year Ended June 30, 2023
93 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ - $ - $ 239 $ 239 Grants and intergovernmental 57,000 314,622 187,793 (126,829) Total revenues 57,000 314,622 188,032 (126,590)
EXPENDITURES:
Current:
Public works - 21,500 21,500 -
Culture and recreation 45,000 45,000 35,078 9,922
Community development - 401,005 271,136 129,869
Total expenditures 45,000 467,505 327,714 139,791
Net change in fund balance $ 12,000 $ (152,883) (139,682) $ 13,201 FUND BALANCE:
Beginning of year (66,714)
End of year $ (206,396)
Budget Amounts
138
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Housing Assistance Special Revenue Fund
For the Year Ended June 30, 2023
94 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Charges for services $ 2,500 $ 2,500 $ 202 $ (2,298) Use of money and property 2,000 5,264 13,435 8,171 Total revenues 4,500 7,764 13,637 5,873
EXPENDITURES:
Current: General government 1,595 1,595 1,595 -
Community development 4,655 4,655 1,517 3,138
Total expenditures 6,250 6,250 3,112 3,138
Net change in fund balance $ (1,750) $ 1,514 10,525 $ 9,011 FUND BALANCE:
Beginning of year 464,217
End of year $ 474,742
Budget Amounts
139
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Measure A Special Revenue Fund
For the Year Ended June 30, 2023
95 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Sales taxes $ 600,000 $ 600,000 $ 799,061 $ 199,061 Use of money and property 36,000 82,516 127,151 44,635 Total revenues 636,000 682,516 926,212 243,696
EXPENDITURES:
Current: General government 3,210 3,210 3,210 -
Capital outlay 500,000 987,500 622,118 365,382
Total expenditures 503,210 990,710 625,328 365,382
Net change in fund balance $ 132,790 $ (308,194) 300,884 $ 609,078 FUND BALANCE:
Beginning of year 4,726,570
End of year $ 5,027,454
Budget Amounts
140
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual CYSFF TOT Special Revenue Fund
For the Year Ended June 30, 2023
96 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Transient occupancy tax $ 138,000 $ 200,000 $ 222,373 $ 22,373 Use of money and property 6,000 16,013 27,087 11,074 Total revenues 144,000 216,013 249,460 33,447
EXPENDITURES:
Current: General government 45,280 45,280 45,280 -
Culture and recreation - 55,200 5,228 49,972
Total expenditures 45,280 100,480 50,508 49,972
Net change in fund balance $ 98,720 $ 115,533 198,952 $ 83,419 FUND BALANCE:
Beginning of year 1,001,532
End of year $ 1,200,484
Budget Amounts
141
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Lighting District Special Revenue Fund
For the Year Ended June 30, 2023
97 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Property taxes $ 647,933 $ 647,933 $ 889,025 $ 241,092 Use of money and property 31,000 72,424 118,709 46,285 Total revenues 678,933 720,357 1,007,734 287,377
EXPENDITURES:
Current: General government 50,250 50,250 47,375 2,875
Public works 126,558 127,308 69,719 57,589
Capital outlay - 58,863 46,310 12,553
Total expenditures 176,808 236,421 163,404 73,017
Net change in fund balance $ 502,125 $ 483,936 844,330 $ 360,394 FUND BALANCE:
Beginning of year 4,314,525
End of year $ 5,158,855
Budget Amounts
142
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Drainage District Special Revenue Fund
For the Year Ended June 30, 2023
98 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Property taxes $ 140,002 $ 140,002 $ 175,764 $ 35,762 Use of money and property 4,000 11,730 19,760 8,030 Total revenues 144,002 151,732 195,524 43,792
EXPENDITURES:
Current: General government 92,098 92,098 90,785 1,313
Public works 339,176 340,595 118,662 221,933
Total expenditures 431,274 432,693 209,447 223,246
REVENUES OVER (UNDER) EXPENDITURES (287,272) (280,961) (13,923) 267,038 OTHER FINANCING SOURCES (USES):
Transfer in 287,272 287,272 287,272 -
Total other financing sources (uses) 287,272 287,272 287,272 - Net change in fund balance $ - $ 6,311 273,349 $ 267,038 FUND BALANCE:
Beginning of year 727,162
End of year $ 1,000,511
Budget Amounts
143
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Measure C Special Revenue Fund
For the Year Ended June 30, 2023
99 Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ 1,000 $ 2,701 $ 7,349 $ 4,648 Total revenues 1,000 2,701 7,349 4,648
EXPENDITURES:
Current: General government 800 800 800 -
Culture and recreation 206,500 206,500 85,758 120,742
Total expenditures 207,300 207,300 86,558 120,742
Net change in fund balance $ (206,300) $ (204,599) (79,209) $ 125,390 FUND BALANCE:
Beginning of year 217,659
End of year $ 138,450
Budget Amounts
144
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Local Grants Special Revenue Fund
For the Year Ended June 30, 2023
100
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ 3,000 $ 8,798 $ 19,182 $ 10,384 Grants and intergovernmental 150,000 150,000 175,000 25,000 Total revenues 153,000 158,798 194,182 35,384
EXPENDITURES:
Current:
Public safety 150,000 150,000 121,835 28,165
Total expenditures 150,000 150,000 121,835 28,165
Net change in fund balance $ 3,000 $ 8,798 72,347 $ 63,549 FUND BALANCE:
Beginning of year 522,679
End of year $ 595,026
Budget Amounts
145
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Silicon Valley Community Foundation (SVCF) Special Revenue Fund For the Year Ended June 30, 2023
101
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ 1,000 $ 1,031 $ 4,270 $ 3,239 Total revenues 1,000 1,031 4,270 3,239
EXPENDITURES:
Current:
Community development 168,442 176,043 175,882 161
Total expenditures 168,442 176,043 175,882 161
Net change in fund balance $ (167,442) $ (175,012) (171,612) $ 3,400 FUND BALANCE:
Beginning of year 2,014,585
End of year $ 1,842,973
Budget Amounts
146
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Low and Moderate Income Housing Special Revenue Fund
For the Year Ended June 30, 2023
102
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property $ 20,000 $ 42,479 $ 123,968 $ 81,489 Total revenues 20,000 42,479 123,968 81,489
EXPENDITURES:
Current: General government 49,610 49,610 30,867 18,743 Community development 1,173,017 1,264,115 345,887 918,228 Total expenditures 1,222,627 1,313,725 376,754 936,971
REVENUES OVER (UNDER) EXPENDITURES (1,202,627) (1,271,246) (252,786) 1,018,460 OTHER FINANCING SOURCES (USES):
Transfer in 462,724 462,724 462,724 -
Transfer out - (1,000,000) (1,000,000) -
Total other financing sources (uses) 462,724 (537,276) (537,276) - Net change in fund balance $ (739,903) $ (1,808,522) (790,062) $ 1,018,460 FUND BALANCE:
Beginning of year 8,553,257
End of year $ 7,763,195
Budget Amounts
147
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Housing TOT Special Revenue Fund
For the Year Ended June 30, 2023
103
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Transient occupancy tax $ 138,000 $ 200,000 $ 222,373 $ 22,373 Use of money and property 20,000 45,955 72,257 26,302 Total revenues 158,000 245,955 294,630 48,675
EXPENDITURES:
Current: General government 27,280 27,280 27,280 -
Community development - 1,260,000 1,228,571 31,429
Total expenditures 27,280 1,287,280 1,255,851 31,429
Net change in fund balance $ 130,720 $ (1,041,325) (961,221) $ 80,104 FUND BALANCE:
Beginning of year 3,331,172
End of year $ 2,369,951
Budget Amounts
148
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Measure HH Special Revenue Fund
For the Year Ended June 30, 2023
104
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Other taxes $ 1,677,280 $ 1,677,280 $ 1,677,265 $ (15) Use of money and property 25,000 72,495 111,162 38,667 Total revenues 1,702,280 1,749,775 1,788,427 38,652
EXPENDITURES:
Current: General government 3,011 3,011 1,500 1,511 Community development 616,052 1,396,602 559,325 837,277 Total expenditures 619,063 1,399,613 560,825 838,788
REVENUES OVER (UNDER) EXPENDITURES 1,083,217 350,162 1,227,602 877,440 OTHER FINANCING SOURCES (USES):
Transfer out - (1,000,000) (1,000,000) -
Total other financing sources (uses) - (1,000,000) (1,000,000) - Net change in fund balance $ 1,083,217 $ (649,838) 227,602 $ 877,440 FUND BALANCE:
Beginning of year 4,742,718
End of year $ 4,970,320
Budget Amounts
149
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Measure W Special Revenue Fund
For the Year Ended June 30, 2023
105
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Sales taxes $ 300,000 $ 300,000 $ 347,628 $ 47,628 Use of money and property 4,000 9,451 17,213 7,762 Total revenues 304,000 309,451 364,841 55,390
EXPENDITURES:
Current: General government 1,500 1,500 1,500
Capital outlay 423,113
Total expenditures 1,500 1,500 424,613 -
Net change in fund balance $ 302,500 $ 307,951 (59,772) $ 55,390 FUND BALANCE:
Beginning of year 868,808
End of year $ 809,036
Budget Amounts
150
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual ARPA Special Revenue Fund
For the Year Ended June 30, 2023
106
Variance with
Final Budget Actual Positive Original Final Amounts (Negative) REVENUES:
Use of money and property 250,000 48,751 44,657 (4,094) Grants and intergovernmental 3,506,250 3,506,266 3,506,266 - Total revenues 3,756,250 3,555,017 3,550,923 (4,094)
EXPENDITURES:
Current: General government 130,444 35,044 33,997 1,047 Public safety 700,001 872,136 872,129 7
Total expenditures 830,445 907,180 906,126 1,054
REVENUES OVER (UNDER) EXPENDITURES 2,925,805 2,647,837 2,644,797 (3,040) OTHER FINANCING SOURCES (USES):
Transfer out (821,140) (2,600,140) (2,600,140) -
Total other financing sources (uses) (821,140) (2,600,140) (2,600,140) - Net change in fund balance $ 2,104,665 $ 47,697 44,657 $ (3,040) FUND BALANCE:
Beginning of year (44,657)
End of year $ -
Budget Amounts
151
107
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152
108
STATISTICAL SECTION
153
109
This part of the City's Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, noted disclosures, and required supplementary information says about the City's overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit.
Financial Trends
These schedules contain trend information to help the reader understand how the City's financial performance and wellbeing have changed over time:
1. Net Position by Component
2. Changes in Net Position
3. Fund Balances - Governmental Funds
4. Changes in Fund Balances - Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax:
1. Assessed Value of Taxable Property
2. Direct and Overlapping Property Tax Rates
3. Principal Property Taxpayers
4. Property Tax Levies and Collections
Debt Capacity
These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future:
1. Ratio of Outstanding Debt by Type
2. Computation of Direct and Overlapping Debt
3. Computation of Legal Bonded Debt Margin
4. Bonded Debt Pledged Revenue Coverage - Successor Agency Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place:
1. Demographic and Economic Statistics
2. Principal Employers
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs:
1. Number of Positions - City Government by Function
2. Operating Indicators by Function
3. Capital Asset Statistics by Function
Operating Information
Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year. The City Implemented GASB Statement 34 in 2003; schedules presenting governmentwide information include information beginning in that year. 154
City of East Palo Alto
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
110
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Government activities Net investment in capital assets $ 31,132,522 $ 35,561,630 $ 41,044,530 $ 42,278,404 $ 48,784,281 $ 55,197,664 $ 56,070,993 $ 63,227,229 $ 64,005,813 $ 74,583,002 Restricted For: Streets and Infrastructure 4,971,963 5,538,340 5,816,534 6,411,718 7,700,051 9,885,470 11,354,052 12,774,681 14,736,889 16,118,821 Parks and Recreation 496,583 550,014 1,120,082 1,117,148 1,089,920 340,827 348,880 344,094 334,082 343,811 Measure C programs 1,483,198 1,464,460 1,405,053 1,510,846 1,015,232 592,734 253,401 223,160 217,659 138,450 Housing Programs 13,108,951 14,012,643 17,325,494 20,518,013 20,824,081 21,669,184 24,277,027 25,891,744 26,780,234 31,735,201 Special Programs 726,772 954,220 1,168,856 853,741 1,262,039 1,522,452 1,755,499 2,012,599 2,010,100 2,529,780 Capital projects 209,247 188,644 279,184 3,796,398 3,012,787 9,816,132 10,159,391 6,707,412 8,602,288 7,172,849 Total restricted 20,996,714 22,708,321 27,115,203 34,207,864 34,904,110 43,826,799 48,148,250 47,953,690 52,681,252 58,038,912 Unrestricted 26,832,636 23,123,638 28,798,504 33,919,154 40,774,262 40,040,582 46,185,712 49,482,293 59,082,008 62,177,856 Total governmental activities net position $ 78,961,872 $ 81,393,589 $ 96,958,237 $ 110,405,422 $ 124,462,653 $ 139,065,045 $ 150,404,955 $ 160,663,212 $ 175,769,073 $ 194,799,770 Business-type activities Net investment in capital assets $ 3,743,594 $ 3,548,303 $ 3,353,012 $ 4,050,566 $ 11,161,837 $ 10,964,954 $ 10,880,048 $ 11,205,575 $ 11,306,820 $ 11,212,431 Restricted For: Capital Projects¹ 834,882 835,114 926,770 928,562 682,991 585,636 591,828 591,909 1,943,955 5,589,148 Total restricted 834,882 835,114 926,770 928,562 682,991 585,636 591,828 591,909 1,943,955 5,589,148 Unrestricted¹ 1,685,818 1,889,840 4,919,239 5,592,490 1,949,538 3,292,824 4,362,698 5,216,208 4,120,165 7,672,675 Total business-type activities net position $ 6,264,294 $ 6,273,257 $ 9,199,021 $ 10,571,618 $ 13,794,366 $ 14,843,414 $ 15,834,574 $ 17,013,692 $ 17,370,940 $ 24,474,254 Primary Government Net investment in capital assets $ 34,876,116 $ 39,109,933 $ 44,397,542 $ 46,328,970 $ 59,946,118 $ 66,162,618 $ 66,951,041 $ 74,432,804 $ 75,312,633 $ 85,795,433 Restricted 21,831,596 23,543,435 28,041,973 38,624,491 34,904,110 43,826,799 48,740,078 48,545,599 54,625,207 63,628,060 Unrestricted 28,518,454 25,013,478 33,717,743 36,023,579 43,406,791 43,919,042 50,548,410 54,698,501 63,202,173 69,850,531 Total primary government net position $ 85,226,166 $ 87,666,846 $ 106,157,258 $ 120,977,040 $ 138,257,019 $ 153,908,459 $ 166,239,529 $ 177,676,904 $ 193,140,013 $ 219,274,024 ¹ Certain amounts have been reclassified to present historical information in conformance with current classification. 155
City of East Palo Alto
Changes in Net Position (continued)
Last Ten Fiscal Years
(accrual basis of accounting)
111
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
General Revenues and Other Changes in Net Position Governmental activities: TaxesProperty Taxes $ 9,411,575 $ 10,260,689 $ 11,428,331 $ 12,288,670 $ 14,642,402 $ 16,411,143 $ 16,099,035 $ 15,097,898 $ 17,295,600 $ 20,957,659 Sales Taxes 3,113,705 3,798,237 4,364,562 4,078,803 5,923,229 5,793,668 5,171,001 5,422,953 5,738,443 6,394,903 Utility Users Tax 1,464,049 1,513,088 1,516,104 1,520,017 1,680,279 1,537,991 1,584,592 1,630,879 1,631,049 1,936,239 Transient Occupancy Tax 2,452,951 2,803,542 2,809,127 2,906,241 3,089,942 2,990,217 1,962,256 200,886 1,447,892 2,223,732 Business License Tax¹ 576,084 668,138 602,245 616,653 1,428,860 1,452,963 1,585,841 1,223,696 1,269,802 1,768,500 Other Taxes¹ 1,614,030 1,741,988 1,621,994 1,824,599 1,254,845 86,410 1,796,955 1,833,719 1,677,265 1,782,881 Investment earnings 194,682 232,001 312,707 394,890 849,716 2,029,009 2,113,187 (9,692) (2,010,393) 2,296,615 Miscellaneous 430,498 493,864 719,437 194,024 49,306 1,147,440 1,277,393 1,595,376 1,273,166 1,487,771 Transfers - - - (531,049) (238,312) - - - - (6,241,000) Extraordinary Items - - 3,246,461 - - - - - - - Total Governmental activities 19,257,574 21,511,547 26,620,968 23,292,848 28,680,267 31,448,841 31,590,260 26,995,715 28,322,824 32,607,300 Business-type activities:
Investment earnings 13,652 9,557 12,984 34,159 32,939 79,415 234,047 (13,745) (298,202) 351,464 Transfers - - - - 531,049 238,312 - - (140,423) 6,241,000 Total Business-type activities 13,652 9,557 12,984 34,159 563,988 317,727 234,047 (13,745) (438,625) 6,592,464 Total Primary Government 19,271,226 21,521,104 26,633,952 23,327,007 29,244,255 31,766,568 31,824,307 26,981,970 27,884,199 39,199,764 Change in Net Position Governmental Activites 4,728,886 9,552,573 18,126,648 13,447,185 14,057,231 14,602,392 11,339,910 10,258,257 15,255,186 19,080,781 Business-type Activities 38,911 5,536 642,589 842,768 3,469,009 1,132,728 1,049,048 662,726 754,238 7,103,314 Change in Net Position $ 4,767,797 $ 9,558,109 $ 18,769,237 $ 14,289,953 $ 17,526,240 $ 15,735,120 $ 12,388,958 $ 10,920,983 $ 16,009,424 $ 26,184,095 ¹ Certain amounts have been reclassified to present historical information in conformance with current classification descriptions.
Fiscal Year Ending June 30
156
City of East Palo Alto
Fund Balances-Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
112
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
General Fund
Nonspendable $ 11,776,028 $ 11,769,991 $ 11,932,475 $ 12,066,847 $ 11,743,001 $ 10,938,871 $ 8,826,647 $ 6,554,760 $ 5,282,165 $ 2,875,868 Restricted - - - - - - 20,065 23,784 27,297 38,659
Committed - - - - - - 980,355 980,355 10,097,589 11,844,496 Assigned 77,915 187,141 383,658 1,188,899 1,886,415 1,839,551 2,183,599 4,128,219 6,658,000 6,000,000 Unassigned 12,305,114 13,221,866 16,293,653 17,235,337 24,191,919 26,426,148 30,996,166 31,116,240 26,407,109 33,027,657 Total General Fund 24,159,057 25,178,998 28,609,786 30,491,083 37,821,335 39,204,570 39,204,570 42,803,358 48,472,160 53,786,680 All Other Governmental Funds
Restricted 21,304,289 22,684,977 26,537,401 34,122,255 34,904,110 43,826,799 47,339,670 45,250,665 45,389,536 51,986,249 Committed - - - - - - - 5,500,000 9,000,000 10,414,734
Assigned 703,226 1,913,459 4,803,773 7,289,475 6,772,150 7,874,189 11,936,316 10,908,746 5,600,829 6,889,192 Unassigned (340,922) (233,356) (197,068) - - - - (61,923) (111,371) (206,396) Total all other governmental funds 21,666,593 24,365,080 31,144,106 41,411,730 41,676,260 51,700,988 51,700,988 61,597,488 59,878,994 69,083,779 Total Governmental Funds $ 45,825,650 $ 49,544,078 $ 59,753,892 $ 71,902,813 $ 79,497,595 $ 90,905,558 $ 90,905,558 $ 104,400,846 $ 108,351,154 $ 122,870,459 Fiscal Year Ended June 30
157
City of East Palo Alto
Changes in Fund Balances-Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
113
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Revenues Taxes $ 18,700,903 $ 20,271,896 $ 22,015,184 $ 22,570,573 $ 26,465,002 $ 28,911,799 $ 30,593,515 $ 27,551,942 $ 31,488,448 $ 38,052,255 Licenses, fees, and permits 927,194 932,302 8,225,539 2,276,892 2,945,418 2,816,522 1,425,267 2,665,772 2,344,950 1,734,484 Charges for services 2,110,075 2,638,045 2,778,293 2,090,795 1,942,517 2,027,506 2,901,680 1,487,373 1,340,766 1,387,903 Fines and fortfeitures 261,440 368,621 532,143 442,911 745,766 421,661 401,717 242,042 263,437 379,861 Use of money and property 207,461 245,602 474,624 410,003 878,892 2,082,517 2,730,055 207,416 (2,323,287) 2,802,993 Grants and intergovernmental 3,181,804 4,941,401 3,589,152 8,724,241 5,177,790 7,459,093 1,285,504 5,659,603 4,897,399 17,631,163 Miscellaneous 607,906 609,570 1,212,731 205,096 119,862 385,940 260,257 1,915,735 1,700,286 975,524 Total revenues 25,996,783 30,007,437 38,827,666 36,720,511 38,275,247 44,105,038 39,597,995 39,729,883 39,711,999 62,964,183 Expenditures Current General Government 4,050,248 3,804,928 4,037,015 4,270,123 4,286,525 4,696,638 5,126,419 6,144,761 6,332,990 6,646,083 Public Safety 10,673,461 10,237,181 10,200,118 10,159,814 10,165,174 11,240,702 10,920,002 11,629,425 11,767,310 12,671,959 Public Works 2,421,820 2,698,224 3,106,375 3,560,158 4,251,301 4,150,097 3,844,254 4,134,384 4,097,153 4,189,669 Culture and recreation 774,662 789,369 1,036,572 959,888 1,243,981 1,203,631 1,001,494 700,691 1,219,765 1,553,917 Community Development 3,969,143 2,263,113 2,257,570 2,397,396 2,984,606 3,589,412 4,823,525 5,758,006 5,146,245 7,001,196 Capital Outlay 1,668,320 6,877,626 2,524,109 3,290,362 7,716,265 7,800,356 2,505,041 9,244,588 7,067,172 9,614,380 Debt Service Principal repayment 29,914 45,254 61,347 52,302 31,399 16,085 - - - 452,677 Interest & fiscal charges 3,281 4,180 4,325 2,347 1,214 154 - - 6,561 73,997 Total expenditures 23,590,849 26,719,875 23,227,431 24,692,390 30,680,465 32,697,075 28,220,735 37,611,855 35,637,196 42,203,878 Excess of revenues over (under) expenditures 2,405,934 3,287,562 15,600,235 12,028,121 7,594,782 11,407,963 11,407,963 2,118,028 4,074,803 20,760,305 Other financing sources (uses) Transfers in 1,225,985 4,024,730 1,236,787 3,876,948 2,121,910 8,637,770 8,266,603 3,506,089 2,381,000 5,133,238 Transfers (out) (1,225,985) (4,024,730) (3,498,787) (3,811,148) (2,121,910) (8,637,770) (8,266,603) (3,506,089) (2,381,000) (11,374,238) Capital leases - 121,666 - - - - - - - - Total other financing sources(uses) - 121,666 (2,262,000) 65,800 - - - - - (6,241,000) Net change in fund balances $ 2,405,934 $ 3,409,228 $ 13,338,235 $ 12,093,921 $ 7,594,782 $ 11,407,963 $ 11,407,963 $ 2,118,028 $ 4,074,803 $ 14,519,305 Debt service as a percentage of noncapital expenditures 0.15% 0.25% 0.32% 0.26% 0.14% 0.07% 0.08% 0.00% 0.02% 1.62% Debt service as a percentage of total
expenditures 0.14% 0.19% 0.28% 0.22% 0.11% 0.05% 0.06% 0.00% 0.02% 1.25% 158
City of East Palo Alto
Assessed Value of Taxable Property
Last Ten Fiscal Years
114
Secured Total Unsecured Factor of
Fiscal Gateway 101 University Secured Gateway 101 University Unsecured Total Taxable Estimated Taxable Assessed Year City Corridor Circle Ravenswood Property City Corridor Circle Ravenswood Property Assessed (1) Actual Value (2) Value (3) 2014 $ 1,173,993,111 $ 330,429,999 $ 376,804,050 $ 81,596,056 $ 1,962,823,216 $ 6,125,013 $ 18,274,858 $ 22,893,647 $ 3,370,914 $ 50,664,432 $ 2,013,487,648 $ 2,013,487,648 1.000000 2015 1,272,051,647 341,894,816 378,514,734 83,231,935 2,075,693,132 6,198,106 18,472,810 25,681,636 4,601,336 54,953,888 2,130,647,020 $3,549,905,090 1.000000 2016 1,387,303,962 366,869,951 386,077,451 89,606,753 2,229,858,117 5,895,578 21,087,072 32,434,814 5,307,991 64,725,455 2,294,583,572 $4,990,019,421 1.000000 2017 1,496,819,954 383,867,913 391,965,125 128,424,119 2,401,077,111 5,357,954 21,336,520 31,608,639 6,300,157 64,603,270 2,465,680,381 $4,932,990,577 1.000000 2018 1,860,043,257 493,901,959 399,943,872 139,127,273 2,893,016,361 5,568,741 21,568,793 28,727,193 3,838,839 59,703,566 2,952,719,927 $7,145,582,223 1.000000 2019 1,987,717,844 589,570,833 491,664,014 149,310,365 3,218,263,056 16,763,127 24,130,526 26,264,047 3,792,066 70,949,766 3,289,212,822 $7,232,431,631 1.000000 2020 2,141,077,211 610,407,047 501,497,289 167,894,435 3,420,875,982 16,924,357 24,269,647 25,817,541 3,956,073 70,967,618 3,491,843,600 $6,049,029,684 1.000000 2021 2,256,060,762 626,312,724 511,628,461 247,209,411 3,641,211,358 5,172,050 36,754,744 23,863,678 4,876,777 70,667,249 3,711,878,607 $7,490,106,321 1.000000 2022 2,334,992,280 647,462,524 520,340,698 261,727,649 3,764,523,151 17,480,486 36,132,686 17,381,330 4,386,585 75,381,087 3,839,904,238 $7,074,714,408 1.000000 2023 2,496,505,848 702,048,413 688,427,574 245,346,193 4,132,328,028 6,909,334 39,183,992 13,391,529 4,677,616 64,162,471 4,196,490,499 $6,827,322,921 1.000000 Source: San Mateo County Assessors, MuniServices, LLC / an Avenu Insights & Analytics Company Source: Prior published ACFR
Notes:
(1) Total Assessed Taxable Value is net of all exemptions, including homeowners' exemption. (2) Estimated Actual Value is derived from a series of calculations comparing median assessed values from 1940 to current median sale prices.
Based on these calculations a factor was extrapolated and applied to current assessed values. (3) California cities do not set their own direct tax rate. The State constitution establishes the rate at 1% and allocates a portion of that amount to all the taxing entities within a tax rate area. $0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Millions Unsecured Property Secured Property
159
City of East Palo Alto
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
115
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Basic County-wide Rate 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 Override Assessments
Ravenswood School District 0.0415 0.0360 0.0304 0.0376 0.0352 0.0616 0.0522 0.0341 0.0369 0.0415 Sequoia Union High School District 0.0313 0.0433 0.0434 0.0391 0.0383 0.0365 0.0340 0.0315 0.0290 0.0286 San Mateo Community College District 0.0194 0.0190 0.0250 0.0247 0.0235 0.0175 0.0266 0.0213 0.0227 0.0193 Midpeninsula Open Space District 0.0000 0.0000 0.0008 0.0006 0.0009 0.0018 0.0016 0.0015 0.0015 0.0013 TOTAL 0.0922 0.0983 0.0996 0.1020 0.0979 0.1174 0.1144 0.0884 0.0901 0.0907 Total Tax Rate 1.0922 1.0983 1.0996 1.1020 1.0979 1.1174 1.1144 1.0884 1.0901 1.0907 Source: County Auditor data, MuniServices, LLC / Avenu Insights & Analytics Source: Previously published ACFR Report
Tax Rate as represented by TRA 021-000
160
City of East Palo Alto
Principal Property Taxpayers
Current Fiscal Year and Nine Years Ago
116
Taxpayer Taxable Value ($)
Percent of Total
City Taxable
Value (%)
Taxable Value ($)
Percent of Total
City Taxable
Value (%) Columbia REIT University Circle LP $ 535,093,330 11.97% Woodland Park Property Owner Llc 443,099,614 9.91% University Plaza EPA LLC 209,076,804 4.68% $ 4,620,600 0.23% SHR Palo Alto LLC 148,735,875 3.33% 50,818,338 2.52%
Ikea Property Inc 103,100,660 2.31% 83,160,735 4.13%
Bayshore 1771 LLC 54,228,300 1.21%
Four Corners EPA Property Owner LLC 43,283,822 0.97%
Sycamore Real Estate Investment LLC 42,356,765 0.95%
HPI ASVRF 1990 Bay LLC 37,342,901 0.84%
Light Tree Three LP 22,807,932 0.51% Wells REIT II - University Circle 325,159,118 16.15% Gateway 101 LLC 25,830,016 1.28%
DKB Homes LLC 9,662,363 0.48%
Green Valley Corp 7,213,426 0.36%
Romic Environmental Tech Corp 6,750,000 0.34%
East Palo Alto Hotel Devel 6,062,454 0.30%
Cummings Park Assoc 4,862,439 0.24%
Principal Taxpayers $ 1,639,126,003 36.67% $ 524,139,489 26.03% Total Taxable Value $ 4,469,543,670 100.00% $ 2,013,487,648 100.00% Source: County Assessor data, MuniServices, LLC / Avenu Insights & Analytics 2022-23 2013-14
161
City of East Palo Alto
Property Tax Levies and Collections
Last Ten Fiscal Years
117
Total Tax Levied Current Tax Percentage Delinquent Tax Total Tax Percentage for Fiscal Year (1) Collections (2) of Levy Collections (3) Collections of Levy 2014 $ 4,915,330 $ 4,668,248 95.0% $ 4,668,248 95.0%
2015 5,326,772 5,197,898 97.5% 5,197,898 97.5%
2016 5,751,125 5,515,510 95.9% 5,515,510 95.9%
2017 6,158,288 5,864,760 95.2% 5,864,760 95.2%
2018 7,498,588 7,137,824 95.2% 7,137,824 95.2%
2019 8,006,496 7,755,634 96.9% 7,755,634 96.9%
2020 8,571,769 8,357,638 97.5% 8,357,638 97.5%
2021 8,941,750 8,660,036 96.8% 8,660,036 96.8%
2022 9,304,588 9,847,946 105.8% 9,847,946 105.8%
2023 9,866,504 9,928,335 100.6% 9,928,335 100.6%
Source: San Mateo County Controller, City General Ledger Notes:
(1) Prior to the dissolution of the former Redevelopment Agency effective January 2012, the table data includes secured and unsecured tax levies for the City, City districts, and the former Redevelopment Agency. Beginning in FY 2012-13, the amounts levied are related to the City and City districts only.
(2) Beginning in 1993, Current Tax Collections are reduced by a mandatory tax allocation imposed by the State of California (Educational Revenue Augmentation Fund (ERAF)). (3) The County of San Mateo collects and allocates property taxes under the Teeter Plan whereby the City receives property tax revenues based on the total amount assessed, but not collected; therefore, the City has no direct delinquent tax collections.
June 30
Fiscal Year Ended
Fiscal Year of the Levy
Collected Within the
Total Collections To Date
162
City of East Palo Alto
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
118
Business-Type Activities
Fiscal Year
End
Capitalized
Lease Debt
(1)
Redevelopment Tax Allocation Bonds (2)
Revenue Bonds (2)
Less: Restricted Bonds Held (3)
Notes Payable
Total Primary Government DebtPercentage of
Personal
Income (5)
Outstanding Debt Per Capita (5)Outstanding Debt to Taxable Assessed Value 2013 $ 114,635 $ - $ - $ - $ - $ 114,635 0.02% $ 3.96 0.01% 2014 84,721 - - - - 84,721 0.01% 2.91 0.00%
2015 161,133 - - - - 161,133 0.03% 5.28 0.01%
2016 99,786 - - - - 99,786 0.02% 3.29 0.00%
2017 47,484 - - - - 47,484 0.01% 1.54 0.00%
2018 16,085 - - - 700,000 716,085 0.10% 23.48 0.02%
2019 - - - - 700,000 700,000 0.09% 22.73 0.02%
2020 - - - - 676,667 676,667 0.08% 22.30 0.02%
2021 - - - - 653,334 653,334 0.08% 21.53 0.02%
2022 - - - - 630,001 630,001 0.07% 21.75 0.02%
2023 - - - - 606,668 606,668 0.06% 21.22 0.01%
Notes:
(1) Capitalized Lease Debt due to Police Vehicles acquired in 2013 and 2015. (2) Tax Allocation Bonds and Revenue Bonds related to financing Redevelopment Agency projects and activities. (3) Bond proceeds invested and, in October of 2010, used as part of a purchase in lieu of redemption structure. In 2009 the Public Finance Authority proceeds were used to purchase, and hold as investment, the 1999 Tax Allocation Bonds. (4) During FY 2011-12, the former Redevelopment Agency was dissolved and all debts transferred to a Successor Trust. (5) Population Projections prepared by State of California Department of Finance, Personal Income Data by MuniServcies LLC Governmental Activities
163
City of East Palo Alto
Computation of Direct and Overlapping Debt
Current Fiscal Year
119
City's Share Total Debt Percentage of Debt DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 6/30/2023 Applicable (1) 6/30/2023 City of East Palo Alto $ - 100.000% $ -
Total Direct Debt $ - $ -
San Mateo Community College District $ 708,837,622 1.459% $ 10,341,941 Sequoia Union High School District 440,812,000 3.348% 14,758,386 Ravenswood School District 84,950,000 40337.000% 34,266,282 Midpeninsula Regional Open Space District 82,680,000 1.105% 913,614 California Statewide Communities Development Authority 1915 Act Bonds 2,346,566 100.000% 2,346,566 Total Overlapping Debt 1,319,626,188 62,626,789
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $ 1,319,626,188 $ 62,626,789
OVERLAPPING GENERAL FUND DEBT
San Mateo County General Fund Obligations $ 589,931,687 1.459% $ 8,607,103 San Mateo County Board of Education Certificates of Participation 6,120,000 1.459% 89,291 Menlo Park Fire Protection District Certificates of Participation 8,935,000 8.217% 734,189 Midpeninsula Regional Open Space District General Fund Obligations 91,570,600 1.105% 1,011,855 San Mateo County Mosquito and Vector Control District General Fund Obligations 3,617,831 1.459% 52,784 TOTAL OVERLAPPING GENERAL FUND DEBT $ 700,175,118 $ 10,495,222 OVERLAPPING TAX INCREMENT DEBT (Successor Agency)
2015A Refunding Tax Allocation Bonds $ 13,065,000 100.000% $ 13,065,000 COMBINED TOTAL DEBT $ 86,187,011 (2)
Ratios to 2022-23 Assessed Valuation:
Direct Debt 0.000%
Direct and Overlapping Tax and Assessment Debt 1.490%
Direct and Overlapping Tax, Assessment and Increment Debt 1.800% Combined Total Debt 2.050%
Ratios to Redevelopment Successor Agency Incremental Valuation ($1,427,707,876):
Overlapping Tax Increment Debt 0.800%
Source: Avenu Insights & Analytics, California Municipal Statistics, Inc. Notes:
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value.
(2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and non-bonded capital lease obligations. 164
City of East Palo Alto
Computation of Legal Bonded Debt Margin
Last Ten Fiscal Years
120
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Taxable Assessed Valuation $ 2,013,487,648 $ 2,130,647,020 $ 2,294,583,572 2,465,680,381 $ 2,952,719,927 Conversion Percentage 25% 25% 25% 25% 25% Adjusted Assessed Valuation 503,371,912 532,661,755 573,645,893 616,420,095 738,179,982 Debt service limit percentage 15% 15% 15% 15% 15%
Debt Limit 75,505,787 79,899,263 86,046,884 92,463,014 110,726,997 Debt Applicable to Limit:
Less: Outstanding General Obligations - - - - -
Legal Debt Margin $ 75,505,787 $ 79,899,263 $ 86,046,884 $ 92,463,014 $ 110,726,997 2018-2019 2019-2020 2020-2021 2021-22 2022-23
Taxable Assessed Valuation $ 3,289,212,822 $ 3,491,843,600 $ 3,711,878,607 $ 3,839,904,238 $ 4,196,490,499 Conversion Percentage 25% 25% 25% 25% 25% Adjusted Assessed Valuation 822,303,206 872,960,900 927,969,652 959,976,060 1,049,122,625 Debt service limit percentage 15% 15% 15% 15% 15%
Debt Limit 123,345,481 130,944,135 139,195,448 143,996,409 157,368,394 Debt Applicable to Limit:
Less: Outstanding General Obligations - - - - -
Legal Debt Margin $ 123,345,481 $ 130,944,135 $ 139,195,448 $ 143,996,409 $ 157,368,394 Source: San Mateo County Assessors, MuniServices, LLC / an Avenu Insights & Analytics Company Note:
California Government Code, Section 43605 sets the debt limit at 15%. The Code section was enacted prior to the change in basing assessed value to full market value when it was previously 25% of market value. 15% of 25% is the equivalent of 3.75% of Total Taxable Valuation. Amounts are calculated accordingly. 165
City of East Palo Alto
Bonded Debt Pledged Revenue Coverage
Successor Agency (including Former Redevelopment and Authority Bonds) Last Ten Fiscal Years
121
Fiscal Increment Payments to Year ( Gross RPTTF) Principal Interest Total Coverage PFA Principal Interest Total Coverage 2014 $ 7,601,754 $ 585,000 $ 1,360,764 $ 1,945,764 3.9 $ 1,415,438 $ 645,000 $ 770,438 $ 1,415,438 1.0 2015 7,635,260 620,000 1,325,004 1,945,004 3.9 1,415,138 670,000 745,138 1,415,138 1.0 2016 8,369,650 655,000 1,037,717 1,692,717 4.9 15,242,245 ³ 14,880,000 362,245 15,242,245 1.0 2017 9,214,713 795,000 732,249 1,527,249 6.0 - - - - -
2018 10,573,336 865,000 703,178 1,568,178 6.7 - - - - - 2019 14,617,765 885,000 686,850 1,571,850 9.3 - - - - - 2020 ⁴ 13,545,644 900,000 659,550 1,559,550 8.7 - - - - - 2021 14,396,863 935,000 618,175 1,553,175 9.3 - - - - - 2022 14,414,377 975,000 570,425 1,545,425 9.3 - - - - - 2023 17,258,476 1,030,000 520,300 1,550,300 11.1 - - - - - Notes:
¹ Proceeds from the 2005 East Palo Alto Public Financing Authority revenue bonds were used to purchase the outstanding 1999 Tax Allocation bonds (TABs) on October 01, 2009. The 1999 TABS were held with a fiscal agent and recorded as an asset in the Public Financing Authority (PFA); a blended component unit.
The 2015 Refunding Bonds were issued to defease the 1999, 2003A, and 2003B TABS and subsequently redeem the 2005 PFA Revenue Bonds.
² Effective January 10, 2012, tax increments of the former Redevelopment Agency are deposited into a a Redevelopment Property Tax Trust Fund (RPTTF) and are only available to pay approved, enforceable obligations of the former Redevelopment Agency.
³ Payments from 1999 TABS includes proceeds from 2015 Refunding Bonds paid to PFA.
Total increment includes approximately $2.3 million in supplemental tax payments for prior activity.
RDA Tax Allocation (Refunding) Bonds Public Financing Authority (PFA) Revenue Bonds¹ Debt Service Debt Service
166
City of East Palo Alto
Demographic and Economic Statis
Last Ten Fiscal Years
122
Fiscal Year Population (1)
City
Unemployment
Rate (2)
City Per Capita
Personal Income (3)
County
Unemployment
Rate (2)
County Per Capita
Personal Income (3)
Public School
Enrollment (4)
2013-14 28,934 11.20% $ 20,302 4.60% $ 76,901 4,030
2014-15 29,137 5.10% 20,438 3.20% 77,414 4,216
2015-16 30,545 5.40% 20,785 3.40% 78,728 4,058
2016-17 30,340 4.80% 21,785 3.00% 82,517 3,853
2017-18 30,917 2.70% 23,171 2.20% 87,767 3,632
2018-19 30,499 1.80% 24,440 1.70% 92,576 3,436
2019-20 30,794 11.90% 25,419 11.10% 96,285 3,269
2020-21 30,350 8.97% 27,437 6.84% 103,929 2,993
2021-22 28,963 2.30% 31,515 1.70% 119,375 2,793
2022-23 28,586 2.90% 36,759 2.70% 139,239 2,640
Source: San Mateo County Assessors, MuniServices, LLC / an Avenu Insights & Analytics Company Source: 2013-14 and prior, previously published CAFR Report The California Department of Finance demographics estimates now incorporate 2010 Census counts as the benchmark.
Notes:
(1)
(2)
(3)
(4)
Income Data is provided by the U.S. Census Bureau
Student Enrollment reflects the total number of students enrolled in the Ravenswood Elementary School.
Population Projections are provided by the California Department of Finance Projections.
Unemployment Data provided by Employment Development Department Bureau of Labor Statistics. 26,000
27,000
28,000
29,000
30,000
31,000
32,000
City Population
0%
5%
10%
15%
20%
25%
30%
167
City of East Palo Alto
Principal Employers
Last Fiscal Year and Seven Years Ago
123
Business Name Number of
Employees
Percent of Total
Employment
Number of
Employees
Percent of Total
Employment Amazon Web Services 1,613 11.12%
Ravenswood Family Health Center* 350 2.41% 163 1.18%
Ikea* 294 2.03% 343 2.49%
Ravenswood City School District 262 1.81% 538 3.90%
Four Seasons Hotel - Silicon Valley 207 1.43% 285 2.07% Home Depot 185 1.28% 175 1.27%
City of East Palo Alto* 121 0.84% 102 0.74%
Target 120 0.83%
DLA Piper LLP 114 0.79%
Eastside College Preparatory School 68 0.47%
US Post Office 150 1.09%
NTT i3 120 0.87%
Nordstrom Rack 77 0.56%
Ropes and Gray Law Firm 63 0.46%
Total Top Employers 3,334 22.99% 2,016 14.61%
Total City Employment (1) 14,500 13,800
Source: MuniServices, LLC / Avenu Insights & Analytics
Source: 2013-14 count is from prior published ACFR
Results based on direct correspondence with city’s local businesses. *Includes full and part time.
(1) Total City Labor Force provided by EDD Labor Force Data.
Note: Amazon Web Services has not responded with the employee headcount. Prior year number applied. 2022-23 2013-14
168
City of East Palo Alto
Number of Positions-City Government by Function
Last Ten Fiscal Years
124
Function 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-20 2020-21 2021-22 2022-23 General Government 27.6 25.1 21.0 23.0 23.0 23.0 24.0 24.0 21.0 21.0 Public Safety 47.5 44.0 45.5 45.5 46.0 46.3 47.2 48.2 48.2 49.7 PoliceOfficers 38.0 36.0 36.0 36.0 36.5 37.3 36.5 37.5 37.5 38.4 Civilians 9.5 8.0 9.5 9.5 9.5 9.0 10.7 10.7 10.7 11.3 Public Works¹ - - 19.0 19.0 19.0 19.0 19.0 20.3 21.5 21.5 Culture & Recreation² - - 4.4 4.4 4.4 4.2 4.2 3.7 8.2 8.2 Community Development 34.0 36.0 15.0 17.0 19.9 20.5 20.5 17.5 19.0 20.0 Administration 7.0 8.0 4.0 4.0 5.9 6.5 6.5 3.5 4.0 4.0 Economic Development/Redevelopment Agency 2.0 - - - - - - - - - Planning Division 4.0 3.0 3.0 4.0 4.0 4.0 4.0 4.0 4.0 5.0 Building Services Division 4.0 5.0 6.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Housing Division ( includes Rent Stabilization) - 2.0 2.0 2.0 3.0 3.0 3.0 3.0 4.0 4.0 Engineering Services (To Public Works FY2015-16) 6.0 6.0 - - - - - - - - Maintenance Division (To Public Works FY2015-16) 11.0 12.0 - - - - - - - - Administration Division - - 2.0 2.0 2.0 2.0 2.0 4.5 4.5 4.5 Engineering Services Division - - 5.0 5.0 5.0 5.0 5.0 3.8 5.0 5.0 Maintenance Division - - 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 Administration - - 1.8 1.0 1.0 1.0 1.0 1.0 3.0 3.0 Recreation - - 1.0 1.0 1.0 1.0 1.0 0.9 2.9 2.9 Senior Services - - 1.6 2.4 2.4 2.2 2.2 1.8 2.3 2.3 Total 109.1 105.1 104.9 108.9 112.3 112.9 114.8 113.6 117.8 120.3 Source: City of East Palo Alto Adopted Budget
¹ Public Works transferred to Community Development during Great Recession. ² Culture and Recreation transferred to General Government during Great Recession. 169
City of East Palo Alto
Operating Indicators by Function
Last Ten Fiscal Years
125
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 Function Public Safety Calls for Service 29,123 28,253 31,312 30,745 28,087 29,375 26,344 24,969 20,855 23,701 Number of serious crimes ¹ 510 387 174 116 319 164 129 172 359 216 Number of burglaries 213 180 93 97 78 82 64 92 80 43 Number of assaults 436 306 284 239 238 276 323 292 284 315 Number of auto thefts reported 174 132 393 86 101 192 110 212 158 150 Number of homicides 4 6 4 1 1 3 2 7 6 3 Number of robberies 60 65 77 48 69 57 49 65 55 63 Number of physical arrests 640 965 1,462 1,433 984 904 602 481 465 395 Public Works Streets Street Resurfacing (lane miles) 2.5 0.8 - - - - 2.2 2.5 6.3 6.2 Potholes repaired 16 61 94 98 159 152 159 89 75 81 Engineering Encroachment permits 49 57 109 67 - 44 101 150 87 92 Culture & recreation
Facility Rentals 74 24 41 67 58 55 101 24 106 242 Senior Lunches 5,784 3,471 6,662 9,112 6,509 3,094 5,742 8,548 10,155 6,075 Senior Transportation 2,183 3,012 3,020 2,996 2,606 2,349 2,041 - 7,854 1,744 Community Event participants 4,900 3,300 2,600 3,762 3,600 3,820 426 - 1,700 2,540 Fit Zone/Clean Zone Participants 5,436 6,300 1,116 2,655 194 500 130 - - 75 Community Development Building Permits Residential - Count 324 297 391 590 506 442 397 397 352 407 Commercial Count 126 49 43 60 29 31 31 44 34 37 Transportation 2 Shuttle Passengers Caltrain/Commuter Shuttle 76,879 85,259 28,901 7,978 - - - - - - Shopper Shuttle (now Redwood City #4) 4,076 - - - - - - - - - Youth Shuttle (now MidTown #3) 4,539 - - - - - - - - - Weekend Shuttle 23,582 - - - - - - - - - Water Service³ Hydrant Breaks 9 8 12 3 4 7 15 - 10 12 Water main breaks 5 18 19 7 3 13 16 10 14 21 Average daily consumption per family (in gallons) 238.7 201.0 200.0 217.0 222.7 258.0 226.0 229.0 258.0 270.8 Notes:
¹ Crimes against a person (homicide, rape, robbery, assault) ² Services reduced in FY2014-15 and all routes eliminated September 2016. ³ Data obtained from American Water/Veolia Companies serving City water customers comprising approximately 90% of all water customers in East Palo Alto.
Source: City Departments
170
City of East Palo Alto
Capital Asset Statistics by Function
Last Ten Fiscal Years
126
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-20 2020-21 2021-22 2022-23
FUNCTION
General Government Public Works/Community Development 1 1 1 1 1 1 1 1 1 1 Community Development - Housing 1 1 1 1 1 1 1 1 1 1 Highways & Streets
Streets (miles) 38 38 38 38 38 38 38 38 38 38
Streetlights 827 846 846 846 846 846 846 846 846 846 Traffic Signals 14 14 14 14 14 14 14 14 14 14 Culture & recreation
Parks (number of parks) 6 6 6 6 6 6 6 6 6 6 Parks acreage (acres) 25 25 25 25 25 25 25 25 25 25 Senior Center 1 1 1 1 1 1 1 1 1 1 Cooley Landing Learning Center - - - 1 1 1 1 1 1 1 Water Service¹ Water pipelines (miles) 39 39 39 39 39 39 39 39 40 40 Fire hydrants 283 283 290 330 330 330 330 330 272 325 Maximum daily capacity 2.0 2.0 2.0 2.0 3.0 3.0 3.0 3.0 1.5 3.0 (millions of gallons per day)
Notes:
¹ Data obtained from American Water/Veolia Companies serving City water customers comprising approximately 90% of allwater customers in East Palo Alto.
Source: Various city departments
171
East Palo Alto, California
Single Audit Reports
For the year ended June 30, 2023
172
City of East Palo Alto
Single Audit Report
For the Year Ended June 30, 2023
Table of Contents
Page
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............................................................... 1 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance ................................................. 3 Schedule of Expenditures of Federal Awards ................................................................................................. 7 Notes to the Schedule of Expenditures of Federal Awards............................................................................ 8 Schedule of Findings and Questioned Costs ................................................................................................. 11 173
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 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
To the honorable members of the City Council
of the City of East Palo Alto, California
We have audited, in accordance with 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 governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of East Palo Alto, California (City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated December 22, 2023.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control.
Accordingly, we do not express an opinion on the effectiveness of the City’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 material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 174
2 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City '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.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Menlo Park, California
December 22, 2023
175
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 3 Independent Auditor’s Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
To the honorable members of the City Council
of the City of East Palo Alto, California
Report on Compliance for the Major Federal Program
Opinion on the Major Federal Program
We have audited City of East Palo Alto, California’s (City) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on the City of East Palo Alto’s major federal program for the year ended June 30, 2023. The City of East Palo Alto’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.
In our opinion, the City of East Palo Alto complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2023.
Basis for Opinion on the Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for its major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the City’s federal program.
176
4 Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. 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, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of its major federal program as a whole.
In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, 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 City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.
• Obtain an understanding of the City’sinternal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Report on Internal Control over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
177
5 Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated December 22, 2023, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
Menlo Park, California
December 22, 2023
178
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179
City of East Palo Alto
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2023
7 Assistance
Listing Pass-through Program
Grantor Agency and Grant Title Number Number Expenditures U.S. Department of Commerce:
Enonomic Development Cluster
Direct Programs
Economic Adjustment Assistance 11.307 07 79 07507 $ 3,131,556 Subtotal Economic Development Cluster 3,131,556
Total U.S. Department of Commerce 3,131,556
U.S. Department of Transportation:
Passed through State of California Department of Transportation (CalTrans) Highway Planning and Construction 20.205 HSIPSL-5438(019) 1,360 Highway Planning and Construction 20.205 HPLUL-5438(011) 826,696 Subtotal Highway Planning and Construction 828,056
Total U.S. Department of Transportation 828,056
U.S. Department of Treasury:
Direct Programs
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 n/a 3,506,266 Total U.S. Department of Treasury 3,506,266
U.S. Department of Health and Human Services:
Aging Cluster
Passed through County of San Mateo Area Agency on Aging Congregate lunch program/transportation 93.045 n/a 37,250 Congregate lunch program/transportation 93.044 n/a 4,901 Subtotal Aging Cluster 42,151
Total U.S. Department of Health and Human Services 42,151 U.S. Environmental Protection Agency:
Passed through Association of Bay Area Governments
Geographic Programs - San Francisco Bay Water Quality Improvement Fund 66.126 n/a 114,800 Total U.S. Environmental Protection Agency: 114,800
Total Expenditures of Federal Awards $ 7,622,829
See accompanying Notes to Schedule of Expenditures of Federal Awards 180
City of East Palo Alto
Notes to the Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2023
8 A. Reporting Entity
The financial reporting entity consists of (a) the primary government, City of East Palo Alto, California (City), (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The component unit discussed below is included in the reporting entity because of its operational or financial relationships with the City.
• East Palo Alto Public Financing Authority
Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the primary government’s exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.
Separate financial statements for the East Palo Alto Financing Authority are not prepared. There are currently no reportable financial transactions of the Authority.
B. Basis of Accounting
Funds received under the various grant programs have been recorded within the general, special revenue, and capital projects funds of the City. The City utilizes the modified accrual basis of accounting for the general, special revenue, and capital projects funds.
Expenditures of federal awards reported on the Schedule of Expenditures of Federal Awards (Schedule) are recognized when incurred.
C. Relationship of Schedule of Expenditures of Federal Awards to Financial Statements The accompanying Schedule presents the activity of all federal financial assistance programs of the City. Federal financial assistance received directly from federal agencies as well as federal financial assistance passed through the State of California is included in the Schedule.
The Schedule was prepared only from the accounts of various grant programs and, therefore, does not present the financial position or results of operations of the City. 181
City of East Palo Alto
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2023
9 D. Pass-Through Entities’ Identifying Number
When federal awards were received from a pass-through entity, the Schedule shows, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the City determined that no identifying number is assigned for the program or the City was unable to obtain an identifying number from the pass-through entity.
E. Indirect Costs
The City did not elect to use the 10% de minimis indirect cost rate. 182
City of East Palo Alto
Notes to the Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2023
10 Section I - Summary of Auditor's Results
Unmodified
Internal control over financial reporting:
• Material weakness(es) identified? No
• Significant deficiency(ies) identified? None noted
Any noncompliance material to the financial statements noted? No Internal control over major programs:
• Material weakness(es) identified? No
• Significant deficiency(ies) identified? None noted
Type of auditor’s report issued on compliance for major programs Unmodified No
Identification of major programs:
Assistance Listing
Number(s) Name of Federal Program or Cluster Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $ 3,506,266 Total Expenditures of All Major Federal Programs $ 3,506,266 Total Expenditures of Federal Awards $ 7,622,829
Percentage of Total Expenditures of Federal Awards 46%
Dollar threshold used to distinguish between type A and type B programs $ 750,000 Auditee qualified as low-risk auditee undersection 200.520? Yes Financial Statements
Types of auditors’ report issued on whether financial statements audited were prepared in accordance with GAAP
Any audit findings disclosed that are required to be reported in accordance with section 200.516(a)?
Federal Awards
183
City of East Palo Alto
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2023
11 Section II – Current Year Findings
A. Financial Statement Audit
No current year financial statement findings.
B. Federal Award Program Audit
No current year federal award program audit findings.
Section III- Prior Year Findings
A. Financial Statement Audit
No prior year financial statement findings.
B. Federal Award Program Audit
No prior year federal award program audit findings.
184
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2022
Table of Contents
Measure A Fund
East Palo Alto, California
Independent Accountant’s Report
and Schedule of Receipts and
Disbursements
For the year ended June 30, 2023
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 185
City of East Palo Alto
Measure A Transportation Fund
For the Year Ended June 30, 2023
Table of Contents
Table of Contents
Independent Accountants’ Report .............................................................................................................................1 Schedule of Receipts and Disbursements ..................................................................................................................2 Management's Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds For Local Transportation Purposes ................................................................................................................3 DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 186
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 Independent Accountants’ Report
To the Honorable Mayor and Members of City Council
of the City of East Palo Alto
East Palo Alto, California
We have examined the City of East Palo Alto’s (City) assertion that Management complied with the requirements of the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes in Accordance with the 2004 Measure A (Agreement) between the City and the San Mateo County Transportation Authority dated March 5, 2009 for the year ended June 30, 2023. A summary of revenues and expenditures is attached to this report. The City’s management is responsible for its assertion. Our responsibility is to express an opinion on management’s assertion based upon our examination.
Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform procedures to obtain evidence about management’s assertion. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.
We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement.
In our opinion, management's assertion that the City complied with the Agreement for the year ended June 30, 2023 is presented in accordance with (or based on) the Agreement, is fairly stated, in all material respects.
This report is intended solely for the information and use of the City Council, Management, and the San Mateo County Transportation Authority Board and Management, and is not intended to be and should not be used by anyone other than these specified parties.
Menlo Park, California
December 22, 2023
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 187
City of East Palo Alto
Measure A Transportation Fund
Schedule of Receipts and Disbursements
For the Year Ended June 30, 2023
2 Schedule of Receipts and Disbursements
RECEIPTS:
Transaction and use tax - Measure A $ 799,061
Investment income 127,151
Total receipts 926,212
DISBURSEMENTS:
Annual street reserfacing 622,118
Fiscal services & management overhead 3,210
Total disbursements 625,328
Receipts over / (under) disbursements $ 300,884
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 188
CITY OF EAST PALO ALTO
December 22, 2023
San Mateo County Transportation Authority
120 San Carlos A venue
San Carlos, California 94070
Management's Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds For Local Transportation Purposes
The City of East Palo Alto is responsible for complying with the Agreement For Distribution Of San Mateo County Measure A Funds For Local Transportation Purposes (the Agreement) between the City and the San Mateo County Transportation Authority effective January 1, 2009. The Agreement states that in return for receiving an annual allocation of a specified portion of the retail transactions and use tax approved by Measure A - San Mateo County Transportation Expenditure Plan, the City, agrees that funds, "shall not be used to replace funds previously provided by property tax or other local revenues for public transportation purposes, and that City will limit the use of Funds Provided Pursuant to this Agreement to the improvement and maintenance of local transportation, including streets and road improvements." With respect to compliance with the Agreement, management attests to the following for the year ended June 30, 2023:
• Management is responsible for establishing and maintaining an effective internal control structure with respect to compliance with the Agreement;
• Management is responsible for complying with the Agreement; • Management has evaluated the City's compliance with the requirements of the Agreement; • All transactions, as summarized in the attached Balance Sheet and Statement of Revenues and Expenditures for the Year Ended June 30, 2023, are in compliance with the Agreement.
Melvin E. Gaines Tomohito Oku
City Manager Finance Director
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 189
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2022
Table of Contents
Measure C Fund
East Palo Alto, California
Financial Statements and
Independent Auditor’s Reports
For the year ended June 30, 2023
190
City of East Palo Alto
Measure C Fund
Financial Statements
For the Year Ended June 30, 2023
Table of Contents
Table of Contents
Independent Accountants’ Report.............................................................................................................................1 Balance Sheet...............................................................................................................................................................4 Statement of Revenues, Expenditures and Changes in Fund Balances ..................................................................5 Notes to Financial Statements ....................................................................................................................................6 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.........................10 191
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 Independent Accountants’ Report
To the Honorable Mayor and Members of City Council
of the City of East Palo Alto
East Palo Alto, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Measure C Special Revenue Fund (Fund), a nonmajor special revenue fund of the City of East Palo Alto, California (City) as of and for the year ended June 30, 2023, and the related notes to the financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Measure C Special Revenue Fund of the City of East Palo Alto, California, as of June 30, 2023, and the changes in its financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, 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 Measure C Special Revenue Fund, and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2023, and the changes in its financial position, or its cash flows for the year 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.
192
2 Responsibilities of Management for the Financial Statements 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 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 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 City’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.
193
3 Required Supplementary Information
Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2023, on our consideration of the Fund of the City'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 Fund of the City'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 Fund of the City's internal control over financial reporting and compliance.
Menlo Park, California
December 22, 2023
194
City of East Palo Alto
Measure C Fund
Balance Sheet
June 30, 2023
4 Balance Sheet
Public Violence
Safety Prevention
Program Program
ASSETS:
Cash and Investments $ 31,858 $ 105,454
Accrued interest 243 895
Total assets $ 32,101 $ 106,349
FUND BALANCES:
Restricted $ 32,101 $ 106,349
Total fund balances 32,101 106,349
Total liabilities and fund balances $ 32,101 $ 106,349
Measure C
Special Revenue
Fund
See accompanying notes to the financial Statements
195
City of East Palo Alto
Measure C Fund
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023
Statement of Revenues, Expenditures and Changes in Fund Balances 5 Statement of Revenues, Expenditures and Changes in Fund Balances Public Violence
Safety Prevention
Program Program
REVENUES:
Interest income $ 1,865 $ 5,484
Total revenues 1,865 5,484
EXPENDITURES:
Administration:
General government - 800
Program expenditures:
Violence prevention - 85,758
Total expenditures - 86,558
REVENUES OVER (UNDER) EXPENDITURES: 1,865 (81,074)
FUND BALANCES:
Beginning of year 30,236 187,423
End of year $ 32,101 $ 106,349
Special Revenue
Fund
See accompanying notes to the financial Statements
196
City of East Palo Alto
Measure C Fund
Notes to Financial Statements
For the Year Ended June 30, 2023
6 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
All transactions of the Measure C Special Revenue Fund (Measure C Fund) of the City of East Palo Alto, California (City), are included as a separate special revenue fund in the basic financial statements of the City. The Measure C Fund accounts for the City’s share of revenues earned and expenditures incurred under the City’s Measure C parcel tax. The accompanying financial statements are for the Measure C Fund only and are not intended to fairly present the financial position or results of operations of the City.
B. Basis of Accounting and Measurement Focus
The accompanying financial statements are prepared on the modified accrual basis of accounting. Revenues are generally recorded when measurable and available, and expenditures are recorded when the related liabilities are incurred.
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus, wherein only current assets and current liabilities generally are included on the balance sheet. Operating statements of governmental funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.
C. Fund Accounting
The operations of the Measure HH Fund are accounted for in a separate special revenue fund. The fund is a separate accounting entity with a set of self-balancing accounts which comprise the assets, liabilities, fund equity, revenues, and expenses.
D. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.
197
City of East Palo Alto
Measure C Fund
Notes to Financial Statements
For the Year Ended June 30, 2023
7 2. CASH AND INVESTMENTS
Measure C monies are pooled with the City’s cash, cash equivalents, and investments. The City pools cash resources from all funds to facilitate the management of cash. Cash and cash equivalents are considered amounts on hand, in demand deposits, and short-term investments with a maturity date within three months of the date acquired by the City and are presented as "Cash and Investments". The City invests in two external investment pools, the State of California Local Agency Investment Fund (LAIF) and the San Mateo County Investment Fund (County Pool).
All pooled cash and investments held by the City are considered cash and cash equivalents because LAIF and the County Pool are used essentially as demand deposits from the standpoint of the City. Information about the City's Cash and Investments is disclosed in the City's Comprehensive Annual Financial Report.
As of June 30, 2023, the Measure C Fund has the following cash and investment activity:
Cash and investments $ 137,312
Investments are stated at fair value using the aggregate method, resulting in the following investment income allocated to the Measure C Fund:
Cash and investments $ 137,312
Interest income $ 4,821
Unrealized gain on change in fair value of investments 2,528 $ 7,349
3. MEASURE C FUNDS
In November 2006, the Voters approved Measure C, a special parcel tax to fight crime through community prevention and law enforcements programs. The proceeds of the parcel tax are to be used for enhancing services and programs to prevent violence and crime in East Palo Alto.
The tax was enacted for a ten-year period ending June 30, 2017. 198
8 City of East Palo Alto
Measure C Fund
Notes to Financial Statements
For the Year Ended June 30, 2023
Tax proceeds may only be used as part of the following integrated programs of violence prevention and public safety intervention, in accordance with the following specific purposes:
(1) Community and neighborhood policing, training, crime suppression and investigations. (2) Violence Prevention services with an emphasis on youth and families. Such services include preventive social services provided by the City of East Palo Alto or by adding capacity to community-based nonprofit programs with a focus on youth, ex-felons, domestic violence, and support for senior citizens.
(3) Not less than 1% or more than 3% of funds appropriated to each police service or social service program shall be set aside for the purpose of independent evaluation of the program, including the number of people served and the rate of crime or violence reduction achieved.
(4) Mandated apportionment of funds: Of the total proceeds spent on programs enumerated in this section 3, Paragraphs 1 and 2, not less than 50% of such proceeds shall be directed at violence prevention programs with emphasis on youth, ex-felons, and senior protection.
The City Council approved that 50% of Measure C funding is designated to the Police Department for Public Safety and the remaining 50% of funding is used for Crime Prevention Programs.
199
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200
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 10 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
To the Honorable Mayor and Members of City Council
of the City of East Palo Alto, 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 Measure C Special Revenue Fund (Fund) of the City of East Palo Alto, California (City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, and have issued our report thereon dated Report December 22, 2023. Our opinion included an emphasis of matter as discussed that the financial statements present only the financial position specific to the Fund and are not intended to present fairly the financial position and results of operations of the City in conformity with accounting principles generally accepted in the United States of America.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Fund'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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control. Accordingly, we do not express an opinion on the effectiveness of the Fund'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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified. 201
11 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Measure C Special Revenue Fund'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.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Menlo Park, California
December 22, 2023
202
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2022
Table of Contents
Measure HH Fund
East Palo Alto, California
Financial Statements and
Independent Auditor’s Reports
For the year ended June 30, 2023
203
City of East Palo Alto
Measure HH Fund
Financial Statements
For the Year Ended June 30, 2023
Table of Contents
Table of Contents
Independent Accountants’ Report.............................................................................................................................1 Balance Sheet...............................................................................................................................................................4 Statement of Revenues, Expenditures and Changes in Fund Balances ..................................................................5 Notes to Financial Statements ....................................................................................................................................6 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on Audit of Financial Statements Performed in Accordance with Government Auditing Standards ....................................................................................................................................................................10 204
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 Independent Accountants’ Report
To the Honorable Mayor and Members of City Council
of the City of East Palo Alto
East Palo Alto, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Measure HH Special Revenue Fund (Fund), a nonmajor special revenue fund of the City of East Palo Alto, California (City) as of and for the year ended June 30, 2023, and the related notes to the financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Measure HH Special Revenue Fund of the City of East Palo Alto, California, as of June 30, 2023, and the changes in its financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, 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 Measure HH Special Revenue Fund, and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2023, and the changes in its financial position, or its cash flows for the year 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.
205
2 Responsibilities of Management for the Financial Statements 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 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 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 City’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.
206
3 Required Supplementary Information
Management has omitted management's discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, on our consideration of the Fund of the City'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 Fund of the City'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 Fund of the City's internal control over financial reporting and compliance.
Menlo Park, California
December 22, 2023
207
City of East Palo Alto
Measure HH Fund
Balance Sheet
June 30, 2023
4 Measure HH
Special Revenue
Fund ASSETS:
Cash and Investments $ 4,978,379 Accrued interest 37,213 Total assets $ 5,015,592
LIABILITIES AND FUND BALANCES:
Accounts payable and accrued liabilities $ 45,272
Total liabilities 45,272
Fund Balances:
Restricted 4,970,320
Total fund balances 4,970,320
Total liabilities and fund balances $ 5,015,592
See accompanying notes to the financial Statements
208
City of East Palo Alto
Measure HH Fund
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023
5 Measure HH
Special Revenue
Fund REVENUES:
Parcel Tax - Measure HH $ 1,677,265
Interest income 111,162
Total revenues 1,788,427
EXPENDITURES:
Administration: General government 1,500 Commuity development 14,053 Program expenditures:
Job Train and First Source Hiring 45,272
965 Weeks affordable housing 1,500,000
Total expenditures 1,560,825
REVENUES OVER (UNDER) EXPENDITURES: 227,602
FUND BALANCES:
Beginning of year 4,742,718
End of year $ 4,970,320
See accompanying notes to the financial Statements
209
City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the Year Ended June 30, 2023
6 to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
All transactions of the Measure HH Special Revenue Fund (Measure HH Fund) of the City of East Palo Alto, California (City), are included as a separate special revenue fund in the basic financial statements of the City. The Measure HH Fund accounts for the City’s share of revenues earned and expenditures incurred under the City’s Measure HH parcel tax.
The accompanying financial statements are for the Measure HH Fund only and are not intended to fairly present the financial position or results of operations of the City.
B. Basis of Accounting and Measurement Focus
The accompanying financial statements are prepared on the modified accrual basis of accounting. Revenues are generally recorded when measurable and available, and expenditures are recorded when the related liabilities are incurred.
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus, wherein only current assets and current liabilities generally are included on the balance sheet. Operating statements of governmental funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.
C. Fund Accounting
The operations of the Measure HH Fund are accounted for in a separate special revenue fund. The fund is a separate accounting entity with a set of self-balancing accounts which comprise the assets, liabilities, fund equity, revenues, and expenses.
D. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.
210
City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the Year Ended June 30, 2023
7 2. CASH AND INVESTMENTS
Measure HH monies are pooled with the City's cash, cash equivalents, and investments. The City pools cash resources from all funds to facilitate the management of cash. Cash and cash equivalents are considered amounts on hand, in demand deposits, and short-term investments with a maturity date within three months of the date acquired by the City and are presented as "Cash and Investments". The City invests in two external investment pools, the State of California Local Agency Investment Fund (LAIF) and the San Mateo County Investment Fund (County Pool).
All pooled cash and investments held by the City are considered cash and cash equivalents because LAIF and the County Pool are used essentially as demand deposits from the standpoint of the City. Information about the City's Cash and Investments is disclosed in the City's Comprehensive Annual Financial Report.
As of June 30, 2022, the Measure HH Fund had the following cash and investment activity:
Cash and investments $ 4,978,379
Investments are stated at fair value using the aggregate method, resulting in the following investment income allocated to the Measure HH Fund:
Interest income $ 107,247
Unrealized gain on change in fair value of investments 3,921 $ 111,168
3. MEASURE HH FUNDS
In November 2018, the voters approved Measure HH, a special parcel tax to combat community displacement through affordable housing programs and assets, and provide programs for facilitating community access to job opportunities. The proceeds of the parcel tax are to be used for affordable and supportive housing programs, programs that facilitate access to job opportunities in the S.T.E.M. sectors, and building trades and strengthen First Source Hiring.
Revenue generated from this special tax can be used only for the following purposes:
• to create and maintain affordable and supportive housing programs, with an emphasis on the creation of net new housing;
• to create and maintain programs that facilitate access to job opportunities for East Palo Alto residents in the science, technology, engineering, and mathematics (STEM) sectors, building trades, and to strengthen the City's First Source Hiring Program, and; • to pay for City staff and overhead costs to administer the ordinance and provide an annual report.
Revenue generated from this special tax must be used in the following manner:
• a minimum of 35% of the revenue must be used exclusively for the construction of new, affordable housing stock.
211
City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the Year Ended June 30, 2023
8 3. MEASURE HH FUNDS, CONTINUED
• a maximum of 15% of the revenue may be used for City staff and overhead costs to administer the ordinance and to provide an annual report. • the remaining proceeds may be used for any of the other purposes specified in the ordinance at the discretion of the City Council
The tax revenue cannot be used for any other purpose.
The authority to levy the tax imposed by Chapter 3.70 shall not expire unless ended by the voters of East Palo Alto. Measure HH authorizes the City Council to amend the parcel tax without subsequent voter approval, provided such amendment does not increase the amount of tax paid by any taxpayer in excess of the rate set forth in the Measure or change the allowed uses for the tax revenues.
A. Measure HH Expenditures
During fiscal year 2022, the City incurred $15,553 and $1,545,272 in administrative activities and program activities, respectively.
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 10 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
To the Honorable Mayor and Members of City Council
of the City of East Palo Alto, 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 Measure HH Special Revenue Fund (Fund) of the City of East Palo Alto, California (City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, and have issued our report thereon dated Report December 22, 2023. Our opinion included an emphasis of matter as discussed that the financial statements present only the financial position specific to the Fund and are not intended to present fairly the financial position and results of operations of the City in conformity with accounting principles generally accepted in the United States of America.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Fund'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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control.
Accordingly, we do not express an opinion on the effectiveness of the Fund'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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified. 214
11 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Measure HH Special Revenue Fund'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.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Menlo Park, California
December 22, 2023
215
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2022
Table of Contents
Measure W Fund
East Palo Alto, California
Independent Accountant’s Report
and Schedule of Receipts and
Disbursements
For the year ended June 30, 2023
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 216
City of East Palo Alto
Measure W Transportation Fund
For the Year Ended June 30, 2023
Table of Contents
Table of Contents
Independent Accountant’s Report ...........................................................................................................................1 Schedule of Receipts and Disbursements ...............................................................................................................2 Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes ...........................................................................................................3 DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 217
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 Independent Accountants’ Report
To the Honorable Mayor and Members of City Council
of the City of East Palo Alto
East Palo Alto, California
We have examined the City of East Palo Alto’s (City) assertion that Management complied with the requirements of the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes in Accordance with the San Mateo County Congestion Relief Plan, (Agreement) between the City and the San Mateo County Transportation Authority dated January 16, 2020 for the year ended June 30, 2023. A summary of revenues and expenditures is attached to this report. The City’s management is responsible for its assertion. Our responsibility is to express an opinion on management’s assertion based upon our examination.
Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform procedures to obtain evidence about management’s assertion. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material misstatement of management’s assertion whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.
We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement.
In our opinion, management's assertion that the City complied with the Agreement for the year ended June 30, 2023, is presented in accordance with (or based on) the Agreement is fairly stated, in all material respects.
This report is intended solely for the information and use of the City Council, Management, and the San Mateo County Transportation Authority Board and Management, and is not intended to be and should not be used by anyone other than these specified parties.
Menlo Park, California
December 22, 2023
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 218
City of East Palo Alto
Measure W Transportation Fund
Schedule of Receipts and Disbursements
For the Year Ended June 30, 2023
2 Schedule of Receipts and Disbursements
RECEIPTS:
Transaction and use tax - Measure W $ 347,628
Investment income 17,213
Total receipts 364,841
DISBURSEMENTS:
Annual street reserfacing 423,113
Fiscal services & management overhead 1,500
Total disbursements 424,613
Receipts over / (under) disbursements $ (59,772)
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 219
CITY OF EAST PALO ALTO
December 22, 2023
San Mateo County Transportation Authority
120 San Carlos Avenue
San Carlos, California 94070
Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes
The City of East Palo Alto (City) is responsible for complying with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes (Agreement) between the City and the San Mateo County Transportation Authority entered into on October 17, 2019. The Agreement states that in return for receiving an annual allocation of a specified portion of the retail transaction and use tax approved by Measure W – San Mateo County Transportation Expenditure Plan, the City, in use of these funds, shall “refrain from substituting funds provided to it pursuant to this Agreement for property tax funds which are currently being used to fund existing local transportation programs and limit the use of said funds to the improvement of local transportation, including streets and road improvements.” With respect to compliance with the Agreement, management attests to the following for the year ended June 30, 2023:
• Management is responsible for establishing and maintaining an effective internal control with respect to compliance with the Agreement.
• Management is responsible for complying with the Agreement. • Management has evaluated the City’s compliance with requirements of the Agreement; and • All Transactions, as summarized in the attached Schedule of Receipts and Disbursements for the fiscal year ended June 30, 2023, are in compliance with the Agreement.
Melvin E. Gaines Tomohito Oku
City Manager Finance Director
DocuSign Envelope ID: 8E632736-3478-400E-87D4-1ED29D1C8DDE 220
City of East Palo Alto
Appropriations Limit Schedule
For the Year Ended June 30, 2023
Table of Contents
Independent Accountant’s Report on Applying Agreed-Upon Procedures Related To The Article XIII-B Appropriations Limit Calculation For the Fiscal Year Ended June 30, 2024
221
City of East Palo Alto
Appropriations Limit Schedule
For the Year Ended June 30, 2023
Table of Contents
Independent Accountant’s Report.............................................................................................................................1 Appropriations Limit Schedule...................................................................................................................................3 Notesto Appropriations Limit Schedule .....................................................................................................................4 222
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 Independent Accountant’s Report
To the Honorable Mayor and
City Council of the City of East Palo Alto
East Palo Alto, California
We have performed the procedures enumerated below, on the Appropriations Limit Calculation of the City of East Palo Alto, California (City) (the specified party), prepared in accordance with Article XIII-B of the California Constitution for the fiscal year ended June 30, 2024. The City’s management is responsible for the Appropriate Limit Calculation.
The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of assisting the City in evaluating its Appropriations Limit Calculation and we will report on findings based on the procedures performed. Additionally, the City agreed to and acknowledged that the procedures performed are appropriate to meet their purposes. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.
The procedures and the associated findings are as follows:
1. We obtained the completed worksheets setting forth the calculations necessary to establish the City’s appropriations limit and compared the 2023-24 limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City’s City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the City’s City Council.
Finding: No exceptions were found as a result of this procedure.
2. We added last year's limit to the annual adjustment amount and compared the resulting amount to the 2023-24 appropriations limit.
Finding: No exceptions were found as a result of this procedure.
3. We compared the current year information to the worksheets described in No. 1 above and to information provided by the California State Department of Finance.
Finding: No exceptions were found as a result of this procedure. 223
2 We agreed the prior year appropriations limit to the prior year appropriations limit adopted by the City’s City Council.
Finding: No exceptions were found as a result of this procedure.
We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the City’s Appropriation Limit Calculation. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.
No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by Article XIII-B of the California Constitution.
This report is intended solely for the information and use of the City Council, and management of the City and is not intended to be and should not be used by anyone other than these specified parties.
Menlo Park, California
December 22, 2023
224
City of East Palo Alto
Appropriations Limit Schedule
For the Year Ended June 30, 2024
3 Amount Source
A. Appropriation liimit for the year ended June 30, 2023 $37,844,018 Prior year schedule B. Calculation factors:
1. Population increase 0.9957 State Department of Finance
2. Inflation increase 1.0444 State Department of Finance
3. Total adjustment factor 1.0399 B1 * B2
C. Annual adjustment increase 1,510,321 [(B3-1)*A)]
D. Other adjustments
Loss responsibility (-) - N/A
Transfers to private (-) - N/A
Transfers to fees (-) - N/A
Assumed responsibility (+) - N/A
E. Total adjustments 1,510,321 (C+D)
F. Appropriations limit for the year ending June 30, 2024 39,354,338 (A+E) 225
City of East Palo Alto
Notes to Appropriations Limit Schedule
For the Year Ended June 30, 2024
4 1. PURPOSEOF LIMITEDPROCEDURES REVIEW
Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes. Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIIIB, the annual calculation of the appropriations limit is subject to this agreed upon procedures engagement.
2. METHOD OF CALCULATION
Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-1987, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.
3. INFLATION FACTORS
A California governmental agency may use as its inflation factor either the annual percentage change in the 4th quarter per capita personal income (which percentage is supplied by the State Department of Finance), or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City of East Palo Alto for the fiscal year 2023-2024 represents the percentage change per capita personal income.
4. POPULATION FACTORS
A California governmental agency may use as its population factor either the annual percentage change of the jurisdiction’s own population, or the annual percentage change in population in the County where the jurisdiction is located. The factor adopted by the City of East Palo Alto for fiscal year 2023-2024 represents the population change in San Mateo County.
5. OTHER ADJUSTMENTS
A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity. There were no adjustments made for the fiscal year ending June 30, 2024.
226
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4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE 1 December 22, 2023
To the honorable members of the City Council
of the City of East Palo Alto, California
We have audited the financial statements of City of East Palo Alto, California (City) as of and for the year ended June 30, 2023, and have issued our report thereon dated December 22, 2023.
Professional standards require that we advise you of the following matters relating to our audit.
Our Responsibility in Relation to the Financial Statement Audit under Generally Accepted Auditing Standards and Government Auditing Standards and our Compliance Audit under the Uniform Guidance
As communicated in our letter dated May 18, 2023 our responsibility, as described by professional standards, is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America and to express an opinion on whether the City complied with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City major federal programs. Our audit of the financial statements and major program compliance does not relieve you or management of its respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
Our responsibility, as prescribed by professional standards as it relates to the audit of the City major federal program compliance, is to express an opinion on the compliance for each of the City major federal programs based on our audit of the types of compliance requirements referred to above. An audit of major program compliance includes consideration of internal control over compliance with the types of compliance requirements referred to above as a basis for designing audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, as a part of our major program compliance audit, we considered internal control over compliance for these purposes and not to provide any assurance on the effectiveness of the City’s internal control over compliance. 227
2 We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, 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.
We have provided our comments regarding internal controls during our audit in our 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 dated December 22, 2023. We have also provided our comments regarding compliance with the types of compliance requirements referred to above and internal controls over compliance during our audit in our Independent Auditor’s Report on Compliance with Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance dated December 22, 2023.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you.
Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and other firms utilized in the engagement, if applicable, have complied with all relevant ethical requirements regarding independence.
Significant Risks Identified
As stated in our auditor’s report, professional standards require us to design our audit to provide reasonable assurance that the financial statements are free of material misstatement whether caused by fraud or error. In designing our audit procedures, professional standards require us to evaluate the financial statements and assess the risk that a material misstatement could occur. Areas that are potentially more susceptible to misstatements, and thereby require special audit considerations, are designated as “significant risks.”
• Our audit standards require that we perform audit procedures relating to management override of internal controls and therefore we performed certain audit procedures in response to that risk.
• We performed audit procedures relating to revenue recognition and therefore we selected grant revenues and sales tax revenue as the revenues streams that we will perform audit procedures in the current fiscal year.
228
3 Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during year. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are related to the City’s pension liabilities. We evaluated the key factors and assumptions used to develop these estimates and determined that it is reasonable in relation to the basic financial statements taken as a whole.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the City’s financial statements relate to the discount rate used by the City to estimate its pension liabilities. A disclosure has been made about the sensitivity of those pension liabilities where an increase or decrease of 1% will have significant impact on this estimate.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of the audit.
229
4 Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole. Uncorrected misstatements or matters underlying those uncorrected misstatements could potentially cause future-period financial statements to be materially misstated, even though the uncorrected misstatements are immaterial to the financial statements currently under audit. There were no uncorrected or corrected missstatements identified as a result of our audit procedures.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the financial statements or the auditor’s report. No such disagreements arose during the course of the audit.
Circumstances that Affect the Form and Content of the Auditor’s Report For purposes of this letter, professional standards require that we communicate any circumstances that affect the form and content of our auditor’s report. We did not identify any circumstances that affect the form and content of the auditor’s report.
Representations Requested from Management
We have requested certain written representations from management which are included in the management representation letter dated December 22, 2023. 230
5 Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating conditions affecting the entity, and operating plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City’s auditors.
Other Information Included in Annual Reports
Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the City’s annual reports, does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information.
Additionally, in accordance with such standards, we have read the information and considered whether such information, or the manner of its presentation, was materially inconsistent with its presentation in the financial statements.
Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements.
Group Audits
The financial statements include the financial statements of City and the City of East Palo Alto Public Financing Authority (Authority). For the purposes of our audit, we consider the City to be a significant component of the consolidated financial statements; however we do not consider the Authority to be a significant component of the financial statements. Consistent with the audit of the financial statements as a whole, our audit included obtaining an understanding of the Authority and their environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements of the Authority and completion of further audit procedures.
This report is intended solely for the information and use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties.
Menlo Park, California
231